-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PNGb5geD5ZdpRK5qLEVEclWvkqFpOnyisEB9SgUXUcbQMRKhUYiqc70wPnz0wgMM qoL9SmPu9Bk6ovwEn/nzAg== 0000950129-04-008859.txt : 20041112 0000950129-04-008859.hdr.sgml : 20041111 20041110213108 ACCESSION NUMBER: 0000950129-04-008859 CONFORMED SUBMISSION TYPE: F-10 PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 20041112 DATE AS OF CHANGE: 20041110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEROIL CORP CENTRAL INDEX KEY: 0001221715 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-10 SEC ACT: 1933 Act SEC FILE NUMBER: 333-120383 FILM NUMBER: 041134666 BUSINESS ADDRESS: STREET 1: 25025 I-45 NORTH STREET 2: SUITE 420 CITY: WOODLANDS STATE: TX ZIP: 77380 BUSINESS PHONE: 2812921800 MAIL ADDRESS: STREET 1: 25025 I-45 NORTH STREET 2: SUITE 420 CITY: THE WOODLANDS STATE: TX ZIP: 77380 F-10 1 h19854fv10.txt INTEROIL CORPORATION AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 2004 REGISTRATION NO. 333- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM F-10 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 INTEROIL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW BRUNSWICK 2911 NOT APPLICABLE (PROVINCE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER OF INCORPORATION OR ORGANIZATION) CODE NUMBER (IF APPLICABLE)) (IF APPLICABLE))
SUITE 2, LEVEL 2, ORCHID PLAZA 79-88 ABBOTT ST. CAIRNS, QLD 4870, AUSTRALIA 61 7 4046 4600 (ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) GARY M. DUVALL 25025 I-45 NORTH, SUITE 420 THE WOODLANDS, TEXAS 77380 (281) 292-1800 (NAME, ADDRESS, (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF AGENT FOR SERVICE IN THE UNITED STATES) COPY TO: GEORGE G. YOUNG III, ESQ. HAYNES AND BOONE, L.L.P. 1221 MCKINNEY STREET, SUITE 2100 HOUSTON, TEXAS 77010 (713) 547-2000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: FROM TIME TO TIME AFTER EFFECTIVENESS OF THIS REGISTRATION STATEMENT. PROVINCE OF ONTARIO (PRINCIPAL JURISDICTION REGULATING THIS OFFERING (IF APPLICABLE)) It is proposed that this filing shall become effective (check appropriate box): A.|_| Upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada) B.|X| At some future date (check the appropriate box below): 1.|_| pursuant to Rule 467(b) on at (designate a time not sooner than 7 calendar days after filing) 2.|_| pursuant to Rule 467(b) on at (designate a time 7 calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on. 3.|_| pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto. 4.|X| After the filing of the next amendment to this form (if preliminary material is being filed). If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction's shelf short form prospectus offering procedures, check the following box. |X|
CALCULATION OF REGISTRATION FEE ================================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE PRICE REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------ Common Shares, no par value, issuable upon the conversion of the 8 7/8% Senior Convertible Debentures 4,140,585 $25.94 (2) $107,406,774.90 $13,608.44 due August 28, 2009 or the payment of interest thereon - ------------------------------------------------------------------------------------------------------------------ Common Shares, no par value, issuable upon exercise of warrants 359,415 $25.94 (3) $9,323,225.10 $1,181.25 - ------------------------------------------------------------------------------------------------------------------ TOTAL $14,789.69 - ------------------------------------------------------------------------------------------------------------------
1. Pursuant to Rule 416 under the Securities Act of 1933, this Registration Statement also covers such additional number of shares of common stock as may be issuable upon a stock split, stock dividend or similar transaction. 2. Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based upon the average of the high and low prices of InterOil's common shares as reported on the American Stock Exchange on November 3, 2004. 3. Calculated pursuant to Rule 457(g) under the Securities Act of 1933, as amended, based upon the offering price of the underlying common shares as determined in accordance with Rule 457(c). THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A) OF THE ACT, MAY DETERMINE. PART I INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS The information in this prospectus is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer to sale is not permitted. Subject to Completion Dated November 10, 2004 PRELIMINARY BASE SHELF PROSPECTUS INTEROIL CORPORATION C$165,000,000 4,500,000 COMMON SHARES We issued our 8.875% senior convertible debentures ("Debentures") and warrants to purchase our common shares ("Warrants") in private placements on August 27, 2004 and September 3, 2004. This prospectus may be used by selling shareholders in connection with resales of the common shares issuable upon the conversion, redemption, exercise or payment of the Debentures and/or Warrants, including common shares issued in respect of interest payable on the Debentures. Such common shares are sometimes referred to in this prospectus as the "Registrable Securities". Our common shares currently trade under the symbol "IOL" on the Toronto Stock Exchange and under the symbol "IOC" on the American Stock Exchange, the Australian Stock Exchange and the Port Moresby Stock Exchange. The last reported sale price of our common shares on the Toronto Stock Exchange on November 9, 2004 was C$36.60 per share and on the American Stock Exchange was U.S.$30.55 per share. INVESTING IN OUR COMMON SHARES INVOLVES RISKS. PLEASE CAREFULLY CONSIDER THE "RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS. THIS PROSPECTUS HAS NOT BEEN FILED IN RESPECT OF, AND WILL NOT QUALIFY, ANY RESALE OF REGISTRABLE SECURITIES IN ONTARIO AT ANY DATE LATER THAN JANUARY 4, 2005 OR IN ANY OTHER PROVINCE OR TERRITORY OF CANADA AT ANY TIME. THIS PROSPECTUS WILL QUALIFY RESALES OF REGISTRABLE SECURITIES IN ONTARIO WITH A MAXIMUM AGGREGATE VALUE OF UP TO C$165,000,000 ONLY, WHICH AGGREGATE VALUE IS DETERMINED BY MULTIPLYING THE LAST REPORTED SALE PRICE OF OUR COMMON SHARES ON THE TORONTO STOCK EXCHANGE ON NOVEMBER 9, 2004 OF C$36.60 PER SHARE AND 4,500,000 COMMON SHARES. NO UNDERWRITER WILL BE INVOLVED IN ANY SALE OR RESALE OF REGISTRABLE SECURITIES IN CANADA UNDER THIS PROSPECTUS. UNDER THE MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, WE ARE PERMITTED TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE PREPARE OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. OUR FINANCIAL STATEMENTS MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED STATES COMPANIES. YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN CANADA, SOME OF OUR OFFICERS AND DIRECTORS NAMED IN THIS PROSPECTUS ARE NOT RESIDENT IN THE UNITED STATES AND MOST OF OUR ASSETS ARE LOCATED OUTSIDE THE UNITED STATES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is November __, 2004. TABLE OF CONTENTS REFERENCES........................................................................................... 1 EXCHANGE RATE INFORMATION............................................................................ 1 FORWARD-LOOKING STATEMENTS........................................................................... 2 ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES.......................................................... 3 SUMMARY.............................................................................................. 4 Use of This Prospectus......................................................................... 4 Our Business................................................................................... 4 Recent Developments............................................................................ 6 RISK FACTORS......................................................................................... 7 Risk Related To Our Business................................................................... 7 Risk Related to an Investment in our Common Shares............................................. 12 USE OF PROCEEDS...................................................................................... 13 TRADING RANGE OF COMMON SHARES....................................................................... 14 DIVIDENDS............................................................................................ 14 DESCRIPTION OF OUR COMMON SHARES..................................................................... 15 Options........................................................................................ 15 Convertible Securities......................................................................... 15 DESCRIPTION OF OUR DEBENTURES........................................................................ 16 DESCRIPTION OF OUR WARRANTS.......................................................................... 20 CHANGES IN OUR SHARE AND DEBT CAPITAL................................................................ 22 LIST OF SELLING SHAREHOLDERS......................................................................... 22 PLAN OF DISTRIBUTION................................................................................. 25 MATERIAL CONTRACTS................................................................................... 29 Securities Purchase Agreement.................................................................. 29 Share Sale Agreement........................................................................... 29 Facilities Management Contract................................................................. 29 Engineering Procurement and Construction Contract.............................................. 30 Crude Supply Agency and Sales Agreement........................................................ 30 Domestic Sales Agreement....................................................................... 30 Purchase and Sale Agreement.................................................................... 31 Export Marketing and Shipping Agreement and Agreement for the Sale and Purchase of Naphtha..... 31 Refinery State Project Agreement............................................................... 31 CORPORATE STRUCTURE.................................................................................. 32 WITHHOLDING TAX AND CURRENCY EXCHANGE CONTROLS IN PNG................................................ 33 LEGAL MATTERS........................................................................................ 34 EXPERTS.............................................................................................. 34 AVAILABLE INFORMATION................................................................................ 34 DOCUMENTS INCORPORATED BY REFERENCE.................................................................. 34 LIST OF DOCUMENTS FILED WITH THE SEC................................................................. 36 AUDITORS, TRANSFER AGENT AND REGISTRAR............................................................... 36 PURCHASER'S STATUTORY RIGHTS......................................................................... 36 AUDITORS' CONSENT.................................................................................... 37 GLOSSARY OF CERTAIN TERMS............................................................................ 38 INDEX TO FINANCIAL INFORMATION....................................................................... 44 CERTIFICATE OF THE COMPANY........................................................................... A-1
(i) REFERENCES In this prospectus, unless we state otherwise, "InterOil", the "Company", "we", "us" and "our" refer to InterOil Corporation and all of its subsidiaries. The term "PNG" refers to Papua New Guinea. The term "Shell" refers to subsidiaries of the Royal Dutch Shell Group. The term "BP" refers to subsidiaries of BP p.l.c. See "Glossary of Certain Terms" for additional terms used in this prospectus. EXCHANGE RATE INFORMATION Unless we state otherwise or the context otherwise requires, all references to dollar amounts in this prospectus are references to U.S. dollars. The exchange rate between the Canadian dollar and the U.S. dollar used in this prospectus varies depending on the date and context of the information contained herein. Some of the financial information about BP Papua New Guinea Limited, which we acquired in 2004, and which is included herein, in expressed in Kina, the local currency of Papua New Guinea. The following table sets forth, for each period indicated, the high and low exchange rates, the average of the exchange rates on the last day of each month during such period indicated, and the exchange rate at the end of the period indicated, for one PNG Kina expressed in Canadian dollars.
Fiscal Year Ended Six Months Ended --------------------------------- ------------------------ (C$) December 31, December 31, June 30, June 30, 2002 2003 2003 2004 ------------ ------------ -------- -------- High............................. $0.45440 $0.42800 $0.42800 $0.43200 Low.............................. $0.35480 $0.37810 $0.37801 $0.39410 Average.......................... $0.41150 $0.40291 $0.39876 $0.41425 Close............................ $0.40490 $0.40130 $0.39000 $0.41770
On November 9, 2004, the noon buying rate was C$0.3762 per K1. The following table sets forth, for each period indicated, the high and low exchange rates, the average of the exchange rates on the last day of each month during such period indicated, and the exchange rate at the end of the period indicated, for one PNG Kina expressed in United States dollars.
Fiscal Year Ended Six Months Ended ----------------------------- -------------------------- (U.S.$) December 31, December 31, June 30, June 30, 2002 2003 2003 2004 ------------ ------------ -------- --------- High..................................... $0.29150 $0.31000 $0.28940 $0.31050 Low...................................... $0.22760 $0.25530 $0.25530 $0.30450 Average.................................. $0.26206 $0.28841 $0.27454 $0.30948 Close.................................... $0.25680 $0.31000 $0.28940 $0.31050
On November 9, 2004, the noon buying rate was U.S.$0.3150 per K1. The following table sets forth, for each period indicated, the high and low exchange rates, the average of the exchange rates on the last day of each month during such period indicated, and the exchange rate at the end of the period indicated, for one (1) Canadian dollar expressed in United States dollars.
Fiscal Year Ended Six Months Ended ------------------------------ ---------------------- (U.S.$) December 31, December 31, June 30, June 30, 2002 2003 2003 2004 ------------ ------------ -------- -------- High............................... $0.66530 $0.77470 $0.75120 $0.78830 Low................................ $0.61750 $0.63270 $0.63270 $0.71380 Average............................ $0.63724 $0.71629 $0.68925 $0.74785 Close.............................. $0.63440 $0.77270 $0.74270 $0.74400
On November 9, 2004, the noon buying rate was U.S.$0.83619 per C$1. FORWARD-LOOKING STATEMENTS Certain statements contained in, or incorporated by reference into, this prospectus are forward-looking statements as defined in the U.S. federal securities laws. All statements, other than statements of historical facts, included herein or incorporated by reference herein, including without limitation, statements regarding our drilling plans, business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words "believe", "expects", "anticipates", "intends", "estimates" or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that such forward-looking statements will prove to be correct. Each forward-looking statement reflects our current view of future events and is subject to risks, uncertainties and other factors that could cause actual results to differ materially from any results expressed or implied by our forward-looking statements. Risks and uncertainties include, but are not limited to: - our lack of substantial operating history; - the operation of our refinery project at less than full capacity; - commissioning and start-up costs; - profitability of our refinery; - our ability to market refinery output; - the success of our exploration prospects; - political, legal and economic risks related in PNG; - anticipated markets for our refined products; - dependence on exclusive relationships with our supplier and customers; - ability to obtain necessary licences; - uninsured risks; - the impact of competition; - the enforceability of legal rights; - the volatility of oil prices; - weather and unforeseen operating hazards; - the uncertainty of our ability to attract capital; 2 - debt covenants limiting ability to raise additional financing; and - other factors. The information contained in this prospectus and the documents incorporated by reference into this prospectus, including the information set forth under the heading "Risk Factors" contain more information about certain factors that could affect our operating results and performance. Our forward-looking statements are expressly qualified in their entirety by this cautionary statement. ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES We are a corporation organized under the laws of New Brunswick, Canada and substantially all of our assets are located in PNG. Many of our directors and officers are not residents of the United States of America. As a result, it may be difficult for United States investors to effect service of process within the United States on us or our directors or officers or to enforce in the United States upon judgments of courts of the United States predicated upon civil liability under United States federal securities laws against us or our directors or officers. Certain selling shareholders are incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or reside outside of Canada. Although certain selling shareholders may have appointed agents for service of process in Ontario, it may not be possible for investors to collect from us or any selling shareholder, judgments obtained in Canadian courts. 3 SUMMARY THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION FOUND IN GREATER DETAIL ELSEWHERE IN THIS PROSPECTUS OR IN DOCUMENTS INCORPORATED BY REFERENCE HEREIN. THIS PROSPECTUS INCLUDES DOCUMENTS INCORPORATED BY REFERENCE. YOU SHOULD READ THE ENTIRE PROSPECTUS AND THE DOCUMENTS WE INCORPORATE BY REFERENCE, INCLUDING THE FINANCIAL DATA AND RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. USE OF THIS PROSPECTUS This prospectus may be used by selling shareholders in connection with the resale of the Registrable Securities. A selling shareholder may sell some, none or all of the Registrable Securities offered by this prospectus. We cannot predict when or in what amounts a selling shareholder may sell any of the Registrable Securities. For details of how the Registrable Securities may be sold, see "Plan of Distribution." This prospectus has not been filed in respect of, and will not qualify, any resale of Registrable Securities in Ontario at any date later than January 4, 2005 or in any other province or territory of Canada at any time. No underwriter will be involved in any sale or resale of Registrable Securities in Canada under this prospectus. OUR BUSINESS OVERVIEW We are developing a vertically-integrated energy company whose primary focus is PNG and the surrounding region. We operate through five subsidiaries. Please see "Corporate Structure" for additional details on our corporate structure. Our assets consist of an oil refinery, upstream petroleum exploration licenses and retail and commercial distribution facilities. BP supplies crude oil feedstock to the refinery. In addition, Shell has agreed to purchase from us the majority of the refinery's anticipated output. We are also undertaking an extensive petroleum exploration program within our 8 million acre license area located in PNG. Our operations are organized into three major business segments: - The upstream segment, which includes the exploration for and the future production of crude oil and/or natural gas; - The midstream segment, which includes the refining of crude oil and the marketing of refined products both domestically and for export; and - The downstream segment, which includes distribution of refined products in PNG. UPSTREAM We have an extensive upstream portfolio consisting of approximately 8 million acres of exploration licenses. The vast majority of our licenses are located onshore in the Eastern Papuan Basin and have the logistical advantage of moderate terrain, barge access to infrastructure and proximity to our refinery. We believe that this logistical advantage will allow for lower cost of development, provide cash-flow from early production, and provide access to a local market (our refinery) for oil production in contrast to past oil production activities in PNG. We have not discovered on our licences any oil or gas reserves that are deemed proved, probable or possible. Our exploration activities on these licenses have been suspended while we seek to finance and acquire drilling equipment with a drilling capacity sufficient to reach the total depths we believe are appropriate to explore our licenses more effectively. 4 MIDSTREAM Our refinery is centrally located across the harbour from Port Moresby, the capital city of PNG. Our refinery has a nameplate operating capacity of 32,500 barrels per day and was designed to comply with the World Bank's environmental standards. However, we expect the refinery to be capable of operating above the nameplate capacity, at up to 36,500 barrels per day, with a 96% annual throughput rate, resulting in an annual production of 12.8 million barrels of refined product. Our refinery is designed to process "sweet" crude, which is low in sulphur content and does not require product processing beyond distillation, reforming and blending. This simplified refinery design is expected to lower the processing cost, which should make the cost per barrel for processing comparable with the processing costs of much larger facilities. During the last quarter of 2004, we are in the process of commissioning our refinery. During the commissioning process, we are performing reliability and performance testing activities. These activities will result in sales of refined product at lower quantities than the refinery's nameplate capacity. In 2002, we entered into a crude supply contract with BP. Under this agreement, BP will be the exclusive supplier of crude feedstock for our refinery. The margin expected to drive refinery profitability is the spread between the sales price of our refined product and the cost of crude. Through an agreement with the government of PNG: - We are entitled to sell refined products in PNG for the import parity price, or IPP; and - The government of PNG has agreed to prohibit the dumping of imports below the IPP. In general, the IPP is the price that would be paid in PNG for a refined product that is being imported. For each refined product produced, the IPP is calculated by adding the cost that would typically be incurred to import such product to the PLATTs posted price for such product in Singapore. The costs that are included in this calculation include freight cost, insurance cost, landing charges, losses incurred in the transportation of refined products, demurrage and taxes. We anticipate that between 50 and 60% of our refinery's throughput will be sold into the PNG domestic market. We expect to sell the majority of the remaining product into the export market under our agreement with Shell, with the balance to be sold under a gas sales agreement with Origin Energy Holdings Limited and pursuant to export sales in the spot market. We have entered into an operating contract with a PNG subsidiary of Petrofac Facilities Management Limited, a leading facilities management company. Petrofac will manage the day-to-day operations and maintenance of the refinery. DOWNSTREAM We own and operate our own distribution, commercial and retail assets in PNG through a wholly-owned subsidiary. Our assets account for approximately 20% of the wholesale product market in PNG based on total volume of sales for such products. We also have an agreement with Shell to acquire their wholesale and distribution assets in PNG. We will lease these assets back to Shell under a long-term lease back arrangement, and Shell will continue to operate the business. This agreement is contingent upon successfully completing the commissioning process and our issuance of a certificate stating that the construction of the refinery is complete. The agreement is also subject to PNG government approval. We have initiated the formal process to obtain PNG government approval of the acquisition. We expect this process to be complete and approval granted shortly after the commissioning phase of the refinery is completed. 5 RECENT DEVELOPMENTS ACQUISITION FROM BP On April 28, 2004, we acquired BP's distribution assets and commercial and retail operations in PNG, comprising 40 service stations and 10 terminals and depots. In 2003, total sales from these assets were approximately $70 million and through the first six months of 2004, total sales from these assets were approximately $67 million. We will continue to operate these assets as a stand-alone entity with separate, independent management. Our distribution operations will purchase refined products from our refinery on the same commercial terms as all other unaffiliated PNG distributors. We have begun a re-branding process, with the first service station being branded with the "InterOil" name on September 24, 2004. The re-branding of the remaining service stations and other assets will continue into the fourth quarter of 2004. The purchase price was $12.2 million for these BP assets and inventory, of which $1.0 million has been paid, with the balance of funds payable on March 1, 2005. BP agreed to fund the working capital of these assets for one year after the effective date, whereupon we will repay to BP a working capital adjustment, certain dividend amounts and the balance of the purchase price. We expect that the payment will be approximately $12.52 million. As a result of this acquisition, we achieved our first operating revenue in May and June of 2004 of $12.6 million. Attached to this prospectus are unaudited pro forma consolidated statements of earnings for us for the six months ended June 30, 2004 and the year ended December 31, 2003. This illustrates, on a pro forma basis, the effects of the acquisition, based on assumptions described in the notes to such pro forma consolidated statements of earnings. Also attached are certain historical financial statements of the acquired entity. EXPLORATION PROGRAM We suspended drilling on our two exploration projects Sterling Mustang - 1 and Moose - 2 on during the summer of 2004 in order to acquire drilling rigs with the capacity to drill deeper than our current drilling equipment. We continue to evaluate the acquisition and financing of suitable rigs and have commenced a limited seismic program. CORPORATE FINANCING ACTIVITIES On August 28, 2004 and September 3, 2004, we issued U.S.$45,000,000 in Debentures. These Debentures will mature on August 28, 2009. We may elect to pay interest and the amount payable at maturity in cash or common shares or any combination of cash and common shares. We intend to use the net proceeds for additional working capital and general corporate purposes. On November 3, 2004, we amended our credit facility with BNP Paribas (Singapore branch) to increase the maximum availability under the facility from $60,000,000 to $100,000,000. This financing facility supports the ongoing procurement of crude oil for the refinery and includes related hedging transactions. The amended facility comprises a base facility to accommodate the issuance of letters of credit followed by secured loans in the form of short-term advances. In addition to the base facility, the amended agreement offers both a cash-secured short-term advance facility and a discounting facility on specific monetary receivables. REFINERY ACTIVITY Our refinery is currently in the commissioning and benchmark testing phase, which we expect to extend through the fourth quarter of 2004. On June 15, 2004, we received and off-loaded our first cargo of crude feedstock for refinery operations. Subsequent deliveries of crude feedstock have continued as dictated by the commissioning activities. We made our first domestic sale of 22,000 barrels of refined product on August 10, 2004, followed by our first sale of 240,000 barrels of refined product into the export market on September 7, 2004. We expect to continue to make sales 6 into both markets as product is generated during the commissioning phase, as the refinery units are undergoing reliability and performance testing and are brought into full production. RISK FACTORS An investment in our common shares is speculative and involves a high degree of risk. Before making an investment, you should give careful consideration to the following risk factors relating to our business and our common shares as well as to the other information in this prospectus or incorporated herein. In addition, this prospectus contains or incorporates statements that constitute forward-looking statements regarding, among other matters, our intent, belief or current expectations about our business. These forward-looking statements are subject to risks, uncertainties and assumptions. RISK RELATED TO OUR BUSINESS WE HAVE A LIMITED OPERATING HISTORY. We are a development stage company, with limited financial results upon which you may judge our potential. We may not become profitable. We may experience many of the problems, delays and expenses encountered by any early stage business, many of which are beyond our control, This includes, but is not limited to, substantial delays and expenses in commissioning the refinery and conducting our exploration drilling program, difficulty in obtaining financing and competition from larger and more established companies. OUR REFINERY IS NOT OPERATING AT FULL CAPACITY. We have completed the construction of our refinery in PNG and have substantially completed its commissioning, but it is not yet operating at full capacity. We encountered delays in the construction of the refinery. The likelihood of the success of our refinery project must be considered in light of the risks inherent in, and the difficulties, costs, complications and delays frequently encountered by new start-up companies. These risks include, without limitation, shortages of equipment, materials or labor; delays in delivery of equipment or materials; contractual disagreements; labor disruptions; political events; local or political opposition; accidents and unforeseen engineering, design or environmental problems. Any further delay in the commencement of operation of the refinery at full capacity would delay the anticipated revenues to be realized at the refinery, which would have a corresponding adverse impact upon our financial condition and business. Accordingly, there can be no assurance of the future profitability of us or our refinery. REFINERY COMMISSIONING AND START-UP COSTS MAY VARY MATERIALLY FROM OUR ESTIMATES. When we arranged for financing to construct our refinery, we estimated the capital, financing and development costs necessary to complete construction and start up of our refinery. Because our refinery project is unique, many of the estimates we made were subject to substantial uncertainties. The actual costs of completing the required work to commence operations at the refinery, including costs associated with commissioning and obtaining feedstock for the refinery, may vary from our estimates as a result of many factors, including changes in market conditions and changes in the sots of crude feedstocks, and may influence the completion of commissioning and final costs associated with commissioning and start-up. In addition, the costs of our financing of any increased start-up costs may be substantial, or may not be available at all. OUR REFINERY OPERATIONS MAY NOT BE PROFITABLE. Our refining operations are expected to be primarily affected by the difference or margin between the sales prices of our refined products and the costs we incur to purchase crude oil and other feedstocks. Historically, refining margins have been volatile, and we expect this volatility will exist in the future. Therefore, we will be subject to the risk that the difference between the cost to us of our crude oil supply and the price at which we can sell our refined products will not be sufficient for the profitable operation of our company and to allow us to service our indebtedness, including 7 our Debentures. We cannot control the prices at which our feedstocks will be purchased or at which refined petroleum products can be sold. WE MAY NOT BE SUCCESSFUL IN OUR EXPLORATION FOR OIL. We currently do not have any oil or gas reserves that are deemed proved, probable or possible pursuant to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. We have drilled one exploration well, suspended the drilling of two exploration wells and one exploration/appraisal well, and have plans to drill at least 12 additional exploration wells in PNG. We cannot be certain that the exploration wells we drill will be productive or that we will recover all or any portion of the costs to drill these wells. Because of the high cost, topography and subsurface characteristics of the areas we are exploring, we have limited seismic or other geoscience data to assist us in identifying drilling objectives. The lack of this data makes our exploration activities more risky than would be the case if such information were available. In addition, our current exploration and development plans may be curtailed, delayed or cancelled as a result of lack of adequate capital and other factors, such as weather, compliance with governmental regulations, mechanical difficulties, materials shortages, delays in the delivery of equipment, success or failure of activities in similar areas, current and forecasted prices for oil and changes in the estimates of costs to complete the projects. We will continue to gather information about our exploration projects, and it is possible that additional information may cause us to alter our schedule or determine that a project should not be pursued at all. You should understand that our plans regarding our projects are subject to change. OUR INVESTMENTS IN PNG ARE SUBJECT TO POLITICAL, LEGAL AND ECONOMIC RISKS. Our investments in PNG involve risks typically associated with investments in developing countries, such as uncertain political, economic, legal and tax environments; expropriation and nationalization of assets; the risks of war, expropriation, nationalization, renegotiation or nullification of existing contracts; taxation policies; foreign exchange restrictions; international monetary fluctuations; currency controls and foreign governmental regulations that favor or require the awarding of drilling contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Political conditions have at times been unstable in PNG. We attempt to conduct our business in such a manner that political and economic events of this nature will have minimal effects on our operations. In addition, we believe that the refinery is in the long term best interests of PNG and that we will continue to have the support of the current government. Notwithstanding the current support, our ability to conduct operations or exploration and development activities is subject to changes in government regulations or shifts in political attitudes for which we have no control. There can be no assurance that we have adequate protection against any or all of the risks described above. In addition, if a dispute arises with respect to our PNG operations, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons, especially foreign oil ministries and national oil companies, to the jurisdiction of the United States. WE MAY NOT BE ABLE TO MARKET ALL OF OUR REFINERY'S OUTPUT. We have entered into an agreement with Shell under which Shell will purchase refined products for distribution in PNG exclusively from us. Currently, Shell sells refined products in PNG and markets products in the region sufficient to utilize approximately 94% of the refinery's estimated output. In addition, the Project Agreement described under "Material Contracts" gives us certain rights to supply the domestic market in PNG with refined products. We have estimated that between 50% and 60% of the refinery's net output will be used to supply the PNG market. We will market the balance of the refinery's output in nearby regional markets. We have signed contracts with Shell, which require Shell to purchase the majority of our output for three years from our issuance of a 8 certificate stating that the construction of the refinery is complete. While we will sell refined products through our domestic retail network, our agreements with Shell are the only commercial agreements for the purchase of our refined products for export. However, we can give no assurances that we will be able to market the refinery's output to these nearby regional markets and we may be unable to market all of the refinery's output we produce. In addition, termination of the Shell agreement could have a material adverse effect on our results of operations and financial condition. Further, the Project Agreement between us and the PNG government provides that if there is more than one refinery operating in PNG during the term of the Project Agreement, the right to supply the domestic market will be shared by the refineries in proportion to their refining capacities. Therefore, if one or more additional refineries are built in PNG, our share of the domestic market will be diminished. WE MAY NOT BE ABLE TO OBTAIN CRUDE FEEDSTOCKS FOR OUR REFINERY. The Project Agreement requires the government of PNG to take action to ensure that domestic crude oil producers sell us their PNG domestic crude production for use in our refinery and that refined products for domestic PNG use will be purchased from us at the IPP. However, our agreement with BP is our only commercial agreement for the delivery of crude feedstock. If our relationship with BP were to terminate for any reason, we cannot assure you that we will be able to enter into other commercial agreements to supply adequate feedstock to our refinery. Termination of the BP agreement could have a material adverse effect on our results of operations and financial condition. PNG crude oil production rates are expected to satisfy the refinery's requirements for at least five years after commercial start-up. Alternative crude oils that are suitable for use as project feedstock are available in the nearby region. However, crude oil sourced from outside PNG may be more expensive than domestic crude oil and may reduce our gross profit margins. Alternatively, imported crude oil may be selected to alter the refinery product mix in response to changing market conditions. WE MAY NOT BE ABLE TO OBTAIN ALL OF THE LICENSES NECESSARY TO OPERATE OUR BUSINESS. Our operations require licenses and permits from various governmental authorities to drill wells, operate the refinery and market our refined products. We believe that we hold, or will hold, all necessary licenses and permits under applicable laws and regulations for our operations in PNG and believe we will be able to comply in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that we will be able to obtain or maintain all necessary licenses and permits that may be required to commission our oil refinery facilities or to maintain continued operations that economically justify the cost. OUR REFINING OPERATIONS WILL EXPOSE US TO RISK, NOT ALL OF WHICH ARE INSURED. Our refining operations will be subject to various hazards common to the industry, including explosions, fires, toxic emissions, maritime hazards and uncontrollable flows of oil and gas. In addition, our refining operations are subject to hazards of loss from earthquakes and severe weather conditions. As protection against operating hazards, we maintain insurance coverage against some, but not all of such potential losses. We may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates. In addition, losses may exceed coverage limits. As a result of market conditions, premiums and deductibles for certain types of insurance policies for refiners have increased substantially, and could escalate further. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. For example, insurance carriers are now requiring broad exclusions for losses due to risk of war and terrorist acts. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our financial position. 9 THE EXPLORATION AND PRODUCTION, AND THE REFINING AND DISTRIBUTION BUSINESSES ARE COMPETITIVE. We operate in the highly competitive areas of oil exploration and production, and refining and distribution of refined products. A number of our competitors have materially greater financial and other resources than we possess. Such competitors have a greater ability to bear the economic risks inherent in all phases of the industry. In our exploration and production business, the availability of alternate fuel sources, the costs of our drilling program, the development of transportation systems to bring future production to the market and transportation costs of oil are factors that affect our ability to compete in the marketplace. Many of our competitors operate in areas where they are able to sell both the oil and the natural gas that they produce. In our refining business, we will compete with numerous other companies for available supplies of crude oil and other feedstocks and for outlets for our refined products. BP has agreed to supply all of our feedstock. However, many of our competitors obtain a significant portion of their feedstocks from company-owned production, which may enable them to obtain feedstocks at a lower cost. The high cost of transporting goods to and from PNG reduces the availability of alternate fuel sources and retail outlets for our refined products. Competitors that have their own production or extensive distribution networks are at times able to offset losses from refining operations with profits from producing or retailing operations, and may be better positioned to withstand periods of depressed refining margins or feedstock shortages. In addition, new technology is making refining more efficient, which could lead to lower prices and reduced margins. YOU MAY BE UNABLE TO ENFORCE YOUR LEGAL RIGHTS AGAINST US. We are a New Brunswick, Canada corporation. All, or a substantial portion, of our assets are located outside the United States. It may be difficult for investors to enforce, outside the United States, judgments against us that are obtained in the United States in any such actions, including actions predicated upon the civil liability provisions of the securities laws of the United States. In addition, certain of our directors and officers are nationals or residents of countries outside of the United States, and all or a substantial portion of the assets of such persons are or may be located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon such persons or to enforce judgments against them obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States. THE VOLATILITY OF OIL PRICES COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. The prices we will receive for the refined products we produce and sell are likely to be subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and a variety of additional factors beyond our control. These factors include but are not limited to the condition of the worldwide economy, the actions of the Organization of Petroleum Exporting Countries, governmental regulations, political stability in the Middle East and elsewhere and the availability of alternate fuel sources. The prices for oil will affect: - our revenues, cash flows and earnings; - our ability to attract capital to finance our operations, and the cost of such capital; - the value of our oil properties; - the profit or loss we incur in refining petroleum products; and - the profit or loss we incur in exploring and developing our reserves. 10 WEATHER AND UNFORESEEN OPERATING HAZARDS MAY ADVERSELY IMPACT OUR OPERATING ACTIVITIES. Our operations are subject to risks inherent in the oil and gas industry, such as blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution, and other environmental risks. These risks could result in substantial losses due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. Our PNG operations are subject to a variety of additional operating risks such as earthquakes, mudslides, tsunamis and other effects associated with active volcanoes, extensive rainfall or other adverse weather conditions. Our operations could result in liability for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could have a material adverse effect on our financial condition and results of operations. WE MAY NOT BE ABLE TO GENERATE CASH FLOWS IF WE ARE UNABLE TO RAISE CAPITAL. We make, and will continue to make, substantial capital expenditures for the completion of our refinery and for the exploration, development, acquisition and production of oil reserves. We believe that we will have sufficient cash provided by operating activities and borrowings under our financing arrangements to fund planned capital expenditures. If our ability to obtain debt or equity financing decreases as a result of lower refining margins, lower oil prices, delays, operating difficulties, construction costs, refinery start-up costs or lack of drilling success, we may have limited ability to expend the capital necessary to undertake or complete future drilling programs. There can be no assurance that additional debt or equity financing or cash generated by operations will be available to meet these requirements. OUR SIGNIFICANT DEBT LEVELS AND OUR DEBT COVENANTS MAY LIMIT OUR FUTURE FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND IN PURSUING BUSINESS OPPORTUNITIES. As of September 30, 2004, we had approximately $136 million in long-term debt, excluding current maturities. The level of our indebtedness will have important effects on our future operations, including: - a portion of our cash flow will be used to pay interest and principal on our debt and will not be available for other purposes; - our OPIC credit facility, BNP credit facility and Debentures contain financial tests which we must satisfy in order to avoid a default under such credit facilities or under the Debentures; - covenants in our OPIC credit facility, BNP credit facility and Debentures require us to meet financial tests in order to borrow additional money, which may have the effect of limiting our flexibility in reacting to changes in our business and our ability to fund future operations and acquisitions; and - our ability to obtain additional financing for capital expenditures and other purposes may be limited. While any of the Debentures are outstanding, neither we nor our subsidiaries, may incur, guarantee or assume any Indebtedness other than Permitted Indebtedness unless our aggregate Indebtedness is not greater than 400% of EBITDA both prior to and after the incurrence of such Indebtedness or such Indebtedness would qualify as Permitted Defeased Indebtedness. As a result, we may not be able to obtain debt financing to pursue opportunities as they arise, which could adversely affect our cash flows or results of operations. 11 RISK RELATED TO AN INVESTMENT IN OUR COMMON SHARES THE MARKET PRICE OF OUR COMMON SHARES FLUCTUATES. The price of our common shares on the Toronto Stock Exchange, the American Stock Exchange, the Australian Stock Exchange and the Port Moresby Stock Exchange fluctuates. Between January 1, 2003 and November 9, 2004, the price of our common shares on the TSX Venture Exchange and subsequently on the Toronto Stock Exchange has fluctuated from a high of C$39.95 to a low of C$11.50. Fluctuation in our common share price is caused by a number of factors, some of which are beyond our control, including: - additions or departures of our key personnel; - announcements by us of significant acquisitions or capital commitments; - prices for oil and gas; - quarterly variations in our operating results; - short sales of our common shares; and - significant sales of our common shares, among other factors. In addition, the stock market in recent years has experienced broad price and volume fluctuations that have often been unrelated to the operating performance of companies. These broad market fluctuations could adversely affect the market price of our common shares. FUTURE ISSUANCES OF OUR COMMON SHARES MAY ADVERSELY AFFECT THE PRICE OF OUR COMMON SHARES. The future issuance of a substantial number of our common shares into the public market, or the perception that such issuances could occur, could adversely affect the prevailing market price of our common shares. A decline in the price of our shares could make it more difficult to raise funds through future offerings of common shares or securities convertible into common shares. We believe that substantially all of our outstanding common shares and common shares issued in the future upon the exercise of outstanding options and the conversion or exercise of the Debentures and Warrants will be tradeable under the United States federal securities laws following this offering, subject to certain limitations. These limitations include vesting provisions in option agreements, and volume and manner-of-sale restrictions under Rule 144. WE MAY NOT HAVE THE FUNDS NECESSARY TO FINANCE THE CHANGE IN CONTROL REPURCHASE OPTION. Upon the occurrence of specific kinds of change in control events, we may be required to repurchase outstanding Debentures in cash at 115% of the principal amount, plus accrued but unpaid interest. However, it is possible that we will not have sufficient funds at such time to make the required repurchase of Debentures in cash or that we are otherwise legally restricted from such repurchases, which could be an event of default under the Debentures resulting in a material and adverse effect on our financial condition, which could negatively affect the price of our common shares. 12 CONVERSION OF THE DEBENTURES, EXERCISE OF THE WARRANTS AND ADDITIONAL SALES OF COMMON SHARES BY OUR SELLING SHAREHOLDERS MAY DEPRESS THE PRICE OF OUR COMMON SHARES AND SUBSTANTIALLY DILUTE YOUR EQUITY INTEREST. If all of the principal and interest on the Debentures are converted into common shares and all of the Warrants are converted into common shares, we may issue up to 4,500,000 common shares. The issuance of all or a significant portion of these shares could result in the substantial dilution to the interests of other shareholders or a decrease in the price of our common shares due to the additional supply of shares relative to demand in the market. A decline in the price of our common shares could encourage short sales of our common shares, which could place further downward pressure on the price of our common shares. THE DEBENTURES PROVIDE FOR VARIOUS EVENTS OF DEFAULT THAT WOULD ENTITLE THE SELLING SHAREHOLDERS TO REQUIRE US TO REPAY THE ENTIRE AMOUNT OWED IN CASH WITHIN SEVEN DAYS. IF AN EVENT OF DEFAULT OCCURS, WE MAY BE UNABLE TO IMMEDIATELY REPAY THE AMOUNT OWED, AND ANY REPAYMENT MAY LEAVE US WITH LITTLE OR NO WORKING CAPITAL IN OUR BUSINESS. The Debentures provide for various events of default. If an event of default occurs, selling shareholders can require us to repay the full principal amount owed, plus the greater of (i) accrued interest, and an additional 15% of the principal amount owed and (ii) the excess between the product of (A) the highest closing price of the commons shares on the Toronto Stock Exchange for the 20 Trading Days immediately preceding acceleration of the Debentures and (B) the conversion ratio. These liquidated damages must be paid within three days of the date of the event of default. Some of the events of default include matters over which we may have some, little or no control. Many other events of default are described in the agreements we executed when we issued the Debentures. If an event of default occurs, we may be unable to repay the entire amount, plus the liquidated damages, in cash. Any such repayment could leave us with little or no working capital for our business. THE DEBENTURES RESTRICT OUR ABILITY TO RAISE ADDITIONAL EQUITY, WHICH COULD HINDER OUR EFFORTS TO OBTAIN ADDITIONAL NECESSARY FINANCING TO OPERATE OUR BUSINESS, OR TO REPAY THE HOLDERS OF THE DEBENTURES. The agreements we executed when we issued these Debentures prohibit us from obtaining additional equity or equity equivalent financing in a private transaction without first offering the selling shareholders the opportunity to provide up to 30% of such financing upon the terms and conditions proposed. This restriction may make it extremely difficult to raise additional equity capital while the Debentures are outstanding. We may need to raise such additional capital, and if we are unable to do so, we may have little or no working capital for our business, and the market price of our common shares may decline. WE DO NOT INTEND TO PAY, AND HAVE RESTRICTIONS UPON OUR ABILITY TO PAY DIVIDENDS ON OUR COMMON SHARES. We have not paid cash dividends in the past and we do not intend to pay dividends on our common stock in the foreseeable future. We currently intend to retain any earnings for the future operation and development of our business. Our ability to make dividend payments in the future will be dependent on our future performance and liquidity. In addition, the Debentures contain restrictions on our ability to pay dividends on our common shares. USE OF PROCEEDS We will not receive any proceeds from the resale of Registrable Securities from any of the selling shareholders. All of the net proceeds from sales of Registrable Securities will be retained by the selling shareholders. We will receive proceeds upon the exercise of Warrants, which we anticipate using for working capital and other general corporate purposes. 13 TRADING RANGE OF COMMON SHARES Our common shares trade on the Toronto Stock Exchange under the symbol "IOL" in Canadian dollars and on the American Stock Exchange under the symbol "IOC" in U.S. dollars. In addition, on the Australian Stock Exchange our common shares trade in CHESS Depositary Interests, which are the equivalent of 1/10th of a common share. The CHESS Depository Interests trade in Australian dollars under the symbol "IOC". The high and low closing prices of our common shares on the respective exchanges for the periods indicated are set forth in the following table:
TORONTO STOCK EXCHANGE AND TSX VENTURE AMERICAN STOCK AUSTRALIAN STOCK EXCHANGE (1) EXCHANGE (2) EXCHANGE (3) -------------------- ------------------------- -------------------- HIGH LOW HIGH LOW HIGH LOW YEAR ENDED DECEMBER 31, 2002 First quarter n/a n/a n/a n/a A$16.00 A$7.60 Second quarter C$14.22 C$9.40 n/a n/a A$17.00 A$9.70 Third quarter C$10.50 C$7.50 n/a n/a A$12.00 A$8.50 Fourth quarter C$12.00 C$8.15 n/a n/a A$13.00 A$9.40 YEAR ENDED DECEMBER 31, 2003 First quarter C$14.50 C$11.50 n/a n/a A$16.50 A$12.50 Second quarter C$18.30 C$13.75 n/a n/a A$19.50 A$14.50 Third quarter C$36.00 C$16.75 n/a n/a A$40.50 A$18.30 Fourth quarter C$32.80 C$20.00 n/a n/a A$35.40 A$23.00 YEAR ENDING DECEMBER 31, 2004 First quarter C$39.95 C$30.00 n/a n/a A$37.80 A$30.00 Second quarter C$36.00 C$28.05 n/a n/a A$36.00 A$30.10 Third quarter C$30.89 C$19.25 U.S.$24.35 U.S.$15.55 A$31.90 A$21.50 Fourth quarter (through November 9, 2004) C$36.66 C$27.90 U.S.30.70 U.S.22.65 A$40.00 A$26.90
- ---------- Notes: (1) On July 14, 2004, our common shares began trading on the Toronto Stock Exchange. Prior to that time our common shares were traded on the TSX Venture Exchange. (2) On September 8, 2004, our common shares began trading on the American Stock Exchange. (3)The Australian Stock Exchange column has been adjusted for a full common share by multiplying the daily quoted price of a CHESS Depository Interest by 10. The Port Moresby Stock Exchange is associated with the Australian Stock Exchange and has been excluded from this table. On November 9, 2004, the closing price of our common shares on the Toronto Stock Exchange was C$36.60 and on the American Stock Exchange was U.S.$30.55. DIVIDENDS We have not declared or paid dividends on our common shares in the past two years and we do not anticipate that we will pay dividends in the near future. In addition, the Debentures prohibit us from declaring a dividend. Our anticipated capital requirements are such that we intend to follow a policy of retaining earnings in order to finance further business development. 14 DESCRIPTION OF OUR COMMON SHARES Each common share has one vote on all matters voted on by our shareholders, including the election of our directors, and entitles the holder thereof to receive dividends if, as and when declared by our board of directors. Holders of common shares will participate rateably in any distribution of assets upon liquidation, dissolution or winding-up. Our common shares are not convertible, redeemable, assessable or entitled to the benefits of any sinking or repurchase fund. Our articles contain restrictions on the issuance of common shares or securities convertible into common shares except in certain circumstances including the consent of PIE. In addition, certain persons have a pre-emptive right upon the issuance of common shares or securities convertible into common shares. This pre-emptive right does not apply in cases where the consent of PIE is obtained for the issuance. Our by-laws also contain a requirement that we must obtain shareholder approval when we propose to issue common shares that, together with all other common shares we have issued in the prior 12 months, equal more than 15% of our common shares outstanding at the beginning of that 12 month period, unless we offer our common shares on a pro rata basis to all holders of our common shares, but then only if the Port Moresby Stock Exchange so requires such approval. Holders of common shares will be entitled to dividends in the amounts and at the times declared by our board of directors in its discretion out of funds legally available for the payment of dividends. Under New Brunswick corporate law, shareholders have cumulative voting rights in the election of directors. Holders of our common shares are permitted to cast a number of votes equal to the number of common shares held by such person multiplied by the number of directors elected. Such votes may be cast for one candidate or distributed among the candidates in any manner. On October 31, 2004, there were 25,852,575 common shares issued and outstanding. OPTIONS On October 31, 2004, there were options outstanding to purchase 1,216,523 common shares. CONVERTIBLE SECURITIES We have entered into an agreement with PIE under which PIE can exchange its 5,000 shares of SPI on a one-for-one basis for our common shares. This election may be made by PIE at any time. Mr. Phil E Mulacek, our president and chief executive officer, is the president and majority shareholder of PIE. We have granted to PNG Drilling Ventures Limited a right to convert its participating interest in certain wells into a maximum of 628,305 of our common shares under a drilling participation agreement dated July 21, 2003. 15 DESCRIPTION OF OUR DEBENTURES Our Debentures were issued on August 27, 2004 and September 3, 2004. The following description summarizes the material provisions of the Debentures. The following summary does not purport to be complete and is subject to, and qualified by reference to, the provisions of the Debentures, including the definitions of certain terms in the Debentures. Copies of the Debentures have been filed on SEDAR. As used in this description, the words "we", "us", "our" and "InterOil" do not include any of our current or future subsidiaries. Definitions for certain capitalized terms used in this section, but that are not defined, can be found in "Glossary of Certain Terms". GENERAL We issued an aggregate principal amount of U.S.$45,000,000 of Debentures. Our Debentures will mature on August 28, 2009 (the "Maturity Date"). The amount payable at maturity of each Debenture is the initial principal plus all accrued but unpaid interest thereon, to the extent such principal amount and interest has not been converted into common shares. INTEREST Commencing on the date the Debenture was issued, interest accrues daily on the principal amount of the Debentures and is compounded quarterly at a rate of 8.875% per year. Interest is payable on the first day of each calendar quarter, commencing on October 1, 2004. We have the option to pay interest either in cash or common shares, or a combination of cash and common shares. In order to exercise such right, we must deliver to all the holders of Debentures an irrevocable written notice stating our election to pay such interest in full on such Interest Payment Date in either cash or common shares or a combination thereof (the "Interest Election Notice"). Such Interest Election Notice shall be delivered at least forty calendar days prior to the applicable Interest Payment Date but no more than sixty calendar days prior to such Interest Payment Date (the "Interest Notice Date"). If we elect or are required to repay any interest in common shares, the number of such shares to be issued for such Interest Payment Date shall be the number determined by dividing (x) the amount of interest, by (y) 90% of the Market Price as of such Interest Payment Date. Such shares shall be issued and delivered within three Trading Days following such Interest Payment Date. Interest will cease to accrue on the Debentures at maturity, or that portion of the Debenture which is converted, including pursuant to a special conversion right, or conversion, which includes special conversion, or redemption. We may not reissue a Debenture that has matured or been converted, redeemed or otherwise cancelled, except for registration of transfer, exchange or replacement of such Debenture. RANKING OF DEBENTURES Our Debentures are unsecured and subordinate to all Senior Debt, whether outstanding on the date of issue of our Debentures or thereafter created, incurred, assumed or guaranteed. Our Debentures shall rank equally in right of payment with, or prior to, all our existing and future unsecured indebtedness that is subordinated to Senior Debt. CONVERSION RIGHTS The holder of a Debenture has the right to convert the outstanding Principal Amount in whole or in part into our common shares at U.S.$20.16 per common share (the "Conversion Price") by delivering to us a Conversion Notice. If we do not deliver the stock certificates within three Trading Days after the Conversion Date, the holder of the Debenture shall be entitled to rescind such conversion by written notice to us. If a holder of the Debenture does not rescind a Conversion Notice following our failure to deliver common shares upon conversion, we will pay the holder cash in an amount equal to 2% of the Principal Amount per month until such shares are delivered. 16 SPECIAL CONVERSION RIGHT In addition to the conversion rights set forth above, the holder of a Debenture has the right to convert 5.56% of the Principal Amount (a "Special Conversion Amount") on each of the following dates (each, a "Special Conversion Date" and such conversion right, the "Special Conversion Right"): June 25, 2006, July 25, 2006, August 25, 2006, September 25, 2006, October 25, 2006, June 25, 2007, July 25, 2007, August 25, 2007, September 25, 2007, October 25, 2007, June 25, 2008, July 25, 2008, August 25, 2008, September 25, 2008, October 25, 2008, June 25, 2009, July 25, 2009 and the Maturity Date. Each conversion of a Special Conversion Amount shall be effected at the Special Conversion Price. REMEDY CONVERSION RIGHT Upon the occurrence of a Remedy Triggering Event, the holder of a Debenture has a right to convert the Remedy Conversion Amount on a Remedy Conversion Date (such conversion right, the "Remedy Conversion Right"). In no event shall the holder of a Debenture be permitted to exercise both the Special Conversion Right and the Remedy Conversion Right in the same month. A Remedy Triggering Event shall occur upon the occurrence of any of following events: - our Average Consolidated EBITDA for the period ending June 30, 2005 is less than U.S.$5 million; - our Average Consolidated EBITDA for the period ending September 30, 2005 is less than U.S.$6.25 million; - our Average Consolidated EBITDA for any period ending on or after December 31, 2005 is less than U.S.$7.5 million; or - an Event of Default has occurred. Immediately upon the first occurrence of any Remedy Triggering Event, the Principal Amount shall be automatically adjusted to an amount equal to 110% of such Principal Amount. We will give the holders of a Debenture not less than 25 days nor more than 30 days written notice of our irrevocable election to satisfy our obligation with respect to the applicable Special Conversion Date or Remedy Conversion Date. If we do not deliver notice within the prescribed period, we will be deemed to have elected to pay the Special Conversion Amount or Remedy Conversion Amount in cash. Within five Trading Days of receipt of our notice, the holder of a Debenture must deliver written notice of exercise of their applicable additional conversion amount. REDEMPTION OF DEBENTURES AT OUR OPTION Commencing on the date 12 months after the Effective Date, if (i) the daily volume weighted average price of the common shares has been at or above 140% of the Conversion Price for at least 30 consecutive Trading Days (any such 30 Trading Day period being a "Trigger Period"), and (ii) the combined trading volume of the common shares shall have averaged at least 65,000 shares per day on the Toronto Stock Exchange and American Stock Exchange during each Trading Day during the Trigger Period, we have the right to require the holder of a Debenture to convert the Debenture in whole, as set forth and subject to the conditions in the Debenture. CONVERSION PRICE ADJUSTMENTS The conversion price will be adjusted in certain instances, including the payment of dividends or distributions on common shares payable in common shares or other shares, subdivisions or combinations of common shares, distributions to all holders of common shares of evidences of our indebtedness or assets or cash or rights or warrants to subscribe for or purchase any of our securities or any of our subsidiaries, any recapitalization, reorganization, consolidation, 17 merger, spin-off or other business combination (other than a Change in Control Transaction) pursuant to which holders of common shares are entitled to receive securities or other assets with respect to or in exchange for common shares. Upon a Change in Control Transaction, the holder of a Debenture shall have the right at its option, (i) to convert the Debenture (in whole or in part) at the Special Conversion Price into shares of securities, receivable by holders of common shares following such Change in Control Transaction, or (ii) to require us or our successors to redeem the Debenture in cash at 115% of the Principal Amount. If the holder of as Debenture does not notify us of its election within 10 Trading Days, the holder of a Debenture shall be deemed to have waived its rights to do so. FRACTIONAL SHARES We will not issue any fractional common shares. Instead, we will pay cash based on the closing price of a common share at such time. If we elect not to, or are unable to, make such a cash payment, the holder of a Debenture shall be entitled to receive, in lieu of the fraction of a share, one whole common share. CERTAIN COVENANTS Permitted Indebtedness. So long as any Debentures are outstanding, we will not, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness other than Permitted Indebtedness unless certain conditions have been met. Namely, either of the following conditions must be met: - both prior to and after giving effect to the incurrence of such Indebtedness, the aggregate Indebtedness on a consolidated basis is not in excess of 400% of EBITDA on a consolidated basis; or - such Indebtedness would qualify as Permitted Defeased Indebtedness. Dividends. While any Debentures remain outstanding, we will not declare any dividends on any shares of any class of our capital stock, or apply any of our property or assets to the purchase, redemption or other retirement of, or set apart any sum for the payment of any dividends on, or for the purchase, redemption or other retirement of, or make any other distribution by reduction of capital in respect of, any shares of any class of our capital. Sale of Equity Securities. Subject to certain exceptions, until the date that no Debentures remain outstanding, we will not, directly or indirectly, offer, sell or grant any option to purchase, or dispose of any of our subsidiaries' equity or equity equivalent securities, including any debt, preferred stock or other instrument or security that is convertible into or exchangeable or exercisable for our common shares or any rights, warrants or options to subscribe for or purchase our common shares or any stock or securities that are convertible into or exercisable or exchangeable for our common shares (a "Subsequent Placement") without first offering the holders of Debentures the opportunity to provide up to 30% of such financing upon the terms and conditions proposed. Interest Shares. We are required to deliver cash in lieu of Interest Shares on the applicable Interest Payment Date if at any time from and including the Interest Notice Date until the time at which the holders of Debentures receive such Interest Shares (i) any of the Equity Conditions are not satisfied or (ii) an Event of Default exists or occurs pursuant to the Debenture, or any event which, with the passage of time or notice or both, would constitute an Event of Default, unless otherwise waived in writing by the holder of a Debenture in whole or in part at the holder's option. OWNERSHIP/ISSUANCE LIMITATIONS In the event that payment in Interest Shares would result in the holder of a Debenture exceeding 9.99% in control or direction over, or a combination of both, of the voting rights attached to our voting securities, (i) on the Interest Payment Date, we will pay such portion of interest, in Interest 18 Shares as may be effected without exceeding such limitations, and (ii) the balance of the interest shall be paid in cash. In connection with the delivery of any notices by the holder of a Debenture, we may request, and the holder shall confirm, that in connection with receiving any applicable common shares pursuant thereto whether or not, after giving effect to receipt of the applicable common shares, such holder, together with its Affiliates, will have beneficial ownership of a number of common shares which exceeds 9.99% of our voting securities. DEFAULT AND RELATED MATTERS If an Event of Default occurs, and is continuing with respect to any of our Debentures, the holder may declare all of the then outstanding Principal Amount of the Debenture and all other Debentures held by the holder, to be due and payable immediately in cash, except that in the case of an Event of Default arising from events described in clauses (h) and (i) of the definition of Event of Default in the "Glossary of Certain Terms", the Debenture will become due and payable without further action or notice. In the event of an acceleration, the amount due and owing to the holder of a Debenture shall be the greater of (1) 115% of the Principal Amount of our Debentures held by the holder and (2) the product of (A) the highest closing price for the common shares on the Principal Market for the 20 Trading Days immediately preceding the holder's acceleration and (B) the conversion ratio. In either case we will pay interest on such amount in cash at the Default Rate to the holder of a Debenture if such amount is not paid within seven days of the holder's request. The remedies pursuant to the Debenture are cumulative. OUR OPTION TO EFFECT COVENANT DEFEASANCE If we deposit in an account sufficient funds to cover the payment of principal and interest in the Debentures, many of the covenants related to the Debentures, including those related to transactions with an Affiliate, transfers of assets or the incurrence of additional indebtedness will be waived for the remainder of the terms of the Debentures. MODIFICATION AND WAIVER No provision of the Debenture may be amended other than by a written instrument signed by us and the holders of Debentures representing at least 55% of the aggregate principal amount of our Debentures. Any amendment to the Debenture shall be binding on all holders of the Debentures. No provision may be waived other than by a written instrument signed by the party against whom enforcement is sought. Any amendment must apply to all of the holders of a Debenture then outstanding and any consideration offered or paid to amend or consent to a waiver or modification must be made to all holders of Debentures. Each holder of a Debenture may elect to waive (whether permanently or temporarily, and subject to such conditions, if any, as the holder may specify in such notice) any of its rights under the Debenture by providing us notice, in which event such waiver shall be binding against such holder in accordance with its terms; provided, however, such voluntary waiver may not reduce such holder's obligations to us pursuant to the Debenture. GOVERNING LAW Our Debentures are governed by, and construed in accordance with, the laws of the State of New York. 19 DESCRIPTION OF OUR WARRANTS The Warrants were issued on August 27, 2004 and September 3, 2004. The following description summarizes the material provisions of the Warrants. The following summary does not purport to be complete and is subject to, and qualified by reference to, all of the provisions of the Warrants, including certain defined terms in the Warrants. Copies of the Warrants have been filed on SEDAR. As used in this description, the words "we", "us", "our" and "InterOil" do not include any of our current or future subsidiaries. Definitions for certain capitalized terms used in this section, but that are not defined, can be found in "Glossary of Certain Terms". GENERAL Each Warrant entitles the holder to purchase one common share at an exercise price of $21.91, subject to certain adjustments, until 5:00 p.m. (Toronto time) on August 27, 2009. Any Warrants not exercised prior to such time will expire. EXERCISE OF WARRANTS In the event that a Warrant is not exercised in full, the number of common shares to be available for purchase thereunder shall be reduced by the number of such common shares for which that Warrant is exercised. The holder of a Warrant will only need to physically surrender the Warrant to us upon the purchase of the full amount of common shares represented by the Warrant. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS In the case of a reorganization, reclassification, merger, consolidation, sale, transfer or disposition of assets, the holder of a Warrant has the right to exercise the Warrant and receive the number of common shares of the successor or acquiring corporation or our common shares that would have been exercisable immediately prior to such event. DISTRIBUTIONS TO COMMON SHAREHOLDERS If there is a distribution to our common shareholders, other than as part of a dissolution, we will provide to the holder of the Warrant, without payment of any additional consideration, upon exercise of the Warrant, the amount of the distribution to which the holder of a Warrant would have been entitled to receive had the exercise occurred before the record date for such distribution. EXERCISE PRICE AND COMMON SHARE ADJUSTMENTS The number of securities purchasable upon the exercise of the Warrant and the exercise price will be adjustable upon the occurrence of the following: - payment of a dividend or a distribution in common shares to holder of our common shares; - subdivision of our outstanding common shares into a greater number of shares; - combination of our outstanding common shares into a smaller number of shares; or - issuance of any shares of our capital stock in a reclassification of the common shares. We will provide notice to the holder of the Warrant upon the occurrence of any such event and the number of shares purchasable upon exercise of the Warrant will be adjusted as though the Warrant had been exercised prior to such event. 20 FRACTIONAL SHARES We will not issue any fractional shares upon the exercise of the Warrant. A cash adjustment will be paid for each such final fraction in an amount equal to such fraction multiplied by the exercise price. OWNERSHIP/ISSUANCE LIMITATIONS We will not effect the exercise of the Warrant, and no holder of a Warrant shall have the right to exercise the Warrant to the extent that after giving effect to such exercise, the number of common shares that may be acquired by the holder, when added to the total number of common shares deemed beneficially owned by such holder at such time, exceeds 9.99% of our voting securities. TRANSFERABILITY Subject to the compliance with applicable securities laws and the terms and conditions of the Warrant, the Warrants are transferable in whole or in part, and may be divided or combined with other Warrants. MODIFICATION AND WAIVER No provision of the Warrants may be amended other than by a written instrument signed by us and the holders of Debentures representing at least 55% of the aggregate principal amount of the Debentures. Any amendment to the Warrants shall be binding on all holders of Warrants. No provision may be waived other than by a written instrument signed by the party against whom enforcement is sought. Any amendment made must apply to all of the holders of a Warrant then outstanding and any consideration offered or paid to amend or consent to a waiver or modification must be made to all holders of the Warrants. Each holder of a Warrant may elect to waive (whether permanently or temporarily, and subject to such conditions, if any, as the holder may specify in such notice) any of its rights under the Warrant by providing us notice, in which event such waiver shall be binding against such holder in accordance with its terms; provided, however, such voluntary waiver may not reduce such holder's obligations to us pursuant to the Warrant. GOVERNING LAW The Warrants are governed by, and construed in accordance with, the laws of the State of New York. 21 CHANGES IN OUR SHARE AND DEBT CAPITAL Since December 31, 2003, the following changes have occurred in our share and loan capital: - we issued 263,929 of our common shares upon the exercise of previously granted options, which has increased our share capital by $2,080,192, increased cash receipts by $1,495,945 and reduced in other paid in capital of $584,247; - we issued U.S.$45,000,000 principal amount of Debentures on August 27, 2004 and September 3, 2004, which will cause an increase to our long-term debt and to our shareholder's equity. We are in the process of determining the correct split between debt and equity under Canadian GAAP; and - we issued 772,685 of our common shares on conversion of certain previously granted participating interests, which has increased our share capital by $8,929,169, and reduced long-term liabilities in an equal amount. LIST OF SELLING SHAREHOLDERS On August 27, 2004 we issued $30,000,000 aggregate principal amount of Debentures and Warrants to purchase 239,612 common shares. We issued an additional $15,000,000 aggregate principal amount of Debentures and Warrants to purchase 119,801 common shares on September 3, 2004. The selling shareholders in the table listed below acquired Debentures and Warrants from us, or are transferees of holders who acquired Debentures and Warrants from us in these private placements on August 27, 2004 and September 3, 2004. The common shares listed in the following table as being beneficially owned by a selling shareholder prior to the offering include common shares that are issuable upon conversion of the Debentures held by the selling shareholder, based on the current conversion price of the Debentures of $20.16 per share, and that are issuable upon exercise of Warrants held by the selling shareholder. Beginning on June 25, 2006, holders of Debentures will be permitted to convert their Debentures into common shares at 90% of the market price of our common shares as described under "Description of Our Debentures -- Conversion Rights" and "Description of Our Debentures -- Special Conversion Right." In addition, we have the right to pay interest on the Debentures in common shares as described under "Description of Our Debentures -- Interest." As a result of these and other provisions, holders of the Debentures may acquire more common shares than are currently listed in the following table. In addition, the calculation of the shares beneficially owned does not take into account the limitation on more than 9.99% beneficial ownership contained in the terms of the Debentures and the Warrants. Currently, 2,591,556 common shares are issuable upon conversion of the Debentures and exercise of the Warrants. This prospectus covers an additional 1,908,444 common shares that in the future may be issued to holders of the Debentures in lieu of cash interest payments and any increase in the number of common shares that may be acquired upon conversion of the Debentures after June 25, 2006. The selling shareholders listed below are offering all of the common shares beneficially owned by such holders that are issuable upon conversion of the Debentures and exercise of the Warrants. The information in this table is as of November 8, 2004, and is based upon information provided by the selling shareholders. Information with respect to selling shareholders in this prospectus will be updated by way of prospectus supplements. The selling shareholders may from time to time offer and sell pursuant to this prospectus any or all of the common stock being registered. To prevent dilution to the selling shareholders, the following numbers may change because of adjustments to reflect stock splits, stock dividends or similar events involving our common shares. 22 The term selling shareholders includes the shareholders listed below and their transferees, pledgees, donees and other successors. Unless otherwise indicated, each selling shareholder has sole voting and investment power with respect to the common shares described in this table.
NUMBER OF NUMBER OF SHARES SHARES PERCENTAGE BENEFICIALLY NUMBER OF BENEFICIALLY OWNED OWNED PRIOR TO SHARES BEING OWNED AFTER AFTER NAME OF SELLING SHAREHOLDER OFFERING(1) OFFERED OFFERING OFFERING(1) --------------------------- ---------------- ------------ ------------ ----------- AIG Global Investment Corp. (Canada)(2) 410,975 143,975 267,000 1.0% BTR Global Arbitrage Trading Limited(3) 280,561 230,361 50,200 *(13) Centrum Bank AG(4) 1,862,416 138,216 1,724,200 2.8% Front Street Investment Management(5) 57,590 57,590 0 0 Kings Road Investments Ltd.(6) 192,926 192,926 0 0 Manchester Securities Corporation(7) 863,853 863,853 0 0 Middlemarch Partners Limited (8) 43,192 43,192 0 0 Portside Growth and Opportunity Fund(9) 575,902 575,902 0 0 Provident Premier Master Fund, Ltd.(10) 287,951 287,951 0 0 TD Asset Management Inc.(11) 28,795 28,795 0 0 TD Newcrest (12) 78,795 28,795 50,000 *(13)
- ---------- Notes: (1) The percentage of shares beneficially owned after the offering is based on 25,852,575 common shares outstanding as of October 31, 2004 plus, with respect to each selling shareholder, the number of common shares being offered by such selling shareholder pursuant to this prospectus. We do not know when or in what amounts the selling shareholders may offer for sale the shares of common stock pursuant to this offering. The selling shareholders may choose not to sell any of the shares offered by this prospectus. Because the selling shareholders may offer all or some of the common shares pursuant to this offering, and because there are currently no agreements, arrangements or undertakings with respect to the sale of any of the common shares, we cannot estimate the number of common shares that the selling shareholders will hold after completion of the offering. For purposes of this table, we have assumed that the selling shareholders will have sold all of the shares covered by this prospectus upon the completion of the offering. (2) The shares beneficially owned by AIG Global Investment Corp. (Canada) include 124,008 common shares issuable upon conversion of $2,500,000 aggregate principal amount of Debentures and 19,967 common shares issuable upon exercise of Warrants held by AIG Global Investment Corp. (Canada). AIG Global Investment Corp. (Canada) shares voting and investment powers with respect to all of these common shares with the Office of the Superintendent of Financial Institutions (Canada). (3) The shares beneficially owned by BTR Global Arbitrage Trading Limited include 198,413 common shares issuable upon conversion of $4,000,000 aggregate principal amount of Debentures and 31,948 common shares issuable upon exercise of Warrants held by BTR Global Arbitrage Trading Limited. BTR Global Arbitrage Trading Limited shares voting and investment power with respect to all of these common shares with Salida Capital Corp., third party investment advisor to BTR Global Arbitrage Trading Limited, Danny Guy and Brad White. Danny Guy and Brad White are both portfolio managers of BTR Global Arbitrage Trading Limited. (4) The shares beneficially owned by Centrum Bank AG include 119,048 common shares issuable upon conversion of $2,400,000 aggregate principal amount of Debentures and 19,168 common shares issuable upon exercise of Warrants held by Centrum Bank AG. (5) The shares beneficially owned by Front Street Investment Management include 49,603 common shares issuable upon conversion of $1,000,000 aggregate principal amount of Debentures and 7,987 common shares issuable upon exercise of Warrants held by Front Street Investment Management. (6) The shares beneficially owned by Kings Road Investments Ltd. include 166,171 common shares issuable upon conversion of $3,350,000 aggregate principal amount of Debentures and 26,755 common shares issuable upon exercise of Warrants held by Kings Road Investments Ltd. Kings Road Investments Ltd. shares voting and investment power with respect to all of these common shares with Alexander Jackson, Reade Griffith and Paddy Dear. 23 (7) The shares beneficially owned by Manchester Securities Corporation include 744,048 common shares issuable upon conversion of $15,000,000 aggregate principal amount of Debentures and 119,805 common shares issuable upon exercise of Warrants held by Manchester Securities Corporation. Manchester Securities Corporation is a wholly-owned subsidiary of Elliott Associates, L.P. Paul E. Singer and Elliott Capital Advisors, L.P., an entity controlled by Mr. Singer, are the general partners of Elliott Associates, L.P. Manchester Securities Corporation shares voting and investment power with respect to all of these common shares with Elliott Associates, L.P. and Paul E. Singer. (8) The shares beneficially owned by Middlemarch Partners Limited include 37,202 common shares issuable upon conversion of $750,000 aggregate principal amount of Debentures and 5,990 common shares issuable upon exercise of Warrants held by Middlemarch Partners Limited. (9) The shares beneficially owned by Portside Growth and Opportunity Fund include 496,032 common shares issuable upon conversion of $10,000,000 aggregate principal amount of Debentures and 79,870 common shares issuable upon exercise of Warrants held by Portside Growth and Opportunity Fund. Ramius Capital Group, LLC is the investment advisor of Portside Growth and Opportunity Fund. C4S & Co., LLC is the sole managing member of Ramius Capital Group, LLC. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon, the four managing members of C4S & Co., LLC, and Ramius Capital Group, LLC share voting and investment power with respect to all of these common shares with Portside Growth and Opportunity Fund. Ramius Capital Group, LLC, Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon disclaim beneficial ownership of these common shares. (10) The shares beneficially owned by Provident Premier Master Fund, Ltd. include 248,016 common shares issuable upon conversion of $5,000,000 aggregate principal amount of Debentures and 39,935 common shares issuable upon exercise of Warrants held Provident Premier Master Fund, Ltd. The managing members of Gemini Investment Strategies, LLC, the investment advisor to Provident Premier Master Fund, Ltd., are Steven W. Winters and Richard S. Yakomin. Mr. Winters and Mr. Yakomin share voting and investment power with respect to all of these common shares with Provident Premier Master Fund, Ltd. Mr. Winters and Mr. Yakomin disclaim beneficial ownership of these common shares. (11) Of the aggregate principal amount of Debentures, $72,000 is for the account of Emerald North American Long Short Fund, $214,000 is for the account of TD Energy Fund and $214,000 is for the account of TD Resource Fund, each of which is managed by TD Asset Management Inc. These shares include 24,802 common shares issuable upon conversion of $500,000 aggregate principal amount of Debentures and 3,993 common shares issuable upon exercise of Warrants. (12) The shares beneficially owned by TD Newcrest include 24,802 common shares issuable upon conversion of $500,000 aggregate principal amount of Debentures and 3,993 common shares issuable upon exercise of Warrants beneficially owned by TD Newcrest. (13) Less than 1%. 24 PLAN OF DISTRIBUTION Our Debentures and Warrants pursuant to which the Registrable Securities are issuable were issued on August 27, 2004 and September 3, 2004 and offered and sold in the United States, Canada and elsewhere to accredited investors. THIS PROSPECTUS HAS NOT BEEN FILED IN RESPECT OF, AND WILL NOT QUALIFY, ANY RESALE OF REGISTRABLE SECURITIES IN ONTARIO AT ANY DATE LATER THAN JANUARY 4, 2005 OR IN ANY OTHER PROVINCE OR TERRITORY OF CANADA AT ANY TIME. This prospectus will qualify resales of Registrable Securities in Ontario with a maximum aggregate value of up to C$165,000,000 only, which aggregate value is determined by multiplying the last reported sale price of our common shares on the Toronto Stock Exchange on November 9, 2004 of C$36.60 per share and 4,500,000 common shares. No underwriter will be involved in any sale or resale of Registrable Securities in Canada under this prospectus. Our outstanding common shares are listed on the Australian Stock Exchange, Port Moresby Stock Exchange, American Stock Exchange and the Toronto Stock Exchange, each of which has approved the listing of the common shares. The holders of our Debentures, Warrants and our Registrable Securities are entitled to the benefits of a registration rights agreement, dated as of August 26, 2004, between us and each selling shareholder (the "Registration Rights Agreement"), pursuant to which we have filed this base shelf prospectus with the Ontario Securities Commission under the Canadian shelf prospectus system and a registration statement including this prospectus with the SEC under the United States Securities Act (the "Shelf Registration Statement") covering resales of the Registrable Securities. Pursuant to this agreement, we have agreed, at our expense: (a) to file with the SEC a registration statement on such form as we deem appropriate covering resales by holders of all Registrable Securities; (b) to use our best efforts to cause such registration statement to become effective as promptly as is practicable, but in no event later than 120 days after August 26, 2004; and (c) to use our best efforts to keep the registration statement effective until the earlier of: (i) two years from the effective date of the registration statement; or (ii) until all Registrable Securities may be sold by the holders under Rule 144(k). We are registering our Registrable Securities covered by this prospectus under the United States Securities Act to permit any of the selling shareholders to conduct public secondary trading of these securities from time to time after the date of this prospectus in accordance with the federal securities laws of the United States and under the securities laws of the province of Ontario prior to January 4, 2005. There can be no assurance that any of the selling shareholders will sell any or all of the shares offered hereby. The selling shareholders will be responsible for any fees, disbursements and expenses of any counsel for the selling shareholders in excess of $10,000. All other expenses incurred in connection with the registration and sale of the Registrable Securities, including printer's and accounting fees and the fees, disbursements and expenses of counsel for the Company will be borne by us. Additionally, we have agreed to indemnify the selling shareholders against certain liabilities that they may incur in connection with the sale of the Registrable Securities registered hereunder, including liabilities under the United States Securities Act, and each selling shareholder has agreed to indemnify us, other holders and any persons who control us, as defined in the federal securities laws of the United States, against any liability with respect to any information furnished by such holder in writing to us (including the selling shareholder's questionnaire) expressly for use in this shelf registration statement. Agents, underwriters, brokers and dealers may be entitled under agreements entered into by the selling 25 shareholders or us to indemnification against certain civil liabilities, including liabilities under the United States Securities Act. The selling shareholders may sell all or any portion of the Registrable Securities beneficially owned by them and offered hereby from time to time directly, to or through underwriters or agents designated from time to time, to or through brokers or dealers, or through any combination of these methods of sale. The sales may be effected from time to time in one or more transactions: - on the American Stock Exchange; - in the over-the-counter market; - on any other U.S. national securities exchange or quotation service on which the common shares may be listed or quoted at the time of the sale; - in transactions otherwise than on such exchanges or systems or in the over-the-counter market; - through the writing of options, whether such options are listed on an options exchange or otherwise; - ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; - block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; - purchases by a broker-dealer as principal and resale by the broker-dealer for its account; - an exchange distribution in accordance with the rules of the applicable exchange; - privately negotiated transactions; - short sales; - broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; - pledges of our common shares as security for any loan or obligation, including pledges of brokers or dealers; - firm commitment or best efforts underwriting; - in a combination of any such methods of sale; and - any other method permitted pursuant to applicable law. The Registrable Securities may be sold at: - fixed prices that may be changed; - market prices prevailing at the time of sale; - prices related to the prevailing market prices at the time of sale; or - negotiated prices. All shelf information omitted from this base shelf prospectus will be contained in a prospectus supplement that will be delivered to purchasers together with this base shelf prospectus. Each prospectus supplement will be incorporated by reference into this base shelf prospectus as at the date of the prospectus supplement and only for purposes of the resale to which the prospectus supplement pertains. Each prospectus supplement to this base shelf prospectus will contain current information with respect to the selling shareholders. Any underwriter, agent, broker or dealer may receive compensation in the form of discounts, commissions or concessions from the selling shareholders or the purchasers of the shares for whom such broker-dealers may act as agents or to whom they sell as principals, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). A member firm of an exchange on which our common shares are traded may be engaged to act as a selling shareholder's agent in the sale of Registrable Securities by such selling shareholder. 26 In connection with distributions of the Registrable Securities offered by this prospectus or otherwise, the selling shareholders may enter into hedging transactions with brokers or dealers or other financial institutions with respect to our common shares. In connection with such transactions, such brokers or dealers or other financial institutions may engage in short sales of our common shares in the course of hedging the positions they assume with the selling shareholders. Such hedging transactions may require or permit the selling shareholders to deliver the Registrable Securities to such brokers or dealers or other financial institutions to settle such hedging transactions. The selling shareholders may also sell our common shares short and deliver the Registrable Securities to close out such short positions. If so required by applicable law, this prospectus, as amended or supplemented, may be used to effect: - the short sales of our common shares referred to above; - the sale or other disposition by the brokers or dealers or other financial institutions of any Registrable Securities they receive pursuant to the hedging transactions referred to above; or - the delivery by the selling shareholders of Registrable Securities to close out short positions. The selling shareholders may also pledge or grant a security interest in the Registrable Securities registered hereunder to a broker or dealer or other financial institution and, upon a default, such broker or dealer or other financial institution may effect sales of the pledged shares pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling shareholders may also transfer the Registrable Securities registered hereunder to a third party and such transferee may effect sales of the Registrable Securities pursuant to this prospectus (as supplemented or amended to reflect such transaction). In addition, any Registrable Securities covered by this prospectus that qualify for resale in the United States pursuant to Rule 144 under the United States Securities Act, may be sold under Rule 144 rather than pursuant to this prospectus. Any Registrable Securities covered by this prospectus that qualify for resale outside the United States pursuant to Regulation S may, after January 4, 2005, be sold under Regulation S rather than under this prospectus. Once sold under the registration statement, of which this prospectus forms a part, the common shares will be freely tradable in the hands of persons other than our affiliates. 27 The selling shareholders and any underwriters, brokers, dealers, agents or others that participate with the selling shareholders in the distribution of the Registrable Securities offered by this prospectus may be deemed to be "underwriters" within the meaning of the United States Securities Act and any underwriting discounts, commissions, concessions or fees received by such persons and any profit on the resale of the Registrable Securities purchased by such persons may be deemed to be underwriting commissions or discounts under the United States Securities Act. To the extent the selling shareholders may be deemed to be underwriters, the selling shareholders may be subject to certain statutory liabilities of the United States Securities Act, including, but not limited to, Sections 11, 12 and 17 of the United States Securities Act and Rule 10b-5 under the United States Exchange Act. In addition and without limiting the foregoing, the selling shareholders will be subject to applicable provisions of the United States Securities Exchange Act of 1934, and the rules and regulations thereunder. 28 MATERIAL CONTRACTS
DATE DESCRIPTION PARTIES - ----------------- ------------------------------------------------- ---------------------------------------------------------- August 26, 2004 Securities Purchase Agreement InterOil Corporation and the Initial Purchasers as listed March 10, 2004 Share Sale Agreement InterOil Corporation, SPI Distribution Limited, Gas Tank Nederland B.V. and BP Papua New Guinea Limited November 9, 2003 Facilities Management Contract InterOil Limited and Petrofac Niugini Limited March 26, 2002 Engineering Procurement and Construction Contract InterOil Limited and Clough Niugini Limited December 21, 2001 Crude Supply Agency and Sales Agreement EP InterOil, Ltd. and BP Singapore Pte Limited April 9, 2001 Domestic Sales Agreement InterOil Limited and Shell Papua New Guinea Limited April 9, 2001 Purchase and Sale Agreement InterOil Corporation and Shell Overseas Holdings Limited March 26, 2001 Export Marketing and Shipping Agreement EP InterOil, Ltd. and Shell International Eastern Trading Company February 8, 2001 Agreement for the Sale and Purchase of Naphtha EP InterOil, Ltd. and Shell International Eastern Trading Company May 29, 1997 Refinery State Project Agreement InterOil Limited and EP InterOil, Ltd. and The Independent State of Papua New Guinea
SECURITIES PURCHASE AGREEMENT This agreement is between us and the selling shareholders. The agreement provides for the issuance of the Debenture and the Warrants. See "Description of Our Debentures" and "Description of Our Warrants". SHARE SALE AGREEMENT This agreement is between us, SPI Distribution Limited, Gas Tank Nederland B.V. and BP PNG and provides for the sale and purchase by us of the shares in BP PNG. The agreement includes the following key components: (a) a BP entity, GAS Tank Nederland agrees to sell its wholly-owned subsidiary, BP PNG, with all of its current assets and business as a going concern to, SPI Distribution Limited; and (b) BP agrees to fund the working capital of BP PNG for one year after the effective date, whereupon InterOil will repay to BP the working capital adjustment, certain dividend amounts and the balance of the purchase price. FACILITIES MANAGEMENT CONTRACT This agreement is between InterOil Limited and Petrofac Niugini Limited and provides for the management of the day-to-day operation and maintenance of our refinery. The agreement includes the following key components: 29 (a) Initial term of 5 years from "practical completion" of our refinery, subject to a 6-month notice of termination by either party; (b) Reimbursable cost basis; (c) Contractor remuneration based on a fixed management fee subject to rebate and incentive arrangements according to achievement against key performance indicators; (d) Contractor provided performance security and parent company guarantee from Petrofac Facilities Management Limited. ENGINEERING PROCUREMENT AND CONSTRUCTION CONTRACT This agreement is between InterOil Limited and Clough Niugini Limited and provides for the design, procurement, and construction of our refinery. The agreement includes the following key components: (a) Lump sum turnkey contract; (b) 26 months construction/commissioning period to "practical completion" of our refinery; and (c) Liquidated damages against delay in completion and 12-month defect liability period. CRUDE SUPPLY AGENCY AND SALES AGREEMENT This agreement is between EP InterOil, Ltd. and BP Singapore Pte Limited and provides for the supply of feedstock for InterOil's refinery. The agreement includes the following key components: (a) Ensures supply (feedstock) to the refinery for a marketing fee; (b) Supply will first be sourced from PNG local producers at the prevailing market price for domestically produced crude; (c) BP may provide alternative supply at or below the posted price of the domestically produced crude; and (d) InterOil may decline acceptance of BP supplied crude and replace with alternative crude. DOMESTIC SALES AGREEMENT This agreement is between InterOil Limited and Shell Papua New Guinea Limited ("Shell PNG") and provides for the supply and purchase of refined product from the refinery for the purposes of re-supply and sale in PNG upon the physical completion and commissioning ("practical completion") of our refinery. The agreement includes the following key components: (a) Shell PNG agrees to source all of its product requirements from InterOil and to limit import of product in accordance with the agreement; and (b) Shell PNG agrees to pay InterOil under the IPP methodology provided for in the Refinery State Project Agreement. 30 PURCHASE AND SALE AGREEMENT These agreements are executory between us and Shell Overseas Holdings Limited ("Shell Overseas") and provide for the sale and purchase of the shares in Shell PNG upon the physical completion and commissioning ("practical completion") of our refinery. The agreements include the following key components: (a) Shell Overseas agrees to sell its PNG operating company with all its physical product distribution assets having transferred its business to a new operating company to be owned by Shell; and (b) Shell Overseas will lease the distribution assets back from InterOil to continue Shell's product distribution business unabated. EXPORT MARKETING AND SHIPPING AGREEMENT AND AGREEMENT FOR THE SALE AND PURCHASE OF NAPHTHA These agreements are between EP InterOil, Ltd. and Shell International Eastern Trading Company ("SIETCO") and provide for the purchase for export of refined product from the refinery of volumes not sold domestically. These agreements include the following key components: (a) Provide for market-based pricing of product for export; and (b) SIETCO agrees to take 100% of any excess volumes, after domestic sales, of all products available for export including unleaded mogas, Jet-A1, kerosene and diesel and to take 100% of the refinery's naphtha production. REFINERY STATE PROJECT AGREEMENT This agreement is between InterOil Limited, EP InterOil, Ltd. and The Independent State of Papua New Guinea and provides the following key components: (a) Minimum 30-year term; (b) The right for InterOil to construct, manage and operate our refinery and to sell product domestically and by export; (c) 5-year tax holiday for income derived from operation of our refinery; (d) First call on domestically produced crude oil, at market pricing, for feedstock into the refinery; (e) 30-year Import Parity Pricing ("IPP") methodology for pricing of refined products sold from our refinery provides the overall refinery margin; and (f) Provides mechanism to require local refined product distributors and wholesalers to purchase their supply first from our refinery using prices determined using the IPP methodology and prevents product dumping at below IPP levels. 31 CORPORATE STRUCTURE We have five, majority-owned, principal subsidiaries SPI InterOil LDC ("SPI"); EP InterOil, Ltd. ("EPI"); InterOil Limited ("IOL"); SP InterOil Exploration and Production Corporation ("SPI E&P") and InterOil Products Limited ("IPL"). Other than IPL, all companies have integrated, shared management. INTEROIL CORPORATION We were formed under the Business Corporations Act (New Brunswick) by articles of amalgamation dated May 29, 1997. Our registered office is located at Brunswick House, 10th Floor, 44 Chipman Hill, Saint John, New Brunswick E2L 4S6. SPI INTEROIL, LDC SPI was incorporated under the International Business Companies Act, 1989, of the Commonwealth of the Bahamas on November 22, 1996. The registered office of SPI is located in Nassau, the Bahamas. SPI was formed under the laws of the Bahamas to facilitate investment and to maximise the tax advantages available to its investors. The General Manager of SPI is Petroleum Independent and Exploration Corporation ("PIE"), a privately held company registered in Texas, USA and incorporated in 1981. The management fee paid to PIE in 2002 was U.S.$150,000. Mr. Phil E Mulacek, our president and chief executive officer, is the president and majority shareholder of PIE. SPI negotiated the purchase of the refinery assets, which included a modular crude unit, a reformer and two ocean-going American-flagged steel deck barges. After acquiring the equipment, SPI directed the dismantling, loading and transportation of the equipment off the Texas Gulf coast. We entered into an agreement with PIE under which PIE can exchange its 5,000 shares of SPI on a one-for-one basis for fully paid and validly issued shares in InterOil. This election may be made by PIE at any time. EP INTEROIL, LTD. EPI was incorporated under the Companies Law of the Cayman Islands in 1996 to form a joint venture with Enron Papua New Guinea Limited ("EPNG"). Its registered office is located in Grand Cayman. Currently, SPI controls EPI, with 100% of the voting stock. EPI acquired the crude distillation and reformer units from SPI and arranged for this equipment to be refurbished in Texas by Gulf Copper Manufacturing Corp. It also acquired two PGT-5 gas turbine generators from GM Services of Italy. This equipment has been transferred to IOL in PNG for the construction of the refinery. INTEROIL LIMITED IOL is incorporated in PNG, and was formed in 1994 to construct, own and operate the refinery once the refinery is completed. Its registered office is in Port Moresby, PNG. IOL has played a very active role in working with the PNG government to obtain the permits, authorizations and certificates required under the State Project Agreement and has also obtained a 99-year lease of the refinery site. IOL has received "Pioneer status" in PNG, which grants a five-year income tax holiday to IOL in PNG. SP INTEROIL EXPLORATION AND PRODUCTION CORPORATION SPI E&P was incorporated under the International Business Companies Act, 1989, of the Commonwealth of the Bahamas on September 3, 1998. The registered office of SPI E&P is located in Nassau, the Bahamas. SPI E&P was formed under the laws of the Bahamas to facilitate investment and to maximise the tax advantages available to its investors. 32 SPI E&P owns all of the specific purpose exploration companies holding and operating exploration rights in PNG, including SPI (208) Limited, which is undertaking a drilling program in its petroleum prospecting licence (PPL 238). INTEROIL PRODUCTS LIMITED IPL is incorporated in PNG and was formed in October 1969 as BP Papua New Guinea. IPL changed its name in April 2004 after its acquisition by us. Its registered office is in Lae, Morobe Province, PNG. IPL owns and operates a petroleum products distribution, wholesale and retail business in PNG and has approximately 20% of the wholesale product market in PNG based on total volume of sales for such products, in competition with Shell and ExxonMobil. CORPORATE CHART [CORPORATE FLOW CHART] PRINCIPAL OPERATIONAL OFFICES Our principal operational offices are located at Suite 2, Level 2, Orchid Plaza 79-88 Abbott Street, Cairns, QLD 4870, Australia, our telephone number is (61) 7 4046 4600 and our website address is www.interoil.com. WITHHOLDING TAX AND CURRENCY EXCHANGE CONTROLS IN PNG The current rate of dividend withholding tax stipulated by the Income Tax Act 1959 (PNG) is 17%. The Central Banking (Foreign Exchange & Gold) Regulation (Ch138) (PNG) regulates the flow of currency into and out of PNG. A PNG company can only send PNG Kina or a foreign currency (other than that which was the subject of a previously approved exchange) out of PNG with the Central Bank's prior approval. These authorities or approvals are delegated to certain commercial banks as authorised dealers up to certain limits. The limits to exchanging and remitting foreign currency overseas from PNG are K50,000 per transaction without further tax clearance from the Internal Revenue Commission and K500,000 in aggregate per annum without further Central Bank approval. 33 LEGAL MATTERS Certain Canadian legal matters relating to the issue and sale of common shares offered hereby will be passed upon on behalf of us by Stikeman Elliott LLP. Certain United States legal matters will be passed upon on behalf of us by Haynes and Boone LLP. EXPERTS Our consolidated annual financial statements as at and for the years ended December 31, 2003 and 2002 incorporated by reference herein, have been audited by KPMG. The financial statements of InterOil Products Limited as of December 31, 2003, 2002 and 2001 and for each of the three years in the period ended December 31, 2003 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers, independent accountants, given on the authority of said firm as experts in auditing and accounting. The Commonwealth Scientific & Industrial Research Organization ("CSIRO"), an agency of the Australian Government, has provided technical support in relation to our exploration program. CSIRO is not an expert for purposes of the United States Securities Act. The CSIRO reports are available for review at our offices in Cairns, Queensland. AVAILABLE INFORMATION Information has been incorporated by reference in this base shelf prospectus from documents filed with the SEC and the securities commissions or similar regulatory authorities in Canada. Copies of the documents incorporated herein by reference and of the permanent information record may be obtained on request without charge from our Vice-President, Corporate Development, Gary M. Duvall (telephone: (281-292-1800)), or by accessing the disclosure documents available through the Internet on the Canadian System for Electronic Document Analysis and Retrieval ("SEDAR") which can be accessed as www.sedar.com, for Canadian filings, and SEC's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, which can be accessed at www.sec.gov. We are subject to the informational requirements of the Exchange Act, and in accordance therewith file reports and other information with the SEC. Such reports and other information filed by the company can be inspected and copied at the public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and at the following regional offices of the SEC: 175 West Jackson Blvd., Suite 900 Chicago, IL 60604; and 233 Broadway New York, NY 10279. DOCUMENTS INCORPORATED BY REFERENCE The following documents of ours filed with the SEC and/or securities commissions or similar authorities in Canada are incorporated by reference for purposes of sales by the selling shareholders in Ontario (the document as so used is referred to as the "Canadian Prospectus") and for the purpose of sales by the selling shareholders in the United States (the document as so used is referred to as the "U.S. Prospectus"): (a) Annual Information Form dated May 19, 2004; (b) Comparative consolidated financial statements for the years ended December 31, 2003 and December 31, 2002, together with the auditors' report thereon, contained on pages 29-42 of the 2003 Annual Report of the Company; (c) Management's Discussion and Analysis for the year ended December 31, 2003 contained on pages 43-48 of the 2003 Annual Report of the Company; (d) Amended comparative consolidated financial statements for the years ended December 31, 2003, December 31, 2002 and December 31, 2001, together with the notes and the auditors' report thereon; 34 (e) Unaudited comparative consolidated financial statements for the six months ended June 30, 2004 and June 30, 2003; (f) Management's discussion and analysis in respect of the six months ended June 30, 2004; (g) Amended unaudited comparative consolidated financial statements for the six months ended June 30, 2004, June 30, 2003 and June 30, 2002; (h) Management Information Circular for the annual and special meeting of shareholders held on June 29, 2004 (excluding those portions, which, in accordance with National Instrument 44-101, need not be incorporated by reference); (i) Material change report dated February 2, 2004 in respect of a revision to the estimate for completion of our refinery project in PNG; (j) Material change report dated March 16, 2004 in respect of the share sale agreement with BP plc to acquire BP's PNG subsidiary, BP PNG; (k) Material change report dated June 17, 2004 in respect of the first shipment of crude oil for our refinery has arrived at our marine terminal located across the harbour from Port Moresby, PNG; (l) Material change report dated July 7, 2004 in respect of the refinery's crude distillation unit accepting feedstock for the first time; (m) Material change report dated August 27, 2004 in respect of the definitive agreement for the private placement of $30 million to $40 million of Debentures; and (n) Material change report dated September 10, 2004 in respect of the closing the issuance of an additional $15 million of Debentures, raising a total of $45 million. Any document of the type referred to in the preceding paragraph (excluding confidential material change reports) filed by us with a securities commission or similar authority in Canada, after the date of this prospectus and prior to January 5, 2005, shall be deemed to be incorporated by reference into this base shelf prospectus for purposes of any distribution of Registrable Securities in Ontario pursuant to the Canadian Prospectus. Any document of the type referred to in the preceding paragraph filed by us after the date of this prospectus with the SEC shall be deemed to be incorporated by reference into this base shelf prospectus for purposes of any sale of Registrable Securities in the United States pursuant to the U.S. Prospectus. Any statement contained herein in a document incorporated or deemed to be incorporated or deemed to be incorporated by reference herein shall be modified or superseded for purposes of this base shelf prospectus to the extent that a statement contained herein, or in any other subsequently filed document which also is incorporated or is deemed to be incorporated by reference therein, modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this base shelf prospectus. 35 LIST OF DOCUMENTS FILED WITH THE SEC The following documents have been filed with the SEC as part of the Registration Statement of which the prospectus forms a part: the documents referred to under the heading "Documents Incorporated by Reference"; U.S. GAAP Reconciliations; documents referred to under the heading "Material Contracts"; reports of CSIRO; and the consents of KPMG and PricewaterhouseCoopers. AUDITORS, TRANSFER AGENT AND REGISTRAR Our auditors are KPMG, Sydney, Australia. The transfer agent and registrar for our common shares is Computershare Trust Company of Canada at its principal transfer office in Toronto, Ontario. PURCHASER'S STATUTORY RIGHTS Securities legislation in Ontario provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. The securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, damages where the base shelf prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province. The purchaser should refer to any applicable provisions of the securities legislation for the particulars of these rights or consult with a legal advisor. 36 AUDITORS' CONSENT TO THE BOARD OF DIRECTORS OF INTEROIL CORPORATION We have read the prospectus dated November 10, 2004 relating to the distribution of certain common shares of the Company. We have complied with Canadian generally accepted standards for an auditors' involvement with offering documents. We consent to the incorporation by reference in the above-mentioned prospectus of our auditor's report to the shareholders of the Company on the consolidated balance sheets of the Company as at December 31, 2003 and 2002 and the consolidated statements of earnings, retained earnings and cash flows for each of the years then ended and to the reference to our firm under the heading "Experts" in the prospectus. Our report is dated March 4, 2004 (except as to note 13 which is as of March 24, 2004). Sydney, Australia /s/ KPMG November 10, 2004 37 GLOSSARY OF CERTAIN TERMS Unless otherwise specified in the applicable shelf prospectus supplement, the following defined terms shall have the following meanings: "AFFILIATE" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control", when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "APPROVED MARKET" means the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market. "AVERAGE CONSOLIDATED EBITDA" means as of the end of any fiscal quarter, the average of the EBITDA for the two consecutive fiscal quarters ending on the date of calculation. If the refinery owned by the Company's subsidiary does not reach Practical Completion by December 31, 2004, the calculation of the earnings interest expense, taxes, depreciation, depletion and amortization comprising EBITDA will be calculated on a pro forma basis as if Practical Completion occurred on December 31, 2004. "BANKRUPTCY EVENT" means any of the following events: (a) the Company or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any subsidiary thereof; (b) there is commenced against the Company or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Company or any subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing. "CHANGE IN CONTROL TRANSACTION" will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company with or into any other corporation or other person (whether or not the Company is the surviving corporation), or any other corporate 38 reorganization or transaction or series of related transactions in which in any of such events the existing voting stockholders of the Company prior to such event cease to own 50% or more of the voting stock, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any "going private" transaction or tender offer by the Company for 20% or more of the Company's common shares), (ii) any person together with its affiliates and associates beneficially owns or is deemed to beneficially own in excess of 50% of the Company's voting power, (iii) there is a replacement of more than one-half of the members of the Company's Board of Directors which is not approved by those individuals who are members of the Company's Board of Director's on the date thereof, or (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis, (v) a transaction occurs as a result of which the common shares ceases to be listed on the Principal Market, or (vi) the occurrence of the closing by the Company pursuant to an agreement to which the Company is a party or which it is bound providing for an event set forth in (i), (ii), (iii), (iv), or (v) above. "COMMON SHARES" means the shares of InterOil Corporation, no par value per share, purchased by the Holder or Holders. "CONTINGENT OBLIGATION" means, as to any person, any direct or indirect liability, contingent or otherwise, of that person with respect to any indebtedness, lease, dividend or other obligation of another person if the primary purpose or intent of the person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto. "CONVERSION NOTICE" means the fully executed notice of conversion in the form attached to the Debenture as Exhibit A that is delivered to the Company when the holder decides to convert the outstanding Principal Amount under the Debenture. "CONVERSION PRICE" shall equal U.S. $20.16, as adjusted pursuant to the terms hereof. "CONVERTIBLE SECURITIES" means any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of common stock. "CSIRO" means the Australian Commonwealth Scientific and Industrial Research Organisation. "DEFAULT RATE" equals the lower of fifteen percent (15%) per annum or the highest rate permitted by law. "DEFEASANCE AMOUNT" means (i) with respect to any Indebtedness incurred solely in connection with the purchase of equipment ("Equipment Financing"), an amount equal to 20% of such Equipment Financing (ii) with respect to any such Indebtedness incurred solely in connection with a Project Financing Indebtedness, and amount equal to 5% of such Project Financing Indebtedness and (iii) in all other circumstances an amount equal to 25% of such Indebtedness. "EBITDA" means for any fiscal quarter, earnings for such quarter plus the sum of the following for such quarter to the extent deducted in calculating earnings for such quarter: interest expense, taxes, depreciation, depletion and amortization, in each case (i) calculated in accordance with Canadian GAAP and consistent with past practice including the allocation of all corporate costs, and (ii) excluding results attributable to the Company's oil and gas exploration and production business. "EFFECTIVE DATE" means the date on which the registration statement covering resale of our Registrable Securities becomes effective under the United States Securities Act. 39 "EQUITY CONDITIONS" means each of the following: (a) the Company is in compliance with all requirements of the applicable U.S. and Canadian federal, state and provincial securities regulators, including, without limitation, all disclosure requirements; (b) the Company shall be in compliance with its obligations under the Registration Rights Agreement; (c) during the period beginning on the Initial Closing Date and ending on and including the applicable date of determination, there shall not have occurred an event of default under Section 4(a)(iv); (d) on each day during the period beginning on the Initial Closing Date and ending on and including the applicable date of determination, the common shares (including our Registrable Securities) shall be listed on the Principal Market and delisting or suspension by such market or exchange shall not have been threatened either (A) in writing by such market or exchange or (B) by falling below for at least the requisite period the applicable minimum listing maintenance requirements of such market or exchange; (e) on the applicable date of determination the registration statement or registration statements required pursuant to the Registration Rights Agreement shall be effective and available for the sale of all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement; (f) the Company shall have no knowledge of any fact that would cause the registration statements required pursuant to the Registration Rights Agreement not be effective and available for the sale of at least all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement; and (g) on the applicable date of determination, our Registrable Securities may be sold in Canada either pursuant to a qualified prospectus or without any restriction. "EVENT OF DEFAULT" means any of the following: (a) the suspension from trading or failure of the common shares to be listed on the Principal Market for a period of 5 consecutive days or for more than an aggregate of 10 days in any 365 day period; (b) at any time following the tenth consecutive Business Day that the number of shares of common shares that the holder would be entitled to receive upon a conversion of the full Principal Amount of the Debenture; (c) in the case of a default in payment of the principal amount or accrued but unpaid interest thereon continuing for at least 5 days of any of our Debentures on or after the date such payment is due; (d) a default in the timely issuance of Registrable Securities which default continues for 5 business days after the Company has received written notice that it has failed to issue shares within the fifth day following the Conversion date; 40 (e) failure by the Company for 10 days after written notice has been received by the Company to comply with any material provision of any Debentures, the Purchase agreement, the warrants or the Registration Rights Agreement; (f) a breach by the Company of its material representation or warranties in the Purchase Agreement; (g) any default after any cure period under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its subsidiaries for in excess of $500,000; (h) a final judgement for the payment of money aggregating in excess of $2,500,000 are rendered against the Company or any of its subsidiaries; or (i) if the Company or any of its subsidiaries is subject to any Bankruptcy Event. "INDEBTEDNESS" of any person means, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services; (c) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all monetary obligations under any leasing or similar arrangement which, in accordance with Canadian GAAP, is classified as a capital lease; (g) all indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or in any property or assets (including accounts and contract rights) owned by any person, even though the person which owns such assets or property has not assumed or become liable for the payment of such indebtedness; and (h) (h) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above; "INTEREST PAYMENT DATE" is the date elected through the Interest Election Notice to pay interest on the Debenture either in cash or common shares, or a combination thereof. 41 "INTEREST SHARES" means the shares that are issued to the holder when an Interest Election Notice states that the Company elects to pay interest in common shares in lieu of cash. "MARKET PRICE" shall equal the arithmetic mean of the daily VWAP's during the twenty (20) Trading Days immediately preceding the date as of which such Market Price is being determined. The VWAP's used to determine the Market Price shall be appropriately and equitably adjusted for any stock splits, stock dividends, recapitalizations and the like. "NI 44-101" means National Instrument 44-101 Short Form Prospectus Distributions. "PERMITTED DEFEASED INDEBTEDNESS" means Indebtedness incurred by the Company or its Subsidiaries provided that the Company irrevocably deposits in the Collateral Amount cash in U.S. dollars, non-callable U.S. Government Obligations (as defined in the Debentures), or a combination thereof, in an amount equal to or greater than the applicable Defeasance Amount. "PERMITTED INDEBTEDNESS" means: (a) the BNP Credit Facility and the ANZ Credit Facility; (b) Loan Agreement between E.P. InterOil, Ltd. and Overseas Private Investment Corporation (OPIC) dated as of June 12, 2001 in the principal amount not to exceed U.S.$85,000,000; (c) Deferred payment of second instalment of purchase price of $3,000,000 due February 28, 2005; Promissory Note dated June 11, 2004 by the Company to Gas Tank Nederland B.V. in the principal amount of $8,000,000; Deferred payment of 2003 profits dividend of K13,503,000 ($4,000,000) due February 24, 2005; (d) The vendor financing of the balance of the purchase price with respect to the prospective purchase of Shell PNG by the Company or a nominee of the Company under the Purchase and Sale Agreement between Shell Overseas Holdings Limited and the Company not to exceed $18 million; (e) Loan of $4.5 million from Aton Select Fund Ltd. and Talras Overseas S.A., through Clarion Finanz AG under Letter Agreement dated June 23, 2004; (f) Loan Agreements between Phil Mulacek and Petroleum Independent and Exploration Corporation, as lender, and InterOil Corporation, as borrower, under which Phil Mulacek and Petroleum Independent and Exploration Corporation advanced the principal sum of Cdn$2.1 million to InterOil Corporation; (g) Obligations with respect to customary provisions regarding post-closing purchase price adjustments and indemnification in agreement for the purchase or sale of a business or assets; (h) Permitted Refinancing Indebtedness; (i) Indebtedness arising out of payment obligations under non-speculative hedging transaction; and (j) Inter-company Indebtedness. "PLATTS" means the Singapore Product Postings located in the PLATT'S Oilgram Price Report published by Standard and Poor's Corporation. 42 "PRACTICAL COMPLETION" has the meaning given to it in the Engineering, Procurement & Construction Contract described under "Material Contracts". "PRINCIPAL AMOUNT" shall refer to the sum of (i) the outstanding principal amount of the Debenture, (ii) all accrued but unpaid interest thereunder, and (iii) any default payments owing under the Transaction Documents but not previously paid or added to the Principal Amount. "PRINCIPAL MARKET" shall mean the Toronto Stock Exchange. "REMEDY CONVERSION AMOUNT" shall mean an amount equal to 10% of the Principal Amount. "REMEDY CONVERSION DATE" shall mean the 25th day of each of the ten consecutive calendar months immediately following the month in which a Remedy Triggering Event shall have been publicly reported; provided, that if such day is not a Trading Day, hen the Remedy Conversion Date shall be the next Trading Day. "SEDAR" means the System for Electronic Document Analysis and Retrieval. "SELLING SHAREHOLDER" means the holders of Registrable Securities who have delivered a completed selling shareholder's questionnaire. "SENIOR DEBT" shall mean Indebtedness of the Company described in clauses (a) through (f) and clause (h) in the definition of Permitted Indebtedness. If the Company is not liable for such Indebtedness either directly or indirectly or pursuant to a guarantee or other Contingent Obligation, such Indebtedness shall not be Senior Debt. "SPECIAL CONVERSION PRICE" means the lesser of (i) the Conversion Price and (ii) 90% of the Market Price. "SUBSIDIARIES" means any entity in which the Company, directly or indirectly, owns 25% or more of the capital stock or other equity or similar interest. "TRADING DAY" means a day on which there is trading on the Principal Market. "TRANSACTION DOCUMENTS" means the Securities Purchase Agreement dated August 26, 2004, as amended by an amending agreement dated September 2, 2004, the Debentures, the Warrants, and the Registration Rights Agreement. "VWAP" shall mean the daily volume weighted average of: (1) the daily volume weighted average price of the common shares on the Principal Market, expressed in U.S. dollars based upon the most current Bank of Canada buy rate on the day such price determined and (2) the daily volume weighted average price of the common shares on the Approved Market, where (1) and (2) are as reported by Bloomberg Financial LP (based on the trading day from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time) using the "Volume at Price" function on the date in question. If the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York City Time (or such other time as the Principal Market and the Approved Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City Time (or such other time as the Principal Market and the Approved Market publicly announces is the official open of trading) as reported by Bloomberg. 43 INDEX TO FINANCIAL INFORMATION
PAGE INTEROIL CORPORATION A. PRO FORMA FINANCIAL STATEMENTS Compilation Report 46 Statement of Operations for the six months ended June 30, 2004 48 Statement of Operations for the year ended December 31, 2003 49 Notes 50 B. RECONCILIATION OF INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2004 AND 2003 AND CUMULATIVE PERIOD ENDED JUNE 30, 2004 FROM CANADIAN GAAP TO U.S. GAAP 52 INTEROIL PRODUCTS LIMITED (FORMERLY BP PAPUA NEW GUINEA LIMITED) A. ANNUAL FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 Annual Report of the Directors to the Shareholders for the year ended December 31, 2003 59 PricewaterhouseCoopers Report of Independent Accountants 60 Balance Sheet 61 Statement of Earnings 62 Statement of Cash Flows 63 Statement of Changes in Equity 64 Notes to the Financial Statements 65
44 B. INTERIM FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2004 AND 2003 Condensed Balance Sheet 72 Condensed Statement of Earnings 73 Condensed Statement of Cash Flows 74 Condensed Statement of Changes in Equity 75 Notes to the Condensed Interim Financial Statements 76
45 COMPILATION REPORT The Board of Directors of InterOil Corporation We have read the accompanying unaudited pro forma consolidated statements of operations for the six months ended June 30, 2004 and for the year ended December 31, 2003 and have performed the following procedures: 1. Compared the figures in the columns captioned "InterOil Corporation" to the unaudited financial statements of InterOil Corporation (the "Company") for the six months ended June 30, 2004, and the audited financial statements of the Company for the year ended December 31, 2003, respectively, and found them to be in agreement. 2. Compared the figures in the columns captioned "BP Papua New Guinea Limited" to the unaudited financial statements of BP Papua New Guinea Limited (now renamed InterOil Products Limited) for the three months ended March 31, 2004, and the audited financial statements of BP Papua New Guinea Limited for the year ended December 31, 2003, respectively, and found them to be in agreement. 3. Made enquiries of certain officials of the Company who have responsibility for financial and accounting matters about: (a) The basis for determination of the pro forma adjustments; and (b) Whether the unaudited pro forma consolidated statements of operations comply as to form in all material respects with the Ontario Securities Act and the related regulations. The officials: (c) described to us the basis for determination of the pro forma adjustments, and (d) stated that the unaudited pro forma consolidated statements of operations comply as to form in all material respects with the Ontario Securities Act and the related regulations. 4. Read the notes to the unaudited pro forma consolidated statements of operations, and found them to be consistent with the basis described to us for determination of the pro forma adjustments. 5. Recalculated the application of the pro forma adjustments to the aggregate of the amounts in the columns captioned "InterOil Corporation" for the six months ended June 30, 2004, and for the year ended December 31, 2003 and "BP Papua New Guinea Limited" for the three months ended March 31, 2004, and for the year ended December 31, 2003, and found the amounts in the column captioned "Pro forma" to be arithmetically correct. 46 A pro forma financial statement is based on management assumptions and adjustments which are inherently subjective. The foregoing procedures are substantially less than either an audit or a review. The objective of an audit or a review is the expression of assurance with respect to management's assumptions, the pro forma adjustments, and the application of the adjustments to the historical financial information. Accordingly, we express no such assurance. The foregoing procedures would not necessarily reveal matters of significance to the unaudited pro forma consolidated statements of operations, and we therefore make no representation about the sufficiency of the procedures for the purposes of a reader of such statements. (signed) KPMG Sydney, Australia November 9, 2004 COMMENTS FOR UNITED STATES READERS ON DIFFERENCES BETWEEN CANADIAN AND UNITED STATES REPORTING STANDARDS The above report, provided solely pursuant to Canadian requirements, is expressed in accordance with standards of reporting generally accepted in Canada. To report in conformity with United States standards on the reasonableness of the pro forma adjustments and their application to the unaudited pro forma consolidated statements of earnings requires an examination or review substantially greater in scope than the review we have conducted. Consequently, we are unable to express any opinion in accordance with standards of reporting generally accepted in the United States with respect to the compilation of the accompanying unaudited pro forma consolidated statements of operations. (signed) KPMG Sydney, Australia November 9, 2004 47 INTEROIL CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2004 (Unaudited) (Expressed in thousands of United States Dollars, unless otherwise stated, except share numbers)
CANADIAN GAAP U.S. GAAP ------------------------------------------------------------- ---------------------- BP PAPUA INTEROIL NEW GUINEA PRO FORMA GAAP CORPORATION LIMITED NOTE ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA (MARCH 31, 2004) ($'000S) ($'000S) ($'000S) ($'000S) ($'000S) ($'000S) ----------- --------------- ---------- ----------- ---------- ----------- ---------- REVENUE Sales and operating revenues................. 12,586 18,698 4(a) 8,619 39,903 - 39,903 Interest..................................... 175 32 4(a) 36 243 - 243 Rent......................................... - 31 4(a) 8 39 - 39 Other........................................ 85 69 - 154 - 154 ---------- ------ ----- ---------- --- ---------- 12,846 18,830 8,663 40,339 - 40,339 ---------- ------ ----- ---------- --- ---------- EXPENSES Cost of sales and operating expenses......... 10,469 14,853 4(b) 6,701 32,023 - 32,023 Administrative and general expenses.......... 3,620 1,962 4(c)(d)(e) 1,431 7,013 - 7,013 Exploration costs............................ 1,491 - - 1,491 - 1,491 Legal and professional fees.................. 829 - - 829 - 829 Foreign exchange loss (gain)................. 97 141 4(f) (450) (212) - (212) ---------- ------ ----- ---------- --- ---------- 16,506 16,956 7,682 41,144 - 41,144 ---------- ------ ----- ---------- --- ---------- Profit (loss) before income taxes and non-controlling interest................... (3,660) 1,874 981 (805) - (805) Income tax (expense)......................... (509) (554) 4(g) 49 (1,014) - (1,014) ---------- ------ ----- ---------- --- ---------- Profit (loss) before non-controlling interest.................................... (4,169) 1,320 1,030 (1,819) - (1,819) ---------- ------ ----- ---------- --- ---------- Non-controlling interest..................... 2 - - 2 - 2 ---------- ------ ----- ---------- --- ---------- Net profit (loss)............................ (4,167) 1,320 1,030 (1,817) (1,817) ---------- ------ ----- ---------- --- ---------- Basic (loss) per share...................... (0.17) (0.07) (0.07) Diluted (loss) per share..................... (0.17) (0.07) (0.07) Shares used in per share calculation - basic.................................... 24,938,621 24,938,621 24,938,621 Shares used in per share calculation - diluted.................................. 24,938,621 24,938,621 24,938,621
See accompanying notes to the unaudited pro forma consolidated statements of operations 48 INTEROIL CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2003 (Unaudited) (Expressed in United States Dollars, unless otherwise stated, except share numbers)
CANADIAN GAAP U.S. GAAP ----------------------------------------------------------- ------------------------- BP PAPUA INTEROIL NEW GUINEA PRO FORMA GAAP CORPORATION LIMITED NOTE ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA (AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) $'000 $'000 $'000 $'000 $'000 $'000 ----------- ---------- ------- ----------- ---------- ----------- ----------- REVENUE Sales and operating revenues................ - 69,897 - 69,897 - 69,897 Interest.................................... 247 146 - 393 - 393 Rent........................................ - 157 - 157 - 157 Other....................................... 12 86 - 98 - 98 ---------- ------ ----- ---------- --------- ---------- 259 70,286 - 70,545 - 70,545 ---------- ------ ----- ---------- --------- ---------- EXPENSES Cost of sales and operating expenses........ - 55,640 - 55,640 - 55,640 Administrative and general expenses......... 2,337 7,348 4(d)(h) (125) 9,560 - 9,560 Management fees for prior periods waived.... (840) - - (840) - (840) Exploration costs........................... 165 - - 165 - 165 Legal and professional fees................. 1,421 - - 1,421 - 1,421 Foreign exchange loss (gain)................ 679 (1,644) - (965) (8,071) (9,036) ---------- ------ ----- ---------- --------- ---------- 3,762 61,344 (125) 64,981 (8,071) 56,910 ---------- ------ ----- ---------- --------- ---------- Profit (loss) before income taxes and non-controlling interest................... (3,503) 8,942 125 5,564 8,071 13,635 Income tax (expense)........................ (37) (2,593) - (2,630) - (2,630) ---------- ------ ----- ---------- --------- ---------- Profit (loss) before non-controlling interest.................................. (3,540) 6,349 125 2,934 8,071 11,005 ---------- ------ ----- ---------- --------- ---------- Non-controlling interest.................... 23 - - 23 (117) (94) ---------- ------ ----- ---------- --------- ---------- Net profit (loss)........................... (3,517) 6,349 125 2,957 7,954 10,911 ---------- ------ ----- ---------- --------- ---------- Basic profit (loss) $ per share............. (0.16) 0.13 0.48 Diluted profit (loss) $ per share........... (0.16) 0.12 0.45 Shares used in per share calculation - basic................................... 22,649,924 22,649,924 22,649,924 Shares used in per share calculation - diluted................................. 22,649,924 4(i) 24,192,138 24,192,138
See accompanying notes to the unaudited pro forma consolidated statements of operations 49 INTEROIL CORPORATION NOTES TO THE PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2004 AND YEAR ENDED DECEMBER 31, 2003 (Unaudited) (Expressed in United States Dollars, unless otherwise stated) 1. BASIS OF PRESENTATION (a) Actual historic financial information On March 10, 2004, InterOil Corporation ("the Company") signed an agreement to acquire 100% of BP Papua New Guinea Limited (renamed InterOil Products Limited or "IPL"). IPL is a distributor of refined petroleum products in Papua New Guinea. The results of IPL's operations have been included in the actual historic consolidated financial statements of InterOil Corporation from that date. Under the acquisition agreement, InterOil Corporation was entitled to the profit of IPL from March 1, 2004. However, control of IPL's shares was not transferred to InterOil Corporation until April 28, 2004. Accordingly, the profit earned after tax between March 1, 2004 and April 28, 2004 was recognized as a reduction in the Company's acquisition cost. The results of IPL's operations from April 29, 2004 have been included in the Company's actual historic consolidated statement of earnings. (b) Pro forma consolidated financial information The unaudited pro forma consolidated statements of operations have been prepared to illustrate the notional earnings of the consolidated group as it was structured at June 30, 2004 as if that group had existed at January 1, 2003. Accordingly, the pro forma assumptions are as follows: (i) InterOil Corporation obtained 100% control of IPL on January 1, 2003 and was entitled to 100% of IPL's results of operations for the year ended December 31, 2003 and the six months ended June 30, 2004. (ii) Imputed interest is recognized on the basis that the amounts payable to the vendor were repaid one year after control of IPL was assumed to have passed to InterOil Corporation. (iii) The pro forma consolidated financial information disclosed in the consolidated statements of operations is based on: SIX MONTHS ENDED JUNE 30, 2004 - The unaudited statement of earnings of InterOil Corporation for the six months ended June 30, 2004 which includes the results of IPL for the two months from April 29, 2004. - The unaudited statement of earnings of IPL for the three months ended March 31, 2004. The average Kina to United States Dollar exchange rate for the three months ended March 31, 2004 is 0.3093. - The pro forma adjustments set out in Note 4. YEAR ENDED DECEMBER 31, 2003 - The audited statement of earnings of InterOil Corporation for the year ended December 31, 2003. - The audited statement of earnings of IPL for the year ended December 31, 2003. The average Kina to United States Dollar exchange rate for the twelve months ended December 31, 2003 is 0.2884. - The pro forma adjustments set out in Note 4. It is management's opinion that these unaudited pro forma consolidated statements of operations include all adjustments necessary for the fair presentation, in all material respects, of the transaction described in Note 3 in accordance with the pro forma assumptions on a basis consistent with InterOil Corporation's accounting policies. The unaudited pro forma consolidated statements of operations are not intended to reflect the results of operations of InterOil Corporation which would have actually resulted had the proposed transaction been effected on the date indicated. Further, the pro forma consolidated financial information is not necessarily indicative of the results of operations that may be obtained in the future. 50 The unaudited pro forma consolidated statements of operations should be read in conjunction with the historical financial statements and notes thereto of InterOil Corporation and IPL described above. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited pro forma consolidated statements of operations have been compiled using the significant accounting policies as set out in the audited financial statements of InterOil Corporation for the year ended December 31, 2003 and the unaudited financial statements of InterOil Corporation for the six months ended June 30, 2004 which are incorporated by reference in this prospectus. The generally accepted accounting principles ("GAAP") applied by InterOil Corporation in its financial statements are those applicable to Canadian public enterprises. The significant accounting policies of IPL after adjustment to Canadian GAAP conform in all material respects to those of InterOil Corporation. The unaudited pro forma consolidated statements of operations have also been restated in conformity with Unites States GAAP. 3. BUSINESS ACQUISITION As indicated in Note 1, the Company, through its wholly owned subsidiary, S.P.I. Distribution Limited, acquired 100% of the outstanding common shares of BP Papua New Guinea Limited which was subsequently renamed InterOil Products Limited. This acquisition has been accounted for using the purchase method and results from IPL's operations have been included in InterOil Corporation's results of operations from April 28, 2004. The allocation of the purchase price is summarised in the table below:
$ ---------- PURCHASE PRICE: Cash paid.................................................................. 1,000,000 Payable to vendor on March 1, 2005 (net of imputed interest of $559,118)... 10,667,736 Payable to vendor on March 1, 2005 under related service agreement......... 1,000,000 Acquisition costs.......................................................... 227,613 ---------- 12,895,349 ---------- NET ASSETS ACQUIRED: Cash....................................................................... 5,859,517 Non-cash working capital................................................... 3,215,018 Property, plant and equipment.............................................. 3,180,530 Future income tax benefits................................................. 640,284 ---------- 12,895,349 ----------
4. PRO FORMA ADJUSTMENTS The unaudited pro forma consolidated statements of operations include the following adjustments which reflect the pro forma assumptions described in Note 1(b): (a) To record the revenues earned by IPL during the period April 1, 2004 to April 28, 2004. (b) To record the cost of sales and operating expenses incurred by IPL during the period April 1, 2004 to April 28, 2004. (c) To record the administrative and general expenses incurred by IPL during the period April 1, 2004 to April 28, 2004. (d) To record changes in depreciation expense resulting from adjustments to the property, plant and equipment carrying values made on the consolidation of IPL into IOC. (e) To reverse the imputed interest expense included in the June 30, 2004 InterOil Corporation statement of earnings relating to the purchase price payable by InterOil Corporation to the vendor of IPL one year from the date of control. This amount was assumed to have been paid by December 31, 2003. (f) To record the foreign exchange gain incurred by IPL during the period April 1, 2004 to April 28, 2004. (g) To record the income tax expense incurred by IPL during the period April 1, 2004 to April 28, 2004. (h) To record imputed interest expense on the portion of the purchase price payable by InterOil Corporation to the vendor of IPL one year from the date of control. (i) Certain securities that were previously antidilutive are considered dilutive as a result of the pro forma adjustments that generated a pro forma profit. 51 INTEROIL CORPORATION RECONCILIATION OF THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2004 AND 2003 AND CUMULATIVE PERIOD ENDED JUNE 30, 2004 FROM CANADIAN GAAP TO U.S. GAAP (Expressed in U.S. dollars) InterOil Corporation's (the "Company" or "InterOil") primary business interest is the development of an oil refinery (the "Project") in Papua New Guinea ("PNG"). The Company is also engaged in oil and gas exploration and development activity in PNG. The unaudited interim consolidated financial statements of the Company for the three and six month periods ended June 30, 2004 and 2003 and the period from the commencement of the development stage to June 30, 2004 have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP") which, in most respects, conforms with generally accepted accounting principles in the United States ("U.S. GAAP"). The following are the significant differences in accounting principles as they pertain to the unaudited interim consolidated financial statements for the three and six month periods then ended: 1. DERIVATIVE INSTRUMENTS AND HEDGING: SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") established accounting and reporting standards requiring all derivative instruments be recorded in the consolidated balance sheet at their fair value. If hedge accounting is appropriate based upon specific criteria, the impact of recording the derivative instrument is offset to the extent that the hedging relationship is effective. All ineffectiveness in the hedging relationship as well as derivative instruments not qualifying for hedge accounting is reflected immediately in the consolidated statement of operations. The Company elected not to adopt the FASB's optional hedge accounting provisions. Accordingly, for U.S. GAAP reporting purposes only, effective January 1, 2001, unrealized gains and losses resulting from the valuation of derivatives at fair value are recognized in income as the gains and losses arise and not concurrently with the recognition of the transactions being hedged. In its Canadian GAAP financial statements, the Company continues to recognize the gains and losses on derivative contracts designated as hedges concurrently with the recognition of the transactions being hedged. On initial adoption of SFAS 133, the Company recorded additional liabilities of $5,179,131, and a resulting cumulative transitional adjustment to increase accumulated losses, for the fair value of derivatives which did not qualify as hedges on January 1, 2001. 2. STOCK BASED COMPENSATION: SFAS 123, "Accounting for Stock-based Compensation" ("SFAS 123"), establishes financial accounting and reporting standards for stock-based employee compensation plans as well as transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. The Company issues options to non-employees, and to employees that are direct awards of stock or call for settlement by the issuance of equity instruments using the fair value based method. Consideration paid by employees on the exercise of stock options is recorded as share capital and contributed surplus. Disclosure required under SFAS 123 is included after the reconciliations to U.S. GAAP. The Company applies the recommendations of the Canadian Institute of Chartered Accountants in Handbook Section 3870, "Stock-based compensation and other stock-based payments", which result in recognition of compensation expense for stock options issued to employees and non-employees under Canadian GAAP on a basis consistent with the requirements of SFAS 123. 52 3. INCOME TAX EFFECT OF ADJUSTMENTS: The income tax effect of U.S. GAAP adjustments was expense of nil (unaudited) for both the three and six month periods ended June 30, 2004 and $1,844,887 (unaudited) and $2,679,109 (unaudited) for the three and six month periods ended June 30, 2003. However, the impact of these adjustments is offset by a corresponding fluctuation in the valuation allowance (unaudited) for U.S. GAAP purposes. RECONCILIATION OF CANADIAN AND U.S. GAAP NET INCOME (Unaudited) (U.S. $'000s)
CUMULATIVE AMOUNTS FROM INCEPTION OF DEVELOPMENT THREE MONTHS ENDED SIX MONTHS ENDED STAGE TO JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 2004 -------- ------- ------- ----- ------------ Net (loss) as shown in unaudited interim financial statements in accordance with Canadian GAAP .............................................. (2,522) (1,205) (4,167) (518) (15,198) Adjustments (before income tax and minority interest): Recognition of unrealized forward contract gains (1) .............. - 4,777 - 6,937 8,239 Income tax effect of adjustments (3) ........................................ - - - - - ------ ----- ------ ----- ------ NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE .......................................................... (2,522) 3,572 (4,167) 6,419 (6,959) Cumulative effect of accounting changes (1) ................................. - - - - (5,179) Minority interests share of after tax adjustments ........................... - (64) - (93) 145 ------ ----- ------ ----- ------ NET INCOME (LOSS) IN ACCORDANCE WITH U.S. GAAP .............................. (2,522) 3,508 (4,167) 6,326 (11,993) ------ ----- ------ ----- ------
- ---------- Note: The notes in the above table refer to the discussion above the table. 53 STATEMENT OF COMPREHENSIVE INCOME (LOSS), NET OF TAX (Unaudited) (U.S. $'000s)
CUMULATIVE AMOUNTS FROM INCEPTION OF DEVELOPMENT THREE MONTHS ENDED SIX MONTHS ENDED STAGE TO JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 2004 ------- ----- ------- ----- ------------ NET INCOME (LOSS) IN ACCORDANCE WITH U.S. GAAP ........................ (2,522) 3,508 (4,167) 6,326 (11,993) Foreign currency translation reserve Movement under Canadian GAAP ................................ 50 - 50 - 50 Movement under U.S. GAAP .................................... - - - - - Income tax effect of movement in foreign currency translation reserve.. - - - - - ------ ----- ------ ----- ------- Other comprehensive income (loss) ..................................... 50 - 50 - 50 ------ ----- ------ ----- ------- COMPREHENSIVE INCOME (LOSS) ........................................... (2,472) 3,508 (4,117) 6,326 (11,943) ------ ----- ------ ----- -------
STATEMENT OF ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX (AOCI) (Unaudited) (U.S. $'000s)
FOREIGN TAX EFFECT ON ACCUMULATED CURRENCY FOREIGN CURRENCY OTHER TRANSLATION TRANSLATION COMPREHENSIVE RESERVE RESERVE INCOME ----------- ---------------- ------------- AOCI BALANCE AS OF DECEMBER 31, 2002..... - - - Current period change.................... - - - --- --- --- AOCI BALANCE AS OF MARCH 31, 2003........ - - - Current period change.................... - - - --- --- --- AOCI BALANCE AS OF JUNE 30, 2003......... - - - === === === AOCI BALANCE AS OF DECEMBER 31, 2003..... - - - Current period change.................... - - - --- --- --- AOCI BALANCE AS OF MARCH 31, 2004........ - - - Current period change.................... 50 - 50 --- --- --- AOCI BALANCE AS OF JUNE 30, 2004......... 50 - 50 === === ===
EARNINGS PER SHARE Basic earnings per share is computed by dividing net income available to shareholders by the weighted average number of shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if options or contracts to issue shares were exercised or converted into shares. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options determined using the treasury method. No 54 (unaudited) potential shares in options on issue were antidilutive for the three and six month periods ended June 30, 2004. The potential shares in options of 135,000 (unaudited) on issue were antidilutive for the three and six month periods ended June 30, 2003.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2004 2003 2004 2003 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) WEIGHTED AVERAGE NUMBER OF SHARES ON WHICH EARNINGS PER SHARE CALCULATIONS ARE BASED IN ACCORDANCE WITH U.S. GAAP ('000s) ('000s) ('000s) ('000s) ------ ------ ------ ------ Basic.......................................................... 25,057 22,238 24,939 21,646 Effect of dilutive options..................................... - 1,211 - 859 ------ ------ ------ ------ Diluted........................................................ 25,057 23,449 24,939 22,505 ------ ------ ------ ------
NET EARNINGS (LOSS) PER SHARE IN ACCORDANCE WITH U.S. GAAP) ($) ($) ($) ($) ----------- ----------- ----------- ----------- Basic.......................................................... (0.10) 0.16 (0.17) 0.30 Diluted........................................................ (0.10) 0.15 (0.17) 0.28
The adjustments under U.S. GAAP result in changes to the consolidated balance sheet of the Company as follows: RECONCILIATION OF CANADIAN AND U.S. GAAP BALANCE SHEET AMOUNTS (Unaudited) (U.S. $'000s
AS AT JUNE 30, 2004 AS AT DECEMBER 31, 2003 ---------------------- ----------------------- CANADIAN U.S. CANADIAN U.S. GAAP GAAP GAAP GAAP -------- ------- -------- -------- Current assets............................. 58,441 58,441 35,012 35,012 Oil and gas properties..................... 38,691 38,691 23,018 23,018 Capital assets............................. 52,044 52,044 48,855 48,855 Deferred project costs..................... 167,669 170,728 153,455 156,514 Future income tax benefit.................. 642 642 - - ------- ------- ------- ------- TOTAL ASSETS............................... 317,487 320,546 260,340 263,399 ------- ------- ------- ------- Current liabilities........................ 66,652 66,652 16,315 16,315 Deferred financing costs................... 834 834 - - Long term debt............................. 92,610 92,610 90,600 90,600 Non-controlling interest................... 6,465 6,320 6,467 6,323 Shareholders' equity....................... 150,926 154,130 146,958 150,161 ------- ------- ------- ------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY... 317,487 320,546 260,340 263,399 ------- ------- ------- -------
STOCK BASED COMPENSATION As permitted by SFAS 123, the Company has elected to follow the intrinsic value method of accounting for stock-based compensation arrangements, as provided for in Accounting Principles Board Opinion 25. In December 2002 the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure, an amendment of FASB Statement No. 123" ("SFAS 148"). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosure in annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 became effective in the year ended December 55 31, 2002. The Company has not adopted a fair value based method of accounting for stock options granted to employees. Options are exercisable on a 1:1 basis. Options are issued at no less than market price to directors, staff and contractors. Options vest at various dates in accordance with the applicable option agreement, have an exercise period of three to five years assuming continuous employment by the InterOil Group and may be exercised at any time after vesting within the exercise period. Upon resignation or retirement, vested options must be exercised within 30 days for employees and 90 days for directors. The following summarizes the stock options outstanding at respective balance sheet dates:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2004 2003 2004 2003 ------------------------ ----------------------- ----------------------- ---------------------- WEIGHTED WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (`000s) (U.S.$) (`000s) (U.S.$) (`000s) (U.S.$) (`000s) (U.S.$) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Outstanding at beginning of period......................... 1,344 7.51 1,265 5.92 1,363 7.55 1,510 5.48 Granted ......................... 154 25.05 187 10.92 174 25.26 192 10.85 Exercised ....................... (5) 6.00 (4) 2.75 (15) 5.81 (254) 4.44 Expired ......................... (10) 23.71 - - (39) 23.55 - - ----- ---- ----- ---- ----- ----- ----- ---- Outstanding at end of period..... 1,483 9.23 1,448 6.57 1,483 9.23 1,448 6.57 ----- ---- ----- ---- ----- ----- ----- ---- Weighted average fair value of options granted during the period (U.S. $`000s)............ 1,564 668 1,742 682 ----- ----- ----- -----
The fair values of the options granted as detailed above have been estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 3.2%; dividend yield of nil; volatility factor of the expected market price of the Company's common stock of 45%; and a weighted average expected life of the options of three years. The following table summarizes information about fixed stock options outstanding at June 30, 2004:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE (VESTED) - ------------------------------------------------------------------ ----------------------------- WEIGHTED WEIGHTED AVERAGE WEIGHTED AVERAGE REMAINING AVERAGE NUMBER OF EXERCISE CONTRACTUAL NUMBER OF EXERCISE RANGE OF EXERCISE PRICES OPTIONS PRICE LIFE OPTIONS PRICE (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (U.S.$) (`000s) (U.S.$) (Years) (U.S.$) (Years) - --------------------------- ----------- ----------- ----------- ----------- ----------- 2.75 to 5.00............... 533 4.36 1.14 514 4.34 5.01 to 8.00............... 439 5.87 2.55 364 5.60 8.01 to 12.00.............. 279 11.24 1.47 107 11.65 12.01 to 23.50............. 60 21.88 2.45 30 20.28 23.51 to 27.00............. 172 25.24 4.03 90 24.00 ----- ----- ---- ----- ----- 2.75 to 27.00.............. 1,483 9.23 2.52 1,105 7.50 ----- ----- ---- ----- -----
56 Where options were granted with exercise prices equal to the market price when the options were granted, no compensation expense has been charged to income at the time of the option grants. During the three and six month periods ended June 30, 2004, the Company recorded compensation expense of $487,263 and $569,695, respectively, under Canadian GAAP. This is equivalent to the amount the Company recognized under U.S. GAAP following the fair value treatment required under SFAS 123. Had compensation cost for the Company's stock options been determined based on the fair market value at the grant dates of the awards, and amortized on a straight-line basis, consistent with methodology prescribed by SFAS 123, the Company's net income and net income per share for the three and six month periods ended June 30, 2003 would have been the pro forma amounts indicated as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2003 JUNE 30, 2003 ------------- ------------- (unaudited) (U.S. $'000s) Net income under U.S. GAAP.................................... 3,508 6,326 Pro forma stock based compensation............................ (374) (379) ---------- --------- Pro forma net income.......................................... 3,134 5,947 ---------- --------- Earnings per share as reported Basic.......................................... 0.16 0.30 Diluted........................................ 0.15 0.28 Pro forma earnings per share Basic.......................................... 0.14 0.27 Diluted........................................ 0.13 0.26 ---------- ---------
ACQUISITION OF INTEROIL PRODUCTS LIMITED ("IPL") The following summary unaudited pro forma condensed consolidated financial information for the six month periods ended June 30, 2004 and 2003 shows the estimated pro forma impact on the Company's unaudited interim consolidated financial statements of the acquisition of IPL as of April 28, 2004. This pro forma information is based on management's current estimates of, and good faith assumptions regarding, the adjustments arising from the transactions described above. The pro forma adjustments are based on currently available information and actual adjustments could differ materially from the current estimates. The pro forma information does not purport to represent what the financial position and results of operations actually would have been had the acquisition of IPL been consummated on the dates indicated or to project the financial position of any future date of operations for any future period. The following pro forma statements of earnings for the six month periods ended June 30, 2004 and 2003 give effect of the acquisition of IPL as if it had occurred on January 1, 2003. 57
INTEROIL IPL(1) PRO FORMA -------- ------ --------- SIX MONTHS ENDED JUNE 30, 2004 (unaudited) (unaudited) (unaudited) (U.S.$ '000s) (U.S. '000s) (U.S.$ '000s) Sales and operating revenue.......................................... 12,586 27,317 39,903 Net loss - Canadian GAAP............................................. (4,167) 2,350 (1,817) Net loss - U.S. GAAP................................................. (4,167) 2,350 (1,817) Basic loss per share (cents per share) Canadian GAAP(2)..................................... (0.17) (0.07) U.S. GAAP(3)......................................... (0.17) (0.07) Diluted loss per share (cents per share) Canadian GAAP(2)..................................... (0.17) (0.07) U.S. GAAP(3)......................................... (0.17) (0.07) SIX MONTHS ENDED JUNE 30, 2003 Sales and operation revenue.......................................... - 34,999 34,999 Net loss - Canadian GAAP............................................. (518) 3,175 2,657 Net loss - U.S. GAAP................................................. 6,326 3,175 9,501 Basic loss per share (cents per share) Canadian GAAP(2)..................................... (0.02) 0.12 U.S. GAAP(3)......................................... 0.30 0.44 Diluted (loss)/earnings per share (cents per share) Canadian GAAP(2)..................................... (0.02) 0.12 U.S. GAAP(3)......................................... 0.28 0.42
- ----------- Notes: (1) Financial data for the six months ended June 30, 2004 represents results for the period from January 1, 2004 to April 28, 2004, the effective date the Company gained control of IPL, and is derived from the unaudited management accounts of IPL. Financial data for the six months ended June 30, 2003 represents results for the year ended 31 December 2003 divided in half. (2) The weighted average number of shares used in the earnings per share information is consistent with that used under Canadian GAAP for the respective periods. (3) The weighted average number of shares used in the earnings per share information is consistent with that used under U.S. GAAP for the respective periods. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS U.S. GAAP requires the disclosure of accounting pronouncements that have been issued but are not yet effective for the Company reporting. The following applicable accounting pronouncements have been recently issued: DEBT: In May 2003, the FASB issued SFAS No. 150 "Accounting for certain financial instruments with characteristics of both liabilities and equity" ("SFAS 150"). SFAS 150 changes the classification in the balance sheet of certain common financial instruments from whether equity or mezzanine presentation to liabilities and requires the issuer of those financial instruments to recognize changes in fair value or redemption amount, as applicable, in earnings. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and with one exception, is effective at the beginning of the first interim period beginning after June 15, 2003. The effect of adopting SFAS 150 will be recognised as a cumulative effect on an accounting change as of the period beginning the period of adoption. Restatement of prior periods is not permitted. SFAS 150 did not have any impact on the financial position or results of operations. 58 BP PAPUA NEW GUINEA LIMITED ANNUAL REPORT OF THE DIRECTORS TO THE SHAREHOLDERS FOR THE YEAR ENDED 31 DECEMBER 2003 The directors take pleasure in presenting their annual report on the affairs of the company, including the financial statements, for the year ended 31 December 2003. ACTIVITIES The principal continuing activity of the company is that of importing and distribution of petroleum products in Papua New Guinea. RESULT The net profit of the company for the year after tax was K22,010,000 (2002 profit: K11,094,000). DIVIDEND Dividends paid during the year amounted to K8,000,000 (2002: KNil). Dividends declared subsequent to year end totalled K15,729,688 and encompass profits from the 2003 year and the first two months of 2004 and are payable to the owner of the shares at this time as part of the share sale agreement dated 10 March 2004. DIRECTORS The directors at balance date were: Gerry R Hueston Robert Welsh Peter Diezmann Mr G Bourne resigned from the Board of Directors on 12 September 2003. Mr GR Hueston was appointed to the Board on 12 September 2003. AUDITORS Details of amounts paid to the auditors for audit and other services are shown in note 2 to the financial statements. DONATIONS The total amount of donations made by the company is stated in note 2 to the financial statements. REGISTERED OFFICE The company's registered office and principal place of business is situated at Section 34, Lot 22, Speybank Street, Lae, Morobe Province. CHANGE OF NAME The Company changed its name to InterOil Products Limited on 29 April 2004. OTHER DISCLOSURES The board has received the agreement of all shareholders for the annual report not to include the disclosures required by Section 212(1)(a) and (1)(d) to (j). For, and on behalf of, the Board Director Director (signed) "Tom S. Donovan" (signed) "Graeme K. Alexander" November 9, 2004 59 PRICEWATERHOUSECOOPERS PRICEWATERHOUSECOOPERS ANZ Haus REPORT OF INDEPENDENT ACCOUNTANTS Central Avenue PO Box 451 LAE TO THE MEMBERS AND DIRECTORS OF BP PAPUA NEW GUINEA PAPUA NEW GUINEA LIMITED Website: www.pwc.com.pg Telephone 675 472 2644 Facsimile 675 472 6270 In our opinion, the accompanying balance sheets and the related statements of earnings, of cash flows and changes in equity, set out on pages 60 to 70, after the restatement described in Note 21, present fairly, in all material respects, the financial position of BP Papua New Guinea Limited (the "Company") as at 31 December 2003, 2002 and 2001, and the results of its operations and its cash flows for each of the years in the three-year period ended 31 December 2003, in conformity with International Financial Reporting Standards and with the Papua New Guinea Companies Act 1997. These financial statements are the responsibility of the directors of the Company. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the International Standards on Auditing and the auditing standards generally accepted in Canada. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in Canada and the United States of America. Information relating to the nature and effect of such differences is presented in Note 23 to the financial statements. (signed) PricewaterhouseCoopers Stephen Beach Partner Lae, Papua New Guinea Dated November 9, 2004 60 BP PAPUA NEW GUINEA LIMITED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2003, 2002 AND 2001 BALANCE SHEET (Expressed in Papua New Guinea Kina, except supplementary information)
SUPPLEMENTARY INFORMATION ----------- DECEMBER 31, 2003 USD'000 DECEMBER 31, DECEMBER DECEMBER @ 1 K = 0.3105 2003 31, 2002 31,2001 NOTE USD K'000 K'000 K'000 ---- --- ----- ----- ----- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents.......... 5,808 18,706 6,452 4,137 Trade receivables.................. 5 7,285 23,462 27,029 15,211 Other receivables and prepayments........................ 5 199 642 2,607 523 Inventories........................ 6 6,518 20,992 22,538 22,230 ---------- -------- ------- ------- 19,810 63,802 58,626 42,101 NON CURRENT ASSETS: Property, plant and equipment...... 4 4,735 15,249 12,606 12,971 Deferred income tax benefit........ 3 861 2,776 1,593 2,004 ---------- -------- ------- ------- 25,406 81,827 72,825 57,076 ---------- -------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Income tax payable................. 3 1,893 6,097 1,547 225 Accounts payable and accrued liabilities........................ 8 2,382 7,673 2,843 5,768 Employee provisions................ 9 104 336 209 211 Due to related parties............. 12 3,625 11,674 26,206 19,993 ---------- -------- ------- ------- 8,004 25,780 30,805 26,197 NON CURRENT LIABILITIES: Employee provisions................ 9 120 388 371 324 ---------- -------- ------- ------- 8,124 26,168 31,176 26,521 ---------- -------- ------- ------- SHAREHOLDERS' EQUITY: Share capital...................... 10 - - - - General reserve.................... 10 260 838 838 838 Retained earnings.................. 17,022 54,821 40,811 29,717 ---------- -------- ------- ------- 17,282 55,659 41,649 30,555 ---------- -------- ------- ------- 25,406 81,827 72,825 57,076 ---------- -------- ------- -------
See accompanying notes to the financial statements Approved by the Board on November 2, 2004 (signed) "Tom S. Donovan" (signed) "Graeme K. Alexander" - ---------------------------------------- ----------------------------------- Director Director 61 BP PAPUA NEW GUINEA LIMITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 STATEMENT OF EARNINGS (Expressed in Papua New Guinea Kina, except supplementary information)
YEAR ENDED ------------------------------------------------------------- SUPPLEMENTARY INFORMATION ------------- DECEMBER 31, 2003 USD'000 DECEMBER 31, DECEMBER DECEMBER @ 1 K = 0.3105 2003 31, 2002 31, 2001 NOTE USD K'000 K'000 K'000 ---- --- ----- ----- ----- (Unaudited) Sales revenue...................... 75,253 242,361 191,230 164,480 Cost of sales...................... (59,904) (192,927) (162,535) (136,733) ---------- --------- -------- -------- GROSS PROFIT....................... 15,349 49,434 28,695 27,747 Other operating income............. 261 840 1,057 1,345 Administrative and general expenses 2 (7,911) (25,479) (19,448) (21,373) Foreign exchange gains/(losses) 1,770 5,699 4,388 (425) ---------- --------- -------- -------- OPERATING PROFIT................... 9,469 30,494 14,692 7,294 Finance income..................... 157 506 159 122 ---------- --------- -------- -------- PROFIT BEFORE INCOME TAXES......... 9,626 31,000 14,851 7,416 Income tax (expense)............... 3 (2,792) (8,990) (3,757) (1,850) ---------- --------- -------- -------- NET PROFIT 6,834 22,010 11,094 5,566 ---------- --------- -------- --------
See accompanying notes to the financial statements 62 BP PAPUA NEW GUINEA LIMITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 STATEMENT OF CASH FLOWS (Expressed in Papua New Guinea Kina, except supplementary information)
YEAR ENDED --------------------------------------------------------------- SUPPLEMENTARY INFORMATION ------------- DECEMBER 31, 2003 USD'000 DECEMBER 31, DECEMBER DECEMBER @ 1 K = 0.3105 2003 31, 2002 31, 2001 USD K'000 K'000 K'000 -------------- ------------ -------- --------- (Unaudited) OPERATING ACTIVITIES Profit before income taxes.................... 9,626 31,000 14,851 7,416 Adjustments for non-cash transactions: Depreciation and profit on sale of property, plant and equipment......... 578 1,863 1,717 2,065 Unrealized exchange (gain)/loss.......... - - (2,336) 12 Change in non-cash operating working capital: Inventories......................... .... 480 1,546 (308) 4,628 Trade and other receivables.............. 1,718 5,532 (13,902) 8,823 Accounts payable and accrued liabilities.............................. 1,544 4,974 (2,880) 1,723 Due to related parties................... (4,512) (14,532) 8,549 (23,670) Taxes Paid (1,746) (5,623) (2,024) (445) ----------- --------- -------- --------- Cash flows provided by operating activities.................................... 7,688 24,760 3,667 552 ----------- --------- -------- --------- INVESTING ACTIVITIES Expenditure on capital assets............ (1,454) (4,682) (1,640) (1,442) Funds received on sale of assets......... 55 176 288 155 ----------- --------- -------- --------- Cash flows used in investing activities....... (1,399) (4,506) (1,352) (1,287) ----------- --------- -------- --------- FINANCING ACTIVITIES Dividend paid............................ (2,484) (8,000) - - ----------- --------- -------- --------- Cash flows used in investing activities....... (2,484) (8,000) - - ----------- --------- -------- --------- Increase (decrease) in cash and cash equivalents................................... 3,805 12,254 2,315 (735) Cash and cash equivalents, beginning of period..................................... 2,003 6,452 4,137 4,871 ----------- --------- -------- --------- Cash and cash equivalents, end of period...... 5,808 18,706 6,452 4,137 ----------- --------- -------- --------- CASH AND CASH EQUIVALENTS COMPRISES: Cash on hand and at bank...................... 5,808 18,706 6,452 4,137 Bank overdrafts............................... - - - - ----------- --------- -------- --------- 5,808 18,706 6,452 4,137 ----------- --------- -------- ---------
See accompanying notes to the financial statements 63 BP PAPUA NEW GUINEA LIMITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 STATEMENT OF CHANGES IN EQUITY (Expressed in Papua New Guinea Kina, except supplementary information)
YEAR ENDED ------------------------------------------------------------- SUPPLEMENTARY INFORMATION ------------- DECEMBER 31, 2003 USD'000 DECEMBER 31, DECEMBER DECEMBER @ 1 K = 0.3105 2003 31, 2002 31, 2001 USD K'000 K'000 K'000 -------------- ------------ --------- -------- (Unaudited) SHARE CAPITAL At beginning of year................ - - - - Issue of capital stock.............. - - - - ---------- --------- ------- ------- At end of year...................... - - - - ---------- --------- ------- ------- GENERAL RESERVE At beginning of year................ 260 838 838 838 Change in year...................... - - - - ---------- --------- ------- ------- At end of year...................... 260 838 838 838 ---------- --------- ------- ------- RETAINED EARNINGS At beginning of year................ 12,672 40,811 29,717 24,151 Dividends declared and paid......... (2,484) (8,000) - - Net profit for year................. 6,834 22,010 11,094 5,566 ---------- --------- ------- ------- At end of period.................... 17,022 54,821 40,811 29,717 ---------- --------- ------- ------- SHAREHOLDERS' EQUITY AT END OF YEAR. 17,282 55,659 41,649 30,555 ---------- --------- ------- -------
See accompanying notes to the financial statements 64 BP PAPUA NEW GUINEA LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 1 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES BP Papua New Guinea Limited (the "Company") is a company incorporated in Papua New Guinea. Its primary business interest is to distribute refined fuel products in Papua New Guinea. All amounts are expressed in Papua New Guinea Kina rounded to the nearest thousand kina, unless noted otherwise. These financial statements are presented in accordance with the Papua New Guinea Companies Act 1997 and comply with International Financial Reporting Standards ("IFRS"). These financial statements were approved for issue by the Board of Directors on November 2, 2004. A. GENERAL ACCOUNTING POLICIES The fundamental accounting assumptions recognised as appropriate for the measurement and reporting of results, cash flows and the financial position have been followed in the preparation of these financial statements. These accounts have been prepared using the historical cost convention as modified by the re-measurement of certain financial instruments at fair value through profit and loss. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. B. PARTICULAR ACCOUNTING POLICIES The following particular accounting policies, which significantly affect the measurement of profit and of financial position, have been applied: (a) Revenue Revenue comprises the fair value for the sale of goods and services net of goods and services tax, rebates and discounts. Revenue is recognised as follows: (i) Sales of goods Sales of goods are recognised when the Company has delivered products to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured. It is not the Company's policy to sell products with a right of return. (ii) Rental income Rental income is recognised on an accrual basis in accordance with the substance of the relevant rental agreements. (iii) Interest income Interest income is recognised on a time-proportionate basis using the effective interest method. (b) Property, Plant and Equipment The cost of purchased fixed assets is the value of the consideration given to acquire the assets and the value of other directly attributable costs which have been incurred in bringing the assets to the location and condition necessary for their intended service. Where the carrying amount of an individual non-current asset is greater than its recoverable amount the asset is written down to its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. (c) Depreciation Depreciation is charged on a straight line basis so as to write off the cost or valuation of the fixed assets to their residual value over the expected useful lives. The estimated economic lives are as follows: Leasehold land and improvements................ Shorter of 100 years or lease period Buildings...................................... 30-40 years Plant & equipment.............................. 10-15 years Motor vehicles................................. 4 years Office furniture & fittings.................... 10-15 years
65 (d) Foreign Currencies Foreign currency transactions are recorded at the exchange rates in effect at the date of the transaction. Monetary assets and liabilities arising from trading transactions or overseas borrowings are translated at closing rates. Gains and losses due to currency fluctuations on these items are included in the profit and loss account. (e) Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined on a first in, first out basis including appropriate freight inward, wharfage and insurance costs. (f) Taxation Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The tax effect of transactions or events that are taken directly to reserves are charged or credited directly to the same reserve. (g) Components of Cash and Cash Equivalents For the purposes of the statement of cash flows, cash is considered to be cash on hand and current accounts in banks, net of bank overdrafts. Cash equivalents are short-term, highly liquid investments with original maturities less than 90 days that are readily convertible to known amounts of cash. (h) Employee Entitlements The amounts expected to be paid to employees for their pro-rata entitlement to long service and annual leave and leave fares are accrued annually having regard to anticipated periods of service, remuneration levels and statutory obligations. (i) Provisions A provision is recognised when there is a present obligation to transfer economic benefits as a result of past events. The amount provided is the best estimate of the expenditure that would be required to settle the obligation that existed at the balance sheet date. (j) Leased Assets Operating lease payments are representative of pattern of benefit derived from the leased asset and accordingly are charged to the profit and loss account in the periods in which they are incurred. (k) Trade Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. (l) Use of estimates The preparation of the financial statements in conformity with International Financial Reporting Standards and with the Papua New Guinea Companies Act 1997 requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the year. Actual results could differ from those estimates. C. RELEASE OF NEW INTERNATIONAL FINANCIAL REPORTING STANDARDS The International Accounting Standards Board has issued 18 revised standards and five new financial reporting standards that will be applicable to the company from 1 January 2005. The company has conducted investigations and does not consider that there are any measurement or recognition issues arising from the release of these new pronouncements that will have a significant impact on the reported financial position or financial performance of the company. 66 2. ADMINISTRATIVE AND GENERAL EXPENSES
2003 2002 2001 K'000 K'000 K'000 ------- ------- ------- Auditors remuneration Audit..................................... 49 40 38 Other services............................ 36 64 42 Bad debts written off....................... 671 197 812 Costs arising from kerosene contamination... 23 1,636 5,600 Depreciation................................ 1,939 1,792 2,081 Donations................................... 102 103 71 Impairment of receivables................... - - (608) Lease rentals............................... 605 695 949 Other operating expenses.................... 9,319 5,869 4,916 Profit on sale of property, plant and equipment................................... (76) (75) (16) Repairs and maintenance..................... 4,784 2,454 1,863 Staff costs................................. 8,027 6,673 5,625 ------ ------ ------ 25,479 19,448 21,373
3 (a) INCOME TAX EXPENSE The prima facie tax payable on the operating profit differs from the income tax provided in the accounts and is reconciled as follows:
2003 2002 2001 K'000 K'000 K'000 ------- ------ ------ Operating profit before tax......................... 31,000 14,851 7,416 ------ ------ ----- Prima facie tax payable @ 30% (2002 and 2001:25%)... 9,300 3,713 1,854 Effect of change n tax rate......................... (275) - - Over provision in previous year..................... (151) - (78) Non deductible items................................ 116 44 74 ------ ------ ----- Income tax expense.................................. 8,990 3,757 1,850 ------ ------ ----- COMPRISING Current year income tax............................. 10,324 3,346 1,093 Deferred income tax................................. (908) 411 835 Effect of change in tax rate........................ (275) - - Prior year tax...................................... (151) - (78) ------ ------ ----- 8,990 3,757 1,850 ------ ------ -----
The PNG corporate tax rate changed from 25% to 30% effective from January 1, 2003. (b) DEFERRED INCOME TAX BENEFIT
2003 2002 2001 K'000 K'000 K'000 ------ ------ ------ At beginning of year........................ 1,593 2,004 2,839 Temporary differences movement.............. 1,183 (411) (835) ----- ----- ----- At end of year.............................. 2,776 1,593 2,004 ----- ----- ----- The deferred income tax benefit relates to: Depreciation................................ 1,195 953 995 Employee provisions......................... 227 145 134 Duty provision.............................. 217 217 0 Unrealized Foreign exchange (gain)/loss..... - (584) 3 Trade receivables impairment................ 439 366 365 Minor capital expenditure................... 835 627 617 Others...................................... (137) (131) (110) ----- ----- ----- 2,776 1,593 2,004 ----- ----- -----
67 4. PROPERTY, PLANT AND EQUIPMENT
WORK IN LAND & PLANT & MOTOR PROGRESS BUILDINGS EQUIPMENT VEHICLES TOTAL K'000 K'000 K'000 K'000 K'000 -------- --------- --------- -------- ------- 2003 COST January 1, 2003............ 491 7,441 23,472 2,054 33,458 Additions.................. 4,685 - - - 4,685 Disposals.................. - (122) (12) (348) (482) Transfers.................. (2,487) 232 1,376 879 - ------ ----- ------ ----- ------ December 31, 2003.......... 2,689 7,551 24,836 2,585 37,661 ------ ----- ------ ----- ------ DEPRECIATION January 1, 2003............ - 3,796 15,620 1,436 20,852 Change for the year........ - 271 1,139 529 1,939 Disposals.................. - (46) (11) (322) (379) ------ ----- ------ ----- ------ December 31, 2003.......... - 4,021 16,748 1,643 22,412 ------ ----- ------ ----- ------ WDV at December 31, 2003... 2,689 3,530 8,088 942 15,249 ------ ----- ------ ----- ------ 2002 COST January 1, 2002............ 825 7,704 22,377 1,486 32,392 Additions.................. 1,640 - - - 1,640 Disposals.................. - (387) (61) (126) (574) Transfers.................. (1,974) 124 1,156 694 - ------ ----- ------ ----- ------ December 31, 2002.......... 491 7,441 23,472 2,054 33,458 ------ ----- ------ ----- ------ DEPRECIATION January 1, 2002............ - 3,863 14,628 930 19,421 Change for the year........ - 114 1,046 632 1,792 Disposals.................. - (181) (54) (126) (361) ------ ----- ------ ----- ------ December 31, 2002.......... - 3,796 15,620 1,436 20,852 ------ ----- ------ ----- ------ WDV at December 31, 2002... 491 3,645 7,852 618 12,606 ------ ----- ------ ----- ------ 2001 COST January 1, 2001............ 24 7,761 22,730 1,102 31,617 Additions.................. 1,440 - - - 1,440 Disposals.................. - (108) (474) (83) (665) Transfers.................. (639) 51 121 467 - ------ ----- ------ ----- ------ December 31, 2001.......... 825 7,704 22,377 1,486 32,392 ------ ----- ------ ----- ------ DEPRECIATION January 1, 2001............ - 3,639 13,588 641 17,868 Change for the year........ - 324 1,414 343 2,081 Disposals.................. - (100) (374) (54) (528) ------ ----- ------ ----- ------ December 31, 2001.......... - 3,863 14,628 930 19,421 ------ ----- ------ ----- ------ WDV at December 31, 2001... 825 3,841 7,749 556 12,971 ------ ----- ------ ----- ------
5. TRADE AND OTHER RECEIVABLES
2003 2002 2001 K'000 K'000 K'000 ------- ------- ------- Trade receivables.................... 24,924 28,491 16,673 Less: Provision for doubtful debts... (1,462) (1,462) (1,462) ------ ------ ------ 23,462 27,029 15,211 ------ ------ ------ Other receivables and prepayments.... 603 499 486 VAT recoverable...................... - 1,896 - Customer loans....................... 39 212 37 ------ ------ ------ 642 2,607 523 ------ ------ ------ Total trade and other receivables.... 24,104 29,636 15,734 ------ ------ ------
68 6. INVENTORIES
2003 2002 2001 K'000 K'000 K'000 ------ ------ ------ Trading stock - Petroleum products.. 19,965 21,505 21,469 Stores and other materials.......... 1,027 1,033 761 ------ ------ ------ 20,992 22,538 22,230 ------ ------ ------
7. BANK OVERDRAFT FACILITY An unsecured bank overdraft facility of K500,000 is available at all times with Westpac Bank PNG Limited. Additional short term needs to exceed this facility, where required, are discussed and agreed at the time. There was no bank overdraft in existence at the balance date or comparative year ends. 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2003 2002 2001 K'000 K'000 K'000 ----- ----- ----- Trade creditors... 611 225 152 Accrued expenses.. 3,226 1,282 3,844 Duty payable...... 2,756 1,336 1,080 VAT payable....... 1,080 - 692 ----- ----- ----- 7,673 2,843 5,768 ----- ----- -----
9. EMPLOYEE PROVISIONS
2003 2002 2001 K'000 K'000 K'000 ----- ----- ----- Current liability......................... 336 209 211 Non current liability..................... 388 371 324 ---- ---- ---- 724 580 535 ---- ---- ---- Opening balance........................... 580 535 360 Net charge to provisions during the year.. 406 181 177 Less: Payments............................ (262) (136) (2) ---- ---- ---- Closing balance........................... 724 580 535 ---- ---- ----
10. PAID UP CAPITAL AND RESERVES
2003 2002 2001 K K K ---- ---- ---- --- --- --- Issued and paid up capital 100 ordinary shares.......... 200 200 200 --- --- ---
Under the Papua New Guinea Companies Act, shares have no par value and there is no authorised share capital. The general reserve of K838,000 has no restrictions on its use. There is no tax on the undistributed profits of the Company. Payments of dividends to shareholders from the retained earnings and reserves of the Company are subject to a dividend withholding tax. 11. CONTINGENT LIABILITIES The Company had no known contingent liabilities at December 31, 2003 (2002 and 2001: KNil). 12. RELATED PARTY INFORMATION Related parties comprise entities within the BP Group. Refined fuel products are predominantly sourced under contract from BP Australia Limited, with contract rates based on quoted market prices ex Singapore. Amounts attributable to transactions with related parties and outstanding balances are given below.
2003 2002 2001 K'000 K'000 K'000 ------- ------- ------- Refined fuel products............ 149,498 110,479 100,785 ------- ------- ------- Payable to BP Australia Limited.. 11,674 26,206 19,993 ------- ------- -------
69 13. ULTIMATE HOLDING COMPANY As at December 31, 2003 the shares in the Company were held by Gas Tanks Nederland BV. The ultimate holding Company was BP Plc, incorporated in UK. Subsequent to year-end, the shares in the Company held by Gas Tanks Nederland BV were sold effective April 28, 2004 to InterOil Corporation headquartered in Canada. 14. RETIREMENT BENEFITS The Company participates in the National Superannuation Fund of Papua New Guinea, a multi-employer defined contribution superannuation scheme, in respect of its citizen employees. Mandatory employer and employee contribution rates to an authorised superannuation fund on behalf of citizen employees are established by legislation. Employer contributions expensed during the year amounted to K169,000 (2002: K160,000; 2001: K158,000). No superannuation contributions are made on behalf of non-citizen employees. The Company has no further retirement benefit obligations. 15. OPERATING LEASE OBLIGATIONS Obligations payable after balance date on non-cancellable operating leases are as follows:
2003 2002 2001 K'000 K'000 K'000 ----- ----- ----- Not later than 1 year.......................... 829 571 641 Later than 1 year but not later than 2 years... 213 447 189 Later than 2 years but not later than 3 years.. 176 213 171 Later than 3 years but not later than 4 years.. 193 176 159 Later than 4 years but not later than 5 years.. 103 193 176 Later than 5 years............................. 103 168 360 ----- ----- ----- 1,617 1,768 1,696 ----- ----- -----
The above operating leases are predominantly for residential and commercial properties, and there are no significant contingent rent or escalation clauses or other restrictions under these leases. In addition, the Company holds State land leases on which annual land rentals are payable. The remaining lease terms on these land leases range from 76 to 99 years. The annual land lease rental expense for 2004 is expected to be K62,634, with anticipated periodic rent increases in future years linked to land values. 16. SEGMENT INFORMATION
2003 2002 2001 K'000 K'000 K'000 ------- ------- ------- Revenue derived within Papua New Guinea.. 231,163 177,504 154,653 Export revenue........................... 11,198 13,726 9,827 ------- ------- ------- 242,361 191,230 164,480 ------- ------- -------
The Company operates in one segment which is the distribution of refined fuel products throughout Papua New Guinea through a network of retail service stations and under commercial contracts. Export sales are incidental to domestic sales and there are no assets or liabilities located outside of Papua New Guinea. 17. CAPITAL COMMITMENTS The Company had no material commitments for future capital expenditure at December 31, 2003 (2002 and 2001: K Nil). 18. FINANCIAL INSTRUMENTS Activities and Management Policies (a) Foreign Exchange The Company undertakes transactions denominated in foreign currencies from time to time in which exposures in foreign currency arise. The Company does not hedge its foreign currency risks. The Company imports petroleum products from a related company, BP Australia. At December 31, 2003 the Company's exposure for unpaid shipments and other charges amounted to AUD 2,393,294 (2002: AUD 11,147,666; 2001: AUD 9,098,510) and USD 1,613,189 (2002 and 2001: Nil), which were not hedged. The exchange rate applicable at December 31, 2003 to the Kina/AUD was K1= AUD 0.3890 (2002: K1=AUD 0.4396: 2001 K1=AUD0.4952) and Kina/USD was K1=USD0.2925. 70 (b) Credit In the normal course of its business the Company incurs credit risk from trade debtors and financial institutions. There are no significant concentrations of credit risk. The Company has a credit policy that is used to manage this exposure to credit risk. As part of this policy, limits on exposures have been set and are monitored on a regular basis. (c) Net Fair Value The carrying amount of the financial assets and liabilities are considered to approximate their fair value. The Company did not hold any derivative financial instruments for hedging or risk management purposes. (d) Petroleum Products Contracts for the purchase and sale of petroleum products are held for receipt/delivery in accordance with the Company's expected purchase, sale or usage. The Company has no history of settling such contracts net for cash. 19. EMPLOYEES The average number of people employed by the Company during the year was 189 (2002: 155; 2001: 154). The increase from 2002 was predominantly due to hired casuals who were required for short-term projects. 20. VULNERABILITY TO CONCENTRATION RISK The Company`s predominant activity is to distribute refined fuel products throughout Papua New Guinea through a network of retail service stations and under commercial contracts. There is no dependence on a single customer or geographic region of the country. Refined fuel products are predominantly sourced under contract from BP Australia Limited. Retail fuel prices in Papua New Guinea are subject to price control by an independent regulator. 21. CORRECTION TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS These accounts include adjustments as compared to the financial statements previously issued by the Company as of and for the years ended December 31, 2003 and 2002. The adjustments correct the recognition of a provision for a duty claim in 2003 that should have been recognized in 2002 including the tax effect. The effect of these adjustments are as follows:
2003 2002 K'000 K'000 ----- ----- NET PROFIT As reported...................................... 21,503 11,601 As restated...................................... 22,010 11,094 TOTAL SHAREHOLDERS' EQUITY As reported...................................... 55,659 42,156 As restated...................................... 55,659 41,649
22 CONVENIENCE TRANSLATION INTO UNITED STATES DOLLAR AMOUNTS The Company reports its financial statements in Papua New Guinea Kina. The United States dollar ("U.S. dollar") amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader, and have been converted at the rate of one Papua New Guinea Kina to 0.3105 U.S. dollar, the spot rate as of June 30, 2004. Such convenience translations should not be construed as representations that the Papua New Guinea Kina amounts represent, have been, or could be, converted into, United States dollars at that or any other rate. The U.S. dollar amounts are unaudited and are not presented in accordance with International Financial Reporting Standards. 23. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND THE U.S. The Company's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and the Papua New Guinea Companies Act 1997. IFRS differs in certain significant respects from accounting principles generally accepted in Canada ("Canadian GAAP") and in the United States of America ("U.S. GAAP"). However, there are no significant reconciling differences between IFRS and Canadian and U.S. GAAP, as those standards relate to the Company and these financial statements. 24. EVENTS AFTER THE BALANCE SHEET DATE On 10 March 2004 an agreement was signed for all the shares in the company to be acquired by InterOil Corporation, with control passing effective 28 April 2004. The purchase price at the date of transfer was U.S.$12.2 million for assets and inventory. In accordance with the sale agreement, dividends of K15,729,688 are payable to the former shareholder, comprising profits from the 2003 year and the first two months of 2004. The Company changed its name to InterOil Products Limited on 29 April 2004. 71 BP PAPUA NEW GUINEA LIMITED CONDENSED INTERIM FINANCIAL STATEMENTS AS AT MARCH 31, 2004 AND 2003 CONDENSED BALANCE SHEET (Expressed in Papua New Guinea Kina, except supplementary information)
SUPPLEMENTARY INFORMATION MARCH 31, 2004 USD'000 MARCH 31, DECEMBER MARCH 31, @ 1 K = 0.3105 2004 31, 2003 2003 NOTE USD K'000 K'000 K'000 ---- --- ----- ----- ----- (Unaudited) (Unaudited) (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents.......... 6,464 20,819 18,706 6,901 Trade receivables.................. 7,251 23,352 23,462 26,441 Other receivables and 1,077 3,468 642 1,316 prepayments........................ Inventories........................ 8,099 26,084 20,992 25,948 ------ ------ ------ ------ 22,891 73,723 63,802 60,606 NON CURRENT ASSETS: Property, plant and equipment...... 4,658 15,002 15,249 12,809 Deferred income tax benefit........ 667 2,147 2,776 2,320 ------ ------ ------ ------ 28,216 90,872 81,827 75,735 ------ ------ ------ ------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Income tax payable................. 1,781 5,736 6,097 5,025 Accounts payable and accrued liabilities........................ 4 1,265 4,074 7,673 2,871 Employee provisions................ 100 323 336 198 Dividends payable.................. 6 4,884 15,730 - - Due to related parties............. 6,335 20,403 11,674 19,141 ------ ------ ------ ------ 14,366 46,266 25,780 27,235 ------ ------ ------ ------ NON CURRENT LIABILITIES: Employee provisions................ 126 406 388 384 14,492 46,672 26,168 27,619 SHAREHOLDERS' EQUITY: Share capital...................... - - - - General reserve.................... 260 838 838 838 Retained earnings.................. 13,464 43,362 54,821 47,278 ------ ------ ------ ------ 13,724 44,200 55,659 48,116 ------ ------ ------ ------ 28,216 90,872 81,827 75,735 ------ ------ ------ ------
See accompanying notes to the condensed financial statements Approved by the Board on November 2, 2004 (signed) "Tom S. Donovan" (signed) "Graeme K. Alexander" - ------------------------------------- --------------------------------------- Director Director 72 BP PAPUA NEW GUINEA LIMITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE 3 MONTH PERIODS ENDED MARCH 31, 2004 AND 2003 CONDENSED STATEMENT OF EARNINGS (Expressed in Papua New Guinea Kina, except supplementary information)
SUPPLEMENTARY INFORMATION 31 MARCH 2004 USD'000 31 MARCH 31 MARCH @ 1 K = 0.3105 2004 2003 NOTE USD K'000 K'000 ---- --- ----- ----- (Unaudited) (Unaudited) (Unaudited) Sales revenue...................... 18,771 60,453 59,095 Cost of sales...................... (14,911) (48,020) (44,529) ------- ------- ------- GROSS PROFIT....................... 3,860 12,433 14,566 Other operating income............. 101 324 151 Administrative and general 3 (1,969) (6,342) (4,764) expenses Foreign exchange gains/(losses) (142) (456) (798) ------- ------- ------- OPERATING PROFIT................... 1,850 5,959 9,155 Finance income..................... 33 104 73 ------- ------- ------- PROFIT BEFORE INCOME TAXES......... 1,883 6,063 9,228 Income tax (expense)............... 3 (557) (1,792) (2,761) ------- ------- ------- NET PROFIT 1,326 4,271 6,467 ------- ------- -------
73 BP PAPUA NEW GUINEA LIMITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE 3 MONTH PERIODS ENDED MARCH 31, 2004 AND 2003 CONDENSED STATEMENT OF CASH FLOWS (Expressed in Papua New Guinea Kina, except supplementary information)
3 MONTH PERIOD ENDED ------------------------------------------- SUPPLEMENTARY INFORMATION MARCH 31, 2004 USD'000 MARCH 31, MARCH 31, @ 1 K = 0.3105 2004 2003 USD K'000 K'000 --- ----- ----- (Unaudited) (Unaudited) (Unaudited) OPERATING ACTIVITIES Profit before income taxes.................... 1,883 6,063 9,228 Adjustments for non-cash transactions: Depreciation and profit on sale of property, plant and equipment................................ 100 323 437 Unrealized exchange loss................. 213 687 670 Change in non-cash operating working capital: Inventories.............................. (1,581) (5,092) (3,410) Trade and other receivables.............. (843) (2,716) 1,879 Accounts payable and accrued liabilities.............................. (1,116) (3,594) 30 Due to related parties................... 2,497 8,042 (7,735) Taxes paid (473) (1,524) (10) ------ ------ ------ Cash flows provided by operating activities.................................... 680 2,189 1,089 ------ ------ ------ INVESTING ACTIVITIES Expenditure on capital assets............ (187) (602) (652) Funds received on sale of assets......... 163 526 11 ------ ------ ------ Cash flows used in investing activities....... (24) (76) (641) ------ ------ ------ Increase in cash and cash equivalents......... 656 2,113 448 Cash and cash equivalents, beginning of period........................... 5,808 18,706 6,452 ------ ------ ------ Cash and cash equivalents, end of period...... 6,464 20,819 6,901 ------ ------ ------ CASH AND CASH EQUIVALENTS COMPRISES: Cash on hand and at bank...................... 6,464 20,819 6,901 Bank overdrafts............................... - - - ------ ------ ------ 6,464 20,819 6,901 ------ ------ ------
See accompanying notes to the condensed financial statements 74 BP PAPUA NEW GUINEA LIMITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE 3 MONTH PERIODS ENDED MARCH 31, 2004 AND 2003 CONDENSED STATEMENT OF CHANGES IN EQUITY (Expressed in Papua New Guinea Kina, except supplementary information)
3 MONTH PERIOD ENDED --------------------------------------------------- SUPPLEMENTARY INFORMATION ------------------ --------------------------- MARCH 31, MARCH 31, MARCH 31, 2004 2004 2003 USD'000 K'000 K'000 @ 1 K = 0.3105 USD -------------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) SHARE CAPITAL At beginning of period.................... - - - Issue of capital stock.................... - - - ------ ------ ------ At end of period.......................... - - - ------ ------ ------ GENERAL RESERVE At beginning of period.................... 260 838 838 Change in period.......................... - - - ------ ------ ------ At end of period.......................... 260 838 838 ------ ------ ------ RETAINED EARNINGS At beginning of period.................... 17,022 54,821 40,811 Dividends declared........................ (4,884) (15,730) - Net profit for period..................... 1,326 4,271 6,467 ------ ------ ------ At end of period.......................... 13,464 43,362 47,278 ------ ------ ------ SHAREHOLDERS' EQUITY AT END OF PERIOD..... 13,724 44,200 48,116 ------ ------ ------
See accompanying notes to the condensed financial statements 75 PAPUA NEW GUINEA LIMITED NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE 3 MONTH PERIODS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED) 1. STATEMENT OF ACCOUNTING POLICIES BP Papua New Guinea Limited (the "Company") is incorporated in Papua New Guinea, and all amounts are expressed in Papua New Guinea Kina rounded to the nearest thousand kina, unless noted otherwise and with the Papua New Guinea Companies Act 1997. These financial statements comply with International Accounting Standard IAS 34: Interim Financial Reporting and with the Papua New Guinea Companies Act 1997. In the opinion of management, the accompanying condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, that are necessary to present fairly the financial position of the Company as of March 31, 2004 and 2003 and the statement of earnings and of cash flows for the three month periods ended March 31, 2004 and 2003. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the annual financial statements of the Company for the year ended December 31, 2003. The results of operations for the interim periods are not necessarily indicative of the results of the full fiscal year. 2. GENERAL ACCOUNTING POLICIES The fundamental accounting assumptions recognised as appropriate for the measurement and reporting of results, cash flows and the financial position have been followed in the preparation of these financial statements. These accounts have been prepared using the historical cost convention as modified by the re-measurement of certain financial instruments at fair value through profit and loss. The accounting policies adopted and methods of computation used are consistent with those of the previous financial year ended December 31, 2003. 3. INTERIM OPERATIONS There are no significant seasonal or cyclical factors that impact the interim financial periods ended March 31, 2004 and 2003. 4. ADMINISTRATIVE AND GENERAL EXPENSES
MARCH 31, 2004 MARCH 31, 2003 K'000 K'000 -------------- -------------- Auditors remuneration Audit...................................... 31 11 Other services............................. 12 - Bad debts written off................................ - - Depreciation......................................... 544 448 Donations............................................ 34 69 Environmental remediation............................ 120 116 Lease rentals........................................ 185 273 Other operating expenses............................. 2,502 1,529 Profit on sale of property, plant and equipment...... (221) (11) Repairs and maintenance.............................. 1,258 575 Staff costs.......................................... 1,877 1,754 ----- ----- 6,342 4,764 ----- -----
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
MARCH 31, 2004 MARCH 31, 2003 K'000 K'000 -------------- -------------- Trade creditors...................................... 153 392 Accrued expenses..................................... 1,870 1,313 Duty payable......................................... 2,051 1,166 VAT payable.......................................... - - ----- ----- 4,074 2,871 ----- -----
76 6. PAID UP CAPITAL
MARCH 31, 2004 MARCH 31, 2003 K K -------------- -------------- Issued and paid up capital ---- ---- 100 ordinary shares................................. 200 200 ---- ----
7. DIVIDENDS PAID AND PAYABLE There were no dividends paid in the periods ended March 31, 2004 or 2003. Dividends declared in the period to March 31, 2004 totalled K15,729,688 and encompass profits from the 2003 year and the first two months of 2004 and are payable to the owner of the shares at this time as part of the share sale agreement dated March 10, 2004. 8. CONTINGENT LIABILITIES The Company had no known contingent liabilities at March 31, 2004 (2003: KNil). 9. RELATED PARTY INFORMATION Related parties comprise entities within the BP Group and InterOil Corporation. Refined fuel products are predominantly sourced under contract from BP Australia Limited, with contract rates based on quoted market prices ex Singapore. There were no material transactions with InterOil Corporation. Amounts attributable to transactions with the BP Group during the three month periods ended March 31, 2004 and 2003 and outstanding balances at March 31, 2004 and 2003 are given below
MARCH 31, 2004 MARCH 31,2003 K'000 K'000 -------------- ------------- Refined fuel products..................................... 42,991 42,053 ------ ------ Payable to BP Australia Limited, excluding dividend....... 20,403 19,141 ------ ------
10. ULTIMATE HOLDING COMPANY As at April 28, 2004, the shares in the Company were held by S.P. Distribution Limited, a subsidiary of InterOil Corporation, a company registered in New Brunswick, Canada. Prior to April 28, 2004, the shares were owned by Gas Tanks Nederland BV., and the ultimate holding company was BP Plc, incorporated in UK. The purchase price at the date of transfer was U.S.$12.2 million for assets and inventory. The Company changed its name to InterOil Products Limited on 29 April 2004. 11. CONVENIENCE TRANSLATION INTO UNITED STATES DOLLAR AMOUNTS The Company reports its financial statements in Papua New Guinea Kina. The United States dollar ("U.S. dollar") amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader, and have been converted at the rate of one Papua New Guinea Kina to 0.3105 U.S. dollar, the spot rate as of June 30, 2004. Such convenience translations should not be construed as representations that the Papua New Guinea Kina amounts represent, have been, or could be, converted into, United States dollars at that or any other rate. The U.S. dollar amounts are unaudited and are not presented in accordance with International Financial Reporting Standards.. 12. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND THE U.S. The Company's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and the Papua New Guinea Companies Act 1997. IFRS differs in certain significant respects from accounting principles generally accepted in Canada ("Canadian GAAP") and the United States of America ("U.S. GAAP"). However, there are no significant reconciling differences between IFRS and Canadian and U.S. GAAP, as those standards relate to the Company. 77 CERTIFICATE OF THE COMPANY November 10, 2004 This short form prospectus, together with the documents incorporated in this prospectus by reference, will, as of the date of the last supplement to this prospectus relating to the securities offered by this prospectus and the supplement(s), constitute full, true and plain disclosure of all material facts relating to the securities offered by this prospectus and the supplement(s) as required by the securities legislation of Ontario. (Signed) PHIL E. MULACEK (Signed) TOM S. DONOVAN Chief Executive Officer Chief Financial Officer On behalf of the Board of Directors (Signed) CHRISTIAN VINSON (Signed) ROGER GRUNDY Director Director A-1 PART II INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS INDEMNIFICATION Section 22 of the Bylaws of the Company provides, with regard to indemnity and insurance under the Business Corporations Act (New Brunswick) (the "Act"), in part as follows: "Subject to Section 81 of the Act, except in respect of an action by or on behalf of the Corporation or Another Body Corporate (as hereinafter defined) to procure a judgement in its favour, the Corporation shall indemnify each director and officer of the Corporation and each former director and officer of the Corporation and each person who acts or acted at the Corporation's request as a director or officer of Another Body Corporate, and his heirs and legal representatives, against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or Another Body Corporate, as the case may be, if (a) he acted honestly and in good faith with a view to the best interests of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful. "Another Body Corporate" as used herein means a body corporate of which the Corporation is or was a shareholder or creditor." The Act provides that no officer or director of the Company may be indemnified in connection with the defense of any civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the corporation or body corporate, unless a court of competent jurisdiction has approved the terms of such indemnification. However, the Act further provides that notwithstanding any provision to the contrary therein, any officer or director is entitled to indemnification if such person (i) was substantially successful on the merits of the defense of the action or proceeding; (ii) acted honestly and in good faith with a view to the best interests of the corporation; and (iii) where a criminal or administrative action or monetary penalty is involved, such person had reasonable grounds for believing that his or her conduct was lawful. Insofar as indemnification for liabilities arising from the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. PART III UNDERTAKING AND CONSENT TO SERVICE OF PROCESS ITEM 1. UNDERTAKING. The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form F-10 or to transactions in said securities. ITEM 2. CONSENT TO SERVICE OF PROCESS. Concurrently with the filing of this Registration Statement on Form F-10, the Company is filing with the Commission a written irrevocable consent and power of attorney on Form F-X. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on this Form F-10 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toronto, Province of Ontario, Canada, on the 10th day of November, 2004. INTEROIL CORPORATION By: /S/ PHIL E. MULACEK ------------------------------------- Phil E. Mulacek Chairman of the Board, Chief Executive Officer and President POWER OF ATTORNEY NOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Phil E. Mulacek and Gary M. Duvall his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign, execute and file with the Securities and Exchange Commission and any state securities regulatory board or commission any documents relating to the proposed issuance and registration of the securities offered pursuant to this Registration Statement on Form F-10 under the Securities Act of 1933, as amended, including any amendment or amendments relating thereto (and, in addition, any post effective amendments), with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated, on the 10th day of November, 2004. /S/ PHIL E. MULACEK Chairman of the Board, - ----------------------------- Chief Executive Officer and President Phil E. Mulacek (Principal Executive Officer) /S/ TOM S. DONOVAN General Manager-Finance/Accounts - ----------------------------- and Chief Financial Officer Tom S. Donovan (Principal Financial Officer and Principal Accounting Officer) /S/ CHRISTIAN M. VINSON Director; Chief Operating Officer - ----------------------------- and Vice President Christian M. Vinson /S/ GEOFFREY M. FOLIE Deputy Chairman of the Board - ----------------------------- Geoffrey M. Folie /S/ ROGER N. GRUNDY Director - ----------------------------- Roger N. Grundy /S/ GAYLEN J. BYKER Director - ----------------------------- Gaylen J. Byker /S/ EDWARD N. SPEAL Director - ----------------------------- Edward N. Speal EXHIBIT INDEX EXHIBIT DESCRIPTION NUMBER 1 Base Shelf Prospectus (included herein as Part I of this Registration Statement) 2 Annual Information Form dated May 19, 2004 3 U.S. GAAP reconciliation which includes audited comparative financial statements of the Registrant and notes thereto for the years ended December, 31, 2003, December 31, 2002, December 31, 2001 and cumulative, together with the report and rates of the auditors thereon (incorporated herein by reference to Exhibit 5 of the Company's Report on Form 40-F dated May 12, 2004) 4 Amending Agreement to Securities Purchase Agreement, dated September 1, 2004, by and among, InterOil Corporation, Portside Growth and Opportunity Fund, Manchester Securities Corp. and Provident Master Fund LTD. 5 8.78% Senior Convertible Debenture due August 28, 2009 of InterOil Corporation, dated August 27, 2004 6 Management's Discussion and Analysis for the year ended December 31, 2003, contained on pages 43-48 of the 2003 Annual Report of the Company (incorporated herein by reference to Exhibit 3 of the Company's Report on Form 40-F dated May 12, 2004) 7 Amended unaudited comparative consolidated financial statements for the six months ended June 30, 2004, June 30, 2003 and June 30, 2002 8 Management Information Circular for the annual meeting of shareholders held on June 29, 2004 (excluding those portions, which, in accordance with National Instrument 44-101, need not be incorporated by reference) 9 Unaudited comparative consolidated financial statements for the six months ended June 30, 2004 and June 30, 2003 and management's discussion and analysis thereof 10 Material Change Report dated February 2, 2004 in respect of a revision to the estimate for completion of our refinery project in Papua New Guinea (incorporated herein by reference to Exhibit 123 of the Company's Report on Form 40-F dated May 12, 2004) 11 Material Change Report dated March 16, 2004 in respect of the share sale agreement with British Petroleum plc to acquire British Petroleum's Papua New Guinea subsidiary, BP PNG (incorporated herein by reference to Exhibit 122 of the Company's Report on Form 40-F dated May 12, 2004) 12 Material Change Report dated June 17, 2004 in respect of the arrival of the first shipment of crude oil for our refinery at our marine terminal located across the harbor from Port Moresby, Papua New Guinea 13 Material Change Report dated July 7, 2004 in respect of our refinery's crude distillation unit accepting feedstock for the first time 14 Material Change Report dated August 27, 2004 in respect of the definitive agreement for the private placement of U.S.$30 million to U.S.$40 million of Debentures 15 Material Change Report dated September 10, 2004 in respect of closing the issuance of an additional U.S.$15 million of Debentures, raising a total of U.S.$45 million 16 Refinery State Project Agreement by and among InterOil Limited to InterOil, Ltd. and the Independent State of Papua New Guinea dated May 29, 1997 17 Agreement for the Sale and Purchase of Naphtha dated February 8, 2001 18 Export Marketing and Shipping Agreement by and between EP InterOil, Ltd. and Shell International Eastern Trading Company dated March 23, 2001 19 Domestic Sales Agreement by and between InterOil Limited and Shell Papua New Guinea Limited dated April 9, 2001 20 Sale and Purchase Undertaking Agreement, by and between InterOil Corporation and Shell Overseas Holdings Limited dated July 21, 2004. 21 Crude Supply Agency and Sales Agreement by and between EP InterOil, Ltd. and BP Singapore Plc Limited dated December 21, 2001 22 Engineering Procurement and Construction Contract by and between InterOil Limited and Clough Niugini Limited dated March 26, 2002 23 Facilities Management Contract by and between InterOil Limited and Petrofac Niugini Limited dated November 9, 2003 24 Share Sale Agreement by and among InterOil Corporation, SPI Distribution Limited, Gas Tank Nederland B.V., and BP Papua New Guinea Limited dated March 9, 2004 25 Securities Purchase Agreement by and between InterOil Corporation and the Initial Purchasers as listed therein dated August 26, 2004 26 CSIRO Petroleum Confidential Report No. 02-019, Preliminary Report on the Geochemistry of Solid Bitumens in the Pale Sandstone, Subu-1 Well and Outcrop at the Aure Scarp, East Papuan Basin, dated April 2002 27 CSIRO Petroleum Confidential Report No. 04-002 (Part I), The Geochemistry and Organic Petrology of Oil Shows and Fine-Grained Rocks in Moose-1 and Moose-1ST1, East Papuan Basin, dated January 2004 28 CSIRO Petroleum Confidential Report No. 04-059 (Part I), The Geochemistry of Oil Shows in the Moose-2 Well, East Papuan Basin, dated September 2004 29 CSIRO Petroleum Confidential Report No. 04-059 (Part II), The Geochemistry of Oil Shows in the Moose-2 Well, East Papuan Basin, dated September 2004 30 Consent of KPMG 31 Consent of PricewaterhouseCoopers 32 Power of Attorney (included on the signature page of this Registration Statement) EX-99.2 2 h19854exv99w2.txt ANNUAL INFORMATION FORM EXHIBIT 2 (INTEROIL LOGO) INTEROIL CORPORATION ANNUAL INFORMATION FORM YEAR ENDED 31 DECEMBER 2003 TABLE OF CONTENTS CORPORATE STRUCTURE.............................................. 3 GENERAL DEVELOPMENT OF THE BUSINESS.............................. 5 DESCRIPTION OF INTEROIL'S BUSINESS............................... 5 SOCIAL AND ENVIRONMENTAL POLICY.................................. 9 RISK FACTORS..................................................... 10 UPSTREAM OPERATIONS.............................................. 12 DIVIDENDS........................................................ 18 DESCRIPTION OF CAPITAL STRUCTURE................................. 18 MARKET FOR SECURITIES............................................ 18 MANAGEMENT DISCUSSION AND ANALYSIS............................... 19 DIRECTORS AND OFFICERS........................................... 19 BOARD COMMITTEES................................................. 22 CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS......... 22 PENALTIES OR SANCTIONS........................................... 23 LEGAL PROCEEDINGS................................................ 23 TRANSFER AGENTS AND REGISTRARS................................... 23 FORWARD LOOKING STATEMENTS....................................... 23 ADDITIONAL INFORMATION........................................... 24 GLOSSARY OF TERMS................................................ 25
INTEROIL CORPORATE 2003 AIF PAGE 2 CORPORATE STRUCTURE InterOil comprises three business segments under the public company, InterOil Corporation: the refining arm under the holding company, SP InterOil LDC ("SPI"), and comprising EP InterOil Limited ("EPI") and InterOil Limited ("IOL"); the petroleum exploration and development arm under SPI Exploration and Production Corporation; and the distribution and marketing arm under SPI Distribution Limited. All InterOil companies have integrated, shared management. In this Annual Information Form the terms "InterOil" and the "Company" mean InterOil Corporation and its subsidiaries and partnership interests on a consolidated basis. As at 31 March 2004 there were 24,831,461 common shares and options to purchase 1,343,504 common shares issued and outstanding. This amount is inclusive of three private placements totaling 3,817,500 common shares that were completed in February, April, and August 2003. InterOil was formed under the Business Corporations Act (New Brunswick) by articles of amalgamation dated 29 May 1997. InterOil was formed as the result of the amalgamation of Cybermind Group Inc. ("Cybermind") and South Pacific InterOil Limited (SP Canada). The registered office of InterOil is located at Brunswick House, 10th Floor, 44 Chipman Hill, Saint John, NB E2L 4S6. Unless otherwise noted, all subsidiaries are directly or indirectly 100% owned. 1. SPI InterOil, LDC ("SPI") SPI was incorporated under the International Business Companies Act, 1989, of the Commonwealth of the Bahamas on 22 November 22. The registered office of SPI is located in Nassau, the Bahamas. SPI was formed under the laws of the Bahamas to facilitate investment and to maximize the tax advantages available to its investors. The General Manager of SPI is Petroleum Independent and Exploration Corporation ("PIE Corp."), a privately held company registered in Texas, USA and incorporated in 1981. This structure allowed InterOil to meet US content requirements for the project financing of the refinery provided by the Overseas Private Investment Corporation, an agency of the US Government. During the development of the InterOil, SPI negotiated the purchase of the refinery assets, which included a modular crude unit, a reformer and two ocean-going American-flagged steel deck barges. After acquiring the equipment, SPI directed the dismantling, loading and transportation of the equipment to the Texas Gulf coast. The Corporation has entered into an agreement with PIE Corp. to exchange on a one-for-one basis shares in SPI for fully paid shares in InterOil. This election may be made by PIE Corp at any time. There are 5,000 shares in this category. These shares provided the US content for the US$85,000,000 in approved financing. 2. EP InterOil, Ltd. ("EPI") EPI was incorporated under the Companies Law of the Cayman Islands in 1996 and was the vehicle established to form a joint venture with Enron PNG Limited ("EPNG"), a 100%-owned subsidiary of Enron. Its registered office is located in Grand Cayman. SPI INTEROIL CORPORATE 2003 AIF PAGE 3 controls EPI, with 100% of the voting stock, as the joint venture has terminated and EPNG has elected to take a passive role by only holding non-voting stock. EPI sponsored its wholly owned subsidiary, IOL, when IOL entered into the lump-sum, turn-key, engineering, procurement and construction contract (the "EPC Contract") with Clough Niugini Limited, to build the refinery. EPI has also negotiated the purchase and refurbishment of the principal supplied equipment that will be used at the refinery and has commissioned the work to prepare the equipment movement and installation at the refinery site. EPNG, holds 897,542 participating non-voting shares in EPI, but has decided that the refinery is not consistent with its corporate objectives. EPNG's interest is anticipated to be diluted on an ongoing basis as InterOil contributes more equity. As at 31 December 2003, EPNG's interest had been diluted to 1.34%. 3. InterOil Limited ("IOL") IOL was incorporated in Papua New Guinea ("PNG") in 1994 to construct, own and operate the refinery. Its registered office is in Port Moresby, PNG. IOL has played a very active role in working with the PNG government to obtain the permits authorizations and certificates required under the Refinery State Project Agreement and has also obtained a 99-year lease over the refinery site. IOL has received "Pioneer status" in PNG, which grants a five-year income tax holiday to IOL in Papua New Guinea. IOL entered into the EPC Contract in March 2002 and the Facilities Management Contract with Petrofac Niugini Limited in November 2003. 4. SPI Exploration and Production Corporation ("SPI E&P") SPI E&P was incorporated under the International Business Companies Act, 1989, of the Commonwealth of the Bahamas in 1998. The registered office of SPI E&P is located in Nassau, the Bahamas. SPI E&P was formed under the laws of the Bahamas to facilitate investment in exploration for, and the development and production of, oil and gas resources and to maximize the tax advantages available to its investors. SPI E&P wholly owns the specific purpose exploration companies holding and operating exploration rights in Papua New Guinea. 5. SPI Distribution Limited ("SPI Distribution") SPI Distribution was incorporated under the International Business Companies Act, 1989, of the Commonwealth of the Bahamas in 2001. The registered office of SPI Distribution is located in Nassau, the Bahamas. SPI Distribution was formed under the laws of the Bahamas to facilitate investment in the distribution of refined products in Papua New Guinea and to maximize the tax advantages available to its investors. SPI Distribution will hold all of InterOil's product distribution assets in Papua New Guinea and has acquired InterOil Products Limited (formerly BP Papua New Guinea Limited) to initiate this purpose. INTEROIL CORPORATE 2003 AIF PAGE 4 GENERAL DEVELOPMENT OF THE BUSINESS Three Year History Over the past three years, the Corporation (or a subsidiary) has: - located and purchased refinery equipment in order to build a 32,500 bpd refinery in Papua New Guinea; - obtained two 99-year leases from the PNG Government on suitable land with deep water access to construct the refinery; - been granted a Petroleum Processing Facility License ("PPFL No 1") under the Oil and Gas Act 1998 (PNG) to operate the refinery; - signed a 30-year Project Agreement with the PNG Government, which confers certain tax and market privileges; - obtained PNG environmental and all other permits/approvals as necessary; - signed an agreement to purchase all of Shell's retail and commercial distribution assets in PNG and lease them back to Shell; - reached an agreement with Shell for the purchase and marketing of the majority of the export capacity of the refinery; - signed a contract with BP Singapore Pte Limited, whereby BP will act as the exclusive crude oil supplier to the refinery; - obtained a US$85 million loan from the Overseas Private Investment Corporation (OPIC) to finance the refinery; - executed a lump-sum, turn-key, engineering, procurement and construction contract with Clough to build the refinery; - completed the construction of the refinery; - signed a facilities management contract for refinery operations with Petrofac, of the UK; - established a strong exploration position by obtaining approximately eight million exploration acres in 3 key exploration licenses in PNG; - in 2003 raised a total of US$64.58 million through 3 private placements; - sold indirect working interest participation in our drilling program for US$19.80 million; - initiated its multi-well exploration program on separate, independent structures; and - acquired BP's PNG subsidiary, BP Papua New Guinea Limited, including all its petroleum distribution assets and operations in Papua New Guinea. DESCRIPTION OF INTEROIL'S BUSINESS 1. Purpose and Mission InterOil's focus is the construction of its oil refinery in Papua New Guinea; the exploration of its various exploration licenses; and the development of a fully integrated oil company that will own and operate assets from the wellhead to the gasoline pump. The refinery is expected to process 32,500 barrels of oil per day and result in PNG becoming an exporter of refined petroleum products. INTEROIL CORPORATE 2003 AIF PAGE 5 2. Overview InterOil's operations are organized into three major business segments: - The upstream segment includes the exploration for and the production of crude oil and natural gas; - The midstream segment includes the refining of crude oil; and - The downstream segment includes distribution of refined products in PNG. 3. Upstream InterOil has an extensive upstream portfolio consisting of approximately 8 million acres of exploration licenses. The vast majority of these licenses are located onshore in the Eastern Papuan Basin, and have the logistical advantage of moderate terrain, barge access to infrastructure and proximity to the refinery. This logistical advantage allows for lower cost of development, early production, and access to a local market for oil production in contrast to past oil production activities in PNG. Following positive fiscal policy announcements by the Government of Papua New Guinea in December 2002, InterOil announced a commitment to an eight well drilling program. On 28 March 2003 the program commenced with the spudding of the first prospect, Moose, located in the area governed by Petroleum Prospecting License 238 ("PPL 238") in the Eastern Papuan Basin in PNG. On-site inspection of the core data from the Moose - 1 well indicates more than fourteen oil shows in 135 meters (443 feet) of continuous core from 673 meters (2,208 feet) to 808 meters (2,651 feet). The oil shows are both in the fractures and from porous sections within the limestone. Testing of the well was inconclusive due to fluid invasion of the reservoir whilst drilling. PPL 238 is further described below. On 28 July 2003 the drilling program was expanded to 16 separate wells, each on an independent structure and located in InterOil's exploration acreage. Preparations are in progress to procure additional drill rigs in order to accelerate the exploration program. A heli-portable drilling rig has been contracted and mobilized on InterOil's second prospect, the Sterling Mustang. On 9 December 2003 InterOil spudded its second exploration well, Moose - 2, on the Moose Structure. Operations are currently drilling ahead. On 6 January 2004 InterOil Spudded its first exploration well, the Sterling Mustang - 1, on its second structure, Sterling Mustang. Operations are currently drilling ahead. 4. Midstream Construction of the refinery is substantially complete with crude oil expected to be introduced into the storage tanks in June 2004. The refinery complex is located across the harbor from Port Moresby, the capital of PNG, and is located on the former site of the Australian Naval Base where InterOil has secured a 99-year lease from the PNG Government. The refinery is being built pursuant to the EPC contract with Clough Niugini Limited. INTEROIL CORPORATE 2003 AIF PAGE 6 Refinery Project The refinery has a name-plate operating capacity of 1.5 million tonnes per year (about 11 million barrels) and complies with the World Bank's environmental standards. It has been engineered to process "sweet" crude, low in sulphur content, requiring few environmental costs in the refining process. The refinery is centrally located across the harbour from Port Moresby the capital city of Papua New Guinea, some 24 kilometres (15 miles) away by road and 4 kilometres (2.5 miles) by water. The marine facilities comprise a large jetty, which has deep water access of 17 metres (56 feet) and has been designed to accommodate tankers from 12,000-110,000 dwt. This will be used for the berthing of crude and product tankers. A second wharf can accommodate ships up to 18,000 dwt. The refinery will optimize the production of higher premium products, such as diesel, which is in short supply in the region. Gasoline on the other hand, which is in regional oversupply, will constitute 13% by volume of the refinery's production stream. The refinery has a total storage capacity of 1.9 million barrels (300 million litres) including crude storage of 750,000 barrels (120 million litres). A contract has been awarded to Petrofac Nuigini Limited ("Petrofac"), a PNG subsidiary of Petrofac Facilities Management Limited and leading facilities management company, for the operation and management of the refinery. Petrofac commenced site operations in November 2003 and have mobilized all key positions plus the majority of its operators. Petrofac is also confirming that all refinery operating practices are in compliance with the latest industry codes and standards and are participating in pre-commissioning and commissioning activities. Construction of the laboratory at the refinery is complete and will be operated by an independent company, SGS Oil, Gas & Chemicals ("SGS") a global leader in the verification, testing and certification industry. SGS's responsibilities will include the establishment of the required quality assurance programs, the procurement of all required testing equipment, and laboratory personnel. The laboratory will test and certify all finished products on-site. Marketing and Crude Supply Crude oil from PNG is currently exported over 2,000 kilometres (1,250 miles) to Brisbane and further to refineries in Sydney and Singapore. InterOil, under an agreement with the Government of PNG, is entitled to access domestic crude oil for a period of 30 years. This right to access domestic crude provides a secure source of crude supply to the refinery. InterOil has also entered into an agreement with B.P. Singapore (the Asian trading arm of BP International) for the supply of crude to the refinery for an initial period of five years, ensuring a reliable source of feedstock for refinery operations. The key margin expected to drive the refinery profitability is the spread between the wholesale price of product in PNG (based on the State sanctioned Import Parity Price or IPP formula) and the cost of crude. This spread comprises two major components: (1) the differential between the Singapore Posted Product prices and the price of feedstock (crude) and (2) the Singapore to PNG import freight component. INTEROIL CORPORATE 2003 AIF PAGE 7 PNG is InterOil's principal market for all products except naphtha. Under InterOil's agreement with the Government of PNG, all PNG domestic distributors will purchase their refined petroleum product needs from the refinery at IPP. As a result, PNG will no longer have to rely on imported refined products. Naphtha is the major export product from the refinery is naphtha, which will be sold to a unit of Shell on a term basis for the petrochemical industry. Any gasoline, diesel, and jet/kerosene produced by the refinery that is surplus to domestic demand will be marketed by Shell to the nearby Pacific Islands and North Australian markets. InterOil's supply and trading group will continue to adopt pro-active marketing strategies that will enhance the financial performance of the refinery. PROJECTED PRODUCTION FROM THE REFINERY
PRODUCT VOLUME - ------- ------ Diesel 38.0% Naphtha 20.3% Marine Diesel 15.7% Jet / Kerosene 7.7% Gasoline 13.0% LPG 1.3% - ------------------------------------ Sub-total 96.0% - ------------------------------------ Power Plant Usage 3.6% Process Losses 0.4% - ------------------------------------ Total 100.9% - ------------------------------------
5. Downstream Currently, PNG imports all of its refined petroleum products. The State Project Agreement gives InterOil certain rights to supply the domestic market in PNG with refined oil products. InterOil has estimated that approximately 50% to 60% percent of the refinery net output will be used to supply the PNG domestic market. The balance of the refinery's production will be sold into the near regional and export markets. InterOil believes that the refinery will be able to price its products competitively in these markets due to transportation cost advantages and the premium quality of products produced using PNG crude feedstock. Contracts have been concluded with units of Royal Dutch/Shell whereby they will purchase and market the vast majority of the export capacity of the refinery for a period of three years at prices ruling at the time of supply. The contracts will become effective as soon as the refinery begins commercial operations. BP Papua New Guinea Acquisition In April 2004 InterOil acquired BP Papua New Guinea Limited ("BP PNG") from BP. The acquisition includes all BP's distribution assets and commercial and retail operations in INTEROIL CORPORATE 2003 AIF PAGE 8 Papua New Guinea. The company has been renamed InterOil Products Limited. InterOil's acquisition of BP PNG has established InterOil's downstream business. InterOil Products Limited will continue to operate as a stand-alone entity and will purchase its product requirements from the refinery on the same commercial terms as all other PNG distributors. Because InterOil will be responsible for the operations of InterOil Products Limited, the BP purchase is distinctly different from the Shell transaction where the assets will be purchased and leased back to Shell who will continue to operate their distribution business under the Shell banner. Shell Assets Acquisition InterOil has entered into agreements with units of Royal Dutch/Shell whereby InterOil will purchase Shell Papua New Guinea Limited including all of Shell's wholesale and distribution assets in Papua New Guinea. Such assets will be leased back to Shell for day-to-day operations under a lease back arrangement. This agreement is subject to all mandatory government approvals and is contingent upon the successful completion of the refinery. SOCIAL AND ENVIRONMENTAL POLICY InterOil's goal is to implement and maintain high standards of safety, positive environmental practice and social responsibility in all our operations. Since our inception and as InterOil has evolved, we have actively reviewed and improved our programs and continue to do so with the support of our staff, government and local communities. InterOil is committed to: - Providing a safe and healthy working environment for all employees and contractors; - Community development assistance programs to enhance and improve the standard of health and education; - Establishing emergency response procedures that allow personnel to respond promptly and effectively; and - Maintaining procedures designed to ensure that our operations are conducted in compliance with applicable laws, and traditional cultural understanding. InterOil has developed an active community relations program encompassing all segments of our operations. Although the refinery site is located on state owned land InterOil has developed a long-term community development assistance program that includes local communities from three main villages in the vicinity. In compliance with PNG law, InterOil's development philosophy is based on "bottom-up planning" thus ensuring that all planning and development takes the local community into account. Training workshops involving local communities, with participants ranging in ages from 14 to 68 years old started in April 2001 forming the basis for a five-year rolling plan covering areas such as, communication, needs analysis, planning, leadership and INTEROIL CORPORATE 2003 AIF PAGE 9 conflict resolution. The provision of a reticulated water supply to local communities has been one of the many positive outcomes, leading to improved health and living standards. In our upstream acreage InterOil has a team of Land and Industrial Relations Officers who operate in the field. This team undertakes initial "land-owner" identification and assists with the recruitment of local village personnel. Other duties include the establishment of communication channels with the community and their leaders to ensure minimum social disruption and the smooth running of exploration activities. The officers also undertake the responsibility of compensation to land-owners with respect to the company's activities. Other activities include the provision of health and medical services to our employees, contractors and the local communities in the areas in which our exploration activities are conducted. The recording of verbal histories, clan boundaries, and genealogies has been integrated with the extensive geological mapping, seismic and drilling activities and will form a valuable resource for future use. Social mapping and landowner identification studies of the customary land owners in our licence areas is carried out on a consultative basis with the relevant stakeholders prior to conducting geological and exploration activities. The social mapping is undertaken in order to understand the social structure, how society functions and its relationship to the land. Finally, InterOil continues to work closely with the government, landowners and the community in order to ensure all our activities have a minimum environmental impact on the flora and fauna and equally important to understand the quality of life of the people that inhabit the area. RISK FACTORS 1. No Operating History/No Certainty of Future Profit InterOil has encountered certain delays in the development of the refinery. It is possible that unforeseen difficulties may cause other delays during final development, commissioning and/or construction of the refinery. The likelihood of the success of InterOil and its refinery project must be considered in light of inherent risks, and the difficulties, costs, complications and delays frequently encountered in the establishment of new project start-up companies. Accordingly, there can be no assurance of the future profitability of the refinery or InterOil. 2. Achievement of Project Revenues The State Project Agreement, combined with the Shell marketing and distribution contracts, gives InterOil access to the PNG and near region refined petroleum product markets and access to crude oil produced in PNG. Import Parity Prices, the pricing methodology provided for in the Project Agreement, have historically provided sufficient margins for attainment of the revenues forecast by InterOil. InterOil cannot control the price at which refined petroleum products may be sold in PNG or the other markets targeted by the refinery project. Further, the State Project Agreement provides that if there is more than one refinery operating in PNG during the term of the State Project Agreement, the right to supply the domestic market will be shared by the refineries in INTEROIL CORPORATE 2003 AIF PAGE 10 proportion to their refining capacities. The operating revenue to be derived from the BP Papua New Guinea Limited may change over time and no guarantees can be made that it will be profitable. 3. Projected Refinery Costs InterOil has estimated the capital, financing and development costs of the refinery. However, the actual costs of completing the required work to bring the refinery to completion may vary from the lump sum EPC Contract as a result of many factors, including changes in market conditions and change orders during construction, which factors may also influence the completion date and the final cost of construction of the refinery. 4. Political Risk Future political and economic conditions in PNG could result in the Government adopting different policies than exist presently, or Government bodies could frustrate activities, which might adversely affect the oil exploration and production industry, product distribution, the oil refining industry or the petroleum products distribution industry. However, InterOil believes these activities are in the long-term best interests of PNG and has no reason to believe it does not have the support of the present Government or will not have that support from future governments. The construction and operation of the refinery require various permits and licences from various Government authorities. The State Project Agreement gives the refinery project certain assurances that the necessary permits and licences will be received. 5. Existence of Markets The State Project Agreement gives InterOil certain rights to supply the domestic market in PNG with refined petroleum products. InterOil estimates that 50 to 60 percent of the refinery's net output will be used to supply the PNG market, and this market may be subject to various changes associated with the economic growth in PNG. The balance of the refinery's production will be sold into the near regional markets. InterOil estimates that the refinery will be able to price its products competitively due to transportation cost advantages and the premium quality of products produced using PNG crude feedstock. However InterOil cannot guarantee that the markets for its products will continue as predicted. 6. Crude Oil Supply PNG crude oil production rates are expected to satisfy the refinery's requirements for at least five years after commercial start-up. Alternative crude oils that are suitable for use as project feedstock are available in the nearby region. However, crude oil sourced from outside PNG may be more expensive than domestic crude oil and may reduce the margins. Alternatively, imported crude oil may be selected to alter the refinery product mix for changing market conditions. INTEROIL CORPORATE 2003 AIF PAGE 11 UPSTREAM OPERATIONS 1. Exploration Background In January 2002, InterOil announced that it believed, based on the presence of hydrocarbons in Pale Sandstone cores from two stratigraphic wells, that it had discovered a new oil system in the Eastern Papuan Basin. This confirmed to InterOil that the Eastern Papuan Basin was now prospective for oil, and given the characteristics of the Pale Sandstone, had the potential for large oilfields comparable to the Kutubu oilfield located in the PNG Fold Belt. Independent analysis has been carried out by CSIRO (the Australian Government Commonwealth Scientific & Industrial Research Organization) who have provided expert verification reporting that the reservoir quality of the Pale Sandstone is good, and that the oil samples are from at least two separate sources. 2. History Since the discovery of oil in the Toro Sandstone at Kutubu, exploration activity has focused on the Toro Sandstone fairway in the Fold Belt in western Papua New Guinea. The Eastern Papuan Basin had been intermittently explored since 1911 with the last well drilled by Petro-Canada in 1991. The Pale Sandstone was discovered in an outcrop in 1987 by a geological field survey conducted by Petro-Canada. The nature of the sandstone, its extent, and reservoir quality were unknown until InterOil drilled in the region. When InterOil began to look for exploration opportunities in 1998, the Eastern Papuan Basin was open acreage except for an area around the Puri-1 oil discovery. InterOil considered the area to have strong petroleum potential as indicated by numerous oil and gas surface seeps; the Pale Sandstone outcrop found during the 1987 geological field survey; and oil tested at the Puri-1 well. The key to InterOil's business plan is the development of a cost effective exploration method in the InterOil exploration licence areas. The implementation of the plan has resulted in InterOil obtaining licences with good logistics and with access to its refinery, and in finding tangible evidence of a working petroleum system. InterOil has identified over 40 leads and prospects in its licence areas. Three new Petroleum Prospecting Licences (PPL's 236, 237 and 238) were obtained in March 2003 and cover approximately eight million acres. These licences replace and expand InterOil's previous licences (PPL's 210, 220 and 230 respectively). The licence areas stretch from just east of the existing oil export pipeline near Kikori to the refinery at Port Moresby - a distance of approximately 480 kilometres (300 miles). The new licences qualify for a tax rate of 30 percent. To enhance the exploration portfolio, InterOil sought and obtained interests in other permits in PNG. InterOil has interests in Petroleum Retention Licences PRL 4 and PRL 5. PRL 4 and PRL 5 are potential gas condensate fields operated by Santos with access to the Fly River. The initial phase of InterOil's exploration program involved finding, reviewing, reprocessing and interpreting original data (including ground mapping, landsat, gravity and seismic data). Together with extensive fieldwork, this early program established a portfolio of leads and prospects. This initial work, together with reports of other Pale INTEROIL CORPORATE 2003 AIF PAGE 12 Sandstone outcrops, indicates that the Pale Sandstone constitutes a regional fairway. Subsequently, InterOil decided that key reservoir information could be obtained by drilling two stratigraphic wells, Subu-1 and Subu-2. Not only did these wells establish two reservoir quality sandstones (Pale and Subu) but also demonstrated the presence of altered hydrocarbons which point to the presence of four hydrocarbon sources. InterOil currently has no reserves as defined in Canadian National Instrument 51-101 STANDARDS OF DISCLOSURE FOR OIL AND GAS ACTIVITIES ("NI 51-101"). All information contained herein regarding resources are references to undiscovered resources under NI 51-101, whether stated or not. 3. Exploration Results Two stratigraphic wells drilled by InterOil in August 2001, Subu-1 and Subu-2, in PPL 238, cored over 488 metres (1,600 feet), with 375 metres (1,230 feet) of good reservoir quality in the Pale Sandstone. A field survey found a second exposure of Pale Sandstone that extends the known width of the Pale fairway to more than 60 kilometres (37 miles). The estimated true stratigraphic thickness of the Pale and Subu Sandstone is 266 metres (877 feet) at Subu-1 and Subu-2. Hydrocarbons were present throughout the coring of the sandstones and preliminary analyses suggest these hydrocarbons are bitumen residue of three oils derived from four sources. One is similar to Kutubu oil, sourced from a Jurassic-age rock, one is from a Palaeogene or Late Cretaceous aged source, while the third and fourth are from immature or marginally mature sources, which may be mature in deeper parts of the kitchens. The Cretaceous source is likely to still be generating oil, increasing the chances of migration into current structures. Unaltered crudes are light (40-45(degree) API) and low sulphur (<0.5%), suitable for processing in InterOil's refinery. CSIRO has been contracted to supply specialist technical and research services in connection with our exploration program. Reports received from CSIRO have so far indicate: - The Subu wells identified two independent sandstone units (Pale and Subu Sandstones) deposited under different settings; - Based on the results of testing, both the sandstone reservoirs are regarded as good quality; - Testing has revealed that one of the hydrocarbon samples recovered from the Subu cores was from a similar age source to the producing Kutubu and Gobe oilfields; - Two other oil sources were similar in age to those in the Gippsland Basin in Australia and the Taranaki Basin in New Zealand. 4. 2003 Exploration Activities InterOil announced a commitment to an eight well drilling program in December 2002. This program was subsequently increased to a potential sixteen well program. On 28 March 2003 the program commenced with the spudding of the first exploration well in the first prospect, the Moose, located in the area covered by PPL 238 in the Eastern Papuan Basin in PNG. On-site inspection of the core data from the Moose well indicated more than fourteen oil shows in 135 metres (443 feet) of continuous core from INTEROIL CORPORATE 2003 AIF PAGE 13 673 metres (2,208 feet) to 808 metres (2,651 feet). The oil shows are both in the fractures and from porous sections within the limestone. Testing of the well was inconclusive due to fluid invasion of the reservoir during drilling. On 9 December 2003 InterOil spudded its second exploration well on this structure, the Moose - 2. On 6 January 2004 InterOil spudded its next exploration well, the Sterling Mustang - 1, on its second structure, Sterling Mustang. 5. Geophysical Operations InterOil undertook two seismic acquisition programs during late 2003 and early 2004. The seismic survey began with initiation of the Hadina survey in November 2003 and was concluded with the completion of the Orloli program in January 2004. The Hadina survey in PPL 238 consisted of 29 line-km (17 line-miles) covering the Rhino, Mammoth and Mastodon structures. The Orloli survey across the Stegosaurus structure in PPL 237 consisted of 8 line-km (5 line-miles). Initial data processing was completed in February 2004, showing good to excellent quality data. Ground gravity data was acquired along the seismic lines and will be used to complement the seismic interpretation. The gravity results will be examined in conjunction with the seismic data to determine to what extent that method can be used to high-grade prospects for seismic acquisition or drilling, as gravity data can be acquired at a fraction of the cost of seismic data. Airborne gravity gradiometer data and aeromagnetic data covering 5,342 line-km (3,300 line-miles) were acquired in PPL 236 and coastal areas of PPL 237 and 238. Within PPL 236, this data will be used to interpolate and extrapolate from existing seismic and well data. Similar data acquired in 2002 covering 825 line-km (513 line-miles) showed that faults identified from seismic data could be traced on the gravity data, significantly improving the quality of the interpretation. Within PPL 237 and 238, the data was for reconnaissance purposes and to test capabilities of that method to detect buried reefs and anticlinal structures. 6. Oil and Gas Wells The following table sets out the number and status of wells in which InterOil has a working interest as at 31 December 2003.
OIL WELLS GAS / CONDENSATE WELLS ------------------------------------------------------------------------------------ Producing Non-Producing Producing Non-Producing LOCATION Gross Net Gross Net Gross Net Gross Net - -------- ----- --- ----- --- ----- --- ----- --- Papua New Guinea 0 0 3 3 0 0 0.6 0.6
7. Properties with No Attributed Reserves The following table sets out InterOil's undeveloped land holdings as at 31 December 2003. INTEROIL CORPORATE 2003 AIF PAGE 14
UNDEVELOPED ACRES ----------------- LOCATION Gross Net - -------- ----- --- Papua New Guinea 7,978,186 7,758,776 Total 7,978,186 7,758,776
Each Petroleum Prospecting Licence in Papua New Guinea requires a bond backed by a bank guarantee of K100,000 (US$31,500) and annual work and expenditure commitments as set by the Minister under the licence conditions. 8. Costs Incurred The following table summarizes the capital expenditure (including capitalized general and administrative costs) related to InterOil's exploration activities for the year ended 31 December 2003:
PROPERTY ACQUISITION COST US$ - ------------------------- --- Proved Properties Nil Undeveloped Properties Nil Exploration Costs $20,139,312 Development Costs Nil Total $20,139,312
9. Exploration and Development Activities The following table sets out the gross and net exploration and development wells in which InterOil participated during the quarter ended 31 March 2003:
UNDEVELOPED ACRES ----------------- TYPE Gross Net - ---- ----- --- Oil 2 2 Gas 0 0 Gas / Condensate 0 0 Service 0 0 Dry 1 1 Total 3 3
10. Operated Permit Details In 2003 increased understanding of the geology in the region led InterOil to apply for a larger area than covered by its previous licences PPL's 210, 220 and 230. The resulting three key Petroleum Prospecting Licences (236, 237, and 238) cover approximately eight million acres. INTEROIL CORPORATE 2003 AIF PAGE 15 Petroleum Prospecting Licence ("PPL") 236 InterOil has 100% ownership and is the Operator of the licence. PPL 236 was granted on 28 March 2003. This licence covers an area that includes the refinery, with road access to the prospective locations. The proximity to Port Moresby means that even a modest gas discovery may be economic for a pipeline to the Port Moresby area, including to the refinery and other potential electrical power generation facilities. A small oil discovery this close to the refinery would be economic with low development, operating and transport costs. One large structure, Whale, and two fault and reef structures, Sea Dragon and Marlin, have been identified in this permit. This licence is connected by road to InterOil's refinery site near Port Moresby. Petroleum Prospecting Licence ("PPL") 237 InterOil has 100% ownership and is the Operator of the licence. PPL 237 was granted on 28 March 2003. This licence is well located to receive hydrocarbons that have migrated out of the adjacent Omati and Aure Trough areas. The licence contains the gas discovery Bwata-1. Little exploration work has been done in this area for more than 20 years and application of modern technologies should result in a considerably improved appraisal. The flat nature of the terrain means that low altitude airborne geophysical exploration methods, e.g. gravity and magnetics, may be appropriate. Barge transport of oil to the refinery would be facilitated by the presence of several rivers, which exit to the sea through PPL 237. Prospects for the expanded drilling program include the independent structures T-Rex, Triceratops, Brontosaurus, and Stegosaurus. The Puri-1 oil discovery is also located within this licence. Petroleum Prospecting Licence ("PPL") 238 InterOil has 100% ownership and is the Operator of the licence. PPL 238 was granted on 7 March 2003. InterOil identified the potential in this area and was rewarded with encouraging results from the stratigraphic wells and field surveys that indicate a new oil system in the Pale/Subu Sandstones. InterOil's two current exploration wells, Moose - 2 and Sterling Mustang - 1, are located within this licence. There are numerous oil and gas seeps in the area and large surface structures suggest the potential for large oilfields. A number of shallow bore-holes encountered oil and gas shows. The licensed property is partially connected by road to InterOil's refinery site near Port Moresby, and navigable rivers penetrate inland to the prospective areas. InterOil believes that this favorable location will result in lower drilling and development costs compared to existing operations in the highlands. 1.1 Non-Operated Permit Details Petroleum Retention Licence ("PRL") 4 InterOil has a 20% working interest. PRL 4 was granted on 1 September 2000. This licence covers the Stanley gas condensate field which is a candidate for condensate recovery by gas recycling and liquids stripping. Road access to the location will reduce development and operating costs, with the potential to barge the petroleum liquids down the Fly River to InterOil's refinery. INTEROIL CORPORATE 2003 AIF PAGE 16 Petroleum Retention Licence ("PRL") 5 InterOil has 20% working interest. PRL 5 was granted on 15 February 2000. This licence covers the Ketu and Elevala gas condensate fields. The Elevala field is an undeveloped resource, estimated by the Operator, Santos, to contain one trillion cubic feet (tcf) of gas and 33 million barrels of condensate. Both Ketu and Elevala have down dip oil potential. 12. Upstream Exploration and Drilling Plan Following positive fiscal policy announced by the Government of Papua New Guinea in December 2002, InterOil announced a commitment to an eight well drilling program. On 28 March 2003 the program commenced with the spudding of the first well in the "Moose" prospect, located in PPL 238 in the Eastern Papuan Basin. On-site inspection of the core data from the Moose well indicated more than fourteen oil shows in 135 meters (443 feet) of continuous core from 673 meters (2,208 feet) to 808 meters (2,651 feet). The oil shows are both in the fractures and from porous sections within the limestone. On 28 July 2003 the drilling program was expanded to 16 separate wells, each on an independent structure and located in InterOil's exploration acreage. Preparations are in progress to procure additional drill rigs in order to accelerate the exploration program. The Simmons #3 heli-portable drilling rig has been contracted and mobilized to the Sterling Mustang structure. On 9 December 2003 InterOil spudded its second exploration well, Moose - 2, on the Moose Structure. On 6 January 2004 InterOil Spudded its first exploration well, the Sterling Mustang - 1, on its second structure, Sterling Mustang. 13 Conclusion InterOil has an extensive upstream asset portfolio consisting of approximately 8.8 million acres of exploration licenses. The vast majority of these licenses is located onshore in the Eastern Papuan Basin, and has the logistical advantage of moderate terrain, barge access to infrastructure and road access to the refinery. This logistical advantage allows for lower cost of development, early production, and access to a market for oil production. InterOil currently has no reserves as defined in Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). InterOil has identified 12 Pale/Subu Sandstone leads and prospects and 20 other leads and prospects. The size of these leads and prospects cannot be accurately estimated until further drilling, completion of field work and/or seismic operations are conducted. However, large anticlines and seismic and gravity anomalies have been identified. There are three categories of future exploration for InterOil: a) Shallow wells to explore prospects near the Pale/Subu Sandstone outcrops; b) Deeper Pale/Subu Sandstone prospects which will require a rig with greater depth capability; and INTEROIL CORPORATE 2003 AIF PAGE 17 c) Other exploration play types including the carbonate reservoirs (as demonstrated by the Puri-1 discovery) and shallow prospects defined by seismic data near Port Moresby. DIVIDENDS The Corporation has not paid dividends in the past and does not expect to pay dividends in the near future, but will consider whether it can or should pay dividends on an ongoing basis. DESCRIPTION OF CAPITAL STRUCTURE InterOil is authorized to issue an unlimited number of common shares. Holders of common shares are entitled to one vote per share at meetings of shareholders of InterOil, to receive dividends on common shares when declared by the Board of Directors and to receive pro-rata the remaining property and assets of InterOil upon its dissolution or winding up, subject to any rights having priority over the common shares. MARKET FOR SECURITIES InterOil's common shares are listed and trade in Canada in Canadian Dollars on the TSX Venture Exchange under the symbol IOL, and on the Australian Stock Exchange (ASX) in CHESS Depository Interests (CDIs), in Australian Dollars under the symbol IOC which trade on a 10:1 basis to common shares. InterOil shares trade as ordinary fully paid shares on the Port Moresby Stock Exchange in the local currency (Kina) under the symbol (IOC). The following table discloses the trading price range and volume of InterOil's common shares traded on the TSX-V and the ASX. Canada - TSX-V: IOL (All Prices are in Canadian Dollars)
MONTH CLOSE (C$) VOLUME - ------------- ---------- -------- January 2003 14.25 246,566 February 2003 13.75 378,139 March 2003 14.05 180,520 April 2003 17.40 406,589 May 2003 16.75 357,629 June 2003 17.10 196,600 July 2003 32.90 1,528,200 August 2003 31.99 1,043,200 September 2003 32.85 1,381,658 October 2003 27.70 469,324 November 2003 28.25 370,653 December 2003 31.50 547,039
INTEROIL CORPORATE 2003 AIF PAGE 18 Australia - ASX: IOC (base data converted to full share values) (All Prices are in Australian Dollars)
MONTH CLOSE (A$) VOLUME January 2003 14.60 93,283 February 2003 13.20 83,460 March 2003 14.20 55,414 April 2003 13.60 125,366 May 2003 17.50 182,757 June 2003 19.00 68,061 July 2003 29.50 132,341 August 2003 34.00 205,755 September 2003 34.00 97,005 October 2003 29.00 53,721 November 2003 26.00 41,146 December 2003 31.73 21,471
MANAGEMENT DISCUSSION AND ANALYSIS InterOil's Management Discussion and Analysis for the fiscal years ended 31 December 2003 and 31 December 2002 is incorporated herein by reference and are available on SEDAR at www.sedar.com DIRECTORS AND OFFICERS The following are the names and municipalities of residence of the directors and officers of InterOil, their positions and offices with InterOil and their principal occupations during the past five years. The Board presently comprises six directors of whom three are independent (Gaylen Byker, Michael Folie, and Edward Speal). Two are senior executives (InterOil's CEO and President, Phil Mulacek and its Chief Operating Officer and Vice President, Christian Vinson) and the other is a related - party (Roger Grundy). The directors shall hold office until the next annual and special meeting of InterOil shareholders or until their respective successors have been duly elected or appointed. INTEROIL CORPORATE 2003 AIF PAGE 19
NAME MUNICIPALITY POSITION DATE OF APPOINTMENT - ---------------- ------------ ------------------------- ------------------- Phil Mulacek USA Chairman, CEO, & Director 29 May 1997 Christian Vinson USA Vice President, COO & 30 May 1997 Director Michael Folie Australia Deputy Chairman & 01 Jan 2001 Director Gaylen Byker USA Director 29 May 1997 Roger Grundy England Director 29 May 1997 Edward Speal Canada Director 25 Jun 2003 Thomas Donovan USA Chief Financial Officer 01 Dec 2002 Graeme Alexander Australia Company Secretary 29 Jan 2001
Principal Occupation of Directors and Officers during the Past 5 Years: Phil E Mulacek is the Chairman of the Board of Directors, Chief Executive Officer, and President of InterOil, positions he has held since 1997. Mr Mulacek is the founder of P.I.E. Corp based in Houston, Texas. P.I.E. was established in 1981 for the purposes of oil and gas exploration, drilling and production and operated across the southwest portion of the United States. P.I.E. developed and participated in more than 90 wells at depths from 500 metres (1,641 feet) to 8,000 metres (26,248 feet). P.I.E. led the development of InterOil's refinery and the commercial activities that were necessary to secure the refinery's economic viability. Mr Mulacek has over 25 years experience in oil and gas exploration and production and holds a Bachelor of Science Degree in Petroleum Engineering from Texas Tech University. Christian M Vinson is a Member of the Board of Directors and has been the Chief Operating Officer for InterOil since 1995. Mr Vinson joined InterOil from P.I.E. Corp, a Houston, Texas based oil and gas exploration and production company. Before joining P.I.E. Corp, Mr Vinson was a manager with NUM Corporation, a Schneider company, in Naperville, Illinois where his responsibilities included establishment of the company's first USA office. As Chief Operating Officer of InterOil Mr Vinson has the in-country responsibility for government and community relations and corporate development. Mr Vinson has played a key role in the development of InterOil and was responsible for securing a 30-year Project Agreement with the Government of Papua New Guinea for InterOil's refinery. Mr Vinson has developed long standing relationships with key government and industry leaders over the last ten years. Mr Vinson earned an Electrical and Mechanical Engineering degree from Ecole d'Electricite et Mecanique Industrielles, Paris, France. Gaylen J Byker is President of Calvin College, a liberal arts institution of higher learning, located in Grand Rapids, Michigan. Dr Byker has obtained four university degrees including a PhD (doctorate) in international relations from the University of Pennsylvania and a JD (law) from the University of Michigan. Dr Byker is a former partner in Offshore Energy Development Corporation where he was head of development, Hedging and Project Finance for gas exploration and transportation projects offshore. Prior to joining OEDC, he was co-head of Commodity Derivatives, Phibro Energy, Inc., a subsidiary of INTEROIL CORPORATE 2003 AIF PAGE 20 Salomon, Inc. and head of Commodity-Indexed Transactions Group, Banque Paribas, New York, with worldwide responsibility for hedging and financing transactions utilizing long-term commodity price risk management. Dr Byker was manager of Commodity-Indexed Swaps and Financings for Chase Manhattan Investment Bank, New York, and was also an associate attorney at Morgan, Lewis & Bockius in Philadelphia, Pennsylvania, USA. G Michael Folie is Deputy Chairman of the Board of Directors and following a distinguished career as an executive in the resource sector, is currently a consultant and independent director specializing in petroleum and mining. Dr Folie held a number of senior executive positions with Shell Australia Limited and its subsidiaries from 1979 to 1994 where he was involved in all aspects of Shell's Australian businesses, including investments in coal, alumina, gold, LNG, oil refineries and chemical plants. From 1990 to 1994, Dr Folie was a director of Shell Australia, involved in all of Shell's operations, including oil products and refining. From 1994, he was managing director and Chief Executive Officer of Australian Stock Exchange listed Acacia Resources Limited until it merged with AngloGold in January 2000. Dr Folie was a director of the Export Finance and Insurance Corporation, an arm of the Australian Federal Government, from 1994 to 1997. Dr Folie is a Director of the Federal Government's Australian Research Council, the Institute of Public Affairs and Chairman of Concept Gold. Dr Folie obtained a PhD in Civil Engineering from Southampton University and a Masters in Economics from the London School of Economics and currently resides in Melbourne, Australia. Roger N Grundy is the Managing Director of Breckland Ltd, a UK-based engineering consulting firm, and is an internationally recognized expert in the area of refinery efficiency. Mr Grundy serves as the Technical Director for InterOil's refinery and has acted as a consultant to more than 135 existing refineries on six continents for major oil companies, independents and the World Bank. Mr Grundy has 37 years experience in all areas of oil refinery and petrochemical operations and construction and holds an Honours Degree in Mechanical Engineering from University College, London. He is also a Fellow of the UK Institution of Mechanical Engineers, Member of the American Institute of Chemical Engineers and a Member of the Institute of Petroleum. Edward N Speal is based in Toronto, Ontario and is responsible for the Energy, Project Finance and Corporate Banking businesses for BNP Paribas in Canada. He was the President and Chief Executive Officer of Paribas Bank of Canada from 1996 to 2000. He previously worked in New York for Banque Paribas running its Commodity Index Trading Group (1992-1996). From 1989 to 1991, he was managing director of R. P. Urfer & Co., working on an exclusive basis for Banque Paribas as advisory director assisting in the establishment and development of its global commodity derivatives business. From 1983-1989, he worked for the Chase Manhattan Bank of Canada. Mr Speal is a Canadian citizen and is a graduate of Queen's University at Kingston. Tom Donovan is General Manager Finance/Accounts, Chief Financial Officer. Mr Donovan's experience in international business and financial systems is a requisite for ensuring that the financial integrity of InterOil's business segments is maintained and integrated worldwide. Prior to joining InterOil, Mr Donovan was the Director of Corporate Accounting for Rapid Design Service, Inc. RDS provided product design, development, engineering, document processing, and training through 35 locations in 11 countries. During his tenure at RDS Mr Donovan successfully managed the development and implementation of an enterprise wide integrated accounting system across the INTEROIL CORPORATE 2003 AIF PAGE 21 international organization. Mr Donovan also played a key role on the RDS due diligence team, and was directly responsible for managing the financial conversion process for all acquired companies. Prior to RDS, he held various positions in financial management for International Total Services, Inc. Mr Donovan has a Bachelor of Business and Administration (Accounting and Finance) from the University of Toledo, Toledo, Ohio. Graeme Alexander is Corporate Counsel and Company Secretary. Mr Alexander has extensive legal and geological experience having worked as a Minerals Geologist for 10 years before specializing in law. Mr Alexander has significant Papua New Guinea in-country experience, developed during his position as principal commercial partner of Gadens Lawyers in Papua New Guinea. Prior to that he was senior counsel of Mobil Exploration & Production Pty Limited and Ampolex Limited, during which time he also worked on PNG matters. Mr Alexander has worked in the geological and legal fields in the minerals and petroleum industries for a total of 30 years and holds a Bachelor of Applied Science (Geology) from the Canberra College of Advanced Education and a Law Degree from the University of Technology, Sydney. BOARD COMMITTEES The Board has formed the following Committees: Audit, Compensation & Remuneration, and Health Safety & Environment (HSE). The Committee memberships consist of independent Directors except that the CEO sits on the Compensation and Remuneration Committee as a full member and attends the meetings of the Audit Committee by invitation. The Audit Committee monitors business and financial risks and ensures the integrity of InterOil's financial statements by regular meetings with the Chief Financial Officer and the external auditor. It is also responsible for monitoring InterOil's compliance with legislative requirements. The Compensation & Remuneration Committee is responsible for reviewing the compensation of the CEO and other executives to ensure that they are rewarded in accordance with market rates. In due course this Committee will also make recommendations to shareholders regarding Directors' fees. The Compensation and Remuneration Committee meets as required, to fill vacancies on the Board as they occur and to review compensation. The HSE Committee is responsible for ensuring that InterOil complies with all applicable HSE requirements and otherwise maintains HSE standards. As at 31 March 2004 the directors and officers of InterOil as a group, owned beneficially, directly and/or indirectly or exercised control or direction over 8,656,798 common shares of InterOil representing 34,86 percent of the issued and outstanding shares consisting of 24,832,798 common shares at that date. CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS None of those persons who are directors officers or promoters of InterOil is, or has been within the past ten years, a director, or officer or promoter of any other corporation that, while such person was acting in that capacity, was the subject of a cease trade or similar order or an order that denied the access to any statutory exemptions for a period of more than 30 consecutive days, or was declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangements or INTEROIL CORPORATE 2003 AIF PAGE 22 compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that person. PENALTIES OR SANCTIONS None of those persons who are directors officers or promoters of InterOil is, or has been within ten years prior to the date of this Annual Information Form, been subject to any penalties or sanctions imposed by a court or securities regulatory authority relating to trading in securities, promotion or management of a publicly traded corporation, or theft or fraud. LEGAL PROCEEDINGS InterOil is not subject to any legal or other actions, current or pending, that may materially affect its operating results, financial position or property ownership. TRANSFER AGENTS AND REGISTRARS InterOil's transfer agent and registrar is Computershare Trust Company of Canada. In Australia and Papua New Guinea the transfer agent and registrar is Computershare Ltd. The registers for transfers of the Company's common shares are maintained by Computershare Trust Company of Canada at its principal offices in Toronto. Queries should be directed to Computershare Trust Company at 1-888-267-6555 (toll free in North America). The registers for transfers of the company's CDIs and ordinary fully paid shares as traded in Australia and Papua New Guinea are maintained by Computershare Limited at its Sydney office in Australia. Queries should be directed to Computershare (Australia) whose principle address is Level 3, Carrington Street, Sydney NSW, 2000 Australia or at (612) 8234 5000 FORWARD LOOKING STATEMENTS This document contains forward-looking statements that involve risks and uncertainties. The statements are identified by the use of the words such as "may", "expect", "will", "anticipate", "plan", "believe", "continue", or other similar expressions. These forward-looking statements reflect management's current expectations and assumptions as to future events that may not prove to be accurate. Actual results are subject to a number of risks and uncertainties and could differ materially from those discussed in these statements. In light of the many risks and uncertainties associated with our operations, you should be aware that the forward-looking statements described in this document may not transpire. InterOil undertakes no obligation, and does not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. INTEROIL CORPORATE 2003 AIF PAGE 23 ADDITIONAL INFORMATION InterOil will provide to any person, upon request to the Secretary of the Corporation, Suite 2, Level 2, Orchid Plaza, 79-88 Abbott Street, Cairns, QLD 4870 Australia (Phone: 61-7-4046-4600): a) when the securities of InterOil are in the course of a distribution pursuant to a short form base shelf prospectus or a preliminary short form base shelf prospectus: (I) one copy of the Annual Information Form, together with one of any document, or the pertinent pages of any document, incorporated by reference in the Annual Information Form; (II) one copy of the comparative consolidated financial statements for its most recently completed financial period together with the accompanying report of the auditors and one copy of any interim consolidated financial statements of InterOil subsequent to the consolidated financial statements for its most recently completed financial period; (III) one copy of the management information circular in respect to its most recent annual meeting of shareholders that involved the election of directors; and (IV) one copy of any other documents that are incorporated by reference into the preliminary short form base shelf prospectus or the short form prospectus and are not required to be provided under (I) to (III) above; or b) at any other time, one copy of any document referred to in (a) (I), (II) and (III) above, provided that InterOil may require the payment of a reasonable charge if the request is made by a person who is not a security holder of InterOil. Additional information, including that related to directors' and officers' remuneration is contained in the InterOil's Information Circular prepared in respect of the annual and special meeting of shareholders to be held on 29 June 2004. Additional financial information is provided in InterOil's financial statements for the year ended 31 December 2003, which financial statements are incorporated by reference herein, and which can be found in InterOil's 2003 Annual Report to shareholders filed on SEDAR (www.sedar.com). Copies of the information circular, the financial statements, including any additional copies of this Annual Information Form may also be obtained from the following individuals:
NORTH AMERICA AUSTRALASIA Gary M Duvall Anesti Dermedgoglou V.P. Corporate Development V.P. Investor Relations InterOil Corporation InterOil Corporation Gary.duvall@interoil.com Anesti@interoil.com Phone: 1-281-292-1800 Phone: 61-7-4046-4600
INTEROIL CORPORATE 2003 AIF PAGE 24 GLOSSARY OF TERMS ANTICLINE A configuration of folded, stratified rocks in which rocks dip in two directions away from a crest, generally convex upward, the core of which contains the stratigraphically older rocks. In Papua New Guinea generally seen at surface as a hill, often elongate or cigar shaped. API GRAVITY The industry standard method of expressing specific gravity of crude oils. Higher API gravities mean lower specific gravity and lighter oils. BASIN (SEDIMENTARY) Segment of the earth's surface which has been down-warped and infilled with sedimentary detrital or carbonate rocks. Sediments increase in thickness toward the centre of a basin. BARREL, BBL (PETROLEUM) Unit volume measurement used for petroleum and its products; 1 barrel = 42 US gallons, 35 Imperial gallons (approx.), or 159 liters (approx.); 7.3 barrels = 1 ton (approx.); 6.29 barrels = 1 cubic metre = 35.32 cubic feet. BCF Standard measure of gas volume. Billion (109) cubic feet equivalent to 1000 million cubic feet (mcf). BITUMEN Any solid and semi-solid hydrocarbons that can be converted into liquid form by heating. BUNKER FUEL Residual fuel oil {i.e. Bunker C grade) or middle distillates used for bunkering ships. CARBONATE Sedimentary rocks composed of calcium carbonate (CaCo3). See limestone. CHARGE The movement of oil and gas into a reservoir and a structure, normally an anticline, to form an oil or gas field. CONDENSATE A component of natural gas which is a liquid at surface conditions. CRETACEOUS The final period of the Mesozoic era, spanning the time between 145 and 65 million years ago. The name is derived from the Latin word "creta" (chalk) and was first applied to extensive deposits of this age that form white cliffs along the English Channel. DOWN DIP A term used where one well is below another well due to inclination of the strata in which the reservoir lies. EOCENE An epoch of the lower Tertiary period, spanning the time between 55.5 and 33.7 million years ago. Its name is from the Greek words "eos" (dawn) and "ceno" (new). FIELD A natural accumulation of oil and/or gas within a reservoir below a seal rock, and within a trap. INTEROIL CORPORATE 2003 AIF PAGE 25 FOLD BELT An area affected by compressional forces which results in folding (wrinkling) and thrusting. Usually separated from an undeformed foreland by a frontal fault (thrust). FORELAND A stable area which lies in front of and is unaffected by the compressional forces which develop a Fold Belt. HYDROCARBONS Compounds containing only hydrogen and carbon atoms. May be in solid, liquid or gaseous form. JURASSIC The middle period of the Mesozoic era, spanning the time between 213 and 145 million years ago. It is named after the Jura Mountains between France and Switzerland, where rocks of this age were first studied. LIMESTONE Sedimentary rock composed largely of mineral calcite, CaCO3, formed by either organic or inorganic processes. Carbonate rocks, limestone and dolomite, constitute estimated 12 to 22% of sedimentary rocks exposed above sea level. MESOZOIC The middle era between the Paleozoic and the Tertiary 248 and 65 million years ago. Its name is from the Greek word "Mesozoic" (middle life). MIGRATION The movement of hydrocarbons from the source rock through porous units or carrier beds and fractures. MIOCENE An epoch of the upper Tertiary period, spanning the time between 23.8 and 5.3 million years ago. It is named after the Greek words "meion" (less) and "ceno" (new). NAPHTHA That portion of the distillate obtained in the refinement of petroleum which is intermediate between the lighter gasoline and the heavier benzene, and has a specific gravity of about 0.7, used as a solvent for varnishes, illuminant, etc. PALEOZOIC ERA The earliest era of the Phanerozoic Eon, marked by the presence of marine invertebrates, fish, amphibians, insects, and land plants. PERMEABILITY For rock or earth material, ability to transmit fluids. PETROLEUM SYSTEM A pod of active source rock and all the geologic elements and processes that are essential if a hydrocarbon accumulation is to exist. PLAY A particular combination of reservoir and structure (trap) considered to be prospective. PLIOCENE Final epoch of the Tertiary period, spanning the time between 5.3 and 1.8 million years ago. It is named after the Greek words "pleion" (more) and "ceno" (new). POROSITY Percentage of open space or interstices in rock or other earth material. Vital for a reservoir rock. PDL Petroleum Development Licence. The tenement given by the Independent State of Papua New Guinea to develop an oil and/or gas field. INTEROIL CORPORATE 2003 AIF PAGE 26 EX-99.4 3 h19854exv99w4.txt AMENDED AGREEMENT TO SECURITIES PURCHASE AGREEMENT EXHIBIT 4 AMENDING AGREEMENT TO SECURITIES PURCHASE AGREEMENT AND DEBENTURES THIS AGREEMENT made as of the day of September, 2004. RECITALS: (a) InterOil Corporation (the "COMPANY"), Portside Growth and Opportunity Fund, Manchester Securities Corp. and Provident Premier Master Fund, Ltd. (collectively, the "INITIAL PURCHASERS") entered into a securities purchase agreement, dated August 26, 2004 (the "SECURITIES PURCHASE AGREEMENT") providing the purchase of Debentures and Warrants. (b) The Company proposes to issue an additional US$10,000,000 principal amount of Debentures (together with Warrants) as provided in the Securities Purchase Agreement, and to issue and additional US$5,000,000 principal amount of Debentures (together with Warrants), which is not provided for in the Securities Purchase Agreement. (c) It is necessary to amend the Securities Purchase Agreement to evidence the additional purchasers and to amend to Securities Purchase Agreement to permit up to an aggregate of US$45,000,000 principal amount of Debentures (together with Warrants) to be issued at the Initial Closing and the Subsequent Closing. (d) This Amending Agreement evidences the consent of the parties to the Securities Purchase Agreement to the amendments and modifications to the Securities Purchase Agreement as set forth below, including the addition of those persons listed on Schedule "A" hereto as parties to the Securities Purchase Agreement (the "SUBSEQUENT PURCHASERS"). In consideration of the foregoing and the mutual agreements contained herein (the receipt and adequacy of which are acknowledged), the Company, the Initial Purchasers and each of the Subsequent Purchasers agree as follows: SECTION 1 DEFINED TERMS In this Amending Agreement and the recitals hereto, unless otherwise expressly provided, all capitalized terms shall have the meanings given to them in the Securities Purchase Agreement. -2- SECTION 2 SUBSEQUENT PURCHASERS (1) Each Subsequent Purchaser represents to the Initial Purchasers and the Company that it is an existing shareholder of the Company and a "non-U.S." Person (as defined under Rule 902 of Regulation S as promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the "1933 Act")) as required by Section 1.1(b) of the Securities Purchase Agreement. (2) Schedule "A" hereto shall be deemed to amend the Schedule of Purchasers and the execution of this Amending Agreement shall satisfy the obligation of the Company to deliver an amended Schedule of Purchasers to the Initial Purchasers. (3) The Company shall issue and sell to each Subsequent Purchaser and such Subsequent Purchaser shall purchase from the Company on the Subsequent Closing Date (i) the aggregate principal amount of Debentures set forth opposite such Subsequent Purchaser's name on Schedule "A" and (ii) Warrants to purchase that number of Common Shares set forth opposite such Subsequent Purchaser's name on Schedule "A". The Company and the Subsequent Purchasers acknowledge that all conditions precedent to the Subsequent Closing have been fulfilled and that the Subsequent Closing will occur on September 1, 2004 or such other date as is no more than seven Trading Days following August 26, 2004. (4) Each Subsequent Purchaser, by executing this Amending Agreement, (i) confirms the accuracy of the representations and warranties as to it set forth in the Securities Purchase Agreement, as amended hereby, including, without limitation, the representations in Section 2.2(a) of the Securities Purchase Agreement and (ii) agrees that it shall be bound by all the terms and conditions set forth in the Securities Purchase Agreement, as amended hereby. SECTION 3 AMENDMENTS TO THE SECURITIES PURCHASE AGREEMENT The Securities Purchase Agreement is amended, effective as of this date, as follows: (a) the references in Section 1.1(b) and Section 1.3(a)(ii) of the Securities Purchase Agreement to "$10,000,000" are amended to be "$15,000,000"; (b) the references to "60%" in Section 9.5(a) of the Securities Purchase Agreement are amended to be "55%"; -3- (c) the parties to the Securities Purchase Agreement shall be the Company, the Initial Purchasers and each of the Subsequent Purchasers; and (d) the address for notice of each of the Subsequent Purchasers will be as set out in Schedule "A" hereto. SECTION 4 REFERENCES Any reference to the Securities Purchase Agreement in any Debenture or Warrant or in the Registration Rights Agreement shall mean the Securities Purchase Agreement as amended hereby. SECTION 5 AMENDMENT TO THE DEBENTURES The Initial Purchasers and the Company hereby agree that: (a) the references to "4,000,000 Common Shares" in Section 3(f) of the Debentures are amended to be "4,500,000 Common Shares"; and (b) the references to "60%" in Section 3(e) of the Debentures are amended to be "55%". SECTION 6 FEES AND EXPENSES The reasonable fees and expense of counsel to the Initial Purchasers related to this Amending Agreement shall be reimbursed by the Company up to a maximum of US$7,000. SECTION 7 NO WAIVER The parties hereby acknowledge and confirm that, except as specifically amended by the provisions of this Amending Agreement, all of the terms and conditions contained in the Securities Purchase Agreement are and shall remain in full force and effect, unamended, in accordance with the provisions thereof. SECTION 8 GOVERNING LAW. THIS AMENDING AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, -4- ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AMENDING AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. IF ANY PROVISION OF THIS AMENDING AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF THIS AMENDING AGREEMENT IN THAT JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS AMENDING AGREEMENT IN ANY OTHER JURISDICTION. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY. SECTION 9 HEADINGS. The headings of this Amending Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Amending Agreement. SECTION 10 SEVERABILITY. If any provision of this Amending Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Amending Agreement in that jurisdiction or the validity or enforceability of any provision of this Amending Agreement in any other jurisdiction. SECTION 11 COUNTERPARTS This Amending Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. -5- IN WITNESS WHEREOF the parties hereto have executed this Amending Agreement on the date first referenced above. INTEROIL CORPORATION By: ------------------------------------ Authorized Signing Officer PORTSIDE GROWTH AND OPPORTUNITY FUND By: ------------------------------------ Authorized Signing Officer MANCHESTER SECURITIES CORP. By: ------------------------------------ Authorized Signing Officer PROVIDENT PREMIER MASTER FUND, LTD. By: ------------------------------------ Authorized Signing Officer PURCHASER: By: ------------------------------------ Authorized Signing Officer SCHEDULE "A"
PRINCIPAL AMOUNT OF NUMBER OF SUBSEQUENT PURCHASER DEBENTURES WARRANTS PURCHASE PRICE ADDRESS FOR NOTICE - ----------------------------------------------------------------------------------------------------------------------------------- 1. Middlemarch Partners Limited $375,000 2,995 $375,000 Brant Investments Limited SL Level, Royal Bank Plaza South Tower, 200 Bay Street Toronto, ON M5J 2J5 - ----------------------------------------------------------------------------------------------------------------------------------- 2. Middlemarch Partners Limited $375,000 2,995 $375,000 Haywood Securities Inc. BCE Place, 181 Bay Street Suite 2910, P.O. Box 808 Toronto, ON M5J 2T3 - ----------------------------------------------------------------------------------------------------------------------------------- 3. TD Proprietary $500,000 3,993 $500,000 Investerco 77 Bloor Street West 3rd Floor Toronto, ON M4Y 2T1 - ----------------------------------------------------------------------------------------------------------------------------------- 4. Kings Road Investments Limited $2,950,000 23,561 $2,950,000 UBS Securities LLC 667 Washington Blvd. 9th Floor Stamford, CT06901 - ----------------------------------------------------------------------------------------------------------------------------------- 5. Waterfall Vanilla LP $330,000 2,635 $330,000 CIBC Wood Gundy 161 Bay Street, 5th Floor Toronto, ON M9J 2S8 - -----------------------------------------------------------------------------------------------------------------------------------
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PRINCIPAL AMOUNT OF NUMBER OF SUBSEQUENT PURCHASER DEBENTURES WARRANTS PURCHASE PRICE ADDRESS FOR NOTICE - ----------------------------------------------------------------------------------------------------------------------------------- 6. Waterfall Tipping Point LP $70,000 559 $70,000 CIBC Wood Gundy 161 Bay Street, 5th Floor Toronto, ON M9J 2S8 - ----------------------------------------------------------------------------------------------------------------------------------- 7. AIG Global Investment Corp. $2,500,000 19,967 $2,500,000 AIG Global Investment Corp. (Canada) (Canada) C/O Royal Trust Royal Trust Plaza South Plaza, 2nd Floor Toronto, ON M5J 2J6 - ----------------------------------------------------------------------------------------------------------------------------------- 8. TD Asset Management Inc. $214,000 1,709 $214,000 CIBC Mellon GSS Company Securities Level Commerce Court West Toronto, ON M5L 1G9 - ----------------------------------------------------------------------------------------------------------------------------------- 9. TD Asset Management Inc. $214,000 1,709 $214,000 CIBC Mellon GSS Company Securities Level (a split of one purchase of Commerce Court West $428,000) Toronto, ON M5L 1G9 - ----------------------------------------------------------------------------------------------------------------------------------- 10. TD Asset Management Inc. $72,000 575 $72,000 TD Waterhouse Securities Department 3rd Floor 77 Bloor Street West Toronto, ON M5S 1M2 - ----------------------------------------------------------------------------------------------------------------------------------- 11. Front Street Investment $1,000,000 7,978 $1,000,000 87 Front Street East Management Suite 400 Toronto, ON M5E 1B8 - -----------------------------------------------------------------------------------------------------------------------------------
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PRINCIPAL AMOUNT OF NUMBER OF SUBSEQUENT PURCHASER DEBENTURES WARRANTS PURCHASE PRICE ADDRESS FOR NOTICE - ----------------------------------------------------------------------------------------------------------------------------------- 12. BTR Global Arbitrage Trading $4,000,000 31,948 $4,000,000 C/O Ogier Fiduciary Services Limited (Cayman) Limited P.O. Box 1234 GT Queensgate House South Church Street George Town, Grand Cayman, Cayman Islands - ----------------------------------------------------------------------------------------------------------------------------------- 13. Centrum Bank AG $2,400,000 19,168 $2,400,000 Centrum Bank AG Postfach 1168 FL-9490 Vaduz Liechenstein - -----------------------------------------------------------------------------------------------------------------------------------
EX-99.5 4 h19854exv99w5.txt 8.78% SENIOR CONVERTIBLE DEBENTURE EXHIBIT 5 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS DEBENTURE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE DEBENTURE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY CONVERSION OF ANY PORTION OF THIS DEBENTURE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW. THE SECURITIES ISSUABLE UPON EXERCISE OR CONVERSION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES CAN NOT BE TRADED THROUGH THE FACILITIES OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK EXCHANGE. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MAY NOT TRADE THE SECURITY BEFORE DECEMBER 28, 2004. 8 7/8% SENIOR CONVERTIBLE DEBENTURE DUE AUGUST 28, 2009 OF INTEROIL CORPORATION DEBENTURE NO.: ____ ORIGINAL PRINCIPAL AMOUNT: U.S. $[___] ORIGINAL ISSUANCE DATE: AUGUST 27, 2004 NEW YORK, NEW YORK THIS DEBENTURE ("DEBENTURE") is one of a duly authorized issue of debentures of INTEROIL CORPORATION, a corporation duly organized and existing under the laws of the Province of New Brunswick, Canada (the "COMPANY"), designated as the Company's 8 7/8% Senior Convertible Debentures Due August 28, 2009 ("MATURITY DATE") in an aggregate principal amount (when taken together with the original principal amounts of all other Debentures) which does not exceed Forty Million U.S. Dollars (U.S.$40,000,000) (the "DEBENTURES"). All references herein to "$" or "dollars" shall refer to U.S. dollars. FOR VALUE RECEIVED, the Company hereby promises to pay to the order of ___________________________ or its registered assigns or successors-in-interest ("HOLDER") the initial principal sum of [AMOUNT] (U.S.$_________) (the "INITIAL PRINCIPAL AMOUNT") together with all accrued but unpaid interest thereon, if any, when due, whether upon the Maturity Date or upon acceleration, redemption or otherwise (in each case in accordance with the terms hereof) to the extent such principal amount and interest has not been converted into the Company's Common Shares, no par value (the "COMMON SHARES"), in accordance with the terms hereof. Interest on the unpaid principal balance hereof shall accrue at the rate of 8 7/8% per annum from the original date of issuance, August 27, 2004 (the "ISSUANCE DATE"), until the same becomes due and payable on the Maturity Date, on any Interest Payment Date (as defined below), or such earlier date upon acceleration or by conversion or redemption in accordance with the terms hereof or of the other Transaction Documents. Interest on this Debenture shall accrue daily commencing on the Issuance Date, shall be compounded quarterly and shall be computed on the basis of a 360-day year, 30-day months and actual days elapsed and shall be payable in accordance with Section 1 hereof. Notwithstanding anything contained herein, this Debenture shall bear interest on the due and unpaid Principal Amount from and after the occurrence and during the continuance of an Event of Default pursuant to Section 4(a), at the rate (the "DEFAULT RATE") equal to the lower of fifteen percent (15%) per annum or the highest rate permitted by law. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal. Except as provided in Section 1 below, all payments of principal and interest on this Debenture shall be made in lawful money of the United States of America by wire transfer of immediately available funds to such account as the Holder may from time to time designate by written notice in accordance with the provisions of this Debenture or by Company check. This Debenture may not be prepaid in whole or in part except as otherwise provided herein or in the Transaction Documents. Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Securities Purchase Agreement dated on or about the August 26, 2004 pursuant to which the Debentures were originally issued (the "PURCHASE AGREEMENT"). For purposes hereof the following terms shall have the meanings ascribed to them below: "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AVERAGE CONSOLIDATED EBITDA" means, as of the end of any fiscal quarter, the average of the EBITDA for the two consecutive fiscal quarters ending on the date of calculation. If the refinery owned by the Company's subsidiary does not reach Practical Completion by December 31, 2004, the calculation of the earnings interest expense, taxes, depreciation, depletion and amortization comprising EBITDA will be calculated on a pro forma basis as if Practical Completion occurred on December 31, 2004. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed. "CHANGE IN CONTROL TRANSACTION" will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company with or into any other 2 corporation or other Person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the existing voting stockholders of the Company prior to such event cease to own 50% or more of the voting stock, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any "going private" transaction or tender offer by the Company for 20% or more of the Company's Common Shares), (ii) any Person together with its affiliates and associates beneficially owns or is deemed to beneficially own in excess of 50% of the Company's voting power, (iii) there is a replacement of more than one-half of the members of the Company's Board of Directors which is not approved by those individuals who are members of the Company's Board of Directors on the date thereof, or (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis, (v) a transaction occurs as a result of which the Common Shares ceases to be listed on the Principal Market, or (vi) the occurrence of the closing by the Company pursuant to an agreement to which the Company is a party or which it is bound providing for an event set forth in (i), (ii), (iii), (iv), or (v) above. "CONVERSION RATIO" means, at any time, a fraction, of which the numerator is the entire outstanding Principal Amount of this Debenture (or such portion thereof that is being redeemed or repurchased), and of which the denominator is the Conversion Price. "CONVERSION PRICE" shall equal U.S.$20.16, as adjusted pursuant to the terms hereof. "CONVERTIBLE SECURITIES" means any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Shares. "DEBT" shall mean indebtedness of any kind. "EBITDA" means for any fiscal quarter, earnings for such quarter plus the sum of the following for such quarter to the extent deducted in calculating earnings for such quarter: interest expense, taxes, depreciation, depletion and amortization, in each case (i) calculated in accordance with Canadian GAAP and consistent with past practice including the allocation of all corporate costs, and (ii) excluding results attributable to the Company's oil and gas exploration and production business. "EFFECTIVE DATE" means the date on which both the registration statement under the Securities Act and the Prospectus filed with the Ontario Securities Commission, in each case covering the Underlying Shares, shall have been declared effective by the applicable securities authorities. "EQUITY CONDITIONS" means each of the following: (i) the Company is in compliance with all requirements of the applicable U.S. and Canadian federal, state and provincial securities regulators, including, without limitation, all disclosure requirements; (ii) the Company shall be in compliance with its obligations under the Registration Rights Agreement; (iii) during the period beginning on the Initial Closing Date and ending on and including the applicable date of determination, there shall not have occurred an event of default under Section 4(a)(iv) hereof; (iv) on each day during the period beginning on the Initial Closing Date and ending on and including the applicable date of determination, the Common Shares (including the Underlying Shares and the Warrant Shares) shall be listed on the Principal Market and delisting or 3 suspension by such market or exchange shall not have been threatened either (A) in writing by such market or exchange or (B) by falling below for at least the requisite period the applicable minimum listing maintenance requirements of such market or exchange; (v) on the applicable date of determination the registration statement or registration statements required pursuant to the Registration Rights Agreement shall be effective and available for the sale for all of the Registerable Securities in accordance with the terms of the Registration Rights Agreement; (vi) the Company shall have no knowledge of any fact that would cause the registration statements required pursuant to the Registration Rights Agreement not to be effective and available for the sale of at least all of the Registerable Securities in accordance with the terms of the Registration Rights Agreement and (vii) on the applicable date of determination, the Underlying Shares and the Warrant Shares may be sold in Canada either pursuant to a qualified prospectus or without any restriction. "MARKET PRICE" shall equal the arithmetic mean of each of the daily VWAP's during the twenty (20) Trading Days immediately preceding the date as of which such Market Price is being determined. The VWAP's used to determine the Market Price shall be appropriately and equitably adjusted for any stock splits, stock dividends, recapitalizations and the like. "PERSON" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "PRACTICAL COMPLETION" has the meaning given to it in the Conditions of Contract, Engineering, Procurement & Equipment Refurbishment and Construction of InterOil Refinery at Napa Napa Papau New Guinea between InterOil Limited and Clough Niugini Limited dated as of March 26, 2002. "PRINCIPAL AMOUNT" shall refer to the sum of (i) the outstanding principal amount of this Debenture, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Transaction Documents (other than payment provided in Section 4(b) hereof) but not previously paid or added to the Principal Amount. "PRINCIPAL MARKET" shall mean the Toronto Stock Exchange. "REMEDY CONVERSION AMOUNT" shall mean an amount equal to 10% of the Principal Amount when first calculated pursuant to Section 3(c)(ii). "REMEDY CONVERSION DATE" shall mean the 25th day of each of the ten consecutive calendar months immediately following the month in which a Remedy Triggering Event shall have been publicly reported; provided, that if such day is not a Trading Day, then the Remedy Conversion Date shall be the next Trading Day. "SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as amended. "SENIOR DEBT" shall mean Indebtedness of the Company described in clauses (A) through (F) and clause (H) in the definition of Permitted Indebtedness. Notwithstanding the foregoing, if the Company is not liable for such Indebtedness either directly or pursuant to a guarantee or other Contingent Obligation, such Indebtedness shall not be Senior Debt. 4 "SPECIAL CONVERSION AMOUNT" shall mean an amount equal to 5.56% of the Initial Principal Amount (including all accrued but unpaid interest thereon), subject to the adjustments set forth in Section 3(a) and in Section 3(c)(iv). "SPECIAL CONVERSION DATE" shall mean each of the following dates: (i) June 25, 2006, (ii) July 25, 2006, (iii) August 25, 2006, (iv) September 25, 2006, (v) October 25, 2006, (vi) June 25, 2007, (vii) July 25, 2007, (viii) August 25, 2007, (ix) September 25, 2007, (x) October 25, 2007, (xi) June 25, 2008, (xii) July 25, 2008, (xiii) August 25, 2008, (xiv) September 25, 2008, (xv) October 25, 2008, (xvi) June 25, 2009, (xvii) July 25, 2009 and (xviii) the Maturity Date; provided, that if such day is not a Trading Day, then the Special Conversion Date shall be the next Trading Day. "SPECIAL CONVERSION PRICE" shall mean the lesser of (i) the Conversion Price and (ii) 90% of the Market Price. "TRADING DAY" shall mean a day on which there is trading on the Principal Market. "UNDERLYING SHARES" means the Common Shares which may be issued upon conversion of, or otherwise under, the Debenture in accordance with the terms hereof and the Purchase Agreement. "VWAP" shall mean the daily volume weighted average of: 1) the daily volume weighted average price of the Common Shares on the Principal Market, expressed in US dollars based upon the most current Bank of Canada buy rate on the date such price is determined and 2) the daily volume weighted average price of the Common Shares on the Approved Market , where 1) and 2) are as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time) using the "Volume at Price" function on the date in question. If the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York City Time (or such other time as the Principal Market and the Approved Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading) as reported by Bloomberg. The following terms and conditions shall apply to this Debenture: SECTION 1. PAYMENTS OF PRINCIPAL AND INTEREST. (a) Interest. Accrued interest on this Debenture shall be paid quarterly, on the first day of each calendar quarter, commencing on October 1, 2004 (each such payment date, an "INTEREST PAYMENT DATE"). Subject to the terms hereof, the Company shall, at its option, have the right to pay interest on each Interest Payment Date either in cash or Common Shares or a combination thereof. In order to exercise such right, the Company shall deliver to all the Holders of Debentures a written irrevocable notice in the form of Exhibit B attached hereto electing to pay such interest in full on such Interest Payment Date in either cash or Common Shares or a combination thereof ("INTEREST ELECTION NOTICE"). Such Interest Election Notice shall be delivered at least forty (40) calendar days prior to the applicable Interest Payment Date but no more than sixty (60) calendar days prior to such Interest Payment Date (the date of such notice 5 being hereinafter referred to as the "INTEREST NOTICE DATE"). If the Company is electing to pay a combination of cash and Common Shares it shall specify the percentages of cash and Common Shares in the Interest Election Notice. If such Interest Election Notice is not delivered within the prescribed period set forth in the preceding sentence, then such payment shall be paid in cash. If the Company elects to pay any interest in shares of Common Shares (such Common Shares, the "INTEREST SHARES"), the number of such Interest Shares to be issued for such Interest Payment Date shall be the number determined by dividing (x) amount of interest, by (y) 90% of the Market Price as of such Interest Payment Date. Such Interest Shares shall be issued and delivered within three (3) Trading Days following such Interest Payment Date and shall be duly authorized, validly issued, fully paid, non-assessable and free and clear of all encumbrances, other than transfer restrictions imposed by applicable securities laws. If the Holder does not receive the requisite number of Interest Shares within such three Trading Day period, the Company shall (a) if the Holder is required by its broker to purchase (in an open market transaction or otherwise) Common Shares to deliver in satisfaction of a sale by the Holder of the Interest Shares which the Holder anticipated receiving upon such interest payment, then (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the amount obtained by multiplying (A) the number of Interest Shares that the Company was required to deliver to the Holder in connection with the exercise at issue by (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either pay in cash the full amount of the interest due or deliver to the Holder the number of Interest Shares that would have been issued had the Company timely complied with its delivery obligations hereunder, and (b) if the Holder so requests, then deem the election (whether by the Company or the Holder) to be cancelled and shall pay the full amount of interest due hereunder (together with any Default Interest) or such portion as the Holder specified is to be paid in cash instead of Interest Shares within two (2) Business Days of such request by the Holder. Except as otherwise provided in this Section 1, all holders of Debentures must be treated equally with respect to such payment of interest in Interest Shares. (b) Gross-up. (i) All payments by the Company under this Debenture shall be made free and clear of and without deduction or withholding for any and all taxes unless required by law, rule, regulation or the interpretation of such law, rule or regulation, by the relevant governmental authority ("Governmental Authority"). If the Company shall be so required to deduct or withhold any such taxes from or in respect of any amount payable under this Debenture, (A) the amount payable shall be increased by such additional amount as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional amounts paid under this Section 1.1(b), the Holder receives a net amount equal to the full amount it would have received if no deduction or withholding had been made; (B) the Company shall make such required deductions or withholdings; 6 (C) the Company shall pay the full amount deducted or withheld to the relevant taxation or other governmental authority in accordance with and within the time required by applicable law; and (D) the Company shall deliver to the Holder, as soon as practicable after it has made such payment to the applicable authority (x) a copy of such receipt as issued by such authority evidencing the remittance of all amounts required to be deducted or withheld from the sum payable under this Debenture, or (y) if such a receipt is not available from such authority, notice of the payment of such amount deducted or withheld; provided that, the obligations of the Company to pay additional amounts pursuant to this Section shall not apply with respect to taxes imposed on the Holder ("EXCLUDED TAXES") that are income, capital or franchise taxes imposed on (or measured by) net income or capital by the jurisdiction under the laws of which the Holder is organized or in which its principal office is located, are branch profits taxes or similar taxes imposed by any jurisdiction in which any Holder is located, or arise by virtue of the Holder not dealing at arm's length with the Company for purposes of the Income Tax Act (Canada). (ii) Without prejudice to Section 1.1(b)(i), if the Holder is required at any time (whether before or after the Company has discharged all of its other obligations under this Debenture) to make any payment on account of any tax which the Company is required to withhold in accordance with Section 1.1(b)(i) or for which an Obligor is otherwise required to indemnify the Holder pursuant to Sections 1.1(b)(i), or 1.1(b)(iii), or if any liability in respect of any such payment is asserted, imposed, levied or assessed against the Holder, the Company shall, within 30 days of written demand of the Holder, promptly indemnify the Holder against such payment or liability, together with interest, penalties and expenses payable or incurred in connection with such payment or liability, including, without limitation, any tax imposed by any jurisdiction on or in relation to any amounts paid to or for the account of such Holder pursuant to this Section 1.1(b). On intending to make a claim pursuant to this Section 1.1(b), the Holder shall notify the Company of the event in respect of which it believes it is entitled to make such claim and supply reasonable supporting evidence including a copy of the relevant portion of any written assessment. (iii) If the Company fails to pay any taxes required to be paid by it pursuant to this Section 1.1(b) when due to the appropriate governmental authority or fails to remit to the Holder the required receipts or other documentary evidence required by Section 1.1(b), the Company shall indemnify the Holder for any incremental taxes, interest or penalties that may become payable by the Holder as a result of any such failure. (iv) The agreements and obligations contained in Section 1.1(b) shall survive the payment in full of principal, interest, fees and any other amounts payable under this Debenture and the termination of this Debenture. (c) Equity Conditions. Notwithstanding anything to the contrary herein, the Company shall be prohibited from exercising its right to issue Interest Shares (and must deliver cash in respect thereof) on the applicable Interest Payment Date if at any time from and including the Interest Notice Date until the time at which the Holders receive such Interest Shares (i) any 7 of the Equity Conditions are not satisfied or (ii) an Event of Default hereunder exists or occurs, or any event which, with the passage of time or notice or both, would constitute an Event of Default, unless otherwise waived in writing by the Holder in whole or in part at the Holder's option. (d) Ownership/Issuance Limitations. Notwithstanding anything to the contrary herein, the Company shall be prohibited from exercising its right to pay interest in Interest Shares (and must deliver cash in respect thereof) on the applicable Interest Payment Date to the extent, and only to the extent, that such payment in Interest Shares would result in the Holder hereof exceeding the limitations contained in Section 3(k) below. In such event, (i) the Company on the Interest Payment Date, shall pay such portion of interest, in Interest Shares as may be effected without exceeding such limitations, and (ii) the balance of the interest shall be paid in cash. In connection with the delivery of any notices by the Holder, the Company may request, and the Holder shall confirm, that in connection with receiving any applicable Common Shares pursuant thereto whether or not, after giving effect to receipt of the applicable Common Shares, such Holder, together with its Affiliates, will have beneficial ownership of a number of Common Shares which exceeds the Maximum Percentage. SECTION 2. SENIORITY. (a) The Company covenants and agrees, and each Holder of a Debenture, by his acceptance thereof, likewise covenants and agrees, for the benefit of the holders, from time to time, of Senior Indebtedness, that, to the extent and in the manner hereinafter set forth in this Section, the Indebtedness represented by the Debenture and the payment of the principal of (and premium, if any, on) and interest on each and all of the Debentures are hereby expressly made subordinate and subject in right of payment as provided in this Section to the prior payment in full of all Senior Indebtedness, whether outstanding on the date of hereof or thereafter created, incurred, assumed or guaranteed; provided, however, that the Debentures, the Indebtedness represented thereby and the payment of the principal of (and premium, if any, on) and interest on the Debentures in all respects shall rank equally with, or prior to, all existing and future unsecured indebtedness (including, without limitation, Indebtedness) of the Company that is subordinated to Senior Indebtedness. (b) In the event of any bankruptcy, insolvency or liquidation proceeding with respect to the Company, upon any distribution of assets or other property of the Company or payment on behalf of the Company with respect to the Debentures: (i) the holders of Senior Indebtedness shall be entitled to receive payment in full of such Senior Indebtedness, or provision must be made for such payment, before the Holders of the Debentures are entitled to receive any direct or indirect payment or distribution of any kind or character, whether in cash, property or securities on account of principal of (or premium, if any, on) or interest on the Debentures or on account of the purchase or redemption or other acquisition of Debentures (including pursuant to a Change of Control); and (ii) any direct or indirect payment or distribution of assets or other property of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, or which the Holders would be entitled but for the provisions of this Section 8 shall be paid by the Company or by any liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (iii) in the event that, notwithstanding the foregoing provisions of this Section, the Holder of any Debenture shall have received any payment or distribution of assets or other property of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, in respect of principal of (and premium, if any, on) or interest on the Debenture before all Senior Indebtedness is paid or provided for in full, then and in such event such payment or distribution shall be received and held in trust for and shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. (c) Upon (1) the occurrence of an event of default on any Senior Indebtedness caused by the failure to pay the principal or interest on such Senior Indebtedness, when scheduled or upon acceleration, and (2) receipt by a Holder of written notice of such occurrence, then no payment or distribution of any properties of the Company of any kind or character shall be made by the Company on account of principal of (or premium, if any, on) or interest on the Debentures or on account of the purchase or redemption or other acquisition of Debentures unless and until such event of default shall have been cured or waived in writing or shall have ceased to exist or such Senior Indebtedness shall have been paid in full or otherwise discharged. Nothing in the foregoing shall be construed to prohibit: (i) the issuance of any Common Shares to Holder upon conversion or as payment of interest; or (ii) the accrual of any interest or other amounts due pursuant to the terms of the Debenture. (d) In the event that, notwithstanding the foregoing, the Company shall make any payment to the Holder of any Debenture prohibited by the foregoing provisions of this Section 2, then and in such event such payment shall be paid over and delivered forthwith to the Company. (e) Notwithstanding anything in this Debenture to the contrary, no Person shall have any rights senior to the Holder with respect to the Collateral Account (as defined in the Securities Purchase Agreement). SECTION 3. CONVERSION. (a) Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at such Holder's option, at any time and from time to time to convert the outstanding Principal Amount under this Debenture in whole or in part by delivering to the Company a fully executed notice of conversion in the form of conversion notice attached hereto as Exhibit A (the "CONVERSION NOTICE"), which may be 9 transmitted by facsimile. Such conversions of Principal Amount under this Section 3(a), shall be applied, as specified by the Holder (as set forth in writing to the Company) to reduce (x) the amount of Special Conversion Amounts that may be converted on pursuant to Section 3(c) commencing with the next Special Conversion Amount; (y) the Special Conversion Amounts starting with the last Special Conversion Amount, or (z) all remaining Special Conversion Amounts pro rata. In addition, the Holder may specify that conversions of Principal Amounts be applied first to reduce any remaining Principal Amount due on the Maturity Date (net of remaining Special Conversion Amounts) and thereafter to reduce the Special Conversion Amounts starting with the last Special Conversion Amount. In the event that no option is selected by the Holder, the amount converted pursuant to this Section 3(a) shall be applied to reduce any remaining Principal Amount due on the Maturity Date and thereafter the last Special Conversion Amount. (b) Common Shares Issuance Upon Conversion. (i) Conversion Date Procedures. Upon conversion of this Debenture pursuant to Section 3(a) above, the outstanding Principal Amount hereunder shall be converted into such number of fully paid, validly issued and non-assessable Common Shares, free of any liens, claims and encumbrances, as is determined by dividing the outstanding Principal Amount being converted by the Conversion Price. The date of any Conversion Notice hereunder shall be referred to herein as the "CONVERSION DATE". If a conversion under this Debenture cannot be effected in full for any reason, or if the Holder is converting less than all of the outstanding Principal Amount hereunder pursuant to a Conversion Notice, if the Holder so elects, the Company shall promptly deliver to the Holder (but no later than five Trading Days after the Conversion Date) a Debenture for such outstanding Principal Amount as has not been converted if this Debenture has been surrendered to the Company for partial conversion. The Holder shall not be required to physically surrender this Debenture to the Company upon any conversion hereunder unless the full outstanding Principal Amount represented by this Debenture is being converted or repaid. The Holder and the Company shall maintain records showing the outstanding Principal Amount so converted and repaid and the dates of such conversions or repayments or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Debenture upon each such conversion or repayment. (ii) Stock Certificates. The Company will deliver to the Holder not later than three (3) Trading Days after the Conversion Date, a certificate or certificates which shall be free of restrictive legends and trading restrictions except as provided in the Purchase Agreement, representing the number of Common Shares being acquired upon the conversion of this Debenture. In lieu of delivering physical certificates representing the Common Shares issuable upon conversion of this Debenture, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder's (or such designee's) prime broker with DTC through its Deposit Withdrawal Agent Commission system (provided that the same time periods herein as for stock certificates shall apply). If in the case of any conversion hereunder, such certificate or certificates are not delivered to or as directed by the 10 Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return this Debenture tendered for conversion. If the Company fails to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section 3(b) (free of any restrictions on transfer) in accordance herewith, prior to the third Trading Day after the Conversion Date, the Company shall pay to the Holder, in cash, an amount equal to 2% of the Principal Amount per month until such shares are delivered. (c) Additional Conversion Rights. (i) In addition to the conversion rights get set forth in Section 3(a) above, the Holder shall have the right, exercisable as set forth below, (A) to convert the Special Conversion Amount on each of the Special Conversion Dates (such conversion right, the "SPECIAL CONVERSION RIGHT") and (B) if there has occurred a Remedy Triggering Event at any time, then to convert the Remedy Conversion Amount on a Remedy Conversion Date (such conversion right, the "REMEDY CONVERSION RIGHT" and together with the Special Conversion Right, the "ADDITIONAL CONVERSION RIGHTS"). Notwithstanding the foregoing, in no event shall the Holder be permitted to exercise both the Special Conversion Right and the Remedy Conversion Right in the same month. (ii) For purposes of this Section 3(c), a "REMEDY TRIGGERING EVENT" shall mean the occurrence of any of the following events: (A) the Average Consolidated EBITDA of the Company for the period ending June 30, 2005 is less than U.S.$5 million, (B) the Average Consolidated EBITDA of the Company for the period ending September 30, 2005 is less than U.S.$6.25 million, (C) the Average Consolidated EBITDA for any period ending on or after December 31, 2005 is less than U.S.$7.5 million, or (D) an Event of Default shall have occurred. Immediately upon the first occurrence of any Remedy Triggering Event, the Principal Amount (including all accrued but unpaid interest thereon) shall be automatically adjusted to an amount equal to 110% of such Principal Amount. (iii) Not less than twenty-five (25) Trading Days nor more than thirty (30) Trading Days preceding each Special Conversion Date or Remedy Conversion Date, the Company shall give the Holder written notice (each, a "COMPANY NOTICE") of the Company's irrevocable election to satisfy its obligations with respect to the applicable Special Conversion Amount or Remedy Conversion Amount by payment in full in cash or shares of such Special Conversion Amount or Remedy Conversion Amount (as the case may be) on such Special Conversion Date or Remedy Conversion Date as applicable upon the Holder's exercise of the applicable Additional Conversion Right. If the applicable Company Notice is not delivered within the foregoing prescribed period, then the Company shall be deemed to have elected to irrevocably pay the Special Conversion Amount or Remedy Conversion Amount (as the case may be) in full in cash and such applicable Special Conversion Amount or Remedy Conversion Amount shall be paid in cash on the applicable Special Conversion Date or Remedy Conversion Date if the Holder shall have exercised the applicable Additional Conversion Right. (iv) Within five (5) Trading Days of receipt of the Company's notice pursuant to Section 3(c)(iii) above, the Holder shall deliver written notice (a "HOLDER NOTICE") of 11 exercise of its applicable Additional Conversion Right. If the Holder's Notice is not received by the Company within the preceding time frame, the Holder shall be deemed to have waived the applicable Additional Conversion Right for such Special Conversion Date or the Remedy Conversion Date, as the case may be. If the Company elects to pay the applicable Conversion Amount in Common Shares, then the Company shall within three (3) Trading Days following the Special Conversion Date or the Remedy Conversion Date (as the case may be), issue to the Holder such number of Common Shares as shall be obtained by dividing the Special Conversion Amount or the Remedy Conversion Amount (as the case may be) by the Special Conversion Price. Notwithstanding the foregoing, (A) in the event that the number of Common Shares issued to the Holder would cause the limitations in Section 3(k) to be exceeded, that portion of the Special Conversion Amount or the Remedy Conversion Amount (as the case may be) that would cause such limit to be exceeded shall instead be paid in cash and (B) if there is a failure to maintain to satisfy any Equity Condition on each Trading Day during the period from the giving of the Holder's notice to convert until the Special Conversion Date or the Remedy Conversion Date (as the case may be), then unless waived by the Holder, the Special Conversion Amount or the Remedy Conversion Amount (as the case may be) shall be paid in cash. If the Holder does not receive the requisite number of Common Shares in the form required above within such three (3) Trading Day period, the Company shall (a) if the Holder is required by its broker to purchase (in an open market transaction or otherwise) Common Shares to deliver in satisfaction of a sale by the Holder of the Common Shares which the Holder anticipated receiving upon exercise of such Special Conversion Right, then (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the amount obtained by multiplying (A) the number of Common Shares that the Company was required to deliver to the Holder in connection with the conversion at issue by (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate that portion of the Principal Amount, the conversion of which was not honored, or deliver to the Holder the number of Common Shares that would have been issued had the Company timely complied with its delivery obligations hereunder, and (b) if the Holder so requests, then shall pay the Special Conversion Amount due hereunder (together with any Default Interest) or such portion as the Holder specified is to be paid in cash instead of Common Shares within two (2) Business Days of such request by the Holder. All holders of Debentures must be treated equally with respect to the Company's election to satisfy the Special Conversion Amount in cash. (v) Notwithstanding the foregoing, the Holder shall retain all rights pursuant to Section 3(a) above, at any time until the Special Conversion Date or the Remedy Conversion Date (as the case may be) to convert any portion of the applicable Special Conversion Amount or the Remedy Conversion Amount (as the case may be) at the Conversion Price. (d) Mandatory Conversion. (i) If, commencing on the date which is twelve (12) months after the Effective Date, (A) the daily VWAP of the Common Shares has been at or above 140% of the Conversion Price for at least 30 consecutive Trading Days (any such 30 Trading Day period being a "TRIGGER PERIOD"), and (B) the aggregate number of Common Shares traded on the Principal Market and the Approved Markets shall be at least 65,000 shares per day (as adjusted 12 for stock splits, reverse splits, stock divided, and reorganizations) during each Trading Day of the Trigger Period, then the Company shall have the right to require the Holder to convert this Debenture in whole, as set forth and subject to the conditions set forth below; provided that this election must apply to all Debentures equally. (ii) To exercise its right to require the Holder to convert this Debenture following a Trigger Period, the Company must give to the Holder a written notice (a "MANDATORY CONVERSION NOTICE") which notice must be given within three Trading Days of the end of any Trigger Period, which notice shall specify the date (the "MANDATORY CONVERSION DATE") on which this Debenture shall be converted, which date shall be not less than ten Trading Days nor more than 20 Trading Days from the date such notice is received by the Holder, and on the Mandatory Conversion Date, (i) the outstanding Principal Amount hereunder shall be converted into such number of fully paid, validly issued and non-assessable Common Shares, as is determined by dividing the outstanding Principal Amount being converted by the then Conversion Price and (ii) the rights of the Holders under the Debentures shall cease and the Holder shall be treated for all purposes as having become an owner of Common Shares. Notwithstanding the foregoing, the Company's right to require the conversion of this Debenture shall be subject to the following conditions: at all times during the Trigger Period and from the date of the Mandatory Conversion Notice to the Mandatory Conversion Date, (A) all of the Equity Conditions have been satisfied, (B) the Common Shares shall have been continually listed (and not suspended from trading) on the Principal Market or an Approved Market; and (C) no Event of Default or event which, with the giving of notice or the passage of time or both, would constitute an Event of Default, shall have occurred. (e) Conversion Price Adjustments. (i) Stock Dividends, Splits and Combinations. If the Company or any of its subsidiaries, at any time while the Debentures are outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in Common Shares, (B) subdivide outstanding Common Shares into a larger number of shares, or (C) combine outstanding Common Shares into a smaller number of shares, then each Affected Conversion Price (as defined below) shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Shares outstanding before such event and the denominator of which shall be the number of shares of Common Shares outstanding after such event. Any adjustment made pursuant to this Section 3(e)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination. As used herein, the Affected Conversion Prices (each an "AFFECTED CONVERSION PRICE") shall refer to: (i) the Conversion Price; (ii) each reported daily closing price of the Common Shares on the Principal Market occurring on any Trading Day included in the period used for determining the Market Price, which Trading Day occurred before the record date in the case of events referred to in clause (A) of this subparagraph 3(e)(i) and before the effective date in the case of the events referred to in clauses (B) and (C) of this subparagraph 3(e)(i). 13 (ii) Distributions. If the Company or any of its subsidiaries, at any time while the Debentures are outstanding, shall distribute to all holders of Common Shares evidences of its indebtedness or assets or cash or rights or warrants to subscribe for or purchase any security of the Company or any of its subsidiaries (excluding those referred to in Section 3(e)(i) above), then concurrently with such distributions to holders of Common Shares, the Company shall distribute to holders of the Debentures the amount of such indebtedness, assets, cash or rights or warrants which the holders of Debentures would have received had all their Debentures been converted into Common Shares at the Conversion Price immediately prior to the record date for such distribution. (iii) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger, spin-off or other business combination (other than a Change of Control) pursuant to which holders of Common Shares are entitled to receive securities or other assets with respect to or in exchange for Common Shares (a "CORPORATE EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture at the Conversion Price, (i) in addition to the Common Shares receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such Common Shares had such Common Shares been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the Common Shares otherwise receivable upon such conversion, such securities or other assets received by the holder of Common Shares in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with a conversion rights for the form of such consideration (as opposed to shares of Common Shares) at a conversion ratio for such consideration commensurate with the Conversion Ratio. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. (iv) Rounding of Adjustments. All calculations under this Section 3 or Section 1 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (v) Notice of Adjustments. Whenever any Affected Conversion Price is adjusted pursuant to Section 3(d)(iii) above, the Company shall promptly deliver to each holder of the Debentures, a notice setting forth the Affected Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, provided that any failure to so provide such notice shall not affect the automatic adjustment hereunder. (vi) Change in Control Transactions. If a Change in Control Transaction occurs, the Company shall notify the Holder of such Change in Control Transaction promptly, but in no event more than 5 Trading Days, following such Change in Control Transaction. If a Change in Control Transaction occurs, the Holder shall have the right, at its option, (A) to convert this Debenture, in whole or in part, at the Special Conversion Price in effect as of the day before the closing date of the Change in Control Transaction, into the shares of stock or other securities, cash and/or property, if any, receivable by Holders of Common Shares following such Change in Control Transaction, or (B) to require the Company or its successor to redeem this Debenture in cash at 115% of the Principal Amount (including accrued but unpaid interest). The Holder may exercise its rights by sending notice to the Company within 10 Trading Days following the receipt of the notice of the Change in Control from the 14 Company. If Holder does not notify the Company of its election within such 10 Trading Days, the Holder shall be deemed to have waived its rights under this Section. If the Holder elects to convert all or a portion of this Debenture under clause (A) of this paragraph, the Company or its successor shall promptly deliver to the Holder the securities, cash and/or property to which the Holder is entitled and if the Holder elects to cause the redemption of the Debenture under clause (B) of this paragraph then the Company or its successor shall promptly, but in no event more than 10 Trading Days after such election, pay the redemption price to the Holder. In addition, if the Change of Control involves the issuance by the surviving company of securities, cash and/or property, in exchange for Common Shares, the Company shall make appropriate provision (in form and substance reasonably satisfactory to the Holder of not less than 60% of the aggregate Principal Amount of all Debentures then outstanding) to ensure that this Debenture is convertible into such securities, cash and/or property based on the exchange ratio for the Common Shares in the Change of Control Transaction. This provision shall similarly apply to successive Change of Control Transactions. (vii) Other Events. If any event occurs of the type contemplated by the provisions of this Section 3(e) but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Debenture; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 3(e). (viii) Notice of Certain Events. If: (A) the Company shall declare a dividend (or any other distribution) on its Common Shares; or (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Shares; or (C) the Company shall authorize the granting to all Holders of the Common Shares rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (D) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Common Shares of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Shares are converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the books of the Company, on or prior to the date notice to the Company's stockholders generally is given, a notice stating (x) the date on which a record is to be taken for 15 the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Shares of record shall be entitled to exchange their shares of Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange. (f) Reservation and Issuance of Underlying Securities. The Company shall at all times reserve and keep available out of its authorized and unissued Common Shares solely for the purpose of issuance upon conversion of this Debenture (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders of the Debentures, such number of its Common Shares as shall from time to time be sufficient to effect the conversion of all Debentures; provided, however, that the Company shall not be required to issue more than 4,000,000 Common Shares (as adjusted for stock dividend, stock splits and other events described in Section 3) pursuant to the conversion of interest and principal repayment provisions of the Debentures or exercise of the Warrants. The Company covenants that all Common Shares that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid, nonassessable and freely tradeable, other than transfer restrictions of applicable securities laws. (g) No Fractions. Upon a conversion hereunder the Company shall not be required to issue share certificates representing fractions of Common Shares, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the closing price of a Common Shares at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole Common Share. (h) Charges, Taxes and Expenses. Issuance of certificates for Common Shares upon the conversion of this Debenture (including repayment in stock) shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Common Shares are to be issued in a name other than the name of the Holder, this Debenture when surrendered for conversion shall be accompanied by an assignment form; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any such transfer. (i) Cancellation. After all of the Principal Amount (including accrued but unpaid interest and default payments at any time owed on this Debenture) have been paid in full or converted into Common Shares, this Debenture shall automatically be deemed canceled and the Holder shall promptly surrender the Debenture to the Company at the Company's principal executive offices. 16 (j) Notices Procedures. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by confirmed facsimile, or by a nationally recognized overnight courier service to the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or by a nationally recognized overnight courier service addressed to the Holder at the facsimile telephone number or address of the Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed delivered (i) upon receipt, when delivered personally, (ii) when sent by facsimile, upon receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a nationally recognized overnight courier service. (k) 9.99% Conversion Limitations. (i) The Company shall not effect the conversion of this Debenture, and no Holder of this Debenture shall have the right to convert this Debenture, to the extent that after giving effect to such conversion, the number of Common Shares that may be acquired by the Holder upon conversion (other than pursuant to a mandatory conversion in Section 3(d)) or pursuant to the payment of interest in Common Shares, pursuant to the terms hereof shall not exceed a number that, when added to the total number of Common Shares deemed beneficially owned by such Holder, directly or indirectly (as determined pursuant to the Securities Act (Ontario), as amended from time to time), and to those Common Shares over which the Holder exercises control or direction give the Holder beneficial ownership, directly or indirectly (as determined pursuant to the Securities Act (Ontario), as amended from time to time) or control or direction over, or a combination of both carrying more than 9.99% of the voting rights attached to voting securities of the Company for time being outstanding (the "RESTRICTED OWNERSHIP PERCENTAGE"). (ii) After the Common Shares have been listed on an Approved Market, the Company shall not effect any conversion of this Debenture (other than pursuant to a mandatory conversion in Section 3(d)), and the Holder of this Debenture shall not have the right to convert any portion of this Debenture, to the extent that after giving effect to such conversion, the Holder (together with the Holder's Affiliates) would beneficially own in excess of the Restricted Ownership Percentage after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of Common Shares issuable upon conversion of this Debenture with respect to which the determination of such sentence is being made, but shall exclude the number of Common Shares which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Debenture beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Debentures or other Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(k)(ii), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 17 ACT"). For purposes of this Section 3(k)(ii), in determining the number of outstanding Common Shares, the Holder may rely on the number of outstanding Common Shares as reflected in (x) the Company's most recent Form 20-F, (y) a more recent public announcement by the Company or (z) any other notice by the Company or its transfer agent setting forth the number of Common Shares outstanding. Upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding Common Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its Affiliates since the date as of which such number of outstanding Common Shares was reported. (l) Reorganization. Notwithstanding any other provision of this Debenture, on a reorganization of capital, the number of Common Shares into which this Debenture may be converted and the Conversion Price, or both, must be reorganized so that the Holder will not receive a benefit that holders of Common Shares do not receive. SECTION 4. DEFAULTS AND REMEDIES. (a) Events of Default. An "EVENT OF DEFAULT" is: (i) the suspension from trading or failure of the Common Shares to be listed on the Principal Market for a period of five consecutive days or for more than an aggregate of 10 days in any 365-day period; (ii) at any time following the tenth consecutive Business Day that the number of shares reserved for issuance under this Debenture is less than the number of shares of Common Shares that the Holder would be entitled to receive upon a conversion of the full Principal Amount of this Debenture (without regard to any limitations on conversion set forth in Section 3(i)); (iii) in the case of a default in payment of the principal amount or accrued but unpaid interest thereon continuing for at least 5 days of any of the Debentures on or after the date such payment is due (to the extent such principal and/or amount has not been converted into Common Shares in accordance with the terms hereof), including without limitation payments due on any Interest Payment Date, Special Conversion Date or Remedy Conversion Date where the Company has exercised its right to pay in cash; (iv) a default in the timely issuance of Underlying Shares upon and in accordance with the terms hereof, which default continues for five business days after the Company has received written notice informing the Company that it has failed to issue shares or deliver stock certificates within the fifth day following the Conversion Date; (v) failure by the Company for ten (10) days after written notice has been received by the Company to comply with any other material provision of any of the Debentures, the Purchase Agreement, the Warrants or the Registration Rights Agreement (including without limitation, the covenants contained in Section 3 of the Purchase Agreement); (vi) a breach by the Company of its material representations or warranties in the Purchase Agreement; (vii) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its subsidiaries for in excess of $500,000 or for money borrowed the repayment of which is guaranteed by the Company or any of its Subsidiaries for in excess of $500,000, whether such indebtedness or guarantee now exists or shall be created hereafter; (viii) a final judgment or judgments for the payment of money aggregating in excess of $2,500,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within 60 days after the entry hereof, bonded, discharged or stayed pending appeal, or are not discharged 18 within 60 days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $2,500,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within 60 days of the issuance of such judgment; or (x) if the Company or any of its Subsidiaries is subject to any Bankruptcy Event (as defined below). "BANKRUPTCY EVENT" means any of the following events: (a) the Company or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any subsidiary thereof; (b) there is commenced against the Company or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Company or any subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing. (b) Remedies. If an Event of Default occurs and is continuing with respect to any of the Debentures, the Holder may declare all of the then outstanding Principal Amount of this Debenture and all other Debentures held by the Holder, including any interest due thereon, to be due and payable immediately in cash, except that in the case of an Event of Default arising from events described in clauses (viii) and (x) of Section 4(a), this Debenture shall become due and payable without further action or notice. In the event of an acceleration, the amount due and owing to the Holder shall be the greater of (1) 115% of the Principal Amount of the Debentures (including all accrued and unpaid interest, if any) held by the Holder and (2) the product of (A) the highest closing price for the Common Shares on the Principal Market for the twenty (20) Trading days immediately preceding the Holder's acceleration and (B) the Conversion Ratio. In either case the Company shall pay interest on such amount in cash at the Default Rate to the Holder if such amount is not paid within seven days of Holder's request. The remedies under this Debenture shall be cumulative. SECTION 5. COMPANY'S OPTION TO EFFECT COVENANT DEFEASANCE. (a) The Company may, at its option and at any time, elect to have the obligations of the Company released with respect to Sections 3.13, 3.14 and 3.15 of the Purchase Agreement ("COVENANT DEFEASANCE") and thereafter any omission to comply with such obligations shall not constitute an Event of Default with respect to the Debentures. Other than as 19 set forth above, none of the other rights and obligations of the parties under the Transaction Documents shall be affected. (b) The following shall be the conditions to application of Covenant Defeasance: (i) the Company must irrevocably deposit in the Collateral Account, for the benefit of the Holders of Debentures, cash in U.S. dollars, non-callable U.S. Government Obligations (as defined below), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of all of the Debentures on the stated date for payment thereof or on the redemption date, as the case may be; (ii) the Company shall have delivered to the Holders an Opinion of Counsel in the United States reasonably acceptable to the Holders confirming that the Holders will not recognize income, gain or loss for federal or Canadian income tax purposes as a result of such Covenant Defeasance and will be subject to federal and Canadian income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iii) such Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Debenture, the Purchase Agreement or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (iv) the Company shall have delivered to the Holders an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (v) the Company shall have delivered to the Holders an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Covenant Defeasance have been complied with; and (vi) No event or condition shall exist that would prevent the Company from making payments of the principal of, premium, if any, and interest on the Debentures on the date of such deposit on the date of such deposit. (c) All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to this Section 5 in respect of the outstanding Debentures shall be held in trust and applied by the Trustee, in accordance with the provisions of the Debentures and the Purchase Agreement, to the payment, either directly or through any paying agent (including the Company acting as its own paying agent) as the Trustee may determine, to the Holders of such Debentures of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. 20 (d) If the Trustee or any Paying Agent is unable to apply any money in accordance with paragraph (c) of this Section 5 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Debenture and the Purchase Agreement shall be revived and reinstated as though no deposit had occurred pursuant to this Section 5 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with paragraph (c) of this Section 5, and the Company shall execute all documents reasonably satisfactory to the Holders evidencing such revival and reinstatement. (e) If the amount deposited in the Collateral Account, the Trustee shall return to the Company the difference, if positive, between the balance in the Collateral Account and the Principal Amount. (f) For purposes of this Section, the following definitions apply: "OFFICER'S CERTIFICATE" means a certificate signed by the chief executive officer, the president or the chief financial officer of the Company. "OPINION OF COUNSEL" means a written opinion of counsel, who may be an officer, counsel or employee of the Company, and who shall be reasonably acceptable to the Trustee. "TRUSTEE" means a national bank with combined capital and surplus in excess of $50,000,000. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of the United States for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which, in either case, are not callable or redeemable at the option of the issuer thereof and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. SECTION 6. GENERAL. (a) Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by the Holder in successfully enforcing this Debenture and/or collecting any amount due under this Debenture. (b) Savings Clause. In case any provision of this Debenture is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such 21 provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Debenture will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law. (c) Assignment, Etc. Subject to compliance with applicable securities laws, the Holder may assign or transfer this Debenture to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Holder may assign or transfer this Debenture to any of such Holder's Affiliates without the consent of the Company and (ii) upon any Event of Default, the Holder may assign or transfer this Debenture without the consent of the Company. The Holder shall notify the Company of any such assignment or transfer promptly. This Debenture shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns. (d) No Waiver. No failure on the part of the Holder to exercise, and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time. (e) Governing Law; Jurisdiction. (i) Governing Law. THIS DEBENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION. (ii) Jurisdiction. The Company irrevocably submits to the exclusive jurisdiction of any State or Federal Court sitting in the State of New York, County of New York, over any suit, action, or proceeding arising out of or relating to this Debenture. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding brought in such a court and any claim that suit, action, or proceeding has been brought in an inconvenient forum. The Company agrees that the service of process upon it mailed by certified or registered mail (and service so made shall be deemed complete three days after the same has been posted as aforesaid) or by personal service shall be deemed in every respect effective service of process upon it in any such suit or proceeding. Nothing herein shall affect Holder's right to serve process in any other manner permitted by law. The Company agrees that 22 a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. (iii) No Jury Trial. The Company hereby knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this Debenture. (f) Replacement Debentures. This Debenture may be exchanged by Holder at any time and from time to time for a Debenture or Debentures with different denominations representing an equal aggregate outstanding Principal Amount, as reasonably requested by Holder, upon surrendering the same. No service charge will be made for such registration or exchange. In the event that Holder notifies the Company that this Debenture has been lost, stolen or destroyed, a replacement Debenture identical in all respects to the original Debenture (except for registration number and principal amount, if different than that shown on the original Debenture), shall be issued to the Holder, provided that the Holder executes and delivers to the Company an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with the Debenture. (g) (i) Subject to Section 6(g)(iii), until December ___, 2004, any certificate representing Debentures issued on a transfer or exchange of this Debenture and any certificate representing Underlying Shares shall be issued with and bear the following legend: UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE DECEMBER ___, 2004. (ii) The Holder acknowledges that, while any certificate representing Underlying Shares contains legends restricting their transfer, (i) such securities cannot be traded through the facilities of the Toronto Stock Exchange since the certificate is not freely transferable and consequently is not "good delivery" in settlement of transactions on the Toronto Stock Exchange; and (ii) that the Toronto Stock Exchange would deem the selling securityholder to be responsible for any loss incurred on a sale made by him in such securities. As such, at any such time that there is a restrictive legend on any certificate representing Underlying Shares, such certificate shall also bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK EXCHANGE. (iii) The Company agrees to reissue certificates representing Debentures or Underlying Shares, as the case may be, without the legends set forth above in Section 6(g)(i) and Section 6(g)(ii) at such time as (i) such securities are qualified for distribution under a prospectus in Ontario (it being acknowledged that there must be a trade of such security) or (ii) such securities are sold to a purchaser or purchasers in a transaction that meets the requirements of (A) 23 Section 2.5 of Multilateral Instrument 45-102 - Resale of Securities (in the opinion of counsel to the seller or the holder, in form and substance reasonably satisfactory to the Company and its counsel) and (B) the requirements of the Toronto Stock Exchange, if any; provided, that, the legend set forth above in Section 6.2(b) may only be removed if there is no other restrictive legend on the certificate representing such securities. [Signature Page Follows] 24 IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed on August 27, 2004. INTEROIL CORPORATION By: ---------------------------------- Name: Title: EXHIBIT A FORM OF CONVERSION NOTICE (To be Executed by the Holder in order to Convert a Debenture) The undersigned hereby elects to convert the aggregate outstanding Principal Amount (as defined in the Debenture) indicated below of this Debenture into Common Shares, no par value (the "Common Shares"), of INTEROIL CORPORATION. (the "Company") according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. Conversion information: ------------------------------------------------------- Date to Effect Conversion ------------------------------------------------------- Aggregate Principal Amount of Debenture Being Converted ------------------------------------------------------- Number of Common Shares to be Issued ------------------------------------------------------- Conversion Price The Principal Amount converted shall be applied as follows: - to reduce the Special Conversion Amount commencing with the next one - to reduce the Special Conversion Amount(s) commencing with the last one - to reduce pro-rata all remaining Special Conversion Amounts - to reduce any remaining Principal Amount due on the Maturity Date (after subtracting all remaining Special Conversion Amounts) and thereafter any Special Conversion Amounts commencing with the last one ------------------------------------------------------- Signature ------------------------------------------------------- Name ------------------------------------------------------- Address EXHIBIT B FORM OF INTEREST PAYMENT ELECTION NOTICE To: [HOLDER AT HOLDER'S ADDRESS] Pursuant to Section 1(a) of Debenture No. ______ of INTEROIL CORPORATION (the "Company") issued on August 27, 2004, we hereby notify you that the Company is irrevocably electing to pay the accrued interest due on the Interest Payment Date (as defined in the Debenture) which occurs on ______, 20__ (check one): In full in cash on such Interest Payment Date. ________ In full in Interest Shares within three (3) Trading Days following such Interest Payment Date. ________ In a combination of cash and Interest Shares within three (3) Trading Days following such Interest Payment Date in the following percentages: _____% of cash _____% of Interest Shares INTEROIL CORPORATION By: ------------------------------------- Name: Title: EXHIBIT C FORM OF SPECIAL CONVERSION AND REMEDY CONVERSION NOTICE ELECTION NOTICE To: [HOLDER AT HOLDER'S ADDRESS] Pursuant to Section 3(c)(iii) of Debenture No. ______ of INTEROIL CORPORATION issued on August 27, 2004, we hereby notify you that we are irrevocably electing to pay the applicable outstanding Special Conversion Amount or Remedy Conversion Amount (as defined in the Debenture) due on the applicable Special Conversion Date or Remedy Conversion Date (as defined in the Debenture) which occurs on ______, 20__ (check one) (the "Date"): _________ In full in cash on the Date. _________ Will honor in Common Shares within three (3) Trading Days following the Date. INTEROIL CORPORATION By: --------------------------------------- Name: Title: EX-99.7 5 h19854exv99w7.txt AMENDED UNAUDITED COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS . . . EXHIBIT 7 INTEROIL CORPORATION (INTEROIL CORPORATION LOGO) CONSOLIDATED BALANCE SHEETS (Expressed in United States dollars)
UNAUDITED AUDITED UNAUDITED JUNE 30 DECEMBER 31 JUNE 30 2004 2003 2003 $ $ $ ----------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents 21,163,705 9,313,682 6,867,693 Temporary investments 168,647 24,723,572 3,452,093 Trade receivables 7,127,714 -- -- Other receivables -- 175,491 591,468 Other assets 129,064 311,093 -- Inventories (note 4) 29,303,284 -- -- Prepaid expenses 548,284 488,532 392,563 ----------- ----------- ----------- 58,440,698 35,012,370 11,303,817 Plant and equipment (note 5) 219,712,847 202,309,465 170,663,045 Oil and gas properties (note 6) 38,690,805 23,018,015 9,489,641 Future income tax benefit 642,353 -- -- ----------- ----------- ----------- 317,486,703 260,339,850 191,456,503 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities Crude feedstock 23,476,702 -- -- Other 22,164,787 5,835,583 12,675,556 Deferred acquisition cost (note 13) 11,854,110 -- -- Due to related parties (note 3) 1,056,251 1,478,751 1,690,001 Unsecured loans (note 8) 3,600,000 -- -- Current portion of secured loan (note 7) 4,500,000 9,000,000 4,500,000 ----------- ----------- ----------- 66,651,850 16,314,334 18,865,557 Deferred financing costs 834,439 -- -- Secured loan (note 7) 80,500,000 74,000,000 55,500,000 Indirect participation interest (note 9) 12,109,500 16,600,000 7,650,000 ----------- ----------- ----------- 160,095,789 106,914,334 82,015,557 ----------- ----------- ----------- Non-controlling interest (note 10) 6,465,064 6,467,496 6,489,352 ----------- ----------- ----------- Shareholders' equity: Share capital (note 11) 165,065,159 157,449,200 110,363,916 Additional paid in capital 1,747,233 540,222 619,530 Deferred foreign exchange 49,715 -- -- Deficit accumulated during the development stage (15,936,257) (11,031,402) (8,031,852) ----------- ----------- ----------- 150,925,850 146,958,020 102,951,594 ----------- ----------- ----------- 317,486,703 260,339,850 191,456,503 =========== =========== ===========
See accompanying notes to the consolidated financial statements INTEROIL CORPORATION (INTEROIL CORPORATION LOGO) CONSOLIDATED STATEMENTS OF EARNINGS (Expressed in United States dollars)
UNAUDITED CUMULATIVE AMOUNTS FROM INCEPTION OF UNAUDITED UNAUDITED DEVELOPMENT QUARTER ENDED SIX MONTHS ENDED STAGES TO ---------------------------- ---------------------------- ------------ JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 2004 $ $ $ $ $ ----------- ----------- ----------- ------------ ----------- REVENUE Sales and operating revenues 12,586,137 -- 12,586,137 -- 12,586,137 Interest 123,956 19,861 175,254 34,110 7,142,027 Other (19,560) 7,856 84,738 7,856 118,887 Equity earnings of SP InterOil, LDC -- -- -- -- (281,128) ----------- ----------- ----------- ------------ ----------- 12,690,533 27,717 12,846,129 41,966 19,565,923 ----------- ----------- ----------- ------------ ----------- EXPENSES Cost of sales and operating expenses 10,468,871 -- 10,468,871 -- 10,468,871 Administrative and general expenses 2,399,751 830,633 3,620,684 1,376,333 14,369,261 Management fees -- -- -- -- 1,365,000 Management fees for prior periods waived -- -- -- (840,000) (840,000) Exploration costs 1,485,828 -- 1,491,623 -- 2,452,209 Legal and professional fees 236,927 133,362 829,054 302,355 4,489,281 Foreign exchange 114,678 252,937 96,713 (301,358) 2,260,383 ----------- ----------- ----------- ------------ ----------- 14,706,055 1,216,932 16,506,945 537,330 34,565,005 ----------- ----------- ----------- ------------ ----------- (Loss) before income taxes and non-controlling interest (2,015,522) (1,189,215) (3,660,816) (495,364) (14,999,082) Income tax (expense) (508,821) (15,997) (508,821) (23,701) (658,247) ----------- ----------- ----------- ------------ ----------- (Loss) before non-controlling interest (2,524,343) (1,205,212) (4,169,637) (519,065) (15,657,329) Non-controlling interest 2,065 534 2,432 1,046 458,722 ----------- ----------- ----------- ------------ ----------- NET (LOSS) (2,522,278) (1,204,678) (4,167,205) (518,019) (15,198,607) =========== =========== =========== ============ =========== Basic (loss) per share (0.10) (0.05) (0.17) (0.02) Diluted (loss) per share (0.10) (0.05) (0.17) (0.02) Weighted avg number of common shares outstanding - Basic and diluted 25,056,672 22,238,463 24,938,621 21,645,981
See accompanying notes to the consolidated financial statements INTEROIL CORPORATION (INTEROIL CORPORATION LOGO) CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in United States dollars)
UNAUDITED CUMULATIVE AMOUNTS FROM INCEPTION OF UNAUDITED UNAUDITED DEVELOPMENT QUARTER ENDED SIX MONTHS ENDED STAGES TO ---------------------------- --------------------------- ------------ JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 2004 $ $ $ $ $ ------------ ------------ ----------- ------------ ------------ Cash flows provided by (used in): OPERATING ACTIVITIES Net (loss) (2,522,278) (1,204,678) (4,167,205) (518,019) (15,198,607) Net distributions from SP InterOil LDC -- -- -- -- 781,187 Non-controlling interest (2,065) (534) (2,432) (1,046) (458,722) Adjustments for non-cash transactions 2,107,456 -- 2,199,651 -- 4,363,321 Change in non-cash operating working capital 1,454,524 146,794 1,200,013 (1,280,373) (115,569) ------------ ------------ ------------ ------------ ------------ 1,037,637 (1,058,418) (769,973) (1,799,438) (10,628,390) ------------ ------------ ------------ ------------ ------------ INVESTING ACTIVITIES Cash acquired on consolidation of SPI InterOil LDC -- -- -- -- (14,858,947) Expenditure on oil and gas properties (8,134,953) (2,705,138) (16,912,183) (4,177,782) (35,613,281) Expenditure on capital assets (5,701,042) (27,399,860) (8,688,000) (46,189,979) (155,722,912) Funds received on sale of assets -- -- 405,353 -- 405,353 Redemption/(purchase) of cash on short-term investments 13,950,068 1,069,800 24,554,925 3,964,701 (168,647) Acquisition of InterOil Products Limited net of cash received 4,757,276 -- 4,757,276 -- 4,757,276 ------------ ------------ ------------ ------------ ------------ 4,871,349 (29,035,198) 4,117,371 (46,403,060) (201,201,158) ------------ ------------ ------------ ------------ ------------ FINANCING ACTIVITIES Proceeds from borrowings 5,600,000 16,500,000 5,600,000 29,000,000 87,840,000 Proceeds from indirect participation interest -- 7,150,000 3,235,000 7,150,000 19,535,000 Other net advances (to) related party (note 3) (211,250) (200,209) (422,500) (565,861) 900,598 Proceeds from issue of common shares 30,000 7,394,719 90,125 16,197,513 124,717,655 ------------ ------------ ------------ ------------ ------------ 5,418,750 30,844,510 8,502,625 51,781,652 232,993,253 ------------ ------------ ------------ ------------ ------------ Increase in cash and cash equivalents 11,327,736 750,894 11,850,023 3,579,154 21,163,705
INTEROIL CORPORATION (INTEROIL CORPORATION LOGO) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Expressed in United States dollars)
UNAUDITED UNAUDITED AUDITED QUARTER ENDED SIX MONTHS ENDED YEAR ENDED ---------------------------- ---------------------------- ----------- JUNE 30 JUNE 30 JUNE 30 JUNE 30 DECEMBER 31 2004 2003 2004 2003 2003 $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- SHARE CAPITAL At beginning of period 157,677,259 103,017,992 157,449,200 94,120,609 94,120,609 Adjustment to reflect change in accounting for employee stock options (note 1) -- -- 92,434 -- -- Issue of capital stock 7,387,900 7,345,924 7,523,525 16,243,307 63,328,591 ----------- ----------- ----------- ----------- ----------- At end of period 165,065,159 110,363,916 165,065,159 110,363,916 157,449,200 ----------- ----------- ----------- ----------- ----------- ADDITIONAL PAID IN CAPITAL At beginning of period 1,267,870 769,964 540,222 769,964 769,964 Adjustment to reflect change in accounting for employee stock options (note 1) -- -- 645,216 -- -- Stock compensation 479,363 (150,434) 561,795 (150,434) (229,742) ----------- ----------- ----------- ----------- ----------- At end of period 1,747,233 619,530 1,747,233 619,530 540,222 ----------- ----------- ----------- ----------- ----------- DEFERRED FOREIGN EXCHANGE At beginning of period -- -- -- -- -- Movement for period (note 1) 49,715 -- 49,715 -- -- ----------- ----------- ----------- ----------- ----------- At end of period 49,715 -- 49,715 -- -- ----------- ----------- ----------- ----------- ----------- DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE At beginning of period (13,413,978) (6,827,174) (11,031,402) (7,513,833) (7,513,833) Adjustment to reflect change in accounting for employee stock options (note 1) -- -- (737,650) -- -- Net (loss) for period (2,522,278) (1,204,678) (4,167,205) (518,019) (3,517,569) ----------- ----------- ----------- ----------- ----------- At end of period (15,936,256) (8,031,852) (15,936,257) (8,031,852) (11,031,402) ----------- ----------- ----------- ----------- ----------- SHAREHOLDERS' EQUITY AT END OF PERIOD 150,925,851 102,951,594 150,925,850 102,951,594 146,958,020 =========== =========== =========== =========== ===========
INTEROIL CORPORATION (INTEROIL CORPORATION LOGO) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in United States dollars) InterOil Corporation's (the "Company" or "InterOil") primary business interests are the development of an oil refinery (the "Project"), Oil and Gas Exploration in Papua New Guinea ("PNG") and distribution of refined petroleum products in PNG. 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The unaudited consolidated financial statements for the quarter ended June 30, 2004 and the six months ended June 30, 2004 have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of the financial data is based on accounting policies and practices consistent with those used in the preparation of the audited annual consolidated financial statements for the year ended December 31, 2003. These unaudited consolidated financial statements should be read together with the audited annual consolidated financial statements and the accompanying notes included in the Company's 2003 Annual Report except for the following; Stock-based compensation - Prior to January 1, 2004, the Company applied the fair value based method of accounting prescribed by CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, only to employee stock appreciation rights, and applied the settlement method of accounting to employee stock options. Under the settlement method, any consideration paid by employees on the exercise of stock options or purchase of stock is credited to share capital and no compensation expense was recognised. The CICA Accounting Standards Board has amended CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, to require entities to account for employee stock options using the fair value based method, beginning January 1, 2004. Under the fair value based method, compensation expense is measured at fair value at the date of grant and is expensed over the award's vesting period. In accordance with one of the transitional options permitted under amended Section 3870, the Company has retroactively applied the fair value based method to all employee stock options granted on or after January 1, 2002, without restatement to prior periods. The effect of retroactively adopting the fair value based method, without restatement, is to increase the opening accumulated deficit by $737,650, increase additional paid up capital by $645,216 and increase share capital by $92,434. Inventory valuation - Crude oil and refined petroleum products are valued at the lower of cost, on a first-in, first-out basis, or net realisable value. Cost consists of raw material, labour, direct overheads and transportation. Foreign currency - For subsidiaries considered to be self-sustaining foreign operations, all assets and liabilities denominated in foreign currency are translated to United States dollars at exchange rates in effect at the balance date and all revenue and expense items are translated at the rates of exchange in effect at the time of the transactions. Foreign exchange gains or losses are reported as a seperate component of shareholders' equity. For subsidiaries considered to be an integrated foreign operation, monetary items denominated in foreign currency are translated to United States dollars at exchange rates in effect at balance date and non-monetary items are translated at rates of exchange in effect when the assets were acquired or obligations incurred. Revenue and expense items are translated at the rates of exchange in effect at the time of the transactions. Foreign exchange gains or losses are included in income. Deferred financing costs - Deferred financing costs represent the unamortised cost of fees incurred to secure long-term borrowings. Amortisation is provided on a straight-line basis, over the term of the related debt and is included in administrative and general expenses for the period. Receivables - The collectability of debts is assessed at reporting date and specific provision is made for any doubtful accounts. 2. SUPPLEMENTAL CASH FLOW INFORMATION
QUARTER ENDED SIX MONTHS ENDED ----------------------- ----------------------- JUN-30 JUN-30 JUN-30 JUN-30 2004 2003 2004 2003 $ $ $ $ --------- --------- --------- --------- Cash paid during the period for: Interest -- 1,656,451 -- 1,656,451 Income taxes 8,588 6,731 17,177 13,462 Interest received during the period for non-cash investing and financing activities: 123,083 -- 275,263 3,881 Write off of Oil and Gas exploration retention licences 1,488,127 -- 1,488,127 -- Conversion of indirect participation into share capital 7,725,500 -- 7,725,500 --
3. RELATED PARTIES Amounts due to related parties of $1,056,251 (December 31, 2003 - $1,478,751) represents monies owed to Petroleum Independent and Exploration Corporation (PIE) which acts as a sponsor of the Company's oil refinery project. PIE advanced a loan of $2,900,000 to the InterOil Group in the quarter ended March 31, 2002 and the Company has repaid $1,843,750 of this loan as at June 30, 2004. This loan has interest charged at a rate of 5.75% per annum. During the six months ended 30 June 2004, $75,000 was accrued for the sponsor's (PIE) legal, accounting and reporting costs. 4. INVENTORIES
JUN-30 DEC-31 JUN-30 2004 2003 2003 $ $ $ ---------- ---------- ---------- Midstream (crude oil feedstock) 23,476,702 -- -- Downstream (refined petroleum product) 5,826,582 -- -- ---------- ---------- ---------- 29,303,284 -- -- ========== ========== ==========
5. PLANT AND EQUIPMENT The Company is considered to be in the construction and pre-operating stage of development of an oil refinery in Papua New Guinea. Project costs, net of any recoveries, incurred during this pre-operating stage are being capitalised as part of plant and equipment (refinery assets). Administrative and general costs are expensed as incurred. Plant and equipment are recorded at cost. Development costs and the costs of acquiring or constructing support facilities and equipment are capitalised. Interest costs relating to the construction and pre-operating stage of the development project prior to commencement of commercial operations are capitalised as part of the cost of such plant and equipment (refinery assets). Plant and equipment is depreciated over their useful lives. Depreciation of refinery assets will commence on the date of achieving commercial operations. Plant and equipment by business stream:
JUN-30 DEC-31 JUN-30 2004 2003 2003 $ $ $ ----------- ----------- ----------- Upstream assets 5,644,660 5,650,817 5,656,827 Refinery assets 210,336,101 196,244,045 164,624,057 Downstream assets 3,629,235 321,817 287,151 Corporate assets 102,851 92,786 95,010 ----------- ----------- ----------- 219,712,847 202,309,465 170,663,045 =========== =========== ===========
6. OIL AND GAS PROPERTIES The Company follows the successful efforts method of accounting for oil and gas exploration and development activities. Direct acquisition costs of development properties as well as geological and geophysical costs associated with these properties are capitalised. Costs of development and exploratory wells that result in additions to proven reserves are also capitalised. Costs associated with Retention Licences PRL 4 and PRL 5 have been written off in the current quarter. This was due to the non-existence of gas contracts and immediate development plans for these licences.
JUN-30 DEC-31 JUN-30 2004 2003 2003 $ $ $ ---------- ---------- ---------- PPL 238, at cost 37,778,860 21,192,055 6,491,989 Other exploration properties at cost 911,945 1,825,960 2,997,652 ---------- ---------- ---------- 38,690,805 23,018,015 9,489,641 ========== ========== ==========
7. SECURED LOAN On June 12, 2001, the Company entered into a loan agreement with the Overseas Private Investment Corporation (OPIC), an agency of the US Government, to secure a project financing facility of $85,000,000. The facility is fully drawn down at June 30, 2004. The loan is secured over the assets of the refinery project. The loan expires June 30, 2014 and half yearly repayments of $4,500,000 were to commence on June 30, 2004. The loan agreement has been amended such that repayments will now commence on June 30, 2005. 8. UNSECURED LOAN On June 24, 2004, the Company entered into a loan agreement with Clarion Finanz AG for $3,000,000. Interest is calculated at 12% per annum calculated daily. The loan expires on June 24, 2005 and repayments are due to commence in July 2004. On June 29, 2004 the Company entered into an agreement with Global Asset Management LLC. A promissory note for $600,000 has been issued and is due to be repaid on or before August 31, 2004. 9. INDIRECT PARTICIPATION INTEREST In March 2004, the Company received an additional $3,235,000 from PNG Drilling Ventures Limited ("PNGDV") relating to PNGDV's indirect interest in the Company's phase 1 exploration program. In January 2004, $75,500 of the PNGDV indirect participation interest was converted to 5,000 common shares of InterOil Corporation in accordance with the indirect participation interest agreement. The balance of the indirect participation interest at June 30, 2004 is $12,109,500. On May 17, 2004 PNG Energy Investors converted their $7,350,000 indirect participation interest to 683,140 common shares of InterOil Corporation. 10. NON-CONTROLLING INTEREST At June 30, 2004, a subsidiary, S .P. InterOil LDC, holds 98.69% (December 31, 2003 - 98.66%) of the non-voting participating shares issued from E. P. InterOil Limited. 11. SHARE CAPITAL InterOil Corporation has issued shares as at June 30, 2004 of 25,519,601 (December 31, 2003 - 24,815,961, June 30, 2003 - 22,488,683). The total number of shares issued in the period to June 30, 2004 is 703,640 (June 30, 2003 - 1,902,740, year ended December 31, 2003 - 4,230,018). InterOil Corporation securities trade on the Australian Stock Exchange as Chess Depository Interests (CDIs) on the basis of 10 CDIs to one common share. They also trade on the Port Moresby Stock Exchange and the Toronto Stock Exchange in Canada as common shares. 12. STOCK OPTIONS As at June 30, 2004, InterOil Corporation has 1,482,985 (December 31, 2003 - 1,363,265) stock options outstanding. During the six months to June 30, 2004, a total of 174,260 options were issued. 13. ACQUISITION OF SUBSIDIARY On March 1, 2004, InterOil, through its wholly owned subsidiary, S.P.I. Distribution Limited acquired 100% of the outstanding common shares of BP Papua New Guinea Limited which was subsequently renamed InterOil Products Limited ("IPL"). InterOil purchased IPL in order to enhance its downstream position in Papua New Guinea as IPL is a distributor of refined petroleum products in Papua New Guinea. The results of IPL's operations have been included in the consolidated financial statements since April 28, 2004, the date control of IPL's shares was transferred to InterOil. Under the agreement, InterOil Corporation was entitled to the profit of IPL from March 1, 2004. The profit earned after tax between March 1, 2004 and April 28, 2004 of $1,243,746 was recognised as a reduction in the acquisition cost. The aggregate purchase price is $13,226,854, including a service agreement for $1,000,000 related to the purchase. A deposit of $1,000,000 of the purchase price has been paid. The remaining $12,226,854 (discounted amount $11,854,110) is payable on March 1, 2005 and is included in current liabilities in the financial statements. The following table summarises the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.
$ ----------- Current assets 22,474,255 Future income tax benefit 640,284 Property, plant and equipment 3,007,312 ----------- Total assets acquired 26,121,851 Current liabilities (12,894,997) ----------- Net assets acquired 13,226,854 ===========
14. WORKING CAPITAL FACILITY The Company has secured a $60,000,000 working capital facility to finance the ongoing purchase of crude oil for the refinery. Under the facility the Company has access to documentary letters of credit, stand by letters of credit, short term advances and advances on merchandise. The interest rate applicable to any advance under the short term loans is 2.5% per annum above LIBOR. The facility is available for twelve months to June 2005. The facility is secured by sales contracts, purchase contracts, certain cash accounts associated with the refinery, all crude and refined products of the refinery. At June 30, 2004, the Company had letters of credit outstanding for $25,960,000. Cash totalling $11,536,332 was being maintained as a security margin for the facility. 15. SUBSEQUENT EVENTS In July 2004, $1,359,200 was received by the Company from a director for the exercise of stock options. In July 2004, an additional amount of $1,500,000 was drawn down on the unsecured loan with Clarion Finanz AG. 16. SEGMENT REPORTING Management has determined that the Company operates in three key segments; Upstream - exploration and production, Midstream - refinery operations, Downstream - refined product distribution, in Papua New Guinea. The remaining amounts related to Corporate offices. The following tables present the Company's results by segment. Quarter ended June 30, 2004 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- External revenues -- -- 12,586,137 -- 12,586,137 ----------- Segment contributions (1,878,780) (219,983) 1,223,029 (1,244,184) (2,119,918) ----------- Reconciliation to net earnings (loss): Segment contributions (2,119,918) Investment income 123,956 Other (19,560) Non controlling interest 2,065 Income tax expense (508,821) ----------- Net earnings (loss) (2,522,278) ===========
Quarter ended June 30, 2003 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- External revenues -- -- -- -- -- ----------- Segment contributions (311,917) (269,761) (224) (635,030) (1,216,932) ----------- Reconciliation to net earnings (loss): Segment contributions (1,216,932) Investment income 19,861 Other 7,856 Non controlling interest 534 Income tax expense (15,997) ----------- Net earnings (loss) (1,204,678) ===========
Six months ended June 30, 2004 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- External revenues -- -- 12,586,137 -- 12,586,137 ----------- Segment contributions (2,370,537) (310,606) 1,190,675 (2,430,340) (3,920,808) ----------- Reconciliation to net earnings (loss): Segment contributions (3,920,808) Investment income 175,254 Other 84,738 Non controlling interest 2,432 Income tax expense (508,821) ----------- Net earnings (loss) (4,167,205) ===========
Six months ended June 30, 2003 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- External revenues -- -- -- -- -- ----------- Segment contributions (472,482) 1,005,555 (1,298) (1,069,105) (537,330) ----------- Reconciliation to net earnings (loss): Segment contributions (537,330) Investment income 34,110 Other 7,856 Non controlling interest 1,046 Income tax expense (23,701) ----------- Net earnings (loss) (518,019) ===========
The following tables present the Company's assets by segment. June 30, 2004 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- Total assets 45,884,246 234,396,546 25,441,417 11,764,494 317,486,703 =========== =========== =========== =========== ===========
June 30, 2003 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- ----------- ----------- ----------- ----------- Total assets 17,534,025 169,857,543 287,151 3,777,784 191,456,503 =========== =========== =========== =========== ===========
EX-99.9 6 h19854exv99w9.txt UNAUDITED COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS EXHIBIT 9 [KPMG LOGO] INDEPENDENT REVIEW REPORT TO THE MEMBERS OF INTEROIL CORPORATION SCOPE We have reviewed the financial report of InterOil Corporation for the half-year ended 30 June 2004, denominated in US dollars, consisting of the statement of operations, balance sheet, statement of cash flows, statement of shareholders' equity accompanying notes and the directors' declaration. The financial report includes the consolidated financial statements of the consolidated entity, comprising the Company and the entities it controlled at the end of the half-year or from time to time during the half-year. The Company's directors are responsible for the financial report. We have performed the independent review of the financial report in order to state whether, on the basis of procedures described, anything has come to our attention that would indicate that the financial report is not presented fairly in accordance with generally accepted accounting standards in Canada so as to present a view which is consistent with our understanding of the consolidated entity's financial position, and in order for the Company to lodge the financial report with the Australian Stock Exchange. Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements. The review is limited primarily to inquiries of company personnel and analytical procedures applied to the financial data. Our review has not involved a study and evaluation of internal accounting controls, tests of accounting records or tests of responses to inquiries by obtaining corroborative evidence from inspection, observation or confirmation. The procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. STATEMENT Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of InterOil Corporation does not present fairly the financial position of the consolidated entity as at 30 June 2004 and its performance for the half-year at that date in accordance with general accepted accounting principles in Canada. /s/ KPMG - ------------------- KPMG /s/Trent van Veen - ----------------- Trent van Veen Partner Signed at Sydney this the 13th day of August 2004 [LOGO] INTEROIL CORPORATION [INTEROIL LOGO] ARBN: 094 136 884 Consolidated Financial Statements (Unaudited, Expressed in United States dollars) Six months ended June 30, 2004 and 2003 INTEROIL CORPORATION APPENDIX 4D HALF YEAR REPORT [INTEROIL LOGO] PERIOD ENDING JUNE 30, 2004 RESULTS FOR ANNOUNCEMENT TO THE MARKET ARBN: 094 136 884 RESULTS
%Up/ JUNE 2004 JUNE 2003 (DOWN) $US'000 $US'000 Revenues from ordinary activities >1000% 12,846 42 (Loss) from ordinary activities after tax attributable to members 704% (4,167) (518) Net (loss) for the period attributable to members 704% (4,167) (518) Earnings per common share (0.17) (0.02) Earnings per CDI (0.02) (0.00)
DIVIDENDS The company does not propose to pay dividends in the current period. There were no dividends paid in the previous corresponding period. NET TANGIBLE ASSETS PER SECURITY
$US $US Net tangible asset backing per common share 6.17 4.87 Net tangible asset backing over CDI* 0.62 0.49
*10 Chess Depository Instruments (CDIs) represent one common share. CONTROL OVER ENTITIES On March 1, 2004, InterOil Corporation, through its wholly owned subsidiary S.P.I. Distribution Limited acquired 100% of the outstanding common shares of BP Papua New Guinea Limited which was subsequently renamed InterOil Products Limited ("IPL"). IPL is a distributor of refined petroleum products in Papua New Guinea. The results of IPL's operations have been included in the consolidated financial statements since April 28, 2004, the date that control of the acquired entity's shares was transferred to InterOil Corporation. Under the agreement, InterOil Corporation was entitled to the profit of IPL from March 1, 2004. The profit earned after tax between March 1, 2004 and April 28, 2004 of $1,243,746 was recognised as a reduction in the acquisition cost. This information is provided according to ASX Listing Rule 4.3A. The Appendix 4D and Financial Report for the half year ended June 30, 2004 should be read in conjunction with the Company's 2003 annual report. The Financial Statements have been prepared using Canadian Generally Accepted Accounting Principles (GAAP). The Financial Statements for the half year ended June 30, 2004 have been reviewed. INTEROIL CORPORATION CONSOLIDATED BALANCE SHEETS [INTEROIL LOGO] (Expressed United States dollars)
REVIEWED AUDITED REVIEWED JUNE 30 DECEMBER 31 JUNE 30 2004 2003 2003 $ $ $ ----------- ----------- ----------- ASSETS Current assets Cash and cash equivalents 21,163,705 9,313,682 6,867,693 Temporary investments 168,647 24,723,572 3,452,093 Trade receivables 7,127,714 - - Other receivables - 175,491 591,468 Other assets 129,064 311,093 Inventories (note 4) 29,303,284 - - Prepaid expenses 548,284 488,532 392,563 ----------- ----------- ----------- 58,440,698 35,012,370 11,303,817 Plant and equipment (note 5) 219,712,847 202,309,465 170,663,045 Oil and gas properties (note 6) 38,690,805 23,018,015 9,489,641 Future income tax benefit 642,353 - - ----------- ----------- ----------- 317,486,703 260,339,850 191,456,503 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued labilities Crude feedstock 23,476,702 - - Other 22,164,787 5,835,583 12,675,556 Deferred acquisition cost (note 13) 11,854,110 - - Due to related parties (note 3) 1,056,251 1,478,751 1,690,001 Unsecured loans (note 8) 3,600,000 - - Current portion of secured loan (note 7) 4,500,000 9,000,000 4,500,000 ----------- ----------- ----------- 66,651,850 16,314,334 18,865,557 Deferred financing costs 834,439 - - Secured loan (note 7) 80,500,000 74,000,000 55,500,000 Indirect participation interest (note 9) 12,109,500 16,600,000 7,650,000 ----------- ----------- ----------- 160,095,789 106,914,334 82,015,557 ----------- ----------- ----------- Non-controlling interest (note 10) 6,465,064 6,467,496 6,489,352 ----------- ----------- ----------- Shareholders' equity Share capital (note 11) 165,065,159 157,449,200 110,363,916 Additional paid in capital 1,747,233 540,222 619,530 Deferred foreign exchange 49,715 - - Accumulated deficit (15,936,257) (11,031,402) (8,031,852) ----------- ----------- ----------- 150,925,850 146,958,020 102,951,594 ----------- ----------- ----------- 317,486,703 260,339,850 191,456,503 =========== =========== ===========
See accompanying notes to the consolidated financial statements INTEROIL CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS [INTEROIL LOGO] (Expressed in United States dollars)
UNAUDITED REVIEWED QUARTER ENDED SIX MONTHS ENDED ------------------------- ------------------------ JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 $ $ $ $ ---------- -------- ---------- --------- REVENUES Sales and operating revenues 12,586,137 - 12,586,137 - interest 123,956 19,861 175,254 34,110 Other (19,560) 7,856 84,738 7,856 ---------- -------- ---------- --------- 12,690,533 27,717 12,846,129 41,966 ---------- -------- ---------- --------- EXPENSES Cost of sales and operating expenses 10,468,871 - 10,468,871 - Administrative and general expenses 2,399,751 315,045 3,620,684 1,376,333 Management fees for prior periods waived - - - (840,000) Exploration costs 1,485,828 - 1,491,623 - Legal and professional fees 236,927 133,362 829,054 302,356 Foreign exchange 114,678 252,937 96,713 (301,358) ---------- -------- ---------- --------- 14,706,055 701,344 16,506,945 537,330 ---------- -------- ---------- --------- (Loss) before income taxes and non-controlling interest (2,015,523) (673,627) (3,660,816) (495,364) income tax (expense) (508,821) (15,997) (508,821) (23,701) ---------- -------- ---------- --------- (Loss) before non-controlling interest (2,524,344) (689,624) (4,169,637) (519,065) Non-controlling interest 2,065 534 2,432 1,046 ---------- -------- ---------- --------- NET (LOSS) (2,522,279) (689,090) (4,167,205) (518,019) ---------- -------- ---------- --------- BASIC (LOSS) PER SHARE (0.10) (0.03) (0.17) (0.02) DILUTED (LOSS) PER SHARE (0.10) (0.03) (0.17) (0.02)
See accompanying notes to the consolidated financial statements INTEROIL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS [INTEROIL LOGO] (Expressed in United States dollars)
UNAUDITED REVIEWED QUARTER ENDED SIX MONTHS ENDED ------------------------- -------------------------- JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 $ $ $ $ ---------- ----------- ----------- ----------- Cash flows provided by (used in) OPERATING ACTIVITIES Net (loss) (2,522,278) (689,090) (4,167,205) (518,019) Non-controlling interest (2,065) (534) (2,432) (1,046) Adjustments for non-cash transactions 2,107,456 252,937 2,199,651 - Change in non-cash operating working capital 1,454,524 (106,143) 1,200,013 (1,280,373) ---------- ----------- ---------- ----------- 1,037,637 (542,830) (769,973) (1,799,438) ---------- ----------- ---------- ----------- INVESTING ACTIVITIES Expenditure on oil and gas properties (8,134,953) (2,705,138) (16,912,183) (4,177,782) Expenditure on Capital assets (5,701,042) (27,399,860) (8,688,000) (46,189,979) Funds received on sale of assets - - 405,353 - Redemption of cash on short-term investments 13,950,068 1,069,800 24,554,925 3,964,701 Acquisition of InterOil Products Limited net of cash received 4,757,276 - 4,757,276 - ---------- ----------- ---------- ----------- 4,871,349 (29,035,198) 4,117,371 (46,403,060) ---------- ----------- ---------- ----------- FINANCING ACTIVITIES Proceeds from borrowings 5,600,000 16,500,000 6,600,000 29,000,000 Proceeds from indirect participation interest - 7,150,000 3,235,000 7,150,000 Other net advances (to) related party (note 3) (211,250) (200,209) (422,500) (565,861) Proceeds from issue of common shares 30,000 6,879,131 90,125 16,197,513 ---------- ----------- ---------- ----------- 5,418,750 30,328,922 8,502,625 51,781,652 ---------- ----------- ---------- ----------- Increase in cash and cash equivalents 11,327,736 750,894 11,850,023 3,579,154 Cash and cash equivalents, beginning of period 9,835,969 6,116,799 9,313,682 3,288,539 ---------- ----------- ---------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD 21,163,705 6,867,693 21,163,705 6,867,693 ========= =========== ========== ===========
See accompanying notes to the consolidated financial statements. INTEROIL CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY [INTEROIL LOGO] (Expressed in United States dollars)
REVIEWED AUDITED REVIEWED ----------- ----------- ----------- JUNE 30 DECEMBER 31 JUNE 30 2004 2003 2003 $ $ $ ----------- ----------- ----------- SHARE CAPITAL At beginning of year as previously reported 157,449,200 94,120,609 94,120,609 Adjustment to reflect change in accounting for employee stock options (note 1) 92,434 - - Issue of capital stock 7,523,525 63,328,591 16,243,307 ----------- ----------- ----------- At end of period 165,065,159 157,449,200 110,363,916 ----------- ----------- ----------- ADDITIONAL PAID IN CAPITAL At beginning of year as previously reported 540,222 769,964 769,964 Adjustment to reflect change in accounting for employee stock options (note 1) 645,216 - - Stock compensation 561,795 (229,742) (150,434) ----------- ----------- ----------- At end of period 1,747,233 540,222 619,530 ----------- ----------- ----------- DEFERRED FOREIGN EXCHANGE At beginning of year - - - Movement for period (note 1) 49,715 - - ----------- ----------- ----------- At end of period 49,715 ----------- ----------- ----------- ACCUMULATED DEFICIT At beginning of year (11,031,402) (7,513,833) (7,513,833) Adjustment to reflect change in accounting for employee stock options (note 1) (737,650) - - Net (loss) for period (4,167,205) (3,517,569) (518,019) ----------- ----------- ----------- At end of period (15,936,257) (11,031,402) (8,031,852) ----------- ----------- ----------- SHAREHOLDERS' EQUITY AT END OF PERIOD 150,925,850 146,958,020 102,951,594 =========== =========== ===========
See accompanying notes to the consolidated financial statements INTEROIL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited Expressed in United States dollars) [INTEROIL LOGO] InterOil Corporation (the "Company" or InterOil) primary business interests and the development of an oil refinery (the "Project"), Oil and Gas Exploration in Papua New Guinea ("PNG") and distribution of refined petroleum products in PNG. 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The unaudited consolidated financial statements for the six months ended June 30, 2004 have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of the financial data is based on accounting policies and practices consistent with those used in the preparation of the audited annual consolidated financial statements for the year ended December 31, 2003. These unaudited consolidated financial statements should be read together with the audited annual consolidated financial statements and the accompanying notes included in the Company's 2003 Annual Report except for the following: Stock-based compensation-Prior to January 1, 2004, the Company applied the fair value based method of accounting prescribed by CICA Handbook Section 3870. Stock-based Compensation and Other Stock-based Payments, only to employee stock appreciation rights, and applied the settlement method of accounting to employee stock options. Under the settlement method, any consideration paid by employees on the exercise of stock options or purchase of stock is credited to share capital and no compensation expense was recognised. The CICA Accounting Standards Board has amended CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, to require entities to account for employee stock options using the fair value based method, beginning January 1, 2004. Under the fair value based method, compensation expense is measured at fair value at the date of grant and is expensed over the award's vesting period. In accordance with one of the transitional options permitted under amended Section 3870, the Company has retroactively applied the fair value based method to all employee stock options granted on or after January 1, 2002, without restatement to prior periods. The effect of retroactively adopting the fair value based method, without restatement is to increase the opening accumulated deficit by $737,650, increase additional paid up capital by $645,216 and increase share capital by $ 92,434. Inventory valuation - Crude oil and refined petroleum products are valued at the lower of cost, on a first-in, first-out basis, or net realisable value. Cost consists of raw material, labour, direct overheads and transportation. Foreign currency - For subsidiaries considered to be self-sustaining foreign operations, all assets and liabilities denominated in foreign currency are translated to United States dollars at exchange rates in effect at the balance date and all revenue and expense items are translated at the rates of exchange in effect at the time of the transactions. Foreign exchange gains or losses are reported as a separate component of shareholder's equity. For subsidiaries considered to be an integrated foreign operation, monetary items denominated in foreign currency are translated to United States dollars at exchange rates in effect at balance date and non-monetary items are translated at rates of exchange in effect when the assets were acquired or obligations incurred. Revenue and expense items are translated at the rates of exchange in effect at the time of the transactions. Foreign exchange gains or losses are included in income. Deferred financing costs - Deferred financing costs represent the unamortised cost of fees incurred to secure long-term borrowings. Amortisation is provided on a straight-line basis, over the term of the related debt and is included in administrative and general expenses for the period. Receivables - The collectability of debts is assessed at reporting date and specific provision is made for any doubtful accounts. 2 SUPPLEMENTAL CASH FLOW INFORMATION
JUN-30 JUN-30 2004 2003 $ $ --------- --------- Cash paid during the Period for: Interest - 1,656,451 Income taxes 17,177 13,462 Interest received during the period for non-cash investing and financing activities: 275,263 3,881 Write off Oil and Gas exploration retention licences 1,488,127 Conversion of indirect participation into share capital 7,725,500
3. RELATED PARTIES Amounts due to related parties of $1,056,251 (December 31, 2003- $1,478,751) represents monies owed to Petroleum Independent and Exploration Corporation (PIE) which acts as a sponsor of the Company's Oil refinery project. PIE advanced a loan of $2,900,000 to the InterOil Group in the quarter ended March 31, 2002 and the Company has repaid $1,843,750 of this loan as at June 30, 2004. This loan has interest charged at a rate of 5.75% per annum. During the period, $75,000 was accrued for the sponsor's (PIE) legal, accounting and reporting costs. 4. INVENTORIES
JUN-30 DEC-31 JUN-30 2004 2003 2003 $ $ $ ------- ------ ------- Midstream (crude oil feedstock) 23,476,702 - - Downstream (refined petroleum product) 5,826,582 - - ---------- ------ ------- 29,303,284 - - ========== ====== =======
5. PLANT AND EQUIPMENT The Company is considered to be in the construction and pre-operating stage of development of an oil refinery in Papua New Guinea. Project costs, net of any recoveries, incurred during this pre-operating stage are being capitalised as part of plant and equipment (refinery assets). Administrative and general costs are expensed as incurred. Plant and equipment are recorded at cost. Development costs and the costs of acquiring or constructing support facilities and equipment are capitalised. Interest costs relating to the construction and pre-operating stage of the development project prior to commencement of commercial operations are capitalised as part of the cost of such plant and equipment (refinery assets). Plant and equipment is depreciated over their useful lives. Depreciation of refinery assets will commence on the date of achieving commercial operations. Plant and equipment by business stream:
JUN-30 DEC-31 JUN-30 2004 2003 2003 $ $ $ ----------- ----------- ----------- Upstream assets 5,644,660 5,650,817 5,656,827 Refinery assets 210,336,101 196,244,045 164,624,057 Downstream assets 3,629,235 321,817 287,151 Corporate assets 102,851 92,786 95,010 ----------- ----------- ----------- 219,712,847 202,309,465 170,663,045 =========== =========== ===========
[INTEROIL CORPORATION LOGO] INTEROIL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, Expressed in United States dollars) 6. OIL GAS PROPERTIES The Company follows the successful efforts method of accounting for oil and gas exploration and development activities. Direct acquisition costs of development properties as well as geological and geophysical costs associated with these properties are capitalised. Costs of development and exploratory wells that result in additions to proven reserves are also capitalised. Costs associated with Retention Licences PRL 4 and PRL 5 have been written off in the current quarter. This was due to the non-existence of gas contracts and no immediate development plans for these licences.
JUN-30 DEC-31 JUN-30 2004 2003 2003 $ $ $ ---------- ---------- --------- PPL 238 at cost 37,778,860 21,192,055 6,491,989 Other exploration properties at cost 911,945 1,825,960 2,997,652 ---------- ---------- --------- 38,690,805 23,018,015 9,489,641 ========== ========== =========
7. SECURED LOAN On June 12, 2001 the Company entered into a loan agreement with the Overseas Private Investment Corporation (OPIC), an agency of the US Government, to secure a project financing facility of $85,000,000. The facility is fully drawn down at June 30, 2004. The loan is secured over the assets of the refinery project. The loan expires June 30, 2014 and half yearly repayments of $4,500,000 were to commence on June 30, 2004. The loan agreement has been amended such that repayments will now commence on June 30, 2005. 8. UNSECURED LOAN On June 24, 2004 the company entered into a loan agreement with Clarion Finanz AG for $3,000,000 interest is calculated at 12% per annum calculated daily. The loan expires on June 24, 2005 and repayments are due to commence in July 2004. On June 29, 2004 the Company entered into an agreement with Global Asset Management LLC. A promissory note for $600,000 has been issued and is due to be repaid on or before August 31, 2004. 9. INDIRECT PARTICIPATION INTEREST In March 2004, the Company received an additional $3,235,000 from PNG Drilling Ventures Limited ("PNGDV") relating to PNGDV's indirect interest in the Company's phase 1 exploration program in January 2004, $75,500 of the PNGDV indirect participation interest was converted to 5,000 common shares of InterOil Corporation in accordance with the indirect participation interest agreement. The balance of the indirect participation interest at June 30, 2004 is $12,109,500. On May 17, 2004 PNG Energy Investors converted their $7,350,000 indirect participation interest to 683,140 common shares of InterOil Corporation. 10. NON-CONTROLLING INTEREST At June 30, 2004, a subsidiary S.P. InterOil LDC, holds 98.69% (December 31, 2003 - 98.66%) of the non-voting participating shares issued from E.P. InterOil Limited. 11. SHARE CAPITAL InterOil Corporation has issued shares as at June 30, 2004 of 25,519,601 (December 31, 2003 - 24,815,961). The total number of shares issued in the period to June 30, 2004 is 703,640 (June 30, 2003 - 1,902,740). The weighted average number of shares used in the earnings per share calculation is 24,938,621 (2003 - 22,488,683) InterOil Corporation securities trade on the Australian Stock Exchange as chess Depository interests (CDIs) on the basis of 10 CDIs to one common share. They also trade on the port Moresby Stock Exchange and the Toronto Stock Exchange in Canada as Common Shares. 12. STOCK OPTIONS As at June 30, 2004 InterOil Corporation has 1,482,985 (December 31, 2003 - 1,363,265) stock options outstanding. During the six months to June 30, 2004 a total of 174,260 options were issued. 13. ACQUISITION OF SUBSIDIARY On March 1, 2004, InterOil, through its wholly owned subsidiary, S.P.I. Distribution Limited acquired 100% of the outstanding common shares of BP Papua New Guinea Limited which was subsequently renamed InterOil Products Limited ("IPL"). IPL is a distributor of refined petroleum products in Papua New Guinea. The results of IPL's operations have been included in the consolidated financial statements since April 28, 2004, the data control of IPL's shares was transferred to InterOil. Under the agreement, InterOil Corporation was entitled to the profit of IPL from March 1, 2004. The profit earned after tax between March 1, 2004 and April 28, 2004 of $1,243,746 was recognised as a reduction in the acquisition cost. The aggregate purchase price is $13,226,854, including a service agreement for $1,000,000 related to the purchase. A deposit of $1,000,000 of the purchase price has been paid. The remaining $12,226,854 (discounted amount $11,854,110) is payable on March 1, 2005 and is included in current liabilities in the financial statements. The following table summarises the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.
$ ----------- Current assets 22,474,255 Future income tax benefit 640,284 Property, plant and equipment 3,007,312 ----------- Total assets acquired 26,121,851 Current liabilities (12,894,997) Net assets acquired 13,226,854 -----------
14. WORKING CAPITAL FACILITY The Company has secured a $60,000,000 working capital facility to finance the ongoing purchase of crude oil for the refinery. Under the facility the Company has access to documentary letters of credit, stand by letters of credit, short term advances and advances on merchandise. The interest rate applicable to any advance under the short term loans is 2.5% per annum above LIBOR. The facility is available for twelve months to June 2005. The facility is secured by sales contracts, purchase contracts, certain cash accounts associated with the refinery all crude and refined products of the refinery. At June 30, 2004, the Company had letters or credit outstanding for $25,960,000. Cash totalling $11,536,332 was being maintained as a security margin for the facility. INTEROIL CORPORATION [INTEROIL LOGO] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited Expressed in United States dollars) 15. SUBSEQUENT EVENTS In July 2004, $1,359,200 was received by the Company from a Director for the exercise of stock options. In July 2004, an additional amount of $1,500,000 was drawn down on the unsecured Loan with Clanon Finanz AG. 16. SEGMENT REPORTING Management has determinated that the Company operates in three key segments. Upstream exploration and production, Midstream-refinery operations. Down stream refined product. The following tables present the company results by segment Quarter ended June 30, 2004 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ --------- --------- ---------- ----------- ----------- External revenues - 12,586,137 - 12,586,137 ---------- Segment contributions (1,878,780) (219,983) 1,223,029 (1,244,185) (2,119,919) ---------- Reconciliation to net earning (loss) Segment contributions (2,119,919) Investment income 123,956 Other (19,560) Non controlling interest 2,065 Income tax expense (508,821) ---------- Net earnings (loss) (2,522,279) ==========
Quarter ended June 30, 2003 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ --------- --------- ---------- --------- -------- External revenues - - - - - -------- Segment contributions (311,917) (269,761) (224) (119,442) (701,344) -------- Reconciliation to net earning (loss) Segment contributions (701,344) Investment income 19,861 Other 7,856 Non controlling interest 534 Income tax expense (15,997) -------- Net earnings (loss) (689,090) ========
Six months ended June 30, 2004 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ ----------- --------- ---------- ----------- ----------- External revenues - - 12,586,137 - 12,586,137 ---------- Segment contributions (2,370,537) (310,606) 1,190,675 (2,430,341) (3,920,809) ---------- Reconciliation to net earning (loss) Segment contributions (3,920,809) Investment income 175,254 Other 84,738 Non controlling interest 2,432 Income tax expense (508,821) ---------- Net earnings (loss) (4,167,206) ==========
Six months ended June 30, 2003 (unaudited)
UPSTREAM MIDSTREAM DOWNSTREAM OTHER TOTAL $ $ $ $ $ --------- ----------- ---------- ----------- --------- External revenues - - - - - -------- Segment contributions (472,482) (1,005,555) (1,298) (1,069,105) (537,330) -------- Reconciliation to net earning (loss) Segment contributions (537,330) Investment income 34,110 Other 7,856 Non controlling interest 1,046 Income tax expense (23,701) -------- Net earnings (loss) (518,019) ========
INTEROIL CORPORATION DIRECTORS' CERTIFICATE [INTEROIL LOGO] The directors of the Company have made reasonable enquiries to ensure that there is no material statement in this document that is misleading and to ensure that there is no material omission from this document. The Board reports, as at 13 August 2004, after due inquiry by them, that they have not become aware of any circumstances that in their opinion materially affect or will materially affect the assets and liabilities, financial position, profits and losses or prospects of the Company /s/ Phil E Mulacek ------------------------------------- Phil E Mulacek Chairman, on behalf of the Board of Directors InterOil Corporation 26025 1-45 North, Suite 420 PO Box 8727 The Woodlands, TX 77387-8727, USA Telephone 281 292 1800 Facsimile: 281 292 0888 Web: www.interoil.com EX-99.12 7 h19854exv99w12.txt MATERIAL CHANGE REPORT DATED 6/17/2004 EXHIBIT 12 MATERIAL CHANGE REPORT PURSUANT TO NATIONAL INSTRUMENT 51-102 1. NAME AND ADDRESS OF COMPANY InterOil Corporation ("InterOil") Suite 2, Level 2 Orchid PLAZA 79-88 Abbott St. Cairns, Queensland 4870 Australia 2. DATE OF MATERIAL CHANGE June 15, 2004 3. NEWS RELEASE InterOil filed a news release on SEDAR on June 15, 2004. A copy of the news release is attached hereto as Appendix "A". 4. SUMMARY OF MATERIAL CHANGE InterOil announced that the first shipment of crude oil for its refinery has arrived at InterOil's marine terminal located across the harbour from Port Moresby. 5 FULL DESCRIPTION OF MATERIAL CHANGE Please see the news release attached hereto as Appendix "A". 6. RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102 Not Applicable. 7. OMITTED INFORMATION None. 8. EXECUTIVE OFFICER Further Information regarding the matters described in this report may be obtained from Gary M. Duvall, Vice President, Corporate Development of InterOil, who is knowledgeable about the details of the material change and may be contacted at +1 281 292 1800. 9. DATED at Houston, Texas USA this 17 day of June, 2004. INTEROIL CORPORATION By: (Signed) "Gary M. Duvall" ------------------------------------- Name: Gary M. Duvall Title: Vice President - Corporate Development APPENDIX "A" NEWS RELEASE [INTEROIL LOGO] NEWS RELEASE INTEROIL ANNOUNCES ARRIVAL OF FIRST CRUDE OIL SHIPMENT FOR THE REFINERY JUNE 15, 2004 - PORT MORESBY, PAPUA NEW GUINEA - INTEROIL CORPORATION (IOL:TSX-V) (IOC:ASX/POMSoX), a Canadian company with operations in Papua New Guinea announced today that the first shipment of crude oil for its refinery has arrived at InterOil's marine terminal located across the harbour from Port Moresby. The InterOil refinery project has transformed the country from a crude oil exporting nation that had to import its refined products to a net exporter of refined products. The refinery has a name-plate capacity of 32,500 barrels per day and complies with the World Bank's environmental standards. It has been engineered to process "sweet" crude, low in sulphur, requiring few environmental costs in the refining process. Production from the refinery will accommodate the country's domestic requirements while also providing export product to the surrounding region. "We are extremely pleased with this event and proud of our achievements to date," said Mr Phil Mulacek, CEO of InterOil. "Commissioning can now begin with the introduction of crude oil into the processing units as we build towards full production." InterOil is focused on Papua New Guinea and the surrounding region, and is developing an integrated energy business consisting of an oil refinery, petroleum exploration, and retail assets. The majority of product from the refinery is secured by contracts with Shell Overseas Holdings Ltd. BP Singapore is the exclusive agent for all crude oil supplied to the refinery. In addition to the refinery and retail assets InterOil has commenced an extensive exploration program in Papua New Guinea. InterOil's common shares are traded in Canada in Canadian dollars on the TSX Venture Exchange under the symbol IOL, and on the Australian Stock Exchange, (ASX) in CHESS Depositary Interests (CDI), in Australian dollars under the symbol IOC which trade on a 10:1 basis to common shares. InterOil Corporation shares also trade on the Port Moresby Stock Exchange in Papua New Guinea in the local currency (KINA) under the symbol IOC. For more information please see the InterOil website at: www.interoil.com. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. FOR FURTHER INFORMATION:
NORTH AMERICA AUSTRALASIA - ------------------------ ------------------------ Gary M Duvall Lisa Elhot Anesti Dermedgoglou V.P., Corporate Development V.P., IR Counsel V.P., Investor Relations InterOil Corporation DRG&E InterOil Corporation gary.duvall@interoil.com lelliott@drg-e.com anesti@interoil.com Houston, TX USA Houston, TX USA Cairns, Qld Australia Phone: +1 281 292 1800 Phone: + 1 1713 529 6600 Phone: +617 4046 4600
CAUTIONARY STATEMENT This press release contains forward-looking statements. All statements, other than statements of historical facts, included in this release, including without limitation, statements regarding our drilling plans, business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words "believe", "expects", "anticipates", "intends", "estimates" or similar expressions or variations on such expressions are forward-looking statements. The Company can give no assurances that such forward-looking statements will prove to be correct. Risks and uncertainties include, but are not limited to, the existence of underground deposits of commercial quantities of oil and gas; fluctuations in prices for oil and gas production; curtailments or delays in development due to mechanical, operating, marketing or other problems, capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates, and from the number of exploration and development opportunities being greater or fewer than currently anticipated. The Company currently has no reserves as defined under Canadian National Instrument 51-101 reserve definitions. See the Company's filings with the Canadian securities regulators for additional risks and information about the Company's business. EX-99.13 8 h19854exv99w13.txt MATERIAL CHANGE REPORT DATED 7/7/2004 EXHIBIT 13 MATERIAL CHANGE REPORT PURSUANT TO NATIONAL INSTRUMENT 51-102 1. NAME AND ADDRESS OF COMPANY InterOil Corporation ("InterOil") Suite 2, Level 2 Orchid Plaza 79-88 Abbott St. Cairns, Queensland 4870 Australia 2. DATE OF MATERIAL CHANGE June 29, 2004 3. NEWS RELEASE InterOil filed news releases on SEDAR on June 29, 2004. 4. SUMMARY OF MATERIAL CHANGE InterOil announced that the Crude Distillation Unit at its refinery in Papua New Guinea had begun accepting feedstock on June 29, 2004. 5. FULL DESCRIPTION OF MATERIAL CHANGE InterOil announced that the Crude Distillation Unit at its refinery in Papua New Guinea had begun accepting feedstock on June 29, 2004. Refined product is expected to be produced several days after this introduction. 6. RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102 Not Applicable 7. OMITTED INFORMATION None 8. EXECUTIVE OFFICER Further information regarding the matters described in this report may be obtained from Gary M. Duvall, Vice President, Corporate Development of InterOil, who is knowledgeable about the details of the material change and may be contacted at +1 2812921800 9. DATED at Houston, Texas USA this 6th day of July, 2004. INTEROIL CORPORATION By: (Signed) "Gary Duvall" ----------------------------------- Name: Gary M. Duvall Title: Vice President [INTEROIL LOGO] NEWS RELEASE FIRST CRUDE OIL FED INTO THE REFINERY JUNE 29, 2004 - TORONTO, CANADA - INTEROIL CORPORATION (IOL:TSX-V) (IOC:ASX/POMSOX), a Canadian company with operations in Papua New Guinea announced the following, in conjunction to its Annual General Meeting. Refinery InterOil Corporation Chairman Mr. Phil Mulacek announced that at 21:00 Papua New Guinea time on Tuesday, June 29, 2004, the first crude oil was introduced into the refinery as part of the commissioning process. Mr. Mulacek said, "This event marks a key milestone for the Midstream business". He also announced that the second cargo of crude oil was received into storage at the refinery on Monday, June 28, 2004. InterOil is focused on Papua New Guinea and the surrounding region, and is developing an integrated energy business consisting of an oil refinery, petroleum exploration, and retail assets. The majority of the products from the refinery is secured by contracts with Shell. BP Singapore is the exclusive agent for all crude oil supplied to the refinery. In addition to the refinery and retail assets, InterOil has commenced an extensive exploration program in Papua New Guinea. This release may not be made in the United States. InterOil's common shares are traded in Canada in Canadian dollars on the TSX Venture Exchange under the symbol IOL, and on the Australian Stock Exchange, (ASX) in CHESS Depositary Interests (CDI) in Australian dollars under the symbol IOC which trade on a 10.1 basis to common shares. InterOil Corporation shares also trade on the Port Moresby Stock Exchange in Papua New Guinea in the local currency (KINA) under the symbol IOC. For more information please see the InterOil website at: www.interoil.com The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. FOR FURTHER INFORMATION:
NORTH AMERICA AUSTRALASIA ------------- ----------- Gary M Duvall Lisa Elliott Anesti Dermedgoglou V.P., Corporate Development V.P., IR Counsel V.P., Investor Relations InterOil Corporation DRG&E InterOil Corporation gary.duvall@interoil.com lelliott@drg-e.com anesti@interoil.com Houston, TX USA Houston, TX USA Cairns, Qld Australia Phone: +1 281 292 1800 Phone: +1 713 529 6600 Phone: +617 4046 4600
CAUTIONARY STATEMENT This press release contains forward-looking statements. All statements, other than statements of historical facts, included in this release, including without limitation, statements regarding our drilling plans, business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words "believe", "expects"', "anticipates", "intends", "estimates" or similar expressions or variations on such expressions are forward-looking statements. The Company can give no assurances that such forward-looking statements will prove to be correct. Risks and uncertainties include, but are not limited to, the existence of underground deposits of commercial quantities of oil and gas; fluctuations in prices for oil and gas production, curtailments or delays in development due to mechanical, operating, marketing or other problems, capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates; and from the number of exploration and development opportunities being greater or fewer than currently anticipated. The Company currently has no reserves as defined under Canadian National Instrument 51-101 reserve definitions. See the Company's filings with the Canadian securities regulators for additional risks and information about the Company's business. This press release is not an offer of securities for sale in the United States. Securities may be sold in the United States absent registration or pursuant to an exemption from registration. Any public offering of securities made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and will contain detailed information about the company and management, as well as financial statements. EX-99.14 9 h19854exv99w14.txt MATERIAL CHANGE REPORT DATED 8/27/2004 EXHIBIT 14 MATERIAL CHANGE REPORT PURSUANT TO NATIONAL INSTRUMENT 51-102 1. NAME AND ADDRESS OF COMPANY InterOil Corporation ("InterOil") Suit 2, Level 2 Orchid Plaza 79-88 Abbott St. Cairns, Queensland 4870 Australia 2. DATE OF MATERIAL CHANGE August 27, 2004 3. NEWS RELEASE InterOil filed a news release on SEDAR on August 27, 2004. A copy of the news release is attached hereto as Appendix "A". 4. SUMMARY OF MATERIAL CHANGE InterOil announced that it has entered into a definitive agreement for the private placement of US$30 million to US$40 million of senior convertible debentures to a limited number of institutional investors. 5. FULL DESCRIPTION OF MATERIAL CHANGE Please see the news release attached hereto as Appendix "A". 6. RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102 Not Applicable. 7. OMITTED INFORMATION None. 8. EXECUTIVE OFFICER Further information regarding the matters described in this report may be obtained from Gary M. Duvall, Vice President, Corporate Development of InterOil, who is knowledgeable about the details of the material change and may be contacted at +1 281 292 1800. 9. DATED at New York this 27th day of August, 2004. INTEROIL CORPORATION By: (Signed) "Gary M. Duvall" ------------------------- Name: Gary M. Duvall Title: V.P, Corporate Development APPENDIX A" NEWS RELEASE [INTEROIL LOGO] NEWS RELEASE NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW. INTEROIL CORPORATION ANNOUNCES PRIVATE PLACEMENT OF UP TO US$40 MILLION OF SENIOR CONVERTIBLE DEBENTURES AUGUST 27, 2004-TORONTO, CANADA - INTEROIL CORPORATION (IOL:TSX) (IOC:ASX/POMSoX), a Canadian company with operations in Papua New Guinea today announced that it has entered into a definitive agreement for the private placement of US$30 million to US$40 million of senior convertible debentures to a limited number of institutional investors. InterOil intends to use the net proceeds for additional working capital and general corporate purposes. The debentures have a final maturity date of five years and one day from issuance and bear interest at a rate of 8.875% per annum payable quarterly. The debentures are convertible at the investor's option at any time into common shares at a fixed conversion price of US$20.16 (C$26.45) per share. The definitive agreement provides that, starting 21 months from closing, the investors will have the option to request redemption of portions of the original principal amount from InterOil in equal amounts at stated dates until the maturity date. At InterOil's option, any cash payments contemplated under the debentures may be made in registered common shares issued at a ten percent discount to market. In addition, if after the one-year anniversary of closing, the trading price exceeds US$28.23 (C$37,03) per share, in certain circumstances, InterOil may require the investors to convert the debentures into common shares at the fixed conversion price. The debentures have certain customary covenants regarding, among other things, the debt that InterOil may incure. In an event of default under the debentures, InterOil may be required to repay any outstanding amounts plus accrued and unpaid interest, plus a 15% premium. In connection with the private placement, InterOil will issue to the investors five-year warrants to purchase 239,610 to 319,480 common shares depending on the final amount of the placement. The warrants will have an exercise price equal to US$21.91 (C$28.75). This private placement will be made under an exemption from the registration requirements of the United States Securities Act of 1933, as amended, and purchasers may not offer or sell the securities sold in the offering in the absence of an effective registration statement or exemption from registration requirements. As part of the terms of the private placement, InterOil has agreed to file a registration statement to cover the resale of the securities by the investors. This private placement is subject to all necessary regulatory approvals, including that of the Toronto Stock Exchange. This news release is issued pursuant to Rule 135(c) under the Securities Act of 1933 and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. This news release is not an offer of securities for sale in the United States Securities may not be offered or sold in the United States absent registration or pursuant to an exemption from registration. Any public offering of securities made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and will contain detailed information about the company and management, as well as financial statements. InterOil is building a vertically integrated energy company whose primary focus is Papua New Guinea and the surrounding region. Its assets comprise an oil refinery, upstream petroleum exploration licenses, and retail and commercial distribution assets. The majority of the refined products from InterOil's refinery is secured by off-take contracts with Shell and InterOil's wholly-owned subsidiary, InterOil Products Limited. BP Singapore is InterOil's agent for all crude oil supplied to the refinery. InterOil is also undertaking an extensive petroleum exploration program within its eight million acre license area located in Papua New Guinea. InterOil's common shares are traded in Canada in Canadian dollars on the Toronto Stock Exchange under the symbol IOL and on the Australian Stock Exchange, (ASX) in CHESS Depositary Interests (CDI), in Australian dollars under the symbol IOC which trade on a 10.1 basis to common shares. For more information please see the InterOil website at: www.interoil.com. FOR FURTHER INFORMATION: Gary M Duvall Anesti Dermedgoglou V.P., Corporate Development V.P., Investor Relations InterOil Corporation InterOil Corporation gary.duvall@interoil.com anesti@interoil.com Houston, TX USA Cairns,Qld Australia Phone: +1281 292 1800 Phone: +617 4046 4600 CAUTIONARY STATEMENTS This press release contains forward-looking statements. All statements, other than statements of historical facts, included in this release, including without limitation, statements regarding our drilling plans, business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words "believe", "expects", "anticipates", "intends", "estimates" or similar expressions or variations on such expressions are forward-looking statements. The Company can give no assurances that such forward-looking statements will prove to be correct. Risks and uncertainties include, but are not limited to, the existence of underground deposits of commercial quantities of oil and gas; fluctuations in prices for oil and gas production, curtailments or delays in development due to mechanical, operating, marketing or other problems; capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates; and from the number of exploration and development opportunities being greater or fewer than currently anticipated. The Company currently has no reserves as defined under Canadian National Instrument 51-101 reserve definitions. See the Company's filings with the Canadian securities regulators for additional risks and information about the Company's business. EX-99.15 10 h19854exv99w15.txt MATERIAL CHANGE REPORT DATED 9/10/2004 EXHIBIT 15 MATERIAL CHANGE REPORT PURSUANT TO NATIONAL INSTRUMENT 51-102 1. NAME AND ADDRESS OF COMPANY InterOil Corporation ("InterOil") Suite 2, Level 2 Orchid Plaza 79-88 Abbott St. Cairns, Queensland 4870 Australia 2. DATE OF MATERIAL CHANGE September 2, 2004 3. NEWS RELEASE InterOil filed a news release on SEDAR on September 2, 2004. A copy of the news release is attached hereto as Appendix "A". 4. SUMMARY OF MATERIAL CHANGE InterOil announced that it has closed on an additional US$15 million of its previously announced private placement. This brings the total of US$45 million of senior convertible debentures to a limited number of institutional investors. Due to interest from existing investors, the previously announced private placement was increased from $40 million to $45 million. The securities will be issued with an effective date of September 3, 2004. The debentures mature on August 28, 2009 and bear interest at a rate of 8.875% per annum, payable quarterly. The debentures are convertible at the investor's option at any time into common shares at a fixed conversion price of US$20.16 (C$26.45) per share. The definitive agreement provides that, starting 21 months from closing, the investors will have the option to request redemption of portions of the original principal amount from InterOil in equal amounts at stated dates until the maturity date. At InterOil's option, any cash payments contemplated under the debentures may be made in registered common shares issued at a ten percent discount to market. In connection with the private placement, InterOil issued to the investors five-year warrants to purchase 359,415 common shares at an exercise price equal to US$21.91 (C$28.75). 5. FULL DESCRIPTION OF MATERIAL CHANGE Please see the news release attached hereto as Appendix "A" 6. RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102 Not Applicable. 7. OMITTED INFORMATION None. 8. EXECUTIVE OFFICER Further information regarding the matters described in this report may be obtained from Gary M. Duvall, Vice President, Corporate Development of InterOil, who is knowledgeable about the details of the material change and may be contacted at +1 281 292 1800. 9. DATED at The Woodlands, Texas this 9th day of September, 2004. INTEROIL CORPORATION By: (Signed) "Gary M. Duvall" ------------------------- Name: Gary M. Duvall Title: Vice President, Corporate Development APPENDIX "A" NEWS RELEASE NEWS RELEASE (INTEROIL LOGO) INTEROIL CLOSES ON ADDITIONAL US$15 MILLION OF SENIOR CONVERTIBLE DEBENTURES SEPTEMBER 02, 2004-TORONTO, CANADA - INTEROIL CORPORATION (IOL:TSX) (IOC:ASX/POMSOX), a Canadian company with operations in Papua New Guinea, today announced that it has closed on an additional US$15 million of its previously announced private placement. This brings the total to US$45 million of senior convertible debentures to a limited number of institutional investors. Due to interest from existing investors, the previously announced private placement was increased from $40 million to $45 million. The securities will be issued with an effective date of September 3, 2004. InterOil intends to use the net proceeds for additional working capital and general corporate purposes. "This transaction greatly enhances InterOil's near-term working capital position for inventory as our refining operations advance through the commissioning phase, and provides incremental capital for InterOil's drilling program and the securing of drilling rigs with improved capabilities" said Mr Phil Mulacek, CEO of InterOil. The debentures mature on August 28, 2009 and bear interest at a rate of 8.875% per annum, payable quarterly. The debentures are convertible at the investor's option at any time into common shares at a fixed conversion price of US$20. 16 (C$26.45) per share. The definitive agreement provides that, starting 21 months from closing, the investors will have the option to request redemption of portions of the original principal amount from InterOil in equal amounts at stated dates until the maturity date. At InterOil's option, any cash payments contemplated under the debentures may be made in registered common shares issued at a ten percent discount to market. In addition, if after the one-year anniversary of closing, the trading price exceeds US$28.23 (C$37.03) per share in certain circumstances. InterOil may require the investors to convert the debentures into common shares at the fixed conversion price. The debentures have certain customary covenants regarding, among other things, the debt that InterOil may incur in an event of default under the debentures, InterOil may be required to repay any outstanding amounts plus accrued and unpaid interest, plus a 15% premium. In connection with the private placement, InterOil issued to the investors five-year warrants to purchase 359,415 common shares at an exercise price equal to US$21.91 (C$28.75). This private placement was made under an exemption from the registration requirements of the United States Securities Act of 1933, as amended, and purchasers may not offer or sell the securities sold in the offering in the absence of an effective registration statement or exemption from registration requirements. As part of the terms of the private placement, InterOil has agreed to file a registration statement to cover the resale of the securities by the investors. This private placement has received all necessary regulatory approvals, including that of the Toronto Stock Exchange. This news release is issued pursuant to rules under the United States Securities Act of 1933 and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or pursuant to an exemption from registration. Any public offering of securities made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and will contain detailed information about the company and management, as well as financial statements. InterOil is building a vertically integrated energy company whose primary focus is Papua New Guinea and the surrounding region. Its assets comprise an oil refinery, upstream petroleum exploration licenses, and retail and commercial distribution assets. The majority of the refined products from InterOil's refinery is secured by off-take contracts with Shell and InterOil's wholly-owned subsidiary, InterOil Products Limited. BP Singapore is InterOil's agent for all crude oil supplied to the refinery. InterOil is also undertaking an extensive petroleum exploration program within its eight million acre license area located in Papua New Guinea. InterOil's common shares are traded in Canada in Canadian dollars on the Toronto Stock Exchange under the symbol IOL and on the Australian Stock Exchange, (ASX) in CHESS Depositary Interests (CDI), in Australian dollars under the symbol IOC which trade on a 10:1 basis to common shares. For more information please see the InterOil website at: www.interoil.com. FOR FURTHER INFORMATION: Gary M Duvall Anesti Dermedgoglou V.P., Corporate Development V.P., Investor Relations InterOil Corporation InterOil Corporation gary.duvall@interoil.com anesti@interoil.com Houston, TX USA Caims. Qld Australia Phone: +1 281 292 1800 Phone: +6174046 4600 CAUTIONARY STATEMENTS This press release contain forward-looking statements. All statements, other than statements of historical facts, included in this release, including without limitation, statements regarding our drilling plans, business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words "believe", "expects", "anticipates", "intends", "estimates" or similar expressions or variations on such expressions are forward-looking statements. The Company can give no assurances that such forward-looking statements will prove to be correct. Risks and uncertainties include, but are not limited to, the existence of underground deposits of commercial quantities of oil and gas; fluctuations in prices for oil and gas production; curtailments or delays in development due to mechanical, operating, marketing or other problems; capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates; and from the number of exploration and development opportunities being greater or fewer than currently anticipated. The Company currently has no reserves as defined under Canadian National Instrument 51-101 reserve definitions. See the Company's filings with the Canadian securities regulators for additional risks and information about the Company's business. EX-99.16 11 h19854exv99w16.txt REFINERY STATE PROJECT AGREEMENT EXHIBIT 16 PROJECT AGREEMENT AMONG THE INDEPENDENT STATE OF PAPUA NEW GUINEA (THE STATE) AND INTEROIL PTY LIMITED (INTEROIL) AND EP INTEROIL, LTD. (EPIL) TABLE OF CONTENTS CLAUSE PAGE - ------ ---- 1. INTERPRETATION 1 1.1 Definitions 1 1.2 General 8 1.3 Headings and Parts of Speech 8 2. AGREEMENT - COMMENCEMENT AND TERM 9 3. CONDITIONS PRECEDENT 9 3.1 Conditions Precedent to Refiner's and Developer's Obligations 9 3.2 Conditions Precedent to State's Obligations 9 3.3 Conditions Precedent to Obligations of the Parties 10 4. PRELIMINARY OBLIGATIONS AND MILESTONES 10 4.1 Commercial and Financing Agreements 10 4.2 Grant of Authorisations 11 4.3 Milestone Schedule and Security Bond 11 4.4 Arrangements Prior to Financial Close 12 5. REFURBISHMENT OF REFINERY 12 6. OBLIGATIONS OF REFINER 13 7. OBLIGATIONS OF THE STATE 14 8. INVESTMENT INCENTIVES 14 8.1 Business Incentives 14 8.2 Pioneer Certificates 14 8.3 Import and Value Added Taxes 14 8.4 Right to Export 15 8.5 Bonded Store Area 15 8.6 Provincial and Local Taxes 16 21 May 97 8.7 STATE TAX INDEMNITY 16 9. AUTHORISATIONS AND ALLOWANCES 16 9.1 TAXATION AND OTHER INCENTIVES 16 9.2 HARBOURS BOARD 17 9.3 COASTAL SHIPPING 17 9.4 WATER RESOURCES 17 9.5 ROAD AND UTILITY ACCESS 18 9.6 PIPELINE EASEMENTS 18 9.7 IP ACT 18 9.8 PROVINCIAL GOVERNMENTS 18 9.9 FINANCING REQUIREMENTS 19 9.10 ASSURANCES AS TO CONTINUED EFFECTIVENESS 19 10. FOREIGN EXCHANGE 19 10.1 FINANCING PLAN 19 10.2 EQUITY INVESTMENT IN REFINER 20 10.3 OVERSEAS BORROWINGS BY REFINER 20 10.4 PAYMENTS OF GOODS AND SERVICES 21 10.5 PAYMENT OF DIVIDENDS 22 10.6 FOREIGN CURRENCY ACCOUNTS 23 10.7 RETURN OF FOREIGN SURPLUS CURRENCY 24 10.8 STATE'S ACTION TO ENSURE COMPLIANCE 24 10.9 RIGHTS UNDER FOREIGN EXCHANGE REGULATIONS 24 11. FINANCING OF THE PROJECT 24 11.1 PROJECT FINANCING COOPERATIONS 24 11.2 CREATION OF SECURITY 25 12. LOCAL SUPPLIES, BUSINESS DEVELOPMENT AND IMPORTS 25 12.1 LOCAL SUPPLIES AND BUSINESS DEVELOPMENT 25 12.2 IMPORTATION OF EQUIPMENT, GOODS AND CRUDE OIL 26 II 21 MAY 97 12.3 CUSTOMS CLEARANCE 26 12.4 EXPORT OF PREVIOUSLY IMPORTED GOODS AND MATERIALS 26 13. NON-DISCRIMINATION AND RELATED MATTERS 27 13.1 NON-DISCRIMINATION 27 13.2 OTHER OIL REFINERIES IN PNG 27 14. ENVIRONMENTAL MATTERS 27 15. LABOUR AND EMPLOYMENT 28 15.1 TRAINING AND LOCALISATION 28 15.2 VISAS AND PERMITS 29 15.3 HEALTH AND SAFETY 29 16. INSURANCE 29 16.1 OBTAINING INSURANCE 29 16.2 INSURANCE CLAIMS 30 17. ELECTRIC POWER GENERATION 30 18. ACCESS TO CRUDE OIL 30 18.1 TIMELY ACCESS TO PNG CRUDE OIL 30 18.2 DOMESTIC MARKET OBLIGATIONS 31 18.3 ACCESS TO NON-PNG CRUDE OIL 31 18.4 FURTHER ASSURANCES 31 18.5 EXISTING PETROLEUM CONTRACTS 31 19. SALES OF PRODUCTS 31 19.1 OBLIGATION TO PURCHASE FROM DOMESTIC PRODUCERS 31 19.2 OBLIGATIONS TO PREVENT DUMPING OF PRODUCTS BY IMPORTERS 31 19.3 FURTHER ASSURANCES 32 20. REPRESENTATIONS AND WARRANTIES 32 20.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES 32 iii 21 May 97 20.2 Representations and Warranties of Refiner 32 21. INSPECTION 33 22. RIGHT OF REFINER TO EXPAND FACILITY 33 23. FORCE MAJEURE 33 23.1 Excuse of Obligations 33 23.2 Removal of Force Majeure 33 23.3 Suspension of Obligations 34 24. TERMINATION 34 24.1 Termination by the State 34 24.2 Termination by Refiner 34 24.3 Termination Notices 36 24.4 Termination by either Party 36 25. CONSULTATION 36 26. REMEDIES 37 26.1 Liquidated Damages for the State's Failure to provide Crude Access 37 26.2 Liquidated Damages for the State's Failure to Ensure Sales to Domestic Producers 37 26.3 No Set-offs, No Penalty 37 27. DISPUTES AND ARBITRATION 37 27.1 Disputes 38 27.2 Submission to ICSID 38 27.3 ICSID Arbitration 38 27.4 Award 39 27.5 Costs of Arbitration 39 27.6 Stay of Other Proceedings 39 27.7 Sole Expert 39 28. SOVEREIGN IMMUNITY 40
iv 21 May 97 29. LAW AND JURISDICTION 40 29.1 Governing Law 40 29.2 Submission to Jurisdiction 40 30. ASSIGNMENT 40 31. OWNERSHIP OF MATERIALS AND CONFIDENTIALITY 41 31.1 Confidentiality and Publicity 41 31.2 Disclosure of Confidential Information 41 32. MISCELLANEOUS 41 32.1 Head Office 41 32.2 Waiver 41 32.3 Severability 42 32.4 Further Assurance 42 32.5 Application for Authorisations 42 32.6 Protection of Project Site 42 32.7 Entire Agreement 42 32.8 Costs Generally 42 32.9 Agreement Prevails 43 32.10 Rights Cumulative 43 32.11 Counterparts 43 32.12 Relationship of Parties 43 32.13 Listing on PNG Stock Exchange 43 32.14 Amendment of Agreement 43 32.15 Notices 43 SCHEDULE 1 CONDITIONS PRECEDENT TO REFINER'S AND DEVELOPER'S OBLIGATIONS 46 APPENDIX A: CALCULATION OF IMPORT PARITY PRICE 48 APPENDIX B: REFINERY PROPOSAL 51 v 21 May 97 PAPUA NEW GUINEA SEAL THE INDEPENDENT STATE OF PAPUA NEW GUINEA Oil and Gas Act, No. 49 of 1998 S.100 MEMORANDUM OF APPROVAL (OF AN INSTRUMENT CREATING AN INTEREST) PETROLEUM PROCESSING FACILITY LICENCE NO. 1 I, Dr. FABIAN POK, M.P., Minister for Petroleum and Energy, by virtue of the powers conferred upon me by the Oil and Gas Act No. 49 of 1998 and all other powers me enabling, do hereby approve the within application pursuant to Section 100 of the said Act. DATED this 16th day of August, 2000 /s/ Dr. FABIAN POK, M.P. - ------------------------ HON. Dr. FABIAN POK, M.P. Minister for Petroleum and Energy The Minister for Petroleum and Energy on the 16th day of August, 2000 approved the within application DATED this 17th day of August, 2000 /s/ C. Warrillow - ---------------- C. Warrillow A Delegate of the Director ENTERED IN THE REGISTER this 17th day of August, 2000 /s/ C. Warrillow - ---------------- C. Warrillow A Delegate of the Director AGREEMENT made on 29th May 1997 AMONG: (1) THE INDEPENDENT STATE OF PAPUA NEW GUINEA, care of the Office of National Planning, Vulupindi Haus, 3rd Floor, P.O. Box 710, Waigani, National Capital District, Papua New Guinea (the "STATE"); (2) INTEROIL PTY LIMITED, a company duly incorporated in Papua New Guinea, of P.O. Box 30, Waigani, National Capital District, Papua New Guinea ("INTEROIL" or "REFINER"); and (3) EP INTEROIL LTD., a company formed under the laws of the Cayman Islands, Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies ("EPIL" or "DEVELOPER"). RECITALS: A. Papua New Guinea produces significant quantities of crude oil. B. At present there is no domestic oil refining facility, consequently, Papua New Guinea imports most of its requirements for refined petroleum products. C. The State has determined in a decision of the National Executive Council dated 17 December 1993, that it wishes to encourage the development of domestic oil refining capacity in Papua New Guinea and to that end Developer proposes to relocate the former Chevron Nikiski Refinery to the Port Moresby Harbour area to provide an initial domestic oil refining capacity of approximately 35,000 barrels per day to fulfil the refined petroleum product needs of Papua New Guinea and export markets (the "REFINERY"). D. Developer has expressed interest in establishing the Refinery on a basis that will derive an appropriate return on its investment while securing appropriate benefits for the nation and, in particular, the people of Papua New Guinea. E. The State acknowledges that Refiner has received IPA approval and certification for the Project and that the establishment of the Refinery is consistent with the State's development objectives. F. Developer and Refiner shall establish and operate the Refinery on the terms and conditions set out herein. THE PARTIES AGREE AND DECLARE AS FOLLOWS: 1. INTERPRETATION 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires: "ABANDONMENT" means a determination by Refiner not to pursue the Project, as evidenced by a cessation of Implementation or Operations and no resumption by Refiner within 120 days; provided that, an Abandonment shall 21 May 1997 not result from delays caused by the contractor under the Construction Contract or delays in equipment delivery; "ACCOUNTING PROFITS" means Refiner's book profits, calculated in accordance with generally accepted accounting principles and arrived at after deduction of: (a) in relation to each year of income, the Income Tax which has been paid or will be payable by Refiner on its taxable income for that year; or (b) in relation to an interim period prior to the finalisation of annual accounts, the Income Tax which will be payable by Refiner in respect of the taxable income derived by Refiner during that period on the basis that Refiner continued to derive income during the whole of the year of income of which the period forms a part at the same daily average rate as in that period; "AFFILIATE" of any person means any other person which controls, is controlled by or is under common control with such first person (for the purpose of this definition, "control" of a person means the power to direct the management or policies of the person, whether through the ownership of voting securities, by contract, or otherwise); "AFRA" means Average Freight Rate Assessment as published by the London Tanker Brokers Panel Limited on a monthly basis; "AGREEMENT" means this Project Agreement and all schedules, appendices, attachments and annexes to this Project Agreement; "APPROVED FINANCING PLAN" has the meaning given to it in Clause 10.1; "AUTHORISATION" means any grant of rights, consent, permit, authorisation, registration, filing, agreement, notarisation, certificate, permission, licence, approval, authority or exemption from, by or with the State, any Government Agency, or Provincial Government; "BASE LEASE" means the State Leases registered as Volume 18 Folio 44 and Volume 18 Folio 45 over Portions 1499 and 1500 respectively at Napa Napa, Port Moresby, Papua New Guinea entered into between Refiner and the State and dated 27 May 1996; "BASE LEASE PERIOD" means the 99 year period from 1 February 1996 to 31 January 2095; "BONDED STORE AREA" means a zone or area of land and sea where the State does not impose any Taxes on goods or services for import or export; "BUSINESS DAY" means a day on which the banks in each of New York City, Sydney and Port Moresby are open for business; "BUSINESS DEVELOPMENT PLAN" has the meaning given to it in Clause 6; "CENTRAL BANK" means the bank of Papua New Guinea, being the Central Bank of PNG under the Central Banking Act; 2 21 May 97 "CENTRAL BANKING ACT" means the Central Banking Act (Chapter 138 of the PNG Revised Laws); "COMMENCEMENT OF COMMERCIAL PRODUCTION" means the first day on which the Refiner is able to deliver Products from the Refinery, after the occurrence of successful commissioning and start-up pursuant to the Construction Contract; "COMPANIES ACT" means the Companies Act (Chapter 146 of the PNG Revised Laws); "CONSTRUCTION CONTRACT" means the contract or contracts to be entered into by Refiner with a construction contractor for the construction of the Project, which may include the provision of engineering and procurement services. "CONSTRUCTION PERIOD" means the period beginning on the Effective Date and ending on Commencement of Commercial Production; "CONSTRUCTION SCHEDULE" means the schedule of construction and performance milestones for the construction, testing and commissioning of the Refinery submitted by Refiner to the State; "CRUDE" or "CRUDE OIL" means crude oil, whether produced domestically in PNG (or from the PNG offshore area) or imported into PNG, and other feedstocks required to operate the Refinery; "CRUDE ACCESS" has the meaning given to it in Clause 18.1; "CRUDE PURCHASE AGREEMENT" means an agreement between a producer of Crude Oil and Refiner for the purchase of Crude Oil by Refiner; "DEVELOPER" means EP InterOil Ltd; "DISTRIBUTABLE PROFITS" means, in relation to any date of determination, the greater of Refiner's current year's undistributed Accounting Profits or its accumulated retained earnings as of that date; "DOMESTIC DISTRIBUTORS" means all distributors in PNG that distribute Products to retailers of such Products; "DOMESTIC MARKET OBLIGATION" means a provision in a petroleum agreement between the State and a producer of domestic Crude Oil that obligates such producer to sell to oil refineries in PNG domestically produced Crude Oil at non-discriminatory market prices in order to meet the requirements of the Papua New Guinea market; "EFFECTIVE DATE" means the date which is two (2) Business Days after the fulfillment or satisfaction of the last to be satisfied of the conditions precedent set out in Clause 3 or such other date as the Parties may agree in writing; "ELCOM" means the Papua New Guinea Electricity Commission established under the Electricity Commission Act (Chapter 78 of the PNG Revised Laws); 3 21 May 97 "ENVIRONMENTAL PLAN" means the environmental plan to be submitted by Refiner to the State in accordance with the Environmental Planning Act; "ENVIRONMENTAL PLANNING ACT" means the Environmental Planning Act (Chapter 370 of the PNG Revised Laws); "EXECUTION DATE" means the date of execution of this Agreement; "FINANCING AGREEMENTS" means the loan agreements, notes, indentures, security agreements, guarantees and other documents relating to the construction financing and permanent financing (including refinancing) of the Project or any part thereof; "FORCE MAJEURE" means any cause beyond the reasonable control of the Party failing to perform, including: (a) fires, floods, earthquakes, storms, volcanic eruptions, typhoons, cyclones, tidal waves, snow and ice, epidemic, explosion, pestilence, holocaust, acts of supervening force, failure or breakdown of facilities and/or equipment of the Refinery from any other cause not specifically listed in this paragraph (a) or in paragraph (b) (provided that failure or breakdown of the facilities and/or equipment of the Refinery is not caused by the failure by the Party claiming Force Majeure to operate and maintain those facilities and/or equipment in accordance with good engineering and operation practices), restraint by court order or order of any Government Agency, export or import restrictions (including Customs clearance delays), closing of ports, airports, terminals, roadways, waterways or rail lines, rationing or allocation schemes (whether imposed by any Government Agency or by industry in cooperation with any Government Agency), or any labor or material shortage; or (b) war (regardless of whether declared), act of civil or military authority, civil disturbance or disobedience, riot, sabotage, terrorism, threats of sabotage or terrorism, action or non-action by or inability to obtain the necessary Authorisation from any Government Agency, expropriation (or such action or actions which, when taken in the aggregate, have the effect of expropriation), requisition, confiscation, or landowner activity or actions by persons asserting rights as traditional owners of the land on and around which the Refinery is to be built; "FOREIGN EXCHANGE REGULATIONS" means the Central Banking (Foreign Exchange and Gold) Regulation made pursuant to the Central Banking Act; "GOVERNMENT AGENCY" means any government or any governmental, semi-governmental or judicial entity, court or authority of the State, including, without limitation, any provincial government established under the Organic Law on Provincial Governments and Local-level Governments; "HARBOURS BOARD" means the Papua New Guinea Harbours Board established under the Harbours Board Act (Chapter 240 of the PNG Revised Laws); "ICSID" has the meaning given to in Clause 27.2; 4 21 May 97 "IMPLEMENTATION" means the development, financing, construction, commissioning and other work to be carried out in connection with the Refinery prior to Commencement of Commercial Production; "IMPORT PARITY PRICE" means, with respect to a Product, its Import Parity Price as determined in accordance with the provisions of Appendix "A"; "INCOME TAX" or "INCOME TAXES" means a levy, impost, deduction, charge, duty or tax based on or calculated from Refiner's revenues or net income or similar measure of performance; "INDEPENDENT ACCOUNTANT" means a major certified accounting firm or such other registered accountant ordinarily resident in Papua New Guinea as the Parties may agree, or, in the absence of agreement, as determined by the President of the body regulating the standards and conduct of registered accountants in Papua New Guinea from one of the following firms of registered accountants or its successor in interest: (a) KPMG; (b) Coopers & Lybrand; (c) Ernst & Young; (d) Deloitte Touche Tohmatsu; (e) Price Waterhouse; "INVESTORS" means the owners of the equity interests in Developer and Refiner, together with their respective successors and permitted assigns; "IPA" means the Authority established under the IP Act; "IP ACT" means the Investment Promotion Act 1992; "K" or "KINA" means the lawful currency of Papua New Guinea; "LENDER" means any party to the Financing Agreements that is lending money or otherwise providing credit and any agent or trustee acting for such party, together with their respective successors and permitted assigns; "LOSS" means any loss, damage, liability, payment, obligation and expense (including without limitation reasonable lawyers' fees), but, in any event, excluding any indirect or consequential loss, damage, liability, payment, obligation or expense; "MATERIAL CHANGE" means any event or condition that might materially adversely affect the business and operations of Developer and Refiner; "MILESTONE SCHEDULE" has the meaning given to it in Clause 4.3; "NOTICE OF INTENT TO TERMINATE" has the meaning given to it in Clause 24.3(1); "OPERATIONAL PERIOD" means the period beginning Commencement of Commercial Production and expiring on the last day of the Term; 5 21 May 97 "OPERATIONS" means the operation of the Project in accordance with this Agreement; "PARTIES" means the parties to this Agreement; "PIONEER CERTIFICATE" has the meaning attributed to that expression in the Industrial Development (Incentives to Pioneer Industries) Act (Chapter 119 of the PNG Revised Laws); "PLATT'S" means the Singapore Product Postings located in the PLATT'S Oilgram Price Report published by Standard & Poor's Corporation; "PNG" or "PAPUA NEW GUINEA" means Papua New Guinea or, as the context requires, Papua New Guinean; "PNG CONTROLLED COMPANY" means a company in respect of which: (a) the right to exercise one hundred percent (100%) of the voting power; (b) the right to receive one hundred percent (100%) of the dividends that may be paid by the company; and (c) the right to receive one hundred percent (100%) of any distribution of the capital of the company in the event of a winding up or of a reduction in the capital of the company, are held, either directly, or through one or more interposed companies, each of which is itself a PNG Controlled Company under this definition, by Papua New Guinea citizens but does not include a company where the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the wishes of any person who is not a citizen of Papua New Guinea. "PRODUCT" means motor gasoline (both leaded and unleaded), aviation gasoline, dual purpose kerosene, kerosene/Jet-A1, automotive diesel oil, gasoil, industrial diesel, industrial fuel oil, liquid propane gas, liquid butane gas, naphtha, residual fuel oil and such other commercially viable products of the kind that Refiner may from time to time determine to produce; "PROJECT" means the relocation to, and the development, construction and operation of the former Chevron Nikiski Refinery and other new, used, modified and/or refurbished equipment and ancillary facilities at Napa Napa, Port Moresby, Papua New Guinea; "PROJECT SITE" means the land, spaces, waterways, roads, wells and any rights acquired by Refiner under the Base Lease or to be acquired by Refiner for the purposes of the Project on, through, above or below the ground on which the Project or any part thereof is to be built (including any working and accommodation areas required by the Refiner and its contractors), all rights of way and access from public roads and highways, and, where applicable, railway and seaward access; "PROVINCIAL GOVERNMENT" means the Central Province Provincial Government and the National Capital District Commission; 6 21 May 97 "REFINER" means InterOil Pty Limited; "REFINER'S INDUSTRY" means the petroleum refining industry in Papua New Guinea involving the conversion of Crude Oil into Products; "REFINERY" has the meaning given to it in the Recitals to this Agreement; "REFINERY PROPOSAL" means the proposal of Developer and Refiner for development of the Refinery as set out in Appendix "B", together with any amendment or variation to the proposal in accordance with Clause 32.13. "RELEVANT EXCHANGE RATE" for a given day, means the average of the previous twenty Business Days' average of the buy and sell rates for Kina published by Westpac Bank-PNG-Limited; or if such bank no longer quotes buy and sell rates for Kina, ANZ Banking Group (P.N.G.) Limited, Bank of South Pacific Limited or such other bank with offices in Port Moresby as is mutually determined by the Parties (for the purposes of this definition only Business Day means a day on which banks are open for business in Port Moresby); "SERVICES" means any services, rights, benefits or privileges that are, or are to be, provided, granted or conferred under any agreement for or in relation to the performance of work (including but limited to work of a professional nature), the conferring of rights or benefits or privileges for which consideration is payable by way of fee, royalty, tribute, levy or similar exaction or the carriage, packaging or storage of any property or the doing of any act in relation to any property and agreements for the provision of services, whether of a professional or technical or banking or other nature; "SITE ASSESSMENT" has the meaning given to it in Clause 14; "SOLE EXPERT" means a person appointed by agreement between the Parties in dispute to resolve any difference of view or disagreement between such Parties and who shall not be or have been an employee of the State or any Government Agency or Refiner or any Affiliate of Refiner, or in the event that the Parties in dispute fail to agree on the appointment of the Sole Expert a person appointed by the Chairman of the Administrative Council of ICSID or his designee; "SOURCING PLAN" has the meaning given to it in Clause 6; "STATE FORCE MAJEURE" means any Force Majeure described in paragraph (b) of the definition of Force Majeure or any other Force Majeure caused by any act or omission of the State of any Government Agency; "TARGET DATE" has the meaning given to it in Clause 12.3; "TAX" means any levy, impost, deduction, charge on goods and Services, duty or withholding tax or charge (together with any related interest, penalty, fine and expense in connection with any of them) levied or imposed by any Government Agency, other than Income Tax, and including (without limitation) any tax in the nature of import duty, export duty, excise or other tax or duty. 7 21 May 97 franchise free, sales tax, turnover tax, value added tax, consumption tax or other tax whether imposed upon goods or Services; "TAX ACT" means the Income Tax Act 1959 and includes where appropriate any associated Act prescribing rates of tax; "TERM" has the meaning given to it in Clause 2; "TRAINING AND LOCALISATION PROGRAMME" means the Refiner's programme for the training of PNG employees and the replacement of expatriate employees with PNG employees, as submitted to the Department of Labour and Employment from time to time; "VAT" means Value Added Tax, which may be included in the PNG tax system; and "WORLD SCALE" means the New Worldwide Tanker Nominal Freight Scale published annually and amended from time to time by the World Scale Association. 1.2 GENERAL In this Agreement, including the Recitals, unless the context otherwise requires: (a) the singular includes the plural and vice versa; (b) a word denoting an individual or person includes a corporation, firm, partnership, joint venture, association, authority, trust, state or government and vice versa; (c) a word denoting any gender includes all genders; (d) a reference to Recital, Clause, Schedule, Appendix or Annexure is to a recital, clause (including sub-clauses, paragraphs and sub-paragraphs), schedule, appendix or annexure of or to this Agreement; (e) a reference to any agreement or document is to that agreement or document (and, where applicable, any of its provisions) as amended, novated, supplemented or replaced from time to time; (f) a reference to any Party includes that Party's executors, administrators, substitutes, successors and permitted assigns; and (g) a reference to any legislation or legislative provision includes any statutory modification or re-enactment of, or legislative provision substituted for, and any subordinate legislation under, that legislation or legislative provision. 1.3 HEADINGS AND PARTS OF SPEECH In this Agreement, including the Recitals: 8 21 May 97 (a) headings are not part of this Agreement. They are for convenience of reference only and do not affect interpretation; and (b) where an expression is defined, another part of speech or grammatical form of that expression has a corresponding meaning. 2. AGREEMENT - COMMENCEMENT AND TERM This Agreement shall have a term (the "TERM") beginning on the Execution Date and ending on the first to occur of (i) the thirtieth anniversary of Commencement of Commercial Production, (ii) the date on which the Base Lease terminates, and (iii) the date that this Agreement is terminated pursuant to Clause 24, subject in each case to extension by agreement of the Parties. 3. CONDITIONS PRECEDENT 3.1 CONDITIONS PRECEDENT TO REFINER'S AND DEVELOPER'S OBLIGATIONS All of the obligations of the Refiner and Developer under this Agreement (other than the obligations under Clauses 4.1, 4.3 and 6(f) are subject to the fulfilment of the conditions set out in Schedule 1. 3.2 CONDITIONS PRECEDENT TO STATE'S OBLIGATIONS All of the obligations of the State under this Agreement (other than the State's obligations under Clauses 4.2, 11 and 14(b)) are subject to the fulfilment of the following conditions: (a) the submission to the Central Bank by Developer and Refiner of a final financing plan for the Project that is consistent with the Foreign Exchange Regulations and Clause 10; (b) receipt by the State of written confirmation from Australia and New Zealand Banking Group (PNG) Limited that it holds credit account balances in the name of Refiner in Kina and foreign currency which in aggregate, taking the Kina and Kina equivalent of the foreign currency, exceed K10,000,000; (c) receipt by the State of written confirmation from The R-M Trust Company in Canada that it is holding funds on behalf of S.P. InterOil, LDC exceeding US$35,000,000; (d) receipt by the State of confirmation which may be in the form of a legal opinion or otherwise that Developer owns the principal components of the former Chevron Nikiski Refinery free from any encumbrances; (e) the submission to the State of a letter from Enron Corp. expressing its intent to provide funds to its subsidiary to invest in the Project in accordance with Developer's shareholders' agreement dated January 1997 between the Investors; and 9 21 May 97 (f) the submission to the Department of Environment and Conservation of the State of the Environmental Plan for the Project in accordance with Clause 14(a). 3.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES The obligations of all the Parties under this Agreement (other than the obligations of Refiner under Clauses 4.1, 4.3 and 6(f) and the obligations of the State under Clauses 4.2, 11, 14(b), 18 and 19) are subject to the fulfillment of the following conditions: (a) the finalisation and execution of the Financing Agreements on terms and conditions satisfactory to Refiner and the satisfaction of all conditions precedent to first funding thereunder, except where the failure to satisfy such conditions precedent is solely the fault of Developer or Refiner; (b) the finalisation and execution of Crude Purchase Agreements with domestic producers of Crude Oil on terms and conditions satisfactory to Refiner for such amounts of Crude Oil as in the reasonable opinion of Refiner are necessary to commence Operations; and (c) the finalisation and execution of sales agreements for the sale of Products by Refiner to Domestic Distributors for all of their requirements for Products which the Refinery has available capacity to provide, for such period and on such terms and conditions as in the reasonable opinion of Refiner are necessary to commence Operations. 4. PRELIMINARY OBLIGATIONS AND MILESTONES 4.1 COMMERCIAL AND FINANCING AGREEMENTS Notwithstanding Clauses 3.1 and 3.3, Refiner shall: (a) use its reasonable efforts to negotiate, finalise and obtain the execution of the Financing Agreements (including the satisfaction of all the conditions precedent thereunder), the Crude Purchase Agreements and the sales agreements for the sale of Products, all as referred to in Clause 3.3; (b) apply in the normal course and in a timely manner (as required under relevant PNG legislation) for all Authorisations necessary to satisfy the conditions precedent set out in Schedule 1; and (c) prepare and submit to the State a quarterly report, commencing with a report for the first three full calendar months after the Execution Date and thereafter until Commencement of Commercial Operations, summarising in reasonable detail the status of negotiations and results of Refiner's obligations under Clause 4.1(a). 10 21 May 97 4.2 GRANT OF AUTHORISATIONS Notwithstanding Clauses 3.2 and 3.3, the State shall ensure that all Departments and Ministers of the State and other Government Agencies, and use its reasonable efforts to ensure that the National Capital District Commission and any relevant provincial government of PNG, process Refiner's applications for Authorisations as soon as possible and grant the Authorisations necessary to satisfy the conditions precedent set out in Schedule 1 no later than the second milestone date under Clause 4.3. 4.3 MILESTONE SCHEDULE AND SECURITY BOND The Parties acknowledge and agree that the Milestone Schedule set forth below (the "MILESTONE SCHEDULE") is an estimate with which Developer and Refiner will attempt to comply. Refiner shall lodge a security bond in an amount of K50,000, supposed by a cash deposit or bank guarantee, in the form and manner provided by Section 102 of the Petroleum Act (Chapter 198 of the PNG Revised Laws) for the holders of petroleum licences under that Act, as security for the achievement by Developer and Refiner of the milestones in the Milestone Schedule. If any milestone is not achieved for reasons other than: (a) Force Majeure through no fault of Developer or Refiner; or (b) any action or inaction by the State, regardless of whether such action or inaction would constitute a breach of the State's obligations hereunder, the State may enforce the security bond and either the cash deposit will be forfeited by Refiner or the State will have the right to recover the amount of the security bond under the bank guarantee. Thereafter, Developer and Refiner must lodge a new security bond supported by a cash deposit or bank guarantee as a security for the achievement by Developer and Refiner of the subsequent milestones in the Milestone Schedule. Except for the State's right to the security bond upon a failure to achieve the milestones below and without prejudice to any right the State might otherwise have under Clause 24 to terminate this Agreement, Refiner shall incur no liability nor shall the State recover any remedies or damages hereunder as a result of the failure of Refiner to achieve any milestone in the Milestone Schedule. Milestone Date (unless otherwise agreed by the Parties) --------- ---- Commencement of preliminary One (1) month after the Execution Date site work on the Project Site and repair of roads accessing the Project Site Closing under the Financing Eleven (11) months after the Execution Agreements and effectiveness Date of the Construction Contract 11 21 May 97 Tow-out of refurbished equipment Ten (10) months after actual closing on barges for transport to PNG under Financing Agreements and effectiveness of the Construction Contract Commencement of Commercial Four (4) months after actual tow-out of Production refurbished equipment on barges for transport to PNG
If Refiner fails to achieve a milestone because of a Force Majeure or State action described in (a) or (b) above, such milestone shall be extended by the period of time such Force Majeure or State action prevents Refiner from achieving the milestone. 4.4 ARRANGEMENTS PRIOR TO FINANCIAL CLOSE The State acknowledges that Refiner's export sales from Products will not always generate enough foreign currency for the purposes set out in Clause 10.6(c), (d) and (e) because Refiner will be first selling its Products to the PNG domestic market. The Parties agree that, before the second milestone in Clause 4.3 is reached, it will be necessary for Refiner and the Central Bank to meet mutually acceptable arrangements for Refiner to convert Kina funds into foreign currency and hold them in foreign currency accounts for such purposes. Failure to reach such arrangements is likely to delay closing under the Financing Agreements. Therefore, if agreement is not reached on these arrangements, the second milestone and all subsequent milestones in Clause 4.3 will be suspended. 5. REFURBISHMENT OF REFINERY Developer and Refiner shall ensure that: (a) the Refinery and its emission levels meet the standards for air emissions and liquid effluents as laid down in the Pollution Prevention and Abatement Handbook for Environmentally Sustainable Development - Part III Petroleum Refining, September, 1996, issued by the World Bank Environmental Department; (b) any previously used equipment in the Refinery is renovated to "as new" condition, and all columns, heat exchangers and pressure vessels conform to the ASME Boiler & Pressure Vessel Code, Section VIII; (c) notwithstanding the requirements of the ASME Boiler & Pressure Vessel Code Section VIII, all pressurised equipment handling hydrocarbons (whether this equipment is new or used) is subject to hydraulic pressure testing prior to the commissioning of the Refinery; (d) all pipework of two inches nominal bore or under in the Refinery is renewed during development of the Refinery; 12 (e) all tankage, instrumentation and utilities that comprise part of the Refinery are of new or "like new" quality and conform to internationally recognised standards; and (f) the State receives independent verification from an internationally recognised inspection agency approved by the State of the certification of the Project pursuant to the Construction Contract, the Refinery's compliance with paragraphs (a) and (c) above and its substantial compliance with paragraph (b), (d) and (e) above. Refiner shall not commence Operations, other than for testing prior to commissioning and Commencement of Commercial Operations, until the Refinery complies with paragraphs (a), (c) and (f) above and substantially complies with paragraphs (b), (d) and (e) above. For the purposes of paragraph (f) above, Refiner shall give written notice to the State of the international inspection agency it intends to use and the State shall within 14 days after such notice either approve that agency (such approval not to be unreasonably withheld) or disapprove it giving reasons in writing for doing so. Refiner shall bear the cost of the international inspection agency which carries out the verification. 6. OBLIGATIONS OF REFINER In addition to the other obligations of Refiner set out in this Agreement, Developer and Refiner shall have the following specific obligations: (a) To develop the Project and cause the Refinery to be constructed substantially in accordance with the specifications and capacity provided in the Refinery Proposal; {b) To submit to the State the Construction Schedule no later than 120 days after the conditions set forth in Clauses 3.1 have been satisfied, and to use all commercially reasonable efforts to ensure that construction and start up of operations of the Project are conducted in accordance with the Construction Schedule, subject to delays beyond the control of Refiner and its contractors; (c) To prepare and submit to the State, within 180 days after the conditions set forth in Clauses 3.1 and 3.3 have been satisfied or as soon thereafter as is practicable, a plan for the use of products and Services sourced in PNG by the Refinery in its operations (the "SOURCING PLAN"); (d) To prepare and submit to the State, within 180 days after the conditions set forth in Clauses 3.1 and 3.3 have been satisfied or as soon thereafter as is practicable, a plan for the potential business that may be generated as a result of the Refinery's operations for PNG Controlled Companies (the "BUSINESS DEVELOPMENT PLAN"); (e) To prepare and submit to the State an annual report summarising the progress that the Project has made under the Sourcing Plan and the Business Development Plan; (f) Prior to Commencement of Commercial Production, to prepare and deliver to the State quarterly progress reports relating to the progress of the construction of the Project and Commencement of Commercial Production; 13 (g) To test, commission and start up operations of the Project in accordance with the performance tests set forth in the Construction Contract; (h) To operate and maintain the Project during the Term in accordance with applicable law from time to time; and (i) To request and apply to the State and any applicable Government Agencies for all necessary Authorisations contemplated under this Agreement. 7. OBLIGATIONS OF THE STATE In addition to the other obligations of the State set out in this Agreement, the State shall have the following specific obligations: (a) To assist Refiner in obtaining and maintaining the effectiveness of all Authorisations in accordance with, and as required by, Clauses 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17; and (b) To promptly implement its obligations under Clauses 18 and 19. 8. INVESTMENT INCENTIVES 8.1 BUSINESS INCENTIVES Refiner shall be granted and enjoy the business incentives currently available to all foreign investors under relevant Papua New Guinea laws, subject to compliance with those laws. Refiner acknowledges that it must in many cases apply as a formality for the business incentives to the relevant Government Agency, but the State agrees that, where Refiner has applied in accordance with the applicable law, Refiner shall be granted such incentives. 8.2 PIONEER CERTIFICATE The State covenants and agrees that the tax exemption made available to Refiner under Section 18 of the Industrial Development (Incentives to Pioneer Industries) Act (Chapter 119 of the PNG Revised Laws) by virtue of the Pioneer Certificate will continue to be available to the Refiner and remain in force beginning upon the date of Commencement of Commercial Production and ending on the fifth anniversary of the last day of the year of income in which the date of Commencement of Commercial Production occurred. 8.3 IMPORT AND VALUE ADDED TAXES Developer and Refiner and their respective agents and contractors shall have the right to acquire, construct and import into PNG a complete and self contained, fully operational, barge-mounted refinery and new, used, modified, and/or refurbished equipment, including but not limited to, a crude unit, naphtha hydro-desulphuriser reformer, isomerisation unit and ancillary equipment, light and liquids fractionation, stripping, storage, water treatment, boilers, related processing, support utilities, loading, unloading, utilities, power generation equipment and such other ancillary capital equipment as is 14 necessary for the implementation of the Refinery and associated consummables and spare parts necessary for the Commencement of Commercial Operations (the assets and all related expenses above being collectively referred to as the "EXEMPT GOODS") in each case free and clear of and without any deduction or withholding for or on account of any import duties or VAT, and an exemption to such effect shall be granted by the State. Goods and equipment that (i) are not an integral part of the Refinery, and (ii) are available to Refiner in PNG as required by and in accordance with Clause 12.1 are not Exempt Goods. The State acknowledges that the Exempt Goods are "Capital Machinery" falling within Divisions 84 and 85 of the Customs Tariff Act 1990 and as such will qualify for exemption from import duties under the Notice of Exemption published in National Gazette No. G24 of 10 March 1995. The Parties acknowledge that PNG does not currently impose VAT; however, a VAT system may be in effect in PNG at the time the Exempt Goods are acquired and imported. When the VAT system is enacted in PNG, the State shall grant any necessary exemption to give effect to this Clause 8.3. 8.4 RIGHT TO EXPORT Subject to: (a) any requirement of defence and the safety of the public and quarantine; (b) the obligations of the State under multilateral international agreements to which the State is a party; and (c) any determination by the National Executive Council of the State (notice of which has been given to Refiner) that the export of any Products to a particular place is not permitted, the State shall ensure that: (d) Refiner has the right to export from Papua New Guinea the Products resulting from the Operations; and (e) customers of Refiner who purchase the Products resulting from the Operations on an f.o.b. basis in Papua New Guinea for export are allowed to export such Products; and (f) no Products resulting from the Operations and exported by Refiner or customers of Refiner who purchased the Products on an f.o.b. basis for export will be subject to any Tax, licence, permit or impost of any nature whatsoever. 8.5 BONDED STORE AREA The State shall ensure that Refiner is issued a licence as prescribed in Section 54 of the Customs Act (Chapter 101 of the PNG Revised Laws) that covers 15 the Base Lease, and such other storage terminal areas deemed necessary by Refiner to operate the Refinery. 8.6 PROVINCIAL AND LOCAL TAXES The State will use its best endeavours to ensure that Refiner is exempt from any Taxes imposed by any provincial or local-level government (including the National Capital District Commission) that discriminate, or have the effect of discriminating, against Refiner, the Products and Refiner's Industry. 8.7 STATE TAX INDEMNITY The State agrees to indemnify and hold harmless the Refiner against any amounts which the Refiner may be called upon to pay in respect of any Tax or Income Tax or otherwise (including any assessment, reassessment, amended assessment, default assessment, penalty, fine or other obligation in relation thereto) as a result and to the extent of the State's undertakings in this Clause 8 not being fulfilled or the benefit of those provisions not being received by Refiner. The State will ensure that any indemnity payment made pursuant to this clause will not be subject to any Income Tax or Tax and, in the event any payment under this Clause 8.7 is subject to Income Tax or Tax, such payment due to Refiner shall be increased or grossed-up so that the net amount actually receivable by Refiner after the deduction, levy or withholding of such aforesaid taxes or amounts is the amount that would have been due had no such taxes or amounts been deducted, levied or withheld. 9. AUTHORISATIONS AND ALLOWANCES 9.1 TAXATION AND OTHER INCENTIVES (A) GENERAL. To the extent that any Authorisations or other documentation is required by the Refiner to avail itself of the incentives and tax treatment set forth in Clause 8 above, the State shall grant or procure the grant of such Authorisations or other documentation to Refiner as soon as practicable after the Execution Date. (B) COMMISSIONER GENERAL OF INTERNAL REVENUE. Where any right or assurance is given to or conferred upon Refiner under this Agreement and such right or assurance requires the Commissioner General of Internal Revenue to: (i) approve any permit, exemption, act, or other matter; or (ii) grant or issue any authority or approval under the Tax Act including tax clearance certificates under Part IX Division 2 of the Tax Act; and Refiner has supplied any necessary information to the Commissioner General of Internal Revenue, the State shall, upon request from Refiner, ensure by policy directions or otherwise to the Commissioner General of Internal Revenue, that such approval is given and any authority, including the issue of a tax clearance certificate, is granted. 16 9.2 HARBOURS BOARD The State will use its best efforts to ensure that the Harbours Board grants any necessary approvals for the construction and operation of those parts of Refiner's facilities for the Project which are in or encroach upon the declared port of Port Moresby, and does not discriminate against Refiner and any Affiliate providing services to the Project (including, without limitation, any Affiliate providing barging, storage and transportation of Products by sea) in relation to any charges or dues that the Harbours Board or any other government, semi-government authority or person having jurisdiction may levy including, but not limited to discriminatory port dues, navaid charges, pilotage, wharfage charges, berthage charges and charges for Customs officers that may be levied. 9.3 COASTAL SHIPPING (a) Subject to Clause 12.1, Refiner shall have the right to use international flagged vessels with displacement of 5,000 tonnes or more for shipping, floating storage, transportation and freight of any product or goods needed for operation of the Refinery, including Crude Oil, blended products, chemicals, reagents, catalyst, additives, naphtha feedstocks, blending agents, octanes, LPG, benzene and refined products and equipment. Subject to Clause 12.1 and paragraph (b) below, the State shall grant, or procure the grant by any relevant Government Agency, of any Authorisation of the State or any Government Agency under the Merchant Shipping Act (Chapter 242 of the PNG Revised Laws), the Harbours Board Act (Chapter 240 of the PNG Revised Laws) or legislation dealing with like or similar subject matter to permit Refiner to do the foregoing things, and shall not require Refiner to use PNG flagged vessels for such things. (b) If Refiner requires any Authorisation under the Merchant Shipping Act or the Harbours Board Act (or the Regulations or By-Laws thereunder), or under any other legislation dealing with like or similar subject matter, Refiner shall make application for such Authorisations to the responsible Government Agency in the normal course and in a timely manner (as required under the relevant legislation) for such Authorisations and comply with any necessary formal procedures associated with the grant or issue of such Authorisations. 9.4 WATER RESOURCES If Refiner shall require any Authorisation in relation to: (a) the investigation of water sources on or close to the Project Site; (b) sourcing of water for drinking or industrial purposes; (c) treatment of water for drinking or industrial purposes; (d) storage of water by tanks or other means; and (e) disposal of waste water, 17 then the State shall grant or procure the grant by any relevant Government Agency (including, within the National Capital District, NCD Water and Sewerage Pty Ltd) of any Authorisation that may be necessary or desirable to Refiner, including, without limitation, any Authorisation that may be necessary or desirable under the Public Health Act (Chapter 226 of the PNG Revised Laws), the Water Resources Act (Chapter 205 of the PNG Revised Laws), the National Water Supply and Sewerage Act (Chapter 393 of the PNG Revised Laws) or the National Capital District Water Supply and Sewerage Act 1996. 9.5 ROAD AND UTILITY ACCESS (a) If utilities are available on the southern side of Port Moresby Harbour, the State shall ensure that Refiner has access to those utilities in common with other users. Utilities include but are not limited to roads, water, electricity, sewerage and other infrastructure provided by the State or any Government Agency. (b) Refiner shall have the right at its own expense to upgrade, repair and maintain the access roads to the Project Site to meet the needs of the Project. If any access road must be re-routed for this purpose, Refiner shall negotiate with the traditional landowners to purchase the additional land required or acquire any necessary easements or rights of way. If Refiner is unable to reach agreement with the traditional landowners within a reasonable time, the State shall use its powers of compulsory acquisition under the Land Act to acquire the additional land required and Refiner shall pay to the State the cost of doing so. 9.6 PIPELINE EASEMENTS The State shall grant or procure the grant by any relevant Government Agencies of all easements or rights of way that the Project may require for the construction and operation of pipelines and flare stacks within the Project Site and from the Project Site to the tank farms or other load out points of the Project, at no cost to Developer and Refiner, other than generally applicable application fees and similar charges. 9.7 IP ACT The State shall ensure that the certificate of Refiner issued under the IP Act in respect of the activities contemplated or required to be carried out under the Refinery Proposal is not canceled or varied (otherwise than for breach of a material term or condition of such certificate) during the Term and is unconditional or subject only to such conditions as are acceptable to Refiner in respect of the Refinery and Refiner's Operations or as required under the IP Act. 9.8 PROVINCIAL GOVERNMENTS If the Refiner shall require any lease or Authorisation of any Provincial Government or any other political subdivision of or within the State or any Provincial Government, for the construction or operation of the Project, the State shall assist Refiner in obtaining any such lease or Authorisation. 18 9.9 FINANCING REQUIREMENTS The State shall grant or procure the grant of all Authorisations required to be obtained from the State or any Government Agency for Refiner or for the construction, financing, ownership, operation or maintenance of the Project as identified in or contemplated by the Financing Agreements. 9.10 ASSURANCES AS TO CONTINUED EFFECTIVENESS The State shall further ensure that such Authorisations and other documentation contemplated in this Clause 9 and throughout this Agreement are not terminated, revoked, limited or restricted and continue to be effective during the Term. 10. FOREIGN EXCHANGE 10.1 FINANCING PLAN Developer and Refiner shall submit the final financing plan for the Project to the Central Bank prior to the execution of the Financing Agreements to satisfy the condition precedent in Clause 3.2(a). The final financing plan will: (a) set out in reasonable detail the manner in which Developer and Refiner intend to finance the total cost of the Project through to Commencement of Commercial Production, including a reasonable provision for working capital to maintain Operations; (b) provide for a maximum debt:equity ratio for Refiner (including indebtedness to shareholders and other associated parties) of 5:1; (c) identify sources of the proposed debt finance and the terms and conditions of such debt finance, including in particular the cost of funds (identifying all fees, charges and commissions as well as interest rates or interest margins); (d) the security to be provided for the financing; (e) identify, and justify to the satisfaction of the Central Bank, Refiner's need for foreign currency accounts for the purposes of Clauses 10.6 and 10.7; and (f) identify capital to be used by Refiner in carrying out the project as equity or debt, as the case may be. For the purposes of this clause 10, "equity" shall mean ordinary shares, preference shares which have been designated at the time of their issue as "equity" by a notice to the Central Bank and undistributed accounting profits. The State shall ensure that the Central Bank gives expeditious consideration to the final financing plan and requests any further information required from Developer and Refiner. Within fifteen Business Days of the date of receipt of the submission of the final financing plan, the Central Bank shall notify Developer and Refiner in writing whether or not the final financing plan has 19 been approved. If and when it is approved, it will thereupon become the "APPROVED FINANCING PLAN". If at any time Developer and Refiner wish to change the Approved Financing Plan, they shall submit the proposed changes to the Central Bank and if required meet to discuss the changes with the Central Bank. Within fifteen Business Days of the date of receipt of the submission of the changes, the Central Bank shall notify Developer and Refiner in writing whether or not the changes have been approved. If either the final financing plan or any changes to it are not approved but Refiner is of the view that it provides for the financing of the Project in a manner which is commercially and economically reasonable, Refiner shall refer the issue to the State by written notice and the State through its Minister for Finance or his representative shall, within a further ten Business Days after such notice, meet with the Governor of the Central Bank and they shall jointly decide whether the financing is commercially and economically reasonable. If they decide that it is, the final financing plan or such changes shall be approved. 10.2 EQUITY INVESTMENT IN REFINER In accordance with the Approved Financing Plan, Developer may make equity investments in Refiner which may be in the form of a subscription for ordinary shares (fully paid or partly paid) of Refiner; a subscription for redeemable preference shares of Refiner issued at par or with a fully paid premium; or other instruments classified as equity. The Central Bank shall give authority under the Foreign Exchange Regulations for Refiner: (a) to allot or issue the ordinary shares, redeemable preference shares and other instruments subscribed for by Developer classified as equity under internationally generally accepted accounting principles or under clause 10.1(f); (b) to make an entry in its register that recognises and gives the effect to the allotment and issue of the ordinary shares, redeemable preference shares and other instruments classified as equity to Developer; and (c) to export scrip representing such ordinary shares, redeemable preference shares and other instruments classified as equity to Developer, subject to the conditions that: (d) Developer provides information about the nature and amount of funds invested or brought into the country for or in respect of its acquisition of the shares or the making of the shareholder loans; and (e) completes and submits to the Central Bank the required forms under the Foreign Exchange Regulations. 10.3 OVERSEAS BORROWINGS BY REFINER In accordance with the Approved Financing Plan, the Central Bank shall give authority under the Foreign Exchange Regulations for Refiner to borrow in foreign currency from sources {including shareholders) outside Papua New 20 Guinea for the purpose of financing or refinancing the Project, provided that the following basic requirements are met: (a) the currency of borrowing is readily convertible into Kina; (b) the interest rate, fees and charges applicable to the borrowing when combined do not exceed the level which is commercially and economically reasonable for a project such as the Project; (c) there is no condition attached to the financing which may result in Refiner becoming liable for the debts of third parties who are not residents of Papua New Guinea; (d) the term of the borrowing is for a period of one year or more; (e) after the borrowing Refiner will have a maximum debt to equity ratio of 5:1 (including indebtedness to shareholders and other associated parties) and of 3:1 (excluding indebtedness to shareholders and other associated parties); (f) a copy of the supporting documentation (principally the loan agreement and security documents) is forwarded to the Central Bank; (g) the form required under the Foreign Exchange Regulations is completed and signed by Refiner and submitted to the Central Bank providing full details of foreign currency loans; and (h) the form required by the Foreign Exchange Regulations is completed and signed by Refiner and submitted to the Central Bank for every drawdown under foreign currency loans. 10.4 PAYMENTS FOR GOODS AND SERVICES Where the Implementation or Operations of the Project requires, as permitted elsewhere by this Agreement, the import of goods (including Crude Oil) by Refiner from outside Papua New Guinea, or the acquisition by Refiner of Services from outside Papua New Guinea, Refiner may contract to pay for such goods or such Services in foreign currency. Refiner may pay in a foreign currency for the purchase of domestically produced Crude Oil from a company which is: (a) a foreign company; and (b) managed and controlled by Refiner in Papua New Guinea and which engages in no other activity than the purchase of Crude Oil from domestic producers, provided that: (c) the price paid to the foreign company is the same as that paid by the foreign company to the domestic producer, and is paid into a special purpose foreign currency account held by that company with a bank in Papua New Guinea; 21 (d) in addition to funds required to make the payments referred to in paragraph (c), the company is funded by Refiner only to the extent necessary to pay bank charges, principal and interest, corporate fees and other necessary statutory fees: and (e) the Crude Oil purchased does not originate from a domestic producer under an obligation to supply Crude Oil to the domestic market and accept payment therefor in kina, which obligation is unsatisfied at the time of purchase. The Central Bank shall grant authority to Refiner to convert kina to a foreign currency for the purpose of making the payments referred to in this clause 10.4. 10.5 PAYMENT OF DIVIDENDS (a) Before paying any dividends to shareholders outside Papua New Guinea, Refiner shall present to the Central Bank a set of financial statements, including a profit and loss statement and a balance sheet, which: (i) have been certified by a duly authorised officer of Refiner as having been prepared in accordance with generally accepted accounting principles; and (ii) show that there are Distributable Profits in respect of which, or in respect of part of which, the dividends are to be declared, and a copy of the resolution of the board of directors of Refiner authorising that dividend, and a tax clearance certificate under Part IX Division 2 of the Tax Act covering the amount of the dividends. (b) Within a period of ten Business Days after the date of receipt of the financial statements submitted in support of a proposed dividend, the Central Bank may, if on reasonable grounds it is not satisfied that there are Distributable Profits out of which the dividend can be paid, require Refiner to submit financial statements audited by an Independent Accountant and showing that there are sufficient Distributable Profits. (c) Dividends of Refiner which are: (i) declared not more frequently than quarterly; and (ii) payable out of Distributable Profits, will be approved by the Central Bank. (d) The State shall ensure that Central Bank will respond to any application by Refiner for authority for payment of a dividend within 30 days from the date on which the financial statements referred to in paragraph (a) were received or, in the case where the Central Bank has required audited financial statements, within 30 days from the date on which the 22 Central Bank has received financial statements showing that there are sufficient Distributable Profits. 10.6 FOREIGN CURRENCY ACCOUNTS Following approval of the final financing plan under Clause 10.1 and in accordance with the Approved Financing Plan, the Central Bank shall grant Refiner authority to maintain one or more foreign currency accounts in US Dollars or any other fully convertible currency. The Central Bank shall give authority under the Foreign Exchange Regulations for the opening of such accounts not later than the time when the second milestone in Clause 4.3 is reached. Refiner may retain in its foreign currency accounts: (a) funds received or transferred to it in foreign currency as part of the equity investment of Developer or Refiner's foreign currency borrowings, in accordance with the Approved Financing Plan; and (b) proceeds of its sale of Products to purchasers outside Papua New Guinea, to the extent necessary to enable Refiner to draw on the accounts during such period as may be approved by the Central Bank at the time the Approved Financing Plan is approved, in respect of: (c) repayments of, or payments of interest, service charges, fees and expenses on or related to, its foreign currency borrowings; (d) commitments in foreign currency for the supply of goods (including without limitation consumables and imported Crude Oil) and the Services of foreign employees and consultants (including without limitation under operations and maintenance contracts and administrative and commercial services contracts); and (e) dividends approved by the Central Bank in accordance with Clause 10.5; and (f) any other payment approved by the Central Bank. Furthermore, if and to the extent that the amounts otherwise retained in its foreign currency accounts under this Clause 10.6 are not sufficient at any time to meet its commitments referred to in paragraph (d) above plus the next two periodic payments of principal plus interest on Refiner's foreign currency borrowings referred to in paragraph (c) above, Refiner may request authority to convert the proceeds of its sale of Products to purchasers in Papua New Guinea into foreign currency and pay those proceeds into its foreign currency accounts and the Central Bank shall deal with such requests expeditiously. Refiner shall provide to the Central Bank the following reports in respect of each foreign currency account authorised by the Central Bank in relation to this Agreement: (g) a monthly report detailing the flow of funds into and out of the account; (h) a quarterly forecast report on foreign currency transactions; 23 (i) a six monthly report including certified copies of bank statements on the flow of funds into and out of the account; and (j) any other report relating to foreign currency accounts as may be generally required by the Central Bank from time to time. 10.7 RETURN OF SURPLUS FOREIGN CURRENCY Except as provided for in Clause 10.6 or otherwise permitted under this Agreement or the Foreign Exchange Regulations, Refiner shall convert its foreign currency earnings from the Operations into Kina and remit the proceeds to Papua New Guinea to a bank account in the name of Refiner for its use. 10.8 STATE'S ACTION TO ENSURE COMPLIANCE Where any right or assurance given to Refiner under this Clause 10 requires the Central Bank: (a) to approve any act, matter or thing; or {b) to grant authority under the Foreign Exchange Regulations for its exercise or performance, and Refiner has supplied any necessary information to the Central Bank and otherwise met the conditions of this Clause 10, the State shall, upon request from Refiner, ensure by policy directions to the Central Bank or otherwise that such approval is given or such authority is granted. 10.9 RIGHTS UNDER FOREIGN EXCHANGE REGULATIONS Notwithstanding this Clause 10, Refiner shall have the rights otherwise available under the Foreign Exchange Regulations and shall have access to foreign exchange as permitted by the Central Bank (or any other authority having the power to regulate foreign exchange in Papua New Guinea) from time to time. 11. FINANCING OF THE PROJECT 11.1 PROJECT FINANCING COOPERATION The State acknowledges that Refiner intends to finance development of the Project on a limited or non-recourse, project finance basis with the ratio of external indebtedness of Refiner (being indebtedness to non-associated parties) to shareholder funds in Refiner being a maximum of 3:1. The State further acknowledges that such financing is fundamental to the successful Implementation of the Project. The State agrees to cooperate with Refiner in its pursuit of such limited or non-recourse, project finance based debt financing for the Project. In furtherance of the foregoing covenant and agreement, the State covenants and agrees to: 24 (a) Provide potential Lenders with such non-proprietary/non-secret data as is available with no additional work on the part of the State, and as such Lenders reasonably require; (b) At financial closing, provide legal opinions, which may include customary qualifications, to the Lenders, Developer and Refiner regarding (but not limited to) the due authorisation and approval of this Agreement, the valid and binding effect of this Agreement and the Base Lease on the State, the absence of any known default or breach under material agreements to which the State is a party caused by or which could be caused by the execution and delivery of this Agreement and the Base Lease, and the absence of any litigation pending, and to the best of the State's knowledge, threatened litigation against the State and/or any Government Agency that, if the determination was adverse to the State and/or the Government Agency, could reasonably be expected to have a material adverse effect on the validity of this Agreement and the Base Lease; and (c) Execute such consents as are customarily and reasonably required by Lenders with respect to this Agreement and the Base Lease. 11.2 CREATION OF SECURITY Developer and Refiner will be permitted to mortgage, charge or pledge in accordance with the laws of Papua New Guinea: (a) the Project Site and other real property (including buildings) acquired for the Project; (b) all equipment, including the Refinery, the reformer and the barges mounting all such equipment, and other property, including intellectual property, of Refiner and Developer; (c) any contractual rights of Refiner, including under this Agreement and any agreement contemplated by this Agreement, that have economic value; (d) all cash, accounts receivable and other assets owned by Refiner; and (e) all proceeds of the foregoing. Refiner shall ensure that such mortgaged, charged or pledged rights and assets shall continue to be used in the Implementation of the Project as stipulated in this Agreement. 12. LOCAL SUPPLIES, BUSINESS DEVELOPMENT AND IMPORTS 12.1 LOCAL SUPPLIES AND BUSINESS DEVELOPMENT Refiner shall: (a) in accordance with the Sourcing Plan, use and purchase goods and services supplied, produced or manufactured in Papua New Guinea 25 whenever the same can be obtained on competitive terms, including landed prices, conditions and delivery dates and are in all substantive respects of a quality comparable with those available from outside Papua New Guinea; (b) in accordance with the Business Development Plan, encourage PNG citizens desirous of establishing businesses providing goods and services to the Project during Operations provided that Refiner shall not be obliged or called upon to grant or lend money to any PNG citizens or any local enterprises; (c) make use of PNG subcontractors where services of a standard and quality comparable with those that Refiner could obtain but for the operation of this clause are available from such PNG subcontractors at competitive prices, and on competitive terms, conditions and delivery or performance dates; and (d) where it is necessary to import vehicles, machinery, plant or equipment, and such items are not purchased direct from the manufacturer by Refiner, effect the purchase of such items through traders operating in Papua New Guinea, provided that: (i) such items are available through such traders at competitive landed prices, and on competitive terms, conditions and delivery dates; and (ii) Refiner shall not be bound to comply with this paragraph in any case where Refiner can show to the satisfaction of the Central Bank that compliance would adversely affect the financing of the Project. 12.2 IMPORTATION OF EQUIPMENT, GOODS AND CRUDE OIL Notwithstanding Clause 12.1, Refiner shall be entitled to import without restriction all the Exempt Goods referred to in Clause 8.3 which are required for Implementation of the Project and all specialised equipment and consummables required to operate the Refinery at its full capacity. 12.3 CUSTOMS CLEARANCE The State shall ensure that all machinery, supplies equipment and Crude Oil imported into, or used in connection with the construction, operation or maintenance of the Project shall be promptly cleared for release from Customs and removal by Refiner or its agents following delivery of such machinery, supplies, equipment and Crude Oil and shall ensure that any disputes in that regard are resolved on a priority basis. 12.4 EXPORT OF PREVIOUSLY IMPORTED GOODS AND MATERIALS All imported items not consumed or incorporated into the Project may be freely re-exported by Refiner without incurring liability for any Tax. Refiner shall be entitled to export without restriction all items of plant, machinery and the reformer catalyst imported for permanent installation in the 26 Project for the purpose of repair or refurbishment outside PNG and to re-import the same and such spare and replacement parts as may be required without restriction or imposition, except for import duties or VAT, as applicable, and the State shall, at the request of Refiner, use reasonable measures to expedite the issuance of any consent or approval required for the export and re-import of such plant and machinery. 13. NON-DISCRIMINATION AND RELATED MATTERS 13.1 NON-DISCRIMINATION (a) The State acknowledges and agrees that it shall treat Refiner's investment in the Refinery on a basis no less favourable than that accorded to investments and activities associated with investments of other foreign owned or controlled companies in Papua New Guinea under any bilateral investment protection treaty between the State and any other country, and accordingly, if under any such treaty other companies receive the benefit of any undertakings by the State relating to expropriation, nationalisation and compensation therefor, Refiner will be treated as though those undertakings extend to Refiner. (b) If the State grants or permits to be granted by the State or any Government Agency incentives, inducements or undertakings to any other developers in respect of similar or comparable scale projects which are more advantageous than those conferred on Refiner under this Agreement, the State shall grant the same incentives, inducements and undertakings to Refiner or ensure that they are granted to it. (c) The State shall not impose or permit to exist during the Term any Taxes that discriminate against Refiner or any Income Taxes that discriminate against Refiner or Refiner's Industry (so long as Refiner's throughput capacity for refining Crude Oil is more than 60% of the Crude Oil refining throughput capacity in PNG). 13.2 OTHER OIL REFINERIES IN PNG The State shall not grant or permit any Government Agency to grant to any person any exclusive rights to build a refinery in PNG that would be in the same or similar business as that conducted by Refiner or other domestic refineries. This covenant shall continue in force during the Term. 14. ENVIRONMENTAL MATTERS (a) The Refiner shall lodge the Environmental Plan with the State within 190 days of the Execution Date. The Environmental Plan shall be consistent with the environmental standards referred to in Clause 14(c). The Refiner shall lodge with the State monthly progress reports on the development of the Environmental Plan (including, where appropriate, drafts of the Plan) during the period from the Execution Date until the date of lodgement. (b) The State shall use its best endeavours to ensure that, subject to compliance with Clause 14(a), the Environmental Plan is approved as soon as 27 practicable. The State shall ensure that Refiner receives a response to the Environmental Plan from the relevant Minister or Department of the State no later than 30 days after submission of the Environmental Plan under Clause 14(a). Such response shall either be an approval of the Environmental Plan or a detailed response setting forth all requirements necessary to obtain approval from the State. (c) The State shall not promulgate or apply environmental standards to the Refiner that are, when viewed objectively, more onerous than those that govern and regulate environmental conduct and standards of the refining industry under the standards for air emissions and liquid effluents as laid down in the Pollution Prevention and Abatement Handbook for Environmentally Sustainable Development - Part III Petroleum Refining, September 1996, issued by the World Bank Environmental Department. (d) Refiner shall construct and operate the Refinery in accordance with prevailing international standards, the approved Environmental Plan and the Environmental Planning Act. The State acknowledges that relevant standards referred to in paragraph (c) are prevailing international standards. (e) If Refiner's Investigations of the Project Site prior to Refiner's commencement of construction of the Refinery disclose any physical condition on the Project Site which could give rise to any remedial obligation under any environmental laws of PNG or which could result in any liability to any third party claiming damage to person or properly as a result of such physical condition and the physical condition is such that it cannot be remedied to the satisfaction of Refiner, the State shall assist Refiner to find a suitable alternative site for the Project. If a suitable alternative site cannot be found within a reasonable time, Clause 24.2(7) will apply. (f) The State and Refiner will agree to a base line environmental assessment of the historical damage to the Project Site immediately after Refiner has concluded the Preliminary Soil and Water Site Tests and prior to Refiner's commencement of construction activities on the Project Site (the "SITE ASSESSMENT"). Refiner shall not be responsible for any historical contamination and environmental risk, and assumes no liabilities arising from or caused by existing environmental conditions and defects on the Project Site, which are set forth in the Site Assessment. Refiner shall assume the cost of incremental damage to the Project Site, if any, arising from the Implementation and Operations of the Project above the conditions set forth in the Site Assessment. 15. LABOUR AND EMPLOYMENT 15.1 TRAINING AND LOCALISATION (a) In accordance with work permit guidelines stipulated under the Employment of Non Citizens Act (Chapter 374 of the PNG Revised Laws) and the Training and Localisation Programme, Refiner shall select and train personnel in the Operations in accordance with the law and practice in force from time to time relating to training and localisation so as to confer appropriate training and other employment benefits on 28 Papua New Guineans, and in particular to the people from the immediate vicinity of the Project Site. (b) Refiner shall progressively replace foreign personnel with PNG citizens, in accordance with the Training and Localisation Programme; provided that if the Training and Localisation Programme is disrupted by circumstances or events (whether or not they constitute Force Majeure) making it difficult or impossible for Refiner to comply with its obligations under the Training and Localisation Programme, Refiner may give notice thereof to the State, together with alternative or revised plans to achieve the objects of the part of the Training and Localisation Programme which is affected, and the State within one month of such notice shall either: (i) approve such alternative or revised plans; or (ii) meet with Refiner to discuss the alternative or revised plans. (c) To the extent practicable, Refiner shall give first preference in training and employment to PNG citizens whose place of origin is near the Project Site. 15.2 VISAS AND PERMITS (a) The State shall, by the issue of appropriate policy directions, procure that the Refiner is within a reasonable time granted all visas, permits and licences (together called the "WORK PERMITS") for its employees, agents, contractors and consultants that are necessary to enable Refiner to construct the Refinery and to conduct the Operations. The State shall ensure that any delays or difficulties in that regard are resolved on a priority basis. (b) Nothing in this Clause 15.2 shall be construed or interpreted as requiring the State to secure any permits for any person who does not comply with the statutory criteria and relevant policy in relation to the issue of Work Permits. 15.3 HEALTH AND SAFETY During the local construction of the Refinery and its Operations, Refiner shall comply with the Industrial Safety, Health and Welfare Act (Chapter 175 of the PNG Revised Laws) and all other applicable laws of PNG relating to health and safety. 16. INSURANCE 16.1 OBTAINING INSURANCE Refiner shall obtain and maintain insurance for the Project in accordance with industry practices to the extent available on commercially reasonable terms. For all matters which involve PNG risks, Refiner shall obtain and maintain its insurance from PNG insurers or through PNG insurance brokers, as required by the Insurance Act 1995, except to the extent that: 29 (a) Schedule 1 paragraph (h) provides for an exemption; (b) adequate insurance from companies having the financial capacity to meet any claims is not obtainable from or through such insurers or insurance brokers; or (c) the Financing Agreements require otherwise. If paragraph (a), (b) or (c) applies, the State shall grant or procure the grant by the relevant Government Agency of an exemption from any requirements under the laws of PNG that would require Refiner to obtain and maintain insurance covering the Project from insurance companies or through insurance brokers located in PNG. 16.2 INSURANCE CLAIMS If any claim is made by Refiner under the insurance covering the Project, the Parties acknowledge that the Financing Agreements may require that any proceeds of the claim received by Refiner be paid into an escrow account established in accordance with the terms and conditions of the Financing Agreements and that disbursements from such account shall be controlled by the terms and conditions of the Financing Agreements. 17. ELECTRIC POWER GENERATION The Refiner and/or an Affiliate shall have the right and shall be granted a licence, if necessary, to generate electric power for the construction and operation of the Project. The State shall ensure that Refiner will not be charged for such electric power by ELCOM or any other Government Agency. 18. ACCESS TO CRUDE OIL 18.1 TIMELY ACCESS TO PNG CRUDE OIL During the Term, the State shall use its best efforts to persuade and induce producers of domestic Crude Oil in PNG and its offshore area to provide each domestic Crude Oil refinery with the ability to purchase, in a timely manner, Crude Oil from PNG's domestic Crude Oil production at the prevailing fair market value and under the prevailing market terms for Kutubu Crude Oil or any other indigenous Crude Oil to the extent of each such refinery's requirements to operate at full capacity ("CRUDE ACCESS"). The State will, if necessary by seeking legislation and issuing executive orders or policy directives, ensure that sufficient sales in PNG of Crude Oil produced domestically in PNG are conducted so that domestic Crude Oil refineries shall not be denied Crude Access. However, the State has no obligation under this Clause 18.1 to procure the domestic production of Crude Oil beyond that which would otherwise be produced. In the event of a dispute between the State and Refiner as to whether the proposed price and terms for the purchase of domestically produced Crude Oil that are offered to Refiner by a domestic Crude Oil producer are at the prevailing fair market value and under the prevailing market terms contemplated hereunder, Refiner and the State 30 shall submit the matter to a Sole Expert with expertise in the pricing of Crude Oil in PNG (or, if no one with such expertise is available, with expertise in the Asia Pacific region) pursuant to Clause 27.7 to determine and certify whether the disputed price and terms are consistent with prevailing market prices and terms as set forth above. 18.2 DOMESTIC MARKET OBLIGATIONS During the Term, the State shall procure that all petroleum development and production agreements wholly or partially relating to Crude Oil entered into or renegotiated by the State or any Government Agency after the Execution Date will contain a Domestic Market Obligation. 18.3 ACCESS TO NON-PNG CRUDE OIL In addition to Crude Access pursuant to Clause 18.1, Refiner will be entitled to purchase Crude Oil from outside Papua New Guinea. 18.4 FURTHER ASSURANCES The State shall promptly do all acts and sign, execute and deliver all instruments to give full effect to this Clause 18. The State shall seek all legislation and issue executive orders or policy directives which are necessary for the prevention or mitigation of conduct intended to, or likely to, avoid or frustrate Crude Access by domestic Crude Oil refineries. 18.5 EXISTING PETROLEUM CONTRACTS The State shall not be obligated under this Clause 18 to take any action, including legislation, to renegotiate, cancel or repudiate petroleum agreements existing at the Execution Date. 19. SALES OF PRODUCTS 19.1 OBLIGATION TO PURCHASE FROM DOMESTIC PRODUCERS The State will ensure that Domestic Distributors shall purchase Products first from domestic production of such Products to the extent that such Products produced domestically (i) are available on a basis equivalent to the basis on which the same Products that could be obtained through import markets, (ii) are equivalent in quality to the same Products that could be obtained through import markets, and (iii) are offered by domestic producers of Products at prices that are not greater than the Import Parity Price calculated in accordance with Appendix "A". 19.2 OBLIGATION TO PREVENT DUMPING OF PRODUCTS BY IMPORTERS The State shall not allow Domestic Distributors or importers of Products into PNG to offer Products to PNG's domestic markets at prices lower than the Import Parity Price for such Products for the purpose or having the effect of dumping, or of avoiding or frustrating the ability of domestic refiners to sell Products in domestic markets in PNG at Import Parity Prices. The State shall seek legislation and issue executive decisions and policy directives, if 31 necessary, to prevent or mitigate the effects of dumping or other conduct intended to, or likely to, avoid or frustrate access of any domestic Crude Oil refinery to domestic markets to sell Products in domestic markets in PNG at Import Parity Prices. 19.3 FURTHER ASSURANCES The State shall seek legislation, issue policy directives or executive decisions and perform such other acts and sign, execute and deliver all instruments to give full effect to and as may be necessary to perform its obligations under this Clause 19. 20. REPRESENTATIONS AND WARRANTIES 20.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES Each of the Parties represents and warrants that: (a) It has the capacity to enter into and perform this Agreement and where applicable the Base Lease and all transactions and agreements contemplated herein and in the Base Lease and that all corporate and other actions required to authorise it to enter into and perform this Agreement and the Base Lease and all transactions and agreements contemplated herein and in the Base Lease have been or shall be properly taken. (b) Its execution, delivery and performance of this Agreement and where applicable the Base Lease have been duly authorised by all required actions of its governing authority or owners and do not and shall not: (1) Violate any law, rule regulation, order or decree applicable to it; or (2) Violate its organisational documents. (c) Each of this Agreement and where applicable the Base Lease is a legal and binding obligation of the Party, enforceable against that Party in accordance with its terms, except to the extent enforceability is modified by bankruptcy, reorganisation and other similar laws affecting the rights of creditors generally and by general principles of equity. (d) It shall not breach any other agreement or arrangement by entering into or performing this Agreement and where applicable the Base Lease and this Agreement and the Base Lease when signed shall have been duly executed by it and shall be valid and binding upon it in accordance with their respective terms. 20.2 REPRESENTATIONS AND WARRANTIES OF REFINER Refiner represents and warrants that: (a) It is duly organised, validly existing and in good standing under the laws of Papua New Guinea. 32 (b) It has the corporate power to complete Implementation of the Project and achieve Commencement of Commercial Production. (c) It has carried out a thorough examination of the economic feasibility of the Project and of its projected costs and revenues based on fair and reasonable assumptions and projections. 21. INSPECTION At reasonable intervals and on reasonable notice, Refiner shall allow qualified representatives of the State access during planned shutdowns to inspect the facilities of the Refinery and its Products; provided that any such representative given access shall be obligated to fully abide by all safety procedures and regulations in effect at the Refinery. Any dispute arising out of such inspection shall be referred to the Sole Expert in accordance with Clause 27.7. 22. RIGHT OF REFINER TO EXPAND FACILITY Refiner shall have the right, in its sole discretion, to expand the Refinery, its activities and operations, provided that upon completion of such expansion Refiner obtains the necessary Authorisations and continues to be in compliance with the terms of this Agreement and all applicable laws. 23. FORCE MAJEURE 23.1 EXCUSE OF OBLIGATIONS; NOTICE OF FORCE MAJEURE A Party's obligations under this Agreement shall be excused when and to the extent its performance of those obligations is prevented by Force Majeure; provided, however, that the State is not excused if the only Force Majeure affecting the State's performance is a State Force Majeure and neither Refiner nor the State is excused if the obligation excuses an obligation to pay money. The Party rendered unable to fulfill its obligations under this Agreement by reason of Force Majeure shall notify the other Parties in writing of this circumstance within thirty (30) days of its occurrence and shall exercise due diligence to end the inability as promptly as practicable; provided, however, that a Party is not required to settle any strike, or labour or landowner dispute in which it may be Involved. For the avoidance of doubt, the State shall be obligated to perform all of its obligations under this Agreement during periods of State Force Majeure. 23.2 REMOVAL OF FORCE MAJEURE In the event of Force Majeure the Parties will use all reasonable efforts to remove its cause without being obliged to settle or compromise any strike, or labour or landowner dispute. 33 23.3 SUSPENSION OF OBLIGATIONS If Force Majeure substantially prohibits the performance by a Party of its obligations under this Agreement within any period herein specified or implied during which that Party is required to carry out such obligations and notice of the Force Majeure is given as required by Clause 23.1 the period during which such obligations are to be performed or carried out is extended for a period equal to the period during which such obligations are substantially prohibited or delayed as result of Force Majeure. If any Force Majeure occurs and, on account of such Force Majeure, the Project is materially damaged or delayed and that damage or delay is not covered by insurance, Refiner shall not be obligated to restore or replace the Project unless the Parties agree on appropriate terms for that reinstatement. 24. TERMINATION 24.1 TERMINATION BY THE STATE Each of the following events (each a "REFINER TERMINATION EVENT"), if not cured within the time period permitted (if any) to cure, shall give rise to the right on the part of the State to terminate this Agreement pursuant to Clause 24.3; provided, however, that no such event shall be a Refiner Termination Event (i) if it results from a breach by the State of this Agreement or the Base Lease or (ii) if it is an event described in Clause 24.1(4) and it occurs as a result of or during a Force Majeure for the period provided pursuant to Clause 24.1(5): (1) During the Construction Period, an Abandonment by Refiner; (2) After the Commencement of Commercial Production, Refiner ceasing operations for a period of ninety (90) consecutive days without prior written notice to and the prior written consent of the State; (3) Except for the purpose of amalgamation or reconstruction, Refiner goes into voluntary or involuntary winding up as a result of a resolution being passed (and not being revoked within seven days) or an order being made (and not being cancelled within seven days) for the liquidation of Refiner; (4) Any material breach by Refiner of this Agreement that is not remedied within sixty (60) days after notice from the State stating that a material breach of this Agreement has occurred that could result in the termination of this Agreement, identifying the material breach in question in reasonable detail and demanding remedy thereof, or (5) Any Force Majeure other than a State Force Majeure that continues and prevents Operations for more than eighteen (18) months. 24.2 TERMINATION BY REFINER Each of the following events (each a "STATE TERMINATION EVENT"), if not cured within the time period permitted (if any) to cure, shall give rise to the right on the part of Refiner to terminate this Agreement pursuant to 34 Clause 24.3; provided, however, that no such event shall be a State Termination Event (i) if it results from a breach by Refiner of this Agreement, or (ii) if it is an event described in Clause 24.2(2), (4) or (5) and it occurs as a result of or during the period provided pursuant to Clause 24.2(6): (1) The expropriation, compulsory acquisition or nationalisation by the State or any Government Agency of (i) Refiner or any equity interest in Refiner, or (ii) any material asset or right of Refiner; (2) Failure by Refiner to obtain the Authorisations and tax clearances and exemptions specified in Schedule 1 within twelve (12) months after the Execution Date, so long as such failure is not the sole fault of, or solely caused by, Refiner; (3) Any material breach by the State of this Agreement or the Base Lease that is not remedied within sixty (60) days after notice from Refiner to the State stating that a material breach of this Agreement or the Base Lease, as the case may be, has occurred that could result in the termination of this Agreement, identifying the material breach in reasonable detail and demanding remedy thereof; (4) Any Material Change that (i) makes unenforceable, invalid or void any material undertaking of the State or any Government Agency under, or pursuant to this Agreement or the Base Lease or (ii) makes it unlawful for Refiner, its contractors, the Lenders or the Investors to make or receive any payment, to perform any obligation or to enjoy or enforce any material right under this Agreement, any agreement to which the Refiner is a party in connection with the Operations of the Refinery or any Financing Agreement, or any such payment, the performance of any such material obligation or the enjoyment or enforcement of any such material right becomes unenforceable, invalid or void as a result of any such Material Change, provided that, in the case of (i) and (ii) above, any such effect continues for more than ninety (90) days; (5) Any change in the laws of Papua New Guinea placing any material restrictions or limitations (other than restrictions or limitations that are in existence on the date of the execution of this Agreement) on the ability of Refiner to exchange Kina for United States Dollars or to remit United States Dollars or other foreign currency offshore or for the Investors to repatriate any capital, dividends, distributions or other proceeds from Refiner (provided that such distributions do not arise in connection with a breach of this Agreement) which restrictions or limitations remain in place for more than one hundred and eighty (180) days without an arrangement being provided to exempt Refiner and the Investors from all such restrictions and limitations; (6) Any Force Majeure that continues and prevents Operations for more than twelve (12) months; or (7) The circumstances described in Clause 14(e) have arisen and a suitable alternative site has not been found. 35 24.3 TERMINATION NOTICES (1) Upon the occurrence of a State Termination Event or a Refiner Termination Event, as the case may be, that is not cured or for which a cure is not being diligently pursued, within the applicable cure period, if any, by the State (in the case of a Refiner Termination Event) or Refiner or the Lenders (in the case of a State Termination Event), the other Party may, at its option, initiate termination of this Agreement by delivering a written notice (a "Notice of Intent to Terminate") of its intent to terminate this Agreement to the defaulting Party. (2) Following the delivery of a Notice of Intent to Terminate, the State and Refiner shall consult for a period of up to ten (10) days in case of a failure to make payments when due, and up to one hundred and twenty (120) days with respect to any other Refiner Termination Event or State Termination Event (or such longer period as they may mutually agree) as to what steps shall be taken with a view to remedying or mitigating the consequences of the relevant Refiner Termination Event or State Termination Event taking into account all prevailing circumstances. (3) Upon expiration of the consultation period described in Clause 24.3(2) and unless the State and Refiner shall have otherwise agreed or unless the Refiner Termination Event or State Termination Event giving rise to the Notice of Intent to Terminate shall have been remedied, the State (in the case of a Refiner Termination Event) or Refiner (in the case of a State Termination Event) may terminate this Agreement by delivering a Termination Notice to the other Parties. Upon the delivery of a Termination Notice, the rights and obligations of the Parties under this Agreement shall immediately terminate, and upon the satisfaction of such continuing rights and obligations, this Agreement shall immediately terminate. 24.4 TERMINATION BY EITHER PARTY Either the State or Refiner shall have the right to terminate this Agreement by notice in writing to each of the other Parties if the conditions precedent to the obligations of the Parties under Clause 3.3 have not been fulfilled within eighteen (18) months after the Execution Date, provided that neither Refiner or State may terminate the Project Agreement under this Clause 24.3 if such party is in breach of its obligations under Clause 4.1 or Clause 4.2, as applicable. 25. CONSULTATION Any of the Parties may at any time request consultation with the other Parties on the implementation, application or proposed amendment of this Agreement. Such consultation shall begin with thirty (30) days from the date the request is made by written notice to the other Parties, unless the Parties agree otherwise. 36 26. REMEDIES 26.1 LIQUIDATED DAMAGES FOR THE STATE'S FAILURE TO PROVIDE CRUDE ACCESS If Refiner is unable to purchase Crude Oil from domestic producers to meet its requirements as a result of the State's failure to meet its obligations under Clause 18 and as a consequence Refiner must purchase imported Crude Oil as a substitute for domestic Crude Oil, then the State shall pay Refiner in liquidated damages the amount in U.S. Dollars by which: (i) the aggregate cost of the Imported Crude Oil purchased by Refiner, including all transportation and landing costs, exceeds (ii) the cost of the same quantity of domestic Crude Oil at the prevailing market price and terms on the date on which Refiner purchased imported Crude Oil as a substitute including transportation and other landed costs. This amount shall accrue to Refiner as liquidated damages for failure by the State to meet its obligations under Clause 18 in lieu of and as a full substitute for any actual damages or claims for breach under Clause 18. 26.2 LIQUIDATED DAMAGES FOR THE STATE'S FAILURE TO ENSURE SALES TO DOMESTIC PRODUCERS If the State fails to meet its obligations under Clause 19.1, and, as a result of such failure, Refiner must sell Products at prices lower than the Import Parity Price, then State shall pay Refiner in liquidated damages the amount in U.S. Dollars by which: (i) the Import Parity Price for such Products on the date on which the sale of such Products would have occurred had the State fulfilled its obligations calculated based on the services that Refiner could have provided, exceeds (ii) the actual sales price of such Products. This amount shall accrue to Refiner as liquidated damages for failure by the State to meet its obligations under Clause 19 in lieu of and as a full substitute for any actual damages or claims for breach under Clause 19. 26.3 NO SET-OFFS, NO PENALTY (a) Any amount calculated and paid in accordance with this Clause 26 shall not be set off against or deducted from any other type of liability, damages or amounts due under this Agreement. (b) The Parties acknowledge that the liquidated damages set forth herein are reasonable and appropriate measures of the damages Refiner would suffer for failures by the State to meet its obligations under Clauses 18 and 19 and do not represent a penalty or consequential damages for losses sustained by Refiner as a result of such failures. 37 27. DISPUTES AND ARBITRATION 27.1 DISPUTES For the purposes of this Clause, "DISPUTE" means any dispute, disagreement, controversy or claim arising out of or relating to this Agreement or the interpretation or performance of provisions of this Agreement or the breach, termination or validity thereof, which the Parties are unable to resolve by mutual agreement within a reasonable time. It does not include any difference of view or disagreement which, pursuant to provisions of this Agreement, has been submitted for determination of a Sole Expert. 27.2 SUBMISSION TO ICSID The Parties irrevocably consent to submit any Dispute between the State, Developer and Refiner to the International Centre for Settlement of Investment Disputes ("ICSID") for settlement by arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "CONVENTION"). 27.3 ICSID ARBITRATION (a) For the purposes of Article 26(2)(b) of the Convention the Parties agree that, although Refiner is a national of Papua New Guinea, it is ultimately owned by United States corporations, and further that for the purposes of the Convention it shall be treated as a national of the United States. (b) An ICSID Arbitral Tribunal constituted pursuant to this Agreement (the "TRIBUNAL") shall consist of a single arbitrator appointed by agreement between the Parties, but if the Parties are unable to agree on the identity of the single arbitrator to be so appointed within 45 days of the date on which the Secretary-General of ICSID has dispatched notification of the registration of a request for arbitration, the Tribunal shall consist of three arbitrators. In that event, one arbitrator shall be appointed by each Party and the third arbitrator, who shall be the President of the Tribunal, shall be appointed by agreement between the Parties or in the absence of such agreement by the Chairman of the Administrative Council of ICSID in accordance with Article 38 of the Convention. (c) Nothing in any notice by the State pursuant to Article 25(4) of the Convention shall be read or construed as limiting the jurisdiction which a Tribunal established under the Convention pursuant to this Agreement would otherwise have to settle by arbitration a Dispute. (d) For the purposes of submission of any Dispute to arbitration by ICSID, the Parties agree (without limitation) that a Dispute about any of the following is fundamental to the Refiner's investment in the Project: (i) any of the matters which are the subject of conditions precedent set out in Schedule 1; 38 ] (ii) the continuation of the Base Lease and the Authorisations resulting from the fulfilment of the conditions precedent set out in Schedule 1; (iii) the right to retain foreign currency in foreign currency accounts and to convert Kina into foreign currency which can be remitted out of PNG, as provided for in Clause 10; (iv) access to PNG crude oil as provided for in Clause 18; (v) the right to sell its Products in PNG as provided for in Clause 19 (vi) non-discrimination and related matters under Clause 13; and (vii) the ability of Refiner to obtain financing on commercial terms. 27.4 AWARD An award or a decision, including an interim award or decision, in arbitral proceedings pursuant to the Convention shall be binding on the Parties and judgement on it may be entered in any court having jurisdiction for that purpose. 27.5 COSTS OF ARBITRATION Unless otherwise agreed or provided, the cost of any arbitration proceedings will be borne: (a) equally by the two parties to the Dispute where it has been referred jointly by them; or (b) otherwise, by the unsuccessful party in accordance with the ICSID Arbitration Rules. 27.6 STAY OF OTHER PROCEEDINGS Where a Dispute has been referred to arbitration pursuant to this Clause 27, neither party to the Dispute shall be entitled to exercise any rights or election, or commence or pursue any other action or proceedings, arising in consequence of any alleged default by the other arising out of the subject matter of the Dispute until the Dispute has been resolved by the decision of the arbitrators. 27.7 SOLE EXPERT Where any difference of view or disagreement between any two or more of the Parties is, pursuant to any other provision of this Agreement, submitted for determination of a Sole Expert, the Sole Expert shall act as an expert and not as an arbitrator, and accordingly the foregoing provisions of this Clause 27 do not apply. A determination by a Sole Expert shall be binding on the Parties. Unless otherwise agreed, the cost of submitting any such matter to a Sole Expert will be borne: 39 (a) if one Part calls for the matter to be determined by the Sole Expert and loses, by that Party; (b) if one Party calls for the matter to be determined by the Sole Expert and wins, equally by all Parties to the determination; and (c) if a number of Parties jointly submit the matter to be determined by the Sole Expert, equally by all of them. 28. SOVEREIGN IMMUNITY The State hereby unconditionally and irrevocably waives any claim to sovereign or other immunity: (a) In respect of arbitration proceedings; (b) In respect of proceedings to recognise, enforce or execute any such award including, without limitation, immunity from service of process and from the jurisdiction of any court; and (c) In respect of the execution of any such award against its assets. The State unconditionally and irrevocably agrees that the execution, delivery and performance by it of this Agreement and any other agreements relating to the Project to which it is a party constitute private and commercial acts. 29. LAW AND JURISDICTION 29.1 GOVERNING LAW This Agreement is governed by and shall be construed in accordance with the law in force in Papua New Guinea except insofar as the laws of Papua New Guinea are inconsistent with the rules of international law or relevant international convention, in which case the relevant rules of international law or the provisions of the relevant international convention will apply. 29.2 SUBMISSION TO JURISDICTION The Parties hereby submit to the non-exclusive jurisdiction of the National Court of Papua New Guinea (and any court hearing appeals from it) for: (a) the determination of any matter arising out of this Agreement or the Project which is not a Dispute referrable to arbitration under Clause 27 or a difference of view or disagreement referrable to a Sole Expert under Clause 27.7; and (b) the enforcement of any award resulting from arbitration under Clause 27. 30. ASSIGNMENT Subject to the provisions of Clause 11, a Party shall not assign in whole or in part the benefits or obligations arising under this Agreement without the consent in writing 40 of the other Parties which consent shall not be unreasonably withheld. Upon any assignment under this Clause 30, the party acquiring an interest hereunder shall be substituted in place of the Party whose interest was assigned under this Agreement. 31. OWNERSHIP OF MATERIALS AND CONFIDENTIALITY 31.1 CONFIDENTIALITY AND PUBLICITY All information exchanged between the State and the Refiner respectively during negotiations relating to the Refinery and this Agreement are confidential to the Parties and may not be disclosed to any person except: (a) with the consent of the Party that supplied the information; or (b) if required by the laws or by any Stock Exchange listing or similar rules of any jurisdiction to which a Party or any Affiliate is or becomes subject or by the order of a court of competent jurisdiction; or (c) if the information is generally and publicly available or becomes publicly available other than as a result of breach of this provision by the person disclosing the information; or (d) if the information was known by the disclosing party prior to it being disclosed by a Party in connection with the transactions contemplated by this Agreement. 31.2 DISCLOSURE OF CONFIDENTIAL INFORMATION A Party disclosing information under Clause 31.1 shall use all reasonable endeavours to ensure that persons receiving information from it are put under a binding obligation not to and do not disclose the information except in circumstances permitted by Clause 31.1. 32. MISCELLANEOUS 32.1 HEAD OFFICE Refiner shall maintain its principal place of business and head office in PNG during the Term. 32.2 WAIVER No Party shall be deemed to have waived any right under this Agreement unless such Party shall have delivered to the other Parties a written waiver signed by an authorised officer or representative of such waiving Party. No waiver by any Party of any default of another Party under this Agreement shall operate or be construed as a waiver of any right or subsequent default, whether of a like or different character. 41 32.3 SEVERABILITY If any provision of this Agreement shall be held to be invalid or unenforceable under the governing law of this Agreement or by a judgement or decision of any court of competent jurisdiction or any authority, whose decisions shall have the force of law binding on the Parties, the same shall be deemed to be severable and the remainder of this Agreement shall not be deemed to be affected or impaired thereby and shall remain valid and enforceable to the fullest extent permitted by law. Notwithstanding the foregoing the Parties will thereupon negotiate in good faith in order to agree the terms of a fair, reasonable and mutually satisfactory provision to be substituted for the provision so found to be void or unenforceable. 32.4 FURTHER ASSURANCE Each Party must do, sign, execute and deliver and must procure that each of its employees and agents does, signs, executes and delivers, all deeds, documents, instruments and acts reasonably required of it or them by notice from another Party to effectively carry out and give full effect to this Agreement and the rights and obligations of the Parties under it. 32.5 APPLICATION FOR AUTHORISATIONS Wherever in this Agreement the State is obliged to ensure that Developer, Refiner or the Project is granted or issued with any Authorisation, Developer or Refiner (as the case may be) must first apply in the normal course and in a timely manner (as required under relevant PNG legislation) for such Authorisation and comply with any necessary formal procedures associated with the grant or issue of such Authorisation. 32.6 PROTECTION OF PROJECT SITE The State shall provide protection to the Project Site and shall use its best endeavours to intervene in any dispute to effect a resolution and a resumption of operation of the Refinery. 32.7 ENTIRE AGREEMENT This Agreement is the entire agreement of the Parties on the subject matter. The only enforceable obligations and liabilities of the Parties in relation to the subject matter are those contained in this Agreement and the Base Lease. All representations, warranties, communications and prior agreements in relation to the subject matter are merged in and superseded by this Agreement. The Parties expressly negate any other representation or warranty, written or oral, express or implied prior to the execution of this Agreement. 32.8 COSTS GENERALLY Each Party must bear and is responsible for its own costs (including without limitation legal costs) in connection with the negotiation, preparation, execution, and completion of this Agreement. 42 21 May 97 32.9 AGREEMENT PREVAILS If there is any inconsistency (whether expressly referred to or to be implied from this Agreement or otherwise) between the provisions of this Agreement and those of any of the agreements and contracts referred to in this Agreement, those agreements and contracts are to be read subject to this Agreement and the provisions of this Agreement prevail to the extent of the inconsistency. 32.10 RIGHTS CUMULATIVE The rights and remedies provided in this Agreement are cumulative with and do not exclude any rights or remedies provided by law. 32.11 COUNTERPARTS This Agreement may be executed in any number of counterparts and all of those counterparts taken together constitute one and the same instrument. 32.12 RELATIONSHIP OF PARTIES Nothing contained herein shall be construed as establishing or creating between the State and the Refiner the relationship of employer and employee or principal and agent, or partnership or joint venture. 32.13 LISTING ON PNG STOCK EXCHANGE Refiner agrees to consider that within four (4) years of Commencement of Commercial Production, that up to 15% of the ordinary shares of the issued capital of Refiner could be made available to be listed and sold at a price acceptable to Refiner on a local PNG stock exchange, if and when such an exchange becomes operational, pending the acceptance of listing requirements, board approval and other issues deemed acceptable to Refiner. 32.14 AMENDMENT OF AGREEMENT All modifications, amendments or changes to this Agreement, whether made simultaneously with or after the execution of this Agreement, must be in writing and executed by the Parties to be binding. 32.15 NOTICES All notices hereunder, except those specifically provided for under other provisions of this Agreement, shall (without prejudice to any other means of service) be deemed duly given if in writing and sent by pre-paid post registered or certified mail, messenger or telefax addressed to the respective parties at the addresses stated below or such other addresses as they shall respectively hereafter designate in writing from time to time. 43 21 May 97 INDEPENDENT STATE OF PAPUA NEW GUINEA Attention: The Secretary Address: Department of Mining and Petroleum Private Mail Bag Port Moresby Post Office National Capital District Papua New Guinea Facsimile: 675 322-7617 INTEROIL PTY LIMITED AND EP INTEROIL, LTD. Address: Director P O Box 1971 Port Moresby National Capital District Papua New Guinea Facsimile: 675 320-2601 WITH A COPY TO: Enron Papua New Guinea Ltd. 333 Clay Street, Suite 1800 Houston, Texas 77002 United States of America Attention: Mr Glen B Rector Facsimile: 1-713-646-6190 44 21 May 97 EXECUTED AS AN AGREEMENT SIGNED for and on behalf of ) THE INDEPENDENT STATE OF ) PAPUA NEW GUINEA by ) /s/ SIR WIWA KOROWI SIR WIWA KOROWI, G.C.M.G., K., ST. J ) ------------------------------------ Governor General, acting with and in ) GOVERNOR GENERAL accordance with the advice of the ) SIR WIWA KOROWI G.C.M.G., K., St. J. National Executive Council in the ) presence of: /s/ SIR ALBERT KIPALAN, MP - ------------------------------- Witness Name (printed) Sir Albert Kipalan, MP SIGNED for and on behalf of ) /s/ CHRISTIAN M. VINSON INTEROIL PTY LIMITED by its duly ) ------------------------------------ appointed attorneys under a Power of ) Attorney Attorney dated May 1997 ) Name (printed): in the presence of: ) Christian M. Vinson /s/ PETER INGLIS /s/ GLEN B. RECTOR - ------------------------------- ------------------------------------ Witness Attorney Name (printed): Name (printed): Peter Inglis Glen B. Rector SIGNED for and on behalf of ) EP INTEROIL, LTD by its duly ) /s/ CHRISTIAN M. VINSON appointed attorneys under a Power of ) ------------------------------------ Attorney dated May 1997 ) Attorney in the presence of: ) Name (printed): Christian M. Vinson /s/ KELLY KIMBERLY /s/ GLEN B. RECTOR - ------------------------------- ------------------------------------ Witness Attorney Name (printed): Name (printed): Kelly Kimberly Glen B. Rector 45 21 May 97 EXTENSION DEED THE INDEPENDENT STATE OF PAPUA NEW GUINEA (State) INTEROIL LIMITED (Refiner) EP INTEROIL, LTD. (Developer) (PAPUA NEW GUINEA LOGO) THE INDEPENDENT STATE OF PAPUA NEW GUINEA Oil and Gas Act, No. 49 of 1998 s.100 MEMORANDUM OF APPROVAL (OF AN INSTRUMENT CREATING AN INTEREST) PETROLEUM PROCESSING FACILITY LICENCE NO. 1 I, Dr FABIAN POK, M.P., Minister for Petroleum and Energy, by virtue of the powers conferred upon me by the Oil and Gas Act No. 49 of 1998 and all other powers me enabling, do hereby approve the within application pursuant to Section 100 of the said Act. DATED this 11th day of August ,2000 /s/ HON. Dr FABIAN POK, M.P. - --------------------------------- HON. Dr FABIAN POK, M.P. Minister for Petroleum and Energy The Minister for Petroleum and Energy on the 16th day of August, 2000 approved the within application DATED this 17th day of August, 2000 /s/ C. WARRILLOW - --------------------------------- C. Warrillow A Delegate of the Director ENTERED IN THE REGISTER this 17th day of August,2000 /s/ C. WARRILLOW - --------------------------------- C. Warrillow A Delegate of the Director CONTENTS
CLAUSE HEADING PAGE 1. INTERPRETATION .......................................................... 2 2. PROJECT AGREEMENT IN FULL FORCE AND EFFECT .............................. 3 3. VARIATIONS OF PROJECT AGREEMENT ......................................... 3 4. CONFIRMATION OF GOOD STANDING ........................................... 7 5. RATIFICATION AND CONFIRMATION ........................................... 7 6. DISPUTE RESOLUTION AND SOVEREIGN IMMUNITY ............................... 7 7. LAW AND JURISDICTION .................................................... 7 8. ADMINISTRATIVE PROVISIONS ............................................... 8
EXTENSION DEED DATED: 1st July 1999 (STAMP) PARTIES 1. THE INDEPENDENT STATE OF PAPUA NEW GUINEA care of the Office of National Planning, Vulupindi Haus, 3rd Floor, PO Box 710, Waigani, National Capital District, Papua New Guinea (STATE). 2. INTEROIL LIMITED, a company duly incorporated in Papua New Guinea, of PO Box 1971, Port Moresby, National Capital District, Papua New Guinea (REFINER). 3. EP INTEROIL, LTD., a company formed under the laws of the Cayman Islands, Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies (DEVELOPER) BACKGROUND A. The State, Refiner and Developer are parties to an agreement dated 29 May 1997, which by a letter dated 2 October 1998 from the Minister of Petroleum and Energy, was amended to extend to 30 June 1999 the time for the Developer and Refiner to achieve financial closure (the PROJECT AGREEMENT). B. The Project Agreement contains various conditions that the Developer and/or Refiner must fulfill and in accordance with the Project Agreement the Refiner and Developer have satisfied certain of these conditions. C. The parties wish to extend the time to comply with some of the conditions and to delete some of the other conditions in the Project Agreement and have agreed to amend the Project Agreement in accordance with the terms of this Deed. D. The parties otherwise wish to reaffirm and ratify their obligations under the Project Agreement. PAGE 2 OPERATIVE PROVISIONS 1. INTERPRETATION 1.1 INTERPRETATION In this Deed unless the context otherwise requires: reference to a person includes any other entity recognised by law and vice versa; the singular includes the plural and vice versa; words importing one gender include every gender; any reference to any of the parties by their defined terms includes that party's executors, administrators or permitted assigns or, being a company, its successors or permitted assigns; an agreement, representation, or warranty on the part of two or more persons binds them jointly and severally; an agreement, representation, or warranty in favour of two or more persons is for the benefit of them jointly and severally; clause headings are for reference purposes only; reference to a statute, ordinance, code, or other law includes regulations and other instructions under it and consolidations, amendments, re-enactments, or replacements of it. 1.2 DEFINITION In this Deed unless the context otherwise requires: PROJECT AGREEMENT means the agreement titled "Project Agreement" dated 29 May 1997 between the State, the Refiner and the Developer including all schedules, appendices, attachments and annexures to that agreement and as varied by the Variation Letter; VARIATION LETTER means a letter dated 2 October 1998 from the Minister of Petroleum and Energy addressed to Mr Phil Mulacek, InterOil. 1.3 INCORPORATION A word or phrase (other than one defined in this Deed) defined or incorporated in the Project Agreement has the same meaning in this Deed with necessary consequential changes as if they were set out in full in this Deed. 2. PROJECT AGREEMENT IN FULL FORCE AND EFFECT The State, the Refiner and the Developer confirm that the Project Agreement is in full force and effect and as at the date of this Deed has not been varied (except as specified in the Variation Letter), rescinded or terminated. 3. VARIATIONS OF PROJECT AGREEMENT On and from the date of this Deed, the Project Agreement is amended as follows. (a) Clause 1.1 is amended by inserting the following as a new definition: "Domestic Refiners" means the Developer and/or Refiner and includes the Chevron refinery facility located in the Southern Highlands Province and any other comparable refiner of Product established and operating in PNG;" (b) Clause 3.2(e) is deleted (c) Clause 3.3 is amended by inserting the following as an additional paragraph to that clause after sub-clause 3.3(c): "It is agreed between the Parties that Clauses 3.3(a), 3.3(b) and 3.3(c) are for the sole benefit of the Refiner and the Developer and only those Parties may waive those conditions precedent by notice in writing to the State." (d) Clause 4.3 is amended as follows: (i) The second milestone pursuant to the Milestone Schedule in clause 4.3 is deleted and replaced with the following: PAGE 4 "Milestone Date (unless otherwise agreed by the Parties) Satisfaction of the condition Thirty-six (36) precedent months after the specified in Execution Date" Clause 3.3(a) (ii) The third and fourth milestones pursuant to the Milestone Schedule in Clause 4.3 are deleted. (e) Clause 10.1(b) is amended by inserting the words "and the Developer (on a consolidated basis)" after the word "Refiner" appears in the first line of that clause. (f) Clause 10.3(c) is amended by inserting the words "(other than the Developer)" after the words "third parties" as it appears in the second line of that Clause 10.3(c). (g) Clause 10.3(e) is amended by inserting the words "and the Developer (on a consolidated basis)" after the word "Refiner" as it appears in the first line of that Clause 10.3(e). (h) Clause 11.1 is amended by inserting the words "and the Developer" after the word "Refiner" as it appears in lines 3, 4 and 6 of that Clause 11.1. (i) Clause 19.1 is deleted and replaced with the following: "19.1 OBLIGATION TO PURCHASE FROM DOMESTIC REFINERS To the extent that a Domestic Refiner will from time to time offer to Domestic Distributors Product that is included in PLATT'S (or, if PLATT'S no longer reports Singapore Product Postings, another price reporting service that is mutually satisfactory to the State and the Refiner) by the refiners listed in sub-paragraph (a) of Appendix "A", the State will ensure that Domestic Distributors purchase such Product first and foremost from the Domestic Refiner, provided such Product is being supplied by the Domestic Refiner in conformity with the PAGE 5 following terms or such other terms as may be acceptable from time to time to the Domestic Refiner: (i) the Product must be paid for in full within 20 days of the date nominated for delivery and is supplied in volumes ordinarily available to purchasers of Product in PNG from Singapore; (ii) all Product will be supplied FOB at the Domestic Refiner's nominated locations in PNG; (iii) the Product is of a type ordinarily quoted in the manner specified in Appendix "A"; (iv) the Product is supplied at prices equivalent to the Import Parity Price calculated in accordance with Appendix "A" (j) Clause 19 is further amended by inserting the following as an additional Clause 19.4: "19.4 ENFORCEMENT-PURCHASE FROM DOMESTIC PRODUCERS The State must carry out its obligations under Clauses 19.2 and 19.3 within 60 days after notification in writing from a Domestic Refiner to the effect that Domestic Distributors or Importers of Product are: (a) refusing to purchase Product from a Domestic Refiner or are involved in conduct intended to or likely to avoid or frustrate the ability of Domestic Refiners of Product to sell Product in domestic markets at the Import Parity Price for such Product; or (b) involved in conduct for the purpose of dumping or otherwise avoiding or frustrating the ability of Domestic Refiners of Product to sell Product in domestic markets at the Import Parity Price for such Product. Upon receiving such notification the State will seek to pass legislation and regulations under the Customs Tariff Act 1990 (as amended) and any other relevant law or power so as to impose additional import duties on Products that may be imported into PNG in violation of the rights to supply Product to Domestic Distributors PAGE 6 hereby guaranteed to the Developer and Refiner as necessary to: (c) discourage such violations; and (d) establish a source from which payments the State may become liable to make to the Developer and/or Refiner under Clause 26 may be funded." (k) Clause 24.4 is amended by: (i) replacing the words "Clause 3.3" in the third line with the words "Clause 3.3(a)"; and (ii) deleting the words and figures "eighteen (18)" in the fourth line and inserting the words and figures: "thirty six (36)". (1) Clause 26.1 and Clause 26.2 are amended by replacing all references to "Refiner" with "the Developer and/or Refiner". (m) Clause 26 is further amended by inserting the following as an additional sub-clause 26.3. "26.3 PAYMENT OF LIQUIDATED DAMAGES (a) To the extent that the Refiner and/or Developer seeks to recover liquidated damages from the State, the Refiner and/or Developer must provide notice to the State ("LIQUIDATED DAMAGES NOTICE")giving details of the amount of liquidated damages claimed. (b) The State must pay the liquidated damages within 60 days of the date of the Liquidated Damages Notice. (c) The amount specified in the Liquidated Damages Notice is conclusive evidence (in the absence of manifest error) as to the amount of damages payable." (n) The current clause 26.3 entitled "No Set-offs, No Penalty" will be deemed to be Clause 26.4 and all reference to Clause 26.3 will be deemed to be adjusted accordingly. (o) Clause 32.15 is amended by deleting the words commencing with: "with copy to" and ending with "Facsimile 1-713-646-6190" where appearing after the address of InterOil Pty Ltd in that clause. PAGE 7 4. AUTHORISATIONS The State will ensure that all Authorisations now applied for but unprocessed (in particular, application for Harbours Board approvals, grant of import duty exemption, approval of financing plan, foreign exchange and Authorisations consequent thereto and otherwise generally required for the purposes of project finance, construction and operations) are forthwith dealt with according to law and that the Refiner and/or Developer receive full, fair and timely responses within 30 days from Government departments, agencies and authorities in relation to the grant of all Authorisations. 5. CONFIRMATION OF GOOD STANDING 5.1 The State acknowledges and confirms that as at the date of this Deed neither the Refiner nor the Developer are in breach of any obligations under the Project Agreement. 5.2 The State acknowledges and confirms that as at the date of the Deed all obligations required to be performed by the Developer or Refiner have either been performed, or alternatively, the date by which these obligations must be performed, whether through extension with the agreement of the State, or otherwise, have not yet occurred. 6. RATIFICATION AND CONFIRMATION Except to the extent that it is amended by this Deed, the terms and conditions of the Project Agreement are ratified and confirmed, and as amended the Project Agreement continues in full force and effect. 7. DISPUTE RESOLUTION AND SOVEREIGN IMMUNITY The parties agree that clauses 27 and 28 of the Project Agreement are incorporated into, and form part of this Deed as if set out in full in this Deed. 8. LAW AND JURISDICTION 8.1 GOVERNING LAW This Deed is governed by and shall be construed in accordance with the law in force in Papua New Guinea except insofar as the laws of Papua New Guinea are inconsistent with the rules of international law or relevant international convention, in which case the relevant PAGE 8 rules of international law or the provisions of the relevant international convention will apply. 8.2 SUBMISSIONS TO JURISDICTION The parties hereby submit to the non-exclusive jurisdiction of the National Court of Papua New Guinea (and any court hearing appeals from it) for: (a) the determination of any matter arising out of this Deed which is not a Dispute referable to arbitration under clause 27 of the Project Agreement (as incorporated into this Deed) or a difference of view or disagreement referable to a Sole Expert, under clause 27 of the Project Agreement (as incorporated into this Deed); and (b) the enforcement of any award resulting from arbitration under clause 27 of the Project Agreement (as incorporated into this Deed). 9. ADMINISTRATIVE PROVISIONS 9.1 SEVERABILITY If any provision of this Deed shall be held to be invalid or unenforceable under the governing law of this Deed or by a judgement or decision of any court of competent jurisdiction or any authority, whose decisions shall have the force of law binding on the parties, the same shall be deemed to be severable and the remainder of this Deed shall not be deemed to be affected or impaired thereby and shall remain valid and enforceable to the fullest extent permitted by law. Notwithstanding the foregoing the parties will thereupon negotiate in good faith in order to agree the terms of a fair, reasonable and mutually satisfactory provision to be substituted for the provision so found to be void or unenforceable. 9.2 FURTHER ASSURANCE Each party must do, sign, execute and deliver and must procure that each of its employees and agents does, sign, executes and delivers, all deeds, documents, instruments and acts reasonably required of it or them by notice from another party to effectively carry out and give full effect to this Deed and the rights and obligations of the parties under it. PAGE 9 9.3 COSTS GENERALLY Each party must bear and is responsible for its own costs (including without limitation legal costs) in connection with the negotiation, preparation, execution and completion of this Deed. 9.4 DEED PREVAILS If there is any inconsistency (whether expressly referred to or to be implied from this Deed or otherwise) between the provisions of this Deed and those of any of the agreements and contracts referred to in this Deed, those agreements and contracts are to be read subject to this Deed and the provisions of this Deed prevail to the extent of the inconsistency. 9.5 RIGHTS CUMULATIVE The rights and remedies provided in this Deed are cumulative with and do not exclude any rights or remedies provided by law. 9.6 COUNTERPARTS This Deed may be executed in any number of counterparts and all of those counterparts taken together constitute one and the same instrument. 9.7 RELATIONSHIP OF PARTIES Nothing contained herein shall be construed as establishing or creating between the State and the Refiner the relationship of the employer and employee or principal and agent, or partnership or joint venture. PAGE 10 EXECUTED as a deed. ) SIGNED for and on behalf of THE ) INDEPENDENT STATE OF PAPUA ) NEW GUINEA by SIR SILAS ) ATOPARE, GCMG., K. ST. J., ) /s/ SILAS ATOPARE Governor-General, acting with and in ) --------------------------- accordance with the advice of the ) [GOVERNOR GENERAL] National Executive Council in the ) SIR SILAS ATOPARE, GCMG., presence of: ) K. ST. J. ) 1st July, 1999 /s/ TIPO VIATIDA ) - --------------------------------------- ) WITNESS TIPO. VIATIDA - --------------------------------------- NAME (PLEASE PRINT) SIGNED for and on behalf of ) INTEROIL LIMITED by its duly ) authorised representative in the ) presence of: ) ) /s/ DAVID E. COYLE ) (SEAL) - --------------------------------------- ) SIGNATURE OF WITNESS ) /s/ CHRISTIAN M. VINSON ) ------------------------------ David E. Coyle - Company Secretary ) Christian M. Vinson - Director - --------------------------------------- ) NAME OF WITNESS ) ) P.O. Box 1971, Port Moresby ) - --------------------------------------- ) ADDRESS OF WITNESS ) ) ) SIGNED for and on behalf of ) EP INTEROIL, LTD. by its duly ) authorised representative in the ) presence of: /s/ DAVID E. COYLE ) /s/ CHRISTIAN M. VINSON - --------------------------------------- ) ------------------------------ SIGNATURE OF WITNESS ) Christian M. Vinson - Director ) ) David E. Coyle - Company Secretary ) - --------------------------------------- ) NAME OF WITNESS ) ) P.O. BOX 1971, Port Moresby ) - --------------------------------------- ) ADDRESS OF WITNESS EX-99.17 12 h19854exv99w17.txt AGREEMENT FOR THE SALE AND PURCHASE OF NAPHTHA EXHIBIT 17 AGREEMENT FOR THE SALE AND PURCHASE OF NAPHTHA DATED: FEBRUARY 6, 2001 1 AGREEMENT FOR THE SALE AND PURCHASE OF NAPHTHA DATE: FEBRUARY 6TH, 2001 PARTIES: EP INTEROIL, LTD. Incorporated in the Cayman Islands of Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies (the SELLER). SHELL INTERNATIONAL EASTERN TRADING COMPANY owned by Shell Eastern Trading (Pte) Ltd incorporated in Singapore of Shell House #04-00, UE Square, 83 Clemenceau Avenue, Singapore 239920 (the BUYER). RECITAL The Seller wishes to sell and the Buyer wishes to buy Naphtha produced at the InterOil Refinery in Port Moresby Harbour, Papua New Guinea, and the parties have agreed to enter into this agreement to provide for the general terms and conditions under which such sales will take place. OPERATIVE PART The Seller agrees to sell and the Buyer agrees to buy Naphtha under the General Terms and Conditions set out in the Schedule to this Agreement for the Term defined in the Schedule. 2 SCHEDULE GENERAL TERMS AND CONDITIONS FOR THE SALE AND PURCHASE OF NAPHTHA 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS 1.2 REFERENCES AND HEADINGS 1.3 GOVERNING LAW 1.4 WAIVER 1.5 VARIATIONS 2 CONTRACT TERM 3 SALE 3.1 CONTRACT QUANTITY 3.2 NAPHTHA STORAGE TANKS 4 DELIVERY TITLE RISK 4.1 DELIVERY 4.2 TITLE 4.3 WARRANTY OF TITLE 5 PRICE 5.2 CESSATION OR INTERRUPTION OF PRICE QUOTATIONS 3 5.3 ROUNDING OFF 5.4 BILL OF LADING DATE 5.5 LOST BILL OF LADING 6 PAYMENT TERMS 6.1 INVOICE FOR LIFTINGS 6.2 TIME AND METHOD OF PAYMENT 6.3 INTEREST ON LATE PAYMENTS 7 LIFTING CRITERIA 7.1 ESSENTIAL CRITERIA 8 SCHEDULING, TANKER NOMINATION AND LOADING 8.1 FORECAST PRODUCTION AND OTHER INFORMATION 8.2 NOMINATED DATE RANGE AND QUANTITIES 8.4 NOMINATION AND VERIFICATION OF TANKER 8.5 TANKER SUBSTITUTION 8.6 AGREED ARRIVAL DATE 8.7 REJECTION OF AGREED ARRIVAL DATE 8.8 TANKER ARRIVAL 8.9 NON-COMPLIANCE WITH TANKER SPECIFICATIONS 9 BERTH AND LOADING 9.1 SAFE BERTH 4 9.2 LAYTIME 9.3 DEMURRAGE 9.4 ACCEPTANCE OF PORT REGULATIONS 9.5 BUYER"S TANKER 10 QUANTITY/QUALITY DETERMINATION 10.1 PRIMA FACIE CONCLUSIVE 10.2 TANK GAUGING 10.3 NOTIFICATION OF CLAIMS 10.4 TESTS 10.5 QUALITY SPECIFICATION 10.6 INDEPENDENT INSPECTOR 11 FORCE MAJEURE 11.1 RELIEF FROM OBLIGATIONS 11.2 PAYMENTS AND MARKETS 11.3 NOTICE 11.4 OBLIGATIONS OF DELAYED PARTY 11.5 EXTENDED FORCE MAJEURE 12 RISK STRUCTURE 12.1 INSURANCE 12.2 LIABILITY FOR INDIRECT DAMAGES 5 13 POLLUTION 14 TAXES, DUES, DUTIES, IMPOSTS AND GST 14.1 PORT CHARGES 14.2 NEW IMPOSTS 15 NOTICE 15.1 MEANS OF NOTICE 15.2 CHANGE OF ADDRESS 15.3 REPRESENTATIVES 15.4 AUTHORITY OF THE REPRESENTATIVES 15.5 WARRANTY 16 ASSIGNMENT 16.1 SUCCESSORS AND ASSIGNS 16.2 CONDITIONS OF ASSIGNMENT 17 CONFIDENTIALITY 17.1 NON-DISCLOSURE 17.2 EXCLUSIONS 18. DISPUTE RESOLUTION 18.1 NOTICE OF DISPUTE 18.2 MEETING 18.3 FURTHER ALTERNATIVE DISPUTE RESOLUTION 6 18.4 EXPERT 18.5 ARBITRATION 18.6 CONFIDENTIALITY OF PROCEEDINGS 18.7 REPRESENTATION 18.8 CONTINUED PERFORMANCE OF OBLIGATIONS 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS As used in these General Terms and Conditions or in the Agreement or in any invoice or order relating to Naphtha sold under the Agreement, the following terms shall have the following meaning: "A$" means Australian Dollars; "ACCEPTED QUANTITY" means the quantity (plus or minus 5% operational tolerance ) of Naphtha agreed upon between Buyer and Seller pursuant to Clause 8.2 hereto; "AGREED ARRIVAL DATE" means the 3 day period entirely within the Date Range, "ALDR-3", in which the Buyer shall present its Tanker for loading at the Moorings for a lifting; "AGREEMENT" means the Agreement between Seller and Buyer to which these General Terms and Conditions are attached as a schedule and form part or which by reference expressly incorporates these General Terms and Conditions; "AFFILIATE" with respect to the Parties shall mean any Entity directly or indirectly controlling, controlled by, or under common control with the Parties. For the purposes of this definition, the term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Entity, whether through the 7 ownership of voting securities or by contract or otherwise. With respect to the Buyer, "Affiliate" or "affiliated company" of Buyer means any company (other than Buyer) which is directly or indirectly affiliated with N.V. Koninklijke Nederlandsche Petroleum Maatschappij and/or The "Shell" Transport and Trading Company p.l.c; For the purposes of the foregoing a particular company is: directly affiliated with another company if the latter holds fifty percent (50%) or more of the shares or similar entitlements carrying the right to vote at a general meeting (or its equivalent) of the former; and indirectly affiliated with a company (hereinafter in this paragraph called "the parent company") if a series of companies can be specified beginning with the parent company and ending with the particular company, so related that each company is directly affiliated with one or more of the companies earlier in the series; "API" means American Petroleum Institute; "ASTM" means American Society for Testing and Materials; "BARREL" means a volume of 42 US standard gallons at 60(degree)F; "BILL OF LADING" means a clean, full set of bills of lading in the form requested by Buyer issued by Seller for the Naphtha loaded into Buyer's Tankers as proof of delivery of the Naphtha; "BILL OF LADING DATE" has the meaning given in Clause 5.4 hereto; "BUYER" means the entities so described in the Agreement; "CONTRACT QUANTITY" means all Naphtha that Seller makes available for export from InterOil Facilities in Clause 3; "DATE RANGE" has the meaning the period during which a lifting of Naphtha is intended to occur; "DELIVERY POINT" means the point at which Naphtha passes the loading hose flange on the manifold of the Tanker at the Moorings of the InterOil Facilities; 8 "DISCLOSING PARTY" has the meaning given in Clause 16.1 hereto; "ENTITY" means an individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, unincorporated association, nominee, joint venture or other entity; "ETA" means estimated time of arrival; "FOB" means free on board as defined by INCOTERMS 2000 edition; "FORCE MAJEURE" means any of the circumstances described in Clause 11.1 hereto; "GENERAL TERMS AND CONDITIONS" means these terms and conditions for the sale and purchase of Naphtha, that form part of the Agreement; "HVN" means heavy grade Naphtha, HVN - BOILING RANGE 105 DEG C UP TO 155 DEG C, AS GIVEN IN CLAUSE 5; "INTEROIL FACILITIES" means the facilities on InterOil's Marine Jetty, Napa Napa, Port Moresby Papua New Guinea, on and offshore for the production, transportation and storage of Naphtha and other petroleum liquids; "INTEROIL REFINERY" means the crude oil refinery and InterOil Facilities at Napa Napa, Port Moresby, Papua New Guinea; "IP" means Institute of Petroleum; "LIBOR" means the Interbank Offering Rate for one month as quoted by Royal Bank of Scotland PLC, in effect at or about 10:00 am New York time on the due date, or if not quoted on the due date, the last date it is quoted immediately prior to the due date of payment for the amount and period overdue; "LAYTIME" means the period as described in Clause 9.2 hereto; "LVN" means light grade Naphtha, LVN - BOILING RANGE 25 DEG C TO 90 DEG C, per Cause 5, 9 "METRIC TON" shall mean metric ton, as shown as "tonnes", "mt" or "ton"; "MOORINGS" means the facilities for mooring Tankers at the Port; "MVN" means medium grade Naphtha, MVN - BOILING RANGE 90 DEG C TO 105 DEG C, PER CLAUSE 5; "NAPHTHA " means petroleum liquids with a final boiling point of 170degC or less, and a maximum (reid) vapour pressure of 12.5 psi, produced from the InterOil Refinery; "NAPHTHA PRICE" means the price payable by Buyer to Seller for Naphtha as described in Clause 5 hereto; "NOMINATED QUANTITY" means the quantity of Naphtha nominated by Seller for lifting pursuant to Clause 8.2(a) hereto; "NAPHTHA STORAGE TANK" has the meaning given in Clause 3.3 hereto; "NOTICE OF READINESS" means the notice given to Seller's Representative by the master of the Tanker and that the Tanker has arrived at the anchorage designated by Seller and is ready in all respects to enter the Moorings and that the Tanker has received all clearances required by applicable laws or regulations including, without limitation on the foregoing, clearances from Customs and Health Authorities; "OTHER PARTY" means an Entity other than Buyer and Seller; "OWNING PARTY" has the meaning given in Clause 16.1 hereto; "PARTY" means a party to the Agreement for the time being and includes its successors and permitted assigns; "PLATTS" means the Price Reporting arm of Standard and Poor's, New York, United States of America; ""PLATTS MOPJ" has the meaning Mean of Price Japan for Naphtha as reported by Platts, given in Clause 5.1 hereto; 10 "PLATTS MOPS" has the meaning Mean of Price Singapore for Naphtha as reported by Platts, given in Clause 5.1 hereto; "PORT" means the Marine Jetty of the InterOil Refinery; "PORT REGULATIONS" means any Port regulations for Port Moresby Harbour, by a Government or Governmental appointed body and appropriate marine facility/jetty guidelines for the use at the InterOil Refinery and InterOil Facilities and the InterOil marine jetty guidelines in the Port Moresby Harbour, Port Moresby, Papua New Guinea at the InterOil Tanker loading facilities to be issued by Seller to Buyer by no later than November 30th 2001, pursuant to Clause 9.4 hereto; "PROVISIONAL PRICE" has the meaning given in Clause 6.2 (b) for provisional price when final price is not known at time of invoicing, "REPRESENTATIVE" means Buyer's Representative, Buyer's Operational Representative, Seller's Representative or Seller's Operational Representative as the case may be appointed as such from time to time under Clause 14.3; "SELLER" means E.P. InterOil Limited of the Cayman Islands; "SELLER'S REPRESENTATIVE" means the person appointed as such from time to time under Clause 14.4; "TANKER" means the tanker or vessel provided by Buyer to lift Naphtha hereunder; "TANKER OWNER" means any or all of the owner, disponent owner, charterer or operator of the Tanker; "TERM" has the meaning given in Clause 2.3; and "USD" means United States Dollar currency 11 1.2 REFERENCES AND HEADINGS Unless the context otherwise requires, in these General Terms and Conditions: (a) references to Clauses are to clauses of these General Terms and Conditions; (b) references to the singular include the plural and vice versa; (c) paragraph headings in these General Terms and Conditions have been inserted for the purpose of reference only and shall have no effect whatsoever on the meaning, interpretation or construction of the provisions hereof; (d) references to days weeks or months means calendar days, weeks or months; and (e) a reference to "dollars" or "cents" is to United States of America currency, unless stated otherwise. 1.3 GOVERNING LAW (a) This Agreement shall be governed by and construed in accordance with the law of England, and for the purposes specifically of Clause 17.5 below each of the Parties agrees to submit to the jurisdiction of the courts of England. (b) The Parties do not intend that any term of this Agreement should be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement. (c) The United Nations Convention on Contracts for the International Sale of Goods of Vienna, 11th April 1980, shall not apply to this Agreement. 12 1.4 WAIVER No waiver of any provision of this Agreement nor consent to any departure therefrom, by any of the Parties shall be effective unless the same shall be in writing and then such waiver or consent shall be effective only in the specific instance and for the purpose for which it is given. No default or delay on the part of either of the Parties in exercising any rights, powers or privileges hereunder shall operate as a waiver thereof or of any other right hereunder; nor shall a single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 1.5 VARIATIONS This Agreement cannot be modified in any way except in writing and signed by the Parties. 2 TERM & QUANTITY 2.1 The Contract Quantity of Naphtha shall be delivered by Seller for export from InterOil Facilities delivered during the Term as defined in Clause 2.3. 2.2 Not Used 2.3 The Term of this Agreement is for three years from the Bill of Lading date of the first Naphtha export cargo from the InterOil Facilities. At the end of the three year term this Agreement shall terminate unless mutually agreed in writing by both parties. 3 SALE 3.1 CONTRACT QUANTITY Seller agrees to sell and supply and Buyer agrees to purchase, receive and pay for all of the quantity of Naphtha available for export from the InterOil Refinery and made available for lifting at the Delivery Point during the Term pursuant to the Agreement. 13 3.2 CARGO QUANTITY Each Naphtha cargo (whether one individual grade or a combination of LVN, MVN, HVN grades) shall be lifted in shipments of no less than 10,000 and no greater than 35,000 metric tonnes. Buyer from time to time may reasonably request to load smaller parcels of LVN, MNV, or HVN should it wish to do so for freight optimisation, without financial penalty to Seller. In co-operation with Buyer, Seller will provide commercially reasonable endeavours to accede to such requests. 3.3 NAPHTHA STORAGE TANKS Buyer acknowledges the following with regard to the storage tanks on the InterOil Refinery site dedicated to the storage of Naphtha ("NAPHTHA STORAGE TANK"): (a) the Naphtha Storage Tanks have a total combined effective storage net capacity of 350,000 net U.S. barrels. The assumed export tankage is to be of 150,000 bbls, 125,000 bbls and 75,000 bbls per tank, each tank being capable of being in LVN, HVN or MVN service respectively and, with Seller's agreement, interchangeably. (b) Buyer shall use reasonable endeavors to work with Seller to minimise the impact of liftings during periods of non-routine operational maintenance on the InterOil Refinery and InterOil Facilities, including but not limited to the Naphtha Storage Tanks. All routine tank maintenance shall be advised by Seller at no less than 60 days' advance written notice. 4 DELIVERY TITLE RISK 4.1 DELIVERY Seller shall supply and Buyer shall receive each lifting of Naphtha FOB the Tanker at the Delivery Point. 4.2 TITLE All title risk and property in respect of each shipment of Naphtha hereunder shall pass 14 from Seller to Buyer at the Delivery Point. 4.3 WARRANTY OF TITLE Seller hereby irrevocably undertakes and warrants that Seller has at all times, including but not limited to the time of delivery of the Naphtha and cargo (and the passing of their risk and property) in accordance with the Agreement herein, full, unencumbered and indefeasible title to the Naphtha and cargo delivered to Buyer under the Agreement and further has the full right and authority to transfer title to such Naphtha and cargo and to effect delivery of same to Buyer. 5 NAPHTHA PRICE 5.1 PRICE DETERMINATION Unless otherwise agreed, for the purpose of price determination, the three InterOil Refinery Naphtha `Design Grades' listed below shall be combined and covered by three primary prices listed below: DESIGN GRADES LVN - BOILING RANGE 25 DEG C TO 90 DEG C MVN - BOILING RANGE 90 DEG C TO 105 DEG C HVN - BOILING RANGE 105 DEG C TO 155 DEG C The three primary prices for Naphtha shall be: I LIGHT NAPHTHA PRICE - FOR LVN with a maximum endpoint of 90 deg C in accordance with Clause 5.1.1 below, allowing some MVN in the mix to 90 deg C. The Medium Naphtha and Heavy Naphtha mix shall be priced as follows: II MEDIUM NAPHTHA PRICE - for the medium naphtha in accordance with Clause 5.1.2. 15 III HEAVY NAPHTHA PRICE - for the heavy naphtha in accordance with Clause 5.1.2. Above prices shall be subject to the export Naphtha conforming to the specifications stipulated in Clause 10.3. The primary prices shall be calculated in accordance with sub-clauses 5.1.1 and 5.1.2 below. It is recognised that Buyer may seek to change cutpoints of the Light Naphtha and the Medium Naphtha/Heavy Naphtha Mix and, subject to Seller's agreement to accede to Buyer's requests, Buyer and Seller may agree price adjustments to be calculated and applied to the primary pricing formulas. An example of one methodology under consideration is shown in Appendix B. 5.1.1. LIGHT NAPHTHA - LVN [Deleted for confidentiality] 5.1.2. HV/MV NAPHTHA MIX [Deleted for confidentiality] 5.2 CEASATION OR INTERRUPTION OF PRICE QUOTATIONS Buyer shall pay to Seller for each barrel of Naphtha delivered hereunder at the Naphtha Price stated in the Agreement provided that: if the relevant pricing quotations are interrupted or cease to be published then Buyer and Seller shall meet and use their best endeavours to select an appropriate alternate price quotation to be used to determine the Naphtha Price and if the Parties fail to agree upon an alternate price quotation, the Naphtha Price shall be calculated in accordance with the mechanism set out in Clause 6.2(b) hereto. 5.3 ROUNDING OFF In determining the Naphtha Price, fractions of a dollar are to be rounded up to the nearest 3 decimal places. 16 5.4 BILL OF LADING DATE The Bill of Lading Date shall be the day on which the particular lifting is completed and Seller's loading hose is disconnected. 5.5 LOST BILL OF LADING If Buyer does not receive a full set of clean, original Bills of Lading in the form requested by Buyer in its documentary instructions, or they contain any inaccuracies, or if they are not received at all, whether as a result of an act or omission of Seller, Seller's Representative or the terminal operator, Seller shall: (a) re-affirm the warranties contained in Clause 4.3; and (b) irrevocably and unconditionally indemnify Buyer and hold Buyer harmless against any claim made against Buyer by any person as a result of breach by Seller of any of the warranties set out in Clause 4.3, and all loss, costs (including, but not limited to legal costs), damages, and expenses which Buyer may suffer, incur or be put to as a result of Seller's failure to deliver the Bill of Lading in accordance with the Agreement. This Indemnification shall be in the form of a Letter of Indemnity as shown in Appendix "A". The indemnity contained in Clause 5.5(b) shall terminate upon delivery to and acceptance by Buyer by Seller's or Seller's Representative of the full set of clean original Bills of Lading or a full clean replacement set of Bills of Lading. 6 PAYMENT TERMS 6.1 INVOICE FOR LIFTINGS (a) Seller or Seller's Representative shall provide to Buyer the Seller's invoice and such documents including but not limited to the full set of clean original Bills of Lading, certificate of origin, certificate of quality and quantity as are reasonably requested by Buyer for each cargo of Naphtha delivered hereunder. (b) Each invoice shall show: 17 (i) the total quantity of Naphtha lifted by Buyer at such lifting; (ii) the total sum claimed to be due and owing to Seller; (iii) bank and account details for Seller 6.2 TIME AND METHOD OF PAYMENT (a) Subject to other provisions of this Clause 6.2, Buyer shall make payment in United States currency by telegraphic transfer to the Seller's bank and to the account as directed in Seller's invoice free of all charges and without set off discount deduction or counter-claim not later than 30 calendar days after the Bill of Lading Date where the Bill of Lading Date shall count as day zero. (b) [Deleted for confidentiality] (c) In the event that, at any time from the commencement of this Agreement, there is a material change to the methodology of calculating components in the price formula by the reporting services in Clause 5, for example the premia reported by Petroleum Argus in Clause 5.1, or if any of the reporting service assessments used as components in the price formula are discontinued, the Parties shall agree a suitable replacement marker. Should the Parties fail to agree on a replacement, an independent expert shall be mutually agreed upon to identify a replacement. (d) Subject to any direction to the contrary specified in an invoice, payments that come due on a Sunday or Monday bank holiday in New York shall be made on the following banking day. Payments that come due on a Saturday or any other bank holiday, except one falling on a Monday, in New York shall be made on the preceding banking day. (e) All bank charges incurred at Seller's bank shall be for Seller's account. All bank charges incurred at Buyer's bank shall be for Buyer's account. 18 (f) Seller shall make reasonable endeavours to ensure that all documents required for payment are sent to Buyer no later than 3 working days prior to the payment due date failing which payment shall be made 3 working days after receipt of such requisite documents by Buyer. 6.3 INTEREST REIMBURSEMENT AND INTEREST ON LATE PAYMENTS For any one shipment, Seller may, upon giving written notice to Buyer and subject to Buyer's consent not to be unreasonably withheld, prior to that shipment's Bill of Lading Date, request for payment to be made earlier than 30 days after the Bill of Lading Date as specified in Clause 6.2(a) on a revised payment date, but no earlier than 5 days after the Bill of Lading Date. Seller shall pay early payment interest to Buyer for the period from the revised payment date until 30 days after the Bill of Lading Date at LIBOR [deleted for confidentiality]. 7 LIFTING CRITERIA 7.1 ESSENTIAL CRITERIA (a) Buyer shall arrange the liftings based on information provided by Seller or Seller's Representative pursuant to Clause 8.1. For this purpose Buyer and Seller will mutually endeavour to ensure liftings are scheduled to ensure Naphtha in storage at the Naphtha Storage Tank does not reach tank tops or refinery production is not reduced to avoid potential tank tops. (b) Buyer shall use all reasonable efforts to ensure that during any month , liftings shall occur no later than 3 days prior to forecast tank tops so that the effective working storage capacity of 350,000 barrels is not reached; (c) The above allowances may be varied as advised by Seller or Seller's Representative to Buyer from time to time. 19 8 SCHEDULING, TANKER NOMINATION AND LOADING 8.1 FORECAST PRODUCTION AND OTHER INFORMATION Seller or Seller's Representative shall provide the following information to Buyer: (a) every Tuesday, or as soon as practicable each week, the production and inventory forecasts for all grades of Naphtha which are projected to be available for lifting in the next succeeding 3 months, highlighting the last possible date as contemplated under Clause 7.1(b) by which the next lifting must take place; (b) notice as soon as practicable of any material increase or decrease (of 20% or more over any one-week period) in forecasts of Naphtha production advised in Clause 8.1(a); (c) loading windows assigned to other cargoes loading or discharging at the same primary jetty, e.g. firm arrival slots for crude oil import cargoes; (d) notice as soon as practicable of operational circumstances that will reduce the capacity of any one of the Naphtha Storage Tanks; and (e) at least 60 days written notice of scheduled maintenance to any of the Naphtha, Marine and InterOil Refinery facilities (including the loading terminal), or scheduled unavailability of resources which will either impact on production or impose constraints on Buyer's ability to accrue and lift Naphtha. 8.2 NOMINATION PROCEDURES - DATE RANGES AND QUANTITIES (a) On or before the 43rd day prior to the first day of the Date Range being nominated for the next proposed liftings, Buyer will use its best efforts based on Seller's Forecast Production to provide the following information to Seller or Seller's Representative: (i) the 10-day Date Range for the next lifting; 20 (ii) the nominated quantity of Naphtha to be lifted ("NOMINATED QUANTITY") that is between 10,000 to 35,000 metric tonnes. (iii) indicative 10 day lifting windows for the subsequent 2 liftings. (b) Within 1 business day of Buyer's notice of the Date Range, which will not be earlier than the 42nd day of the first date range, Seller or Seller's Representative shall notify Buyer of its acceptance or rejection of the nominated Date Range (c) In the case of rejection, Seller or Seller's Representative shall detail the reasons to Buyer and Buyer and Seller or Seller's Representative shall consult with each other within the next 24 hours and reach agreement on a revised Date Range mutually. Notwithstanding Clause 8.2(b) should parties fail to reach agreement on a revised Date Range, Seller will advise Buyer of a Date Range with last day of such seven day Date Range being the forecast tank tops day minus three days. (d) Pursuant to (b) or (c) above, the 7 day window shall be referred to as the accepted 7 day loading date range (ALDR-7), and quantities nominated by Buyer and agreed to by Seller shall become `Accepted Quantity'. (e) No later than 33 days prior to the first day of the ALDR-7, Seller shall be obliged to narrow this range to a five-day loading window which (unless parties mutually agree otherwise) shall fall fully within the ALDR-7. Seller may also renominate the quantity to be lifted in accordance with limits set in clause 3.2 above, provided the resulting forward offtake programme remains feasible, or else provided such quantity changes are accompanied by adjustments to the timing of subsequent ALDRs as necessary. Any such adjustments shall be mutually agreed and confirmed in writing. Such 5 day Date Range shall be referred to as the accepted 5 day loading Date Range (ALDR-5). 21 (f) No later than 23 days prior to the first day of the ALDR-5, Seller shall further narrow this range to a three-day loading window which shall be referred to as the final accepted loading Date Range, "stem", or ALDR-3. The ALDR-3 shall fall fully within the previously advised ALDR-5 range unless the Parties mutually agree otherwise. Seller is aware that the above notice periods are required to permit Buyer to plan advance sales and to commit to chartering acceptable offtake Tankers in a timely and responsible manner. In the event that Buyer is obliged to charter a suitable Tanker earlier than 23 days prior to the ALDR-3 notification by Seller, due to limited supply of quality Tankers, then the ALDR-3 shall be deemed to be the first three days of the ALDR-5 unless otherwise agreed by the Parties. The Buyer shall notify the Seller in such events. 8.3 NOMINATION AND VERIFICATION OF TANKER (a) No later than 15 days before the first day of the Date Range Buyer shall nominate to Seller or Seller's Representative the Tanker to be used by Buyer. (b) Seller shall advise Buyer within 24 hours of Seller's acceptance or rejection of Tanker nomination. (c) Buyer shall ensure that all Tankers nominated, and each Tanker arriving at the Moorings for loading, shall comply with the specifications set out in the Port Regulations and appropriate marine facility/jetty guidelines. (d) Without limitation to Buyer's obligations pursuant to Clause 8.3(a), Buyer shall provide to Seller or Seller's Representative appropriate documentation to enable Seller or Seller's Representative to verify compliance with the Port Regulations and appropriate marine facility/jetty guidelines at the time of nomination of the Tanker provided that if Buyer is not able to supply such documentation, Buyer shall at the time of confirmation provide a notice of compliance to Seller or Seller's Representative, in a form acceptable to Seller, which acceptance shall not be unreasonably withheld. 22 8.4 TANKER SUBSTITUTION No later than 3 working days prior to the first day of the relevant Date Range Buyer may nominate a substitute Tanker which meets all the requirements of the Port Regulations and appropriate marine facility/jetty guidelines, and Seller shall advise of acceptance or rejection of that Tanker within 24 hours of receiving such nomination from Buyer. 8.5 TANKER ARRIVAL (a) Buyer shall use reasonable endeavours to present its Tanker for loading at the Moorings within the ALDR-3. (b) If, due to an event of Force Majeure, the Tanker is not presented within ALDR-3 ready to receive the Nominated Quantity of Naphtha or is so presented but ceases to be able to lift the Nominated Quantity then the Parties shall negotiate in good faith to try to agree on alternative arrangements. 8.6 NON-COMPLIANCE WITH TANKER SPECIFICATIONS Notwithstanding Clauses 8.3 and 8.4, Seller shall not be obliged to load any Tanker that does not comply with the specifications of the Port Regulations. In addition, and without liability, Buyer shall provide access and other assistance to enable Seller to inspect the Tanker and any relevant documentation upon its arrival at the Moorings to ensure the Tanker complies with any Port Regulations and appropriate marine facility/jetty guidelines which, the intention being, shall be no more onerous than other regulations in effect at comparable Australian ports. 9 BERTH AND LOADING 9.1 SAFE BERTH Seller shall provide, or cause to be provided to Buyer a safe berth at the Moorings as described in the Port Regulations. 23 9.2 LAYTIME (a) The time, which excludes time lost by reason of Force Majeure ("LAYTIME") allowed to Seller for the loading of the Accepted Quantity for each lifting hereunder: (i) for Naphtha parcels in excess of 24,500 metric tons - "mt", Laytime shall be 36 hours Sundays and public holidays included; (ii) for Naphtha parcels co-loaded with other products at the InterOil Facilities, Laytime for the combined nominated quantity shall be 36 hours Sundays and public holidays included, subject to the Buyer's Tanker being able to co-load with out delay; and (iii) for Naphtha parcels smaller than 24,500 mt loaded stand-alone, Laytime shall be 24 hours Sundays and public holidays included. (b) Subject to Clause 9.3(d)(ii), Laytime shall commence: (i) berth or no berth, 6 hours after Notice of Readiness to load is given to Seller or Seller's Representative by the Tanker by letter, facsimile, radio or telephone, or upon the Tanker's arrival (i.e. all fast in berth), whichever first occurs, provided that if the Tanker arrives before the first day of the ADLR-3, Laytime shall not commence until the Tanker is all fast in the berth or at 0600 hours local time on the first day of the ADLR-3 whichever is earlier; and (ii) if the Tanker arrives after the end of the ADLR-3, when the Tanker has finished mooring, that is, all fast. (c) Laytime hours shall cease when disconnection of loading hose is complete. 24 9.3 DEMURRAGE (a) In the event of any delay from any cause whatsoever (including a delay caused by force majeure) whether in connection with the scheduling of the Tanker's turn to load, provision of a berth for the Tanker, berthing or loading of the Tanker or otherwise howsoever without limitation, any liability of Seller and/or Buyer for such delay shall be limited to the payment of demurrage. (b) If the Accepted Quantity is not loaded within the Laytime, Seller shall pay to Buyer demurrage, in respect of the time required to load the Accepted Quantity in excess of the Laytime at the rate per day (or pro rata for part of a day) equal to the actual demurrage rate payable by Buyer to the Tanker owner pursuant to the charter party between Buyer and the Tanker owner or if the Tanker is time-chartered, a rate that was agreed between Seller or Seller's representative and Buyer at the time the Tanker was nominated or accepted for the lifting. It is agreed that the demurrage claim shall be agreed no later than three months from the date documents supporting such claim are sent to Seller. Payment for demurrage claims must be paid no later than one month from the date of such agreement. In the event of a delay beyond either of these deadlines (which aggregate period shall not under any circumstances exceed 4 months unless otherwise agreed in writing,) late payment interest shall be payable (at the rate defined in the payment clause) on the full demurrage amount agreed or if not so agreed, then claimed by Seller, from the deadline and paid with final settlement. Buyer shall submit to Seller within 90 days of the Bill of Lading Date, the Buyer's demurrage claim together with a copy of the charter party. (c) If the Accepted Quantity is not loaded within the Laytime due to bad weather or storms, Seller's liability to pay demurrage shall be halved unless Tanker is already on demurrage in which case, Seller's liability for demurrage is not reduced. 25 (d) Time incurred, spent or lost due to any of the following shall not count as Laytime, or if the Tanker is on demurrage, for demurrage when spent or lost: (i) on an inward passage moving from anchorage to the Moorings; (ii) if the pilot reasonably determines that it is not safe to moor the Tanker at night or otherwise unless carried out concurrently with loading; (iii) due to any cause attributable to Buyer, the Tanker or the Tanker Owner, including but not limited to breakdown or deficiency of the Tanker; (iv) as a result of the inability of the Tanker by reason of its own deficiencies to receive the shipment at a rate consistent with being able to accept up to 150 psi pressure at the ship's manifold over the total period taken for loading; (v) as a result of strike, lockout, stoppage or restraint of labour of the Tanker; (vi) in any deballasting or handling slops or both unless concurrent with loading. (e) Seller shall not be liable (other than for demurrage and for Deadfreight as specified in this clause) for any loss or damage, direct or indirect, which Buyer may suffer as a result of the Tanker not being loaded within the Laytime. (f) If all or part of such Seller's demurrage is incurred due to an event of Force Majeure occurring after Laytime finishes, the rate of demurrage shall be reduced to one half (1/2) for the period of such demurrage or part thereof. (g) Deadfreight In the event the Seller is unable to load 95% of the Accepted Quantity in ADLR3 without incurring demurrage due to shortage of available quantity, the Seller shall compensate Buyer for any demurrage waiting for available cargo as per above. 26 Alternatively, subject to Buyer's and Seller's agreement, Seller may short-load Tanker and pay associated Deadfreight charges to Buyer. Buyer and Seller agree to act in good faith to identify and choose the more cost effective means (between demurrage and Deadfreight) to mitigate costs to Seller associated with cargo shortage. Notwithstanding such identification of the more cost effective means, it is recognised that Buyer may not intentionally be able to delay Tanker beyond ADLR3 to await loading of 95% of Accepted Quantity. Should this be the case, mutual agreement between Buyer and Seller is not required as contemplated above and Buyer can order Tanker to sail with Deadfreight after Laytime has been fully spent with such actual Deadfreight cost being reimbursed by Seller. Seller is not liable to pay Deadfreight if due to Force Majeure. 9.4 ACCEPTANCE OF PORT REGULATIONS The Seller shall provide Buyer with a full and complete set of the Port Regulations and Seller's marine facility operational requirements once these have been finalised, for Buyer's review and acceptance. Buyer shall cause copies of the same to be provided to the owners and the Master of the Tanker nominated and accepted under Clause 8.4 or the Regulations or, if applicable, substituted pursuant to Clause 8.4. Buyer shall use all reasonable endeavours to ensure that the Master and the owners of the Tanker comply in all respects with the requirements set out in the Port Regulations and Seller's marine facility guidelines and operational requirements; such regulations and requirements not to be more onerous than those applicable to loading from oil refineries in Australia. 9.5 BUYER'S TANKER ARRIVES LATE AND CAUSES POTENTIAL TANK TOPS OR TANK TOPS (a) Where Buyer's Tanker is or will be late for the Agreed Loading Date Range (ALDR-3) and in Seller's reasonable opinion this is likely to directly cause production at the InterOil Refinery to be curtailed, then Seller may request Buyer to use an alternative acceptable Tanker capable of arriving within Agreed Arrival Date to avoid reaching terminal tank-tops. 27 (b) If Buyer's Tanker has not arrived prior to three days before tank tops, and Seller can find a buyer with Tanker at short notice, Seller can sell a marketable quantity of Naphtha sufficient to make ullage for Naphtha production prior to late arrival of Buyer's Tanker). (c) If action taken in (b) is unable to alleviate the potential tank tops and shut-in is unavoidable, Seller can then take further action to minimize impact on production at the InterOil Refinery by the late arrival of Buyer's Tanker. Such action may include reducing production or shutting down the InterOil Refinery partially or completely and/or selling the full nominated quantity to a third party buyer (latter action must in all scenarios be preceded by consultation with, and formal notification of specific intent to Buyer). (d) As a consequence of Buyer's Tanker arriving late and causing Seller to take action to avoid shut in by selling Naphtha to a third party, Buyer shall pay Seller direct damages equal to Seller's direct incremental costs, for arms length transactions, for alternative sale of Naphtha being an amount representing the difference between the actual FOB equivalent price received for such Naphtha and the price that would have been payable in sale to Buyer. (e) In respect of consequential losses arising from the late arrival of Buyer's Tanker, Buyer shall also pay Seller liquidated damages based on lost refining and marketing margin due to any reduced refinery throughput. The Parties further agree that such sum represents a genuine pre-estimate of the Seller's losses caused by reduced production, such downturn in production being due to action taken due to the late arrival of Buyer's Tanker. (f) Seller shall act in good faith and use its reasonable endeavours to minimise the costs and losses and provided further in each case that evidence in reasonable detail in support of Seller's claim for reimbursement of each such cost or loss shall be furnished to Buyer; (g) Where the Buyer's Tanker fails to tender a valid notice of readiness within the relevant Agreed Arrival Date, then for any resultant production quantities curtailed 28 by Buyer's Tanker arriving after such loading Date Range owing to reasons other than Force Majeure, Seller may short-load Buyer's Tanker to the extent of the quantities curtailed but only to the extent required to avoid impact on the volume of subsequent loadings. Buyer shall be entitled to verify the above amounts and information and for this purpose, Seller shall provide such co-operation and assistance as Buyer may reasonably require. (h) Payments associated with this clause 9.5 will be due 30 days after Seller submits fully documented details of claim to Buyer. (i) Any payments under this Clause 9.5 shall be payable by Buyer to Seller only in the event of willful misconduct or gross negligence on the part of Buyer, and shall be capped at USD [Deleted for confidentiality] per day of lost refinery production. 10 QUANTITY/QUALITY DETERMINATION 10.1 PRIMA FACIE CONCLUSIVE The quantity and quality of the Naphtha in each shipment shall be determined by measurement, sampling and testing in accordance with internationally recognised industry standards at the InterOil Facilities loading terminal by an independent inspector appointed by the Buyer but acceptable to the Seller. The determinations of such independent inspector, in the absence of fraud or manifest error, shall be final and binding upon both Parties. The original cargo suppliers shall prepare and sign certificates as to the quantity and a certificate as to the quality of the oil loaded upon completion of loading of the cargo. Such certificates shall be countersigned by the independent inspector to signify his agreement with the figures stated therein. Seller or Seller's Representative shall advise Buyer by telex, cable or facsimile of the quantity and quality recorded on such certificates as soon as possible after completion of loading of the cargo. The costs of such independent inspection shall be shared equally between Seller and Buyer. 29 A sufficient quantity of the relevant representative samples shall be correctly taken at the loading terminal and kept in accordance with internationally recognised methodology and practice. The samples, so obtained will be retained by Seller for at least one hundred and twenty (120) days after loading unless otherwise required or a dispute arises in connection therewith, in which event such samples shall be retained for as long as the Parties require. 10.2 NOTIFICATION OF CLAIMS Any claims as to shortage in the quantity or defects in the quality of Naphtha loaded into the Tanker shall be communicated to Seller or Seller's Representative immediately after such shortage or quality defects are discovered. Such communications shall be followed by a formal written notice of claim with all necessary details to properly process the claim. If no notification or formal written notice of claim is received within 70 days from the date of the occurrence of the claim, such claims shall be deemed to have been waived. 10.3 QUALITY SPECIFICATIONS 10.3.1 LIGHT NAPHTHA The Seller undertakes and warrants that the quality of the light grade Naphtha (LVN) supplied and delivered hereunder shall fully comply with the specifications applicable to Japan Open Spec Naphtha as per the CFR FAR EAST OPEN SPEC NAPHTHA CONTRACT applicable at the time of loading of the cargo, subject to the modifications made in the table below. For reference purposes, the specifications applicable to Japan Open Spec Naphtha as per the latest CFR FAR EAST OPEN SPEC NAPHTHA CONTRACT 2000 VERSION including such modifications as indicated (***) is as follows:
PROPERTY UNIT(S) SPECIFICATION TEST METHOD ***S.G. at 60Deg F Report D 1298 ***Colour (Saybolt) Min +30 D 156
30 R.V.P at 37.8 Deg C (PSI) Max 12.5 D 323 ***Lead (PPB) Max 50 UOP 350 Sulphur (PPM) Max 650 IP 243 Paraffins (Vol PCT) Min 65.0 D 1319/2002 N-Paraffins (Vol PCT) Min 30.0 D 1319 Olefins (Vol PCT) Max 1.0 D 1319/2002 *** I.B.P.(Deg C) Min 25 D-86 ***95%Evap.P.(Deg C) Max 105* D-86 Total Chlorine (PPM) Max 1 combustion by IP-243 followed by colorometric determination Mercury (PPB) Max 1** Arsenic (PPB) Max 20** Oxygenated (MTBE and/or Max 50 PPM Products ETBE and/or ethanol and/or methanol)
* For avoidance of doubt, fullrange Naphtha (as described for example by the Argus premium constituting component "c" of the light grade Naphtha price) typically exhibits higher value properties than the above specification, for example AG fullrange Naphtha typically has a paraffins content of 80% as opposed to the 65% stipulated in Japan Open Spec above. Likewise a typical FBP for light grade Naphthas is 100 deg C, and 140-180 deg C for fullrange Naphthas. ** Subject to typical testing procedures as applied for Naphtha in Asia. 31 10.3.2 MVN/HVN NAPHTHA MIX The Seller undertakes and warrants that the qualities of MVN and HVN supplied and delivered hereunder shall fully comply with the specifications stipulated below: MVN
PROPERTY UNIT(S) SPECIFICATION TEST METHOD S.G. at 60Deg F report D 1298 Colour (Saybolt) Min +30 SAYBOLT R.V.P at 37.8 Deg C (PSI) report D 323 Lead (PPB) Max 50 D-3116 Sulphur (PPM) Max 50 D-2622 Paraffins (Vol PCT) report D 1319 Olefins (Vol PCT) Max 1.0 D 1319 Aromatics (VolPCT) report D-1319 ***5%Evap.P.(Deg C) Min 75 D-86 ***95%Evap.P.(Deg C) Max 110 D-86 Vanadium (PPM) Max 1 D-3605 Sodium (PPM) Max 1 D-3605 Arsenic (PPB) Max 10 Gutzeit Method, Vogel 34 edition, (p 796) Total Chlorine (PPM) Max 1 combustion by IP-243 followed by colorometric determination
32 Mercury (PPB) Max 1** Oxygenated Products (MTBE and/or Max 50 PPM ETBE and/or ethanol and/or methanol)
HVN
PROPERTY UNIT(S) SPECIFICATION TEST METHOD S.G. at 60Deg F report D 1298 Colour (Saybolt) Min +30 SAYBOLT R.V.P at 37.8 Deg C (PSI) report D 323 Lead (PPB) Max 50 D-3116 Sulphur (PPM) Max 50 D-2622 Paraffins (Vol PCT) report D 1319 Olefins (Vol PCT) Max 1.0 D 1319 Aromatics (VolPCT) max 20 D-1319 N+A (VolPCT) min 50 D-1319 ***5% Evap P.(Deg C) Min 90 D-86 ***95 Evap P.(Deg C) Max 155 D-86 Vanadium (PPM) ` Max 1 D-3605 Sodium (PPM) Max 1 D-3605 Arsenic (PPB) Max 10 Gutzeit Method, Vogel 34 edition, (p 796) Total Chlorine (PPM) Max 1 combustion by IP-243 followed by colorometric determination
33 Mercury (PPB) Max 1**
10.4 ACCESS To the extent permitted by the Operator of the InterOil Facilities, Seller shall grant access to and facilitate, and co-operate with, Buyer's nominated Representative to the loading terminal of the InterOil Facilities upon reasonable notice for purposes of conducting review and analysis consistent with this Section 7 and for ascertaining production forecast and stock levels. 11 FORCE MAJEURE 11.1 RELIEF FROM OBLIGATIONS No failure or omission to carry out or to observe any of the terms, provisions, or conditions or this Agreement shall give rise to any claim by one Party against the other, or be deemed to be a breach of this Agreement if the same shall be caused directly by: (a) war, hostilities, acts of the public enemy or of belligerents, sabotage, blockade, revolution, insurrection, riot or disorder; arrest or restraint of rulers, or peoples, civil and governmental frustration, expropriation, requisition, confiscation or nationalisation; (b) embargoes or export or import restrictions; substantial interference by, or restrictions or onerous regulation imposed by civil or military authorities, whether legal or de facto and whether purporting to act under some constitution, decree, law or otherwise; (c) acts of God, fire, earthquake, storm, cyclone, lightning, tidal wave, or perils of the sea; (d) accidents of navigation, loss of tanker tonnage due to sinking by belligerents or to governmental taking whether or not by formal requisition; (e) unforeseen accidents or mechanical failures resulting in the shut down, decrease of capacity throughput or closing of the InterOil Refinery; 34 (f) accidents to or closing of harbours, docks, canals, channels, mooring point, or other assistance to or adjuncts of shipping or navigation; (g) epidemic, quarantine, strikes, lockouts or other labour disturbances, but only to the extent they are nationwide or widespread, excluding any strikes or other labour disturbances; (h) rationing or allocation, imposed by applicable law, decree or regulation beyond Seller or Seller's Affiliates control; or (i) any other event, matter or thing wherever occurring, and whether or not of the same class or kind as those set forth, which shall not be reasonably within the control of the Party affected. 11.2 PAYMENTS AND MARKETS Notwithstanding the provisions of Clause 11.1, Buyer shall not be relieved of any obligation to make payments for Naphtha delivered hereunder. 11.3 NOTICE Any Party who is, by reason of Force Majeure, unable to perform any obligation or condition required by this Agreement to be performed shall notify the other Party as soon as possible specifying: (a) the cause and extent of such non-performance; (b) the date of commencement thereof; and (c) the means proposed to be adopted to remedy or abate the Force Majeure. 11.4 OBLIGATIONS OF DELAYED PARTY Any Party who is, by reason of Force Majeure, unable to perform any obligation or condition required by this Agreement to be performed shall: 35 (a) use all reasonable diligence and employ all reasonable means to remedy or abate the Force Majeure as expeditiously as possible; (b) resume performance as expeditiously as possible after termination of the Force Majeure or the Force Majeure has abated to an extent that permits resumption of such performance; (c) notify the other Party when the Force Majeure has terminated or abated to an extent which will permit resumption or performance to occur; and (d) notify the other Party when resumption of performance has occurred; provided that no Party shall, by virtue of this Clause 11, be required against the will of that Party to adjust or settle any strike, lockout or other labour dispute and provided further that under no circumstances shall Seller be obligated to replace Naphtha supplies or cargoes lost as a result of an event of Force Majeure. 11.5 EXTENDED FORCE MAJEURE If the Force Majeure event relied upon by the Affected Party under this clause to excuse its failure to perform under this agreement shall persist for a continuous period of more than thirty (30) days, then the other Party as the case may be shall be at liberty to terminate the Agreement by written notice to the Affected Party whereupon both parties shall be discharged from all obligations under this Agreement except for antecedent breaches, if any. 12 RISK STRUCTURE 12.1 INSURANCE The Buyer shall ensure that each Tanker arranged by Buyer shall, all at no cost to Seller: 36 (a) have on board all certificates of financial responsibility in respect of oil pollution necessary for the required voyage, such as, but not limited to a certificate of insurance required under the International Convention on Civil Liability for Oil Pollution Damage: (b) the Tanker owners shall be members of the International Tanker Owners Pollution Federation Limited; and (c) maintain with respect to the Tanker the standard level of oil pollution liability insurance available from the International Group of P&I Clubs on the date such Tanker is accepted, and the standard level of excess oil pollution liability insurance available through market underwriters on such date currently USD one billion. 12.2 LIMITATION OF LIABILITY Notwithstanding any other provisions in this Agreement, the Parties agree as follows: (i) In no event shall either Party make any claim against the other Party or its employees, officers, agents, or consultants on account of any alleged error of judgement made in good faith in connection with its performance under this Agreement; (ii) Neither Seller nor the Buyer shall be liable whether in tort or in contract for any consequential, indirect or special losses, punitive, exemplary damages of any kind (including but not limited to loss of profit, loss of use and loss of interest) arising out of or in any way connected with the Agreement, its implementation, performance of or failure to perform the Agreement; (iii) In the event that the Buyer is liable to the Seller for breach of the accepted loading date range, Buyer's total liability to the Seller under this Agreement for its breach of those provisions shall be limited to a maximum of $[Deleted for confidentiality] per day; 37 For the purposes of this Agreement, "Gross Negligence and Willful Misconduct" means any act or omission done or omitted to be done with wanton, intentional and reckless disregard of the reasonably foreseeable consequence of such act or omission. 13 TAXES, DUES, DUTIES, IMPOSTS 13.1 PORT CHARGES Any wharfage, harbour dues, port charge, pilotage, line launches, tugs or similar charges (collectively "Port Charges") levied at the InterOil Facilities whether chargeable on the cargo loaded or on the Tanker shall be for the account of Buyer, unless the Parties agree otherwise in writing. 13.2 NEW IMPOSTS Subject to Clause 13.1, in the event any additional tax, dues, duty or impost is levied at the InterOil Marine Facilities whether chargeable on the cargo loaded or on the Tanker, the Parties shall as soon as reasonably practicable meet to agree on the responsibility for payment of the levy, and failing agreement, either Party may terminate this Agreement upon 3 months' prior written notice to the other Party. 14 NOTICE 14.1 MEANS OF NOTICE All notices, statements and other communications to be given, submitted or to be made under this Agreement shall be sufficiently given if in writing and sent either: (a) by hand or courier; or (b) by facsimile with receipt acknowledged, to the address or facsimile numbers specified in this Agreement under Clause 14.4. 38 14.2 CHANGE OF ADDRESS Any Party may change its address for the purposes set forth in Clause 14.1 upon given 15 days prior written notice to the other Party. 14.3 REPRESENTATIVES (a) Each Party hereby appoints the Representatives specified in Clauses 14.4 and 14.5. (b) A Party may change its Representatives by notice to the other Party, and the Seller may nominate an agent to act for the Seller's Representative in certain matters, which notice shall be given to the Buyer. (c) All notices, statements and other communications given, submitted and made under this Agreement by the Buyer or by the Seller from time to time or at any time under this Agreement may be given and received by a single notice by a Representative, such notice being effective notice to or from the relevant Party. 14.4 SELLER'S REPRESENTATIVES (a) The Seller's Representative and its address and facsimile number are: Managing Director E.P. InterOil, Ltd 25025 I-45 North, Suite 420 The Woodlands, Texas 77387, USA Telephone: (281) 292-1800 Facsimile: (281) 292-0888 Attention: Christian Vinson 14.5 BUYER'S REPRESENTATIVES (a) The Buyer's Operational Representative and its address and facsimile number are: 39 NAME: Head of Operations, Chemical Feedstocks Attn: WAYNE KHOO ST114 TEL +65 384 8745 FAX NO: +65 384 8548 TELEX NO: RS20196 14.6 AUTHORITY OF THE REPRESENTATIVES The Representatives shall have the following authority: (a) to make agreements concerning the administration or procedures under the Agreement; and (b) to render any invoice, Bill of Lading or other documentation as required by the Agreement. 15 ASSIGNMENT 15.1 SUCCESSORS AND ASSIGNS Subject to Clause 15.2, the Agreement shall be binding upon and inure to the benefit of the Parties, their successors and assigns. 15.2 CONDITIONS OF ASSIGNMENT The Agreement shall not be assignable by either Party without the assignee entering into a covenant in writing with the non-assigning Party, in a form acceptable to the non-assigning Party such acceptance not to be unreasonably withheld, to be bound by the provisions of the Agreement as if it were a Party to the Agreement. 40 16 CONFIDENTIALITY 16.1 NON-DISCLOSURE Neither Party ("DISCLOSING PARTY") may in the absence of prior written consent either before or for a period of 3 years after termination of this Agreement divulge or suffer its employees, consultants, agents or representatives to divulge to any person (other than to those of its officers, employees, consultants, agents or representatives who reasonably require the information to enable them to properly perform their duties) any of the contents of the Agreement or any other information concerning the operations, dealings, transactions, contracts or commercial or financial affairs of the other Party ("OWNING PARTY"). 16.2 EXCLUSIONS The restrictions imposed by Clause 16.1 do not apply to the disclosure of information: (a) to any Affiliate or bona fide intended assignee of the Disclosing Party upon obtaining a similar undertaking of confidentiality from that Affiliate or assignee in favour of both Parties; (b) to independent consultants, legal counsel and contractors of the Disclosing Party whose duties reasonably require disclosure provided those consultants, legal counsel and contractors have made a similar undertaking of confidentiality to the Disclosing Party; (c) to any bank or financial institution from whom the Disclosing Party is seeking or obtaining finance, provided those banks or institutions have made a similar undertaking of confidentiality to the Disclosing Party; 41 (d) to the extent required by any applicable laws or regulations having jurisdiction over the Disclosing Party; or by the regulations of any recognised stock exchange on which are listed for quotation shares in the capital of the Disclosing Party or any related body corporate (as that term is defined in the Corporations Law) of the Disclosing Party; or in a prospectus issued by the Disclosing Party or an Affiliate of the Disclosing Party as required by securities laws governing the Disclosing Party or such Affiliate; or to the extent required for the purpose of any litigation arising from the Agreement; provided that if the Disclosing Party is served with any notice, demand, request, subpoena or other proceedings seeking discovery, disclosure or production of the Agreement or any information which has been previously disclosed to the Disclosing Party and which is proprietary to the Owning Party, then the Disclosing Party shall: (i) forthwith give a copy of the notice, demand, request, subpoena or other proceedings to the Owning Party; (ii) comply with any reasonable directions issued by the Owning Party in respect of the protection or dissemination of such information, documentation and agreements (whether or not confidential); (iii) upon receiving notice from the Owning Party, accept and give effect to, as far as is possible, any reasonable representation from the Owning Party in regard to the conduct of any negotiations, dissemination or proceedings relating to such information, documentation and agreements (whether confidential or not); and (iv) not otherwise do anything to prejudice the protection of such information, documentation or agreement or which is inconsistent with paragraphs (i) - (iii) inclusive above; or (e) to the extent that the same has become generally available to the public. 42 17. DISPUTE RESOLUTION 17.1 NOTICE OF DISPUTE The Party claiming that a dispute, controversy or claim has arisen shall give notice to the other Party identifying such dispute, controversy or claim and designating its representative in negotiations, being a senior officer of the Party with authority to settle the matter, and the other Party shall promptly give notice in writing designating its representative in negotiations with similar authority. 17.2 MEETING Within 10 days of the notice of dispute, the senior officers of each disputant shall meet to seek to resolve the matter. 17.3 FURTHER ALTERNATIVE DISPUTE RESOLUTION If the dispute, controversy or claim is not resolved by the senior officers within such period of 10 days, the Parties shall, within a further 10 days, seek to agree the process for resolving the matter through means other than litigation, such as further negotiations, mediation or conciliation and on: (a) the procedure and timetable for any exchange of documents and other information relating to the dispute, controversy or claim; (b) procedural rules and a timetable for the conduct of the selected mode of proceedings; and (c) the procedure for selection and remuneration of any mediator who may be employed by the Parties. 17.4 EXPERT If the Parties agree that the matter should be referred to an expert for resolution, the following procedure shall apply unless otherwise agreed by the Parties: 43 (a) either Party shall notify ("INITIAL NOTICE") the other Party of the matter it wishes to be resolved including the name of the person whom it nominates as the expert; (b) the recipient of the Initial Notice shall notify the other Party ("REPLY") within 3 days if it does not accept the person so nominated and make a nomination of the person it proposes to be the expert; (c) if the Parties are not able to agree on the appointment of the expert within 7 days of the Initial Notice, either Party may request the Chairman of the Australian Institute of Petroleum to appoint a person qualified by education, experience and training in the subject matter in dispute to be the expert; (d) the expert so appointed shall promptly fix a reasonable time and place for receiving submissions or information from the Parties or from any other persons that the expert may think fit and the expert may make such further enquiries and require such other evidence as he or she may consider necessary for determining the matter and shall in accordance with this Agreement determine the matter with all due diligence and speed; (e) the expert shall not be deemed not to be an arbitrator but shall render his decision as an expert; (f) the determination of the expert shall be final and binding upon the Parties save in the event of fraud, mistake or miscarriage; (g) each Party shall bear the costs and expenses of all counsel, witnesses and employees retained by it but the cost and expenses of the expert shall be apportioned between the Parties in such proportions as the expert shall in the circumstances consider proper; and (h) if an expert appointed has not arrived at a determination within a period of 30 days from the date of appointment, either Party may upon giving notice to the other, terminate the appointment and a new expert shall be appointed and the point of difference determined in accordance with the provisions of this Clause. 44 17.5 ARBITRATION If each of the Parties does not agree that the dispute be resolved pursuant to Clause 17.4, then the dispute shall be resolved by arbitration, and the arbitration shall be: (a) governed by English law; (b) carried out under the United Nations Commission on International Trade Law Arbitration rules and regulations (UNCITRAL); (c) conducted and presided over by a single arbitrator appointed by the London Court of International Arbitration (LCIA); (d) held in London, England and the language of the arbitration shall be English; and (e) empowered to order interest and costs under an award; and. (f) binding on all parties under arbitration. Any party to the dispute under arbitration may commence proceedings or take any action it deems necessary in the jurisdiction referred to in Clause 1.3 above to enforce a decision of the arbitrator whether pursuant to: (g) the general law or legislation of the jurisdiction; (h) the New York Convention on the Recognition and Enforcement of Foreign Artbitral Awards 1958; or (i) any other treaty making enforcement possible. 17.6 CONFIDENTIALITY OF PROCEEDINGS Any dispute resolution procedure, other than litigation and any determination, shall be kept confidential between the Parties. 45 17.7 REPRESENTATION The Parties may be represented by legal counsel in any dispute resolution procedure. Each Party shall bear the costs and expenses of all counsel, witnesses and employees retained by it but the cost and expenses of the mediator shall be apportioned equally between the Parties. 17.8 CONTINUED PERFORMANCE OF OBLIGATIONS The referral of a matter to dispute resolution under this Clause 17 shall not affect the obligations of the Parties in accordance with the terms and conditions of this Agreement. 46 EXECUTION PAGE EXECUTED by EP INTEROIL, LTD ) ) ) ) ____________________________ ) Authorised Signature ) ) ___________________________ ) ____________________________ Date: ) Name ) ) ____________________________ ) Designation ) ) ) EXECUTED by SHELL ) INTERNATIONAL EASTERN ) TRADING COMPANY OWNED BY ) SHELL EASTERN TRADING (PTE) ) ____________________________ LTD. ) Authorised Signature ) ) ) ____________________________ ) Name ) ) ____________________________ ____________________________ ) Designation Date ) ) ) 47 APPENDIX "A" FORMAT OF LETTER OF INDEMNITY TO BE USED FROM: EP InterOil, Ltd. incorporated in the Cayman Islands of Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies. TO: SHELL INTERNATIONAL EASTERN TRADING COMPANY, owned by Shell Eastern Trading Pte Ltd IN CONSIDERATION of your paying for the cargo of _________________________________U.S. Barrels/Metric Tons of (type of crude oil and / or product) _________________________which sailed from (Port) ___________on (Tanker and date) __________________________________________loaded with such cargo when the (document) _______________________________________for such cargo has not been delivered to you at the time payment is due under our contract dated ______ref:______________________________________________________________. We hereby warrant to you that at the time property passed as specified under the terms of the above contract we had the right to sell the said cargo to you and we had unencumbered title to the said cargo. We hereby irrevocably and unconditionally undertake to indemnify you and hold you harmless against any claim made against you by anyone as a result of breach by us of any of our warranties as set out above, and all losses, costs (including, but not limited to costs as between attorney or solicitor and own client), damages, and expenses which you may suffer, incur or be put to which are not too remote as a result of our failure to deliver the above document(s) in accordance with the contract. This indemnity shall terminate on delivery by us of the aforesaid document(s) and their acceptance by you. This indemnity shall be governed by and construed in accordance with the laws and legal jurisdiction governing the aforesaid contract and all disputes, controversies or claims arising out of or in relation to this indemnity or the breach, termination or validity hereof not settled by negotiation shall be resolved with the procedure provided in such contract AUTHORISED SIGNATORY OF SELLER Name: Designation: 48 Appendix B At Buyer's timely and reasonable request and subject to Sellers agreement, such agreement not to be unreasonably withheld, cutpoints may be adjusted from time to time. It is recognized that parties will need to agree a pricing adjustment clause and the purpose of this clause is to describe one methodology that, while not yet agreed, may be adopted for such price adjustment. Final prices mayl be calculated in accordance with the following: The intention of this clause is to fix the Deemed Cutpoints between LVN/MVN and MVN/HVN to levels of 90 deg C and 105 deg C respectively, to facilitate Seller co-operating with Buyer requests for actual naphtha cutpoint shifts, while keeping Seller whole in pricing terms on the deemed set of cutpoints. Fixing the cut temperatures at deemed levels shall achieve the following: 1 Seller's income will be unaffected by Buyer nominating more or less of a particular cut based on prevailing market conditions. 2. Allow Buyer to fine tune the qualities within refinery normal operating parameters to maximise cut value to customers. 3. This shall be achieved by the following price formulas using as basis the IBP (initial boiling point) and FBP (final boiling point) of the various cuts, and to the prices defined in Clauses 5.1.1 and 5.1.2, where the calculated price is referred to as LVNC, MVNC and HVNC. The final prices for product shall be defined as follows, and calculated in USD/bbl: For this purpose the LVN price will be converted to a USD/BBL price using the actual bbl/mt factor in the case of pricing an LVN cargo, in the case of pricing the LVN component of MVN/HVN cargoes the most recent LVN cargo BBL/MT factor shall be used. 4. LVN [Deleted for confidentiality] 5. MVN [Deleted for confidentiality] 6. HVN [Deleted for confidentiality] Note that this Deemed Cut Point Clause should be structured to work in an equitable and reasonable way if there is good column separation, eg. no gap/no overlap would be an ideal case. If separation between 49 grades is such that there is, in Seller's reasonable opinion, an unacceptable level of overlap, or for other reasons, constraints on cutpoint flexibility become evident, the parties shall meet to discuss how best to modify this Clause so that the Objectives stated under 1. and 2. above can be met. If no agreement can be reached on this cutpoint calculation as per above or indeed any other cutpoint adjustment clause, or if either party raises objections to this clause which cannot be resolved, actual cutpoints shall conform to quality to Clause 10, and prices as per Clauses 5.1 and 5.2 shall apply unless other price adjustment mechanism is mutually agreed. The Deemed Cutpoint calculations above will influence price to the extent that Prices for the grades vary, calculations below demonstrate the effect of the Deemed Cutpoints Clause on daily income, including a +/- $2/bbl variation between LVN and HVN, in combination with two sets of cutpoints between LVN, MVN and HVN. SAMPLE CALCULATIONS (1) [Deleted for confidentiality] SAMPLE CALCULATIONS (2) [Deleted for confidentiality] 50 EX-99.18 13 h19854exv99w18.txt EXPORT MARKETING AND SHIPPING AGREEMENT EXHIBIT 18 EXPORT MARKETING AND SHIPPING AGREEMENT EP INTEROIL, LTD. (EXPORTER) AND SHELL INTERNATIONAL EASTERN TRADING COMPANY (MARKETER) FINAL EXECUTION FORM EXPORT MARKETING AND SHIPPING AGREEMENT Table of Contents 1 Definitions and interpretation 1.1 Definitions 1.2 Interpretation 1.3 Consents or Approvals 1.4 Relationship between Parties 1.5 Governing Law 1.6 Waiver 1.7 Variations 2 Commencement, term and renewal 3 General Scheme of Arrangements 3.1 Effect of this Clause 3.2 General scheme of arrangements 4 Exclusive Exporter 4.1 Grant of rights 4.2 Undertakings of Exporter 5 Export 5.1 Export 5.2 Purchase of Exported Product 5.3 Export Permits 6 Distribution Rights 6.1 Distribution rights of Marketer 6.2 Distribution rights of Exporter 6.3 Exceptions to distribution rights of Marketer. 6.4 Commission for introduction 7 Undertakings of the Marketer relating to distribution 8 Undertakings of the Exporter relating to distribution 9 Committees 9.1 Prior to commencement of supply PAGE (i) EXPORT MARKETING AND SHIPPING AGREEMENT 9.2 From commencement of normal supply 10 Ongoing planning 10.1 Weekly forecast production and other information. 10.2 Shipping report 10.3 Marketing plans and development of Term contract arrangements. 11 Supply of Products to Marketer for distribution 12 Distribution by open book sales and approvals for such sales 13 Shell distribution system sales 13.1 Supply of Product for Shell Group's own stocks 13.2 Excess Product 14 Standard terms of sale 15 Nominations for Products 16 Commission 16.1 Commission 16.2 Relationship between Nominations and Commission 17 Insurance 17.1 Insurance 17.2 Marketer to assist Exporter 18 Force Majeure 18.1 Relief from Obligations 18.2 Payments 18.3 Notice 18.4 Remedy of Force Majeure 18.5 Extended Force Majeure.. 18.6 Mitigation 19 Limitation of Liability 20 Notice 20.1 Means of Notice PAGE (ii) EXPORT MARKETING AND SHIPPING AGREEMENT 20.2 Change of Address 20.3 Representatives 21 Assignment 21.1 Successors and Assigns 21.2 Conditions of Assignment 22 Confidentiality 22.1 Non-Disclosure 22.2 Exclusions 23 Dispute Resolution 23.1 Notice of Dispute 23.2 Meeting 23.3 Further alternative dispute resolution 23.4 Expert 23.5 Arbitration 23.6 Enforcement 23.7 Confidentiality of proceedings 23.8 Representation 23.9 Continued Performance of Obligations Schedule 1 Schedule 2 Schedule 3 PAGE (iii) EXPORT MARKETING AND SHIPPING AGREEMENT Date MARCH 23rd, 2001 Parties EP InterOil, Ltd. incorporated in the Cayman Islands of Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies (the Exporter). Shell International Eastern Trading Company owned by Shell Eastern Trading (Pte) Ltd, incorporated in Singapore of Shell House #04-00, UE Square, 83 Clemenceau Avenue, Singapore 239920 (the Marketer). Recitals A InterOil Limited and EP InterOil, Ltd members of the InterOil Group, have constructed or are in the course of constructing a petroleum refinery at Napa Napa, NCD, Port Moresby in Papua New Guinea. B All petroleum Products produced at the InterOil Refinery that are in excess of the domestic requirements for those products in Papua New Guinea will be allocated and supplied by InterOil Limited to EP InterOil, Ltd., for export by EP InterOil, Ltd. in accordance with the terms of this Agreement. C As InterOil Limited wishes to operate the Refinery at maximum possible capacity; and EP InterOil, Ltd. wishes to supply, export and sell the maximum possible amount of petroleum products allocated for export from Papua New Guinea, at the maximum Effective Netback Price, EP InterOil, Ltd. requires the appointment of a marketer, distributor and shipper of petroleum products able to market, distribute or ship (as the case may be) the allocated amounts of the petroleum products produced at the InterOil Refinery in Papua New Guinea for export from Papua New Guinea by EP InterOil, Ltd. D The Shell Group is a major marketer and distributor of petroleum products throughout the world and hell International Eastern Trading Company is that part of the Shell Group best placed to: i) enter into these arrangements to market, distribute or ship (as the case may be) the allocated amounts of the petroleum Products produced at the InterOil Refinery that are exported from Papua PAGE 4 EXPORT MARKETING AND SHIPPING AGREEMENT New Guinea by EP InterOil Ltd.; and (ii) on its reasonable efforts basis, pursue, in the supply and sale of those petroleum Products it purchased from EP InterOil, Ltd. for distribution in the export market, commercial terms that will achieve the highest effective Netback Price (on an FOB (equivalent basis) for EP InterOil, Ltd. E EP InterOil, Ltd. has agreed with Shell International Eastern Trading Company to engage Shell International Eastern Trading Company to: i market, distribute or ship (as the case may be); ii purchase, from EP InterOil, Ltd. as on-supplier and seller; and distribute and sell, all petroleum products produced at the InterOil Refinery that are allocated for export from Papua New Guinea (excluding those that are not separately on-supplied or sold by EP InterOil, Ltd.) and in so doing, to exercise in good faith all reasonable endeavours to maximise economic returns to EP InterOil under terms of this Agreement. It is agreed as follows. 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS As used in this Agreement, the following terms shall have the following meaning: AFFILIATE with respect to a Party shall mean any Entity directly or indirectly controlling, controlled by, or under common control with the Party. For the purposes of this definition, the term "control" (including the terms "controlled by" and "under common control with") means the possession directly or indirectly, of the power to direct or cause the direction of the management and policies of the Entity, whether through the ownership of voting securities or by contract or otherwise. With respect to the Marketer, "Affiliate" or "affiliated company" of Marketer means any company (other than Marketer) which is directly or indirectly affiliated with N.V. Koninklijke Nederlandsche Petroleum Maatschappij and/or The "Shell" Transport and Trading Company p.l.c. PAGE 5 EXPORT MARKETING AND SHIPPING AGREEMENT For the purposes of the foregoing a particular company is directly affiliated with another company if the latter holds fifty percent (50%) or more of the shares or similar entitlements carrying the right to vote at a general meeting (or its equivalent) of the former; and indirectly affiliated with a company (hereinafter in this paragraph called "the parent company") if a series of companies can be specified beginning with the parent company and ending with the particular company, so related that each company is directly affiliated with one or more of the companies earlier in the series. AGREEMENT means this Export Marketing and Shipping Agreement between Marketer and Exporter. AUTHORITY means any government or any governmental, semi governmental, city, municipal, civic, administrative, fiscal, statutory or judicial body, instrumentality, department, commission, authority, tribunal, agency or other similar entity. It includes any self regulatory organization established under a statute and any stock exchange. BASE COMMISSION means, in relation to a Product, that amount specified for that Product in Schedule 1. COMMISSION means, in relation to a Product, the commission to be paid by the Exporter to the Marketer for a supply of that Product under this Agreement, ascertained in accordance with Clause 16. CONDITIONS OF PURCHASE means the conditions of purchase set out in Schedule 3, and as varied from time to time by agreement between the Marketer and the Exporter. CONTRACT YEAR means the year starting on the Refinery Completion Date and each subsequent year under the term of this Agreement starting on the anniversary of the Refinery Completion Date. CONTROLLER means, in relation to a person's property: 1. a receiver or receiver and manager of that property; or 2. anyone else who (whether or not as agent for the person) is in possession, or has control, of that property to enforce a Security Interest. CUSTOMER means a person or Authority other than the Marketer and members of the Shell Group. DELIVERY PERIOD means the second Month (x + 2) after the Month in which its corresponding Nomination Date falls (x). DELIVERY POINT means the point at which Product passes the loading hose flange on the manifold of the Tanker at the moorings of the InterOil Facilities. EARLIEST NOMINATION DATE means the earliest date on which Nominations for Product may be submitted to the Offtake Coordinator as specified in Clause 15. PAGE 6 EXPORT MARKETING AND SHIPPING AGREEMENT EFFECTIVE NETBACK PRICE means, [Deleted for confidentiality]. END USER means, in relation to Products supplied or sold, a person, entity, corporation or Authority that has those Products delivered into its own operational facilities for its own use or delivered into facilities of direct customers of that person or Authority where those customers have a contract for the ongoing supply of those Products with that person or Authority. For the avoidance of doubt, End Users do not include major traders or oil majors including but not limited to the Exxon Mobil Group of Companies, Texaco Group of Companies, Caltex Group of Companies, BP Amoco Group of Companies or Chevron Group of Companies, but do include Shell Group of Companies. ENTITY means an individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, unincorporated association, nominee, joint venture or other entity. EPC CONTRACT means the contractual documentation for the construction of the InterOil Refinery. EPC CONTRACTOR means Clough Engineering Limited or that subsidiary of Clough Engineering Limited, or any contractor, or sub contractor providing work under the EPC Contract to construct the Refinery. EXCESS PRODUCT means the amount of Products produced at the InterOil Refinery that are in excess of the domestic requirements for those Products in Papua New Guinea and also in excess of committed Term Contracts, and that are available for lifting for further Term Contracts and spot sales by Exporter or Marketer. EXPORT means, in relation to a Product, supplying or selling that Product into the Export Market. EXPORT PRODUCTS has the meaning given in Clause 3.2. EXPORT MARKET means any country, territory or place that is not in Papua New Guinea. FIRM PROGRAM means the program issued by the Offtake coordinator as specified in Clause 15(h). FLOOR PRICE (FP) means, in respect of a Product, the floor price for the relevant Product as specified in Schedule 1. FOB means Free on Board as defined in Incoterms 2000. FORCE MAJEURE means any of the circumstances described in Clause 18 hereto. FREIGHT means, in relation to a Product: 1. the cost agreed between the Exporter and the Marketer of transporting that Product to a Customer; or PAGE 7 EXPORT MARKETING AND SHIPPING AGREEMENT 2. if not agreed, the actual cost of transporting that Product to a Customer; or 3. if an actual cost is not available, and if not agreed the cost calculated in accordance with industry practice and based on market conditions of transporting that Product to the Customer and if necessary verified by an independent expert, to be jointly appointed by the Parties. INCOTERMS 2000 means the publication `Incoterms 2000' published by the International Chamber of Commerce. IDENTIFIED means advised by a notice in writing from one Party to the other Party that material discussions are underway for the purpose of supply of Product. INITIAL TERMINATION DATE has the meaning given in Clause 2(b). INTEROIL FACILITIES means the facilities at Napa Napa, Port Moresby National Capital District and Central Province Papua New Guinea, on and offshore for the production, transportation and storage of petroleum liquids, including the InterOil Refinery. INTEROIL GROUP means IOC and its Affiliates. INTEROIL REFINERY means the refinery for the production and storage of petroleum Products and liquids at Napa Napa, Port Moresby, National Capital District and Central Province Papua New Guinea, owned and/ or operated by InterOil Limited. IOC means InterOil Corporation, a corporation duly established and existing under the laws of the province of New Brunswick, Canada. LATEST NOMINATION DATE means the date on which Nominations for Product may be submitted to the Offtake Coordinator as specified in Clause 15 of this Agreement. LCO means light cycle oil as specified in Schedule 2. LSWR means low sulphur waxy residue as specified in Schedule 2. LIABILITIES means claims, losses, liabilities, costs or expenses of any kind. LOWER FLOOR PRICE means, [Deleted for confidentiality]. MARKETING PLAN has the meaning given in Clause 10.3. MONTH means a calendar month. MDO means marine diesel oil, as specified in Schedule 2. MOPS means "Mean of Platt's Singapore". NAPHTHA means petroleum liquids with a initial boiling point of 25degC to a final boiling point of 170degC or less, and a maximum (reid) vapour pressure of 12.5 psi, produced from the InterOil Refinery. PAGE 8 EXPORT MARKETING AND SHIPPING AGREEMENT NOMINATED SUPPLY means a supply of Product requested under a Nomination. NOMINATION means an election made by notification in writing in accordance with Clause 15 by the Marketer or the Exporter (as the case may be). NOMINATION DATE means the date on which a nomination is made and which is determined by Clause 15 of this Agreement. NOMINATION PERIOD means the period of time as detailed in Clause 15. OCEANIA ENVELOPE means [Deleted for confidentiality] OFFTAKE COORDINATOR means the person appointed by the Exporter to perform the duties specified in Clause 15. OPEN BOOK PRICE means [Deleted for confidentiality] PAPUA NEW GUINEA means the territory of The Independent State of Papua New Guinea, including its territorial waters. PARTY means a Party to this Agreement for the time being and includes its successors and permitted assigns. PORT OF LOADING means the marine jetty of the InterOil Facilities. PORT REGULATIONS means any Port regulations for Port Moresby Harbour, by a Government or Governmental appointed body and appropriate marine facility/jetty guidelines for the use of the InterOil Facilities and the InterOil Tanker loading facilities to be issued by Exporter to Marketer by no later than November 30th 2001. PRODUCTS means all Products, but excluding both Naphtha and LPG, produced by the InterOil Refinery that are specified in Schedule 1 and that are available for export. PRODUCT DELIVERY means the transfer of risk and title to Product from the Exporter to the Marketer. REFINER means InterOil Limited. REFINERY COMPLETION DATE means the date on which Shell Overseas Holdings Limited (being a member of the Shell Group) receives a notice from IOC which: 1. has attached to it a copy of the certificate of practical completion given under the EPC Contract; and 2. contains a certification by a director of IOC that the Refinery has satisfied minimum performance criteria. A copy of such notice shall also be sent directly to Marketer by IOC. PAGE 9 EXPORT MARKETING AND SHIPPING AGREEMENT REPRESENTATIVE means Marketer's Representative, Marketer's Operational Representative, Exporter's Representative or Exporter's Operational Representative, as the case may be appointed as such from time to time under Clause 20.3. SCHEDULED DATE FOR REFINERY COMPLETION means second half of 2002. SHELL GROUP means NV Koninklijke Nederlandsche Petroleum Maatschappij and The Shell Transport and Trading Company, plc and their Affiliates. SPECIFICATION means in relation to a Product, the specification for that Product as set out in Schedule 2 or as may be otherwise agreed in writing by Marketer and Exporter from time to time. SHIPPING REPORT has the meaning given in Clause 10.2. SUPPLY COMMENCEMENT COMMITTEE has the meaning given in Clause 9.1(b). TANKER means the tanker or vessel provided by Marketer to lift Product hereunder. TANKER OWNER means any or all of the owner, despondent owner, charterer or operator of the Tanker. TARGET PRICE (TP) means, in respect of a Product, the target price for the relevant Product as specified in Schedule 1. TAX means any taxes or duties and other charges, levies and impositions, assessed or charged, or assessable or chargeable, by or payable to any governmental taxation or excise authority and includes any additional tax or duty, interest, penalty, charge, fee or other amount imposed or made on or in relation to a failure to file a relevant return or to pay a relevant tax or duty. TENTATIVE NOMINATIONS has the meaning given in Clause 15(d). TERM CUSTOMER means a customer identified as such in the Marketing Plan and approved as such as per Clause 12. TERM CONTRACt means a contract between the Marketer (or Exporter) and a Customer for the supply or sale of a Product in the Export Market by the Marketer or Exporter to that Customer and approved under Clause 12(c). USD means United States Dollar currency. WORKING DAY means a day other than Saturday Sunday or a day designated by a competent authority in Papua New Guinea as a public holiday applying in Port Moresby. 1.2 INTERPRETATION Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise. PAGE 10 EXPORT MARKETING AND SHIPPING AGREEMENT (a) The singular includes the plural and conversely. (b) A gender includes all genders. (c) If a word or phrase is defined, its other grammatical forms have a corresponding meaning. (d) A reference to a person, corporation, trust, partnership, unincorporated body or other Entity includes any of them. (e) A reference to a Clause or Schedule is a reference to a clause of, or a schedule to, this Agreement. (f) A reference to an agreement or document (including, without limitation, a reference to this Agreement) is to the agreement or document as amended, varied, supplemented, novated or replaced except to the extent prohibited by this Agreement or that other agreement or document. (g) A reference to a Party to this Agreement or another agreement or document includes the Party's successors and permitted substitutes or assigns (and, where applicable, the Party's legal personal representatives). (h) A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. (i) A reference to conduct includes an omission, statement or undertaking, whether or not in writing. (j) A reference to an agreement includes any undertaking, deed, agreement or legally enforceable arrangement, whether or not in writing, and a reference to a document includes an agreement (as so defined) in writing, or any certificate, notice, instrument or document of any kind. (k) The meaning of general words is not limited by specific words introduced by including, or for example, or similar expressions. 1.3 CONSENTS OR APPROVALS If the doing of any act, matter or thing under this Agreement is dependent on the consent or approval of a Party or is within the discretion of a Party, the consent or approval may be given or the discretion may be exercised conditionally or unconditionally or withheld by the Party in its absolute discretion unless express provision to the contrary has been made in this Agreement. PAGE 11 EXPORT MARKETING AND SHIPPING AGREEMENT 1.4 RELATIONSHIP BETWEEN PARTIES (a) Except as and to the extent expressly provided in this Agreement: (i) nothing in this Agreement (including any obligations to consult, communicate, negotiate or otherwise in any way act in good faith) creates or will be deemed to create between: A the Marketer on the one part; and B the Exporter on the other part, C any relationship of joint venture, partnership, agency, employment or any other fiduciary relationship of any kind whatsoever; (ii) the Marketer has no authority or power to bind, to contract in the name of, or create a liability against the Refiner or the Exporter; and (iii) the Exporter has no authority or power to bind, to contract in the name of, or create a liability against the Marketer. (b) The Marketer may be described as an authorised dealer or distributor of the Products but may not be described by any party as agent of the Exporter or in any words that may indicate the existence of agency relationship between the Marketer and Exporter. 1.5 GOVERNING LAW (a) This Agreement shall be governed by and construed in accordance with the law of England, and for the purposes specifically of Clause 23.6 below the Parties agrees to submit to the jurisdiction of the courts of England. (b) The Parties do not intend that any term of this Agreement should be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a Party to this Agreement. (c) The United Nations Convention on Contracts for the International Sale of Goods of Vienna, 11th April 1980, shall not apply to this Agreement. 1.6 WAIVER No waiver of any provision of this Agreement nor consent to any departure therefrom, by either of the Parties shall be effective unless the same shall be in writing and then such waiver or consent shall be effective only in the specific instance and for the purpose for which it is given. No default or delay on the part of PAGE 12 EXPORT MARKETING AND SHIPPING AGREEMENT either of the Parties in exercising any rights, powers or privileges hereunder shall operate as a waiver thereof or of any other right hereunder; nor shall a single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 1.7 VARIATIONS This Agreement cannot be modified in any way except in writing and signed by the Parties. 2 COMMENCEMENT, TERM AND RENEWAL (a) This Agreement commences on the date of this Agreement. (b) Unless extended under paragraph (c), this Agreement will terminate on the third anniversary of the Refinery Completion Date (the Initial Termination Date). (c) Not less than 6 months before the Initial Termination Date, the Exporter and the Marketer must commence negotiations with each other in good faith about the extension of this Agreement and the terms on which such extension may occur. If the Exporter and the Marketer fail to agree on an extension, this Agreement will terminate on the Initial Termination Date. PAGE 13 EXPORT MARKETING AND SHIPPING AGREEMENT 3 GENERAL SCHEME OF ARRANGEMENTS 3.1 EFFECT OF THIS CLAUSE Due to its generality, this Clause 3 is subject to and must be read in conjunction with all other terms and conditions in this Agreement. 3.2 GENERAL SCHEME OF ARRANGEMENTS The Exporter will engage the resources of the Marketer to sell, distribute, market and ship (as the case may be) into the Export Market those Export Products produced by the Refiner in Papua New Guinea allocated for Export from Papua New Guinea (Export Products) by: (a) the establishment of committees in accordance with Clause 9 and Nomination procedures in accordance with Clause 15 to, respectively, coordinate and regulate the ongoing marketing, distribution and shipping (as the case may be) of those Products; (b) the sale of Products by the Exporter to the Marketer when a Product is to be re-supplied or sold by the Marketer in the Export Market under a Term Contract in accordance with Clause 12; (c) the sale of Products by the Exporter to the Marketer or a member of the Shell Group (upon the agreement between them of quantity and price) when the Marketer (or the relevant member of the Shell Group) wishes to purchase a Product for its own stocks for general supply or sale of that Product in the Export Market in accordance with Clause 13.1; (d) engaging the Marketer who will use good faith and all reasonable efforts to sell, market, distribute, and ship all available Export Products at the highest Effective Netback Price to Exporter for Export Products; (e) the sale of Excess Product to the Marketer (or a member of the Shell Group nominated by the Marketer) in accordance with Clause 13.2; (f) engaging the Marketer to develop certain export opportunities for the direct sale of Product by the Exporter, or other members of the InterOil Group to certain Customers in accordance with Clauses 6.3; (g) setting incentives for the Marketer to maximise economic returns to the Exporter by: (i) providing competitive Nomination and Commission mechanisms in accordance with Clauses 15 and 16; and PAGE 14 EXPORT MARKETING AND SHIPPING AGREEMENT (ii) allowing Marketer to optimise freight of Products and Naphtha; (h) engaging the Marketer, if the Exporter requests, to ship in accordance with Clause 7.(e) those Products that the Exporter exports and sells directly to an End User under Clause 6.2; and (i) engaging the Marketer, if the Exporter wishes, to source, ship to the Refinery, and sell to the Exporter in accordance with Clause 7, product such as LCO or other agreed blendstock for the purposes of blending with Refinery LSWR to make MDO to a required Specification. 4 EXCLUSIVE EXPORTER 4.1 GRANT OF RIGHTS The Exporter warrants that it has the exclusive rights during the term of this Agreement to: (a) acquire all Product that is not reasonably required by the Refiner to fulfil its PNG domestic obligations in respect of the supply or sale of Products in Papua New Guinea; and (b) export Products from Papua New Guinea. 4.2 UNDERTAKINGS OF EXPORTER The Exporter undertakes to the Marketer that the Exporter will: (a) supply to the Marketer all quantities of the Products not reasonably required by the Refiner to: (i) fulfil its PNG domestic obligations in respect of the supply or sale of Products in Papua New Guinea; and (ii) fulfil its own export sales in accordance with clause 6.2 (a); (b) not supply or sell any Product acquired or produced by Refiner in Papua New Guinea into or in the Export Market other than in accordance with this Agreement; and (c) not supply or sell Products to persons or Authorities: (i) with a view to the supply or sale of those Products in the Export Market; or (ii) where it knows or could reasonably be expected to know that the relevant person or Authority is procuring those Products with PAGE 15 EXPORT MARKETING AND SHIPPING AGREEMENT a ultimate view to the supply or sale of those Products in the Export Market. 5 EXPORT TITLE AND RISK In respect of all Products produced by the Refiner that are transported from Papua New Guinea for supply or sale into the Export Market, by the Exporter, the export of that Product, will, for the purposes of this Agreement occur at the time when, and at the point where, the title and risk in the relevant Product is transferred from the Exporter to the Marketer at the Delivery Point. The Exporter will obtain all necessary export permits and certificates of origin with respect to the export of Products. 6 DISTRIBUTION RIGHTS 6.1 DISTRIBUTION RIGHTS OF MARKETER Subject to Clauses 6.2 and 6.3, the Exporter grants to the Marketer during the term of this Agreement: (a) the exclusive right to market, sell and distribute in the Export Market all Products (excluding MDO); and (b) the non-exclusive right to market and distribute in the Export Market all MDO, in accordance with this Agreement. 6.2 DISTRIBUTION RIGHTS OF EXPORTER (a) Despite Clause 6.1 the Exporter may: (i) sell Product on a Term Contract basis to End Users in the Export Market; (ii) sell MDO direct to Customers in the Export Market; and (iii) sell Product to Customers other than those defined as End Users, if over any six month period Exporter takes and substantiates the view that Export prices achieved by Marketer are inadequate (e.g. less than 60% of exports have achieved Effective Netback Prices at or above the Target Prices). In this event Exporter may give Marketer at least two months notice, (taking cognisance of the fact that Refinery start-up PAGE 16 EXPORT MARKETING AND SHIPPING AGREEMENT uncertainties may hamper Target Price being achieved in the first two months . (b) The Exporter may take such steps as it considers necessary or expedient to promote: (i) the marketing of the Products in the Export Market to End Users in accordance with the terms of this Agreement; and (ii) the distribution of Products under paragraph (a). 6.3 EXCEPTIONS TO DISTRIBUTION RIGHTS OF MARKETER (a) Despite Clause 6.1, when Marketer or Exporter identifies a marketing opportunity that may require the Exporter (or another member of the InterOil Group) to sell a Product and deal directly with a Customer or potential Customer (or class of them) in the Export Market, for example when a Party becomes aware of a distribution opportunity in which it would be advantageous or necessary for the Exporter (or a member of the InterOil Group) rather than the Marketer to be the contracting Party to the relevant supply, then both Parties will enter into good-faith discussions to reach agreement on which Party will sell to that Customer. (b) The Exporter and the Marketer may from time to time, as contemplated in Clause 6.3(a), agree that the Exporter (or another member of the InterOil Group) sells specified quantities of Product and deals directly with Customers or potential Customers in the Export Market, in which circumstances Clause 6.4 will apply. 6.4 COMMISSION FOR INTRODUCTION Notwithstanding Clauses 6.2 (a) and (b), if the Marketer introduces the opportunity for the sale of that Product by the Exporter (or another member of the InterOil Group) to a Customer under Clause 6.3 then: (a) the Exporter must disclose to the Marketer the material details of any sale it makes under Clause 6.3, including the relevant Customer, the quantity of Product supplied and the actual price at which it is supplied; and (b) Exporter will pay Marketer an amount equal to the Commission calculated under Clause 16 as if the Marketer had made a prior Nomination for that product and Exporter had made no later Nomination. PAGE 17 EXPORT MARKETING AND SHIPPING AGREEMENT 7 UNDERTAKINGS OF THE MARKETER RELATING TO DISTRIBUTION The Marketer undertakes to the Exporter that the Marketer will: (a) exercise in good faith all reasonable endeavours to maximise the economic returns to the Exporter under the arrangements anticipated by this Agreement by pursuing, in the supply and sale by Marketer to Customers of those Products which the Marketer purchases from the Exporter, commercial terms with those Customers, that in turn, under the terms of this Agreement relating to the pricing of Export Products between the Exporter and the Marketer, will achieve the Highest Effective Netback Price for the Exporter. (b) not supply or sell Products to persons or Authorities: (i) with a view to the supply or sale of those Products within Papua New Guinea; or (ii) where it knows or could reasonably be expected to know that the relevant person or Authority is procuring those Products with a view to the supply or sale of those Products within Papua New Guinea. (c) Not approach an End User, Identified by the Exporter and not previously Identified by either Party in the Marketing Plan and for which business is likely to be concluded at or above the Target Price, with a view to discussing sale of Product to that End User unless agreed by Exporter. (d) Marketer must disclose to the Exporter the material details of a supply it makes under Clause 12, including the relevant Customer, actual price, the quantity of Product supplied and the actual price at which Freight, insurance and other costs are supplied. (e) The Exporter may request the Marketer to ship or arrange the carriage of Exporter's own Products on a voyage charter basis and, subject to agreement on a commercial price reflecting actual costs incurred for such carriage or arrangement (which shall include but not be limited to Freight, demurrage and insurance (as the case may be)) and other material terms including those relating to charterparty terms, risk and insurance of the relevant cargo of Product which will be done in good faith and according to Industry practice but always adhering to the Shell Group practices, the Marketer may not unreasonably refuse to carry or arrange the carriage of that cargo (but the Exporter acknowledges that the Marketer may give priority to the carriage of Marketer's own Products, or petroleum products of members of the Shell Group and Products the Marketer (or its nominee that PAGE 18 EXPORT MARKETING AND SHIPPING AGREEMENT is a member of the Shell Group) has purchased from the Exporter and that are being carried for delivery to a Customer). For such Exporter's cargoes where it is mutually agreed that the Marketer shall arrange for their carriage, the Exporter shall pay a commission of USD [Deleted for confidentiality] per barrel. (f) Marketer acknowledges the vital importance of the procurement of LCO or other agreed blendstock for the purposes of blending with Refinery LSWR and Marketer agrees to provide all information available to Marketer regarding location, quality, pricing, and freight options for such LCO or blendstock as per Clause 10.3. (g) Following consultation with Exporter, Marketer will provide in good faith, on a reasonable efforts basis, procurement and freighting of Light Cycle Oil (or other agreed blendstock) to the InterOil Refinery for the purpose of blending MDO. Quantities likely to be shipped are between 6,000 to 12,000 tonnes. Marketer shall make reasonable endeavours to ensure that deliveries of LCO (or other agreed blendstocks) are, subject to availability at prices acceptable to InterOil, made as frequently as required by InterOil, which is expected to be approximately every four to six weeks. 8 UNDERTAKINGS OF THE EXPORTER RELATING TO DISTRIBUTION The Exporter undertakes to the Marketer that the Exporter will not supply or sell Export Products to persons or Authorities: (a) other than the Marketer or members of the Shell Group, except as permitted under Clause 6.2 or 6.3; (b) with a view to the supply or sale of those Export Products within Papua New Guinea; (c) where it knows or could reasonably be expected to know that the relevant person or Authority is procuring those Export Products with a view to the supply or sale of those Export Products within Papua New Guinea; and (d) will not approach an End User, Identified by the Marketer and not previously Identified by either Party in the Marketing Plan and for which business is concluded at or above the Target Price, with a view to discussing sale of Export Product to that End User unless agreed by Marketer. PAGE 19 EXPORT MARKETING AND SHIPPING AGREEMENT 9 COMMITTEES 9.1 PRIOR TO COMMENCEMENT OF NORMAL SUPPLY OF PRODUCT BY THE INTEROIL REFINERY: (a) (GENERAL CO-OPERATION) Prior to the Refinery Completion Date the Exporter and the Marketer will use all reasonable endeavours to ensure an orderly introduction of arrangements for the distribution of Products by the Marketer for supply or sale within the Export Market. The generality of this paragraph (a) is not limited by the following terms in this Clause 9.1. (b) (FORMATION AND FUNCTIONS OF SUPPLY COMMENCEMENT COMMITTEE) Not less than 12 months before the Scheduled Date for Refinery Completion, the Exporter, and the Marketer will establish a committee with the Refiner (the SUPPLY COMMENCEMENT COMMITTEE) to provide the forum for consultation between the Exporter, the Marketer and the Refiner regarding: (i) the conduct of each Party in relation to the commissioning and start of operations of the Refinery; (ii) policies, programs, plans and agreements for assisting each other in agreed aspects of the commissioning and start of operations of the Refinery; (iii) mechanisms for taking and delivering Product produced in the testing, commissioning and start up phases of the Refinery, including mechanisms for agreeing or otherwise determining quantities, prices and delivery arrangements, before the Refinery Completion Date (which terms, to the extent possible, it is intended by the parties will be as close as is practicably possible to the terms that will apply from the Refinery Completion Date); and (iv) have any other functions relating to the commissioning and start of operations of the Refinery as are agreed between the Exporter, and the Marketer from time to time, with respect to the supply of Product by the Exporter to the Marketer. (c) (MEETINGS OF SUPPLY COMMENCEMENT COMMITTEE) The Supply Commencement Committee will, unless otherwise agreed by the Exporter and the Marketer, meet not less frequently than: (i) quarterly until 3 months before the projected date of the commencement of regular production of Products by the Refinery; then PAGE 20 EXPORT MARKETING AND SHIPPING AGREEMENT (ii) monthly until 1 month before the projected date of the commencement of regular production of Products by the Refinery; then (iii) weekly until the Refinery Commencement Date. (d) (APPOINTMENT AND POWERS OF REPRESENTATIVES) Each of the Exporter and the Marketer will be entitled by notice to each other to appoint a person as a member of the Supply Commencement Committee and from time to time to remove any person so appointed and to appoint another person in his or her place. The Exporter will be entitled to appoint a second person as a member of the Supply Commencement Committee with the specific purpose of providing relevant information on InterOil Refinery operations. Each of the Exporter and Marketer will also be entitled by notice to each other to appoint any person as an alternate representative for a representative appointed by it and from time to time to remove any person so appointed and to appoint another person in his or her place. An alternate representative shall be entitled to attend any meeting of the Supply Commencement Committee. (e) (QUORUM) The quorum for any meeting of the Supply Commencement Committee will be one representative appointed by each of the Exporter and the Marketer. (f) (CONDUCT OF MEETINGS) Meetings of the Supply Commencement Committee will be held at the times and places and in accordance with any agendas and other procedural arrangements agreed between the representatives of the Parties. (g) (COSTS OF ATTENDANCE AT SUPPLY COMMENCEMENT COMMITTEE MEETINGS) Costs and expenses incurred by the Exporter or the Marketer relating to the attendance of its representatives (including alternates) and advisers at meetings of the Supply Commencement Committee shall be borne by the Exporter or the Marketer respectively. 9.2 FROM COMMENCEMENT OF NORMAL SUPPLY OF PRODUCT BY REFINERY (a) (FORMATION AND FUNCTIONS OF SUPPLY COMMITTEE) From the Refinery Commencement Date the Supply Commencement Committee will be deemed reconstituted as a permanent committee (the Supply Committee) which shall provide the forum for consultation between the Exporter and the Marketer for: (i) review, consideration and discussion of ongoing planning and the associated reports issued under Clause 10; PAGE 21 EXPORT MARKETING AND SHIPPING AGREEMENT (ii) review of operating issues arising out of the performance of this Agreement; (iii) consideration of revisions and impact of the planned shutdown and maintenance programs of the Refinery or resources used in distributing Products under this Agreement; (iv) review of shortfall or make-up quantities and to reconcile them, or where necessary to provide for make-up quantities, all in order to bring supplies and deliveries in line with agreed principles; (v) consideration and reconciliation of the Marketer's and the Exporter's requirements for the Products and actual Products production; (vi) if necessary, the review of quality or specifications of Product and adjustment to these and the price formula if agreed; (vii) the review of any matters which may affect the ability of either Party to undertake its obligations under this Agreement; (viii) any other functions relating to the marketing and distribution of Products as are agreed between the Exporter and the Marketer from time to time; and (ix) with respect to the supply of Product by the Exporter to the Marketer. (b) (MEETINGS OF SUPPLY COMMITTEE) The Supply Committee will, unless otherwise agreed by the Exporter and the Marketer, meet not less frequently than Monthly. (c) (APPOINTMENT AND POWERS OF REPRESENTATIVES) The Exporter and the Marketer will be entitled by notice to each other to appoint a person as a member of the Supply Committee and from time to time to remove that person so appointed and to appoint another person in his or her place. The Exporter and the Marketer will also be entitled by notice to each other to appoint any person as an alternate representative for a representative appointed by it and from time to time to remove any person so appointed and to appoint another person in his or her place. An alternate representative shall be entitled to attend any meeting of the Supply Committee. (d) (QUORUM) The quorum for any meeting of the Supply Committee will be one representative appointed by each of the Exporter and the Marketer. PAGE 22 EXPORT MARKETING AND SHIPPING AGREEMENT (e) (CONDUCT OF MEETINGS) Meetings of the Supply Committee will be held at the times and places and in accordance with any agendas and other procedural arrangements agreed between the representatives of the Parties. (f) (COSTS OF ATTENDANCE AT SUPPLY COMMITTEE MEETINGS) Costs and expenses incurred by the Refiner, Exporter or the Marketer relating to the attendance of its representatives (including alternates) and advisers at meetings of the Supply Committee shall be borne by the Exporter or the Marketer respectively. 10 ONGOING PLANNING 10.1 WEEKLY FORECAST PRODUCTION AND OTHER INFORMATION. By the close of business on the Tuesday of each week (or if that Tuesday is a designated public holiday in Port Moresby, the next day that is not a designated public holiday in Port Moresby), the Offtake Coordinator (appointed by the Exporter) will compile and give to each representative of the Supply Committee or its nominees a report which will include, but may not be limited to: (a) the daily net production, planned offtakes (which shall include domestic and export Nominations) and inventory forecasts for all Products which are projected to be available for lifting in the current and next succeeding 2 months unless otherwise agreed, and highlighting of any breach of operating limits, eg stock out or tank tops, for each Product. It is anticipated that this will assist in the identification of potential Excess Product for which Exporter or Marketer may nominate. Timing for such nomination will be in accordance with Clause 15 of this Agreement; (b) loading windows and Tanker details (where known) assigned to other cargoes loading or discharging at the same primary jetty, eg. firm arrival slots for crude oil import cargoes; (c) details of all Nominations made by the Marketer or the Exporter under this Agreement and the anticipated date of delivery of those Products under those Nominations. In addition to the above the Offtake Coordinator will advise each member of the Supply Committee as soon as practicable of any: (d) material increase or decrease (of 20% or more over any one-week period) in forecasts of production of any Product as advised in Clause 10.1(a); PAGE 23 EXPORT MARKETING AND SHIPPING AGREEMENT (e) operational circumstances that will reduce the capacity of any one of the Product storage tanks at the InterOil Facilities; and at least 60 days written notice of scheduled maintenance to any of the InterOil Facilities (including the loading terminal), or scheduled unavailability of resources which will either impact on production or impose constraints on Marketer's or Exporter's ability to accrue and lift Product. 10.2 SHIPPING REPORT The Marketer will supply to each representative of the Supply Committee a shipping report for the subsequent three-month period, which details Tanker movements in the Oceania Envelope. These Tanker movements will include all Tankers owned or controlled by Marketer and shipping market intelligence on any other Tankers in the Oceania Envelope which Marketer considers is relevant to the offtake program of the InterOil Refinery and which Marketer is at liberty to disclose. 10.3 MARKETING PLANS AND DEVELOPMENT OF TERM CONTRACT ARRANGEMENTS. (a) The Marketer and the Exporter will on a regular basis consult to develop and produce a marketing plan (in such format and with such detail of content as agreed amongst them) relating to the supply, and sale of Products by the Marketer and the Exporter in the Oceania Envelope under this Agreement (Marketing Plan). (b) The Marketing Plan will include but not necessarily be limited to: (i) the allocation of responsibilities and respective marketing and distribution coverage between the Marketer and the Exporter with a view to coordinating and optimising the supply and sale of Products within the Oceania Envelope to achieve the highest Effective Netback Price for Exporter, in accordance with the arrangements anticipated under this Agreement; (ii) details of any intended marketing or distribution arrangements of the Marketer and the Exporter regarding the sale of Product outside the Oceania Envelope; (iii) approximations of anticipated vessel and freight availabilities (and associated tonnage optimisations) within the Oceania Envelope to market and distribute Products in the Oceania Envelope; (iv) identification in writing of potential Term Customers and End Users by Marketer and Exporter. Prioritisation and marketing PAGE 24 EXPORT MARKETING AND SHIPPING AGREEMENT approach to those potential Customers eg. joint venture arrangement, Marketer approach or Exporter approach (with a view to preventing more than one Party talking to the same potential Customer) and which shall take into account future long term production forecasts; (v) specific details of arrangements with respect to the marketing of MDO. Exporter and Marketer will Identify potential Customers of MDO and their required specifications (where known) and discuss blendstock options that may be required to meet these specifications. The Parties will further discuss and agree the technical development required on a case by case basis; (vi) Nomination of Term Contract for approval prior to commitment in accordance with Clause 12. (c) The Parties will meet on a date to be agreed to discuss the matters detailed in Clause 10.2 with a view to producing the first Marketing Plan by no later than 12 months prior to Refinery Completion Date. (d) The Marketing Plan may be replaced or amended by the Marketer and the Exporter upon their mutual agreement at any time. (e) A copy of the Marketing Plan (and any replacement of or amendment to it) must be given to or exchanged by each representative of the Supply Committee. (f) The Marketing Plan will be continuously reviewed and monitored by the Supply Committee, and the Marketer and the Exporter will use all their reasonable endeavours to ensure their respective activities accord to the extent required with the content of the Marketing Plan. 11 SUPPLY OF PRODUCTS TO MARKETER FOR DISTRIBUTION Pursuant to Clauses 12 and 13(a) the Exporter will sell and the Marketer will purchase Products for supply, distribution and sale into the Export Market on the terms set out in Schedule 3 of this Agreement. 12 DISTRIBUTION BY OPEN BOOK SALES AND APPROVAL FOR SUCH SALES. (a) The Marketer will actively seek Customers to enter into Term Contracts. PAGE 25 EXPORT MARKETING AND SHIPPING AGREEMENT (b) When the Marketer wishes to enter into a Term Contract with a certain Customer for the supply or sale in the Export Market of certain Products to that Customer, the Marketer may propose that such resupply or sale is made under a Term Contract, in which event the Marketer will notify the Exporter of all material details of the Marketer's anticipated contract with that Customer. For the avoidance of doubt, the material details shall be the identity of the Customer, and the Product grade, quantities, quality, intended delivery details and timing and intended pricing terms of the relevant Products. It is agreed that with respect to the other contractual terms of the proposed Term Contract, the Marketer shall have full discretion. The Exporter shall, within 15 Working Days of receiving that notification (unless otherwise agreed), either (i) approve those proposed terms; or (ii) reject those proposed terms; provided that the Term Contract Customer has previously been identified and agreed as a priority potential Customer in the Marketing Plan, otherwise the Exporter reserves the right for lengthier consideration to ensure Product availability and pricing terms are favourable for the period of the proposed Term Contract. (c) If the Exporter approves the material terms proposed by the Marketer under Clause 12(b) and the Marketer enters into a contract substantially on those terms with the Customer, that contract will be an approved Term Contract. (d) In respect of such Term Contracts: (i) the Marketer undertakes that it will provide a full signed copy of the Term Contract upon request by the Exporter; (ii) the Exporter undertakes that it: (A) will supply the Marketer with all Products required by the Marketer to supply or sell the Product to the Customer under that Term Contract; (B) has the capacity to fulfil the requirements of that Term Contract; (C) shall accord priority to fulfilling the requirements of all Term Contracts over any Nominations for spot sales, unless Marketer recommends otherwise; and (D) shall pay Marketer an amount equal to the Commission due under Clause 16 in respect of the supply of that product. PAGE 26 EXPORT MARKETING AND SHIPPING AGREEMENT (e) The Marketer shall sell a Product to the Customer under a Term Contract within the price mandate previously agreed for that Product between the Exporter and the Marketer. (f) The FOB price to be paid by the Marketer to the Exporter for a Product to be re-supplied or sold to a Customer under a Term Contract shall be the Open Book Price, less any Commission due to the Marketer from the Exporter. For the avoidance of doubt, Open Book sales shall take account of all costs reasonably incurred provided that the risk of such costs being incurred was identified at the time the Term Contract was proposed. 13 SHELL DISTRIBUTION SYSTEM SALES 13.1 SUPPLY OF PRODUCT TO THE MARKETER AS BUYER (FOR SHELL GROUP'S OWN STOCKS) (a) The Marketer may make Nominations for Products for its own stocks or the stocks of other members of the Shell Group for general supply or sale of that Product in the Export Market to Customers. (b) The price relating to a supply of a Product under this Clause 13.1, will be the price agreed between the Exporter and the Marketer, and Commissions shall apply in accordance with Schedule 1. (c) The Marketer and members of the Shell Group are free to supply and resell the Products they purchase under this Clause 13.1 at the prices and on the terms they think fit. 13.2 EXCESS PRODUCT (a) The Marketer must purchase from the Exporter: (i) all Excess Product that the Marketer Nominates for under clause 15(f), if that Nomination is subsequently accepted in a Firm Program by Exporter; and (ii) the Excess Product that the Marketer is obliged to make a Nomination for under clause 15(i). (b) All Products sold under this Clause 13 will be purchased by the Marketer (or at the Marketer's request, by a member of the Shell Group) for its own stocks for general supply or sale of that Product in the Export Market and Marketer shall pay the Exporter a price equal to: (i) the Nominated Price for that Product if a nomination was made by the Marketer and accepted by the Exporter; or PAGE 27 EXPORT MARKETING AND SHIPPING AGREEMENT (ii) the Floor Price for that Product (excluding Gasoil 0.05%S) or the Lower Floor Price for Gasoil 0.05%S if no Nomination was made by the Marketer. (c) The Marketer is free to supply and resell the Excess Product it purchases under this Agreement at the prices and on the terms it thinks fit. 14 STANDARD TERMS OF SALE All Products sold by the Exporter and purchased by the Marketer under this Agreement will, unless otherwise agreed between the Parties in relation to a specific supply, be sold and delivered to the Marketer in accordance with the Conditions of Purchase set out in Schedule 3. 15 NOMINATIONS FOR PRODUCTS (a) A Nomination for Product must be submitted to the Offtake Coordinator in writing by Marketer or Exporter in accordance with the timing specified in this Clause. Nomination details will include Product/grade, quantity request, a 7-day lifting window and Customer details including Price, which Price will show relativity to MOPS pricing. Nominations for spot liftings of Excess Product shall also include the Effective Netback Price and all details available to Marketer. (b) The Latest Nomination Date for lifting in the Delivery Period (Month x+2) is: (i) the 5th day of Month x for Nominations by any PNG domestic third party, (if that is not a working day, the prior working day); (ii) the 8th day of Month x for Nominations by the Exporter, (if that is not a working day, the prior working day); and (iii) the 10th day of Month x for Nominations by the Marketer, (if that is not a working day, the next working day). (c) The Earliest Nomination Date (such date specified only to provide a basis for the establishment of First Priority Status of a particular Nomination for liftings in the Delivery Period) is: PAGE 28 EXPORT MARKETING AND SHIPPING AGREEMENT (i) for the Marketer, the first working day after the Latest Nomination Date applicable for liftings of Product in Month x+1; and (ii) for the Exporter, the first working day after the day stipulated in paragraph (c)(i) above. (d) Tentative Nominations (including quality, volume and 7 day date range) for third party domestic lifters will be made on the first day of month x-1, for liftings in the Delivery Period, such that by the Earliest Nomination Date the Parties shall have the best estimate of Excess Product availability or deficits for the Delivery Period. Tentative Nominations for third party PNG domestic lifters remaining in the Program after the 5th of Month x shall be considered firm Nominations for the Delivery Period. (e) Nominations for Product delivery in the Delivery Period shall be made within the bounds of the Earliest and Latest Nomination Dates as defined in (b) and (c) above; this Period shall be referred to as the Nomination Period. All Nominations shall be considered tentative and subject to withdrawal by the Parties, until the first working day prior to the Latest Nomination Date. Any Nominations made after this date (ie. on the Latest Nomination Date), or Tentative Nominations not previously withdrawn, shall be considered firm and may not be modified or withdrawn without the agreement of both the Exporter and the Marketer. All Tentative Nominations must be the best indications that the Parties can provide of expected liftings, to enable early identification of stock issues and the most advanced notice to allow formulation of shipping and refinery plans. (f) Tentative Nominations for spot sales of Excess Product (eg. Product surplus in the Delivery Period), in addition to volume and 7 day date range, shall include the Effective Netback Price. If such Tentative Nomination by the Marketer is the first tentative nomination made during the Nomination Period and exceeds the Target Price defined for that Product, then that Nomination shall be given first priority status; (ie. the Commission for such lifting shall be payable even in the event that the Exporter later nominates a similar volume with higher Effective Netback Price which results in exclusion of the Nomination with First Priority Status. eg. due to lack of Product availability). For the avoidance of doubt, it is agreed that in the event that the Marketer has already concluded a contract for sale with its Customer and Exporter has approved such sale as contemplated under clause 12, and Marketer nominates for cargo for such sale then the Exporter shall not nominate a competing nomination for the same Nomination Period. PAGE 29 EXPORT MARKETING AND SHIPPING AGREEMENT (g) Withdrawal of a nomination with first priority status by a Party during the Nomination Period and not replacing such with a similar volume and equal or higher price during such Period shall render that Party ineligible for first priority status for the next month. No such period of ineligibility shall occur if the reason for withdrawal of a first priority status nomination was not within the reasonable control of that Party. (h) An Offtake Coordinator shall be appointed by the Exporter whose role shall be to: (i) receive Nominations from all Parties; (ii) liaise with the Refiner, Marketer and Exporter and keep them appraised of all developments which can impact on Supply arrangements; (iii) confirm to both the Exporter and the Marketer those Nominations with first priority status; (iv) coordinate with both the Exporter and the Marketer during the period between all the Latest Nomination Dates to target a viable refinery and shipping program, which shall enable the highest Effective Netback Prices for Products for both the Exporter and the Marketer; and (v) develop a Firm Program, published for Months x, x+1 and x+2 on a rolling basis, and made available to the parties by the 15th day of Month x (if not a working day, the following working day) which will confirm whether additional spot sales of Excess Product are required in the Delivery Period and allocation of that sale. If, after Latest Nomination Dates have passed, the Refinery Program is adversely affected due to tank tops, and no other means of alleviating such situation can be identified, the Offtake Coordinator may, in consultation with Marketer, insert into the Firm Program for Month X+2 a deemed Nomination on behalf of the Marketer. Such a Nomination by default shall price the Product to the Marketer at the Floor Price for that Product (excluding Gasoil 0.05%S) and at the Lower Floor Price for Gasoil 0.05%S. (j) If, for reasons such as, but not limited to, scheduling errors or inaccurate inventory readings, or other prompt changes excluding events or changes caused by Marketer or Marketer's vessel, for month X+1 or X, and the Refinery Program as a consequence requires one or more prompt cargo PAGE 30 EXPORT MARKETING AND SHIPPING AGREEMENT offtakes to avert the risk of tanktops or throughput curtailment, and no other means of alleviating such situation can be identified, the Offtake Coordinator may, in consultation with the Marketer, insert into the Firm Program for Month X+1 or X a deemed Nomination on behalf of the Marketer. Such a Nomination shall be priced to the Marketer at the actual realised FOB Effective Netback Price.(excluding Commission). The Marketer shall use reasonable endeavours to realise the highest possible Price. In developing a Firm Program for the Delivery Period, the Offtake Coordinator will determine acceptance and rejection of Nominations according to the following ranking: (i) Deliveries to PNG domestic third party customers. (ii) Deliveries to Term Customers. (iii) Spot Sales of Excess Product. In establishing such a ranking, the Offtake Coordinator shall be cognisant of the dependence of any Term Contract lifters and spot lifters to whom commitment has been made, and shall allow flexibility within categories a) and b) to the extent that such flexibility is available, to allow optimisation of all sales by the Marketer and/or Exporter. (eg. co-loads, dates, shipping arrangements etc.) 16 COMMISSION 16.1 COMMISSION Commission must be calculated and paid by the Exporter to the Marketer when due under this Agreement in accordance with this Clause 16. 16.2 RELATIONSHIP BETWEEN NOMINATIONS AND COMMISSION, AND OTHER CIRCUMSTANCES RESULTING IN COMMISSION Amounts of Commission payable will be ascertained as follows: (a) Term Contract business, depending on the Party Identifying that business and the Party concluding that business in accordance with Schedule 1 Table 1. (b) Spot sales of Excess Product, depending on when the Party nominates, in accordance with Schedule 1 Table 2. PAGE 31 EXPORT MARKETING AND SHIPPING AGREEMENT 17 INSURANCE 17.1 INSURANCE (a) This Clause 17 applies when the Marketer carries or arranges shipping carriage on behalf of the Exporter of either (i) the Exporter's Products or feedstocks or (ii) of the Exporter's Products to the Exporter's Customer and the Exporter has requested that the Marketer arranges marine cargo insurance on the cargo. (b) The Marketer shall procure marine cargo insurance with such costs for Exporter's direct account for a value of one hundred and ten percent (110%) of the expected invoice value of the Product, which shall cover the period from the time when the Product passes the Delivery Point, until the time when Product passes the permanent hose connection of the vessel at the port of discharge. Such insurance shall be under the same terms and conditions as a standard marine insurance policy MAR with Institute Cargo Clauses (A), Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo) attached. All deductibles, excess and exclusions applicable in such insurance policy and Clauses shall be applicable and for the account of the insured party. 17.2 MARKETER TO ASSIST EXPORTER If any Product is lost or damaged, the Marketer shall, on the request of the Exporter, assist the Exporter in the processing of the insurance claim with costs for Exporter's account. 18 FORCE MAJEURE 18.1 RELIEF FROM OBLIGATIONS No failure or omission to carry out or to observe any of the terms, provisions, or conditions or this Agreement shall give rise to any claim by one Party against the other, or be deemed to be a breach of this Agreement if the same shall be caused directly by: (a) war, hostilities, acts of the public enemy or of belligerents, sabotage, blockade, revolution, insurrection, riot or disorder; arrest or restraint of rulers, or peoples, civil and governmental frustration, expropriation, requisition, confiscation or nationalisation; (b) embargoes or export or import restrictions; substantial interference by, or restrictions or onerous regulation imposed by civil or military authorities, PAGE 32 EXPORT MARKETING AND SHIPPING AGREEMENT whether legal or de facto and whether purporting to act under some constitution, decree, law or otherwise; (c) Acts of God, fire, earthquake, storm, cyclone, lightning, tidal wave, or perils of the sea; (d) accidents of navigation, loss of tanker tonnage due to sinking by belligerents or to governmental taking whether or not by formal requisition; (e) unforeseen accidents or mechanical failures resulting in the shut down, decrease of capacity throughput or closing of the InterOil Refinery; (f) accidents to or closing of harbours, docks, canals, channels, mooring point, or other assistance to or adjuncts of shipping or navigation; (g) rationing or allocation, imposed by applicable law, decree or regulation beyond Exporter control; or any other event, matter or thing wherever occurring, and whether or not of the same class or kind as those set forth, which shall not be reasonably within the control of the Party affected. 18.2 PAYMENTS Notwithstanding the provisions of Clause 18.1, Marketer shall not be relieved of any obligations to make payment for Product delivered hereunder. 18.3 NOTICE Any Party who is, by reason of Force Majeure, unable to perform any obligation or condition required by this Agreement to be performed shall: (a) promptly notify the other Party of the event of Force Majeure and the obligations it cannot perform; (b) notify the other Party when the Force Majeure has terminated or abated to an extent which will permit resumption or performance to occur; and (c) notify the other Party when resumption of performance has occurred. 18.4 REMEDY OF FORCE MAJEURE Any Party who is, by reason of Force Majeure, unable to perform any obligation or condition required by this Agreement to be performed shall: (a) use all reasonable diligence and employ all reasonable means to remedy or abate the Force Majeure as expeditiously as possible PAGE 33 EXPORT MARKETING AND SHIPPING AGREEMENT (b) resume performance as expeditiously as possible after termination of the Force Majeure or the Force Majeure has abated to an extent that permits resumption of such performance; (c) provided that no Party shall, by virtue of this Clause 18, be required against the will of that Party to adjust or settle any strike, lockout or other labour dispute and provided further that under no circumstances shall Exporter be obligated to replace Product supplies or cargoes lost as a result of an event of Force Majeure. 18.5 EXTENDED FORCE MAJEURE If the Force Majeure event is relied upon by the affected Party under this Clause 18 to excuse its failure to perform under this Agreement shall persist for a continuous period of more than one hundred and eight (180) days, then either the other Party as the case may be shall be at liberty to terminate this Agreement by written notice to the Affected Party whereupon both parties shall be discharged from all obligations under this Agreement except for antecedent breaches, if any. 18.6 MITIGATION The Party that is prevented from carrying out its obligations under this Agreement as a result of Force Majeure must take all action reasonably practicable to mitigate any loss suffered by the other Party as a result of its inability to carry out its obligations under this Agreement. 19 LIMITATION OF LIABILITY Notwithstanding any other provisions in this Agreement, the Parties agree as follows: (a) In no event shall a Party to this Agreement make any claim against the other Party or its employees, officers, agents, or consultants on account of any alleged error of judgement made in good faith in connection with its performance under this Agreement (b) Neither the Exporter nor the Marketer, shall be liable, one against the other whether in tort or in contract for any consequential, indirect or special losses, punitive, exemplary damages of any kind (including but not limited to loss of profit, loss of use and loss of interest) arising out of or in any way connected PAGE 34 EXPORT MARKETING AND SHIPPING AGREEMENT with the Agreement, its implementation, performance of or failure to perform the Agreement; (c) Notwithstanding Clause 19(b), in the event that the Marketer is liable to the Exporter for breach of Condition 13 due to the late arrival of Marketer's Tanker arising from Marketer's Gross Negligence only, Marketer shall, in addition to the direct damages under Condition 13(d), be liable for any consequential, indirect or special loss, including loss of profit, based on lost refining and marketing margin due to any reduced refinery throughput. Marketer's total liability to the Exporter under this Clause 19(c) and under Condition 13(d), and in respect to a Tanker loading Naphtha as well as Product under this Agreement, shall be limited to a maximum of United States Dollars [deleted for confidentiality] per day (whether in this Agreement or any other agreement in respect of the same Tanker loading this or any other cargo). (d) Notwithstanding Clause 19(b), the Marketer shall not be liable to the Exporter for any loss, liability, damage, cost or expense suffered or incurred by the Exporter (to the maximum extent permitted by Law) directly or indirectly arising from or connected with the Marketer's performance, non-performance or malfeasance of its obligations or duties pursuant to its obligations under Clauses 7(e) to (g) inclusive irrespective of the Marketer's fault or negligence unless any such liability, loss, damage, cost or expense results from the Marketer's Gross Negligence. (e) In relation to Clause 19(d) above, the Exporter hereby agrees to indemnify and hold the Marketer harmless in respect of all claims, liabilities losses, damages, costs and expenses incurred by a third party directly or indirectly arising from or connected with the Marketer's performance, non-performance or malfeasance of its obligations or duties pursuant to its obligations under Clauses 7(e) to (g) inclusive irrespective of the Marketer's fault or negligence unless any such liability, loss, damage, cost or expense results from the Marketer's Gross Negligence. (f) In relation to Clause 19(d) and (e) above, in the event that the Marketer is liable to the Exporter, Marketer's total liability to the Exporter under this Agreement for its breach of its obligations under Clauses 7(e) to (g) inclusive shall be limited to the aggregate of the total fees earned in relation to services rendered under Clause 7(e) to (g) inclusive. (g) Nothing herein shall derogate from a Party's obligations to act in good faith and mitigate and minimise costs and damages for which the other Party may be liable under this Agreement. PAGE 35 EXPORT MARKETING AND SHIPPING AGREEMENT (h) "Gross Negligence" means any act or omission done or omitted to be done intentionally or with reckless disregard for any damage or loss such action or omission causes or may cause or which could have been reasonably foreseen to be caused. 20 NOTICE 20.1 MEANS OF NOTICE All notices, statements and other communications to be given, submitted or to be made under this Agreement shall be sufficiently given if in writing and sent either: (a) by hand or courier; or (b) by facsimile with receipt acknowledged, to the address or facsimile numbers specified in this Agreement under Clause 20.3. 20.2 CHANGE OF ADDRESS A Party may change its address for the purposes set forth in Clause 20 upon giving 15 days prior written notice to the other Party. 20.3 REPRESENTATIVES (a) Each Party hereby appoints the Representatives specified in this Clause 20.3. (b) A Party may change its Representatives by notice to the other Party, and the Exporter may nominate an agent to act for the Exporters Representative in certain matters, which notice shall be given to the Marketer. (c) All notices, statements and other communications given, submitted and made under this Agreement by the Marketer or by the Exporter or by the Refiner from time to time or at any time under this Agreement may be given and received by a single notice by a Representative, such notice being effective notice to or from the relevant Party. Exporter's Representatives The Exporter's Representative and its address and facsimile number are: Managing Director E.P. InterOil, Ltd 25025 I-45 North, Suite 420 The Woodlands, Texas 77387, USA Telephone: (281) 292-1800 PAGE 36 EXPORT MARKETING AND SHIPPING AGREEMENT Facsimile: (281) 292-0888 Attention: Christian Vinson Marketer's Representatives The Marketer's Representative and its address and facsimile number are: NAME: Head of Operations, Chemical Feedstocks Attn: WAYNE KHOO ST114 TEL +65 384 8745 FAX NO: +65 384 8548 TELEX NO: RS20196 Authority of the Representatives The Representatives shall have the following authority: (A) to make agreements concerning the administration or procedures under the Agreement; and (B) to render any invoice, Bill of Lading or other documentation as required by the Agreement. 21 ASSIGNMENT 21.1 SUCCESSORS AND ASSIGNS Subject to this Clause 21, the Agreement shall be binding upon and inure to the benefit of the Parties, their successors and assigns. 21.2 CONDITIONS OF ASSIGNMENT This Agreement shall not be assignable by either Party without the assignee entering into a covenant in writing with the non-assigning Parties, in a form acceptable to the non-assigning Parties such acceptance not to be unreasonably withheld, to be bound by the provisions of the Agreement as if it were a Party to the Agreement. 22 CONFIDENTIALITY 22.1 NON-DISCLOSURE Neither Party ("Disclosing Party") may in the absence of prior written consent either before or for a period of 3 years after termination of this Agreement divulge or suffer its employees, consultants, agents or representatives to divulge to any person (other than to those of its officers, employees, consultants, agents or representatives who reasonably require the information to enable them to properly PAGE 37 EXPORT MARKETING AND SHIPPING AGREEMENT perform their duties) any of the contents of this Agreement or any other information concerning the operations, dealings, transactions, contracts or commercial or financial affairs of the other Party ("Owning Party"). 22.2 EXCLUSIONS The restrictions imposed by Clause 22.1 do not apply to the disclosure of information: (a) to any Affiliate or bona fide intended assignee of the Disclosing Party upon obtaining a similar undertaking of confidentiality from that Affiliate or assignee in favour of both Parties; (b) to independent consultants, legal counsel and contractors of the Disclosing Party whose duties reasonably require disclosure provided those consultants, legal counsel and contractors have made a similar undertaking of confidentiality to the Disclosing Party; (c) to any bank or financial institution from whom the Disclosing Party is seeking or obtaining finance, provided those banks or institutions have made a similar undertaking of confidentiality to the Disclosing Party; (d) to the extent required by any applicable laws or regulations having jurisdiction over the Disclosing Party; or by the regulations of any recognised stock exchange on which are listed for quotation shares in the capital of the Disclosing Party or any Affiliate of the Disclosing Party; or in a prospectus issued by the Disclosing Party or an Affiliate of the Disclosing Party as required by securities laws governing the Disclosing Party or such Affiliate; or to the extent required for the purpose of any litigation arising from this Agreement; provided that if the Disclosing Party is served with any notice, demand, request, subpoena or other proceedings seeking discovery, disclosure or production of this Agreement or any information which has been previously disclosed to the Disclosing Party and which is proprietary to the Owning Party, then the Disclosing Party shall: (i) forthwith give a copy of the notice, demand, request, subpoena or other proceedings to the Owning Party; (ii) comply with any reasonable directions issued by the Owning Party in respect of the protection or dissemination of such information, documentation and agreements (whether or not confidential); PAGE 38 EXPORT MARKETING AND SHIPPING AGREEMENT (iii) upon receiving notice from the Owning Party, accept and give effect to, as far as is possible, any reasonable representation from the Owning Party in regard to the conduct of any negotiations, dissemination or proceedings relating to such information, documentation and agreements (whether confidential or not); and (iv) not otherwise do anything to prejudice the protection of such information, documentation or agreement or which is inconsistent with paragraphs 1-3 inclusive above; or (e) to the extent that the same has become generally available to the public. 23 DISPUTE RESOLUTION 23.1 NOTICE OF DISPUTE The Party claiming that a dispute, controversy or claim has arisen shall give notice to the other Party identifying such dispute, controversy or claim and designating its representative in negotiations, being a senior officer of the Party with authority to settle the matter, and the other Party shall promptly give notice in writing designating its representative in negotiations with similar authority. 23.2 MEETING Within 10 days of the notice of dispute, the senior officers of each disputant shall meet to seek to resolve the matter. 23.3 FURTHER ALTERNATIVE DISPUTE RESOLUTION If the dispute, controversy or claim is not resolved by the senior officers within such period of 10 days, the Parties shall, within a further 10 days, seek to agree the process for resolving the matter through means other than litigation, such as further negotiations, mediation or conciliation and on: (a) the procedure and timetable for any exchange of documents and other information relating to the dispute, controversy or claim; (b) procedural rules and a timetable for the conduct of the selected mode of proceedings; and (c) the procedure for selection and remuneration of any mediator who may be employed by the Parties. PAGE 39 EXPORT MARKETING AND SHIPPING AGREEMENT 23.4 EXPERT If the Parties agree that the matter should be referred to an expert for resolution, the following procedure shall apply unless otherwise agreed by the Parties: (a) either Party shall notify ("Initial Notice") the other Party of the matter it wishes to be resolved including the name of the person whom it nominates as the expert; (b) the recipient of the Initial Notice shall notify the other Party ("Reply") within 3 days if it does not accept the person so nominated and make a nomination of the person it proposes to be the expert; (c) if the Parties are not able to agree on the appointment of the expert within 7 days of the Initial Notice, either Party may request the Chairman of the Australian Institute of Petroleum to appoint a person qualified by education, experience and training in the subject matter in dispute to be the expert; (d) the expert so appointed shall promptly fix a reasonable time and place for receiving submissions or information from the Parties or from any other persons that the expert may think fit and the expert may make such further enquires and require such other evidence as he or she may consider necessary for determining the matter and shall in accordance with this Agreement determine the matter with all due diligence and speed; (e) the expert shall not be deemed not to be an arbitrator but shall render his decision as an expert; (f) the determination of the expert shall be final and binding upon the Parties save in the event of fraud, mistake or miscarriage; (g) each Party shall bear the costs and expenses of all counsel, witnesses and employees retained by it but the cost and expenses of the expert shall be apportioned between the Parties in such proportions as the expert shall in the circumstances consider proper; and (h) if an expert appointed has not arrived at a determination within a period of 30 days from the date of appointment, either Party may upon giving notice to the other, terminate the appointment and a new expert shall be appointed and the point of difference determined in accordance with the provisions of this Clause. PAGE 40 EXPORT MARKETING AND SHIPPING AGREEMENT 23.5 ARBITRATION If either of the Parties does not agree that the dispute be resolved pursuant to Clause 23.4 then the dispute shall be resolved by arbitration, and the arbitration shall be: (a) governed by English law; (b) carried out under the United Nations Commission on International Trade Law Arbitration rules and regulations (UNCITRAL); (c) conducted and presided over by a single arbitrator appointed by the London Court of International Arbitration (LCIA); (d) held in London, England and the language of the arbitration shall be English; (e) empowered to order interest and costs under an award; and (f) binding on all parties under arbitration. 23.6 ARBITRATION VENUE AND ENFORCEMENT Any Party to the dispute under arbitration may commence proceedings or take any action it deems necessary in the jurisdiction referred to in Clause 1.5(a) above to enforce a decision of the arbitrator whether pursuant to: (a) the general law or legislation of the jurisdiction; (b) the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958; or (c) any other treaty making enforcement possible. 23.7 CONFIDENTIALITY OF PROCEEDINGS Any dispute resolution procedure, other than litigation and any determination shall be kept confidential between the Parties. 23.8 REPRESENTATION The Parties may be represented by legal counsel in any dispute resolution procedure. Each Party shall bear the costs and expenses of all counsel; witnesses and employees retained by it but the cost and expenses of the mediator shall be apportioned equally between the Parties. PAGE 41 EXPORT MARKETING AND SHIPPING AGREEMENT 23.9 CONTINUED PERFORMANCE OF OBLIGATIONS The referral of a matter to dispute resolution under this Clause 23 shall not affect the obligations of the Parties in accordance with the terms and conditions of this Agreement. EXECUTION PAGE EXECUTED by EP INTEROIL, LTD ) ) ) ) Authorised Signature ) ) ) ) Name: Phil E. Mulacek ) Date: ) Designation: Director ) ) ) ) ) PAGE 42 EXPORT MARKETING AND SHIPPING AGREEMENT EXECUTION PAGE EXECUTED by SHELL INTERNATIONAL EASTERN TRADING COMPANY owned by SHELL EASTERN TRADING (PTE) LTD. ) ) ) Authorised Signature ) ) ) ) Name: ) Date ) Designation: ) ) ) ) ) ) PAGE 43 EXPORT MARKETING AND SHIPPING AGREEMENT SCHEDULE 1 SUMMARY TABLE OF COMMISSIONS FOR TERM BUSINESS AND TENDERS
TYPE OF SALE COMMISSION PAYABLE - -------------------------------------------------------------------------------- ---------------------------- a) Shell Identifies business and Shell concludes business (Shell or Third Party) CP>TP [deleted for confidentiality] FPTP Shell provides Freight or Shell on sells on a C&F basis CPTP d) Shell Identifies business (Shell or Third Party) first and InterOil CP PAGE 44 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT 2. SUMMARY TABLE OF COMMISSIONS FOR SPOT SALES
FIRST NOMINATOR FOB PRICE SECOND NOMINATOR COMMISSION a) Shell nominates first FP < or = NP < or = TP InterOil does not nominate higher price [deleted for confidentiality] InterOil nominates higher price b) Shell nominates first NP > or = TP InterOil does not nominate higher price [deleted for confidentiality] InterOil nominates higher price c) InterOil nominates first FP < or = NP < or = TP Shell does not nominate higher price [deleted for confidentiality] Shell nominates higher price a) Shell nominates price < or = TP b) Shell nominates price > or = TP d) InterOil nominates first NP > or = TP Shell does not nominate higher price [deleted for confidentiality] Shell nominates higher price
For Table 2: Shell Nominates means Shell or Third Party Business 3. SUMMARY TABLE FOR PRICING AND FIXED COMMISSION PAGE 45 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT FIXED PRODUCT COMMISION LOWER FLOOR PRICE FLOOR PRICE (FOB) TARGET PRICE (FOB) - ------------------ --------- ------------------------ ------------------------ ----------------------------- ULP [deleted for [deleted for confidentiality] [deleted for confidentiality] 91 RON confidentiality] meeting Australia spec or other mutually agreed grade JET/KERO [deleted for [deleted for confidentiality] [deleted for confidentiality] confidentiality] GASOIL / 0.05%S [deleted for [deleted for confidentiality]. [deleted for confidentiality] [deleted for confidentiality] Meeting Australia confidentiality] spec GASOIL .0.5%S [deleted for [deleted for confidentiality] [deleted for confidentiality] confidentiality] MDO [deleted for [deleted for confidentiality] [deleted for confidentiality] confidentiality] LSWR [deleted for [deleted for confidentiality] [deleted for confidentiality] confidentiality]
Notes For purposes of Table 1, identification of business means the notification in writing tabled at a marketing planning meting as per Clause 10.2.b. The following will apply for sales of Gasoil 0.05% S only: 1 For sales of 0.05%S Gasoil above the Floor Price the Commission set out in Tables 1 and Table 2 will apply. 2. If there are no Nominations above the Floor Price and Marketer Nominates first bet ween the Floor Price and the Lower Floor Price PAGE 46 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT then the Fixed Commission for Gasoil will apply . 3 If InterOil nominates first between the Lower Floor Price and the Floor Price and Shell does not subsequently Nominate a higher price then nil commission will be paid by Exporter to Marketer. [deleted for confidentiality]. PAGE 47 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT PRODUCT: AUSTRALIAN UNLEADED MOTOR FUEL Method Test Specification ASTM D3606 Benzene content, % vol 3.5 max. Visual Colour Purple (1) to Bronze ASTM D130 Corrosion, copper strip, 3 hrs @50 deg C 1 max. ASTM D1298 or D4052 Density @ 15 deg C kg/l Report Distillation: Class A* 10% evaporated, deg C 60 max 50% evaporated, deg C 74 min 50% evaporated, deg C 110 max 90% evaporated, deg C 180 max E.P., deg C 220 max ASTM D86 Residue, % vol 2 max IP 30 Doctor test (3) Negative Calculated FVI See attached schedule ASTM D381 Gum, existent, mg/l 40 max ASTM D3237 Lead content, mg/l @ 15 deg C 5 max. ASTM D2700 Octane number, motor 82 min. ASTM D2699 Octane number, research 91 min. ASTM D525 Oxidation stability, minutes 360 min. ASTM D3231 Phosphorus content, mg/l @ 15 deg C 1.3 max ASTM D323 Reid Vapor Pressure, kPa Report ASTM D3120 Sulphur content, % mass 0.05 max. ASTM D2276 Particulates, mg/l 3 max (4) Visual Appearance Clear & Bright Aromatics 20min to 48max (ave 45%) Oxygenates 0.5%volume max Olefins 20%max(ave18%max by Vol)
NOTES: Steam cracked Naphtha Nil, Purple is defined as: at least equivalent on visual inspection to a 6.0 mg/l solution of Mortons Automate Purple B in Iso octane. Alternatively, a maximum value for mercaptan sulphur of 20 mg/kg as S by ASTM D3227 shall apply. PAGE 49 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT PRODUCT: AUSTRALIAN UNLEADED MOTOR FUEL PETROL VOLATILITY TABLES Table 1 : Petrol Product Distribution Regions IRIS MAIN REGION TERMINALS INCLUDED NSW Low Volatility Zone, ULPNL ACT Parramatta, Newcastle ULPNC New South Wales Country Parramatta, Newcastle ULPNT Northern Territory Darwin, Townsville (Oct -Mar) Gladstone, Mackay, Cairns, ULPQN Queensland - North Townsville (Apr - Sep) ULPQS Queensland - South Pinkenba ULPSA South Australia Birkenhead, Port Lincoln ULPTS Tasmania Devonport, Hobart ULPVC Victoria Newport, Geelong ULPWC Western Australia - Central Geraldton ULPWN Western Australia - North Port Hedland, Dampier, Broome ULPWP Western Australia - Perth North Fremantle ULPWS Western Australia - South Albany, Esperance
PAGE 50 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT Table 2 : Petrol Flexible Volatility Index Controls IRIS Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec - ---- --- --- --- --- --- --- --- --- --- --- --- ---
ULPNL See Note 1 (on this page) 2000 67 67 67/102 107 114 120 120 117 110 105 102/62 62 2001 + 62 62 62/102 107 114 120 120 117 110 105 102/62 62 ULPNC 98 100 102 107 114 120 120 117 110 105 102 98 ULPNT 90 94 98 102 102 102 100 98 96 92 90 90 ULPQN 96 98 102 105 108 110 108 106 103 98 96 96
ULPQS See Note 1 (on this page) 2000 98 100 104 108 113 116 116 112 108 104 100/76 76 2001 76 98 76/104 108 113 116 116 112 108 104 100/76 76 2002 76 76 76/104 108 113 116 116 112 108 104 100/67 67 2003 + 67 67 67/104 108 113 116 116 112 108 104 100/67 67
ULPSA 67 67 67/97 104 114 119 119 114 109 100 95/67 67 ULPTS 106 106 112 117 124 127 127 125 121 117 114 110 ULPVC 95 96 102 110 119 124 125 121 116 109 104 99 ULPWC 92 94 98 106 112 118 114 112 108 100 94 92 ULPWN 90 92 94 96 104 108 104 100 94 88 88 88
ULPWP see Note 2 (on this page) 2000 72 72 72 72/107 112 118 119 118 114 108/67 67 67
PAGE 51 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT 2001+ 67 67 67 67/107 112 118 119 118 114 108/67 67 67 ULPWS 100 100 108 116 120 122 122 120 118 110 106 100
PAGE 52 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT PRODUCT: UNLEADED MOTOR FUEL Method Test Specification ASTM D3606 Benzene content, % vol 5.0 max. Visual Colour Purple (1) ASTM D130 Corrosion, copper strip, 3 hrs @50 deg C 1 max. ASTM D1298 or D4052 Density @ 15 deg C kg/l Report ASTM D86 Distillation: Class A* 10% evaporated, deg C 65 max 50% evaporated, deg C 77 min 50% evaporated, deg C 115 max 90% evaporated, deg C 183 max E.P., deg C 228 max Residue, % vol 2 max IP 30 Doctor test (3) Negative Calculated FVI 96 max ASTM D381 Gum, existent, mg/l 40 max ASTM D3237 Lead content, mg/l @ 15 deg C 13 max. ASTM D2700 Octane number, motor 82 min. ASTM D2699 Octane number, research 91 min. ASTM D525 Oxidation stability, minutes 240 min. ASTM D3231 Phosphorus content, mg/l @ 15 deg C 1.3 max ASTM D323 Reid Vapor Pressure, kPa Report ASTM D3120 Sulphur content, % mass 0.05 max. ASTM D2276 Particulates, mg/l 3 max (4) Visual Appearance Clear & Bright Aromatics 20-48max, avg 45% max Oxygenates 0.5% vol max Olefins 20%max (ave 18%) by vol
Notes: Steam Cracked Naphtha Nil. Purple is defined as: at least equivalent on visual inspection to a 6.0 mg/l solution of Mortons Automate Purple B in Iso octane. Alternatively, a maximum value for mercaptan sulphur of 20 mg/kg as S by ASTM D3227 shall apply. As outlined in AIP guidelines issued May 1994. PAGE 53 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT ISSUE 18 - NOVEMBER 1999 Supersedes Issue 17 - October 1998 AVIATION FUEL QUALITY REQUIREMENTS FOR JOINTLY OPERATED SYSTEMS (AFQRJOS) This document has the agreement of: AGIP, BP, CALTEX, ELF, ESSO, KUWAIT PETROLEUM INTERNATIONAL, MOBIL, SHELL, STATOIL, TEXACO AND TOTAL. The Aviation Fuel Quality Requirements for Jointly Operated Systems (AFQRJOS) for Jet A-1 represent the most stringent requirements of the following two specifications: (A) British Ministry of Defence Standard DEF STAN 91-91/Issue 3 (DERD 2494) of 12 November 1999 for Turbine Fuel, Aviation "Kerosene Type", Jet A-1, NATO Code F-35, Joint Service Designation AVTUR. (B) ASTM Standard Specification D 1655 - 99 for Aviation Turbine Fuels "Jet A-1". Jet fuel which meets the AFQRJOS is usually referred to as "Jet A-1 to Check List", or "Check List Jet A-1" and, by definition, meets both of the above specifications. The IATA Guidance material which was previously included in the AFQRJOS, has now been republished as a guide to international grades of jet fuel. This is a very useful document covering fuel grades, test methods, additives etc. This document, which still incorporates airline particulate and water limits in Part 3, is available from IATA. THE AVIATION FUEL QUALITY REQUIREMENTS FOR JOINTLY OPERATED SYSTEMS FOR JET A-1 ARE DEFINED IN THE FOLLOWING TABLE WHICH SHOULD BE READ IN CONJUNCTION WITH THE NOTES ON PAGE 3 OF THIS DOCUMENT. THE NOTES HIGHLIGHT SOME OF THE MAIN ISSUES CONCERNING THE SPECIFICATION PARAMETERS. IT SHOULD BE STRESSED THAT CONFORMANCE TO AFRQRJOS REQUIRES CONFORMANCE TO THE DETAIL OF BOTH SPECIFICATIONS LISTED ABOVE, NOT JUST THE FOLLOWING TABLE. PAGE 54 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT JOINT FUELLING SYSTEM CHECK LIST FOR JET A-1 ISSUE 18 - NOVEMBER 1999 Supersedes Issue 17 - October 1998 Embodying the most stringent requirements in the following specifications for the grade shown: (a) British MoD DEF STAN 91-91/Issue 3, dated 12 November 1999, Jet A-1. (b) ASTM D 1655 -99, Jet A-1.
PROPERTY LIMITS TEST METHOD REMARKS IP ASTM - -------- ------------------ ------------------- ----------------- APPEARANCE Clear, bright and visually free from solid matter and undissolved water at normal ambient temperature COMPOSITION See 1 Total Acidity, mg KOH/g max 0.015 354 D3242 Aromatics, % vol. max 25.0 156 D1319 Sulfur, Total, % mass max 0.30 107 D1266 or or D4294 or D1552 Sulfur, Mercaptan, % mass max 0.0030 342 D2622 or D5453 OR Doctor Test Negative D3227 Hydroprocessed components in Report (incl. 'nil' D4952 See 2 batch, % vol. or '100%) See 3 Severely hydroprocessed Report (incl. 'nil' components, % vol or '100%)
PAGE 55 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT VOLATILITY Distillation D86 Initial Boiling Point,(0)C Report Fuel Recovered 10% vol. at(degree)C max 205 50% vol. at(degree)C Report 90% vol. at(degree)C Report End Point,(degree)C max 300 Residue, % vol. max 1.5 Loss, % vol. max 1.5 Flash Point,(degree)C min 38 303 D3828 See 4 Density at 15(degree)C, 775 min to 840 max 160 or D1298 or kg/m(3) 365 D4052 FLUIDITY Freezing Point, (degree)C max - 47 D2386 or D5901 or D4305 Viscosity at -20(degree)C, cSt 8.0 71 D445 (see 5 ) or D5972 (mm(2)/max COMBUSTION Specific Energy, net, MJ/kg 42.8 81 D4529 or D3338 or D4809 min 25 57 D1322 Smoke Point, mm min OR 19 57 D1322 Smoke Point, mm min 3.0 D1840 AND Naphthalenes, % vol. max CORROSION Corrosion, Copper, classification max 1 154 D130 (2h at 100(degree)C)
PAGE 56 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT STABILITY Thermal Stability (JFTOT) Control Temp. 260(degree)C 25.0 Filter Pressure Differential, Less than 3, no mm Hg max 'Peacock' or 'Abnormal' colour Tube Deposit Rating (Visual) max deposits 323 D3241 CONTAMINANTS Existent Gum, mg/100mL max 7 131 D381 Water Reaction D1094 Interface Rating max 1b D3948 See 6 Microseparometer (MSEP), rating 70 Fuel with Static Dissipator 85 Additive min OR Fuel without Static Dissipator Additive min CONDUCTIVITY Electrical Conductivity, pS/m 50 min to 450 max 274 D2624 See 7 LUBRICITY BOCLE wear scar diameter, mm 0.85 D5001 See 8 max
PAGE 57 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT ADDITIVES (Names and approval code from DEF- STAN 91-91/3 should be quoted on quality certs). ANTIOXIDANT, mg/L in Hydroprocessed & 17.0 min to 24.0 max See 9 synthetic Fuels 24.0 (Mandatory) in Non-hydroprocessed Fuels 5.7 See 10 (Optional) max METAL DEACTIVATOR, mg/L (Optional) max STATIC DISSIPATOR, mg/L See 11 First Doping Stadis 450 max Re-doping 3.0 Antioxidants are mandatory in hydroprocessed fuels and Corrosion inhibitor/lubricity improver synthetic fuels and MUST be added immediately after is not permitted unless agreed by all the participants in a joint processing. system. The types and concentrations of all additives used, Fuel System Icing Inhibitor is not permitted including 'nil' additions, are to be shown on refinery unless agreed by all the participants in a joint Certificates of Quality and other quality documents. system.
PAGE 58 OF 3 EXPORT MARKETING AND SHIPPING AGREEMENT JOINT FUELLING SYSTEM CHECK LIST ISSUE 18 - NOVEMBER JET A-1 Supersedes Issue 17 - October 1998 MAIN TABLE REMARKS 1. Attention is drawn to DEF STAN 91-91 Issue 3 which approves the Semi- Synthetic Jet Fuel (SSJF) produced by SASOL Oil under approval reference FS (Air)ssjet/1. For SSJF additional testing requirements apply and reference should be made to Issue 3 of DEF STAN 91-91. This particular semi synthetic fuel meets the requirements of this Issue of Check List. 2. The Doctor Test is an alternative requirement to the Sulphur Mercaptan Content. In the event of conflict between the Sulphur Mercaptan and Doctor Test results, the Sulphur Mercaptan result shall prevail. 3. The need to report the % vol. of hydroprocessed fuel (including "nil" or "100%" as appropriate) on refinery Certificates of Quality for Jet A-1 to Check List derives from Annexes A.1.1 to A.1.3 in DEF STAN 91-91/3 about antioxidant additives (additive dose rate cannot be interpreted unless the proportion of hydroprocessed fuel is known). Recipients of Jet A-1 cannot check or demonstrate that fuel complies with Check List if this information is omitted from refinery Certificates of Quality. Note that "hydroprocessed" includes hydrotreated, hydrofined and hydrocracked. Issue 3 of DEF STAN is introducing an additional requirement to report the volume % of severely hydroprocessed components as part of the lubricity requirement coming into force 1 December 2000. Note also that severely hydroprocessed components are defined as petroleum derived hydrocarbons that have been subjected to hydrogen partial pressure of greater than 7000kPa (70bar or 1015psi) during manufacture. 4. Subject to a minimum of 40(Degree)C, results obtained by method ASTM D56 (Tag) may be accepted. 5. See footnotes in individual specifications for viscosity limitations on the use of ASTM D4305. 6. MSEP is required only in DEF STAN 91-91/3. Note 6 of that specification states "No precision data are available for fuels containing SDA; if MSEP testing is carried out during downstream distribution no specification limits apply and the results are not to be used as the sole reason for rejection of a fuel". 7. Conductivity limits are mandatory for product to meet this specification but see note 7 in DEF STAN 91-91/Issue 3 for more information. 8. This requirement originates in DEF STAN 91-91/3 and comes into effect 1 December 2000. The requirement to determine lubricity applies only to fuels containing more than 95% hydroprocessed material where at least 20% of this is severely hydroprocessed (see note 3 above) and for all fuels containing synthetic components. The limit applies only at point of manufacture. For important advisory information on the lubricity of aviation turbine fuels see Annex B of DEF STAN 91-91/3. 9. Approved antioxidant additives are listed in Annex A.1.4 of DEF STAN 91-91/3, together with the appropriate RDE/A/- Qualification Reference for quoting on refinery Certificates of Quality. Note that the list has been shortened. 10. The approved Metal Deactivator Additive (MDA) appears in Annex A.2.2 of DEF STAN 91-91/3. See also Annex A.2.1 about the need to report thermal stability before and after using when contamination of Jet A-1 by any of the trace metals listed in this Annex is unproven. Note also in A.2.3 that maximum doping at point of manufacture is limited to 2mg/L. PAGE 59 EXPORT MARKETING AND SHIPPING AGREEMENT 11. Re-doping limits for Static Dissipator additive are: Cumulative concentration Stadis 450 (RDE/A/621)5.0 mg/l Original dosage not known: Additional concentration Stadis 450 (RDE/A/621) 2.0 mg/l NOTE: FOR SALES OF DPK THE JET CHECKLIST SPECIFICATION WILL APPLY WITH THE FOLLOWING EXCEPTIONS: SMOKE POINT: 20MM MAX SULPHUR: 0.05%MAX CHAR VALUE: 20 MAX. PAGE 60 EXPORT MARKETING AND SHIPPING AGREEMENT PRODUCT: AUTOMOTIVE DIESEL FUEL
Method Test Specification - ------------ --------------------------------- -------------- ------ ASTM D674 Acid number, strong, mg KOH/g Nil ASTM D674 Acid number, total, mg KOH/g 0.50 max. ASTM D482 Ash % mass 0.01 max. ASTM D524 Carbon residue, Ramsbottom on 10% 0.20 max bottoms, % mass ASTM 4737 Cetane index, calculated 45min. ASTM D2500 Cloud point, deg C Table Winter Summer ASTM D1500 Colour, ASTM 2 max. ASTM D130 Copper corrosion, 3 hrs @ 100 deg C 1 max. ASTM 4052 Density @ 15 deg C, kg/l 0.820 - 0.870 ASTM D86 Distillation, 90% recovered, deg C 357 max. ASTM D93 Flash point, PMCC, deg C 64 min. ASTM D2274 Oxidation stability, mg/l 25 max. ASTM D2276 Particulates, mg/l 3 max. ASTM D2622 Sulphur, total, % mass 0.5 max. ASTM D1796 Water and sediment, % vol 0.05 max. ASTM D445 - IP 71 Viscosity kinematic, mm2 /sec, @ 40 1.9 to 5.0 deg C
Notes: Appearance clear and bright rating 1, D4176, Lubricity HFRR 460 Microns max. IP450, Conductivity p/s/m 100 to 450 D 2624 PAGE 61 EXPORT MARKETING AND SHIPPING AGREEMENT Table 3 : Islands Product Codes, Destinations and Cloud Point Limits IRIS Code Destination Season Cloud Point Season Definition (maximum) AGOIL Shell Pacific Islands All Year 15(Degree)C AGOLA Lae, Papua New Guinea All Year 10(Degree)C AGONC New Caledonia, Summer 10(Degree)C 16 Sep - 15 Mar Winter 4(Degree)C 16 Mar - 15 Sep AGOTA Tahiti All Year 10(Degree)C
PAGE 62 EXPORT MARKETING AND SHIPPING AGREEMENT PRODUCT: AUSTRALIAN AUTOMOTIVE DIESEL FUEL
METHOD TEST SPECIFICATION - ---------- ---------------------------------- ------------- ASTM D674 Acid number, strong, mg KOH/g Nil ASTM D674 Acid number, total, mg KOH/g 0.50 max. ASTM D482 Ash % mass 0.01 max. ASTM D4530 Carbon residue, Ramsbottom on 10% bottoms, % mass 0.16 max ASTM 4737 Cetane index, calculated 46 min. ASTM D2500 Cloud point, deg C See table Winter Summer ASTM D1500 Colour, ASTM 2 max. ASTM D130 Copper corrosion, 3 hrs @ 100 deg C 1 max. ASTM 4052 Density @ 15 deg C, kg/l 0.820 - 0.860 ASTM D86 Distillation, 90% recovered, deg C 357 max. ASTM D93 Flash point, PMCC, deg C 64 min. ASTM D2274 Oxidation stability, mg/l 25 max. ASTM D2276 Particulates, mg/l 3 max. ASTM D2622 Sulphur, total, % mass 0.05 max. ASTM D1796 Water and sediment, % vol 0.05 max. Viscosity kinematic, mm2 /sec, @ 40 ASTM D445 - IP 71 deg C 1.9 to 4.5
Notes: Apearance clear and bright rating 1, D4176, Distillation 10% recovered Report, 50% recover Report, Lubricity HFRR 460 Microns max. IP450, Filterability 1.2 max D2068, conductivity psm 100 to 450 D 2624 PAGE 63 EXPORT MARKETING AND SHIPPING AGREEMENT 24.10 DIESEL CLOUD POINT TABLES 24.11 TABLE 1 : SUPPLY POINTS
IRIS AIP SUPPLY POINTS - ----- --- ------------------------------------------------------------- LSDAC AUC Adelaide, (Darwin for Alice Springs and Yulara) LSDAN AUN Broome, Wyndham, Darwin, Gove, Groote Eylandt, Weipa, Karumba LSDNS NSW Newcastle, Sydney AGOQC QC Gladstone, Mackay AGOQN QFNE Cairns AGOQS QS Brisbane, Bundaberg AGOQT QCN Townsville LSDSA SAS Adelaide, Port Lincoln, Port Pirie LSDTS TAS Devonport, Hobart LSDVC VIC Melbourne, Geelong LSDVW VIC Geelong winter AGOWC WAC Dampier, Port Hedland AGOWS WAS Geraldton, Perth, Fremantle, Albany, Esperance
PAGE 64 EXPORT MARKETING AND SHIPPING AGREEMENT Table 2 : Cloud Point Limits
IRIS Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec - ---- --- --- --- --- --- --- --- --- --- --- --- --- LSDAC 15 10 5 2 1 1 1 4 7 11 14 15 LSDAN 15 15 12 9 8 8 8 10 14 15 15 15 LSDNS 9 5 2 0 -1 -1 -1 0 2 5 7 9 AGOQC 15 12 7 4 2 2 2 4 7 12 15 15 AGOQN 15 15 12 7 7 7 7 9 12 15 15 15 AGOQS 11 7 3 0 -1 -1 -1 0 2 7 9 13 AGOQT 15 15 11 7 6 6 6 8 11 15 15 15 LSDSA 8 6 4 2 1 1 1 2 4 5 6 9 LSDTS 3 1 -1 -2 -3 -3 -3 -3 -1 0 2 3 LSDVC 9 6 3 1 0 0 0 1 2 4 6 8 LSDVW 9 6 3 -1 -2 -2 -2 1 2 4 6 8 AGOWC 15 15 9 6 5 5 5 7 11 15 15 15 AGOWS 6 6 6/0 0 0 0 0 0 0/6 6 6 6
PAGE 65 EXPORT MARKETING AND SHIPPING AGREEMENT MARINE DIESEL OIL
Method Test DMC Specification - ----------------- -------------------------- ------------------- ASTM D1298 or Density @ 15 deg C kg/l 0.920 max. D4052 ASTM D445 Kinematic viscosity at 40 deg C cSt 14.0 max. ASTM D93 Flash point deg C 64 min. ASTM D97 Pour point deg C 24 max. (RMB-10) ASTM D4294 Sulphur content, % mass 2.0 max. ASTM D189 Concarbon % mass 2.5 max. ASTM D482 Ash content % mass 0.05 max. DIN 51 790 Vanadium PPM 100 max. ASTM D5708 95A SI + AL PPM 25 max. ASTM D4176 / D473 Water & sediment % 0.3 max
Notes: Predicted specifications calculated using Kutubu as feed * Pour point suppressant used to make specification * Refinery will target 16 max if required ** Also makes specification by addition of suppressant *** Product will be processed to meet specification if required PAGE 66 EXPORT MARKETING AND SHIPPING AGREEMENT PAGE 67 EXPORT MARKETING AND SHIPPING AGREEMENT GRADE: LSWR
TYPE STRAIGHT RUN METHOD - ------------------------ ------------ ------ IBP: 280deg c min D86 Flash Point: 65 deg C min D93 Density: 0.93 max D1298 Sulphur: 0.2% max D1522/4294 Water: 0.5% max D95 Sediment: 0.10% max D473 Ash 0.05% max D482 Conradson Carbon Residue 4.5% max D524 Pour Point 48degC max.
PAGE 68 EXPORT MARKETING AND SHIPPING AGREEMENT SCHEDULE 3 CONDITIONS OF PURCHASE BY THE MARKETER DEFINITIONS In addition to the definitions in Clause 1 of the Agreement, the following definitions apply in this Schedule unless the context otherwise requires: ACCEPTED QUANTITY means the quantity (plus or minus 5% operational tolerance) of Product agreed upon between Marketer and Exporter pursuant to Condition 8.2 hereto; AGREED ARRIVAL DATE means the 3-day period entirely within the Date Range, ALDR-3, in which the Marketer shall present its Tanker for loading at the Moorings for a lifting; API means American Petroleum Institute; ASTM means American Society for Testing and Materials; ASTM STANDARDS means the standards, practices, tests, methods, classifications, guides, terminology, measurement tables, procedures and specifications (in so far as they do not conflict with the Specifications) published by the American Society for Testing and Materials (http://www.astm.org/), as revised from time to time. BARREL ( bbl) means a volume of 42 US standard gallons at 60(degree)F; BILL OF LADING DATE has the meaning given in Condition 5.1 hereto; BILL OF LADING means a clean, full set of bills of lading in the form requested by Marketer issued by Exporter for the Product loaded into Marketer's Tankers as proof of delivery of the Product; CONDITIONS OF PURCHASE means these terms and conditions for the sale and purchase of Product, and shall form part of the Agreement; DATE RANGE has the meaning the period during which a lifting of Product is intended to occur; ETA means estimated time of arrival; IP means Institute of Petroleum; LIBOR means the Interbank Offering Rate for one month as quoted by Royal Bank of Scotland PLC, in effect at or about 10:00 am New York time on the due date, or if not quoted on the due date, the last date it is quoted immediately prior to the due date of payment for the amount and period overdue; MOPS means Mean of Platt's Singapore. MOORINGS means the facilities for mooring Tankers at the Port of Loading. PAGE 69 EXPORT MARKETING AND SHIPPING AGREEMENT NOMINATED QUANTITY means the quantity of Product nominated by Marketer for lifting pursuant to Condition 8.2(a) hereto; NOTICE OF READINESS means the notice given to Exporter's Representative by the master of the Tanker that the Tanker has arrived at the anchorage designated by Exporter and is ready in all respects to enter the Moorings and that the Tanker has received all clearances required by applicable laws or regulations including, without limitation on the foregoing, clearances from Customs and Health Authorities; OTHER PARTY means an Entity other than Marketer and Exporter; OWNING PARTY has the meaning given in Clause 22 of the Agreement; PLATTS means the Price Reporting arm of Standard and Poor's, New York, United States of America. 1. GENERAL CONDITIONS APPLYING In relation to a supply of Product made, that Product will be supplied and delivered by the Exporter and purchased and taken by the Marketer (and for the purposes of construing any inconsistent terms or conditions relating to that supply, to the extent of that inconsistency the following order of priority will apply): (a) where the parties specifically intend to derogate from terms and conditions determined under this Agreement, as may be agreed between the parties in writing (including any agreed terms made under a delivery instruction or a purchase order; (b) in accordance with the conditions set out in this Schedule; and (c) in accordance with Incoterms 2000. 2. CARGO QUANTITY For the purposes of this Agreement the total quantity of such Export Products shall not exceed 90,000 metric tonnes in any rolling three-month period. Products are to be delivered by Exporter to Marketer in cargo quantities as follows: |-| LPG Mix - 1,000 to 1,400 metric tonne shipments. |-| Butane - 1,000 to 1,400 metric tonne shipments. |-| ULP91RON - 2,000 to 4,000 metric tonne shipments. |-| JET A1 - 1,000 to 8,000 metric tonne shipments. |-| 0.05% Sulphur Gasoil - 4,000 to 30,000 metric tonne shipments. |-| MDO - 4,000 to 10,000 metric tonne shipments. PAGE 70 EXPORT MARKETING AND SHIPPING AGREEMENT |-| LSWR - 4,000 to 12,000 metric tonne shipments. Exporter will endeavour to accommodate Marketer's requests to co-load above quantities with a second and or a third Product so that Shell can co-load and ship as an economical cargo quantity. Exporter shall also endeavour to accommodate cargo nominations for quantities outside the above ranges. 3. DELIVERY TITLE RISK 3.1 DELIVERY Exporter shall supply and Marketer shall receive each lifting of Product FOB the Tanker at the Delivery Point. 3.2 TITLE All title risk and property in respect of each shipment of Product hereunder shall pass from Exporter to Marketer at the Delivery Point. 3.3 WARRANTY OF TITLE Exporter hereby irrevocably undertakes and warrants that Exporter has at all times, including but not limited to the time of delivery of the Product and cargo (and the passing of their risk and property) in accordance with the Agreement herein, full, unencumbered and indefeasible title to the Product and cargo delivered to Marketer under the Agreement and further has the full right and authority to transfer title to such Product and cargo and to effect delivery of same to Marketer. 4. PRODUCT PRICE 4.1 Marketer shall pay to Exporter for each barrel of Product delivered FOB hereunder as follows: i. Sales under Term Contracts at the Contract Price approved by Exporter pursuant to Clause 12. ii. Spot Purchase of Excess Product (including purchases for Shell Group's own system) at the Nominated Price; or iii. at the Floor Price for that Product (excluding 0.05%S Gasoil) or the Lower Floor Price for Gasoil 0.05%S if no nomination was made; or iv. at the actual realised FOB Effective Netback Price for a prompt cargo as specified in Clause 15(j); Less the appropriate commission payable by Exporter to Marketer under Clause 16 of the Agreement. PAGE 71 EXPORT MARKETING AND SHIPPING AGREEMENT 4.2 PERIOD FOR PRICING QUOTATIONS The relevant pricing period for Mean of Platt's Singapore (MOPS) quotations for the calculation of price payable by Marketer shall be as follows: a. For purchases at the Floor Price or Lower Floor Price: the simple average of [deleted for confidentiality] consecutive quotes prior to Bill of Lading Date, the quote prevailing on the Bill of Lading Date and [deleted for confidentiality] consecutive quotes immediately after the Bill of Lading Date where Product is purchased by Marketer at Floor Price or Lower Floor Price. In the event that there is no quotation effective for the Bill of Lading Date, then the applicable quotations shall be [deleted for confidentiality] days immediately proceeding and [deleted for confidentiality] days immediately following the Bill of Lading Date. b. For Term Contracts: [deleted for confidentiality]. c. For purchases of Excess Product [deleted for confidentiality]t. 4.3 CESSATION OR INTERRUPTION OF PRICE QUOTATIONS Marketer shall pay to Exporter for each barrel of Product delivered hereunder at the Product Price stated in the Agreement, provided that if the relevant pricing quotations are interrupted or cease to be published then Marketer and Exporter shall meet and use their best endeavours to select an appropriate alternate price quotation to be used to determine the Product Price and if the Parties fail to agree upon an alternate price quotation, the Product Price shall be calculated in accordance with the mechanism set out in Condition 6.2(b) hereto. 4.4 PRICE ROUNDING In determining the Product Price, fractions of a dollar are to be rounded to the nearest 3 decimal places. 5 BILL OF LADING 5.1 BILL OF LADING DATE The Bill of Lading Date shall be the day on which the particular lifting is completed and Exporter's loading hose is disconnected. 5.2 LOST BILL OF LADING If Marketer does not receive a full set of clean, original Bills of Lading in the form requested by Marketer in its documentary instructions, or they contain any inaccuracies, or if they are not received at all, whether as a result of an act or omission of Exporter, Exporter's Representative or the terminal operator, Exporter shall: a. re-affirm the warranties contained in Condition 3.3; and PAGE 72 EXPORT MARKETING AND SHIPPING AGREEMENT b. irrevocably and unconditionally indemnify Marketer and hold Marketer harmless against any claim made against Marketer by any person as a result of breach by Exporter of any of the warranties set out in Condition 3.3, and all loss, costs (including, but not limited to legal costs), damages, and expenses which Marketer may suffer, incur or be put to as a result of Exporter's failure to deliver the Bill of Lading in accordance with the Agreement. This Indemnification shall be in the form of a Letter of Indemnity as shown in Appendix "A". The indemnity contained in Condition 5.2(b) shall terminate upon delivery to and acceptance by Marketer, of the full set of clean original Bills of Lading or a full clean replacement set of Bills of Lading. 6 PAYMENT TERMS 6.1 INVOICE FOR LIFTINGS Exporter or Exporter's Representative shall provide to Marketer, the Exporter's invoice and such documents including but not limited to the full set of clean original Bills of Lading, certificate of origin, certificate of quality and quantity as are reasonably requested by Marketer for each cargo of Product delivered hereunder. Each invoice shall show: i. the total quantity of Product lifted by Marketer at such lifting; ii. the total sum claimed to be due and owing to Exporter; iii. bank and account details for Exporter. 6.2 TIME AND METHOD OF PAYMENT a. Subject to other provisions of this Condition 6.2, Marketer shall make payment in United States currency by telegraphic transfer to the Exporter's bank and to the account as directed in Exporter's invoice free of all charges and without set off, discount, deduction or counter-claim not later than 30 calendar days after the Bill of Lading Date where the Bill of Lading Date shall count as day zero. b. In the event that, at any time from the commencement of this Agreement, there is a material change to the methodology of calculating components in the price formula by the reporting services in Condition 4, for example the premia reported by Platts, or if any of the reporting service assessments used as components in the price formula are discontinued, the Parties shall agree a suitable replacement marker. Should the Parties fail to agree on a replacement, an independent expert shall be mutually agreed upon to identify a replacement. c. Subject to any direction to the contrary specified in an invoice, payments that come due on a Sunday or Monday bank holiday in New York shall be made on the following banking day. PAGE 73 EXPORT MARKETING AND SHIPPING AGREEMENT Payments that come due on a Saturday or any other bank holiday, except one falling on a Monday, in New York shall be made on the preceding banking day. d. All bank charges incurred at Exporter's bank shall be for Exporter's account. All bank charges incurred at Marketer's bank shall be for Marketer's account. Exporter shall make reasonable endeavours to ensure that all documents required for payment are sent to Marketer no later than 3 working days prior to the payment due date failing which payment shall be made 3 working days after receipt of such requisite documents by Marketer. 6.3 INTEREST REIMBURSEMENT AND INTEREST ON LATE PAYMENTS a. For any shipment above 20,000 metric tonnes, Exporter may, upon giving written notice to Marketer and subject to Marketer's written consent, which shall not be unreasonably withheld, to be given prior to that shipment's Bill of Lading Date, request for payment to be made earlier than 30 days after the Bill of Lading Date as specified in Condition 6.2(a) on a revised payment date, but no earlier than 5 days after the Bill of Lading Date. Exporter shall pay early payment interest to Marketer for the period from the revised payment date until 30 days after the Bill of Lading Date at LIBOR plus [deleted for confidentiality] per annum calculated on a daily basis. b. If payment is not made by Marketer within the times as required herein, then interest shall be paid on the overdue amount from the due date until the date of payment at LIBOR plus [deleted for confidentiality] per annum calculated on a daily basis. 6.4 SET-OFF POLICY Whenever under this Agreement any sum of money payable by either party remains unpaid for a period of 30 or more days after receipt of written request for payment, the unpaid sum may be deducted from any sum due from the debtor Party to the other Party, provided the amount Set-Off is not in dispute (i.e. the Party entitled to receive the unpaid amount) under this Agreement. Exercise by either Party of its rights under this Clause 6.4 shall be without prejudice to any other rights or remedies available to such Party under this Agreement, or otherwise howsoever, at law or in equity. 7 LIFTING CRITERIA 7.1 ESSENTIAL CRITERIA a. Marketer shall arrange the liftings based on information provided by Offtake Coordinator pursuant to Condition 8.1. For this purpose Offtake Coordinator Marketer, and Exporter will mutually endeavour to ensure liftings are scheduled to ensure Product in storage at the Product Storage Tank does not reach tank tops or refinery production is not reduced to avoid potential tank tops. PAGE 74 EXPORT MARKETING AND SHIPPING AGREEMENT b. Marketer shall use all reasonable efforts to ensure that during any month, liftings shall occur no later than 3 days prior to forecast tank tops. c. The above allowances may be varied as advised by Offtake Coordinator from time to time. 8 SCHEDULING, TANKER NOMINATION AND LOADING 8.1 PRODUCTION FORECASTS Further to the responsibilities of Offtake Coordinator (pursuant to Clause 10 of the Agreement), the Offtake Coordinator will provide the information specified in Clause 10, which shall provide a framework for Nominations. 8.2 NOMINATION PROCEDURES - DATE RANGES AND QUANTITIES Marketer will nominate for Product liftings in accordance with Clause 15 of this Agreement. a. By the 15th day of Month x Offtake Coordinator will advise an indicative 7-day window for liftings nominated and accepted into a Firm Program for the Delivery Period. b. On or before the 43rd day prior to the middle day of the indicative 7 day window for liftings in the Delivery Period, Exporter will user its best endeavours based on Offtake Coordinator's forecast production to provide a 7 day date range for the next lifting. c. Pursuant to paragraph b above, the 7-day window shall be referred to as the accepted 7-day loading date range (ALDR-7), and quantities nominated by Marketer and agreed to by Exporter shall become `Accepted Quantity'. d. No later than 33 days prior to the first day of the ALDR-7, Exporter must narrow this range to a five-day loading window which (unless parties mutually agree otherwise) shall fall fully within the ALDR-7. Marketer may also renominate the quantity to be lifted in accordance with limits set in Condition 2 above, provided the resulting forward Offtake program remains feasible for the Exporter to perform, or else provided such quantity changes are accompanied by adjustments to the timing of subsequent ALDRs as necessary. Any such adjustments shall be mutually agreed and confirmed in writing. Such 5 day Date Range shall be referred to as the accepted 5 day loading Date Range (ALDR-5). e. No later than 23 days prior to the first day of the ALDR-5, Exporter shall further narrow this range to a three-day loading window, which shall be referred to as the final accepted loading Date Range, "stem", or ALDR-3. The ALDR-3 shall fall fully within the previously advised ALDR-5 range unless the Parties mutually agree otherwise. Exporter is aware that the above notice periods are required to permit Marketer to plan advance sales and to commit to chartering acceptable Offtake Tankers in a timely and responsible manner. PAGE 75 EXPORT MARKETING AND SHIPPING AGREEMENT In the event that Marketer is obliged to charter a suitable Tanker earlier than 23 days prior to the ALDR-3 notification by Exporter, due to limited supply of quality Tankers, then the ALDR-3 shall be deemed to be the first three days of the ALDR-5 unless otherwise agreed by the Parties. The Marketer shall notify the Exporter in such events. 8.3 NOMINATION AND VERIFICATION OF TANKER a. No later than 15 days before the first day of the Date Range (ALDR-3), Marketer shall nominate to Exporter or Exporter's Representative, the Tanker to be used by Marketer. b. Exporter shall advise Marketer within 24 hours of such nomination of Exporter's acceptance or rejection of Marketer's Tanker nomination. c. Marketer shall ensure that all Tankers nominated, and each Tanker arriving at the Moorings for loading, shall comply with the specifications set out in the Port Regulations and appropriate marine facility/jetty guidelines. d. Without limitation to Marketer's obligations pursuant to Condition 8.3(c), Marketer shall provide to Exporter or Exporter's Representative appropriate documentation to enable Exporter or Exporter's Representative to verify compliance with the Port Regulations and appropriate marine facility/jetty guidelines at the time of nomination of the Tanker, provided that if Marketer is not able to supply such documentation, Marketer shall at the time of confirmation provide a notice of compliance to Exporter or Exporter's Representative, in a form acceptable to Exporter, which acceptance shall not be unreasonably withheld. 8.4 TANKER SUBSTITUTION No later than 3 working days prior to the first day of the relevant Date Range (ALDR-3) Marketer may nominate a substitute Tanker which meets all the requirements of the Port Regulations and appropriate marine facility/jetty guidelines, and Exporter shall advise of acceptance or rejection of that Tanker within 24 hours of receiving such nomination from Marketer. 8.5 TANKER ARRIVAL a. Marketer shall use reasonable endeavours to present its Tanker for loading at the Moorings within the ALDR-3. b. If, due to an event of Force Majeure, the Tanker is not presented within ALDR-3 ready to receive the Nominated Quantity of Product or is so presented but ceases to be able to lift the Nominated Quantity then the Parties shall negotiate in good faith to try to agree on alternative arrangements. 8.6 NON-COMPLIANCE WITH TANKER SPECIFICATIONS Notwithstanding Condition 8.3, Exporter shall not be obliged to load any Tanker that does not comply with the specifications of the Port Regulations. In addition, and without liability, Marketer PAGE 76 EXPORT MARKETING AND SHIPPING AGREEMENT shall provide access and other assistance to enable Exporter to inspect the Tanker and any relevant documentation upon its arrival at the Moorings to ensure the Tanker complies with any Port Regulations and appropriate marine facility/jetty guidelines which, the intention being, shall be no more onerous than other regulations in effect at comparable Australian ports. 9 BERTH AND LOADING 9.1 SAFE BERTH Exporter shall provide, or cause to be provided to Marketer a safe berth at the Moorings as described in the Port Regulations. 9.2 ALLOWED LAY-TIME. The Exporter shall be allowed thirty-six (36) hours, Sundays and public holidays included, as lay-time within which to load the Accepted Quantity for each lifting hereunder: i. for Product parcels in excess of 24,500 metric tons. ii. for Product parcels co-loaded with other products at the InterOil Facilities, the allowed lay-time will apply for the combined nominated quantity subject to the Marketer's Tanker being able to co-load with out delay; and iii. for Product parcels smaller than 24,500 mt loaded stand-alone. iv. For Product parcels smaller than 24,500 mt loaded on an MR size Tanker, the allowed lay-time will equal 36 hours multiplied by the ratio of the actual cargo loaded and 24,500 mt, but in any event will not be less than 24 hours. 9.3 COMMENCEMENT OF LAY-TIME OR DEMURRAGE. i. If the Tanker arrives during ADLR-3, lay-time or time on demurrage shall commence upon arrival in berth or when six (6) hours has expired following tendering of a Notice of Readiness, whichever occurs first. Arrival in berth shall mean the Tanker being all fast alongside the berth. ii. If the Tanker arrives before the first day of the ADLR-3 and tenders NOR before such date, Lay-time or time on demurrage shall not commence until the Tanker is all fast in the berth or at 0600 hours local time on the first day of the ADLR-3 whichever is earlier. iii. If the Tanker arrives after the end of the ADLR-3, Lay-time shall commence upon arrival in berth, that is, all fast. Lay-time or, if the Tanker is on demurrage time on demurrage, shall continue until all cargo hoses have been disconnected upon final termination of loading. PAGE 77 EXPORT MARKETING AND SHIPPING AGREEMENT 9.4 LAY-TIME AND DEMURRAGE EXCLUSIONS. Any delay or time consumed due to any of the following shall not count as lay-time or, if the Tanker is on demurrage, as time on demurrage. 1. On an inward passage moving from anchorage or other waiting place, including but not limited to awaiting daylight, tide, tugs or pilot from the time Tanker weighs anchor until Tanker is all fast in berth. 2. By reason of local law regulations or intervention by local authorities including awaiting customs and immigration clearance and pratique, or due to Tanker owner or Tanker Operator or local authority prohibiting loading at night. 3. In any deballasting or handling of slops, cleaning of tanks, pumps, pipelines, bunkering, or for any other purposes of the vessel only unless same is carried out concurrent with loading of Product such that no loss of time is involved. 4. Due to overflow, breakdown, inefficiency, repairs or other conditions whatsoever attributable to the vessel, such that the Tanker is unable to receive the shipment at a rate consistent with being able to accept 150psi pressure at the ship's manifold over the total period taken for the loading. 5. Due to Tanker being in breach of Port Regulations. 6. Due to vessel fire or explosion, labour dispute, strike go slow, work to rule, lockout, stoppage or restraint of labour involving the master, officers or crew of the Tanker. 7. Due to awaiting cargo documentation instructions from the Marketer. 8. Due to delay in or suspension of loading directed by the Exporter due to an unsafe condition of the Tanker. (The Marketer will exercise due diligence to arrange re-berthing and recommencement of loading promptly once the Tanker's deficiency has been corrected and the time period of exclusion will be that period between the time of cargo delivery hose disconnection and cargo hose reconnection). 9. Due to any other delay sought or caused solely by the Marketer, Tanker owner or Tanker operator for Tanker purpose. 10. Due to escape or discharge of Oil, containment or clean-up of an Oil Spill or grave and imminent danger of the same which creates or would create a serious pollution damage on or from the Tanker. PAGE 78 EXPORT MARKETING AND SHIPPING AGREEMENT 9.5 LAY-TIME AND DEMURRAGE INCLUSIONS Time spent or lost due to any of the following shall count as lay-time, or if the Tanker is on demurrage as time on demurrage: 1. Any delay to the Tanker after the expiration of six (6) hours from NOR before arrival in berth or any delay to the Tanker after arrival in berth due to fire, explosion, strike, lock-out or stoppage of labour, breakdown of machinery or equipment in or about the InterOil Facilities or unavailability of cargo or unavailability of berth unless Force Majeure is declared by the Exporter in accordance with Clause 18 of this Agreement. 2. Due to any other delay solely for the Exporter or InterOil Facility's purposes. 9.6 LAY-TIME AND DEMURRAGE INCLUSIONS AT HALF RATE. Any delay lost due to weather or an event of Force-Majeure shall count as lay-time or time on demurrage and if such demurrage is incurred, demurrage shall be paid at half the rate specified in this Agreement. 10 DEMURRAGE a. The Exporter shall be liable for demurrage costs for time on demurrage to the extent that the time period between commencement and termination of lay-time, or if the vessel is on demurrage, time on demurrage, less any exclusions defined in Condition 9.3 exceeds the allowed lay-time specified in Condition 9.2 b. Exporter shall pay to Marketer demurrage, as determined in (a) above at the rate per day (or pro rata for part of a day) equal to the actual demurrage rate payable by Marketer to the Tanker owner pursuant to the charter party between Marketer and the Tanker owner or if the Tanker is time-chartered, a rate that was agreed between Exporter or Exporter's Representative and Marketer at the time the Tanker was nominated or accepted for the lifting. c. The demurrage claim determined in accordance with this Condition 10, shall be agreed no later than three months from the date documents supporting such claim are sent to Exporter. Payment for demurrage claims must be paid no later than one month from the date of such agreement. In the event of a delay beyond either of these deadlines (which aggregate period shall not under any circumstances exceed 4 months unless otherwise agreed in writing,) late payment interest shall be payable (at the rate defined in the payment clause) on the full demurrage amount agreed or if not so agreed, then claimed by Marketer, from the deadline and paid with final settlement. PAGE 79 EXPORT MARKETING AND SHIPPING AGREEMENT Marketer shall submit to Exporter within 90 days of the Bill of Lading Date, the Marketer's demurrage claim together with a copy of the charter party. d. Other than for demurrage and for deadfreight as specified in this Condition 10, Exporter shall not be liable for any other losses or damages, direct or indirect, which Marketer may suffer as a result of the Tanker not being loaded within the Laytime. 11 DEADFREIGHT In the event the Exporter is unable to load 95% of the Accepted Quantity in ADLR-3 without incurring demurrage due to shortage of available quantity, the Exporter shall compensate Marketer for any demurrage waiting for available cargo as per above. Alternatively, subject to Marketer's and Exporter's agreement, Exporter may short-load Tanker and pay associated deadfreight charges to Marketer. Marketer and Exporter agree to act in good faith to identify and choose the more cost effective means (between demurrage and deadfreight) to mitigate costs to Exporter associated with cargo shortage. Notwithstanding such identification of the more cost effective means, it is recognised that Marketer may not intentionally be able to delay Tanker beyond ADLR-3 to await loading of 95% of Accepted Quantity. Should this be the case, mutual agreement between Marketer and Exporter is not required as contemplated above and Marketer can order Tanker to sail with deadfreight after Laytime has been fully spent with such actual deadfreight cost being reimbursed by Exporter. Exporter is not liable to pay deadfreight if due to Force Majeure. 12 ACCEPTANCE OF PORT REGULATIONS The Exporter shall provide Marketer with a full and complete set of the Port Regulations and Exporter's marine facility operational requirements once these have been finalised, for Marketer's review and acceptance. Marketer shall cause copies of the same to be provided to the owners and the Master of the Tanker nominated and accepted under Condition 8.3 or the Regulations or, if applicable, substituted pursuant to Condition 8.4. Marketer shall use all reasonable endeavours to ensure that the Master and the owners of the Tanker comply in all respects with the requirements set out in the Port Regulations and Exporter's marine facility guidelines and operational requirements; such regulations and requirements not to be more onerous than those applicable to loading from oil refineries in Australia. PAGE 80 EXPORT MARKETING AND SHIPPING AGREEMENT 13 MARKETER'S TANKER ARRIVES LATE AND CAUSES POTENTIAL TANK TOPS OR TANK TOPS a. Where Marketer's Tanker is or will be late for the Agreed Loading Date Range (ALDR-3) and in Exporter's reasonable opinion this is likely to directly cause production at the InterOil Refinery to be curtailed, then Exporter may request Marketer to use an alternative acceptable Tanker capable of arriving within Agreed Arrival Date to avoid reaching terminal tank-tops. b. If Marketer's Tanker has not arrived prior to three days before tank tops, and Exporter can find an alternative buyer with a suitable tanker at short notice, Exporter can sell a marketable quantity of Product sufficient to make ullage for Product production prior to late arrival of Marketer's Tanker. c. If action taken in (b) is unable to alleviate the potential tank tops and shut-in is unavoidable, Exporter can then take further action to minimise impact on production at the InterOil Refinery by the late arrival of Marketer's Tanker. Such action may include reducing production or shutting down the InterOil Refinery partially or completely and/or selling the full nominated quantity to a third Party buyer (latter action must in all scenarios be preceded by consultation with, and formal notification of specific intent to Marketer). d. As a consequence of Marketer's Tanker arriving late and causing Exporter to take action to avoid shut in by selling Product to a third Party, and provided such late arrival occurs as a consequence of Marketer's Gross Negligence, Marketer shall pay Exporter direct damages equal to Exporter's direct incremental costs, for arms length transactions, for alternative sale of Product being an amount representing the difference between the actual FOB equivalent price received for such Product and the price that would have been payable in sale to Marketer. e. Exporter shall act in good faith and use its reasonable endeavours to minimise the costs and losses and provided further in each case that evidence in reasonable detail in support of Exporter's claim for reimbursement of each such cost or loss shall be furnished to Marketer; f. Where the Marketer's Tanker fails to tender a valid notice of readiness within the relevant Agreed Arrival Date, then for any resultant production quantities curtailed by Marketer's Tanker arriving after such loading Date Range owing to reasons other than Force Majeure, Exporter may short-load Marketer's Tanker to the extent of the quantities curtailed but only to the extent required to avoid impact on the volume of subsequent loadings. Marketer shall be entitled to verify the above amounts and information and for this purpose, Exporter shall provide such co-operation and assistance as Marketer may reasonably require g. Payments associated with this Condition 13 will be due 30 days after Exporter submits fully documented details of claim to Marketer. PAGE 81 EXPORT MARKETING AND SHIPPING AGREEMENT h. Notwithstanding Clause 19(b) of the Agreement in the event that the Marketer is liable to the Exporter for breach of Condition 13 due to the late arrival of Marketer's Tanker arising from Marketer's Gross Negligence, Marketer shall, in addition to the direct damages under Condition 13(d), be liable for any consequential, indirect or special loss, including loss of profit, based on lost refining and marketing margin due to any reduced refinery throughput. Marketer's total liability to the Exporter under this Condition 13, and in respect to a Tanker loading Naphtha as well as Product under this Agreement, shall be limited to a maximum of United States Dollars [deleted for confidentiality] per day (whether in this Agreement or any other agreement in respect of the same Tanker loading this or any other cargo). 14 QUANTITY/QUALITY DETERMINATION 14.1 PRIMA FACIE CONCLUSIVE The quantity and quality of the Product in each shipment shall be determined by measurement, sampling and testing in accordance with internationally recognised industry standards at the InterOil Facilities loading terminal by an independent inspector appointed by the Marketer but acceptable to the Exporter. The determinations of such independent inspector, in the absence of fraud or manifest error, shall be final and binding upon both Parties. The original cargo suppliers shall prepare and sign certificates as to the quantity and a certificate as to the quality of the oil loaded upon completion of loading of the cargo. Such certificates shall be countersigned by the independent inspector to signify his agreement with the figures stated therein. Exporter or Exporter's Representative shall advise Marketer by telex, cable or facsimile of the quantity and quality recorded on such certificates as soon as possible after completion of loading of the cargo. The costs of such independent inspection shall be shared equally between Exporter and Marketer. A sufficient quantity of the relevant representative samples shall be correctly taken at the loading terminal and kept in accordance with internationally recognised methodology and practice. The samples, so obtained will be retained by Exporter for at least one hundred and twenty (120) days after loading unless otherwise required or a dispute arises in connection therewith, in which event such samples shall be retained for as long as the Parties require. 14.2 NOTIFICATION OF CLAIMS Any claims as to shortage in the quantity or defects in the quality of Product loaded into the Tanker shall be communicated to Exporter or Exporter's Representative immediately after such shortage or quality defects are discovered. Such communications shall be followed by a formal written notice of claim with all necessary details to properly process the claim. If no notification or formal written notice of claim is received within 70 days from the date of the occurrence of the claim, such claims shall be deemed to have been waived. PAGE 82 EXPORT MARKETING AND SHIPPING AGREEMENT 14.3 QUALITY SPECIFICATIONS Product delivered by Exporter to Marketer shall conform with the agreed specification for that Product as per Schedule 2. 15 POLLUTION 15.1 POLLUTION INSURANCE The Marketer shall ensure that each Tanker arranged by Marketer shall, all at no cost to Exporter: a. have on board all certificates of currency of insurance and financial responsibility in respect of oil pollution necessary for the required voyage, such as, but not limited to a certificate of insurance required under the International Convention on Civil Liability for Oil Pollution Damage: b. the Tanker owners shall be members of the International Tanker Owners Pollution Federation Limited; and c. maintain with respect to the Tanker the standard level of oil pollution liability insurance available from the International Group of P&I Clubs on the date such Tanker is accepted, and the standard level of excess oil pollution liability insurance available through market underwriters on such date currently USD one billion. 15.2 POLLUTION AT SEA (a) The Marketer shall exercise all reasonable diligence to prevent any pollution of the sea or any other environment. (b) The Marketer shall comply with all the applicable laws, rules, regulations and conditions relating to pollution, and shall ensure (except to the extent legally permitted) that no trash, waste, oil, bilge water or other pollutants will be discharged or allowed to escape into the sea. 16 TAXES, DUES, DUTIES, IMPOSTS 16.1 PORT CHARGES. Any wharfage, harbour dues port charge, pilotage, line launches, tugs or similar charges (collectively "port charges") levied at the InterOil Facilities in respect of Product exported by the Marketer whether chargeable on the cargo loaded or on the Tanker shall be for the account of Marketer, unless the Parties agree otherwise in writing. PAGE 83 EXPORT MARKETING AND SHIPPING AGREEMENT 16.2 NEW IMPOSTS Subject to Condition 16.1, in the event any additional tax, dues, duty or impost is levied at the InterOil Facilities in respect to Products bought by the Marketer whether chargeable on the cargo loaded or on the Tanker, the Parties shall as soon as reasonably practicable meet to agree on the responsibility for payment of the levy, and failing agreement, such additional levy will be shared equally, by the Exporter and the Marketer. 17. ADDITIONAL CONDITIONS The following shall be as per the Export Marketing and Shipping Agreement main terms:- 17.1 Force Majeure shall be as per Clause 18; 17.2 Governing law shall be as per Clause 1.5; 17.3 Waiver shall be as per Clause 1.6; 17.4 Assignment shall be as per Clause 21; 17.5 Confidentiality shall be as per Clause 22; 17.6 Dispute Resolution shall be as per Clause 23; 17.7 Notice and Representative s shall be as per Clause 20. PAGE 84 EXPORT MARKETING AND SHIPPING AGREEMENT APPENDIX "A" FORMAT OF LETTER OF INDEMNITY TO BE USED FROM: EP InterOil, Ltd. incorporated in the Cayman Islands of Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British West Indies. TO: SHELL INTERNATIONAL EASTERN TRADING COMPANY, owned by Shell Eastern Trading Pte Ltd IN CONSIDERATION of your paying for the cargo of _________________________________U.S. Barrels/Metric Tons of (type of crude oil and / or product) _________________________which sailed from (Port) ___________on (Tanker and date) __________________________________________loaded with such cargo when the (document) _______________________________________for such cargo has not been delivered to you at the time payment is due under our contract dated ______ref:______________________________________________________________. We hereby warrant to you that at the time property passed as specified under the terms of the above contract we had the right to sell the said cargo to you and we had unencumbered title to the said cargo. We hereby irrevocably and unconditionally undertake to indemnify you and hold you harmless against any claim made against you by anyone as a result of breach by us of any of our warranties as set out above, and all losses, costs (including, but not limited to costs as between attorney or solicitor and own client), damages, and expenses which you may suffer, incur or be put to which are not too remote as a result of our failure to deliver the above document(s) in accordance with the contract. This indemnity shall terminate on delivery by us of the aforesaid document(s) and their acceptance by you. This indemnity shall be governed by and construed in accordance with the laws and legal jurisdiction governing the aforesaid contract and all disputes, controversies or claims arising out of or in relation to this indemnity or the breach, termination or validity hereof not settled by negotiation shall be resolved with the procedure provided in such contract. PAGE 85 EX-99.19 14 h19854exv99w19.txt DOMESTIC SALES AGREEMENT EXHIBIT 19 FINAL DOMESTIC SALES AGREEMENT INTEROIL LIMITED (REFINER) and SHELL PAPUA NEW GUINEA LIMITED (PURCHASER) ARTHUR ROBINSON & HEDDERWICKS Stock Exchange Centre 530 Collins Street Melbourne 3000 Australia Tel 61 3 9614 1011 Fax 61 3 9614 4661 pjsm M0110891807v6 969289 MXS (C) Copyright Arthur Robinson & Hedderwicks 2004 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS
TABLE OF CONTENTS 1. DEFINITIONS & INTERPRETATION 2 1.1 Definitions 2 1.2 Interpretation 7 1.3 Consents or Approvals 8 1.4 Commencement 8 1.5 Relationship between parties 8 2. AGREEMENT TO SUPPLY 8 3. REFINER'S OBLIGATION TO SUPPLY PRODUCT TO PURCHASER 9 4. PURCHASER'S OBLIGATION TO PURCHASE PRODUCT FROM THE REFINER 9 5. GENERAL CO-OPERATION REGARDING AVAILABILITY OF PRODUCT 10 5.1 Refinery Shut-In 10 5.2 Regular communication 10 6. FORECASTING 10 7. NOMINATIONS 11 7.1 Nomination for Product supply at the Gantry and Wharf. 11 7.2 Offtake Co-ordinator and Firm Program 12 7.3 Firm Program Confirmations and Accepted Nominations 13 8. PRODUCT PRICE 14 9. CONDITIONS OF PURCHASE APPLY 14 10. TERMINATION 14 10.1 Termination Events 14 10.2 Termination by Notice 14 10.3 Effect of Termination 15 10.4 Survival 15 11. CHANGES TO THE PROJECT AGREEMENT 15 11.1 General consultation 15 11.2 Changes to the Project Agreement 16 12. CONFIDENTIALITY 16 12.1 No disclosure 16 12.2 Permitted disclosures 16 13. COSTS AND EXPENSES 17 14. REPRESENTATIONS AND WARRANTIES 17 15. NOTICES 18 16. GOVERNING LAW 19
PAGE (i) ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS 17. FORCE MAJEURE 19 17.1 Event of Force Majeure 19 17.2 Remedy of Force Majeure 20 17.3 Mitigation 20 18. ENUREMENT 20 19. DISPUTES 20 20. MERGER 21 21. ASSIGNMENT 21 22. AGREEMENT CONDITIONAL ON NOVATION 22 22.1 Obligation to Assign 22 22.2 Condition Precedent 22 23. FURTHER ASSURANCES 22 24. PRIOR AGREEMENTS 22 25. WAIVER 22 26. COUNTERPARTS 22 SCHEDULE 1 23 Conditions of Purchase for a supply of Product at Wharf 23 SCHEDULE 2 24 Conditions of Purchase for supply of Product at Gantry 41 SCHEDULE 3 48 Deed of Novation 48
PAGE (ii) ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS DATE [#] PARTIES 1. INTEROIL LIMITED (company number 1-22826) of Level 6, Defens Haus, Cnr Hunter Street and Champion Parade, Port Moresby, Papua New Guinea (REFINER). 2. SHELL PAPUA NEW GUINEA LIMITED (company number 1-6349) of Level 10, Pacific Place, Cnr Musgrave Street and Champion Parade, Port Moresby, Papua New Guinea (proposed to be renamed InterOil Distribution Company Limited)(PURCHASER). BACKGROUND 1. InterOil Limited, a member of the InterOil Group, has constructed or is in the course of constructing a petroleum refinery at Napa Napa National Capital District and Central Province in Papua New Guinea. 2. The construction and operation of the petroleum refinery by InterOil Limited is recognised and supported by The Independent State of Papua New Guinea pursuant to the Project Agreement between the Independent State of Papua New Guinea, InterOil Limited and EP InterOil, Ltd., as a project of national significance for Papua New Guinea. 3. Following completion of construction and the commissioning of the petroleum refinery by InterOil Limited, it will become a domestic producer in Papua New Guinea of refined petroleum products. 4. The Shell Group is a major distributor of refined petroleum products in Papua New Guinea and intends to distribute such products through Shell Oil Products (PNG) Limited (or another member of the Shell Group incorporated in Papua New Guinea) to replace such distribution activities currently conducted by the Shell Group through Shell Papua New Guinea Limited. 5. The parties are entering into this Agreement to: A. facilitate a smooth transition from reliance on imported refined petroleum products to 5. domestically refined petroleum products in Papua New Guinea; B. encourage the continued operation and the development of a dependable domestic petroleum distribution system to service the domestic market in which customers, the citizens of Papua New Guinea, financiers and the parties can have confidence by creating a framework for the efficient, stable and economic production and distribution of domestically produced petroleum products, thereby promoting: PAGE 1 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (i) the development of a substantial and stable customer base and a stable financial environment for the production activities of the petroleum refinery; (ii) the integrity of the domestic petroleum refining capacity and the domestic petroleum distribution system for the benefit of customers and the encouragement of domestic and foreign investment in Papua New Guinea; and (iii) the general national interest of Papua New Guinea. ( 6. Pursuant and subject to this Agreement: A. the purchaser of petroleum products under this Agreement wishes to acknowledge that in accordance with the requirements of the Project Agreement referred to in Recital 2, as a domestic distributor of petroleum products in Papua New Guinea it will to the extent possible buy all its requirements for petroleum products for distribution in Papua New Guinea from InterOil Limited's refinery and proposes to do so in accordance with the terms and conditions of this Agreement; and B. the InterOil Group and the Shell Group will capitalise upon their specific areas of specialisation and expertise to pursue those aims set out in Recital 5 by delineating their functions so that: (iv) the InterOil Group can focus on its business mission of exploring for, extracting and refining petroleum products and investing in related infrastructure, in Papua New Guinea; and (v) the Shell Group can in Papua New Guinea focus on its business mission and strengths relating to the marketing and domestic distribution of refined petroleum products, where it already has a substantial market presence. IT IS AGREED as follows. 1. DEFINITIONS & INTERPRETATION 1.1 DEFINITIONS The following definitions apply unless the context otherwise requires: ACCEPTED NOMINATION means, in relation to a Nomination (including a tentative Nomination) accepted in the Firm Program Confirmation relating to the Delivery Period of that Nomination, the resulting binding obligation of the: (a) Purchaser to purchase; and PAGE 2 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (b) Refiner to supply, deliver and sell, the Product or Products to which that Nomination relates in accordance with the terms of this Agreement and the applicable Conditions of Purchase. AFFILIATE means: (c) in relation to NV Koninklijke Nederlandsche Petroleum Maatschappij, The Shell Transport and Trading Company plc and the Purchaser, means each of them and any body corporate which is for the time being directly or indirectly controlled by NV Koninklijke Nederlandsche Petroleum Maatschappij and The Shell Transport and Trading Company plc or either of them; and (d) in relation to IOC, any body corporate which is for the time being directly or indirectly controlled by IOC. For this purpose: (e) a company is directly controlled by another company beneficially owning shares carrying more than 50 percent of the votes at a general meeting of shareholders (or its equivalent) of the first mentioned company; and (f) a particular company is indirectly controlled by a company if a series of companies can be specified, beginning with that company and ending with the particular company, so related that each company in the series is directly controlled by one or more of the companies earlier in the series. AUTHORITY means any government or any governmental, semi-governmental, city, municipal, civic, administrative, fiscal, statutory or judicial body, instrumentality, department, commission, authority, tribunal, agency or other similar entity, including any self-regulatory organisation established under statute and any stock exchange. BUSINESS DAY means a day on which trading banks are open for the transaction of banking business in Port Moresby, Papua New Guinea. COMMENCEMENT DATE has the meaning given in Clause 1.4. COMPLETION has the meaning given in the Purchase and Sale Agreement. CONDITIONS OF PURCHASE means those additional terms of trade applicable to a particular supply of Product made pursuant to this Agreement, being: (a) in relation to supplies to be made at Wharf, the Conditions of Purchase set out in Schedule 1; and (b) in relation to supplies at Gantry, the Conditions of Purchase set out in Schedule 2, as varied from time to time by agreement between the Purchaser and the Refiner. CONTROLLER means, in relation to a person's property: (a) a receiver or receiver and manager of that property; or PAGE 3 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (b) anyone else who (whether or not as agent for the person) is in possession, or has control, of that property to enforce a Security Interest. COSTS AGREEMENT means the letter agreement exchanged prior to the date of this Agreement between The Shell Company of Australia Limited and IOC. DELIVERY PERIOD means the period of 1 Month that is 2 Months (Month x+2) after the Month (Month x) in which Nominations are finally made and accepted into the Firm Program relating to that period. DOMESTIC DISTRIBUTOR means a person (other than the Purchaser) who conducts or proposes to conduct a business in Papua New Guinea of distributing Products for re-supply or sale within Papua New Guinea that has the real and effective capacity and willingness to import Products to a location or locations in Papua New Guinea. DOMESTIC LEASE AGREEMENT means the domestic lease agreement dated on or about the date of the Purchase and Sale Agreement between IDC and the Purchaser. FIRM PROGRAM means the program relating to the supply (including scheduling of deliveries) of Product to be made by the Refinery to its customers during a particular Delivery Period. FIRM PROGRAM CONFIRMATION means the written confirmation of Nominations accepted by the Refiner (whether notified by the Refiner or the Offtake Coordinator) into the Firm Program for the Delivery Period to which those Nominations relate. FORCE MAJEURE means an event or cause beyond the reasonable control of the party claiming force majeure which could not have been prevented, overcome or remedied by the exercise by that party (or its agents, contractors or subcontractors and persons under that party's control or direction) of a standard of care and diligence consistent with that of a prudent and competent person under the circumstances including, to that extent: (a) act of God, lightning, storm, flood, fire, earthquake, explosion, cyclone, tidal wave, perils of the sea, landslide or epidemic; (b) war (declared or undeclared), hostilities, acts of the public enemy or of belligerents, sabotage, blockade, revolution, insurrection, riot or disorder and commotion, arrest or restraint of rulers or peoples, civil and governmental frustration, expropriation, requisition, confiscation or nationalisation; (c) the effect of any applicable laws, orders, rules or regulations of any government or other competent Authority; (d) embargoes or export or import restrictions, substantial interference by, or restrictions or onerous regulation imposed by civil or military authorities, whether legal or de facto and whether purporting to act under some constitution, decree, law or otherwise; PAGE 4 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (e) accidents of navigation, loss of tanker tonnage due to sinking by belligerents or to governmental taking (whether or not by formal requisition); (f) accidents or mechanical failures; (g) accidents to or closing of harbours, docks, canals, channels, mooring points, or other assistance to or adjuncts of shipping or navigation; or (h) rationing or allocation imposed by applicable law, decree or regulation. GANTRY means the road tanker loading facility at the Refinery. IDC means Shell Papua New Guinea Limited (proposed to be renamed InterOil Distribution Company Limited), a corporation duly established and existing under the laws of Papua New Guinea. INTEROIL GROUP means IOC and its Affiliates. IOC means InterOil Corporation, a corporation duly established and existing under the laws of the province of New Brunswick, Canada. IPP has the meaning given in the Project Agreement, as that agreement may be varied or amended from time to time, and if any other price (or mechanism for determining the price) of a Product is introduced from time to time under or pursuant to the Project Agreement then IPP, in relation to that Product, means that other price (or the price as so determined by that other mechanism). KINA or K means the lawful currency of Papua New Guinea. LATEST NOMINATION DATE has the meaning given in Clause 7.1(d). MONTH means a calendar month. NOMINATION means an election by the Purchaser to purchase Product that is made by notification in writing to the Refiner in accordance with Clause 7.1(g). OFFTAKE COORDINATOR means an employee or agent of the Refiner, so appointed by the Refiner. PAPUA NEW GUINEA means the territory of The Independent State of Papua New Guinea (including its territorial waters). PLATT'S means the Singapore Product Postings located in the PLATT'S Oilgram Price Report published by the Standard & Poor's Corporation (or, if PLATT's no longer reports Singapore Product Postings, another price reporting service agreed between the Independent State of Papua New Guinea and the Refiner pursuant to the Project Agreement). PRODUCT means: (a) unleaded motor gasoline, dual purpose kerosene, kerosene/Jet-A1, automotive diesel oil, gasoil, industrial diesel, industrial fuel oil, liquid propane gas, residual fuel oil; and (b) such other commercially viable products of the kind that the Refiner may from time to time determine to produce, PAGE 5 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS that is included in PLATT'S at the relevant time. PRODUCT SUPPLY SPECIFICATION, in relation to a Product, means: (a) the specification (including the testing methodology used in relation to it) for that Product from time to time notified by the Refiner to the Purchaser, provided that specification (and the testing methodology used in relation to it) is in accordance with the PLATT'S specification (including the testing methodology used in relation to it) for that Product and also fit for purpose by the users of that Product in Papua New Guinea; or (b) the specification (including the testing methodology used in relation to it) for that Product otherwise agreed by the Purchaser and the Refiner. PROJECT AGREEMENT means the project agreement dated 29 May 1997 between The Independent State of Papua New Guinea, the Refiner and EP InterOil, Limited, as varied by a letter dated 2 October 1998 from the Minister of Petroleum and Energy of the State to the Refiner and as amended and extended by an extension deed dated 1 July 1999 between the State, the Refiner and EP InterOil, Limited. PURCHASER MEANS: (a) prior to novation under Clause 22.1, SPNG; and (b) after novation under Clause 22.1, SOPL. PURCHASE AND SALE AGREEMENT means the purchase and sale agreement between Shell Overseas Holdings Limited and IOC for the purchase of all the issued shares of SPNG by IOC or IOC's nominee. QUARTER means a period of 3 months. REFINERY means the refinery located at Napa Napa, Port Moresby, National Capital District and Central Province, Papua New Guinea, owned and/or operated by the Refiner. SCHEDULED DATE FOR REFINERY COMPLETION means 31 December 2002. SECURITY DEED means the security deed dated on or about the date of the Purchase and Sale Agreement between, among others, the parties to this Agreement. SECURITY INTEREST means an interest or power: (a) reserved in or over any interest in any asset including any retention of title; or (b) created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage, charge, lien, pledge, trust or power, by way of security for the payment of debt or any other monetary obligation or the performance of any other obligation and whether existing or agreed to be granted or created. SHELL GROUP means NV Koninklijke Nederlandsche Petroleum Maatschappij and The Shell Transport and Trading Company, plc and their Affiliates. PAGE 6 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS SOPL means: (a) Shell Oil Products (PNG) Limited, a corporation to be duly established under the laws of Papua New Guinea under that name or such other name as to be determined by the Shell Group; or (b) such other member of the Shell Group (not being SPNG) as notified to the Refiner by SPNG before the Commencement Date. SPNG means Shell Papua New Guinea Limited (proposed to be renamed InterOil Distribution Company Limited), a corporation duly established and existing under the laws of Papua New Guinea. STATE means The Independent State of Papua New Guinea. TANKER means a shipping tanker or vessel procured by the Purchaser or another member of the Shell Group on to which Products are delivered by the Refiner to the Purchaser under this Agreement. TERMINATION DATE means the tenth anniversary of the Commencement Date, as that date may be extended, if applicable, in accordance with the Security Deed. TRANSACTION DOCUMENTS has the meaning given in the Purchase and Sale Agreement. TRANSFER DATE has the meaning given in the Purchase and Sale Agreement. UNCITRAL ARBITRATION RULES means the arbitration rules adopted by UNCITRAL on 28 April 1976 and by the United Nations General Assembly on 15 December 1976 and entitled `Arbitration Rules of the United Nations Commission on International Trade Law', as those rules may be amended from time to time. WHARF means the facilities at the Refinery for securing Tankers and loading those Tankers with Products. 1.2 INTERPRETATION Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise. (a) The singular includes the plural and conversely. (b) A gender includes all genders. (c) If a word or phrase is defined, its other grammatical forms have a corresponding meaning. (d) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them. (e) A reference to a Clause or Schedule is a reference to a clause of, or a schedule to, this Agreement. (f) A reference to an agreement or document (including, without limitation, a reference to this Agreement) is to the agreement or document as amended, varied, supplemented, novated or replaced PAGE 7 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS except to the extent prohibited by this Agreement or that other agreement or document. (g) A reference to a party to this Agreement or another agreement or document includes the party's successors and permitted substitutes or assigns (and, where applicable, the party's legal personal representatives). (h) A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. (i) A reference to conduct includes an omission, statement or undertaking, whether or not in writing. (j) A reference to an AGREEMENT includes any undertaking, deed, agreement or legally enforceable arrangement, whether or not in writing, and a reference to a document includes an agreement (as so defined) in writing, or any certificate, notice, instrument or document of any kind. (k) The meaning of general words is not limited by specific words introduced by INCLUDING, or FOR EXAMPLE, or similar expressions. 1.3 CONSENTS OR APPROVALS If the doing of any act, matter or thing under this Agreement is dependent on the consent or approval of a party or is within the discretion of a party, the consent or approval may be given or the discretion may be exercised conditionally or unconditionally or withheld by the party in its absolute discretion unless express provision to the contrary has been made in this Agreement. 1.4 COMMENCEMENT Subject to Clause 22, this Agreement commences on the date (the COMMENCEMENT DATE) which is the Transfer Date under the Purchase and Sale Agreement. 1.5 RELATIONSHIP BETWEEN PARTIES Except as and to the extent expressly provided in this Agreement or any other Transaction Document, nothing in this Agreement or any other Transaction Document (including any obligations to consult, communicate, negotiate or otherwise in any way act in good faith) creates or will be deemed to create between any of the parties any relationship of joint venture, partnership, agency or any other fiduciary relationship of any kind whatsoever. 2. AGREEMENT TO SUPPLY (a) The Refiner will supply and the Purchaser will purchase Products on the terms set out in this Agreement, for the purpose of re-supply or sale by the Purchaser in Papua New Guinea. PAGE 8 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (b) The Refiner will supply Products for re-supply or sale or use in Papua New Guinea only to the Purchaser and the Domestic Distributors and not to any other person (including any member of the InterOil Group). (c) The Refiner will supply Products to any Domestic Distributor only: (i) at the Refinery; (ii) [deleted for confidentiality]; and (iii) [deleted for confidentiality]. (iv) [deleted for confidentiality]. 3. REFINER'S OBLIGATION TO SUPPLY PRODUCT TO PURCHASER (a) If a Nomination (including a tentative Nomination) is made by the Purchaser in accordance with Clause 7.1, subject to the Refiner having sufficient quantity of Product at the applicable Product Supply Specification to accommodate that Nomination in the Firm Program of the Delivery Period relating to that Nomination, the Refiner must: (i) procure the Offtake Coordinator to accept that Nomination into that Firm Program and ensure that the Purchaser is informed of that acceptance in the Firm Program Confirmation relating to that Delivery Period; and (ii) satisfy the resulting Accepted Nomination within the time specified in and otherwise in accordance with the terms relating to, that Accepted Nomination, subject only to changes made in accordance with the Conditions of Purchase or other amendments agreed relating to that supply. (b) [deleted for confidentiality]. 4. PURCHASER'S OBLIGATION TO PURCHASE PRODUCT FROM THE REFINER (a) Subject to paragraph (c), the Purchaser will source from the Refiner all its requirements for each Product for the purposes of re-supply or sale in Papua New Guinea to the extent the Refiner makes that Product available to the Purchaser at the Product Supply Specification and in accordance with the terms of this Agreement. (b) Subject to paragraph (c), the Purchaser will not import any Product unless: (i) (and only to the extent) the Refiner does not make that Product available to the Purchaser at the Product Supply Specification and in the quantities required by the Purchaser; (ii) the Purchaser has invited the Refiner to enter into discussions to seek agreement on whether and the extent to which importation of Products into Papua New Guinea is necessary, PAGE 9 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS which discussions the Purchaser and the Refiner must conduct in good faith; and (iii) the Purchaser has exercised its best endeavours to agree with the Refiner: (A) on co-operation between them in relation to the supply of Products in Papua New Guinea; and (B) the extent to which importation of Product is required to meet the Purchaser's anticipated demand for Products in Papua New Guinea. (C) [deleted for confidentiality]. 5. GENERAL CO-OPERATION REGARDING AVAILABILITY OF PRODUCT 5.1 REFINERY SHUT-IN Without limiting Clause 3(b) the Refiner and the Purchaser will act in good faith and cooperate with each other in relation to the supply of Product in Papua New Guinea if, for any reason, at any time the Refinery is not operating. 5.2 REGULAR COMMUNICATION The Refiner and the Purchaser will maintain regular communication and keep each other informed as fully as possible about all matters concerning the requirements for and availability and scheduling of Products. 6. FORECASTING For planning purposes only, on the last day of March, June, September and December the Purchaser must provide the Refiner with a forecast of the Purchaser's anticipated requirements for each Product it anticipates purchasing from the Refiner during the subsequent 12 months. The forecast must: (a) be divided into estimates for supply at the Gantry and Wharf; (b) forecast the anticipated requirements for each of the first 3 months to which the report relates on a monthly basis (and where Nominations and Accepted Nominations already exist in relation to those requirements, indicate the parts of those requirements to be met by those Nominations and Accepted Nominations); and (c) forecast the anticipated requirements for the last 9 months to which the Report relates as 3 quarter aggregates, each aggregate quarter being forecast separately. PAGE 10 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS 7. NOMINATIONS 7.1 NOMINATION FOR PRODUCT SUPPLY AT THE GANTRY AND WHARF. (a) If the Purchaser wishes to purchase Products under this Agreement, those Products will be supplied by: (i) the Purchaser making Nominations for such Products for the relevant Delivery Periods in which it requires the supply of those Products; (ii) the Refiner electing to accept those Nominations into the Firm Programs for those Delivery Periods; and (iii) the Offtake Coordinator issuing Firm Program Confirmations for the supply of those Products in those Delivery Periods, in accordance with this Agreement so as to result in Accepted Nominations for those Products, which Products must then be supplied by the Refiner and taken by the Purchaser in accordance with, and subject to, the terms of this Agreement and the applicable Conditions of Purchase. (b) To the extent that on the first day of each Month the Purchaser has expected requirements for Products during the Delivery Period being the Month that is 3 Months (Month x+2) after that Month (Month x-1), the Purchaser must make tentative Nominations for those Products (including the details referred to in paragraph (g)) on that day (or if that day is not a Business Day, the prior Business Day). Such tentative Nominations must be the best indication that the Purchaser can provide of expected supplies of Product it believes it will require from the Refinery in the relevant Delivery Period, to enable the Refiner to identify stock issues and allow the Refiner advance notice to formulate shipping and operational plans relating to the Refinery. (c) A Nomination relating to a supply of Product in a Delivery Period may be made by the Purchaser at any time from the date tentative Nominations are due under paragraph (b) until (and including) the Latest Nomination Date for that Delivery Period. (d) The Latest Nomination Date by which the Purchaser can make a Nomination for a supply of Product in a Delivery Period will be the 5th day of the Month (Month x) that is 2 Months before the Month (Month x+2)) of the relevant Delivery Period (or if that is not a Business Day the prior Business Day) (the LATEST NOMINATION DATE). (e) All Nominations (including tentative Nominations) made in relation to a Delivery Period will be considered non-binding and subject to withdrawal by the Purchaser until the first working day prior to the Latest Nomination Date relating to that Delivery Period. PAGE 11 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (f) Any Nominations made on the Latest Nomination Date, or tentative Nominations or Nominations not withdrawn by the Purchaser before the Latest Nomination Date, may not be modified or withdrawn on or after that Latest Nomination Date relating to the Delivery Period for supplies requested under those Nominations without the agreement of both the Refiner and the Purchaser, but the Refiner will consult with the Purchaser in good faith and reasonably consider a modification or withdrawal of a Nomination to the extent necessary to ensure that Nomination is capable of acceptance by the Offtake Coordinator and inclusion in the Firm Program issued under Clause 7.2(c). (g) Each Nomination will be an offer (subject to withdrawal or modification in accordance with paragraphs (e) and (f) and acceptance by the Refiner in the Firm Program Confirmation issued under Clause 7.3) in the form of an order for the relevant Product or Products requested in that Nomination that must include: (i) for delivery at the Wharf: (A) details of the Product or Products ordered under that Nomination; (B) the quantity or quantities of those Products ordered; and (C) a 7-day lifting window during which the requested supply pursuant to the order must be made and taken in accordance with (but subject to the narrowing of that window and amendments to that window under) the Conditions of Purchase; and (ii) for delivery at the Gantry: (A) details of the Product or Products ordered under that Nomination; (B) the aggregate quantity requirement for that Product or those Products during the Delivery Period to which the Nomination relates, which will be an order for that quantity (or those quantities) and which will, if accepted by the Refiner, be the quantity (or quantities): (1) supplied by the Refiner to the Purchaser; and (2) lifted by the Purchaser (pursuant to placing an adequate number of purchase orders in accordance with the Conditions of Purchase), during that Delivery Period. 7.2 OFFTAKE CO-ORDINATOR AND FIRM PROGRAM The Refiner will: PAGE 12 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (a) appoint an Offtake Coordinator to coordinate the Product related supply activities of the Refiner; (b) procure the Offtake Coordinator to coordinate the respective rights, obligations and activities of the Refiner and the Purchase under or in relation to this Agreement; (c) procure the Offtake Coordinator to compile a Firm Program in time to allow the issue of a Firm Program Confirmation pursuant to Clause 7.3(a); (d) procure the Offtake Coordinator to provide the Purchaser on the last day of each Month with full updated details of Firm Programs for Delivery Periods in the following three Months, including details of agreed revisions and confirmation of supplies to be made to the Purchaser in accordance with Accepted Nominations and the scheduling requirements of the Conditions of Purchase; and (e) be responsible for all the activities and decisions of the Offtake Coordinator. 7.3 FIRM PROGRAM CONFIRMATIONS AND ACCEPTED NOMINATIONS (a) The Refiner must issue (or procure the Offtake Coordinator to issue for the Refiner) a Firm Program Confirmation to the Purchaser on or before the 15th day of each Month (or if that day is not a Business Day or is a Saturday, Sunday or public holiday in Papua New Guinea, the following Business Day) for the Delivery Period that is 2 months (Month x+2) after the Month (Month x) in which that day falls. (b) The Firm Program Confirmation issued under paragraph (a) will: (i) with respect to those Nominations accepted into it be regarded as acceptances by the Refiner of the offers made by the Purchaser under Clause 7.1(g), including acceptance of the order particulars in those nominations (as may have been subject to modification in accordance with paragraph (f)); and (ii) will be final and binding on the Refiner and the Purchaser, pursuant to which the Nominations (including all terms of supply relating to them) confirmed in that Firm Program Confirmation become Accepted Nominations. (c) The: (i) Refiner must supply; and (ii) Purchaser must take, the Product or Products in each Accepted Nomination in accordance with the terms and particulars (including those set out in Clause 7.1(g)) of the Nomination and Firm Program Confirmation that result in that Accepted Nomination, subject to any adjustment of those terms and particulars in accordance with the applicable Conditions of Purchase or amendment by subsequent agreement. PAGE 13 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS 8. PRODUCT PRICE [deleted for confidentiality]. 9. CONDITIONS OF PURCHASE APPLY The Conditions of Purchase apply to all sales of Products by the Refiner to the Purchaser under this Agreement. The terms of Clauses 1 to 26 of this Agreement and any agreements or arrangements made pursuant to those Clauses prevail over the Conditions of Purchase to the extent of any inconsistency between this Agreement, or any agreements or arrangements made pursuant to it, and the Conditions of Purchase. 10. TERMINATION 10.1 TERMINATION EVENTS This Agreement terminates automatically, without any requirement of notice to or from either party to the other: (a) if the Purchase and Sale Agreement is terminated pursuant to Clauses 5.5 or 16 of that Agreement; or (b) on the Termination Date. 10.2 TERMINATION BY NOTICE The Refiner or the Purchaser (as applicable, the NON-DEFAULTING PARTY) may terminate this Agreement by notice to the Purchaser or the Refiner (as applicable, the OTHER PARTY), if: (a) (i) the other party (the DEFAULTING PARTY) commits a material breach of this Agreement; and (ii) after the non-defaulting party has given notice to the defaulting party specifying the breach and requesting that it be remedied or that its consequence be overcome or compensated for (which notice must be given within 6 months after the non-defaulting party first becomes aware of that breach), the defaulting party has failed to remedy that breach or to take steps to overcome its consequences or to compensate for it within 60 days (or such longer period as the non-defaulting party and the defaulting party may agree) after receiving that notice; or (b) the other party: (i) stops or suspends or threatens to stop or suspend payment of all or a class of its debt; (ii) is insolvent (within the meaning of any applicable law); (iii) is held or must be presumed by a court to be insolvent; PAGE 14 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (iv) fails to comply with a statutory demand (within the meaning of any applicable law); (v) has an administrator appointed over all or any of its assets or undertaking; (vi) has a Controller or similar officer appointed to all or any of its assets or undertaking; or (vii) has an order made or a resolution passed for its winding up, deregistration or dissolution or for it to enter an arrangement, compromise or composition with or assignment for the benefit of its creditors, a class of them or any of them (unless done for the purposes of solvent reconstruction). 10.3 EFFECT OF TERMINATION Termination of this Agreement does not affect any accrued rights or remedies of either party under or in relation to this Agreement. 10.4 SURVIVAL Clauses 1 (other than 1.4), 10.3, 12, 15, 16 and this Clause 10.4 survive the expiry or termination of this Agreement. 11. CHANGES TO THE PROJECT AGREEMENT 11.1 GENERAL CONSULTATION If at any time the Refiner or the Purchaser is notified or becomes aware of any proposal or circumstance that will or that reasonably it considers will, lead to a variation or amendment of the Project Agreement and the Refiner or the Purchaser, as applicable, (acting reasonably) considers that such proposal or circumstance, or such variation or amendment, will or may affect the Refiner's or the Purchaser's commercial, economic or competitive position, the Refiner or the Purchaser, as applicable, must as soon as reasonably practicable: (a) notify the other of that proposal or circumstance when, in the Refiner's or the Purchaser's, as applicable, reasonable opinion that proposal or circumstance may have a material adverse effect on the Refiner or the Purchaser, as applicable; (b) consult with the Refiner or the Purchaser, as applicable, concerning the terms of any variation or amendment; and (c) cooperate with the other in good faith so that the Purchaser is able to participate as fully as reasonably practicable with the Refiner in determining an agreed approach to the contemplated variation or amendment and to allow the Purchaser, the Refiner and IDC the opportunity to negotiate and agree such changes to this Agreement, the Domestic Sales Agreement, the Marketing Services Agreement and, as applicable, any other Transaction Documents as they believe necessary so that the Purchaser, the Refiner and IDC, respectively, PAGE 15 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS will each be put as closely as possible in the same relative commercial, economic and competitive position upon the variation or amendment to the Project Agreement as each would be in if that variation or amendment did not take place. 11.2 CHANGES TO THE PROJECT AGREEMENT If the Project Agreement expires or is terminated or if: (a) a variation or amendment is made to the Project Agreement (or an agreement or arrangement is made between any of the parties to the Project Agreement that is equivalent, in its practical operation or result, to a variation or amendment to the Project Agreement); (b) the effect of that variation or amendment (or that agreement or arrangement) is or would be to materially adversely affect the commercial, economic or competitive position of the Purchaser under this Agreement or any other Transaction Document; and (c) within 60 days after that variation or amendment has been made (or that agreement or arrangement has been entered into), the Purchaser and the Refiner (and, as applicable, IDC or the parties to other relevant Transaction Documents) have not agreed and implemented such, changes to this Agreement (and any other relevant Transaction Documents) as are necessary to avoid or overcome that material adverse effect on the Purchaser's commercial, economic or competitive position, so as to put the Purchaser as nearly as practicable in the same commercial, economic and competitive position under this Agreement and the other Transaction Documents as it was in before that variation or amendment (or that agreement or arrangement), the Purchaser may terminate this Agreement by 60 days' notice to the Refiner. 12. CONFIDENTIALITY 12.1 NO DISCLOSURE No party may make any disclosure or public announcement in relation to the terms or conditions of this Agreement or the transactions contemplated by it without the prior consent of the other parties. 12.2 PERMITTED DISCLOSURES Clause 12.1 does not apply to disclosure: (a) to the extent required in any proceedings arising out of or in connection with any Transaction Document; (b) to the extent required under a binding order of a court or any procedure for discovery in any proceedings; PAGE 16 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (c) to the extent required under any law or any rules of any applicable securities exchange or stock exchange; (d) as required or permitted under any Transaction Documents; (e) to legal advisors and consultants, who undertake to keep the information confidential; (f) to a bank or financial institution, provided that bank or financial institution undertakes to keep the information confidential and to use it only for bona fide purposes related to the actual or proposed provision of financial accommodation to a member or members of the InterOil Group (other than IDC) or a member or members of the Shell Group; (g) to any Affiliate; or (h) to the extent information is already in the public domain (other than as a result of a breach of Clause 12.1). Each party agrees to consult with each other, so far as it is reasonably practicable to do so, before making any disclosure pursuant to this Clause. 13. COSTS AND EXPENSES (a) Each party must bear its own costs arising out of the negotiation, preparation and execution of this Agreement except to the extent otherwise provided in the Costs Agreement. (a) All stamp duty and registration fees (including fines, penalties and interest) which may be payable on or in connection with this Agreement and any instrument executed under this Agreement must be borne equally by the Refiner and the Purchaser. 14. REPRESENTATIONS AND WARRANTIES Each party represents and warrants to the other that each of the following statements is true and correct and will be true and correct on the Commencement Date: (a) It is a corporation duly incorporated and validly existing under the laws of the place of its incorporation. (b) It has the power to enter into and perform its obligations under this Agreement, to carry out the transactions contemplated by this Agreement and to carry on its business as now conducted or contemplated. (c) It has taken all necessary corporate action to authorise the entry into and performance of this Agreement and to carry out the transactions contemplated by this Agreement. PAGE 17 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (d) This Agreement constitutes its valid and binding obligation enforceable in accordance with its terms, subject to any necessary stamping and registration. (e) The execution and performance by it of this Agreement and each transaction contemplated under this Agreement do not and will not violate in any respect a provision of: (i) a law or treaty or a judgment, ruling, order or decree of a government or Authority binding on it; (ii) its constituent documents; or (iii) any other document or agreement which is binding on it or its assets. 15. NOTICES Any notice, demand, consent or other communication (a NOTICE) given or made under this Agreement: (a) must be in writing and signed by a person duly authorised by the sender; (b) must be delivered to the intended recipient by prepaid post (if posted to an address in another country, by registered airmail) or by hand or fax to the address or fax number below or the address or fax number last notified by the intended recipient to the sender: (i) to the Refiner: Level 6 Defens Haus Cnr Hunter Street and Champion Parade Port Moresby Papua New Guinea Attention: Managing Director Fax No: +675 320 2601; (ii) to the Purchaser: Level 10 Pacific Place Cnr Musgrave Street and Champion Parade Port Moresby Papua New Guinea Attention: Company Secretary Fax No: +675 321 1842; and PAGE 18 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS Copy to: Shell Oil Products East Shell House UE Square 83 Clemenceau Avenue Singapore 239920 Attention: Vice President, Finance Fax No: +65 384 8204; and (c) will be taken to be duly given or made: (i) in the case of delivery in person, when delivered; (ii) in the case of delivery by post 2 Business Days after the date of posting (if posted to an address in the same country) or 7 Business Days after the date of posting (if posted to an address in another country); (iii) in the case of fax, on receipt by the sender of a transmission control report from the despatching machine showing the relevant number of pages and the correct destination fax machine number and indicating that the transmission had been made without error, but if the result is that a Notice would be taken to be given or made on a day which is not a business day in the place to which the Notice is sent or is later than 4.00pm (local time) it will be taken to have been duly given or made at the commencement of business on the next business day in that place. 16. GOVERNING LAW This Agreement is governed by the law of Papua New Guinea. Each party submits to the exclusive jurisdiction of courts exercising jurisdiction in Victoria, Australia in connection with matters concerning this Agreement. 17. FORCE MAJEURE 17.1 EVENT OF FORCE MAJEURE If a party is prevented in whole or in part from carrying out its obligations under this Agreement (other than an obligation to pay money) as a result of Force Majeure, it must promptly notify the other party accordingly. The notice must: (a) specify the obligations it cannot perform; (b) fully describe the event of Force Majeure; (c) estimate the time during which the Force Majeure will continue; and PAGE 19 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (d) specify the measures proposed to be adopted to remedy or abate the Force Majeure. Following this notice, and while the Force Majeure continues, the obligations which cannot be performed (other than an obligation to pay money) because of the Force Majeure will be suspended. 17.2 REMEDY OF FORCE MAJEURE The party that is prevented from carrying out its obligations under this Agreement as a result of Force Majeure must (a) remedy the Force Majeure to the extent reasonably practicable and resume performance of its obligations as soon as reasonably possible; (b) notify the other Party when the Force Majeure has terminated or abated to an extent which will permit resumption of performance of those obligations to occur; and (c) notify the other Party when resumption of performance of those obligations has occurred, provided that no party will, by virtue of this Clause 17, be required against the will of that Party to adjust or settle any strike, lockout or other labour dispute. 17.3 MITIGATION The party that is prevented from carrying out its obligations under this Agreement as a result of Force Majeure must take all action reasonably practicable to mitigate any loss suffered by any other party as a result of its inability to carry out its obligations under this Agreement. 18. ENUREMENT The provisions of this Agreement will enure for the benefit of and be binding on the parties and their respective successors and permitted substitutes and assigns and (where applicable) legal personal representatives. 19. DISPUTES (a) Each party acknowledges that the parties may agree on an alternative method of resolving a dispute or difference in connection with this Agreement to replace the provisions of this Clause 19 to the extent so agreed, including by way of agreement on the appointment of technical experts to make finally binding determinations about technical matters in relation to issues arising under the Conditions of Purchase. (b) Any dispute or difference arising in connection with this Agreement will be submitted by the parties to that dispute to arbitration in a location agreed between the parties to that dispute (or failing such agreement will be submitted to arbitration in Singapore) in accordance with, and subject to, the UNCITRAL Arbitration Rules. PAGE 20 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS (c) Subject to any contrary provision in the UNCITRAL Arbitration Rules: (i) there must be 3 arbitrators, being one arbitrator appointed by the Purchaser, one arbitrator appointed by the Refiner, and one arbitrator appointed independently by, and in accordance with, the rules of the relevant appointing and administering body; (ii) all 3 arbitrators must be present when a decision of the arbitrators is made and any decision supported by at least 2 of the 3 arbitrators will be final and binding on the parties to that dispute; and (iii) the language of the arbitration must be in English. (d) A party may commence proceedings or take any action it deems necessary in any jurisdiction (except in any State or territory of the United States of America) to enforce a decision of the arbitrators, whether pursuant to: (i) the general law or legislation of that jurisdiction; (ii) the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958; or (iii) any other treaty making such enforcement possible. 20. MERGER The rights and obligations of the parties will not merge on the completion of any transaction contemplated by this Agreement. They will survive the execution and delivery of any assignment or other document entered into for the purpose of implementing any such transaction. 21. ASSIGNMENT (a) Subject to the Security Deed, the rights and obligations of each party under this Agreement are personal and cannot be assigned, encumbered or otherwise dealt with and neither party may attempt, or purport, to do so without the prior written consent of the other party. (b) Nothing in paragraph (a) prohibits or restricts the Refiner granting any Security Interest over all or any part of its assets or undertaking in favour of any member of the Shell Group. PAGE 21 ARTHUR ROBINSON Domestic Sales Agreement & HEDDERWICKS 22. AGREEMENT CONDITIONAL ON NOVATION 22.1 OBLIGATION TO ASSIGN Before Completion occurs under the Purchase and Sale Agreement, Shell Papua New Guinea Limited and the Refiner must novate this Agreement to SOPL in the form of the Deed of Novation set out in Schedule 3. 22.2 CONDITION PRECEDENT This Agreement, except for Clauses 1, 12, 15, 16 and this Clause 22, is conditional on and is not intended to create legally binding rights or obligations until immediately after the last to occur of: (a) this Agreement being novated to SOPL in accordance with Clause 22.1; (b) satisfaction or waiver of each condition precedent set out in Clause 10.1 of the Purchase and Sale Agreement; and (c) Completion having occurred under the Purchase and Sale Agreement. 23. FURTHER ASSURANCES Each party agrees to do all such things and execute all such deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Agreement and the transactions contemplated by it. 24. PRIOR AGREEMENTS This Agreement supersedes all prior agreements and understandings between the parties in connection with it. 25. WAIVER No failure to exercise nor any delay in exercising any right, power or remedy by a party operates as a waiver. A single or partial exercise of any right, power or remedy does not preclude any other or further exercise of that or any other right, power or remedy. A waiver is not valid or binding on the party granting that waiver unless made in writing. 26. COUNTERPARTS This Agreement may be executed in any number of counterparts. All counterparts will be taken to constitute one instrument. PAGE 22 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS SCHEDULE 1 CONDITIONS OF PURCHASE FOR A SUPPLY OF PRODUCT AT WHARF 1. DEFINITIONS In addition to the definitions in Clause 1 of the Agreement, the following definitions apply in this Schedule unless the context otherwise requires. ACCEPTED QUANTITY has the meaning given in Condition 7.1(g). AGREEMENT means the Domestic Sales Agreement to which these Conditions of Purchase are attached. ALDR-3 has the meaning given in Condition 6.1(f). ALDR-5 has the meaning given in Condition 6.1(e). ALDR-7 has the meaning given in Condition 6.1(d). ALLOWED LAYTIME means the period described in Condition 8.2. BARREL means a volume of 42 US standard gallons at 60(degree)F. BILL OF LADING means a full set of clean original bills of lading in the form requested by the Purchaser, issued by the Refiner for the Product loaded into the relevant Tanker as proof of delivery of the Product. BILL OF LADING DATE has the meaning given in Condition 5.1. DELIVERY POINT means the point at which the Product passes the loading hose flange on the manifold of the Tanker at the Moorings. ETA means estimated time of arrival. FACILITY REGULATIONS means appropriate guidelines relating to the Wharf issued by the Refiner to the Purchaser before the commencement of supply of Products from the Refiner to the Purchaser under the Agreement. FOB means Free on Board as defined in Incoterms 2000. GROSS NEGLIGENCE means any act or omission done or omitted to be done: (a) intentionally; or (b) with reckless disregard for any damage or loss that such action or omission: (i) causes or may cause; or (ii) could have been reasonably foreseen to be caused. INCOTERMS 2000 means the publication titled Incoterms 2000 published by the International Chamber of Commerce (as may be revised or replaced by the International Chamber of Commerce from time to time). TANK TOPS means, in relation to storage tanks in which the Refiner can store Products at or near the Refinery, provided that there are an adequate number PAGE 23 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS of such storage tanks having adequate capacity to store Products in accordance with the usual activities and usual levels of production of the Refinery and that all such storage tanks are used except to the extent technical limitations exist in relation to the storage of like or compatible Products, when the normal upper operating limits of all those storage tanks are exceeded. TONNES means metric tonnes. MOORINGS means the facilities for mooring Tankers at the Wharf where Product is supplied to the Delivery Point. NOMINATED QUANTITY means the quantity of Product requested by the Purchaser in a Nomination. NOR means the notice of readiness given to the Refiner by the master of the Tanker that the Tanker has arrived at the anchorage designated by the Refiner and is ready in all respects to enter the Moorings and that the Tanker has received all clearances required by applicable laws or regulations including, without limitation on the foregoing, clearances from Customs and Health Authorities. PORT REGULATIONS means applicable legislation issued by a relevant Authority relating to the Port Moresby Harbour. PRODUCT DELIVERY means the supply of Product through the Delivery Point. REVISED PAYMENT DATE has the meaning given in Condition 6.3. TANKER OWNER means any or all of the owner, disponent owner, charterer or operator of the Tanker. TREASURY BILL RATE means the most recent, short dated treasury bill rate published by the Central Bank of Papua New Guinea. 2. GENERAL CONDITIONS (a) In relation to a supply of Product made, that Product will be supplied and delivered by the Refiner and purchased and taken by the Purchaser in accordance with the Agreement and these Conditions of Purchase, except that to the extent terms of a supply are inconsistent or lacking the following order of priority will apply to determine the terms of the supply: (i) where the parties specifically intend to derogate from terms and conditions determined under the Agreement, as may be agreed between the parties in writing in respect of that supply; (ii) in accordance with the Agreement; (iii) in accordance with the conditions set out in this Schedule; and (iv) in accordance with Incoterms 2000. (b) References to the Refiner in these Conditions of Purchase include references to the Refiner's duly appointed representative or agent. PAGE 24 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS 3. CARGO QUANTITY Except as otherwise agreed, the aggregate quantity of Products required to be delivered by the Refiner to the Purchaser during the loading of a Tanker must be such that not less than 4000 tonnes of Products will be loaded on to that Tanker by the Refiner during that loading. 4. DELIVERY, TITLE AND RISK 4.1 DELIVERY The Refiner will supply and the Purchaser will receive each lifting of Product FOB Napa Napa, Port Moresby, National Capital District and Central Province, Papua New Guinea for supply at the Wharf. 4.2 TITLE All title, risk and property in respect of each delivery of Product hereunder will pass from the Refiner to the Purchaser at the Delivery Point. 4.3 WARRANTY OF TITLE The Refiner hereby irrevocably undertakes and warrants that the Refiner has at all times, including but not limited to the time of delivery of the Product and cargo (and the passing of their risk and property) in accordance with the Agreement herein, full, unencumbered and indefeasible title to the Product and cargo delivered to the Purchaser under the Agreement and further has the full right and authority to transfer title to such Product and cargo and to effect delivery of that Product and Cargo to the Purchaser. 5. BILL OF LADING 5.1 PROVISION OF BILL OF LADING On the day on which the Product Delivery of Product(s) to the Tanker is complete pursuant to the relevant Accepted Nomination and the Refiner's loading hose is disconnected from the Delivery Point (the BILL OF LADING DATE) the Refiner must issue a Bill of Lading relating to that supply to the Purchaser. 5.2 INADEQUATE BILL OF LADING When the Purchaser does not receive a Bill of Lading or receives any inaccurate or inadequate Bill of Lading, the Refiner: (a) re-affirms the warranties contained in Condition 4.3; (b) irrevocably and unconditionally indemnifies the Purchaser on demand and holds the Purchaser harmless against any claim made against the Purchaser by any person as a result of breach by the Refiner of any of the warranties set out in Condition 4.3, and all loss, costs (including, PAGE 25 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS but not limited to legal costs), damages, and expenses which the Purchaser may suffer, incur or be put to as a result of the Refiner's failure to deliver the Bill of Lading in accordance with the Agreement and the Conditions of Purchase; and (c) must on the Bill of Lading Date issue the Purchaser with a letter of indemnity in the form set out in Appendix "A" to this Schedule. The indemnity contained in Condition 5.2(b) will terminate upon delivery to and acceptance by the Purchaser of an accurate and adequate Bill of Lading. 6. PAYMENT TERMS 6.1 INVOICE FOR SUPPLY The Refiner must provide to the Purchaser: (a) Promptly after the Bill of Lading Date, the Refiner's invoice for a completed Product Delivery together with such documents reasonably requested by the Purchaser for each cargo of Product supplied to the Tanker, including the Bill of Lading (if not previously issued under Condition 5.1), certificate of origin, and certificate of quality and quantity. (b) The invoice issued under paragraph (a) must correctly state: (i) the total quantity of Product or Products supplied to the Purchaser; (ii) the total sum claimed to be due and owing to the Refiner, in Kina; and (iii) the Refiner's bank account details. 6.2 TIME AND METHOD OF PAYMENT (a) Subject to the other provisions of this Condition 6.2, the Purchaser must make payment in Kina by telegraphic transfer to the Refiner's bank and to the account as directed in the Refiner's invoice free of all charges and without set off, discount, deduction or counter-claim: (i) not later than 20 calendar days after the Bill of Lading Date (where the Bill of Lading Date will count as day zero); or (ii) if another date is specified in the invoice, on the date specified in the invoice (subject to that date being not earlier than 20 calendar days after the Bill of Lading Date where the Bill of Lading Date will count as day zero, unless Condition 6.3 applies). (b) Payments that fall due on a Sunday or Monday bank holiday in Papua New Guinea will be made on the following Business Day. Payments that fall due on a Saturday or any other bank holiday, except one falling on a Monday, in Papua New Guinea will be made on the preceding Business Day. PAGE 26 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS (c) All bank charges incurred at the Refiner's bank will be for the Refiner's account. All bank charges incurred at the Purchaser's bank will be for the Purchaser's account. (d) The Refiner will use reasonable endeavours to ensure that all documents required (including those under Condition 6.1(a)) and information reasonably requested by the Purchaser to enable the Purchaser to make payment are sent to the Purchaser no later than 3 Business Days prior to the date payment is due, failing which the Purchaser is not obliged to make payment on the due date but must make payment 3 Business Days after the receipt of such requisite documents or information by the Purchaser. 6.3 EARLY PAYMENTS REQUESTED BY THE REFINER (a) The Refiner may, upon giving written notice to the Purchaser and subject to the Purchaser's consent, prior to a shipment's Bill of Lading Date, request payment in relation to that shipment to be made on a specified date earlier than 20 days after the Bill of Lading Date as specified in Condition 6.2 (but no earlier than 5 days after the Bill of Lading Date) (the REVISED PAYMENT DATE). (b) The Refiner must pay early payment interest to the Purchaser on the amount paid by the Purchaser pursuant to paragraph (a) for the period from (and including) the Revised Payment Date to (and including) the day 20 days after the Bill of Lading Date at Treasury Bill Rate plus 2% per annum calculated on a daily basis until and including the day of payment and set-off against the amount due. 6.4 INTEREST ON LATE PAYMENTS If a payment or part of a payment is not made by the Purchaser in accordance with these Conditions of Purchase when due, then interest will be paid on that amount due to the extent it remains outstanding from the date that payment was due until the date of payment at Treasury Bill Rate plus 2% per annum, calculated on a daily basis from the date due until and including the day of payment of that outstanding amount. If payment of amounts due from the Purchaser can be made by way of set-off against amounts due from the Refiner to the Purchaser, payment must be so made to the extent possible to reduce the Purchaser's liability to pay interest under this Condition. 6.5 CREDIT TERMS The Refiner may request appropriate credit terms on sales made under the Agreement, upon which the parties will agree on appropriate credit terms. 7. SCHEDULING, TANKER NOMINATION AND LOADING AT THE WHARF 7.1 NOMINATION PROCEDURES - DATE RANGES AND QUANTITIES (a) For a supply of Product under these Conditions of Purchase, the Nomination to which that supply relates is made by the Purchaser PAGE 27 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS under Clause 7.1(f) of the Agreement and becomes an Accepted Nomination pursuant to Clause 7.3(b) of the Agreement. (b) On or before the 30th day prior to the start of the 7 day window for supply in the Delivery Period of the Accepted Nomination, the Refiner will procure the Offtake Coordinator to define and issue to the Purchaser a status report, based on latest information available to the Refiner, regarding the capacity of the Refiner to supply that Product during the 7 day window in accordance with the terms of the Accepted Nomination. (c) Upon receipt of the status report under paragraph (b), the Purchaser may: (i) accept requested amendments to the Accepted Nomination that are advised by the Offtake Coordinator in that report; (ii) request the Refiner to enter into consultations to be conducted in good faith by both parties to agree on alternative amendments to the Accepted Nomination; or (iii) if no agreement can be reached between the Parties under subparagraph (ii) then: (A) the Purchaser is obliged to accept the 7 day window advised by the Offtake Coordinator provided it is more than 30 days until the commencement of that window and within 3 days of the original 7 day window; or (B) if subparagraph (A) does not apply, the Purchaser may despite the terms of the Agreement or these Conditions of Purchase withdraw its Nomination for the relevant supply upon which the Accepted Nomination and all rights and obligations of the parties pursuant to that Accepted Nomination will become void without consequence. (d) The 7 day window of the Accepted Nomination (whether as originally agreed or as amended pursuant to Condition 7.1(c)) will be referred to as the accepted 7 day loading date range (ALDR-7) (e) No later than 25 days prior to the first day of the ALDR-7: (i) the Refiner will be obliged to narrow this range to a five-day loading window which (unless Parties mutually agree otherwise) must fall fully within the ALDR-7 and such 5 day date range will be referred to as the accepted 5 day loading date range (ALDR-5); and (ii) the Purchaser may renominate the quantity to be lifted within a 10% tolerance of the Accepted Quantity, provided: (A) that the Refiner is capable of supplying that amended quantity; and PAGE 28 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS (B) such quantity changes are accompanied by adjustments to the timing of subsequent loading date ranges as may be necessary (and any such adjustments will be agreed between the parties and confirmed in writing by the Refiner). (f) No later than 20 days prior to the first day of the ALDR-5, the Refiner will further narrow this range to a three-day loading window, which will be referred to as the final accepted 3 day loading date range or `stem' (ALDR-3). The ALDR-3 must fall fully within the previously advised ALDR-5 range (unless the Parties mutually agree otherwise) and will be final and binding on both parties. (g) The quantity of each Product to be supplied to the Tanker during an ALDR-3 will be the respective quantity of that Product ordered by the Purchaser in relation to that delivery (as accepted into the relevant Accepted Nomination by the Refiner, subject to amendments under paragraph (c) and subparagraph (e)(ii) and agreed changes made in respect of that delivery), allowing for an adjustment of that quantity to be made at the time of that delivery of up to plus or minus 5% for operational reasons (the ACCEPTED QUANTITY). 7.2 NOMINATION AND VERIFICATION OF TANKER (a) Once ALDR-3 becomes effective under Condition 7.1(f) the procedures under this Clause will come into operation. (b) No later than 15 days before the first day of ALDR-3 the Purchaser will nominate to the Refiner the Tanker to be used by the Purchaser for the Product Delivery. (c) Within 24 hours of receiving such nomination the Refiner will advise the Purchaser, of the Refiner's acceptance or rejection of the Tanker nomination, and any rejection may only be based on the reasonably substantiated claim that the Tanker is unable to comply with Port Regulations and Facility Regulations. (d) The Purchaser will ensure that all Tankers nominated, and each Tanker arriving at the Moorings for loading, will comply with the specifications set out in the Port Regulations and Facility Regulations. (e) Without limitation to the Purchaser's obligations pursuant to Condition (d), the Purchaser will provide to the Refiner appropriate documentation to enable the Refiner to verify compliance with the Port Regulations and Facility Regulations at the time of Nomination of the Tanker provided that if the Purchaser is not able to supply such documentation, the Purchaser will at the time of confirmation provide a notice of compliance to the Refiner, in a form acceptable to the Refiner, which acceptance will not be unreasonably withheld. PAGE 29 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS 7.3 TANKER SUBSTITUTION No later than 3 working days prior to the first day of ALDR-3 the Purchaser may nominate a substitute Tanker which meets all the requirements of the Port Regulations and Facility Regulations, and the Refiner will advise of acceptance or rejection of that Tanker within 24 hours of receiving such nomination from the Purchaser. 7.4 TANKER ARRIVAL (a) The Purchaser will arrange for the Tanker to give notices of its estimated time of arrival 7 days, 48 hours and 24 hours prior to ETA at the Port of Loading. (b) The Purchaser will use reasonable endeavours to present its Tanker for loading at the Moorings within the ALDR-3. (c) If, due to an event of Force Majeure, the Tanker is not presented at the Moorings within ALDR-3 ready to receive the Accepted Quantity of Product or is so presented but ceases to be able to lift the Accepted Quantity then without prejudice to the rights and obligations of the parties under the Agreement and these Conditions of Purchase the Parties will negotiate in good faith to try to agree on alternative arrangements. 7.5 NON-COMPLIANCE WITH TANKER SPECIFICATIONS Despite Condition 7.2(e), the Refiner will not be obliged to load any Tanker that does not comply with the specifications of the Port Regulations. In addition, and without liability, the Purchaser will provide access and other assistance to enable the Refiner to inspect the Tanker and any relevant documentation upon its arrival at the Moorings to ensure the Tanker complies with any Port Regulations. 8. BERTH AND LOADING 8.1 SAFE BERTH The Refiner will provide, or cause to be provided to the Purchaser a safe and suitable berth at the Wharf. 8.2 ALLOWED LAYTIME (a) The Purchaser will be allowed 36 hours, Sundays and public holidays included, as laytime within which to load the Accepted Quantity (Allowed Laytime). (b) Should the vessel be loaded for the account of 2 or more purchasers, the Refiner will be liable only for its pro rata share of demurrage incurred at the Wharf based on the gross volume of cargo loaded for the Purchaser's account as a percentage of total gross cargo loaded. PAGE 30 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS 8.3 COMMENCEMENT OF LAYTIME OR DEMURRAGE (a) If the Tanker arrives during ALDR-3, laytime (or time on demurrage if applicable) will commence upon arrival in berth or when six (6) hours has expired following tendering of a NOR, whichever occurs first. Arrival in berth will mean the Tanker being all fast alongside the Wharf. (b) If the Tanker arrives before the first day of the ALDR-3 and tenders an NOR before such date, laytime (or time on demurrage if applicable) will not commence until the Tanker is all fast in its berth at the Wharf or at 0600 hours local time on the first day of the ALDR-3 whichever is earlier; and (c) if the Tanker arrives after the end of the ALDR-3, laytime (or time on demurrage) will commence upon arrival, all fast in its berth. Laytime or, if the Tanker is on demurrage, time on demurrage, will continue until all cargo hoses have been disconnected upon final termination of loading. 8.4 LAYTIME AND DEMURRAGE EXCLUSIONS. Any delay or time consumed due to any of the following will not count as laytime or, if the Tanker is on demurrage, as time on demurrage. (a) The Tanker is on an inward passage moving from anchorage or other waiting place, including but not limited to awaiting daylight, tide, tugs or pilot from the time Tanker weighs anchor until Tanker is all fast in berth. (b) The Purchaser fails to give 48 hours or 24 hours notice of ETA pursuant to Condition 7.4(a). (c) The effect of local law regulations or intervention by local authorities including awaiting customs and immigration clearance, health clearance and pratique. (d) The Tanker Owner or Tanker operator or an Authority prohibiting loading at night. (e) Any deballasting or handling of slops, cleaning of tanks, pumps, pipelines, bunkering, or for any other purposes of the Tanker only, unless same is carried out concurrent with loading of Product such that no loss of time is involved. (f) Adverse weather and/or sea conditions that do not allow for the mooring of the Tanker all fast in berth. (g) An objectively ascertainable event of Force Majeure. (h) Overflow, breakdown, inefficiency, repairs or other conditions whatsoever attributable to the vessel, such that the Tanker is unable to receive the shipment at a rate consistent with being able to expeditiously receive a supply of Product, in accordance with the loading capability of the relevant Tanker. PAGE 31 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS (i) The Tanker being in breach of Port Regulations and Facility Regulations. (j) Vessel fire or explosion, labour dispute, strike , go slow, work to rule, lock-out, stoppage or restraint of labour involving the master, officers or crew of the Tanker or tug boat or pilot. (k) Awaiting cargo documentation instructions from the Purchaser. (l) Delay in or suspension of loading directed by the Refiner due to an unsafe condition of the Tanker. (m) Any other delay sought or caused solely by the Purchaser, Tanker Owner or Tanker operator for Tanker purpose. (n) Escape or discharge of fuel or product, containment or clean-up of fuel or Product spill or grave and imminent danger of the same which creates or would create a serious pollution damage on or from the Tanker. (o) Quarantine, unless such quarantine was in force at the time when such port was nominated by the Purchaser to the Tanker Owner or operator. 8.5 LAYTIME AND DEMURRAGE INCLUSIONS Time spent or lost due to any of the following will count as laytime, or if the Tanker is on demurrage, as time on demurrage: (a) any delay to the Tanker after the expiration of six (6) hours from NOR before arrival in berth or any delay to the Tanker after arrival in berth due to fire, explosion, strike, lock-out or stoppage of labour, breakdown of machinery or equipment in or about the Refinery or unavailability of cargo or unavailability of berth unless Force Majeure is declared by the Refiner in accordance with Clause 18 of the Agreement; or (b) due to any other delay that is not caused solely by the Purchaser. 8.6 LAYTIME AND DEMURRAGE INCLUSIONS AT HALF RATE. Any delays not referred to in Conditions 8.4 and 8.5 for which laytime or demurrage consequences are not allocated in the Agreement, will count as laytime or, if the Tanker is on demurrage, as time on demurrage. If such demurrage is incurred, Refiner will pay demurrage at half the rate specified in Condition 8.7. 8.7 DEMURRAGE (a) The Refiner will be liable for demurrage costs for time on demurrage to the extent that the time period between commencement and termination of laytime, or if the vessel is on demurrage, time on demurrage, less any exclusions defined in Condition 8.4 exceeds the Allowed Laytime. PAGE 32 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS (b) The Purchaser will submit to the Refiner within 90 days of the Bill of Lading Date any demurrage claim of the Purchaser together with a copy of the charter party. (c) The Refiner will pay to the Purchaser demurrage, as determined in (a) above at the rate per day (or pro rata for part of a day) equal to the actual demurrage rate payable by the Purchaser to the Tanker Owner pursuant to the charter party between the Purchaser and the Tanker Owner or if the Tanker is time-chartered, a rate that was agreed between the Refiner and the Purchaser at the time the Tanker was nominated or accepted for the lifting. (d) The demurrage claim will be agreed no later than 3 months from the date documents supporting such claim are sent to the Refiner. Payment for demurrage claims must be paid no later than 1 month from the date of such agreement. (e) In the event of a delay beyond the deadlines referred to in paragraph (d) (which aggregate period will not under any circumstances exceed 4 months unless otherwise agreed in writing), late payment interest will be payable (at the rate defined in Condition 6.4) on the full demurrage amount agreed or if not so agreed, then claimed by the Purchaser, promptly paid with final settlement. (f) Except where liable under or caused by the breach of the Agreement or these Conditions of Purchase, or where resulting from the gross negligence of the Refiner, the Refiner will not be liable (other than for demurrage or for deadfreight as specified in Condition 9) for any loss or damage, direct or indirect which Purchaser may suffer as a result of the Tanker not being loaded within the Allowed Laytime. 9. DEADFREIGHT (a) When the Refiner would begin to incur liability for demurrage costs under Condition 8.7 and less than 95% of the Accepted Quantity has been loaded on to a Tanker due to a shortage of Product, without prejudice to any other rights or any claims of the Purchaser made under or in relation to the Agreement or these Conditions of Purchase: (i) the Refiner must compensate for demurrage costs under Condition 8.7 and the Refiner must supply the remainder of the Accepted Quantity; or (ii) if the Refiner and the Purchaser can agree on the payment of deadfreight charges by the Refiner instead of compensation by the Refiner for demurrage pursuant to subparagraph (i), the Refiner may short-load that Tanker and pay the associated deadfreight charges to the Purchaser in accordance with that agreement. When a situation arises requiring discussions to seek agreement under this paragraph, the Purchase and the Refiner will enter into such discussions in good faith to PAGE 33 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS identify and agree the more cost-effective option between incurring demurrage and deadfreight, taking account of the extent of the delay and the effect on the Purchaser of short-loading the Tanker, to mitigate to the extent possible the costs to the parties associated with the delay. (b) Despite paragraph (a), if the Purchaser has bona fide reasons (which it will notify to the Refiner) for not being able to delay the Tanker beyond 72 hours after the commencement of laytime (as ascertained under Condition 8.3) to await loading of 95% of Accepted Quantity then mutual agreement between the Purchaser and the Refiner is not required as contemplated in paragraph (a)(ii) and the Purchaser can order the Tanker to sail with deadfreight upon the expiry of that 72 hours with such actual deadfreight cost being reimbursed to the Purchaser by the Refiner on the Purchaser's demand. (c) It is acknowledged that the Refiner is not liable to pay deadfreight costs under this Condition 9 to the extent that the shortage of quantity is caused by an event of Force Majeure. 10. ACCEPTANCE OF PORT REGULATIONS AND FACILITY REGULATIONS (a) The Refiner will provide the Purchaser with a full and complete set of the Port Regulations and Facility Regulations once these have been finalised, for the Purchaser's review and acceptance. (b) The Purchaser will cause copies of the Port Regulations and Facility Regulations to be provided to the Tanker Owner and the master of the Tanker nominated and accepted under Condition 7.2. The Purchaser will use all reasonable endeavours to ensure that the Tanker Owner and the master of the Tanker comply in all respects with the requirements set out in the Port Regulations and Facility Regulations. 11. THE TANKER ARRIVES LATE AND CAUSES POTENTIAL TANK TOPS OR TANK TOPS (a) Where the Tanker is or will be late for an ALDR-3 and in the Refiner's reasonable opinion this is likely directly to cause production at the Refinery to be curtailed, then the Refiner may request the Purchaser to use an alternative acceptable Tanker capable of arriving within ALDR-3 to avoid reaching Tank Tops. (b) If a Tanker has not tendered its NOR within its allocated ALDR-3 and: (i) as a direct result Tank Tops are likely to occur; and (ii) the Refiner can find another buyer with a suitable vessel to take the Product at short notice, the Refiner may sell a marketable quantity of Product to that other buyer to the extent required to make ullage for Product production PAGE 34 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS until the arrival of the Tanker. Such action must be preceded by consultation with the Purchaser conducted in good faith to mitigate the costs and consequences to the parties in taking such action, and the Refiner must issue a formal notification of specific intent to the Purchaser before taking any such action. (c) If action taken in paragraph (b) is unable to alleviate the potential Tank Tops and reaching Tank Tops before the arrival of the Tanker has become unavoidable, the Refiner can then take further reasonable action to minimise the impact on production at the Refinery caused by the late arrival of the Tanker. Such action may include to the extent that it is necessary reducing production or shutting down the Refinery partially or completely and/or selling some or all of the quantity due for delivery to the late Tanker to another buyer (and the Refiner will be relieved of its obligation to supply that Product to the Purchaser to the extent so sold). Such action must be preceded by consultation with the Purchaser conducted in good faith to mitigate the costs and consequences to the parties in taking such action, and the Refiner must issue a formal notification of specific intent to the Purchaser before taking any such action. (d) If as a consequence of the Refiner taking action under paragraph (c) the Refiner suffers loss, the Purchaser must pay the Refiner direct damages equal to those losses provided: (i) those losses relate to alternative sales of Products to other buyers under arms-length transactions; and (ii) the Refiner can demonstrate that those transactions are arms-length transactions, being an amount representing the difference between the actual FOB equivalent price received for such Product and the price that would have been payable by the Purchaser if purchased by the Purchaser as intended in accordance with the Accepted Nomination. (e) The Refiner will act in good faith and use its reasonable endeavours to minimise the costs it incurs and losses it suffers for which the Refiner may seek relief and compensation under this Condition 11. (f) Any amount payable by the Purchaser under or in relation to this Condition 11 is payable only if and to the extent that the Refiner provides accurate evidence in reasonable detail in support of the Refiner's claim of each cost it incurs and each loss it suffers in respect of which the Refiner seeks compensation under this Condition 11.. (g) When a Tanker fails to tender a valid NOR within ALDR-3 such that delivery of the relevant cargo of Products is delayed beyond ALDR-3 and the Allowed Laytime, if the Refiner has taken action under paragraph (c) so that the Refinery has reduced the quantity of Product stored for delivery to its customers the Refiner may short-load the Tanker (without any obligation to pay deadfreight) to the extent it would have insufficient stocks of the relevant Product remaining to ensure that the Refiner is able to continue to fulfil its obligations to its PAGE 35 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS customers (including to the Purchaser in relation to other Accepted Nominations) under its commitments to those customers at that time. (h) Payments associated with this Condition 11 will be due 30 days after the Refiner submits fully documented details of claim (including those details required by subparagraph (d)(ii) and paragraph (f)) to the Purchaser. (i) Despite paragraphs (a) to (h), any liability under or in relation to this Condition 11 will: (i) only arise (and the resulting claim by the Refiner will only become payable by the Purchaser) in the event of, and to the extent of, Gross Negligence on the part of Purchaser; (ii) not exceed a maximum amount of USD$[deleted for confidentiality] per day and will be payable only to the extent that: (A) the aggregate amount paid by all Shell Group members that are customers of the Refiner loading product on to the relevant Tanker will not exceed USD$[deleted for confidentiality] per day; and (B) the Refiner has no right to claim against other members of the Shell Group in its contractual arrangements with them in relation to the delay of the Tanker. 12. QUANTITY AND QUALITY DETERMINATION 12.1 PRIMA FACIE CONCLUSIVE (a) The Refiner must establish and maintain an accredited laboratory to accurately test and record the quality of each Product when delivered pursuant to this Agreement in accordance with the testing methodology required by the Product Supply Specifications (b) The Refiner must accurately measure the quantities of Products when delivered in accordance with internationally recognised standards in respect of the Product supplied. (c) Subject to contrary evidence provided by an independent inspector appointed under Condition 12.3, the determinations of the laboratory (in respect of quality) and the Refiner (in respect of quantity) made in accordance with paragraphs (a) and (b), respectively, will be final and binding on both parties in the absence of fraud or manifest error. 12.2 OBLIGATIONS OF THE REFINER (a) At the time when a delivery of Products to a Tanker is completed, the laboratory and the Refiner pursuant to their activities in paragraphs (a) and (b) of Condition 12.1 must: PAGE 36 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS (i) prepare and sign certificates that confirm and accurately document (in accordance with the obligations of the Refiner under paragraphs (a) and (b) of Condition 12.1) the quantity and the quality of each Product delivered; (ii) arrange for the delivery, as soon as reasonably possible, of original counterparts of those certificates to the master of the Tanker, the Purchaser, any independent inspector appointed under Condition 12.3 and to any other person as the Purchaser may reasonably require; and (iii) advise the Purchaser by telex, cable or facsimile of the quantity and quality recorded on such certificates (including details of any notations made by the independent inspector under Condition 12.3). (b) The Refiner must ensure that: (i) a sufficient quantity of relevant representative samples of Products delivered as cargo on to a Tanker must be correctly taken and kept in accordance with internationally recognised methodology and practice; and (ii) the samples so obtained must be retained for at least 90 days after loading unless otherwise required or a dispute arises in connection with that cargo (in which event the Refiner will procure that such samples are retained for as long as required by either party). 12.3 INDEPENDENT INSPECTION (a) Should the Purchaser (or the Purchaser and the Refiner together) require an independent inspection of a Product by an independent inspector appointed by the Purchaser (or the Purchaser and the Refiner together if so agreed) when a delivery of Product is made to the Purchaser, the Refiner must: (i) allow and facilitate (and, to the extent possible, procure any other relevant persons to allow and facilitate) the inspection of the cargo by that independent inspector; (ii) provide, as is reasonably required by the independent inspector, all data, documentation, results and readings the Refiner has or can procure to facilitate an inspection of quality and quantity of the relevant Products by the independent inspector; and (iii) provide the independent inspector with the certificates prepared by the Refiner under Condition 12.2(a)(i), who before those certificates are delivered under Condition 12.2(a)(ii) will be permitted to: (A) countersign such certificates to signify his agreement with the particulars and figures stated in those PAGE 37 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS certificates to the extent the independent inspector agrees with them; (B) note on those certificates any disagreement the independent inspector has with the particulars and figures stated in those certificates; and (C) compile, as the independent inspector thinks fit, independent certificates or documents that the Refiner must ensure accompany the certificates prepared by the Refiner. (b) The costs of an independent inspection under this Condition 12.3 will be borne by the Purchaser or, if jointly appointed, shared equally by the Purchaser and the Refiner. 12.4 NOTIFICATION OF CLAIMS Any claims as to shortage in the quantity or defects in the quality of Product loaded into a Tanker will be communicated by the Purchaser to the Refiner immediately after such shortage or quality defects are discovered. Such communications will be followed by a formal written notice of claim with all necessary details to properly process the claim. If no notification or formal written notice of claim is received within 70 days from the date of the discovery of the defects by the Purchaser, claims made in relation to them will be deemed to have been waived. 12.5 QUALITY SPECIFICATIONS A Product delivered by the Refiner to the Purchaser must conform with the Product Supply Specification for that Product. 13. INSURANCE The Purchaser will ensure that (at no cost to the Refiner): (a) each Tanker arranged by the Purchaser will have on board all certificates of currency of insurance and financial responsibility in respect of oil pollution necessary for the proposed voyage, including a certificate of insurance required under the International Convention on Civil Liability for Oil Pollution Damage; (b) the Tanker Owners of each Tanker arranged by the Purchaser will be members of the International Tanker Owners Pollution Federation Limited; and (c) each Tanker arranged by the Purchaser has the standard level of oil pollution liability insurance available from the International Group of P&I Clubs on the date Tanker is accepted, and the standard level of excess oil pollution liability insurance available through market underwriters on such date (currently one billion United States Dollars). PAGE 38 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS 14. POLLUTION AT SEA LIABILITY The Purchaser will comply with all industry standards and legal provisions relating to pollution and will within those standards and provisions ensure that no trash, waste, oil, bilge water, or other pollutants will be discharged or allowed to escape into the sea such that such pollution or discharge affects the Wharf or the operations of the Refiner. 15. TAXES, DUES, DUTIES AND IMPOSTS 15.1 PORT CHARGES. Any wharfage, harbour dues port charge, pilotage, line launches, tugs or similar charges (collectively PORT CHARGES) levied in respect of Product purchased by the Purchaser, whether chargeable on the cargo loaded or on the Tanker will be for the account of the Purchaser, unless the Parties agree otherwise in writing. 15.2 NEW IMPOSTS Any port charges levied in addition to those under Condition 15.1 in respect of Products bought by the Purchaser, whether chargeable on the cargo loaded or on the Tanker, will be for the account of the Purchaser, unless the Parties agree otherwise in writing. PAGE 39 Domestic Sales Agreement (SCHEDULE 1 - CONDITIONS OF PURCHASE FOR A SUPPLY OF ARTHUR ROBINSON PRODUCT AT WHARF) & HEDDERWICKS APPENDIX "A" FORMAT OF LETTER OF INDEMNITY TO BE USED FROM: InterOil Limited, incorporated in the Independent State of Papua New Guinea, Level 6, Defens Haus, Corner of Hunter and Musgrave Street, Port Moresby, NCD Papua New Guinea. TO: [Shell Oil Products (PNG) Limited] of __________________________ IN CONSIDERATION of your paying for the cargo of _________________________________ U.S. Barrels/Metric Tonnes of (type of crude oil and / or product) _________________________ which sailed from (Port) ___________ on (Tanker and date) ________________________________________ loaded with such cargo when the (document) _______________________________________ for such cargo has not been delivered to you at the time payment is due under our contract dated ______ ref: _________________________________________________________. We hereby warrant to you that at the time property passed as specified under the terms of the above contract: (a) we had the right to sell that cargo to you; and (b) we had unencumbered title to that cargo. We hereby irrevocably and unconditionally undertake to indemnify you on demand and hold you harmless against any claim made against you by anyone as a result of breach by us of any of our warranties as set out above, and all losses, costs (including, but not limited to costs as between attorney or solicitor and own client), damages, and expenses which you may suffer, incur or be put to which are not too remote as a result of our failure to deliver the above document(s) in accordance with the contract. This indemnity will terminate on delivery by us of the aforesaid document(s) and their acceptance by you. This indemnity will be governed by and construed in accordance with the laws and legal jurisdiction governing the aforesaid contract and all disputes, controversies or claims arising out of or in relation to this indemnity or the breach, termination or validity hereof not settled by negotiation will be resolved with the procedure provided in such contract. PAGE 40 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS SCHEDULE 2 CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT AT GANTRY 1. DEFINITIONS In addition to the definitions in Clause 1 of the Agreement the following definitions apply in this Schedule unless the context otherwise requires. ACCEPTED QUANTITY means the quantity (allowing for plus or minus 5% operational tolerance) of Product agreed upon between the Refiner and the Purchaser pursuant to Condition 8.1 hereto. BARREL means a volume of 42 US standard gallons at 60(degree)F. CONDITIONS OF PURCHASE means these terms and conditions for the sale and purchase of Product, and will form part of the Agreement. GANTRY REGULATIONS means any regulation, operational or safety, applicable to the loading of road tankers at the Gantry, including but not limited to driver and truck certification, and which will be advised by Refiner to Purchaser prior to commencement of Commercial Production. TREASURY BILL RATE means the most recent, short dated treasury bill rate published by the Central Bank of Papua New Guinea. NOMINATED QUANTITY means the quantity of Product nominated by the Purchaser for lifting pursuant to Condition 8.2(a) hereto. 2. GENERAL CONDITIONS (a) In relation to a supply of Product made, that Product will be supplied and delivered by the Refiner and purchased and taken by the Purchaser in accordance with the Agreement and these Conditions of Purchase, except that to the extent terms of a supply are inconsistent or lacking the following order of priority will apply to determine the terms of the supply: (i) where the parties specifically intend to derogate from terms and conditions determined under the Agreement, as may be agreed between the parties in writing in respect of that supply; (ii) in accordance with the Agreement; (iii) in accordance with the conditions set out in this Schedule; and (iv) in accordance with Incoterms 2000. (b) References to the Refiner in these Conditions of Purchase include references to the Refiner's duly appointed representative or agent. PAGE 41 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS 3. PRODUCTS The Products to be supplied by the Refiner at the Gantry include: (c) Propane (d) LPG (e) Unleaded Motor Spirit (f) Jet/DPK (g) Gasoil (h) MDO 4. PAYMENT TERMS 4.1 INVOICE FOR SUPPLY (a) The Refiner must provide to the Purchaser an invoice (together with such documents reasonably requested by the Purchaser) for Products delivered, which invoices will relate to agreed periods during which deliveries occur (DELIVERY PERIODS). (b) The invoice issued under paragraph (a) must correctly state: (i) the total quantity of Product or Products supplied to the Purchaser, and when those deliveries took place; (ii) the total sum claimed to be due and owing to the Refiner, in Kina; and (iii) the Refiner's bank account details. 4.2 TIME AND METHOD OF PAYMENT (a) Subject to the other provisions of this Condition 4.2, the Purchaser must make payment in Kina for deliveries made at Gantry by telegraphic transfer to the Refiner's bank and to the account as directed in the Refiner's invoice free of all charges and without set off, discount, deduction or counter-claim not later than 20 calendar days after the mid-point of the delivery period to which the invoice relates. (b) Payments that fall due on a Sunday or Monday bank holiday in Papua New Guinea will be made on the following Business Day. Payments that fall due on a Saturday or any other bank holiday, except one falling on a Monday, in Papua New Guinea will be made on the preceding Business Day. (c) All bank charges incurred at the Refiner's bank will be for the Refiner's account. All bank charges incurred at the Purchaser's bank will be for the Purchaser's account. (d) The Refiner will use reasonable endeavours to ensure that all documents required (including those under Condition 6.1(a)) and information reasonably requested by the Purchaser to enable the PAGE 42 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS Purchaser to make payment are sent to the Purchaser no later than 3 Business Days prior to the date payment is due, failing which the Purchaser is not obliged to make payment on the due date but must make payment 3 Business Days after the receipt of such requisite documents or information by the Purchaser. 4.3 INTEREST ON LATE PAYMENTS If a payment or part of a payment is not made by the Purchaser in accordance with these Conditions of Purchase when due, then interest will be paid on that amount due to the extent it remains outstanding from the date that payment was due until the date of payment at Treasury Bill Rate plus 2% per annum, calculated on a daily basis from the date due until and including the day of payment of that outstanding amount. If payment of amounts due from the Purchaser can be made by way of set-off against amounts due from the Refiner to the Purchaser, payment must be so made to the extent possible to reduce the Purchaser's liability to pay interest under this Condition. 4.4 CREDIT TERMS The Refiner may request appropriate credit terms on sales made under the Agreement, upon which the parties will agree on appropriate credit terms. 5. NOMINATION, SCHEDULING AND ORDERS AT THE GANTRY (a) For a supply of Product at the Gantry under these Conditions of Purchase, the Nomination to which that supply relates is made by the Purchaser under Clause 7.1(f) of the Agreement and becomes an Accepted Nomination pursuant to Clause 7.3(b) of the Agreement. (b) The quantity of each Product to be supplied during a Delivery Period will be the aggregate quantity of that Product ordered by the Purchaser for lifting during that Delivery Period (as accepted into the relevant Accepted Nomination by the Refiner) and shall be referred to as the Accepted Quantity of the supply of Product to be made during the relevant Delivery Period (the ACCEPTED QUANTITY). (c) Upon an Accepted Nomination coming into effect for the supply of Product at the Gantry in a Delivery Period: (i) the Purchaser must make sufficient purchase orders before and during that Delivery Period to the extent required to fulfil all its contracted obligations to purchase the full amount of the Accepted Quantity for that Delivery Period; and (ii) the Refiner must supply Product during that Delivery Period as requested in those purchase orders in accordance with and subject to the terms of the Agreement and these Conditions of Purchase, provided that this obligation on the Refiner to supply is limited to the extent that the total quantity of Product requested by the Purchaser to be supplied under purchase orders in the Delivery Period becomes greater than the Accepted Quantity for that Delivery Period. PAGE 43 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS (d) If a purchase order is made by the Purchaser at least 24 hours before the Purchaser intends to take delivery of the Product the subject of that purchase order, subject to any other applicable Conditions of Purchase the Refiner must accept that Purchaser Order and satisfy it within the time specified in, and otherwise in accordance with the terms relating to, that purchase order. (e) If a purchase order is made by the Purchaser at any time during the 24 hours before the Purchaser intends to take delivery of the Product the subject of that purchase order, the Refiner will exercise all reasonable endeavours to satisfy that purchase order, but is not obliged to make a supply pursuant to that purchase order until 24 hours from the time it is made. (f) The Refiner must notify the Purchaser within 24 hours of receipt of a purchase order (or if the Purchaser requests a delivery in less than 24 hours, as soon as reasonably possible before the time of the requested delivery) if it is unable to satisfy that purchase order in whole or in part. Notification given in accordance with this Condition in no way reduces or affects any liability of the Refiner to the Purchaser for failure to supply the Product in accordance with the Agreement or these Conditions of Purchase. (g) The Refiner will be entitled to limit supplies to the monthly Accepted Quantity, pro-rata on a daily basis. 6. COMPLIANCE WITH GANTRY REGULATIONS (a) The Purchaser will ensure that all road tankers arriving at the Gantry for loading will comply with the Gantry Regulations. (b) Without limitation to the Purchaser's obligations pursuant to Condition 3.4(a) the Purchaser will provide to the Refiner or the Refiner's Representative appropriate documentation to enable the Refiner to verify compliance with the Gantry Regulations for any road tanker that may arrive at the Gantry to load Product for the Purchaser, provided that if the Purchaser is not able to supply such documentation, the Purchaser will at the time of confirmation provide a notice of compliance to the Refiner, in a form acceptable to the Refiner, and accepted by the Refiner prior to the commencement of loading. (c) The Refiner will not be obliged to load any road tanker that does not comply with the Gantry Regulations. 7. PRODUCT MEASUREMENT (a) Quantities transferred to the Purchaser's road tankers at the Gantry will be measured by the Refiner using its meter(s). Such measurement will be final and binding in the absence of manifest error. PAGE 44 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS (b) The Refiner will maintain such records as are necessary to record the quantities of Product supplied pursuant to the Agreement and the Purchaser will have access to such records as reasonably required. 8. VEHICLES AND INSPECTION (a) The Purchaser will provide road tankers which are compatible with the Refiner's Gantry, as may be advised by the Refiner from time to time, and which conform to all statutory and the Refiner's loading and safety standards, and comply with Gantry Regulations as advised from time to time. (b) The Purchaser warrants that all road tankers presented for loading conform to all statutory requirements for the transport of Dangerous Goods and have full vapour vent interlock. (c) The Purchaser will present road tankers for loading in a condition fit to receive the Product nominated by the Purchaser. (d) The Purchaser will present road tankers and drivers which hold current accreditation under the AIP Passport and Safe Load Pass, as per AIP Guidelines GL-7 (or other Standard agreed between the Parties), and any additional requirements advised by the Refiner. 9. PRODUCT QUALITY (a) A Product delivered by the Refiner to the Purchaser must conform with the Product Supply Specification for that Product, and the Refiner warrants that it will. (b) If the Purchaser wishes to make a claim in relation to the quality of any Product, the Purchaser will: (i) give notice to the Refiner of any claim it proposes to make, within three working days of the alleged defect coming to its attention, specifying fully the facts related to the allegation; (ii) use its best endeavours to minimise any loss or damage arising from the alleged defect. (c) Following a claim under paragraph (b) the Refiner will: (i) give the Purchaser reasonable opportunity to take samples, inspect and test the Product in respect of which the claim is made; and (ii) otherwise co-operate with the Purchaser in the Purchaser's investigation of the claim. (c) If the Purchaser complies with the provisions of paragraph (b), the Refiner will consider and report to the Purchaser the results of its consideration of the claim as soon as possible. In the event that the Product does not conform to Product Supply Specifications, then the Refiner will indemnify the Purchaser in respect to all damage, loss, claims, actions or liability incurred as a result, except to the extent that such damage, loss, PAGE 45 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS claims, actions or liabilities are deemed to be due to the negligent act or omission or default of the Purchaser its servants, agents or contractors. (d) For the avoidance of doubt the provisions of paragraphs (a) and (b) will not apply where the Refiner advises the Purchaser prior to passing of title under Clauses 13.2 and 13.3 that the Products in question are non-conforming and notwithstanding such advice the Purchaser elects to take delivery of same. 10. ADDITIVE FEATURES (a) The Purchaser and the Refiner will mutually agree whether additive facilities are required at the Refinery and if agreed then the Purchaser will pay the Refiner for the installation, including initial capital cost, and maintenance of all facilities (which are not otherwise used by the Refiner) required for injecting the Purchaser additives to the Product as required by the Purchaser at the Gantry. (e) The Purchaser will provide at its own cost all additives required for dosing Purchaser's Products. (f) The Purchaser's non fixed assets paid for and maintained by the Purchaser remain the property of the Purchaser and can be removed at the conclusion of the agreement. However fixed assets will remain the property of the Refiner. (g) The Purchaser's assets at the Gantry are to be insured by the Purchaser. However the Refiner is responsible for any damage caused by the Refiner to the Purchaser's assets at the Gantry except to the extent arising as a result of the negligent act or omission or default of the Purchaser. The Refiner will not be responsible for any damage caused by third parties. 11. ACCESS Access to Product from the road at the Gantry is available 10 hours, 6 days per week except when the Gantry has been stocked out of Product and/or during tanker discharges into the Gantry facility. The Refiner will notify the Purchaser as soon as practicable of any proposed tanker discharges or actual or envisaged stock outs. 12. DOCUMENTATION The Refiner will provide the Purchaser in a timely manner and in any event before passage of title in the Product, with the necessary accounting and other documentation as required under the statutory requirements for the transport of Dangerous Goods. PAGE 46 Domestic Sales Agreement (SCHEDULE 2 - CONDITIONS OF PURCHASE FOR SUPPLY OF PRODUCT ARTHUR ROBINSON AT GANTRY) & HEDDERWICKS 13. TITLE AND RISK Product to be supplied to the Purchaser under the Agreement is collected by the Purchaser or the Purchaser's nominated carrier from the Gantry or such other place as is agreed between the parties, and ownership and risk in the Product will pass to the Purchaser when the Product passes through the first flange on the manifold of the Purchaser's road tanker or other carrier vehicle nominated by the Purchaser as the case may be. PAGE 47 Domestic Sales Agreement ARTHUR ROBINSON (SCHEDULE 3 - DEED OF NOVATION) & HEDDERWICKS SCHEDULE 3 DEED OF NOVATION DATE PARTIES 1. SHELL PAPUA NEW GUINEA LIMITED (company number 1-6349) of Level 10, Pacific Place, Cnr Musgrave Street and Champion Parade, Port Moresby, Papua New Guinea (SPNG) 2. [SHELL OIL PRODUCTS (PNG) LIMITED / OTHER NOMINATED SHELL GROUP COMPANY] (company number [#]) of [Level 10, Pacific Place, Cnr Musgrave Street and Champion Parade, Port Moresby, Papua New Guinea] ([SOPL]). 3. INTEROIL LIMITED (company number 1-22826) of Level 6, Defens Haus, Cnr Hunter Street and Champion Parade, Port Moresby, Papua New Guinea (the REFINER). RECITALS A SPNG and the Refiner are parties to a domestic sales agreement (the DOMESTIC SALES AGREEMENT) dated [#]. B It is intended by the Shell group of companies and acknowledged and agreed by SPNG and the Refiner in the Domestic Sales Agreement that [SOPL] will replace the present activities of SPNG in distributing petroleum products in Papua New Guinea. C The Domestic Sales Agreement must be novated in the form of this Deed as a condition to the Domestic Sales Agreement becoming fully effective within its terms. D As a result, the parties to this Deed have agreed that the Domestic Sales Agreement will be novated on the terms of this Deed, so that: (a) [SOPL] becomes a party to the Domestic Sales Agreement in place of SPNG; and (b) SPNG is released from its obligations under the Domestic Sales Agreement. IT IS AGREED as follows. PAGE 48 Domestic Sales Agreement ARTHUR ROBINSON (SCHEDULE 3 - DEED OF NOVATION) & HEDDERWICKS 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS The following definitions apply unless the context requires otherwise. DOMESTIC SALES AGREEMENT has the meaning given in Recital A. EFFECTIVE DATE means [the Commencement Date defined in the Domestic Sales Agreement]. PURCHASER has the meaning given in the Domestic Sales Agreement. 1.2 INTERPRETATION Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise. (a) A gender includes all genders. (c) The singular includes the plural and conversely. (d) If a word or phrase is defined, its other grammatical forms have a corresponding meaning. (e) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them. (f) The meaning of general words is not limited by specific examples introduced by INCLUDING, or FOR EXAMPLE, or similar expressions. (g) A reference to an agreement or document including a reference to this Deed is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this Deed or that other agreement or document. (h) A reference to a party to this Deed or another agreement or document includes the party's successors, permitted substitutes and permitted assigns (and, where applicable, the party's legal personal representatives). 2. NOVATION 2.1 NOVATION With effect on and from the Effective Date: (a) [SOPL] is substituted for SPNG as a party under the Domestic Sales Agreement; and (b) the Domestic Sales Agreement takes effect as an agreement on the same terms as previously except that references to SPNG or the Purchaser will be read and construed as if they were references only to [SOPL]. PAGE 49 Domestic Sales Agreement ARTHUR ROBINSON (SCHEDULE 3 - DEED OF NOVATION) & HEDDERWICKS 2.2 ASSUMPTION OF BENEFITS AND OBLIGATIONS With effect on and from the Effective Date [SOPL] is bound by and must comply with the provisions of the Domestic Sales Agreement binding on SPNG or the Purchaser and assumes all of the rights and benefits of SPNG and the Purchaser under the Domestic Sales Agreement. 2.3 RELEASE OF SPNG With effect on and from the Effective Date the Refiner releases SPNG from all: (a) its obligations and liabilities (whether stated as the obligations of SPNG or the Purchaser) under the Domestic Sales Agreement; and (b) actions, claims or proceedings that it may have against SPNG or the Purchaser under or in respect of the Domestic Sales Agreement. 3. NOTICES For the purposes of Clause [[16] NOTE: CROSS REFERENCE TO THE NOTICES CLAUSE] of the Domestic Sales Agreement, the address of [SOPL] to which any notice, demand, consent or other communication must be delivered is: [Level 10 Pacific Place Cnr Musgrave Street and Champion Parade Port Moresby Papua New Guinea Attention: Company Secretary Fax No: +675 321 1842] 4. COSTS, STAMP DUTIES (a) Each party will bear its own costs and expenses in relation to the preparation and execution of this Deed, including legal costs and expenses. (b) The Refiner must pay all stamp, transaction, registration and similar taxes (including fines, penalties and interest) that may be payable or determined to be payable in relation to the execution, delivery or performance of this Deed or any other transaction contemplated by this Deed. 5. GOVERNING LAW This Deed is governed by the law of Papua New Guinea. Each party submits to the exclusive jurisdiction of courts exercising jurisdiction in Victoria, Australia in connection with matters concerning this Deed. PAGE 50 Domestic Sales Agreement ARTHUR ROBINSON (SCHEDULE 3 - DEED OF NOVATION) & HEDDERWICKS 6. COUNTERPARTS This Deed may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument. EXECUTED as a Deed. [Each attorney executing this Deed states that he or she has no notice of revocation or suspension of his or her power of attorney.] [NOTE: INSERT THE APPROPRIATE EXECUTION CLAUSES.] PAGE 51 Domestic Sales Agreement ARTHUR ROBINSON (SCHEDULE 3 - DEED OF NOVATION) & HEDDERWICKS EXECUTED as an agreement. SIGNED for and on behalf of SHELL PAPUA NEW GUINEA LIMITED by its authorised signatory in the presence of: ____________________ Authorised signatory ______________________________ Witness ____________________ Name and address Name and Title SIGNED for and on behalf of INTEROIL LIMITED by its authorised signatory in the presence of: ____________________ Authorised signatory ______________________________ Witness ______________________________ ____________________ Name and address Name and Title PAGE 52 EX-99.20 15 h19854exv99w20.txt SALE AND PURCHASE UNDERTAKING AGREEMENT EXHIBIT 20 [SHELL CENTRE LOGO] SHELL OVERSEAS HOLDINGS LIMITED SHELL CENTRE LONDON, SE 17NA SP InterOil LDC Shirley House 50 Shirley Street Nassau Bahamas Attention: Mr Phil Mulacek President and Chief Executive Officer Petroleum Independent and Exploration Corporation Dear Sirs, SHELL AND INTEROIL AGREEMENTS The proposed agreements and deeds referred to in the schedule below (the PROPOSED AGREEMENTS) have been negotiated by or on behalf of each of the persons expressed to be a party to them and at the date of this letter each of the proposed agreements is in a form acceptable to each of those persons. In consideration of SP InterOil LDC (SPI) agreeing to procure each of the persons expressed to be a party to a proposed agreement (other than any member of the Shell group of companies) to enter into each proposed agreement to which it is expressed to be party promptly after the date on which the transaction evidenced by the proposed agreements is approved (on terms acceptable to each of SPI and Shell Overseas Holdings Limited (SOHL) by the Independent Consumer & Competition Commission of Papua New Guinea (and in any event within one month after the date on which notice of such approval on such terms is received by SPI and SOHL), SOHL agrees with SPI that SOHL will enter into and procure each other member of the Shell group of companies who is expressed to be a party to a proposed agreement to enter into each proposed agreement to which it is expressed to be party promptly after that date (and in any event within one month after the date on which notice of such approval on such terms is received by SPI and SOHL). Upon the due execution of each of the proposed agreements, each of them will become effective subject to and in accordance with their terms. This letter is intended to create a binding, legally enforceable agreement between SOHL and SPI, but nothing in this letter is intended to effect or should be taken as effecting any of the transactions the subject of the proposed agreements. This letter supersedes in all respects all rights and obligations of SOHL and SPI, and neither SOHL nor SPI has any accrued rights or obligations, pursuant to the letter agreements between them dated 9 April 2001 and 21 January 2004. The terms of this letter are governed by the laws of Victoria, Australia, and each of SOHL and SPI submits to the non-exclusive jurisdiction of courts exercising jurisdiction there in connection with matters concerning this letter. Page 1 Please confirm SPI's agreement to the matters set out in this letter by having a duly authorised attorney of SPI sign, date and deliver to SOHL the enclosed copy of this letter. Yours faithfully /s/ David John Alexander McGuire - ---------------------------------------- SHELL OVERSEAS HOLDINGS LIMITED, by its duly authorised attorney David John Alexander McGuire - ---------------------------------------- Date 21 July 2004 Agreed for and on behalf of SP INTEROIL LDC by its duly authorised attorney /s/ James Max Duddingston Will.s. - ----------------------------------------- Signature /s/ James Max Duddingston Will.s. - ----------------------------------------- Name Date 21 July 2004 SCHEDULE 1. Purchase and Sale Agreement between SOHL and InterOil Corporation (IOC) 2. Domestic Lease Agreement between Shell Papua New Guinea Limited, proposed to be renamed InterOil Distribution Company Limited, (IDC) and a new subsidiary of SOHL to be incorporated in Papua New Guinea, proposed to be called Shell Oil Products (PNG) Limited (SOPL). 3. SPNG Deed of Acknowledgement & Release between IDC, SOHL and SOPL. 4. Deed of Charge between IDC and SOPL. 5. Share Mortgage between IOC, SOHL and, if applicable, SPI Distribution Limited (SPIB). 6. Security Deed between, IOC, SOHL, IDC, IOL, SOPL and SPIB. 7. Payment Arrangements Deed between IOC, SOHL, IDC and SOPL. Page 2 EX-99.21 16 h19854exv99w21.txt CRUDE SUPPLY AGENCY AND SALES AGREEMENT EXHIBIT 21 CRUDE SUPPLY AGENCY AND SALES AGREEMENT DATE: 21 December 2001 1. PARTIES This Agreement is entered into between: E.P. INTEROIL, LTD, a company incorporated under the laws of the Cayman Islands with its registered office at c/o Maples and Calder, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies ("BUYER"); and BP SINGAPORE PTE LIMITED a company registered in Singapore with its registered office at 396 Alexandra Road # 01-01 BP Tower, Singapore 119954 ("SELLER"). 2. SCOPE Seller agrees to sell and to be the exclusive marketing agent for the supply of crude oil ("CRUDE") to Buyer or a nominated related company, subject to Seller's prior approval, not to be unreasonably withheld, to provide for all the crude oil requirements of the Buyer's oil refinery at Napa Napa near Port Moresby in Papua New Guinea (the "INTEROIL REFINERY") in accordance with the terms of this Agreement. This Agreement comprises the following Special Provisions and the General Terms & Conditions for Sales and Purchases of Crude Oil (BP Oil International Limited General Terms & Conditions for Sales and Purchases of Crude Oil 2000 Edition) attached as Annexure `A'. If there is any conflict between the terms of these Special Provisions and the terms of the General Terms & Conditions, the former will prevail. As exclusive marketing agent for Crude supply to the InterOil Refinery, Seller undertakes to act in good faith and use its reasonable endeavours to: (a) ensure a competitive CIF price for Crude delivered to the InterOil Refinery; and (b) supply a steady volume of Crude to the InterOil Refinery in accordance with the scheduling/nomination provisions under clause 4 such that the InterOil Refinery incurs no loss of crude run. 3. CRUDE 3.1 TYPE The Crude shall be, when available, Kutubu Blend crude oil ("KUTUBU BLEND CRUDE"), in running production quality and may be substituted by similar crudes from a pre-determined basket subject to prior agreement by both parties. 1 The Seller may, and would be expected to nominate Crude outside this basket if it believes that Crude offers excess value to the InterOil Refinery. Such Crude may include crudes such as distressed cargoes or West African crudes. The Seller agrees to work with the Buyer's scheduler/LP planner to supply the optimum Crude on the day crude selection and purchase decision is made with the Buyer having last say on Crude supplied (subject to availability). 3.2 DELIVERY Subject to agreement on price under clause 3.3 the Seller shall deliver the Crude to the InterOil Refinery as and when, and in the amounts required by the Buyer, for processing in the InterOil Refinery in accordance with the scheduling/nomination provisions in clause 4. The Buyer shall make available to the Seller a terminal and berth that is both safe and meets an International level of HSSE standards in accordance with the following publications by Witherbys: - ISGOTT - Mooring Equipment Guidelines - Guide to Marine Terminal Fire Protection and Emergency Evacuation. Such terminal shall be made available for inspection at the reasonable request of the Seller and Buyer agrees to work with Seller to rectify problems highlighted in such inspections. The Seller acknowledges the terms of the Project Agreement dated 29 May 1997 (as amended and extended by the Extension Deed dated 1 July 1999) between the Buyer as Developer, InterOil Limited as the Refiner and the Independent State of Papua New Guinea (copy attached hereto as Annexure `B'). The Seller agrees to act in good faith; to use all reasonable efforts to ensure Crude Access (as defined in that Agreement) and not to frustrate the Buyer's ability to purchase Kutubu Blend Crude. 3.3 PRICE [deleted for confidentiality] 2 3.4 PAYMENT The Buyer shall pay the Seller within 30 days after Bill of Lading date (unless both parties mutually agree alternate terms on a cargo-by-cargo basis) however payment may be made up to 45 days after Bill of Lading date if the Buyer pays interest on the payment amount at the rate of LIBOR plus 2% pa. for the excess period over 30 days. Payment shall be made by means of an irrevocable documentary letter of credit in accordance with the provisions of section 23.8 of the General Terms & Conditions. Said letter of credit shall be opened with a bank of investment grade standard and be in a form and substance acceptable to the Seller. All banking charges at applicant's bank are for applicant's account and beneficiary's bank for beneficiary's account. The letter of credit shall be advised to Seller's London office, by not later than 1600hrs (London time) 15 working days prior to loading dates. 3.5 FEE [deleted for confidentiality] 3 3.6 SUPPLY The Seller will supply the Crude nominated by the Buyer on a delivered basis to the InterOil Refinery and title to and risk in such Crude will pass to the Buyer at the permanent flange of the discharge jetty at the InterOil Refinery. The Seller will be responsible for the charter of a mutually acceptable vessel at a competitive market rate for delivery of Crude and will liaise with the Buyer to ensure freight economics are optimised. Quality and quantity will be based on that available at the Port of Loading and otherwise will be in accordance with the General Terms & Conditions. 3.7 SURPLUS If the Buyer decides that a cargo is surplus to the requirements of the InterOil Refinery after the Buyer has committed to that cargo (for whatever reason in the Buyer's sole discretion) or in the event that the Buyer/InterOil Refinery is unable to receive a cargo of Crude previously agreed for whatever reason, the Seller will use its best efforts to obtain the best netback value for the sale of that Crude. Any loss resulting from the sale will be borne by the Buyer; any gain resulting from the sale will be shared equally by the Buyer and the Seller. 3.8 CRUDE OPTIMISATION [deleted for confidentiality] 4. SCHEDULE OF DELIVERIES 4.1 ESSENTIAL CRITERIA: (a) The Seller shall arrange deliveries of Crude to the InterOil Refinery based on information provided by the Buyer or Buyer's Representative pursuant to clause 4.2. For this purpose the Buyer and the Seller will mutually endeavour to ensure deliveries are scheduled so that production of the InterOil Refinery is not reduced as a result of a Crude shortfall or a delivery of Crude is unable to be discharged due to insufficient ullage in the Refinery Crude tanks. (b) Seller shall use all reasonable efforts to ensure that during any month, deliveries shall occur such that the Crude inventory level does not fall below 80,000 barrels or such other level as may be mutually agreed from time to time. (c) Notwithstanding the right of the Buyer to reduce Refinery Crude runs due to scheduled or unscheduled Refinery maintenance, tank-tops for one or more Refinery products or for general economic considerations, Buyer undertakes to maintain a minimum 75% 4 stream factor when averaged over any rolling 12 month period. In the event that this does not occur then Buyer and Seller will, within 30 days of the 12 month period, discuss and agree in good faith a pro rata increase in the commission fee. Seller reserves the right to terminate this Agreement, upon 60 days notice, in the event that the stream factor in any rolling 12 month period falls below 50%. 4.2 FORECAST PRODUCTION AND OTHER INFORMATION Buyer or Buyer's Representative shall provide the following information to the Seller: (a) every Tuesday, or as soon as practicable each week, the crude inventory and crude usage forecasts for the InterOil Refinery for the current month and the next succeeding 2 months, highlighting the last possible date as contemplated under clause 4.1(b) by which the next delivery must arrive; (b) notice as soon as practicable of any material increase or decrease (of 10% or more over any one week period) in forecasts of crude usage or inventory; (c) notice as soon as possible of operational circumstances that will reduce the capacity of either of the two proposed crude storage tanks; (d) at least 60 days notice of scheduled maintenance of any of the InterOil Refinery marine and other facilities (including the loading terminal), or unavailability of resources, which will either impact on Refinery crude usage or impose constraints on Seller's ability to deliver Crude. 4.3 NOMINATION PROCEDURES - DATE RANGES AND QUANTITIES. Buyer and Seller acknowledge that the following nomination procedures must work equitably for both parties and be acceptable to the Kutubu Offtake Coordinator. To the extent that the following procedures are shown to be impractical then both parties will work together to agree an amended set of procedures: 5 (a) On or before the 15th day of month x, Seller will use best efforts based on the Kutubu Offtake Coordinator's forecast production to provide the following information to Buyer or Buyer's Representative: (i) tentative 5 day loading windows for the available Crude cargoes in month x+3; (ii) firm 5 day loading windows for the available crude cargoes in month x+2 and firm price indications for such cargoes in accordance with clause 3.3 of this Agreement; (iii) firm 2 day loading windows in month x+1 for those cargoes previously agreed between the Buyer and the Seller; and (iv) full details, including CIF price, quality, loading dates and estimated arrival dates of any alternative Crudes that Seller may wish to propose for delivery in month x+2. (b) Not later than the 28th day of month x, the Buyer will nominate which Crude cargoes it will commit to buy for delivery in month x+2. 4.4 NARROWING OF DATE RANGES. (a) The Loading Date Range for Kutubu Blend Crude cargoes will be advised by the Seller to the Buyer on a regular basis in accordance with advice from the Kutubu Offtake Coordinator. (b) For alternate Crude deliveries: (i) the Buyer and the Seller will agree a 10 day arrival window (ADR 10) at the time of commitment to the cargo which will be narrowed by the Seller to a 5 day window (ADR 5) (within ADR 10) 30 days prior to vessel arrival; and (ii) no Later than 15 days prior to the first day of the ADR 5, the Seller shall further narrow this range to a three day arrival window (ADR 3) which shall fall fully within the previously advised ADR 5 unless the Parties mutually agree otherwise. 5. TERM AND TERMINATION (a) The supply of Crude under this Agreement will be for a term of 5 years from the Bill of Lading date of the first loading of the supply of Crude to the InterOil Refinery. (b) This Agreement may only be terminated in accordance with this clause 5 and Section 27 of the General Terms & Conditions. 6 (c) The Seller may at its sole discretion (without prejudice to its other rights) either terminate this Agreement or suspend delivery under this Agreement until further notice on notifying the Buyer in writing, if the Buyer fails in its repayment obligations under the Credit and Indemnity Agreement executed by the parties on or about the date of this Agreement. (d) The Buyer may at its sole discretion (without prejudice to its other rights) either terminate this Agreement or suspend the taking of delivery under this Agreement until further notice on notifying the Seller in writing, if the Seller fails in its obligations under the First Demand Bond executed by the Seller on or about the date of this Agreement. (e) Failure by the Buyer to comply with the requirements of clause 3.4, shall be a breach by the Buyer of this Agreement entitling the Seller to terminate this Agreement and claim damages. In any event, whether the Seller has exercised that right to terminate or not, the Seller shall be under no obligation to commence discharge of the shipment in question or loading the shipment in question (as the case may be) and shall be entitled to claim direct damages (including demurrage, if any). (f) Neither party may terminate this Agreement, suspend delivery or the taking of delivery without first giving the other party at least 30 days notice of such intention to terminate or suspend and the opportunity to rectify the cause of such intention to terminate within that time. 6. CONFIDENTIALITY The parties undertake that information listed below which is exchanged between the parties pursuant to the Agreement shall be deemed to be confidential and the parties agree to keep and maintain, and shall cause its employees and agents to keep and maintain, the information indicated herein below confidential:- (a) any and all information received, obtained or observed by the parties or its employees and agents in respect of the InterOil Refinery, in particular, the technology, operation and processes utilised in the InterOil Refinery and any commercial information relating thereto; and (b) any and all information received from the parties related companies in relation to supply of the InterOil Refinery which is in writing marked "private and confidential " or "confidential". 7 The parties further undertake to use all such information only for the purposes contemplated in the Agreement and will confine such information to its directors, officers and employees who are directly concerned with such purposes and made aware of its confidential status. The foregoing restrictions on the party as the recipient of information ("the Recipient") shall not apply to any information which:- (c) the Recipient can prove by documentary evidence, was already in the possession of the Recipient and at the Recipient's free disposal before the Recipient received, obtained or observed the information; or (d) is disclosed to the Recipient without any obligation of confidence by a third party who has not derived it directly or indirectly from the other party or affiliated companies of the other party; (e) is reasonably required by Overseas Private Investment Corporation to be disclosed to it or its nominated advisers; (f) is or becomes public knowledge through no act or default on the part of the Recipient or the Recipient's agents or employees. 7. VARIATIONS TO THE GENERAL TERMS & CONDITIONS The General Terms & Conditions are varied as follows, and if there is any conflict between the terms of these Special Provisions and the General Terms & Conditions, the terms of these Special Provisions shall prevail: (a) Section 11.1 - The quantity delivered in any cargo shall be that agreed under clause 4 and shall be delivered in one cargo; (b) Section 11.3 - Nominated Discharge Port is the InterOil Refinery wharf, Port Moresby Harbour, Papua New Guinea; (c) Section 13.2 - For non Kutubu Crude cargoes running hours shall commence: (i) berth or no berth, 6 hours after NOR or upon all fast in berth, whichever first occurs, provided that if the Vessel arrives before the first day of ALDR 3, running hours shall not commence until the Vessel is all fast in berth or at 0600hrs on the first day of ALDR3 whichever is the earlier; and (ii) if the Vessel arrives after the end of ALDR 3, when the Vessel is all fast in berth. (d) Section 18.1.4 - Definition of "banking day" - means a day other than a Saturday or Sunday or statutory "bank holiday" in New York, New York; 8 (e) Section 23.6 - Seller's bank details Pay to Citibank New York Account No. 40595264 ABA No. 021000089 In favour of BP Singapore Pte Limited (f) Section 26.1 - Indemnities and limitation of liabilities - The Seller shall indemnify the Buyer for loss of crude run due to negligence of the Seller at a rate of USD [deleted for confidentiality] per day, and Seller's liability in respect of direct, indirect or consequential losses or expenses as a result of such loss shall be capped at that rate. Seller's negligence shall be limited to acts or omissions occurring in the course of performance of the supply obligation which actually results in a loss of throughput and shall specifically exclude any event of force majeure. (g) Section 29 - Notices In respect of Seller: BP Singapore Pte Limited 396 Alexandra Road #01-01 BP Tower Singapore 119954 Fax No: 65 275 7659 Richard Massam In respect of the Buyer: EP InterOil, Ltd C/- InterOil Australia Pty Ltd Suite 2 Level 2 Orchid Plaza 79 Abbott Street Cairns, QLD 4870 Australia Fax No: 61 7 4031 4565 Managing Director The parties have caused their duly authorised representatives to execute this Agreement on the 20th day of December 2001. E.P. INTEROIL, LTD BP SINGAPORE PTE LIMITED - ----------------------------------- ---------------------------------- Name : Name : Title : Title : 9 CRUDE SUPPLY AGENCY AND SALES AGREEMENT BETWEEN BP SINGAPORE PTE LIMITED (SELLER) AND EP INTEROIL, LTD (BUYER) ANNEXURE BP OIL INTERNATIONAL LIMITED GENERAL TERMS & CONDITIONS FOR SALES AND PURCHASES OF CRUDE OIL EX-99.22 17 h19854exv99w22.txt ENGINEERING PROCUREMENT AND CONSTRUCTION CONTRACT EXHIBIT 22 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED CONDITIONS OF CONTRACT ENGINEERING, PROCUREMENT & EQUIPMENT REFURBISHMENT AND CONSTRUCTION OF INTEROIL REFINERY AT NAPA NAPA PAPUA NEW GUINEA PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS VOLUME I TERMS AND CONDITIONS 1. INTERPRETATION AND CONSTRUCTION OF CONTRACT...................................................... 8 1.1 Definitions............................................................................ 8 1.2 Interpretation......................................................................... 15 2. NATURE OF CONTRACT............................................................................... 16 2.1 Performance and payment................................................................ 16 2.2 Early Work............................................................................. 16 2.3 Principal Supplied Equipment........................................................... 16 2.4 Notice to Proceed...................................................................... 17 2.5 Taxes.................................................................................. 17 2.6 Condition Precedent.................................................................... 18 3. SEPARABLE PORTIONS............................................................................... 18 4. THE CONTRACTOR'S PRIMARY OBLIGATIONS............................................................. 18 5. WARRANTIES OF THE CONTRACTOR AND THE PRINCIPAL................................................... 19 6. YEAR 2000 COMPLIANCE............................................................................. 22 7. SECURITY......................................................................................... 23 7.1 Provision.............................................................................. 23 7.2 Recourse............................................................................... 23 7.3 Reduction and release.................................................................. 24 7.4 Deed of Guarantee, Undertaking and Substitution........................................ 24 7.5 No Payment Until Security Lodged....................................................... 24 8. EVIDENCE OF CONTRACT............................................................................. 24 9. SERVICE OF NOTICES............................................................................... 24 9.1 Notices................................................................................ 24 9.2 Authorised Signatories................................................................. 25 10. CONTRACT DOCUMENTS............................................................................... 25 10.1 Discrepancies.......................................................................... 25 10.2 Principal Supplied Information......................................................... 26 10.3 Contractor Supplied Documents.......................................................... 26 10.4 Availability........................................................................... 27 10.5 Confidential Information............................................................... 27 10.6 Media.................................................................................. 28 10.7 Records and Access to Records.......................................................... 28 11. ASSIGNMENT AND SUBCONTRACTING.................................................................... 29 11.1 Assignment............................................................................. 29
Page 1 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS 11.2 Subcontracting generally............................................................... 29 11.3 Contractor's responsibility............................................................ 30 12. WARRANTY REQUIREMENTS............................................................................ 30 12.1 Warranties on Materials or Goods....................................................... 30 13. INTELLECTUAL PROPERTY RIGHTS..................................................................... 31 13.1 Warranties............................................................................. 31 13.2 Intellectual Property Rights granted to the Principal.................................. 31 13.3 Future Design Documents................................................................ 31 13.4 Moral Rights........................................................................... 31 14. LEGISLATIVE REQUIREMENTS......................................................................... 32 14.1 Compliance............................................................................. 32 14.2 Changes................................................................................ 32 14.3 Specific Legislative Requirements and Community Relations.............................. 31 14.4 Major External Approvals and Responsibilities.......................................... 41 14.5 Compliance with the Foreign Corrupt Practices Act...................................... 34 15. REFURBISHMENT, DELIVERY AND OWNERSHIP OF EQUIPMENT............................................... 35 15.1 Refurbishment.......................................................................... 35 15.2 Delivery and Security of Equipment..................................................... 35 15.3 Ownership in Equipment Procured by the Contractor...................................... 35 16. PROTECTION OF PEOPLE AND PROPERTY................................................................ 35 17. URGENT PROTECTION................................................................................ 36 18. CARE OF THE WORK AND REINSTATEMENT OF DAMAGE..................................................... 36 18.1 Care of work under the Contract........................................................ 36 18.2 Reinstatement.......................................................................... 36 18.3 Excepted Risks......................................................................... 37 18.4 Force Majeure.......................................................................... 37 19. DAMAGE TO PERSONS AND PROPERTY OTHER THAN WORK UNDER THE CONTRACT................................ 38 19.1 Indemnity by the Contractor............................................................ 38 19.2 Indemnity by the Principal............................................................. 38 20. LIMITATION OF LIABILITY AND CONSEQUENTIAL DAMAGES................................................ 39 20.1 Survival and Security.................................................................. 39 20.2 Limit of Liability of the Contractor................................................... 39 20.3 Mutual Exclusion of Consequential Damages.............................................. 39 21. INSURANCE OF THE WORK UNDER THE CONTRACT......................................................... 40 21.1 Principal to insure.................................................................... 40 22. PUBLIC LIABILITY INSURANCE....................................................................... 41 22.1 Principal to insure.................................................................... 41
Page 2 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS 23. INSURANCE OF EMPLOYEES........................................................................... 41 24. PROFESSIONAL INDEMNITY INSURANCE................................................................. 42 24.1 Contractor............................................................................. 42 24.2 Consultants............................................................................ 42 25. INSPECTION AND PROVISIONS OF INSURANCE POLICIES.................................................. 42 25.1 Proof of insurance..................................................................... 42 25.2 Failure to produce proof of insurance.................................................. 42 25.3 Notices from or to insurer............................................................. 42 25.4 Notices of potential claims............................................................ 43 25.5 Settlement of claims................................................................... 43 25.6 Cross liability........................................................................ 43 25.7 Insurance Generally.................................................................... 43 26. PRINCIPAL'S REPRESENTATIVE....................................................................... 44 27. SITE SUPERVISORS................................................................................. 44 28. NO PERSONAL LIABILITY............................................................................ 44 29. CONTRACTOR'S REPRESENTATIVE...................................................................... 45 30. CONTRACTOR'S EMPLOYEES AND SUBCONTRACTORS........................................................ 45 30.1 Generally.............................................................................. 45 31. CONTRACTOR'S PROJECT MANAGEMENT TEAM............................................................. 45 32. SITE ....................................................................................... 46 32.1 Possession............................................................................. 46 32.2 Access for Principal and others........................................................ 46 32.3 Minerals, fossils and relics........................................................... 46 33. SETTING OUT THE WORKS............................................................................ 47 33.1 Setting out............................................................................ 47 33.2 Errors in setting out.................................................................. 47 33.3 Care of Survey Marks................................................................... 47 34. CLEANING UP...................................................................................... 47 34.1 Clean and Tidy Site.................................................................... 47 34.2 Hazardous Materials.................................................................... 48 35. LATENT CONDITIONS................................................................................ 48 35.1 Site................................................................................... 48 35.2 Principal Supplied Equipment........................................................... 48 35.3 Notification........................................................................... 48 35.4 Deemed Variation....................................................................... 48 36. MATERIALS, LABOUR AND CONSTRUCTION PLANT......................................................... 49
Page 3 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS 37. QUALITY.......................................................................................... 49 37.1 Quality of material and work........................................................... 49 37.2 Quality assurance...................................................................... 49 37.3 Defective work......................................................................... 50 37.4 Acceptance of defective work........................................................... 50 37.5 Timing................................................................................. 51 38. PROCESS PERFORMANCE TEST AND RELIABILITY TEST.................................................... 51 38.1 Conditions precedent to the Process Performance Test and Reliability Test.............. 51 38.2 Conducting the Process Performance Test and Reliability Test........................... 51 39. EXAMINATION AND TESTING.......................................................................... 51 39.1 Tests.................................................................................. 51 39.2 Covering up............................................................................ 52 39.3 Who conducts........................................................................... 52 39.4 Notice................................................................................. 52 39.5 Delay.................................................................................. 52 39.6 Completion and Results................................................................. 52 39.7 Costs.................................................................................. 52 40. WORKING HOURS.................................................................................... 52 41. PROJECT SCHEDULE................................................................................. 52 41.1 Submission and Approval of Project Schedule............................................ 52 41.2 Application of the Project Schedule.................................................... 53 42. SUSPENSION 42.1 Suspension by the Principal's Representative........................................... 53 42.2 Suspension by the Contractor........................................................... 53 42.3 Recommencement......................................................................... 53 42.4 Cost................................................................................... 54 43. TIME AND PROGRESS................................................................................ 54 43.1 Progress............................................................................... 54 43.2 Notice of delay........................................................................ 54 43.3 Claim.................................................................................. 54 43.4 Assessment............................................................................. 54 43.5 Extension of time...................................................................... 55 43.6 Reduction of Time...................................................................... 55 43.7 Mechanical Completion.................................................................. 55 43.8 Pre-commissioning, Commissioning, Facilities Testing................................... 56 43.9 Practical Completion................................................................... 57 43.10 Liquidated damages..................................................................... 57 43.11 Delay damages.......................................................................... 57 43.12 Reports................................................................................ 58 44. DEFECTS LIABILITY................................................................................ 59
Page 4 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS 45. VARIATIONS....................................................................................... 59 45.1 Directing Variations................................................................... 59 45.2 Proposed Variations.................................................................... 59 45.3 Contractor Proposed Variations......................................................... 60 45.4 Pricing................................................................................ 61 45.5 Notification of Variations............................................................. 62 46. PAYMENT CLAIMS AND PAYMENTS...................................................................... 62 46.1 Advance Payment........................................................................ 62 46.2 Payment Claims......................................................................... 63 46.3 Payment Certificates and Calculations.................................................. 64 46.4 Payment................................................................................ 65 46.5 Certificates of Mechanical Completion and Practical Completion......................... 65 46.6 Effect of Certificates................................................................. 66 46.7 Set-Off................................................................................ 66 46.8 Ownership of Equipment................................................................. 66 46.9 Final Payment Claim and Certificate.................................................... 66 46.10 Interest............................................................................... 67 46.11 Deferred Payment Option................................................................ 68 47. PAYMENT OF WORKERS AND SUBCONTRACTORS............................................................ 68 47.1 Workers and Subcontractors............................................................. 68 47.2 Withholding payment.................................................................... 68 47.3 Direct payment......................................................................... 68 47.4 Liens and Claims....................................................................... 69 48. DEFAULT OR INSOLVENCY............................................................................ 69 48.1 Preservation of other rights........................................................... 69 48.2 Contractor's default................................................................... 69 48.3 Principal's notice to show cause....................................................... 70 48.4 Principal's rights..................................................................... 70 48.5 Take out............................................................................... 70 48.6 Adjustment on completion of work taken out............................................. 71 48.7 Principal's default.................................................................... 71 48.8 Contractor's notice to show cause...................................................... 72 48.9 Contractor's rights.................................................................... 72 48.10 Termination............................................................................ 72 48.11 Insolvency............................................................................. 72 48.12 No Insolvency.......................................................................... 73 49. TERMINATION FOR FRUSTRATION...................................................................... 74 50. TERMINATION FOR CONVENIENCE...................................................................... 74 51. NOTIFICATION OF CLAIMS........................................................................... 76 51.1 Communication of claims................................................................ 76
Page 5 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS 51.2 Liability for failure to communicate................................................... 76 51.3 Principal's Representative's decision.................................................. 76 52. DISPUTE RESOLUTION............................................................................... 77 52.1 Notice of dispute...................................................................... 77 52.2 Conference............................................................................. 77 52.3 Arbitration............................................................................ 78 52.4 Summary relief......................................................................... 78 53. WAIVER OF CONDITIONS............................................................................. 78 54. CO-ORDINATION WITH PRINCIPAL AND OTHERS.......................................................... 78 55. INDEPENDENT CONTRACTOR........................................................................... 78 56. SURVIVAL......................................................................................... 79 57. ENTIRE AGREEMENT................................................................................. 79 SCHEDULE............................................................................................... 79 ANNEXURES.............................................................................................. 86 ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED & DEED OF NOVATION................................... 87 ANNEXURE 2 APPROVED FORM OF UNDERTAKING...................................................... 96 ANNEXURE 3 DEED OF GUARANTEE, UNDERTAKING AND SUBSTITUTION................................... 97 ANNEXURE 4 TERMS OF INSURANCE................................................................ 104 ANNEXURE 5 PRO FORMA CONSENT DEED............................................................ 110 ANNEXURE 6 PROJECT AGREEMENT................................................................. 111 ANNEXURE 7 SCHEDULE OF RATES FOR VARIATIONS.................................................. 112 ANNEXURE 8 FORM OF SUBCONTRACTOR'S FINAL RELEASE AND STATUTORY DECLARATION................... 113 ANNEXURE 9 LEGISLATIVE RESPONSIBILITIES AND PERMITS.......................................... 114 ANNEXURE 10 CONTRACTOR'S PROJECT MANAGEMENT TEAM.............................................. 117 ANNEXURE 11 PROJECT SCHEDULE.................................................................. 118 ANNEXURE 12 FORMAL INSTRUMENT OF AGREEMENT.................................................... 119 ANNEXURE 13 FORM OF FINAL RELEASE............................................................. 122 ANNEXURE 14 CONTRACTOR'S PLANT HIRE CHARGES................................................... 123 ANNEXURE 15 DEED OF NOVATION - REFURBISHMENT CONTRACTS........................................ 123
Page 6 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TABLE OF CONTENTS ANNEXURE 16 DEFERRED PAYMENT OPTION........................................................... 126 ANNEXURE 17 PRE-AWARD MEETING MINUTES......................................................... 128 VOLUME II ANNEXURE 18 PRINCIPAL'S PROJECT REQUIREMENTS.................................................. 130
Page 7 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 1. INTERPRETATION AND CONSTRUCTION OF CONTRACT 1.1 DEFINITIONS In the Contract, except where the context otherwise requires: BASIC DESIGN means the design for the Works included in the Principal's Project Requirements. CERTIFICATE OF PRACTICAL COMPLETION has the meaning given in clause 43.9. COMMISSIONING has the meaning given to it in the Principal's Project Requirements. COMPENSABLE CAUSE means any act, default or omission of the Principal's Representative, the Principal or its consultants, agents or other contractors (not being engaged by the Contractor) and includes any blockade or picketing of the Site which prevents access for the delivery of materials to the Site or the access of personnel pursuant to clause 18.3.1(e), except where such blockade or picketing is caused by an act, default or omission of the Contractor. CONSENT DEED means the tripartite deed between the Principal, Contractor, the Contractor's parent company and OPIC contained in ANNEXURE 5 which provides direction under certain events referred to in the Contract. CONSTRUCTION PLANT means appliances, plant, equipment tools and temporary facilities used in the carrying out of work under the Contract but not forming part of the Works, supplied by the Contractor but not with the intention of such items becoming the Principal's property. CONTRACT, THE CONTRACT, THIS CONTRACT, CONSTRUCTION CONTRACT and THE EPC CONTRACT all mean: (a) the Formal Instrument of Agreement; (b) these Conditions of Contract and the Schedule to these Conditions of Contract; (c) the Annexures to these Conditions of Contract; and (d) the Basic Design. CONTRACT CURRENCY AMOUNT means each of the amounts specified in ITEM 11. CONTRACT SUM means the aggregate lump sum of the Contract Currency Amounts, excluding any additions or deductions which may be required to be made under the Contract, expressed as the US Dollar equivalent (calculated on the basis of the average of the buy and sell rates quoted by Citibank applicable at the opening of business on the date of the Contract) in ITEM 11 for the purpose only of specifying an aggregate lump sum of those Contract Currency Amounts. CONTRACTOR means the person bound to carry out and complete work under the Contract and named in ITEM 3. CONTRACTOR'S DESIGN OBLIGATIONS means all tasks necessary to design and specify the Works required by the Contract, including preparation of the Design Documents. CONTRACTOR'S PROJECT MANAGEMENT TEAM members are listed in ANNEXURE 10. CONTRACTOR'S MARGIN means the Contractor's profit margin on its costs expended on the work under the Contract specified in ITEM 19. Page 8 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED CONTRACTOR'S PROPOSAL means the proposal dated 15 February 2002, submitted to and accepted by the Principal. CONTRACTOR'S REPRESENTATIVE means the person named in ITEM 5 as the Contractor's Representative or other person from time to time appointed in writing by the Contractor under clause 29. CRUDE FEEDSTOCK has the meaning given to it in the Principal's Project Requirements. DATE COMPLIANT means, in respect of any equipment, that the equipment functions and operates (and has been designed, developed and/or programmed to ensure that it functions and operates) properly, accurately and without interruption before, during and after the year 2000 and, without limitation, that: (e) the equipment correctly processes and deals properly with dates and the transition between dates including year 2000 dates; (f) the equipment correctly processes and deals properly with all calculations and functions based on dates; (g) the equipment correctly processes year 2000 as a leap year and all subsequent leap years; (h) the equipment stores and provides output of date information in ways that are unambiguous as to the century; and (i) the equipment functions and operates properly as a component of the Works and is compatible with proper functioning and operation of the Works including any other equipment or material forming part of the Works. DATE FOR MECHANICAL COMPLETION means the last day of the period of time for Mechanical Completion specified by ITEM 12, but if any extension of time to the Date for Mechanical Completion is directed by the Principal's Representative or any reduction is directed by the Principal's Representative pursuant to clause 43.6, or allowed in any arbitration or litigation, it means the date resulting therefrom. DATE FOR PRACTICAL COMPLETION means the last day of the period of time for Practical Completion specified by ITEM 12, but if any extension of time to the Date for Mechanical Completion or Date for Practical Completion is directed by the Principal's Representative or any reduction is directed by the Principal's Representative pursuant to clause 43.6, or allowed in any arbitration or litigation, it means the date resulting therefrom. DATE OF MECHANICAL COMPLETION means: (a) the date evidenced in a Mechanical Completion Certificate under clause 43.7.4(b) as the date when Mechanical Completion in respect of the entire Works was reached; or (b) where another date is determined in any arbitration or litigation as the date upon which Mechanical Completion was reached, that other date. DATE OF PRACTICAL COMPLETION means: (a) the date evidenced in a Certificate of Practical Completion under clause 43.9.3 as the date upon which Practical Completion was reached in respect of the entire works; or (b) where another date is determined in any arbitration or litigation as the date upon which Practical Completion was reached, that other date. Page 9 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED DAY means calender day of the Gregorian Calendar. DEED OF GUARANTEE, UNDERTAKING AND SUBSTITUTION has the meaning in clause 7.4 and means the Deed of Guarantee, Undertaking and Substitution contained in ANNEXURE 3. DEFECTS LIABILITY PERIOD has the meaning in clause 44 and means the last to expire of the period stated in clause 44.1.1 and the period pursuant to clause 44.1.3(b). DESIGN DOCUMENTS means the drawings, specifications and other information, samples, models, patterns and the like required by the Contract created (including where stated those created by the Contractor) for the construction of the Works including the Basic Design and Detailed Design. DETAILED DESIGN has the meaning given to it in the Principal's Project Requirements. DISPUTE has the meaning in clause 52. DIRECTION includes agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement. EARLY WORK, unless otherwise agreed in writing, means all work relating to the work under the Contract performed by the Contractor prior to the date of the Notice to Proceed and includes earthworks and Site preparation (excluding the causeway) and all Design Documents required, in accordance with the Principal's Project Requirements, to Refurbish Principal Supplied Equipment. EQUIPMENT means all: (a) Principal Supplied Equipment provided to the Contractor; (b) equipment to be procured by the Contractor on behalf of the Principal under the Contract and incorporated into the Works; and (c) unfixed plant and equipment to be procured by the Contractor on behalf of the Principal under the Contract, which if not used in the work under the Contract or incorporated in the Works, becomes the Principal's property. EXCEPTED RISK has the meaning in clause 18.3. FACILITIES TESTING means both Process Performance Test and Reliability Test in accordance with the Principal's Project Requirements. FINAL CERTIFICATE has the meaning in clause 46.9. FINAL PAYMENT has the meaning in clause 46.9. FINAL PAYMENT CLAIM means the final payment claim referred to in clause 46.9. FORCE MAJEURE means acts of the public or foreign enemies, hostilities or wars (declared or undeclared), civil disturbances, rebellions, revolutions, insurrections, riots, military or usurped power, martial law, confiscation or other action by any government or public authority, epidemics, landslides, earthquakes, lightning, explosions and any other cause, event or circumstance which is unpredictable and similar to the kind herein enumerated or equivalent forces, not within the reasonable control of the party affected thereby and which that party is unable to overcome by the exercise of due diligence. Force Majeure does not include financial distress of either party, strikes, lock-outs or other industrial disputes by or caused by employees of the Contractor or the Principal or Subcontractors; events involving a previous or concomitant fault; late delivery of equipment, plant or materials or late Page 10 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED performance of the Contractor, unless such late delivery or performance is itself caused by Force Majeure. For the avoidance of doubt the events contemplated in clauses 14.2 and 18.3.1(e) are not events of Force Majeure. FORMAL INSTRUMENT OF AGREEMENT means the form of agreement set out in ANNEXURE 12. GAS TURBINES has the meaning described in the Principal's Project Requirements. GROSS NEGLIGENCE means any act or omission done or omitted to be done intentionally or with reckless disregard for any damage or loss such action or omission causes or may cause or which could have been reasonably foreseen to be caused. INTELLECTUAL PROPERTY means any patent, registered design, trademark or name, copyright or other protected right. LEGISLATIVE REQUIREMENT includes: (a) Acts, Ordinances, regulations, by-laws, orders, awards and proclamations of the jurisdiction where work under the Contract or the particular part thereof is being carried out; (b) certificates, licences, consents, permits, approvals and requirements of organisations having jurisdiction in connection with the carrying out of work under the Contract; and (c) fees and charges payable in connection with the foregoing. LENDER means the entity stated in ITEM 7. LIEN means any lien, security interest or other charge or encumbrance of any kind, including the lien or retained title for security of a vendor and any mechanic's lien asserted in connection with and in respect of moneys legitimately owed by the Contractor and relating to work under the Contract or the Works. MECHANICAL COMPLETION means the stage in the carrying out and completion of work under the Contract as set out in the Principal's Project Requirements when: (a) all: (i) Design Documents; (ii) procurement of equipment and materials; (iii) construction and installation; (iv) Pre-commissioning, including commissioning of all utilities, systems, components and structures of the Works, have been completed as is necessary for Commissioning of the Works and the Works are ready for the introduction of crude feedstock in accordance with the Principal's Project Requirements; (b) the Works have instrument control and electrical integrity demonstrated by the Contractor by testing practices generally accepted in the industry; (c) the Works have achieved satisfactory (to the Principal Representative) mechanical and structural integrity as demonstrated by testing by the Contractor as required by the Design Documents; Page 11 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (d) all systems, components and structures necessary to safely operate the Works and to undertake Commissioning and the Process Performance Test and Reliability Test are installed; and (e) all major defects or deficiencies in the Works have been rectified to the reasonable satisfaction of the Principal's Representative. MECHANICAL COMPLETION CERTIFICATE has the meaning given in clause 43.7.4. NON-QUALIFYING CAUSE OF DELAY means any delay not a Qualifying Cause of Delay. NOTICE OF MECHANICAL COMPLETION has the meaning given to it in clause 43.7.2. NOTICE TO PROCEED means a notice issued to the Contractor by the Principal in accordance with clause 2.4. OPIC means Overseas Private Investment Corporation, a United States Government agency. PAYMENT CERTIFICATE has the meaning in clause 46.3. PAYMENT CLAIM means a claim for payment defined in clause 46.2.1. PRACTICAL COMPLETION is that stage in the carrying out and completion of work under the Contract when: (a) the Works are complete except for minor defects or punch list items: (i) which do not prevent the Works from being reasonably capable of being used for their intended purpose; (ii) which the Principal's Representative determines the Contractor has reasonable grounds for not promptly rectifying; and (iii) the rectification of which will not prejudice the convenient use of the Works; (b) those tests which are required by the Contract to be carried out and passed before the Works reach Practical Completion, including but not limited to the Process Performance Test and Reliability Test have been carried out and passed; (c) documents and other information: (i) required under the Contract; (ii) which, in the Principal's Representative's opinion, are essential for the use, operation and maintenance of the Works, have been supplied, including the warranties required under clause 6.1.5 and clause 12.1; (d) necessary permits, registrations, approvals, certifications, consents or licences required to be obtained by the Contractor in accordance with clause 14 have been provided to the Principal's Representative; and (e) the Contractor has complied with the requirements of clause 6.1.3. PRE-COMMISSIONING has the meaning given to it in the Principal's Project Requirements. Page 12 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED PRESCRIBED NOTICE has the meaning given in clause 51.1. PRINCIPAL means the party described in ITEM 1. PRINCIPAL'S PROJECT REQUIREMENTS means the written summary or outline of the Principal's requirements for the Works described in ANNEXURE 18 and includes, without limitation: (a) the stated purpose for which the Works are intended; and (b) the Principal's design requirements for the Works. PRINCIPAL'S REPRESENTATIVE means the Principal's Representative and any other individual appointed in writing by the Principal under clause 27. PRINCIPAL SUPPLIED EQUIPMENT has the meaning given in clause 2.3. PRINCIPAL SUPPLIED INFORMATION means any documented information, other than the Principal's Project Requirements, supplied or made available to the Contractor by or on behalf of the Principal before or after the date of the Notice to Proceed. PROCUREMENT PLAN has the meaning given to it in the Principal's Project Requirements. PROCESS PERFORMANCE TEST has the meaning given to in the Principal's Project Requirements. PROJECT AGREEMENT means the agreement between the Government of the Independent State of Papua New Guinea, E.P. InterOil, Ltd. and the Principal in relation to the construction and operation of the Refinery, a copy of which is attached hereto as ANNEXURE 6. PROJECT SCHEDULE has the meaning given in the Principal's Project Requirements and in clause 41 and is included in the Contract as ANNEXURE 11. PUBLIC LIABILITY POLICY has the meaning given in clause 22. QUALIFYING CAUSE OF DELAY means: (a) any act, default or omission of the Principal's Representative, the Principal or its consultants, agents or other contractors (not being engaged by the Contractor) including any delay in delivery of the Refurbished Equipment and other Principal Supplied Equipment to the Site; (b) Variations directed under clause 45; (c) a substantial breach of the Contract by the Principal which prevents the Contractor from discharging its obligations; (d) Excepted Risks pursuant to clause 18.3; and (e) an event of Force Majeure requiring an extension of time to mitigate the effects of delays caused by Force Majeure under clause 18.4. REFURBISHMENT and REFURBISH mean, in relation to Principal Supplied Equipment, rectify defects, renovate and modify as necessary so that the subject equipment has a utility and performance capability that is fit for the purpose of incorporation into the Works. REFURBISHMENT PLAN has the meaning given to it in the Principal's Project Requirements. Page 13 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED RELIABILITY TEST means the 30 day reliability test specified in the Principal's Project Requirements. SCHEDULE OF RATES means the list of prices in ANNEXURE 7 which, in respect of any work to be carried out as part of a Variation, shows the rate or respective rates of payment for the execution of that work and which may include lump sums, other sums, quantities and prices. SEPARABLE PORTION means a portion of the Works identified as such in the Contract or which the Principal's Representative has determined pursuant to clause 3. SITE means the lands and other places to be made available and any other lands and places made available to the Contractor by the Principal for the purpose of the Contract. SOLE DISCRETION means, where the Principal or the Principal's Representative may act in its or his "sole discretion" the Principal or the Principal's Representative is: (a) not obliged to comply with any expressed or implied condition of the Contract or the general law to act reasonably, fairly or in good faith; (b) not obliged to give consideration to any effect: (i) the exercise or non-exercise of that discretion, or (ii) the exercise or non-exercise of the right, or (iii) the taking or non-taking of any action relating to that discretion may have on the Contractor, and (c) not obliged to give reasons for its action, inaction or the exercise of its right, and any decision made, action taken or exercise of right by the Principal in its sole discretion is not subject to review under the Contract, by an arbitrator or under the general law. If the immunity from review of the exercise of that discretion is invalid or otherwise unenforceable at law, under statute or in equity, that immunity from review may be severed from this definition. STEERING COMMITTEE has the meaning in clause 52.2. SUBCONTRACTOR includes consultants. SUBCONTRACTOR'S CONSENT DEED means the deed set out in ANNEXURE 1. SUBSYSTEM MECHANICAL COMPLETION CERTIFICATE means a certificate delivered by the Principal's Representative to the Contractor pursuant to clause 43.7.4 acknowledging that a subsystem of the Works as specified therein has achieved Mechanical Completion; PRINCIPAL'S REPRESENTATIVE means the person stated in ITEM 9 as the Principal's Representative or other person from time to time appointed in writing by the Principal to be the Principal's Representative and notified as such in writing to the Contractor by the Principal and, so far as concerns the functions delegated by the Principal's Representative to a Site Supervisor, that Site Supervisor. SURVEY MARK in clause 33 means a survey peg, bench mark, reference mark, signal, alignment, level mark or any other mark for the purpose of setting out, checking or measuring work under the Contract. TEMPORARY WORKS means work used in carrying out and completing work under the Contract, but not forming part of the Works. Page 14 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED TEST has the meaning given in clause 39.1 and includes examination and measurement. VARIATION has the meaning given in clause 45. WORKING DAYS means calendar days on which the commercial banks in Queensland are open for business. WORKS means: (a) the whole of the work to be carried out and completed in accordance with the Contract, including Variations provided for by the Contract, which by the Contract is to be handed over to the Principal; and (b) includes any Early Work within the meaning in (a) above. WORK UNDER THE CONTRACT means the work which the Contractor is or may be required to carry out and complete under the Contract,and includes: (a) Early Work; (b) provision of materials; (c) procurement of all Equipment other than Principal Supplied Equipment, and shipping and handling of Equipment as provided elsewhere in the Contract; (d) the Contractor's Design Obligations, including development of the Basic Design and preparation of the Detailed Design to the Principal's satisfaction; and (e) Works, Variations, remedial work, Construction Plant and Temporary Works. 1.2 INTERPRETATION In the Contract: 1.2.1 References to a person include an individual, firm or a body, corporate or unincorporated. 1.2.2 The time for doing any act or thing under the Contract shall, if it ends on a Saturday, Sunday or Statutory or Public Holiday in the country in which the work is being done, be deemed to end on the day next following which is not a Saturday, Sunday or Statutory or Public Holiday. 1.2.3 Clause headings and subclause headings in these Conditions of Contract shall not form part of these Conditions of Contract and shall not be used in the interpretation of the Contract. 1.2.4 A reference to an ANNEXURE is a reference to an Annexure attached to these Conditions of Contract unless the context requires otherwise. 1.2.5 A reference to an ITEM is a reference to an Item in the SCHEDULE. 1.2.6 Words in the singular include the plural and words in the plural include the singular, according to the requirements of the context. 1.2.7 Words importing a gender include every gender. 1.2.8 Where general words are associated with specific words which define a class, the general words are not limited by reference to that class. Page 15 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 1.2.9 Communications between the Principal, the Principal's Representative and the Contractor shall be in the English language. 1.2.10 Measurements of physical quantities shall be in legal units of measurement of the jurisdiction in ITEM 14. 1.2.11 Unless otherwise provided in the Contract, prices are in the currencies in ITEM 15 and payments shall be made in those currencies at the place in ITEM 16, and unless otherwise stipulated all references to "dollars" and "$", are references to US Dollars. 1.2.12 The law governing the Contract, its interpretation and construction, and any agreement to arbitrate, is the law of the jurisdiction in ITEM 14. 1.2.13 If any part of this Contract is or becomes illegal, invalid or unenforceable the legality, validity or enforceability of the remainder of the Contract will not be affected and the Contract will be read as if the part had been deleted. 1.2.14 No rule of construction applies to the interpretation of the Contract to the disadvantage of one party on the basis that such party prepared the Contract or any relevant part of it. 1.2.15 A reference to any statute or any provision of any statute includes all legislation, regulations and instruments issued under that statute or provision and any modification, consolidation, amendment, re-enactment or replacement of that statute or provision. 1.2.16 A reference to a party to the Contract or any instrument includes that party's successors and permitted assigns. 1.2.17 The rights and obligations of the parties are subject to the provisions of the executed Consent Deed. 2. NATURE OF CONTRACT 2.1 PERFORMANCE AND PAYMENT 2.1.1 The Contractor shall carry out and complete work under the Contract in accordance with the Contract and directions authorised by the Contract. 2.1.2 The Principal shall pay the Contract Currency Amounts together with any additions or deductions made pursuant to the Contract. The Contract Currency Amounts shall not be adjusted for rise and fall. 2.2 EARLY WORK 2.2.1 The Principal authorised the Contractor to perform and the Contractor has performed Early Work prior to the date of the Notice to Proceed. 2.2.2 Despite the prior performance of the Early Work by the Contractor and the prior payment to the Contractor by the Principal for the performance of the Early Work, which the Contractor acknowledges as having been received in full, all Early Work is deemed included in the work under the Contract. 2.2.3 All rights and obligations of the Principal and the Contractor under the Contract apply to Early Work, except that the Principal retains all risk of and responsibility for loss of or damage to the earth works forming and comprising the Site and the earthen causeway. 2.3 PRINCIPAL SUPPLIED EQUIPMENT 2.3.1 The Principal shall make available CIF Site to the Contractor, Principal Supplied Equipment as set out in the Principal's Project Requirements. Page 16 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 2.3.2 The Contractor takes full responsibility for the fitness for purpose of the Design Documents provided for the Refurbishment of such Principal Supplied Equipment. 2.3.3 The Contractor shall not be entitled to any extension of time to the Date for Mechanical Completion or Date for Practical Completion nor any extra payment because of the Design Documents provided for the Refurbishment of any Principal Supplied Equipment not being fit for purpose. 2.4 NOTICE TO PROCEED 2.4.1 The Principal shall authorise the Contractor to commence the remaining work under the Contract, other than Early Work, by a Notice to Proceed. 2.4.2 The Contractor shall not be authorised to proceed with work under the Contract except upon receipt of a Notice to Proceed. The Contractor may, at its own expense, proceed with preparation for work under the Contract prior to the receipt of a Notice to Proceed and the Principal agrees to cooperate with the Contractor in such preparation, provided that the Principal shall incur no monetary obligation and shall not be required to act in any manner not required by or not in compliance with this Contract 2.5 TAXES 2.5.1 Imported Equipment, Plant and Materials: (a) This clause 2.5.1 shall apply to all equipment, plant and material for incorporation into the Works. (b) The Contractor shall import all equipment, plant and material for incorporation into the Works into the Independent State of Papua New Guinea in the name of the Principal as consignee. The Contractor shall ensure that all Subcontractors and suppliers of the Contractor comply with this requirement, and except to the extent caused by breach of this clause 2.5.1(b) by the Contractor, the Principal shall pay directly to the Internal Revenue Commission of Papua New Guinea (IRC) all import duty and value added tax (VAT) as applicable to the equipment, plant and materials imported into the Independent State of Papua New Guinea in compliance with this clause 2.5.1(b). (c) The Contractor shall be responsible for the importation, bonding and re-export of all Construction Plant and Temporary Works imported into the Independent State of Papua New Guinea and used in the performance of the work under the Contract. The Contractor shall ensure that all Subcontractors and suppliers of the Contractor comply with this requirement. (d) The Contractor shall pay directly to the Internal Revenue Commission of Papua New Guinea (IRC) all import duty and value added tax (VAT) as applicable to the equipment, plant and materials imported into the Independent State of Papua New Guinea in compliance with clause 2.5.1(c). 2.5.2 Non-imported work under the Contract If the Contractor has complied with clause 2.5.3, the Principal shall pay to or reimburse the Contractor for any value added tax (VAT) in relation to the performance of work under the Contract including for the provision of equipment, plant and materials that is not imported into the Independent State of Papua New Guinea. 2.5.3 Contractor's Assistance The Contractor shall provide all reasonable assistance to the Principal and provide all documentation specified by the Principal as necessary for the Principal to be able to receive Page 17 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED a refund of VAT, sales taxes, import duties and any other taxes to which the Principal is entitled, including any refund under the Project Agreement. 2.5.4 Income Tax Liability The Contractor must file all returns and promptly pay when due all income taxes, employee related taxes, levies, fees, assessments and other similar charges measured or based upon the Contractor's receipts, income or profits which are imposed by governmental authorities of any country having jurisdiction to levy such charges in connection with the Contractor's performance under the Contract and the Contractor's compensation therefor. Except as otherwise provided in the Contract, the Contractor shall pay all taxes, employee related taxes, levies, fees duties, assessments and charges imposed with respect to the performance of the Contractor's obligations under the Contract. 2.6 CONDITION PRECEDENT The Contract is subject to: (a) the Contractor entering into and executing the Consent Deed contained in ANNEXURE 5 prior to or coincidentally with the execution of the Contract; (b) the establishment to the Contractor's reasonable satisfaction of all necessary insurance to be provided by the Principal under the Contract; and (c) receipt by the Contractor from the Principal of written verification by the Lender that the Principal is entitled to draw on its OPIC loan. 3. SEPARABLE PORTIONS The Principal's Representative may at any time determine that any part of the Works shall be a Separable Portion. The Principal's Representative shall clearly identify for each Separable Portion the: (a) portion of the Works; (b) Date for Practical Completion; and (c) respective amounts for security, liquidated damages and delay damages (all calculated pro-rata according to the ratio of the Principal's Representative's valuation of the Separable Portion to the Contract Sum). 4. THE CONTRACTOR'S PRIMARY OBLIGATIONS 4.1.1 Without limiting the generality of the Contractor's responsibilities, the Contractor shall ensure the Principal's Project Requirements are met and shall, without limitation, carry out the following obligations: (a) (i) design the Works in accordance with the Contract, including without limitation, prepare the Detailed Design, in accordance with the Basic Design to the satisfaction of the Principal; (ii) take delivery of all Principal Supplied Equipment CIF Site; (iii) procure Equipment (other than Principal Supplied Equipment) and materials; Page 18 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (iv) construct the Works in accordance with the Contract, including the Principal's Project Requirements and the Detailed Design as approved in writing by the Principal; (v) carry out Pre-commissioning and ensure the Works progresses to and reaches Mechanical Completion by the Date for Mechanical Completion in accordance with the Contract; (vi) carry out Commissioning, Process Performance Testing and Reliability Testing; and (vii) ensure that the work under the Contract progresses to and reaches Practical Completion by the Date for Practical Completion in accordance with the Contract; (b) (i) satisfy and ensure that all its Subcontractors satisfy all Legislative Requirements; and (ii) arrange for all permits and approvals set out in ANNEXURE 9 as the responsibility of the Contractor; (c) complete the Works in accordance with the Contract for the Contract Currency Amounts adjusted by any additions or deductions which may be required to be made under the Contract; (d) be responsible for and control, co-ordinate, administer and direct all activities for the planning of the work under the Contract; (e) execute the Consent Deed and Subcontractor's Consent Deed and shall ensure Subcontractors execute the Subcontractor's Consent Deed in accordance with the Contract; (f) (i) comply with; (ii) ensure all Subcontractors comply with; and (iii) ensure the Principal does not breach, the terms of the Project Agreement in respect of the Contractor's performance of the work under the Contract; (g) perform work under the Contract with due regard to the traditions and customs of the Independent State of Papua New Guinea and Napa Napa in particular; and (h) comply with and ensure that all Subcontractors comply with the (US) Foreign Corrupt Practices Act and all legislation with respect to the employment of minors. 5. WARRANTIES OF THE CONTRACTOR AND THE PRINCIPAL 5.1.1 Without limiting the generality of clause 2.1.1, the Contractor warrants to the Principal that: (a) all Early Work has been performed in accordance with the Contract, is free from defects, and is fit for the purpose of the Principal's Project Requirements; Page 19 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (b) the Contractor: (i) has carefully prepared and checked the Basic Design for the Works and warrants to the Principal that such Basic Design is suitable, appropriate and adequate for the purpose stated in and is in accordance with the Principal's Project Requirements; (ii) has carefully checked and satisfied itself that and warrants to the Principal that all Principal Supplied Equipment is: A free from defects, except for latent conditions ; B fit for its intended purpose in accordance with the Principal's Project Requirements; and C except in the event of a latent condition, fit for incorporation into the Works without further cost to the Principal or extension of time to the Date for Mechanical Completion or the Date for Practical Completion; (iii) shall at all times be suitably qualified and experienced, and shall exercise due skill, care and diligence in the execution and completion of the work under the Contract; (iv) shall execute and complete the Contractor's Design Obligations and produce the Design Documents in accordance with the Principal's Project Requirements; (v) shall execute and complete the work under the Contract in accordance with the Design Documents so the Works, when completed: A are fit for their intended purpose; and B comply with all the requirements of the Contract and all Legislative Requirements; and (vi) has examined, carefully checked and accepts and has allowed for in the Contract Sum all costs relating to and arising out of compliance with clause 14; and (c) the Contractor: (i) is a corporation validly existing under the laws of its place of incorporation; (ii) has the corporate power to enter into and perform its obligations under the Contract and to carry out the transactions contemplated by it; (iii) has taken all necessary corporate action to authorise the entry into and performance of this Contract and to carry out the transactions contemplated by it; (iv) acknowledges that the Contract is the Contractor's valid and binding obligation enforceable in accordance with its terms; Page 20 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (v) acknowledges that the execution and performance by it of this Contract and the transactions contemplated under it did not and will not violate in any respect any provision of: A any law or treaty or any judgment, ruling, order or decree binding on it; B its constitution or other constituent documents; or C any other document or agreement which is binding on it or its assets; (vi) acknowledges that all its representations and warranties in the Contract are true and not misleading; (vii) has not entered into the Contract in reliance on, or as a result of, any statement or conduct of any kind by or on behalf of the Principal, the Lender or any of their respective related bodies corporate (as defined in the Corporations Act 2001 (Cth)) except as expressly set out in the Contract; (viii) has not received any notice of any transfer, mortgage, charge, execution or other dealing in relation to the Contract nor any notice under s218 of the Income Tax Assessment Act 1936 (Cth) or the Income Tax Assessment Act 1997 (Cth) or any similar provision in the Income Tax Act 1959 (PNG); (ix) has recent relevant experience with major projects in the Independent State of Papua New Guinea and is familiar with the traditions and customs of the Independent State of Papua New Guinea and Napa Napa in particular. 5.1.2 The Contractor acknowledges that the warranties in clauses 5.1.1(a) and 5.1.1(b) shall remain unaffected notwithstanding: (a) any Variations under clause 45; (b) that the Contractor has entered into a novation of any prior contract between the Principal and a consultant or supplier of the Principal and thereafter has retained that consultant or supplier in connection with the work under the Contract; and (c) any receipt or review of, or comment or direction on, the Design Documents by the Principal's Representative. 5.1.3 The Principal warrants to the Contractor that the Principal: (a) is a corporation validly existing under the laws of its place of incorporation; (b) has the corporate power to enter into and perform its obligations under the Contract and to carry out the transactions contemplated by it; (c) has taken all necessary corporate action to authorise the entry into and performance of this Contract and to carry out the transactions contemplated by it; (d) acknowledges that the Contract is the Principal's valid and binding obligation enforceable in accordance with its terms; Page 21 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (e) acknowledges that the execution and performance by it of this Contract and the transactions contemplated under it did not and will not violate in any respect any provision of: (i) any law or treaty or any judgment, ruling, order or decree binding on it; (ii) its constitution or other constituent documents; or (iii) any other document or agreement which is binding on it or its assets; (f) acknowledges that all its representations and warranties in the Contract are true and not misleading; (g) has not entered into the Contract in reliance on, or as a result of, any statement or conduct of any kind by or on behalf of the Contractor or any of its related bodies corporate (as defined in the Corporations Act 2001 (Cth)) except as expressly set out in the Contract; (h) has not received any notice of any transfer, mortgage, charge, execution or other dealing in relation to the Contract nor any notice under s218 of the Income Tax Assessment Act 1936 (Cth) or the Income Tax Assessment Act 1997 (Cth) or any similar provision in the Income Tax Act 1959 (PNG). 6. YEAR 2000 COMPLIANCE 6.1.1 The Contractor warrants that all Equipment provided under the Contract (in any format and including all releases, updates or amendments to the original Equipment provided) is Date Compliant. 6.1.2 If the Contractor becomes aware that any Equipment provided in connection with the Contract is not or will not be Date Compliant at any time, the Contractor must immediately notify the Principal in writing. 6.1.3 If any Equipment provided in connection with the Contract is not Date Compliant at any time or the Principal reasonably considers that any Equipment provided in connection with the Contract is not likely to be Date Compliant at any time, the Contractor must promptly on receipt of notification from the Principal: (a) demonstrate to the Principal that the Equipment is Date Compliant and provide test cases and expected and actual results to prove the Equipment is Date Compliant; or (b) make the Equipment Date Compliant (by providing such updates, replacement of equipment or services as may be required by the Principal), at no cost to the Principal. 6.1.4 The Contractor shall indemnify and keep the Principal indemnified against all liabilities, claims, costs, losses, damages or expenses which the Principal may suffer or incur arising out of or resulting from the failure of any Equipment provided in connection with the Contract to be Date Compliant. 6.1.5 If the Contractor proposes to enter into a subcontract or supply contract in relation to any part of the Works and the subcontract or supply contract involves any Equipment then (unless exempted by the Principal in writing) the Contractor must obtain a Date Compliant warranty in the form required by the Principal. The Contractor shall obtain the warranty and shall hand over to the Principal all original warranties duly executed by the relevant Subcontractor or supplier and the Contractor prior to and as a condition precedent to the Works reaching Practical Completion. If the Contractor does not comply with this clause, Page 22 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED the Principal's Representative may withhold the issue of the Certificate of Practical Completion under clause 43.9. 6.1.6 The warranties and obligations in this clause are in addition to and do not limit any other warranties or obligations of the Contractor under the Contract and shall survive the issue of a Final Certificate or the termination of the Contract. 7. SECURITY 7.1 PROVISION 7.1.1 The Contractor shall provide within 28 days of the date of the Notice to Proceed security in the form set out in ANNEXURE 2 issued by a trading bank in Australia approved by the Principal and the Lender to ensure the due and proper performance of the Contract. The security shall be for an amount equal to the amount stated in ITEM 17. 7.1.2 If the Contract Currency Amounts are varied under the Contract, the Principal's Representative may direct the Contractor to cause the issuer of the security to increase or decrease the amount of the security to the actual amount of the Principal's entitlement. 7.2 RECOURSE 7.2.1 The Principal may have recourse to security provided under the Contract and may convert into money security that does not consist of money if: (a) the Contractor commits a substantial breach of Contract, including: (i) the Contractor fails to complete all work under the Contract in accordance with the Contract; or (ii) the Contractor fails to pay an amount payable to the Principal; or (b) the Principal is otherwise entitled to exercise a right under the Contract in respect of security; and: (c) the Principal has given the Contractor notice in writing for the period of 10 days, of the Principal's intention to have recourse to the security; (d) the period of 10 days has elapsed since the notice was given; and (e) the Contractor has failed to remedy the circumstances under Clause 7.2.1(a). 7.2.2 Provided that clause 7.2.1(c) and (d) is complied with, the Contractor shall not take any steps to enjoin or otherwise restrain: (a) any issuer of the security from paying the Principal pursuant to the security; (b) the Principal from taking any steps for the purposes of making a demand under the security or receiving payment under the security; or (c) the Principal using the moneys received under the security. 7.2.3 The Principal shall not be liable for any loss occasioned by the conversion of security under the Contract. Page 23 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 7.3 REDUCTION AND RELEASE 7.3.1 Mechanical Completion Upon the issue of the Certificate of Mechanical Completion, the Principal's entitlement to security, including additional security pursuant to clause 7.1.2, shall be reduced by 50% of the amount then held, and the reduction shall be effected within 14 days after such issue or upon receipt of the replacement security whichever is later. 7.3.2 Practical Completion Upon the issue of the Certificate of Practical Completion the Principal's entitlement to security, including additional security pursuant to clause 7.1.2, shall be reduced by 50% of the amount then held, and the reduction shall be released and returned within 14 days to the Contractor. 7.3.3 Final Completion The Principal shall release the balance of the security then held within 14 days after the issue of the Final Certificate, provided the Contractor has provided to the Principal all releases required pursuant to clause 46.9. 7.4 DEED OF GUARANTEE, UNDERTAKING AND SUBSTITUTION Immediately upon request by the Principal the Contractor shall provide a duly executed and enforceable Deed of Guarantee, Undertaking and Substitution given in favour of the Principal in the form provided in ANNEXURE 3. 7.5 NO PAYMENT UNTIL SECURITY LODGED The Principal may refuse to make any payment otherwise due to the Contractor until the Contractor has fully complied with its obligations to lodge security under this clause 7. 8. EVIDENCE OF CONTRACT 8.1.1 Until a Formal Instrument of Agreement is executed by the parties, the agreement in writing between the parties for the execution of the work under the Contract, including documents or parts of documents to which reference may properly be made to ascertain the rights and obligations of the parties, shall evidence the Contract. 8.1.2 The Principal and the Contractor shall execute 2 copies of the Formal Instrument of Agreement. 8.1.3 The Principal shall have both copies stamped (unless they are exempt from stamp duty) and forward one copy to the Contractor. 8.1.4 The Principal shall bear the cost of any stamp duty payable on the Contract. 8.1.5 The Principal and Contractor shall show evidence of acceptance of the Contract by initialling each page of the Contract. 9. SERVICE OF NOTICES 9.1 NOTICES 9.1.1 A notice in connection with the Contract: (a) must be signed by the party or on behalf of the party by a person authorised to do so by the party giving the notice; Page 24 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (b) must be in writing; (c) must be delivered by hand or sent by prepaid ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee or sent by facsimile to the facsimile number of the addressee; and (d) if a notice is sent by email it must be confirmed in accordance with paragraphs (a), (b) and (c) above. 9.2 AUTHORISED SIGNATORIES 9.2.1 The authorised signatories to notices are those specified in ITEM 18 and such other persons as are notified from time to time in writing by one party to the other. 9.2.2 A notice (and other documents) shall be deemed to have been given and received: (a) if addressed or delivered to the relevant address in the Contract or last communicated in writing to the person giving the notice; and (b) on the earliest date of: (i) actual receipt; (ii) confirmation of correct transmission of facsimile; or (iii) 14 days after posting. 9.2.3 Any notice given to the Contractor's Representative, identified in a notice to the Principal's Representative under clause 29, shall be deemed to have been given to the Contractor. 10. CONTRACT DOCUMENTS 10.1 DISCREPANCIES 10.1.1 The several documents forming the Contract are to be taken as mutually explanatory of one another. If either party discovers any ambiguity or discrepancy in or between the documents comprising the Contract, that party shall notify the Principal's Representative in writing of the ambiguity or discrepancy. In the event of an ambiguity or discrepancy being discovered and brought to the attention of the Principal's Representative, or discovered by the Principal's Representative, the Principal's Representative shall direct the Contractor as to the interpretation to be followed by the Contractor in carrying out the work under the Contract, however: (a) if there is an ambiguity or inconsistency between any express standards, then the standard to be achieved shall be the higher of the standards prescribed; (b) if a standard of workmanship, material, finish or any other aspect of the Works is not specified then the standard of such workmanship, material, finish, or other aspect shall be equivalent to the standard prescribed for similar parts of the Works; and (c) figures shall prevail over scaled dimensions in a discrepancy. 10.1.2 If an ambiguity or discrepancy exists in any term or terms of the documents comprising the Contract, or any one or more of them, then these documents shall be given that interpretation which resolves the ambiguity or discrepancy consistent with the terms of the Contract as a whole and no rule of construction shall apply to the disadvantage of one party on the basis that that party put forward the documents comprising the Contract or any of them. Page 25 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 10.1.3 Subject to clauses 10.1.1 and 10.1.2 a discrepancy between the documents comprising the Contract shall be resolved in accordance with the order or precedence set out in the Formal Instrument of Agreement. 10.1.4 The Principal's Representative's direction under clause 10.1.1 shall not entitle the Contractor to a variation, any extra payment or an extension of time. 10.2 PRINCIPAL SUPPLIED INFORMATION 10.2.1 The Principal Supplied Information shall: (a) remain the Principal's property and be returned to the Principal within 7 days after the Date of Practical Completion or on written demand; and (b) not be used, copied nor reproduced for any purpose other than work under the Contract. 10.2.2 The documents comprising the Principal's Project Requirements and the Detailed Design shall remain the property of the Principal. 10.2.3 In respect of all Principal Supplied Information supplied by the Principal to the Contractor prior to or in conjunction with entering into the Contract, the Contractor agrees: (a) unless the Principal expressly agrees otherwise in writing, any Principal Supplied Information: (i) has been provided only for the Contractor's convenience; (ii) has not been relied upon by the Contractor for the purpose of entering into the Contract; (b) the Principal does not: (i) assume any responsibility or duty of care in respect of; or (ii) warrant, guarantee or make any representation as to, the Principal Supplied Information (including its accuracy or adequacy for the purposes of the Contract); (c) the Principal shall not be liable to the Contractor in contract, tort, equity, under statute or otherwise arising from or in connection with the provision of the Principal Supplied Information or the non-provision of any other information by the Principal; and (d) except as expressly provided by the Contract, the Contractor shall not be entitled to any extension of time to the Date for Mechanical Completion or the Date for Practical Completion, adjustment to the Contract Currency Amounts or other claim arising from or in connection with the accuracy or adequacy of the Principal Supplied Information covered under this clause 10.2.3. 10.3 CONTRACTOR SUPPLIED DOCUMENTS 10.3.1 The Contractor shall supply to the Principal's Representative the documents and number of copies thereof, both stated in the Principal's Project Requirements. Page 26 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 10.3.2 If the Contractor submits documents to the Principal's Representative, then except where the Contract otherwise provides: (a) the Principal's Representative shall not be required to check such documents for errors, omissions, inconsistencies, ambiguities, discrepancies or compliance with the Contract; (b) notwithstanding clause 25.7.3, any Principal's Representative's acknowledgment or approval shall not prejudice the Contractor's obligations; and (c) if the Contract requires the Contractor to obtain the Principal's Representative's direction about such documents, the Principal's Representative shall give, within the time stated in ITEM 21, the appropriate direction, including reasons if the documents are not suitable. 10.3.3 Copies of documents supplied by the Contractor shall be the Principal's property for its sole use at its sole discretion. 10.3.4 The Contractor shall, during the progress of the work under the Contract, keep a record of all differences between the drawings used by the Contractor and how the Works were actually constructed by the Contractor, and the Contractor shall supply a copy of such record to the Principal under clause 10.3.3. 10.3.5 A direction by the Principal's Representative to vary anything in the Design Documents shall be a Variation to work under the Contract only to the extent that the Design Documents, before such Variation, complied, or would have complied, with the Principal's Project Requirements. 10.4 AVAILABILITY The Contractor shall, during the work under the Contract, keep available to the Principal's Representative and the Principal: (a) on Site, one complete set of documents affecting work under the Contract and supplied by a party or the Principal's Representative; and (b) at the place of manufacture or assembly of any significant part of work under the Contract off-Site, a set of the documents affecting that part. 10.5 CONFIDENTIAL INFORMATION 10.5.1 The parties shall ensure that they keep confidential such documents, samples, models, patterns and other information as are clearly identified as confidential and shall ensure that they are not disclosed to a third party other than as directed by the Principal's Representative. 10.5.2 Without limiting its other obligations under this clause, the Contractor must not: (a) disclose to any person, other than the Lender; or (b) use for any purpose other than the carrying out of work under the Contract, any of the contents of the Contract or any other information obtained by the Contractor in the course of or in connection with its carrying out work under the Contract unless: (c) the Principal has given its prior consent in writing; or (d) as required by law. Page 27 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 10.5.3 The Contractor's obligations under this clause shall apply after the issue of a Final Certificate or termination of the Contract for any reason (whether or not the Contractor signs a separate agreement under this clause). 10.6 MEDIA The Contractor shall not disclose any information concerning the project for distribution through any communications media without the Principal's prior written approval (which shall not be unreasonably withheld). The Contractor shall refer to the Principal any inquiries from any media concerning the project. 10.7 RECORDS AND ACCESS TO RECORDS 10.7.1 The Contractor shall make and keep and the Contractor shall ensure all Subcontractors make and keep accurate records of the work under the Contract including but not limited to: (a) all documents referred to in this Contract, and the Principal's Project Requirements; (b) Design Documents; (c) calculations and mark-ups; (d) records as to progress of the works; (e) diary records of daily tasks; (f) complete photographic records; (g) quality system documents, records and reports; (h) manning and equipment records; (i) results of the examination and testing of any work or materials; (j) time records; (k) all cost records relating in any way to delays; (l) Variations; (m) all Consultant's reports and opinions obtained by the Contractor in relation to the matters referred to in this clause; and (n) all necessary supporting documents, invoices, records and related financial statements whether in writing or stored on any other medium whatsoever. 10.7.2 Subject to the Contractor's right to claim legal professional privilege in respect of any record, which is hereby maintained, the Principal or any other person nominated by the Principal shall have the right upon the Principal's reasonable request, to inspect, copy and audit at any time any record referred to in clause 10.7.1. The Contractor shall make available forthwith upon request such facilities as may be necessary to enable a legible reproduction of any records referred to in this clause 10.7.1 stored on a medium other than writing to be provided to the Principal. 10.7.3 The Contractor's records referred to in clause 10.7.1 shall not be destroyed and the Principal shall have right of access under clause 10.7.2 prior to: (a) 6 years after the issue of the Final Certificate under clause 46.9; Page 28 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (b) 6 years after the lawful termination of the Contract; or (c) the resolution of all claims under or arising out of the Contract whichever is the later in time. 11. ASSIGNMENT AND SUBCONTRACTING 11.1 ASSIGNMENT 11.1.1 The Contractor shall not assign, novate, mortgage, encumber or otherwise deal with the Contract or any of its interests, rights and obligations under or in connection with the Contract. 11.1.2 Subject to the terms of the Consent Deed, the Principal may at any time in its absolute discretion and without any consent from the Contractor, assign, novate, mortgage, encumber or otherwise deal with the Contract or any of its interests, rights and obligations under or in connection with the Contract provided that the assignee, novatee or mortgagee: (a) has the necessary powers and assets to enable it to perform the Principal's obligations under the Contract; and (b) enters into a covenant with the Contractor that the assignee, novatee or mortgagee will duly perform the Principal's obligations in the Contract (including this clause). 11.1.3 Subject to the terms of the Consent Deed, the Contractor must, if requested by the Principal, execute a deed of novation on terms reasonably required by the Principal giving effect to the assignment, novation, mortgage, encumbrance or other dealing. 11.1.4 The Contractor shall enter into the: (a) Subcontractor's Consent Deed contained in ANNEXURE 1 in respect of the subcontracts set out in ITEM 22(a) promptly upon entering into a subcontract; and (b) Subcontractor's Novation Deed, contained in ANNEXURE 1 upon request by the Principal, and promptly provide the executed documents to the Principal . 11.1.5 For the purposes of effecting the terms of such documents contemplated by this clause 11.1 only, the Contractor hereby irrevocably appoints the Principal's Representative to be the Contractor's attorney with authority to execute the documents referred to in clauses 11.1.4(a) and 11.1.4(b) as are necessary to give effect to the terms of each document and to bind the Contractor accordingly. 11.2 SUBCONTRACTING GENERALLY 11.2.1 Unless otherwise agreed in writing by the Principal, the Contractor shall not without the Principal's Representative's prior written approval (which shall not be unreasonably withheld): (a) subcontract or allow a Subcontractor to subcontract any work described in ITEM 22(b); or (b) allow a Subcontractor to assign a subcontract or any payment or any other right, benefit or interest thereunder. Page 29 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 11.2.2 With a request for approval, the Contractor shall give the Principal's Representative written particulars of the work to be subcontracted and the name and address of the proposed Subcontractor. The Contractor shall give the Principal's Representative other information, which the Principal's Representative reasonably requests, including the proposed subcontract documents with all terms and conditions including prices. 11.2.3 Within 14 days of the Contractor's request for approval, the Principal's Representative shall give the Contractor written notice of approval or of the reasons why approval is not given. 11.2.4 Unless otherwise agreed in writing by the Principal, the Contractor shall ensure: (a) all Subcontractors set out in ITEM 22(A) execute the Subcontractor's Consent Deed: (b) all subcontracts contain: (i) provision that the Subcontractor shall not assign nor subcontract without the Contractor's written consent; and (ii) provisions which may be reasonably necessary to enable the Contractor to fulfil the Contractor's obligations to the Principal; (iii) provision that if the Contract is terminated and upon the Subcontractor being paid the sum certified by the Principal's Representative as owing to the Subcontractor, the Contractor and the Subcontractor shall, after the Principal has done so, promptly execute a Subcontractor's Novation Deed in the form provided in ANNEXURE 1; (iv) provision that all warranties in the subcontract are made in favour of the Principal and the Lender; (v) provision that the subcontract may be charged or otherwise secured in favour of the Lender; and (vi) without limiting clause 11.2.4(b)(ii), provisions that the Subcontractor must comply with the Worker Rights Requirements set out in ITEM 34 in connection with its subcontractors, employees, agents or those for whom it is responsible. 11.3 CONTRACTOR'S RESPONSIBILITY 11.3.1 Except where the Contract otherwise provides, the Contractor shall be liable to the Principal for the acts, defaults and omissions of Subcontractors and employees and agents of Subcontractors as if they were those of the Contractor. 11.3.2 The Principal's approval to subcontract shall not relieve the Contractor from any liability or obligation under the Contract. 12. WARRANTY REQUIREMENTS 12.1 WARRANTIES ON MATERIALS OR GOODS 12.1.1 The Contractor shall obtain a warranty from Subcontractors and other suppliers or manufacturers of the materials or goods which are material in nature to the functionality of the Works in favour of the Principal and the Lender. The warranties provided pursuant to this clause 12.1.1 must be reasonably satisfactory to the Principal, be in the name of each of the Principal, the Lender and the Contractor as beneficiaries and allow for the Principal and the Lender to assign, charge or otherwise deal Page 30 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED with the benefits of these warranties. The Contractor shall give an executed copy of such warranties to the Principal's Representative before the Date for Practical Completion. 12.1.2 The warranties which are required by this clause 12 shall not be construed in any way to modify or limit any of the rights, powers or remedies of the Principal against the Contractor whether under the Contract or otherwise. In respect of the materials or goods the subject of a warranty, the Contractor must discharge the Contractor's obligations under this Contract in respect of any defective work in respect of materials or goods for which such a warranty has been obtained despite the Principal having the benefit of the warranty. 13. INTELLECTUAL PROPERTY RIGHTS 13.1 WARRANTIES 13.1.1 The Principal warrants that, unless otherwise provided in the Contract, design, materials, documents and methods of working, each specified in the Contract or provided or directed by the Principal or the Principal's Representative shall not infringe any Intellectual Property right. 13.1.2 The Contractor warrants that any other design, materials, documents and methods of working, each provided by the Contractor, shall not infringe any Intellectual Property right. 13.1.3 Each party shall indemnify the other against such respective infringements. 13.2 INTELLECTUAL PROPERTY RIGHTS GRANTED TO THE PRINCIPAL 13.2.1 Copyright and property in the Design Documents contained in the Contract documents and any part of the Principal's Project Requirements, Basic Design and Detailed Design hereby vest in the Principal and the Principal grants to the Contractor an irrevocable and royalty free licence effective from the date of the Notice to Proceed to reproduce, adapt and utilise the Design Documents for the purpose of performing the work under the Contract only. 13.2.2 The Contractor shall do everything necessary to perfect such vesting. 13.2.3 The Contractor shall ensure that the Design Documents are not used, copied or supplied for any purpose other than the work under the Contract without the written consent of the Principal or as required by law. 13.3 FUTURE DESIGN DOCUMENTS Pursuant to Section 197 of the Copyright Act 1968 (Cth), Section 19(2) of the Designs Act 1906 (Cth), Section 14 of the Patents Act 1990 (Cth), the Copyright and Neighbouring Rights Act 2000 (PNG), the Patents and Industrial Designs Act 2000 (PNG) and pursuant to any equity and common law rights, all Intellectual Property (including copyrights, patent rights, design rights, confidential information, trade secrets and any other property of an intellectual nature) as and when the Design Documents are developed, created, made or manufactured by or through the Contractor, will automatically be owned by the Principal. 13.4 MORAL RIGHTS 13.4.1 The Contractor shall, upon the Principal's reasonable request in writing, procure from each person ("AUTHOR") engaged in the production of copyright work contained in the Contractor's Design Obligations in relation to the work under the Contract, a written consent from that Author permitting the Principal to: (a) reproduce, publish, transmit, copy or make an adaptation of any copyright work produced by the Author without identifying the Author as the author of the work; or Page 31 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (b) subject any copyright work produced by the Author to any derogatory treatment within the meaning of Section 195AG of the Copyright Act 1968 (Cth) including materially altering the copyright work in a way that is prejudicial to the Author's moral reputation, and the Contractor shall indemnify, keep indemnified and hold the Principal harmless from and against any failure by the Contractor to comply with such request. 14. LEGISLATIVE REQUIREMENTS 14.1 COMPLIANCE 14.1.1 The Contractor shall satisfy: (a) all Legislative Requirements and obtain all permits and otherwise satisfy its responsibilities as specified in ANNEXURE 9; (b) such Legislative Requirements as a Contractor carrying out work similar to work under the Contract would ordinarily be required to satisfy except as are required to be satisfied by the Principal in clause 14.4; and (c) all Legislative Requirements and obtain all permits directed by the Principal's Representative to be satisfied by or obtained on behalf of the Principal. 14.1.2 The Contractor, upon finding that a Legislative Requirement is at variance with the Contract, shall promptly give the Principal's Representative written notice thereof. 14.2 CHANGES 14.2.1 If a Legislative Requirement: (a) necessitates a change: (i) to the Works; (ii) to so much of work under the Contract as is considered material by the Principal's Representative; (iii) being the provision of services by a municipal, public or other statutory authority in connection with work under the Contract; or (iv) in a fee or charge or payment of a new fee or charge; (b) comes into effect after the date of the Contractor's Proposal but could not reasonably then have been anticipated by a competent contractor; and (c) causes the Contractor to incur more or less cost than otherwise would have been incurred, the difference shall be assessed by the Principal's Representative under clause 45.4.1 and added to or deducted from the Contract Currency Amounts. Page 32 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 14.3 SPECIFIC LEGISLATIVE REQUIREMENTS AND COMMUNITY RELATIONS 14.3.1 Specific Legislative Requirements Without limiting the Contractor's obligations under clauses 14.1 and 16: (i) the Contractor shall: A carry out the work under the Contract in accordance with; B ensure that Subcontractors comply with; and C ensure that neither the Contractor nor its Subcontractors cause the Principal to breach, the requirements contained in ANNEXURE 6 in relation to the performance of the work under the Contract; (ii) the Contractor shall take all action necessary to protect and preserve the environment from harm or damage arising from or in connection with the carrying out of work under the Contract; (iii) the Contractor shall comply with all Legislative Requirements relating to the protection or preservation of the environment; and (iv) despite: A any termination of the Contract, or B the issue of the Final Certificate pursuant to clause 46.9, or C the exercise by the Principal of its rights pursuant to clause 48.4, to the maximum extent permitted by law, the Contractor shall indemnify and keep indemnified the Principal and the Principal's employees and agents against all claims, demands, actions, costs (including legal costs), charges, expenses, damages, loss and other liability (including without limitation in tort, under any law, in respect of making good environmental damage or in defending claims) arising from or contributed to by acts or omissions of the Contractor, its employees, its Subcontractors or their employees (whether wilful, negligent or otherwise) amounting to a breach by the Contractor of its obligations under this clause 14. 14.3.2 Community Relations Subject to any other provision of the Contract: (a) The Principal shall be primarily responsible for community relations associated with the performance of the work under the Contract. (b) The Contractor shall have no direct involvement in community relations outside the Site unless in accordance with a direction from the Principal, but shall assist the Principal in its relationships and dealings with members of the community and community groups and co-operate with the Principal in dealing with matters arising out of or relating to community involvement or activity in relation to the performance of the work under the Contract. (c) The Contractor shall communicate and liaise closely with the Principal with respect to the employment of members of the local community and the creation of business opportunities for the local community during the period of the Project, Page 33 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED and the Contractor shall assist the Principal in complying with the Principal's obligations under clause 12 of the Project Agreement, provided that the Contractor is not otherwise commercially adversely affected by providing such assistance but subject to clause 14.1.1. (d) The Principal and the Contractor shall inform each other of any community relations matter coming to their knowledge, which may affect the performance of the work under the Contract or the operation of the Works. (e) In consultation with the Contractor, the Principal shall direct the Contractor as to any course of action the Principal may require in relation to matters arising that relate to this clause. The Contractor shall comply with the Principal's reasonable directions under this clause. If the Contractor incurs more or less cost than it could reasonably have anticipated at the time of the Notice to Proceed as a result of complying with a Principal's direction under this clause such costs shall be valued under clause 45.4. 14.4 MAJOR EXTERNAL APPROVALS AND RESPONSIBILITIES 14.4.1 Major approvals required to be obtained by the Contractor and the Principal during the design and construction of the Works and the responsibility for obtaining such approvals are listed in ANNEXURE 9. All costs in respect of such approvals (other than those in respect of Temporary Works) are the responsibility of the Principal; all such costs in respect of the Temporary Works are the responsibility of the Contractor. 14.4.2 Where the obtaining of the approval is the Principal's responsibility, the Contractor shall provide the Principal with the necessary information and in the form and by the time required by the Principal. Delays in the Contractor providing the Principal necessary information or obtaining approvals that are the Contractor's responsibility as detailed shall not be grounds for an extension of time to the Date for Mechanical Completion or the Date for Practical Completion under clause 43. 14.4.3 Prior to Practical Completion the Contractor shall deliver all licences, permits, registrations, approvals or consents obtained by the Contractor in respect of the Works except those provided for in this clause 14 which are the responsibility of the Principal. 14.4.4 The Contractor shall, and shall cause its Subcontractors to, comply with the Worker Rights Requirements set out in ITEM 34. 14.5 COMPLIANCE WITH THE FOREIGN CORRUPT PRACTICES ACT The Contractor hereby represents, warrants and agrees as follows: (a) None of the Contractor's directors, officers, employees, agents and representatives is now, and shall not be during the term of this Contract, a candidate for office or an employee, officer or representative of the government of Papua New Guinea or any government agency, government instrumentally, or political party of Papua New Guinea. (b) The Contractor shall not use any portion of the compensation paid by the Principal hereunder to make any payment of gift, either directly or indirectly, to any employee, officer or representative of the government of Papua New Guinea or any other government. (c) The Contractor maintains and shall continue to maintain a system of internal accounting controls consistent with its obligations under this clause. (d) The Contractor shall ensure that all Subcontracts include terms that mirror clauses 14.5(a), (b) and (c) above. Page 34 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 15. REFURBISHMENT, DELIVERY AND OWNERSHIP OF EQUIPMENT 15.1 REFURBISHMENT 15.1.1 The Principal shall arrange Refurbishment of Principal Supplied Equipment to the standard set out in the Design Documents provided by the Contractor and supply the Principal Supplied Equipment set out in the Principal's Project Requirements. 15.1.2 The Principal shall, with the Contractor's approval, arrange 3rd party certification that Refurbished Principal Supplied Equipment has been refurbished in accordance with the Design Documents by a person competent and qualified to issue such certificate prior to such Equipment being transported for loading for shipping and delivery CIF Site. 15.1.3 Upon receipt of the 3rd party certification referred to in clause 15.1.2 and acceptance thereof by the Contractor (such acceptance not to be unreasonably withheld), the Principal will submit and the Contractor agrees to enter into a deed of novation (in the form attached as ANNEXURE 15) of the Principal's refurbishment contracts. 15.2 DELIVERY AND SECURITY OF EQUIPMENT 15.2.1 The Principal shall deliver the Principal Supplied Equipment, including the Refurbished Equipment, to the Contractor, and the Contractor shall accept such Equipment CIF Site in accordance with the Principal's Project Requirements. 15.2.2 Any Principal Supplied Equipment delivered to the wharf at Site must be transferred from the point of delivery by the Contractor as a matter of priority so as to minimise demurrage costs. 15.2.3 The Contractor shall deliver Equipment (other than Principal Supplied Equipment) and materials necessary for the Works in accordance with the Procurement Plans provided by the Contractor pursuant to the Principal's Project Requirements and at such times that the Contractor determines necessary to comply with the Contract. 15.2.4 All Equipment procured by the Contractor under the Contract shall be imported into the Independent State of Papua New Guinea nominating InterOil Limited as consignee. 15.2.5 The Contractor shall take all reasonable measures necessary to protect Equipment from loss or damage occurring before the Date of Practical Completion, except Principal Supplied Equipment until delivered in accordance with the Contract. 15.3 OWNERSHIP IN EQUIPMENT PROCURED BY THE CONTRACTOR Ownership of, and unencumbered title in, Equipment or any part of it procured by the Contractor under the Contract shall pass to the Principal upon payment to the Contractor in respect of such Equipment. Upon Practical Completion or prior to removal from Site, whichever is earlier, the Principal shall be entitled to first right of refusal to acquire all Construction Plant at the residual value of that Plant as specified in ANNEXURE 14 plus any duty or tax payable upon such acquisition. 16. PROTECTION OF PEOPLE AND PROPERTY 16.1.1 Insofar as the Contract permits and subject to the provisions of the Contract, the Contractor shall: (a) provide all things and take all measures to protect people and property; (b) avoid unnecessary interference with the passage of people and vehicles; and (c) prevent nuisance and unreasonable noise and disturbance, Page 35 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED in carrying out the work under the Contract. 16.1.2 Without limiting the generality of the Contractor's obligations, they include the provision of barricades, guards, fencing, temporary roads, footpaths, warning signs, lighting, watching, traffic flagging, safety helmets and clothing, removal of obstructions and protection of services, the work under the Contract and the Works. 16.1.3 If the Contractor or the employees or agents of the Contractor damage property, including but not limited to public utilities and services and property on or adjacent to the Site, the Contractor shall, subject to clauses 18.1.1(a), 18.3 and 19.2, promptly make good the damage and pay any compensation which the law requires the Contractor to pay. 16.1.4 If the Contractor fails to comply with an obligation under this clause, the Principal, after the Principal's Representative has given reasonable written notice to the Contractor and in addition to the Principal's other rights and remedies, may have the obligation performed by others. The cost thereby incurred shall be certified by the Principal's Representative as moneys due from the Contractor to the Principal. 17. URGENT PROTECTION 17.1.1 If urgent action is necessary to protect work under the Contract, the Works and other property or people and the Contractor fails to take the action, in addition to any other remedies of the Principal, the Principal's Representative may take the necessary action. If the action was action which the Contractor should have taken at the Contractor's cost, the cost incurred by the Principal shall be a debt due from the Contractor to the Principal. 17.1.2 If time permits, the Principal's Representative shall give the Contractor prior written notice of the intention to take action pursuant to this clause. 18. CARE OF THE WORK AND REINSTATEMENT OF DAMAGE 18.1 CARE OF WORK UNDER THE CONTRACT 18.1.1 Except as provided in clause 18.3, the Contractor shall be responsible for care of: (a) the whole of work under the Contract, including all Equipment (other than Principal Supplied Equipment until delivered in accordance with the Contract), from and including the date of commencement of work under the Contract to 4:00 pm on the Date of Practical Completion, at which time responsibility for the care of the Works shall pass to the Principal; and (b) the issue of a Certificate of Practical Completion shall not relieve the Contractor from responsibility for the completion of outstanding work and items to be removed from the Site by the Contractor after 4:00 pm on the Date of Practical Completion until completion of outstanding work or compliance with clauses 37, 39 and 44. 18.1.2 Without limiting the generality of clause 18.1.1, the Contractor shall be responsible for the care of all unfixed equipment the value of which has been included in a certificate under clause 46 and the care and preservation of equipment, plant and material entrusted to the Contractor by the Principal or brought onto the Site by Subcontractors for carrying out work under the Contract. 18.2 REINSTATEMENT 18.2.1 If loss or damage, other than that caused by an Excepted Risk, occurs to work under the Contract, including any Equipment, during the period of the Contractor's care, the Contractor shall, at the Contractor's cost, rectify such loss or damage. Page 36 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 18.2.2 In the event of loss or damage being caused by any of the Excepted Risks (whether or not in combination with other risks), the Contractor shall, if and to the extent directed by the Principal's Representative, rectify the loss or damage and which shall be deemed to be a Variation. If loss or damage is caused by a combination of Excepted Risks and other risks, any such direction and consequential valuation made under clause 45.4 shall take into account the proportional responsibility of the parties. 18.3 EXCEPTED RISKS 18.3.1 The Excepted Risks causing loss or damage, for which the Principal is liable, are: (a) any negligent act, inaction or omission of the Principal's Representative, the Principal or its consultants, agents, employees or other contractors (not the Contractor or engaged by the Contractor); (b) any risk specifically excepted elsewhere in the Contract; (c) ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel not caused by the Contractor or its Subcontractors or their employees or agents; (d) use or occupation of any part of work under the Contract by the Principal or its consultants, agents or other contractors (not being employed by the Contractor); (e) blockade or picketing of the Site which prevents the access for the delivery of materials to the Site or the access of personnel, except to the extent caused by the Contractor or its Subcontractors or the Contractor's or its Subcontractors' employees or agents; and (f) war, invasion, acts of foreign enemies, hostilities or warlike operations (whether war is declared or not), civil war, mutiny, riots, strikes (except strikes by Contractor's employees or Subcontractor's employees), lock-out, civil commotion assuming the proportions of or amounting to a popular rising, military rising, insurrection, rebellion, revolution, military or usurped power, and act of terrorism committed by persons acting on behalf of or in connection with any organisation, conspiracy, confiscation, commandeering, requisition or destruction or damage by order of any government de jure or de facto or by any public authority, as and if excluded from time to time under the insurance policies required under clause 21. 18.4 FORCE MAJEURE 18.4.1 If either the Principal or the Contractor is temporarily rendered unable, wholly or in part by Force Majeure to comply with its obligations under the Contract, and notice of such Force Majeure is given to the other party in writing within 48 hours after becoming aware of the occurrence of the event of Force Majeure relied on, then such obligations (excluding any obligation to make a payment under the Contract due or becoming due immediately prior to the event of Force Majeure) of the party affected are suspended for so long as this inability continues by reason of Force Majeure. The party so affected must give written notice to the other party of the ending of that event within 48 hours after becoming aware thereof. 18.4.2 Neither the Principal nor the Contractor will be liable one to the other for delays caused by Force Majeure if notice thereof is given in accordance with clause 18.4.1. 18.4.3 Any claim on the part of the Contractor for an extension of time or an adjustment to the Project Schedule by reason of a suspension under this clause 18.4 must be made within a reasonable time after the end of the suspension, and the Contractor must promptly submit a revised Project Schedule to the Principal's Representative for review. Page 37 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 18.4.4 If there is a dispute as to the existence of a Force Majeure event, the party claiming to be affected by the Force Majeure must bear the burden of proving that it is so affected. 18.4.5 Where both parties have accepted that a Force Majeure event is in existence, the party affected must do everything reasonably possible to minimise the effects of the Force Majeure. Each party must bear its own financial consequences of the Force Majeure event and no extra payment or compensation will be due to either the Principal or the Contractor as a result of any suspension of activity attributable to the Force Majeure. 18.4.6 The Contractor must, insofar as is reasonably possible in the circumstances, maintain all safety and security measures during the period of the suspension. 19. DAMAGE TO PERSONS AND PROPERTY OTHER THAN WORK UNDER THE CONTRACT Insofar as this clause 19 applies to property, it applies to property other than the work under the Contract. 19.1 INDEMNITY BY THE CONTRACTOR 19.1.1 Subject to clause 19.1.2, the Contractor shall indemnify, keep indemnified, release the Principal from and hold the the Principal harmless against all claims for: (a) loss of or damage to the Contractor's property or the property of third parties, including employees, consultants, agents and contractors of the Contractor; and (b) death of or injury to third parties, including employees of the Contractor and of its consultants, agents and contractors, arising out of or as a consequence of the carrying out of work under the Contract on the Site even if caused or contributed to by the negligence of the parties referred to under clause 19.2. The indemnity and release in this clause 19.1.1 shall not apply to claims in respect of loss of or damage to property of, or injury to or death of a party who is referred to in clause 19.2. 19.1.2 Subclause 19.1.1 shall not apply to: (a) the extent that the Contractor's liability is limited by another provision of the Contract; (b) exclude any other right of the Principal to be indemnified by the Contractor; (c) the Contractor's obligations under clause 18.1; (d) claims in respect of the right of the Principal to have the work under the Contract carried out. 19.2 INDEMNITY BY THE PRINCIPAL The Principal shall indemnify, keep indemnified, release the Contractor from and hold the Contractor harmless against all claims: (a) referred to in clause 19.1.2(d); (b) for loss of or damage to property of the Principal or the Principal's employees, agents or contractors or employees of the Principal's agents or contractors; Page 38 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (c) for death of or injury to the Principal's employees, consultants, agents or other contractors (not being employed by the Contractor), arising in anyway on the Site even if caused or contributed to by the negligence of the parties referred to under clause 19.1.1. 20. LIMITATION OF LIABILITY AND CONSEQUENTIAL DAMAGES 20.1 SURVIVAL AND SECURITY All limitations on each party's liability contained in the Contract shall survive the issue of the Final Certificate under clause 46.9 and termination of the Contract and are not intended to restrict the rights to security provided for in clause 7.1.1 or in clause 46.1.3. 20.2 LIMIT OF LIABILITY OF THE CONTRACTOR 20.2.1 Notwithstanding anything to the contrary in the Contract and subject to clause 20.2.2, the aggregate liability of the Contractor to the Principal arising out of this Contract from any and all causes shall in no event exceed fifty percent (50%) of the Contract Sum. 20.2.2 Notwithstanding anything in the foregoing to the contrary, the limits of the Contractor's liability set forth in this clause 20.2 shall: (a) not apply to any claims for fraud, Gross Negligence or willful misconduct; (b) not apply to: (i) the Contractor's obligations under clauses: A 18 (Care of the Work and Reinstatement of Damage); B 43.10 (Liquidated damages); and C 44 (Defects Liability); (ii) the Contractor's indemnities contained in clauses: A 6; B 14; and C 19; (iii) receipt of proceeds of insurance claims under the insurance policies required under clause 21; and (c) not affect the Contractor's agreement and obligation to perform work under the Contract in accordance with this Contract regardless of whether the actual costs incurred by the Contractor in connection with completing the work under the Contract will exceed the Contract Currency Amounts or the amount that the Contractor may have originally budgeted for completion of work under the Contract. 20.3 MUTUAL EXCLUSION OF CONSEQUENTIAL DAMAGES Other than the Contractor's liability for liquidated damages under clause 43.10, neither party shall be liable to the other party, whether based on contract, tort, indemnity, under any warranty or otherwise arising out of or related to the work under the Contract or this Page 39 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED Contract, for any consequential, indirect, special, exemplary or incidental loss or damage being any: (a) loss of use of property, equipment or systems; (b) loss by reason of plant shutdown or service interruption; (c) costs of capital or expenses thereof; (d) loss of profits or revenues or the loss of use thereof; (e) claims of either party's customers or any other third party, caused by or resulting from any act or omission by the Principal's Representative, the parties or their employees, agents, consultants, subcontractors or other contractors' work under the Contract and each party hereby releases the other party from any liability for all such losses, costs, loss of profits and claims. 21. INSURANCE OF THE WORK UNDER THE CONTRACT 21.1 PRINCIPAL TO INSURE 21.1.1 On or before the date of the Notice to Proceed, the Principal shall insure the work under the Contract, other than Construction Plant, under policies in terms no less beneficial to the insured than the Contractor's All Risk policy included in ANNEXURE 4. The Principal shall ensure that the Lender, the Contractor and all Subcontractors are named as co-insureds and must maintain such insurance while ever the Contractor has an interest in work under the Contract. 21.1.2 The Contractor shall be responsible for: (a) all "excesses" under the policy of insurance held by the Principal in respect of any claim made by: (i) the Contractor or its Subcontractors, or (ii) the Lender or the Principal where such claim is caused or contributed to by the Contractor (in the latter case the Contractor's responsibility for the excess shall be limited to its proportional contribution); (b) all items or matters excluded from the policy of insurance for which the Contractor or its Subcontractors are otherwise liable under the provisions of this Contract; and the Contractor's liability for excesses under this clause 21.1.2 shall not relieve the Contractor from any of its other liabilities under the Contract. 21.1.3 The Contractor shall indemnify the Principal against any and all loss (howsoever arising) due to the Contractor or any of its Subcontractors having failed to and the Principal shall not be responsible for any claim by reason that the Contractor or any of its Subcontractors have failed to: (a) fully inform itself or themselves of, or comply with, the express terms and conditions of the policy held by the Principal with the exception of any reference to the Principal's proposal or other representations or disclosures to the insurer; and (b) comply in any respect with the claim procedures set down in the policy. Page 40 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 22. PUBLIC LIABILITY INSURANCE 22.1 PRINCIPAL TO INSURE 22.1.1 On or before the date of the Notice to Proceed, the Principal shall effect in relation to work under the Contract, a Public Liability Policy in terms no less beneficial to the insured than that policy included in ANNEXURE 4. The Principal shall ensure that the Lender, the Contractor and all Subcontractors are named as co-insureds and must maintain such insurance while ever the Contractor has an interest in work under the Contract. 22.1.2 The Contractor shall be responsible for: (a) all "excesses" under the policy of insurance held by the Principal in respect of any claim made by: (i) the Contractor or its Subcontractors, or (ii) the Lender or the Principal where such claim is caused or contributed to by the Contractor (in the latter case the Contractor's responsibility for the excess shall be limited to its proportional contribution); (b) all items or matters excluded from the policy of insurance for which the Contractor or its Subcontractors are otherwise liable under the provisions of this Contract; and the Contractor's liability for excesses under this clause 22.1.2 shall not relieve the Contractor from any of its other liabilities under the Contract. 22.1.3 The Contractor shall indemnify the Principal against any and all loss (howsoever arising) due to the Contractor or any of its Subcontractors having failed to and the Principal shall not be responsible for any claim by reason that the Contractor or any of its Subcontractors have failed to: (a) fully inform itself or themselves of, or comply with, the express terms and conditions of the policy held by the Principal with the exception of any reference to the Principal's proposal or other representations or disclosures to the insurer; and (b) comply in any respect with the claim procedures set down in the policy. 23. INSURANCE OF EMPLOYEES 23.1.1 Before commencing the work under the Contract, the Contractor shall insure against liability for death of or injury to persons employed by the Contractor, including liability by statute and at common law. Such insurance cover shall be maintained until the completion of all work under the Contract. 23.1.2 Where permitted by law, the insurance policy or policies shall be extended to provide indemnity for the Principal's statutory liability to the Contractor's employees and if permitted by law shall note the interests of the Lender. 23.1.3 The Contractor shall ensure that all Subcontractors have similarly insured their employees. Page 41 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 24. PROFESSIONAL INDEMNITY INSURANCE 24.1 CONTRACTOR 24.1.1 Before the Contractor commences work under the Contract, the Contractor shall effect a professional indemnity insurance policy with cover in relation to the work under the Contract for any one claim and with a total aggregate cover of not less than the sum stated in ITEM 25. 24.1.2 The policy and such level of cover shall be maintained until the Final Certificate is issued pursuant to clause 46.9 or termination of the Contract and thereafter for a period as is stated in ITEM 25. 24.2 CONSULTANTS 24.2.1 The Contractor shall ensure that every Consultant, if within a category stated in ITEM 25, is insured for professional indemnity with a cover not less than the sum stated in ITEM 25. 24.2.2 Each Consultant's policy shall be maintained until the Final Certificate is issued pursuant to clause 46.9 or termination of the Contract and thereafter for a period as is stated in ITEM 25. 25. INSPECTION AND PROVISIONS OF INSURANCE POLICIES 25.1 PROOF OF INSURANCE 25.1.1 Before the Contractor commences work under the Contract and whenever requested in writing by the other party, a party liable to insure shall provide satisfactory evidence of such insurance effected and maintained. 25.1.2 Insurance shall not limit liabilities or obligations under other provisions of the Contract. 25.2 FAILURE TO PRODUCE PROOF OF INSURANCE If a party responsible for providing insurance fails promptly to provide satisfactory evidence of compliance with the insurance obligations required by this Contract or fails to effect or keep in force any of the insurances required by this Contract to the approval of the other party that party may effect and maintain the insurance and pay the premiums. The amount so paid shall be a debt due from the party in default to the other party. The rights given by this clause 25.2 are in addition to any other right. 25.3 NOTICES FROM OR TO INSURER The party responsible for the insurance shall ensure that each insurance policy contains provisions acceptable to the other party which: (a) requires the insurer to inform both parties, whenever the insurer gives a party or a Subcontractor a notice in connection with the policy; (b) provides that a notice of claim given to the insurer by either party, the Principal's Representative or a Subcontractor shall be accepted by the insurer as a notice of claim given by both parties, the Principal's Representative and the Subcontractor; and (c) requires the insurer, whenever the party fails to maintain the policy, promptly to give written notice thereof to both parties and prior to cancellation of the policy. Page 42 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 25.4 NOTICES OF POTENTIAL CLAIMS The Contractor shall, as soon as practicable, inform the Principal in writing of any occurrence that may give rise to a claim under a policy of insurance and shall keep the Principal informed of subsequent developments concerning the claim. The Contractor shall ensure that Subcontractors in respect of their operations similarly inform the Principal. 25.5 SETTLEMENT OF CLAIMS Upon settlement of a claim under the insurance required by clause 21: (a) to the extent that reinstatement has been the subject of a payment or allowance by the Principal to the Contractor, if the Contractor has not completed such reinstatement, insurance moneys received shall, if requested by either party, be paid into an agreed bank account in the joint names of the parties. As the Contractor reinstates the loss or damage, the Principal's Representative shall certify, on a monthly basis, against the joint account for the cost of reinstatement; and (b) to the extent that reinstatement has not been the subject of a payment or allowance by the Principal to the Contractor, the Contractor shall be entitled immediately to receive from insurance moneys received, the amount of such moneys so paid in relation to any loss suffered by the Contractor. 25.6 CROSS LIABILITY Except for the insurance of employees policy, any insurance required to be effected in joint names in accordance with the Contract shall include a cross liability clause in which the insurer agrees to waive all rights of subrogation or action against any of the persons constituting the insured and for the purpose of which the insurer accepts the term 'insured' as applying to each of the persons constituting the insured as if a separate policy of insurance had been issued to each of them (subject always to the overall sum insured not being increased thereby). 25.7 INSURANCE GENERALLY 25.7.1 Before the Contractor commences the work under the Contract, the Contractor must acquire and maintain Construction Plant Insurance for the full replacement value of the Construction Plant and any other item of plant or equipment that is owned, hired or leased and is used by the Contractor in the performance of the work under the Contract. The Contractor must ensure that all Subcontractors' Construction Plant is similarly insured. The Contractor must ensure that all such Construction Plant Insurance names the Principal and the Lender as additional insureds. 25.7.2 All insurances which the Principal or the Contractor effects under the Contract must : (a) be effected with insurers who, as a minimum, have a claim paying ability with a rating of no less than A as determined by Standard and Poors' Australia (or a corresponding rating issued by another rating agency); (b) not contain any exclusion, endorsement or alteration effected after the inception date of the policy which may materially affect the work under the Contract, unless it is first approved by the Contractor or the Principal as the case may be, and the Lender; and (c) except for non-project specific insurance contain a term which requires the insurer to notify the Principal and the Lender in accordance with clause 25.3(c). Page 43 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 25.7.3 As and when required in accordance with the progress of work under the Contract, the Principal shall effect, in relation to work under the Contract and in relation to the Contract, insurance policies in terms no less beneficial to the insured than those policies referred to in ANNEXURE 4 in addition to the policies required under clauses 21 and 22. The Principal shall ensure that the Contractor and all Subcontractors are named as co-insureds under these additional policies and must maintain such insurance while ever the Contractor has an insurable interest in work under the Contract. The provisions of clauses 22.1.2 and 22.1.3 shall also apply hereunder mutatis mutandis. 25.7.4 The Principal shall be responsible for insuring all equipment, plant and materials for incorporation into the Works which is transported by ship or other means to the Site by the Contractor and is consigned to the Principal, including by road from the wharf in Port Moresby to the Site, provided that the Contractor notifies the Principal in writing with details of cargo prior to shipment and provides the Principal with a copy of the bill of lading upon shipment. 26. PRINCIPAL'S REPRESENTATIVE 26.1.1 The Principal shall ensure that at all times there is a Principal's Representative. The Principal's Representative shall act as agent for and in the interest of the Principal, except that in the role of valuer and certifier and in making determinations the Principal's Representative shall act reasonably and in good faith. 26.1.2 Except where the Contract otherwise provides, the Principal's Representative may give a direction orally but shall as soon as practicable confirm it in writing. If the Contractor in writing requests the Principal's Representative to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Principal's Representative does so. If pursuant to a provision of the Contract enabling the Principal's Representative to give directions, the Principal's Representative gives a direction, the Contractor shall comply with the direction. 27. SITE SUPERVISORS 27.1.1 The Principal may from time to time appoint individuals (SITE SUPERVISORS) to exercise certain functions designated by the Principal and specific delegated Principal's Representative's functions, provided that: (a) no aspect of any function shall at any one time be the subject of appointment or delegation to more than one Site Supervisor; (b) delegation shall not prevent the Principal's Representative exercising any function; (c) the Principal's Representative forthwith gives the Contractor written notice of, respectively: (i) the appointment, including the Site Supervisor's name and appointed or delegated functions; and (ii) the termination of each appointment. 28. NO PERSONAL LIABILITY The Contractor and the Principal agree that neither the Principal's Representative nor any other Site Supervisor shall be under any personal liability to the Contractor or the Principal (as the case may be) for anything done or omitted to be done in the exercise of the functions of the Principal's Representative or Site Supervisor (as the case may be). The Contractor agrees that this agreement may be pleaded as a defence to any claim by the Contractor against the Principal's Representative or Site Supervisor (as the case may be). Page 44 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF INTEROIL LIMITED CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 29 CONTRACTOR'S REPRESENTATIVE 29.1.1 The Contractor shall supervise work under the Contract directly through a competent representative (CONTRACTOR'S REPRESENTATIVE). Matters within the Contractor's Representative's knowledge (including directions received) shall be deemed to be within the Contractor's knowledge. 29.1.2 The Contractor shall forthwith give the Principal's Representative written notice of the name of Contractor's Representative and any subsequent changes. 29.1.3 If the Principal's Representative at any time makes a reasonable objection to the appointment or continuation in office of the Contractor's Representative, the Contractor shall terminate the appointment and appoint another representative in his place. 29.1.4 Without limiting the generality of this clause, the Contractor shall assign adequate supervisory personnel to ensure that the work under the Contract is being performed in accordance with the Contract. In the event the Principal's Representative is not satisfied that this is being achieved, the Principal's Representative may instruct the Contractor to assign additional or alternative personnel to the Contract. 30. CONTRACTOR'S EMPLOYEES AND SUBCONTRACTORS 30.1 GENERALLY 30.1.1 The Principal's Representative may direct the Contractor to have removed, within a stated time, from the Site or from any activity of work under the Contract, any person employed on work under the Contract who, in the Principal's Representative's opinion, is incompetent, negligent or guilty of misconduct. 30.1.2 The Contractor shall provide an adequate number of qualified personnel to perform engineering, design, architectural or other professional services and qualified and competent supervisory staff, crafts persons and other personnel to perform the work under the Contract. 30.1.3 If requested by the Principal's Representative, the Contractor shall furnish the Principal's Representative with the names and addresses of the Contractor's Subcontractors, field employees of the Contractor and its Subcontractors, and others who have performed or are performing the work under the Contract hereunder. 30.1.4 The Contractor shall be solely responsible for the engagement and management of the Contractor's Subcontractors in the performance of the work under the Contract, for all work under the Contract performed by Contractor's Subcontractors and for all acts and omissions of the Contractor's Subcontractors as provided in the Contract. 31. CONTRACTOR'S PROJECT MANAGEMENT TEAM 31.1.1 The Contractor: (a) must ensure the members of Contractor's Project Management Team listed in ANNEXURE 10 are engaged in the provision of work under the Contract in the respective capacities also set out in ANNEXURE 10; (b) must only replace members of Contractor's Project Management Team: (i) in circumstances of death, serious illness, change of employment or request by the Principal's Representative; and (ii) with others (having equivalent skill and experience) approved by the Principal's Representative; and - -------------------------------------------------------------------------------- Page 45 PNG REFINERY PROJECT INTEROIL LIMITED - - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND CLOUGH NIUGINI LIMITED ANNEXURES (c) must promptly fill any vacancy of the Contractor's Project Management Team with a person approved by the Principal's Representative. 32. SITE 32.1 POSSESSION 32.1.1 Provided the Contractor has complied with clause 25.1, the Principal shall before the expiry of the time in ITEM 26, give the Contractor possession of such of the Site necessary for commencement of work under the Contract on Site. If the Principal has not given the Contractor possession of the whole Site by that time, the Principal shall give the Contractor possession of such further portions of the Site as may, from time to time, be necessary for carrying out work under the Contract. Subject to clause 48.7, delay by the Principal in giving possession shall not be a breach of the Contract. 32.1.2 Possession of the Site shall confer on the Contractor a right to only such use and control as is necessary to enable the Contractor to carry out work under the Contract and shall exclude any purpose not connected with work under the Contract, unless approved by the Principal's Representative. 32.2 ACCESS FOR PRINCIPAL AND OTHERS 32.2.1 The Principal and the Principal's employees, consultants and agents may, at any time after reasonable written notice to the Contractor, have access to any part of the Site for any purpose. The Contractor shall coordinate and facilitate the execution of the work on the Site by the Principal's employees, consultants, and agents and shall cooperate with them and coordinate the Contractor's work (including programming) with their work. If requested by the Contractor, the Principal shall give to the Contractor the names and roles of the persons so engaged. 32.2.2 The Contractor shall at all reasonable times give the Principal's Representative, the Principal and other persons authorised in writing by the Principal access to work under the Contract at any place where the work under the Contract is being carried out or materials are being prepared or stored. The Contractor shall assist the Principal's Representative, the Principal or other persons authorised in writing by the Principal in carrying out design, review and inspection. 32.2.3 The Principal shall ensure that none of the persons referred to in this clause 32.2 impedes the Contractor. 32.2.4 The Principal shall ensure that its employees, consultants and agents who enter the Site shall comply with the requirements of the Contractor in relation to workplace health and safety. 32.2.5 The Contractor shall not, without the approval of the Principal's Representative, permit entry to the Site by any person not required on the Site for the performance of the work under the Contract. 32.3 MINERALS, FOSSILS AND RELICS 32.3.1 Valuable minerals, fossils, articles or objects of antiquity or of anthropological or archaeological interest, treasure trove, coins and articles of value found on the Site shall as between the parties be and remain the property of the Principal. Immediately upon the discovery of these things the Contractor shall: (a) take precautions to prevent their loss, removal or damage; and (b) give the Principal's Representative written notice of the discovery. - -------------------------------------------------------------------------------- Page 46 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF INTEROIL LIMITED CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 32.3.2 All costs so incurred by the Contractor shall be assessed by the Principal's Representative and added to the Contract Currency Amounts. 33. SETTING OUT THE WORKS 33.1 SETTING OUT The Principal shall ensure that the Principal's Representative gives the Contractor the data, Survey Marks and like information necessary for the Contractor to set out the Works, together with those Survey Marks specified in the Contract. Thereupon the Contractor shall set out the Works in accordance with the Contract. 33.2 ERRORS IN SETTING OUT The Contractor shall rectify every error in the position, level, dimensions or alignment of any work under the Contract after promptly notifying the Principal's Representative and unless the Principal's Representative within 3 days directs otherwise. If the error was caused by incorrect data, Survey Marks or information given by the Principal's Representative, the cost incurred by the Contractor in rectifying the error shall be assessed by the Principal's Representative and added to the Contract Currency Amounts. 33.3 CARE OF SURVEY MARKS 33.3.1 The Contractor shall keep in their true positions all Survey Marks supplied by the Principal's Representative. 33.3.2 The Contractor shall reinstate any Survey Mark disturbed, after promptly notifying the Principal's Representative and unless the Principal's Representative within 3 days directs otherwise. 33.3.3 If the disturbance was caused by the Principal's Representative or a person referred to in clause 32.2 other than the Contractor, the cost incurred by the Contractor in reinstating the Survey Mark shall be assessed by the Principal's Representative and added to the Contract Currency Amounts. 34. CLEANING UP 34.1 CLEAN AND TIDY SITE 34.1.1 The Contractor shall keep the Site and work under the Contract clean and tidy and regularly remove rubbish and surplus material. 34.1.2 Within 14 days after the Date of Practical Completion, the Contractor shall remove Temporary Works and Construction Plant. The Principal's Representative may extend the time to enable the Contractor to perform remaining obligations. 34.1.3 If the Contractor fails to comply with the preceding obligations in this clause, the Principal's Representative may direct the Contractor to rectify the non-compliance and the time for rectification. If: (a) the Contractor fails to comply with such a direction; and (b) that failure has not been made good within 5 days after the Contractor receives written notice from the Principal's Representative that the Principal intends to have the subject work carried out by others, the Principal may have that work so carried out and the Principal's Representative shall certify the cost incurred as moneys due from the Contractor to the Principal. The rights given by this paragraph are additional to any other rights and remedies. - -------------------------------------------------------------------------------- Page 47 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF INTEROIL LIMITED CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 34.2 HAZARDOUS MATERIALS Contractor shall comply with all governmental, national and local laws, both in effect and in the process of ratification at the date of signing of this Contract including any state law or regulation defining hazardous substance or hazardous waste, and any materials containing polychlorinated biphenyls or asbestos that is or may become friable. All normal construction materials such as petroleum products shall be properly stored, dispensed and safeguarded by Contractor. Any spills or other contamination under the control of the Contractor, or the Contractor's Subcontractors shall be the sole responsibility of the Contractor to contain, clean up and properly dispose of. 35. LATENT CONDITIONS 35.1 SITE Latent conditions with respect to the Site are physical conditions on the Site or its surroundings, including artificial things which differ materially from the physical conditions which should reasonably have been anticipated by the Contractor at the time of the Contractor's Proposal if the Contractor had: (a) examined all Principal Supplied Information; and (b) inspected the Site and its surroundings, in respect of which the Contractor acknowledges that it had carried out the Early Work in relation to the Site. 35.2 PRINCIPAL SUPPLIED EQUIPMENT Latent conditions with respect to Principal Supplied Equipment shall mean defects not discovered during Refurbishment of the Principal Supplied Equipment and which are detrimental to the safe and efficient operating life of the Principal Supplied Equipment, and cause the Principal Supplied Equipment to be unfit for its intended purpose. 35.3 NOTIFICATION 35.3.1 The Contractor, upon becoming aware of a latent condition while carrying out work under the Contract, shall promptly, and where possible before the latent condition is disturbed, give the Principal's Representative written notice of the general nature thereof. 35.3.2 If required by the Principal's Representative promptly after receiving notice under clause 35.3.1, the Contractor shall, as soon as practicable, give the Principal's Representative a written statement of: (a) the latent condition encountered and the respects in which it differs materially; (b) the additional work, resources, time and cost which the Contractor estimates to be necessary to deal with the latent condition; and (c) other details reasonably required by the Principal's Representative including without limitation the Contractor's proposal for dealing with the latent condition. 35.3.3 The Contractor shall take all necessary action to overcome the affect of a latent condition to the reasonable satisfaction of the Principal. 35.4 DEEMED VARIATION The effect of the latent condition shall be a deemed Variation, priced having no regard to additional cost incurred more than 28 days before the date on which the Contractor gave the notice required by clause 35.3.1 but so as to include the Contractor's other costs for each compliance with clause 35.3.2. - -------------------------------------------------------------------------------- Page 48 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF INTEROIL LIMITED CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 36 MATERIALS, LABOUR AND CONSTRUCTION PLANT 36.1.1 Except where the Contract otherwise provides, the Contractor shall supply everything necessary for the proper performance of the Contractor's obligations and discharge of the Contractor's liabilities. 36.1.2 In respect of the Equipment and any Construction Plant and other equipment, plant and materials to be supplied by the Contractor in connection with the Contract, the Principal's Representative may direct the Contractor to: (a) supply particulars of the mode and place of manufacture, the source of supply, the performance capacities and other related information; and (b) arrange reasonable inspection at such place or sources by the Principal's Representative, the Principal and persons authorised by the Principal. 36.1.3 The Principal's Representative may give the Contractor a written direction not to remove Temporary Works, Construction Plant or other equipment, plant and materials from the Site. Thereafter the Contractor shall not remove them without the Principal's Representative's prior written approval (which shall not be unreasonably withheld). 36.1.4 The Equipment, Temporary Works, Construction Plant and other equipment, plant and materials used by the Contractor in the course of the Contract must be in good order, be regularly well maintained in accordance with accepted industry standards and be so as not to prejudice the execution of the work under the Contract in accordance with the Contract. 36.1.5 The Contractor shall be responsible for any temporary facilities for gas water and electricity necessary for construction. The Principal shall be responsible for the provision of potable water necessary for the construction camp facilities. 36.1.6 Temporary buildings and utilities (other than the construction camp) may be erected by the Contractor only with the prior written approval of Principal's Representative and shall be built with labour and materials furnished by Contractor. The temporary buildings and utilities shall remain the property of the Contractor (unless otherwise designated in the Contract) and shall be removed by the Contractor and the site of temporary facilities shall be returned to its original condition by the Contractor at its own expense upon completion of the work under the Contract. 36.1.7 The Contractor shall use only established Site roadways, or use temporary Site roadways and designated access routes when and as authorised by the Principal's Representative. When materials and equipment are transported during the work under the Contract, vehicles shall not be loaded beyond the loading capacity prescribed by Legislative Requirements. The Contractor shall not block any fire lanes. 36.1.8 The Contractor must ensure all Equipment, Construction Plant and other equipment, plant and materials used on the Site comply with all relevant Legislative Requirements. 37. QUALITY 37.1 QUALITY OF MATERIAL AND WORK The Contractor shall use the materials and standards of workmanship required by the Contract. In the absence of any requirement to the contrary, the Contractor shall use suitable new materials and proper and tradesmanlike workmanship. 37.2 QUALITY ASSURANCE 37.2.1 The Contractor shall establish, implement and maintain a quality assurance program which shall be submitted to the Principal for review and approval. - -------------------------------------------------------------------------------- Page 49 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 37.2.2 The Contractor shall ensure that all provisions for quality assurance apply equally to all Subcontractors. 37.2.3 Within 6 weeks after the date of the Notice to Proceed or a mutually agreed time the Contractor shall submit to the Principal for review the Contractor's quality plan. 37.2.4 Any changes to the Contractor's quality plan as reasonably requested by the Principal in order to provide assurance of satisfactory compliance to the documents must be implemented by the Contractor. 37.2.5 The Contractor shall participate in and allow reasonable access to the Principal's agents to periodically audit the Contractor's quality assurance program and quality plan. 37.2.6 Any such quality system shall be used only as an aid to achieving compliance with the Contract and to document such compliance. Such system shall not discharge the Contractor's other obligations under the Contract. 37.3 DEFECTIVE WORK 37.3.1 If the Principal's Representative becomes aware of work under the Contract carried out (including material provided) by the Contractor which does not comply with the Contract, the Principal's Representative shall as soon as practicable give the Contractor written details thereof. If the subject work under the Contract has not been rectified, the Principal's Representative may direct the Contractor to do any one or more of the following (including times for commencement and completion): (a) remove the material from the Site; (b) demolish the work; (c) reconstruct, replace or correct the work; and (d) not deliver it to the Site. 37.3.2 If (a) the Contractor fails to comply with such a direction; and (b) that failure has not been made good within 8 days after the Contractor receives written notice from the Principal's Representative that the Principal intends to have the subject work rectified by others, the Principal may have that work so rectified and the Principal's Representative shall certify the cost incurred as moneys due from the Contractor to the Principal. 37.4 ACCEPTANCE OF DEFECTIVE WORK 37.4.1 Instead of a direction pursuant to clause 37.3, the Principal's Representative may direct the Contractor that the Principal elects to accept the subject work, whereupon there shall be a deemed Variation. 37.4.2 The Principal's Representative may also direct a Variation in connection with work under the Contract. Page 50 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 37.4.3 In assessing the adjustment to be made to the Contract Currency Amounts following the acceptance of a Variation in connection with work under the Contract, the Principal's Representative may have regard to: (a) the reduction in the value of the Works resulting from that acceptance or Variation; and (b) the costs which would have been incurred by the Contractor in rectifying the subject work if it had not been accepted or the Variation had not been directed. 37.5 TIMING 37.5.1 The Principal's Representative may give a direction pursuant to this clause 37 at any time before the expiry of the last Defects Liability Period. 37.5.2 The Contractor agrees: (a) the Principal's Representative's rights under clause 37 are not prejudiced or otherwise affected by any Payment Certificate or payment under clause 46, test or failure to test, approval or acceptance by the Principal's Representative or Principal in respect of any work; and (b) the rights of the Principal's Representative under this clause 37 do not prejudice or otherwise affect any other rights of the Principal's Representative or Principal in respect of defective work. 38. PROCESS PERFORMANCE TEST AND RELIABILITY TEST 38.1 CONDITIONS PRECEDENT TO THE PROCESS PERFORMANCE TEST AND RELIABILITY TEST The Process Performance Test and Reliability Test shall not be conducted until the Principal's Representative issues a Mechanical Completion Certificate for the Works. 38.2 CONDUCTING THE PROCESS PERFORMANCE TEST AND RELIABILITY TEST The Process Performance Test and Reliability Test shall be conducted in accordance with the Principal's Project Requirements. 39. EXAMINATION AND TESTING 39.1 TESTS 39.1.1 At any time before the expiry of the last Defects Liability Period, the Principal's Representative may direct that any work under the Contract be tested. The Contractor shall give such assistance and samples and make accessible such parts of the work under the Contract as may be directed by the Principal's Representative. 39.1.2 Where the Contract provides that all or any part of the Works shall comply with performance criteria, other than the Process Performance Test and Reliability Test the Principal's Representative may direct that a formal performance trial be carried out to verify that the relevant part of the Works comply with those performance criteria. 39.1.3 If at any time in the opinion the Principal's Representative the performance of the relevant part of the Works is below the criteria specified in the Contract, the Contractor shall forthwith carry out such modifications or additional work as may be necessary to achieve such performance criteria. Page 51 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 39.2 COVERING UP The Principal's Representative may direct that any part of work under the Contract shall not be covered up or made inaccessible without the Principal's Representative's prior written direction. 39.3 WHO CONDUCTS Tests shall be conducted as provided elsewhere in the Contract or by the Principal's Representative or a person (which may include the Contractor) nominated by the Principal's Representative. 39.4 NOTICE The Principal's Representative or the Contractor (whichever is to conduct the Test) shall give reasonable written notice to the other of the date, time and place of the Test. If the other does not attend, the Test may nevertheless proceed. 39.5 DELAY Without prejudice to any other right, if the Contractor or the Principal's Representative delays in conducting a Test, the other, after giving reasonable written notice of intention to do so, may conduct the Test. 39.6 COMPLETION AND RESULTS 39.6.1 On completion of the Tests, the Contractor shall make good work under the Contract so that it fully complies with the Contract. 39.6.2 Results of Tests shall be promptly made available by each party to the other and to the Principal's Representative. 39.7 COSTS Costs in connection with testing pursuant to this clause 39 shall be borne by the Principal unless the Test is consequent upon or reveals a failure of the Contractor to comply with the Contract (including this clause 39) in which case they shall be borne by the Contractor. 40. WORKING HOURS If the working hours and working days on the Site are not stated elsewhere in the Contract, they shall be as notified by the Contractor to the Principal's Representative before commencement of work on Site. They shall not be varied without the Principal's Representative's prior written approval, except when, in the interests of safety of persons or property, the Contractor finds it necessary to carry out work under the Contract otherwise, whereupon the Contractor shall give the Principal's Representative written notice of those circumstances as early as possible. 41. PROJECT SCHEDULE 41.1 SUBMISSION AND APPROVAL OF PROJECT SCHEDULE 41.1.1 The Contractor shall update the Project Schedule on a monthly basis from the date of the Notice to Proceed and be in the form required by the Principal's Project Requirements. 41.1.2 The Principal's Representative shall comment on the Project Schedule within 14 days of its receipt except when such longer period has been agreed. Page 52 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 41.2 APPLICATION OF THE PROJECT SCHEDULE 41.2.1 The Project Schedule forms part of the Contract and is the basis for the Contractor's rights and obligations under clause 43.5. 41.2.2 The Project Schedule may be used by the Principal's Representative to evaluate claims for an extension of time to the Date for Mechanical Completion or the Date for Practical Completion under clause 43.3. 41.2.3 Despite any other provision of this clause 41.2: (a) any program or schedule prepared by the Contractor shall not be used as a Project Schedule for the purposes of this clause 41 until it has been approved by the Principal's Representative; (b) the Principal's Representative may require the provision of an updated Project Schedule after a change in the Date for Practical Completion or any circumstances affecting the progress of work under the Contract; (c) the Principal's Representative may direct the time that various stages or portions of the work under the Contract shall be carried out including without limitation accelerating the progress of the work under the Contract and bringing forward the Date for Practical Completion by a reasonable period having regard to the Principal's Representative's direction; (d) the Contractor shall not be entitled to any addition to the Contract Currency Amounts arising from a direction of the Principal's Representative under this clause 41.2.3. unless the Contractor has notified the Principal's Representative that the direction will result in the Contractor incurring more cost (together with an estimate of that cost) within 7 days after receipt by the Contractor of the direction and before the Contractor gives effect to the direction, and the Principal's Representative then confirms the direction in writing. 42. SUSPENSION 42.1 SUSPENSION BY THE PRINCIPAL'S REPRESENTATIVE Subject to the terms of the Consent Deed, the Principal's Representative may direct the Contractor to suspend the carrying out of the whole or part of work under the Contract for such time as the Principal's Representative thinks fit, if the Principal's Representative is of the opinion that it is necessary: (a) because of an act, default or omission of: (i) the Principal's Representative, the Principal or its employees, consultants, agents or other contractors (not being employed by the Contractor); or (ii) the Contractor, a Subcontractor or the employees or agents of either; (b) for the protection or safety of any person or property; or (c) to comply with a court order. 42.2 SUSPENSION BY THE CONTRACTOR 42.2.1 Subject to the terms of the Consent Deed, if the Contractor wishes to suspend the carrying out of the whole or part of work under the Contract, otherwise than pursuant to clause 48.9, the Contractor shall obtain the Principal's Representative's prior written approval. The Page 53 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED Principal's Representative may approve the suspension and may impose conditions of approval. 42.2.2 The Contractor shall not be entitled to any extension of time to the Date for Mechanical Completion or the Date for Practical Completion in connection with a suspension approved by the Principal's Representative under this clause 42.2. 42.3 RECOMMENCEMENT As soon as the Principal's Representative becomes aware that the reason for any suspension no longer exists, the Principal's Representative shall direct the Contractor to recommence suspended work under the Contract as soon as reasonably practicable. The Contractor may recommence work under the Contract suspended pursuant to clause 42 after receiving such direction or if the suspension is under clause 48.9 at any time after giving reasonable notice to the Principal's Representative. 42.4 COST 42.4.1 The Contractor shall bear the cost of suspension pursuant to clause 42.1(a)(ii) and clause 42.2. If the Contractor made the protection, safety or court order necessary, the Contractor shall bear the cost of suspension pursuant to clauses 42.1(b) or 42.1(c). If the Contractor otherwise incurs more or less cost than otherwise would have been incurred, the difference shall be assessed by the Principal's Representative and added to or deducted from the Contract Currency Amounts. 43. TIME AND PROGRESS 43.1 PROGRESS The Contractor shall ensure that work under the Contract reaches Mechanical Completion and Practical Completion by the Date for Mechanical Completion and the Date for Practical Completion respectively. The Contractor shall proceed with the work under the Contract with due expedition and without delay. 43.2 NOTICE OF DELAY A party becoming aware of anything which will probably cause delay to work under the Contract shall as soon as practicable and within 21 days of becoming so aware give the Principal's Representative and the other party written assessment of that cause and the estimated delay. 43.3 CLAIM 43.3.1 The Contractor shall be entitled to such extension of time for carrying out work under the Contract (including reaching Mechanical Completion or Practical Completion) as the Principal's Representative assesses, if: (a) the Contractor is or will be delayed in reaching Mechanical Completion or Practical Completion by a Qualifying Cause of Delay; and (b) the Contractor gives the Principal's Representative, within 14 days after the commencement of the delay, a written claim for an extension of time for reaching Mechanical Completion or Practical Completion evidencing the facts of causation and of the delay to work under the Contract (including extent). 43.3.2 If further delay results from a Qualifying Cause of Delay evidenced in a claim under clause 43.3.1(b), the Contractor shall as soon as becoming aware of the delay claim an extension of time for reaching Mechanical Completion or Practical Completion for such delay by promptly giving the Principal's Representative a written claim evidencing the facts of that Page 54 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED delay, within 14 days of giving a written claim for an extension of time under clause 43.3.1(b). 43.4 ASSESSMENT 43.4.1 When both Non-Qualifying Causes of Delay and Qualifying Causes of Delay overlap, the Contractor shall be entitled to an extension of time for reaching Mechanical Completion or Practical Completion provided that the Qualifying Cause of Delay is a critical path item on the Project Schedule. 43.4.2 In assessing each extension of time the Principal's Representative may have regard as to whether: (a) work under the Contract can nevertheless reach Mechanical Completion or Practical Completion without an extension of time for reaching Mechanical Completion or Practical Completion; (b) the Contractor can accelerate; or (c) the Contractor has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of the delay. 43.4.3 For the avoidance of doubt, in determining an extension of time for reaching Mechanical Completion or Practical Completion the Principal's Representative may have regard to the Project Schedule at the date of the event or events on which the claim is based. 43.5 EXTENSION OF TIME 43.5.1 Within 28 days after receiving the Contractor's claim for an extension of time, the Principal's Representative shall give to the Contractor and the Principal a written direction evidencing the extension of time for reaching Mechanical Completion or Practical Completion so assessed. A delay by the Principal or failure of the Principal's Representative to grant a reasonable extension of time within that 28 day period shall not cause the Date for Mechanical Completion or Date for Practical Completion to be set at large, but nothing in this clause 43.5.1 shall prejudice any right of the Contractor to damages. 43.5.2 Notwithstanding that the Contractor is not entitled to or has not claimed an extension of time for reaching Mechanical Completion or Practical Completion, the Principal's Representative may at any time and from time to time before issuing the Final Certificate direct an extension of time for reaching Mechanical Completion or Practical Completion. 43.6 REDUCTION OF TIME Where any direction given by the Principal's Representative (including any Variation) has the effect of reducing the amount of time required by the Contractor to achieve Mechanical Completion or Practical Completion: (a) the Principal's Representative may give to the Contractor and the Principal a written direction bringing forward the Date for Mechanical Completion or Date for Practical Completion by a reasonable period; and (b) the Date for Mechanical Completion and the Date for Practical Completion for all purposes under the Contract shall be the date so directed. Page 55 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 43.7 MECHANICAL COMPLETION 43.7.1 Entire Works Mechanical Completion may be accomplished on a subsystem by subsystem basis, the sum total of which and the integrated operation thereof shall constitute Mechanical Completion of the Works. However, a Mechanical Completion Certificate shall be issued with respect to the Works only when the entire Works has achieved Mechanical Completion. 43.7.2 Notice of Mechanical Completion The Contractor shall give the Principal's Representative at least 14 days written notice of the date upon which the Contractor anticipates that Mechanical Completion will be reached. Whenever the Contractor believes that Mechanical Completion of the Works or any subsystem thereof has occurred, the Contractor shall so notify the Principal's Representative in writing ("Notice of Mechanical Completion") with respect to the Works or subsystem, provided that: (a) the Contractor shall not submit Notices of Mechanical Completion with respect to more than five (5) subsystems within any seven (7) day period; and (b) the Contractor shall submit an overall Notice of Mechanical Completion with respect to the Works even if Subsystem Mechanical Completion Certificates for all subsystems of the Works have been previously issued, but nothing herein shall require an overall joint inspection of the Works to determine whether Mechanical Completion has occurred. 43.7.3 Joint Inspection (a) If all subsystems of the Works have each been the subject of a Certificate of Mechanical Completion under 43.7.4 below the Principal and the Principal's Representative shall not be obliged to conduct a joint inspection of the Works under 43.7.3(b) below. (b) Subject to 43.7.3(a), promptly after the Principal's Representative's receipt of the Contractor's Notice of Mechanical Completion for the Works or any subsystem, the Principal, the Principal's Representative and the Contractor shall conduct a joint inspection of the Works or subsystem to determine whether the applicable conditions of Mechanical Completion have been satisfied. 43.7.4 Mechanical Completion Certificate (a) Within 7 days after the Principal's Representative's receipt of the Contractor's Notice of Mechanical Completion for a subsystem, the Principal's Representative shall provide to the Contractor a Subsystem Mechanical Completion Certificate setting out the date on which Mechanical Completion of the subsystem occurred or provide to the Contractor a notice pursuant to clause 43.7.5. (b) Within 7 days after the Principal's Representative's receipt of the last of the Contractor's Notices of Mechanical Completion with respect to all subsystems of the Works and submission by the Contractor of a Notice of Mechanical Completion with respect to the entire Works, the Principal's Representative shall provide to the Contractor a Mechanical Completion Certificate for the Works setting out the date on which Mechanical Completion of the Works occurred or provide to the Contractor a notice pursuant to clause 43.7.5. Page 56 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 43.7.5 Objection to Notice of Mechanical Completion If the Principal's Representative objects to any Notice of Mechanical Completion, the Principal's Representative shall respond by notice in writing within seven (7) days of its receipt setting forth in reasonable detail the reasons for such objection. The Contractor shall perform such corrective measures as may be required, including any necessary re-testing, if applicable, to respond properly to any objections properly raised in the Principal's Representative's response and may thereafter again deliver its Notice of Mechanical Completion for the Works or subsystem. The provisions of this clause 43.7.5 shall apply to each new Notice of Mechanical Completion delivered hereunder. 43.8 PRE-COMMISSIONING, COMMISSIONING, FACILITIES TESTING 43.8.1 Not later than 90 days prior to the date on which Pre-commissioning is indicated to commence in the Project Schedule, the Contractor shall provide to the Principal the Contractor's written procedures for Pre-commissioning, Commissioning and Facilities Testing. The procedures shall be in sufficient detail to enable the Principal to review the Contractor's procedures to assess the number of trained operators and maintenance personnel to meet the Principal's obligations under clause 43.8.3. The Contractor shall cooperate with the Principal in any review undertaken by the Principal and shall be reasonable in terms of the personnel required. 43.8.2 Not later than 28 days prior to the date on which the Contractor anticipates that the work under the Contract will reach a stage where Pre-commissioning can commence, the Contractor shall notify the Principal in writing of the anticipated date of such commencement. 43.8.3 The Principal must supply sufficient trained operators and maintenance personnel in a timely manner to work under the Contractor's supervision in the Commissioning and Facilities Testing of the Works. 43.8.4 The Principal shall replace promptly any trained operator or maintenance person the subject of a reasonable objection by the Contractor to the Principal against that person on the grounds of competency or attitude to safety. 43.9 PRACTICAL COMPLETION 43.9.1 The Contractor shall give the Principal's Representative at least 14 days written notice of the date upon which the Contractor anticipates that Practical Completion will be reached. 43.9.2 When the Contractor is of the opinion that Practical Completion has been reached the Contractor shall in writing request the Principal's Representative to issue a Certificate of Practical Completion. 43.9.3 Within 5 days after receiving the request, the Principal's Representative shall give the Contractor and the Principal either a Certificate of Practical Completion evidencing the Date of Practical Completion or written reasons for not doing so. 43.9.4 If the Principal's Representative is of the opinion that Practical Completion has been reached, the Principal's Representative may issue a Certificate of Practical Completion even though no request has been made. 43.10 LIQUIDATED DAMAGES 43.10.1 Nothing in this clause 43.10 is intended to restrict the rights to security provided for in clause 7 or rights of set-off under clause 46.7. 43.10.2 If the work under the Contract does not reach Practical Completion by the Date for Practical Completion, the Principal's Representative shall certify, as due and payable to the Principal, Page 57 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED liquidated damages stated in ITEM 29 for every day after the Date for Practical Completion to and including the earliest of the Date of Practical Completion or termination of the Contract. 43.10.3 If an extension of time to the Date for Practical Completion is directed after the Contractor has paid or the Principal has set off liquidated damages under clause 43.10.2, the Principal shall forthwith repay to the Contractor such of those liquidated damages as represent the days the subject of the extension of time. 43.10.4 The liability of the Contractor to the Principal under this clause 43.10 for failure to reach Practical Completion by the Date for Practical Completion) shall in no event exceed the amount stated in ITEM 30. 43.11 DELAY DAMAGES 43.11.1 Entitlement to damages The Contractor shall not be entitled to any delay damages for any delay or disruption in the completion of the work under the Contract except where: (a) an extension of time to the Date for Mechanical Completion or Date for Practical Completion has been made or should properly have been allowed for arising from a Compensable Cause; and (b) any additional expenses incurred by the Contractor due to the delay or disruption have not been included in the value of any Variation and are not payable by virtue of any other provision of the Contract; and (c) the Contractor gives the Principal's Representative a claim for costs as incurred by the Contractor by reason of the delay arising from the Compensable Cause pursuant to clause 51.1. 43.11.2 Quantum of damages (a) Subject to 43.11.3, where the conditions of clause 43.11.1 are satisfied the Principal shall pay the Contractor such costs as are directly incurred by the Contractor by reason of the delay. (b) The Contractor shall not be entitled to any amount for profit or loss of profit in relation to delay or disruption to the performance of the work under the Contract. 43.11.3 Limitation of Liability (a) The total amount payable by the Principal by way of delay damages for all claims referred to in clause 43.11.1 shall not exceed the amount stated in ITEM 31. (b) The amount payable by the Principal to the Contractor under clauses 43.11.1 and 43.11.2 above is the agreed damages payable by the Principal to the Contractor and shall be paid in full satisfaction of all claims, demands, actions, proceedings or suits for damages which the Contractor may make or bring against the Principal arising in connection with all and any delay or disruption encountered by the Contractor in execution of work under the Contract. 43.12 REPORTS The Contractor shall schedule and coordinate the details of the work under the Contract being performed to meet Practical Completion. The Contractor's monthly report will be in a format agreed between the Contractor and the Principal's Representative. Page 58 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 44. DEFECTS LIABILITY 44.1.1 The Defects Liability Period shall commence at the time and on the date and be for the period stated in ITEM 32. 44.1.2 The Contractor shall carry out rectification at times and in a manner causing as little inconvenience to the occupants or users of the Works as is reasonably possible. As soon as possible after the Date of Practical Completion, the Contractor shall rectify all defects existing at the Date of Practical Completion. 44.1.3 During the Defects Liability Period, the Principal's Representative may give the Contractor a direction to rectify a defect which: (a) shall identify the defect and the date for completion of its rectification; and (b) may state a date for commencement of the rectification and whether there shall be a separate Defects Liability Period therefor (not exceeding that in ITEM 32, commencing at 4:00 pm on the date the rectification is completed and governed by this clause) for specific equipment items repaired or replaced. 44.1.4 If the rectification is not commenced or completed by the stated dates, the Principal may have the rectification carried out by others but without prejudice to any other rights and remedies the Principal may have. The cost thereby incurred shall be certified by the Principal's Representative as moneys due and payable to the Principal. 45. VARIATIONS 45.1 DIRECTING VARIATIONS 45.1.1 The Contractor shall not vary work under the Contract except as directed in writing by the Principal's Representative. 45.1.2 Subject to the terms of the Consent Deed, the Principal's Representative, before the Date of Practical Completion, may direct the Contractor to vary the work under the Contract by any one or more of the following which is nevertheless of a character and extent contemplated by, and capable of being carried out under, the provisions of the Contract: (a) change the design; (b) increase, decrease or omit any part; (c) change the character or quality; (d) change the levels, lines, positions or dimensions; (e) carry out additional work; (f) demolish or remove material or work no longer required by the Principal; (g) change the time the various stages or portions of work under the Contract shall be carried out, including accelerating the progress of the work under the Contract. 45.1.3 The Contractor shall not be bound to execute a Variation directed after Practical Completion unless the Variation is in respect of rectification work referred to in clause 44. 45.2 PROPOSED VARIATIONS 45.2.1 The Principal's Representative may give the Contractor written notice of a proposed Variation. Page 59 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 45.2.2 The Contractor shall as soon as practicable after receiving such notice, notify the Principal's Representative whether the proposed Variation can be effected, together with, if it can be effected, the Contractor's estimate of the: (a) effect on the Project Schedule (including the Date for Practical Completion and the Date for Mechanical Completion); (b) cost (including all time-related costs, if any); and the Contractor shall confirm the effect on any applicable warranty of the proposed Variation. 45.2.3 The Principal's Representative may direct the Contractor to give a detailed quotation for the proposed Variation supported by measurements or other evidence of cost. 45.2.4 The Contractor's reasonable costs for each compliance with this subclause shall be certified by the Principal's Representative as moneys due to the Contractor. 45.2.5 If the parties cannot agree on the affect of any Variation on warranties and indemnities given under the Contract by the Contractor any party may give to the other written notice of Dispute under clause 52, meanwhile all warranties and representations given under the Contract by the Contractor shall continue unaffected. 45.3 CONTRACTOR PROPOSED VARIATIONS 45.3.1 The Contractor may propose in writing an increase or decrease to the scope of the Works and that the Principal's Representative direct a Variation to the work under the Contract. Such proposal shall include the details of the proposed Variation. It is the intention of the parties that any cost savings resulting from a Variation proposed by the Contractor should benefit the Contractor and the Principal equally. 45.3.2 The Principal's Representative may give written notice to the Contractor requiring it to give to the Principal's Representative: (a) details of: (i) the proposed Variation in addition to those details provided in accordance with clause 45.3.1; (ii) the reason for the proposed Variation; (iii) the effect of the proposed Variation on other parts of the work under the Contract; (iv) the effect of the proposed Variation on the Project Schedule (including the Date for Practical Completion and the Date for Mechanical Completion); and (v) the cost effect of the proposed Variation including proposals for: A sharing any cost savings (if any) in a way which benefits the Principal and the Contractor equally, and B additions to or deductions from the Contract Currency Amounts (if any); (b) a written statement and warranty that the proposed Variation will not adversely effect: (i) the functional integrity of the Works; Page 60 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (ii) the performance standards of the Works required under the Contract; (iii) the quality requirements of the Works required under the Contract; (iv) any indemnity or warranty given by the Contractor under the Contract; (v) life cycle costs of the Works; and (c) any other information and supporting documentation the Principal's Representative may reasonably require. 45.3.3 The Principal's Representative may give written approval of any Variation to the work under the Contract the Contractor proposes with the agreement of the Principal. The Principal's Representative may agree to a Variation proposed by the Contractor under this clause 45.3 at the Principal's Representative's sole discretion. 45.3.4 If the Contractor requests a Variation that relates to the Refurbishment of the Principal Supplied Equipment, the Principal's Representative will respond to such request within 14 days. All other Contractor Variation requests will be responded to within 28 days by the Principal's Representative. 45.4 PRICING 45.4.1 Where the value of a Variation has not been mutually agreed, the Principal's Representative shall, as soon as possible, value each Variation: (a) using the following, in order of precedence: (i) an amount determined in accordance with the rates or prices contained in ANNEXURE 7 to the extent that it is reasonable to use them; (ii) other applicable rates or prices stipulated in the Contract; (iii) insofar as the Variation requires: A work by a Subcontractor, by addition of the actual increase in the existing subcontract contract sum or the contract sum of the new subcontract as the case requires; or B reduced work by a Subcontractor, by deduction of the actual decrease in the subcontract contract sum; and (iv) reasonable rates or prices as determined by the Principal's Representative; and (b) if the valuation is: (i) an increase or decrease in a fee or charge; (ii) a new fee or charge; or (iii) the provision of services by a municipal, public or other statutory authority in connection with work under the Contract, under Clauses 14.2.1(a)(iii) and 14.2.1(a)(iv), the value shall be the actual increase or decrease or the actual amount of the new fee or charge or the actual cost of the services without regard to overheads or profit; Page 61 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (c) for the purposes of a valuation other than as provided in clause 45.4.1(a)(i) or clause 45.4.1(b) above, include an amount equal to that stated in ITEM 33 for profit and off-Site overheads. 45.4.2 The amount of the Principal's Representative's valuation pursuant to clause 45.4.1 shall be added to or deducted from the Contract Currency Amounts. 45.5 NOTIFICATION OF VARIATIONS 45.5.1 Despite any other provision of the Contract, if the Principal's Representative at any time gives the Contractor a direction which, in the opinion of the Contractor involves a Variation (other than a direction which the Principal's Representative expressly acknowledges in writing involves a Variation) the Contractor must notify the Principal's Representative of the Contractor's assessment that the direction is a Variation within 7 days after receipt by the Contractor of the direction and not give effect to the direction until receipt of the Principal's Representative's response pursuant to clause 45.5.2. 45.5.2 Within 7 days of the Contractor's notice pursuant to clause 45.5.1 the Principal's Representative shall: (a) confirm in writing agreement with the Contractor's assessment of the direction as being a Variation; or (b) give the reasons why the Principal's Representative does not agree and instruct the Contractor to give effect to the direction. 45.5.3 The Contractor shall not be entitled to an extension of time to the Date for Mechanical Completion or Date for Practical Completion, adjustment to the Contract Currency Amounts or any other claim in connection with the Principal's Representative's direction unless the Principal's Representative agrees in writing that the direction is a Variation. 45.5.4 Nothing in this clause 45.5 shall reduce the Contractor's obligations to comply with a direction of the Principal's Representative under clause 25.7.3 or prevent the Contractor proceeding in accordance with clause 52. 46. PAYMENT CLAIMS AND PAYMENTS 46.1 ADVANCE PAYMENT 46.1.1 The Contractor shall on receipt of the Notice to Proceed deliver to the Principal by facsimile and e-mail (in the manner provided under clause 46.2.2) the following claims for advance payments in accordance with the following schedule: (a) four percent (4%) of each of the Contract Currency Amounts upon issue of the Notice to Proceed; (b) four percent (4%) of each of the Contract Currency Amounts at the end of the fourth month after the Notice to Proceed is issued; (c) two percent (2%) of each of the Contract Currency Amounts at the end of the eighth month after the Notice to Proceed is issued. 46.1.2 If the Contractor has provided security to the Principal in accordance with clause 7 and clause 46.1.3, the Principal shall pay to the Contractor the amount of each of the claims within 28 days after receipt of the claim or the security, whichever is the later. 46.1.3 The Contractor shall provide within 28 days of the Notice to Proceed security equivalent to the sum of the claims for advance payments under clause 46.1.1 in the form set out in Page 62 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED ANNEXURE 2 issued by a trading bank in Australia approved by the Principal and the Lender to ensure the repayment of the advance payment under this clause 46.1. 46.1.4 The Contractor may from time to time cause the issuer of the security referred to in clause 46.1.3 to decrease the amount of the security to the total amount of the advance payments outstanding for repayment at that time. 46.2 PAYMENT CLAIMS 46.2.1 Entitlement (a) Nothing in this clause 46 shall entitle the Contractor to payment of an amount greater or less than the Contract Currency Amounts together with any additions or deductions which may be required to be made under the Contract. (b) On the last day of each month and within the time prescribed by clause 46.9, the Contractor shall be entitled to submit a claim for payment (PAYMENT CLAIM) in the aggregate of the costs paid by the Contractor in the performance of the work under the Contract that is in accordance with the Contract up to the date of the Payment Claim (excluding VAT or Goods and Services Tax (GST) components paid to third parties), less all amounts previously claimed (but excluding amounts claimed under clause 46.1 as the Advance Payment). (c) Payment Claims shall be in the appropriate currency as set out in the price breakdown structure contained in the Contract and must include evidence, to the satisfaction of the Principal's Representative, of the amount claimed by the Contractor, including: (i) Subcontractor and supplier costs: Registers of invoices from Subcontractors and suppliers for work under the Contract which have been paid to the date of the claim, net of any VAT or GST component paid to third parties or any retention amount held. These registers shall include as a minimum: I the cheque or wire or telegraphic transfer number; II invoice numbers and the number of invoices paid; III date of payment; IV Subcontractor's or other supplier's name; and V amount paid net of any retention amount held in respect of any such Subcontractor or supplier, stating net amounts, any VAT or GST component and gross amounts, and currency of payment. (ii) Labour: Details of all labour costs paid by the Contractor to the date of the Payment Claim. (iii) Plant Hire: Page 63 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED Details of the cost of all plant hire, including internal plant hire charges, paid by the Contractor to the date of the Payment Claim showing numbers of units and rates in accordance with ANNEXURE 14. (iv) Profit and overheads: The percentage stated in ITEM 19 of the aggregate of items referred to in clause 46.2.1(c)(i) to (iii) above (inclusive) for the Contractor's profit and overheads (VAT and GST components must be excluded for the purposes of calculation). (v) Details of any other amount due under the Contract. (vi) Documentary evidence of the payment of moneys paid to: A workers of the Contractor; and B Subcontractors, in respect of work under the Contract the subject of the Payment Claim. (vii) A signed lien release provided by the Contractor stating that the Contractor will indemnify the Principal from all claims made by Subcontractors for non-payment for work performed to the date of the Payment Claim and that all previous payments made to the Contractor have been applied to the Works in accordance with the Contract. 46.2.2 Means of making Payment Claims (a) All Payment Claims made under this clause 46 shall be by facsimile transmitted simultaneously to the Principal's Cairns Office marked to the attention of the Financial Controller and to the Principal's Representative at the Principal's Port Moresby office. Copies of each such Payment Claim must also be sent at the same time by e-mail addressed to the Principal's Representative and the Principal's Commercial Manager at the Principal's Port Moresby office. (b) If the time for any Payment Claim falls due on a day which is a Saturday, Sunday, statutory or a public holiday in Queensland, the Contractor shall submit the Claim on the previous working day. 46.3 PAYMENT CERTIFICATES AND CALCULATIONS 46.3.1 Subject to receiving a Payment Claim in accordance with clause 46.2.1(c), within 14 days after receipt of a Payment Claim, the Principal's Representative shall assess the Payment Claim to determine if all required documentation is contained in the Payment Claim and shall issue to the Principal and to the Contractor a Payment Certificate stating the amount of the payment. 46.3.2 The Principal's Representative shall set out in the Payment Certificate the calculations employed to arrive at the amount and, if the amount is more or less than the amount claimed by the Contractor, the reasons for the difference. The Principal's Representative shall also set out in a Payment Certificate: (a) the aggregate of the costs paid by the Contractor in the performance of the work under the Contract to the date of the Payment Claim (excluding VAT or GST components paid to third parties); (b) the amount in aggregate already paid by the Principal for the work under the Contract; and Page 64 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (c) any other amount due to the Contractor from Principal or from the Contractor to the Principal, resulting in the balance due to the Contractor or to the Principal as the case may be. 46.4 PAYMENT 46.4.1 Subject to the provisions of the Contract, within 28 days of receipt by the Principal's Representative of a Payment Claim or within 14 days of issue by the Principal's Representative of the Principal's Representative's Payment Certificate, whichever is the earlier, and within 14 days of the issue of a Final Certificate, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount (or amounts) not less than the amount (or amounts) shown in the Payment Certificate as due to the Contractor or to the Principal, as the case may be. 46.4.2 The advance payments made in accordance with clause 46.1 will be repaid by the Contractor to the Principal as follows: (a) Upon the Contractor issuing a Payment Claim which brings the total claimed to $45 million or more, all payments by the Principal to the Contractor of that Payment Claim and of all subsequent Payment Claims, but subject to clause 46.4.2 (b), will be reduced by $500,000. (b) Upon the Contractor issuing a Payment Claim which brings the total claimed to $70 million or more, all payments by the Principal to the Contractor of that Payment Claim and of all subsequent Payment Claims, but subject to clause 46.4.2 (c), will be reduced by $750,000. (c) Upon the Contractor issuing a Payment Claim which brings the total claimed to the sum of the total Contract Currency Amounts, the Principal shall, by notice to the Contractor, direct the Contractor as to the repayment of any remaining advance payments so as to ensure that any remaining advance payments are fully repaid prior to or as payment of the Final Payment Claim, and the Contractor must comply with such direction 46.4.3 Upon full repayment of the advance payments the Principal shall release the security provided by the Contractor under clause 46.1.3. 46.4.4 A payment made pursuant to this clause 46.4 shall not prejudice the right of the Principal's Representative to amend a previous Payment Certificate or of either party to dispute under clause 52 whether the amount so paid is the amount properly due and payable and on determination (whether under clause 52 or as otherwise agreed) of the amount so properly due and payable, the Principal or the Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable. 46.4.5 All payments by the Principal and by the Contractor shall be made to the credit of the Contractor or the Principal as the case may be, or as directed by the Contractor or the Principal, at the financial institutions indicated in ITEM 16, in the currencies requested and as indicated in ITEM 15, or as may be directed by the Contractor or the Principal. 46.4.6 Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only, except as provided under clause 46.9. 46.5 CERTIFICATES OF MECHANICAL COMPLETION AND PRACTICAL COMPLETION The Contractor and the Principal's Representative shall give the notices and certificates required under and otherwise comply with the requirements of clauses 43.7 and 43.9. Page 65 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 46.6 EFFECT OF CERTIFICATES The issue of a Payment Certificate or a Certificate of Mechanical Completion or a Certificate of Practical Completion shall not constitute approval of any work or other matter nor shall it prejudice any claim by the Principal or the Contractor. 46.7 SET-OFF 46.7.1 Without limiting the Principal's rights under any other provision in this Contract the Principal may deduct from any moneys due to the Contractor any sum which is due by the Contractor to the Principal under or in connection with the work under the Contract, including: (a) all payments, charges, damages and expenses which the Principal has paid or incurred and in respect of which the Contractor is liable under the Contract to pay or reimburse the Principal, but has failed to do so; (b) all amounts owing by the Contractor to the Principal on any account whatever under this Contract; and (c) the full amount of any Lien on the Works, Contractor's security or any portion thereof imposed by or on behalf of any Subcontractor for any reason or any claim of which the Principal has notice from any Subcontractor. 46.7.2 If the moneys due to the Contractor are insufficient to discharge the liability of the Contractor to pay any of the foregoing amounts to the Principal, the Principal may have recourse to the security provided by the Contractor for payment of such amounts. 46.7.3 Nothing in this clause shall affect the right of the Principal to recover from the Contractor the whole of such moneys or any balance that remains owing or otherwise limit the rights of the Principal in relation to security provided by the Contractor in accordance with clause 7. 46.8 OWNERSHIP OF EQUIPMENT The Contractor warrants and agrees that ownership of and property in any Equipment incorporated or to be incorporated in the Works or otherwise intended to remain the Principal's property shall pass to the Principal upon the earlier of: (a) payment to the Contractor of the amount claimed by the Contractor in respect of that Equipment or in accordance with clause 15.3; or (b) the delivery of the Equipment to the Site; or (c) a specific designation by a Subcontractor that such Equipment is for the Works or the property of the Principal. 46.9 FINAL PAYMENT CLAIM AND CERTIFICATE 46.9.1 Within 7 days after the latest to expire of the period stated in ITEM 32 or the period stated under clause 44.1.3(b), the Contractor shall give the Principal's Representative a written Final Payment Claim endorsed 'Final Payment Claim' being a Payment Claim together with all other claims whatsoever in connection with the subject matter of the Contract. Each of the following shall constitute conditions precedent to the issue of the Final Certificate: (a) the Principal has received, with respect to each Subcontractor performing services or delivering Equipment or materials comprising any part of work under the Contract, a final release in the form of ANNEXURE 8 stating that all amounts due to such Subcontractor have been satisfied in full, provided that, if any Subcontractor fails for any valid reason to provide such a release, the Principal may, at its option, withhold from release of security at Final Certificate in accordance with clause 7.3 Page 66 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED an amount sufficient to cover the amounts claimed to be due to such Subcontractor and waive the Contractor's obligations under this clause to the extent that the undrawn amount of the security at Final Certificate is sufficient to cover such claims in addition to all other claims which may be made against it; (b) the Principal has received a statutory declaration from the Contractor setting forth in reasonable detail each alleged liability or other amount owing to Subcontractors which is disputed by the Contractor and which the Contractor knows or has reason to believe may result in a claim thereafter being made against the Principal; and (c) the Principal has received from the Contractor a statutory declaration of final release in the form of ANNEXURE 13 stating that all amounts due to all Subcontractors have been satisfied in full. 46.9.2 Subject to clause 46.9.1, within 42 days after the expiry of the last Defects Liability Period, the Principal's Representative shall issue to both the Contractor and the Principal a Final Certificate evidencing the moneys finally due and payable between the Contractor and the Principal on any account whatsoever in connection with the subject matter of the Contract. In the Final Certificate the Principal's Representative shall also set out: (a) amounts paid under the Contract and amounts otherwise due from the Principal to the Contractor and/or due from the Contractor to the Principal arising out of or in connection with the Contract including but not limited to any amount due under any provision of the Contract; (b) the Contract Currency Amounts together with any additions or deductions made pursuant to the Contract; and (c) the total value of all previous certificates, claims and securities issued pursuant to the Contract. 46.9.3 Those moneys certified as due and payable shall be paid by the Principal or the Contractor, as the case may be, within 14 days after the debtor receives the Final Certificate. Such payment is hereby defined as the "FINAL PAYMENT". 46.9.4 The Final Certificate shall be conclusive evidence of accord and satisfaction, and in discharge of each party's obligations in connection with the subject matter of the Contract except for: (a) fraud or dishonesty relating to work under the Contract or any part thereof or to any matter dealt with in the Final Certificate ; (b) any defect or omission in the Works or any part thereof which was not apparent at the end of the last Defects Liability Period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the Final Certificate; (c) any accidental or erroneous inclusion or exclusion of any work or figures in any computation or an arithmetical error in any computation; (d) unresolved issues the subject of any notice of dispute pursuant to clause 52, served before the 7th day after the issue of the Final Certificate; and (e) any liability of the both parties under clauses 5, 10.5 and 20.1. 46.10 INTEREST 46.10.1 Interest in ITEM 37 shall be due and payable after the date of any default in payment. Page 67 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 46.10.2 Despite any other provision of the Contract, interest shall only accrue on moneys payable by a party to the other party and a party shall only be taken to be in default in payment after the other party has given to that party a notice in writing that payment is overdue. 46.11 DEFERRED PAYMENT OPTION Principal may, in its sole discretion, elect to defer payment of up to $5 million of the Contract Sum by notice in writing to the Contractor not later than 30 days prior to the time when the total sum paid by the Principal to the Contractor under the Contract reaches the sum of the Contract Currency Amounts less $5 million, the actual date of the election to be agreed by the parties in advance. This option is subject to the Principal entering into a subordinate loan agreement for repayment of the deferred payment amount prior to the time of such deferment, and such agreement receiving prior OPIC approval. The parties agree that the subordinate loan agreement will be based substantially on the terms contained in ANNEXURE 16. 47. PAYMENT OF WORKERS AND SUBCONTRACTORS 47.1 WORKERS AND SUBCONTRACTORS 47.1.1 The Contractor shall give to the Principal's Representative in respect of a Payment Claim, documentary evidence of the payment of moneys due and payable to: (a) workers of the Contractor and of the Subcontractors; and (b) Subcontractors, in respect of work under the Contract the subject of that Payment Claim. 47.1.2 If the Contractor is unable to give such documentary evidence, the Contractor shall give other documentary evidence of the moneys so due and payable to workers of the Contractor and of the Subcontractors. 47.1.3 Documentary evidence, except where the Contract otherwise provides, shall be to the Principal's Representative's satisfaction. 47.2 WITHHOLDING PAYMENT 47.2.1 Subject to clause 47.2.2 the Principal may withhold from moneys due to the Contractor an amount reasonably estimated by the Principal to be due and payable to workers of the Contractor and of the Subcontractors and to Subcontractors until the Contractor complies with clause 47.1. 47.2.2 The Principal shall not withhold payment of such money in excess of the amount reasonably estimated to be due under clause 47.2.1. 47.3 DIRECT PAYMENT 47.3.1 Before Final Payment , the Principal, if not aware of a relevant relation-back day (as defined in the Corporations Act 2001 (Cth)) may pay unpaid moneys the subject of clause 47.1 directly to a worker or a Subcontractor where: (a) permitted by law; (b) given a court order in favour of the worker or Subcontractor; or (c) requested in writing by the Contractor. Page 68 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 47.3.2 Such payment and a payment made to a worker or Subcontractor in compliance with a Legislative Requirement shall be deemed to be part satisfaction of the Principal's obligation to pay pursuant to clause 46.4 or clause 46.9, as the case may be. 47.4 LIENS AND CLAIMS 47.4.1 Title indemnity The Contractor shall indemnify the Principal from and against any and all Liens and all expenses and solicitors' fees incurred in discharging any Lien. 47.4.2 Principal's right to discharge Liens: (a) If the Contractor shall default in discharging any Lien, the Principal shall promptly notify the Contractor, and the Contractor shall then satisfy or otherwise cause to be released any such Lien, provided that the Contractor shall have the right to contest any such Lien, if the Contractor first provides to the Principal a bond or other collateral security in an amount, form and substance satisfactory to the Principal and otherwise complies with applicable Legislative Requirements. (b) If the Contractor either does not promptly satisfy such Lien or does not give the Principal reasons in writing satisfactory to the Principal for not paying such Lien, or (according to the Principal's Representative) is seen to be acting unreasonably with respect to the Lien, within 10 days of the Contractor's receipt of such notice, the Principal shall have the right, at its option, after providing notice to the Contractor, to pay or settle such Lien, and the Contractor shall, within 5 days of request by the Principal, reimburse the Principal for all costs incurred by the Principal to discharge such Lien, costs and solicitors' fees and other expenses. 48. DEFAULT OR INSOLVENCY 48.1 PRESERVATION OF OTHER RIGHTS If a party breaches (including repudiates) the Contract nothing in this clause shall prejudice the right of the other party to recover damages or exercise any other right or remedy. 48.2 CONTRACTOR'S DEFAULT If the Contractor commits a substantial breach of the Contract the Principal may, by hand or by certified post, give the Contractor a written notice to show cause. Substantial breaches include: (a) failing to: (i) provide security; (ii) provide evidence of insurance; (iii) comply with a direction of the Principal's Representative pursuant to clause 37.3; (iv) use the materials or standards of work required by the Contract; (v) perform properly the Contractor's Design Obligations; or (vi) establish, implement and maintain a quality assurance program in accordance with clause 37.2; (b) wrongful suspension of work; Page 69 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (c) substantial departure from the Project Schedule without reasonable cause or the Principal's Representative's approval; (d) failing to proceed with due expedition and without delay; and (e) in respect of clause 46.9, knowingly providing documentary evidence containing an untrue statement. 48.3 PRINCIPAL'S NOTICE TO SHOW CAUSE A notice under clause 48.2 shall state: (a) that it is a notice under clause 48 of the Contract; (b) the alleged substantial breach; (c) that the Contractor is required to show cause in writing why the Principal should not exercise a right referred to in clause 48.4; (d) the date and time by which the Contractor must show cause (which shall not be less than 7 clear days after the notice is received by the Contractor); and (e) the place at which cause must be shown. 48.4 PRINCIPAL'S RIGHTS 48.4.1 Subject to the terms of the Consent Deed, if the Contractor fails to show reasonable cause by the stated date and time, the Principal may by written notice to the Contractor: (a) take out of the Contractor's hands the whole or part of the work under the Contract remaining to be completed and suspend payment until it becomes due and payable pursuant to clause 48.6; or (b) terminate the Contract. 48.4.2 Upon giving a notice under clause 48.2, the Principal may not suspend payments to the Contractor until the date which is a day following the last date for showing cause in the notice under clause 48.2. 48.4.3 If the Principal exercises the right under clause 48.4.1(a), the Contractor shall not be entitled to any further payment in respect of the work under the Contract taken out of the hands of the Contractor unless payment becomes due to the Contractor under clause 48.6. 48.5 TAKE OUT 48.5.1 The Principal shall complete work under the Contract taken out of the Contractor's hands and may: (a) use Design Documents, Equipment and other equipment, plant and materials, intended for work under the Contract; and (b) without payment of compensation to the Contractor: (c) take possession of, and use such of the Construction Plant, Temporary Works and other temporary facilities, equipment, tools, plant and material on or in the vicinity of the Site as were used by the Contractor; and Page 70 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (d) contract with such of the Contractor's Subcontractors (and for such purpose such contracts require the Contractor to novate any subcontract in accordance with the Subcontractor's Consent Deed), as are reasonably required by the Principal to facilitate completion of work under the Contract. 48.5.2 If the Principal takes possession of Design Documents, Construction Plant or other equipment, plant and material, the Principal shall maintain them and, subject to clause 48.6, on completion of the work under the Contract, shall return such of them as are surplus. 48.5.3 The Principal's Representative shall keep records of the cost of completing the work under the Contract. 48.6 ADJUSTMENT ON COMPLETION OF WORK TAKEN OUT 48.6.1 When work under the Contract taken out of the Contractor's hands has been completed, the Principal's Representative shall assess the cost thereby incurred and shall certify as moneys due and payable accordingly the difference between that cost (showing the calculations therefor) and the amount which would otherwise have been paid to the Contractor if such work under the Contract had been completed by the Contractor. 48.6.2 If the Contractor is indebted to the Principal, the Principal may retain Construction Plant or other equipment, plant and material taken under clause 48.5 until the debt is satisfied. If after reasonable notice, the Contractor fails to pay the debt, the Principal may sell the Construction Plant or other equipment, plant and material and apply the proceeds to the satisfaction or part satisfaction of the debt and the costs of sale. Any excess shall be paid to the Contractor. 48.6.3 Subject to clause 20.3, in assessing the cost incurred in relation to work under the Contract taken out of the Contractor's hands the Principal's Representative must include the following items of cost to the Principal: (a) any costs being incurred by the Principal by reason of its ownership or holding of the Site for any period; and (b) any other costs, losses, expenses or damages, arising from or in connection with the Contractor's breach. 48.7 PRINCIPAL'S DEFAULT 48.7.1 If the Principal commits a substantial breach of the Contract then subject to the terms of the Consent Deed, the Contractor may, by hand or by certified post, give the Principal a written notice to show cause. 48.7.2 Substantial breaches include the Principal's failure to: (a) produce evidence of insurance; (b) rectify inadequate Contractor's possession of the Site if that failure continues for longer than the time stated in ITEM 38; or (c) make a payment due and payable pursuant to the Contract, including ensuring the timely payment of insurance moneys to the Contractor in accordance with clause 25.5 for the costs of any reinstatement the subject of a settled claim under the insurance required under clause 21; and (d) give a Certificate of Practical Completion or reasons as referred to in clause 43.9. Page 71 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 48.8 CONTRACTOR'S NOTICE TO SHOW CAUSE A notice given under clause 48.7 shall state: (a) that it is a notice under clause 48 of the Contract; (b) the alleged substantial breach; (c) that the Principal is required to show cause in writing why the Contractor should not exercise a right referred to in clause 48.9; (d) the date and time by which the Principal must show cause (which shall not be less than 7 clear days after the notice is received by the Principal); and (e) the place at which cause must be shown. 48.9 CONTRACTOR'S RIGHTS 48.9.1 If the Principal fails to show reasonable cause by the stated date and time, then subject to the terms of the Consent Deed, the Contractor may, by written notice to the Principal, suspend the whole or any part of work under the Contract. 48.9.2 The Contractor shall remove the suspension if the Principal remedies the breach. 48.9.3 Subject to the terms of the Consent Deed, the Contractor may, by written notice to the Principal, terminate the Contract, if within 28 days of the date of suspension under this subclause, the Principal fails: (a) to remedy the breach; or (b) if the breach is not capable of remedy, to make other arrangements to the reasonable satisfaction of the Contractor. 48.9.4 Subject to clause 20.3, damages suffered by the Contractor by reason of the suspension shall be assessed by the Principal's Representative, who shall certify them as moneys due and payable to the Contractor. 48.10 TERMINATION 48.10.1 If the Contract is terminated pursuant to clause 48.4.1(b) or clause 48.9, the parties' remedies, rights and liabilities shall be the same as they would have been under the law governing the Contract had the defaulting party repudiated the Contract and the other party elected to treat the Contract as at an end and recover damages. 48.10.2 In the event of termination under clause 48.4.1(b) the Principal may also, without payment of compensation, take possession of the Temporary Works, Construction Plant, Design Documents, drawings, specifications and other information, samples, models, patterns and the like created for the construction of the Works and take an assignment of subcontracts. 48.11 INSOLVENCY 48.11.1 Subject to the terms of the Consent Deed, if: (a) a party informs the other in writing or creditors generally, that the party is insolvent or is financially unable to proceed with the Contract; (b) execution is levied against a party by a creditor; Page 72 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (c) in relation to a party being a corporation: (i) notice is given of a meeting of creditors with a view to the corporation entering a deed of company arrangement; (ii) it enters a deed of company arrangement with creditors; (iii) a controller or administrator is appointed; (iv) an application is made to a court for its winding up and not stayed within 14 days; (v) a winding up order is made in respect of it; (vi) it resolves by special resolution that it be wound up voluntarily (other than for a member's voluntary winding up); or (vii) a mortgagee of any of its property takes possession of that property; (viii) it takes or has taken or instituted against it any action or proceeding whether voluntarily or compulsory which has an object or may result in the winding up of the company, other than a voluntary winding up by members for the purpose of reconstruction or amalgamation or is placed under official management or enters into a compromise or other arrangement with its creditors or a receiver and a party is appointed to carry on the Contractor's business for the benefit of creditors or any of them; (ix) execution is levied by creditors, debenture holders or trustees or under a floating charge; (x) a receiver of the property or part of the property of that party is appointed; (xi) a meeting of creditors is called with a view to: A entering a scheme of company arrangement or composition with creditors; or B placing that party under official management, then, subject to the terms of the Consent Deed, where the other party is: (d) the Principal, the Principal may, without giving a notice to show cause, exercise the right under clause 48.4.1(a); or (e) the Contractor, the Contractor may, without giving a notice to show cause, exercise the right under clause 48.9. 48.11.2 The rights given by this clause 48.11 are in addition to any other rights and may be exercised notwithstanding that there has been no breach of contract. 48.12 NO INSOLVENCY 48.12.1 The Contractor acknowledges that neither: (a) the enforcement of any right by or on behalf of the Lender over the Principal (or any of its assets) under a security; or Page 73 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (b) any action by a third party in relation to the Principal or its assets, which results in the Lender exercising its rights under clause 48.12.1(a), will entitle the Contractor to exercise its rights under clause 48.9 or clause 48.11. 48.12.2 The rights and remedies given by this subclause are additional to any other rights and remedies. They may be exercised notwithstanding that there has been no breach of contract. 49. TERMINATION FOR FRUSTRATION 49.1.1 Subject to the terms of the Consent Deed, if the Contract is frustrated: (a) the Principal's Representative shall issue a Payment Certificate under clause 46.2 for work under the Contract carried out to the date of frustration, evidencing the amount which would have been payable had the Contract not been frustrated and had the Contractor been entitled to and made a Payment Claim on the date of frustration; (b) the Payment Certificate under clause 49.1.1(a) shall evidence and the Principal shall pay the Contractor: (i) the amount due to the Contractor evidenced by all unpaid certificates; (ii) the cost of Equipment and other equipment, plant and materials reasonably ordered by the Contractor for work under the Contract and which the Contractor is liable to accept, but only if: A those items will become the Principal's property upon payment free of any Lien; and B the value of such items is not included in the amount payable under clause 49.1.1(b)(i); and (iii) the costs reasonably incurred: A removing Temporary Works and Construction Plant; B returning to their place of engagement the Contractor, Subcontractors and their respective employees engaged in work under the Contract at the date of frustration; and C by the Contractor in expectation of completing work under the Contract and not included in any other payment; and (c) the Principal shall promptly release and return all security provided by the Contractor. 50. TERMINATION FOR CONVENIENCE 50.1.1 Subject to the terms of the Consent Deed, the Principal may at any time and for any reason terminate the Contract by 7 days prior notice to the Contractor in which case the Contractor shall, upon receipt of the notice: (a) cease carrying out work under the Contract; Page 74 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED (b) if directed by the Principal to do so: (i) assign or novate in favour of the Principal any subcontracts (including for the provision of any Equipment and other equipment, plant and materials) or rights under any subcontracts entered into or obtained by the Contractor in connection with the carrying out of work under the Contract or completion of the Works; (ii) terminate any other outstanding subcontracts and recover from the Subcontractor any property, documentation, material or information of the Principal or the Principal's Representative; and (iii) deliver to the Principal, all property, documentation or information of the Principal provided to the Contractor in connection with its carrying out work under the Contract; and (c) deliver to the Principal any of the Equipment and other equipment, plant and materials or work under the Contract which under the Contract has become the property of the Principal. 50.1.2 Upon termination of the Contract under this clause: (a) the Principal shall pay the Contractor: (i) the amount due to the Contractor evidenced by all unpaid certificates; (ii) for any work under the Contract performed by Contractor prior to and up to the date of termination in addition to work under the Contract described in clause 50.1.2(a)(i); (iii) the cost of Equipment and other equipment, plant and materials reasonably ordered by the Contractor for work under the Contract and which the Contractor is liable to accept, but only if: A those items will become the Principal's property upon payment free of any Lien; and B the value of such items is not included in the amount payable under clauses 50.1.2(a)(i) and 50.1.2(a)(ii) ; and (iv) the costs reasonably incurred including overheads: A of removing Temporary Works and Construction Plant; B of returning to their place of engagement the Contractor, Subcontractors and their respective employees engaged in work under the Contract at the date of termination; and C by the Contractor in expectation of completing work under the Contract and not included in any other payment; and (b) the Contractor shall have no claim against the Principal for any overhead, loss of profits, costs, expenses, damages, losses or other liabilities arising from or in connection with the termination in respect of the unexecuted work under the Contract. (c) the Principal shall promptly release and return all security provided by the Contractor. Page 75 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 51. NOTIFICATION OF CLAIMS 51.1 COMMUNICATION OF CLAIMS 51.1.1 The Prescribed Notice is a written notice and shall include particulars of all of the following: (a) the breach, act, omission, direction, approval or circumstances on which the claim is based; (b) the provision of the Contract or other basis for the claim; and (c) the quantum of the claim. 51.1.2 As soon as practicable after a party becomes aware of any claim in connection with the subject matter of the Contract and not later than 28 days after the first occurrence of the breach, act, omission, direction, approval or circumstances on which the claim is based, the party shall give to the other party and to the Principal's Representative the Prescribed Notice or a notice of Dispute under clause 52.1. 51.1.3 This clause 51.1 and clause 51.3 shall not apply to any claim, including a claim for payment (except for claims which would, other than for this clause 51.1, have been included in the Final Payment Claim), the communication of which is required by another provision of the Contract. 51.2 LIABILITY FOR FAILURE TO COMMUNICATE 51.2.1 If the Contractor does not: (a) give to the Principal and the Principal's Representative a Prescribed Notice of a claim pursuant to clause 51.1; or (b) give to the Principal's Representative in accordance with the requirements of the Contract any other notice required to be given by a provision of the Contract in connection with circumstances potentially giving rise to an extension of time to the Date for Mechanical Completion or the Date for Practical Completion, adjustment to the Contract Currency Amounts or any other claim, the Contractor shall not be entitled to the claim or to any extension of time to the Date for Mechanical Completion or the Date for Practical Completion, adjustment to the Contract Currency Amounts or other claim arising from those circumstances. 51.2.2 For the purposes of this clause, "claim" shall include a claim in contract, equity (including for quantum meruit), tort (including for negligence), under statute or otherwise. 51.3 PRINCIPAL'S REPRESENTATIVE'S DECISION 51.3.1 If within 28 days of giving the Prescribed Notice the party giving it does not notify the other party and the Principal's Representative of particulars of the claim, the Prescribed Notice shall be deemed to be the claim. 51.3.2 Within 56 days of receipt of the Prescribed Notice the Principal's Representative shall assess the claim and notify the parties in writing of the decision. 51.3.3 Unless a party within a further 28 days of such notification gives a notice of dispute under clause 52.1 which includes such decision, the Principal's Representative shall certify the amount of that assessment to be moneys then due and payable. Page 76 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 52. DISPUTE RESOLUTION 52.1 NOTICE OF DISPUTE 52.1.1 If a difference or dispute (together called a 'Dispute') between the parties arises in connection with the subject matter of the Contract, including a dispute concerning: (a) a Principal's Representative's direction; or (b) a claim: (i) in tort; (ii) under statute; (iii) for restitution based on unjust enrichment or other quantum meruit; or (iv) for rectification or frustration, or like claim available under the law governing the Contract, then either party shall, by hand or by certified mail, give the other and the Principal's Representative a written notice of Dispute adequately identifying and providing details of the Dispute. 52.1.2 Notwithstanding the existence of a Dispute, the parties shall, subject to clauses 48, 49 and 52.4, continue to perform the Contract. 52.2 CONFERENCE 52.2.1 At the time of execution of the Contract the Steering Committee members are those persons stated in ITEM 8. 52.2.2 The Contractor and the Principal may replace their Steering Committee member(s) at any time, or nominate a substitute to represent it on specific matters, by giving notice in writing to the other and to the Principal's Representative and Contractor's Representative at least twenty-four (24) hours prior to the change in representation. 52.2.3 In respect of any decision which is required to be made by the Steering Committee under this clause 52, the Steering Committee members are hereby authorised to bind the party to the Contract that they represent to the decisions of the Steering Committee. 52.2.4 Steering Committee members may bring to meetings of the Steering Committee such advisers as they consider necessary provided that: (a) they advise each of the other Steering Committee members of: (i) the names of those advisers, and (ii) the nature of the advice it is anticipated such advisers will give, twenty-four (24) hours in advance of the meeting; and (b) no reasonable objection against the bringing of such adviser is made by another Steering Committee member. Page 77 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 52.2.5 All decisions by the Steering Committee will be by vote as follows: (a) Each Steering Committee member will be entitled to cast one vote. (b) All votes must be cast. (c) Every decision or determination by the Steering Committee must be unanimous. 52.2.6 The parties to the Contract must implement all decisions and directions of the Steering Committee in respect of the work under the Contract given in accordance with this clause 52. 52.2.7 Within 14 days after receiving a notice of Dispute, the Steering Committee shall confer at least once to endeavour to resolve the Dispute or to agree on methods of doing so. All aspects of every such conference except the fact of occurrence shall be privileged. 52.2.8 If the Dispute has not been resolved within 28 days of service of the notice of Dispute, that Dispute shall be and is hereby referred to arbitration. 52.3 ARBITRATION 52.3.1 Arbitration shall be affected at the place stated in ITEM 39(a) and in the language stated in ITEM 39(b) by an arbitrator, who shall be agreed by the parties or, if no agreement is reached within 14 days, by an arbitrator appointed by the President for the time being of the Australasian Dispute Centre. The arbitration shall be conducted in accordance with the UNCITRAL Model Law on International Commercial Arbitration current as at the date of execution of the Contract. 52.4 SUMMARY RELIEF Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the Contract or to seek injunctive or urgent declaratory relief. 53. WAIVER OF CONDITIONS Except as provided at law or in equity or elsewhere in the Contract, none of the provisions of the Contract shall be varied, waived, discharged or released, except with the prior written consent of the parties. 54. CO-ORDINATION WITH PRINCIPAL AND OTHERS The Contractor acknowledges that it has made reasonable allowance in the Contract Currency Amounts, the Project Schedule and the Date for Practical Completion, for coordinating the work of and cooperating with other contractors of the Principal. 55. INDEPENDENT CONTRACTOR The Contractor warrants to the Principal as at the date of the Contract and at all times during the performance of the work under the Contract that it will: (a) act as an independent contractor and will not act as the agent of the Principal or the Principal's Representative in executing the work under the Contract and maintaining control over its employees and Subcontractors; and (b) execute the work under the Contract in accordance with its own methods, subject to complying with the Contract, and nothing contained in the Contract or any subcontract ordered by the Contractor will create any contractual relationship between any Subcontractor and either the Principal or the Principal's Representative. Page 78 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED 56. SURVIVAL Each agreement, representation, warranty, covenant, right and obligation contained or referred to in the Contract shall survive the performance of the Contract, and shall terminate only when the Works are complete, all amounts due or to become due under the Contract are paid in full and the Contract is otherwise fully performed by both parties. 57. ENTIRE AGREEMENT The Contract, the Consent Deed and the Deed of Guarantee, Undertaking and Substitution embody the entire agreement between the Principal and the Contractor and supersedes all other statements, representations, undertakings and agreements between them. The parties are not bound by or liable for any statement, representation, promise, inducement or understanding not set forth in the Contract. No change, amendment or modification of any of the terms or conditions of the Contract is valid unless reduced to writing and signed by both parties. Page 79 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED SCHEDULE
ITEM DESCRIPTION DETAIL 1. Principal INTEROIL LIMITED (Clause 1.1) incorporated in the Independent State of Papua New Guinea 2. Principal's Address and Facsimile Number Level 6, Defens Haus PO Box 1971 Port Moresby, PNG 675-320-2601 3. Contractor CLOUGH NIUGINI LIMITED (Clause 1.1) incorporated in the Independent State of Papua New Guinea 4. Contractor's Address and Facsimile Number C/- PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, PNG 675 321 1428 5. Contractor's Representative Lambert Brau 6. Contractor's Representative Address and C/- Level 6, 251 St Georges Terrace Facsimile Number Perth WA 6000 FAX 61-(0)8-9481 6699 7. Lender Overseas Private Investment Corporation of (Clause 1.1) 1100 New York Avenue, N.W., Washington, D.C. 20527, USA Fax 1 202 408 9866 8. Steering Committee Principal's Steering Committee representatives: (Clause 1.1) Roger Grundy or successor by appointment of the Principal Graeme Alexander or successor by appointment of the Principal
Page 80 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED SCHEDULE
ITEM DESCRIPTION DETAIL Contractor's Steering Committee Representatives: Colin Percival or successor by appointment of the Contractor David Jones or successor by appointment of the Contractor 9. Principal's Representative Alexander R Nairn (Clause 1.1) Project Director 10. Principal's Representative's Address and C/- InterOil Limited Facsimile Number Level 6, Defens Haus PO Box 1971 Port Moresby, PNG 675-320-2601 [deleted for confidentiality] 11. Contract Currency Amounts Contract Sum (Clause 1.1) $[deleted for confidentiality] (Indicative only) 12. Period of time for: (a) Mechanical Completion 20 months from the date of the Notice to Proceed with work under the (Clause 1.1) Contract pursuant to clause 2.4 (b) Practical Completion 6 months from the Date for Mechanical Completion (Clause 1.1) 13. The Principal's Project Requirements are Principal's Project Requirements described in the following documents (Clause 1.1) Annexure 18 14. Governing Law Queensland Law (Clause 1.2.11) 15. Currency US$, AU$, Euro, Sing $, PNG Kina (Clause 1.2.10) 16. Place for Payments Payment by the Principal - Banks nominated by Contractor (Clause 1.2.10) Payment to the Principal - Banks nominated by the Principal 17. The amount of security 10% of the Contract Sum (Clause 7.1.1) 18. Authorised Signatories For the Principal: (Clause 9)
Page 81 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED SCHEDULE
ITEM DESCRIPTION DETAIL The Principal's Representative and other nominated Principal's Representatives For the Contractor: Contractor's Representative [deleted for confidentiality] 19. Contractor's Margin (Clause 46.2.1(c)(iv)) 20. Not used NOT USED 21. Time for Principal's Representative's Direction 14 days about Documents (Clause 10.3.2(c)) 22. Subcontracts (a) Subcontractors required to execute Suppliers of Subcontractor's equipment, goods Consent Deed; and and materials which are material in nature to the functionality of the Works. (b) Subcontract Work requiring Approval Suppliers of equipment, goods and materials which are material in nature to the functionality of the Works. (Clause 11) 23. Not used Not used 24. Limitation of the Contractor's liability 50% of the Contract Sum (Clause 20.2) 25. Professional Indemnity Insurance: (Clause 24) (a) Contractor: (i) The amount of the Contractor's Professional [deleted for confidentiality] Indemnity
Page 82 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED SCHEDULE
ITEM DESCRIPTION DETAIL (ii) The excess shall not exceed $200,000 (iii) The policy shall be maintained for the period following Final Certificate or 6 years termination (b) Consultants: (i) The amount of the Consultant's Professional Not less than A$1 million any one claim Indemnity (ii) The excess shall not exceed Not used (iii) The policy shall be maintained for the period following Final Certificate or 6 years termination 26. Time for Giving Possession Within 7 Days of Notice to Proceed (Clause 32.1) 27. Latent Conditions in Principal Supplied Equipment for Refurbishment (a) The time by which a survey of Principal Not used Supplied Equipment for latent conditions is to be undertaken (b) The time by which the Contractor shall notify Not used the Principal's Representative of any latent condition 28. Time for issuing the Certificate of Mechanical Completion for the Works (Clause 43.7.4(a) & 43.7.4(b)) (a) Subsystems Not used (b) Works Not used 29. Liquidated Damages, Rate $30,000 per day subject to clause 43.10.4 (Clause 43.10)
Page 83 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED SCHEDULE
ITEM DESCRIPTION DETAIL 30. Aggregate liability of the Contractor for delay 5% of the Contract Sum in reaching Mechanical Completion and Practical Completion under clause 43.10 LIQUIDATED DAMAGES (Clause 43.10.4) 31. The limitation to the Principal's liability for 2.5% of the Contract Sum delay damages under clauses 43.11.1 and 43.11.2 (Clause 43.11.3) 32. Defects Liability Period The sooner of: (clause 44) 18 months from 4.00pm on the Date of Mechanical Completion; and 12 months from 4.00pm on the Date of Practical Completion; 33. The amounts to be included in valuation of (i) Increase in work: Direct costs (inclusive of on-Site variation as profit and off-Site overheads - overhead) plus off-Site overheads and (Clauses 45.4.1) profit at 6.8% and 4.2% respectively of the actual direct cost (ii) Reduction in work: Direct costs (exclusive of on-Site overhead) plus off-Site overheads and profit at 6.8% and 4.2% respectively of the actual direct cost 34. Worker Rights Requirements The Contractor shall not, and shall cause its Subcontractors not to, take any action to prevent its employees from lawfully exercising their right of association and their right to organise and bargain collectively and shall observe applicable laws relating to a minimum age for employment of children, acceptable conditions of work with respect to minimum wages, hours of work and occupational health and safety, and not to use forced labour. In addition, the Contractor agrees, and shall cause its Subcontractors to agree that (i) no person under the age of fourteen (14) years shall be employed by either the Contractor or its Subcontractors and that no person under the age of sixteen (16) years shall be employed by either the Contractor or its Subcontractors in the performance of any hazardous activity and (ii) every person employed by either the Contractor or its Subcontractors shall have the right to remove himself or herself from dangerous work situations without jeopardising his or her continued employment in connection with the Contract. The Contractor shall, and shall cause each Subcontractor to, require each of its subcontractors to comply with the foregoing undertakings (the "Worker Rights Requirements") with respect to employees of such subcontractors. The Contractor shall, and shall cause it Subcontractors to, use commercially reasonable efforts to monitor the compliance of contractors and subcontractors with the Worker Rights Requirements. In the event information concerning non-compliance or potential non-compliance with the Worker Rights Requirements with respect to employees of either the Contractor,
Page 84 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED SCHEDULE
ITEM DESCRIPTION DETAIL Subcontractors (or their subcontractors) comes to the attention of a responsible officer of either the Contractor or a Subcontractor, the Contractor shall, or, if applicable, shall cause the Subcontractor to, give prompt notice thereof to the Principal and shall investigate the circumstances of such non-compliance or potential non-compliance. In the event of non-compliance, the Contractor shall, or, if applicable, shall cause the Subcontractor to (i) cure such non-compliance or use its best efforts to cause the relevant subcontractor to cure, such non-compliance, in all cases to the satisfaction of the Principal, and (ii) terminate such Subcontract, or cause such Subcontractor to terminate the relevant subcontract, unless such non-compliance is cured to the satisfaction of the Principal within ninety (90) days after such notice, or notice from the Principal to the Subcontractor, whichever first occurs. Notwithstanding the foregoing, neither the Contractor nor its Subcontractors (or their subcontractors) shall be responsible for non-compliance with the Worker Rights Requirements resulting from actions of a government. 35. Payment Claims Once monthly (Clause 46) 36. Times for Payment Claims To be submitted on the last day of each month (Clause 46.2) 37. Interest rate on Overdue payments 3 month London Interbank Offered Rate(LIBOR) (Clause 46.10) 38. Time for Principal to rectify Inadequate 14 days Possession (Clause 48.7.2(b)) 39. Arbitration (Clause 52.3) (a) Place of Arbitration Brisbane, Queensland (b) Language of Arbitration English
Page 85 PNG REFINERY PROJECT - INTEROIL LIMITED CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES CLOUGH NIUGINI LIMITED ANNEXURES PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED & DEED OF NOVATION SUBCONTRACTOR'S CONSENT DEED This DEED is made on the day of 2002 BETWEEN 1. INTEROIL LIMITED incorporated in the Independent State of Papua New Guinea of Level 6, Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("the PRINCIPAL"); 2. CLOUGH NIUGINI LIMITED incorporated in the Independent State of Papua New Guinea of C/- PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("the CONTRACTOR"); 3. INSERT NAME OF SUBCONTRACTOR A C N INSERT ACN of ....................................................... ............ ................................(with successors and permitted assigns) (the SUBCONTRACTOR); and 4. OVERSEAS PRIVATE INVESTMENT CORPORATION, an agency of the United States of America, of 1100 New York Avenue, N.W., Washington, D.C 20527, U.S.A. (with its successors and permitted assigns) ("the LENDER"). RECITALS A The Contractor has entered into the Design and Construction Contract with the Principal to carry out the Works. B The Subcontractor has been engaged by the Contractor pursuant to the Subcontract to carry out the Subcontract Work C The parties have agreed to enter into this Deed for their mutual benefit. IT IS AGREED AS FOLLOWS. 2. DEFINITIONS AND INTERPRETATION 2.1 DEFINITIONS The following definitions apply unless the context requires otherwise. DEED means this Deed. DESIGN AND CONSTRUCTION CONTRACT means the agreement dated 15 February 2002 between the Principal and the Contractor. NOVATION NOTICE means a notice given under Clause 3.1, which requires the Subcontractor to perform the Subcontract in favour of the Incoming Contractor. SUBCONTRACT means the agreement dated 15 February 2002 between the Contractor and the Subcontractor. SUBCONTRACT WORK means all the obligations and all the work, which is to be carried out by the Subcontractor under the Subcontract. Page 87 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED & DEED OF NOVATION SUBCONTRACTOR'S CONSENT DEED 2.2 INTERPRETATION Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise. (a) The singular includes the plural and the converse. (b) A gender includes all genders. (c) Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. (d) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them. (e) Unless stated otherwise, a reference to a clause or schedule is a reference to a clause of, or schedule to, this Deed. (f) Reference to a party to this deed or another agreement or document includes the party's successors and permitted substitutes or assigns. (g) A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it (h) A reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form. (i) A reference to conduct includes an omission, statement or undertaking, whether or not in writing. (j) Mentioning anything after include, includes or including does not limit what else might be included. 3. SUSPENSION AND TERMINATION The Subcontractor undertakes not to exercise at any time prior to the novation of the Subcontract, any right under or arising out of the Subcontractor's employment under the Subcontract to suspend or terminate the Subcontract Work or the Subcontract or to release itself or the Contractor from any or all of their respective obligations under the Subcontract ("Right to Terminate or Suspend"), unless: (a) it has given, to the Principal and the Contractor, a written notice fully specifying the circumstances and each and every ground (of which it is aware) upon which the Right to Terminate or Suspend has accrued to the Subcontractor, and specifically states any terms of the Subcontract which give rise to or underlie that right ("Notice of Right"); and (b) the Principal has not given the Subcontractor a Novation Notice within 30 days of receipt of the Notice of Right. 4. NOVATION 4.1.1 If the Principal: (a) exercises its rights under Clauses 48 of the Design and Construction Contract ; or Page 88 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED & DEED OF NOVATION SUBCONTRACTOR'S CONSENT DEED (c) receives a Notice of Right, then the Principal shall, within 30 days, give to the Subcontractor and the Contractor, written notice stating whether or not the Principal or other person appointed by the Principal ("Incoming Contractor") requires the Subcontractor to perform the Subcontract in favour of the Incoming Contractor, rather than in favour of the Contractor. 4.1.2 Provided that the Incoming Contractor undertakes to pay all unpaid moneys due under the Subcontract, upon receipt of the Novation Notice, the Subcontract shall be novated so that the Incoming Contractor shall take the place of the Contractor under the Subcontract as though the Incoming Contractor had always been party to the Subcontract instead of the Contractor. 4.1.3 The Subcontractor undertakes to release the Principal from all suits, actions, demands and claims for costs (except for the unpaid moneys due under the Subcontract referred to in Clause 4.1.2), expenses, damages and losses (including consequential loss) arising out of or incidental to the Subcontract and any work which may have been performed by the Subcontractor under the Subcontract with the Contractor prior to the novation. 4.1.4 The Contractor undertakes to indemnify the Principal for the moneys payable under Clause 4.1.2. 5. NOTICES A notice given: (a) personally will be served on delivery; (b) by post will be served seven days after posting; (c) by facsimile transmission will be served on receipt of a transmission report by the machine from which the facsimile was sent indicating that the facsimile had been sent in its entirety to the facsimile number specified in this Deed or such other number as may have been notified by the receiving party. If the facsimile has not been completely transmitted by 5.00 pm (determined by reference to the time of day at the recipient's address) it will be deemed to have been served on the next day. 2. ENTIRE AGREEMENT This Deed contains the entire agreement of the parties with respect to its subject matter. It sets out the only conduct relied on by the parties and supersedes all earlier conduct by the parties with respect to its subject matter. 3. AMENDMENT This Deed may be amended only with the express written consent of the Lender and by another deed executed by all parties who may be affected by the amendment. 4. NO WAIVER No failure to exercise and no delay in exercising any right, power or remedy under this Deed will operate as a waiver. Nor will any single or partial exercise of any right, power or remedy preclude any other or future exercise of that or any other right, power or remedy. 5. STAMP DUTY The Principal shall bear any stamp duty chargeable on this Deed and on any instruments executed under this Deed. Page 89 PNG REFINERY PROJECT- CONSTRUCTION-CONDITION OF ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED CONTRACT SCHEDULE AND & DEED OF NOVATION ANNEXURES 6. GOVERNING LAW The laws of Queensland govern this Deed. The parties submit to the non-exclusive jurisdiction of courts exercising jurisdiction there. 7. COUNTERPARTS This Deed may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument. EXECUTED AS A DEED Sign Sealed and Delivered on behalf of INTEROIL ) LIMITED by its duly authorised signatories: ) ) ....................................................... ) ..................... Director ) Director/Secretary ) ....................................................... ) ..................... Name of Director - please print ) Name of Director/ ) Secretary - please ) print Sign Sealed and Delivered on behalf of CLOUGH ) NIUGINI LIMITED by its duly authorised signatories: ) ) ....................................................... ) ..................... Director ) Director/Secretary ) ....................................................... ) ..................... Name of Director - please print ) Name of Director/ ) Secretary - please ) print Sign Sealed and Delivered by ) INSERT NAME OF SUBCONTRACT or ACN INSERT ACN by ) its attorney: ) ) ....................................................... ) ..................... Name of Attorney - please print ) Signature of Attorney ) under power of the attorney number................... ) who certifies that at the time of execution of this ) instrument he/she has no notice of the revocation of the ) power of attorney in the presence of: ) ) ....................................................... ) Signature of Witness Page 90 PNG REFINERY PROJECT- CONSTRUCTION-CONDITION OF ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED CONTRACT SCHEDULE AND & DEED OF NOVATION ANNEXURES Signature of Witness ) ) Name of Witness - please print ) ) of................................................... ) ...................................................... ) Address of Witness ) Sign Sealed and Delivered by OVERSEAS PRIVATE ) INVESTMENT CORPORATION by ) its attorney: ) ) ....................................................... ) ..................... Name of Attorney - please print ) Signature of Attorney ) under power of the attorney number ................... ) who certifies that at the time of execution of this ) instrument he/she has no notice of the revocation of the ) power of attorney in the presence of: ) ) ....................................................... ) Signature of Witness ) ) ....................................................... ) Name of Witness - please print ) ) of.................................................... ) ...................................................... ) Address of Witness ) Page 91 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 1 SUBCONTRACTOR'S CONSENT CONTRACT SCHEDULE AND ANNEXURES DEED & DEED OF NOVATION - -------------------------------------------------------------------------------- SUBCONTRACTOR'S DEED OF NOVATION This Deed made the ...................... day of ....................... 2002 Between: 1. INTEROIL LIMITED, incorporated in the Independent State of Papua New Guinea of Level 6 Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("the PRINCIPAL"); 2. CLOUGH NIUGINI LIMITED incorporated in the Independent State of Papua New Guinea of C/- PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("the CONTRACTOR"); 3. INSERT NAME OF SUBCONTRACTOR A C N INSERT ACN of ............. (with successors and permitted assigns) (the SUBCONTRACTOR); and 4. INSERT NAME OF INCOMING CONTRACTOR INSERT ACN of ............................... (with successors and permitted assigns) ("the INCOMING CONTRACTOR"); Witnesses that 1. Upon receipt by the subcontractor of the sum certified by the Principal's Representative as owing under the prior contract prescribed in the Schedule hereto: (a) the prior contract shall be discharged; (b) the subcontractor shall release the Contractor from the further performance of the prior contract and from all claims and demands in connection with the prior contract; (c) the Incoming Contractor shall punctually perform the obligations of the Contractor under the prior contract as far as they are not performed. The Incoming Contractor acknowledges itself bound by the provisions of the prior contract as if the Incoming Contractor had been named in the prior contract; and (d) the subcontractor shall punctually perform like obligations and be bound to the Incoming Contractor as if the provisions of the prior contract were incorporated herein. 2. The Principal and subcontractor each warrant to the Incoming Contractor that: (a) subcontract work carried out to the date hereof is in accordance with the provisions of the prior contract; and (b) all claims and demands in connection with the prior contract have been made to the Contractor. 3. The Principal and subcontractor each indemnifies the Incoming Contractor from all claims and demands of the Contractor, Principal and subcontractor in connection with the prior contract. Page 92 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 1 SUBCONTRACTOR'S CONSENT CONTRACT SCHEDULE AND ANNEXURES DEED & DEED OF NOVATION - -------------------------------------------------------------------------------- 4. A dispute or difference between: (a) the Principal and the subcontractor in connection with the Principal's Representative's certification of the sum owing under the prior contract; or (b) the Incoming Contractor and the Subcontractor in connection with clause 1(c) and 1(d); shall be resolved pursuant to the provisions of the subcontract between the Subcontractor and the Contractor which for the purposes of this clause 4 are incorporated herein . 5. This Deed shall be governed by the laws in force in the State or Territory stated in the provisions of the agreement between the Principal and Contractor and in the event that no State or Territory is so stated then in accordance with the law for the time being in force in that State or Territory in which the project is being carried out. SCHEDULE PRIOR CONTRACTS ..................................................................... ..................................................................... ..................................................................... ..................................................................... ..................................................................... Page 93 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 1 SUBCONTRACTOR'S CONSENT CONTRACT SCHEDULE AND ANNEXURES DEED & DEED OF NOVATION - -------------------------------------------------------------------------------- EXECUTED AS A DEED Sign Sealed and Delivered on ) behalf of INTEROIL LIMITED by ) its duly authorised ) signatories: ) ) ....................................... ) ..................................... Director ) Director/Secretary ) ....................................... ) ..................................... Name of Director - please print ) Name of Director/Secretary - please ) print Sign Sealed and Delivered on ) behalf of CLOUGH NIUGINI ) LIMITED by its duly authorised ) signatories: ) ....................................... ) ..................................... Director Director/Secretary ....................................... ) ..................................... Name of Director - please print Name of Director/Secretary - please print Page 94 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 1 SUBCONTRACTOR'S CONSENT DEED CONTRACT SCHEDULE AND ANNEXURES & Deed of NOVATION SUBCONTRACTOR'S DEED OF NOVATION Sign Sealed and Delivered by ) INSERT NAME OF SUBCONTRACTOR ACN INSERT ) ACN INSERT ACN by its attorney: ) .................................... ) ..................... Name of Attorney - please print ) Signature of Attorney ) under power of the attorney number ..................... ) who certifies that at the time of execution of this ) instrument he/she has no notice of the revocation of the ) power of attorney in the presence of: ) ) ......................................................... ) Signature of Witness ) ) ......................................................... ) Name of Witness - please print ) ) Of...................................................... ) ......................................................... ) Address of Witness ) Sign Sealed and Delivered by ) INSERT NAME OF INCOMING CONTRACTOR ACN ) INSERT ACN by its attorney: ) ) ......................................................... ) ..................... Name of Attorney - please print ) Signature of Attorney ) under power of the attorney number ..................... ) who certifies that at the time of execution of this ) instrument he/she has no notice of the revocation of the ) power of attorney in the presence of: ) ) ......................................................... ) Signature of Witness ) ) ......................................................... ) Name of Witness - please print ) Of...................................................... ) ......................................................... ) Address of Witness Page 95 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 2 APPROVED FORM OF UNDERTAKING Contract for: CONSTRUCTION OF OIL REFINERY, NAPA NAPA, PAPUA NEW GUINEA (PNG REFINERY PROJECT) ("CONTRACT") At the request of CLOUGH NIUGINI LIMITED incorporated in the Independent State of Papua New Guinea of C/- PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea ("Contractor") and in consideration of INTEROIL LIMITED incorporated in the Independent State of Papua New Guinea of Level 6 Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea ("Principal") accepting this undertaking in respect of the Contract, Insert name of financial institution ACN Insert ACN Insert (the "Financial Institution") unconditionally undertakes to pay on demand any sum or sums which may from time to time be demanded by the Principal to a maximum aggregate sum of.............................................................................. ................................................................................. Insert amount of Security. This undertaking is to continue: 1 until notification has been received from the Principal that the sum is no longer required by the Principal; or 2. until this undertaking is returned to the Financial Institution; or 3. until payment to the Principal by the Financial Institution of the whole of the sum. Should the financial Institution be notified in writing, purporting to be signed by INSERT NAME OF PERSON OF SIGN REQUEST FOR PAYMENT UNDER THIS GUARANTEE HERE for and on behalf of the Principal that the Principal desires payment to be made of the whole or any part or parts of the sum, it is unconditionally agreed that the Financial Institution will make payment or payments to the Principal forthwith without reference to the Contractor and notwithstanding any notice given by the Contractor not to pay same. Provided always that the financial Institution may at any time without being required so to do pay to the Principal the amount of ............................................................................. .......................................................INSERT AMOUNT OF SECURITY less any amount or amounts it may previously have paid under this undertaking or such lesser sum may be required and specified by the Principal and thereupon the liability of the Financial Institution hereunder shall immediately cease. DATED at ................................ day of ................... 200 .... SIGNED for and on behalf of .................. (Financial Institution) ........ ................................................................................ By its Attorney(s) ............................................................. ......................................................................... (Names) Pursuant to Power of Attorney No ................... } who hereby warrant that he has/they have not received } notification of revocation of his/their appointment. }.................Attorney in the presence of - .................................}..................Witness Branch of Issue: ..........................Telephone: ......................... Page 96 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 3 DEED OF GUARANTEE, UNDERTAKING AND SUBSTITUTION THIS DEED is made on the...............day of..........................2002 PARTIES: 1. CLOUGH LIMITED (ABN 59 008 678 813) of Level 6 251 St Georges Terrace Perth, Western Australia, and ("GUARANTOR"). 2. CLOUGH NIUGINI LIMITED c/o PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea, a subsidiary of Clough Engineering Limited ("CONTRACTOR") 3. INTEROIL LIMITED of Level 6 Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("THE PRINCIPAL"). BACKGROUND: A. The Principal has entered into the Contract for the execution and performance by the Contractor of the work under the Contract relating to the engineering, procurement and construction of an oil refinery at Napa Napa, Port Moresby Harbour, Papua New Guinea. B. Under the Contract, the Contractor must procure that the Guarantor provides to the Principal a deed of guarantee, undertaking and substitution in the form of this Deed. C. The Guarantor has fully informed itself of the obligations and liabilities of the Contractor under the Contract and is prepared to give and execute the guarantee, undertaking and agreements contained in this Agreement. D. The consideration for the Guarantor entering into this Deed is the Principal awarding the Contract to the Contractor. The Guarantor acknowledges that the Principal awarded the Contract to the Contractor on the basis that the Guarantor would enter into this Deed. The Guarantor admits good consideration flows to it from the Principal for its execution of this Deed. OPERATIVE PROVISIONS: 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this Deed unless the context otherwise requires: CONTRACT means the contract mentioned in paragraph A of the Background; WORKS and WORK UNDER THE CONTRACT means the Works and work under the Contract respectively referred to in the Contract; Page 97 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 3 DEED OF GUARANTEE,UNDERTAKING CONTRACT SCHEDULE AND ANNEXURES AND SUBSTITUTION 1.2 INTERPRETATION In this Deed unless the context otherwise requires: (a) Reference to a person includes any other entity recognised by law vice versa; (b) Words importing the singular include the plural and vice versa; (c) Words importing one gender include every gender; (d) Any reference to any parties by their defined terms includes that party's executors, administrators, or permitted assigns or being a company, its successors or permitted assigns; (e) Every agreement or undertaking expressed or implied by which more than one person agrees or undertakes any obligation or derives any benefit binds or enures for the benefit of those persons jointly and each of them severally; (f) Clause headings are for reference purposes only; (g) Reference to a statute includes all regulations under and amendments to that statute any statute passed in substitution for that statute or incorporating any of its provisions to the extent that they are incorporated. 2. GUARANTEE BY GUARANTOR 2.1 PERFORMANCE OF OBLIGATIONS (a) The Guarantor guarantees to the Principal the due and punctual performance by the Contractor of the obligations on the part of the Contractor to be performed under the Contract or in respect of the Works. (b) At any time and from time to time while the Contractor is in default under any provision of the Contract the Principal may, after giving 7 days notice to the Contractor, by written demand require the Guarantor to remedy the default. (c) The Guarantor must: (i) if the default is capable of being remedied within 10 days, remedy the default within that period; (ii) if the default is not capable of being remedied within 10 days, take all reasonable steps to commence the remedy of the default within that period and shall continue thereafter to promptly remedy the default to the reasonable satisfaction of the Principal. (d) If the Guarantor is required to carry out all or part of the Works to remedy the default it must, at its option, either: (i) if it holds all requisite licences, itself carry out the Works in accordance with the Contract; or (ii) procure a contractor satisfactory to the Principal to carry out the Works in accordance with the Contract. Page 98 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 3 DEED OF GUARANTEE,UNDERTAKING CONTRACT SCHEDULE AND ANNEXURES AND SUBSTITUTION (c) The Guarantor is entitled to rely on any defence available to the Contractor; and the parties agree that nothing in this Deed is intended to make the Guarantor's liability to the Principal more extensive than the Contractor's liability under the Contract. (d) The rights of the Principal under this Deed may be exercised either separately or together and from time to time with any other rights held by the Principal (whether under this Deed, the Contract or otherwise). (e) The parties agree that nothing in this Deed will cause an increase to the Principal's liability under the Contract. 2.2 PAYMENT OF MONEY Subject to clause 2.1, the Guarantor must, from time to time, pay to the Principal on demand any sum which is payable by the Contractor to the Principal under or in respect of the Contract whether or not arising by way of damages (liquidated or unliquidated), debt restitution or otherwise. 3. INDEMNITY BY GUARANTOR 3.1 INDEMNITY AGAINST LOSS ETC. Subject to clause 2.1(e), the Guarantor indemnifies the Principal and agrees to keep the Principal indemnified against all loss damage costs and expenses suffered or incurred by the Principal as a result of any failure by the Contractor to perform any of its obligations under the Contract or in respect of the work under the Contract or as a result of any breach of any of the terms covenants and conditions contained in or implied by the Contract or as a result of any failure by the Guarantor to performs any of its obligations under this Deed. 3.2 BASIS OF INDEMNITY The indemnity in clause 3.1 applies whether or not: (a) the Contract or any transaction relating to the Contract was void or illegal or has been subsequently avoided; or (b) any matter or fact relating to that transaction was or ought to have been within the knowledge of the Principal. 4. CONTINUING GUARANTEE AND INDEMNITY This Deed is continuing guarantee and indemnity (it being the intent of the Guarantor that the guarantee and indemnity will be absolute and unconditional in all circumstances) and is irrevocable and will remain in full force and effect until the obligations of the Contractor under the Contract have been fully satisfied, even if the Contract has been terminated. 5. NO DISCHARGE This Deed will not be considered as wholly or partially discharged by: (a) the payment at any time of any money on account or by any time, credit, indulgence, or concession extended by the Principal to the Contractor, the Guarantor or any other person; or Page 99 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 3 DEED OF GUARANTEE,UNDERTAKING CONTRACT SCHEDULE AND ANNEXURES AND SUBSTITUTION (b) any compounding compromise, release, abandonment, waiver, variation, relinquishment, or renewal of any rights of the Principal against the Contractor or the Guarantor or any other person; or (c) the delay, neglect or omission of the Principal to enforce any rights against the Contractor or the Guarantor; or (d) all or any part of any document or agreement held by the Principal at any time or of any right, obligation, power or remedy changing, ceasing or being transferred (this includes amendment, variation, novation, replacement, rescission, invalidity, extinguishment, repudiation, avoidance, unenforceability, frustration, failure, expiry, termination, loss, release, discharge, abandonment or assignment) (e) winding up or bankruptcy of any party to the Contract; or (f) disclaimer of the Contract by a liquidator or any one else; or (g) the Contractor completing the Works; or (f) any other dealing, matter or thing or by any alteration, modification, variation, or addition to the Contract. Without limitation, this Guarantee will not be discharged, modified or abrogated by any variation to the Works agreed between the Contractor and the Principal, even if the Guarantor is not aware of or does not consent to that variation. 6. NO SUBSTITUTION OF RIGHTS 6.1 PRINCIPAL OBLIGATION This Deed is a principal obligation of the Guarantor and will not be treated as ancillary or collateral to any other obligation to the intent that this Guarantee is enforceable although the Contract or any other obligation arising between the Principal and the Contractor or any other person becomes in whole or part unenforceable for any reason. 6.2 RIGHT TO ENFORCE AGAINST GUARANTOR FIRST This Deed is in addition to and not in substitution for any other rights which the Principal may have under or because of the Contract and, subject to clause 2.1, may be enforced against the Guarantor without first having recourse to any of those rights and without taking any steps or proceedings against the Contractor. 6.3 NO AFFECT ON SECURITY This Deed does not prejudicially affect and is not prejudicially affected by any other security or guarantee or indemnity at any time held by the Principal but that other security is deemed to be collateral and the Guarantor may not as against the Principal in any way claim the benefit or seek the transfer of any security or any part of that security. 6.4 CONTRACTOR'S LIABILITY UNDER CONTRACT If for any reason the Contractor ceases to be bound by any of the terms and conditions of the Contract or the obligations of the Contractor under the Contract are affected or modified other than by the Contractor's performance of them or by express written agreement or if the Contract is or becomes void or voidable then the Guarantor on a full indemnity basis must pay to the Principal an amount equal to the total direct loss or damage incurred by the Principal as a result. Page 100 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 3 DEED OF GUARANTEE,UNDERTAKING CONTRACT SCHEDULE AND ANNEXURES AND SUBSTITUTION The obligations of the Guarantor under this paragraph are original and independent and are in addition to the Principal's other rights. If a liquidator or anybody else on behalf of the Contractor disclaims the Contract, or if for any other reason the Contract is not enforceable in full against the Contractor, the Guarantor (or any one of them nominated by the Principal) must promptly after demand by the Principal enter into a contract on the same terms as the Contract (amended as required by the effluxion of time) for the completion of the Works. 7. BANKRUPTCY OF CONTRACTOR 7.1 ASSIGNMENT OF RIGHTS BY GUARANTOR If the Contractor becomes bankrupt or enters into any scheme of arrangement in favour of creditors or, being a company enters into liquidation, the Guarantor assigns to the Principal the whole of its right to claim, if any, against the official receiver or liquidator so that the Principal will be entitled to receive the whole of that entitlement in reduction of the amount due under the Guarantee. 7.2 NO COMPETITION BY GUARANTOR Unless and until the Works are completed in accordance with the Contract and the Principal has received all money due under the Contract, the Guarantor may not claim any subrogation against the Contractor, the Principal or the Lender without the prior written consent of the Principal. 7.3 RIGHTS OF SUBROGATION After the Works are completed in accordance with the Contract and the Final Payment (if any) has been paid in full, the Guarantor will not exercise any right of subrogation or any other right which might require the Principal to repay any money received by the Principal. 8. ADMINISTRATIVE PROVISIONS 8.1 NOTICES (a) Any notice, approval, request, demand or other communication (notice) to be given for the purposes of this Deed must be in writing and must be: (i) served personally; or (ii) sent by ordinary or certified mail (airmail if overseas) to the address of the party specified in this Deed ( or such other address as that party notifies in writing); or (iii) sent by facsimile transmission to the facsimile number of that party specified in this Deed, (or such other facsimile number as that party notifies in writing). (b) A notice given: (i) personally will be served on delivery; (ii) by post will be served seven days after posting; (iii) by facsimile transmission will be served on receipt of a transmission report by the machine from which the facsimile was sent indicating that the facsimile had been sent in its entirety to the facsimile number specified in this Deed or such other number as may have been notified by the receiving party. If the facsimile has not been completely transmitted by 5.00 pm (determined by reference to the time of Page 101 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF ANNEXURE 3 DEED OF GUARANTEE,UNDERTAKING CONTRACT SCHEDULE AND ANNEXURES AND SUBSTITUTION day at the recipient's address) it will be deemed to have been served on the next day. 8.2 STAMP DUTY AND COSTS 8.2.1 The Principal must pay all stamp duty on or arising in connection with this Deed and any other related documentation. 8.2.2 Each party must bear its own legal and other costs and expenses arising directly or indirectly with respect to the preparation, execution, completion and performance of this Deed or any related documentation. 8.3 GOVERNING LAW This Deed will be governed by the laws of Queensland. The parties submit to the non-exclusive jurisdiction of the courts of Queensland. 8.4 SEVERABILITY If any part of this Deed is or becomes illegal, invalid or unenforceable in any relevant jurisdiction, the legality, validity or enforceability of the remainder of the Deed will not be affected and this Deed will be read as if the part had been deleted in that jurisdiction only. 8.5 MERGER The obligations contained in this Deed will continue until satisfied in full. 8.6 EXECUTION BY COUNTERPARTS This Deed may consist of one or more counterpart copies and all counterparts will, when taken together, constitute the one document. Page 102 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF DEED OF GUARANTEE,UNDERTAKING CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 3 AND SUBSTITUTION EXECUTED AS A DEED Signed Sealed and Delivered on behalf ) of CLOUGH LIMITED ABN )59 008 678 813 ) by its duly authorised signatories: ) ) _____________________________________ ) ______________________________________ Director ) Director/Secretary ) _____________________________________ ) ______________________________________ Name of Director - please print ) Name of Director/Secretary - ) please print Signed Sealed and Delivered on ) behalf of CLOUGH NIUGINI LIMITED by ) its duly authorised signatories: ) ) _____________________________________ ) ______________________________________ Director ) Director/Secretary ) _____________________________________ ) ______________________________________ Name of Director - please print ) Name of Director/Secretary - please ) print Signed Sealed and Delivered on ) behalf of INTEROIL LIMITED by its ) duly authorised signatory in the ) presence of: ) ) _____________________________________ ) ______________________________________ Witness ) Authorised Signatory ) _____________________________________ ) ______________________________________ Name and address of Witness ) Name of Signatory - please print Page 103 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 4 TERMS OF INSURANCE PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 4 TERMS OF INSURANCE 1. PUBLIC LIABILITY INSURANCE Refer to the attached Foreign Commercial General Liability policy dated 30 August 2000 with limits of $2,000,000 per occurrence and in the aggregate. The parties agree to review the definitions and usages of the terms "insured" and "named insured" as used in this policy and seek amendments thereto to the their mutual satisfaction. 2. MARINE LIABILITY Marine liability insurance for the Insured's liability arising out of claims for bodily injury or property damage arising out of any vessel or barge owned, rented or chartered by an Insured with a minimum $25,000,000 limit per occurrence. This insurance shall be extended or endorsed to cover liabilities arising out of specialist construction activities or operations related to the work under the Contract. 3. MARINE TERMINAL OPERATOR'S LIABILITY Coverage for the Insured's liability arising out of claims for bodily injury or property damage including physical damage to vessels, property of others or cargo during docking/undocking, loading/unloading or while in the custody of the Insured with a minimum limit of $25,000,000 per occurrence. A maximum deductible or self-insured retention of $250,000 per occurrence shall be allowed. 4. ENVIRONMENTAL IMPAIRMENT LIABILITY Environmental Impairment Liability insurance for the Insured's liability arising out of the release of pollutants that cause environmental damage or bodily injury or property damage to third parties and first party clean-up expenses with a minimum limit of $50,000,000. A maximum deductible or self-insured retention of $1,000,000 per claim shall be allowed. The Principal shall not be required to obtain such insurance earlier than the sixtieth (60th) day prior to the date crude oil is first introduced into the Project. 5. UMBRELLA LIABILITY INSURANCE Refer to the attached Commercial Umbrella liability policy dated 31 August 2000 with per occurrence and general aggregate limits of $25,000,000. Notwithstanding the terms of clause 22.1.1 of the Contract, the Principal shall, within 60 days after the Notice to Proceed is issued, acquire an umbrella liability insurance policy with terms no less beneficial than those available in the Australian insurance market, which will be taken out on a full occurrence basis, and shall maintain such insurance while ever the Contractor and each other insured party has an insurable interest under the Contract, but in no event less than for a period of 5 years following the issue of the Final Certificate in respect of products and completed operations liabilities coverage. Such policy shall replace the attached Commercial Umbrella liability policy, and if the Principal should fail to provide proof of the replacement insurance within the 60 day period the Contractor may proceed in accordance with clause 25.2 of the Contract. The policy shall be for a minimum of $25,000,000 for each and every occurrence and only limited in the aggregate in respect of product and completed operations liabilities with a self-insured retention not greater than $50,000 for each and every occurrence. This policy shall Page 104 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 4 TERMS OF INSURANCE also provide difference in conditions coverage and for amounts in excess of the self-insured retention. Co-insureds under this policy must include the following parties: 1) InterOil Corporation, EP InterOil, Ltd, InterOil Limited; 2) Overseas Private Investment Corporation; 3) Clough Limited, Clough Engineering Ltd, Clough Niugini Limited; 4) each of the subsidiaries of each of the above; 5) each of the Subcontractors of each of the above; and 6) each of the agents, employees and directors of each of the above. The policy will include: 1) a cross liability clause; 2) full waiver of subrogation; 3) blanket contractual liabilities; 4) a "worker to worker" clause; 5) motor vehicle "gap" cover; 6) world wide cover specifically including USA and Canada jurisdictions for claims; 7) any professional indemniyty exclusion not to apply to personal injury or property damage or liability arising from the Insureds' Site first-aid staff; and 8) a condition clearly stating that this insurance is primary and no other insurance shall be called upon to contribute. The Policy shall be in excess of the following underlying policies:
Underlying Policy Level of Cover - ----------------- -------------- 1) Foreign General Liability Insurance or $2 million each and every occurrence and in the equivalent aggregate 2) PNG Employer's Liability Insurance Kina 5 million each and every occurrence 3) Extra-territorial Workers Compensation Cover A$ 1 million each and every occurrence 4) Motor Vehicle Third Party Liability Insurance Kina 5 million limit per occurrence 5) Marine Liability Insurance US$ 25 million each and every occurrence 6) Marine Terminal Operator's Liability US$ 25 million each and every occurrence Insurance
6. CONTRACTORS' ALL RISKS Refer to the attached Contractor's All Risk (Collective) Policy dated 1 December 2001 # issued by American Home Assurance Company, Port Moresby, Papua New Guinea. The parties agree that the Principal will use its best endeavours to secure the following amendments to the Contractor's All Risk policy document. If the Principal is unable to secure the majority of these amendments within 60 days after the Notice to proceed is issued, the Contractor may arrange a suitable difference in conditions (DIC) policy on commercial terms acceptable to the Principal, and the Principal will reimburse the Contractor its costs in acquiring and maintaining such DIC policy. Page 105 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 4 TERMS OF INSURANCE POLICY REFERENCE COMMENT Page 1 The final paragraph (after 2) should be indented so that it lines up as part of General Exclusion 2; in addition, the reference to "Exclusion General Exclusions a)should be amended to read "Exclusion 2) a)"." Page 3 The word "immediately" should be replaced with "as soon as practicable". General Conditions 4 b and 5 a) Page 3 14 days should be amended to 30 days. General Condition 5 Page 3 The final paragraph of General Condition 5 should be deleted. General Condition 5 Page 4 Insert the word "First" in front of the words "Named Insureds" on line 3, which would then be amended to "Named Insured". General Condition 10 Page 4 The words "Insured Business" should be amended to "insured business". General Condition 11 b) Page 5 The word "financial" should be inserted between "consequential" and "loss" on the 1st line. Special Exclusion b) Page 5 In order of priority: (a) The exclusion should be amended to provide for Design Exclusion 5; Special Exclusion c) (b) failing that it should provide for Design Exclusion 4; and (c) failing all of the above, the word "portion" in the 2nd paragraph should be amended to "fragment". Page 5 The references to "files" and "drawings" should be deleted. Special Exclusion g) Page 6 The last paragraph should be deleted entirely. Provisions applying Page 106 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 4 TERMS OF INSURANCE to Section 1 - Memo 1 - Sums Insured Page 7 The Extended Maintenance Period should be amended from a specific period to 12 months from the Date for Practical Completion. Period of Insurance This needs to contemplate that there will be several different dates as various stages are completed and must also allow for a further period of 12 months from the date of rectification of any latent defect, subject to an overall maximum period of 24 months - ie if a latent defect is discovered on the 364th day, a further period of cover of 12 months will be required from that date. Page 9 The values of items 1.2, 2, and 3 are not "NIL", as these interests are included in the overall sum insured of US$153m. These items therefore need to be amended to read "Included in Item 1.1 above". Sums Insured Page 9 Item 1.1 should be amended to read "Contract Price/Limit of Liability". Sums Insured Page 9 Marsh are to advise if the sub limits are included in the overall limit of US$153m - ie the policy cover is not US$153m PLUS the various sub limits. Limits of Liability Page 9 The sub limit for Inland Transit should be increased from US$1,000,000 to US$1,500,000. Limits of Liability Page 9 The sub limit for Offsite Storage and Fabrication should be increased from US$1,000,000 to US$1,500,000. Limits of Liability Page 9 The percentage limit for Expediting Expenses should be increased from 20% to 25%. Limits of Liability Page 9 The percentage limit for Debris Removal should be increased from 10% to 25%. Limits of Liability Page 9 Marsh are to advise on the meaning of "named perils" that apply to this cover. Limits of Liability - First Party Pollution Page 9 The sub limit should be stated as "PNG Kina equivalent of US$5,000,000 any one occurrence", to be consistent with the sub limit referred to on Page 14 Limits of Liability -Temporary Page 107 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 4 TERMS OF INSURANCE Removal Page 9 Marsh are to advise if sub limits can be accumulated on sub limits Limits of Liability Page 16 The sub limit should be stated as "PNG Kina equivalent of US$5,000,000 any one occurrence", to be consistent with the sub limit summarised on Page 9. Professional Fees Page 16 The limit under this clause should be increased to the "PNG Kina equivalent of US$100,000". Plans and Documents Page 17 This provision should be completed as follows: Lenders Loss "All claims payments for loss or damage to the Payee Clause InterOil Refinery Construction Project shall be paid solely into the joint account in the names of InterOil Limited and Clough Niugini Limited held at Wells Fargo in Lubbock Texas and administered under and pursuant to the Collateral Account Agreement between InterOil Limited and Overseas Private Investment Corporation. The registered mailing address of the Lender Loss Payee is: Overseas Private Investment Corporation 1100 New York Avenue, N.W. Washington, D.C. 20527 USA (Attention: Vice President, Finance) Re: InterOil Refining Project (Papua New Guinea) (Facsimile: 1 202 408 9866) A Claim release form signed by Overseas Private Investment Corporation shall be a complete release of Insurer's liability in respect of the subject claim." Page 18 (a) Under paragraph (vi), the words "always excepting the First Named Insured" should be added after the words "...vitiating party as an Insured" Multiple Insureds at the end of the clause. Clause (b) Under paragraph (vii), delete the word "not" in line 2. Page 19 Marsh is to advise why the policy is subject to United Kingdom of Great Britain law practice and jurisdiction. Law and Jurisdiction The Insureds would prefer that the policy is subject to the laws of the Page 108 State of Queensland and the Commonwealth of Australia and the jurisdiction of the courts of the State of Queensland. Page 19 (a) Marsh is to advise why these clauses have been included in this policy; and Special Conditions Concerning Fire (b) whether they can be deleted. Fighting Facilities (c) If the answer to (b) is "No", the opening paragraph should be modified to read that the First Named Insured will use their best endeavours to ensure the following requirements are met. Page 21 Delete the reference to this clause being a warranty and rename it "Storage". Warranty concerning storage Page 22 Any additional premium to be paid by the first named Insured should not exceed the pro rata premium for the period. Reinstatement of Sum Insured Clause Page 23 Delete the words in bold in the last paragraph. Automatic Increase Clause Page 32 Add Special Condition 6 Waiver of Subrogation, to bring the policy into line with the contract conditions. Special Conditions applicable to Section II 7. MARINE CARGO AND TRANSIT INSURANCE Open marine cargo and transit insurance insuring the Insured, as their interests may appear, on a "warehouse to warehouse" basis including land, air and marine transit insuring "all risks" of loss or damage on a replacement cost basis plus freight and insurance from the time the goods are in the process of being loaded for transit until they are finally delivered to the Site including during shipment deviation, delay, forced discharge, re-shipment and transshipment. Such insurance shall include coverage for war, strikes, theft, pilferage, non-delivery, charges of general average sacrifice or contribution, salvage expenses, temporary storage in route, consolidation, repackaging, refused and returned shipments, contain a replacement by air extension clause, 50/50 clause, unintentional, difference in conditions for C.I.F. shipments, errors and omissions clause, import duty clause, non-vitiation clause, an English law and practices plus adjustment and settlement clause, debris removal, contain no exclusion for inadequate packing or survey warranties and insure for the replacement value of the largest single shipment plus freight and insurance, subject to a minimum limit of $15,000,000 per conveyance. A maximum deductible or self-insured retention of $100,000 per occurrence shall be allowed. Page 109 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 5 PRO FORMA CONSENT DEED THE PRO-FORMA CONSENT DEED IS ATTACHED HERETO AND INCLUDED HEREIN. Page 110 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 6 PROJECT AGREEMENT THE PROJECT AGREEMENT IS ATTACHED HERETO AND INCLUDED HEREIN Page 111 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 7 SCHEDULE OF RATES FOR VARIATIONS THE SCHEDULE OF RATES FOR VARIATIONS IS ATTACHED HERETO AND INCLUDED HEREIN. Page 112 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND FORM OF SUBCONTRACTOR'S FINAL ANNEXURES ANNEXURE 8 RELEASE AND STATUTORY DECLARATION FINAL FORM OF RELEASE STATUTORY DECLARATION BY SUBCONTRACTOR (CLAUSE 46.9 - FINAL PAYMENT) OATHS ACT 1867 QUEENSLAND TO WIT I, of........................................................................... in the State of. . . . . . . . . . . , do solemnly and sincerely declare that, in relation to the Contract between INTEROIL LIMITED incorporated in the Independent State of Papua New Guinea of Level 6 Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea (the "PRINCIPAL") and CLOUGH NIUGINI LIMITED incorporated in the Independent State of Papua New Guinea of c/o PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea (the "CONTRACTOR"), for the engineering, design and construction of the stick built refinery, at Napa Napa, Port Moresby Harbour, Papua New Guinea (the "CONTRACT") [Name of Subcontractor]......................................................... ("Subcontractor") is a subcontractor to the Contractor for part of the Work under the Contract namely: 1 I hold the position of ................................................... I am in a position to know the facts contained herein and to bind the Subcontractor by the terms of this declaration and I am duly authorised by the Subcontractor to make this decision on its behalf. 2. All amounts due have been paid in full. 3. All the Subcontractor's workers who at any time have been engaged on work under the Contract by the Subcontractor have been paid in full all moneys due and payable 4. All subcontractors of the Subcontractor have been paid all that is due and payable to them in respect of their part of the work under the contract. AND I MAKE this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Oaths Act 1867. TAKEN AND DECLARED before me (name in full)____________________________ ) Signature _______________________ ) ) (Signed by Subcontractor) ) __________________________________________ ) ) Signature ________________________ ) ) A Justice of the Peace ) at______________in the State of __________ ) ) this day of __________________________ Page 113 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND LEGISLATIVE RESPONSIBILITIES ANNEXURES ANNEXURE 9 AND PERMITS PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE LEGISLATIVE RESPONSIBILITIES AND ANNEXURES ANNEXURE 9 AND PERMITS
ISSUING RESPONSIBLE DEADLINE PERMIT NAME STATUS AGENCY MINISTER PARTY TO COMPLETE COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ BUILDING ACT Commenced and on-going National Capital PRINCIPAL AND Mechanical Approval required for erection District CONTRACTOR Completion (MP) of or alterations to buildings Building Board - ------------------------------------------------------------------------------------------------------------------------------------ CENTRAL BANKING (FOREIGN Central Bank authority Central Bank Principal Notice to Authority required for foreign EXCHANGE & GOLD) for Final Financing Proceed (NTP) currency transactions and REGULATION Plan received accounts, payments and issue of securities to non-residents, dispatch of funds out of PNG - ------------------------------------------------------------------------------------------------------------------------------------ CUSTOMS ACT Commenced and on-going Commissioner of Principal NTP plus 3 License for any warehouse/bond Customs in the months store (if needed) Internal Revenue Commission Principal MP Licenses for import of any prescribed goods (as may be required) - ------------------------------------------------------------------------------------------------------------------------------------ CUSTOMS TARIFF ACT Granted 06/11/1998 Department of Principal NTP Exemptions from import duty on Finance the importation of the Refinery - ------------------------------------------------------------------------------------------------------------------------------------ ENVIRONMENTAL PLANNING Approved 01/12/1997 Department of Principal NTP Environmental Plan Approval ACT & ENVIRONMENTAL Environmental & CONTAMINANTS ACT Conservation - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICITY COMMISSION Order under Section 31 Electricity Principal NTP Authorisation for production of ACT granted 05/12/2001 Commission electricity for own consumption - ------------------------------------------------------------------------------------------------------------------------------------
Page 114 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 9 LEGISLATIVE RESPONSIBILITIES AND PERMITS
ISSUING AGENCY RESPONSIBLE DEADLINE TO PERMIT NAME STATUS MINISTER PARTY COMPLETE COMMENTS - ------------------ ---------------------- ------------------- -------------- ----------- -------------------------------- EMPLOYMENT OF Granted to Principal Department of Labour Contractor and MP Approval of training and NON-CITIZENS & Employment Principal localisation program ACT Submitted by Contractor? Granted to Principal Contractor and MP Approval to recruit non-citizen Principal staff Submitted by Principal Contractor and MP Work Permits for non-citizen Principal staff INDUSTRIAL Not Started Department of Labour Principal MP Registration of the Site as a SAFETY, HEALTH AND & Employment "Factory", being defined as a WELFARE ACT place where persons are engaged in a manufacturing process or generation of power, or a place otherwise declared to be a factory under the Act (if required). Registration of pressure vessels HARBOURS BOARD ACT Approval to construct Harbours Board Principal NTP Permit for construction of jetty causeway and jetty granted 12/09/2001 EXPLOSIVES ACT Not Started Chief Inspector in Contractor MP Licence to keep, permit to use, Department of explosives (if applicable during Labour & Employment construction phase) INFLAMMABLE Not Started Chief Inspector in Principal MP Licence to keep/store inflammable LIQUID ACT Department of liquid Labour & Employment Principal MP Registration of any premises where inflammable liquid is to be kept.
Page 115 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 9 LEGISLATIVE RESPONSIBILITIES AND PERMITS
ISSUING AGENCY RESPONSIBLE PERMIT NAME STATUS MINISTER PARTY DEADLINE TO COMPLETE COMMENTS INSURANCE ACT Commenced Insurance Principal NTP Exemption required for any Commissioner in insurance (other than Department of Finance re-insurance) of risks in PNG with an insurer other than a licensed PNG insurer LAND ACT Granted 010/1/1998 Department of Lands Principal NTP Leases for Project Land & Physical Planning PHYSICAL Outline Planning National Capital Principal & MP Development Planning required PLANNING ACT Permission granted District Physical Contractor 25/01/2001 Planning Board for NCD WATER Granted 6/09/2001 Water Resources Principal NTP Water Investigation Permit RESOURCES ACT Board Principal NTP Water Use Permits for use of water and discharge of waste into water NATIONAL CAPITAL Granted NCD Water and Principal NTP Approval for design, DISTRICT WATER Sewerage Pty Limited construction, maintenance, and SUPPLY AND operation of water works and SEWERAGE ACT sewerage systems
Page 116 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 10 CONTRACTOR'S PROJECT MANAGEMENT TEAM Member Functions / Capacity 1 Lambert Brau Project Manager 2 Andrew Gordon Deputy Project Manager 3 D Bridge Safety Manager 4 T Johnson Procurement Manager 5. S Weetman Engineering Manager 6. S Cunningham Commercial Manager 7. T Antoniou Construction Manager 8. M Potts Commissioning Manager 9. E Bergen Subcontract Manager 10. L Knight Site Administrator 11. A Bryceland Construction Superintendent 12. J Stallard Materials Controller 13. N Ballantyne Jetty Superintendent Page 117 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 11 PROJECT SCHEDULE THE PROJECT SCHEDULE IS ATTACHED HERETO AND INCLUDED HEREIN. Page 118 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 12 - FORMAL INSTRUMENT OF AGREEMENT DEED made the day of 2002 BETWEEN 1. INTEROIL LIMITED of Level 6, Defens Haus, cnr Champion Parade and Hunter Street, Port Moresby,PNG (with its successors and permitted assigns) (the "PRINCIPAL") and 2. CLOUGH NIUGINI LIMITED c/o PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea, a subsidiary of Clough Limited (ABN 59 008 678 813) (the "CONTRACTOR") RECITALS Tenders were invited by the Principal for a contract (the "CONTRACT") for the design, construction, commissioning and defects liability of a stick built oil refinery at Napa Napa. Port Moresby Harbour, Papua New Guinea (the "WORKS"). The Contractor made a proposal dated 15 February 2002 (the "CONTRACTOR'S PROPOSAL") to provide the material and perform the work required for the Works for the sum of US$[deleted for confidentiality] based on the following Contract Currency Amounts: [deleted for confidentiality] The Contractor in lodging the Contractor's Proposal, represented to the Principal that it had the skill and judgement necessary to construct the Works and that it had employed and would employ the necessary personnel in that regard and acknowledges that in entering into this Agreement the Principal has relied upon these representations. OPERATIVE PROVISIONS 1. By executing this Agreement the Contractor warrants that each of the recitals is true and correct and acknowledges that the Principal has entered into this Agreement in reliance thereon. 2. The Contract between the Principal and the Contractor is evidenced by this Agreement and the documents listed in clause 3 below. 3. Should there be any discrepancy or inconsistency between the following documents, which constitute the Contract, the following order of precedence shall apply to resolve the same: (a) this Agreement; (b) the Terms and Conditions of Contract; (c) the Schedule to the Terms and Conditions of Contract; and (d) the Annexures to the Terms and Conditions of Contract. Page 119 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 12 - FORMAL INSTRUMENT OF AGREEMENT 4. The Contract Sum (as defined in the Terms and Conditions of Contract ) is US$[deleted for confidentiality] based on the following Contract Currency Amounts: [deleted for confidentiality] 5. In consideration of the promises on the part of the Principal in the Contract the Contractor shall provide the materials and perform the work under the Contract required to complete the Works in accordance with the Contract and will otherwise perform, fulfil, comply with, submit to and observe all provisions of the Contract which are to be performed, fulfilled, complied with, submitted to or observed by or on the part of the Contractor. 6. In consideration of the promises on the part of the Contractor in the Contract the Principal shall make payments to the Contractor in accordance with the Contract and will otherwise perform, fulfil, comply with, submit to and observe all provisions of the Contract which are to be performed, fulfilled, complied with, submitted to and observed by on the part of the Principal. 7. The Contract shall take effect according to its tenor notwithstanding any prior contract in conflict with or at variance with it, and any correspondence or documents relating to the subject matter of the Contract which may have passed between the parties to the Contract prior to its execution. 8. If any party to the Contract consists of one or more persons and one or more corporations the Contract shall bind such person or persons and such corporation or corporations (as the case may be) and their respective executors, administrators, successors and permitted assigns jointly and severally and the persons and corporations included in the term "Contractor" or the term "Principal" in the Contract shall jointly be entitled to the benefit of the Contract and the Contract shall be read and construed accordingly. Page 120 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 12 - FORMAL INSTRUMENT OF AGREEMENT EXECUTED AS A DEED Signed Sealed and Delivered on behalf of ) INTEROIL LIMITED by its duly authorised ) signatory in the presence of: ) .......................................... ) ................................. Witness ) Authorised Signatory ) ) .......................................... ) ................................. Name and address of Witness ) Name of Signatory - please print ) Sign Sealed and Delivered on behalf of ) CLOUGH NIUGINI LIMITED by its duly ) authorised signatories: ) ) .......................................... ) ................................. Director ) Director/Secretary ) .......................................... ) ................................ Name of Director - please print ) Name of Director/Secretary - ) please print ) Page 121 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 13 FORM OF FINAL RELEASE FORM OF FINAL RELEASE STATUTORY DECLARATION BY CONTRACTOR (CLAUSE Error! Reference source not found. - FINAL PAYMENT) OATHS ACT 1867 QUEENSLAND TO WIT I, of........................................................................... in the State of....................., do solemnly and sincerely declare that, in relation to the Contract between INTEROIL LIMITED incorporated in the Independent State of Papua New Guinea of Level 6 Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea (the "PRINCIPAL") and CLOUGH NIUGINI LIMITED incorporated in the Independent State of Papua New Guinea of c/o PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea (the "CONTRACTOR"), for the engineering, design and construction of the stick built refinery, at Napa Napa, Port Moresby Harbour, Papua New Guinea (the "CONTRACT") 1. I hold the position of ................................................ I am in a position to know the facts contained herein and to bind the Contractor by the terms of this declaration and I am duly authorised by the Contractor to make this decision on its behalf. 2. All amounts due have been paid in full. 3. All the Contractor's and its Subcontractors and the Subcontractors' workers who at any time have been engaged on work under the Contract by the Contractor or its Subcontractors have been paid in full all moneys due and payable 1. All subcontractors of the Subcontractors have been paid all that is due and payable to them in respect of their part of the work under the Contract. AND I MAKE this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Oaths Act 1867. ) TAKEN AND DECLARED before me ) (name in full) ............. ) Signature...................................... ) ) (Signed by Subcontractor) ) ............. .............. ) ) ) Signature...................................... ) at.......the State of....... ) A Justice of the Peace this day of........... Page 122 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 14 CONTRACTOR'S PLANT HIRE CHARGES THE SCHEDULE OF THE CONTRACTOR'S PLANT HIRE CHARGES IS ATTACHED HERETO AND INCLUDED HEREIN. Page 123 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 15 DEED OF NOVATION - REFURBISHMENT CONTRACTS This Deed made the ............. day of ................................ 20001 Between: 1. INTEROIL LIMITED, incorporated in the Independent State of Papua New Guinea of Level 6 Defens Haus, cnr Champion Parade & Hunter Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("the PRINCIPAL"); 2. CLOUGH NIUGINI LIMITED incorporated in the Independent State of Papua New Guinea of C/- PricewaterhouseCoopers, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea (with its successors and permitted assigns) ("the CONTRACTOR"); and 3. [INSERT NAME OF REFURBISHMENT CONTRACTOR] of ............................ ....................................... (with successors and permitted assigns) (the REFURBISHMENT CONTRACTOR) Witnesses that 1. Upon receipt by the Refurbishment Contractor of the sum certified by the Principal's Representative as owing under the prior contract prescribed in the Schedule hereto: (e) the prior contract shall be discharged; (f) the Refurbishment Contractor shall release the Principal from the further performance of the prior contract and from all claims and demands in connection with the prior contract; (g) the Contractor shall punctually perform the obligations of the Principal under the prior contract as far as they are not performed. The Contractor acknowledges itself bound by the provisions of the prior contract as if the Contractor had been named in the prior contract; and (h) the Refurbishment Contractor shall punctually perform like obligations and be bound to the Contractor as if the provisions of the prior contract were incorporated herein. 2. The Principal and Refurbishment Contractor each warrant to the Contractor that: (a) refurbishment contract work carried out to the date hereof is in accordance with the provisions of the prior contract; and (b) all claims and demands in connection with the prior contract have been made to the Principal. 3. The Principal and Refurbishment Contractor each indemnifies the Contractor from all claims and demands of the Principal and Refurbishment Contractor up to the date hereof in connection with the prior contract. Page 124 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 15 DEED OF NOVATION - REFURBISHMENT CONTRACTS 4. A dispute or difference between: (a) the Principal and the Refurbishment Contractor in connection with the Principal's Representative's certification of the sum owing under the prior contract; or (b) the Contractor and the Refurbishment Contractor in connection with clause 1(c) and 1(d), shall be resolved pursuant to the provisions of the contract between the Principal and the Refurbishment Contractor which for the purposes of this clause 4 are incorporated herein. 5. This Deed shall be governed by the laws in force in the State or Territory stated in the provisions of the agreement between the Principal and Contractor and in the event that no State or Territory is so stated then in accordance with the law for the time being in force in that State or Territory in which the project is being carried out. SCHEDULE PRIOR CONTRACTS ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- Page 125 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT AND ANNEXURES ANNEXURE 15 DEED OF NOVATION - REFURBISHMENT CONTRACTS EXECUTED AS A DEED Signed Sealed and Delivered on ) behalf of INTEROIL LIMITED by ) its duly authorised signatories: ) ) - ----------------------------------- ) ----------------------------------- Director ) Director/Secretary ) - ----------------------------------- ) ----------------------------------- Name of Director - please print ) Name of Director/Secretary - please ) print Sign Sealed and Delivered on ) behalf of CLOUGH NIUGINI LIMITED by ) its duly authorised signatories: ) ) - ----------------------------------- ) ----------------------------------- Director ) Director/Secretary ) - ----------------------------------- ) ----------------------------------- Name of Director - please print ) Name of Director/Secretary - please ) print Sign Sealed and Delivered by ) [REFURBISHMENT CONTRACTOR] by ) its attorney: ) ) - ----------------------------------- ) ----------------------------------- Name of Attorney - please print ) Signature of Attorney ) under power of the attorney ) number ........ who certifies that ) at the time of execution of this ) instrument he/she has no notice of ) the revocation of the power of ) attorney in the presence of: ) ) - ----------------------------------- ) Signature of Witness ) ) - ----------------------------------- ) Name of Witness - please print ) ) Of................................. ) .................................... ) ................ Address of Witness ) Page 126 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 16 DEFERRED PAYMENT OPTION SUMMARY TERM SHEET Deferred Payment Facility FACILITY TYPE: To provide a deferred payment option (the "OPTION") to the Principal, if required, prior to completion of the Contract. The deferred payment will be of an overdraft nature provided by the Contractor that will enable the Principal to defer a portion of the Contract Sum not to exceed $5 million (the "DEFERRED PAYMENT"). USE OF FACILITY: The Facility may only be used to defer payment to the Contractor on the last $5 million due under the Contract. BORROWER: InterOil Limited (the "PRINCIPAL") AMOUNT: $5 million or such lesser amount as determined by the Principal. TERM: From the date of deferral to twelve (12) months after Practical Completion. The date the Option may be exercised will be no later than 30 days prior to the time when the Contract reaches a total cash payment of the sum of the Contract Currency Amounts less $5 million, the actual date of exercise to be agreed between the parties in advance. ESTABLISHMENT 0.5% payable if the Option is exercised by the Principal. If FEE: less than the maximum amount is deferred the Establishment Fee will be adjusted on a pro-rata basis. INTEREST RATE: 7.5% per annum on the daily outstanding balance paid in arrears semi annually on 30 June and 31 December. RE-PAYMENT: The Deferred Payment will be re-paid to the Contractor in two semi-annual instalments with the Principal making monthly deposits to an account controlled by the Overseas Private Investment Corporation (OPIC) once Practical Completion has been certified. The payments will be made to the Contractor at the same time the semi-annual payment is made to OPIC provided that Practical Completion has been reached. DRAWINGS: The Principal may defer such amounts on such dates as are payable to the Contractor under the Contract. All payments to the Contractor prior to the last $5 million will be paid according to the terms of the Contract. REDUCTION IN Two (2) equal semi annual payments of $2.5 million plus OUTSTANDING interest will be made following the issuance of the AMOUNT: Certificate of Practical Completion. PRE-PAYMENT The Principal may at its sole option elect to repay the PROVISION: Deferred Payment at any time during the loan term without any pre-payment premium. Page 127 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 16 DEFERRED PAYMENT OPTION RANKING: The Deferred Payment will rank as senior subordinate debt being subordinate to all working capital and the OPIC Loan, but senior to any other debt of the Principal. SECURITY: i) The Principal will covenant and warrant in the subordinate loan agreement through a negative pledge not to incur any other debt ranking in priority or pari passu with the Deferred Payment other than the working capital and OPIC Loan. ii) Cross default provisions will apply between the Deferred Payment facility and the OPIC Loan. The OPIC Loan Agreement Clause 8, Events of Default, shall apply to the Deferred Payment loan. iii) The Contractor will be granted a fixed and floating charge over the assets of the Principal, ranking behind the working capital provider and OPIC. iv) If required by OPIC, the Contractor will negotiate in good faith and enter into a Subordination Agreement and/or Deed of Priority with OPIC in a form acceptable to OPIC. APPROVAL: The Principal is responsible for obtaining OPIC approval for this Deferred Payment facility. DUE DILIGENCE The Contractor will review the following documents as part DOCUMENTATION of their due diligence. The Contractor acknowledges that all of the documents provided are confidential and unless available in the public market sector must not disclose any information contained in the listed documents without the prior written consent of the Principal and OPIC. a) OPIC Loan Agreement; b) Collateral Account Agreement; c) Security Agreement; d) InterOil Cash Financial Model; DEFERRED Upon notification by the Principal that it will require the PAYMENT LOAN Deferred Payment, the parties agree to prepare standard loan DOCUMENTS: documents incorporating the above provisions. The cost to prepare the loan documentation and all other fees, duties and charges relating to such documents will be the responsibility of the Principal. NEGOTIATIONS: The Principal and the Contractor agree to negotiate in good faith with one another to complete the loan documentation. Page 128 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 17 PRE-AWARD MEETING MINUTES THE PRE-AWARD MEETING MINUTES ARE ATTACHED HERETO AND INCLUDED HEREIN. Page 129 PNG REFINERY PROJECT- CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES VOLUME II Page 130 PNG REFINERY PROJECT - CONSTRUCTION - CONDITIONS OF CONTRACT SCHEDULE AND ANNEXURES ANNEXURE 18 PRINCIPAL'S PROJECT REQUIREMENTS Page 131 EX-99.23 18 h19854exv99w23.txt FACILITIES MANAGEMENT CONTRACT EXHIBIT 23 FACILITIES MANAGEMENT CONTRACT INTEROIL LIMITED and PETROFAC NIUGINI LIMITED [FREEHILLS LOGO] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com DX 240 Melbourne SYDNEY MELBOURNE PERTH BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference DAO:JRM TABLE OF CONTENTS
Clause Page 1 DEFINITIONS AND INTERPRETATION 1 1.1 Definitions 1 1.2 Interpretation 10 2 CONDITIONS PRECEDENT 11 3 TERM 11 3.1 Initial Term 11 3.2 Extended Term 11 4 PERFORMANCE AND PAYMENT 11 4.1 Services 11 4.2 Payment 11 4.3 Good Faith 12 5 CONTRACTOR RESPONSIBILITIES 12 5.1 Delivery of Services - General 12 5.2 Notice of Commissioning 13 5.3 Site and Facility 13 6 LEGISLATIVE REQUIREMENTS 14 6.1 Compliance 14 6.2 Changes 14 6.3 Mitigation 15 6.4 Assistance of the Principal 15 6.5 Documents evidencing approvals of Authorities 15 6.6 Prohibition of corrupt practices 15 7 ENVIRONMENTAL COMPLIANCE 16 8 QUALITY 16 8.1 Quality assurance 16 8.2 Non-compliance 17 8.3 Acceptance of non-compliance or lesser standard 17 8.4 Defects of the EPC Contractor 17 9 DISCREPANCIES 17 10 PLANS 18 10.1 Preparation of Plans 18 10.2 Review of Plans 19 10.3 Further development of Plans 19 10.4 Compliance with Plans 20
PAGE 1 10.5 Incorporation of Plans into Operation and Maintenance Manuals 20 11 DELIVERABLE DOCUMENTS 20 11.1 Contractor supplied documents 20 11.2 Operation and Maintenance Manuals 21 12 REPORTING 22 12.1 Contractor Reports 22 12.2 Withholding payment 22 13 COMMITTEE AND REVIEW MEETINGS 22 14 SECURITY 23 14.1 Form of Performance Security 23 14.2 Conversion of Performance Security 23 14.3 Release of Performance Security 24 14.4 Deed of Guarantee 24 14.5 Withholding payment 24 15 ANNUAL OPERATING BUDGETS AND KEY PERFORMANCE INDICATORS 24 15.1 Annual Operating Budgets 24 15.2 Amendments to Annual Operating Budgets 24 15.3 Setting the Annual Operating Budget and Key Performance Indicators 25 16 ADDITIONAL CAPITAL EXPENDITURE SERVICES AND VARIATIONS 26 16.1 Forecast and budget for Additional Capital Expenditure Services 26 16.2 Additional Capital Expenditure Services 27 16.3 Variations 28 16.4 Valuation 28 17 MANAGEMENT FEE, REIMBURSABLE COSTS, ADDITIONAL CAPITAL EXPENDITURE AND PAYMENT 29 17.1 Management Fee and Reimbursable Costs 29 17.2 Time for payment of Management Fee, Reimbursable Costs and Additional Capital Expenditure 29 17.3 Fixed and firm pricing 31 17.4 Costs not reimbursable 31 17.5 Tax on payments 32 17.6 No additional payments 32 17.7 Interest on overdue payments 32 18 REBATE AMOUNTS AND INCENTIVE AMOUNTS 33 19 RECORDS AND AUDITING 33 19.1 Records 33 19.2 Auditing 33
PAGE 2 20 MATERIALS AND EQUIPMENT 34 21 FORCE MAJEURE 34 21.1 Notice 34 21.2 Impact of Force Majeure 34 21.3 Mitigation of Force Majeure 34 21.4 Adjustments 35 22 INTELLECTUAL PROPERTY RIGHTS 35 22.1 Ownership of Principal's Background Materials 35 22.2 Licence to use Principal's Background Materials 35 22.3 Ownership of Contract Materials 35 22.4 Licence to use Contract Materials 36 22.5 Delivery of Contract Materials 36 22.6 Moral Rights 36 22.7 Warranty by the Contractor 36 22.8 Indemnity 36 22.9 Use of infringing material 37 22.10 Survival 37 23 CONFIDENTIAL INFORMATION 37 23.1 Non-disclosure of Principal's Confidential information 37 23.2 Non-disclosure of Contractor's Confidential Information 37 23.3 Permitted disclosure 37 23.4 Confidentiality undertakings 37 23.5 Return of Confidential Information 38 23.6 Media 38 24 ASSIGNMENT AND SUB-CONTRACTING 38 24.1 Assignment 38 24.2 Subcontracting generally 38 24.3 Contractor's responsibility 39 25 PRINCIPAL 39 25.1 Principal's Directions 39 25.2 Principal's Representative 40 26 CONTRACTOR'S REPRESENTATIVE 41 27 CONTRACTOR'S EMPLOYEES AND SUBCONTRACTORS 41 27.1 Employees and Subcontractors 41 27.2 Organisation Structure and Key Personnel 41 28 DAMAGES TO PERSONS AND PROPERTY 42 28.1 Protection of people and property 42 28.2 Urgent protection 42 28.3 Occupational health and safety 43
PAGE 3 29 INDEMNITY AND LIMITATION AND EXCLUSION OF LIABILITY 43 29.1 Indemnities 43 29.2 No consequential losses 44 29.3 Limitation on liability 44 30 Insurances 45 30.1 Principal's Insurance 45 30.2 Contractor's Insurance 45 31 INSPECTION AND PROVISIONS OF INSURANCE POLICIES 46 31.1 Proof of insurance 46 31.2 Failure to produce proof of insurance 46 31.3 Notices from or to the insurer 46 31.4 Notices of potential claims 47 31.5 Care of the Services and settlement of claims 47 31.6 Cross liability 48 31.7 Deductibles 48 32 PAYMENT OF WORKERS AND SUBCONTRACTORS 48 32.1 Workers and subcontractors 48 32.2 Withholding payment 49 32.3 Direct payment 49 33 WORKING HOURS 49 34 SUSPENSION 49 34.1 Principal's suspension 49 34.2 Contractor's suspension 50 34.3 Recommencement 50 34.4 Costs of suspension 50 35 DEFAULT OR INSOLVENCY 51 35.1 Preservation of other rights 51 35.2 Contractor's default 51 35.3 Principal's notice to rectify 51 35.4 Principal's rights 51 35.5 Take out 52 35.6 Principal's default 52 35.7 Contractor's notice to rectify 52 35.8 Contractor's rights 53 35.9 Termination 53 35.10 Insolvency 53 35.11 Termination for convenience 53 35.12 Employment of personnel 53 36 TERMINATION PLAN 54 36.1 General 54 36.2 Termination Plan to be approved and updated 54 36.3 Withholding payment 55 36.4 Implementation of Termination Plan 55
PAGE 4 37 SET-OFFS BY THE PRINCIPAL 55 38 NOTIFICATION OF CLAIMS 56 38.1 Notice of claim 56 38.2 Updating Notice of Claim 56 38.3 Time bar 56 39 DISPUTE RESOLUTION 57 39.1 Notice of Dispute 57 39.2 More than one Dispute 57 39.3 Response 57 39.4 Without Prejudice meeting 57 39.5 Arbitration 58 39.6 Litigation 58 39.7 Continued performance of Contract 58 39.8 Condition precedent to arbitration and litigation 58 39.9 Injunctive or urgent relief 59 40 GENERAL 59 40.1 Costs and expenses 59 40.2 Service of notices 59 40.3 Waiver of conditions 60 40.4 Prohibition and enforceability 60 40.5 Variation 60 40.6 Cumulative rights 61 40.7 Counterparts 61 40.8 To the extent not excluded by law 61 40.9 Attorneys 61 40.10 Survival of obligations 61 40.11 Warranties 61 40.12 Entire agreement 62 40.13 Governing law and jurisdiction 62 40.14 VAT 63
ANNEXURE PART A - SCOPE OF SERVICES ANNEXURE PART B - FORM OF UNCONDITIONAL UNDERTAKING ANNEXURE PART C - FEES AND BUDGET, RATES, KPIS ANNEXURE PART D - DEED OF GUARANTEE ANNEXURE PART E - DEED OF NOVATION ANNEXURE PART F - ORGANISATION STRUCTURE AND KEY PERSONNEL ANNEXURE PART G - PRECONTRACT MEETING MINUTES ANNEXURE PART H - CONTRACTOR'S PROPOSAL ANNEXURE PART I - INSURANCES ANNEXURE PART J - CONSENT DEED PAGE 5 THIS CONTRACT is made on 2003 between the following parties: 1. INTEROIL LIMITED a company incorporated in the Independent State of Papua New Guinea of Level 6, Defens Haus, Port Moresby, Papua New Guinea (PRINCIPAL) 2. PETROFAC NIUGINI LIMITED a company incorporated in the Independent State of Papua New Guinea of 12th Floor, Deloitte Tower, Port Moresby, National Capital District, Papua New Guinea (CONTRACTOR) RECITALS A. The Contractor is experienced in the performance of services of the same nature as the Services and has offered to provide the Services. B. It has been agreed that the Contractor will provide the Services in accordance with and subject to the provisions of the Contract. C. The Principal is legally entitled to enter into the Contract and provide access to the Site and the Facility for the purposes of the Contract. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in the Contract: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In the Contract, except where the context otherwise requires: ADDITIONAL CAPITAL EXPENDITURE means the actual direct costs reasonably and properly incurred by the Contractor in performing the Additional Capital Expenditure Services without profit or margin; ADDITIONAL CAPITAL EXPENDITURE SERVICES means: (a) any Major Repairs and Replacements; and (b) any Improvements and Expansions; ANNUAL OPERATING BUDGET means: (a) in respect of the Services from the Commencement Date until the last day of the first Operating Year, the budget set out in Annexure Part C; (b) in respect of the Services for each Operating Year after the first Operating Year, the budget determined in accordance with clause 15.3; PAGE 1 ANNUAL OPERATING BUDGET REPORT means the detailed report prepared by the Contractor setting out the details of the Annual Operating Budgets and the Indicative Annual Operating Budgets; BACKGROUND MATERIALS means all Documents owned or licensed by a party that existed prior to the Execution Date and any Modifications subsequently made to those Documents at any time; BUSINESS DAY means a day that is not a Saturday, Sunday or Public Holiday; CAPITAL EXPENDITURE means expenditure for equipment, machinery, fixed assets, real property and improvements which under current accounting practice is regarded as capital expenditure; CENTRAL BANK means the Bank of Papua New Guinea of ToRobert Haus, Douglas Street, Port Moresby, Papua New Guinea; CLAIM includes any claim: (a) concerning or arising out of or in connection with or relating to: (1) the Contract; (2) the Services; or (3) the Facility; and (b) whether in tort, in equity, pursuant to any applicable domestic or international statute or law, or of any other kind under any applicable law; COMMENCEMENT DATE means the later of the Execution Date and the date the Contract becomes unconditional under clause 2; COMMITTEE means the committee established under clause 13, which comprises: (a) the Principal's Representative; (b) the Contractor's Representative; and (c) any other person reasonably required by the Principal's Representative or the Principal from time to time; CONFIDENTIAL INFORMATION means, in relation to any party to the Contract, information relating to a party's business, computer systems or affairs and includes any: (a) trade secrets, know-how, scientific and technical information; (b) product, customer, marketing or pricing information; (c) information in relation to the Contract; and (d) any other information which a party notifies the other is confidential, or which the other party knows or ought to know is confidential; CONSENT DEED means the deed of that name between the Principal, the Contractor and the Financier dated on or about the Execution Date in the form of Annexure Part J; CONTRACT means this document and all annexures to this document; CONTRACT MATERIALS means: PAGE 2 (a) all Documents created or developed by or on behalf of the Contractor during the Term in connection with the Contract; and (b) all of the Contractor's Background Materials which the Contractor makes available for use in connection with the Contract; CONTRACTOR means Petrofac Niugini Limited, a company incorporated in the Independent State of Papua New Guinea; CONTRACTOR GROUP means the Contractor, its subcontractors, its and their respective Related Bodies Corporate and its and their respective employees, agents and consultants, but does not include any member of the Principal Group; CONTRACTOR'S INSURANCE means the insurance specified in, and in accordance with, Annexure Part I. CONTRACTOR'S PROPOSAL means the Contractor's proposal set out in Annexure Part H; CORPORATIONS ACT means the Corporations Act 2001 of the Commonwealth of Australia; DATE OF PRACTICAL COMPLETION means the date evidenced in a Certificate of Practical Completion under the EPC Contract or, where another date is determined in any arbitration or litigation, that other date; DEED OF GUARANTEE means the deed of guarantee and indemnity in the form of Annexure Part D; DEED OF NOVATION means the deed of novation in the form of Annexure Part E; DELIVERABLE DOCUMENTS means all Documents required to be submitted, delivered, supplied or otherwise given by the Contractor to the Principal under the Contract, including as referred to in the Scope of Services and including Reports and Plans; DIRECTION includes agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement; DISPUTE means any dispute, difference or issue between the parties concerning or arising out of or in connection with or relating to the breach, termination, validity, repudiation, rectification, frustration, operation or interpretation of the Contract or the subject matter of the Contract including, without limitation, any Claim; DOCUMENTS includes any material in any form (tangible or intangible) including, without limitation, documents, Operation and Maintenance Manuals and other manuals, Reports, data, drawings, diagrams, charts, software, software tools, know-how, technology or processes; ENVIRONMENTAL MANAGEMENT AND MONITORING PLAN has the meaning in the Scope of Services; ENVIRONMENTAL REPORT has the meaning in clause 7(b); EPC CONTRACT means the engineering, procurement and construction contract between the Principal and the EPC Contractor dated 26 March 2002 for the engineering, procurement and construction of the Facility; EPC CONTRACTOR means Clough Niugini Limited, a company incorporated in the Independent State of Papua New Guinea; PAGE 3 EXECUTION DATE means the date on which the Contract is executed by the parties; FACILITIES MANAGEMENT BEST PRACTICE means the exercise of that degree of skill, care, prudence, foresight and operating and maintenance practice which could reasonably and ordinarily be expected from a skilled and experienced contractor engaged in the operation, maintenance and management of facilities and refinery processes having similar characteristics to the Facility and the Refining Process under the same or similar physical (but not taking into account financial) circumstances; FACILITY means the refinery facility at Napa Napa, Port Moresby, Papua New Guinea owned by the Principal, including all refining, processing, storage and administrative infrastructure, marine and camp facilities, internal access roads and security fencing; FINAL TERMINATION PLAN has the meaning in clause 36.2(b)(3); FINANCIER means Overseas Private Investment Corporation, an agency of the Government of the United States of America; FORCE MAJEURE means acts of war, revolution, riots, civil commotion, acts of a public enemy, embargo, acts of government in its sovereign capacity, strikes or other industrial action (other than strikes or industrial action taken by some or all of the party's employees), earthquakes, floods or other natural disasters but only where the above listed acts, events or conditions: (a) are beyond the reasonable control of the party claiming relief for Force Majeure; and (b) could not be avoided by the use of reasonable diligence by that party; FOREIGN CORRUPT PRACTICES ACT means the Foreign Corrupt Practices Act of 1977 15 USC ss78dd-1 (USA) GOVERNMENT AGENCY means any government or governmental, semi-governmental, administrative, fiscal or judicial body, quasi-judicial or administrative entity, agency or authority having jurisdiction over any part of, or in connection with the Services; GROSS NEGLIGENCE means any act, omission or failure to act (whether sole, joint or concurrent) by Operations Personnel which was intended to cause or which was in reckless disregard of or wanton indifference to, harmful and avoidable consequences which such person knew, or should have known, such act, omission or failure to act would have had on the safety or property of another person or entity but shall not include any error of judgement or mistake in the exercise of any function, authority or discretion in good faith and specifically vested in such Operations Personnel by the Principal and which is justifiable for the safeguarding of life, property or the environment or due to emergency; GUARANTOR means Petrofac Facilities Management Limited, a company incorporated in Scotland with registered number 75047; IMPROVEMENTS AND EXPANSIONS means any Modification, addition or upgrading of the Facility or the Refining Process which requires Capital Expenditure (including Technological Innovations) other than items of Capital Expenditure which: PAGE 4 (a) are contemplated in the Annual Operating Budget or the Operations and Maintenance Manuals; or (b) would be regarded, by a skilled and experienced contractor engaged in the operation, maintenance and management of facilities having similar characteristics to the Facility, as routine or preventative maintenance or repairs or otherwise an operating expense; INCENTIVE AMOUNT means an amount payable by the Principal to the Contractor in excess of the Management Fee for exceeding a Key Performance Indicator calculated in accordance with the formulae determined under clause 15.3 and Annexure Part C; INDICATIVE ANNUAL OPERATING BUDGETS means the indicative annual costs budgets for the Services for the second, third, fourth and fifth Operating Years set out in Annexure Part C; INSOLVENCY EVENT means where: (a) either party informs the other party or any of its creditors that it is insolvent or unable to pay its debts as they fall due or either party reasonably suspects the other party is insolvent or unable to pay its debts as they fall due; (b) either party enters into a composition or arrangement with its creditors or calls a meeting of creditors to entering into a composition or arrangement; (c) a mortgagee seeks to exercise a right of possession or control over the whole or a substantial part of a party's property; (d) either party takes or has instituted against it an action or proceedings whether voluntary or compulsory with the object of, or which may result in, the winding-up of that party; (e) either party has a winding-up order made against it or passes a resolution for winding-up; or (f) either party goes into liquidation, has appointed, or is a party to the appointment of, an official manager, administrator, receiver, provisional liquidator or liquidator to the whole or part of its property or undertaking; INTELLECTUAL PROPERTY RIGHT means any patent, registered design, trademark or name, copyright or other protected right; KEY PERFORMANCE INDICATORS means the key performance indicators designed to capture the level to which the Contractor has performed a certain obligation as determined by the parties under clause 15.3 and Annexure Part C to be critical to the Contractor's performance of the Services under the Contract. KEY PERSONNEL means the personnel of the Contractor listed in Annexure Part F; LEGISLATIVE REQUIREMENT includes: (a) Acts, Ordinances, regulations, by-laws, orders, awards and proclamations of the jurisdiction where the Services or any part thereof are being performed; (b) certificates, licences, consents, permits, authorisations, approvals and requirements of organisations having jurisdiction in connection with the performance of the Services; and PAGE 5 (c) fees and charges payable in connection with the foregoing; MAJOR REPAIRS AND REPLACEMENTS means all repairs to and replacements of any part of the Facility or the Site which require Capital Expenditure other than items of Capital Expenditure which: (a) are contemplated in the Annual Operating Budgets or the Operations and Maintenance Manuals (including spare parts); or (b) would be regarded, by a skilled and experienced contractor engaged in the operation, maintenance and management of facilities having similar characteristics to the Facility, as routine or preventative maintenance or repairs or otherwise an operating expense; MAJOR REPAIRS AND REPLACEMENTS BUDGET means the annual budget for Major Repairs and Replacements to the Facility and the Site as revised from time to time; MANAGEMENT FEE means the management fee set out in Annexure Part C payable by the Principal to the Contractor in respect of the Contractor's profit margin and overhead and corporate administration; MANAGEMENT PLAN has the meaning in the Scope of Services; MATERIALS AND EQUIPMENT includes the materials, supplies, machinery, tools, apparatus, equipment, buildings, computer hardware, computer software, roads, right-of-ways, services, spare parts and other items of whatever nature specified and supplied by the Contractor to provide the Services; MOBILISATION PLAN has the meaning in the Scope of Services; MODIFICATIONS means any enhancements, adaptations, changes, alterations or variations; MONTH means: (a) each period of one month from the Commencement Date (and from the same day of each subsequent month) until the Date of Practical Completion; and then (b) each period of one month from the Date of Practical Completion (and from the same day of each subsequent month) during the Term; MORAL RIGHTS means the rights conferred on authors of literary works by Part IX of the Copyright Act 1968 (Cth); NOTICE OF COMMISSIONING means a notice from the Principal to the Contractor advising when the EPC Contractor intends to commence the commissioning of the Facility under the EPC Contract; NOTICE OF DISPUTE has the meaning in clause 39.1; OCCUPATIONAL HEALTH AND SAFETY PLAN has the meaning in the Scope of Services; OPERATING YEAR means each period of one year from the Date of Practical Completion (and each anniversary of the Date of Practical Completion) during the Term; OPERATION AND MAINTENANCE MANUALS means the manuals referred to in clause 11.2 (as amended and updated from time to time in accordance with clause 11.2) PAGE 6 which describe the policy, practices and procedures for the operation and maintenance of the Facility; OPERATION AND MAINTENANCE PLAN has the meaning in the Scope of Services; OPERATIONS PERSONNEL means any person employed by the Contractor or the Principal, as the case may be, as a technician or in any more senior level, as the case may be, with direct responsibility for the conduct of operations or the performance of the Services and other obligations under this Contract; OPIC LOAN AGREEMENT means the loan agreement between the Principal and the Financier dated 12 June 2001; OPIC ENVIRONMENTAL REQUIREMENTS means the requirements set forth in the OPIC Environmental Handbook, April 1999; ORGANISATION STRUCTURE means the organisation structure for the Facility set out in Annexure Part F; OTHER CONTRACT DOCUMENTS means: (a) Precontract Meeting Minutes; and (b) Contractor's Proposal; OTHER CONTRACTOR means any of the contractors of the Principal (other than the Contractor) in relation to the Facility and the Site, any subcontractors of such contractors, its and their respective Related Bodies Corporate and its and their respective employees, agents and consultants; PERFORMANCE SECURITY has the meaning in clause 14.1; PLANS includes the plans referred to in the Scope of Services, as each such plan may be updated, amended and developed under clause 10; PRECONTRACT MEETING MINUTES means the minutes of meeting set out in Annexure Part G; PRINCIPAL means InterOil Limited, a company incorporated in the Independent State of Papua New Guinea; PRINCIPAL GROUP means the Principal, its Other Contractors, its and their respective Related Bodies Corporate and its and their respective employees, agents and consultants, but does not include any member of the Contractor Group; PRINCIPAL'S INSURANCE means the insurance specified in, and in accordance with, Annexure Part I. PRINCIPAL'S REPRESENTATIVE means a person appointed in writing by the Principal under subclause 25.2; PRODUCTS means all refined petroleum products produced by the Facility from time to time; PUBLIC HOLIDAY means a day gazetted as a public holiday in the Independent State of Papua New Guinea by the Government of Papua New Guinea; QUALITY PLAN has the meaning in the Scope of Services; RATES means the rates set out in Annexure Part C; RAW MATERIALS means the crude oil made available by the Principal for the Refining Process; PAGE 7 REBATE AMOUNT means an amount payable by the Contractor to the Principal as a rebate of the Management Fee for a failure by the Contractor to achieve a Key Performance Indicator calculated in accordance with the formulae determined under clause 15.3 and Annexure Part C; RECORDS means proper and fully detailed records and books of account relating to the performance of the Services and the Contractor's other obligations under the Contract, including all relevant details of: (a) all costs, prices and charges in contracts with any subcontractors and costs breakdowns as required by the Principal; (b) the Contractor's personnel costs; (c) other management and administrative costs and overheads; (d) performance of the Facility; (e) production costs; and (f) quantity and quality of Product; REFINING PROCESS means the process of refining the Raw Materials to produce the Products including the transportation of Raw Materials and Products to and from and within the Site and the Facility; REIMBURSABLE COSTS means the actual direct costs reasonably and properly incurred by the Contractor in performing the Services without profit or margin but excluding Additional Capital Expenditure; RELATED BODY CORPORATE has the same meaning as set out in the Corporations Act; REPORTS means the reports referred to in clause 12, the Environmental Report and any other report referred to in the Scope of Services; SCOPE OF SERVICES means the summary of the Principal's requirements for the Services set out in Annexure Part A; SERVICES means: (a) the services referred to in the Scope of Services; (b) any Additional Capital Expenditure Services; (c) any Variations; and (d) all other services necessary for the safe and efficient: (1) operation and maintenance of the Facility; and (2) management of the Facility, the Refining Process and the Site, in accordance with Facilities Management Best Practice; SITE means all land and sub-sea areas within the boundaries of the Site Leases where the Services are to be performed and includes: (a) all access roads to and within the Facility; and (b) where the context so requires, anything on the Site; SITE LEASES means: PAGE 8 (a) State Lease No. 03116/0510 in respect of land described as Portion 510, Milinch Granville, Fourmil Moresby; (b) State Lease No. 49/714/1130 in respect of land described as Portion 1130, Milinch Granville, Fourmil Moresby; (c) State Lease No. 04116/1499 in respect of land described as Portion 1499, Milinch Granville, Fourmil Moresby; and (d) State Lease 04116/1500 in respect of land described as Portion 1500, Milinch Granville, Fourmil Moresby, in each case as granted to the Principal pursuant to the Land Act (Chapter No. 185) and any state lease or leases in replacement thereof; SPILL PREVENTION CONTROL AND COUNTERMEASURE PLAN has the meaning in the Scope of Services; TAX means: (a) any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding; or (b) any income, stamp or transaction duty, tax or charge, that is assessed. levied, imposed or collected by any Government Agency and includes any interest, fine, penalty, charge, fee or other amount imposed on or in respect of any of the above; TECHNOLOGICAL INNOVATIONS means innovations or advancements of a technological nature for the purpose of improving the performance capabilities of the Facility or the Refining Process and require Capital Expenditure; TERM means the period from the Commencement Date until the expiry or termination of the Contract; TERMINATION PLAN has the meaning in clause 36.1; and TRAINING PLAN has the meaning in the Scope of Services; VARIATION means any increase, decrease or omission to the Scope of Services, excluding: (a) any Additional Capital Expenditure Services; and (b) any Direction by the Principal to perform the Services in accordance with the Contract; VAT means the value added tax levied under the VAT Act; VAT ACT means the Value Added Tax Act 1998 (No. 51 of 1998) (PNG); WORLD BANK GUIDELINES means: (a) the World Bank 1998 Pollution and Abatement Handbook for: (1) Petroleum Refining; (2) General Environmental Guidelines; and (3) Monitoring Guidelines; (b) the International Finance Corporation General Health and Safety Guidelines; and PAGE 9 (c) the "Techniques for Assessing Industrial Hazards" included in the September 1985 World Bank Guidelines for Identifying, Analysing and Controlling Major Hazard Installation in Developing Countries with respect to environmental and safety issues associated with explosions, fire and other accidents. 1.2 INTERPRETATION In the Contract: (a) references to days means calendar days and references to a person include an individual, firm or a body, corporate or unincorporated; (b) references to a month from a particular date means the period from that date until and including the day before the same date of the following calendar month; (c) unless otherwise stated, time for doing any act or thing under the Contract will, if it ends on a Saturday, Sunday or Public Holiday, be deemed to end on the day next following which is not a Saturday, Sunday or Public Holiday; (d) clause headings and subclause headings in the Contract do not form part of the Contract and will not be used in the interpretation of the Contract; (e) words in the singular include the plural and words in the plural include the singular, according to the requirements of the context. Words importing a gender include every gender; (f) communications between the Principal and the Contractor must be in the English language; (g) measurements of physical quantities must be in legal units of measurement of Queensland; (h) unless otherwise provided, payments of Reimbursable Costs and Additional Capital Expenditure shall be in the same currency or currencies as the relevant actual costs were incurred by the Contractor and otherwise in the currency of the Independent State of Papua New Guinea; (i) the law governing the Contract, its interpretation and construction, is the law of Queensland; (j) no provision of the Contract will be construed adversely to a party solely on the ground that the party was responsible for the preparation of the Contract or that provision; (k) a reference to a statute, regulation, proclamation, ordinance or by-law includes all statutes, regulations, proclamations, ordinances or by-laws amending, consolidating or replacing it, and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under that statute; (l) a reference to a document includes all amendments or supplements to, or replacements or novations of, that document; (m) a reference to a party to a document includes that party's employees, agents, contractors, successors and permitted assigns; and PAGE 10 (n) a reference to a body, other than a party to the Contract (including, without limitation, an institute, association or authority), whether statutory or not: (1) which ceases to exist; or (2) whose powers or functions are transferred to another body, is a reference to the body which replaces it or which substantially succeeds to its powers or functions. 2 CONDITIONS PRECEDENT The Contract will be of no legal force and effect unless and until (a) requisite regulatory approval has been received from the Central Bank; and (b) the Principal, the Contractor and the Financier have executed and delivered the Consent Deed. 3 TERM 3.1 INITIAL TERM The Contract: (a) commences on the Commencement Date; and (b) subject to clause 3.2, shall continue for a period of 5 Operating Years from the Date of Practical Completion, unless terminated in accordance with clause 35. 3.2 EXTENDED TERM Unless the Contract has been terminated in accordance with clause 35, the Principal may give notice (in its sole and unfettered discretion) to the Contractor no later than 3 Months before the expiry of the fifth Operating Year that the Principal has elected that the Contract will automatically continue and, if the Principal gives a notice under this clause, the Contract shall continue until the Contract is terminated in accordance with clause 35. 4 PERFORMANCE AND PAYMENT 4.1 SERVICES The Contractor must perform the Services in accordance with: (a) the Contract; and (b) the Directions of the Principal in accordance with the Contract. 4.2 PAYMENT The Principal must pay the Contractor: (a) the Management Fee; PAGE 11 (b) the Reimbursable Costs; and (c) any Additional Capital Expenditure, in accordance with the Contract. 4.3 GOOD FAITH The Principal and the Contractor must act honestly and in good faith in the performance of their respective obligations under the Contract. 5 CONTRACTOR RESPONSIBILITIES 5.1 DELIVERY OF SERVICES - GENERAL (a) When providing the Services, the Contractor must: (1) engage personnel to perform the Services who are both competent and professional; (2) provide, operate and maintain Materials and Equipment sufficient to perform the Services; (3) provide the Services in a professional manner; and (4) comply with all Legislative Requirements. (b) The Contractor must: (1) provide the Services in accordance with: (A) Facilities Management Best Practice; and (B) the Operation and Maintenance Manuals; and (C) any other requirements of the Contract; and (2) continuously improve operation and maintenance standards and systems to reflect Facilities Management Best Practices, including performance standards and management and control systems. (c) In complying with its obligations under the Contract and particularly Facilities Management Best Practice, the Contractor must perform the Services: (1) so as not to: (A) cause or contribute to any defect in the Facility; or (B) have any adverse impact on the good working order of the Facility; and (2) so that the Facility: (A) meets the Key Performance Indicators; and (B) maximises output and quality of Product. PAGE 12 5.2 NOTICE OF COMMISSIONING (a) No later than 28 days prior to the date on which the EPC Contractor anticipates commencing the commissioning of the Facility, the Principal must give the Contractor a Notice of Commissioning. (b) The Contractor must commence and continue to perform the Services from the Commencement Date to ensure that the Contractor does not cause any delay to the Date of Practical Completion. (c) The Contractor must prior to the Date of Practical Completion: (1) co-operate with the Principal and with the EPC Contractor in complying with all timelines, directions and instructions of the EPC Contractor; and (2) not through any act or omission on the part of the Contractor or its subcontractors, employees or agents cause: (A) any delay or interference to the activities of the EPC Contractor; or (B) any delay to the Date of Practical Completion. 5.3 SITE AND FACILITY (a) Without limiting clause 5.3(b), the Contractor acknowledges that it has: (1) had access to; (2) carried out a general inspection of; and (3) conducted its own enquiries in respect of, the Site and the Facility in order to establish, understand and satisfy itself as far as practicable as to: (4) the nature and status of; and (5) all risks and contingencies associated with, the Site and the Facility. (b) The Contractor acknowledges and agrees that the Services include all responsibility and risks related to the physical conditions and characteristics, location and employment conditions of the Site and the Facility and include all costs associated with: (1) removal of any material required to be removed for reasons of removing hazardous materials or conditions from the Site and the Facility or for the Services to be completed as required by the Contract; (2) the location and adequacy of existing services, including all pipes, cables and plumbing; (3) the adequacy and position of all load bearing and support structures; (4) all other physical conditions and characteristics of the Site above, on or below the surface which may affect the performance by the Contractor of its obligations under the Contract (other than latent PAGE 13 conditions which a contractor, exercising Facilities Management Best Practices, would not reasonably be aware of); (5) any adverse impact the Services may have on any adjacent or adjoining land; (6) the availability and reliance of commercial airlines, ship operators, tug and stowage operators and other suppliers of logistical support; (7) the equipment, facilities and resources needed for the performance of the Services and the remedying of any defect including accommodation, transportation, handling and storage; (8) the availability of labour, equipment, parts, consumables, procurement items, fuel, water, electricity and other utilities; (9) the local laws, regulations and customs including fiscal and social legislation and practices, import and export regulations and conditions of employment of foreign personnel in Papua New Guinea; (10) local community and security conditions; and (11) any other local conditions that may affect the performance of the Services, and the Contractor acknowledges that: (12) the Management Fee, the Rates and the Annual Operating Budget include or shall include an allowance for all costs associated with the Contractor's risk and responsibilities under clause 5.3; and (13) the Contractor is not entitled to make any Claim and there shall be no increase to the Management Fee or the Rates or amendment to the Annual Operating Budget in respect of those risks and responsibilities. 6 LEGISLATIVE REQUIREMENTS 6.1 COMPLIANCE (a) The Contractor must comply with all Legislative Requirements. (b) The Contractor, upon finding that a Legislative Requirement is inconsistent with a provision of the Contract, must promptly give the Principal written notice of the inconsistency. (c) The Contractor is not entitled to make any Claim and there shall be no increase to the Management Fee or the Rates or amendment to the Annual Operating Budget for any inconsistency between a Legislative Requirement and any provision of the Contract. 6.2 CHANGES If a Legislative Requirement: (a) necessitates; PAGE 14 (1) a change to the Services; or (2) a change in a fee or charge; or (3) payment of a new fee or charge; (b) has effect after the Execution Date but could not reasonably have been anticipated before the Execution Date by a competent and experienced contractor performing services in the nature of the Services; and (c) causes the Contractor to incur more or less cost than otherwise would have been incurred, the difference shall be assessed by the Principal's Representative under clause 16.4 and shall be deemed to constitute a Variation and the relevant Annual Operating Budget shall be amended accordingly. 6.3 MITIGATION The Contractor must use all reasonable endeavours to minimise or mitigate the effects of a change in Legislative Requirements. 6.4 ASSISTANCE OF THE PRINCIPAL The Principal must provide all reasonable assistance required by the Contractor to obtain all consents, licences, permits or authorities necessary for the Contractor to perform the Services. 6.5 DOCUMENTS EVIDENCING APPROVALS OF AUTHORITIES The Contractor must give the Principal copies of documents issued to the Contractor by municipal, public or other statutory authorities in respect of the Services and, in particular, confirming the compliance (or otherwise) of the Contractor with Legislative Requirements. 6.6 PROHIBITION OF CORRUPT PRACTICES The Contractor represents, warrants and agrees that: (a) The Contractor's directors, officers, employees, agents and representatives are not now and will not during the Term be a candidate for office or an employee, officer or representative of the government of Papua New Guinea or of any government agency, government instrumentality or political party of Papua New Guinea; (b) The Contractor will not use any part of any payment by the Principal under the Contract to make any payment or gift, either directly or indirectly, to any employee, officer or representative of any government, including the government of Papua New Guinea; (c) The Contractor shall at all times ensure that it complies with the Foreign Corrupt Practices Act; (d) The Contractor maintains and will continue to maintain appropriate systems and internal accounting controls to monitor and ensure compliance with its obligations under this clause; and PAGE 15 (e) The Contractor shall ensure that all subcontracts include terms that require subcontractors to comply with the same obligations as are contained in clauses 6.6(a), (b), (c) and (d). 7 ENVIRONMENTAL COMPLIANCE (a) The Contractor must perform the Services in compliance with: (1) the World Bank Guidelines; (2) the OPIC Environmental Requirements; (3) the Environmental Management and Monitoring Plan; and (4) all applicable Legislative Requirements. (b) The Contractor must, one month prior to each anniversary of the date of the OPIC Loan Agreement, submit to the Principal a self-monitoring environmental report in a form acceptable to the Principal (ENVIRONMENTAL REPORT). (c) The Environmental Report must include, without limitation, regular testing results for any emissions standards, effluent standards, noise, reports of material non-compliance with relevant environmental guidelines and requirements and remedial actions required to meet relevant environmental guidelines and requirements. (d) The Contractor must prior to the expiry of the second Operating Year submit to the Principal an acceptable assessment, by a suitably qualified independent engineer, of the current status of the Facility's compliance with the guidelines, requirements and plans referred to in clause 7(a). (e) Within 24 hours of its occurrence, the Contractor must submit to the Principal an acceptable written notice of any accident impacting on the environment or resulting in the loss of life. 8 QUALITY 8.1 QUALITY ASSURANCE (a) The Contractor must: (1) plan, develop, establish and maintain the quality assurance system/s which are referred to in the Scope of Services; and (2) ensure that the Principal has access to the quality assurance system/s of the Contractor. (b) The quality assurance system/s of the Contractor shall be used only as an aid to achieving compliance with the Contract and such system/s will not in any way: (1) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; or PAGE 16 (2) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law. 8.2 NON-COMPLIANCE (a) If the Principal becomes aware of any Services (including any Materials and Equipment) which do not comply with the Contract, the Principal will as soon as practicable give the Contractor written details thereof and the Principal may Direct the Contractor to remedy the non-compliance, including the manner and reasonable time for doing so. (b) If: (1) the Contractor fails to comply with a Direction under the clause 8.2(a); and (2) the failure has not been made good within a reasonable time after the Contractor receives written notice that the Principal intends to have the relevant Direction complied with by others, the Principal may instruct others to comply with the Direction and the costs incurred shall be moneys due from the Contractor to the Principal. 8.3 ACCEPTANCE OF NON-COMPLIANCE OR LESSER STANDARD A Direction pursuant to clause 8.2 may: (a) Direct the Contractor that the Principal elects to accept the non-compliance; or (b) Direct the Contractor to perform the Services to a lesser standard than required by the Contract, in which case the Direction shall be deemed to constitute a Variation and the Annual Operating Budget shall be amended accordingly. 8.4 DEFECTS OF THE EPC CONTRACTOR (a) The Contractor must inspect the Facility regularly during the first Operating Year and in accordance with the Operation Maintenance Manuals for the purpose of identifying any defects in the Facility for which the EPC Contractor is or may be responsible under the EPC Contract. (b) The Contractor must promptly notify the Principal of any defects the Contractor detects in the Facility, including any impact or potential impact (including timing) on the Refining Process and any recommendation (including timing and cost or likely cost) to ensure there is no adverse impact on the Refining Process or the Facility. 9 DISCREPANCIES (a) The Contractor acknowledges that it has reviewed the documents forming the Contract and other documents prepared for the purpose of performing the Services and is satisfied with the adequacy of those documents to PAGE 17 perform its obligations under the Contract, including the performance of the Services. (b) If either party discovers any conflict, inconsistency, ambiguity or discrepancy in any document prepared for the purpose of performing the Services, that party must give the other written notice of it and the Principal's Representative will then Direct the Contractor as to the interpretation and construction such that where the conflict, inconsistency, ambiguity or discrepancy: (1) relates to the standard of performance of the Services, the higher standard shall apply; and (2) is between any two or more of the following documents, the following order of priority shall apply: (A) this document, excluding the annexures; (B) the Scope of Services; (C) the annexures to this document, other than the Scope of Services and the Other Contract Documents; (D) the Other Contract Documents; and (3) otherwise, as the Principal in its sole and unfettered discretion directs. (c) The Contractor is not entitled to make any Claim and there shall be no increase to the Management Fee or the Rates or amendment to the Annual Operating Budgets as a result of: (1) any ambiguity or discrepancy in or between any document or documents forming part of the Contract or other documents prepared for the purpose of performing the Services (whether prepared before or after the Execution Date and whether prepared by or for the Principal or the Contractor); or (2) any Direction by the Principal's Representative under clause 9(b). 10 PLANS 10.1 PREPARATION OF PLANS (a) The Contractor must prepare the Plans to provide a detailed description of how the Contractor intends to perform the Services and its other obligations under the Contract in accordance with the Contract with respect to the subject matter of each Plan. (b) The Contractor acknowledges and agrees that the Plans will require ongoing development, amendment and updating throughout the duration of the Services and performance of the Contractor's other obligations under the Contract to take into account: (1) Variations and Additional Capital Expenditure Services; (2) changes in Legislative Requirements; and PAGE 18 (3) any other events or circumstances which occur or come into existence and which have, or may have, any effect on the manner in which the Contractor performs the Services and its other obligations under the Contract. 10.2 REVIEW OF PLANS (a) The Principal may: (1) review any Plan submitted under this clause 10; and (2) if the Plan submitted does not comply with the Contract, notify the Contractor of that non-compliance within 14 days of the submission of the Plan. (b) If the Contractor receives a notice under clause 10.2(a)(2), the Contractor must promptly submit an amended Plan to the Principal. (c) The Principal owes no duty to the Contractor to review any Plan submitted by the Contractor for errors, omissions or compliance with the Contract. (d) Any acknowledgement, approval, acceptance, receipt, recommendation or review of, comment on, or Direction in respect of, any Plan by the Principal (including a request under clause 10.3(b)) will not in any way: (1) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; (2) constitute acceptance by the Principal of the performance of the Contractor's obligations under the Contract; (3) be considered to be an acknowledgment by the Principal that the relevant documents comply with the Contract; or (4) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law. 10.3 FURTHER DEVELOPMENT OF PLANS (a) The Contractor: (1) warrants that each Plan will be fit for its intended purpose; and (2) must continue to develop and promptly amend or update the Plans to take into account: (A) the circumstances and events referred to in clause 10.1(b) as those circumstances and events occur or come into existence; and (B) any breach or potential breach of the warranty referred to in clause 10.3(a)(1), and promptly submit each further Plan to the Principal as it is further developed, amended or updated. (b) If the Principal believes that: (1) any Plan does not comply with the requirements of the Contract; or PAGE 19 (2) the Contractor has not further developed, updated or amended any Plan in accordance with the requirements of clause 10.3(a), the Principal may by written notice request that the Contractor further develop, update or amend the Plan specifying: (3) the reasons why such development, updating or amending is required (or why the Plan does not comply with the Contract); and (4) the time within which such development, updating or amending must occur (which must be reasonable, having regard to the amount of work required), and the Contractor must: (5) further develop, update or amend the Plan as requested by the Principal; and (6) submit the further developed, updated or amended Plan to the Principal within the time specified under clause 10.3(b)(4). 10.4 COMPLIANCE WITH PLANS The Contractor: (a) must comply with its obligations as set out in each Plan which has been submitted to the Principal under this clause 10 and in respect of which the Principal has not given a notice under clause 10.2(a)(2); and (b) agrees that compliance by it with any Plan will not in any way: (1) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; or (2) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law. 10.5 INCORPORATION OF PLANS INTO OPERATION AND MAINTENANCE MANUALS To the extent that they are relevant to the operation, maintenance or management of the Facility, all Plans must be incorporated into the Operation and Maintenance Manuals. 11 DELIVERABLE DOCUMENTS 11.1 CONTRACTOR SUPPLIED DOCUMENTS (a) The Contractor must supply to the Principal the Deliverable Documents and the number of copies thereof as stated in the Contract or, if not stated, as Directed. (b) If the Contractor submits documents to the Principal, then: (1) the Principal is not be required to check such documents for errors, omissions, inconsistencies, ambiguities, discrepancies or compliance with the Contract; PAGE 20 (2) any acknowledgement, approval, acceptance, receipt, recommendation or review of, comment on, or Direction in respect of such documents by the Principal will not: (A) relieve the Contractor of any of its liabilities or responsibilities under the Contract or otherwise according to law; (B) constitute acceptance by the Principal of the performance of the Contractor's obligations under the Contract; (C) be considered as an acknowledgment by the Principal that the relevant documents comply with the Contract; or (D) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law; and (3) if the Contract requires the Contractor to obtain the Principal's Direction about such documents, the Principal shall give, within 14 days after receiving such documents, the appropriate Direction, including reasons if the documents are not suitable. (c) Deliverable Documents supplied by the Contractor will be the Principal's property. 11.2 OPERATION AND MAINTENANCE MANUALS (a) The Contractor must: (1) be available to comment on and review the development of the Operation and Maintenance Manuals to be produced by the EPC Contractor under the EPC Contract; and (2) maintain the Operation and Maintenance Manuals in accordance with the requirements of the Contract. (b) The Principal owes no duty to the Contractor to review the Operation and Maintenance Manuals or any draft submitted by the Contractor for errors, omissions or compliance with the Contract. (c) Any acknowledgement, approval, acceptance, receipt, recommendation or review of, comment on, or Direction in respect of, any Operation and Maintenance Manuals (or any draft Operations and Maintenance Manuals) by the Principal will not in any way: (1) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; or (2) constitute acceptance by the Principal of the performance of the Contractor's obligations under the Contract; (3) be considered as an acknowledgment by the Principal that the Operation and Maintenance Manuals comply with the Contract; or (4) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law. (d) The Contractor warrants that: PAGE 21 (1) the Operation and Maintenance Manuals will be fit for their intended purposes; and (2) compliance with the Operation and Maintenance Manuals will enable it, during the Term, to fulfil its obligations under the Contract. (e) The Contractor: (1) must comply with the Operation and Maintenance Manuals as submitted to the Principal; and (2) agrees that compliance by it with the Operation and Maintenance Manuals will not in any way: (A) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; or (B) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law. 12 REPORTING 12.1 CONTRACTOR REPORTS The Contractor must deliver the Reports to the Principal in accordance with the Contract, including the Scope of Services. 12.2 WITHHOLDING PAYMENT If the Contractor fails to deliver the Reports in accordance with this clause 12 then, until the Contractor provides the Reports containing the information required by this clause 12, or otherwise fails to remedy the relevant default to the reasonable satisfaction of the Principal, amounts otherwise due to the Contractor in respect of the Management Fee may be withheld by the Principal. 13 COMMITTEE AND REVIEW MEETINGS (a) The parties must ensure that the Committee is established promptly and within 14 days after the Commencement Date. (b) The Committee will: (1) meet weekly to review management issues relating to the provision of the Services and at other times required by the Principal's Representative; and (2) review and discuss: (A) the implementation of the Services; (B) any Reports, Deliverable Documents or other information delivered by the Contractor to the Principal; PAGE 22 (C) achievement of performance standards and Key Performance Indicators; (D) the continuous improvement of operation and maintenance standards and systems to reflect Facilities Management Best Practices, including performance standards and management and control systems. (c) The Principal's Representative must convene and chair all meetings of the Committee and prepare and promptly provide minutes of the meetings of the Committee to the Principal and the Contractor. (d) The parties acknowledge that the minutes of meeting prepared under this clause 13 or matters reviewed or discussed at any meeting of the Committee will not constitute Directions to the Contractor for the purpose of the Contract. 14 SECURITY 14.1 FORM OF PERFORMANCE SECURITY The Contractor must provide to the Principal, within 28 days after the Execution Date, an unconditional and irrevocable undertaking of 10% of the Annual Operating Budget for the first Operating Year which must be: (a) in the form of Annexure Part B; (b) in favour of the Principal and the Financier; and (c) given by a financial institution approved by the Principal, (PERFORMANCE SECURITY). 14.2 CONVERSION OF PERFORMANCE SECURITY (a) Without limiting the unconditional nature of the Performance Security, the Principal and the Financier may have recourse to the Performance Security for any amount that, in the opinion of the Principal or the Financier, the Principal is entitled to claim from the Contractor under or in connection with the Contract, including Rebate Amounts. (b) The Contractor agrees that: (1) it will not institute any proceedings or exercise any rights to restrain or injunct: (A) the financial institution that issued the Performance Security from paying money to the Principal or the Financier under the Performance Security; or (B) the Principal or the Financier from: (i) making a demand for payment; (ii) receiving payment; or (iii) using the money received, under the Performance Security; and PAGE 23 (2) damages will be an adequate remedy for the Contractor where the Principal or the Financier has recourse to the Performance Security in breach of the Contract. 14.3 RELEASE OF PERFORMANCE SECURITY Within 30 days after the end of the Term of the Contract, the Principal must release the Performance Security or any remaining portion of the Performance Security. 14.4 DEED OF GUARANTEE The Contractor must deliver to the Principal the Deed of Guarantee executed by the Guarantor within 30 days after the Execution Date. 14.5 WITHHOLDING PAYMENT If the Contractor fails to deliver the Performance Security or the Deed of Guarantee in accordance with this clause 14, until the Contractor provides the Performance Security and the Deed of Guarantee required by this clause 14, amounts otherwise due to the Contractor may be withheld by the Principal provided that the total of the amounts withheld do not exceed 10% of the Annual Operating Budget for the first Operating Year. 15 ANNUAL OPERATING BUDGETS AND KEY PERFORMANCE INDICATORS 15.1 ANNUAL OPERATING BUDGETS Within 30 days after the Execution Date, the Contractor must provide to the Principal the Annual Operating Budgets Report providing details of: (a) the Annual Operating Budgets; and (b) the Indicative Annual Operating Budgets. 15.2 AMENDMENTS TO ANNUAL OPERATING BUDGETS (a) The Contractor may request that an Annual Operating Budget be amended in respect of any: (1) additional costs reasonably and properly incurred as a result of any: (A) Additional Capital Expenditure Services (but excluding Additional Capital Expenditure); (B) Variation; (C) unforeseeable emergency relating to health and safety or damage to the Facility (except to the extent caused or contributed to by the Contractor); or (D) breach by the Principal of an express term of the Contract; or (2) Reimbursable Costs not contemplated in the Annual Operating Budget. PAGE 24 (b) If the Contractor requests that an Annual Operating Budget be amended, it must submit a redraft of the relevant Annual Operating Budget to the Principal's Representative, noting the amendments requested and containing a summary of the reasons for seeking those amendments. (c) The Principal's Representative must reasonably and promptly consider any proposal to adjust an Annual Operating Budget under clause 15.2(b) and: (1) if the Principal's Representative agrees to approve such amendments to the relevant Annual Operating Budget, the amended Annual Operating Budget will become the relevant Annual Operating Budget; and (2) until the Principal's Representative agrees to approve such amendments or, if the Principal's Representative does not approve such amendments, the current Annual Operating Budget will continue to apply. (d) Despite clause 15.2(c), the Contractor must continue to perform the Services necessary to satisfy the requirements of the Contract, including the Key Performance Indicators, and any consideration, approval or disapproval of amendments to an Annual Operating Budget in accordance with clause 15.2(c) will not in any way: (1) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; (2) constitute acceptance by the Principal of the performance of the Contractor's obligations under the Contract; (3) be considered as an acknowledgment by the Principal that the relevant documents comply with the Contract; or (4) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law. (e) Even if the Contractor is not entitled to or has not requested an increase in the Annual Operating Budget, subject to the Financier's consent, the Principal's Representative may, in its absolute discretion and without obligation to the Contractor to do so, increase the Annual Operating Budget where the Principal's Representative has reasonable grounds to do so. 15.3 SETTING THE ANNUAL OPERATING BUDGET AND KEY PERFORMANCE INDICATORS (a) No later than 3 months prior to the commencement of each Operating Year (other than the first Operating Year), the parties must meet and negotiate in good faith, in respect of the next Operating Year: (1) the Annual Operating Budget; (2) any Variations; (3) the Key Performance Indicators or adjustments to the Key Performance Indicators; and (4) the Incentive Amounts and/or Rebate Amounts, in accordance with the formulae under Annexure Part C. PAGE 25 (b) The parties must determine the revised Annual Operating Budget: (1) by having regard to: (A) the Scope of the Services at that time, including any Variations and the measurement of the performance of the Services or Key Performance Indicators under clause 18; (B) the Reimbursable Costs reasonably and properly incurred by the Contractor in the preceding Operating Year as independently audited (and, for the purpose of this clause 15.3(b)(1)(B), if the parties cannot agree on the identity of the auditor, then the parties will request the President of the Institute of Chartered Accountants in Australia to nominate an independent auditor); (C) any information or fixed estimate of future operating and maintenance costs provided by the Contractor to the Principal and, in respect of the second, third, fourth and fifth Operating Years, the Indicative Annual Operating Budget; and (D) to the extent it is reasonable to do so, a comparison of the Reimbursable Costs (as independently audited) over the previous Operating Year against verified actual operation and maintenance costs of prudent, competent and experienced operators of refineries similar to the Facility; and (2) on the basis that: (A) the Contract remains in full force and the Contractor continues to fully comply with its obligations under the Contract; and (B) the Services and the Contractor's other obligations under the Contract will be performed in a timely and cost efficient manner. (c) If the parties are unable to reach agreement on the revised Annual Operating Budget and any Variations (as contemplated by clause 15.3(a)) prior to the commencement of the next Operating Year (other than the first Operating Year), the Annual Operating Budget applicable to the next Operating Year, will be the Annual Operating Budget that applied during the previous Operating Year until such time as agreement can be reached or any relevant Dispute resolved or determined. 16 ADDITIONAL CAPITAL EXPENDITURE SERVICES AND VARIATIONS 16.1 FORECAST AND BUDGET FOR ADDITIONAL CAPITAL EXPENDITURE SERVICES The Contractor must deliver to the Principal's Representative, in a form which the Principal's Representative reasonably requires and no later than 2 months prior to the end of each calendar year during the Term: PAGE 26 (a) a forecast and recommended program for Additional Capital Expenditure Services which the Contractor proposes be undertaken in the next calendar year; and (b) a 5 year program of expected Additional Capital Expenditure Services, including details of how the Contractor has taken into account the Major Repairs and Replacements Budget and any recommendations of the Principal. 16.2 ADDITIONAL CAPITAL EXPENDITURE SERVICES (a) The Principal's Representative may, at any time during the Term, give a written Direction to the Contractor to perform any Additional Capital Expenditure Services. (b) The Contractor must, within such time as may be reasonably Directed or otherwise agreed by the parties, provide a detailed proposal including: (1) the terms, scope, timing and proposed price of any Additional Capital Expenditure Services; and (2) the effect of any Additional Capital Expenditure Services on the Key Performance Indicators and the Annual Operating Budget. (c) If the parties agree on the terms, scope, timing, price and effects of any Additional Capital Expenditure Services set out in the Contractor's proposal pursuant to clause 16.2(b) then: (1) the Contractor must perform those Additional Capital Expenditure Services as agreed and in accordance with Facilities Management Best Practices; and (2) the Principal must pay the Contractor the Additional Capital Expenditure as agreed and in accordance with clause 17.2. (d) If the parties cannot agree on the terms, scope, timing and price for the performance of any Additional Capital Expenditure Services pursuant to clause 16.2(c), the Principal's Representative may: (1) Direct the Contractor to perform those Additional Capital Expenditure Services; or (2) arrange for the performance of those Additional Capital Expenditure Services by other contractors, in which event the Contractor must: (A) if requested by the Principal's Representative, as part of the Services, do all things that are within the Contractor's responsibility and are reasonably necessary to allow those contractors to carry out the Additional Capital Expenditure Services; and (B) not unreasonably obstruct, delay or interfere with the work of those contractors. (e) The Contractor must continue to perform the Services necessary to satisfy the requirements of the Contract and the Key Performance Indicators and will not be relieved of any obligation under the Contract as a result of any PAGE 27 arrangement by the Principal for the provision of any Additional Capital Expenditure Services by other contractors under clause 16.2(d). (f) The Contractor must not perform any Additional Capital Expenditure Services except as Directed by the Principal's Representative in writing. 16.3 VARIATIONS (a) The Principal's Representative may, at any time during the Term, give a written Direction to the Contractor to perform any Variation. (b) The Contractor must, within such time as may be reasonably Directed or otherwise agreed by the parties, provide a detailed proposal including: (1) the terms, scope, timing and proposed price of any Variation; and (2) the effect of any Variation on the Key Performance Indicators and the Annual Operating Budget;. (c) If the parties agree on the terms, scope, timing, price and effects of any Variation set out in the Contractor's proposal pursuant to clause 16.3(b) then: (1) the Contractor must perform that Variation as agreed and in accordance with the Contract; and (2) the Principal must pay the Contractor as agreed and in accordance with clause 17.2. (d) If the parties cannot agree on the terms, scope, timing and price for the performance of any Variation pursuant to clause 16.3(b), the Principal's Representative may Direct the Contractor to perform that Variation. (e) The Contractor must not perform any Variation except as Directed by the Principal's Representative in writing. 16.4 VALUATION (a) If the parties are unable to agree: (1) the price for the performance of any Additional Capital Expenditure Services, then the Principal's Representative must determine the value; or (2) the price for the performance of any Variation or an amendment to the relevant Annual Operating Budget in respect of a Variation, then the Principal's Representative must determine the value or the amount of the amendment (if any) to the Annual Operating Budget having regard to the cost of the work and materials to be added to or omitted as a result of the Variation, on the following basis: (3) if applicable rates or prices are set out in the Contract, those rates or prices will be used; (4) if clause 16.4(a)(3) does not apply, the rates or prices in the Contract will be used to the extent that it is reasonable to do so; (5) to the extent that neither clauses 16.4(a)(3) or (4) apply: PAGE 28 (A) in respect of Variations and Major Repairs and Replacements, the reasonable direct cost to the Contractor without margin or profit will be used; and (B) in respect of Improvements and Expansion, the reasonable direct cost to the Contractor with margin or profit will be used; and (6) to the extent that clauses 16.4(a)(3),16.4(a)(4) and 16.4(a)(5) do not apply, a reasonable assessment shall be made by the Principal's Representative. (b) For the purpose of a valuation made under clause 16.4(a)(5), the Principal will have reference to the Records of the Contractor in respect of the cost incurred or saved, as the case may be, and the Contractor must maintain in a complete and accurate form and submit detailed summaries of such Records in the relevant statement submitted under clause 17. 17 MANAGEMENT FEE, REIMBURSABLE COSTS, ADDITIONAL CAPITAL EXPENDITURE AND PAYMENT 17.1 MANAGEMENT FEE AND REIMBURSABLE COSTS Subject to clause 17.2(e), the Principal must pay to the Contractor the Management Fee, the Reimbursable Costs and any Additional Capital Expenditure in accordance with the Contract. 17.2 TIME FOR PAYMENT OF MANAGEMENT FEE, REIMBURSABLE COSTS AND ADDITIONAL CAPITAL EXPENDITURE (a) The Contractor must submit to the Principal's Representative within 5 Business Days after the end of each Month a statement in a form approved by the Principal's Representative of: (1) the Reimbursable Costs stated in PNG Kina; (2) the equal monthly portion of the Management Fee (including any addition or reduction for any applicable Incentive Amounts and/or Rebate Amounts) stated in PNG Kina; (3) any Additional Capital Expenditure stated in PNG Kina; and (4) the applicable currency exchange rates in accordance with clause 17.2(f), for the preceding Month in respect of the Services performed during that Month. (b) The Contractor must, at the time of submitting a statement in accordance with clause 17.2(a), also submit to the Principal's Representative, on a full open-book accounting basis, all Records evidencing the Contractor's expenditure in performing the Services to allow the Principal's Representative to verify each claim to its reasonable satisfaction. PAGE 29 (c) The Principal's Representative must, within 10 Business Days after receiving a statement and the Records in accordance with clauses 17.2(a) and (b): (1) reasonably determine the amount payable in respect of the statement having regard to the Records and the Rates; and (2) issue a certificate to the Contractor and the Principal of: (A) the assessment by the Principal's Representative of the Reimbursable Costs claimed by the Contractor in the statement; (B) any money which is due or which may become due from the Contractor to the Principal in respect of the Contract or the Services; (C) the amount certified as payable in PNG Kina to the Contractor by the Principal, or to the Principal by the Contractor, as the case may be; and (D) the applicable currency exchange rates in accordance with clause 17.2(f). (d) Subject to clause ERROR! REFERENCE SOURCE NOT FOUND., where an amount is payable by the Principal to the Contractor in respect of a certificate issued by the Principal's Representative under clause 17.2(c), and subject to the provisions of the Contract, the Principal must pay the Contractor the amount certified as payable by the Principal's Representative under clause 17.2(c) by the later of: (1) 10 Business Days after the Principal's Representative issues the certificate under clause 17.2(c); (2) the end of the Month in which the Principal's Representative issues the certificate under clause 17.2(c); (3) the receipt by the Principal's Representative of a statutory declaration, waiver of lien or documentary evidence of moneys duly paid to and received by subcontractors; (4) the receipt by the Principal's Representative of all Deliverable Documents falling due for delivery during the Month covered by the statement to which the certificate applies; and (5) compliance by the Contractor with all Directions by the Principal to remedy any breach of the Contract required during the Month covered by the statement to which the certificate applies. (e) The Contractor acknowledges that in no circumstances will the Contractor be entitled to payment of any amount in excess of the Annual Operating Budget (as amended in accordance with clause 15.2) in respect of the performance of the Services during the relevant period. (f) [deleted for confidentiality]. (g) Where the Contractor has incurred an obligation to pay but has not yet paid Additional Capital Expenditure, the Contractor may at any time provide such details as the Principal's Representative may reasonably PAGE 30 require of the relevant amounts and the basis on which the obligation to pay has been incurred and the time by which payment is due, including all supporting documentation, in which event: (1) the Principal's Representative must reasonably determine, and issue a certificate to the Contractor and the Principal certifying, the amount that will be payable by the Contractor in respect of the Additional Capital Expenditure and the date by which that amount will be payable; (2) subject to clause ERROR! REFERENCE SOURCE NOT FOUND., the Principal must pay the Contractor the amount certified under clause 17.2(g)(1) on the business day before the date by which that amount will be payable by the Contractor. 17.3 FIXED AND FIRM PRICING (a) The Rates under the Contract are fixed and firm until the end of the first Operating Year. (b) Subject only to clauses 16.4(a)(5)(B) and 17.3(c), the Management Fee is fixed and firm until the end of the fifth Operating Year. (c) The amount of the Management Fee for each Operating Year after the first Operating Year shall be increased by an amount calculated as follows: MF x (CPI/CPI Base) - MF Where: MF is the Management Fee for the previous Operating Year; CPI is the most recent index entitled "Australia - All Groups" catalogue number 6401 published by the Australian Bureau of Statistics prior to the end of the previous Operating Year; CPI BASE is CPI for the Base Quarter; and BASE QUARTER is the last calendar quarter before the end of the Operating Year immediately prior to the previous Operating Year. 17.4 COSTS NOT REIMBURSABLE The Contractor acknowledges that the following costs, if incurred by the Contractor, will be borne by the Contractor and will not form part of the Reimbursable Costs: (a) the costs of rectifying any breach of the Contract by the Contractor (including the costs of rectifying any non-compliant Services or Materials and Equipment); (b) any damages payable by the Contractor pursuant to the Contract; (c) any amounts payable by the Contractor under any indemnities in the Contract; (d) in respect of any litigation or dispute resolution process between the Contractor and its subcontractors: PAGE 31 (1) any legal costs incurred by the Contractor in relation to that litigation or dispute resolution process; or (2) any loss incurred by the Contractor in relation to that litigation or dispute resolution process as a result of, or in connection with, a breach by the Contractor of its obligations under the Contract or a breach of any subcontract by the Contractor; (e) any income tax payable by the Contractor on the Contractor's gross earnings; (f) any penalties, unless caused by a breach of the Contract by the Principal; (g) any amounts payable in relation to any litigation or dispute resolution process between the Contractor and the Principal, except to the extent that there is an order for the Principal to pay any such amount; and (h) subject only to clause 15.2(a)(1)(C), any costs incurred by the Contractor in performing Variations or Additional Capital Expenditure Services which have not been Directed by the Principal's Representative in writing. 17.5 TAX ON PAYMENTS If, pursuant to any Legislative Requirement, the Principal is required to make a deduction or withholding in respect of Tax from any payment to be made to the Contractor under the Contract, then: (a) the Principal must pay the amount deducted or withheld to the appropriate Government Agency as required by the Legislative Requirement; and (b) the Principal must use all reasonable endeavours to obtain official receipts or other documentation from the Government Agency and, within 4 Business Days after receipt, deliver a copy of those documents to the Contractor. 17.6 NO ADDITIONAL PAYMENTS If: (a) the Principal is required to make a deduction or withholding in respect of Taxes from any payment to be made to the Contractor under the Contract; or (b) the Contractor is required to pay any Taxes in respect of any payment it receives from the Principal under the Contract, then, the Principal is not obliged to make, and the Contractor is not entitled to claim, any additional payment in respect of the deduction or withholding in respect of Taxes or for the payment of Tax. 17.7 INTEREST ON OVERDUE PAYMENTS If any money due to either party remains unpaid after the date on which (or the expiration of the period within which) it should have been paid, interest is payable on the money from, but excluding, the date on which (or the expiration of the period within which) it should have been paid, to and including the date on which the money is paid, at [deleted for confidentiality]. PAGE 32 18 REBATE AMOUNTS AND INCENTIVE AMOUNTS (a) The Principal will measure the performance of the Contractor in providing the Services according to the extent to which the Contractor has and is meeting the Key Performance Indicators. (b) If the Contractor fails to perform to the standard required by a Key Performance Indicator and that failure was not caused by an act or omission of the Principal, the Principal may be entitled to claim a Rebate Amount. (c) The parties agree that Rebate Amounts do not limit the Principal's right at general law to recover damages: (1) in excess of the respective Rebate Amount for the Contractor's failure to achieve any Key Performance Indicator; or (2) in respect of the Contractor's failure to perform the Services in accordance with the Contract. (d) If the Contractor exceeds a Key Performance Indicator in performing the Services, the Contractor may be entitled to claim an Incentive Amount in respect of the relevant Key Performance Indicator. (e) The liability of the Contractor to pay Rebate Amounts and the liability of the Principal to pay Incentive Amounts do not arise in respect of any Services performed prior to the commencement of the second Operating Year. 19 RECORDS AND AUDITING 19.1 RECORDS (a) The Contractor must keep and maintain all Records for a period of 7 years. (b) All Records shall be available and accessible at all times to the Principal and its authorised agents, on a full open-book basis, without limitation. 19.2 AUDITING (a) The Principal may, on the provision of ten (10) Business Days written notice to the Contractor, conduct detailed audits of the Contractor's performance of the Services to determine whether or not the Contractor is performing the Services to the Key Performance Indicators. (b) The Contractor must, at the request of the Principal, provide sufficient Records on a full open-book basis to the Principal (including for examination and copying) so that the Principal may verify the contents or amounts included or referred to in any statement provided by the Contractor under clause 17 or other information provided by the Contractor pursuant to the Contract. (c) The Contractor must allow the Principal and its authorised agents unrestricted access to all Records, premises, equipment and personnel PAGE 33 reasonably necessary for the Principal to conduct any audit referred to in clause 19.2. 20 MATERIALS AND EQUIPMENT The Contractor will supply all Materials and Equipment necessary for the proper performance of the Contractor's obligations and discharge of the Contractor's liabilities, and the direct costs reasonably and properly incurred by the Contractor in doing so will be Reimbursable Costs. Property and ownership in Materials and Equipment purchased by the Contractor shall automatically vest in the Principal on the reimbursement by the Principal of the relevant cost. Subject to clause 35.5, on the expiry of the Term or in the event of termination of the Contract, the Contractor shall deliver up or make available all Materials and Equipment in accordance with the directions of the Principal, at no further cost to the Principal (except to the extent that the relevant cost has not been reimbursed). 21 FORCE MAJEURE 21.1 NOTICE Any party who is, by reason of Force Majeure unable to perform any obligation under the Contract must notify the other party in writing as soon as possible, specifying: (a) the cause and extent of the non-performance; (b) the date of commencement of the non-performance; and (c) the means proposed to be adopted to remedy or abate the Force Majeure. 21.2 IMPACT OF FORCE MAJEURE Subject to clause 21.3, a party shall have no liability in respect of any failure to perform its obligations under the Contract to the extent that the failure to perform is due to Force Majeure. 21.3 MITIGATION OF FORCE MAJEURE A party who is, by reason of Force Majeure, unable to perform any obligation under the Contract must: (a) use all reasonable diligence and employ all reasonable means to remedy or abate the Force Majeure as expeditiously as possible (provided however that neither party shall, by virtue of this clause, be required against the will of such party to terminate or settle any strike or other industrial action); (b) resume performance as expeditiously as possible after the Force Majeure or, if the Force Majeure has abated resume performance to the extent possible; and (c) notify the other party when the Force Majeure has ceased or abated to an extent which permits the resumption of performance. PAGE 34 21.4 ADJUSTMENTS If the Contractor is, by reason of Force Majeure, unable to perform any of the Services: (a) if the Services are substantially unable to be performed then, during that period, the Management Fee to which the Contractor would otherwise be entitled shall be reduced if and to the extent that the Principal's Representative reasonably considers appropriate; and (b) the Annual Operating Budget for the relevant period shall be amended, to reflect the affect of the Force Majeure on the Services performed by the Contractor. 22 INTELLECTUAL PROPERTY RIGHTS 22.1 OWNERSHIP OF PRINCIPAL'S BACKGROUND MATERIALS Subject to clause 22.2, the Contractor agrees that: (a) the Principal owns and retains all right, title and interest in the Principal's Background Materials (including Intellectual Property Rights in the Principal's Background Materials); and (b) the Contractor will obtain no interest in the Principal's Background Materials solely by its access to or use of those Background Materials in relation to the Contract. 22.2 LICENCE TO USE PRINCIPAL'S BACKGROUND MATERIALS The parties agree that all the Principal's Background Materials which the Principal makes available to the Contractor in connection with the Contract will be deemed to be licensed to the Contractor on a non-exclusive, royalty free basis to use, adapt, modify, reproduce, maintain, operate, rectify or rebuild solely for the purpose of performing its obligations, exercising its rights or taking the benefit of its rights under the Contract until termination or expiration of the Contract. 22.3 OWNERSHIP OF CONTRACT MATERIALS Subject to clause 22.4(a) and except in respect of any Contractor's Background Materials licensed by the Contractor from a third party, the parties agree that: (a) the Principal will own all right, title and interest in the Contract Materials (including Intellectual Property Rights in the Contract Materials); (b) to the extent necessary, the Contractor must assign to the Principal all rights, if any, it has or obtains to the Contract Materials; and (c) the Contractor will obtain no interest in the Contract Materials solely by its development of, access to or use of those Contract Materials in relation to the Contract. PAGE 35 22.4 LICENCE TO USE CONTRACT MATERIALS (a) The Principal grants to the Contractor a non-exclusive, royalty free licence for the Contractor to use, adapt, modify, reproduce, maintain, operate, rectify or rebuild any Contract Materials referred to in clause 22.3 in performing its obligations under the Contract until termination or expiration of the Contract. (b) In respect of any Contractor's Background Materials licensed by the Contractor from a third party, the Contractor must procure for the Principal a non-exclusive, perpetual, sub-licensable, royalty free licence for the Principal to use, adapt, modify, reproduce, maintain, operate, rectify or rebuild such Background Materials for the operation, maintenance and management of the Facility and the Refining Process. 22.5 DELIVERY OF CONTRACT MATERIALS Upon termination or expiration of the Contract, the Contractor must deliver to the Principal: (a) all Contract Materials; (b) all the Principal's Background Materials made available to the Contractor; (c) any other Documents and Records determined by the Principal as being required for the operation, maintenance and management of the Facility and the Refining Process; and (d) provide access to personnel to explain the operation of any Contract Materials. 22.6 MORAL RIGHTS The Contractor must ensure that all of its consultants, subcontractors and personnel: (a) acknowledge that their Moral Rights are not infringed by; and (b) consent to, all acts or omissions of the parties in relation to their Moral Rights in respect of the Contract Materials. 22.7 WARRANTY BY THE CONTRACTOR The Contractor warrants that the Intellectual Property Rights granted to the Principal under this clause 22 and the use by the Principal pursuant to clause 22 will not infringe any Intellectual Property Rights owned by any third person. 22.8 INDEMNITY The Contractor must indemnify and hold harmless the Principal against any action, claim, demand, cost, loss, damage or expense arising from: (a) any infringement or alleged infringement of Intellectual Property Rights owned by a third person in respect of any Contract Materials; and (b) any breach of the warranty in clause 22.7. PAGE 36 22.9 USE OF INFRINGING MATERIAL If the use of any item of Contract Materials is determined to constitute an infringement of Intellectual Property Rights of any third person and its use is enjoined, the Contractor must, at its own expense, either: (a) procure for the Principal the right to continue using the item of Contract Materials; (b) replace the item of Contract Materials with a non-infringing item; or (c) modify the item of Contract Materials or its uses so it becomes non-infringing. 22.10 SURVIVAL The rights and obligations of the parties under this clause 22 survive expiry or termination of the Contract. 23 CONFIDENTIAL INFORMATION 23.1 NON-DISCLOSURE OF PRINCIPAL'S CONFIDENTIAL INFORMATION Subject to clauses 22.2, 22.4 and 23.2, the Contractor may not disclose Confidential Information of the Principal without the prior written consent of the Principal (which consent must not be unreasonably withheld). 23.2 NON-DISCLOSURE OF CONTRACTOR'S CONFIDENTIAL INFORMATION Subject to clause 22.3, the Principal may not disclose Confidential Information of the Contractor without the prior written consent of the Contractor (which consent must not be unreasonably withheld). 23.3 PERMITTED DISCLOSURE Either party may disclose Confidential Information of the other party which: (a) at the time of disclosure is in the public domain, but not as result of a breach of clauses 23.1 or 23.2, as the case may be; (b) is required to be disclosed for the purposes of performing its obligations under the Contract; (c) is required to be disclosed to its professional advisers, bankers or financial advisers; or (d) is required by Legislative Requirements to be disclosed. 23.4 CONFIDENTIALITY UNDERTAKINGS Subject to clauses 22.2 and 22.4, if the Contractor requires further disclosure of Confidential Information of the Principal to be made to its subcontractors or suppliers or others under clause 23.3(b) for the purposes of performing its obligations under the Contract, the Contractor must procure confidentiality undertakings (on terms satisfactory to the Principal) from its subcontractors or suppliers in relation to that disclosure. PAGE 37 23.5 RETURN OF CONFIDENTIAL INFORMATION Either party must return to the other party any Confidential Information of the other party on demand. 23.6 MEDIA (a) The Contractor must not disclose any information concerning the Services for distributing through any communications media without the Principal's prior written approval, which may place conditions on such approval. (b) The Contractor must refer to the Principal any enquiries from any media concerning the Services. 24 ASSIGNMENT AND SUB-CONTRACTING 24.1 ASSIGNMENT (a) Subject to clause 24.1(b), neither party shall, without the prior written consent of the other party (which consent shall not be unreasonably withheld), and except on such reasonable terms and conditions as may be determined in writing by the other party, assign this Contract or assign any payment or any other right, benefit or interest under this Contract. (b) The Principal may assign this Contract or assign any payment or any other right, benefit or interest under this Contract to any person or entity as required by the Financier under the Consent Deed without the Contractor's consent. 24.2 SUBCONTRACTING GENERALLY (a) The Contractor must not without the Principals' prior written approval (which may not be unreasonably withheld): (1) subcontract or allow a subcontractor to subcontract any work ; or (2) allow a subcontractor to assign a subcontract or any payment or any other right, benefit or interest under the subcontract. (b) With a request for approval, the Contractor must give the Principal written particulars of the work to be subcontracted and the name and address of the proposed subcontractor. (c) The Contractor must give the Principal other information which the Principal reasonably requests, including the proposed subcontract documents and documentation which confirms the qualifications of the officer and employees of the proposed subcontractor who will be undertaking the work. (d) Within 14 days of the Contractor's request for approval, the Principal must give the Contractor written notice of the approval or rejection of the Contractor's request for approval to subcontract. (e) Any subcontract whether entered into as at the Execution Date or in the future by the Contractor must contain: PAGE 38 (1) provision that the subcontractor must not assign or subcontract without the Contractor's written consent; (2) provisions that require subcontractors to comply with the same obligations as are contained in clauses 6.6(a), 6.6(b), 6.6(c) and 6.6(d); (3) provisions reasonably necessary to enable the Contractor to fulfil the Contractor's obligations to the Principal; and (4) provision that if the Contract is terminated, the Contractor and the subcontractor must after the Principal has done so, promptly execute a Deed of Novation. (f) The Contractor irrevocably appoints the Principal as the Contractor's attorney with authority to execute any Deed of Novation necessary to give effect to the novation referred to in clause 24.2(e)(4) and to bind the Contractor accordingly. 24.3 CONTRACTOR'S RESPONSIBILITY (a) The Contractor is liable to the Principal for the acts, defaults and omissions of subcontractors and employees and agents of subcontractors as if they were those of the Contractor. (b) Approval to subcontract does not relieve the Contractor from any liability or obligation under the Contract. (c) The Contractor must not, and has no authority to, incur any liability on behalf of the Principal or enter into any agreements or commitments in the name of, or on behalf of, the Principal and must take no step to bind or commit the Principal. 25 PRINCIPAL 25.1 PRINCIPAL'S DIRECTIONS (a) Except where the Contract otherwise provides: (1) the Principal or the Principal's Representative may give a Direction orally but shall as soon as practicable confirm it in writing; (2) compliance by the Contractor with any Direction issued by the Principal or the Principal's Representative will not in any way: (A) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; (B) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law; or (C) entitle the Contractor to: (i) make any Claim; (ii) any increase in the Management Fee or the Rates; or PAGE 39 (iii) any amendment to the Annual Operating Budget. (b) If the Contractor considers that a Direction given by the Principal or the Principal's Representative is a Direction to perform Additional Capital Expenditure Services or a Variation, the Contractor must give written notice to the Principal's Representative of the Direction which must include the effect the Contractor anticipates the Additional Capital Expenditure Services or the Variation will have on: (1) the Plans; (2) the Key Performance Indicators; and (3) the Annual Operating Budget. (c) If the Contractor does not give the notice referred to in clause 25.1(b) before complying with the Direction, the Contractor will not be entitled to have the value of the Additional Capital Expenditure Services or the Variation determined under clause 16.4 and compliance with the Direction will not in any way: (1) relieve the Contractor of any of its liabilities or responsibilities to the Principal under the Contract or otherwise according to law; (2) lessen or affect the Principal's rights against the Contractor under the Contract or otherwise according to law; or (3) entitle the Contractor to: (A) make any Claim; (B) any increase in the Management Fee or the Rates; or (C) any amendment to the Annual Operating Budget. 25.2 PRINCIPAL'S REPRESENTATIVE (a) The Principal may from time to time appoint individuals to exercise delegated Principal's functions, provided that: (1) no aspect of any function shall at any one time be the subject of delegation to more than one Principal's Representative; (2) delegation shall not prevent the Principal exercising any function; and (3) the Principal forthwith gives the Contractor written notice of respectively: (A) the appointment, including the Principal's Representative's name and delegated functions; and (B) the termination of each appointment. (b) The Principal must immediately notify the Contractor in writing of the name of the Principal's Representative and of any subsequent changes. (c) The Principal's Representative must act reasonably in relation to any function of assessment or certification of the Contractor's entitlements under the Contract. PAGE 40 26 CONTRACTOR'S REPRESENTATIVE (a) The Contractor must supervise the Services personally or, may from time to time appoint an individual to exercise any functions of the Contractor under the Contract and to supervise the performance of the Services. (b) The Contractor must immediately give the Principal written notice of the Contractor's Representative and any subsequent changes. (c) The appointment of the Contractor's Representative does not prevent the Contractor from exercising any function. (d) The Contractor's Representative will represent the Contractor for all purposes of the Contract, unless the Contractor advises the Principal in writing that some other person is to be the Contractor's Representative. (e) The Contractor's Representative is authorised to negotiate with the Principal on behalf of the Contractor and to bind the Contractor contractually in respect of matters arising from the performance of the Services. (f) Matters within the knowledge of the Contractor's Representative (including Directions received) are deemed to be within the knowledge of the Contractor. (g) If the Principal makes a reasonable objection to the appointment of a Contractor's Representative, the Contractor must terminate the appointment and appoint another Contractor's Representative. 27 CONTRACTOR'S EMPLOYEES AND SUBCONTRACTORS 27.1 EMPLOYEES AND SUBCONTRACTORS (a) The Contractor must employ in activities connected with the Services only persons or subcontractors who are competent, careful, skilled and experienced in their respective trades and professions. (b) The Principal may direct the Contractor to have removed, within a stated time, from the Facility or the Site or from any activity of the Services, any person employed on the Services who, in the Principal's reasonable opinion, is incompetent, negligent or guilty of misconduct. 27.2 ORGANISATION STRUCTURE AND KEY PERSONNEL (a) The Contractor must effect and maintain the Organisation Structure for the Term unless: (1) the Principal, in its sole and unfettered discretion, approves a change to the Organisation Structure; or (2) the Principal gives a notice to the Contractor instructing the Contractor to change the Organisation Structure. (b) The Contractor must engage the Key Personnel in the performance of the Services, unless: PAGE 41 (1) the Principal, in its sole and unfettered discretion, approves the substitution of a member of the Key Personnel; (2) the Principal gives a notice to the Contractor instructing the Contractor to remove a member of the Key Personnel; or (3) a member of the Key Personnel dies, retires or resigns, except to accept other employment with another related entity of the Contractor, or otherwise suffers from ill mental or physical health. (c) The Contractor must promptly fill any vacancy in the Key Personnel with a person approved of in writing by the Principal. 28 DAMAGES TO PERSONS AND PROPERTY 28.1 PROTECTION OF PEOPLE AND PROPERTY (a) The Contractor must: (1) take all reasonable and necessary measures to protect people and property including complying with the Principal's requirements in respect thereof and, in particular, comply with all occupational health and safety legislation and take full responsibility for the adequacy, stability and safety of all operations of the Facility and on the Site; (2) establish, maintain and comply with emergency safety and security procedures applicable to the Services, the Facility and the Site as notified to the Contractor by the Principal from time to time; (3) avoid unnecessary interference with the passage of people and vehicles; (4) prevent nuisance and unreasonable noise and disturbance. (b) If the Contractor damages any property of a third party, including, but not limited to, public utilities and services and property on or adjacent to the Facility and the Site, the Contractor must promptly rectify the damage and pay any compensation which the law requires the Contractor to pay. (c) If the Contractor fails to comply with an obligation under this clause, the Principal, after giving reasonable written notice to the Contractor and in addition to the Principal's other rights and remedies, may have the obligation performed by others and the cost incurred will be moneys due from the Contractor to the Principal. 28.2 URGENT PROTECTION (a) If urgent action is necessary to protect the Services, the Facility, the Site, other property or people and the Contractor fails to take the action: (1) in addition to any other remedies of the Principal, the Principal may take the necessary action; and (2) if the action was action which the Contractor should have taken at the Contractor's cost, the reasonable cost incurred shall be moneys due from the Contractor to the Principal. PAGE 42 (b) If time permits, the Principal must give the Contractor prior written notice of the intention to take action pursuant to this clause. 28.3 OCCUPATIONAL HEALTH AND SAFETY (a) The Contractor must comply with: (1) all Directions in regard to the application of the Principal's occupational health and safety policy and procedures for the Site; and (2) the Occupational Health and Safety Plan. (b) If the Contractor fails to comply with an obligation under this clause the Principal, after the Principal has given reasonable written notice to the Contractor and in addition to the Principal's other rights and remedies, may have the obligation performed by others. The cost incurred will be moneys due from the Contractor to the Principal. 29 INDEMNITY AND LIMITATION AND EXCLUSION OF LIABILITY 29.1 INDEMNITIES (a) Subject to clauses 29.2 and 29.3, the Contractor is responsible for and must indemnify and hold harmless the Principal Group, and the Principal is responsible for and must indemnify and hold harmless the Contractor Group (each of the Contractor and the Principal being the "INDEMNIFYING PARTY" as appropriate and each of the Principal Group and the Contractor Group being the "INDEMNIFIED PARTY" as appropriate) from and against any and all claims, liabilities, costs, losses, damages and expenses of every kind and nature (including extra-judicial settlements and compromises) in respect of: (1) sickness, injury or death of any employee, agent or consultant of the Indemnifying Party's Group (which means, in the case of the Contractor, the Contractor Group, and in the case of the Principal, the Principal Group); and (2) loss of, damage to or destruction of the property or equipment owned, hired, leased, chartered or otherwise belonging to or provided by the Indemnifying Party's Group, including, for the avoidance of doubt, loss of Raw Materials or Products, arising from or as a result of the performance, inadequate performance or non-performance of the Contract from any cause whatsoever, and notwithstanding the negligence or breach of duty (statutory or otherwise) of the Indemnified Party or any other person and irrespective of any claim in tort, under contract or otherwise at law, provided that this indemnity does not apply or is reduced proportionally to the extent that the Gross Negligence of the Indemnified Party contributes to the sickness, injury, death, loss, damage, destruction, cost or expense. (b) Subject to clauses 29.2 and 29.3, the Contractor is responsible for and must indemnify and hold harmless the Principal Group and the Principal is PAGE 43 responsible for and must indemnify and hold harmless Contractor Group (each of the Contractor and the Principal being the "INDEMNIFYING PARTY" as appropriate and each of the Principal Group and the Contractor Group being the "INDEMNIFIED PARTY" as appropriate) from and against any and all claims, liabilities, costs, losses, damages and expenses of every kind and nature (including extra-judicial settlements and compromises) in respect of the sickness, injury or death of any third party and the loss of, damage to or destruction of any property of any third party, including environmental or pollution damage, arising from or as a result of the performance, inadequate performance or non-performance of the Contract and caused by the negligence or breach of duty (statutory or otherwise) of the Indemnifying Party's Group (such term having the same meaning as in clause 29.1(a)), provided that this indemnity does not apply or is reduced proportionally to the extent that the negligence or breach of duty (statutory or otherwise) of the Indemnified Party contributes to the sickness, injury, death, loss, damage, destruction, cost or expense. 29.2 NO CONSEQUENTIAL LOSSES (a) For the purposes of this clause 29.2, "CONSEQUENTIAL LOSS" means loss of use, contract, production, product or revenue, profit or expected profit and any consequential, special or indirect loss or damage arising out of or in connection with the Contract or the Services, and whether or not such losses were foreseeable at the time of entering into the Contract. (b) Notwithstanding any other provisions to the contrary elsewhere in this Contract, the Contractor shall save, indemnify, defend and hold harmless the Principal Group from the Contractor Group's own Consequential Loss (even if caused wholly or partly by the negligence or Gross Negligence of the Principal Group) and the Principal shall save, indemnify, defend and hold harmless the Contractor Group from the Principal Group's own Consequential Loss (even if caused wholly or partly by the negligence or Gross Negligence of the Contractor Group). 29.3 LIMITATION ON LIABILITY (a) Where the Contractor is liable to the Principal or any other person under clause 29.1(a), and: (1) none of the Principal's Insurances nor the Contractor's Insurances are applicable (other than as a result of a failure by the Contractor to effect or maintain the Contractor's Insurances); or (2) one or more of the Principal's Insurances or the Contractor's Insurances is applicable but the Contractor's liability exceeds the proceeds received by the Principal under the Principal's Insurances or the Contractor's Insurances, as the case may be, then, except where the Contractor Group is Grossly Negligent, the liability of the Contractor in any Operating Year (beyond the applicable proceeds of insurance) is limited to five million United States Dollars (US$5,000,000), and the Principal shall save, indemnify, defend and hold harmless the Contractor Group from any such liability in excess of five million United States Dollars (US$5,000,000). PAGE 44 (b) Where the Contractor is liable to the Principal or any other person under clause 29.1(b), and: (1) none of the Principal's Insurances nor the Contractor's Insurances are applicable (other than as a result of a failure by the Contractor to effect or maintain the Contractor's Insurances); or (2) one or more of the Principal's Insurances or the Contractor's Insurances is applicable but the Contractor's liability exceeds the proceeds received by the Principal under the Principal's Insurances or the Contractor's Insurances, as the case may be, then, except where the Contractor Group has been Grossly Negligent, the liability of the Contractor in any Operating Year (beyond the applicable proceeds of insurance) is limited to twenty million United States Dollars (US$20,000,000), and the Principal shall save, indemnify, defend and hold harmless the Contractor Group from any such liability in excess of twenty million United States Dollars (US$20,000,000). 30 INSURANCES 30.1 PRINCIPAL'S INSURANCE (a) Prior to the anticipated date for commissioning, the Principal must effect and maintain the Principal's Insurances in accordance with Annexure Part I. (b) The insurances must: (1) be in the names of the Principal, the Contractor and the Financier; (2) include a non-vitiation clause to the effect that acts, omissions and misrepresentations by one assured which would otherwise vitiate any claim under the policy or render the policy void can only affect the right of that particular assured and cannot prejudice the rights and interests of the other assured under the policy; (3) include a waiver of the insurers' rights of subrogation against the Contractor and any of the Contractor's subcontractors; (4) cover the parties and all subcontractors whenever performing the Services for their respective rights, interests and liabilities; and (5) be in terms approved in writing by the Financier. 30.2 CONTRACTOR'S INSURANCE (a) The Contractor must effect and maintain the Contractor's Insurances in accordance with Annexure Part I. (b) The insurances must: (1) except in relation to workers' compensation insurance, be in the names of the Principal, the Contractor and the Financier; (2) include a waiver of the insurer's rights of subrogation against the Principal; and PAGE 45 (3) cover the parties whenever performing the Services for their respective rights, interests and liabilities. 31 INSPECTION AND PROVISIONS OF INSURANCE POLICIES 31.1 PROOF OF INSURANCE (a) Before the Contractor commences the Services and whenever requested in writing by a party, the other party must provide satisfactory evidence of the insurance required to be effected and maintained by the other party under the Contract (including policies, renewal certificates and endorsement slips). (b) Insurance does not limit liabilities or obligations under other provisions of the Contract. (c) Any insurance policy to be effected or maintained under the Contract by the Contractor must be in a form acceptable to the Principal and the Financier and with an insurer authorised to carry on business in Papua New Guinea and: (1) with at least a Standard and Poor's "BBB+" rating; or (2) with at least a Best Insurance Reports rating of "A-"; or (3) otherwise acceptable to the Principal and the Financier. 31.2 FAILURE TO PRODUCE PROOF OF INSURANCE (a) If a party makes a request under clause 31.1 and the other party fails to promptly provide satisfactory evidence of compliance with clause 31.1, then without prejudice to any other rights or remedies, that party may insure and the cost thereof shall be moneys due and payable from the other party to that party. (b) If the Contractor fails to provide proof of the insurance effected and maintained by the Contractor in accordance with clause 30.2 then, until the Contractor provides the proof of the insurance required by clause 31.1, amounts otherwise due to the Contractor in respect of the Management Fee may be withheld by the Principal. 31.3 NOTICES FROM OR TO THE INSURER Each party must ensure that each policy that it is required to effect and maintain under the Contract contains provisions acceptable to the other party and the Financier that will: (a) provide that, whenever the insurer gives the Principal, the Contractor or a subcontractor a notice of cancellation concerning the policy, such cancellation shall not be effective against the Financier for 60 days except whenever the Contractor or the Principal, as the case may be, fails to renew the policy or to pay a premium then clause 31.3(c) applies; (b) provide that a notice of claim given to the insurer by the Principal, the Financier, the Contractor or a subcontractor will be accepted by the insurer PAGE 46 as a notice of claim given by the Principal, the Financier, the Contractor and the subcontractor; and (c) require the insurer, whenever the Contractor or the Principal, as the case may be, fails to renew the policy or to pay a premium, to give 10 days written notice of the failure immediately to the Principal, the Financier and the Contractor before the insurer gives any notice of cancellation. 31.4 NOTICES OF POTENTIAL CLAIMS The Contractor must, as soon as practicable, inform the Principal in writing of any occurrence that may give rise to a claim under an insurance policy required to be effected and maintained by the Contractor under clause 30 and shall keep the Principal informed of subsequent developments concerning the claim. The Contractor must ensure that subcontractors in respect of their operations similarly inform the parties. The Principal must, as soon as practicable, inform the Contractor in writing of any occurrence that may give rise to a claim under an insurance policy required to be effected and maintained by the Principal under clause 30 and shall keep the Contractor informed of subsequent developments concerning the claim. 31.5 CARE OF THE SERVICES AND SETTLEMENT OF CLAIMS (a) The Contractor is responsible for the care of the Services, the Facility and the Site from and including the Date of Practical Completion until the expiry or termination of the Contract. (b) Without limiting the Contractor's obligations under clause 31.5(a), the Contractor: (1) is responsible for: (A) the care of all Materials and Equipment; (B) items entrusted to the Contractor by the Principal for the purpose of performing the Services; (C) items brought onto Site by subcontractors for that purpose; and (D) items in the course of transportation or delivery to the Site; and (2) must provide the storage and protection necessary to preserve those items. (c) If loss or damage occurs to the Services, the Facility or the Site during the period for which the Contractor is responsible for the care of the Services, the Facility and the Site: (1) the Contractor must, subject to clauses 29 and 31.5(c)(2), rectify such loss or damage so that the Services, the Facility or the Site, as the case may be, conform in every respect with the provisions of the Contract; and (2) on settlement of a claim under the insurance required by clause 30 and subject to the consent of the Financier: PAGE 47 (A) to the extent that reinstatement has been the subject of a payment or allowance by the Principal to the Contractor, if the Contractor has not completed such reinstatement, insurance moneys received must, if requested by either party, be paid into an agreed bank account in the joint names of the parties and as the Contractor reinstates the loss or damage, the Principal must sign against the joint account for the reasonable cost of reinstatement; and (B) to the extent that reinstatement has not been the subject of a payment or allowance by the Principal to the Contractor, the Contractor is entitled, immediately, to receive from insurance moneys received, the amount of such moneys so paid in relation to any loss suffered by the Contractor. 31.6 CROSS LIABILITY Any insurance required to be effected in accordance with the Contract must include a cross liability, clause which states that: (a) the insurer agrees to waive all rights of subrogation or action against any of the persons constituting the insured and for the purpose of which the insurer accepts the term "insured" as applying to each of the persons constituting the insured as if a separate policy of insurance had been issued to each of them (subject always to the overall insured not being increased); and (b) failure by any insured to comply with the terms of the policy does not prejudice the insurance in relation to any other insured. 31.7 DEDUCTIBLES (a) The policies of insurance referred to in clause 30.2 which the Contractor is required to effect and maintain under the Contract must not have deductibles greater than the deductibles specified in Annexure Part I for each policy. (b) The Contractor must pay any deductible payable under the policies of insurance referred to in clause 30.2 unless and to the extent that the relevant claim is as a result of an act or omission of the Principal. 32 PAYMENT OF WORKERS AND SUBCONTRACTORS 32.1 WORKERS AND SUBCONTRACTORS (a) The Contractor must give in respect of a statement provided in accordance with clause 17.2, a statutory declaration by an authorised officer declaring, and documentary evidence of, the payment of moneys due and payable to: (1) workers of the Contractor and of the subcontractors; and (2) subcontractors, in respect of performance of the Services the subject of that statement. PAGE 48 (b) If the Contractor is unable to give such statutory declaration or documentary evidence, the Contractor must give other documentary evidence of the moneys so due and payable to workers and subcontractors. (c) Documentary evidence, except where the Contract otherwise provides, must be to the Principal's reasonable satisfaction. 32.2 WITHHOLDING PAYMENT (a) Subject to clause 32.2(b), the Principal may withhold moneys certified as due and payable to the Contractor in accordance with clause 17.2 until the Contractor complies with clause 32. (b) The Principal must not withhold payment of such moneys in excess of the moneys evidenced pursuant to clause 32 as due and payable to workers and subcontractors. 32.3 DIRECT PAYMENT (a) The Principal may pay unpaid moneys the subject of clause 32 directly to a worker or a subcontractor where: (1) permitted by a Legislative Requirement; (2) given a court order in favour of the worker or subcontractor; or (3) requested in writing by the Contractor. (b) A payment made to a worker or subcontractor under clause 32.3(a) will be deemed to be paid in part satisfaction of the Principal's obligations to pay pursuant to clause 17. 33 WORKING HOURS (a) If the working hours and working days on the Site are not stated elsewhere in the Contract, they shall be as notified by the Contractor to the Principal before commencement of the Services on the Site. (b) The working hours shall not be varied without the Principal's prior written approval, except when, in the interests of safety of persons or property, the Contractor finds it necessary to perform the Services otherwise, whereupon the Contractor shall give the Principal written notice of those circumstances as early as possible. 34 SUSPENSION 34.1 PRINCIPAL'S SUSPENSION The Principal's Representative may direct the Contractor to suspend the performance of the whole or part of the Services for such time as the Principal's Representative thinks fit, if the Principal's Representative is of the opinion that it is necessary: (a) because of an act, default or omission of: PAGE 49 (1) the Principal or its employees, consultants, agents or other contractors (not being employed by the Contractor); or (2) the Contractor, a subcontractor or either's employees or agents; (b) for the protection or safety of any person or property; (c) to comply with a court order; or (d) for the convenience of the Principal. 34.2 CONTRACTOR'S SUSPENSION (a) If the Contractor wishes to suspend the performance of the whole or part of the Services, otherwise than pursuant to clause 35.8, the Contractor must obtain the Principal's prior written approval. (b) The Principal may approve the suspension and may impose conditions of approval. 34.3 RECOMMENCEMENT (a) As soon as the Principal becomes aware that the reason for any suspension no longer exists, the Principal must direct the Contractor to recommence suspended Services as soon as practicable. (b) The Contractor may commence the Services suspended pursuant to clause 34.2 or 35.8 at any time after reasonable notice to the Principal. 34.4 COSTS OF SUSPENSION (a) The Contractor must bear all costs incurred by the Contractor in respect of, or arising out of, any suspension pursuant to clause 34.1(a)(2) and clause 34.2 and the Management Fee shall be adjusted on a pro rata daily basis to reflect the period of the suspension. (b) The Contractor must bear all costs incurred by the Contractor in respect of, or arising out of, any suspension pursuant to clauses 34.1(b) or (c) if the Contractor made the protection, safety or court order necessary and the Management Fee shall be adjusted on a pro rata daily basis to reflect the period of the suspension. (c) Without limiting any other rights of the Principal under the Contract, in respect of a suspension referred to in clauses 34.4(a) or 34.4(b), the Contractor must reimburse the Principal for all costs incurred by the Principal that would not have been incurred but for the suspension. (d) In the event of any other suspension (other than as referred to in clauses 34.4(a) or (b)), if the Contractor incurs more or less cost than otherwise would have been incurred: (1) the difference shall be assessed by the Principal's Representative and shall be deemed to constitute a Variation and the relevant Annual Operating Budget shall be amended accordingly; and (2) if the suspension occurs prior to the Date of Practical Completion, the Management Fee shall be assessed by the Principal's Representative and adjusted to be the lesser of: PAGE 50 (A) US$[deleted for confidentiality] per month; and (B) the amount reasonably assessed by the Principal's Representative. 35 DEFAULT OR INSOLVENCY 35.1 PRESERVATION OF OTHER RIGHTS If a party breaches (including repudiates) the Contract, nothing in this clause prejudices the right of the other party to recover damages or exercise any other right or remedy. 35.2 CONTRACTOR'S DEFAULT (a) If the Contractor commits a substantial breach of the Contract, the Principal may, by hand or by registered post, give the Contractor a written notice requiring the Contractor to rectify the breach. (b) Substantial breaches include, but are not limited to: (1) failing to: (A) provide Performance Security or the Deed of Guarantee; (B) provide evidence of insurance; (C) comply with a Direction of the Principal pursuant to clause 8.2; or (D) use the Materials and Equipment required by the Contract; (2) wrongful suspension of Services; (3) in respect of clause 17.2(d), knowingly providing documentary evidence containing an untrue statement; (4) failing to meet any Key Performance Indicator or any Minimum Performance Level for a period of 6 consecutive months; and (5) breach of an express term of the Contract. 35.3 PRINCIPAL'S NOTICE TO RECTIFY A notice under clause 35.2 must: (a) state that it is a notice under clause 35.2 ; (b) specify the alleged substantial breach; and (c) specify a reasonable date and time by which the Contractor must rectify the breach (which must not be less than 7 clear days after the notice is received by the Contractor). 35.4 PRINCIPAL'S RIGHTS If the Contractor fails to rectify the breach by the stated date and time, the Principal may by written notice to the Contractor: PAGE 51 (a) take out of the Contractor's hands the whole or part of the Services to be performed and suspend payment of moneys due and payable; (b) exercise its rights in respect of the Performance Security or the Deed of Guarantee; (c) terminate the Contract by a further written notice. 35.5 TAKE OUT (a) The Principal must perform the Services taken out of the Contractor's hands and may: (1) use Materials and Equipment and other things intended for the Services; and (2) without payment of compensation to the Contractor: (A) take possession of, and use such of the Materials and Equipment and other things on or in the vicinity of the Site as were used by the Contractor; and (B) contract with such of the Contractor's subcontractors and consultants, as are reasonably required by the Principal to facilitate performance of the Services. (b) If the Principal takes possession of Materials and Equipment for which the Principal has not reimbursed the Contractor, the Principal shall maintain them and, on completion of the Principal performing the Services, shall return such of them as are surplus or reimburse the Contractor for the relevant costs. (c) The Principal shall keep records of the cost of performing the Services. 35.6 PRINCIPAL'S DEFAULT (a) If the Principal commits a substantial breach of the Contract, the Contractor may, by hand or by registered post, give the Principal a written notice to rectify. (b) Substantial breaches include, but are not limited to, failing to make a payment due and payable which is not the subject of a Dispute and which is due under the contract in accordance with the Contract. 35.7 CONTRACTOR'S NOTICE TO RECTIFY A notice given under clause 35.6 must state: (a) that it is a notice under clause 35.6; (b) the alleged substantial breach; and (c) the date and time by which the Principal must rectify the breach (which shall not be less than 7 clear days after the notice is received by the Principal). PAGE 52 35.8 CONTRACTOR'S RIGHTS (a) If the Principal fails to rectify the breach by the stated date and time, the Contractor may, by written notice to the Principal, suspend the whole or any part of the Services. (b) The Contractor may by written notice to the Principal remove the suspension if the Principal remedies the breach. (c) The Contractor may, by written notice to the Principal, terminate the Contract, if within 28 days of the date of suspension under this clause, the Principal fails: (1) to remedy the breach; or (2) if the breach is not capable of remedy, to make other arrangements to the reasonable satisfaction of the Contractor. (d) The Contractor may also be entitled to damages suffered by reason of the suspension. 35.9 TERMINATION If the Contract is terminated under clause 35.4(b) or 35.8, the parties' remedies, rights and liabilities shall be the same as they would have been under the law governing the Contract had the defaulting party repudiated the Contract and the other party elected to treat the Contract as at an end and recover damages. 35.10 INSOLVENCY (a) If the Contractor commits an Insolvency Event, the Principal may, without giving a notice to rectify, exercise the rights under clause 35.4. (b) If the Principal commits an Insolvency Event, the Contractor may, without giving a notice to rectify, exercise the rights under clause 35.8. (c) The rights and remedies given by this clause 35.10 are additional to any other rights and remedies and may be exercised even though that there has been no breach of the Contract. 35.11 TERMINATION FOR CONVENIENCE (a) Either party may terminate the Contract for any reason at any time by giving not less than 6 months written notice to the other party and termination will become effective at the end of that notice period. (b) If the Principal gives a written notice to the Contractor under this clause 35.11 then the Principal shall, within 14 days after the date on which the termination becomes effective, pay the Contractor one of the following amounts (as applicable): (1) [deleted for confidentiality]. 35.12 EMPLOYMENT OF PERSONNEL (a) For the duration of this Contract and, in the event of termination under clause 35.11 during the Initial Term, for a period of one year after that termination, the Principal shall not directly or indirectly employ or PAGE 53 otherwise engage the Contractor's personnel who were at the time of termination involved in the operation of the Facility. (b) For the duration of this Contract and, in the event of termination under clause 35.11 during the Initial Term, for a period of one year after that termination, the Contractor shall not directly or indirectly employ or otherwise engage the Principal's personnel who were at the time of termination involved in the operation of the Facility. 36 TERMINATION PLAN 36.1 GENERAL The Contractor acknowledges that the Services include the preparation of a fully detailed and effective plan providing for all relevant services (including the services listed in clause 36.2) to be provided by the Contractor to the Principal: (a) on the expiry or termination of the Contract under clauses 3 or 35; or (b) where the Principal takes the Services out of the hands of the Contractor under clause 35.5, to ensure the efficient and effective transition of the Services from the Contractor to the Principal, or the Principal's nominee, during a period of not more than 4 months and without any adverse impact on the Facility, the Refining Process or the Product (TERMINATION PLAN). 36.2 TERMINATION PLAN TO BE APPROVED AND UPDATED (a) The services to be provided by the Contractor to the Principal and specified in the Termination Plan must include: (1) all appropriate and required training; (2) delivery of Materials and Equipment in accordance with clause 22.5; (3) any other Materials and Equipment as determined by the Principal as being required for the services to be provided by the Contractor; (4) delivery by the Contractor to the Principal of resources, plant and equipment used in respect of the Services; (5) delivery by the Contractor of Deeds of Novation in accordance with clause 24.2; and (6) cooperation by the Contractor with the Principal and/or the Principal's nominee. (b) The Contractor must: (1) within 6 months after the Commencement Date, submit a draft Termination Plan to the Principal; (2) during the period of 2 months after submitting the draft Termination Plan under clause 36.2(b)(1), meet with the Principal as often as may reasonably be required by the Principal to review PAGE 54 the draft Termination Plan and receive comments from the Principal on the draft Termination Plan; (3) within 3 months after submitting the draft Termination Plan under clause 36.2(b)(1), submit a final Termination Plan to the Principal which takes into account any issues identified by the parties (FINAL TERMINATION PLAN); and (4) within 7 days of each anniversary of the submission of the Final Termination Plan: (A) if reasonably required, submit an updated and improved Termination Plan to the Principal; or (B) confirm in writing to the Principal that the most recently submitted Termination Plan does not reasonably require updating. 36.3 WITHHOLDING PAYMENT If the Contractor fails to comply with the requirements of this clause 36 then, until the Contractor complies with the requirements of this clause 36, Management Fees otherwise due to the Contractor may be withheld by the Principal. 36.4 IMPLEMENTATION OF TERMINATION PLAN If: (a) the Principal does not give the Contractor the notice referred to in clause 3.2 that the Term of the Contract will not be extended; (b) either party gives notice of termination under clause 35; (c) the Contract expires or is otherwise terminated; or (d) the Principal takes the Services out of the hands of the Contractor under clause 35.5, then, subject to any Direction by the Principal to the contrary, the Contractor must: (e) if clause 36.4(a) or (b) applies, commence the implementation of the most recently submitted Termination Plan so as to ensure that the Termination Plan is fully implemented by the date the Contract will expire or be terminated; (f) if clauses 36.4(c) or (d) applies, immediately commence the implementation of the most recently submitted Termination Plan; and (g) in any event, continue to implement the most recently submitted Termination Plan until all activities required by the Termination Plan have been performed by the Contractor. 37 SET-OFFS BY THE PRINCIPAL (a) The Principal may set-off or deduct from money due to the Contractor any money due from the Contractor to the Principal (including Rebate Amounts) arising under or in connection with the Contract or the Services, PAGE 55 save that the amount that may be set-off or deducted pursuant to this clause shall at no time exceed an amount equal to 10% of the Annual Operating Budget for the Operating Year. (b) The Principal's entitlement to set-off or deduct is not affected by the existence of a Dispute, including any dispute as to the Principal's right to set-off or deduct, or as to the amount which the Principal has set-off or deducted or intends to set-off or deduct. 38 NOTIFICATION OF CLAIMS 38.1 NOTICE OF CLAIM If the Contractor wishes to make a Claim it must give the Principal: (a) a written notice within 14 days of the Contractor becoming aware of the Claim arising which states: (1) that the Contractor proposes to make a Claim; and (2) identifying the general nature, basis and extent of the Claim; and (b) a written submission, within 28 days of giving the written notice under clause 38.1(a), which must include: (1) the basis for the Claim, including whether based on a term of the Contract or otherwise and, if based on a term of the Contract, clearly identifying the specific term; (2) the facts relied on in support of the Claim, in sufficient detail to permit critical assessment, investigation and/or verification; and (3) details of the amount claimed and itemisation of how the amount has been calculated. 38.2 UPDATING NOTICE OF CLAIM The Contractor must continue to update the information required by clause 38.1(b) every 28 days after the written submission under clause 38.1(b) was submitted until no further update is required. 38.3 TIME BAR If the Contractor fails to comply in all respects with clause 38.1 in respect of a Claim then: (a) the Principal shall not be liable (so far as it is possible to exclude liability) in respect of the Claim; (b) the Contractor is absolutely barred from making the Claim; and (c) the Contractor shall be deemed to have waived, and shall have no entitlement in respect of the Claim. PAGE 56 39 DISPUTE RESOLUTION 39.1 NOTICE OF DISPUTE Subject to clause 38.3, in the event of a Dispute, either party shall deliver a written notice to the other party (NOTICE OF DISPUTE) which: (a) states that it is a Notice of Dispute under this clause of the Contract; (b) identifies the Dispute; (c) states the alleged relevant facts relied on; (d) identifies any documents common to the parties which are relied on and refers to any relevant parts; (e) identifies and encloses a copy of any other document relied on and refers to any relevant parts; and (f) states the terms on which it is alleged the Dispute should be resolved. 39.2 MORE THAN ONE DISPUTE A Notice of Dispute may deal with more than one Dispute. 39.3 RESPONSE Within 14 days after a Notice of Dispute has been delivered by a party, the other party must deliver a written response (RESPONSE) which attempts to narrow and clarify the scope of the relevant Dispute and to explain the position of the responding party. A Response should attempt to: (a) identify areas of agreement; (b) identify any relevant documents not referred to in the Notice of Dispute; (c) refer to any relevant parts of documents not referred to in the Notice of Dispute; and (d) identify and enclose a copy of any document referred to in the Response which is not common to the parties. 39.4 WITHOUT PREJUDICE MEETING (a) If a Dispute referred to in a Notice of Dispute has not been wholly resolved within 28 days of delivery of the relevant Notice of Dispute, the party which delivered the Notice of Dispute shall give the other party not less than 7 days and not more than 14 days notice of the time (which shall be within normal business hours) and place (which shall be at or reasonably proximate to the place of the Services or otherwise at a place reasonably convenient to both parties) for a without prejudice meeting. (b) At a without prejudice meeting convened pursuant to this clause, both parties must use their best endeavours to: (1) settle the whole of the Dispute; or (2) settle so much of the Dispute as may be possible; and PAGE 57 (3) to the extent that the Dispute is not wholly resolved: (A) identify any relevant facts, documents and parts of documents which are agreed; (B) identify relevant facts, documents or issues which are of genuine disagreement; (C) agree an appropriate process by which to resolve the matters of disagreement; and (D) if appropriate, agree to extend the period after which either party may take action under clause 39.5. (c) Communications between the parties during a without prejudice meeting, whether oral or written, shall not be admissible as evidence in any legal process unless in writing and signed by both parties. 39.5 ARBITRATION Subject to clause 39.8: (a) If a Dispute does or may involve the EPC Contractor, then the Principal shall, within 35 days after delivery of the relevant Notice of Dispute, give written notice to the Contractor to this effect, in which case the parties acknowledge and agree that the Dispute shall, if not resolved, be referred to arbitration at Brisbane, Queensland before an arbitrator who shall be agreed by the parties or, if no agreement is reached within 14 days, by an arbitrator appointed by the President for the time being of the Australian Dispute Centre. (b) The arbitration shall be conducted in accordance with the UNCITRAL Model Law on International Commercial Arbitration current as at the date of execution of the EPC Contract. 39.6 LITIGATION Subject to clause 39.8, if the Principal does not give a written notice to the Contractor in accordance with clause 39.5, then either party may issue proceedings in respect of the Dispute. 39.7 CONTINUED PERFORMANCE OF CONTRACT Despite the existence of a Dispute, the parties must continue to perform their obligations under the Contract. 39.8 CONDITION PRECEDENT TO ARBITRATION AND LITIGATION It shall be a condition precedent to either party commencing litigation in respect of a Dispute, or the Principal referring a Dispute to arbitration, that: (a) a Notice of Dispute has been delivered in relation to the Dispute; and (b) the party has complied, to the extent reasonably possible, with its obligations under clause 39.4. PAGE 58 39.9 INJUNCTIVE OR URGENT RELIEF Nothing in this clause 39 prejudices either party's right to institute proceedings in respect of a Dispute where the only relief sought is injunctive or other urgent interlocutory relief. 40 GENERAL 40.1 COSTS AND EXPENSES Each party must pay its own legal costs and expenses in respect of the negotiation, preparation, completion and stamping of the Contract. 40.2 SERVICE OF NOTICES (a) Any notice or other communication including, but not limited to, any request, demand, consent or approval, to or by a party to the Contract: (1) must be legible and in writing and in English addressed as shown below: (A) if to the Principal: Address: Level 6, Defens Haus, Port Moresby, Papua New Guinea; Attention: Managing Director ; Facsimile: + 67 5 320 2601; (B) if to the Contractor: Address: 12th Floor, Deloitte Tower, Port Moresby, National Capital District, Papua New Guinea; Attention: General Manager; Facsimile: To be advised, or as specified by any party to the sender by notice; (2) where the sender is a company, must be signed by an authorised representative or under the common seal of the sender; (3) is regarded as being given by the sender and received by the addressee: (A) if by delivery in person, when delivered to the addressee; (B) if by post, 5 Business Days from and including the date of postage; or (C) if by facsimile transmission, whether or not legibly received, when received by the addressee, but if the delivery or receipt is on a day which is not a Business Day or is after 4.00 pm (addressee's time) it is regarded as received at 9.00 am on the following Business Day; and (4) can be relied on by the addressee and the addressee is not liable to another person for any consequences of that reliance if the PAGE 59 addressee believes it to be genuine, correct and authorised by the sender. (b) A facsimile transmission is regarded as legible unless the addressee telephones the sender within 24 hours after transmission is received or regarded as received under clause 40.2(a)(3) and informs the sender that it is not legible. (c) In this clause 40.2, a reference to an addressee includes a reference to an addressee's officers, agents or employees. 40.3 WAIVER OF CONDITIONS (a) Waiver of any right arising from a breach of this Contract or of any right, power, authority, discretion or remedy arising upon default under this Contract must be in writing and signed by the party granting the waiver. (b) A failure or delay in exercise, or partial exercise, of: (1) a right arising from a breach of this Contract; or (2) a right, power, authority, discretion or remedy created or arising upon default under this Contract, does not result in a waiver of that right, power, authority, discretion or remedy. (c) A party is not entitled to rely on a delay in the exercise or non-exercise of a right, power, authority, discretion or remedy arising from a breach of this Contract or on a default under this Contract as constituting a waiver of that right, power, authority, discretion or remedy. (d) A party may not rely on any conduct of another party as a defence to exercise of a right, power, authority, discretion or remedy by that other party. (e) This clause may not itself be waived except by writing. 40.4 PROHIBITION AND ENFORCEABILITY (a) Any provision of, or the application of any provision of, the Contract or any right, power, authority, discretion or remedy which is prohibited in any jurisdiction is, in that jurisdiction, ineffective only to the extent of that prohibition. (b) Any provision of, or the application of any provision of, the Contract which is void, voidable, illegal or unenforceable in any jurisdiction does not affect the validity, legality or enforceability of that provision in another jurisdiction or of the remaining provisions in that or another jurisdiction. (c) If any provision of this Contract is deemed to be or become void, voidable or enforceable, it shall be read down, or if incapable of being read down, severed and the remaining provisions of this Contract shall continue to have full force and effect. 40.5 VARIATION A variation of any term or amendment of the Contract must be in writing and signed by the parties. PAGE 60 40.6 CUMULATIVE RIGHTS The rights, powers, authorities, discretions and remedies arising out of or under the Contract are cumulative and do not exclude any other right, power, authority, discretion or remedy of any party. 40.7 COUNTERPARTS (a) The Contract may be executed in any number of counterparts. (b) All counterparts, taken together, constitute one instrument. (c) A party may execute the Contract by signing any counterpart. 40.8 TO THE EXTENT NOT EXCLUDED BY LAW The rights, duties and remedies granted or imposed under the provisions of the Contract operate to the extent not excluded by law. 40.9 ATTORNEYS Each of the attorneys executing the Contract states that the attorney has no notice of the revocation of the power of attorney appointing that attorney. 40.10 SURVIVAL OF OBLIGATIONS (a) If the Contract is terminated then, except where the Contract provides otherwise: (1) the parties are released from their obligations to continue to perform the Contract except the obligations which are expressed to or, by their nature, survive termination; (2) each party retains the rights and Claims it has against the other party for any past breach of the Contract; and (3) the provisions of the Contract survive termination to the extent necessary to give effect to clause 40.10(a)(1). (b) The indemnities in the Contract are: (1) continuing, separate and independent obligations of the parties from their other obligations and survive termination of the Contract; and (2) absolute and unconditional and unaffected by anything that might have the effect of prejudicing, releasing, discharging or affecting in any other way the liability of the party giving the indemnity. 40.11 WARRANTIES (a) Each party represents and warrants for the benefit of the other party for the Term that: (1) it has full power and authority to execute the Contract and to perform its obligations under the Contract; (2) the Contract has been duly executed by it; PAGE 61 (3) the obligations undertaken by it and set out in the Contract are enforceable against it in accordance with their terms; (4) it subsists and is properly constituted; and (5) the execution and delivery of the Contract and the performance of its obligations under the Contract do not: (A) violate its constituent documents or any law, regulation, treaty, judgement, ruling, order or decree of any court or official directive which is binding on it; (B) violate any other document or agreement to which it is expressed to be a party or which is binding on it or any of its assets; or (C) cause a limitation on its powers or the powers of its directors or other officers to be exceeded. (b) The Contractor: (1) warrants that all information and reports provided to the Principal: (A) are true and accurate in all material respects and not misleading, whether by omission or otherwise; and (B) contains forecasts and opinions all of which have been made or formed after due and careful consideration on the part of its relevant officers based on the best information available to it and are fair and reasonable; and (2) acknowledges that the Principal has relied on such information and reports and any other representations made by the Contractor in making its decision to enter into the Contract. 40.12 ENTIRE AGREEMENT (a) The Contract supersedes all previous agreements in respect of its subject matter and embodies the entire agreement between the parties. (b) Subject to the express warranties contained in this Contract, no reliance shall be placed by either party on any representation, promise or other inducement made or given or alleged to have been made or given by the other party prior to the Execution Date. (c) Information or documents of any nature made available to the Contractor by the Principal do not constitute a warranty or representation of any kind by the Principal. The Contractor is not entitled to make any Claim and there shall be no increase in the Management Fee or the Rates and no amendment to the Annual Operating Budgets on account of any alleged statement, warranty, representation, information or documentary material made or provided by the Principal. 40.13 GOVERNING LAW AND JURISDICTION The Contract is governed by the laws of Queensland. Subject to clause 39.5, the parties irrevocably submit to the exclusive jurisdiction of the courts of Queensland. This clause 40.13 survives termination of the Contract. PAGE 62 40.14 VAT (a) To the extent that any supply made under or in connection with this deed is a taxable supply, the recipient must pay, in addition to the consideration to be provided under the Contract for that supply (unless it expressly includes VAT) an amount (ADDITIONAL AMOUNT) equal to the amount of that consideration (or its VAT exclusive market value) multiplied by the rate at which VAT is imposed in respect of the supply. (b) The term TAXABLE SUPPLY has the same meaning as in the VAT Act. (c) If either party is entitled under the Contract to be reimbursed or indemnified by the other party for a cost or expense incurred in connection with the Contract, the reimbursement or indemnity payment must not include any VAT component of the cost or expense to the extent that the cost or expense is the consideration for a creditable acquisition made by the party being reimbursed or indemnified, or by its representative member. 40.15 WORKERS' RIGHTS (a) The Contractor undertakes not to take any action to prevent its employees from lawfully exercising their right of association and their right to organise and bargain collectively and to observe applicable laws relating to minimum wages, hours of work and occupational health and safety, and not use forced labour. In addition, the Contractor agrees that: (1) it will not employ any person under the age of 14 years and that it will not employ any person under the age of 16 years in the performance of any hazardous activity; and (2) every person employed has the right to remove himself or herself from dangerous work situations without jeopardising his or her continued employment in connection with the Facility and the Services, (the WORKER RIGHTS REQUIREMENTS); and (3) it will cause its subcontractors performing work in the Facility and as part of the Services to comply with the Worker Rights Requirements. (b) The Principal shall use commercially reasonable efforts to monitor the compliance of the Contractor and its subcontractors with the Worker Rights Requirements. In the event information concerning non-compliance or potential non-compliance with the Worker Rights Requirements with respect to employees of the Contractor or its subcontractors comes to the attention of the Principal's Representative, the Principal shall give prompt notice thereof to the Financier and shall investigate the circumstances of such non-compliance or potential non-compliance. (c) In the event of non-compliance, the Principal shall, or, if applicable, shall cause the relevant company to: (1) cure such non-compliance or use its best efforts to cause the relevant company to cure, or to cause its subcontractor to cure, PAGE 63 such non-compliance, in either case to the satisfaction of the Financier; and (2) terminate this Contract or cause the Contractor to terminate the relevant subcontract, unless such non-compliance is cured to the satisfaction of the Financier within 90 days after such notice or notice from the Financier to such company, whichever first occurs. (d) Notwithstanding the foregoing, neither the Principal nor the Contractor is responsible for non-compliance with the Worker Rights Requirements resulting from the actions of a government. PAGE 64 EXECUTED AS AN AGREEMENT: THE COMMON SEAL of INTEROIL LIMITED is fixed to this document in the presence of: Secretary/Director Director Name (please print) Name (please print) THE COMMON SEAL of PETROFAC NIUGINI LIMITED is fixed to this document in the presence of: Secretary/Director Director Name (please print) Name (please print) PAGE 65 EX-99.24 19 h19854exv99w24.txt SHARE SALE AGREEMENT EXHIBIT 24 MALLESONS STEPHEN JAQUES Share Sale Agreement Dated Gas Tank Nederland B.V. ("SELLER") InterOil Corporation ("GUARANTOR") S.P.I. Distribution Limited ("BUYER") BP Papua New Guinea Limited ("COMPANY") MALLESONS STEPHEN JAQUES Level 28 Rialto 525 Collins Street Melbourne Vic 3000 Australia T +61 3 9643 4000 F +61 3 9643 5999 DX 101 Melbourne www.mallesons.com SHARE SALE AGREEMENT Contents DETAILS 1 GENERAL TERMS 2 - ------------------------------------------------------------------------------------------------- 1 SALE AND PURCHASE OF SHARES 2 1.1 Sale and purchase 2 1.2 Free from Encumbrance 2 - ------------------------------------------------------------------------------------------------- 2 CONSIDERATION 2 2.1 Consideration 2 2.2 Adjustments 2 2.3 Other payments 2 - ------------------------------------------------------------------------------------------------- 3 CONDITIONS PRECEDENT [TO BE FINALISED FOLLOWING FINALISATION OF FOREIGN LAW OPINIONS] 3 3.1 Conditions Precedent 3 3.2 Reasonable endeavours 3 3.3 Termination by either party 4 3.4 Waiver of certain conditions precedent 4 3.5 Progress 4 3.6 Effect of termination 4 - ------------------------------------------------------------------------------------------------- 4 TRANSFER DATE 4 4.1 Time and place of Completion 4 4.2 Items to be delivered on the Transfer Date by Seller 5 4.3 Items to be delivered on the Transfer Date by Buyer 5 4.4 Payment on the Transfer Date 6 - ------------------------------------------------------------------------------------------------- 5 PAYMENT OF CONSIDERATION AND OTHER AMOUNTS 6 5.1 Payment on Transfer Date 6 5.2 Payment of Second Instalment of Consideration 6 5.3 Early payment events 6 5.4 Adjustment Statement 7 5.5 Contents of Adjustment Statement 7 5.6 Preparation of Adjustment Statement 7 5.7 Payment of Adjustment Amount 8 5.8 Payment of 2003 Profits dividend 8 5.9 Representation and warranty in relation to 2003 dividend 8 5.10 Payment of 2004 profits dividend 8 5.11 Alternative payment mechanism 8 5.12 Netting of alternative payment and 2003 Profits dividend 9 5.13 Method of payment 9 5.14 Conversion of certain payments 9 5.15 Promissory Note 10 - ------------------------------------------------------------------------------------------------- 6 CONDUCT OF BUSINESS PENDING TRANSFER DATE 10 6.1 Restrictions on Seller 10 6.2 Repayments and releases (pre-Transfer Date) 11 6.3 Repayments and releases (post-Transfer Date) 11
(C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 i - ------------------------------------------------------------------------------------------------- 7 CONDUCT OF BUSINESS AFTER TRANSFER DATE 11 7.1 Prohibition on use of Seller's name 11 7.2 Signage 11 7.3 Exclusion of directors and officers from liability 12 7.4 Disposals by Buyer 12 7.5 Disposals by Company 12 7.6 Acknowledgment by Buyer 13 7.7 Acknowledgment by Company 13 7.8 Damages not an adequate remedy 13 - ------------------------------------------------------------------------------------------------- 8 WARRANTIES 13 8.1 Warranties true and correct and not misleading 13 8.2 Matters Disclosed 13 8.3 Buyer's acknowledgement 14 8.4 Reduction in Consideration 14 8.5 Claims procedure 14 8.6 Time limit for Seller Warranty claims 15 8.7 Time limit for Tax Warranty claims 15 8.8 Indemnity 15 8.9 Threshold for Seller Warranty claims 15 8.10 Insured claim or loss 16 8.11 Act or omission after the Transfer Date 16 8.12 Later recoveries 16 8.13 Set-off 16 8.14 Further disclosure against certain Seller Warranties 16 8.15 Rescission 17 8.16 Seller Warranty regarding Disclosed Tax Dispute 17 8.17 Material Contracts ERROR! BOOKMARK NOT DEFINED. - ------------------------------------------------------------------------------------------------- 9 ENVIRONMENTAL RISK 17 9.1 Purpose of this clause 17 9.2 Environmental Site Assessment 17 9.3 Force Majeure Event 18 9.4 Obligation of Seller to remediate Sites to Agreed Standards (Identified Historic Contamination) 18 9.5 Decision not to remediate (Identified Historic Contamination) 18 9.6 Remediation Report (Identified Historic Contamination) 19 9.7 Completion of remediation works (Identified Historic Contamination) 19 9.8 Relevant Events (Remediation Works) 20 9.9 Seller's indemnity (Identified Historic Contamination) 21 9.10 Seller's indemnity (Unknown Historic Contamination) 21 9.11 Relevant Events (indemnities) 21 9.12 Seller's obligation to remediate Sites to Agreed Standards (Unknown Historic Contamination) 21 9.13 Buyer's indemnity 22 9.14 Failure to pay by Buyer 22 9.15 Insolvency of Buyer or Company 23 9.16 Accounting for subsequent recoveries 23 9.17 Claims procedure 23 9.18 Set-off 24 9.19 Disputes 24
(C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 ii - ------------------------------------------------------------------------------------------------- 10 LIMIT OF LIABILITY 24 10.1 General 24 10.2 Exclusions 24 - ------------------------------------------------------------------------------------------------- 11 SUPERANNUATION 25 12 COSTS AND STAMP DUTY 25 12.1 Legal costs 25 12.2 Stamp duty 25 - ------------------------------------------------------------------------------------------------- 13 NOTICES 25 13.1 Form 25 13.2 Delivery 25 13.3 When effective 26 13.4 Receipt - postal 26 13.5 Receipt - fax 26 13.6 Receipt - general 26 - ------------------------------------------------------------------------------------------------- 14 CONFIDENTIAL INFORMATION 26 14.1 Disclosure of Confidential Information 26 14.2 Disclosure by Buyer of Confidential Information 26 14.3 Use of Confidential Information 27 14.4 Delivery of materials 27 14.5 Use and disclosure of Business Information by Buyer after the Transfer Date 27 14.6 Privacy 27 14.7 Application of clause 14.6 28 14.8 Use of Personal Information by Seller after the Transfer Date 28 14.9 Survival of termination 28 - ------------------------------------------------------------------------------------------------- 15 ASSIGNMENT 28 16 MISCELLANEOUS 28 16.1 Discretion in exercising rights 28 16.2 Partial exercising of rights 28 16.3 No liability for Loss 28 16.4 Approvals and consents 28 16.5 Conflict of interest 29 16.6 Remedies cumulative 29 16.7 Rights and obligations are unaffected 29 16.8 Variation and waiver 29 16.9 No merger 29 16.10 Indemnities 29 16.11 Further steps 29 16.12 Time of the essence 29 16.13 Entire agreement 30 16.14 Construction 30 16.15 Knowledge and belief 30 16.16 Publicity 30 16.17 Interest on overdue amounts 30 - ------------------------------------------------------------------------------------------------- 17 GUARANTEE 30 17.1 Acknowledgment 30
(C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 iii 17.2 Guarantee 31 17.3 Indemnity 31 17.4 Interest on Overdue Amounts 31 17.5 Obligations Absolute and Unconditional 31 17.6 Continuing Obligations and Non-Avoidance 32 17.7 Principal Obligation 32 17.8 Suspension of Guarantor's Rights 32 17.9 Gross-up 33 17.10 Separation of Guarantee 33 - ------------------------------------------------------------------------------------------------- 18 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 33 18.1 Governing law 33 18.2 Serving documents 34 18.3 Appointment of Seller Process Agent 34 18.4 Appointment of IO Process Agent 34 - ------------------------------------------------------------------------------------------------- 19 RESTRAINT 34 19.1 Restraint 34 19.2 Deletion of restrictions 34 19.3 Severance 35 19.4 Shares in a public company 35 19.5 Acknowledgment 35 19.6 Expiry of Restraint 35 - ------------------------------------------------------------------------------------------------- 20 COUNTERPARTS 35 21 SUPERVENING LEGISLATION 35 22 INTERPRETATION 36 22.1 Definitions 36 22.2 References to certain general terms 46 22.3 Headings 47 22.4 Inconsistent agreements 47 SCHEDULE 1- WARRANTIES 48 Part A 48 - ------------------------------------------------------------------------------------------------- SELLER WARRANTIES 48 Part B - 60 - ------------------------------------------------------------------------------------------------- BUYER WARRANTIES 60 - ------------------------------------------------------------------------------------------------- 1 INCORPORATION 60 2 POWER AND AUTHORITY 60 2.1 Authority 60 2.2 Power 60 2.3 Binding obligations 60 2.4 No impediment 60 - ------------------------------------------------------------------------------------------------- 3 SOLVENCY AND ENCUMBRANCES 60 3.1 Not Insolvent 60 3.2 Solvency 60
(C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 iv - ------------------------------------------------------------------------------------------------- 4 LITIGATION 60 5 CONSENTS 61 6 IMPROPER TRANSACTIONS 61 Part C 62 - ------------------------------------------------------------------------------------------------- GUARANTOR WARRANTIES 62 - ------------------------------------------------------------------------------------------------- 1 INCORPORATION 62 2 POWER AND AUTHORITY 62 2.1 Authority 62 2.2 Power 62 2.3 Binding obligations 62 2.4 No impediment 62 - ------------------------------------------------------------------------------------------------- 3 SOLVENCY AND ENCUMBRANCES 62 3.1 Not Insolvent 62 3.2 Solvency 62 - ------------------------------------------------------------------------------------------------- 4 LITIGATION 62 5 CONSENTS 63 SCHEDULE 2- SHARES 64 SCHEDULE 3 - LAST ACCOUNTS 65 SCHEDULE 4 - FORM OF DIRECTORS RELEASE (COMPANY) 66 - ------------------------------------------------------------------------------------------------- 1 RELEASE OF OFFICER 67 2 ACKNOWLEDGEMENT 67 3 SEVERABILITY 67 4 ENTIRE AGREEMENT 67 5 GENERAL 68 5.1 Partial exercising of rights 68 5.2 Remedies cumulative 68 5.3 Rights and obligations are unaffected 68 5.4 Variation and waiver 68 5.5 Costs 68 5.6 Supervening legislation 68 5.7 Counterparts 68 - ------------------------------------------------------------------------------------------------- 6 GOVERNING LAW 68 6.1 Governing law 68 6.2 Jurisdiction 68 6.3 Serving documents 69
(C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 v - ------------------------------------------------------------------------------------------------- 7 INTERPRETATION 69 7.1 Definitions 69 SCHEDULE 5 - ADJUSTMENT STATEMENT 70 SCHEDULE 6 - BANK ACCOUNTS AND SIGNATORIES 73 SCHEDULE 7 - GENERAL DISCLOSURES 74 - ------------------------------------------------------------------------------------------------- 1. GENERAL DISCLOSURES 74 2. SPECIFIC DISCLOSURES 74 5.6 Share option schemes 75 7.3 Guarantees and other obligations 75 10 Premises 75 11 Material Contracts 75 12.1 Current Actions 76 17.2 Tax dispute 76 17.4 Deductions 76 17.12 Tax audit 77 SCHEDULE 8 - DIVIDEND RESOLUTIONS - CLAUSES 5.8 AND 5.10 78 SCHEDULE 9 - SERVICES AGREEMENT (CLAUSE 3.1(A)) 79 SCHEDULE 10 - SHARE SECURITY (CLAUSE 3.1(B)) 80 SCHEDULE 11 - NOTICES (CLAUSE 13.2) 81 SCHEDULE 12 - PROMISSORY NOTE 83 SCHEDULE 13 - ENFORCEABILITY OPINION (CLAUSE 4.3(E) 84 SCHEDULE 14 - DISPUTE RESOLUTION (CLAUSE 9.19) 85 SCHEDULE 15 - PREMISES - DEFINITION OF "PREMISES" 88 SCHEDULE 17 - SITES - DEFINITION OF "SITES" 95 SCHEDULE 18 - LETTER OF COMFORT - FORM OF LETTER OF COMFORT 99 SCHEDULE 19 - DATA ROOM INDEX 100 SIGNING PAGE 102
(C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 vi SHARE SALE AGREEMENT Details [ ] INTERPRETATION - definitions are at the end of the General terms - -------------------------------------------------------------------------------- PARTIES SELLER, BUYER, GUARANTOR, COMPANY - -------------------------------------------------------------------------------- SELLER Name Gas Tank Nederland B.V. Incorporated in The Netherlands - -------------------------------------------------------------------------------- BUYER Name S.P.I. Distribution Limited Incorporated in The Bahamas - -------------------------------------------------------------------------------- GUARANTOR Name InterOil Corporation - -------------------------------------------------------------------------------- Incorporated in New Brunswick, Canada - -------------------------------------------------------------------------------- COMPANY Name BP Papua New Guinea Limited Incorporated in Papua New Guinea - -------------------------------------------------------------------------------- RECITALS A The Seller is the registered holder and beneficial owner of all the issued shares in the capital of the Company (the "SHARES") as set out in schedule 2. B The Seller has agreed to sell, and the Buyer has agreed to buy, the Shares on the terms of this agreement. - -------------------------------------------------------------------------------- GOVERNING LAW Queensland, Australia - -------------------------------------------------------------------------------- DATE OF AGREEMENT See signing page (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 1 SHARE SALE AGREEMENT General terms 1 SALE AND PURCHASE OF SHARES 1.1 SALE AND PURCHASE The Seller agrees to sell the Shares to the Buyer, and the Buyer agrees to buy the Shares from the Seller, on the terms and conditions of this agreement. 1.2 FREE FROM ENCUMBRANCE The Shares must be transferred free from any Encumbrance (other than the Share Securities) and with all rights, including dividend rights, attached or accruing to them on and from the Transfer Date, other than the dividends referred to in clauses 5.8 ("Payment of 2003 Profits dividend") and 5.10 ("Payment of 2004 profits dividend"). 2 CONSIDERATION 2.1 CONSIDERATION The total consideration payable is as follows: (a) the base purchase price, comprising: (i) the First Instalment, equal to $[deleted for confidentiality], payable on the Transfer Date; and (ii) the Second Instalment, equal to $[deleted for confidentiality] payable on the Date for Final Payment; and (b) the Working Capital Adjustment, calculated in accordance with clauses 5.4, 5.5, 5.6 and 5.7, payable on the Date for Final Payment, (together, the "CONSIDERATION"). 2.2 ADJUSTMENTS No adjustments to the Consideration shall apply except in accordance with clauses 5.4, 5.5, 5.6 and 5.7 and clause 8.4 ("Reduction in Consideration"). 2.3 OTHER PAYMENTS To avoid doubt, any payments made or required to be made under clause 5.1 ("Payment on Transfer Date"), clause 5.7 ("Payment of Adjustment Amount"), clause 5.8 ("Payment of 2003 profits dividend"), clause 5.10 ("Payment of 2004 profits dividend") and clause 5.11 ("Alternative payment mechanism"), do not affect the Buyer's obligation to pay the Consideration. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 2 3 CONDITIONS PRECEDENT 3.1 CONDITIONS PRECEDENT Completion is conditional on: (A) (SERVICES AGREEMENT) delivery to the Seller or its solicitors an original or certified copy of the Services Agreement, in the form of schedule 9 executed by each party thereto; (B) (SHARE SECURITY) delivery to the Seller or their solicitors the Share Security in a form registrable in the Bahamas and substantially in the form of schedule 10, executed by the Buyer; (C) (PNG APPROVALS (BUYER)) (i) the Buyer receiving written confirmation from the Investment Promotion Authority in Papua New Guinea that it will not refuse to re-certify the Company as a foreign enterprise as a consequence of a change in ownership of the Company; (ii) the Buyer having obtained all approvals required in respect of the Transaction Documents under the Central Banking Act (Foreign Exchange Regulations) (PNG); (D) (PNG APPROVALS (SHARE SECURITY)) all approvals required in respect of the Share Security under the Central Banking Act (Foreign Exchange Regulations) (PNG) having been obtained; (e) (ICCC APPROVALS):the Buyer having received a written clearance from the ICCC in respect of the acquisition under this agreement, under section 81 of the ICCC Act; (f) (MATERIAL CONTRACTS): the Buyer not giving notice to the Seller in writing within 30 days of the date of this agreement that the Material Contracts contain provisions which are likely to have a material adverse effect on the Business; and (g) (ENFORCEABILITY OPINIONS) delivery to the Seller or its solicitors enforceability opinions (satisfactory to the Seller and substantially in the form set out in Schedule 13) as to the obligations of the Buyer and the Guarantor under this agreement and other Transaction Documents from the Buyer's legal counsel in the jurisdiction of incorporation of each of the Buyer and the Guarantor. 3.2 REASONABLE ENDEAVOURS Each party must use its reasonable endeavours to obtain the fulfilment of the Conditions Precedent, including procuring performance by a third party. The parties must keep each other informed of any circumstances which may result in any Condition Precedent not being satisfied in accordance with its terms. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 3 3.3 TERMINATION BY EITHER PARTY If any of the Conditions Precedent are not fulfilled by the Sunset Date or any later date agreed by the Seller and the Buyer then, if the party who wishes to terminate this agreement has complied with clause 3.2 , this agreement may be terminated on or within 14 days of the Sunset Date by notice given by the Buyer or the Seller to the other of them. 3.4 WAIVER OF CERTAIN CONDITIONS PRECEDENT The Conditions Precedent: (a) in clause 3.1 (b), (d) and (g) are inserted for the benefit of the Seller and may be waived by the Seller in its absolute discretion by notice in writing to the Buyer; (b) in clause 3.1 (a) are inserted for the benefit of both parties and may only be waived with the agreement of both the Buyer and the Seller by notice in writing to each other; (c) in clause 3.1 (c) and clause 3.1(e) may not be waived by either party. 3.5 PROGRESS The Buyer must keep the Seller informed of progress in satisfying the Conditions Precedent in clause 3.1(c), 3.1(e), 3.1(f) and 3.1(g). Both parties must keep each other informed in satisfying the Conditions Precedent in clauses 3.1(a), 3.1(b) and 3.1(d). 3.6 EFFECT OF TERMINATION If this agreement is terminated under clause 3.3 then, in addition to any other rights, powers or remedies provided by law: (a) each party is released from its obligations to further perform the agreement other than in relation to clauses 12.1 ("Legal costs") and 14 ("Confidential information"); (b) each party retains the rights it has against any other party in respect of any breach or Claim that has arisen before termination; and (c) the Buyer must return to the Seller all documents and other materials in any medium in its possession, power or control which contain information relating to the Company. 4 TRANSFER DATE 4.1 TIME AND PLACE OF COMPLETION Completion will take place at 10.00am on the Transfer Date at the offices of solicitors for the Buyer in Port Moresby, Papua New Guinea, or any other time and place agreed between the Seller and the Buyer. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 4 4.2 ITEMS TO BE DELIVERED ON THE TRANSFER DATE BY SELLER At Completion, the Seller will give to the Buyer: (a) (TRANSFERS AND SHARE CERTIFICATES) executed transfers in favour of the Buyer (or as it may direct) of all the Shares, the share certificates for the Shares and any consents which the Buyer reasonably requires to obtain registration of those transfers; (b) (RECORDS AND COMMON SEAL) the Records and the common seals (if any) of the Company; (c) (BANK AUTHORITY) duly completed bank authorities directed to the bankers of the Company authorising the operation of each of its bank accounts by nominees of the Buyer and terminating the authority of each of the present signatories; (d) (RESIGNATIONS) written resignations of all of the current directors and the current secretary of the Company along with: (i) completed corporate forms required for such resignations; and (ii) an acknowledgment that they have no Claim for compensation for loss of office or otherwise against the Company; (e) (DIRECTORS RESOLUTION OF COMPANY) a certified copy of a resolution of directors of the Company resolving that: (i) subject to the payment of stamp duty, the transfer of the Shares will be registered; and (ii) in accordance with the constitution of the Company each of the relevant Incoming Directors be appointed to the board of directors of the Company, and the resignation of the Retiring Directors from the board be accepted, all with effect from the Transfer Date, but so that a properly constituted board of directors is in existence at all times; (f) (CONDITIONS PRECEDENT) evidence that the Condition Precedent set out in clauses 3.1(d) has been satisfied; (g) (RELEASE IN FAVOUR OF FORMER DIRECTORS AND OFFICERS) a release executed by the Company in favour of each of the Officers in the form set out in schedule 4; and (h) (COMFORT LETTER) a comfort letter signed on behalf of BP Holdings International B.V in the form of schedule 18. 4.3 ITEMS TO BE DELIVERED ON THE TRANSFER DATE BY BUYER At Completion, the Buyer will give to the Seller: (a) (CONSENTS TO ACT) executed consents to act by the Incoming Directors; (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 5 (b) (SERVICES AGREEMENT) an executed Services Agreement; (c) (CONDITIONS PRECEDENT) evidence that (i) the Conditions Precedent in clauses 3.1 (b), (c) and (e) have been satisfied; (ii) evidence that the approvals which the Buyer is required to obtain under the Condition Precedent set out in clause 3.1(d) have been obtained; (d) (STAMPING AND REGISTRATION) evidence that the Transaction Documents have been fully stamped and, if registrable, are in registrable form; and (e) (ENFORCEABILITY OPINION) an enforceability opinion (satisfactory to the Seller and substantially in the form set out in Schedule 13) as to the obligations of the Buyer and the Guarantor under this agreement and other Transaction Documents from the Buyer's legal counsel in the jurisdictions of incorporation of each of the Buyer and the Guarantor. 4.4 PAYMENT ON THE TRANSFER DATE On the Transfer Date, the Buyer must make the payments to the Seller in accordance with clause 5.1 if the Seller complies with clause 4.2. 5 PAYMENT OF CONSIDERATION AND OTHER AMOUNTS 5.1 PAYMENT ON TRANSFER DATE On the Transfer Date, the Buyer will pay to the Seller, or as the Seller directs in writing, the First Instalment. 5.2 PAYMENT OF SECOND INSTALMENT OF CONSIDERATION On the Date for Final Payment, the Buyer will pay to the Seller, or as the Seller directs in writing, the Second Instalment. 5.3 EARLY PAYMENT EVENTS In the event that any of the following occurs: (a) the Buyer or the Guarantor is, or becomes Insolvent; (b) the Buyer is in breach of clause 7.4 or the Company is in breach of clause 7.5; or (c) the Buyer fails to deliver to the Seller the Promissory Note by the time specified in clause 5.7(d). then the Seller may by notice to the Buyer declare the Second Instalment, the Working Capital Adjustment and any other amounts outstanding to the Seller under this agreement immediately due and payable. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 6 5.4 ADJUSTMENT STATEMENT Within 30 days of the Transfer Date, the Buyer and the Seller must procure that: (a) an Adjustment Statement be prepared by the Company; and (b) the Adjustment Statement be reviewed by the Auditor, who will provide an opinion that the Adjustment Statement has been prepared in accordance with clauses 5.5 ("Contents of Adjustment Statement") and 5.6 ("Preparation of Adjustment Statement"). The Auditor's opinion will be final and binding on the parties, in the absence of manifest error. 5.5 CONTENTS OF ADJUSTMENT STATEMENT The Adjustment Statement will show: (a) the value of the Working Capital of the Company as at 11.59 pm on the day before the Effective Date ("WORKING CAPITAL ADJUSTMENT"); and (b) the amount equal to the profit for the period from 1 January 2004 to 29 February 2004 (as determined by reference to the Last Management Accounts) less the Anticipated 2004 Profits Payment ("2004 PROFITS ADJUSTMENT"). 5.6 PREPARATION OF ADJUSTMENT STATEMENT (a) The Adjustment Statement, will be prepared: (i) in the case of Inventories comprising Working Capital, to show the value of Inventories in accordance with the accounting policy described in part 2 of schedule 5; and (ii) in the case of each item comprising Working Capital (other than Inventories), to show the value of that item in accordance with accounting policies consistent with those used in the Last Accounts.; and (iii) in the case of the profits for the period from 1 January 2004 to 29 February 2004 (for the purposes of the 2004 Profits Adjustment), to show those profits in accordance with accounting policies consistent with those used in the Last Accounts. To avoid doubt, the value of profits shall be determined on the basis of Inventories valued in accordance with accounting policies consistent with those used in the Last Accounts. (b) The Buyer must ensure that the Company provides the Auditor with such reasonable access, assistance and facilities as it requires to review the Adjustment Statement. The parties will bear their own costs of preparing the Adjustment Statement and shall share in equal proportions the costs of the Auditor. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 7 5.7 PAYMENT OF ADJUSTMENT AMOUNT (a) Subject to clause 5.15, the Working Capital Adjustment will be paid by the Buyer to the Seller on the Date for Final Payment. (b) If the amount in clause 5.5(b) is negative, the amount of the 2004 Profit Adjustment will be deducted from the Working Capital Adjustment paid by the Buyer to the Seller on the Date for Final Payment. (c) If the amount in clause 5.5(b) is positive, the amount of the 2004 Profit Adjustment will be added to the Working Capital Adjustment, paid by the Buyer to the Seller on the Date for Final Payment. (d) The Buyer will, within 15 Business Days of the Auditor delivering its opinion under clause 5.4(b), deliver to the Seller a promissory note in the form of schedule 12 containing an obligation on the part of the Guarantor to pay to the Seller an amount equal to the amount of the Working Capital Adjustment, payable by the Buyer to the Seller on the Date for Final Payment (as adjusted for the 2004 Profit Adjustment under clause 5.7(b) or 5.7(c)) ("PROMISSORY NOTE") 5.8 PAYMENT OF 2003 PROFITS DIVIDEND The Seller may cause the board of directors of the Company, before the Transfer Date, to declare a final dividend on the terms set out in part 1 of schedule 8. The Buyer must cause the Company to pay that dividend after the date which is nine months after the Effective Date but on or before 3 Business Days before the Date for Final Payment, in accordance with its terms, unless the Date for Final Payment occurs prior to the date which is nine months after the Effective Date, in which case, the dividend shall be paid on the Date for Final Payment. 5.9 REPRESENTATION AND WARRANTY IN RELATION TO 2003 DIVIDEND The Buyer represents and warrants to the Seller that the declaration and payment of the dividend referred to in clause 5.8 ("Payment of 2003 profits dividend") will not breach any provision of any document or agreement binding on the Company or its assets. The Buyer makes this representation on the date on which the dividend is paid. 5.10 PAYMENT OF 2004 PROFITS DIVIDEND The Seller may cause the board of directors of the Company before the Transfer Date, to declare an interim dividend on the terms set out in part 2 of schedule 8. The Company may pay that interim dividend on or before the Transfer Date. 5.11 ALTERNATIVE PAYMENT MECHANISM The Buyer: (a) in addition to the Consideration and any other amounts payable by the Buyer under this agreement; and (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 8 (b) without set-off or counter-claim and without any deduction in respect of Taxes, irrevocably undertakes to pay to the Seller on the Date for Final Payment the US$ equivalent of so much of the: (i) the dividend referred to in clause 5.8 ("Payment of 2003 Profits dividend"); and (ii) the Anticipated 2004 Profits, as has not been received by the Seller by the third Business Day prior to the Date for Final Payment, less 8.5% of that amount. 5.12 NETTING OF ALTERNATIVE PAYMENT AND 2003 PROFITS DIVIDEND (a) If the Seller receives any amount under clause 5.11 ("Alternative payment mechanism") referable to the 2003 Profits dividend under clause 5.8 ("Payment of 2003 Profits dividend"), the Seller shall waive its entitlement to that part of the dividend to which it is entitled in respect of the dividend declared under clause 5.8 ("Payment of 2003 Profits dividend") by the amount of the payment received under clause 5.11 ("Alternative payment mechanism") which is referable to the 2003 Profits dividend. (b) If the Seller receives any amount under clause 5.11 ("Alternative payment mechanism") referable to the 2004 profits dividend under clause 5.10 ("Payment of 2004 profits dividend"), the Company shall not be obliged to pay that part of the 2004 profits dividend which is equal to the amount received under clause 5.11 ("Alternative payment mechanism") which is referable to the 2004 profits dividend. 5.13 METHOD OF PAYMENT Each payment referred to in this clause 5 must be made by direct debit or such other method agreed by the parties and will be taken to have been made when it is received by the Seller or in an account nominated by the Seller to the Buyer in writing in US$ and in immediately available funds. 5.14 CONVERSION OF CERTAIN PAYMENTS (a) The dividend under clause 5.10 ("Payment of 2004 profits dividend") shall be converted from PNG kina to US$ at the Applicable Conversion Rate on the day on which the payment is made. (b) The Working Capital Adjustment and the 2004 Profit Adjustment shall be converted from PNG kina to US$ at the Applicable Conversion Rate on the day on which the Auditor provides his opinion under clause 5.4(a). (c) The dividend under clause 5.8 ("Payment of 2003 Profits dividend") shall be converted from PNG kina to US$ at the Applicable Conversion Rate on the day on which the payment is made. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 9 (d) Any payment required to be made under clause 5.11("Alternative payment mechanism"), shall be converted from PNG kina to US$ at the Applicable Conversion Rate on the Date for Final Payment. 5.15 PROMISSORY NOTE (a) The Seller undertakes to the Buyer and the Guarantor not to present for payment of the Promissory Note, if the Seller receives full and final payment of the Working Capital Adjustment from the Buyer on, or prior to, the Date for Final Payment. (b) If the Seller receives full and final payment under the Promissory Note, the Seller waives its rights to receive payment of the Working Capital Adjustment and the 2004 Profit Adjustment under this agreement. 6 CONDUCT OF BUSINESS PENDING TRANSFER DATE 6.1 RESTRICTIONS ON SELLER The Seller will ensure that (except as disclosed in writing by the Seller and agreed to in writing by the Buyer) from the date of this agreement until the Transfer Date, the Company: (a) (ACCOUNTING PRACTICES) will not make any change in accounting methods, principles or practices used by it except if required by a change in the Accounting Standards; (b) (NO FORGIVENESS OF DEBT) will not cancel any indebtedness for money owed to it, or waive any claim or right having a value in excess of $5,000; (c) (CORPORATE ACTIONS) will not: (i) increase, reduce or otherwise alter its share capital or grant any options for the issue of shares or other securities; (ii) declare or pay a dividend other than in accordance with clause 5.8 ("Payment of 2003 Profits dividend") or clause 5.10 ("Payment of 2004 profits dividend"); (iii) make a distribution or revaluation of assets; or (iv) buy back its shares; (d) (BUSINESS RELATIONSHIPS) will use commercially reasonable efforts to maintain its current business relationships; (e) (OPERATION OF BUSINESS) will operate its business in accordance with its usual business practices; (f) (ASSET DISPOSAL) will not dispose of any assets other than in the normal course of its business and for full value; (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 10 (g) (NO ENCUMBRANCES) will not create any Encumbrance over the Material Assets; (h) (MATERIAL CONTRACTS) will not amend in a material respect, or terminate, any Material Contract; (i) (EMPLOYMENT CONTRACTS) will not enter into any material employment contract, or renew or amend any existing material employment contract in a material respect; and (j) (RECORDS) will maintain and keep current and complete all Records. 6.2 REPAYMENTS AND RELEASES (PRE-TRANSFER DATE) The Seller will on or before the Transfer Date procure that the Seller or any Related Entity of the Seller be released from any guarantee, indemnity or similar obligation which they have given in respect of the obligations of the Company, and the Buyer agrees to such releases. 6.3 REPAYMENTS AND RELEASES (POST-TRANSFER DATE) The Seller will on or before the date 12 months after the Effective Date, procure the termination of all inter-company agreements, deeds, contracts arrangements or courses of dealing between the Seller or any Related Entity of the Seller on the one hand and the Company, and the Buyer agrees to such terminations. 7 CONDUCT OF BUSINESS AFTER TRANSFER DATE 7.1 PROHIBITION ON USE OF SELLER'S NAME (a) The Buyer acknowledges that it and, from the Transfer Date, the Company will have no right in or to, or to use, the name "BP", "B.P.", "British Petroleum", "bp", "beyond petroleum", "Beyond Petroleum" "BP Solar", or "Castrol" or any derivation thereof. (b) The Buyer must: (i) from the Transfer Date, not use any trading name, business name, company name, logo, mark or domain name containing or consisting of the Seller's Names in any document; and (ii) subject to clause 7.2, as soon as practical, and no later than 30 days after the Transfer Date, ensure that none of the trading names, business names, company names, logos, marks or domain names used in connection with the business of the Company consist of or contain the Seller's Names. 7.2 SIGNAGE The Buyer and the Seller must ensure that no sign in connection with the business of the Company displays or contains the Seller's Names within as short a period as is reasonably possible, but no later than 6 months after the Transfer Date. The Seller shall bear the costs of any De-branding and the Buyer shall bear the costs of the application or installation of any new trade marks, service marks, trade names, logos, get-up, colour schemes, designs, symbols and trade dress or any other branding or re-branding. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 11 7.3 EXCLUSION OF DIRECTORS AND OFFICERS FROM LIABILITY From the Transfer Date, the Buyer will ensure that the Company does not take any action or proceeding or make any claim or demand against any of the present or former directors or officers of the Company in respect of any act or omission on the part of such director or officer before the Transfer Date, other than any matter arising from the wilful misconduct or dishonesty of that director or officer. The Buyer acknowledges that this clause 7.3 is for the benefit of those directors and officers, and is held on trust for them by the Seller. 7.4 DISPOSALS BY BUYER From the Transfer Date until the Final Payment Date, the Buyer agrees for the benefit of the Seller: (a) (NO ENCUMBRANCES) without the Seller's consent, not to create an Encumbrance or allow one to exist on the whole or any part of the Shares other than the Share Securities; and (b) (NO DISPOSAL) without the Seller's consent, not to dispose of (or agree to dispose of) any of the Shares. 7.5 DISPOSALS BY COMPANY From the Transfer Date until the Final Payment Date, the Company agrees for the benefit of the Seller: (a) (NO ENCUMBRANCES) without the Seller's consent, not to create an Encumbrance or allow one to exist on the whole or any part of its present or future property; and (b) (NO DISPOSAL) without the Seller's consent, not to dispose of (or agree to dispose of) all or a substantial part of its property (either in a single transaction or in a series of transactions whether related or not and whether voluntarily or involuntarily) except: (i) disposals made with the Seller's consent; or (ii) disposals made in the ordinary course of its business for arm's length consideration; or (iii) disposals of cash raised or borrowed for the purpose for which the cash was raised or borrowed; or (iv) disposals of investments dealt in or listed on a securities exchange or over-the-counter market, for arm's length consideration; or (v) disposals of property in exchange for other property of comparable type and value. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 12 7.6 ACKNOWLEDGMENT BY BUYER The Buyer acknowledges that the Seller is entering into this agreement in reliance on the Buyer incurring obligations under clause 7.4. 7.7 ACKNOWLEDGMENT BY COMPANY The Company acknowledges that the Seller is entering into this agreement in reliance on the Company incurring obligations under clause 7.5. 7.8 DAMAGES NOT AN ADEQUATE REMEDY The Buyer and the Company each acknowledge in favour of the Seller that damages are not a sufficient remedy for breach of clauses 7.4 or 7.5. The Seller is accordingly entitled to specific performance or injunctive relief (as appropriate) as a remedy for any breach or threatened breach in addition to any remedies available at law or in equity. 8 WARRANTIES 8.1 WARRANTIES TRUE AND CORRECT AND NOT MISLEADING (a) The Seller represents and warrants to the Buyer that each Seller Warranty is correct and not misleading in any material respect on the date of this agreement and, subject to clause 8.14, on the Transfer Date. (b) The Buyer represents and warrants to the Seller that each Buyer Warranty is correct and not misleading in any material respect on the date of this agreement and the Transfer Date. (c) The Guarantor represents and warrants to the Seller that each Guarantor Warranty is correct and not misleading in any material respect on the date of this agreement and the Transfer Date. 8.2 MATTERS DISCLOSED Each Seller Warranty as given by the Seller on: (a) the date of this agreement and the Transfer Date is to be read down and qualified by: (i) information disclosed in the disclosures in schedule 7; (ii) any fact, matter or circumstance which was known, or ought reasonably to have been known, to the Buyer or any Related Entity of the Buyer as at the date of this agreement; and (b) the Transfer Date is, in addition to clause 8.2(a), to be read down and qualified by any information disclosed by the Seller under clause 8.14, which is or may be inconsistent with that Seller Warranty and, to the extent that any Seller Warranty is misleading or incorrect having regard to any such (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 13 information, fact, matter or circumstance (as the case may be) that Seller Warranty will be deemed not to have been given. 8.3 BUYER'S ACKNOWLEDGEMENT The Buyer acknowledges that: (a) (NO OTHER REPRESENTATIONS) in entering into this agreement and in proceeding to Completion, the Buyer does not rely on any statement, representation, warranty, condition or other conduct which may have been made by or on behalf of the Seller, except the Seller Warranties; (b) (EXCLUSION OF OTHER TERMS) subject to any law to the contrary and except as provided in the Seller Warranties, all terms, conditions, warranties and statements, whether express, implied, written, oral, collateral, statutory or otherwise, are excluded, and the Seller disclaims all liability in relation to them, to the maximum extent permitted by law; and (c) (BUYER HAS RELIED ON ITS OWN ENQUIRIES) it has had the opportunity to make reasonable enquiries and investigations in relation to the petroleum industry or businesses operating in Papua New Guinea. 8.4 REDUCTION IN CONSIDERATION If a payment is made for a breach of any Seller Warranty, the payment is to be treated as an equal reduction in the purchase price of each Share. 8.5 CLAIMS PROCEDURE If the Buyer becomes aware of any circumstance in which the Buyer may seek to make a claim against the Seller for any breach of Seller Warranty or under the indemnity in clause 8.8, then: (a) (NOTICE TO SELLER) the Buyer will give notice to the Seller within 60 days after it becomes aware of that circumstance; (b) (NO PAYMENT OR ADMISSION BY BUYER) the Buyer will ensure that neither it, nor the Company, without the prior written consent of the Seller, makes any payment (unless the last date for making a payment required by law has occurred) or admission to a third party, or takes any other step which may in any way prejudice the defence of any claim made against the Company or the reduction of the liability of the Company under such a claim, or prejudice the prosecution of any claim by the Company. The Seller will not unreasonably withhold its consent, unless the Seller has assumed that prosecution or defence of the proceedings relating to the claim under clause 8.5(c); (c) (WHERE SELLER MAY DEFEND) if the alleged breach of warranty arises in respect of a claim made against the Company, the Buyer shall ensure that the Seller may at its option and at its cost, in the name of the Company, prosecute or defend any proceedings relating to the claim. For that purpose, the Company will make available to the Seller, at the Seller's cost, all such Records as the Seller may reasonably require for the purpose of the proceedings. The Seller shall conduct (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 14 the proceedings in consultation at all times with the Buyer, and so that the reputation of the Company is not harmed in any material way; (d) (WHERE BUYER MAY DEFEND) paragraphs (b) and (c) do not apply where: (i) the amount of a Loss in respect of which the Buyer makes or may seek to make a claim is below the level at which the Seller must bear the Loss under clause 8.9. In that case, the Buyer may control the defence or prosecution of the claim, but will consult with the Seller in doing so; and/or (ii) part (but not all) of the amount of a Loss in respect of which the Buyer makes or may seek to make a claim is above the level at which the Seller must bear the Loss under clause 10. In that case, the Buyer may elect to control the prosecution or defence of any proceedings relating to the claim; and (e) (FAILURE BY BUYER TO GIVE NOTICE) if the Buyer does not give notice of a circumstance when required under paragraph (a), or does not comply with paragraph (b), then the Seller Warranties and clause 8.1 will not apply in respect of any Loss suffered by the Buyer arising from that circumstance. 8.6 TIME LIMIT FOR SELLER WARRANTY CLAIMS The Seller is not liable for, and the Buyer and the Company may not claim for, any Loss suffered by the Buyer or the Company resulting from a breach of the Seller Warranties (other than the Tax Warranties) unless full details of the claim have been given to the Seller in writing prior to the date which is 18 months after the Effective Date. 8.7 TIME LIMIT FOR TAX WARRANTY CLAIMS The Seller is not liable for, and the Buyer and the Company may not claim for, any Loss suffered by the Buyer resulting from a breach of the Tax Warranties unless full details of the claim have been given to the Seller in writing prior to the date which is 7 years after the Effective Date. 8.8 INDEMNITY The Seller indemnifies the Buyer for any Loss suffered or incurred by the Buyer or the Company as a result of any breach of the Seller Warranties or the Seller Warranties being incorrect or misleading in a material respect. 8.9 THRESHOLD FOR SELLER WARRANTY CLAIMS The Seller is not liable for, and the Buyer and the Company may not claim for, any Loss suffered by the Buyer resulting from a breach of the Seller Warranties or under the indemnity in clause 8.8 unless the amount of the Loss: (a) exceeds $20,000 in respect of a particular matter; and (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 15 (b) exceeds $150,000 in aggregate in respect of all matters referred to in paragraph (a), in which event the Buyer may recover all amounts claimed. 8.10 INSURED CLAIM OR LOSS (a) The Seller will not be liable for any claim for breach of Seller Warranty or under the indemnity in clause 8.8 unless the Buyer has first caused the Company to make a claim under any insurance policy held by the Company which may cover that claim, and then only after: (i) that claim has been denied in whole or in part by the relevant insurer; or (ii) the relevant insurer has failed to make payment in respect of that claim within a period of 6 months after notification of the claim provided that at all times the Buyer has acted reasonably and diligently in pursuing that claim. (b) If the Buyer or the Company has still incurred some damage or Loss, that remaining amount will be the amount of the Buyer's Loss for the purposes of this agreement. 8.11 ACT OR OMISSION AFTER THE TRANSFER DATE The liability of the Seller in respect of any claim under the Seller Warranties or under the indemnity in clause 8.8 shall be reduced to the extent that the claim arises as a result of or in connection with any act or omission after the Transfer Date by the Buyer or the Company. 8.12 LATER RECOVERIES If, after the Seller has made a payment to the Buyer pursuant to a claim under the Seller Warranties or under the indemnity in clause 8.8, the Buyer or the Company receives a payment or benefit in relation to the fact, matter or circumstance to which the Seller Warranty claim related, then the Buyer or the Company (as the case may be) must hold on trust for the Seller an amount equal to the amount received from the Seller or, if less, the amount of the payment or benefit which was received by the Buyer or the Company (as the case may be) and promptly repay to the Seller the amount so held on trust. 8.13 SET-OFF The Buyer may not set off or retain any amount payable by the Buyer to the Seller unless it first gives the Seller 5 Business Days' prior notice of its intention to set-off any amount against payment of the Second Instalment. 8.14 FURTHER DISCLOSURE AGAINST CERTAIN SELLER WARRANTIES The Seller shall promptly disclose in writing to the Buyer any matter or thing which may arise or become known to the Seller after the date of this agreement which is inconsistent with the Seller Warranties or which might make any of them incorrect or misleading as at the Transfer Date. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 16 8.15 RESCISSION If any matter or thing disclosed by the Seller to the Buyer under clause 8.14: (a) would be a material breach of the Seller Warranties or result in those Seller Warranties being incorrect or misleading in a material respect, but for the disclosure; and (b) materially detrimentally affects the value of the Business or the Buyer's ability to commercially operate the Business after the Transfer Date, the Buyer may rescind this agreement by notice in writing to the Seller within 5 Business Days of the disclosure but no later than two days before the Transfer Date. 8.16 SELLER WARRANTY REGARDING DISCLOSED TAX DISPUTE Notwithstanding anything else in this clause 8: (a) clauses 8.2, 8.9 and 8.10 shall not apply to any claims by the Buyer against the Seller for breach of Seller Warranty or under the indemnity in clause 8.8 in respect of the Disclosed Tax Dispute; and (b) the Disclosed Tax Dispute shall be taken as not having been disclosed to the Buyer for the purposes of paragraph 17.2 of part A of schedule 1. 9 ENVIRONMENTAL RISK 9.1 PURPOSE OF THIS CLAUSE This clause allocates risk as between the Seller, the Buyer and the Company in relation to Contamination and the Environment in respect of the Sites and sets out the rights and obligations of each party in respect thereof. No party shall have any rights or remedies against the other, except as expressly provided in this clause 9. PART 2 - ASSESSMENT 9.2 ENVIRONMENTAL SITE ASSESSMENT (a) The Seller must, at its cost and expense, design and conduct an Environmental Site Assessment in accordance with the Investigation Guidelines in respect of each Site. (b) The Seller must consult the Buyer's Consultant in relation to the design of the Environmental Site Assessment and must have regard to all reasonable suggestions made by that consultant as to the design and conduct of the Environmental Site Assessment. The Seller need not take account of any suggestions made by the Buyer's Consultant which would unreasonably delay the production of the ESA Report. (c) The purpose of the Environmental Site Assessment is to produce ESA Reports which identify in relation to each Site: (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 17 (i) the existence of Historic Contamination at that Site; and (ii) what remediation measures are needed to bring that Site to the Agreed Standards. (d) The Seller will use reasonable endeavours to complete ESA Reports in relation to all Sites by the ESA Cut-Off Date. (e) The Seller must provide a copy of each ESA Report in draft form to the Buyer's Consultant. The Seller and the Buyer's Consultant must meet to discuss and resolve any material issues raised by the Buyer's Consultant in relation to a draft ESA Report. If any material issues cannot be resolved within 5 Business Days they must be referred to an Independent Expert for determination in accordance with clause 9.19. 9.3 FORCE MAJEURE EVENT If a Force Majeure Event affects the Seller's obligation to complete ESA Reports in relation to all Sites by the ESA Cut-Off Date, the Seller shall use reasonable endeavours to overcome the effects of that Force Majeure Event. PART 3 - REMEDIATION (IDENTIFIED HISTORIC CONTAMINATION) 9.4 OBLIGATION OF SELLER TO REMEDIATE SITES TO AGREED STANDARDS (IDENTIFIED HISTORIC CONTAMINATION) Unless clause 9.5 applies, the Seller must carry out at its cost and expense all remediation work in respect of Identified Historic Contamination in respect of a Site necessary to bring that Site to the Agreed Standards ("REMEDIATION WORKS"). If the Remediation Works require the removal of items of plant and equipment or substantial fixtures the obligations of the Seller do not extend to replacing those items of plant and equipment or those substantial fixtures. 9.5 DECISION NOT TO REMEDIATE (IDENTIFIED HISTORIC CONTAMINATION) (a) If the Seller and the Buyer agree (or if at the request of the Seller it is determined by an Independent Expert under clause 9.19) that: (i) it is not technically or commercially feasible to remediate a Site to the Agreed Standards; and (ii) the Identified Historic Contamination on that Site does not pose an Unacceptable Risk (as determined by an individual Site risk assessment undertaken by the Seller in consultation with the Buyer's Consultant), the Seller may, in lieu of undertaking Remediation Works on that Site pay to the Buyer the costs determined in accordance with clause 9.5(b) in respect of that Site as agreed by the parties or, failing agreement, as determined by an Independent Expert in accordance with clause 9.19 ("ESTIMATED REMEDIATION COSTS"). (b) If: (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 18 (i) it is not technically feasible to undertake the Remediation Works, the Estimated Remediation Cost shall be the cost of completing the relevant Remediation Works on the assumption that the factor causing the technical unfeasibility has been removed; and (ii) it is not commercially feasible to undertake the Remediation Works, the Estimated Remediation Cost shall be the cost of completing the relevant Remediation Works discounted to the extent necessary to reflect the factors which make the remediation commercially unfeasible, in either case, calculated in accordance with the Estimation Principles. 9.6 REMEDIATION REPORT (IDENTIFIED HISTORIC CONTAMINATION) The Seller must produce and deliver to the Buyer's Consultant in respect of each Site a report on the Remediation Works carried out at each Site. If the Buyer's Consultant is of the opinion that a Site has not been remediated to the Agreed Standards it must give notice of that fact to the Seller within 20 Business Days of receipt of the report. Any dispute as to whether a Site has been remediated to the Agreed Standards must be finally determined by an Independent Expert under clause 9.19. The Seller must undertake all additional work identified by the Independent Expert as necessary to remediate that Site to the Agreed Standards. 9.7 COMPLETION OF REMEDIATION WORKS (IDENTIFIED HISTORIC CONTAMINATION) (a) The Seller must use reasonable endeavours to complete all Remediation Works for the relevant Sites within 30 months from the Effective Date. (b) If the Seller has not completed the Remediation Work in respect of a Site within 30 months from the Effective Date the Seller may, in lieu of completing those Remediation Works, pay to the Buyer the estimated costs of completing the required Remediation Works for that Site (on the assumption that no Relevant Events apply and calculated in accordance with the Estimation Principles) as agreed between the Buyer and the Seller or failing agreement as determined by an Independent Expert in accordance with clause 9.19 ("ESTIMATED REMEDIATION COMPLETION COST"). (c) Subject to clause 9.7(d), the Seller may (at its election) and on one or more occasions, extend the period of time it has to complete some or all of the Remediation Works by such period of time as it notifies the Buyer in writing. If at the end of any such extended period, the Seller has not completed the relevant Remediation Work, the Seller may exercise the option in paragraph (b) in lieu of completing the relevant remaining Remediation Works. (d) The Seller shall not be entitled to continue Remediation Works for a Site beyond the date which is 5 years from the Effective Date ("FINAL DATE") without the Buyer's prior written consent. If for any reason (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 19 the Seller has failed to complete the Remediation Works in respect of a Site by the Final Date, the Seller must pay to the Buyer within 10 Business Days of the Final Date the Estimated Remediation Completion Costs for that Site (on the assumption that no Relevant Events apply and calculated in accordance with the Estimation Principles) . 9.8 RELEVANT EVENTS (REMEDIATION WORKS) If any of the following events occurs: (a) any failure by the Buyer or the Guarantor or a Related Entity of either of them or, after the Transfer Date, the Company, to take reasonable steps to mitigate the effects of Identified Historic Contamination (including the prevention of migration or exacerbation of Identified Historic Contamination); (b) any change in use or zoning of the Site; (c) the passing of, or any change in, or entry into force of, any Law after the date of this agreement which introduces or increases any Environmental Liability or other Liability in respect of Historic Contamination; (d) any change in the Agreed Standards applying at the Effective Date; (e) any provision of information by the Buyer or the Guarantor or a Related Entity of either of them or, after the Transfer Date, the Company concerning Contamination or the Environment to any Government Agency or any third party otherwise than pursuant to an obligation at Law to provide that information; (f) any undertaking, authorising, initiation or procuring of any intrusive investigation at or in respect of a Site other than; (i) the Environmental Site Assessments; (ii) where, and to the extent that, such investigation is required by Law; or (iii) where, and to the extent that, such investigation is required by prudent site management practices and the Seller gives its consent to such investigation; or (g) the Buyer or a Related Entity of the Buyer undertaking, authorising, initiation or procuring any remediation or clean up works in respect of the Identified Historic Contamination by a person other than the Seller or a Related Entity of the Seller at or in respect of a Site, (paragraphs (a) to (g) together being the "RELEVANT EVENTS"), the Seller's obligations under clauses 9.4, 9.5 and 9.6 in respect of the relevant Site shall not be affected, but the Buyer shall be responsible for, and shall pay to the Seller, the increased costs of the Seller performing its obligations under clauses 9.4, 9.5 and 9.6 to the extent the increased costs are caused by such event. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 20 PART 4 - INDEMNITY (IDENTIFIED HISTORIC CONTAMINATION) 9.9 SELLER'S INDEMNITY (IDENTIFIED HISTORIC CONTAMINATION) Subject to clause 9.11, the Seller unconditionally indemnifies the Buyer against all Environmental Liability suffered or incurred by the Buyer or the Company in respect of Identified Historic Contamination, but only where an Environmental Liability Trigger Notice has been served on, or received by, the Buyer or the Company in respect of such Identified Historic Contamination, from the date of this agreement until the earliest of: (a) the date of completion of the Remediation Works in respect of that Site; (b) the date of payment by the Seller to the Buyer of the Estimated Remediation Costs under clause 9.5; and (c) the date of payment by the Seller to the Buyer of the Estimated Remediation Completion Costs under clause 9.7. PART 5 - INDEMNITY (OTHER HISTORIC CONTAMINATION) 9.10 SELLER'S INDEMNITY (UNKNOWN HISTORIC CONTAMINATION) Subject to clause 9.11, the Seller unconditionally indemnifies the Buyer against all Environmental Liability suffered or incurred by the Buyer or the Company in respect of Historic Contamination (other than Identified Historic Contamination) ("UNKNOWN HISTORIC CONTAMINATION"), but only where an Environmental Liability Trigger Notice has been served on, or received by, the Buyer or the Company in respect of such Unknown Historic Contamination, from the date of this agreement until the date which is 5 years from the Effective Date. PART 6 - RELEVANT EVENTS 9.11 RELEVANT EVENTS (INDEMNITIES) The Seller's liability under clause 9.9 and 9.10 shall be reduced or extinguished to the extent that the Environmental Liability referred to in clause 9.9 or clause 9.10 (as the case may be) arises or is increased as a consequence of any Relevant Events. PART 7 - REMEDIATION (OTHER HISTORIC CONTAMINATION) 9.12 SELLER'S OBLIGATION TO REMEDIATE SITES TO AGREED STANDARDS (UNKNOWN HISTORIC CONTAMINATION) If any Unknown Historic Contamination becomes known as a consequence of the receipt of an Environmental Liability Trigger Notice in respect of that Historic Contamination, clauses 9.4, 9.5, 9.6, 9.7 and 9.8 shall apply (except that references to "Identified Historic Contamination" shall be read as references to "Unknown Historic Contamination") provided that: (a) the Seller shall not be obliged to remediate or clean-up a Site in respect of Unknown Historic Contamination unless the cost of performing the obligations under clauses 9.4, 9.5, 9.6, 9.7 and 9.8 at that Site are in excess of $50,000 (in which case the Seller shall be responsible for the all costs in performing the obligations under clauses 9.4, 9.5, 9.6, 9.7 and 9.8); and (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 21 (b) the period of time for completing the Remediation Works referred to in clauses 9.7(a) and 9.7(b) shall be 5 years from the Effective Date provided that the Seller may, at any time after: (i) 30 months from the Effective Date; or (ii) the date of receipt of the Environmental Liability Trigger Notice, whichever is the later, pay the Estimated Remediation Completion Cost. To avoid doubt, clause 9.7(c) shall apply (unamended) to the circumstances referred to in this clause 9.12. PART 8 - BUYER'S INDEMNITY 9.13 BUYER'S INDEMNITY The Buyer unconditionally indemnifies the Seller against all Environmental Liability suffered or incurred by the Seller in respect of: (a) Historic Contamination at a Site, from the date that the Seller's indemnity under clauses 9.9 and 9.10 ceases; (b) any Contamination at a Site (other than Historic Contamination) from the Transfer Date; and (c) Historic Contamination at a Site from the Transfer Date, to the extent that the Environmental Liability arises from a Relevant Event, but only where an Environmental Liability Trigger Notice has been served on, or received by, the Seller or a Related Entity of the Seller in respect of the relevant Contamination. PART 9 - EARLY TERMINATION OF SELLER'S OBLIGATIONS UNDER CLAUSE 9 9.14 FAILURE TO PAY BY BUYER Notwithstanding anything else in this clause 9, if the Buyer fails to pay to the Seller within 3 Business Days of the due date for payment, the amount of the Second Instalment, the Working Capital Adjustment, any amount payable by the Buyer under clause 5.11 ("Alternative payment mechanism") or any amount payable by the Buyer under clause 9.8 which is due and owing, the Seller may give notice to the Buyer requiring payment of the amount due and owing within 21 days. If the Buyer does not pay the amount due and owing plus applicable interest within that 21 day period: (a) the Seller shall be released and discharged from performing any further obligations under clauses 9.4, 9.5, 9.6, 9.7, 9.8 and 9.12, and the Seller shall be deemed to have performed its obligations under those clauses; and (b) the Seller shall be released and discharged from the indemnities under clauses 9.9 and 9.10. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 22 9.15 INSOLVENCY OF BUYER OR COMPANY Notwithstanding anything else in this clause 9, if the Buyer or the Company is, or becomes Insolvent, immediately upon the Buyer or the Company being or becoming Insolvent: (a) the Seller shall be released and discharged from performing any further obligations under clauses 9.4, 9.5, 9.6, 9.7, 9.8 and 9.12, and the Seller shall be deemed to have performed its obligations under those clauses; and (b) the Seller shall be released and discharged from the indemnities under clauses 9.9 and 9.10. PART 10 - MISCELLANEOUS 9.16 ACCOUNTING FOR SUBSEQUENT RECOVERIES If a party which has the benefit of an indemnity under this clause 9 receives payment under that indemnity in relation to an Environmental Liability and subsequently recovers any amount in respect of that Environmental Liability (SUBSEQUENT RECOVERY) (whether by way of insurance recovery, tax benefit or otherwise) it must account for that Subsequent Recovery (or in the case of a tax benefit, the value of that recovery) to the party making the payment. 9.17 CLAIMS PROCEDURE If the person entitled to the benefit of an indemnity under this Clause 9 ("INDEMNIFIED PARTY") becomes aware of any circumstance in which the indemnified party may seek to make a claim against the person giving the indemnity ("INDEMNIFYING party") under this clause 9, then: (a) (NOTICE TO INDEMNIFYING PARTY) the indemnified party will give notice to the indemnifying party within 60 days after it becomes aware of that circumstance; (b) (NO PAYMENT OR ADMISSION BY INDEMNIFIED PARTY) the indemnified party will ensure that neither it, nor the Company, without the prior written consent of the indemnifying party, makes any payment (unless the last date for making a payment required by law has occurred) or admission to a third party, or takes any other step which may in any way prejudice the defence of any claim made against the indemnified party or the Company or the reduction of the liability of the Company under such a claim, or prejudice the prosecution of any claim by the Company. The indemnifying party will not unreasonably withhold its consent, unless the indemnifying party has assumed that prosecution or defence of the proceedings relating to the claim under clause 9.17(c); (c) (WHERE INDEMNIFYING PARTY MAY DEFEND) if the alleged Environmental Liability arises in respect of a claim made against the Company, the indemnified party shall ensure that the indemnifying party may at its option and at its cost, in the name of the Company, prosecute or defend any proceedings relating to the claim. For that purpose, the Company will make available to the indemnifying party, at the indemnifying party's cost, all such Records as the indemnifying (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 23 party may reasonably require for the purpose of the proceedings. The indemnifying party shall conduct the proceedings in consultation at all times with the indemnified party, and so that the reputation of the Company is not harmed in any material way; and (d) (FAILURE BY INDEMNIFIED PARTY TO GIVE NOTICE) if the indemnified party does not give notice of a circumstance when required under paragraph (a), or does not comply with paragraph (b), then the indemnifying party's liability under clause 9.9, clause 9.10 or clause 9.13 will be reduced or extinguished to the extent that the indemnifying party's liability under clause 9.9, clause 9.10 or clause 9.13 is increased as a consequence of the indemnified party's acts or omissions referred to in this paragraph (d). 9.18 SET-OFF If the Seller has any present liability to pay money to the Company or the Buyer under this clause 9, the Seller may set-off the amount of that liability against any amounts owing to it by the Company or the Buyer, provided it first gives the Company or the Buyer (as the case may be) 5 Business Days prior notice of its intention to set-off that amount. 9.19 DISPUTES A reference to an Independent Expert under this clause 9 must be made in accordance with schedule 14. 10 LIMIT OF LIABILITY 10.1 GENERAL Notwithstanding anything else in this agreement but subject to clause 10.2, the maximum aggregate Liability of the Seller to the Buyer and the Company in connection with this agreement for any Loss in respect of breach of Seller Warranty or misrepresentation whether under this agreement or otherwise or under the indemnity in clause 8.8 whether the Liability arises under contract, tort, statute or otherwise, shall not exceed in aggregate an amount equal to $2,000,000. 10.2 EXCLUSIONS The limit of liability in clause 10.1 shall not apply to: (a) any amount for which the Seller is liable under clause 9; (b) any Liability of the Seller to the Buyer or the Company under clause 8.16 for breach of a Seller Warranty or under the indemnity in clause 8.8 in respect of the Disclosed Tax Dispute; and (c) any fraud by the Seller. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 24 11 SUPERANNUATION The Seller agrees to ensure that both before and after the Transfer Date the Buyer is provided with all records and information which it may require (including detailed information about each of the members and their participation in the Fund) in order to verify the correctness of any calculations or values to be ascertained for the purposes of this agreement. This obligation extends to any records, information or systems which are recorded, maintained or otherwise dependent on any computerised or similar system or service. 12 COSTS AND STAMP DUTY 12.1 LEGAL COSTS The Seller and the Buyer agree to pay their own legal and other costs and expenses in connection with the negotiation, preparation, execution and completion of this agreement and of other related documentation, except for stamp duty. 12.2 STAMP DUTY The Seller and the Buyer agree to share in equal proportions all stamp duty (other than fines and penalties) chargeable, payable or assessed in relation to the Transaction Documents and the costs of any valuations required by the Government Agency responsible for collection of stamp duty provided that the Seller shall not be liable to pay, or be required to reimburse the Buyer for, any stamp duty in respect of any Promissory Notes issued in connection with this agreement if the Buyer or the Guarantor executes the Promissory Notes in a jurisdiction other than Queensland or Victoria. Fines and penalties shall be borne by the person responsible for the fine or penalty and if both parties are responsible, shall be shared in proportion to the degree of their responsibility. 13 NOTICES 13.1 FORM Unless expressly stated otherwise in this agreement, all notices, certificates, consents, approvals, waivers and other communications in connection with this agreement must be in writing signed by an Authorised Officer and must be marked for the attention of the person identified in Schedule 11 or, if the recipient has notified otherwise, then marked for attention in the last way notified. 13.2 DELIVERY Notices must be: (a) left at the address set out in Schedule 11; or (b) sent by prepaid ordinary post (airmail if appropriate) to the address set out or referred to in Schedule 11; or (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 25 (c) sent by fax to the fax number set out or referred to in Schedule 11. However, if the intended recipient has notified a changed fax number or postal address then the communication must be to that number or address. 13.3 WHEN EFFECTIVE They take effect from the time they are received unless a later time is specified. 13.4 RECEIPT - POSTAL If sent by post, they are taken to have been received three days after posting (or seven days after posting if posted to or from a place outside Australia). 13.5 RECEIPT - FAX If sent by fax, they are taken to have been received at the time shown in the transmission report as the time that the whole fax was sent. 13.6 RECEIPT - GENERAL Despite clauses 13.4 and 13.5, if notices are received after 5.00pm in the place of receipt or on a non-Business Day in that place, they are taken to be received at 9.00am on the next working day in that place and if they are received before 9.00am on a Business Day in the place of receipt, then they are taken to be received at 9.00am on that Business Day in that place. 14 CONFIDENTIAL INFORMATION 14.1 DISCLOSURE OF CONFIDENTIAL INFORMATION No Confidential Information may be disclosed by the Buyer to any person except: (a) Representatives of the Buyer or its related entities requiring the information for the purposes of this Agreement; or (b) with the consent of the Seller (which consent may be given or withheld in its absolute discretion); or (c) if the Buyer is required to do so by law or a stock exchange; or (d) if the Buyer is required to do so in connection with legal proceedings relating to this Agreement. 14.2 DISCLOSURE BY BUYER OF CONFIDENTIAL INFORMATION The Buyer must use all reasonable endeavours to ensure that persons receiving Confidential Information from it under clause 14.1(a) do not disclose the information. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 26 14.3 USE OF CONFIDENTIAL INFORMATION Subject to clause 14.5, the Buyer must not use any Confidential Information except for the purpose of performing its obligations under this agreement. 14.4 DELIVERY OF MATERIALS Subject to clause 14.5, the Buyer must, on the request of the Seller, immediately deliver to the Seller all documents or other materials containing or referring to Confidential Information to which this clause 14 relates which are in its possession, power or control or in the possession, power or control of persons who have received Confidential Information from it under clause 14.1(a) or (b). 14.5 USE AND DISCLOSURE OF BUSINESS INFORMATION BY BUYER AFTER THE TRANSFER DATE On and from the Transfer Date, clauses 14.1 to 14.4 cease to apply to the Buyer in relation to the Confidential Information relating to the Business and apply only in relation to the Confidential Information in relation to the Seller. 14.6 PRIVACY The Buyer agrees to: (a) comply with all Privacy Laws; (i) by which it is bound; and (ii) by which the Seller is bound and which is notified to the Buyer, in connection with Personal Information collected, used or disclosed in connection with this agreement; and (b) notify the Seller immediately after it becomes aware that a disclosure of Personal Information may be required by law before the Transfer Date; and (c) not do anything with the Personal Information that may cause the Seller to be in breach of a Privacy Law of which the Seller has notified the Buyer; and (d) notify the Seller of any request the Buyer receives before the Transfer Date for access to Personal Information which the Seller has disclosed to the Buyer; and (e) not give access to, or copies of, Personal Information disclosed by the Seller to the Buyer to anyone without the Seller's consent unless the Buyer is required to do so under a Privacy Law; and (f) use Personal Information disclosed by the Seller during due diligence only for the purpose of carrying out the due diligence; and (g) handle Personal Information disclosed by the Seller during due diligence in a manner as directed by the Seller; and (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 27 (h) notify the Seller immediately after the Buyer becomes aware that it has breached these agreements 14.7 APPLICATION OF CLAUSE 14.6 Clause 14.6 prevails over the balance of this clause 14 to the extent of any inconsistency in respect of Personal Information which is also Confidential Information. 14.8 USE OF PERSONAL INFORMATION BY SELLER AFTER THE TRANSFER DATE If the Seller is required by this agreement or by law to retain any Personal Information, the Seller may use and disclose that Personal Information for the purpose for which it is required to be retained under this agreement or as required by that other law or by any Privacy Laws. 14.9 SURVIVAL OF TERMINATION This clause 14 will survive termination of this agreement. 15 ASSIGNMENT No party may assign or otherwise deal with its rights under this agreement or allow any interest in them to arise or be varied in each case without the consent of the other party, which consent must not be unreasonably withheld or delayed. 16 MISCELLANEOUS 16.1 DISCRETION IN EXERCISING RIGHTS A party may exercise a right or remedy or give or refuse its consent in any way it considers appropriate (including by imposing conditions), unless this agreement expressly states otherwise. 16.2 PARTIAL EXERCISING OF RIGHTS If a party does not exercise a right or remedy fully or at a given time, the party may still exercise it later. 16.3 NO LIABILITY FOR LOSS A party is not liable for any Loss caused by the exercise or attempted exercise of, failure to exercise, or delay in exercising a right or remedy under this agreement. 16.4 APPROVALS AND CONSENTS By giving its approval or consent a party does not make or give any warranty or representation as to any circumstance relating to the subject matter of the consent or approval. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 28 16.5 CONFLICT OF INTEREST The parties' rights and remedies under this agreement may be exercised even if it involves a conflict of duty or a party has a personal interest in their exercise. 16.6 REMEDIES CUMULATIVE The rights and remedies provided in this agreement are in addition to other rights and remedies given by law independently of this agreement. 16.7 RIGHTS AND OBLIGATIONS ARE UNAFFECTED Rights given to the parties under this agreement and the parties' liabilities under it are not affected by anything which might otherwise affect them by law. 16.8 VARIATION AND WAIVER A provision of this agreement or a right created under it may not be waived or varied except in writing, signed by the party or parties to be bound. 16.9 NO MERGER The warranties, undertakings and indemnities in this agreement do not merge on the Transfer Date. 16.10 INDEMNITIES The indemnities in this agreement are continuing obligations, independent from the other obligations of the parties under this agreement and continue after this agreement ends. It is not necessary for a party to incur expense or make payment before enforcing a right of indemnity under this agreement. 16.11 FURTHER STEPS Each party agrees, at its own expense, to do anything (such as obtaining consents, signing and producing documents and getting documents completed and signed): (a) to bind the party and any other person intended to be bound under this agreement; (b) to show whether the party is complying with this agreement; and (c) as may be necessary or desirable to give full effect to the provisions of this agreement and the transactions contemplated by it. 16.12 TIME OF THE ESSENCE Time is of the essence of this agreement in respect of any date or period determined under this agreement. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 29 16.13 ENTIRE AGREEMENT This agreement constitutes the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and negotiations on that subject matter. 16.14 CONSTRUCTION No rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of, or seeks to rely on, this agreement or any part of it. 16.15 KNOWLEDGE AND BELIEF Any statement made by a party on the basis of its knowledge, information, belief or awareness, is made on the basis that the party has, in order to establish that the statement is accurate and not misleading in any material respect, made all reasonable enquiries of its officers, managers and employees who could reasonably be expected to have information relevant to matters to which the statement relates. 16.16 PUBLICITY A party may not make press or other announcements or releases relating to this agreement and the transactions the subject of this agreement without the approval of the other party as to the form and manner of the announcement or release unless and to the extent that the announcement or release is required to be made by the party by law or by a stock exchange. 16.17 INTEREST ON OVERDUE AMOUNTS If a party fails to pay any amount under this agreement when due, it must pay interest to the party to which the amount is owed on the balance of the unpaid amount at the Default Rate in respect of the period from (and including) the due date for payment to (but excluding) the date of payment and both before and after judgment (on the basis of a 365 day year, calculated on a day to day basis and compounded at monthly intervals). 17 GUARANTEE 17.1 ACKNOWLEDGMENT The Guarantor acknowledges and represents to the Seller that: (a) the Seller has entered this agreement with the Buyer at the request of the Guarantor and in consideration of the Guarantor giving the Guarantee; (b) it is receiving valuable consideration for the Guarantee; and (c) it has not taken any security, mortgage, charge, negotiable instrument, guarantee, indemnity or promise to pay from the Buyer for or in consideration of the Guarantor undertaking the obligations under this clause 17. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 30 17.2 GUARANTEE The Guarantor unconditionally and irrevocably: (a) guarantees to the Seller the payment of each amount due and payable by the Buyer under or in respect of this agreement (the "PAYMENT OBLIGATIONS"); and (b) guarantees to the Seller the due and punctual performance by the Buyer of each of the terms of this agreement undertaken by the Buyer (the "PERFORMANCE Obligations"), (together, the "GUARANTEED OBLIGATIONS"). 17.3 INDEMNITY The Guarantor unconditionally and irrevocably indemnifies the Seller against all Losses resulting from any Guaranteed Obligations not being duly and punctually performed by the Buyer. 17.4 INTEREST ON OVERDUE AMOUNTS The Guarantor must, on demand by the Seller, pay interest on any money which is due and payable by it under the Guarantee which remains unpaid in accordance with clause 16.17 from the due date for payment up to the date of actual payment. This obligation applies both before and (as a separate and independent obligation) after any judgement. 17.5 OBLIGATIONS ABSOLUTE AND UNCONDITIONAL The liability of the Guarantor is not affected by any thing that might otherwise have released or exonerated the Guarantor from any of the Guarantor's obligations under the Guarantee. This includes any of the following (whether occurring with or without the consent of any person): (a) the grant of any time, waiver or other indulgence, concession or delay; or (b) any transaction or arrangement, including the discharge, release, replacement, extinguishment, abandonment, amendment, addition, alteration, deletion, extension, novation, modification or variation of any right or obligation; or (c) any bankruptcy, insolvency, liquidation, administration or winding up; or (d) any of the Guaranteed Obligations being or becoming wholly or partially illegal, void, voidable or unenforceable; or (e) any failure to give notice to the Guarantor in connection with the Guaranteed Obligations (including notice of default of the Buyer or of change of the Guaranteed Obligations); or (f) any legal limitation, disability, incapacity or other similar circumstance affecting the Buyer; or (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 31 (g) any obligation of the Buyer being suspended, qualified or discharged by operation of Law or otherwise; or (h) any assignment of rights associated with the Guaranteed Obligations. 17.6 CONTINUING OBLIGATIONS AND NON-AVOIDANCE (a) The Guarantor's obligations continue notwithstanding any settlement of account, intervening payment or anything else until, subject to clause 17.6(b), full payment of all amounts payable by the Buyer to the Seller under this agreement; and (b) If any payment or other transaction relating to or affecting the Guaranteed Obligations is: (i) void, voidable or unenforceable in whole or in part; or (ii) claimed to be void, voidable or unenforceable and that claim is upheld, conceded or compromised in whole or in part, the liability of the Guarantor under the Guarantee and any power is the same as if: (iii) that payment or transaction (or the void, voidable or unenforceable part of it); and (iv) any release, settlement or discharge made in reliance on any thing referred to in clause 17.6(b)(iii), had not been made and the Guarantor must immediately take all action and sign all documents necessary or required by the Seller to restore to the Seller the Guarantee. (c) Clause 17.6(b) applies whether or not the Seller knew, or ought to have known, of anything referred to in clause 17.6(b). 17.7 PRINCIPAL OBLIGATION The Guarantor's obligations under the Guarantee: (a) are principal obligations and not ancillary or collateral to any other obligation, however created or arising; and (b) may be enforced against the Guarantor even if the Seller has not exercised or exhausted any right or remedy against the Buyer with respect to Guaranteed Obligations. 17.8 SUSPENSION OF GUARANTOR'S RIGHTS Until the Guaranteed Obligations have been irrevocably and fully discharged through complete performance (including, in the case of Payment Obligations, by payment in full), the Guarantor must not: (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 32 (a) take any security, mortgage, charge, negotiable instrument, guarantee, indemnity or promise to pay from the Buyer for or in consideration of the Guarantor undertaking the obligations under this clause 17; (b) have or exercise any rights as surety in competition with the Seller; (c) make a claim or enforce a right against the Buyer; (d) prove in competition with the Seller in any bankruptcy, insolvency, liquidation, administration or winding up of the Buyer; or (e) claim to be entitled (by way of contribution, indemnity, subrogation, marshalling or otherwise) to the benefit of any security, mortgage, charge, negotiable instrument, guarantee, indemnity or promise to pay relating to any of the Guaranteed Obligations. 17.9 GROSS-UP If a law requires the Guarantor to deduct an amount in respect of Taxes from a payment under the Guarantee such that the Seller would not actually receive on the due date the full amount provided for under the Guarantee, then: (a) the Guarantor agrees to deduct the amount for the Taxes (and any further deduction applicable to any further payment due under paragraph (c) below); and (b) the Guarantor agrees to pay an amount equal to the amount deducted to the relevant authority in accordance with applicable law and give the original receipts to the Seller; and (c) the amount payable is increased so that, after making the deduction and further deductions applicable to additional amounts payable under this clause, the Seller is entitled to receive (at the time the payment is due) the amount it would have received if no deductions had been required. 17.10 SEPARATION OF GUARANTEE In the event that there is any doubt as to the validity or enforceability of all or part of this agreement, this clause 17 is to be treated as a separate document from which the invalid or unenforceable parts of this agreement are capable of being severed. 18 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 18.1 GOVERNING LAW This agreement is governed by the law in force in the place specified in the Details. Each party submits to the exclusive jurisdiction of the courts of that place and waives any rights it may have to claim that the courts of that place are an inconvenient forum. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 33 18.2 SERVING DOCUMENTS Without preventing any other method of service, any document in an action may be served on a party by being delivered or left at that party's address in Schedule 11 or with its Process Agent. 18.3 APPOINTMENT OF SELLER PROCESS AGENT The Seller irrevocably appoints the Seller Process Agent as its process agent to receive any document in an action in connection with this agreement. If for any reason the Seller Process Agent ceases to be able to act as process agent for the Seller, the Seller must promptly appoint another person in the place specified for Governing law in the Details as process agent. The Seller agrees that the service of documents on the Seller Process Agent or any other person appointed under this clause will be sufficient service on it. 18.4 APPOINTMENT OF IO PROCESS AGENT The Guarantor, the Buyer and the Company each irrevocably appoints the IO Process Agent as its process agent to receive any document in an action in connection with this agreement. If for any reason the IO Process Agent ceases to be able to act as process agent for the Guarantor, the Buyer or the Company y, the Guarantor, the Buyer or the Company (as the case may be) must promptly appoint another person in the place specified for Governing law in the Details as process agent. The Guarantor, the Buyer or the Company each agree that the service of documents on the IO Process Agent or any other person appointed under this clause will be sufficient service on it. 19 RESTRAINT 19.1 RESTRAINT The Seller undertakes to the Buyer that subject to clause 19.2 ("Deletion of Restrictions") and the Services Agreement, for 3 years from the Effective Date, the Seller will not be Engaged or Involved in any capacity in any business or activity which is the same as the Business carried on by the Company or any material part of it. This restriction applies throughout Papua New Guinea. 19.2 DELETION OF RESTRICTIONS If any part of the Restraint is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill and business of the Company but would be judged reasonable and necessary if any activity were deleted or a period or area were reduced, then the Restraint applies with that activity deleted or period or area reduced by the minimum amount necessary to make the Restraint reasonable in the circumstances. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 34 19.3 SEVERANCE Each part of the Restraint has effect as a separate and severable prohibition or restriction and is to be enforced accordingly. 19.4 SHARES IN A PUBLIC COMPANY Notwithstanding clause 19.1("Restraint"), the Seller may hold in aggregate up to 10% of the shares in any public company which are quoted on any recognised stock exchange, even though that company carries on any of the activities referred to in clause 19.1("Restraint"). 19.5 ACKNOWLEDGMENT The Seller acknowledges that the Restraint is reasonable in the circumstances and necessary to protect the goodwill and business of the Company. 19.6 EXPIRY OF RESTRAINT The Restraint will expire immediately: (a) if there is a change in control of the Buyer or the Company; (b) if the Company disposes of (or agrees to dispose of) all or a substantial part of its property (either in a single transaction or in a series of transactions whether related or not and whether voluntarily or involuntarily) except: (i) disposals made with the Seller's consent; (ii) disposals made in the ordinary course of its business for arm's length consideration; (iii) disposals of cash raised or borrowed for the purpose for which the cash was raised or borrowed; (iv) disposals of investments dealt in or listed on a securities exchange or over-the-counter market, for arm's length consideration; or (v) disposals of property in exchange for other property of comparable type and value. 20 COUNTERPARTS This agreement may consist of a number of copies, each signed by one or more parties to the agreement. If so, the signed copies are treated as making up the one document and the date on which the last counterpart is executed will be the date of the agreement. 21 SUPERVENING LEGISLATION Any present or future legislation which operates to vary the obligations of a party in connection with this agreement with the result that another party's (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 35 rights, powers or remedies are adversely affected (including, by way of delay or postponement) is excluded except to the extent that its exclusion is prohibited or rendered ineffective by law. 22 INTERPRETATION 22.1 DEFINITIONS These meanings apply unless the contrary intention appears. 2003 PROFITS means PNG kina [deleted for confidentiality] (to avoid doubt, being the amount of 2003 after-tax profits less PNG kina [deleted for confidentiality]). 2004 PROFITS ADJUSTMENT has the meaning given in clause 5.5(b). ACCOUNTING PERIOD means: (a) in the case of an Accounts Date other than the Last Balance Date, 12 months; and (b) in the case of the Last Balance Date, the period from the last Accounts Date prior to the Last Balance Date until the Last Balance Date. ACCOUNTING STANDARDS means all accepted accounting principles which are generally applicable in the place of incorporation of that corporation consistently applied. ACCOUNTS means, in respect of an Accounting Period, the audited accounts of the Company, and the reports of the directors and auditors of the Company. ACCOUNTS DATE means each 31 December. ACTION means an action, dispute, claim, demand, investigation, inquiry, prosecution, litigation, proceeding, arbitration, mediation or dispute resolution. ADJUSTMENT AMOUNT means an amount determined from the Adjustment Statement, determined in accordance with clause 5.4 ("Adjustment Statement"). ADJUSTMENT STATEMENT means the statement referred to in clause 5.4 ("Adjustment Statement"). AGREED STANDARDS means the Australia Oil Industry Working Group Guidelines for Management of Petroleum Hydrocarbon Impacted Land, 1999 revised, as appropriate, to take account of the National Environmental Protection measures for Contaminated Land. ANTICIPATED 2004 PROFITS means PNG kina [deleted for confidentiality]. APPLICABLE CONVERSION RATE means the mean of the PNG kina/ US$ closing interbank exchange rates: (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 36 (a) at 4.00pm (PNG time) on the five most recent days up to and including the day prior to the date on which conversion is made under clause 5.14; and (b) as published on the Bank of Papua New Guinea's website. ASSETS means the assets (including without limitation, the Intellectual Property) from time to time of the Company. AUDITOR means PricewaterhouseCoopers, Lae, Papua New Guinea. AUTHORISED OFFICER means a person appointed by a party to act as an Authorised Officer for the purposes of this agreement. BOARD means the board of directors of the Company. BUSINESS means the downstream wholesale and retail distribution of refined petroleum products (but does not include: (a) the wholesale or retail distribution of refined petroleum products associated with "Castrol"; (b) the wholesale or retail distribution of lubricant products), as being conducted by the Company on the date of this agreement. BUSINESS DAY means a day other than a Saturday, Sunday or public holiday in Brisbane, Queensland. BUYER'S CONSULTANT means GHD Pty Limited BUYER WARRANTIES means the representations and warranties set out in part B of schedule 1. CHARTERPARTY means the short-term charter by BP Shipping Ltd (as agent for the Company) of the Essberger Pilot fuel tanker. CLAIM includes any allegation, debt, cause of action, Liability, claim, proceeding, suit or demand of any nature howsoever arising and whether present or future, fixed or unascertained, actual or contingent, whether at law, in equity, under statute or otherwise. COMPLETION means completion of the sale and purchase of the Shares in accordance with clause 4 ("Transfer Date") and COMPLETE has a corresponding meaning. CONDITIONS PRECEDENT means the conditions precedent set out in clause 3. CONFIDENTIAL INFORMATION means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, exchanged between the parties before, on or after the date of this agreement, relating to the business, technology or other affairs of the Seller; CONSIDERATION is defined in clause 2.1. CONTAMINATION means all pollutants or contaminants, including any chemical or industrial, radioactive, dangerous, toxic or hazardous substance water or residue causing harm to, pollution of, or damage to, the Environment. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 37 CONTRACTS means the contracts and commitments entered into by the Company. DATE FOR FINAL PAYMENT means the date being the first to occur of: (a) the date on which the Seller declares the Second Instalment immediately due and payable in accordance with clause 5.3; or (b) one year after the Effective Date. DE-BRANDING means the removal or obliteration of the trade marks, service marks, trade names, logos, get-up, colour schemes, designs, symbols and trade dress of the Seller or a Related Entity of the Seller to the extent deemed necessary by the Seller for the purposes of rendering neutral the appearance of such items but shall not include the application of the Buyer's own trade marks, service marks, trade names, logos, get-up, colour schemes, designs, symbols and trade dress or other branding or re-branding. DEFAULT RATE means the sum of: (a) the offer rate displayed on Reuters page "LIBO" at or around 11.00am (London time) on the day after payment is due over a 30 day period expressed as a rate per cent per annum and rounded up to five decimal places; plus (b) 2%. DISCLOSED TAX DISPUTE means the dispute between the Company and the Rabual office of the IRC referred to in the disclosure against the Seller Warranty in paragraph 17.2 of part A of Schedule 1. DISCLOSURE MATERIAL (DATA ROOM) means the documents, materials and other information made available to the Buyer or a Related Entity of the Buyer or their officers, employees, agents or advisers as identified in the data room index contained in schedule 19 of this agreement. DISCLOSURE MATERIAL (SUPPLEMENTARY) means: (a) the summaries of the Environmental Site Assessments for the terminals and depots; (b) the 2004 business plan for the Company; (c) the draft 2003 statutory accounts for the Company; and (d) the projected balance sheet as at 29 February 2004. DUTY means any stamp, transaction or registration duty or similar charge which is imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount which is imposed in that regard. EFFECTIVE DATE means 1 March 2004. EMPLOYEES means the employees of the Company at the Transfer Date. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 38 ENCUMBRANCE means an interest or power: (a) reserved in or over any interest in any asset including, without limitation, any retention of title; or (b) created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage, charge, lien, pledge, trust or power, by way of security for the payment of debt or any other monetary obligation or the performance of any other obligation and any interest, right or power arising from any option, equity, preferential interest, adverse interest or third party claim or right of any kind and whether existing or agreed to be granted or created. ENGAGED OR INVOLVED includes direct or indirect involvement as a principal, agent, partner, shareholder, unitholder, trustee or beneficiary. ENVIRONMENT means all or any of the following, alone or in combination, the air (including the air within buildings and the air within any other natural or manmade structures above or below ground or above or below water), water (including water under or within land or in pipes, tanks, ditches or sewerage systems), and subsurface ground and soil conditions and living organisms supported by these media. ENVIRONMENTAL LIABILITY means: (a) any fine, penalty, charge or fee levied or increased as a consequence of relevant Contamination existing at one or more of the Sites; and (b) any Claim by a third party as a consequence of relevant Contamination existing at one or more of the Sites; and (c) the reasonable costs of defending the events or circumstances in paragraphs (a) and (b). ENVIRONMENTAL LIABILITY TRIGGER NOTICE means the service on or receipt by the relevant party of written notification of the commencement of, (or an intention to commence) any civil, criminal or regulatory proceedings against the relevant party. ENVIRONMENTAL SITE ASSESSMENT means each investigation conducted pursuant to clause 9.1. ESA CUT-OFF DATE means the date which is 9 months from the Transfer Date, as extended: (a) by any wilful delay by the Buyer or the Buyer's Consultant] in meeting their obligations under this clause 9; or, (b) by a Force Majeure Event, in which case the extension shall be for a maximum of six months. ESA REPORT means the report prepared pursuant to clause 9.2. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 39 ESTIMATED REMEDIATION COMPLETION COSTS has the meaning set out in clause 9.7; ESTIMATED REMEDIATION COSTS has the meaning set out in clause 9.5; ESTIMATION PRINCIPLES means the methodology used to calculate the estimated cost of completing the relevant Remediation Works calculated by reference to: (a) the cost of the Remediation Works identified in the ESA Reports; and (b) the actual costs of the Remediation Works incurred up until the date at which the estimate is made. FINAL DATE has the meaning given in clause 9.7(d). FINAL PAYMENT DATE means the date on which the Second Instalment, the Working Capital Adjustment and any amounts payable under clause 5.11 ("Alternative payment mechanism") are paid by the Buyer to the Seller in accordance with this agreement. FIRST INSTALMENT means that part of the Consideration, being $1,000,000, which the Buyer is obliged to pay on the Transfer Date. FORCE MAJEURE EVENT means any of the following causes provided that they are outside the reasonable control of the affected party: (a) act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor; (b) war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power; (c) act of public enemy, sabotage, malicious damage, terrorism or civil unrest; (d) ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel; (e) confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or (f) strikes, blockades, lock out or other industrial disputes; or (g) where a Site is not a Premises, where the owner or occupier of that Site prevents or restricts the Seller's access to that Site. FUND means the fund administered by the National Superannuation Fund Limited in Papua New Guinea . GOVERNMENT AGENCY means any government, governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 40 GUARANTEE means the guarantee and indemnity contained in clause 17, given by the Guarantor in favour of the Seller; GUARANTOR WARRANTIES means the representations and warranties set out in part C of schedule 1. HISTORIC CONTAMINATION means Contamination at a Site existing as at the Effective Date. ICCC means the Papua New Guinea Independent Consumer and Competition Commission established under the ICCC Act. ICCC ACT means the Independent Consumer and Competition Commission Act 2002 (PNG). IDENTIFIED HISTORIC CONTAMINATION means Historic Contamination in respect of a Site: (a) known at the date of this agreement; (b) identified in or by an ESA Report in respect of that Site; or (c) which becomes known during the course of remediation of any Historic Contamination under paragraphs (a) or (b). INCOMING DIRECTORS means the persons nominated by the Buyer to be directors of the Company from the Transfer Date. A person is INSOLVENT if: (a) it is in liquidation, in provisional liquidation, in bankruptcy proceedings, under administration or wound up; or (b) it is subject to any arrangement, assignment, moratorium or composition, protected from creditors under any statute or dissolved (in each case, other than to carry out a reconstruction or amalgamation while solvent on terms approved by the other parties to this agreement); or (c) an application or order has been made (and in the case of an application, it is not stayed, withdrawn or dismissed within 30 days), resolution passed, proposal put forward, or any other action taken, in each case in connection with that person, which is preparatory to or could result in any of (a) or (b) above; or (d) a receiver, receiver and manager, administrative receiver, controller or similar officer is appointed to all or a material part of the person's assets or undertaking; (e) an Encumbrance becomes enforceable and does not cease to be enforceable within 10 days or is enforced; (f) it is otherwise unable to pay its debts when they fall due; or (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 41 (g) something having a substantially similar effect to (a) to (f) happens in connection with that person under the law of any jurisdiction. INTELLECTUAL PROPERTY includes: (a) any patents, utility models, copyrights, registered or unregistered trade marks or service marks, trade names, brand names, indications of source or appellations of origin, designs, circuit or other eligible layout rights, plant variety rights, registered designs of commercial names or designations; (b) any invention, discovery, trade secret, know-how, computer software or confidential, scientific, technical or product information; (c) any other rights which result from intellectual activity in the industrial, scientific, literary or artistic fields whether industrial, commercial or agricultural and whether dealing with manufactured or natural products and all other intellectual property rights as defined in Article 2 of the Convention establishing the World Intellectual Property Organisation dated 14 July 1967, as amended from time to time; and (d) any pending application, letters patent, deed of grant, certificate of document of title for anything which is referred to in paragraphs (a) to (c) of this definition and any medium in which anything is referred to in those paragraphs is stored or embodied, throughout the world and for the duration of such rights. INTRA-GROUP SERVICES AGREEMENT means the agreements or arrangements with: (a) BP Australia Pty Ltd; and (b) BP Refinery (Bulwer Island) Pty Ltd, identified in table 7 of schedule 16 ("Material Contracts"); INTRA-GROUP SHIPPING AGREEMENT means the agreement or arrangement identified in table 6 of schedule 16 ("Material Contracts"); INTRA-GROUP SUPPLY AGREEMENT means the agreements or arrangements in table 1 of schedule 16 ("Material Contracts"); INVENTORIES means all stock-in-trade (including raw materials, packaging and containers, work in progress and finished goods) in use or intended for use in connection with the Business including items owned or paid for by the Company which are in transit to the Company or on consignment with any customer of the Company. INVESTIGATION GUIDELINES means: (a) Appendix 9 of the Investigation Threshold Levels - Draft Guidelines for the Assessment & Management of Contaminated Land in Queensland, Queensland Department of Environment, May 1998; and (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 42 (b) Draft Contaminated Land Assessment of Service Station Sites, Queensland Department of Environment & Heritage CHEM Unit, March 1992. IO PROCESS AGENT means InterOil Australia Pty Limited; IRC means the Papua New Guinea Inland Revenue Commission. LAST ACCOUNTS means the audited balance sheet of the Company as at the Last Balance Date and the audited profit and loss account of the of the Company for the Accounting Period ending on the Last Balance Date, draft copies of which are set out in schedule 3. LAST BALANCE DATE means 31 December 2003. LAST MANAGEMENT ACCOUNTS means the management accounts prepared by the Company prior to the Transfer Date in respect of the period from 1 January 2004 until 29 February 2004. LAW includes: (a) any law, regulation, authorisation, ruling, judgement, order or decree of any Governmental Agency; and (b) any statute, regulation, proclamation, ordinance or by-law in any jurisdiction. LIABILITY includes all liabilities (whether actual, contingent or prospective), losses, damages, costs and expenses of whatsoever nature or description irrespective of when the acts, events or things giving rise to the liability occurred excluding any consequential or indirect losses, economic losses or loss of profits. LICENCE means a statutory, municipal, contractual or other licence, consent, permission, permit, right or authority. LOSS includes any damage, loss, cost, Claim, Liability or expense (including legal costs and expenses) excluding any consequential or indirect losses economic losses or loss of profits. MATERIAL ASSETS means the emergency evacuation/marine spoil management vessel (known as "Hi Tide"), currently berthed at Lae, Papua New Guinea. MATERIAL CONTRACT means each material contract listed in schedule 16. OFFICER means a Retiring Director or existing company secretary of the Company in favour of whom a release is given under clause 4.2(g). PERSONAL INFORMATION means information or an opinion (including information or an opinion forming part of a database), whether true or not, and whether recorded in a material form or not, about an individual whose identity is apparent, or can reasonably be ascertained, from the information or opinion. PREMISES means the premises listed in schedule 15. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 43 PROMISSORY NOTE has the meaning given in clause 5.7. RECORDS means originals and copies, in machine readable or printed form, of all books, files, reports, records, correspondence, documents and other material of or relating to or used in connection with the Company including: (a) minute books, statutory books and registers, books of account and copies of taxation returns; (b) sales literature, market research reports, brochures and other promotional material (including printing blocks, negatives, sound tracks and associated material); (c) all sales and purchasing records, contracts, designs and working papers; (d) all trading and financial records; and (e) lists of all regular suppliers and customers. RELATED ENTITY has the meaning it has in the Corporations Act. RELEVANT DISPUTE means a dispute arising in relation to any of the circumstances specified in clause 9.19 of this agreement RELEVANT EVENTS has the meaning set out in clause 9.8. REMEDIATION WORKS has the meaning set out in clause 9.4. REPRESENTATIVE of a party includes an employee, agent, officer, director, adviser, partner, joint venturer or sub-contractor of that party or of a Related Entity of that party. RESTRAINT means the restrictive covenant given by the Seller to the Buyer under clause 19.1 RETIRING DIRECTORS means the existing directors of the Company. SECOND INSTALMENT means $[deleted for confidentiality], which the Buyer is obliged to pay on the Date for Final Payment. SECURITIES means shares, debentures, stocks, bonds, notes, interests in a managed investment scheme, units, warrants, options, derivative instruments or any other securities. SELLER PROCESS AGENT means BP Australia Pty Ltd. SELLER'S NAMES means the names referred to in clause 7.1. SELLER WARRANTIES means the representations and warranties set out in part A of schedule 1. SERVICES AGREEMENT means an agreement between the Guarantor and BP Australia Pty Ltd, substantially in the form of schedule 9, dated on or about the Transfer Date; (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 44 SITES means each site listed in schedule 17. SHARES means the issued shares in the capital of the Company described in Schedule 2 and SHARE means any one of those shares. SHARE SECURITY means the Encumbrances created by the documents substantially in the form of Schedule 10 executed by the Buyer and delivered to the Seller SUNSET DATE means the date which is 3 months after the date of this agreement. TAX means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of any of the above but excludes Duty. TAX RETURN means any report or return (including, without limitation, any schedule, election, amended return or other document and any supporting record) required to be filed with a Government Agency or required to be prepared and retained with respect to Tax relating to the operations of the Company. TAX WARRANTIES means the Seller Warranties in paragraph 17 of part A of schedule 1 TRANSACTION DOCUMENTS means (a) this agreement; (b) the Promissory Notes; (c) the Services Agreement; (d) the Share Security (and any affidavits or notarised documents or other documents required for the purposes of registration in the Bahamas); and (e) the directors' releases referred to in clause 4.2(g); (f) any document or agreement that the parties agree in writing is to be a Transaction Document for the purposes of this document; or (g) any document or agreement that amends, supplements, replaces or novates any of the above. TRANSFER DATE means 3 Business Days after the date on which the Conditions Precedent are satisfied or waived by the appropriate parties. UNACCEPTABLE RISK means the risk existing where the sum of hazard indexes and/ or the individual lifetime cancer risk (IELCR) calculated as part of an individual site risk assessment conducted under clause 9.5 for any chemical of concern exceeds 1 and 1 x 10-5 respectively revised, as appropriate, to take account of the National Environmental Protection Measures for Contaminated (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 45 land (NEPM) and/ or any other mutually acceptable guidelines, in those circumstances where the NEPM is considered deficient by both parties. UNKNOWN HISTORIC CONTAMINATION means Historic Contamination which is not Identified Historic Contamination and which becomes known in the circumstances described in clause 9.10. VESSEL OWNER means the owner of the Essberger Pilot. WORKING CAPITAL means the aggregate working capital of the Company determined in accordance with part 1 of schedule 5. WORKING CAPITAL ADJUSTMENT has the meaning given in clause 5.5(a). 22.2 REFERENCES TO CERTAIN GENERAL TERMS Unless the contrary intention appears, a reference in this agreement to: (a) (VARIATIONS OR REPLACEMENTS) a document (including this agreement) includes any variation or replacement of it; (b) (CLAUSES, ANNEXURES AND SCHEDULES) a clause, annexure or schedule is a reference to a clause in or annexure or schedule to this agreement; (c) (REFERENCE TO STATUTES) a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; (d) (SINGULAR INCLUDES PLURAL) the singular includes the plural and vice versa; (e) (PERSON) the word "person" includes an individual, a firm, a body corporate, a partnership, joint venture, an unincorporated body or association, or any Government Agency; (f) (EXECUTORS, ADMINISTRATORS, SUCCESSORS) a particular person includes a reference to the person's executors, administrators, successors, substitutes (including persons taking by novation) and assigns; (g) (TWO OR MORE PERSONS) an agreement, representation or warranty in favour of two or more persons is for the benefit of them jointly and each of them individually; (h) (JOINTLY AND SEVERALLY) an agreement, representation or warranty on the part of two or more of the Guarantor, the Buyer and the Company (after the Transfer Date) binds them jointly and each of them individually; (i) (DOLLARS) US dollars, dollars, $, US$ or USD is a reference to the lawful currency of the United States of America; (j) (KINA) PNG kina, kina or K is a reference to the lawful currency of Papua New Guinea; (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 46 (k) (CALCULATION OF TIME) if a period of time dates from a given day or the day of an act or event, it is to be calculated exclusive of that day; (l) (REFERENCE TO A DAY) a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later; (m) (ACCOUNTING TERMS) an accounting term is a reference to that term as it is used in the Accounting Standards; (n) (REFERENCE TO A GROUP OF PERSONS) a group of persons or things is a reference to any two or more of them jointly and to each of them individually; (o) (MEANING NOT LIMITED) the words "include", "including", "for example" or "such as" are not used as, nor are they to be interpreted as words of limitation, and when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind; (p) (NEXT DAY) if an act under this agreement to be done by a party on or by a given day is done after 5.30pm on that day, it is taken to be done on the next day; and (q) (NEXT BUSINESS DAY) if an event must occur on a stipulated day which is not a Business Day then the stipulated day will be taken to be the next Business Day. 22.3 HEADINGS Headings (including those in brackets at the beginning of paragraphs) are for convenience only and do not affect the interpretation of this agreement. 22.4 INCONSISTENT AGREEMENTS If a provision of this agreement is inconsistent with a provision of the Services Agreement, the provision of this agreement prevails. EXECUTED as an agreement (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 SHARE SALE AGREEMENT Schedule 1- Warranties PART A SELLER WARRANTIES 1 INCORPORATION AND POWER 1.1 INCORPORATION The Company is validly incorporated, organised and subsisting in accordance with all applicable Laws. 1.2 POWER The Company has the power to own its assets to carry on the Business as it is now being conducted. 1.3 COPIES OF CONSTITUENT DOCUMENTS The certified copies of any constituent documents of the Company, delivered by any Seller or the Company to the Buyer, are accurate and incorporate every currently effective amendment to those documents. 1.4 COMPLIANCE WITH CONSTITUENT DOCUMENTS The affairs of the Company and the Business, have at all material times been and continue to be conducted in accordance with the constituent documents referred to in paragraph 1.3. 1.5 CORPORATE RECORDS All statutory records and accounting records which are required to be maintained by applicable Law of the Company: (a) are: (i) in the case of the statutory records, accurate in all material respects; and (ii) in the case of the accounting records, so far as the Seller is aware, accurate to the extent necessary to enable the preparation and presentation of statutory accounts which would give a true and fair view of the financial position of the Company and of the income, expenses and results and operations of the Company; (b) have been maintained in accordance with applicable Law; and (c) are in the possession, custody or control of the Company or its agents, advisers or employees. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 48 1.6 OFFICERS The Company has no Claims against any of the persons referred to in clause 7.3 in respect of their employment with the Company or their conduct as directors or secretary of the Company. So far as the Seller is aware, each of those persons has performed its duties in respect of their employment with the Company, or their conduct as directors or secretary of the Company, in accordance with their contracts of employment and in accordance with applicable Law. 2 SHARES 2.1 PROPORTION OF CAPITAL - COMPANY The Shares comprise all of the issued capital of the Company and are fully paid. 2.2 TITLE - COMPANY The Seller is the registered and beneficial owner of the Shares. 2.3 NO ENCUMBRANCES - COMPANY There are no Encumbrances over the Shares other than the Share Securities. 2.4 CONSENTS Subject to clause 3 of this agreement, the Seller has obtained all consents necessary to enable it to transfer the Shares to the Buyer. 2.5 SHARE REGISTER The statutory registers of members of the Company contain accurate records of each of its members and the Seller and the Company have no actual notice of any legal action for the rectification of the registers of members of the Company. 3 POWER AND AUTHORITY 3.1 AUTHORITY The Seller has taken all corporate action which is necessary to authorise the entry into and performance of its obligations under this agreement. 3.2 POWER The Seller has the corporate power, without any further consent of any other person, to enter into and perform its obligations under this agreement. 3.3 BINDING OBLIGATIONS This agreement constitutes legal, valid and binding obligations of the Seller, enforceable against it in accordance with its terms, subject to any necessary (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 49 stamping and registration, Laws affecting creditors' rights generally and equitable principles. 3.4 NO IMPEDIMENT The execution by the Seller of and, subject to clause 3, the performance by the Seller of its obligations under this agreement does not breach any applicable Law. 4 INFORMATION 4.1 FACTUAL INFORMATION The factual information relating to the Company set out in this agreement (including the schedules) is true, correct and up-to-date and is not misleading or incomplete in any material respect. 4.2 DISCLOSURE MATERIAL (DATA ROOM) So far as the Seller is aware, as at the date on which the data room containing the documents identified in the data room index in schedule 19 was opened to the Buyer and its Related Entities ("DATA ROOM OPENING"): (a) the factual information in the Disclosure Material (Data Room) contained no material omissions and was not, taken as a whole and in the reasonable opinion of the Seller, misleading in any material respect as at the Data Room Opening; and (b) all copies of documents, agreements and other instruments included in the Disclosure Material (Data Room) that are not obviously inaccurate, incomplete, extracts or masked in any way were complete and accurate copies of the originals as at the Data Room Opening. 4.3 DISCLOSURE MATERIAL (SUPPLEMENTARY) So far as the Seller is aware, as at the date on which the item of Disclosure Material (Supplementary) was provided: (a) the factual information in that item of Disclosure Material (Supplementary) contained no material omissions and was not, taken as a whole and in the reasonable opinion of the Seller, misleading in any material respect as at the date on which the item of Disclosure Material (Supplementary) was provided; and (b) all copies of documents, agreements and other instruments included items of the Disclosure Material (Supplementary) that are not obviously inaccurate, incomplete, extracts or masked in any way were complete and accurate copies of the originals as at the date on which the item of Disclosure Material (Supplementary) was provided. In this paragraph 4.2 and 4.3 of part A of schedule 1, "factual information" does not include any opinion or advice (whether given in respect of past, present or future matters), prediction, projection, forecast or any other (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 50 information concerning the future performance or prospects of the Company including, without limitation, financial projections. 5 CORPORATE INFORMATION 5.1 COMPANY DETAILS The Details section of this agreement contains complete, accurate and up to date details of the Company. 5.2 SHARE DETAILS Schedule 2 of this agreement contains complete, accurate and up-to-date details of the Shares. 5.3 ALL SHARES FULLY PAID All shares in the capital of the Company are fully paid up. 5.4 ISSUED SHARES All of the issued shares in the capital of the Company are validly allotted and issued and were not allotted or issued or transferred in breach of any: (a) pre-emptive or similar rights of any person; or (b) contract which is binding on the Company. 5.5 NO OBLIGATION TO ISSUE OTHER SECURITIES The Company is not under any obligation, whether or not subject to any condition, to: (a) issue, allot, create, sell, transfer or otherwise dispose of any Securities; (b) enter into any agreement in respect of the rights to vote which are conferred in respect of any Securities; or (c) grant any warrant, option or right of first refusal or offer in respect of any Securities. 5.6 SHARE OPTION SCHEMES The Company does not have any share or option incentive scheme, profit sharing scheme or employee share ownership plan for any of its employees, directors, officers or consultants. 5.7 REDEMPTIONS, REDUCTIONS, FINANCIAL ASSISTANCE AND BUY-BACKS The Company has not: (a) agreed or offered to: (i) redeem or repay any share capital contrary to its constitution; (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 51 (ii) reduce its share capital or pass any resolution for the reduction of its share capital; (b) agreed or offered to buy-back any shares, except to the extent reflected in the Last Accounts or disclosed to the Buyer. 5.8 DEREGISTRATION The Company is not liable to be deregistered under relevant laws of Papua New Guinea. 5.9 PARTICIPATION INTERESTS The Company is not or has not agreed to become a member of any joint venture or partnership. 5.10 NO SUBSIDIARIES OR INTERESTS IN COMPANIES The Company has no subsidiaries. 6 LAST ACCOUNTS 6.1 LAST ACCOUNTS The Last Accounts: (a) have been prepared in accordance with the Accounting Standards, in the manner described in the notes to them and the accompanying auditor's opinion; and (b) give a true and fair view of the financial position of the Company as at the Last Balance Date, and of the income, expenses and results of operations of the Company for the Accounting Period ending on the Last Balance Date. 6.2 PROVISION FOR BAD AND DOUBTFUL DEBTS In the Seller's opinion, bad and doubtful debts are provided for in the Last Accounts in the manner required by Accounting Standards. 7 SOLVENCY AND ENCUMBRANCES 7.1 NOT INSOLVENT The Company is not Insolvent. 7.2 SOLVENCY The Company is able to pay its debts when they are due to be paid. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 52 7.3 GUARANTEES AND OTHER OBLIGATIONS Except as shown in the Last Accounts, the Company has not granted or agreed to grant and are not a party to any guarantee, letter of comfort, indemnity or security interest. 7.4 OFF BALANCE SHEET FINANCING The Company does not have any finance lease, time purchase or title retention agreement, or other financing of a type which is not required to be disclosed in the Last Accounts. 8 LICENCES AND CONSENTS All material Licences which are necessary for the conduct of the Business have been obtained and are valid and subsisting. All conditions which apply to any such material Licences have been complied with in all material respects. None of such Licences has been breached by the Company in any material respect or, so far as the Seller is aware, is likely to be suspended, cancelled, refused, materially altered, not renewed or revoked. 9 MATERIAL ASSETS 9.1 MATERIAL ASSETS The Company: (a) legally and beneficially own the Material Assets; or (b) is in possession of the Material Assets; or (c) has contractual or other legal or equitable rights to use the Material Assets. 9.2 ENCUMBRANCES No Encumbrance binding on the Company exists over the Material Assets which are legally and beneficially owned by the Company other than: (a) any retention of title entered into in the ordinary course of business; (b) any Encumbrance or guarantee arising in favour of a Government Agency by operation of Law; (c) any Encumbrance for taxes, rates and the like charges arising in the ordinary course of business (including by operation of Law); and (d) any Encumbrance arising in the ordinary course of day to day trading. 9.3 BOOK DEBTS As at the Effective Date, book debts and provisions for bad or doubtful debts, have been provided for in the manner required by the Accounting Standards. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 53 10 PREMISES 10.1 COMPLETE The Premises comprise all of the premises and land which are owned or exclusively occupied by the Company in connection with the Business. 10.2 OCCUPATION The Company is lawfully entitled to occupy or gain access to the Premises. 11 MATERIAL CONTRACTS 11.1 NO DEFAULT So far as the Seller is aware, the Company is not in default of any Material Contract which would have a material adverse effect upon the Business. 11.2 FOREIGN CURRENCY CONTRACTS So far as the Seller is aware, the Company has not entered into any speculative hedging arrangements. 11.3 RESTRICTIVE COVENANTS The Company is not a party to any agreement containing a restrictive covenant which materially limits its freedom to conduct the Business in Papua New Guinea as it thinks fit. 11.4 DISPOSAL OF MATERIAL ASSETS Since the Last Accounts Date, the Company has not disposed of, agreed to dispose of, or made an offer (capable of acceptance) relating to disposal of the Material Assets other than: (a) on arm's length terms; or (b) otherwise in the ordinary course of business. 11.5 TERMINATION NOTICES The Company has not received any notice from any counterparty to a Material Contract of any intention of that counterparty to terminate that Material Contract. 11.6 SELLER CONTRACTS The Company has not entered any agreement with the Seller or a Related Entity of the Seller which will have material adverse effect on the Business after the Transfer Date other than: (a) Intra-Group Supply Agreements; (b) Intra-Group Shipping Agreements; (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 54 (c) Intra-Group Services Agreements; (d) any other agreements, contracts, arrangements or understandings contained in the Disclosure Material (Data Room) and the Disclosure Material (Supplementary); and (e) any other agreements, contracts, arrangements or understandings disclosed by the Seller to the Buyer prior to the date of this agreement. 12 LITIGATION 12.1 CURRENT ACTION So far as the Seller is aware, the Company is not: (a) a party to or the subject of any Action; or (b) the subject of any ruling, judgement, order or decree by any Government Agency or any other person, which would have a material adverse effect upon the Business. 12.2 PENDING, THREATENED OR ANTICIPATED ACTIONS So far as the Seller is aware, there is no Action, judgement, order or decree pending, threatened or anticipated, against the Company which, if decided against the Company, may have a material adverse effect on it. 13 EMPLOYEES 13.1 PROVISIONS The provisions made in the Last Accounts in respect of annual leave, long service, maternity leave and staff loans give a true and fair view of the matters to which they relate as at the Last Balance Date. 13.2 BONUSES Since the Last Balance Date: (a) no bonus has been paid or become payable to any senior executive of the Company; and (b) there has been no material increase in the remuneration payable to any senior executive, other than in respect of that senior executive's performance. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 55 14 SUPERANNUATION ARRANGEMENTS As at the Transfer Date, the Company has made all superannuation contributions which it is obliged to make in respect of the employees of the Company. 15 INSURANCE 15.1 POLICIES Each insurance policy taken out by the Company with a third party insurer (for the avoidance of doubt, excluding any self-insurance arrangements) have been disclosed to the Buyer before the date of this document and all documents, whether originals or accurate copies, relating to that insurance have been disclosed by the Seller or the Company to the Buyer before the date of this document. 15.2 VOIDABILITY So far as the Seller is aware, nothing has been done or omitted to be done which would make any insurance policy taken out by the Company with a third party insurer (for the avoidance of doubt, excluding any self-insurance arrangements) void or voidable. 16 INTELLECTUAL PROPERTY RIGHTS The Company does not infringe or breach or embody any Intellectual Property of a person other than the Seller or a Related Entity of the Seller, whether registered, recorded or otherwise, in undertaking or dealing in any processes, products or services of the Company in the course of the Business. 17 TAXATION 17.1 TAX RETURNS All Tax Returns required by Law to be made, prepared, lodged or filed by the Company have been made, prepared, lodged or filed with the appropriate Governmental Agency and have or will be made by the due dates for filing such Tax Returns. 17.2 DISPUTES There is no current or likely dispute between the Company and any Government Agency in relation to or in respect of Tax or Duty nor has the Company made any claims, obligations or approvals in relation to Tax or Duty that have not been disclosed to the Buyer. 17.3 NOT MISLEADING So far as the Seller is aware, no Tax Return referred to in paragraph 17.1 of part A of this schedule 1 contains a statement that is false or misleading or omits any material matter. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 56 17.4 PAID WHEN REQUIRED All Taxes and Duties which the Company has become liable to pay to any Governmental Agency have been paid and have been paid within the required time. 17.5 DEDUCTIONS All amounts of Tax and Duty required to be deducted or withheld by the Company and remitted or paid to a Government Agency have been duly deducted or withheld and remitted or paid. 17.6 ACCRUED LIABILITIES Provision has been made in the Last Accounts for any Tax liability of the Company that is unassessed or may become due and payable at any future date to the extent that such provision is required to be made in accordance with Accounting Standards. 17.7 TAX INFORMATION (a) The Company has maintained all business records required to be maintained by all relevant Laws relating to Tax or Duty. (b) All information required by any Government Agency to be retained in relation to or in respect of Tax or Duty owed by the Company is currently held by the Company. 17.8 ANTI-AVOIDANCE So far as the Seller is aware, the Company has not entered into or been a party to an arrangement, agreement or any other transaction that contravenes any general or specific anti-avoidance provision of any Law relating to or in respect of Tax or Duty. 17.9 TAX RULINGS Any ruling, determination or election requested, received or made by the Company in respect of Tax or Duty: (a) has been disclosed to the Buyer; and (b) has at all times been complied with in all material respects by the Company. 17.10 REGISTRATIONS All registrations required to be made by the Company with any Government Agency in relation to Tax or Duty are and have at all times been maintained by the Company. 17.11 ACCRUING LIABILITIES No Tax liability of the Company has accrued or arisen since the Last Accounts Date other than as a consequence of activities in the ordinary course of the business of the Company which would have a material adverse effect. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 57 17.12 TAX AUDIT The Company: (a) is not subject to any audit in relation to their respective tax affairs by the relevant Government Agency; or (b) has not received notice of any pending or threatened any audit in relation to their respective tax affairs by the relevant Government Agency. 17.13 PUBLIC OFFICER The Company has at all material times appointed a public officer of the Company in compliance with applicable Law relating to Tax. 17.14 TAX BENEFIT The provision in the Last Accounts relating to future income tax benefit has been provided for in accordance with the Accounting Standards. 18 POSITION SINCE THE LAST BALANCE DATE Since the Last Balance Date, so far as the Seller is aware, there has been no material adverse change materially affecting: (a) the financial or trading position, prospects, turnover, goodwill or assets of the Company; or (b) the Business, other than as a result of the transactions contemplated by clause 5, or in respect of which a payment has been received by the Buyer under clause 5. 19 IMPROPER TRANSACTIONS The Seller and the Company have: (a) complied with all applicable laws dealing with improper or illegal payments, gifts or gratuities, bribery, kick-backs or similar business practices in obtaining any consents, licences, approvals, authorisations, rights or privileges with respect to this agreement, any agreement or document entered into or signed under this agreement or any transaction under this agreement; (b) not paid, promised to pay or authorised the payment of any money or anything of value, directly or indirectly, to any person (whether a government official or private individual or instrumentality, including any political party or candidate of a political party) for the purpose of illegally or improperly inducing any person or political party or any official or candidate thereof to make any decision with respect to any consents, licences, approvals, authorisations, rights or privileges with respect to this agreement, any agreement or document entered into or signed under this agreement or any transaction under this agreement, (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 58 or to illegally or improperly assist, or to take any illegal action favourable to, the Seller, the Company and each Related Entity of the Seller and the Company; and (c) not done or omitted to do anything that would subject another party to liability under the laws of any applicable jurisdiction dealing with improper payments, and its internal management and accounting practices and controls are adequate to ensure compliance therewith. 20 FINANCIAL INDEBTEDNESS Since the Last Accounts Date, the Company has not incurred new financial indebtedness or raised any new financial accommodation exceeding $300,000 in aggregate other than: (a) financial indebtedness incurred, or financial accommodation raised, in the ordinary course of the business of the Company; (b) financial indebtedness incurred in connection with any contract for goods or services with deferred payment or credit terms; (c) any obligation to deliver goods or provide services paid for in advance by any person; (d) financial indebtedness or financial accommodation in connection with any equipment, finance or capital lease including, without limitation, any guarantee given in connection with such lease; (e) financial indebtedness in connection with any environmental or performance bond or guarantee; (f) financial indebtedness in connection with any bond, guarantee, letter of credit required by applicable Law to be given to any Government Authority; (g) financial indebtedness secured by any Encumbrance referred to in paragraphs (a)-(e) of paragraph 9.2 of part A of schedule 1; (h) financial indebtedness incurred under any non-speculative hedging arrangements entered into in the ordinary course of business; (i) financial indebtedness arising under operation of Law; and (j) financial indebtedness contemplated by this agreement, which does not, in aggregate, exceed $15,000,000. For the purposes of this paragraph 20 of this part A of schedule 1, the Company shall not be taken to have incurred any new financial indebtedness or raised any new financial accommodation if it utilises any facility or arrangement existing at the Last Accounts Date and disclosed to the Buyer. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 59 SHARE SALE AGREEMENT PART B - BUYER WARRANTIES 1 INCORPORATION The Buyer is validly incorporated, organised and subsisting in accordance with all applicable Laws. 2 POWER AND AUTHORITY 2.1 AUTHORITY The Buyer has taken all corporate action which is necessary to authorise the entry into and performance of its obligations under this agreement. 2.2 POWER The Buyer has the corporate power, without any further consent of any other person, to enter into and perform its obligations under this agreement. 2.3 BINDING OBLIGATIONS This agreement constitutes legal, valid and, subject to clause 3, binding obligations of the Buyer, enforceable against it in accordance with its terms subject to any necessary stamping and registration, Laws affecting creditors' rights generally and equitable principles. 2.4 NO IMPEDIMENT The execution by the Buyer of and performance by the Buyer of its obligations under this agreement does not breach any applicable Law. 3 SOLVENCY AND ENCUMBRANCES 3.1 NOT INSOLVENT The Buyer is not Insolvent. 3.2 SOLVENCY The Buyer is able to pay its debts when they are due to be paid. 4 LITIGATION There is no Action, judgement, order or decree pending, threatened or anticipated, against the Buyer which, if decided against the Buyer, may have a material adverse effect on its ability to perform its obligations under this agreement. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 60 5 CONSENTS Subject to clause 3 of this agreement, the Buyer has obtained all consents necessary to enable it to enter this agreement and perform the transactions contemplated by this agreement. 6 IMPROPER TRANSACTIONS The Buyer and each Related Entity of the Buyer, and their respective officers, directors, employees and agents have: (a) complied with all applicable laws dealing with improper or illegal payments, gifts or gratuities, bribery, kick-backs or similar business practices in obtaining any consents, licences, approvals, authorisations, rights or privileges with respect to this agreement, any agreement or document entered into or signed under this agreement or any transaction under this agreement; (b) not paid, promised to pay or authorised the payment of any money or anything of value, directly or indirectly, to any person (whether a government official or private individual or instrumentality, including any political party or candidate of a political party) for the purpose of illegally or improperly inducing any person or political party or any official or candidate thereof to make any decision with respect to any consents, licences, approvals, authorisations, rights or privileges with respect to this agreement, any agreement or document entered into or signed under this agreement or any transaction under this agreement, or to illegally or improperly assist, or to take any illegal action favourable to, the Buyer and each Related Entity of the Buyer; and (c) not done or omitted to do anything that would subject another party to liability under the laws of any applicable jurisdiction dealing with improper payments, and its internal management and accounting practices and controls are adequate to ensure compliance therewith. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 61 SHARE SALE AGREEMENT PART C GUARANTOR WARRANTIES 1 INCORPORATION The Guarantor is validly incorporated, organised and subsisting in accordance with all applicable Laws. 2 POWER AND AUTHORITY 2.1 AUTHORITY The Guarantor has taken all corporate action which is necessary to authorise the entry into and performance of its obligations under this agreement and the Guarantee. 2.2 POWER The Guarantor has the corporate power, without any further consent of any other person, to enter into and perform its obligations under this agreement and the Guarantee. 2.3 BINDING OBLIGATIONS This agreement and the Guarantee constitute legal, valid and binding obligations of the Guarantor, enforceable against it in accordance with its terms subject to any necessary stamping and registration, Laws affecting creditors' rights generally and equitable principles. 2.4 NO IMPEDIMENT The execution by the Guarantor of and performance by the Guarantor of its obligations under this agreement and the Guarantee do not breach any applicable Law. 3 SOLVENCY AND ENCUMBRANCES 3.1 NOT INSOLVENT The Guarantor is not Insolvent. 3.2 SOLVENCY The Guarantor is able to pay its debts when they are due to be paid. 4 LITIGATION There is no Action, judgement, order or decree pending, threatened or anticipated, against the Guarantor which, if decided against the Guarantor, (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 62 may have a material adverse effect on its ability to perform its obligations under this agreement and the Guarantee. 5 CONSENTS Subject to clause 3 of this agreement, the Guarantor has obtained all consents necessary to enable it to enter this agreement and perform the transactions contemplated by this agreement and the Guarantee. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 63 SHARE SALE AGREEMENT Schedule 2 - Shares The Shares in the Company are held by the Seller as follows:
SHAREHOLDER CLASS OF SHARES NO. OF SHARES FULLY PAID? - ---------------------- --------------- ------------- ----------- Gas Tanks Nederland BV Ordinary 100 Yes
(C) Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 64 SHARE SALE AGREEMENT Schedule 3 - Last Accounts (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 65 SHARE SALE AGREEMENT Schedule 4 - Form of directors release (Company)
PARTIES COMPANY AND OFFICER - ---------------------------------------------------------------------- COMPANY Name BP Papua New Guinea Limited Incorporated in Papua New Guinea Address Speybank Street Lae PAPUA NEW GUINEA Telephone + 675 473 7700 Fax + 675 472 3556 OFFICER Name [TO BE INSERTED] Address [TO BE INSERTED] RECITALS A Officer is a director or company secretary of BP Papua New Guinea Limited, a company incorporated in the Netherlands (the "COMPANY"). B Officer will be resigning as a director or company secretary of the Company on completion of the sale of the Company from Gas Tank Nederland B.V to S.P.I. Distribution Limited ("TRANSFER DATE"). C The Company agrees to release the Officer on the terms set out in this deed. DATE OF DEED See Signing page
(C) Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 66 SHARE SALE AGREEMENT 1 RELEASE OF OFFICER Subject to any law in Papua New Guinea limiting the ability of a company to indemnify its directors or officers which cannot be excluded by any deed, agreement, arrangement or understanding between a company and its directors or officers, the Company agrees: (a) to unconditionally release the Officer from all rights and Claims relating to his employment or his engagement by Company; and (b) not to issue any proceedings in respect of rights and Claims relating to employment with the Company. The Officer may plead this deed in bar to any Claim or proceedings by the Company or any person claiming on their behalf in respect of Claims or any matter related thereto other than a Claim in relation to a breach of this deed by the Officer. 2 ACKNOWLEDGEMENT The Company acknowledges the indemnity in favour of the directors and employees of the Company given by the Company under the Company's constitution. The Company further acknowledges that that indemnity shall continue to apply in favour of the Officer in respect of Claims: (a) which relate to acts, omissions or circumstances arising prior to, or on, the Transfer Date; and (b) which the Company or any shareholder of the Company has or may have at any time against the Officer in respect of his employment with the Company and any conduct of the Officer involving or relating in any way whatsoever to other shareholders of the Company as at, or prior to, the Transfer Date. 3 SEVERABILITY If the whole or any part of a provision of this deed is void, unenforceable or illegal in a jurisdiction it is severed for that jurisdiction. The remainder of this deed has full force and effect and the validity or enforceability of that provision in any other jurisdiction is not affected. This clause has no effect if the severance alters the basic nature of this deed or is contrary to public policy. 4 ENTIRE AGREEMENT This deed constitutes the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and negotiations on that subject matter. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 67 5 GENERAL 5.1 PARTIAL EXERCISING OF RIGHTS If a party does not exercise a right or remedy fully or at a given time, the party may still exercise it later. 5.2 REMEDIES CUMULATIVE The rights and remedies provided in this deed are in addition to other rights and remedies given by law independently of this agreement. 5.3 RIGHTS AND OBLIGATIONS ARE UNAFFECTED Rights given to the parties under this deed and the parties' liabilities under it are not affected by anything which might otherwise affect them by law. 5.4 VARIATION AND WAIVER A provision of this deed or a right created under it, may not be waived or varied except in writing, signed by the party or parties to be bound. 5.5 COSTS Each party will pay its reasonable legal costs and expenses in connection with the preparation, execution and completion of this deed. 5.6 SUPERVENING LEGISLATION Any present or future legislation which operates to vary the obligations of a party in connection with this deed with the result that another party's rights, powers or remedies are adversely affected (including, by way of delay or postponement) is excluded except to the extent that its exclusion is prohibited or rendered ineffective by law. 5.7 COUNTERPARTS This deed may be executed in counterparts. All counterparts when taken together are to be taken to constitute one instrument. 6 GOVERNING LAW 6.1 GOVERNING LAW This deed is governed by the law in force in Queensland, Australia. Each party submits to the non-exclusive jurisdiction of the courts of that place. 6.2 JURISDICTION Each party submits to the non-exclusive jurisdiction of the courts of the place specified in the Details and courts of appeal from them. Each party waives any right it has to object to an action being brought in those courts including, without limitation, by claiming that the action has been brought in an inconvenient forum or that those courts do not have jurisdiction. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 68 6.3 SERVING DOCUMENTS Without preventing any other method of service, any document in an action may be served on a party by being delivered or left at that party's address in the Details. 7 INTERPRETATION 7.1 DEFINITIONS This meaning applies unless the contrary intention appears: CLAIM means any allegation, debt, cause of action, liability, claim, proceeding, suit or demand of any nature howsoever arising and whether present or future, fixed or unascertained, actual or contingent whether at law, in equity, under statute or otherwise and which either party has or may have against the other in connection with the cessation of the Officer's employment with the Company. EXECUTED as a deed. DATED: _____________________ [INSERT EXECUTION CLAUSES] (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 69 SHARE SALE AGREEMENT Schedule 5 - Adjustment Statement 1 WORKING CAPITAL 1.1 CURRENT ASSETS Current assets (CA) shall be the sum of: - cash - receivables (less provision for bad and doubtful debts) - Inventories - materials and stores - prepayments and other accruals; - VAT input credits. 1.2 CURRENT LIABILITIES Current liabilities (CL) shall be the sum of: - accounts payable; - VAT output liabilities; - provision for annual leave. 1.3 UNADJUSTED WORKING CAPITAL Unadjusted Working Capital (UWC) shall be determined as follows: UWC = CA - CL 1.4 WORKING CAPITAL Working Capital (WC) shall be determined as follows: WC = UWC - A - B Where: A = 2003 Profits B = Anticipated 2004 Profits. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 70 2 ACCOUNTING POLICY FOR INVENTORY The quantity of Inventory will be determined at 11.59pm on the day before the Effective Date. The unit price of each item of Inventory will be determined according to whether that item of Inventory is: 1. Port Moresby (and 17% of deliveries to Lae): ULP, ADF & DPK; 2. Port Morseby: High Sulfur Fuel Oil; 3. LCT Ports: Alotau, Wewak, Madang, Kavieng, Rabaul, Kimbe (and 83% of deliveries to Lae); The unit price of each item of Inventory will comprise: - the relevant BASE COST - plus a FREIGHT COMPONENT; - plus INSURANCE & LOSS A. BASE COST The Base Cost for each item of Inventory in paragraphs 1 to 4 above will be the sum of the following: (a) applicable Marker; (b) applicable premiums and discounts for quality and small parcels; and (c) applicable payments for supply diseconomy and berth shift, as specified in the relevant Intra-Group Supply Agreements for that location. The applicable Marker shall be calculated from all relevant quotes published in the month of February. B. FREIGHT COMPONENT (a) The Freight Component for each item of Inventory in paragraphs 1 and 2 above shall be as stipulated in the relevant Intra-Group Supply Agreements for that location. (b) The Freight Component for each item of Inventory in paragraph 3 above shall be the sum of the following: (i) the freight component stipulated in the relevant Intra-Group Supply Agreements for that location; plus (ii) (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 71 (A) the charter hire payable by the Company to the Vessel Owner under the Charterparty (being US$8150 per day) PLUS the cost of the fuel, towage and pilotage and all other costs and expenses (including agency fees, port charges, commissions, expenses of loading and unloading cargoes, canal dues and all other charges) payable by the Company (and not by the Vessel Owner) under the Charterparty; and (B) any other costs relating to the voyages to be undertaken under the Charterparty, but not costs relating to the cargoes to be carried, which remain costs for the Vessel Owner's account. C. INSURANCE & LOSS A fee for insurance & loss calculated as 0.40% of the sum of the Base Cost and the Freight Component. The Seller represents and warrants that any calculations in paragraphs A and B above which are required to be made in accordance with an Intra-Group Supply Agreement or a Charterparty shall be made in accordance with the terms of the applicable Intra-Group Supply Agreement or the Charterparty (as the case may be). (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 72 SHARE SALE AGREEMENT Schedule 6 - Bank accounts and signatories Set out below is a list of each bank account of the Company. 1. WESTPAC BANK PNG LTD - 2704466201 (LAE BASED) Signatories: - - Peter Diezmann - - John Knox - - Mark Youden - - Jamie McNaught - - Hulala Tokome 2. BANK SOUTH PACIFIC LTD - 1000056450 (LAE BASED) - - Peter Diezmann - - Mark Youden - - Jamie McNaught - - Hulala Tokome (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 73 SHARE SALE AGREEMENT Schedule 7 - General disclosures Set out below are some general disclosures of which the Buyer is aware: 1. GENERAL DISCLOSURES (a) the contents of this agreement, all documents referred to in it, and all transactions, acts and events contemplated by this agreement; and (b) the constitution of the Company and all matters contained or referred to in it; and (c) all matters which would be revealed by inspection of the statutory books (including minute books) and registers of the Company; and (d) the Last Accounts and statutory accounts of the Company, the notes and all matters contained, referred to or which can be deduced from them; and (e) all information affecting the Company which would be available by a search, inspection or enquiry of any registry in Papua New Guinea at which information is available to the public; and (f) all agreements, arrangements, negotiations, proceedings or other matters with, affecting or relating to the Company to which the Buyer or any of its Related Entities was or is a party; and (g) all matters affecting or relating to the Company which are in the public domain; and (h) all information, correspondence and documents supplied by the Seller to the Buyer up to, and including, the Transfer Date, including but not limited to the contents of, and all matters referred to in Disclosure Material (Data Room) and the Disclosure Material (Supplementary) to the extent that it is accurate and not misleading in any material respect. 2. SPECIFIC DISCLOSURES Without limiting the preceding paragraphs, the following matters are specifically disclosed. The headings and paragraph references relate to specific Seller Warranties in part A of schedule 1. These references are for convenience only and do not restrict the general application of the disclosure to all the Seller Warranties. (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 74 5.6 SHARE OPTION SCHEMES The Company has in previous years participated in a share option scheme. Under that scheme, employees of the Company have an opportunity, in or around July of each year, to purchase shares in BP Plc. The Company matches the acquisitions made by the employees. The Company has no outstanding obligations in relation to the last time the employees were given an opportunity to acquire shares in BP Plc. The Company's involvement in the scheme is discretionary. 7.3 GUARANTEES AND OTHER OBLIGATIONS The Company has given the following guarantees, letters of comfort, indemnities or security interests which are not disclosed in the Last Accounts: - an indemnity to ANZ Banking Group (PNG) Limited in respect of a credit card facility for amounts outstanding under the corporate credit cards. The credit cards have no individual credit card limits; - a guarantee to Westpac Bank PNG Ltd for an amount of PNG kina 500,000 in respect of the overdraft facility with Westpac Bank PNG Ltd; - a bond lodged with Inland Revenue Commission bond to secure excise duty payments for an amount of PNG kina 190,000. 10 PREMISES The Company does not currently hold certificates of title for the following Premises: - Alotau depot - Kimbe depot - Lae terminal - BP North Waigani - BP Star 11 MATERIAL CONTRACTS The Company is currently in the process of negotiating the following contracts: CUSTOMER FUEL SUPPLY - contract for the supply of fuel and lubricants with Nawae Construction Ltd - contract for the supply of fuel and lubricants with Stettin Bay Lumber Co Ltd - contract for the supply of fuel and lubricants with Garamut Enterprises Ltd SERVICE STATION - RESELLER - contract re Jimmy Valley S/S with Jimmy Valley Traders - contract re BP Alotau with Inpala Enterprises Ltd; SERVICE STATION - LESSEES - COMPANY OWNED/ DEALER LEASED - lease of BP North Waigani with Parks & Partners Pty Ltd; - lease of BP Lawes Road with Raina No 10 Ltd; - lease of BP Badilli with Kilbah No 10 Ltd; - lease of BP Madang Longreach with JK Lim. 12.1 CURRENT ACTIONS The Company is a party to a number of debtor recovery actions which it considers to be in the ordinary course of business. 17.2 TAX DISPUTE The Company is currently in dispute with Rabaul office of the IRC. This issue relates to customs division of the IRC claiming that incorrect documents were filled in prior to fuel leaving the Rabaul terminal through bunkering and a number of cases where they claimed unregistered PNG vessels were used to ship fuel within PNG. The Company maintains that the relevant documents complied with relevant customs regulations and all documents were stamped and signed by a customs official at the relevant times. The Company has admitted to a small number of incorrect payments and the differences has been paid, thus reducing the amount claimed by customs to PNG kina 650,000.00. 17.4 DEDUCTIONS The Company has not received income tax assessments for the tax years 2001, 2002 and 2003. In relation to the tax years 2001 and 2002, the Company has made provisional tax payments for income tax equal to its estimated liability for income tax for the tax years 2001 and 2002. In relation to the tax year 2003, the Company has made provision of PNG kina 6,097,000 in the Last Accounts. This represents the estimated liability for income tax in respect of the estimated taxable income of the company for the tax year 2003, net of provisional tax payments made during the tax year 2003. 17.12 TAX AUDIT The Company has been requested to provide documentation assisting the IRC in conducting a compliance audit for the 2001 financial year. To date we have provided information as requested by the IRC through PricewaterhouseCoopers. The Company has not received other requests/irregularities in relation to the 2000 financial year. SHARE SALE AGREEMENT Schedule 8 - Dividend resolutions - clauses 5.8 and 5.10 COMPANY - PART 1 "Resolved, in accordance with the company's constitution, to declare a final dividend, payable to shareholders of the company registered as such on 29 February 2004 in proportion to their shareholdings, between nine and twelve months after 1 March 2004, of PNG kina [deleted for confidentiality]." PART 2 "Resolved, in accordance with the company's constitution, to declare an interim dividend, payable on or before the Transfer Date, to shareholders of the company registered as such on 29 February 2004 in proportion to their shareholdings of PNG kina [deleted for confidentiality]" (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 78 SHARE SALE AGREEMENT Schedule 9 - Services Agreement (clause 3.1(a)) (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 79 SHARE SALE AGREEMENT Schedule 10 - Share Security (clause 3.1(b)) (C)Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 80 SHARE SALE AGREEMENT Schedule 11 - notices (clause 13.2) SELLER Address c/o BP Australia Pty Ltd 360 Elizabeth Street Melbourne VIC 3000 AUSTRALIA Telephone + 61 3 9268 1111 Fax + 61 3 9268 4662 Attention Company Secretary GUARANTOR Address C/- InterOil Australia Pty Ltd Suite 2, Level 2, Orchid Plaza 79 Abbott Street Cairns QLD 4870 AUSTRALIA Telephone + 61 7 4046 4600 Fax + 61 7 4031 4565 Attention General Manager Distribution BUYER Address C/- Harry B Sands, Lobosky & Company Shirley House 50 Shirley Street PO Box N-7123 Nassau THE BAHAMAS Telephone + 1 242 323 1317 Fax + 1 242 323 1318 Attention Secretary (C) Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 81 COMPANY (BEFORE TRANSFER DATE) Address Speybank Street Lae PAPUA NEW GUINEA Telephone + 675 473 7700 Fax + 675 472 3556 Attention General Manager (C) Mallesons Stephen Jaques Share Sale Agreement 9 March 2004 82 Schedule 12 - Promissory Note Share Sale Agreement 9 March 2004 83 Schedule 13 - Enforceability opinion (clause 4.3(e) Share Sale Agreement 9 March 2004 84 Schedule 14 - Dispute Resolution (clause 9.19) 1 DISPUTE RESOLUTION Any Relevant Dispute shall be resolved in accordance with the process and procedures outlined in this Schedule 14. 2 NOTICE OF DISPUTE In the event of a Relevant Dispute occurring, either the Seller or the Buyer may serve notice on the other. 3 CONTENTS OF NOTICE OF DISPUTE The party referring the Relevant Dispute to dispute resolution in accordance with this schedule shall give notice to the other party stating that the matter is referred to dispute resolution in accordance with this schedule 14 and must contain information that sets out succinctly the issues and relevant circumstances that are subject of the Relevant Dispute and provides details of why the notice or estimate (as applicable) is disputed. 4 REPLY TO NOTICE OF DISPUTE The recipient of the notice of a Relevant Dispute must, within 7 days of receipt of the notice of a Relevant Dispute, reply in writing to the other party setting out succinctly the recipient's response to the matters set out in the notice of Relevant Dispute and any additional matters the recipient consider necessary. 5 REFERENCE TO AN INDEPENDENT EXPERT If, following reply to the notice of dispute referred to in paragraph 5 of this Schedule 14, any part of the Relevant Dispute is not resolved, either party may refer the Relevant Dispute to an independent expert for determination. Share Sale Agreement 9 March 2004 85 6 APPOINTMENT OF INDEPENDENT EXPERT 6.1 AGREED APPOINTMENT An independent expert appointed to determine a Relevant Dispute shall be an experienced environmental consultant from a reputable firm of environmental consultants in Queensland, Australia and shall be appointed by joint agreement of the Seller and Buyer. 6.2 FAILURE TO AGREE Failing agreement on the appointment of an independent expert within 10 Business Days, either party may refer the matter to the by the president or equivalent for the time being of the Australian Contaminated Land Consultants Association, requesting that they nominate an independent expert in respect of the Relevant Dispute. 6.3 REFERRAL REQUIREMENTS When either party refers the Relevant Dispute to the Australian Contaminated Land Consultants Association the referral must outline the nature of the Relevant Dispute and request that an independent expert be appointed as soon as practicable to determine the Relevant Dispute. 6.4 NOMINATION BINDING The Seller and Buyer each agree that the person appointed as the independent expert by the Australian Contaminated Land Consultants Association is final and not reviewable by the Seller or Buyer. 7 ROLE OF INDEPENDENT EXPERT 7.1 SUBMISSIONS IN WRITING Within 7 Business Days of appointment by the Australian Contaminated Land Consultants Association the independent expert shall require the Seller and Buyer to submit in writing their respective arguments in respect of the Relevant Dispute. The independent expert shall, in his or her absolute discretion, consider whether any oral submissions are necessary in order to resolve the matter. 7.2 POWERS OF INDEPENDENT EXPERT The independent expert shall have the power to open up, review and revise any opinion, certificate, instruction, determination or decision of whatever nature given or made in connection with a Relevant Dispute. 7.3 DOCUMENTATION All information, data or documentation disclosed or delivered by the Seller or Buyer to the independent expert in consequence of or in connection with his or her appointment as an independent expert shall be treated as confidential. The independent expert shall not, except as otherwise permitted by Clause 14 (Confidential Information), disclose to any person or company any such Share Sale Agreement 9 March 2004 86 information, data or documentation and all such information, data or documentation shall remain the property of the party disclosing or delivering the same and all copies shall be returned to such party on completion of the independent expert's work. 7.4 INDEPENDENCE The independent expert must not have a direct or indirect personal interest in the outcome of the decision or determination that he or she is required to make. 8 PROVISION OF ASSISTANCE TO INDEPENDENT EXPERT The Seller and Buyer must supply the independent expert with any information, assistance and co-operation which the independent expert requests in connection with the Relevant Dispute. 9 DECISION OF INDEPENDENT EXPERT 9.1 WRITTEN DECISION The independent expert shall provide to both the Seller and Buyer his or her written decision on the matter within 28 days of receiving both the Seller's and Buyer's arguments. The independent expert shall state reasons for his or her decision and both the Seller and Buyer shall give effect to the decision. 9.2 EXPERT AND NOT AN ARBITRATOR The independent expert is an independent expert, not an arbitrator. The independent expert's decision is final and binding on the parties, except in the case of a manifest error. 10 LIABILITY OF INDEPENDENT EXPERT The independent expert is not liable for anything done or omitted in the discharge or purported discharge of his or her functions as independent expert unless the act or omission is in bad faith. Any employee or agent of the independent expert is similarly protected from liability. 11 REMUNERATION OF INDEPENDENT EXPERT AND PARTIES COSTS The independent expert's costs shall be borne as the independent expert shall specify or, in default, equally by the Seller and Buyer. The Seller and Buyer shall bear its own costs arising out of any Relevant Dispute referred to an independent expert, including legal costs and the costs and expenses of any witnesses. Share Sale Agreement 9 March 2004 87 Schedule 15 - Premises - Definition of "Premises"
TERMINALS/DEPOTS ADDRESS TYPE OF LEASE - ------------------------------- --------------------------------- ---------------- Alotau Depot Allotment 5 Section 43 - Alotau State Lease Daru Depot Commercial Lease Goroka Depot Allotment 3 & 4 Section 53 - State Lease Goroka, Eastern Highlands Kanundi Terminal Portion 103 Granville, Port State Lease Moresby, Central Province Kavieng Depot Allotment 1 Section 45 - Kavieng, State Lease New Ireland Province Kerema Depot Allotment 15 Section 10 - Kerema State Lease Kimbe Depot Allotment 3 Section 57 - Kimbe State Lease Lae Terminal Allotment 23 Section 34 - Lae State Lease Madang Depot Commercial Lease Mt Hagen Depot Portion 849 Dobel, Formil - Mt State Lease Hagen, Western Highlands Rabaul Depot Portion 928 Blanch, Rabaul - East State Lease New Britain Wewak Depot Allotment 8, 9 & 10 Section 36, State Lease Wewak, East Sepik - Wharf Road
SERVICE STATIONS ADDRESS TYPE OF LEASE - ---------------- ------- ------------- BP Badilli Allotment 17 Section 6, Port State Lease Moresby, Central Province BP Boroko Allotment 1 Section 16, Boroko, State Lease Central Province BP Lawes Road Allotment 10 & 11, Section 36 State Lease Granville, Port Moresby BP Madang Madang Town Commercial Lease BP Waigani Allotment 7 Section 36, Hohola, Commercial Lease Waigani Drive BP North Waigani Allotment 124 Section 41, Hohola, State Lease Port Moresby BP Star Allotment 11 Section 5, Lae State Lease
OFFICE ADDRESS TYPE OF LEASE ------ ------- ------------- Ela Beach Office Office C2.2, Ela Beach Tower, Commercial Lease Ela Beach Road, Port Moresby
Share Sale Agreement 9 March 2004 88
COMPOUNDS ADDRESS TYPE OF LEASE - --------- ------- ------------- 9 Mile Compound Portion 489, Milinch of Lae, Fourmil State Lease of Markharr (9 Mile) Oak Street Compound Allotment 11, Section 79, Lae- State Lease Morobe Province (Eriku) Swallow Street Compound Allotment 21, Section 51, Lae- State Lease Morobe Province (China Town) Walnut Street Compound Allotment 2 & 3, Section 77, Lae - State Lease Morobe Province (Boundary Road)
ACCOMMODATION ADDRESS TYPE OF LEASE - ------------- ------- ------------- Windward Apartments Unit 8.2, Windward Apartments, Property Lease Kermadec St, Port Moresby 2 Bedroom Unit - E. Gosik Bowerbird Street, Unit 4 Property Lease Hostel Unit - S. Samuel Papuan Compound, Lae Property Lease Town Unit - A. Maineke Klinki Street, Unit 3 Property Lease 3 Bedroom Unit - N. Alickson Madang Town Property Lease 3 Bedroom Unit - T. Palat Alotau Town Property Lease 3 Bedroom House - P Matang Goroka Town Property Lease 3 Bedroom Town Unit - V. Oda Eagle Street, Lae Property Lease Hostel Unit - A Misake Cassowary Road Property Lease 2 Bedroom Unit - M. Akura Goroka Town Property Lease 1 Bedsitter Unit - J Emmanuel Gordons Drive Property Lease 2 Bedroom Unit - J. Damin Bowerbird Street, China Town Property Lease 2 Bedroom Unit - B. Kila China Town Property Lease 3 Bedroom Town House - S. Sorua Eagle Street, Lae Property Lease 3 Bedroom House - H Patais Wewak Town Property Lease 3 Bedroom Town House - S. Mou Taun Street Property Lease Town Unit - P Tumatui Kinki Street, Unit 2 Property Lease 3 Bedroom Unit - S. Simbiken Korobosea Town Units Property Lease 4 Bedroom House - T. Faite Cassia Crescent Property Lease 3 Bedroom Taun House - T. Yip Weybank Street Property Lease 3 Bedroom House - M. Tunusau Morata Property Lease 3 Bedroom House - J. Joseph Kavieng Town Property Lease 3 Bedroom House - T. Biuna Gordons Drive Property Lease 3 Bedroom House - M. Apusae Kimbe Depot Property Lease 3 Bedroom House - D. Yambuium Waigani Property Lease 3 Bedroom Unit - T Uruaka Klinki Street Property Lease
Share Sale Agreement 9 March 2004 89
3 Bedroom Unit - T. Pokaran Boroko Property Lease 3 Bedroom House - A. Aihi Parer Street, Lae Property Lease 3 Bedroom House - T. Gabuogi Kokopo, Rabaul Property Lease 1 Bedroom Apartment - J Aroga China Town Property Lease 3 Bedroom House - P. Yalehan Lae Property Lease 3 Bedroom house - D. Kaputin Lae Property Lease
Share Sale Agreement 9 March 2004 90 Schedule 16 - Material Contracts - Definition of "Material Contracts"
PARTY CONTRACTING WITH BP DATE OF PAPUA NEW GUINEA LIMITED DESCRIPTION OF CONTRACT CONTRACT - ------------------------------------ ---------------------------------- ---------------- 1. FUEL SUPPLY - INTO COUNTRY BP Refinery (Bulwer Island) Pty Ltd Supply of diesel, kerosene and ULP 1 July 2003 from Bulwer Refinery to PNG BP Australia Pty Ltd MR supply of diesel, kerosene and 1 January 2004 ULP from Shell BP Singapore Pte Ltd Supply of high sulphur Fuel Oil to 1 August 2003 Port Moresby 2. COMMERCIAL FUEL SUPPLY Alotau International Hotel Ltd Supply of fuel and lubricants 1 June 2001 Cheongs Supermarket Ltd Supply of fuel and lubricants 31 December 2002 Currimundi Ltd Supply of fuel and lubricants 25 March 2002 Emirau Marine Products Ltd Supply of fuel and lubricants 17 June 2002 Hanjung Power Pty Ltd Supply of high sulphur Fuel Oil to 28 August 1997 the HPL Kanudi power station Homeguard Ltd Supply of fuel and lubricants 8 March 2002 K.K. Kingston Ltd Supply of fuel and lubricants 27 February 2004 Lae Builders & Contractors Ltd Supply of fuel and lubricants 20 June 2003 Mainland Holdings Ltd Exchange of letters
Share Sale Agreement 9 March 2004 91 Masiruna Ltd Supply of fuel and lubricants 16 August 2001 Mountain Motors Ltd Supply of lubricants 2 May 2002 Nako Fisheries Ltd Supply of fuel and lubricants 30 June 2001 New Britain Palm Oil Ltd Supply of fuel and lubricants 1 September 2001 Oil Search (PNG) Ltd Supply of fuel and lubricants 1 January 2001 PNG Cocoa and Coconut Research Institute Supply of fuel and lubricants 25 May 2001 PNG Motors Ltd Supply of fuel and lubricants for 1 June 2001 PNG Motors Lae & Kokopo PNG Power Ltd Supply of diesel to power stations 1 July 2003 PNG Ready Mix Concrete Ltd Supply of fuel and lubricants 8 June 2001 South Seas Tuna Corporation Ltd Supply of diesel 1 December 2003 Turama Forestry Industries Ltd Supply of fuel and lubricants 7 November 2001 3. SERVICE STATION - RESELLER Ambu Naiya Investments BP Kimbe - Reseller Agreement 1 October 2003 Amuliba Trading Ltd BP Kapal - Reseller Agreement 15 November 2000 Big Rooster Ltd BP Lae Market - Reseller Agreement 24 October 2003 Henri Tioni BP Henri Tioni - Reseller Agreement 13 February 2002 Hila Holdings Pty Ltd Huon Gulf Service Station - 1 June 1993 Reseller Agreement Hungo Limited BP Wewak Autopoint - Reseller 16 June 2003 Agreement J & N Mavi Enterprises Ltd BP Sagalau - Reseller Agreement 18 August 2003
Share Sale Agreement 9 March 2004 92 Jopo Jemara Real Estate Ltd BP Wara Simbu - Equipment Loan 18 August 1998 Agreement Kapmundu Investments Ltd BP Wewak - Reseller Agreement 15 July 2003 Kona Trading Ltd BP Kona - Reseller Agreement 1 May 2001 Lapilo Coffee Plantations Ltd BP Highway - Sale of Land and 24 May 1999 Reseller Agreement Lastop Services Ltd BP Lastop - Reseller Agreement 13 February 2002 Lumbalumba Investments Ltd BP Lumbalumba - Reseller Agreement 6 July 2001 Mozup Plant Hire & Earthmoving Mozup Service Station - Reseller 28 March 2001 Agreement PNG Motors Ltd PNG Motors Goroka - Reseller 1 June 2001 Agreement PNG Motors Ltd BP Eriku - Reseller Agreement 1 June 2001 Rapa Investments Ltd BP Kalaki - Reseller Agreement 2 April 2004 Skowhegan Ltd BP Skowhegan - Reseller Agreement 1 January 1999 Unigate Service Station BP Unigate - Reseller Agreement 1 October 1998 W.M. Middleton Kulili Estate Service Station - 25 May 2000 Reseller Agreement Tim Wong trading as Wong Tim & Co Voco Point Service Station - 10 February 1997 Reseller Agreement 4. SERVICE STATION - COMPANY OWNED/DEALER LEASED Needilup Ltd Golden Rooster lease of building at 15 March 2002 BP Boroko S/S Nilasi Enterprises Ltd BP Boroko 13 October 2001 Nilasi Enterprises Ltd BP Waigani 1 October 2001 Parks & Partners Ltd BP North Waigani 1 October 2001
Share Sale Agreement 9 March 2004 93 5. ROAD CARTAGE CarTrans Ltd Road cartage in Wewak 12 May 2003 Morobe Customs & Cartage Ltd Road cartage in Lae 1 February 1996 Myna Trucking Ltd Road cartage in Madang 1 January 1998 Port Moresby Transport Ltd Road cartage in Port Moresby 1 February 2001 6. SHIPPING The Vessel Owner and BP Shipping Ltd Short term (4-8 months) charter of 1 January 2004 (as agent for the Company) the Essberger Pilot fuel tanker 7. GENERAL SERVICES BP Australia Pty Ltd DCT - Petrolink system licence support BP Refinery (Bulwer Island) Pty Ltd Laboratory and technical support EXSIF Worldwide Inc Isotainer Lease for Oil Search 1 January 2001 Contract Protect Security Ltd Exchange of Letters. Security of 26 November 2003 BP facilities around PNG.
Share Sale Agreement 9 March 2004 94 Schedule 17 - Sites - Definition of "Sites"
UNDERGROUND SIZE OF TANK OWNER AND LOCATION TANK (IN LITRES) OPERATOR - -------------------------------- ----------- ------------ --------- HIGHLANDS 1. GOROKA DEPOT East West Transport Yes 30,000 15,000 10,000 Pagini Transport Yes 30,000 2. KENMORE RETAIL SITES PNG Motors Ltd - D/Way S/Stn GKA Yes 40,000 DODO 20,000 PNG Motors Ltd - Hagen S/Stn Yes 30,000 DODO 20,000(x 2) 3. MT HAGEN DEPOT Waghi MEK Yes 25,000 10,000 MOMASE 4. LAE TERMINAL BP Huon Gulf S/Stn Yes 30,000 DODO 10,000(x 4) 5,000 BP Star S/S-Pamo General Yes 15,000 CODO Supplies 10,000(x 2) 5,000(x 2) BP Voco Point S/Stn Yes 10,000(x 4) DODO BP Buambub 10 Mile Yes 35,000(x 2) DODO 10,000 Avis Rent A Car - Lae Inter Yes 5,000 Hotel GP Motors Yes 5,000 KK Kingston Yes 15,000 10,000 Morobe Pharmacy Yes 5,000(x 2) PNG Forest Products Yes 5,000 PNG Ready mix Yes 5,000 Seeto Kui Yes 5,000 2,000 Taraka Bakery Yes 10,000
Share Sale Agreement 9 March 2004 95 Telikom Yes 15,000 Wau Alluvial Mining Yes 10,000(x 2) PNG Defence Force Yes 10,000(x 2) Lae Terminal - Maintenance Yes 20,000 13,600 5. MADANG DEPOT BP Dylup S/Stn - Fuel Yes 10,000(x 2) DODO 5,000(x 2) BP Sagalau S/Stn Yes 10,000(x 2) DODO 5,000(x 2) JKT Lim T/A BP Madang S/Stn Yes 20,000(x 2) CODO 15,000(x 2) CCRI - Madang Yes 20,000 6. WEWAK DEPOT Wewak Depot (S/Stn) Yes 5,000(x 3) 7. KENMORE RETAIL SITES PNG Motors Ltd - Lae Eruku S/Stn Yes 25,000 DODO 20,000 15,000(x 2) 10,000 PAPUA 8. PORT MORESBY TERMINAL BP Badili Yes 20,000(x 2) CODO 10,000(x 2) BP Boroko Yes 35,000 CODO 30,000 20,000 9,000(x 2) 4,500 BP Lawes Rd S/Stn Yes 30,000(x 2) CODO 18,000 10,000(x 2) BP North Waigani S/Stn Yes 18,000 CODO 10,000 5,000 BP Waigani S/Stn Yes 30,000 CODO 27,000 10,000(x 2) 4,500(x 2) Brain Bell - POM Yes 10,000 Bensbach Wild Life Yes 10,000 Boroko Motors Yes 10,000 Cape Rodney Agri Dev Yes 18,000(x 2) 15,000 10,000 5,000 Hightec Industries Yes 5,000(x 2) Holy Spirit College - Bomana Yes 2,000 Ilimo Park Station Yes 27,000
Share Sale Agreement 9 March 2004 96 13,000 1,000 JJ Wholesalers Yes 5,000 Kayco Electrics Yes 5,000 Kupiano S/Stn Yes 10,000 5,000 Nationwide Rent A Car - Avis Yes 10,000 Port Moresby Golf Club Yes 4,500(x 2) PNG Motors - POM Yes 18,000(x 2) 4,500 Ramington Yes 5,000 PNG Ready Mix - POM Yes 10,000 5,000 Dept of Civil Aviation Yes 5,000 Dept of Works Yes 10,000(x 5) Mainohano High School Yes 5,000 NBC - POM Yes 4,500 PNG National Parliament Yes 10,000 5,000 PNG DF Yes 10,000(x 2) 9,000(x 2) Plant and Transport (PooL) Yes 5,000(x 2) Royal PNG Constabulary Yes 10,000(x 3) 9. ALOTAU Alotau Stevedoring Yes 5,000 Dept of Works - Alotau Yes 25,000 10,000 10. DARU Baimuru Trading Yes 10,000 5,000 TST - Daru Yes 10,000(x 3) Daru - Depot Yes 20,000(x 2) 5,000 11. KEREMA Dept of Works - Kerema Yes 2,000 NGI 12. KAVIENG DEPOT BP Kavieng S/Stn - Depot Yes 10,000 COCO NFA - Kavieng Yes 10,000 13. KIMBE DEPOT Hoskins High School - S/Stn Yes 10,000(x 2) 14. RABAUL DEPOT BP Malaguna S/Stn - T/A Lawana Yes 5,000(x 2) Limited BP Konga - Rabaul Depot Front Yes 5,000 COCO 4,500(x 2) BP Skowhegan S/Stn Yes 5,000 DODO BP Kokopo S/Stn - Rabaul Yes 5,000(x 3)
Share Sale Agreement 9 March 2004 97 Dept of Works Yes 10,000(x 4) Nonga General Hospital Yes 10,000
KEY: DODO - dealer owned and dealer operated CODO - company owned and dealer operated COCO - company owned and company operated Share Sale Agreement 9 March 2004 98 Schedule 18 - Letter of comfort - Form of letter of comfort Share Sale Agreement 9 March 2004 99 Schedule 19 - Data room index Share Sale Agreement 9 March 2004 100 Signing page DATED: [ ] [INSERT EXECUTION CLAUSES] Share Sale Agreement 9 March 2004 102 EX-99.25 20 h19854exv99w25.txt SECURITIES PURCHASE AGREEMENT EXHIBIT 25 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated as of August 26, 2004 by and among INTEROIL CORPORATION (the "COMPANY"), the initial investors listed on the Schedule of Purchasers attached hereto (individually, an "INITIAL PURCHASER" and collectively with any Subsequent Purchasers (as defined below) who become a party hereto pursuant to the terms hereof, the "PURCHASERS"). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Debentures. All references to dollars or "$" shall refer to U.S. dollars. WHEREAS, the Company has authorized the issuance of up to Forty Million ($40,000,000) aggregate principal amount of its 8 7/8% Senior Convertible Debentures in the form attached hereto as Exhibit A (together with any senior convertible debentures issued in replacement thereof in accordance with the terms thereof, the "DEBENTURES"), which Debentures shall be convertible into shares of the Company's common shares, no par value per share (the "COMMON SHARES") (as converted, the "UNDERLYING SHARES"), in accordance with the Debentures. WHEREAS, the Debentures bear interest, which at the option of the Company, subject to certain conditions, may be paid in Common Shares (the "INTEREST SHARES"). WHEREAS, each Initial Purchaser wishes to purchase, severally but not jointly, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate principal amount of Debentures set forth opposite such Initial Purchaser's name on the Schedule of Purchasers (which aggregate principal amount for all Initial Purchasers equals $30,000,000) and (ii) warrants, in substantially the form attached hereto as Exhibit B (the "WARRANTS"), to acquire that number of shares of Common Shares (as exercised, collectively, the "WARRANT SHARES") equal to 7,987 Warrant Shares for each $1,000,000 aggregate principal amount of Debentures set forth opposite such Initial Purchaser's name on the Schedule of Purchasers. WHEREAS, the Company will have the right to sell, upon the terms and conditions stated in this Agreement, up to an additional $10,000,000 of Debentures to additional Purchasers. WHEREAS, the Purchasers will have the registration rights with respect to the Underlying Shares, the Warrant Shares and the Interest Shares pursuant to the terms of that certain Registration Rights Agreement to be entered into between the Company and the Purchasers in the form of Exhibit C (the "REGISTRATION RIGHTS AGREEMENT"). NOW, THEREFORE, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF DEBENTURES AND WARRANTS Section 1.1 Issuance of Debentures; Warrants. (a) Upon the following terms and conditions of this Agreement, the Company shall issue and sell to each Initial Purchaser and such Initial Purchaser shall purchase from the Company on the Initial Closing Date (as defined below), (i) the aggregate principal amount of Debentures set forth opposite such Initial Purchaser's name on the Schedule of Purchasers and (ii) Warrants to purchase that number of Common Shares set forth opposite such Initial Purchaser's name on the Schedule of Purchasers. (a) Upon the following terms and conditions of this Agreement, the Company shall have the right to issue and sell to any other investor who is an existing stockholder of the Company on the date hereof and a "non-U.S." Person (as defined under Rule 902 of Regulation S as promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the "1933 ACT")) (each such investor, a "SUBSEQUENT PURCHASER") and such Subsequent Purchaser shall purchase from the Company on the Subsequent Closing Date (as defined below), (i) the aggregate principal amount of Debentures (which Debentures shall be identical to the Debentures issued to the Initial Purchasers) that shall be set forth opposite such Subsequent Purchaser's name on an amended Schedule of Purchasers (which aggregate amount for all Subsequent Purchasers shall not exceed $10,000,000) and (ii) Warrants (which Warrants shall be identical to the Warrants issued to the Initial Purchasers including having proportionate warrant coverage to the amount of Debentures purchased) to purchase that number of Common Shares that shall be set forth opposite such Purchaser's name on an amended Schedule of Purchasers. Each Subsequent Purchaser shall execute a counterpart signature page to this Agreement agreeing to be bound by the terms hereof and the Company shall amend the Schedule of Purchasers to reflect such Subsequent Purchasers and shall distribute such amended Schedule of Purchasers to each of the Initial Purchasers. Notwithstanding the foregoing, in no event shall the Company issue any Debentures or Warrants to any Subsequent Purchaser if such issuance would require the registration of any of the Debentures or Warrants under the 1933 Act. Section 1.2 Purchase Price. The purchase price for the Debentures and Warrants to be acquired by each Purchaser (the "PURCHASE PRICE") shall be the Purchase Price set forth opposite such Purchaser's name on the Schedule of Purchasers hereto. Section 1.3 The Closing. (a) Timing. (i) Subject to the fulfillment or waiver of the conditions set forth in Article V hereof, the purchase and sale of $30,000,000 aggregate principal amount of the Debentures and applicable Warrants shall take place at a closing (the "INITIAL CLOSING"), at least one, but no more than three, Trading Days (as defined in the Debenture) following the date hereof or such other date as the Initial Purchasers and the Company may agree upon (the "INITIAL CLOSING DATE"). 2 (ii) Subject to the fulfillment or waiver of the conditions set forth in Article V hereof, the purchase and sale of up to $10,000,000 aggregate principal amount of the Debentures and applicable Warrants to the Subsequent Purchasers shall take place at a closing (the "SUBSEQUENT CLOSING") at any time following the date hereof but no more than seven Trading Days following the date hereof (the "SUBSEQUENT CLOSING DATE"). The Initial Closing and the Subsequent Closing collectively are referred to in this Agreement as the "CLOSINGS." The Initial Closing Date and the Subsequent Closing Date collectively are referred to in this Agreement as the "CLOSING DATE." (b) Form of Payment and Closing. On the applicable Closing Date, the Company shall deliver to each Purchaser all of the Debentures and Warrants purchased by it hereunder, each registered in the name of such Purchaser or its nominee. The Debentures and Warrants shall be issued in accordance with the terms of this Agreement. On the applicable Closing Date each Purchaser shall deliver the Purchase Price set forth opposite such Purchaser's name on the Schedule of Purchasers by wire transfer to an account designated in writing by the Company at least one Business Day prior to the applicable Closing Date. In addition, each party shall deliver all documents, instruments and writings required to be delivered by such party pursuant to this Agreement at or prior to the applicable Closing. The Debentures and Warrants will be fully owned and paid for by the Purchasers as of the applicable Closing Date. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchasers as of the date hereof and as of each Closing Date: (a) Organization and Qualification; Material Adverse Effect. The Company is a corporation duly incorporated and existing in good standing under the laws of the Province of New Brunswick and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company does not have Subsidiaries (defined as any entity in which the Company, directly or indirectly, owns 25% or more of the capital stock or other equity or similar interest) other than the Subsidiaries listed on Schedule 2.1(a) attached hereto. Except where specifically indicated to the contrary, all references in this Agreement to subsidiaries shall be deemed to refer to all direct and indirect subsidiaries of the Company. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary other than those in which the failure so to qualify would not have a Material Adverse Effect. In this Agreement, "Material Adverse Effect" means any adverse effect on the business, operations, properties, prospects or financial condition of the Company and its Subsidiaries and which is (either alone or together with all other adverse effects) material to the Company and its Subsidiaries taken as a whole, and any material adverse effect on the transactions contemplated under this Agreement, the Debentures, the Warrants, and the Registration Rights Agreement (the "TRANSACTION DOCUMENTS"), or any other agreement or document contemplated hereby or thereby. 3 (b) Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform the Transaction Documents and to issue the Debentures in accordance with the terms hereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby, including the issuance of the Debentures, have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors (or any committee or subcommittee thereof) or stockholders is required, (iii) when delivered, the Transaction Documents will have been duly executed and delivered by the Company, (iv) when delivered, the Transaction Documents will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except (A) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of creditors' rights and remedies, the discretion that a court may exercise in the granting of equitable remedies or by other equitable principles of general application, and (B) to the extent the indemnification provisions contained in this Agreement and the Registration Rights Agreement may be limited by applicable law and (v) the Debentures and Warrants and the Underlying Shares and Warrant Shares issuable upon the conversion and/or exercise thereof have been duly authorized and, upon issuance thereof and payment therefor in accordance with the terms of this Agreement, the Debentures and Warrants will be validly issued, free and clear of any and all liens, claims and encumbrances, except for restrictions on transfer imposed by applicable securities laws and referenced in Sections 6.1 and 6.2 below. (c) Capitalization. Except as set forth on Schedule 2.1(c), as of the date hereof, the authorized capital stock of the Company consists of an unlimited number of Common Shares, of which as of the date hereof, 25,849,146 shares are issued and outstanding and 2,375,290 shares are issuable and reserved for issuance pursuant to the Company's stock option plans or securities exercisable or exchangeable for, or convertible into, Common Shares. All of such outstanding shares have been, or upon issuance will be, validly issued, fully paid and nonassessable. As of the date hereof, except as disclosed in Schedule 2.1(c), (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register or qualify the sale of any of their securities the applicable securities laws and regulations of any jurisdiction ("SECURITIES Laws") other than pursuant to the Registration Rights Agreement, (v) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance, exercise or conversion 4 of the Debentures or the Warrants as described in this Agreement and (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. The Company has furnished to the Purchasers true and correct copies of the Company's Articles of Amalgamation, as amended and as in effect on the date hereof (the "ARTICLES OF AMALGAMATION"), and the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the terms of all securities convertible or exchangeable into or exercisable for Common Shares and the material rights of the holders thereof in respect thereto. (d) Issuance of Shares. Upon issuance in accordance with this Agreement and the terms of the Debentures and the Warrants, the Underlying Shares, the Interest Shares and the Warrant Shares will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof. (e) No Conflicts. Except as disclosed in Schedule 2.1(e), the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby and issuance of the Debentures and Warrants, and the Underlying Shares and Warrant Shares will not (i) result in a violation of the Articles of Amalgamation or the By-laws; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any material law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations, Canadian and provincial securities laws and regulations and the rules and regulations of the Toronto Stock Exchange ("PRINCIPAL MARKET") or other securities exchange or trading market on which the Common Shares are traded or listed) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Except as disclosed in Schedule 2.1(e), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, (x) its certificate of incorporation, any certificate of designations, preferences and rights of any outstanding series of preferred stock or by-laws or their organizational charter or by-laws, respectively, (y) any material contract, agreement, mortgage, indebtedness, indenture, instrument, or (z)(i) any judgment, decree or order or (ii) any statute, rule or regulation applicable to the Company or its Subsidiaries, the non-compliance with which (in the case of (z)(i) only), would be material to the Company or its Subsidiaries or interfere with the performance of its obligations under the Transaction Documents. Except as set forth on Schedule 2.1(e) or as specifically contemplated by this Agreement and as required under Securities Laws and the rules of the Principal Market, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Transaction Documents or the issuance of the Debentures, the Warrants and the Underlying Shares and Warrant Shares, in accordance with the terms hereof or thereof. Except as disclosed in Schedule 2.1(e), all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. 5 (f) Regulatory Filings. (i) Since January 1, 2003, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the applicable regulatory authorities ("REGULATORY AUTHORITIES") pursuant to the reporting requirements of the Securities Laws (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "REGULATORY FILINGS"). The Company has delivered to each Purchaser or its representatives true and complete copies of any Regulatory Filings that were not filed electronically via SEDAR. As of their respective dates, the Regulatory Filings complied in all material respects with the requirements of the Securities Laws applicable to the Regulatory Filings, and none of the Regulatory Filings, at the time they were filed with the Regulatory Authorities, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the Regulatory Filings complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Regulatory Authorities with respect thereto. Such financial statements have been prepared in accordance with Canadian generally accepted accounting principles, consistently applied, during the periods involved (except (x) as may be otherwise indicated in such financial statements or the notes thereto, or (y) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Purchasers which is not included in the Regulatory Filings, including, without limitation, information referred to in Section 2.2(b) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. (ii) The Company (A) is a reporting issuer in the Canadian provinces of British Columbia, Alberta and Ontario ("CANADIAN JURISDICTIONS") and not in default of applicable Canadian Securities Laws; (B) has a current Annual Information Form and is eligible under National Instrument 44-101 to file a short form prospectus with Canadian securities regulatory authorities of the Canadian Jurisdictions; and (C) meets the general eligibility requirements for use of Form F-10 under the 1933 Act. (g) Absence of Certain Changes. Except as disclosed in Schedule 2.1(g), since December 31, 2003 there has been no adverse change or adverse development in the business, properties, assets, operations, financial condition, prospects, liabilities or results of operations of the Company or its Subsidiaries which has had or, to the knowledge of the Company or its Subsidiaries, is reasonably likely to have a Material Adverse Effect. The Company has not taken any steps, and does not currently expect to take any steps, to seek 6 protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. Except as disclosed in the Regulatory Filings, Schedule 2.1(g) lists all material events, transactions and agreements which have occurred or been entered into by the Company since January 1, 2003. (h) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Shares or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, (i) except as set forth in Regulatory Filings which were filed at least 10 days before the date hereof, (ii) except as set forth in Schedule 2.1(h), and (iii) except which would not be reasonably likely to result in net liability to the Company in excess of $5,000,000. (i) Acknowledgment Regarding Purchaser's Purchase of Securities. The Company acknowledges and agrees that each Purchaser is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further represents to the Purchasers that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. (j) No Undisclosed Events, Liabilities, Developments or Circumstances. Except for the execution of this Agreement (the material terms of which will be disclosed in the press release referred to in Section 3.10 below), no event, liability, development or circumstance has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a filing filed with the Regulatory Authorities relating to an issuance and sale by the Company of its Common Shares and which has not been publicly disclosed. (k) No Inside Information. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided, and they shall not provide, any Purchaser with any material non-public information. (l) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of Debentures and Warrants to the Purchasers to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of the Principal Market, nor will the Company or any of its Subsidiaries take any action or steps that would cause the offering of the Debentures to be integrated with other offerings. 7 (m) Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened, the effect of which would be reasonably likely to result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement. The Company and its Subsidiaries believe that relations between the Company and its Subsidiaries and their respective employees are good. No "executive officer" as defined in Rule 501(f) of the 1933 Act whose departure would be adverse to the Company has notified the Company that such officer intends to leave the Company or otherwise terminate such officer's employment with the Company. (n) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on Schedule 2.1(n), none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or are expected to expire or terminate within two (2) years from the date of this Agreement where such expiration or termination could reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth on Schedule 2.1(n), there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets or other infringement. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. (o) Environmental Laws. Except as set forth in Schedule 2.1(o)], the Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, provincial, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where such noncompliance or failure to receive permits, licenses or approvals referred to in clauses (i), (ii) or (iii) above could have, individually or in the aggregate, a Material Adverse Effect. (p) Title. The Company and its Subsidiaries have good and marketable title to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 2.1(p) or such as do not materially and adversely affect the value of such property and do not interfere with the use 8 made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Company and its Subsidiaries. (q) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary for comparably situated companies in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its Subsidiaries taken as a whole. (r) Regulatory Permits. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities, necessary to conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. (s) Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with Canadian generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (t) Foreign Corrupt Practices Act. Neither the Company, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of acting for, or on behalf of, the Company, directly or indirectly used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; directly or indirectly made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of the United States; or directly or indirectly made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government or party official or employee. (u) Tax Status. The Company and each of its Subsidiaries has duly and timely made or filed all Canadian federal and provincial income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, has duly completed and correctly 9 reported all income and all other amounts and information required to be reported, and (i) has duly and timely paid all taxes and other governmental assessments and charges, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (ii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. The Company has duly and timely withheld all taxes and other amounts required by applicable law to be withheld by it, and has duly and timely remitted to the appropriate government of authority such taxes and any other amounts required by law to be remitted by it. The Company has duly and timely paid all installments on account of taxes for the current year. There are no unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and the Company is not aware of any basis for any such claim. (v) Certain Transactions. Except as set forth on Schedule 2.1(v) and in the Regulatory Filings filed on SEDAR or EDGAR at least thirty (30) Trading Days prior to the date hereof and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock options disclosed on Schedule 2.1(c), none of the officers, directors or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director or any such employee has a substantial interest or is an officer, director, trustee or partner. (w) Acknowledgment of Dilution; Hedging. (i) The Company understands and acknowledges that the number of Underlying Shares issuable upon conversion of Debentures and Warrant Shares issuable upon exercise of the Warrants, pursuant to the Debentures and Warrants purchased pursuant to this Agreement will increase in certain circumstances. The Company further acknowledges that, subject to such limitations as are expressly set forth in the Transaction Documents, its obligation to issue Underlying Shares upon conversion of Debentures and Warrant Shares upon exercise of Warrants pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company. (ii) The Company acknowledges that the issuance of the Underlying Shares, as contemplated hereby and by the provisions of the Debentures, could result in material dilution of the equity interests in the Company held as of the date hereof by the Company's existing shareholders. The Company further acknowledges that (i) the Purchasers may engage in hedging activities at various times during the period following the public announcement of the execution of this Agreement as provided in Section 3.10 below, and during the period that the Debentures are outstanding, including, without limitation, during the periods that the value of the Common Shares deliverable with respect to the Debentures is being determined, and (ii) such hedging activities (if any) 10 could reduce the value of such existing shareholders' equity interests in the Company at and after the time that the hedging activities are being conducted. (x) Application of Takeover Protections. There are no anti-takeover provisions contained in the Company's Articles of Amalgamation or otherwise which will or could be triggered as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Underlying Shares and the Purchasers' ownership of the Underlying Shares. (y) Rights Plan. Neither the Company nor any of its Subsidiaries has adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Shares or a change in control of the Company. (z) Obligations Absolute. The Company agrees that, subject only to the conditions, qualifications and exceptions (if any) specifically set forth in the Transaction Documents, its obligations under the Transaction Documents are unconditional and absolute. Except to the extent (if any) specifically set forth in the Transaction Documents, the Company's obligations thereunder are not subject to any right of set off, counterclaim, delay or reduction. (aa) Issuance of Underlying Shares and Warrant Shares. The Underlying Shares and Warrant Shares are duly authorized and reserved for issuance and, upon conversion of Debentures in accordance with the terms thereof or exercise of the Warrants in accordance with the terms thereof, such Underlying Shares or Warrant Shares will be validly issued, fully paid and non-assessable, free and clear of any and all liens, claims and encumbrances, except for transfer restrictions imposed by applicable securities laws, and listed on the Principal Market and may be listed on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market (each "an Approved Market"), and the holders of such Underlying Shares or Warrant Shares shall be entitled to all rights and preferences accorded to a holder of Common Shares. As of the date of this Agreement, the outstanding Common Shares are currently listed on the Principal Market. (bb) Brokers. Other than its Letter of Agreement with Merrill Lynch, the Company has taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by the Company or the Purchasers relating to this Agreement or the transactions contemplated hereby, provided that any such fees shall be paid by the Company. (cc) No MFN or Variable Rate Transactions. The Company has no outstanding securities or other instruments issued pursuant to any MFN or Variable Rate Transaction. "MFN TRANSACTION" shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions (the "MFN OFFERING") which grants to the investor (the "MFN INVESTOR") the right to receive additional securities based upon future capital raising transactions of the Company on terms more favorable than those granted to the MFN Investor in the MFN Offering. 11 "VARIABLE RATE TRANSACTION" shall mean a transaction in which the Company issues or sells, on or subsequent to the Initial Closing Date (a) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares Common Shares either (x) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Shares at any time after the initial issuance of such debt or equity securities, or (y) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Shares (but excluding standard anti-dilution provisions), or (b) any securities of the Company pursuant to an "equity line" structure which provides for the sale, from time to time, of securities of the Company which are registered for resale pursuant to the 1933 Act or to be qualified for resale under the Securities Laws. (dd) Indebtedness. (1) Except as disclosed in Schedule 2.1(dd), neither the Company nor any of its Subsidiaries has any outstanding Indebtedness (as defined below). Schedule 2.1(dd) provides a description of the material terms of any such outstanding Indebtedness. For purposes of this Agreement: (i) "Indebtedness" of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in accordance with Canadian GAAP, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (ii) "CONTINGENT OBLIGATION" means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto. (2) The Company and its Subsidiaries are (i) current with respect to all payment obligations regarding Indebtedness for borrowed money or debt securities; 12 and (ii) except as set forth in Schedule 2.1(ee), have no outstanding accounts payable or other trade creditor obligations in excess of 30 days old. (ee) Financial Position. None of the Company, its Subsidiaries nor any of their Affiliates has received any communication, written or oral, from the Company's independent auditors that such auditors intend to include a "going concern" or other qualification in their opinion with respect to Company's financial statements for the years ended December 31, 2003 and 2004, nor does the Company have any knowledge of any facts or circumstances which would reasonably require their auditors to include such a "going concern" or other qualifications in such opinion. (ff) Listing and Maintenance Requirements. Between January 1, 2003 and July 14, 2004, when it became listed on the Principal Market, the Company was in compliance with all listing and maintenance requirements for the TSX Venture Exchange and since July 14, 2004, the Company has been in compliance with all listing and maintenance requirements for the Principal Market except, in each case, as could not reasonably be expected to result in a Material Adverse Effect. The Company has no knowledge of any facts or circumstance which would reasonably lead to delisting or suspension of the Common Shares by the Principal Market in the foreseeable future. Since January 1, 2003, the Company has not received any communication, written or oral, from Regulatory Authorities or the TSX Venture Exchange or the Principal Market regarding the suspension or delisting of the Common Shares from the Principal Market, other than the migration of the Common Shares from the TSX Venture Exchange in connection with the commencement of listing on the Principal Market. (gg) Legends. The Company shall issue the Debentures and Warrants and certificates for the Underlying Shares and Warrant Shares to the Purchaser without any legend except as described in Article VI below. Section 2.2 Representations and Warranties of the Purchaser. Each Purchaser on behalf of itself, severally and not jointly, hereby makes the following representations and warranties to the Company as of the date hereof and the applicable Closing Date: (a) Accredited Investor Status; Sophisticated Purchaser. The Purchaser is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the 1933 Act and as defined in Ontario Securities Commission Rule 45-501 Exempt Distributions and Multilateral Instrument 45-103 Capital Raising Exemptions of the Canadian Securities Administrators. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Debentures, the Warrants, Underlying Shares and Warrant Shares. The Purchaser acknowledges that it can bear that economic risk and complete loss of its investment in the Debentures, the Warrants, the Underlying Shares and the Warrant Shares. (b) Information. The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company which have been requested and materials relating to the offer and sale of the Debentures, the Warrants, Warrant Shares and Underlying Shares which have been requested by the Purchaser. The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the 13 Company. Neither such inquiries nor any other due diligence investigations conducted by the Purchaser or its advisors, if any, or its representatives shall modify, amend or affect the Purchaser's right to rely on the Company's representations and warranties contained in Section 2.1 above. The Purchaser understands that its purchase of the Debentures and Warrants involves a high degree of risk. The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Debentures and Common Shares. (c) No Governmental Review. The Purchaser understands that no United States federal or state agency, any other government or governmental agency, or Regulatory Authority has passed on or made any recommendation or endorsement of the Debentures and Underlying Shares or the fairness or suitability of the investment in the Debentures, Warrants, Warrant Shares and Underlying Shares nor have such authorities passed upon or endorsed the merits thereof. (d) Legends. The Purchaser acknowledges that, while any certificate representing Underlying Shares or Warrant Shares contains legends restricting their transfer, (i) such securities cannot be traded through the facilities of the Toronto Stock Exchange since the certificate is not freely transferable and consequently is not "good delivery" in settlement of transactions on the Toronto Stock Exchange; and (ii) that the Toronto Stock Exchange would deem the selling securityholder to be responsible for any loss incurred on a sale made by him in such securities. As such, at any such time that there is a restrictive legend on any certificate representing Underlying Shares, such certificate shall also bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK EXCHANGE. (e) Authorization; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Purchaser and is a valid and binding agreement of the Purchaser enforceable against the Purchaser in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. The Purchaser has the requisite power and authority to enter into and perform its obligations under this Agreement, entered into by the parties hereto in connection with the transactions contemplated by this Agreement. (f) Residency. Each Purchaser is a resident of the jurisdiction set forth opposite such Purchaser's name on the Schedule of Purchasers. (g) No Conflicts. The execution, delivery and performance of this Agreement, by the Purchaser and the consummation by the Purchaser of the transactions contemplated 14 hereby will not (i) result in a violation of the certificate of incorporation, by-laws or other documents of organization of the Purchaser or (ii) result in a violation of any law, rule, regulation or decree applicable to the Purchaser. (h) Purchase Representation. The Purchaser is purchasing the Debentures and the Warrants for its own account and not with a view to distribution in violation of any securities laws provided, however, that by making the representations herein, such Purchaser does not agree to hold any of the Debentures or Warrants for a minimum or other specific term and reserves the right to dispose of the Debentures or Warrants in accordance with or pursuant to a registration statement or an exemption under the 1933 Act and/or applicable Canadian securities laws. The Purchaser understands that neither the Debentures, the Warrants nor the Common Shares issuable upon conversion or exercise thereof have been registered under the 1933 Act or qualified under the "blue sky" laws of any jurisdiction and may be resold in the U.S. only if registered pursuant to the provisions of the 1933 Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law. The Purchaser has been advised and understands that the Company, in issuing the Debentures and Warrants, is relying upon, among other things, the representations and warranties of the Purchaser contained in this Section 2.2 in concluding that such issuance is a "private offering" and is exempt from the registration provisions of the 1933 Act. The Purchaser acknowledges that it may be required to complete and be bound by a Toronto Stock Exchange Private Placement Questionnaire and Undertaking. (i) Rule 144. The Purchaser understands that there is no public trading market for the Debentures or Warrants, that none is expected to develop, and that the Debentures and Warrants must be held indefinitely unless and until such Debentures, Warrants or Underlying Shares or Warrant Shares received upon conversion or exercise thereof are registered under the 1933 Act or an exemption from registration is available. The Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the 1933 Act. (j) Brokers. The Purchaser has taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by the Company or the Purchaser relating to this Agreement or the transactions contemplated hereby. (k) Reliance by the Company. The Purchaser understands that the Debentures and Warrants are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of the Purchaser to acquire the Debentures and Warrants, and the Underlying Shares and Warrant Shares issuable upon conversion or exercise thereof. 15 ARTICLE III COVENANTS Section 3.1 Registration and Listing; Effective Registration. Until such time as no Debentures or Warrants are outstanding, the Company (a) will cause the Common Shares (including the Underlying Shares, the Interest Shares and the Warrant Shares) to (i) continue at all times to be listed on the Principal Market and (ii) after the initial listing of the Common Shares on an Approved Market, continue at all times to be listed on an Approved Market, (b) will comply in all material respects with its reporting and filing obligations under the Securities Laws, and (c) will not take any action or file any document (whether or not permitted by the Securities Laws or the rules thereunder) to terminate or suspend such reporting and filing obligations. Until such time as no Debentures or Warrants are outstanding, the Company shall comply in all material respects with the Company's reporting, filing and other obligations under the by-laws or rules of each Approved Market on which the Common Shares are subsequently listed. Section 3.2 Certificates on Conversion. Upon any conversion by the Purchaser (or then holder of Debentures) of the Debentures pursuant to the terms thereof, the Company shall, if the Purchaser so elects, issue and deliver to the Purchaser (or holder) within three (3) Trading Days of the conversion date a new Debenture or Debentures for the aggregate principal amount of Debentures which the Purchaser (or holder) has not yet elected to convert but which are evidenced in part by the Debentures submitted to the Company in connection with such conversion (with the denominations of such new Debenture(s) designated by the Purchaser or holder). Section 3.3 Replacement Debentures. The Debenture(s) held by the Purchaser (or another holder) may be exchanged by the Purchaser (or such holder) at any time and from time to time for Debenture(s) with different denominations representing an equal aggregate principal amount of Debenture(s), as requested by the Purchaser (or such holder) upon surrendering the same to the Company at the address set forth in the Debenture. No service charge will be made for such registration or transfer or exchange. Section 3.4 Securities Compliance. The Company shall notify the Regulatory Authorities, the Principal Market and any Approved Market on which the Common Shares are listed, in accordance with their requirements, of the transactions contemplated by this Agreement, the Debentures and the Warrants and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Debentures, the Warrants and the Underlying Shares and Warrant Shares issuable upon conversion or exercise thereof. Section 3.5 Notices. The Company agrees to provide all holders of Debentures and Warrants with copies of all notices and information, including without limitation notices and proxy statements in connection with any meetings, that are provided to the holders of Common Shares, contemporaneously with the delivery of such notices or information to such holders of Common Shares. 16 Section 3.6 Use of Proceeds. The Company agrees that the net proceeds received by the Company from the sale of the Debentures and Warrants, shall be used only for acquisitions, operations and working capital. Section 3.7 Reservation of Shares; Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued Common Shares, solely for the purpose of effecting the conversion of the Debentures and exercise of the Warrants, such number of its Common Shares as shall from time to time be sufficient to effect the conversion of all Debentures and the exercise of all Warrants. . Section 3.8 Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Article V of this Agreement. Section 3.9 Form D; Blue Sky Laws; Form 45-501F1. (a) The Company agrees to file a Form D with respect to the Debentures and the Warrants, in accordance with Regulation D and to provide a copy thereof to the Purchaser promptly after such filing. The Company shall, on or before the applicable Closing Date, take such action as the Company shall have reasonably determined is necessary to qualify the Debentures, Warrants, Underlying Shares and Warrant Shares for sale to the Purchaser under applicable securities or "blue sky" laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Purchaser on or prior to the applicable Closing Date; provided, however, that the Company shall not be required in connection therewith to register or qualify as a foreign corporation in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits or taxation, in each case, in any jurisdiction where it is not now so subject. (b) The Company agrees to file a Form 45-501F1 with respect to the Debentures and Warrants pursuant to Rule 45-501 - Exempt Distributions of the Ontario Securities Commission within the manner and in the time periods specified thereunder. Section 3.10 Publicity. The Company shall, immediately following the entry into this Agreement, issue a press release in Canada (which shall specifically state that it is not for dissemination in the United States) with respect to such transactions, in the form of the press release attached as EXHIBIT D hereto (the "PRESS RELEASE"). On or before 5:00 p.m., New York Time, on the first Business Day following the date hereof, the Company shall file a material change report, which shall be available on SEDAR, describing the terms of the transactions contemplated by the Transaction Documents, and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of Debenture, the form of Warrant and the Registration Rights Agreement) as exhibits to such filing (including all attachments, the "MATERIAL CHANGE REPORT"). From and after the publication of the Press Release, no Purchaser shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its respective officers, directors, employees or agents, that is not disclosed in the Press Release. The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees and agents, not to, provide any Purchaser with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the Press Release without the express written 17 consent of such Purchaser. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Purchaser shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Purchaser shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, shareholders or agents for any such disclosure. Subject to the foregoing, neither the Company nor any Purchaser shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Purchaser, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the Material Change Report and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Purchaser shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Section 3.11 Foreign Private Issuer. So long as the Debenture and Warrants are outstanding, the Company shall remain a "foreign private issuer" as defined in the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"); provided however, that the Company may cease to be a foreign private issuer as a result of a Permitted Merger Transaction. As used herein, a Permitted Merger Transaction is any merger, consolidation or similar transaction in which the holder of Debentures or Warrants is entitled to receive cash, securities or other property, and any securities which the holder is entitled to receive are registered, freely tradable and listed on the Principal Market or an Approved Market. Section 3.12 Prohibited Issuances. The Company shall not issue any Common Shares, or warrants, options or any other securities convertible or exchangeable for Common Shares, at a price per Common Share that is less than the Conversion Price (as defined in the Debenture) until 60 days after the Initial Closing Date. Section 3.13 Transactions With Affiliates. The Company agrees that any transaction or arrangement between it or any of its Subsidiaries and any affiliate or employee of the Company shall be effected on an arms' length basis in accordance with customary commercial practice and, except with respect to grants of options and stock to service providers, including employees and consultants, shall be approved by a majority of the Company's outside directors. Section 3.14 Transfer of Assets; Subsidiaries. While any of the Debentures remain outstanding, without the prior written consent of the Purchasers (which may be withheld in the Purchasers' sole discretion), neither the Company nor any of the Subsidiaries shall sell, offer to sell, or otherwise transfer, or dispose of any material portion of their respective assets other than for fair value or in the ordinary course of business in accordance with past practice. Section 3.15 Incurrence of Indebtedness. (a) Definitions. For purposes of the Transaction Documents, the following definitions shall apply: 18 (i) "ANZ CREDIT FACILITY" means that certain loan of [deleted for confidentiality]. (ii) "BNP CREDIT FACILITY" means that certain [deleted for confidentiality]. (iii) "COLLATERAL ACCOUNT" shall have the meaning provided to such term in Section 3.23 hereof. (iv) "DEFEASANCE AMOUNT" means (i) with respect to any Indebtedness incurred solely in connection with the purchase of equipment ("EQUIPMENT FINANCING"), an amount equal to 20% of such Equipment Financing (ii) with respect to any Indebtedness incurred solely in connection with a Project Financing Indebtedness, an amount equal to 5% of such Project Financing Indebtedness and (iii) in all other circumstances an amount equal to 25% of such Indebtedness. (v) "PERMITTED DEFEASED INDEBTEDNESS" means Indebtedness incurred by the Company or its Subsidiaries provided that the Company irrevocably deposits in the Collateral Account cash in U.S. dollars, non-callable U.S. Government Obligations (as defined in the Debentures), or a combination thereof, in an amount equal to or greater than the applicable Defeasance Amount. (vi) "PERMITTED INDEBTEDNESS" (A) the BNP Credit Facility and the ANZ Credit Facility; (B) Loan Agreement [deleted for confidentiality]; (C) Deferred payment of [deleted for confidentiality]; (D) The vendor financing of the balance of the purchase price with respect to the prospective purchase of Shell Papua New Guinea Limited by the Company or a nominee of the Company under the Purchase and Sale Agreement between Shell Overseas Holdings Limited and the Company not to exceed $[deleted for confidentiality]; (E) Loan of [deleted for confidentiality]; (F) Loan Agreements between [deleted for confidentiality]; (G) Obligations with respect to customary provisions regarding post-closing purchase price adjustments and indemnification in agreements for the purchase or sale of a business or assets; (H) Permitted Refinancing Indebtedness; (I) Indebtedness arising out of payment obligations under non-speculative hedging transaction; and 19 (J) Inter-company Indebtedness. (vii) "PERMITTED REFINANCING INDEBTEDNESS" means the purchase, redemption, repayment, defeasance or other acquisition or retirement for value of Permitted Indebtedness described in clauses (B) through (F) in the definition thereof, in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent incurrence of, Indebtedness; provided, that, the principal amount of such new Indebtedness does not exceed the principal amount of the Indebtedness being so purchased, redeemed, repaid, defeased, acquired or retired, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing and such new Indebtedness has a stated maturity for its final scheduled principal payment that is at least 91 days later than the stated maturity for the final scheduled principal payment of the Debentures; and, provided further, that, the interest for such new Indebtedness is no greater than market rate interest for comparable Indebtedness. (viii) "PROJECT FINANCING INDEBTEDNESS" means Indebtedness of any Subsidiary of the Company incurred in connection with the acquisition by the such Subsidiary of fixed assets used in the oil and gas Business (including office buildings and other real property used in conducting its operations) and any renewals and refinancings of such Indebtedness; provided that the holders of such Project Financing Indebtedness agree that they will look solely to the fixed assets so acquired which secure such Indebtedness (subject to customary exceptions such as indemnifications for environmental, title, fraud and other matters), and neither the Company nor any other Subsidiary (a) is directly or indirectly liable for such Indebtedness or (b) provides credit support, including any undertaking, guarantee, agreement or instrument that would constitute Indebtedness (other than the grant of a lien on such acquired fixed assets or the stock of the Subsidiary which holds such assets). (b) Prohibition on Additional Indebtedness. So long as any Debenture is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness other than Permitted Indebtedness and other than the Indebtedness evidenced by the Debentures unless either of the following conditions have been met: (i) Both prior to and after giving effect to the incurrence of such Indebtedness, the aggregate Indebtedness of the Company and its Subsidiaries (on a consolidated basis) is not in excess of [deleted for confidentiality] for the Company and its Subsidiaries (on a consolidated basis) for the twelve-month period ending with the last day of the period covered by, and as set forth in the financial statements of, the Company's most recently filed Form 20-F or Form 6-K. To the extent that the Company or its Subsidiary incurs any such Indebtedness in connection with the bona fide purchase of a business, EBITDA for such twelve-month period shall include the EBITDA of such purchased business during such period calculated on a pro forma basis as if the acquisition occurred on the first day of the period; or 20 (ii) Such Indebtedness would qualify as Permitted Defeased Indebtedness. Section 3.16 Dividends; Stock Repurchases. So long as any Debentures remain outstanding, the Company will not declare any dividends on any shares of any class of its capital stock (other than dividends consisting solely of Common Shares or rights to purchase Common Shares), or apply any of its property or assets to the purchase, redemption or other retirement of, or set apart any sum for the payment of any dividends on, or for the purchase, redemption or other retirement of, or make any other distribution by reduction of capital or otherwise in respect of, any shares of any class of its capital stock. Section 3.17 Corporate Existence; Reporting Company. So long as any Debentures or Warrants remain outstanding, (i) the Company and each Subsidiary will maintain its corporate existence in good standing and remain qualified to do business as a foreign corporation in each jurisdiction in which the nature of its activities or the character of the properties it owns or leases makes such qualification necessary and (ii) following its listing on the AMEX, will remain a reporting issuer under the Exchange and applicable Canadian securities laws. Section 3.18 MFN and Variable Rate Transactions. So long as any Debentures or Warrants remain outstanding, the Company will not engage in any MFN Transactions or Variable Rate Transactions. Section 3.19 Withholding. If withholding on payments to any Purchaser under the Debenture are required, the Company will withhold at the lowest rate permitted by the Treaty. Section 3.20 AMEX Listing. The Company will use its commercially reasonable efforts to have the Common Shares listed for trading on the American Stock Exchange no later than 120 days from the Initial Closing Date. Section 3.21 Additional Issuances of Securities. (a) From the date hereof until the date that no Debentures remain outstanding, the Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of any of its or its subsidiaries' equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for Common Shares or any rights, warrants or options to subscribe for or purchase Common Shares or any stock or securities that are convertible into or exercisable or exchangeable for Common Shares (any such offer, sale, grant, disposition or announcement being referred to as a "SUBSEQUENT PLACEMENT") unless the Company shall have first complied with this Section 3.21. (i) The Company shall deliver to each Purchaser a written notice (the "OFFER NOTICE") of any proposed or intended issuance or sale or exchange (the "OFFER") of the securities being offered (the "OFFERED SECURITIES") in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) 21 identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with the Purchasers not less than 30% of the Offered Securities, allocated among the Purchasers (a) based on such Purchaser's pro rata portion of the number of Underlying Shares into which the Debentures purchased hereunder are convertible at such time (the "BASIC AMOUNT"), and (b) with respect to each Purchaser that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than their Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT"). (ii) To accept an Offer, in whole or in part, a Purchaser must deliver a written notice to the Company prior to the end of the tenth (10th) Business Day after such Purchaser's receipt of the Offer Notice (the "OFFER PERIOD"), setting forth the portion of the Purchaser's Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the "NOTICE OF ACCEPTANCE"). If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts, then each Purchaser who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the "AVAILABLE UNDERSUBSCRIPTION AMOUNT"), each Purchaser who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent its deems reasonably necessary. (iii) The Company shall have fifteen (15) days from the expiration of the Offer Period above to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Purchasers (the "REFUSED SECURITIES"), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the Offer Notice. (iv) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 3.21(a)(iii) above), then each Purchaser, at its sole option and in its sole discretion, may reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that the Purchaser elected to purchase pursuant to Section 3.21(a)(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange 22 (including Offered Securities to be issued or sold to Purchasers pursuant to Section 3.21(a)(iii) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Purchasers in accordance with Section 3.21(a)(i) above. (v) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Purchasers shall acquire from the Company, and the Company shall issue to the Purchasers, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 3.21(a)(iii) above if the Purchasers have so elected, upon the terms and conditions specified in the Offer. The purchase by the Purchasers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Purchasers of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Purchasers and their respective counsel. (vi) Any Offered Securities not acquired by the Purchasers or other Persons in accordance with Section 3.21(a)(iii) above may not be issued, sold or exchanged until they are again offered to the Purchasers under the procedures specified in this Agreement. (b) Exceptions. The restrictions contained in Subsection (a) above shall not apply (1) in connection with any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer, director or consultant for services provided to the Company or any of its subsidiaries, or pursuant to the exercise of any securities of the Company issued thereunder; (2) upon exercise of the Warrants or conversion of the Debentures or upon issuance of the Interest Shares; (3) upon conversion of any options or convertible securities that are outstanding on the day immediately preceding the Closing Date, provided, that the terms of such options or convertible securities are not amended, modified or changed on or after the Closing Date; (4) in connection with any bona fide strategic transaction or acquisition by the Company, whether through an acquisition for stock or a merger, of any business, assets or technologies the primary purpose of which is not to raise equity capital; (5) in connection with any issuance of securities that is not (A) a private placement under Canadian or U.S. securities laws or the rules of the Principal Market (or the Approved Market, if applicable) or (B) a sale to a limited number of institutional investors pursuant to a shelf registration statement; or (6) if the consideration therefor consists solely of non-cash or non-marketable securities and the transaction was not undertaken primarily for financing purposes. Section 3.22 Segment Reporting. Beginning January 1, 2005, the Company shall issue its financial statements in a manner such that Average Consolidated EBITDA for each quarter thereafter shall be readily determinable. Section 3.23 Collateral Account. The Company shall use its commercially reasonable best efforts to establish within ten days of the Initial Closing Date and maintain at all times 23 thereafter free from any and all competing liens, a cash collateral account at a bank or other financial institution reasonably acceptable to the Initial Purchasers (the "COLLATERAL ACCOUNT") with respect to which the Company has delivered to the Trustee (as defined in the Debenture) as the collateral agent (the "COLLATERAL AGENT") an account control agreement satisfactory in form and substance to the Collateral Agent duly executed by the Company and such bank or financial institution. The Company hereby grants to the Collateral Agent (for the benefit of the holders of the Debentures) a first priority security interest in the Collateral Account, all cash, U.S. Government Obligations (as defined in the Debentures) and/or other property deposited therein from time to time and all products and proceeds thereof, as collateral security for the Company's obligations under this Agreement and the Debentures, whether now existing or hereafter incurred. ARTICLE IV TRANSFER AGENT INSTRUCTIONS The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Underlying Shares and Warrant Shares in such amounts as specified from time to time by a Purchaser to the Company upon delivery of a conversion or exercise notice or repayment of any portion of the Debenture in Common Shares or upon delivery of an exercise notice for the Warrant and Warrant Shares (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Purchasers shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. ARTICLE V CONDITIONS TO CLOSINGS Section 5.1 Conditions Precedent to the Obligation of the Company to Sell. The obligation hereunder of the Company to issue and/or sell the Debentures and Warrants at the Closing is subject to the satisfaction, at or before the Closing, of each of the applicable conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Accuracy of the Purchaser's Representations and Warranties. The representations and warranties of the Purchasers will be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time. 24 (b) Performance by the Purchaser. The Purchasers shall have performed all agreements and satisfied all conditions required to be performed or satisfied by the Purchasers at or prior to the Closing, including payment of the purchase price set forth on the signature page hereto. (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents. Section 5.2 Conditions Precedent to the Obligation of each Purchaser to Purchase. The obligation hereunder of each Purchaser, to acquire and pay for the Debentures and Warrants at the Closing is subject to the satisfaction, at or before the Closing, of each of the applicable conditions set forth below. These conditions are for each Purchaser's benefit and may be waived by such Purchaser at any time in its sole discretion. (a) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company shall be true and correct in all material respects (except those representations and warranties which are qualified by materiality in which case such representations and warranties shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties as of an earlier date, which shall be true and correct in all material respects (except those representations and warranties which are qualified by materiality in which case such representations and warranties shall be true and correct in all respects) as of such date). (b) Performance by the Company. The Company shall have performed all agreements and satisfied all conditions required to be performed or satisfied by the Company at or prior to the Closing, including, without limitation, delivery of the Debentures and Warrants to the Purchasers. (c) Registration Rights Agreement. The Company and the Purchasers shall have entered into the Registration Rights Agreement. (d) TSE. From the date hereof to the Closing Date, trading in the Company's Common Shares shall not have been suspended (which shall not include any halt in trading) nor shall there have been any pending or threatened suspensions, and the Common Shares shall be listed on the Principal Market. (e) No Injunction; TSE Approval. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents. The Principal Market shall have approved the listing of the Underlying Shares and Warrant Shares for trading thereon. The Principal Market shall not have objected or indicated that it may object to the consummation of any of the transactions contemplated by this Agreement. (f) Opinion of Counsel. At the Closing, the Purchasers shall have received an opinion of counsel to the Company in the form attached hereto as EXHIBIT F and such other 25 opinions, certificates and documents as the Purchasers or their counsel shall reasonably require incident to the Closing. (g) Officer's Certificates. The Company shall have delivered to the Purchaser a certificate in form and substance satisfactory to the Purchasers and their counsel, executed by an officer of the Company, certifying as to satisfaction of closing conditions, incumbency of signing officers, and the true, correct and complete nature of the Articles of Amalgamation, By-Laws, good standing and authorizing resolutions of the Company. (h) Miscellaneous. The Company shall have delivered to the Purchasers such other documents relating to the transactions contemplated by this Agreement or the Purchasers or their counsel may reasonable request. ARTICLE VI LEGEND AND STOCK Section 6.1 U.S. Legend. (a) Upon payment therefor as provided in this Agreement, the Company will issue one or more Debentures and Warrants in the name each Purchaser or its nominees and in such denominations to be specified by such Purchaser prior to (or from time to time subsequent to) Closing. Each Debenture and Warrant and any certificate representing Underlying Shares or Warrant Shares issued upon conversion or exercise thereof, prior to such Underlying Shares of Warrant Shares becoming duly registered under the 1933 Act and freely tradeable on the Principal Market, shall be stamped or otherwise imprinted with legends in substantially the following form: THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. (b) The Company agrees to reissue certificates representing Debentures, Warrants or Common Shares issuable upon conversion of Debentures or exercise of Warrants, without the legends set forth above in Section 6.1(a), at such time as (i) the holder thereof is permitted to dispose of such Debentures or Warrants and/or Underlying Shares or Warrant Shares issuable upon conversion of the Debentures or exercise of the Warrants without registration under the 1933 Act, or (ii) such securities are sold to a purchaser or purchasers who (in the opinion of counsel to the seller or the Purchaser, in form and substance reasonably satisfactory to the Company and its counsel) are able to dispose of such shares publicly without registration under the 1933 Act and state securities laws, or (iii) such securities have been sold pursuant to an effective registration statement under the 1933 Act, or (iv) a declaration by the seller that such securities have been sold pursuant to Rule 904 under Regulation S of the 1933 Act. 26 Section 6.2 Canadian Legend. (a) For a period of four months from the Closing Date, each Debenture and Warrant and any certificate representing Underlying Shares or Warrant Shares issued upon conversion or exercise thereof shall bear the following legend: Unless permitted under securities legislation, the holder of this security must not trade the security in Canada before the date that is four months and one day following the Closing Date (the "FREE TRADING DATE"). The securities issuable upon exercise or conversion of the securities represented by this certificate are listed on the Toronto Stock Exchange; however, the said securities can not be traded through the facilities of such exchange since they are not freely transferable, and consequently any certificate representing such securities is not "good delivery" in settlement of transactions on the Toronto Stock Exchange. (b) For a period of four months from the Closing Date, any certificate representing Underlying Shares or Warrant Shares issued upon conversion or exercise of any Debenture or Warrant, as the case may be, shall bear the following legend: Unless permitted under securities legislation, the holder of this security must not trade the security in Canada before the Free Trading Date. The securities represented by this certificate are listed on the Toronto Stock Exchange; however, the said securities can not be traded through the facilities of such exchange since they are not freely transferable, and consequently any certificate representing such securities is not "good delivery" in settlement of transactions on the Toronto Stock Exchange. (c) For a period of fourth months from the Closing Date, any certificate representing Underlying Shares or Warrant Shares issued upon conversion or exercise of any Debenture or Warrant, as the case may be, shall bear the following legend: Unless permitted under securities legislation, the holder of this security must not trade the security in Canada before the Free Trading Date. Without prior written approval of the Toronto Stock Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the Toronto Stock Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until the Free Trading Date. The securities represented by this certificate are listed on the Toronto Stock Exchange; however, the said securities can not be traded through the facilities of such exchange since they are not freely transferable, and consequently any certificate representing such securities is not "good delivery" in settlement of transactions on such exchange. (d) The Company agrees to reissue certificates representing Debentures, Warrants, Underlying Shares or Warrant Shares, as the case may be, without the legends set forth above in Section 6.2(a) or Section 6.2(b), at such time as (i) such securities are qualified for distribution by prospectus in Canada or (ii) such securities are sold to a purchaser or purchasers in a transaction that meets the requirements of (A) Section 2.5 of Multilateral Instrument 45-102 - Resale of Securities (in the opinion of counsel to the seller or the Purchaser, in form and substance reasonably satisfactory to the Company and its counsel) and (B) the requirements of 27 the Toronto Stock Exchange; provided, that, the last sentence of the legends set forth above in Section 6.2(a) or Section 6.2(b) shall not be removed in the case of any certificate bearing the legend required by Section 6.1(a). Section 6.3 Pledges, etc. Nothing herein shall limit the right of any holder to pledge these securities pursuant to a bona fide margin account or lending arrangement entered into in compliance with law, including applicable securities laws. ARTICLE VII TERMINATION Section 7.1 Termination. This Agreement, may be terminated by action of the Board of Directors of the Company or by the Purchasers at any time if the Closing shall not have been consummated by the Closing Date set forth in Section 1.3(a) hereof; provided, however, that the party (or parties) prepared to close shall retain its (or their) right to sue for any breach by the other party (or parties). ARTICLE VIII INDEMNIFICATION In consideration of each Purchaser's execution and delivery of this Agreement and acquiring the Debentures and Warrants hereunder and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Purchaser and all of its partners, officers, directors, employees, members and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "INDEMNITEES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate or document contemplated hereby or thereby, (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from (i) the execution, delivery, performance, breach by the Company or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Debentures and Warrants or (iii) the status of such Purchaser or holder of the Debentures or Warrants as an investor in the Company and (d) the enforcement of this Section. Notwithstanding the foregoing, Indemnified Liabilities shall not include any liability of any Indemnitee arising solely out of such Indemnitee's willful misconduct or fraudulent action(s). To the extent that the foregoing undertaking by the Company may be 28 unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. ARTICLE IX GOVERNING LAW; MISCELLANEOUS Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN THAT JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER JURISDICTION. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY. Section 9.2 Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. Section 9.3 Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Section 9.4 Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity 29 or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. Section 9.5 Entire Agreement; Amendments; Waivers. (a) This Agreement and the other Transaction Documents supersede all other prior oral or written agreements between the Purchaser, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchasers makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement or any of the other Transaction Documents may be amended other than by an instrument in writing signed by the Company and the holders of Debentures representing at least 60% of the aggregate principal amount of the Debentures, or, if prior to the Closing Date, the Company and the Purchasers listed on the Schedule of Purchasers as being obligated to purchase at least 60% of the aggregate principal amount of the Debentures, and any amendment to this Agreement or any of the other Transaction Documents made in conformity with the provisions of this Section 9.5(a) shall be binding on all Purchasers and holders of Debentures, as applicable. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Debentures then outstanding. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents, holders of Debentures or holders of the Warrants, as the case may be. The Company has not, directly or indirectly, made any agreements with any Purchasers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. (b) Each Purchaser may, as to itself only, at any time elect, by notice to the Company, to waive (whether permanently or temporarily, and subject to such conditions, if any, as the Purchaser may specify in such notice) any of its rights under any of the Transaction Documents to acquire Common Shares from the Company, in which event such waiver shall be binding against such Purchaser in accordance with its terms; provided, however, that the voluntary waiver contemplated by this sentence may not reduce such Purchaser's obligations to the Company under the Transaction Documents. Section 9.6 Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing, must be delivered by (i) courier, mail or hand delivery or (ii) facsimile, and will be deemed to have been delivered upon receipt. The addresses and facsimile numbers for such communications shall be: If to the Company: InterOil Corporation 25025 I-45 North, Suite 420 The Woodlands, TX 77380 Facsimile: (281) 292-0888 30 Telephone: (281) 292-1800 Attention: Gary M. Duvall With a copy to: Haynes & Boone LLP 1221 McKinney, Suite 2100 Houston, Texas 77010 Facsimile: (713) 236-5699 Telephone: (713) 547-2081 Attention: Guy Young, Esq. If to a Purchaser: As set forth on the Schedule of Purchasers. Each party shall provide five (5) days prior written notice to the other party of any change in address, telephone number or facsimile number. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. Section 9.7 Successors and Assigns. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any Permitted Assignee (as defined below). The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers, including by merger or consolidation. Each Purchaser may assign some or all of its rights hereunder to any assignee of the Debentures or Warrants or Underlying Shares or Warrant Shares to whom the Purchasers may transfer the Debenture or Warrants pursuant to securities laws and the rules of the Principal Market and any Approved Market on which the Common Shares are listed (in each case, a "PERMITTED ASSIGNEE"); provided, however, that any such assignment shall not release any Purchaser from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption. Notwithstanding anything to the contrary contained in the Transaction Documents, the Purchasers shall be entitled to pledge the Debentures or Warrants or Underlying Shares or Warrant Shares in connection with a bona fide margin account. Section 9.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Section 9.9 Survival. The representations, warranties and agreements of the Company and the Purchasers contained in the Agreement shall survive the Closing. Section 9.10 Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request 31 in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. Section 9.11 Placement Agent. The Purchasers and the Company each acknowledges and warrants that it has not engaged any placement agent, other than in the case of the Company pursuant to its Letter of Agreement with Merrill Lynch, in connection with the sale of the Debentures and Warrants, provided that any such fees will be paid exclusively by the Company. Section 9.12 No Strict Construction. The language used in this agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. Section 9.13 Remedies. Each Purchaser and each Permitted Assignee shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any person having any rights under any provision of the Transaction Documents shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of the Transaction Documents and to exercise all other rights granted by law. Each Purchaser and each Permitted Assignee without prejudice may withdraw, revoke or suspend its pursuit of any remedy at any time prior to its complete recovery as a result of such remedy. Section 9.14 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser under the Transaction Documents or a Purchaser enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state, provincial or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Section 9.15 Days. Unless the context refers to "business days" or "Trading Days", all references herein to "days" shall mean calendar days. Section 9.16 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, wherever the Purchaser exercises a right, election, demand or option under a Transaction Document and the Company or applicable Subsidiary does not fully perform its respective related obligations within the periods therein provided, then the Purchaser in its sole discretion may rescind or withdraw from time to time any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights. Section 9.17 Fees and Expenses. On the Closing Date, the Company shall reimburse the Purchasers for its expenses incurred in connection with this Agreement and the Transaction Documents, including, without limitation, legal fees and expenses, up to $95,000 in the 32 aggregate, of which $45,000 shall be allocated to Portside Growth & Opportunity Fund and $50,000 shall be allocated to Manchester Securities Corp. (each, a Purchaser) or their respective designee(s), which amount shall be withheld by such Purchasers from their applicable Purchase Price at the Initial Closing. Section 9.18 Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitations, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. * * * * * [Signature Page Follows] 33 IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date and year first above written. COMPANY: INTEROIL CORPORATION By: ___________________________________________ Name: Title: [Signature Page to Securities Purchase Agreement] IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date and year first above written. PURCHASER: MANCHESTER SECURITIES CORP. By: ___________________________________________ Name: Title: [Signature Page to Securities Purchase Agreement] IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date and year first above written. PURCHASER: PORTSIDE GROWTH AND OPPORTUNITY FUND By: ___________________________________________ Name: Title: [Signature Page to Securities Purchase Agreement] IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date and year first above written. PURCHASER: PROVIDENT PREMIER MASTER FUND, LTD. By: ___________________________________________ Name: Title: [Signature Page to Securities Purchase Agreement] SCHEDULE OF PURCHASERS
Principal Purchaser Address Amount of Number of Purchaser's Representatives' Address Purchaser Name and Facsimile Number Debentures Warrants and Facsimile Number - ------------------ ------------------------------- ------------ ----------- ---------------------------------------- Manchester 712 Fifth Avenue $15,000,000 119,805 Kleinberg, Kaplan, Wolff & Cohen, Securities Corp. New York, New York 10019 P.C. Attention: Brett Cohen 551 Fifth Avenue Telephone: (212) New York, New York 10176 Facsimile: (212) 974-2092 Attention: Lawrence Hui, Esq. Telephone: (212) 986-6000 Residence: New York Facsimile: (212) 986-8866 Portside Growth and c/o Ramius Capital Group, L.L.C. $10,000,000 79,870 Schulte Roth & Zabel LLP Opportunity Fund 666 Third Avenue, 26th Floor 919 Third Avenue New York, NY 10017 New York, New York 10022 Attention: Jeffrey Smith Attn: Eleazer Klein, Esq. Roger Anscher Telephone: (212) 756-2000 Telephone: (212) 845-7900 Facsimile: (212) 593-5955 Facsimile: (212) 845-7999 Residence: Cayman Islands Provident Premier c/o Gemini Investment $ 5,000,000 39,935 Duval & Stachenfeld, LLP Master Fund, Ltd. Strategies, LLC 300 E. 42nd Street. 3rd Floor 35 Waterview Boulevard New York, New York 10017 Parsippany, New Jersey 07054 Attn: Robert Mazzeo, Esq. Attention: Steve W. Winters Telephone: (212) 692-5529 Telephone: (973) 404-1350 Facsimile: (212) 883-8883 Facsimile: (973) 404-1360 Residence: Cayman Islands
LIST OF SCHEDULES Schedule 2.1(a) Subsidiaries Schedule 2.1(c) Capitalization Schedule 2.1(e) No Conflicts Schedule 2.1(g) Certain Changes Schedule 2.1(h) Litigation Schedule 2.1(n) Intellectual Property Rights Schedule 2.1(p) Title Schedule 2.1(v) Certain Transactions Schedule 2.1 (dd) Indebtedness LIST OF EXHIBITS EXHIBIT A Form of Debenture EXHIBIT B Form of Warrant EXHIBIT C Registration Rights Agreement EXHIBIT D Form of Press Release EXHIBIT E Form of Subsidiary Guarantee EXHIBIT F Opinion of Counsel EX-99.26 21 h19854exv99w26.txt CSIRO PETROLEUM CONFIDENTIAL REPORT NO. 02-019 EXHIBIT 26 [CSIRO LOGO] CSIRO Petroleum Confidential Report No. 02-019 APRIL 2002 PRELIMINARY REPORT ON THE GEOCHEMISTRY OF SOLID BITUMENS IN THE PALE SANDSTONE, SUBU-1 WELL AND OUTCROP AT THE AURE SCARP, EAST PAPUAN BASIN A Report to InterOil Corporation S. C. George, M. Ahmed and R. A. Quezada FOR FURTHER INFORMATION CONTACT: Dr. Simon C. George CSIRO Petroleum, PO Box 136, North Ryde, NSW, Australia 1670 Telephone: +61 2 9490 8718, Facsimile: +61 2 9490 8197 E-mail: Simon.George@csiro.au THIS IS A CONFIDENTIAL REPORT FOR RESTRICTED DISTRIBUTION ONLY Copies to: InterOil Corporation (3 hard copies, 1 electronic copy) S. C. George M. Ahmed R. A. Quezada Confidential CSIRO archives (3 hard copies, 1 electronic copy) EXECUTIVE SUMMARY This report presents organic geochemical data and a preliminary interpretation of solid bitumens from three samples from the Eastern Papuan Basin of Papua New Guinea. The samples are from the Aure Scarp within PPL 230. Two are from the Subu-1 well (CN383 and CN360), and the third is a surface sample from the footwall of the McDowell Fault (CN746). The solid bitumen in sample CN746, was recovered from a vein within a dark grey volcanoclastic sandstone in the footwall of the McDowell Fault scarp. CN746 was generated from an early mature Palaeogene or late Cretaceous source rock that contained predominantly terrestrial organic matter, and in particular angiosperm-derived organic matter, deposited in an oxic environment. A coal source is possible. Alteration of oil to form the solid bitumen found at the outcrop likely occurred during moderate biodegradation, once the oil reached the surface. Biodegradation of a pre-existing oil pool is an unlikely mechanism for formation of this bitumen. It may be an early, polar rich expulsion product that has migrated up the thrust and been slightly biodegraded at the surface. This solid bitumen has most similarities with the subfamily 2A of Waples and Wulff (1996) which includes the Bwata-1 condensate. It differs from family 1 of Waples and Wulff (1996) in that it contains no or very low amounts of bicadinanes The solid reservoir bitumen from a vug in a sandstone from Subu-1 (91.24m, CN383) was generated from a Jurassic, clay-rich, marine source rock in the peak oil window, that contained a substantial amount of coniferous terrestrial organic matter. The mechanism by which the solid bitumen formed in the sandstone vug is uncertain at present, but may relate to bacterial sulphate reduction. Sulphate-reducing bacteria are capable of biodegrading oil and precipitating framboidal pyrite. A later fresh charge of condensate composition may have overprinted the biodegraded solid bitumen in this sample. This solid bitumen has most similarities with family 3 of Waples and Wulff (1996), which includes the Iagifu oils (George et al., 1997). The solid bitumen in a black sandstone in Subu-1 (75.57m, CN360) was generated from a marine source rock in the peak oil window that contained dominantly prokaryotic organic matter, and was possibly deposited in a calcareous-influenced depositional environment. Compared to the source of CN383, this source rock was less clay-rich and contained less terrestrial organic matter. A later fresh charge of condensate composition may have overprinted the biodegraded solid bitumen in this sample. CN360 has similarities with the oil stains extracted from Mendi Formation limestones at the Aure Scarp that were analysed by Robertson Research (1991). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 2 TABLE OF CONTENTS
Page number Executive Summary ..................................................................... 2 Table of Contents ..................................................................... 3 List of Tables ........................................................................ 4 List of Figures ....................................................................... 5 1 INTRODUCTION ........................................................................ 6 2 EXPERIMENTAL PROCEDURE .............................................................. 8 2.1 Solvent extraction ............................................................ 8 2.2 Asphaltene precipitation ...................................................... 8 2.3 Column chromatography ......................................................... 8 2.4 Gas Chromatography ............................................................ 8 2.5 Gas Chromatography - Mass Spectrometry (GC - MS) .............................. 9 3 RESULTS AND DISCUSSION .............................................................. 10 3.1 Extractability and gross composition .......................................... 10 3.2 Overall character of aliphatic and aromatic hydrocarbon fractions ............. 11 3.3 n-Alkanes, isoprenoids and alkylcyclohexanes .................................. 11 3.4 Terpanes ...................................................................... 14 3.5 Steranes and Diasteranes ...................................................... 17 3.6 Aromatic Hydrocarbons ......................................................... 19 4 INTERPRETATION ...................................................................... 24 4.1 Literature data for comparison ................................................ 24 4.2 Origin of the solid bitumen in a fossiliferous quartz sandstone, Aure Scarp (outcrop sample CN746) ............................................................ 24 4.3 Solid reservoir bitumen from a vug in a sandstone, 91.24m, Subu-1 (CN383) ..... 26 4.4 Solid bitumen from a black sandstone, 75.57m, Subu-1 (CN360) .................. 27 5 FUTURE GEOCHEMICAL WORK ............................................................. 29 6 CONCLUSIONS ......................................................................... 30 7 REFERENCES .......................................................................... 31 APPENDIX A: Peak assignments and abbreviations ........................................ 10 pages APPENDIX B: CN746 (solid bitumen from outcrop sample) mass chromatograms and peak identifications ................................................ 26 pages APPENDIX C: CN383 (solid bitumen from vug, Subu-1, 91.24m) mass chromatograms and peak identifications ................................................ 25 pages APPENDIX D: CN360 (solid bitumen from black sandstone, Subu-1, 75.57m) mass chromatograms and peak identifications ................................................ 25 pages
CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 3 LIST OF TABLES Table 1: Sample details.............................................................. 6 Table 2: Extractability and fractionation data for the solid bitumens................ 10 Table 3: Aliphatic hydrocarbon parameters for the solid bitumens..................... 13 Table 4: Terpane parameters for the solid bitumen samples............................ 15 Table 5: Sterane and diasterane parameters for the solid bitumen samples............. 18 Table 6a: Aromatic hydrocarbon parameters for the solid bitumen samples.............. 20 Table 6b: Aromatic hydrocarbon parameters for the for the solid bitumen samples (continued from Table 6a).................................................... 21
CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 4 LIST OF FIGURES Figure 1: Map showing the location of the Subu-1 well and the Aure Scarp, East Papuan Basin, Papua New Guinea. From Slater and Dekker (1993) .......................... 7 Figure 2: Aliphatic hydrocarbon distributions of (a) CN746, (b) CN383, and (c) CN360. All graphs are derived from m/z 85 mass chromatograms ........................... 12 Figure 3: Distribution of alkylbenzenes, naphthalene, phenanthrene, biphenyl, dibenzothiophene and alkylated homologues in the (a) CN746 and (b) CN383 solid bitumen samples. Values calculated by the responses in the m/z 106, 120, 134,128, 142, 156, 170, 184.1, 178, 192, 206, 220, 154, 168, 182, 184.0, 198.0 and 212 mass chromatograms ................................................................... 22
CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 5 1 INTRODUCTION This report presents organic geochemical data and a preliminary interpretation of solid bitumens from three samples of the Pale Sandstone from the Eastern Papuan Basin of Papua New Guinea. The samples are from the Aure Scarp within PPL 230 (Fig. 1); two are from the Subu-1 well, and the third is a surface sample from the Ouha anticline. Details of the samples are given in Table 1. Table 1: Sample details.
CSIRO code Location Depth (m) / code Lithological description - ---------- -------- ---------------- ------------------------ CN746 Outcrop OAO3P-O3DHB Solid bitumen in a volcanoclastic sandstone, footwall of the McDowell Fault, Ouha anticline. CN383 Subu-1 91.24 Solid reservoir bitumen from a vug in a sandstone CN360 Subu-1 75.57 Black sandstone containing pyrite and solid bitumen
The results of detailed organic geochemical analyses on these 3 samples are presented. Particular attention is paid to parameters that provide information about the source of the original oil that was altered to form the solid bitumens, to the maturity of the source rocks that generated the original oil, and to the mechanism by which the alteration of oil to the solid bitumen occurred. This is an interim report with a more comprehensive report to be prepared at the completion of the major multidisciplinary study. Several other studies being carried out in parallel with the organic geochemistry of the solid bitumens, which include organic petrology, diagenesis, petrophysical properties (mainly porosity and permeability), source rock potential and maturity, and strontium age dating and sedimentology of limestones and clastics in the Mesozoic-Tertiary sequence. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 6 [SUBU-1 MAP] Figure 1: Map showing the location of the Subu-1 well and the Aure Scarp, East Papuan Basin, Papua New Guinea. From Slater and Dekker (1993). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 7 2 EXPERIMENTAL PROCEDURE 2.1 SOLVENT EXTRACTION The three samples were solvent extracted with a mixture of dichloromethane and methanol (93:7) for 72 hours using a Soxhlet apparatus (CN746, CN360) or by direct dissolution into the solvent (CN383). An aliquot of the extractable organic matter (EOM) was blown to dryness to provide a gravimetric weight of the total EOM. 2.2 ASPHALTENE PRECIPITATION The EOM of the sample CN746 was blown down to very small volume to which an excess of pentane was added for the precipitation of asphaltenes. The suspension was sonicated for 5 minutes and then allowed to settle in a fridge for at least 2 hours. Solid asphaltenes were separated from the soluble maltene fraction by centrifuging the suspension. The process was repeated to isolate any of the remaining maltenes from the asphaltene precipitates. 2.3 COLUMN CHROMATOGRAPHY An accurate amount of un-evaporated EOM (CN383 = 2.9mg, CN360 = 52mg) or maltene fraction (CN746 = 12mg) was adsorbed onto alumina and all solvent was removed by gently blowing with nitrogen. The extracts were fractionated using column chromatography on silica gel (C60: 60-210 (Mu)m) below alumina. Elution with petroleum ether (40-60(Degree)C) produced the aliphatic hydrocarbon fraction, elution with a 4:1 mixture of DCM + petroleum ether produced the aromatic hydrocarbon fraction and elution by a 1:1 mixture of DCM + methanol produced the polar compounds. All solvent was evaporated from 1/10th aliquots of the aliphatic hydrocarbons, aromatic hydrocarbons and the polar compound fractions to give the total weights of the respective fractions. 2.4 GAS CHROMATOGRAPHY Gas chromatography (GC) of the aliphatic and aromatic hydrocarbon fractions was performed on a Varian 3400 gas chromatograph equipped with a flame ionisation detector. Chromatography was carried out on a fused silica column (60 m x 0.25 mm i.d.) coated with DB5MS (modified 5% phenyl 95% methyl silicone, 0.25 (Mu)m film thickness), CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 8 using a splitless injection technique. The oven was programmed for an initial temperature of 40(Degree)C for 2 min., followed by heating at 4(Degree)C min(-1) to 310(Degree)C, and a hold for 30 mins. 2.5 GAS CHROMATOGRAPHY - MASS SPECTROMETRY (GC - MS) GC - MS of the aliphatic and aromatic hydrocarbon fractions was performed on a Hewlett Packard 5890 gas chromatograph interfaced to a VG AutoSpecQ Ultima (electron energy 70 eV; electron multiplier 250 V; filament current 200 (Mu) A; source temperature 250(Degree)C) tuned to 1000 resolution. Chromatography was carried out on a fused silica column (60 m x 0.25 mm i.d.) coated with DB5MS, using a splitless injection technique. The oven was programmed in two ways for different GC - MS runs: (a) for an initial temperature of 40(Degree)C for 2 min., followed by heating at 4(Degree)C min(-1) to 310(Degree)C, and (b) for an initial temperature of 40(Degree)C for 2 min., followed by heating at 20(Degree)C min(-1) to 200(Degree)C and then a second heating ramp at 2(Degree)C min(-1) to 310(Degree)C. All the fractions were run using a magnet scan programme (m/z 50 to 550; 0.5 s/decade), using GC programme a. The aliphatic fractions were run using a single ion monitoring (SIM) programme (SIRV_INCD), using GC programme b: (m/z 177, 183, 191, 205, 217, 218, 231.11, 231.21, 253, 259). The aliphatic fractions were also run using two metastable reaction monitoring (MRM) programmes (SIRV_INCD), using GC programme b: MRM_HOPS: m/z 370, 384, 398, 412, 426, 440, 454, 468, 482-->191. MRM_STER: m/z 358, 372, 386, 400, 414 217; 414-->231. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 9 3 RESULTS AND DISCUSSION All of the gas chromatograms and mass chromatograms referred to in the text are provided in Appendices B, C and D, with peak identifications in Appendix A. 3.1 EXTRACTABILITY AND GROSS COMPOSITION Elemental sulphur was extracted from the rocks in conjunction with organic material, and was removed prior to detailed analyses of the fractions. Extractability and fractionation data for the three samples are given in Table 2. For CN383, 10.6% of the solid bitumen in the vug was extractable, but the small amount of solid bitumen available (33.9 mg) meant that insufficient EOM was obtained to enable asphaltene precipitation or gravimetric analysis of the aliphatic hydrocarbons, aromatic hydrocarbons and polar compound fractions. The other two samples have much lower extractabilities, and are dominated by asphaltenes or polar compounds (>45%). The aliphatic /aromatic hydrocarbon ratio of these two samples is variable, with only very low amounts of aromatic hydrocarbons being obtained from CN360 (the black sandstone). Table 2: Extractability and fractionation data for the solid bitumens.
CN746 CN360# CN383#Section ----- ------- ------------- Weight of rock(*) or solid bitumen (g) 46.3 117.0 0.03385(*) Weight of extractable organic matter (mg) 146.0 65.4 3.6 Extractability (amount of EOM in ppm of rock ((*) or solid bitumen) 3,153 559 106,351(*) FRACTION WEIGHTS Asphaltenes (mg) 9.4 - - Maltenes (mg) 30.0 - - Aliphatic hydrocarbons (mg) 1.0 5.2 - Aromatic hydrocarbons (mg) 4.0 0.9 - Polars(1) (mg) 2.0 9.0 - RATIOS Aliphatic/aromatic hydrocarbon ratio 0.3 5.8 - Hydrocarbon/polar ratio 2.5 0.7 - Aliphatic hydrocarbons (% of EOM) 10.9 34.4 - Aromatic hydrocarbons (% of EOM) 43.5 6.0 - Polars + asphaltenes (% of EOM) 45.6 59.6 -
- ---------- # Asphaltenes not precipitated; Section Insufficient extract for gravimetric analysis of column chromatography fractions; (1)Nitrogen, sulphur and oxygen containing organic compounds soluble in n-pentane. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 10 3.2 OVERALL CHARACTER OF ALIPHATIC AND AROMATIC HYDROCARBON FRACTIONS The aliphatic hydrocarbon fractions of the three samples are dominated by unresolved complex mixture (UCM) humps in the GC traces (Figs B1, C1 and D1) and the total ion chromatograms (TICs) (Figs B2, C2 and D2). The GC and TIC of the aliphatic hydrocarbon fraction of CN746 is dominated by pristane, phytane, the C(16) isoprenoid, a C(24) tetracyclic terpane and other biomarkers. Samples CN383 and CN360 contain abundant low molecular weight (C(7) - C(10)) n-alkanes, alkylcyclohexanes and methylalkylcyclohexanes. The three dominant peaks in the aliphatic hydrocarbon fraction of CN383 are 4(Beta)(H)-19-isopimarane, ent-beyerane and isopimarane (Figs C1, C2 and C6). These diterpenoids are probably derived from conifer resins (Noble et al., 1985, 1986). The aliphatic hydrocarbon fraction of CN360 contains high molecular weight n-alkanes above the UCM (Fig. D3). The aromatic hydrocarbon fraction of CN746 contains well resolved alkylnaphthalenes, alkylphenanthrenes and other medium molecular weight hydrocarbons (Figs B1 and B2). The aromatic hydrocarbon fraction of CN383 is dominated by a UCM hump, but also contains well resolved alkylbenzenes and alkylnaphthalenes, together with an unusual acid derivative. The aromatic hydrocarbon fraction of CN360 contains mainly derivatives (methylesters?) of carboxylic acids, with very few aromatic hydrocarbons. 3.3 n-ALKANES, ISOPRENOIDS AND ALKYLCYCLOHEXANES All three samples contain n-alkanes, although these are only abundant relative to the whole aliphatic hydrocarbon fraction in CN360. The m/z 85 mass chromatograms (Figs B3, C3 and D3) were used to calculate the distribution of n-alkanes and isoprenoids in the samples (Fig. 2). Ratios are given in Table 3. The isoprenoid pristane is the dominant hydrocarbons in the m/z 85 mass chromatogram of CN746. The Pr/Ph ratio is very high (8.6; Table 3), suggesting deposition of terrestrial organic matter under oxic conditions (Didyk et al., 1978). High molecular weight n-alkanes in CN746 have a very strong odd-over-even carbon number predominance (CPIs >4; Table 3), indicative of an immature sample with higher plant input to the source rock. Low maturity of CN746 is also indicated by the high isoprenoid/n-alkane ratios (Table 3). Low to medium molecular weight alkylcyclohexanes (maxima at C(7) and C(14)) and low molecular weight methylalkylcyclohexanes are present in CN746 (Fig. B5). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 11 [A CN746 BAR CHART] [B CN383 BAR CHART] [C CN360 BAR CHART] Figure 2: Aliphatic hydrocarbon distributions of (a) CN746, (b) CN383, and (c) CN360. All graphs are derived from m/z 85 mass chromatograms. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 12 Table 3: Aliphatic hydrocarbon parameters for the solid bitumens.
Parameter CN746 CN383 CN360 - ---------------- ----- ----- ----- Pr/Ph 8.6 0.9 1.4 Pr/ n-C(17) 25.1 1.2 0.62 Ph/ n-C(18) 4.2 2.5 0.42 CPI(22-32) 4.1 - 1.13 CPI(24-32) 4.8 1.25 1.17 CPI(26-32) 5.0 0.92 1.21 CPI(26-30) 4.0 0.83 1.01 CPI 2(26-28) 6.1 0.86 1.18 CPI 2(28-30) 3.3 1.08 1.23 CPI 2(20-22) 1.01 - 1.03 n-C(31)/ n-C(19) 4.6 - 6.6 Wax index 0.37 - 0.15
2*(C(23) + C(25) + C(27) + C(29) + C(31)) CPI(22-32) = [ ------------------------------------------------- ] C(22) + 2*(C(24) + C(26) + C(28) + C(30)) + C(32) 2*(C(25) + C(27) + C(29) + C(31)) CPI(24-32) = [ ----------------------------------------- ] C(24) + 2*(C(26) + C(28) + C(30)) + C(32) 2*(C(27) + C(29) + C(31)) CPI(26-32) = [ --------------------------------- ] C(26) + 2*(C(28) + C(30)) + C(32) 2*(C(27) + C(29)) CPI(26-30) = [ ------------------------ ] C(26) + 2* C(28) + C(30) 2 X C(27) 2 X C(29) CPI(26-28) = [ ----------- ] CPI 2 (28-30) [ ------------- ] C(26) + C(28) C(28) + C(30) 2 X C(21) CPI 2(20-22) [ ----------------- ] C(20) + C(22) C(21) + C(22) C(10) Wax Index = [-------------- ] Fractionation Index = [ --------------- ] C(28) + C(29) C(16) + C(25) n-Alkanes in CN383 are dominated by C(8) and C(9). Similarly, the alkylcyclohexanes (C(7)-C(9) and methylalkylcyclohexanes (C(8) and C(9)) are also low molecular weight dominated (Fig. C5). Low amounts of C(10)-C(33) n-alkanes are present in CN383, despite this sample being dominated by a large UCM hump. These n-alkanes have little odd or even carbon number predominance. The Pr/Ph ratio of CN383 is close to unity but was measured on very small peaks so may be unreliable. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 13 Sample CN360 is also dominated by low molecular weight n-alkanes, alkylcyclohexanes and methylalkylcyclohexanes, in a similar way to CN383. However, CN360 contains a prominent maxima of high molecular weight, waxy n-alkanes (C23-C33), which have a moderate odd-over-even carbon number predominance (CPI ~ 1.1; Table 3). These distributions are consistent with derivation of the solid bitumen from a source rock of moderate maturity containing terrestrial organic matter. The isoprenoid/n-alkane ratios (0.4-0.6) support a mid oil window maturity. 3.4 TERPANES The terpanes in the solid bitumen samples were monitored using four SIM mass chromatograms. The m/z 123 mass chromatograms show the distribution of C(14) to C(16) bicyclic sesquiterpanes, including drimane and homodrimane. Hopanes, moretanes and the tricyclic and tetracyclic terpanes were monitored using the m/z 191 mass chromatograms. The presence of any demethylhopanes was evaluated using the m/z 177 mass chromatogram, while the methylhopanes were analysed using m/z 205. MRM chromatograms were run in order to examine the distribution of the C(27) to C(35) hopanes in greater detail and to provide a cleaner distribution with less interfering peaks that complicate interpretation of the m/z 191 mass chromatogram. Various biomarker parameters related to source and maturity were calculated from the distribution of the terpanes in the SIM and MRM chromatograms and are shown in Table 4. Bicyclic sesquiterpanes were detected in CN746 and CN383, but have substantially different distributions (Figs. B6 and C6). CN746 contains high amounts of C(15) rearranged bicyclic sesquiterpanes and drimane, whereas CN383 is dominated by homodrimane. Consequently, bicyclic sesquiterpane ratios are different (Table 4). Tricyclic and tetracyclic terpanes were detected in all three samples, but in CN746 are dominated by unidentified C(24) tetracyclic isomers, 10 (Beta) (H)-de-A-lupane and 10 (Beta) (H)-de- A-ursane (Fig. B6). Tricyclic terpanes are very subordinate in this sample relative to hopanes. The distribution of tricyclic and tetracyclic terpanes in CN383 and CN360 is variable. CN360 contains less tetracyclic terpanes relative to tricyclic terpanes than CN383, whereas the ratios of tricyclic and tetracyclic terpanes to hopanes is higher in CN383. The latter observation is consistent with a higher maturity of CN383. The higher C(24) tetracyclic terpane/C(23) tricyclic terpane ratios in CN746 and CN383 are consistent with greater terrestrial organic matter contribution to the source rocks of these solid bitumens, compared to the source rock of CN360 (e.g. Preston and Edwards, 2000). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 14 Table 4: Terpane parameters for the solid bitumen samples.
Parameter CN746 CN383 CN360 - --------- ----- ----- ----- Drimane/homodrimane 4.7 S 0.55 S n.d. Rearranged C(15) BS/(drimane + homodrimane) 1.2 S 0.37 S n.d. C(14)BS/(drimane + homodrimane) 0.77 S 0.19 S n.d. Ts/Tm 0.3 M 3.8 M 1.7 M Ts/Ts+Tm 0.22 M 0.79 M 0.62 M Tm/C(27)(Beta) 2.5 M n.d. 12.6 M C(29) Ts/C(29)(Alpha Beta) 0.22 M 0.80 M 0.27 M C(29) Ts/(C(29) Ts+C(29) (Alpha Beta) hopane) 0.18 M 0.44 M 0.21 M C(30) */C(29) Ts n.d. 2.4 S 0.28 S C(29) */C(29) (Alpha Beta) hopane n.d. 0.66 M 0.05 M C(30) */C(30) (Alpha Beta) hopane n.d. 0.89 M 0.06 M C(29) 25-norhopane/C(29) (Alpha Beta) n.d. n.d. 0.030 M C(29) (Alpha) (Beta)/((Alpha) (Beta)(Alpha) (Beta)) 0.63 M 0.79 M 0.93 M C(30) (Alpha) (Beta)/((Alpha) (Beta)+(Beta Alpha)) 0.78 M 0.91 M 0.93 M C(31) (Alpha) (Beta) 22S/(22S+22R) 0.43 M 0.57 M 0.57 M C(32) (Alpha) (Beta) 22S/(22S+22R) 0.32 M 0.57 M 0.59 M C(33) (Alpha) (Beta) 22S/(22S+22R) 0.46 M 0.55 M 0.62 M % C(31) of total (Alpha) (Beta) homohopanes 41.1 M 41.6 S 37.1 S % C(32) of total (Alpha) (Beta) homohopanes 36.0 M 26.8 S 25.0 S % C(33) of total (Alpha) (Beta) homohopanes 11.2 M 17.2 S 17.2 S % C(34) of total (Alpha) (Beta) homohopanes 3.4 M 8.4 S 10.1 S % C(35) of total (Alpha) (Beta) homohopanes 8.3 M 6.0 S 10.6 S C(35)/(C(35)+C(34)) homohopanes 0.71 M 0.42 S 0.51 S Homohopanes/C(30)(Alpha) (Beta) hopane 0.6 M 1.2 S 2.4 S Oleanane/C(30)(Alpha) (Beta) hopane 0.52 M n.d. n.d. Gammacerane/C(30)(Alpha) (Beta) hopane 0.03 M 0.03 M 0.055 M Ts/C(30)(Alpha) (Beta) hopane 0.2 M 0.7 S 0.4 S C(27) hopanes/C(30) (Alpha) (Beta) hopane 0.7 M 1.0 S 0.5 S 28,30-BNH/C(30)(Alpha) (Beta) hopane 3.8 M 0.06 M 0.07 M 28,30-BNH/Ts 25.3 M 0.03 M 0.13 M C(29)(Alpha) (Beta) hopane/C(30)(Alpha) (Beta) hopane 0.48 M 0.46 S 0.77 S C(31)(Alpha) (Beta) hopane/C(30)(Alpha) (Beta) hopane 0.24 M 0.49 S 0.87 S C(32) 2 (Alpha) methylhopanes/C(31)(Alpha) (Beta) 22S+22R Hopanes (m/z 205) n.d. 0.21 S 0.70 S C(26)/C(25)tricyclic terpanes n.d. 1.3 S n.d. C(23) tricyclic/C(30)(Alpha) (Beta) hopane 0.008 S 0.18 S 0.09 S C(24) tetracyclic terpane/C(30)(Alpha) (Beta) hopane 0.028 S 0.34 S 0.05 S C(23)/C(21) tricyclic terpanes 0.81 S 0.59 S 3.54 S C(23-26)/C(19-21) tricyclic terpanes n.d. 0.20 S n.d. C(24)tetracyclic terpane/C(23) tricyclic terpane 3.4 S 1.9 S 0.56 S C(29) steranes/C(29)(Alpha)(Beta) hopane 4.6 S 2.4 S 0.70 S
Terpane abbreviations are listed in Table A1; n.d. = not determined. Ratios were calculated from MRM data (M) or SIM data (S). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 15 Sample CN383 contains large amounts of 4(Beta)(H)-19-isopimarane, ent-beyerane and isopimarane (Figs C1, C2 and C6). Sample CN360 contains a small amount of 4(Beta) (H)-19-isopimarane and isopimarane (Fig. D6). Hopanes in the m/z 191 mass chromatogram of CN746 could be identified (Fig. B7a), but are dominated by several other peaks (a-q) that are unusual components of oils (Fig.B7b). By careful examination of mass spectra from magnet scan data for this sample, and by comparison with GC retention data of Armanios (1994), some of these peaks have been identified as olean-18-ene, olean-13(18)-ene, olean-12-ene, olean-18-ene and 18(Alpha)-olean- 12-ene. Other peaks have mass spectra consistent with C(29) and C(30) triterpenes (see Figs B7 and B8, and Appendix Table A1). The peak eluting prior to C(30)(Alpha) (Beta) hopane in the m/z 412 --> 191 MRM chromatogram contains co-eluting oleanane and lupane; based on the mass spectra of this peak, lupane is subordinate in abundance relative to oleanane. Hopane distributions are much cleaner in MRM analysis, and these chromatograms (Figs B9-B11) show the high relative amount of 28,30-bisnorhopane in CN746, the high amount of moretanes ((Beta) (Alpha) hopanes) relative to (Alpha) (Beta) hopanes, the detection of C(29) to C(32) (Beta) (Beta) hopanes, and the low amounts of the 22S relative to 22R extended C(31) to C(34) homohopanes. No methylhopanes or 25-norhopanes could be detected in this sample, and bicadinanes are either absent or of very low abundance. The significance of these triterpane distributions in CN746 are twofold. Firstly, this sample is undoubtedly of very low maturity, based on the presence of unsaturated biomarkers and (Beta) (Beta) hopanes, the high amount of 28,30-bisnorhopane, the low Ts/Tm ratio (0.3) and other non-equilibrium hopane maturity ratios (e.g. C(30) (Alpha) (Beta)/((Alpha) (Beta) + (Beta) (Alpha)) = 0.78; C(32) (Alpha) (Beta) 22S/(22S+22R) = 0.32). These ratios and the presence of oleanenes (e.g. Eneogwe et al., 2002) are consistent with a maturity in the early stage of hydrocarbon generation. Secondly, the presence of oleanane and oleanenes is strong evidence for derivation of the solid bitumen from a Cretaceous or younger source rock, as these compounds are derived from angiosperm-derived organic matter (Moldowan et al., 1994). The hopane distribution of CN383 is quite different to CN746. It contains no unsaturated triterpenes or oleanane, but does contain high amounts of rearranged triterpanes including Ts, C(29)Ts, diahopanes (C(29)* to C(32)*) and a series of unidentified, early-eluting rearranged triterpanes that sometimes co-occur with diahopanes (Fig. C7, C8 and C9; labelled with Section ; Moldowan et al., 1991; Telnaes et al., 1992; George et al. , 1997). The C(30)*/C(30) (Alpha) (Beta) hopane ratio is 0.89. High abundances of rearranged triterpanes are found in high maturity samples, and in source rock samples deposited in oxic, clay-rich environments (e.g. Moldowan et al., 1991). Based on hopane ratios, the maturity of this sample is the highest of the three samples, as shown by equilibrium hopane maturity ratios such as C(30)(Alpha) (Beta)/ ((Alpha) (Beta) + (Beta) (Alpha)) = 0.91, and a very high Ts/Tm ratio (3.8). No 25-norhopanes and only low contents of methylhopanes were detected in this sample. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 16 The hopane distribution of CN360 is again different to the other two samples. It contains no unsaturated triterpenes or oleanane, and the abundance of rearranged triterpanes including Ts, C(29)Ts and diahopanes is low (Fig. D7). The C(30)*/C(30) (Alpha) (Beta) hopane ratio is 0.06. None of the early-eluting rearranged triterpanes that sometimes co-occur with diahopanes could be detected. The relative amount of homohopanes is greater in CN360 than in the other samples, and in particular C(34) and C(35) extended homohopanes are abundant (Table 4). The C(29) (Alpha) (Beta) hopane/C(30) (Alpha) (Beta) hopane ratio is higher in this sample than the others. Small amounts of 29,30-bisnorhopane and 28,30-bisnorhopane were detected in this sample by MRM analysis (Fig. D8). C(30) to C(36) 2 (Alpha) (H)-methylhopanes are abundant relative to hopanes (see m/z 205 mass chromatogram, Fig. D7) in CN360, whereas they are of much lower abundance in CN383 and could not be detected in CN746. The sum of these hopane distributions is suggestive of a marine source rock containing prokaryotic-dominated organic matter, deposited in a less clay-rich, possibly calcareous influenced depositional environment (see Subroto et al., 1991; Moldowan et al., 1992; Summons and Jahnke, 1990). Based on hopane ratios, the maturity of this sample is within the oil window, based on equilibrium hopane maturity ratios such as C(30) (Alpha) (Beta)/((Alpha) (Beta) + (Beta) (Alpha) = 0.93, but is lower than the maturity on CN383 (Ts/Tm ratio = 1.7). 3.5 STERANES AND DIASTERANES Sterane distributions in the solid bitumen samples were monitored by SIM analyses using both the m/z 217 and m/z 218 mass chromatograms, while the diasteranes (rearranged steranes) were analysed using the m/z 217 and m/z 259 mass chromatograms. MRM chromatograms were also run, in order to examine the distribution of the C(27) to C(30) steranes, diasteranes and methylsteranes in greater detail. The MRM data provided better quality data than the SIM data, due to some interfering contaminants in the SIM chromatograms. Sterane and diasterane ratios are reported in Table 5. The commonly occurring series of C(27) to C(29) (Alpha) (Alpha) (Alpha) and (Alpha) (Beta) (Beta) steranes and (Beta) (Alpha) and (Alpha) (Beta) diasteranes were detected in all three of the solid bitumen samples, but with different distributions. CN746 is very strongly dominated by C(29) steranes (Fig. B11), with C(29)/C(27) (Alpha) (Alpha) (Alpha) 20R steranes = 8.6. This dominance is consistent with a strong terrestrial component to the organic matter of the original source rock of the solid bitumen. No C(30) steranes or diasteranes could be identified in this sample. Diasteranes are of much lower abundance than steranes at all carbon numbers (Fig. B13). The (Alpha) (Alpha) (Alpha) 20R sterane isomers strongly dominate over other steranes, a feature typical of immature sediments. The usual doublet of peaks forming the (Alpha) (Beta) (Beta) steranes is obscured by a co-eluting peak at C(27) (peak f), C(28) (peak n) and most prominently at C(29) (peak v). These co-eluting isomers are tentatively ascribed to be (Beta) (Alpha) (Alpha) steranes, which are also characteristic of immature sediments. Based CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 17 Table 5: Sterane and diasterane parameters for the solid bitumen samples.
Parameters CN746 CN383 CN360 - ---------- ------ ------------ ------------ C(27) (Alpha)(Alpha)(Alpha)20R (% of total C (27) to C(29) (Alpha)(Alpha)(Alpha) 20R steranes) 8.5 29.2 Section 27.5 Section C(28) (Alpha)(Alpha)(Alpha)20R (% of total C (27) to C(29) (Alpha)(Alpha)(Alpha) 20R steranes) 18.3 20.7 Section 19.8 Section C(29) (Alpha)(Alpha)(Alpha)20R (% of total C (27) to C(29) (Alpha)(Alpha)(Alpha) 20R steranes) 73.2 50.1 Section 52.7 Section C(29) (Alpha)(Alpha)(Alpha)20R/C(27) (Alpha)(Alpha)(Alpha) 20R steranes) 8.6 1.7 Section 1.9 Section C(28) (Alpha)(Alpha)(Alpha)20R/C(29) (Alpha)(Alpha)(Alpha) 20R steranes) 0.2 0.4 Section 0.4 Section C(30)/(C(27)+C(28)+C(29)) (Alpha)(Alpha)(Alpha) 20R steranes (%) n.d. 4.1 8.0 C(27) (Alpha)(Beta)(Beta) steranes 20S+R (% of total C(27) to C(29) (Alpha)(Beta)(Beta) 20R steranes) 4.5 17.5 24.9 C(28) (Alpha)(Beta)(Beta) steranes 20S+R (% of total C(27) to C(29) (Alpha)(Beta)(Beta) 20R steranes) 26.4 24.5 21.5 C(29) (Alpha)(Beta)(Beta) steranes 20S+R (% of total C(27) to C(29) (Alpha)(Beta)(Beta) 20R steranes) 69.1 58.1 53.6 C(29) (Alpha)(Beta)(Beta) steranes 20S+R /C(27) (Alpha)(Beta)(Beta) steranes 20S+R 15.4 3.3 2.1 C(27) steranes (% of total C(27) to C(29) regular steranes) 8.5 19.2 28.2 C(28) steranes (% of total C(27) to C(29) regular steranes) 21.6 23.6 21.9 C(29) steranes (% of total C(27) to C(29) regular steranes) 69.9 55.0 49.0 C(27) (Beta)(Alpha) diasterane 20S+R (% of total C(27) to C(29) (Beta)(Alpha) 20S+R diasteranes) 9.7 30.8 37.0 C(28) (Beta)(Alpha) diasterane 20S+R (% of total C(27) to C(29) (Beta)(Alpha) 20S+R diasteranes) 13.4 24.5 23.8 C(29) (Beta)(Alpha) diasterane 20S+R (% of total C(27) to C (29) (Beta)(Alpha) 20S+R diasteranes) 76.9 44.7 39.2 C(29) / C(27) (Beta)(Alpha) diasteranes 7.9 1.5 1.1 C(27) (Beta)(Alpha) diasteranes/((Alpha)(Alpha)(Alpha)+(Alpha)(Beta)(Beta) steranes) 0.21 1.81 0.59 C(28) (Beta)(Alpha) diasteranes/((Alpha)(Alpha)(Alpha)+(Alpha)(Beta)(Beta) steranes) 0.11 1.30 0.51 C(29) (Beta)(Alpha) diasteranes/( (Alpha)(Alpha)(Alpha)+(Alpha)(Beta)(Beta) steranes) 0.20 1.02 0.37 C(27)+C(28)+C(29) (Beta)(Alpha) diasteranes/((Alpha)(Alpha)(Alpha)+ (Alpha)(Beta)(Beta) steranes) 0.18 1.25 0.47 C(27) (Alpha)(Alpha)(Alpha) 20S/(20S+20R) 0.27 0.47 0.46 C(28) (Alpha)(Alpha)(Alpha) 20S/(20S+20R) 0.12 0.49 0.46 C(29) (Alpha)(Alpha)(Alpha) 20S/(20S+20R) 0.05 0.46 0.44 C(29) (Alpha)(Alpha)(Alpha) 20S/20R 0.05 0.85 0.77 Vitrinite reflectance equivalent from C(29) (Alpha)(Alpha)(Alpha) 20S/20R (Sofer et al., 1993) 0.38 0.78 0.74 C(27) (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) 0.18 0.44 0.44 C(28) (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) 0.42 0.56 0.51 C(29) (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) 0.34 0.57 0.56 C(27) (Beta)(Alpha) diasterane 20S/(20S+20R) 0.48 0.61 0.57 C(28) (Beta)(Alpha) diasterane 20S/(20S+20R) 0.45 0.71 0.61 C(29) (Beta)(Alpha) diasterane 20S/(20S+20R) 0.49 0.61 0.59
Sterane and diasterane abbreviations are listed in Table A2. Ratios were calculated from MRM data, except those indicated Section which were calculated from SIM data. n.d. = not determined. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 18 on a calibration of the C(29) (Alpha) (Alpha) (Alpha) 20S/20R ratio (Sofer et al., 1993), the maturity of this sample is estimated to be about 0.4% vitrinite reflectance equivalent (VRE). Samples CN383 and CN360 have relatively similar steranes and diasterane distributions, which are less C(29) dominated, contain more diasteranes and appear more thermally mature than CN746 (Figs. C11 and D11). In both samples C(29) steranes are about twice as abundant as C(27) steranes, but diasteranes have a more even carbon number distribution (Table 5). Both samples contain C(30) steranes, but these are more abundant in CN360 than in CN383, suggesting a greater marine influence in CN360. The main difference between these samples is that diasterane/sterane ratios are higher in CN383 than in CN360. The higher diasterane content of CN383 might reflect a higher maturity of this sample, but this is not supported by other sterane maturity parameters (Table 5) which indicate that CN383 and CN360 have fairly similar maturities, with CN383 only slightly more mature (based on a calibration of the C(29) (Alpha) (Alpha) (Alpha) 20S/20R ratio, CN383 = 0.78% VRE, CN360 = 0.74% VRE). Therefore, the higher diasterane content of CN383 is considered to reflect generation from a more clay-rich source rock than CN360, consistent with the observation of more rearranged hopanes in CN383. 3.6 AROMATIC HYDROCARBONS For the solid bitumen samples, eight major classes of aromatic hydrocarbons were monitored to assess variations in thermal maturity and to characterise source-related geochemical parameters. These compound classes included the alkylbenzenes, alkylnaphthalenes, alkylphenanthrenes, alkylbiphenyls, alkylfluorenes, alkylpyrenes, alkylfluoranthenes and alkyldibenzothiophenes. All chromatograms are included in Appendices B, C and D. A wide variety of source and maturity related parameters were calculated from the integrated SIM mass chromatograms and are reported in Table 6. Abbreviations for aromatic hydrocarbons are defined in Appendix Table A4. Only very low amounts of aromatic hydrocarbons were detected in CN360, so the aromatic hydrocarbon distributions in this sample are not considered further. CN746 contains dominantly alkylphenanthrenes and alkylnaphthalenes, with lesser amounts of alkylbiphenyls and alkyldibenzothiophenes (Fig. 3a). CN383 is dominated by very high relative abundances of C(2) alkylbenzenes, and moderate abundances of C(3) and C(4) alkylbenzenes, alkylnaphthalenes and alkylphenanthrenes, and low amounts of the alkylbiphenyls and alkyldibenzothiophenes (Fig. 3b) The distribution of alkylbenzenes in CN746 is typical of biodegraded oils, with strong dominance of 1,2,3-trimethylbenzene and 1,2,3,4-tetramethylbenzene (Fig. B16; George et al., 2002). This distribution could also be caused by inheritance of a biological CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 19 Table 6a: Aromatic hydrocarbon parameters for the solid bitumen samples.
Parameters CN746 CN383 - ---------- ----- ----- TMBI-1 (1,3,5-TMB/[1,3,5-TMB+1,2,3-TMB]) 0.25 0.46 TMBI-2 (1,2,4-TMB/[1,2,4-TMB+1,2,3-TMB]) 0.39 0.73 MEBI-1 (1M3EB+1M4EB)/(1M3EB+1M4EB+1M2EB]) - 0.78 TeMBI-x (1,2,3,5-TeMB/[1,2,3,5-TeMB+1,2,3,4-TeMB]) 0.36 0.58 TeMBI-y (1,2,4,5-TeMB/[1,2,4,5-TeMB+1,2,3,4-TeMB]) 0.11 0.49 Methylnaphthalene ratio (MNR: 2-MN/1-MN) 0.62 1.5 Naphthalene/(Sigma)methylnaphthalenes 0.26 1.11 Ethylnaphthalene ratio (ENR: 2-EN/1-EN) 1.1 3.8 DNR-1 ([2,6-+2,7-DMN]/1,5-DMN) 1.8 6.0 DNR-2 (2,7-DMN/1,8-DMN) 16 43 DNR-3 (2,6-DMN/1,8-DMN) 13 47 DNR-x ([2,6-+2,7-DMN]/1,6-DMN) 0.71 1.3 DNR-y ([2,6-+2,7-DMN]/[2,6-+2,7-DMN+1,3+1,7-DMN]) 0.30 0.48 DNR-z (1,5-/[1,5-+1,2-DMN) 0.46 0.44 TNR-1 (2,3,6-TMN/[1,4,6-+1,3,5-TMN]) 0.55 0.99 TNR-2 ([2,3,6-+1,3,7-TMN]/[1,4,6-+1,3,5-+1,3,6-TMN]) 0.54 0.88 TNRs ([1,3,7-+2,3,6-TMN]/1,3,6-TMN) 1.03 1.59 TNR-x (1,2,5-TMN/[1,2,5-+1,2,4-+1,2,3-TMN]) 0.61 1.00 Log (1,2,5-TMN/1,3,6-TMN) -0.14 -0.24 Log (1,2,7-TMN/1,3,7-TMN) -0.36 -0.27 TeMNR-1 (2,3,6,7-TeMN/1,2,3,6-TeMN) 0.38 - (1,2,5,6+1,2,3,5-TeMN)/1,2,3,6-TeMN 2.2 - TMNr (1,3,7-TMN/[1,3,7-+1,2,5-TMN]) 0.42 0.58 TeMNr (1,3,6,7-TeMN/[1,3,6,7+1,2,5,6-TeMN]) 0.60 - PMNr (1,2,4,6,7-PMN/[1,2,4,6,7+1,2,3,5,6-PMN]) 0.40 - HPI (Higher plant index) ([Retene + Cadalene + - IP-iHMN]/1,3,6,7-TeMN) 4.1 % IP-iHMN (of total Retene + Cadalene + IP-iHMN) 0.3 - % Cadalene (of total Retene + Cadalene + IP-iHMN) 95.6 - % Retene (of total Retene + Cadalene + IP-iHMN) 4.1 - HPP (Higher plant parameter) (Retene /[Retene + Cadalene]) 0.04 -
.......Continued in Table 6b For compound abbreviations see Table A4. TMBI = trimethylbenzene index, MEBI = methylethylbenzene index, TeMBI = tetramethylbenzene index, DNR = dimethylnaphthalene ratio, TNR = trimethylnaphthalene ratio; TeMNr = tetramethylnaphthalene ratio; PMNr = pentamethylnaphthalene ratio CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 20 Table 6b: Aromatic hydrocarbon parameters for the for the solid bitumen samples (continued from Table 6a).
Parameters CN746 CN383 - ---------- ----- ----- Methylphenanthrene Index (MPI-1) =1.5*[3-MP+2-MP]/[P+9-MP+1-MP]) 0.44 0.69 Calculated vitrinite reflectance %Rc (MPI-1) 0.6*MPI-1+0.4 (for Ro <1.35), from Radke and Welte, 1983 0.66 0.82 Methylphenanthrene distribution fraction (MPDF) =(3-MP+2-MP)/(Sigma)MPs 0.44 0.55 1-MP/9-MP 0.80 0.70 log (1-MP/9-MP) -0.10 -0.16 Methylphenanthrene Ratio (MPR)=2-MP/1-MP 1.01 1.7 Calculated vitrinite reflectance %Rc (MPR) =0.99*log MPR+0.94, from Radke et al., 1984 0.94 1.2 Dimethylphenanthrene ratio (DPR) = (3,5-+2,6-DMP+2,7-DMP)/ (1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP) 0.28 0.45 Log (1,7-DMP/1,3-+3,9-+2,10-+3,10-DMP) -0.43 -0.51 DPR-x (1,7-DMP/1,7-+1,3-+3,9-+2,10-+3,10-DMP) 0.27 0.24 Log (Retene/9-MP) -1.7 0.16 Fluoranthene/(fluoranthene + pyrene) 0.47 0.32 Methylpyrene index (MPyI2)=2-MPy/1-+4-MPy from Garrigues et al., 1988 0.32 0.31 3-MBp/Bp 0.82 0.39 Methylbiphenyl ratio (MBp)=3-MBp/2-MBp, from Alexander et al. (1986) 37 10.1 3-MBp/4-MBp 3.3 2.4 Dimethylbiphenyl ratio (DMBpR-x)=3,5-DMBp/2,5-DMBp, from Cumbers et al. , 1987 - 5.7 Dimethylbiphenyl ratio (DMBpR-y)=3,3'-DMBp/2,3'-DMBp, from Cumbers et al. , 1987 - 8.0 Phenanthrene/dibenzothiophene 7.1 8.5 Dibenzothiophene/phenanthrene 0.14 0.12 Methyldibenzothiophene Ratio (MDR)=4-MDBT/1-MDBT 2.6 - Calculated vitrinite reflectance %Rc (MDR) =0.073*MDR+0.51, from Radke, 1988 0.7 - Dimethyldibenzothiophene Ratio (DMDR) =4,6-DMDBT/3,6-+2,6-DMDBT 0.64 - Dibenzothiophene/1,3,6,7-TeMN 5.8 0.8 Dibenzothiophene/1,2,5,6-+1,2,3,5-TeMN 8.8 0.8
For compound abbreviations see Table A4. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 21 [A CN746 CHART] [B CN383 CHART] Figure 3: Distribution of alkylbenzenes, naphthalene, phenanthrene, biphenyl, dibenzothiophene and alkylated homologues in the (a) CN746 and (b) CN383 solid bitumen samples. Values calculated by the responses in the m/z 106, 120, 134, 128, 142, 156, 170, 184.1, 178, 192, 206, 220, 154, 168, 182, 184.0, 198.0 and 212 mass chromatograms. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 22 signature dominated by these isomers. In contrast, the distribution of alkylbenzenes in CN383 is typical of non-biodegraded oils, with, for example, dominance of 1,2,4- trimethylbenzene (Fig. C16). All the alkylnaphthalene maturity parameters show that CN383 has a significantly greater maturity than CN746 (Table 6a). Based on calibrations of DNR-1 and TNR-2 published by Radke et al. (1994), CN746 has VRE values of 0.65% and 0.72%, whereas CN383 has VRE values of 1.03 % and 0.93%. A similar maturity difference is also indicated by the alkylphenanthrene maturity parameters (Table 6b), although the exact VRE value depends on the ratio and calibration chosen. Based on the well known methylphenanthrene index, VRE = 0.66% for CN746, 0.82% for CN383. The only anomaly in the maturity indicators are the alkylbiphenyl ratios, which suggest a rather lower maturity for CN383 than other parameters. The peak due to 1,2,7-TMN is small in both samples, and therefore the parameter [log (1,2,7-TMN/1,3,7-TMN)] is lower than the benchmark value of -0.4, above which an angiosperm higher plant contribution to the organic matter from which the oil was generated may be suspected (Strachan et al., 1988). This contrasts with the biomarker information on sample CN746, which shows lots of evidence for angiosperm input, with high oleanane and oleanene abundances. The reason for this apparent discrepancy is probably the low maturity of CN746, which has meant that aromatisation processes that lead to the formation of 1,2,7-TMN have not occurred to any great extent (Strachan et al., 1988). Phenanthrene/dibenzothiophene ratios are high (>7), and alkyldibenzothiophenes could not be detected in CN383. Thus, despite the high elemental sulphur content of these rocks, little sulphur has been entrained as organic sulphur compounds in the solid bitumen. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 23 4 INTERPRETATION 4.1 LITERATURE DATA FOR COMPARISON There are several previously published papers or released reports on crude oils, seep oils fluid inclusion oils and extracted oils that can be used for comparison with the geochemistry of the solid bitumens analysed in this study. These are: 1. Robertson Research (1991): geochemistry of oil stained rocks from the Aure Scarp. 2. Waples and Wulff (1996): classified Papuan Basin oils and seeps into 5 major families, with various sub-families. 3. George et al. (1997): published data on Iagifu DST oils (Jurassic sourced) and Iagifu and P'nyang inclusion oils (possible Cretaceous source). 4. Volk et al. (2001): report to Interoil on fluid inclusion oil from Barune Sandstone: probable Cretaceous-sourced oil. 4.2 ORIGIN OF THE SOLID BITUMEN IN A VOLCANOCLASTIC SANDSTONE, MCDOWELL SCARP (OUTCROP SAMPLE CN746) Under the microscope in reflected white light, the bitumen in CN746 appears homogeneous and is associated with framboidal pyrite. Reflectance is low and darkens with time under immersion oil. CN746 is characterised by an aliphatic hydrocarbon fraction dominated by a UCM hump, and lack of most low to medium molecular weight n-alkanes. The presence of isoprenoids, biomarkers and residual high molecular weight n-alkanes suggests that most of the n-alkanes in this sample have been removed by biodegradation. Alkylcyclohexanes also appear to have been affected by biodegradation. The aromatic hydrocarbon fraction of CN746 contains altered alkylbenzene distributions, but alkylnaphthalenes, alkylphenanthrenes and other aromatic hydrocarbons are abundant. Therefore it can be surmised that biodegradation reached a level sufficient to remove n-alkanes, but not to significantly alter isoprenoids, hopanes, steranes or aromatic hydrocarbons. This alteration is approximately equivalent to the moderate biodegradation level 3 quoted by Volkman et al. (1984) and Trolio et al. (1999). It is likely that this biodegradation occurred after the original oil migrated to the surface (at outcrop). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 24 CN746 is also characterised by the presence of unsaturated hydrocarbons, including C(24) tetracyclic terpenes, various oleanene isomers and other C(29) and C(30) triterpenes. Additionally, ring degraded lupanes and ursanes, and oleanane and lupane are present in this sample. No C(30) steranes could be detected, and bicadinanes are either absent or of very low abundance. Sterane distributions strongly favour C(29) and C(27) diasteranes and rearranged hopanes are of very low abundance, the n-alkanes present have a very strong odd-over-even carbon number predominance, and the Pr/Ph ratio is 8.6. All these parameters point to generation of the oil from which the bitumen formed from a strongly terrestrially-dominated, low maturity source rock, deposited in an oxic environment. This source rock contained angiosperm organic matter, so is likely to have been Cretaceous or younger (Moldowan et al., 1994). The absence or very low abundance of bicadinanes suggests an age older than Oligocene/Miocene (Waples and Wulff, 1996), at which time dipterocarpaceae plants evolved in PNG (these give rise to bicadinanes). Therefore, a Palaeogene or late Cretaceous source is a strong possibility. It should be noted, however, that the absence of biomarkers such as bicadinanes is a weak age constraint, as a source rock may contain no input from the particular precursor vegetation that gives rise to bicadinanes. CN746 bitumen has most similarities with the subfamily 2A of Waples and Wulff (1996) which includes the Bwata-1 condensate. The published Pr/Ph ratio of Bwata-1 condensate is 6.4 which is similar to that of CN746, although apparently Bwata-1 condensate does not contain the alkenes seen in CN746. Sample CN746 does not resemble the three samples from the Aure Scarp (two Ieru/Chim Formations, one Mendi Formation) that were analysed by Robertson Research (1991), nor the inclusion oils from the Barune Sandstone (Volk et al., 2001) or the Toro Sandstone (George et al., 1997). Biomarker distributions clearly show that CN746 was not derived from a Jurassic source rock which is thought to have sourced the Iagifu oils in the Papuan fold belt (George et al., 1997). One alternative explanation is that the CN746 bitumen was formed from the biodegradation of a mature oil and that the immature biomarkers of the bitumen were picked up as the original oil migrated past organic-rich, low maturity source rocks to the surface. An argument against this theory is that all the maturity parameters that could be measured for the solid bitumen, including hopane, sterane, alkylnaphthalene, alkylphenanthrene and methyldibenzothiophene ratios indicate a maturity in the early oil window, 0.6-0.7% VRE. This consistency of maturity parameters suggests generation from a genuine, early oil-window source rock. In summary, the solid bitumen sample CN746 was generated from an early mature, Palaeogene or late Cretaceous source rock that contained predominantly terrestrial organic matter, and in particular angiosperm-derived organic matter, deposited in an oxic CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 25 environment. A coal source is possible. Alteration of oil to form the solid bitumen found at the outcrop likely occurred during moderate biodegradation, once the oil reached the surface. Biodegradation of a pre-existing oil column is an unlikely mechanism for formation of this bitumen. It may be an early, polar rich expulsion product that has migrated up a thrust and been slightly biodegraded at the surface. 4.3 SOLID RESERVOIR BITUMEN FROM A VUG IN A SANDSTONE, 91.24M, SUBU-1 (CN383) Both aliphatic and aromatic hydrocarbon fractions of CN383 show evidence for significant biodegradation. Most of the n-alkanes, isoprenoids, alkylcyclohexanes and medium to high molecular weight aromatic hydrocarbons have been removed, leaving biomarkers as the predominant group of compounds in the TIC. This alteration is approximately equivalent to the biodegradation level 5 quoted by Volkman et al. (1984) and Trolio et al. (1999). CN383 also contains evidence for a separate generation of non-degraded, low molecular weight oil. Thus, C(7) - C(9) n-alkenes, alkylcyclohexanes and alkylbenzenes are present in this sample in high abundance. It is likely that the solid bitumen in the vug is mainly represented by the strongly biodegraded portion of the extract, but that solvent extraction has also removed a fresh charge of condensate composition from this sample. Insufficient data on the non-biodegraded portion of this extract makes it difficult to further characterise this charge. The biodegraded component of CN383 contains large amounts of 4(beta)(H)-19-isopimarane, ent-beyerane and isopimarane, which are diterpenoids that are probably derived from conifer resins (Noble et al., 1985, 1986). Biomarker distributions are strongly dominated by rearranged triterpanes, including Ts, C(29) Ts, diahopanes and a series of unidentified, early-eluting rearranged triterpanes that sometimes co-occur with diahopanes (Moldowan et al., 1991; Telnaes et al., 1992; George et al., 1997), and by diasteranes. C(29) steranes dominate over C(27) steranes, and C(30) steranes are present. These distributions are typical of a clay-rich marine source rock containing a substantial amount of coniferous terrestrial organic matter. No oleananes or bicadinanes could be detected in CN383. This sample has most similarities with family 3 of Waples and Wulff (1996), which includes the lagifu oils (George et al., 1997). These are believed to be derived from Jurassic source rocks. Sample CN383 does not resemble the three samples from the Aure Scarp (two leru/Chim Formations, one Mendi Formation) that were analysed by Robertson Research (1991), nor the inclusion oils from the Barune Sandstone (Volk et al., 2001) or the Toro Sandstone (George et al., 1997). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 26 Most biomarker and aromatic thermal-maturity dependent ratios show that the biodegraded component of CN383 has a peak oil generative window maturity, 0.8 - 1.0% VRE. In summary, the solid reservoir bitumen from a vug in Subu-1 (CN383) was generated from a Jurassic, clay-rich, marine source rock in the peak of the oil window that contained a substantial amount of coniferous terrestrial organic matter. The mechanism by which the solid bitumen formed in the sandstone vug is uncertain at present, but may relate to bacterial sulphate reduction. Sulphate-reducing bacteria are capable of biodegrading oil and precipitating framboidal pyrite (e.g. Wilkes et al., 2000). A later fresh charge of condensate to the host rock may have overprinted the composition of biodegraded solid bitumen in this sample. 4.4 SOLID BITUMEN FROM A BLACK SANDSTONE, 75.57M, SUBU-1 (CN360) Surprisingly, solid bitumen extracted from the porespace of a black sandstone less than 16m higher in Subu-1 (CN360) has a significantly different composition compared to the vug bitumen (CN383). CN360 appears to be less biodegraded, with high molecular weight n-alkanes present above a UCM hump. This distribution may indicate extraction of 2 generations of bitumen form this sandstone: a highly biodegraded phase, and a slightly biodegraded phase. Additionally, CN360 also contains evidence for a separate generation of non-degraded, low molecular weight oil. Thus, C(7)-C(9) alkene and alkylcyclohexanes are present in this sample in high abundance and with a similar composition as in CN383, again perhaps representing a fresh charge of condensate composition in this sample. Aromatic hydrocarbons are virtually absent from the extract of CN360. The biomarker composition of CN360 is significantly different compared to the vug bitumen (CN383). In particular, CN360 has a low content of diahopanes and rearranged hopanes, lower diasterane/sterane ratios, a higher relative abundance of C(34) and C(35) homohopanes, 2(alpha)(H)- methylhopanes and C(30) steranes, and a higher C(29) (Alpha)(Beta) hopane/C(38) (Alpha)(Beta) hopane ratio. Additionally, 29,30-bisnorhopane was detected in CN360, whereas this biomarker was not detected in CN383. CN360 contains less tetracyclic terpanes relative to tricyclic terpanes. The sum of these terpane and sterane distributions is suggestive of a marine source rock containing prokaryotic-dominated organic matter, less terrestrial organic matter, deposited in a less clay-rich, possibly calcareous-influenced depositional environment. No oleananes or bicadinanes could be detected in CN360, so there is no evidence for angiosperm plants or dipterocarpaceae plants. However, the small amount of diterpenoids detected in CN360 is consistent with some conifer resin input into the source rock. The maturity of CN360 is somewhat less than CN383, but is still in the peak oil window (~0.8% VRE). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 27 CN360 has similarities with the oil stains extracted from Mendi Formation limestones at the Aure Scarp that were analysed by Robertson Research (1991). In particular, the Ts/Tm ratio, the relative amounts of tricyclic and tetracyclic terpanes, the C(29) (A)(B) hopane/C(29) (A)(B) hopane ratio, the sterane and diasterane distribution and the relative abundance of C(34) and C(35) homohopanes appear similar, although this is based on a qualitative visual comparison of chromatograms. In these respects, CN360 also has some similarities in hopane and sterane content to the inclusion oil from the Toro Sandstone at Iagifu (George et al., 1997), and the inclusion oil from the Barune Sandstone (Volk et al., 2001), although these contain oleanane so may be of younger source age than CN360. It should be noted, however, that the absence of a biomarker such as oleanane is a very weak age constraint, as a Cretaceous or Tertiary marine source rock may contain little angiosperm-derived terrestrial organic matter, and therefore would not contain oleanane. Overall, CN360 is dissimilar to the other two samples from the Aure Scarp (Ieru/Chim Formations) that were analysed by Robertson Research (1991), and to the Iagifu oils (George et al., 1997). At this stage it is not possible to relate CN360 to any of the oil families defined by Waples and Wulff (1996). In summary, the solid bitumen in the black sandstone in Subu-1 (CN360) was generated from a marine source rock in the peak oil window that contained dominantly prokaryotic organic matter, and was possibly deposited in a calcareous-influenced depositional environment. Compared to the source of CN383, this source rock was less clay-rich and contained less terrestrial organic matter. A later fresh charge of condensate composition may have overprinted the biodegraded solid bitumen in this sample. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 28 5 FUTURE GEOCHEMICAL WORK 1. Analyse more solid bitumens and EOMs from Subu-1, as well as from Subu-2, using GC and GC-MS to ascertain (a) the extent of variability in the source of the bitumens, (b) the extent of variability in maturity of the solid bitumens, and (c) the geochemical characterisation and prevalence of the apparently fresh generation of condensate, so as to determine whether this is a natural hydrocarbon charge or a contaminant introduced from drilling mud additives. 2. Investigate the significance of the organic acid derivatives that occur in the aromatic hydrocarbon fractions of the two samples analysed from Subu-1. 3. Reconstruct pre-biodegradation signatures of some of the solid bitumens using asphaltene pyrolysis. 4. Ascertain the source potential of the fine grained rock section(s) in Subu-1 and Subu-2 in terms of the quality and maturity of their organic matter. 5. Carry out a carbon isotopic study of extracts and fractions of solid bitumens to aid in interpretation of their genesis. In particular, this will help in relating the solid bitumens in the Subu wells and in the outcrop to the oil and oil seep data provided by Waples and Wulff (1996). 6. Carry out a sulphur isotopic study of elemental sulphur, organic sulphur, pyrite and any sulphate to aid in interpretation of the role sulphur played in bitumen formation. 7. Carry out a Molecular Composition of Inclusions (MCI) study on one interval from Subu-1 (114.85m; CN392) in order to characterise pristine oil trapped prior to solid bitumen formation. 8. Analyse Puri-1 oil and Bwata-1 condensate under the same analytical conditions as the solid bitumens, in order to more confidently compare their geochemical compositions and origins. 9. Correlate and compare all the solid bitumens, extracts, Puri-1 oil, Bwata-1 condensate and the potential source rock extracts in terms of their molecular and isotopic distribution patterns, and integrate the findings with other CSIRO data generated in this project and with the regional geological framework to locate the probable migration pathways and locations of prospective hydrocarbon occurrences. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 29 6 CONCLUSIONS Solid bitumen in a volcanoclastic sandstone, McDowell Scarp (outcrop sample CN746) The solid bitumen in sample CN746 was generated from an early mature, Palaeogene or late Cretaceous source rock that contained predominantly terrestrial organic matter, and in particular angiosperm-derived organic matter, deposited in an oxic environment. A coal source is possible. Alteration of oil to form the solid bitumen found at the outcrop likely occurred during moderate biodegradation, once the oil reached the surface. Biodegradation of a pre-existing oil column is an unlikely mechanism for formation of this bitumen. It may be an early, polar rich expulsion product that has migrated up a thrust and been slightly biodegraded at the surface. This solid bitumen has most similarities with the subfamily 2A of Waples and Wulff (1996) which includes the Bwata-1 condensate. Solid reservoir bitumen from a vug in a sandstone, 91.24m, Subu-1 (CN383) The solid reservoir bitumen from a vug was generated from a Jurassic, clay-rich, marine source rock in the peak oil window that contained a substantial amount of coniferous terrestrial organic matter. The mechanism by which the solid bitumen formed in the sandstone vug is uncertain at present, but may relate to bacterial sulphate reduction. Sulphate-reducing bacteria are capable of biodegrading oil and precipitating framboidal pyrite. A later fresh charge of condensate composition may have overprinted the biodegraded solid bitumen in this sample. This solid bitumen has most similarities with family 3 of Waples and Wulff (1996), which includes the Iagifu oils (George et al., 1997). Solid bitumen from a black sandstone, 75.57m, Subu-1 (CN360) The solid bitumen in the black sandstone in Subu-1 (CN360) was generated from a marine source rock in the peak oil window that contained dominantly prokaryotic organic matter, and was possibly deposited in a calcareous-influenced depositional environment. Compared to the source of CN383, this source rock was less clay-rich and contained less terrestrial organic matter. A later fresh charge of condensate composition may have overprinted the biodegraded solid bitumen in this sample. 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Telnaes, N., Isaksen, G. H. and Farrimond, P. (1992) Unusual triterpane distributions in lacustrine oils. Organic Geochemistry 18, 785-789. Trolio, R., Grice, K., Fisher, S. J., Alexander, R. and Kagi, R. I. (1999) Alkylbiphenyls and alkyldiphenylmethanes as indicators of petroleum biodegradation. Organic Geochemistry 30, 1241-1253. Volk, H., Ahmed, M., George, S. C., Quezada, R. A., Middleton, H. and Allan, T. (2001) Geochemical composition of oil trapped in fluid inclusions in the Barune Sandstone, Papua New Guinea. CSIRO Petroleum, Confidential Report No. 00-057. Volkman, J. K., Alexander, R., Kagi, R. I., Rowland, S. J. and Sheppard, P. N. (1984) Biodegradation of aromatic hydrocarbons in crude oils from the Barrow Sub-basin of Western Australia. Organic Geochemistry 6, 619-632. Waples, D. W. and Wulff, K. J. (1996) Genetic classification and exploration significance of oils and seeps of the Papuan Basin. In Petroleum Exploration and Development in Papua New Guinea, Ed. P. G. Buchanan, pp. 417-430. Proceedings of the Third PNG Petroleum Convention, Port Moresby. Wilkes H., Boreham, C., Harms, G., Zengler, K., Rabus, R., 2000. Anaerobic degradation and carbon isotopic fractionation of alkylbenzenes in crude oil by sulphate-reducing bacteria. Organic Geochemistry 31, 101-115. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page 33 APPENDIX A PEAK ASSIGNMENTS AND ABBREVIATIONS CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page Ai TABLE OF CONTENTS Table A1: Peak assignments for terpanes in the m/z 123, 191, 177 and 205 mass and MRM chromatograms. Table A2: Peak assignments for steranes, diasteranes and methylsteranes in the m/z 217, 218, 259 and 231 mass chromatograms and MRM chromatograms. Table A3: Peak assignments for triaromatic steroids in the m/z 231 mass chromatogram. Table A4: Peak abbreviations for aromatic hydrocarbons, with the diagnostic m/z ions. CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page Aii Table A1: Peak assignments for terpanes in the m/z 123, 191, 177 and 205 mass and MRM chromatograms.
Peak Terpane assignments - ---- ------------------- BS Bicyclic sesquiterpane C(29) Section C(29) rearranged triterpane Ts C(27)18(Alpha)(H),22,29,30-trisnorneohopane TNH C(27)17(Alpha)(H),18(Alpha)(H),21(beta)(H)-trisnorhopane C(30) Section C(30)rearranged triterpane Tm C(27)17(Alpha)(H),22,29,30-trisnorhopane C(27)(Beta) C(27)17(beta)(H),22,29,30-trisnorhopane 25,30-BNH C(28)17(Alpha)(H),25,30-bisnorhopane 29,30-BNH C(28)17(Alpha)(H),29,30-bisnorhopane 28,30-BNH C(28)28,30-bisnorhopane 25-nor C(29)25-nor-17(Alpha)(H)-hopane C(29)* C(29)17(Alpha)(H)-diahopane C(31)Section C(31)rearranged triterpane C(29) (Alpha)(Beta) 17(Alpha)(H),21(Beta)(H)-30-norhopane C(29)Ts 18(Alpha)(H)-30-norneohopane C(30)* C(30)17(Alpha)(H)-diahopane C(29) (Beta)(Alpha) 17(Beta)(H),21(Alpha)(H)-30-norhopane C(30)25-nor S C(30)25-nor-17(Alpha)(H)-hopane (22S) C(30)25-nor R C(30)25-nor-17(Alpha)(H)-hopane (22R) Oleanane 18(Alpha)(H)-oleanane (+ 18(beta)(H)-oleanane) C(30) (Alpha)(Beta) 17(Alpha)(H),21(Beta)(H)-hopane C(30) (Beta)(Alpha) 17(Beta)(H),21(Alpha)(H)-hopane C(31)* C(31)17(Alpha)(H)-diahopane C(31) (Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-homohopane (22S) C(31) (Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-homohopane (22R) G Gammacerane C(31) (Beta)(Alpha) 22S+R 17(Beta)(H),21(Alpha)(H)-homohopane (22S and 22R) C(32)* C(32)17(Alpha) (H)-diahopane C(32) (Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-bishomohopane (22S) C(32) (Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-bishomohopane (22R) C(33) (Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-trishomohopane (22S) C(33) (Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-trishomohopane (22R) C(34) (Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-tetrakishomohopane (22S) C(34) (Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-tetrakishomohopane (22R) C(35) (Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-pentakishomohopane (22S) C(35) (Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-pentakishomohopane (22R) 2(Alpha)(Me) 2(Alpha)-methylhopane
Continued... CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A1 Table A1 (Continued): Peak assignments for terpanes in the m/z 123, 191, 177 and 205 mass and MRM chromatograms.
Peak Terpane assignments Evidence - ---- ------------------------- -------- a C(29) triterpene (unidentified) MS b Olean-18-ene MS, GC RT c C(30) triterpene (D:A-Friedolean-6-ene ??) MS (tentative) d C(30) triterpene (unidentified) MS e C(30) triterpene (unidentified) MS f C(30) triterpene (ursene? + ?) MS g C(30) triterpene (diene?: unidentified) MS h Olean-13(18)-ene MS, GC RT i Olean-12-ene + ? MS, GC RT j Olean-18-ene MS, GC RT k Olean-11,13(18)-diene? MS l C(29) hopane (28-nor-17(Alpha)(h)-hopane?? MS m 18(Alpha)-Olean-12-ene MS, GC RT n C(30) triterpene (probably diploptene) MS o C(30) triterpene (D:C-Friedours-7-ene??) MS p C(30) triterpene MS q C(29) triterpane?? MS C(29) (Beta)(Beta) 17(Beta)(H),21(Beta)(H)-30-norhopane MS, GC RT C(30) (Beta)(Beta) 17(Beta)(H),21(Beta)(H)-norhopane MS, GC RT C(31) (Beta)(Beta) 17(Beta)(H),21(Beta)(H)-homohopane MS, GC RT C(32) (Beta)(Beta) 17(Beta)(H),21(Beta)(H)-bishomohopane MS, GC RT
Oleanene identifications partly based on GC retention times from Armanios (1994). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A2 Table A2: Peak assignments for steranes, diasteranes and methylsteranes in the m/z 217, 218, 259 and 231 mass chromatograms and MRM chromatograms.
Peak Sterane, diasterane and methylsterane assignments Abbreviation - ---- ------------------------------------------------- ------------ a 13(Beta)(H),17(Alpha)(H)-diacholestane (20S) C(27)(Beta)(Alpha) 20S diasterane b 13(Beta)(H),17(Alpha)(H)-diacholestane (20R) C(27)(Beta)(Alpha) 20R diasterane c 13(Alpha)(H),17(Beta)(H)-diacholestane (20S) C(27)(Alpha)(Beta) 20S diasterane d 13(Alpha)(H),17(Beta)(H)-diacholestane (20R) C(27)(Alpha)(Beta) 20R diasterane e 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane (20S) C(27)(Alpha)(Alpha)(Alpha) 20S sterane f 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20R) C(27)(Alpha)(Beta)(Beta) 20R sterane g 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20S) C(27)(Alpha)(Beta)(Beta) 20S sterane h 5(Alpha) (H),14(Alpha)(H), 17(Beta)(H)-cholestane (20R) C(27)(Alpha)(Alpha)(Alpha) 20R sterane i 24-methyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20S)* C(28)(Beta)(Alpha) 20S diasterane j 24-methyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20R)* C(28)(Beta)(Alpha)20R diasterane k 24-methyl-13(Alpha)(H),17(Beta) (H)-diacholestane (20S) C(28)(Alpha)(Beta)20S diasterane l 24-methyl-13(Alpha)(H),17(Beta)(H)-diacholestane (20R)* C(28)(Alpha)(Beta) 20R diasterane m 24-methyl-5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane(20S)* C(28)(Alpha)(Alpha)(Alpha) 20S sterane n 24-methyl-5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20R) C(28)(Alpha)(Beta)(Beta) 20R sterane o 24-methyl-5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20S) C(28)(Alpha)(Beta)(Beta) 20S sterane p 24-methyl-5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane (20R) C(28)(Alpha)(Alpha)(Alpha) 20R sterane q 24-ethyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20S) C(29)(Beta)(Alpha) 20S diasterane r 24-ethyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20R) C(29)(Beta)(Alpha) 20R diasterane s 24-ethyl-13(Alpha)(H),17(Beta)(H)-diacholestane (20S) C(29)(Alpha)(Beta) 20S diasterane t 24-ethyl-13(Alpha)(H),17(Beta)(H)-diacholestane (20R) C(29)(Alpha)(Beta) 20R diasterane u 24-ethyl-5(Alpha)(H),14(Alpha),(H)17(Alpha) (H)-cholestane (20S) C(29)(Alpha)(Alpha)(Alpha) 20S sterane v 24-ethyl-5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20R) C(29) (Alpha)(Beta)(Beta) 20R sterane w 24-ethyl-5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20S) C(29)(Alpha)(Beta)(Beta)20S sterane x 24-ethyl-5(Alpha)(H),14(Alpha)(H), 17(Alpha)(H)-cholestane (20R) C(29)(Alpha)(Alpha)(Alpha) 20R sterane y 24-n-propyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20S) C(30)(Beta)(Alpha)20S diasterane z 24-n-propyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20R) C(30)(Beta)(Alpha)20R diasterane A 24-n-propyl-5(Alpha)(H),14(Alpha)(H), 17(Alpha)(H)-cholestane (20S) C(30)(Alpha)(Alpha)(Alpha) 20S sterane B 24-n-propyl-5(Alpha)(H),14(Beta)(H), 17(Beta)(H)-cholestane (20R) C(30)(Alpha)(Beta)(Beta) 20R sterane C 24-n-propyl-5(Alpha)(H),14(Beta)(H), 17(Beta)(H)-cholestane (20S) C(30)(Alpha)(Beta)(Beta) 20S sterane D 24-n-propyl-5(Alpha)(H),14(Alpha)(H), 17(Alpha)(H)-cholestane (20R) C(30)(Alpha)(Alpha)(Alpha) 20R sterane
* = isomeric peaks (24S and 24R). Continued... CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A3 Table A2 (Continued): Peak assignments for steranes, diasteranes and methylsteranes in the m/z 217, 218, 259 and 231 mass chromatograms and MRM chromatograms.
Peak Sterane, diasterane and methylsterane assignments Abbreviation - ---- ------------------------------------------------- ------------ E 2(Alpha)-methyl-24-ethylcholestane (20S) 2(Alpha)-methyl 20S F 3(Beta)-methyl-24-ethylcholestane (20S) 3(Beta)-methyl 20S G 2(Alpha)-methyl-24-ethylcholestane (14(Beta),17(Beta)(H), 2(Alpha)-methyl (Beta)(Beta) 20R 20R) H 2(Alpha)-methyl-24-ethylcholestane (14(Beta),17(Beta)(H), 2(Alpha)-methyl (Beta)(Beta) 20S 20S) I 3(Beta)-methyl-24-ethylcholestane (14(Beta),17(Beta)(H), 3(Beta)-methyl (Beta)(Beta) 20R 20R) J 3(Beta)-methyl-24-ethylcholestane (14(Beta),17(Beta)(H), 3(Beta)-methyl (Beta)(Beta) 20S 20S) K 4(Alpha)-methyl-24-ethylcholestane (20S) 4(Alpha)-methyl 20S L 4(Alpha)-methyl-24-ethylcholestane (14(Beta),17(Beta)(H), 4(Alpha)-methyl (Beta)(Beta) 20R 20R) M 4(Alpha)-methyl-24-ethylcholestane (14(Beta),17(Beta)(H), 4(Alpha)-methyl (Beta)(Beta) 20S 20S) N 2(Alpha)-methyl-24-ethylcholestane (20R) 2(Alpha)-methyl 20R O 3(Beta)-methyl-24-ethylcholestane (20R) 3(Beta)-methyl 20R P 4(Alpha), 23S, 24S-trimethylcholestane (20R) 4(Alpha),23S,24S dinost 20R Q 4(Alpha), 23S, 24R-trimethylcholestane (20R) 4(Alpha),23S,24R dinost 20R R 4(Alpha)-methyl-24-ethylcholestane (20R) 4(Alpha)-methyl 20R S 4(Alpha), 23R, 24R-trimethylcholestane (20R) 4(Alpha),23R,24R dinost 20R T 4(Alpha), 23R, 24S-trimethylcholestane (20R) 4(Alpha),23R,24S dinost 20R
dinost = dinosterane isomers Table A3: Peak assignments for triaromatic steroids in the m/z 231 mass chromatogram.
Peak Name of Sterane with the Same Side Chain (X) Structure Carbon Number - ---- ------------------------------------------------------ ------------- 1 pregnane (X = ethyl) 20 2 20-methylpregnane (X = 2-propyl) 21 3 20-ethylpregnanes (X = 2-butyl)* 22 4 cholestane (20S) 26 5 cholestane (20R) + ergostane (20S) 26, 27 6 24-ethylcholestane (20S) 28 7 24-methylcholestane (20R) 27 8 24-ethylcholestane (20R) 28 9 24-n-propylcholestane (20S)** 29 10 24-n-propylcholestane (20R) 29
* = epimeric peaks a and b at C(20). ** = epimeric peaks a and b at C(24). CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A4 Table A4: Peak abbreviations for the aromatic hydrocarbons, with diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion - ---------------------------- ------------ --- Ethylbenzene EB 106 meta- and para-Xylene m-+p-xylene 106 ortho-Xylene o-xylene 106 Isopropylbenzene iPB 120 n-Propylbenzene nPB 120 1-Methyl-3-ethylbenzene 1M3EB 120 1-Methyl-4-ethylbenzene 1M4EB 120 1,3,5-Trimethylbenzene 1,3,5-TMB 120 1-Methyl-2-ethylbenzene 1M2EB 120 1,2,4-Trimethylbenzene 1,2,4-TMB 120 1,2,3-Trimethylbenzene 1,2,3-TMB 120 Isobutylbenzene iBB 134 sec-Butylbenzene sBB 134 1-Methyl-3-isopropylbenzene 1M3IB 134 1-Methyl-4-isopropylbenzene 1M4IB 134 1-Methyl-2-isopropylbenzene 1M2IB 134 1,3-Diethylbenzene 1,3-DEB 134 1-Methyl-3-propylbenzene 1M3PB 134 1-Methyl-4-propylbenzene 1M4PB 134 1,4-Diethylbenzene 1,4-DEB 134 n-Butylbenzene nBB 134 1,2-Diethylbenzene 1,2-DEB 134 1,3-Dimethyl-5-ethylbenzene 1,3-D5EB 134 1-Methyl-2-propylbenzene 1M2PB 134 1,4-Dimethyl-2-ethylbenzene 1,4-D2EB 134 1,3-Dimethyl-4-ethylbenzene 1,3-D4EB 134 1,2-Dimethyl-4-ethylbenzene 1,2-D4EB 134 1,3-Dimethyl-2-ethylbenzene 1,3-D2EB 134 1,2-Dimethyl-3-ethylbenzene 1,2-D3EB 134 1,2,4,5-Tetramethylbenzene 1,2,4,5-TeMB 134 1,2,3,5-Tetramethylbenzene 1,2,3,5-TeMB 134 1,2,3,4-Tetramethylbenzene 1,2,3,4-TeMB 134
Continued... CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A5 Table A4 (Continued): Peak abbreviations for the aromatic hydrocarbons, with the diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion - ---------------------------- ------------ --- Naphthalene N 128 2-Methylnaphthalene 2-MN 142 1-Methylnaphthalene 1-MN 142 2-Ethylnaphthalene 2-EN 156 1-Ethylnaphthalene 1-EN 156 2,6-Dimethylnaphthalene 2,6-DMN 156 2,7-Dimethylnaphthalene 2,7-DMN 156 1,3- and 1,7-Dimethylnaphthalene 1,3- and 1,7-DMN 156 1,6-Dimethylnaphthalene 1,6-DMN 156 1,4- and 2,3-Dimethylnaphthalene 1,4- and 2,3-DMN 156 1,5-Dimethylnaphthalene 1,5-DMN 156 1,2-Dimethylnaphthalene 1,2-DMN 156 1,8-Dimethylnaphthalene 1,8-DMN 156 1,3,7-Trimethylnaphthalene 1,3,7-TMN 170 1,3,6-Trimethylnaphthalene 1,3,6-TMN 170 1,3,5- and 1,4,6-Trimethylnaphthalene 1,3,5- and 1,4,6-TMN 170 2,3,6-Trimethylnaphthalene 2,3,6-TMN 170 1,2,7-Trimethylnaphthalene 1,2,7-TMN 170 1,6,7-Trimethylnaphthalene 1,6,7-TMN 170 1,2,6-Trimethylnaphthalene 1,2,6-TMN 170 1,2,4-Trimethylnaphthalene 1,2,4-TMN 170 1,2,5-Trimethylnaphthalene 1,2,5-TMN 170 1,2,3-Trimethylnaphthalene 1,2,3-TMN 170 1,3,6,7-Tetramethylnaphthalene 1,3,6,7-TeMN 184 1,2,4,6-, 1,2,4,7- and 1,2,4,6-, 1,2,4,7- and 184 1,4,6,7-Tetramethylnaphthalene 1,4,6,7-TeMN 1,2,5,7-Tetramethylnaphthalene 1,2,5,7-TeMN 184 2,3,6,7-Tetramethylnaphthalene 2,3,6,7-TeMN 184 1,2,6,7-Tetramethylnaphthalene 1,2,6,7-TeMN 184 1,2,3,7-Tetramethylnaphthalene 1,2,3,7-TeMN 184 1,2,3,6-Tetramethylnaphthalene 1,2,3,6-TeMN 184 1,2,5,6- and 1,2,3,5-Tetramethylnaphthalene 1,3,6,7- and 1,2,3,5-TeMN 184
Continued... CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A6 Table A4 (Continued): Peak abbreviations for the aromatic hydrocarbons, with the diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion - ---------------------------- ------------ --- 1,2,4,6,7-Pentamethylnaphthalenes 1,2,4,6,7-PMN 198 1,2,3,5,7-Pentamethylnaphthalenes 1,2,3,5,7-PMN 198 1,2,3,6,7-Pentamethylnaphthalenes 1,2,3,6,7-PMN 198 1,2,3,5,6-Pentamethylnaphthalenes 1,2,3,5,6-PMN 198 Phenanthrene P 178 3-Methylphenanthrene 3-MP 192 2-Methylphenanthrene 2-MP 192 9-Methylphenanthrene 9-MP 192 1-Methylphenanthrene 1-MP 192 3-Ethylphenanthrene 3-EP 206 9-, 2- and 1 + Ethylphenanthrene + 9-EP, 2-EP, 1-EP, 3,6-DMP 206 3,6-Dimethylphenanthene 3,5- and 2,6-Dimethylphenanthrene 3,5- and 2,6-DMP 206 2,7-Dimethylphenanthrene 2,7-DMP 206 1,3-, 3,9-, 2,10- and 3,10-Dimethylphenanthrene 1,3-, 3,9-, 2,10- and 3,10- 206 1,6-, 2,9- and 2,5-Dimethylphenanthrene 1,6-, 2,9- and 2,5-DMP 206 1,7-Dimethylphenanthrene 1,7-DMP 206 2,3-, 1,9-, 4,9- and 4,10-Dimethylphenanthrene 2,3-, 1,9-, 4,9- and 4,10-DMP 206 1,8-Dimethylphenanthrene 1,8-DMP 206 1,2-Dimethylphenanthrene 1,2-DMP 206 Trimethylphenanthrenes TMPs 220 Tetramethylphenanthrenes TeMPs 234 1-Isohexyl-2-methyl-6-isopropylnaphthalene i-HMN 197 Biphenyl Bp 154 2-Methylbiphenyl 2-MBp 168 Diphenylmethane DPM 168 3-Methylbiphenyl 3-MBp 168 4-Methylbiphenyl 4-MBp 168 Dibenzofuran DBF 168 2,3'-Dimethylbiphenyl 2,3'-DMBp 182 2,5-Dimethylbiphenyl 2,5-DMBp 182 2,4- + 2,4'-Dimethylbiphenyl 2,4- + 2,4'-DMBp 182 2,3-Dimethylbiphenyl 2,3-DMBp 182 3-Methyldiphenylmethane 3-MDPM 182 4-Methyldiphenylmethane 4-MDPM 182 3-Ethylbiphenyl 3-EBp 182 3,5-Dimethylbiphenyl 3,5-DMBp 182
Continued... CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A7 Table A4 (Continued): Peak abbreviations for the aromatic hydrocarbons, with the diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion - ---------------------------- ------------ --- 3,3'-Dimethylbiphenyl 3,3'-DMBp 182 4-Ethylbiphenyl 4-EBp 182 3,4'-Dimethylbiphenyl 3,4'-DMBp 182 4,4'-Dimethylbiphenyl 4,4'-DMBp 182 Fluorene Fl 166 2-Methylfluorene 2-MFl 180 3-Methylfluorene 3-MFl 180 1-Methylfluorene 1-MFl 180 4-Methylfluorene 4-MFl 180 Fluoranthene Fa 202 Pyrene Py 202 Methylfluoranthenes MFa 216 2-Methylpyrene 2-MPy 216 4-Methylpyrene 4-MPy 216 1-Methylpyrene 1-MPy 216 Dibenzothiophene DBT 184 4-Methyldibenzothiophene 4-MDBT 198 2-Methyldibenzothiophene 2-MDBT 198 3-Methyldibenzothiophene 3-MDBT 198 1-Methyldibenzothiophene 1-MDBT 198 4-Ethyldibenzothiophene 4-ETDBT 212 4,6-Dimethyldibenzothiophene 4,6-DMDBT 212 2,4-Dimethyldibenzothiophene 2,4-DMDBT 212 2,6-Dimethyldibenzothiophene 2,6-DMDBT 212 3,6-Dimethyldibenzothiophene 3,6-DMDBT 212 3,7-Dimethyldibenzothiophene 3,7-DMDBT 212 1,4-Dimethyldibenzothiophene 1,4-DMDBT 212 1,6-Dimethyldibenzothiophene 1,6-DMDBT 212 1,8-Dimethyldibenzothiophene 1,8-DMDBT 212 1,3-Dimethyldibenzothiophene 1,3-DMDBT 212 1,9-Dimethyldibenzothiophene 1,9-DMDBT 212 1,2-Dimethyldibenzothiophene 1,2-DMDBT 212
CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page A8 APPENDIX B CN746 (SOLID BITUMEN FROM OUTCROP SAMPLE) PEAK ASSIGNMENTS AND ABBREVIATIONS CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page Bi [A: FID, ALIPHATIC HYDROCARBONS CHART] [B: FID, AROMATIC HYDROCARBONS CHART] Figure B1: Gas chromatograms (FID) for the bitumen outcrop sample (CN746), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B1 [A: TIC, ALIPHATIC HYDROCARBONS CHART] [B: TIC, AROMATIC HYDROCARBONS CHART] Figure B2: Total ion chromatograms (TIC) for the bitumen outcrop sample (CN746), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B2 [N-ALKANES CHART] [CHART] Figure B3: Partial m/z 85.10 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B3 [ISOPRENOIDS CHART] [CHART] [CHART] Figure B4: Partial m/z 113.13 and 125.13 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of isoprenoids and (Beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B4 [N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure B5: Partial m/z 83.09 and 97.10 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B5 [BICYCLIC SESQUITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure B6: Partial m/z 123.12 and 191.18 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes and (b) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C24 tetracyclic terpane, and so on. dL = 10 (Beta) (H)-de-A- lupane, dU = 10 (Beta) (H)-de-A-ursane CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B6 [HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure B7a: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1, together with identifications of unusual hopanes, hopenes and oleanenes (a-r). CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B7
[a: TIC CHART] [CHART] [CHART] Figure B7b: Partial TIC, and m/z 191.18 and 410.4 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of unusual hopanes, hopenes and oleanenes. Data acquired using a magnet scan programme and linear heating rate. Hopane abbreviations are listed in Table A1, together with identifications of unusual hopanes, hopenes and oleanenes (a-r). CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B8
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure B8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4 -- 191.2) for the bitumen outcrop sample (CN746), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B9
[C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure B9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4 --> 191.2) for the bitumen outcrop sample (CN746), showing the distribution of (a) C(30), (b) C(31) and (c) C(32) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B10
[C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure B10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5 --> 191.2) for the bitumen outcrop sample (CN746), showing the distribution of (a) C(33), (b) C(34) and (c) C(35) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B11
[STERANES AND DIASTERANES CHART] [STERANES CHART] Figure B11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B12
[DIASTERANES CHART] [METHYLSTERANES CHART] Figure B12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B13
[C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure B13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4 --> 217.2) for the bitumen outcrop sample (CN746), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B14
[C(26) STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-N-PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure B14: Partial MRM chromatograms (m/z 358.4, 414.4 --> 217.2; 414.4 --> 231.2) for the bitumen outcrop sample (CN746), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes. Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B15
[HOPANES CHART] [STERANES AND DIASTERANES CHART] Figure B15: Partial added MRM chromatograms for the bitumen outcrop sample (CN746), showing (a) the distribution of C(27) to C(35) hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 4820.4 --> 191.2), and (b) the distribution of C(27) to C(29) steranes and diasteranes (m/z 372.4 + 386.4 + 400.4 --> 217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B16
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure B16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) C(2) (ALKYLBENZENES), (b) C(3) (ALKYLBENZENES) and (c) C(4) (ALKYLBENZENES) respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B17
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure B17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B18
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure B18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B19
[CHART] [CHART] [CHART] Figure B19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B20
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure B20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B21
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure B21: Partial m/z 220.13 and 234.14 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B22
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure B22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B23
[FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure B23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B24
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure B24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms for the bitumen outcrop sample (CN746), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen sample CN746 from outcrop, Page B25
APPENDIX C CN383 (SOLID BITUMEN FROM VUG, SUBU-1, 91.24M) PEAK ASSIGNMENTS AND ABBREVIATIONS CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page Ci
[a: FID, ALIPHATIC HYDROCARBONS CHART] [b: FID, AROMATIC HYDROCARBONS CHART] Figure C1: Gas chromatograms (FID) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C1
[a: TIC, ALIPHATIC HYDROCARBONS CHART] [b: TIC, AROMATIC HYDROCARBONS CHART] Figure C2: Total ion chromatograms (TIC) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C2
[N-ALKANES CHART] [CHART] Figure C3: Partial m/z 85.10 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of n-alkanes, methylalkanes and iso-prenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C3
[ISOPRENOIDS CHART] [CHART] [CHART] Figure C4: Partial m/z 113.13 and 125.13 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of isoprenoids and B-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C4
[n-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure C5: Partial m/z 83.09 and 97.10 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C5
[BICYCLIC SESQUITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure C6: Partial m/z 123.12 and 191.18 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes and (b) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure C7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C7
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure C8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4 --> 191.2) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C8
[C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure C9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4 --> 191.2) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C(30), (b) C(31) and (c) C(32) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C9
[C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure C10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5 --> 191.2) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C(33), (b) C(34) and (c) C(35) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C10
[STERANES AND DIASTERANES CHART] [STERANES CHART] Figure C11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C11
[DIASTERANES CHART] [METHYLSTERANES CHART] Figure C12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C12
[C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure C13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4 --> 217.2) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C (27), (b) C (28) and (c) C (29) steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C13
[C(26) STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-n- PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure C14: Partial MRM chromatograms (m/z 358.4, 414.4 --> 217.2; 414.4 --> 231.2) for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes. Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C14
[HOPANES CHART] [CHART] Figure C15: Partial added MRM chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing (a) the distribution of C(27) to C(35) hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 4820.4 -> 191.2), and (b) the distribution of C27 to C29 steranes and diasteranes (m/z 372.4 + 386.4 + 400.4 --> 217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C15
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure C16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C16
[NAPHTALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure C17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure C18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C18
[CHART] [CHART] [CHART] Figure C19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure C20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure C21: Partial m/z 220.13 and 234.14 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C21 [BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure C22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C22 [FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure C23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C23 [DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure C24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms for the bitumen from vug sample (CN383, Subu-1, 91.24m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from vug, sample CN383, Page C24 APPENDIX D CN360 (SOLID BITUMEN FROM BLACK SANDSTONE, SUBU-1, 75.57M) PEAK ASSIGNMENTS AND ABBREVIATIONS CSIRO Petroleum Interoil solid bitumen geochemistry preliminary report, Page Di [A: FID, ALIPHATIC HYDROCARBONS CHART] [B: FID, AROMATIC HYDROCARBONES CHART] Figure D1: Gas chromatograms (FID) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D1 [A: TIC, ALIPHATIC HYDROCARBONS CHART] [B: TIC, AROMATIC HYDROCARBONS CHART] Figure D2: Total ion chromatograms (TIC) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m, Subu-1, 75.57m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D2 [N-ALKANES CHART] [CHART] Figure D3: Partial m/z 85.10 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D3 [ISOPRENOIDS CHART] [CHART] [CHART] Figure D4: Partial m/z 113.13 and 125.13 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of isoprenoids and (Beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D4 [N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure D5: Partial m/z 83.09 and 97.10 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D5 [BICYCLIC SESQUITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure D6: Partial m/z 123.12 and 191.18 mass chromatograms for the bitumen from the black sandstone sample (CN360. Subu-1. 75.57m), showing the distribution of (a) C14 to C16 Bicyclic sesquiterpanes and (b) tricyclic/tetracyclic terpanes. 14b refers to c14 bicyclic sesquiterpanes, 16/3 refers to c19 tricyclic terpane, 24/2 refers to c24 tetracyclic terpane. and so on CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure D7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D7
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure D8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4/191.2) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D8
[C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure D9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4/191.2) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) C(30), (b) C(31) and (c) C(32) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D9
[C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure D10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5/191.2) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) C(33), (b) C(34) and (c) C(35) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D10
[STERANES AND DIASTERANES CHART] [STERANES CHART] Figure D11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D11
[DIASTERANES(BA) CHART] [METHYLSTERANES CHART] Figure D12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D12
[C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure D13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4/217.2) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D13
[C(26) STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-n-PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure D14: Partial MRM chromatograms (m/z 358.4, 414.4 217.2; 414.4/231.2) for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes, Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D14
[HOPANES CHART] [CHART] Figure D15: Partial added MRM chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing (a) the distribution of C(27) to C35 hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 4820.4/191.2), and (b) the distribution of C(27) to C(29) steranes and diasteranes (m/z 372.4 + 386.4 + 400.4/217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D15
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure D16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D16
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure D17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure D18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D18
[CHART] [CHART] [CHART] Figure D19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure D20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenan-threnes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure D21: Partial m/z 220.13 and 234.14 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D21
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure D22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D22
[FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure D23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D23
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure D24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms for the bitumen from the black sandstone sample (CN360, Subu-1, 75.57m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A4. CSIRO Petroleum Interoil, bitumen from black sandstone, sample CN360, Page D24
EX-99.27 22 h19854exv99w27.txt CSIRO PETROLEUM CONFIDENTIAL REPORT NO. 04-002 EXHIBIT 27 [CSIRO LOGO] CSIRO Petroleum Confidential Report No. 04-002 (Part 1) JANUARY 2004 THE GEOCHEMISTRY AND ORGANIC PETROLOGY OF OIL SHOWS AND FINE-GRAINED ROCKS IN MOOSE-1 AND MOOSE-1ST1, EAST PAPUAN BASIN PART 1: TEXT AND DIAGRAMS, APPENDICES A TO G A Report to InterOil Corporation S. C. George, M. Ahmed, N. R. Sherwood, R. A. Quezada and N.J. Russell FOR FURTHER INFORMATION CONTACT: Dr. Simon C. George CSIRO Petroleum, PO Box 136, North Ryde, NSW, Australia 1670 Telephone: +61 2 9490 8718, Facsimile: +61 2 9490 8197 E-mail: Simon.George@csiro.au THIS IS A CONFIDENTIAL REPORT FOR RESTRICTED DISTRIBUTION ONLY Copies to: InterOil Corporation (4 hard copies, electronic copy) CSIRO authors Confidential CSIRO archives (2 hard copies, electronic copy) EXECUTIVE SUMMARY During drilling of the Moose-1 well (and the subsequent sidetrack well Moose-1 ST1), oil shows were identified in the Mendi Formation limestone, which was a secondary target in PPL 238 of Papua New Guinea. This study uses geochemical analyses to assess the origin of these oil shows, and in particular to geochemically correlate the oil shows with other crude oils in the region, and to establish the contributions of possible drilling contaminants on the oil shows, including diesel, Aus-Tex additive, and drilling greases. A further purpose of this study is to use organic geochemical and petrological analyses to investigate the source potential, including thermal maturity, of fine-grained mudstones underlying the Mendi Formation limestones in Moose-1 ST1. Oil shows from 530 m (Moose-1), 675.1 m, 686.2 m, 727 m, 759.5-759.6 m and 840 m (all Moose-1 ST1) were strongly overprinted by diesel. Carefully application of high resolution organic geochemistry enabled the indigenous signature of some of these oil shows to be separated from that of the diesel. The diesel has a characteristic n-alkane distribution maximising at n-C(16), and also a distinctive pattern of branched and cyclic alkanes, but contains few biomarkers. Oil shows from 686.2 m and 759.5-759.6 m (Moose-1 ST1) were also strongly overprinted by a drilling additive called Aus-Tex, which is characterised by unusually high abundances of some polycyclic aromatic hydrocarbons, but which also contains abundant biomarkers that strongly interfere with the natural geochemistry of these oil shows. The oil shows from 686.2 m and 759.5-759.6 m were essentially unusable for obtaining information on the natural component. An oil show from 809.7 m contains no discernible wellbore contaminants and indicated a mixture of oil signatures. The main natural component of all the interpretable oil shows is an oil with an origin from a calcareous source with a high proportion of prokaryotic and a low proportion of terrestrial organic matter input, which correlates well with the "Family B" solid bitumens in the Subu wells and the fluid inclusion oil from Subu-1. Geochemical features of this oil type are high amounts of 2? - -methylhopanes and 30-norhopanes, high C(29)/C(30) ? ? hopane ratios and lack of a significant terrestrial signature. The oil show from 809.7 m contains a mixture of the calcareous sourced oil, and an oil derived from a clay-rich, marine source rock low in sulphur, which had significant input of terrestrial organic matter and was deposited in an oxic depositional environment. This signature correlates with the Jurassic-sourced oils in the Foldbelt and at Puri-1, and with the "Family A" solid bitumens in the Subu wells. Geochemical features of this oil type are high amounts of diterpanes and a high [C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) ratio, indicative of a strong terrestrial influence, and a moderate to high content of rearranged hopanes and diasteranes. The oil shows in Moose-1 and Moose-1 ST1 have CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 2 a maturity in the peak oil window (about 0.8 to 0.9% VRE), which is slightly higher than that indicated by the geochemical signatures for the underlying fine-grained samples. The difference in maturity, but more importantly the major difference in source characteristics, indicates that these fine-grained samples did not source the oil shows in the Mendi Formation limestones. The fine-grained samples in Moose-1ST1 were deposited in an oxic marine depositional environment with major terrestrial organic matter input, including a minor coniferous organic matter component that could be derived from re-worked Jurassic rocks. They correlate reasonably well with the fine-grained samples analysed from the Subu wells. C(26) sterane distributions are consistent with Cretaceous or younger ages for these strata. They have low TOC values (<1.2%) and low hydrogen indices (mostly <155 mg/g), indicating type III organic matter, with low liquid hydrocarbon generation potential. On the basis of the maceral contents, in particular the liptinite contents, the original oil generation potential ranges from poor to very good. This is better than is apparent from the Rock-Eval results, probably because of the diluting effect of inertinite on hydrogen indices, and also the maturity level that this sequence has reached. Most of the finegrained samples in Moose-1ST1 have measured vitrinite reflectance values (~0.65 to ~0.70%) that are `suppressed', by at least 0.2%. The FAMM-derived equivalent vitrinite reflectance, which is free from the effects of VR suppression, is about 0.9%, indicating full maturity for oil generation. On the basis of the geochemical data, the best estimate of their thermal maturity is about 0.7-0.8% (mid oil window), which is consistent with the Rock Eval data but is somewhat lower than the equivalent vitrinite reflectance data from FAMM. The anomalously high maturity indicated for the uppermost sample (vitrinite reflectance value of 1.25%) may be due to overthrusting, localised thermal effects from igneous activity and associated hydrothermal fluids, or the complicating effects of reworked material. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 3 TABLE OF CONTENTS
Page number EXECUTIVE SUMMARY .............................................................. 2-3 TABLE OF CONTENTS .............................................................. 4-7 LIST OF TABLES and FIGURES ..................................................... 8-11 1 INTRODUCTION ................................................................. 12 2.1 Samples .................................................................. 14 2.2 Total organic carbon and Rock Eval ....................................... 14 2.3 Solvent extraction ....................................................... 14 2.3.1 Soxhlet Extraction ................................................... 14 2.3.2 Ultrasonication ...................................................... 14 2.3.3 Separating funnel .................................................... 17 2.4 Asphaltene precipitation ................................................. 17 2.5 Column chromatography .................................................... 17 2.5.1 Long column method ................................................... 17 2.5.2 Short column method .................................................. 18 2.6 Gas Chromatography ....................................................... 18 2.7 Gas Chromatography - Mass Spectrometry (GC - MS) ......................... 18 2.8 Organic petrology ........................................................ 19 2.8.1 FAMM Analyses ........................................................ 19 2.8.2 Conventional Organic Petrology ....................................... 21 3 RESULTS AND DISCUSSION ....................................................... 23 3.1 Total organic carbon and Rock Eval data ................................. 23 3.2 Extractability ........................................................... 23 3.3 Extract gross compositions ............................................... 25 3.4 Overall character of aliphatic and aromatic hydrocarbon fractions, including n-alkane distributions ............................................. 25 3.5 n-Alkane and isoprenoid parameters ....................................... 28 3.6 Intra n-alkane peaks in EOM .............................................. 29 3.7 Alkylcyclohexanes and methylalkylcyclohexanes ............................ 32 3.8 Terpanes ................................................................. 32 3.8.1 Bicyclic sesquiterpanes .............................................. 36
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 4 3.8.2 Diterpanes ............................................... 36 3.8.3 Tricyclic and tetracyclic terpanes ....................... 37 3.8.4 Methylhopanes ............................................ 38 3.8.5 Hopanes .................................................. 39 3.9 Steranes and Diasteranes ..................................... 42 3.10 Aromatic Hydrocarbons ....................................... 47 3.10.1 Overall aromatic hydrocarbon composition ................ 47 3.10.2 Alkylbenzenes ........................................... 51 3.10.3 Alkylnaphthalenes ....................................... 52 3.10.4 Alkylphenanthrenes ...................................... 55 3.10.5 Alkylbiphenyls .......................................... 57 3.10.6 Alkyldibenzothiophenes .................................. 58 3.11 Organic petrology results ................................... 59 3.11.1 Sample descriptions and maceral contents ................ 59 3.11.2 Thermal maturity: FAMM and vitrinite reflectance analyses........................................................ 62 4 INTERPRETATION AND SYNTHESIS ..................................... 65 4.1 The fine-grained rocks in Moose-1ST1 ......................... 65 4.1.1 Source potential ......................................... 65 4.1.2 Source characteristics ................................... 65 4.1.3 Thermal maturity characteristics ......................... 70 4.2 Overprinting of oil shows by diesel, Aus-Tex and grease ...... 73 4.2.1 Diesel (Appendices J and K) .............................. 73 4.2.2 Aus-Tex (Appendix L) ..................................... 74 4.2.3 Grease samples: Pipe Dope and Grease Gun (Appendices M and N) ....................................................... 74 4.2.4 Moose-1 530 m, open hole slurry sample (Appendix B) ...... 74 4.2.5 Moose-1ST1, 675.1 m, core (Appendix C) ................... 75
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 5 4.2.6 Moose-1ST1, 686.2 m, core (Appendices D and E) ...................................... 75 4.2.7 Moose-1ST1,727 m, oil mixed with water (Appendix F) ................................. 75 4.2.8 Moose-1ST1, 759.5 m, core (Appendix G) .............................................. 76 4.2.9 Moose-1ST1, 809.7 m, core (Appendix H) .............................................. 76 4.2.10 Moose-1ST1, 840 m, fluid sample (Appendix I) ....................................... 77 4.3 The source of the natural component of the oil shows at Moose-1 and Moose-1ST1 .......... 78 4.3.1 "Calcareous" source signature ....................................................... 78 4.3.2 "Jurassic" source signature ......................................................... 79 4.4 Distribution of oil shows and contaminants in Moose-1 and Moose-1 ST1 ................... 80 5 CONCLUSIONS ................................................................................. 82 6 ACKNOWLEDGEMENTS ............................................................................ 83 7 REFERENCES .................................................................................. 84 APPENDIX A: Peak assignments and abbreviations ................................................ 9 pages APPENDIX B: Moose-1 530m (Open Hole Slurry Sample): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX C: Moose-1ST1 675.1 m (Extractable Organic Matter): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX D: Moose-1ST1 686.2m (Extractable Organic Matter): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX E: Moose-1ST1 686.2m (Extractable Organic Matter, Soxhlet Extract): gas and mass chromatograms and peak identifications ........................................... 6 pages APPENDIX F: Moose-1ST1 727m (Oil Mixed With Water): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX G: Moose-1ST1 759.5m (Core Sample): gas and mass chromatograms and peak identifications .......................................................................... 25 pages APPENDIX H: Moose-1ST1 809.7m (Core Sample): gas and mass chromatograms and peak identifications .......................................................................... 25 pages APPENDIX I: Moose-1ST1 840m (Fluid Sample): gas and mass chromatograms and peak identifications .......................................................................... 25 pages APPENDIX J: Moose-1ST1 Diesel Sample (Tank): gas and mass chromatograms and peak identifications .......................................................................... 25 pages APPENDIX K: Moose-1ST1 Diesel Sample (Line): gas and mass chromatograms and peak identifications ........................................................ 2 pages
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 6 APPENDIX L: Moose-1ST1, Aus-Tex Sample: gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX M: Moose-1ST1, Grease Gun Sample: gas and mass chromatograms and peak identifications ........................................................ 2 pages APPENDIX N: Moose-1ST1, Pipe Dope Sample: gas and mass chromatograms and peak identifications ........................................................ 2 pages APPENDIX O: Moose-1ST1 820m (Mudstone Sample): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX P: Moose-1ST1 920m (Mudstone Sample): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX Q: Moose-1ST1 968-971m (Mudstone Sample): gas and mass chromatograms and peak identifications ........................................................ 25 pages APPENDIX R: Fluorescence alteration diagrams from Moose-1 ST1 ................................. 3 pages APPENDIX S: Reflectance histograms for samples from Moose-1 ST1 ............................... 8 pages The report is presented in two volumes: Part 1: Text and diagrams, Appendices A to G Part 2: Appendices H to S
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 7 LIST OF TABLES Table 1: Sample details. ................................................................ 15 Table 2: Geochemical and organic petrological analyses carried out. ..................... 16 Table 3: Total organic carbon and Rock Eval data. ....................................... 24 Table 4: Extractability and gross compositional data .................................... 24 Table 5: General molecular data and aliphatic hydrocarbon parameters .................... 26 Table 6: Preliminary origin of oil shows, based on overall and gross distributions ...... 28 Table 7a: Terpane parameters (part a).................................................... 33 Table 7b: Terpane parameters (part b).................................................... 33 Table 7c: Terpane parameters (part c) ................................................... 34 Table 7d: Terpane parameters (part d).................................................... 34 Table 7e: Terpane parameters (part e).................................................... 35 Table 7f: Terpane parameters (part f) ................................................... 35 Table 8a: Sterane and diasterane parameters (part a) .................................... 43 Table 8b: Sterane and diasterane parameters (part b) .................................... 43 Table 8c: Sterane and diasterane parameters (part c)..................................... 44 Table 8d: Sterane and diasterane parameters (part d)..................................... 44 Table 8e: Sterane and diasterane parameters (part e)..................................... 45 Table 9b: Aromatic hydrocarbon parameters (part b)....................................... 48 Table 9c: Aromatic hydrocarbon parameters (part c) ...................................... 49 Table 9d: Aromatic hydrocarbon parameters (part d)....................................... 49 Table 9e: Aromatic hydrocarbon parameters (part e) ...................................... 50 Table 9f: Aromatic hydrocarbon parameters (part f) ...................................... 50
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 8 Table 10: Maceral group compositions, vitrinite reflectance data and petrographic descriptions for samples from Moose-1 ST1 .................................... 60 Table 10 continued: Maceral group compositions, vitrinite reflectance data and petrographic descriptions for samples from Moose-1 ST1. ........................ 61 Table 11: FAMM-derived equivalent vitrinite reflectance (EqVR) and measured vitrinite reflectance (VR) data for samples from Moose-1 ST1. ............................. 63 Table 12: Summary of the origin of oil shows, based on all geochemical data ............. 81
LIST OF FIGURES Figure 1: Location map of Moose-1 relative to the Subu wells and other prospects in PPL 238 of Papua New Guinea .......................................................... 12 Figure 1a: Fluorescence alteration diagram showing the `normal' calibration curve and suppression/enhancement iso-correction lines based on a suite of Indonesian Tertiary coals and source rocks .............................................. 20 Figure 2: Normalised n-alkane profiles of samples ........................................... 27 Figure 3: Cross-plot of two carbon preference indices (defined in Table 5) .................. 29 Figure 4a: Partial gas chromatographs for the n-C(13) and n-C(16) range, comparing diesel with oil show samples 675.1 m, 686.2 m and 727 m (total EOM). iC15 and iC16 are acyclic C(15) and C(16) isoprenoids, 2MPD = 2-methylpentadecane, other significant peaks are numbered. Lines indicate relative abundances between selected compounds ...................................................................... 30 Figure 4b: Partial gas chromatographs for the n-C(13) and n-C(16) range, comparing diesel with oil show samples 759.5-759.6 m, 809.7 m and 840 m (total EOM). iC15 and iC16 are acyclic C(15) and C(16) isoprenoids, 2MPD = 2-methylpentadecane, other significant peaks are numbered. Lines indicate relative abundances between selected compounds ...................................................................... 31 Figure 5: Cross-plot of C(31) 2? Me/(C(31) 2? Me+C(30)? ? hopane) versus C(32) 2? Me/(C(32) 2? Me+C(31)? ? hopane). The two families refer to solid bitumens extracted from the sandstones in the Subu wells, the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (data shown as black dots, from George et al., 2003) .............................................................................. 39
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 9 Figure 6: Cross-plot of C(27) sterane ????????????? versus C(29) sterane ?????? ? ? ? ? ? ? ? ratios. The family refers to solid bitumens extracted from the sandstones in the Subu wells (data shown as black dots, from George et al., 2003) ................................... 46 Figure 7: Normalised aromatic hydrocarbon compositions of the Moose-1 samples ......................... 51 Figure 8: Cross-plot of the trimethylnaphthalene ratio versus the tetramethylnaphthalene ratio. The data from the Subu wells are shown as black dots (from George et al., 2003). .................................................................. 53 Figure 9: Cross-plot of log (1,2,7-TMN/1,3,7-TMN) versus log (1,2,5-TMN/1,3,6-TMN). The boundaries on this trimethylnaphthalene graph are taken from Strachan et al. (1988). The data from the Subu wells are shown as black dots (from George et al., 2003). ............................................................ 54 Figure 10: Cross-plot of methylphenanthrene index (1.5*[3-MP+2-MP]/[P+9-MP+1-MP]) versus methylphenanthrene distribution fraction ((3-MP+2-MP)/ ? MPs). The data from the Subu wells are shown as black dots (from George et al., 2003). ............................................................................. 56 Figure 11: Cross-plot of methylphenanthrene ratio (2-MP/1-MP) versus dimethylphenanthrene ratio (3,5-+2,6-DMP+2,7-DMP)/ (1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP). The data from the Subu wells are shown as black dots (from George et al., 2003) .................................................... 57 Figure 12: Cross-plot of dibenzothiophene/phenanthrene ratio versus dibenzothiophene/1,3,6,7-TeMN ratio. The data from the Subu wells are shown as black dots (from George et al., 2003) ............................................................. 59 Figure 13: Cross-plot of C(29)Ts/C(29)? ? hopane versus C(30)*/C(30) ? ? hopane for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-1 and Moose-1ST1 well ................................... 67 Figure 14: Cross-plot of C(29) ? ? hopane/C(30) ? ? hopane versus C(31) ? ? hopane/C(30) ? ? hopane ratios for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-1 and Moose-1ST1 well ............................................................................... 68
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 10 Figure 15: Cross-plot of Pr/Ph versus C35??C(35) + C(34) homohopane ratios for the samples from this project compared to Subu well, literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-1 and Moose-1ST1 well .......................................................... 69 Figure 16: Cross-plot of C(29) sterane ? ? ? 20S/(20S+20R) versus C(29) sterane ?????? ? ? ? ? ? ? ? for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies .................................. 72
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 11 1 INTRODUCTION The Moose-1 well was spudded in March 2003, with a cored sidetrack well (Moose- 1ST1) from 650 m commenced in July 2003. The Moose prospect was identified as the first prospect to be drilled by InterOil in PPL 238 (formerly PPL 230) in Papua New Guinea (Fig. 1). The well is located at Long 145?11'8.52"E, Lat 06?57'50.96"S. The nearest wells include the Subu stratigraphic wells (27 km) drilled by InterOil in August 2001 (George et al., 2003), and the Puri-1 well (26 km) drilled in 1957-9. The nearest commercial production is the South East Gobe field approximately 166 km to the northwest. [LOCATION MAP OF MOOSE-1] Figure 1: Location map of Moose-1 relative to the Subu wells and other prospects in PPL 238 of Papua New Guinea. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 12 During drilling, oil shows were identified in the Mendi Formation limestone, which was a secondary target in PPL 238. The limestone reservoir is interpreted to extend from 610 m to 809.9 m and was fully cored from 664.14 m. There is a 2 m siltstone interval from 756.34 to 758.36 m. On the basis of the cores two limestone zones (Upper and Lower, separated by the 2m siltstone zone) and three porosity types (matrix, fracture and fault) have been identified. The main purpose of this report is to use geochemical analyses to assess the origin of the oil shows in the Mendi Formation limestone section penetrated by Moose-1 and Moose-1 ST1. In particular, it is important to geochemically correlate the oil shows with other crude oils in the region, and to establish the contributions of possible drilling contaminants on the oil shows, including diesel, Aus-Tex additive, and drilling greases. The geochemical characteristics of the oil shows are compared with previously analysed oils, bitumens, oil inclusions and oil seeps from nearby in Papua New Guinea. A further purpose of this study is to use organic geochemical and petrological analyses to investigate the source potential, including thermal maturity, of fine-grained mudstones underlying the Mendi Formation limestones in Moose-1 ST1. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 13 2 SAMPLES AND EXPERIMENTAL PROCEDURE 2.1 SAMPLES Details of the 27 samples analysed in this study are provided in Table 1, including CSIRO code, depth interval, type of sample and a brief description. Except for the sample from 530 m in Moose-1, all other samples are from Moose-1ST1, or are additives that were used at the Moose-1 well site which have been tested for interference with the natural oil show geochemistry. A summary of the analyses carried out on each samples is provided in Table 2. 2.2 TOTAL ORGANIC CARBON AND ROCK EVAL Fourteen fine-grained samples (Table 2) were crushed to a fine powder and then submitted to Geotechnical Services Pty Ltd for total organic carbon (TOC) analysis and Rock Eval pyrolysis, using standard techniques, including de-carbonation treatment of the samples. Rock Eval pyrolysis was completed on 13 of the samples with TOC values > 0.5%. 2.3 SOLVENT EXTRACTION Samples were extracted in three different ways (Table 2). 2.3.1 Soxhlet Extraction After crushing to a fine powder, samples were solvent extracted with a mixture of dichloromethane (DCM) and methanol (MeOH) (93:7 vol%) for 72 hours using a Soxhlet apparatus. An aliquot of the extractable organic matter (EOM) was blown to dryness to provide a gravimetric weight of the total EOM. 2.3.2 Ultrasonication Whole core was ultrasonicated in an excess of DCM in a large beaker. Where possible, an aliquot of the EOM was blown to dryness to provide a gravimetric weight. For sample 530 m, a combination of both ultrasonication of the slurry and a separating funnel (see Section 2.3.3) was used. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 14 Table 1: Sample details.
Type of CSIRO code Appendix Well Depth (m) sample Description - ---------- -------- ---------- ------------- --------- ------------------ 530 m B Moose-1 530.0 m open hole brown slurry 675.1 m C Moose-1ST1 675.1 m core suspected oil show 686.2 m D Moose-1ST1 686.2 m core suspected oil show 686.2 m Sox E Moose-1ST1 686.2 m core matrix Soxhlet extracted 727 m F Moose-1ST1 727.0 m yellow suspected oil mixed with fluid water 759.5-759.6 m G Moose-1ST1 759.5-759.6 m core (wet) suspected oil show, oil/water wet sample 809.7 m H Moose-1ST1 809.7 m core suspected oil show 840 m I Moose-1ST1 840.0 m fluid water with oil Diesel (tank) J - - diesel tank sample Diesel (line) K - - diesel line sample Aus-Tex L - - Aus-Tex drilling additive Grease gun M - - grease Shell grease (grease gun) Pipe dope N - - grease Shell grease (pipe dope) 811.0 m - Moose-1ST1 811.0 m core mudstone * 820.0 m O Moose-1ST1 820.0 m core mudstone * 861.0 m - Moose-1ST1 861.0 m core mudstone * 870.0 m - Moose-1ST1 870.0 m core mudstone * 880.0 m - Moose-1ST1 880.0 m core mudstone * 890.0 m - Moose-1ST1 890.0 m core mudstone * 901.0 m - Moose-1ST1 901.0 m core mudstone * 909.0 m - Moose-1ST1 909.0 m core mudstone * 920.0 m P Moose-1ST1 920.0 m core mudstone * 930.0 m - Moose-1ST1 930.0 m core mudstone * 937.0 m - Moose-1ST1 937.0 m core mudstone * 950.0 m - Moose-1ST1 950.0 m core mudstone * 960.0 m - Moose-1ST1 960.0 m core mudstone * 968-971.0 m Q Moose-1ST1 968-971.0 m cuttings mudstone *
* The fine-grained samples are generically termed "mudstones" in this Table. A more detailed lithological description of these predominantly calcareous siltstones and mudstones is given in Table 10. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 15 Table 2: Geochemical and organic petrological analyses carried out.
CSIRO GC-FID GC-MS GC-FID GC-MS code Extract EOM EOM CC Fract Fract TOC RE VR FAMM ---- ------- --- --- -- ----- ----- --- -- -- ---- 530 m *UP* ** ** No No No No No No No 675.1 m *U* ** ** *S* ** ** No No No No 686.2 m *U* ** ** *S* ** ** No No No No 686.2 m *X* ** ** No No No No No No No Sox 727 m *P* ** ** *L* ** ** No No No No 759.5-759.6 *U* ** ** *L* ** ** No No No No m 809.7 m *X* ** ** *S* ** ** No No No No 840 m *P* ** ** *L* ** ** No No No No Diesel No ** ** *L* ** ** No No No No (tank) Diesel No ** No No No No No No No No (line) Aus-Tex *X* ** ** *L++* ** ** No No No No Grease gun *U* ** No No No No No No No No Pipe dope *U* ** No No No No No No No No 811.0 m No No No No No No ** ** * No 820.0 m *X* No No *L* ** ** ** ** * No* 861.0 m No No No No No No ** ** * * 870.0 m No No No No No No ** ** * No 880.0 m No No No No No No ** ** * No 890.0 m No No No No No No ** ** * No 901.0 m No No No No No No ** No * No 909.0 m No No No No No No ** ** * * 920.0 m *X* No No *L* ** ** ** ** * No* 930.0 m No No No No No No ** ** * No 937.0 m No No No No No No ** ** * No 950.0 m No No No No No No ** ** * No 960.0 m No No No No No No ** ** * No 968-971.0 *X* No No *L* ** ** ** ** * ** m
* = analysis carried out; No = analysis not carried out. Extract = Extracted, with method used (X = Soxhlet extraction; U = ultrasonication; P = separating funnel); GC-FID EOM = gas chromatography with flame ionisation detection of extractable organic matter; GC-MS EOM = gas chromatography-mass spectrometry of extractable organic matter; CC = Column chromatography, with method used (L = long column fractionation; S = short column fractionation;++ = additional asphaltene precipitation); GC-FID Fract = gas chromatography with flame ionisation detection of aliphatic and aromatic fractions; GC-MS Fract = gas chromatography-mass spectrometry of aliphatic and aromatic fractions; TOC = total organic carbon; RE = Rock Eval; VR = vitrinite reflectance; FAMM = fluorescence alteration of multiple macerals. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 16 2.3.3 Separating funnel Fluid samples were extracted using a separating funnel, shaking the fluid with a similar volume (~25 mL) of DCM, followed by decanting the solvent layer containing the EOM. The separating funnel was then washed with a further three batches of 25 mL of DCM Where possible, an aliquot of the EOM was blown to dryness to provide a gravimetric weight. 2.4 ASPHALTENE PRECIPITATION The EOM of the AUS-Tex (Table 2) was blown down to very small volume to which an excess of pentane was added for the precipitation of asphaltenes. The suspension was sonicated for 5 minutes and then allowed to settle in a fridge for at least 2 hours. Solid asphaltenes were separated from the soluble maltene fraction by centrifuging the suspension. The process was repeated to isolate any of the remaining maltenes from the asphaltene precipitate. 2.5 COLUMN CHROMATOGRAPHY Samples were fractionated by column chromatography in two different ways (Table 2). 2.5.1 Long column method Samples in which sufficient EOM was recovered (>20 mg) were fractionated by a long column chromatography method. An accurate amount of un-evaporated EOM (or maltene fraction for Aus-Tex) was adsorbed onto alumina and all solvent was removed by gently blowing with nitrogen. The extracts were fractionated using column chromatography on silica gel (C60: 60-210 (Mu)m) below alumina. Elution with petroleum ether (40-60(degree)C, 100 mL) produced the aliphatic hydrocarbon fraction, elution with a 4:1 mixture of DCM + petroleum ether (150 mL) produced the aromatic hydrocarbon fraction and elution by a 1:1 mixture of DCM + MeOH (100 mL) produced the polar compounds. All solvent was evaporated from 1/10th aliquots of the aliphatic and aromatic hydrocarbon fractions, and from the whole polar compound fraction, to give the total weights of the respective fractions. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 17 2.5.2 Short column method Samples in which only a small amount of EOM was recovered (<20 mg) were fractionated by a short column chromatography method. The extracts were fractionated using column chromatography on silica gel (C60: 60-210 (Mu)m) below alumina in a Pasteur pipette. Elution with petroleum ether (40-60(degree)C, 5 mL) produced the aliphatic hydrocarbon fraction, elution with a 4:1 mixture of DCM + petroleum ether (5 mL) produced the aromatic hydrocarbon fraction and elution by a 1:1 mixture of DCM + MeOH (5 mL) produced the polar compounds. Generally too little of the fractions is recovered using this method to enable gravimetric weights to be obtained. 2.6 GAS CHROMATOGRAPHY Gas chromatography (GC) of the aliphatic and aromatic hydrocarbon fractions and most of the EOM fractions (Table 2) was performed on a Varian 3400 gas chromatograph equipped with a flame ionisation detector. Chromatography was carried out on a fused silica column (60 m x 0.25 mm i.d.) coated with DB5MS (modified 5% phenyl 95% methyl silicone, 0.25 (Mu)m film thickness) or with DB1 (dimethylpolysiloxane, 0.25 (Mu)m film thickness), using a splitless injection technique. The oven was programmed for an initial temperature of 40(degree)C for 2 min., followed by heating at 4(degree)C min.-1 to 310(degree)C, and a hold for 30 mins. 2.7 GAS CHROMATOGRAPHY-MASS SPECTROMETRY (GC-MS) GC-MS of the aliphatic and aromatic hydrocarbon fractions and most of the EOM fractions (Table 2) was performed on a Hewlett Packard 5890 gas chromatograph interfaced to a VG AutoSpecQ Ultima (electron energy 70 eV; electron multiplier 250 V; filament current 200 (Mu)A; source temperature 250(degree)C) tuned to 1000 resolution. Chromatography was carried out on a fused silica column (60 m x 0.25 mm i.d.) coated with DB5MS, using a splitless injection technique. The oven was programmed in two ways for different GC-MS runs: (a) for an initial temperature of 40(degree)C for 2 min., followed by heating at 4(degree)C min.-1 to 310(degree)C, and (b) for an initial temperature of 40(degree)C for 2 min., followed by heating at 20(degree)C min.-1 to 200(degree)C and then a second heating ramp at 2(degree)C min.-1 to 310(degree)C. All the fractions were analysed using a magnet scan programme (m/z 50 to 550; 0.5 s/decade), using GC programme a. The aliphatic fractions were analysed using a single ion monitoring (SIM) programme (SIRV_INCD), using GC programme b: (m/z 177, 183, CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 18 191, 205, 217, 218, 231.11, 231.21, 253, 259). The aliphatic fractions were also analysed using two metastable reaction monitoring (MRM) programmes, using GC programme b: MRM_HOPS: m/z 370, 384, 398, 412, 426, 440, 454, 468, 482? 191. MRM_STER: m/z 358, 372, 386, 400, 414? 217; 414? 231. 2.8 ORGANIC PETROLOGY The samples were prepared as polished mounts using standard techniques and stored in a vacuum desiccator prior to analysis to minimise any oxidation effects. 2.8.1 FAMM Analyses The FAMM (`fluorescence alteration of multiple macerals') analytical technique was developed by CSIRO Petroleum to provide an objective and accurate method of determining the thermal maturity of petroleum source rocks, including those containing vitrinite that exhibits suppressed or enhanced reflectance. FAMM results, expressed as `equivalent vitrinite reflectance' (EqVR) values, are free from the effects that hydrogen content exerts on measured vitrinite reflectance (VR). Perhydrous vitrinites exhibit suppression of reflectance by comparison with orthohydrous vitrinites, whereas subhydrous vitrinites exhibit enhancement of reflectance. The FAMM methodology has been described by Wilkins et al. (1992;1995). The chemical basis of fluorescence alteration has been discussed in the literature (Lin and Davis, 1988; Davis et al., 1990; Pradier et al., 1990 and 1991). The application of FAMM to resolve problems due to complexities in stratigraphy, structure and organic matter (OM) populations (including reworking, cavings and drilling mud additives) for SE Asian samples has been discussed by Wilkins et al. (1997). More recent developments in FAMM methodology and interpretations, including a discussion on oxidation effects, are presented in Wilkins et al. (1998). In the present study, a custom-built, fibre optics-based laser microprobe (488 nm wavelength) was used to collect the fluorescence data at a fixed wavelength, corresponding to that of the general peak of fluorescence emission intensity (i.e. 620-630 nm). The fluorescence alteration data are obtained by measuring the change in fluorescence intensity with time, from a focused ~2 ?m diameter laser spot on the surface of each analysed maceral grain over a period of 400 seconds. The fluorescence alteration CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 19 ratio is the ratio of the final intensity (F(400)) to initial intensity (F(o)). The alteration data for grains of liptinite, vitrinite and inertinite group macerals, where present, are plotted on a `fluorescence alteration diagram' (Fig. 1a). In this diagram F(400), which is primarily controlled by the OM type, is plotted against the fluorescence alteration ratio, which, for a given OM type, is primarily controlled by the thermal maturity. [FLUORESCENCE ALTERATION RATIO LINE GRAPH] Figure 1a: Fluorescence alteration diagram showing the `normal' calibration curve and suppression/enhancement iso-correction lines based on a suite of Indonesian Tertiary coals and source rocks. Central to the FAMM technique is a calibration derived from well-characterised, `normal' (`orthohydrous') telovitrinites which plot on or close to a sub-vertical line on the diagram (Fig. 1a). This J-shaped curve represents vitrinites for which EqVR=VR and its lateral position may vary slightly for different geological provinces due to basic differences in precursor flora (Wilkins et al., 1998); however, the position of the horizontal iso-EqVR lines remains constant. Figure 1a shows the `normal' vitrinite curve and corresponding suppression iso-correction curves for 400s fluorescence alterations based on a suite of Indonesian Tertiary coals (Teerman et al., 1995). In the present study the Tertiary calibration has been employed. Fluorescence alteration data from hydrogen-poor macerals (i.e. subhydrous vitrinite and most inertinite) plot to the left of the `normal' vitrinite line; hydrogen-rich macerals (i.e. liptinite and perhydrous vitrinite) plot to the right. This enables identification of perhydrous vitrinite, which is associated with VR suppression, and subhydrous vitrinite, which is associated with VR enhancement. The `normal' vitrinite line is calibrated in CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 20 units of `mean random vitrinite reflectance in oil' (Rm(o)%). Mean maximum reflectance in oil (Rmax(o)%) = 1.066 x Rm(o)% for the 0.4%-1.2% reflectance range (Ting, 1978). For samples containing a suite of iso-metamorphic inertinite, vitrinite and liptinite, fluorescence alteration data, in general, plot on or near, a parabolic curve (multimaceral curve) on fluorescence alteration diagrams. The EqVR for an orthohydrous vitrinite population can be determined from the intersection between the multimaceral curve and the normal vitrinite curve. For samples having EqVRs <0.9%, containing perhydrous or subhydrous vitrinites, the EqVR is generally read from the horizontal tangent to the multimaceral curve. For samples having EqVRs >0.9% containing perhydrous or subhydrous vitrinites and for samples where multimaceral curves are poorly constrained or cannot be drawn, EqVR is generally determined from the mean fluorescence alteration ratio of the indigenous vitrinite population. In the present study the values read from multimaceral curves are similar to those determined from the position of the average vitrinite. Where there are slight differences the values from the average vitrinite are reported, to facilitate more direct comparisons with the VR data. As a cross-check of the EqVR values approximate corrections to measured VR values can be made from the plotted position of vitrinite on fluorescence alteration diagrams. For example, vitrinite plotting on the +0.2% line would require a correction of 0.2% (absolute) to be added to the VR to compensate for VR suppression. In the FAMM method however the thermal maturity is determined from the EqVR value, rather than the `corrected VR' as the corrections are estimated values. 2.8.2 Conventional Organic Petrology For VR and maceral analyses, reflected white light and incident conventional fluorescence excitation were employed, with the use of oil immersion on the samples. Organic matter abundances were determined by visual estimation and are presented as percentages by volume of the total sample in Table 10 and Appendix R. The following ranges of volume percentages apply to the abundance classes used:
ABUNDANCE CLASS VOLUME % - --------------- -------- rare <0.1 sparse 0.1-0.5 common >0.5-2 abundant >2-10 major >10
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 21 Where possible, at least 25 VR measurements (Rm(o)%) were made on each sample. The measurements were taken at random orientation of the vitrinite phytoclasts, in nonpolarised light (cf. `maximum VR', which is measured in plane polarised light via stage rotation). Zeiss equipment was employed and an interference filter having a passband peak of 546 nm was used. The photometer was mainly calibrated against a synthetic garnet standard of 0.92% reflectance. The samples were measured with an immersion oil having a refractive index of 1.518 at 23(degrees)C +/-1(degree)C. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 22 3 RESULTS AND DISCUSSION All of the gas chromatograms and mass chromatograms referred to in the text are provided in Appendices B to Q, with peak identifications in Appendix A. 3.1 TOTAL ORGANIC CARBON AND ROCK EVAL DATA Fourteen fine-grained samples (mudstones) from Moose-1 ST1 were analysed for their content in total organic carbon (TOC) and by Rock Eval pyrolysis (Table 3). Most samples (11) have TOC values between 0.8-1.2%, and only one has a TOC <0.5%. Rock Eval data suggest oil-window maturities and type III organic matter, with little liquid hydrocarbon generation potential, as shown by hydrogen indices of 105-155 mg/g for all but two of the samples. One of the exceptions (811 m) has a very small S(2) peak, despite a reasonable TOC (1.1%), indicating that most of the organic carbon in this sample is refractory and non-generative. The most prospective sample is 968-971 m, which has a hydrogen index of 217 mg S(2) / g TOC. Production indices vary between 0.11 and 0.29, consistent with the rocks having reached the oil-generative window. T(max) data for these samples mostly vary from 442-448(Degrees) C, corresponding to a vitrinite reflectance of ca. 0.7-0.9% when applying a correlation for type III organic matter established by Teichmuller and Durand (1982). The T(max) value of the 968-971 m sample is somewhat lower (432(Degrees)C), probably due the different kerogen type of this sample. 3.2 EXTRACTABILITY Extractability data are expressed as extractable organic matter (EOM) ppm of rock (= (Mu)g EOM / g rock) (Table 4). Widely varying amounts of EOM were recovered from the samples. The 686.2 m sample (Soxhlet extract) contains 1,342 ppm, whereas ultrasonication of this sample produced very little EOM (2 mg). This indicates that most of the extractable hydrocarbons in this sample reside deep within the limestone matrix (analysed by crushing and Soxhlet extraction), rather than in the open porosity or on any fracture surfaces (easily accessible during ultrasonication). The Aus-Tex additive is very extractable (>10%). The mudstone samples have extractabilities between 441 and 1,629 ppm (Table 4). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 23 Table 3: Total organic carbon and Rock Eval data.
CSIRO TOC T(max) S(1) S(2) S(3) S(1)+S(2) code (%) ((Degree)C) (mg/g) (mg/g) (mg/g) (mg/g) S(2)/ S(3) PI HI OI - ------------- ---- ----------- ------ ------ ------ ---------- ---------- ---- --- --- 811.0 m 1.11 nd 0.04 0.10 0.05 0.14 2.00 0.29 9 5 820.0 m * 0.55 442 0.13 0.85 0.08 0.98 10.63 0.13 155 15 861.0 m 0.84 444 0.15 1.29 0.11 1.44 11.73 0.10 154 13 870.0 m 0.80 443 0.22 1.12 0.09 1.34 12.44 0.16 140 11 880.0 m 0.94 444 0.41 1.34 0.07 1.75 19.14 0.23 143 7 890.0 m 0.51 444 0.08 0.54 0.16 0.62 3.38 0.13 106 31 901.0 m 0.28 nd nd nd nd nd nd nd nd nd 909.0 m 1.13 443 0.25 1.45 0.08 1.70 18.13 0.15 128 7 920.0 m * 0.93 445 0.15 0.99 0.14 1.14 7.07 0.13 106 15 930.0 m 0.90 445 0.16 0.98 0.18 1.14 5.44 0.14 109 20 937.0 m 0.89 455 0.15 0.94 0.16 1.09 5.88 0.14 106 18 950.0 m 0.92 448 0.12 0.97 0.22 1.09 4.41 0.11 105 24 960.0 m 0.99 444 0.15 1.13 0.84 1.28 1.35 0.12 114 85 968-971.0 m * 1.08 432 0.91 2.34 2.19 3.25 1.07 0.28 217 203
TOC = total organic carbon; PI = production index (S(1) / S(1) + S(2)); HI = hydrogen index (mg S(2) / g TOC); OI = oxygen index (mg S(3) / g TOC); nd = not determined. * = the three samples selected for more detailed geochemical characterisation. Table 4: Extractability and gross compositional data.
Extract Asph. Polars Aliph./ HCs / recov- Extract recov- Aliph. Arom. + arom. Polars ered (ppm of ered HCs HCs Asph. HC + CSIRO code (mg) rock) (%) (%) (%) (%) ratio Asph. - ------------- ------- --------- ------ ------ ----- ------- ------- ------ 675.1 m 19 nd nd nd nd nd nd nd 686.2 m 2 nd nd nd nd nd nd nd 686.2 m Sox 155 1,342 nd nd nd nd nd nd 727 m 348 nd nd 92.4 5.1 2.5 18.0 39.0 759.5-759.6 m 32 nd nd 61.7 23.2 15.1 2.7 5.6 809.7 m 3 36 nd nd nd nd nd nd 840 m 46 nd nd 75.8 11.3 12.9 6.7 6.8 Diesel (tank) nd nd nd 85.6 12.4 1.9 6.9 51.4 Aus-Tex 4,676 102,481 8.6 48.4 17.3 34.3 2.8 1.9 820 m 46 441 nd 33.5 37.9 28.6 0.9 2.5 920 m 48 476 nd 36.7 33.3 30.0 1.1 2.3 968-971 m 87 1,629 nd 26.5 21.2 52.4 1.3 0.9
Asph = asphaltenes; Alip. = aliphatic; Arom. = aromatic; HC = hydrocarbon: Polars = polar compounds eluted during column chromatography. The fraction (Polars + Asph.) is the sum of the recovered asphaltenes (if any) and recovered polar compounds; nd = not determined. Note that quantitation of hydrocarbon fractions are partially affected by evaporation loss, and quantitation of asphaltenes and polar compounds are affected by partial recovery of these fractions. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 24 3.3 EXTRACT GROSS COMPOSITIONS Extract gross compositions are shown in Table 4. The yield of recovered asphaltenes from the precipitation procedure for Aus-Tex is 8.6% of the total extract. For other samples, only total polar compounds were quantified. The 727 m sample is highly aliphatic (aliphatic / aromatic hydrocarbon ratio = 18). Two other oil show samples contain 13-15% polar compounds and more than 60% aliphatic hydrocarbons. The diesel is polar-lean (<2%) and dominantly aliphatic (aliphatic / aromatic hydrocarbon ratio = 6.9), whereas the Aus-Tex is much more polar (34.3%) and has a greater relative content of aromatic hydrocarbons (aliphatic / aromatic hydrocarbon ratio = 2.8). The three mudstone samples have near unity aliphatic / aromatic hydrocarbon ratios (0.9-1.3) and much greater polar compound contents than the oil show samples (28-52%). 3.4 OVERALL CHARACTER OF ALIPHATIC AND AROMATIC HYDROCARBON FRACTIONS, INCLUDING N-ALKANE DISTRIBUTIONS The overall character of the aliphatic and aromatic hydrocarbon fractions is best judged from the GC traces (Appendix *1) and the TICs (Appendix *2). These show considerable variation throughout the sample set, mainly due to the presence / absence and extent of an Unresolved Complex Mixture (UCM) or "hump". A UCM of varying amount is present in both aliphatic and aromatic hydrocarbon fractions of many samples. To provide an approximate method of quantifying this, two UCM / n-alkane ratios were calculated from peak heights measured in GC traces of total EOM (aliphatic HC fractions of the three mudstone samples), excluding the effects of the baseline bleed. These ratios were measured at the position of the C(17) and C(27) n-alkanes (Table 5). Where no n-alkanes could be clearly distinguished in the GC trace, a small, nominal value was assigned, based on abundances in mass chromatograms. n-Alkanes are the most abundant class of compounds in most of the samples, and their distribution (Fig. 2) defines the overall molecular weight distribution of each sample. The diesel has an n-alkane molecular weight distribution that maximises at n-C(16), with significant amounts of n-alkanes from n-C(8) to n-C(25) (Fig. J1). Hardly any n-alkanes > n-C(29) are present. The UCM/n-C(17) ratio is low (<0.01) because only a slight UCM is present at this molecular weight range. The UCM/n-C(27) ratio is higher (0.2 to 0.7) and variable due to the very low content of n-C(27) in the diesel (Table 5). There is a distinct UCM in the aromatic hydrocarbon fraction, which is dominated by alkylnaphthalenes, alkylphenanthrenes and alkyldibenzothiophenes (Fig. J2). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 25 Table 5: General molecular data and aliphatic hydrocarbon parameters.
UCM UCM n-C(31) / / Pr / Ph / CPI CPI2 n-Alkane / Wax CSIRO code n-C(17) n-C(27) Pr/Ph n-C(17) n-C(18) 22-32 26-28 maxima n-C(19) Index - ------------- ------- ------- ----- ------- -------- ----- ----- -------- ------- ----- 530 mt 0.17 1.71 1.19 0.27 0.28 nd 0.86 16 nd 32.7 675.1 m 0.03 0.44 1.26 0.33 0.28 nd 0.69 17 nd 145.7 686.2 m 0.06 1.80 1.10 0.27 0.28 nd 0.76 17 nd 50.2 686.2 m Sox 0.07 0.44 1.19 0.26 0.26 nd nd 17 nd nd 727 m 0.10 75 1.93 0.46 0.30 nd nd 17 nd nd 759.5-759.6 0.05 0.31 1.12 0.26 0.28 0.92 0.96 17 0.02 10.4 m 809.7 m 0.08 0.90 1.37 0.26 0.21 1.00 1.02 20 0.06 6.7 840 m 0.06 0.22 1.10 0.27 0.29 0.93 0.81 16 0.002 41.1 Diesel 0.04 0.67 1.75 0.38 0.26 0.92 0.71 16 0.000 69.0 (tank) 2 Diesel (line) 0.06 0.20 1.80 0.31 0.23 nd nd 16 nd nd Aus-Tex 0.07 nd 0.83 0.40 0.44 0.99 1.11 28 1.10 0.4 Shell grease, >100 >100 nd nd nd nd nd nd nd nd gun Shell grease, >100 >100 nd nd nd nd nd nd nd nd pipe dope 820 m 0.05 0.07 3.03 0.84 0.25 1.06 1.06 19 0.01 8.8 920 m 0.06 0.05 2.75 1.70 0.59 1.16 1.22 23 0.10 3.4 968-971 m 0.03 0.06 2.09 0.75 0.39 1.18 1.31 17 0.07 3.7
UCM / n-C(17) = height of UCM at n-C(17) / height of n-C(17) (measured in GC traces); UCM / n-C(27) = height of UCM at n-C(27) / height of n-C(27) (measured in GC traces); Pr = pristane; Ph = phytane. Pr/Ph, Pr/n-C(17) and Ph/n-C(18) measured in GC traces, other ratios measured in m/z 85 mass chromatograms. CPI = Carbon Preference Index. nd = not determined. ? 2 * (C(23) ? C(25) ? C(27) ? C(29) ? C(31)) ? CPI(22?32) ? ? -------------------------------------------------- ? ? C(22) ? 2 * (C(24) ? C(26) ? C(28) ? C(30) ? C(32) ? ? 2 ? C(27) ? ? C(21) ? C(22) ? CPI 2 (26?28) ? ? ------------- ? Wax Index = ? ? -------------- ? ? C(26) ? C(28) ? ? C(28) ? C(29) ? Many of the oil show samples have overall distinct similarities to the diesel. These include 530 m from Moose-1 (the open-hole slurry; Fig. B1), which has a very similar n-alkane distribution. This sample has a larger UCM hump, with higher UCM/n-C(17) and UCM/n-C(27) ratios, than the diesel, which is interpreted to be due to greater biodegradation of this sample. Other oil show samples from Moose-1ST1 that are similar to diesel (with respect to the n-alkane distribution and the size of the UCM) include 675.1 m (Figs C1), 686.2 m (Figs C1, D1), 759.5 m (Fig. G1) and to some extent 840 m (Fig. I1). The 686.2 m sample was ultrasonicated and Soxhlet extracted, and these two analytical approaches showed very similar n-alkane distributions, so only the CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 26 [PERFORMANCE GRAPH] Figure 2: Normalised n-alkane profiles of samples. ultrasonicated sample was analysed in more detail. The 840 m includes a peak co-eluting with n-C(22), which is not present in the diesel. The Aus-Tex has a quite different molecular weight distribution (maxima = n-C(28)) and UCM profile (Fig. L1), and is characterised by unusually high abundances of some polycyclic aromatic hydrocarbons (PAH; phenanthrene, fluoranthene, pyrene, chrysene, benzofluoranthene, benzopyrene, and dibenzochrysene, and related isomers; Fig. L2). These PAH serve as a marker for a contribution of Aus-Tex to oil shows, even though no oil show samples have a similar n-alkane distribution as the Aus-Tex. Similar PAH as in Aus-Tex are apparent in the oil show samples 686.2 m and 759.5-759.6 m. The 727 m oil show sample contains some n-alkanes, which have a similar distribution as diesel (Fig. F1), but is characterised by a very marked high molecular weight UCM hump (UCM/n-C(27) =75). No other oil shows have this distribution, but two grease samples (pipe dope and grease gun) have no n-alkanes and a very marked UCM at a similar high molecular weight (Figs M1 and N1). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 27 The 809.7 m oil show sample contains n-alkanes with a maxima at n-C20, and also has peaks near the elution position of n-C(22) and n-C(24) which are not present in the diesel. The n-alkane distribution distinguishes this sample from diesel (Fig. 2). The three mudstone samples in Moose-1ST1 have higher n-alkane molecular weight maximas than the oil show samples or the diesel (Fig. 2; 17-23). The mudstone samples have virtually no UCM hump in either the aliphatic or aromatic hydrocarbon fractions. Thus, based on overall distributions, the oil shows in Moose-1 and Moose-1ST1 have the following gross origins (Table 6). Note that later in the report this assignment is further refined. Table 6: Preliminary origin of oil shows, based on overall and gross distributions.
CSIRO code Description Origin - ---------- ----------- ------ 530 m brown slurry Diesel, minor biodegraded component 675.1 m suspected oil show Diesel 686.2 m suspected oil show Diesel, mix of Aus-Tex (minor) 727 m suspected oil mixed with Minor diesel and major biodegraded component, water possibly a grease (pipe dope or grease gun??) 759.5-759.6 m suspected oil show, oil/water Diesel, mix of Aus-Tex (minor) wet sample 809.7 m suspected oil show Natural oil show, slightly biodegraded. Some contribution of diesel is possible. 840 m water with oil Natural oil show, slightly biodegraded. Some contribution of diesel is possible.
3.5 N-ALKANE AND ISOPRENOID PARAMETERS Aliphatic hydrocarbon parameters are given in Table 5. All the oil shows that contain n-alkanes (except 809.7 m) and the diesel have minor even carbon number n-alkane predominance over the C(22)-C(32) range, as measured by the CPI(22)-(32), but this predominance is more marked over the C(26)-C(28) range, as measured by the CPI(26)-(28) (Fig. 3). This distribution is consistent with derivation of the diesel and the oil shows from a calcareous source. In contrast, the fine-grained samples have slight odd predominance in the high molecular weight n-alkanes, and thus plot closer to many of the Subu samples. This indicates that the fine-grained samples contain a contribution from terrestrial organic matter. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 28 [CHART] Figure 3: Cross-plot of two carbon preference indices (defined in Table 5). The Pr/Ph ratios of the oil shows mostly varies between 1.1 and 1.4, and are lower than for the diesel (~1.8) and the fine-grained samples (2.1-3.0). One oil show sample (727 m) has a higher Pr/Ph ratio (1.9), more similar to the diesel. The Aus-Tex has a lower Pr/Ph ratio than the other samples (Table 5). Isoprenoid/alkane ratios are similar for the diesel and the oil shows, but are mostly higher for the fine-grained samples, consistent with the latter being less thermally mature than the diesel or the oil shows. 3.6 INTRA N-ALKANE PEAKS IN EOM In addition to using ratios, similarities and dissimilarities between the diesel and the oil shows can be demonstrated by examination of the low abundance peaks that elute between n-C(13) and n-C(16) (Fig. 4). Using this method, and particularly the correlation lines CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 29 [CHART] Figure 4a: Partial gas chromatographs for the n-C(13) and n-C(16) range, comparing diesel with oil show samples 675.1 m, 686.2 m and 727 m (total EOM). iC15 and iC16 are acyclic C(15) and C(16) isoprenoids, 2MPD = 2-methylpentadecane, other significant peaks are numbered. Lines indicate relative abundances between selected compounds. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 30 [CHART] Figure 4b: Partial gas chromatographs for the n-C(13) and n-C(16) range, comparing diesel with oil show samples 759.5-759.6 m, 809.7 m and 840 m (total EOM). iC15 and iC16 are acyclic C(15) and C(16) isoprenoids, 2MPD = 2-methylpentadecane, other significant peaks are numbered. Lines indicate relative abundances between selected compounds. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 31 between pairs of compounds, shows that the diesel is very similar to the oil shows from 675.1 m, 686.2 m, 759.5-759.6 m and 840 m. These similarities include the dominance of the C(16) isoprenoid, the low abundance of peaks 22 and 27, and peak 1 being greater than peak 3. Oil show 727 m also has many similarities to diesel, but it also contains a very large peak eluting between peaks 20 and 21, and much larger peaks 22 and 27 than in the diesel (Fig. 4a). For these reasons, it is likely that the oil show 727 m contains both diesel and another component. The sample differing the most from the diesel is 809.7 m. In this sample the C(16) isoprenoid is a less dominant peak, peak 27 is very large, peak 3 is greater than peak 1, and there is an additional large peak eluting between iC15 and peak 10 (Fig. 4b). These data support the conclusion from the overall distribution of compounds in this oil show, which is that the 809.7 m oil show is not strongly affected by diesel and is the closest to a genuine oil signature in Moose-1ST1. Interestingly, based on overall composition oil show sample 840m appears quite dissimilar to diesel, but has a similar n-C(13) and n-C(16) range profile (Fig. 4b). This suggests that diesel, which is recognised to be a contributor to this sample (Table 5), is dominant in this molecular weight range. 3.7 ALKYLCYCLOHEXANES AND METHYLALKYLCYCLOHEXANES The distribution of alkylcyclohexanes in the sample set follows that of the n-alkanes very closely (see Appendix Figure *5). For example, sample 809.7 m has a higher molecular weight maxima for alkylcyclohexanes than the other oil show samples or the diesel, and this is also the case of the n-alkanes (Fig. 3). Alkylcyclohexanes are relatively more abundant in the three finer-grained samples than in the oil show samples. Methylalkylcyclohexanes have a low abundance in all samples. 3.8 TERPANES Terpane distributions are summarised in Tables 7a-f. These biomarkers enable source and maturity-related information to be deduced, as well as specific oil-oil correlations to be made. For example, additional contributions of natural crude oil to the oil shows that are predominantly diesel can be recognised. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 32 Table 7a: Terpane parameters (part a).
CSIRO Drim./ C(15)BS/ C(14) BS/ 19NIP/ IP/ 19NIP/ IP/ C(26)/C(25) C(23) tri./ code HD D+HD D+HD C(30)? ? C(30)? ? C(23) tri. C(23) tri. tri. C(30)? ? - -------- ----- -------- --------- -------- -------- ---------- ---------- ------------ ----------- Calc. S123 S123 S123 S191 S191 S191 S191 S191 S191 530 m 0.50 0.42 n.d. n.d. n.d. n.d. n.d. 1.16 0.09 675.1 m 0.59 0.37 n.d. n.d. n.d. n.d. n.d. 0.66 1.33 686.2 m 0.24 0.18 n.d. n.d. n.d. n.d. n.d. 0.81 0.30 727 m 1.17 0.80 n.d. n.d. n.d. n.d. n.d. 1.68 0.02 759.5-7 0.67 0.38 n.d. n.d. n.d. n.d. n.d. 0.87 0.14 59.6 m 809.7 m 0.27 0.22 n.d. 0.35 0.22 1.32 0.84 0.95 0.27 840 m 0.63 0.48 n.d. n.d. n.d. n.d. n.d. 0.88 1.94 Diesel 1.47 0.71 0.17 n.d. n.d. n.d. n.d. 0.46 260 (tank) Aus-Tex 1.05 0.32 n.d. n.d. n.d. n.d. n.d. 1.56 0.01 820 m 0.33 0.92 0.41 0.03 0.02 3.35 2.65 1.22 0.01 920 m 0.47 0.56 0.35 0.08 0.06 9.15 6.67 1.07 0.01 968-971 0.51 0.54 0.25 0.06 0.05 1.80 1.63 1.18 0.03 m
Terpane abbreviations are listed in Table A1. Drim./HD = drimane/homodrimane; C(15)BS/D+HD = rearranged C(15) bicyclic sesquiterpanes/(drimane + homodrimane); C(14) BS/ D+HD = C(14) bicyclic sesquiterpanes/(drimane + homodrimane); 19NIP/C(30)? ? = 19NIP = 4?(H)-19-isopimarane/C(30)? ? hopane; IP/C(30)? ? = isopimarane/C(30)? ? hopane; 19NIP/C(23) tri. = 19NIP = 4?(H)-19-isopimarane/C(23) tricyclic terpane; IP/C(23) tri. = isopimarane/C(23) tricyclic terpane; C(26)/C(25) tri. = C(26)/C(25) tricyclic terpanes; C(23) tri./ C(30)? ? = C(23) tricyclic terpane/C(30)? ? hopane. Calc. = method used to calculate ratio: S123 = peak area in m/z 123 mass chromatogram, S191 = peak area in m/z 191 mass chromatogram; nd = not determined. Table 7b: Terpane parameters (part b).
CSIRO C24 tet. C(23)/C(21) C(23)-(26)/ C(24) tet. C(24)/C(24) C(19)/C(19) Ts/(Ts+ Tm/ code /C(30)? ? tri. C(19)-(21) /C(23) tri. +C(23) tri +C(23) tri Ts/Tm Tm) C(27)? - ------- --------- ----------- ----------- ------------ ----------- ----------- ------ ------- ------- Calc. S191 S191 S191 S191 S191 S191 M M M 530 m 0.07 2.5 1.99 0.79 0.44 0.21 1.7 0.64 17 675.1 m 0.43 1.7 0.92 0.32 0.24 0.37 2.0 0.66 n.d. 686.2 m 0.13 1.4 0.73 0.43 0.30 0.50 1.6 0.62 12 727 m 0.04 6.4 16.06 1.83 0.65 n.d. 1.8 0.64 n.d. 759.5-7 0.04 1.3 0.64 0.28 0.22 0.46 1.01 0.50 9 59.6 m 809.7 m 0.51 1.6 1.06 1.90 0.66 0.28 1.2 0.55 18 840 m 0.52 1.5 0.73 0.27 0.21 0.47 1.6 0.61 11 Diesel 68 1.3 0.71 0.26 0.21 0.38 2.3 0.70 11 (tank) Aus-Tex 0.01 1.3 1.61 1.16 0.54 0.33 0.98 0.50 8 820 m 0.05 0.97 0.44 5.4 0.84 0.79 0.79 0.44 24 920 m 0.05 0.66 0.20 5.3 0.84 0.87 0.68 0.41 19 968-971 0.07 1.10 0.50 2.0 0.67 0.69 0.85 0.46 15 m
Terpane abbreviations are listed in Table A1. C(24) tet / C(30)? ? ?? ?C(24) tetracyclic terpane/C(30)? ? hopane; C(23)/C(21) tri. = C(23)/C(21) tricyclic terpanes; C(23)-(26) / C(19)-(21) = C(23)-(26) /C(19)-(21) tricyclic terpanes; C(24) tet. / C(23) tri.= C(24) tetracyclic terpane/C(23) tricyclic terpane; C(24)/C(24)+C(23) tri = C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane); C(19)/C(19)+C(23) tri = C(19) tricyclic terpane/(C(19) tricyclic terpane + C(23) tricyclic terpane). Calc. = method used to calculate ratio: S191 = peak area in m/z 191 mass chromatogram, M = peak area in metastable reaction monitoring chromatogram; nd = not determined. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 33 Table 7c: Terpane parameters (part c).
C(29)Ts/ C(29) C(29) C(30) CSIRO C(29)Ts/ C(29)Ts+ C(30)*/ C(29)*/ C(30)*/ C(30) Section/ 25-nor/ ? ? ??? ? ? ? ??? ? code C(29)?? C(29)? ? C(29)Ts C(29)? ? C(30)? ? C(30)? ? C(29)? ? ???) ???) - ---- ------- -------- ------- ------- -------- -------------- --------- --------- --------- Calc. M M M M M M M M M 530 m 0.19 0.16 0.10 0.02 0.03 n.d. 0.02 0.94 0.94 675.1 m 0.18 0.15 n.d. n.d. n.d. n.d. n.d. 0.97 0.94 686.2 m 0.24 0.20 0.19 0.08 0.04 n.d. n.d. 0.93 0.92 727 m 0.20 0.17 n.d. n.d. n.d. n.d. n.d. 0.95 0.95 759.5-7 0.25 0.20 0.45 0.20 0.06 n.d. n.d. 0.89 0.92 59.6 m 809.7 m 0.43 0.30 0.71 0.19 0.62 0.21 n.d. 0.88 0.75 840 m 0.22 0.18 0.21 0.10 0.05 n.d. n.d. 0.94 0.91 Diesel 0.26 0.20 n.d. n.d. n.d. n.d. n.d. 0.95 0.94 (tank) Aus-Tex 0.21 0.18 0.48 0.25 0.05 n.d. 0.03 0.89 0.92 820 m 0.36 0.26 0.50 0.12 0.09 n.d. n.d. 0.86 0.90 920 m 0.24 0.19 0.64 0.11 0.09 n.d. n.d. 0.85 0.88 968-971 0.28 0.22 0.56 0.12 0.09 n.d. n.d. 0.88 0.91 m
Terpane abbreviations are listed in Table A1. C(29)Ts/C(29)? ? ?? ?C(29)Ts/C(29)? ? hopane; C(29)Ts/C(29)Ts+C(29)? ? = ?C(29)Ts/(C(29)Ts+C(29)? ? hopane); C(29)*/C(29)? ? = C(29)*/C(29)? ? hopane; C(30)*/C(30)? ? = C(30)*/C(30)? ? hopane;C(30)Section/C(30)ab = C(30)Section/C(30)? ? hopane; C(29) 25-nor/C(29)? ? = C(29) 25-norhopane/C(29)? ? hopane; C(29) ? ? ??? ? ? ? ? ) = C(29) hopanes ? ? ??? ? ? ? ? ); C30 ? ? ??? ? ? ? ? ) = C(30) hopanes ? ? ??? ? ? ? ? ). Calc. = method used to calculate ratio: S191 = peak area in m/z 191 mass chromatogram, M = peak area in metastable reaction monitoring chromatogram; nd = not determined. (Deggars) = MRM data. Table 7d: Terpane parameters (part d).
C(31)? ? ? C(32)? ? C(33)? ? % C(31) % C(32) % C(33) % C(34) % C(35) C(35)/ CSIRO 22S/(22 22S/(22 22S/(22 homo- homo- homo- homo- homo- (C(35)+ code S+22R) S+22R) S+22R) hops hops hops hops hops C(34) - ---------- ---------- -------- -------- ------ ------- ------- ------- ------- ------- Calc. M M M S191 S191 S191 S191 S191 S191 530 m 0.59 0.62 0.63 36 21 17 13 13 0.51 675.1 m 0.58 0.57 0.56 46 25 14 8 7 0.48 686.2 m 0.57 0.59 0.59 44 24 15 9 9 0.49 727 m 0.57 0.59 0.60 34 21 18 12 15 0.55 759.5-7 0.58 0.55 0.56 45 27 16 8 4 0.36 59.6 m 809.7 m 0.58 0.51 0.64 46 25 12 8 9 0.53 840 m 0.53 0.60 0.59 38 24 16 11 10 0.46 Diesel 0.52 0.63 0.51 100 n.d. n.d. n.d. n.d. n.d. (tank) Aus-Tex 0.57 0.56 0.57 36 26 18 12 9 0.42 820 m 0.59 0.59 0.60 48 30 13 7 3 0.28 920 m 0.59 0.58 0.61 53 26 13 7 2 0.23 968-971 0.57 0.58 0.60 47 26 14 8 4 0.32 m
Terpane abbreviations are listed in Table A1. C(31)? ? ?22S/(22S+22R) = C(31)? ? hopanes (22S/(22S+22R)); C(32)???22S/(22S+22R) = C(32)? ? hopanes (22S/(22S+22R)); C(33)???22S/(22S+22R) = C(33)? ? hopanes (22S/(22S+22R)); % C(31) homo-hops = C(31) homohopanes, as % of total (C(31) to C(35)) homohopanes, etc; C(35)/(C(35)+C(34)) = C(35)? ? hopanes/(C(35)? ? hopanes+C34? ? hopanes). Calc. = method used to calculate ratio: M = peak area in metastable reaction monitoring chromatogram; nd = not determined. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 34 Table 7e: Terpane parameters (part e).
Homo- Olean-a Gamm- C(30) C(27) 28,30- 29,30- 28,30- C(29)? ? CSIRO hops/ ne/ acerane 30-nor/ hops/ BNH/ BNH/ BNH/ /C(30)? ? code C(30)? ? C(30)? ? /C(30)? ? C(30)? ? C(30)? ? C(30)? ? C(30)? ? Ts hops - ---------- -------- -------- --------- -------- -------- -------- -------- ------ --------- Calc. S191 S191 M M S191 M M M S191 530 m 3.5 0.23 0.05 0.18 0.36 0.03 0.09 0.04 1.06 675.1 m 2.0 n.d. 0.08 0.19 0.67 n.d. 0.12 n.d. 1.14 686.2 m 1.9 n.d. 0.16 0.10 0.45 n.d. 0.06 n.d. 0.84 727 m 4.0 n.d. 0.04 0.19 0.36 n.d. 0.10 n.d. 1.08 759.5-7 0.9 0.06 0.23 0.004 0.17 n.d. 0.02 n.d. 0.48 59.6 m 809.7 m 1.3 0.01 0.08 0.14 1.8 0.06 0.08 0.03 1.9 840 m 1.6 0.03 0.17 0.07 0.48 n.d. 0.07 n.d. 0.71 Diesel n.d. n.d. n.d. 0.15 8.4 0.06 0.29 0.02 3.9 (tank) Aus-Tex 1.4 0.06 0.24 0.02 0.21 0.005 0.02 0.02 0.44 820 m 1.3 n.d. n.d. n.d. 0.33 0.02 0.02 0.08 0.50 920 m 1.1 n.d. n.d. n.d. 0.34 0.03 0.01 0.13 0.55 968-971 1.2 n.d. n.d. n.d. 0.36 0.01 0.01 0.05 0.60 m
Terpane abbreviations are listed in Table A1. Calc. = method used to calculate ratio: S191 = peak area in m/z 191 mass chromatogram, M = peak area in metastable reaction monitoring chromatogram; nd = not determined. (Double Dagger) value probably affected by co-elution. Table 7f: Terpane parameters (part f).
C(31)? ?/ C(29) ster. C(31) 2? Me/ C(32) 2? Me/ C(33) 2? Me/ C(30)? ? ?? C(29)? ? ?? (C31 2? Me+ (C(32) 2? Me+ (C(33) 2? Me+ CSIRO code hopanes hopanes C(30)? ? C(31)? ? C(32)? ? - ------------- ----------- ----------- ------------ -------------- -------------- Calc S191 S191,S217 S205 S205 S205 530 m 1.25 0.23 0.82 0.55 0.85 675.1 m 0.94 0.15 0.67 0.48 0.79 686.2 m 0.84 0.23 0.60 0.40 0.74 727 m 1.34 0.22 0.81 0.52 0.86 759.5-759.6 m 0.42 0.48 0.12 0.07 0.39 809.7 m 0.62 0.18 0.56 0.30 0.62 840 m 0.62 0.31 0.40 0.32 0.67 Diesel (tank) 0.51 0.10 n.d. n.d. n.d. Aus-Tex 0.50 0.78 0.18 0.13 0.39 820 m 0.62 0.73 0.32 0.18 0.48 920 m 0.59 0.56 0.31 0.13 0.40 968-971 m 0.59 0.49 0.33 0.17 0.46
Terpane abbreviations are listed in Table A1. Calc. = method used to calculate ratio: S191 = peak area in m/z 191 mass chromatogram, S217 = peak area in m/z 217 mass chromatogram, S205 = peak area in m/z 205 mass chromatogram; nd = not determined. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 35 3.8.1 Bicyclic sesquiterpanes Bicyclic sesquiterpanes were detected using the m/z 123 mass chromatogram in all the samples (Appendix Fig. *6a). In the diesel, bicyclic sesquiterpanes included drimane (most abundant), with lesser amounts of homodrimane and rearranged C(15) bicyclic isomers (Fig. J6a). Two C(14) isomers could also be detected. Ratios based on these distributions are given in Table 7a. In contrast, most of the oil shows have bicyclic sesquiterpane distributions dominated by homodrimane, with very small amounts of C(14) isomers detected. Thus, drimane/homodrimane ratios are lower in most of the oil shows than in the diesel (Table 7a). The one exception is the 727 m oil show, which is more similar to the diesel (Fig. F6a). Aus-Tex has a slightly different bicyclic sesquiterpane distribution, with dominantly drimane and homodrimane (Fig. L6a). The mudstone samples have similar bicyclic sesquiterpane distributions to most of the oil shows, with dominant homodrimane. These variations suggest that in most of the oil show samples the bicyclic sesquiterpanes are not primarily derived from diesel, but from another component. 3.8.2 Diterpanes Most oil show samples and the diesel contain no detectable or very low abundance diterpanes in the m/z 123 and 191 mass chromatograms. For example, the diesel just has a very small isopimarane peak (Fig. J6b). This is in contrast to many typical Jurassic-sourced oils and solid bitumens which contain large amounts of 4?(H)-19-isopimarane, ent-beyerane and isopimarane (George et al., 2003). In this regard, the oil show sample 809.7 m is different to the diesel and the other oil show samples, because it contains a significant amount of 4?(H)-19-isopimarane, ent-beyerane and isopimarane (Fig. H6b). The 19NIP/C(30)? ? hopane and IP/C(30)? ? hopane ratios of sample 809.7 m in Moose-1ST1 (Table 7a) are similar to those of Puri-1 crude oil, and solid bitumens CN249 and CN250 from Subu-1 (George et al., 2003). This is further supporting evidence that this sample contains a genuine oil show not substantially affected by diesel. These diterpenoids are probably derived from conifer resins (Noble et al., 1985, 1986). Thus it can be concluded that sample 809.7 m was derived from a rock containing significant amounts of coniferous organic matter, which based on the Subu work may well be a Jurassic-age source rock. The fine-grained samples from Moose-1ST1 contain low amounts of 4?(H)-19-isopimarane, ent-beyerane and isopimarane relative to hopanes, with 19NIP/C(30)? ? hopane and IP/C(30)? ? hopane ratios of 0.02-0.08 (Table 7a). However, CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 36 relative to tricyclic terpanes 4?(H)-19-isopimarane and isopimarane are moderately abundant. In this respect these samples are similar to the fine-grained samples from Subu. Thus, the fine-grained samples from Moose-1ST1 contain low amounts of coniferous organic matter. 3.8.3 Tricyclic and tetracyclic terpanes All of the C(19) to C(26) (not C(22)) tricyclic terpanes and C(24) tetracyclic terpane were detected in all of the samples. The overall abundance of these terpanes could most conveniently be measured against the relative abundance of the C(30) ? ? hopane in the m/z 191 mass chromatogram (Tables 7a and 6b; C(23) tri./C(30)? ? and C(24) tet./C(30)? ?). These two ratios are very low (<0.1) in the Aus-Tex and the fine grained samples, reflecting the low relative abundance of tricyclic and tetracyclic terpanes in these samples. These ratios are very high in the diesel, due to the very low abundance of hopane in the diesel. The oil shows have variable ratios, from very low (e.g. 727 m) to moderately high (840 m). This variability is consistent with varying contributions to the oil shows of diesel and another, probably natural, component. Two other terpane ratios [C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) and C(19) tricyclic terpane/(C(19) tricyclic terpane + C(23) tricyclic terpane)] can be used to gain a broad approximation of the relative amounts of terrestrial and marine organic matter in a source rock (Preston and Edwards, 2000; George et al., 2002a). The three fine-grained samples have high ratios (>0.65; Table 6b), suggesting significant terrestrial organic matter input. In this respect they are similar to the fine-grained samples from the Subu wells (George et al., 2003). In contrast, these ratios are mostly relatively low for the diesel and the oil shows, although samples 727 m and 809.7m have high C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) ratios. A high terrestrial organic matter input in the 809.7 m sample is consistent with the presence of diterpanes in this sample, indicating coniferous organic matter. The C(26) tricyclic terpanes are not significantly more abundant than the C(25) tricyclic terpanes in samples other than 727 m (where the C(26)/C(25) tricyclic ratio >1 is caused by the evaporative profile) and in Aus-Tex (Table 7b). This is evidence against the diesel or any of the oil shows being sourced from a lacustrine source rock facies (Schiefelbein et al., 1999). The Aus-Tex contains significant amounts of C(28) and C(29) tricyclic terpanes (similar abundance as C(24) tetracyclic terpane), which although present in the oil shows, are always of lesser abundance. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 37 3.8.4 Methylhopanes Methylhopanes were detected in all the samples, except the diesel, by monitoring the m/z 205 mass chromatogram (Fig. *7c). Two isomer classes were identified: 2? - -methylhopanes and 3?-methylhopanes. The 3?-methylhopanes are less abundant than the 2?-methylhopanes, although are slightly more abundant in the fine-grained samples. Where 2?-methylhopanes are abundant, notably in oil show samples 530 m and 727 m, a complete series of the 2?-methylhopanes from C(30) to C(36) is detectable (e.g. Figs. B7c and F7c). There is considerable variation across the sample set in the abundance of the 2? - -methylhopanes compared to hopanes (Table 7f), as shown by the cross-plot of C(31)2?Me/(C(31)2?Me+C(30)? ? hopane) versus C(32)2?Me/(C(32)2? Me+C(31)? ? hopane) (Fig. 5). These ratios were effective at discriminating two families of solid bitumens in the sandstone samples from the Subu wells, together with the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (George et al., 2003). The "Family A" samples (low amounts of 2?-methylhopanes) were derived from a Jurassic-age source rock that contained high amounts of terrestrial organic matter, and in particular coniferous organic matter. The origin of 2?-methylhopanes is thought to be related to high prokaryotic source input (Summons and Jahnke, 1990). 2?-methylhopanes are commonly found in high abundance in oils derived from source rocks deposited in calcareous environments. Thus the "Family B" solid bitumens were ascribed to having an origin from a calcareous source with a high proportion of prokaryotic and a low proportion of terrestrial organic matter input. The lack of 2?-methylhopanes (and most other hopanes) in the diesel, and the low abundance of 2?-methylhopanes in the Aus-Tex, indicates that the variable but generally high amounts of 2?-methylhopanes in most of the oil show samples are derived from a natural component of the oil show, and not a drilling contaminant (Fig. 5; Table 7f). On the cross-plot, most of the oil shows cluster around the Family B Subu population (Fig. 5). This indicates that the most likely source of the natural component of most of the oil shows is the same or a similar source as that which sourced the Family B solid bitumens and the fluid inclusion oil in the Subu wells. The exception is the 759.5-759.6 m oil show, which has a very low content of 2?-methylhopanes, probably due to overprinting with Aus-Tex (Fig. 5). The three fine-grained samples have low 2?-methylhopane/hopane ratios, consistent with significant terrestrial organic matter input, as deduced by terpane ratios (Fig. 5). In this respect, they are again similar to the Subu fine-grained samples (George et al., 2003). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 38 [CHART] Figure 5: Cross-plot of C(31)2?Me/(C(31)2?Me+C(30)? ? hopane) versus C(32) 2?Me/(C(32)2? Me+C(31)? ? hopane). The two families refer to solid bitumens extracted from the sandstones in the Subu wells, the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (data shown as black dots, from George et al., 2003). 3.8.5 Hopanes Hopanes and moretanes were monitored using the m/z 191 mass chromatograms. MRM chromatograms were also run in order to examine the distribution of the C(27) to C(35) hopanes in greater detail and to provide a cleaner distribution with less interfering peaks that can complicate the interpretation of m/z 191 mass chromatograms. Various biomarker parameters related to source and maturity were calculated from the distribution of the terpanes in the SIM and MRM chromatograms and are shown in Table 7 (b to f). The ratio Tm/C(27)? is mainly controlled by maturity, and is most sensitive in the early part of the oil window, whereas the Ts/Tm ratio is both maturity and source controlled. The CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 39 ratio Tm/C(27)? varies from 8-24, without any clear correlation between samples. The Ts/Tm ratio is lower for the fine-grained samples (0.7-0.85) than the oil show samples (1-2), consistent with the fine-grained samples being of a lower maturity than the oil shows. The diesel contains some Ts and Tm, with a Ts/Tm ratio of 2.3. The higher relative amount of these C(27) hopanes in the oil shows, together with the lower Ts/Tm ratios, indicates that most of the C(27) hopanes in the oil shows are probably derived from a natural component and not the diesel. The Ts/Tm ratios for the oil shows are similar to those found for the Family B solid bitumens in the Subu wells, and are considerably lower than the Ts/Tm ratios for the Family A solid bitumens in the Subu wells (3-6). This indicates that the oil shows may have been derived from the same source rock as the one from which the Family B solid bitumens in the Subu wells were derived. The C(29)Ts/C(29)? ? hopane ratio varies between 0.18-0.36 for the Moose-1 sample set (Table 7c), except for sample 809.7 m which has a slightly higher ratio (0.43). Again, these ratios correlate with the Family B solid bitumens in the Subu wells, and are very different to the Family A solid bitumens (ratios 3.5-6; George et al., 2003). Other rearranged hopanes, including C(29) and C(30) diahopane and an unidentified C(30) rearranged hopane (C(30)Section) were detected in higher abundance in oil show sample 809.7 m than the other samples. Based on C(29)*/C(29) ? ? hopane, C(30)*/C(30) ? ? hopane and C(30)Section (rearranged hopane)/C(30) ? ? hopane ratios, oil show sample 809.7 m correlates with the Family A solid bitumens, whereas all the other samples correlate better with the Family B solid bitumens in the Subu wells. Previous work in Papua New Guinea has indicated that high abundances of diahopanes are characteristic of Jurassic, terrestrially-derived, oils (Waples and Wulff, 1996; George et al., 1997). Homohopane S/(S+R) maturity ratios are at or near equilibrium values (Table 7d). The C(29) hopane ? ? ??? ? ? ? ? ) and C(30) hopane ? ? ??? ? ? ? ? ) ratios are mostly at or near equilibrium values (0.9-0.95) for the Moose-1 sample set (Table 7c). This implies mid oil window maturities or greater for those samples. The exceptions are the oil show sample 809.7 m and the fine-grained samples, which have non-equilibrium ratios and thus probably have lower maturities than the other samples. This is supported by lower Ts/Tm ratios for these samples. Homohopane proportions are similar for all samples, and are strongly depleted in the higher molecular weight components, so provide little correlation information (Table 7d). Traces of oleanane were detected in four of the oil show samples (530 m, 759.5-759.6 m, 809.7 m, 840 m). This compound is a biomarker for angiosperm input into a source rock, and although absent from the diesel is also present in Aus-Tex. Therefore no conclusion can be drawn regarding the oleanane present. Gammacerane was detected in low to moderate amounts in all the oil show samples, is absent from diesel and the fine-grained samples, but is present in Aus-Tex, in quite high abundance (Fig. L9a). Interestingly, two CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 40 samples with obvious Aus-Tex contamination based on PAH abundance (686.2 m and 759.5-759.6 m) have higher gammacerane/C(30) ?? hopane ratios than other oil show sample, indicating a likely control on this ratio by Aus-Tex. Little 25-norhopane (a biomarker for biodegradation) is present in any of the samples (Table 7c). 29,30-bisnorhopane and C(30) 30-norhopane are present in significant amounts in most of the oil show samples (low abundance in 759.5-759.6 m sample) These form part of a homologous series (C(28)-C(34)) which could be partially or completely detected in these samples (e.g. Figs. B8, B9 and B10). However, 30-norhopanes are also present in small amounts in the diesel. Thus, although these isomers are higher in abundance than in the Family B solid bitumens in the Subu wells, they may be partially derived from the diesel and not from a naturally-sourced crude oil with family B affinity. C(29)/C(30) ?? hopane ratios are quite high for the oil shows (0.71-1.9) except for samples 759.5-759.6 m which has a lower value. In contrast, diesel has an even higher value (3.9). These data indicate a component of the hopanes in the oil shows was not derived from diesel, and was most likely derived from a calcareous-influenced source rock, similar to that which sourced the Family B solid bitumens in the Subu wells. The fine-grained samples from Moose-1 ST1 have much lower values (0.5-0.6), consistent with these not being a local source for a component of the oil shows Sterane/hopane ratios are all <1 for the oil shows (Table 7f), consistent with Family B solid bitumens in the Subu wells, and the fine-grained samples also have low values, similar to the Subu fine-grained samples (George et al., 2003). In summary, hopane distributions indicate many differences between the fine-grained samples from Moose-1ST1 (lower maturity) and the oil shows (mid oil window maturity or higher). The low abundance of several hopanes in diesel, and the different distributions compared to the oil shows, are indicative of a natural component to most of the oil shows, notwithstanding some overprinting also from Aus-Tex. For most of the oil shows, the natural component correlates best with Family B solid bitumens in the Subu wells. An exception is the oil show sample 809.7 m, which also correlates with the Family A solid bitumens based on abundance of rearranged hopanes, although this sample also contains some indicators of Family B affiliation, such as 30-norhopanes and strong 2? - -methylhopanes. Interestingly this sample is the one least affected by diesel (see Sections 3.4 and 3.6). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 41 3.9 STERANES AND DIASTERANES Sterane distributions in the samples were monitored by SIM analyses using both the m/z 217 and m/z 218 mass chromatograms, while the diasteranes (rearranged steranes) were analysed using the m/z 217 and m/z 259 mass chromatograms. MRM chromatograms were also run, in order to examine the distribution of the C(27) to C(30) steranes, diasteranes and methylsteranes in greater detail. The MRM data provided better quality data than the SIM data, due to co-elutions and some interfering contaminants in the SIM chromatograms. Sterane and diasterane ratios are reported in Table 8. The diesel has a very unusual sterane and diasterane distribution, very strongly biased towards the C(27) compared to the C(29) isomers (Fig. J11). The C(29)/C(27) ? ? ? 20R sterane ratio is 0.2 (Table 8a), whereas the oil shows have ratios from 0.7-1.9. This distribution is unlike any of the oil shows, and is likely a consequence of the refinery cut causing molecular weight discrimination. In the same way, the hopanes in the diesel are strongly biased towards low molecular weight components. Therefore, most of the sterane signature in the oil shows can be deduced to not be derived from the diesel, although it is possible that some distortion of the true sterane signature of the indigenous oil shows has been imparted by the diesel. Aus-Tex contains abundant steranes, and these strongly dominate over diasteranes. In this respect, Aus-Tex is different to most of the oil shows, as shown by the diasterane/sterane ratio, which is 0.17 for the Aus-Tex, 0.21-4.0 for the oil shows. Again there is a correlation between the two oil shows samples which have obvious Aus-Tex contamination based on PAH abundance (686.2 m and 759.5-759.6 m), which have lower diasterane/sterane ratios than other oil show samples (0.21, 0.26), indicating a likely control on this ratio by Aus-Tex (Table 8c). Most of the oil shows contain similar amounts of C(27) and C(29) steranes and diasteranes (Tables 8a and b). The two exceptions are 727 m and 809.7 m, which are more C(29) biased. Sample 809.7 m contains many more diasteranes relative to steranes than any other oil show samples (Table 8c), and in this respect has a greater rearranged signal than even the most diasterane-rich natural sample from the Subu study (Puri-1 crude oil). This is consistent with the greater amount of rearranged hopanes in this oil show compared with the others, and is further indication of at least a contribution of the likely Jurassic, terrestrially-derived oil that sourced the Family A solid bitumens in the Subu wells (George et al., 2003) to this oil show, which based on overall distributions has little diesel contamination. The lower diasterane/sterane ratios of the other oil shows correlate better with the Family B solid bitumens in the Subu wells (George et al., 2003). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 42 Table 8a: Sterane and diasterane parameters (part a).
C(27) ? ? ? C(28) ? ? ? C(29) ? ? ? C(29)/C(27) C(28)/C(29) C(30)/(C(27)+ 20R 20R 20R ? ? ? 20R ? ? ? 20R C(28)+C(29) CSIRO code (%) (%) (%) steranes steranes ? ? ? 20R TMI - ------------- ----------- ----------- ----------- ---------- ----------- ------------- ---- Calc. S217* S217* S217* S217* S217* M M 530 m 36.1 21.2 42.7 1.2 0.50 3.4 0.88 675.1 m 43.8 18.2 38.0 0.9 0.48 2.3 0.54 686.2 m 48.8 19.5 31.7 0.7 0.61 1.6 0.67 727 m 30.8 15.1 54.1 1.8 0.28 10.1 0.90 759.5-759.6 m 37.9 23.0 39.1 1.0 0.59 1.5 0.59 809.7 m 28.9 15.7 55.4 1.9 0.28 19.4 1.19 840 m 41.6 22.7 35.7 0.9 0.64 1.7 0.51 Diesel (tank) 72.6 12.1 15.3 0.2 0.79 nd 0.29 Aus-Tex 33.4 28.7 38.0 1.1 0.75 1.6 0.70 820 m 19.5 24.6 55.8 2.9 0.44 5.7 1.3 920 m 19.0 20.1 60.9 3.2 0.33 4.8 1.7 968-971 m 26.7 23.3 50.0 1.9 0.47 4.6 1.4
Sterane and diasterane abbreviations are listed in Table A2. C(27) ? ? ? 20R (%) = C(27) ? ? ? 20R sterane (as % of total C(27) to C(29) ? ? ? 20R steranes); C(28) ? ? ? 20R (%) = C(28) ? ? ? 20R sterane (as % of total C(27) to C(29) ? ? ? 20R steranes); C(29) ? ? ? 20R (%) = C(29) ? ? ? 20R sterane (as % of total C(27) to C(29) ? ? ? 20R steranes); C(30)/(C(27)+C(28)+C(29)) ? ? ? 20R steranes (%); TMI = Terrestrial/marine index = (C(27)(??) ?? diasteranes/(C(27) ?? diasteranes + C(30) ?? diasteranes)). Calc. = method used to calculate ratio: S217 = peak area in m/z 217 mass chromatogram, M = peak area in metastable reaction monitoring chromatogram; nd = not determined. * MRM used for diesel. Table 8b: Sterane and diasterane parameters (part b).
C(27) ??? C(28) ??? C(29) ??? C(27) C(28) C(29) C(27) ?? C(28) ?? C(29) ?? CSIRO steranes steranes steranes steranes steranes steranes diaster. diaster. diaster. code (%) (%) (%) (%) (%) (%) (%) (%) (%) - ----- --------- --------- --------- -------- -------- -------- -------- -------- -------- Calc. S218 S218 S218 M M M S259 S259 S259 530 m 30.9 21.6 47.5 40.7 18.0 41.3 37.1 22.8 40.2 675.1 m 39.6 20.3 40.1 42.7 18.8 38.4 45.1 28.2 26.6 686.2 m 33.3 25.1 41.5 36.2 25.0 38.7 35.6 27.9 36.6 727 m 26.5 18.1 55.4 37.7 16.1 46.2 28.6 23.0 48.4 759.5-75 27.6 26.6 45.8 41.6 24.7 33.7 33.6 29.7 36.7 9.6 m 809.7 m 32.3 20.9 46.7 37.2 21.9 40.8 21.7 31.1 47.2 840 m 37.7 27.0 35.3 42.2 22.7 35.1 44.6 33.5 21.9 Diesel 70.4 13.4 16.2 62.7 16.7 20.6 60.4 23.5 16.1 (tank) Aus-Tex 26.0 31.8 42.2 39.9 24.8 35.3 25.3 32.4 42.4 820 m 29.3 22.0 48.7 26.0 22.7 51.2 19.2 29.9 50.9 920 m 31.8 15.7 52.5 24.5 19.6 55.9 17.4 25.7 56.9 968-971 m 30.2 21.7 48.1 30.4 23.3 46.4 20.9 27.6 51.5
Sterane and diasterane abbreviations are listed in Table A2. C(27) ??? steranes (%) = C(27) ??? steranes 20S+R (as % of total C(27) to C(29) ??? 20R steranes); C(28) ??? steranes (%) = C(28) ??? steranes 20S+R (as % of total C(27) to C(29) ??? 20R steranes); C(29) ??? steranes (%) = C(29) ??? steranes 20S+R (as % of total C(27) to C(29) ??? 20R steranes); C(27) steranes (%) = C(27) steranes (% of total C(27) to C(29) regular steranes); C(28) steranes (%) = C(28) steranes (% of total C(27) to C(29) regular steranes); C(29) steranes (%) = C(29) steranes (% of total C(27) to C(29) regular steranes); C(27) ?? diaster. (%) = C(27) ?? diasterane 20S+R (as % of total C(27) to C(29) ?? 20S+R diasteranes); C(28) ?? diaster. (%) = C(28) ?? diasterane 20S+R (as % of total C(27) to C(29) ?? 20S+R diasteranes); C(29) ?? diaster. (%) = C(29) ?? diasterane 20S+R (as % of total C(27) to C(29) ?? 20S+R diasteranes). Calc. = method used to calculate ratio: S218 = peak area in m/z 218 mass chromatogram, S259 = peak area in m/z 259 mass chromatogram, M = peak area in metastable reaction monitoring chromatogram; nd = not determined. * MRM used for 809.7 m sample. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 43 Table 8c: Sterane and diasterane parameters (part c).
C(27) ?? C(28) ?? C(29) ?? C(27) ? ? ? C(28) ? ? ? C(29) ? ? ? diaster./ diaster./ diaster./ Diaster./ 20S/(20S 20S/(20S 20S/(20S CSIRO code steranes steranes steranes steranes + 20R) + 20R) + 20R) - ---------- --------- --------- --------- --------- ----------- ----------- ----------- Calc. M M M M M M M 530 m 0.47 0.60 0.45 0.48 0.54 0.44 0.42 675.1 m 0.71 0.61 0.45 0.59 0.46 0.42 0.43 686.2 m 0.32 0.24 0.21 0.26 0.39 0.39 0.38 727 m 0.29 0.34 0.22 0.27 0.47 0.48 0.46 759.5-759.6 m 0.24 0.20 0.18 0.21 0.39 0.35 0.39 809.7 m 3.55 4.28 4.28 4.01 0.53 0.56 0.47 840 m 0.54 0.40 0.34 0.44 0.43 0.35 0.36 Diesel (tank) 1.28 1.46 1.13 1.28 0.47 0.61 0.50 Aus-Tex 0.19 0.17 0.15 0.17 0.37 0.34 0.35 820 m 1.22 1.11 0.92 1.04 0.50 0.46 0.49 920 m 1.38 1.40 1.19 1.28 0.50 0.48 0.49 968-971 m 0.82 0.89 0.94 0.89 0.44 0.43 0.42
Sterane and diasterane abbreviations are listed in Table A2. C(27) ?? diaster./steranes = C(27) ?? diasteranes/?? ? ? +??? steranes); C(28) ?? diaster./steranes = C(28) ?? diasteranes/?? ? ? +??? steranes); C(29) ?? diaster./steranes = C(29) ?? diasteranes/?? ? ? +??? steranes); Diaster./steranes = C(27)+C(28)+C(29) ?? diasteranes/?? ? ? +??? steranes). Calc. = method used to calculate ratio: M = peak area in metastable reaction monitoring chromatogram. Table 8d: Sterane and diasterane parameters (part d).
C(29) ? ? ? ? VRE from C(27) C(28) C(29) C(29) ?? steranes C(29) ????????? ????????? ????????? diasterane CSIRO code 20S/20R 20S/20R ? ? ? ? ? ? ? ? ? ? ? ? S/(S+R) - ------------- ------------- -------- -------- --------- --------- ---------- Calc. M M M M M M 530 m 0.71 0.71 0.45 0.51 0.57 0.59 675.1 m 0.76 0.73 0.41 0.49 0.53 0.64 686.2 m 0.61 0.65 0.28 0.40 0.42 0.65 727 m 0.84 0.77 0.46 0.58 0.57 0.62 759.5-759.6 m 0.64 0.67 0.21 0.32 0.33 0.65 809.7 m 0.87 0.79 0.40 0.43 0.52 0.62 840 m 0.57 0.64 0.29 0.34 0.38 0.63 Diesel (tank) 1.00 0.85 0.48 0.56 0.65 0.78 Aus-Tex 0.53 0.62 0.19 0.29 0.32 0.63 820 m 0.97 0.83 0.34 0.40 0.40 0.60 920 m 0.98 0.84 0.29 0.32 0.34 0.59 968-971 m 0.73 0.71 0.30 0.37 0.40 0.60
Sterane and diasterane abbreviations are listed in Table A2. VRE from C(29) 20S/20R = Vitrinite reflectance equivalent from C(29) ? ? ? steranes 20S/20R (Sofer et al., 1993). Calc. = method used to calculate ratio: M = peak area in metastable reaction monitoring chromatogram. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 44 Table 8e: Sterane and diasterane parameters (part e).
21-nor/ 21-nor/ (21- + (21- + CSIRO code NDR NCR 24-nor) 27-nor) - ---------- ---- ---- ------- ------- Calc. M M M M 530 m nd 0.31 0.71 0.58 675.1 m nd 0.49 0.71 0.66 686.2 m 0.48 0.61 0.46 0.58 727 m nd 0.29 0.85 0.77 759.5-759.6 m 0.49 0.66 0.10 0.19 809.7 m 0.32 0.53 0.46 0.56 840 m 0.51 0.61 0.45 0.57 Diesel (tank) nd nd nd nd Aus-Tex 0.45 0.68 0.09 0.18 820 m 0.38 0.45 0.28 0.27 920 m 0.37 0.37 0.20 0.19 968-971 m 0.41 0.50 0.37 0.42
Sterane and diasterane abbreviations are listed in Table A2. C(26) steranes distributions (Holba et al., 1998a, 1998b): NDR = nordiacholestanes ratio: [(24- /(24- + 27-) nordiacholestanes]; NCR = norcholestanes ratio [(24-/(24- + 27-) norcholestanes]; 21-nor/(21- + 24-nor) = 21-norcholestane/(21-norcholestane + ? ? ? 20R 24-norcholestane); 21-nor/(21- + 27-nor) = 21- norcholestane /(21- norcholestane + ? ? ? 20R 27- norcholestane). Calc. = method used to calculate ratio: M = peak area in metastable reaction monitoring chromatogram. C(30) steranes and diasteranes are present in all the samples, except that they could not be detected in the diesel (Table 8a). This indicates a marine source for these oil shows, assuming that Aus-Tex has not been a major overprint. C(30) steranes and diasteranes are particularly abundant in the oil shows from 727 m and 809.7 m, which are more C(29) sterane biased and which contain little or no diesel contamination in this molecular weight fraction. This indicates that these oil shows are at least in part natural, and derived from a strongly marine source rock. The C(27-29) ? ? ? 20S/(20S+20R) sterane ratios are generally close to equilibrium and do not show any obvious intra-sample variabilities, except that the diesel has somewhat higher values and the Aus-Tex has somewhat lower values (Table 8c). Using an equation from Sofer et al. (1993), a vitrinite reflectance equivalent (VRE) can be calculated from the C(29) ? ? ? steranes 20S/20R ratio. This indicates maturities in the early to mid oil window (0.65-0.85%) for all the samples (Table 8d). The C(27)-C(29) ?????? ? ? ? ? ? ? ? sterane ratios allow more differentiation of the sample set based on thermal maturity, because these ratios only reach equilibrium at higher maturities (Fig. 6). The following observations can be made: (1) The fine-grained samples have low thermal maturities (ratios 0.3-0.4), slightly higher than for the Subu fine grained samples (0.2-0.3). (2) The Aus-Tex has a low thermal maturity. (3) Oil show sample 759.5-759.6 m, which is known to be overprinted by Aus-Tex, has a very similar low thermal maturity, so steranes in this sample are almost certainly affected significantly by Aus-Tex. (4) The apparent CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 45 (CHART) Figure 6: Cross-plot of C(27) sterane ????????????? versus C(29) sterane ?????? ? ? ? ? ? ? ? ratios. The family refers to solid bitumens extracted from the sandstones in the Subu wells (data shown as black dots, from George et al., 2003). lower thermal maturity of 686.2 m oil show (and possibly 840 m) is also likely caused by Aus-Tex (see Fig. 6). (5) The diesel has very low amounts of steranes, and these give a higher maturity than any oil shows, so diesel overprinting has probably not significantly affected any oil shows. (6) Other oil shows (530 m, 675.1 m, 727 m, 809.7 m) have a similar mid oil window maturity as many of the solid bitumens from Subu. All samples except the diesel contain significant amounts of C(26) steranes (norcholestanes) and diasteranes (nordiacholestanes) (Fig. x14a). The importance of these compounds is that they can be used as age-diagnostic biomarkers (Holba et al., 1998a, b). Apart from the 21-norcholestane isomer, which may increase in relative abundance with maturity, there are two main series of norcholestanes and nordiacholestanes. The 27-nor series is abundant in older rocks, whereas in Cretaceous CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 46 and Tertiary rocks the 24-nor series becomes more abundant (Holba et al., 1998a, b). Two ratios, the NDR (nordiacholestanes ratio) and the NCR (norcholestanes ratio), quantify this (Table 8e). NDR values above a threshold of 0.25 and NCR values above a threshold of 0.35 are consistent with Cretaceous or younger rocks. NDR values above a threshold of 0.5 and NCR values above a threshold of 0.6 are consistent with Tertiary rocks. The NDR ratios for the oil shows in Moose-1 vary between 0.32-0.51, and the NCR ratios for the oil shows vary between 0.29-0.66. These values therefore indicate that the oil shows contain C(26) steranes derived principally from Cretaceous or younger strata. Note the Aus-Tex also contains C(26) steranes, and these have values in the same range (Table 8e). Therefore, the age specificity for the samples contaminated by Aus-Tex (759.5-759.6 m, 686.2 m, and possibly 840 m) is unreliable. Other oil shows dated using this method are considered to be reliable. The fine-grained rocks in Moose-1ST1 have NDR ratios varying between 0.37-0.41, and NCR ratios varying between 0.37-0.5. These values are consistent with Cretaceous or younger ages for these strata. 3.10 AROMATIC HYDROCARBONS Eight major classes of aromatic hydrocarbons were monitored to assess variations in thermal maturity and to characterise source-related geochemical parameters. These compound classes were the alkylbenzenes, alkylnaphthalenes, alkylphenanthrenes, alkylbiphenyls, alkylfluorenes, alkylpyrenes, alkylfluoranthenes and alkyldibenzothiophenes. All chromatograms are included in the appendices. A wide variety of source and maturity related parameters were calculated from the integrated SIM mass chromatograms and are reported in Table 9. Abbreviations for aromatic hydrocarbons are defined in Appendix Table A3. 3.10.1 Overall aromatic hydrocarbon composition The overall aromatic hydrocarbon compositions of the Moose-1 samples are shown in Figure 7. All samples contain low amounts of alkylbenzenes. The diesel is strongly dominated by alkylnaphthalenes, whereas Aus-Tex is very strongly dominated by phenanthrene. The oil shows have quite variable compositions, some being dominated by alkylnaphthalenes (727 m, 759.5-759.6 m), and some containing dominantly alkyldibenzothiophenes (675.1 m, 686.2 m, 840 m). Alkyldibenzothiophenes are also rich in the diesel (Fig. 7), so it is likely that the high content of sulphur compounds in the oil shows is related to contamination by diesel. The one oil show (809.7 m) that has a very different composition (high alkylphenanthrenes and biphenyl) is also the sample that aliphatic parameters show to have the least contamination from diesel or Aus-Tex. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 47 Table 9a: Aromatic hydrocarbon parameters (part a).
CSIRO code TMBI- TMBI- MEBI- TeMBI TeMBI MNR N/ ENR DNR-1 1 2 1 -x -y ? MNs - ------------------------------------------------------------------------------------------------------ 530 m 0.38 0.69 0.70 0.53 0.39 1.5 0.27 3.4 3.5 675.1 m nd nd nd nd nd 2.1 0.01 10.2 5.4 686.2 m nd 0.42 nd 0.41 0.07 1.8 0.11 25.2 4.1 727 m nd 0.35 nd 0.28 0.09 2.6 0.02 nd 9.6 759.5-759.6 0.23 0.30 nd 0.54 0.39 1.5 0.26 3.7 4.3 m 809.7 m 0.34 0.60 0.76 0.47 0.27 1.4 0.14 1.4 3.9 840 m nd nd nd 0.47 0.44 1.5 0.11 nd 2.3 Diesel 0.19 0.54 0.44 0.38 0.21 1.5 0.21 3.9 4.4 (tank) Aus-Tex 0.32 0.84 nd 0.46 0.30 1.5 0.37 6.1 4.6 820 m nd 0.12 nd 0.43 0.24 1.3 0.19 1.5 2.2 920 m 0.11 0.47 nd 0.36 0.23 2.1 0.43 2.2 4.1 968-971 m 0.16 0.50 nd 0.44 0.30 2.4 0.54 1.6 3.7
For compound abbreviations see Table A3. TMBI = trimethylbenzene index; TMBI-1 = (1,3,5-TMB/[1,3,5-TMB+1,2,3-TMB]); TMBI-2 = (1,2,4-TMB/[1,2,4-TMB+1,2,3-TMB]); MEBI = methylethylbenzene index, MEBI-1 = (1M3EB+1M4EB)/(1M3EB+1M4EB+1M2EB); TeMBI = tetramethylbenzene index; TeMBI-x (1,2,3,5-TeMB/[1,2,3,5-TeMB+1,2,3,4-TeMB]); TeMBI-y (1,2,4,5-TeMB/[1,2,4,5-TeMB+1,2,3,4-TeMB]); MNR = methylnaphthalene ratio (2-MN/1-MN); N/? MNs = naphthalene/? methylnaphthalenes: ENR = ethylnaphthalene ratio (2-EN/1-EN); DNR = dimethylnaphthalene ratio: DNR-1 ([2,6-+2,7-DMN]/1,5-DMN). Table 9b: Aromatic hydrocarbon parameters (part b).
CSIRO code DNR-x DNR-y DNR-z TNR-1 TNR-2 TNRs TNR-x 136-TMN/ 137-TMN - ---------------------------------------------------------------------------------------------- 530 m 1.02 0.47 0.52 0.64 0.63 1.17 0.75 1.64 675.1 m 0.95 0.44 0.41 0.98 0.82 1.45 0.79 1.45 686.2 m 0.83 0.42 0.54 0.68 0.66 1.17 0.86 1.58 727 m 1.12 0.49 0.35 0.96 0.73 1.19 0.78 1.73 759.5-759.6 1.13 0.48 0.52 0.67 0.64 1.18 0.75 1.61 m 809.7 m 0.94 0.42 0.33 1.04 0.88 1.71 0.72 1.36 840 m 0.78 0.47 0.58 0.90 0.80 1.38 0.75 1.37 Diesel 1.26 0.52 0.55 0.76 0.68 1.23 0.71 1.60 (tank) Aus-Tex 1.12 0.43 0.56 1.02 0.89 1.49 0.71 1.25 820 m 0.81 0.42 0.38 0.97 0.87 1.81 0.86 1.30 920 m 0.67 0.42 0.40 0.97 0.85 1.58 0.96 1.33 968-971 m 0.63 0.42 0.47 0.86 0.91 1.71 0.95 1.06
For compound abbreviations see Table A3. DNR = dimethylnaphthalene ratio; DNR-2 = (2,7-DMN/1,8-DMN); DNR-3 = (2,6-DMN/1,8-DMN); DNR-x = ([2,6-+2,7-DMN]/1,6-DMN); DNR-y = ([2,6-+2,7-DMN]/[2,6-+2,7-DMN+1,3+1,7-DMN]); DNR-z = (1,5-/[1,5-+1,2-DMN]); TNR = trimethylnaphthalene ratio; TNR-1 = (2,3,6-TMN/[1,4,6-+1,3,5-TMN]); TNR-2 = ([2,3,6-+1,3,7-TMN]/[1,4,6-+1,3,5-+1,3,6-TMN]); TNRs = ([1,3,7-+2,3,6-TMN]/1,3,6-TMN); TNR-x = (1,2,5-TMN/[1,2,5-+1,2,4-+1,2,3-TMN]). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 48 Table 9c: Aromatic hydrocarbon parameters (part c).
CSIRO code Log Log TeM- TeM- TMNr TeMNr PMNr HPI % (1,2,5-/ (1,2,7-/ NR-1 NR-2 IP-iHM 1,3,6-) 1,3,7-) N - --------------------------------------------------------------------------------------------------- 530 m -0.16 -0.36 0.73 3.4 0.47 0.58 nd 0.26 0 675.1 m -0.12 -0.49 0.68 2.9 0.47 0.59 0.48 0.16 0 686.2 m -0.14 -0.58 0.37 3.9 0.47 0.60 0.52 0.13 0 727 m -0.45 -0.57 0.85 2.5 0.62 0.71 0.58 0.10 0 759.5-759.6 -0.19 -0.41 0.66 2.4 0.49 0.60 0.42 0.26 0 m 809.7 m 0.06 -0.38 0.68 2.5 0.39 0.54 0.54 0.59 0 840 m -0.12 -0.66 0.83 2.7 0.49 0.56 0.38 0.39 0 Diesel -0.40 -0.48 0.94 2.2 0.61 0.71 0.45 0.17 0 (tank) Aus-Tex -0.47 -0.62 0.40 1.6 0.70 0.77 nd nd nd 820 m 0.49 -0.09 0.44 8.9 0.20 0.24 0.16 1.0 3.8 920 m 0.75 -0.31 0.23 13.5 0.12 0.17 0.14 4.4 2.6 968-971 m 0.45 -0.55 0.30 12.5 0.25 0.21 0.10 2.6 2.8
For compound abbreviations see Table A3. Log (1,2,5-/1,3,6-) = Log (1,2,5-TMN/1,3,6-TMN); Log (1,2,7-/1,3,7-) = Log (1,2,7-TMN/1,3,7-TMN); TeMNR = tetramethylnaphthalene ratio; TeMNR-1 = (2,3,6,7-TeMN/1,2,3,6-TeMN); TeMNR-2 = (1,2,5,6+1,2,3,5-TeMN)/1,2,3,6-TeMN; TMNr = (1,3,7-TMN/[1,3,7-+1,2,5-TMN]); TeMNr = (1,3,6,7-TeMN/[1,3,6,7+1,2,5,6-TeMN]); PMNr = pentamethylnaphthalene ratio = PMNr (1,2,4,6,7-PMN/[1,2,4,6,7+1,2,3,5,6-PMN]); HPI = higher plant index = ([retene + cadalene + IP-iHMN]/1,3,6,7-TeMN); % IP-iHMN = % IP-iHMN of total (retene + cadalene + IP-iHMN). Table 9d: Aromatic hydrocarbon parameters (part d).
CSIRO % % HPP MPI-1 %R(c) MPDF 1-MP/ log MPR code Cad. Retene (MPI-1) 9-MP (1-MP/ 9-MP) - -------------------------------------------------------------------------------------------------------- 530 m 79.8 20.2 0.20 0.65 0.79 0.45 0.60 -0.22 1.13 675.1 m 5.0 95.0 0.95 0.70 0.82 0.43 0.74 -0.13 1.00 686.2 m 67.0 33.0 0.33 0.56 0.73 0.44 0.74 -0.13 1.04 727 m 35.9 64.1 0.64 0.74 0.84 0.48 0.53 -0.28 1.3 759.5-759.6 84.3 15.7 0.16 0.44 0.67 0.54 0.62 -0.20 1.3 m 809.7 m 13.2 86.8 0.87 0.68 0.81 0.46 0.78 -0.11 1.12 840 m 53.9 46.1 0.46 0.62 0.77 0.44 0.80 -0.10 0.98 Diesel 63.3 36.7 0.37 0.77 0.86 0.49 0.64 -0.19 1.2 (tank) Aus-Tex nd nd nd 0.17 0.50 0.65 0.87 -0.06 2.4 820 m 35.6 60.5 0.63 0.54 0.72 0.47 0.80 -0.09 0.82 920 m 9.5 87.9 0.90 0.39 0.63 0.38 1.6 0.21 0.60 968-971 m 11.1 86.2 0.89 0.33 0.60 0.39 1.6 0.20 0.60
For compound abbreviations see Table A3. % Cad. = % cadalene of total (retene + cadalene + IP-iHMN); % Retene = % Retene of total (retene + cadalene + IP-iHMN); HPP = higher plant parameter = (retene /[retene + cadalene]); MPI-1= methylphenanthrene index =1.5*[3-MP+2-MP]/[P+9-MP+1-MP]); %R(c) (MPI-1) = calculated vitrinite reflectance from MPI-1 (0.6*MPI-1+0.4 (for R(o) <1.35), from Radke and Welte, 1983); MPDF = methylphenanthrene distribution fraction = ((3-MP+2-MP)/ ? MPs); MPR = methylphenanthrene ratio = (2-MP/1-MP). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 49 Table 9e: Aromatic hydrocarbon parameters (part e).
CSIRO code DPR Log DPR-x Log Fl/(Fl + MPyI2 3-MBp 3-MBp/ MBpR (1,7-DM (Retene Py) /Bp 4-MBp P/ /9-MP) DMP X) - -------------------------------------------------------------------------------------------------------- 530 m 0.23 -0.52 0.23 -1.24 0.19 0.40 1.9 2.4 4.6 675.1 m 0.25 -0.42 0.28 -1.07 0.35 0.39 3.5 2.4 6.8 686.2 m 0.20 -0.47 0.25 -1.56 0.50 0.48 2.5 2.9 8.2 727 m 0.29 -0.51 0.24 -1.26 0.11 0.26 1.9 2.4 5.5 759.5-759.6 0.38 -0.51 0.24 -1.37 0.53 0.64 1.7 2.3 4.6 m 809.7 m 0.30 -0.43 0.27 -0.77 0.51 0.40 0.04 2.0 5.8 840 m 0.29 -0.40 0.28 -0.98 0.46 0.45 2.5 1.8 6.4 Diesel 0.31 -0.43 0.27 -1.08 0.16 0.37 1.4 2.0 3.7 (tank) Aus-Tex 0.52 -0.49 0.24 nd 0.53 1.09 1.2 5.5 nd 820 m 0.24 -0.06 0.47 -0.63 0.39 0.40 1.7 2.7 25.8 920 m 0.28 0.00 0.50 0.09 0.39 0.37 1.4 2.3 10.8 968-971 m 0.18 -0.07 0.46 -0.24 0.53 0.39 0.91 2.4 4.2
For compound abbreviations see Table A3. DPR = dimethylphenanthrene ratio = (3,5-+2,6-DMP+2,7-DMP)/(1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP); Log (1,7-DMP/DMP X) = Log (1,7-DMP/1,3-+3,9-+2,10-+3,10-DMP); DPR-x = dimethylphenanthrene ratio-x = (1,7-DMP/1,7-+1,3-+3,9-+2,10-+3,10-DMP); Fl/(Fl + Py) = fluoranthene/(fluoranthene + pyrene); MPyI2 = methylpyrene index = (2-MPy/(1-+4-MPy); MBpR = methylbiphenyl ratio = (3-MBp/2-MBp). Table 9f: Aromatic hydrocarbon parameters (part f).
CSIRO code DMBp DMBp P/DBT DBT/P MDR DMDR DBT/ P/A 2MP/2 R-x R-y 1,3,6,7- MA TeMN - --------------------------------------------------------------------------------------------------- 530 m 2.2 3.2 1.2 0.84 2.3 0.68 1.9 nd nd 675.1 m 2.5 4.9 1.9 0.53 2.1 0.61 1.8 56.3 13.5 686.2 m 4.8 nd 2.3 0.44 2.1 0.60 2.4 13.9 53.0 727 m 2.4 4.1 6.4 0.16 5.3 1.10 0.41 nd nd 759.5-759.6 2.4 3.7 4.1 0.24 2.1 0.65 1.9 7.4 2.6 m 809.7 m 2.6 5.5 3.1 0.32 1.7 0.56 2.5 33.8 37.0 840 m 2.6 4.3 2.1 0.47 1.8 0.58 2.2 nd nd Diesel 2.1 3.0 1.5 0.67 2.3 0.59 1.2 nd 5.3 (tank) Aus-Tex nd nd 35.4 0.03 14.0 0.42 9.4 7.4 6.2 820 m 10.1 24.5 14.2 0.07 3.0 0.53 0.87 60.7 1.7 920 m 9.7 29.2 20.1 0.05 2.0 0.92 0.97 67.0 11.2 968-971 m 2.0 4.6 47.4 0.02 3.0 0.87 0.73 28.0 9.5
For compound abbreviations see Table A3. DMBpR-x = dimethylbiphenyl ratio = (3,5-DMBp/2,5-DMBp); DMBpR-y = dimethylbiphenyl ratio = (3,3'-DMBp/2,3'-DMBp); MDR = methyldibenzothiophene ratio = (4-MDBT/1-MDBT); DMDR = dimethyldibenzothiophene ratio = (4,6-DMDBT/(3,6-+2,6-DMDBT)); P/A -= phenanthrene/anthracene; 2MP/2MA = 2-methylphenanthrene/2-methylanthracene. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 50 (CHART) Figure 7: Normalised aromatic hydrocarbon compositions of the Moose-1 samples. The fine-grained samples have overall aromatic hydrocarbon compositions dominated by alkylnaphthalenes. 3.10.2 Alkylbenzenes Alkylbenzenes, including the xylenes, trimethylbenzenes and tetramethylbenzenes, were detected in most of the samples (see Appendix *16). These compounds are in such low abundance in some samples (675.1 m, 686.2 m, 840 m) that their distribution is not CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 51 interpretable. Low abundances of alkylbenzenes may be due to partial evaporative loss during sample work-up, or to the effects of biodegradation. There are at least two potential controls on the distribution of alkylbenzenes. Firstly, some isomers may be more thermally stable than others, so maturity-dependent ratios can be configured (TMBI-1, TMBI-2, MEBI-1, TeMBI-x, TeMBI-y; Table 9a). The Moose-1 samples are not readily separated by thermal maturity based on these ratios. A second control on alkylbenzene distributions is biodegradation. Moderate biodegradation of oils has been shown to result in the preferential retention of 1,2,3-trimethylbenzene and 1,2,3,4-tetramethylbenzene relative to other trimethylbenzene and tetramethylbenzene isomers (George et al., 2002b). More extensive biodegradation results in the removal of all alkylbenzenes. Two of the Moose-1 oil show samples (727 m, 759.5-759.6 m) have alkylbenzene distributions dominated by 1,2,3-trimethylbenzene and/or 1,2,3,4-tetramethylbenzene relative to other trimethylbenzene and tetramethylbenzene isomers. Furthermore, alkylbenzenes in the fine-grained samples are also dominated by these two isomers. This is evidence that the alkylbenzenes in these samples have been affected by biodegradation. 3.10.3 Alkylnaphthalenes Alkylnaphthalenes provide information on the thermal maturity, biodegradation history and source characteristics of the samples analysed. Biodegradation favours less alkylated isomers, those with ?-substitution patterns, and those with a 1,6-substitution pattern, whereas aromatic hydrocarbons with methyl groups on adjacent positions and with greater alkylation are more resistant to biodegradation (Volkman et al., 1984; Fisher et al., 1998). There is no evidence that the alkylnaphthalene in any of the samples from Moose-1 have been affected by biodegradation. The diesel contains very abundant alkylnaphthalenes (especially C(2) and C(3)) in its aromatic hydrocarbon fraction (Fig. 7). Consequently, oil show samples that are partially composed of diesel mostly have alkylnaphthalene distributions that are similar to diesel (Table 9a and b). For example, the DNR-1 of diesel is 4.4, and the oil shows have DNR-1 values of 2.3-5.4, except for oil show sample 727 m which has a higher value (9.6). Therefore, there is little geochemically meaningful data from alkylnaphthalenes to be derived for the oil shows. Oil show sample 727 m has consistently more mature MNR, DNR-1, TNR-1 and TNR-2 parameters than diesel, so it may contain an additional, more mature component, over and above the diesel that has been identified based on aliphatic distributions. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 52 (CHART) Figure 8: Cross-plot of the trimethylnaphthalene ratio versus the tetramethylnaphthalene ratio. The data from the Subu wells are shown as black dots (from George et al., 2003). Higher molecular weight alkylnaphthalenes are relatively less abundant in the diesel, so may be more reliable as maturity indicators (Fig. 8). The trimethylnaphthalene and tetramethylnaphthalene ratios (Table 9c) for the fine-grained samples are consistently lower than those of the oil shows, and are similar to the values for the Subu fine-grained samples. Based on these ratios, most oil shows are less mature than the diesel or the Aus-Tex, and have similar mid oil window maturities to many of the solid bitumens from the Subu wells (Fig. 8). All but one of the samples have 136-TMN/137-TMN ratios (Table 9b) between 1.1 and 1.6, consistent with the liquid reaction environment (van Aarssen et al., 2001). This suggests that the fine-grained samples have reached the oil window, and that the oil shows were generated within it (or are influenced by diesel which has a value of 1.6). Oil show sample 727 m is the exception, with high trimethylnaphthalene and tetramethylnaphthalene ratios (Fig. 8), a high pentamethylnaphthalene ratio, and a high 136-TMN/137-TMN ratio (1.7). All the CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 53 alkylnaphthalene data suggest that this sample is more mature than the other oil show samples. Other alkylnaphthalene ratios provide information on source. The ratio (1,2,5-TMN/1,3,6-TMN) increases with greater input from higher plants (Strachan et al., 1988), although clearly this ratio is also influenced by maturity, with low maturity samples containing greater amounts of 1,2,5-TMN which is a precursor compound (van Aarssen et al., 1999). The ratio (1,2,7-TMN/1,3,7-TMN) increases with greater input from angiosperms (Strachan et al., 1988), and thus is often high in samples with high oleanane. The cross-plot of the logs of these ratios is shown in Fig. 9, with boundaries on this trimethylnaphthalene graph taken from Strachan et al. (1988). Both ratios are high for the three fine-grained samples, reflecting both a likely angiosperm input to these samples, and also their low maturity. Interestingly, no oleanane was detected in these samples (see Section 3.8.5). The oil show samples and the diesel have values for these (CHART) Figure 9: Cross-plot of log (1,2,7-TMN/1,3,7-TMN) versus log (1,2,5-TMN/1,3,6-TMN). The boundaries on this trimethylnaphthalene graph are taken from Strachan et al. (1988). The data from the Subu wells are shown as black dots (from George et al., 2003). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 54 two ratios close to the boundary lines, and into the lower left quadrant, meaning no clear evidence for angiosperm organic matter input. The higher plant index (HPI) varies from 1.0-4.4 for the fine grained samples, 0.1-0.6 for the oil shows and diesel (Table 9c). The higher values in the fine grained samples likely reflects increased higher plant contributions compared to the oil shows. The higher plant fingerprint (varying proportions of retene + cadalene + IP-iHMN; Table 9c and d) shows that only the fine-grained samples contain detectable IP-iHMN, and that these samples contain dominantly retene, not cadalene. Retene is likely to be resin-derived, and this evidence corroborates the presence of 4?(H)-19-isopimarane and isopimarane in these samples, which are also resin-derived compounds. 3.10.4 Alkylphenanthrenes The methylphenanthrene index (MPI-1), the methylphenanthrene distribution fraction (Fig. 10), the methylphenanthrene ratio and the dimethylphenanthrene ratio (Fig. 11) are lower for the fine-grained sediments than the oil shows, suggesting that they have lower thermal maturities (Table 9d and e). The fine-grained sediments in Moose-1 have similar alkylphenanthrene maturity indicators as the fine-grained sediments in the Subu wells (George et al., 2003). Calculated reflectance (Rc) from MPI-1 is 0.60-0.72% for the fine-grained sediments, suggesting an early oil window maturity. The alkylphenanthrene ratios of most of the oil shows are somewhat lower than that of diesel, and very different to that of Aus-Tex (Figs. 10 and 11). The exception is the 759.5-759.6 m oil show, which has values different to the other oil shows, trending towards the position of Aus-Tex. This sample is strongly contaminated by Aus-Tex, and it is likely that the alkylphenanthrene ratios have been affected by the Aus-Tex. There is no clear sign that other oil show samples which are known to contain significant amounts of Aus-Tex (686.2 m, and possibly 840 m) have altered alkylphenanthrene distributions. As for the alkylnaphthalenes, oil show 727 m has the highest maturity of the oil shows. Calculated reflectance (Rc) from MPI-1 is 0.84% for the 727 m oil show, suggesting a mid oil window maturity. Other oil shows have calculated reflectance (Rc) from MPI-1 to as low as 0.73%. These values are less than for many of the solid bitumens from the Subu wells, which have peak oil window maturities (0.8-1.1%). Three alkylphenanthrene ratios can be used to assess the degree of contribution of coniferous organic matter into a rock, in particular Araucariaceae input (Alexander et al., 1988). These are 1-MP/9-MP, retene/9-MP and 1,7-DMP/(1,3-+3,9-+2,10-+3,10-DMP) (Table 9d and e). The three fine-grained samples mostly have values for the logs of these ratios over the threshold suggested by Alexander et al. (1988). This evidence CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 55 (CHART) Figure 10: Cross-plot of methylphenanthrene index (1.5*[3-MP+2-MP]/[P+9-MP+1-MP]) versus methylphenanthrene distribution fraction ((3-MP+2-MP)/ ? MPs). The data from the Subu wells are shown as black dots (from George et al., 2003). corroborates the presence of 4?(H)-19-isopimarane and isopimarane in these samples, which are also resin-derived compounds. All the oil shows have values for the logs of these ratios below the threshold suggested by Alexander et al. (1988). This is evidence against any coniferous organic matter input. Interestingly, oil show sample 809.7 m does have a higher log retene/9-MP ratio (-0.77) than the other oil shows (although the other ratios are not different to the other oil shows). This corroborates the significant presence of 4?(H)-19-isopimarane and isopimarane in this sample (see Section 3.8.2). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 56 (CHART) Figure 11: Cross-plot of methylphenanthrene ratio (2-MP/1-MP) versus dimethylphenanthrene ratio (3,5-+2,6-DMP+2,7-DMP)/ (1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP). The data from the Subu wells are shown as black dots (from George et al., 2003). 3.10.5 Alkylbiphenyls Alkylbiphenyls provide information about thermal maturity (Alexander et al., 1986, although these ratios may be only sensitive to variations in the upper part of the oil window (George and Ahmed, 2002). The methylbiphenyl ratio and two dimethylbiphenyl ratios (Table 9e and f) are higher for the fine-grained rocks than the oil shows. This is the complete reverse of what is indicated by all other maturity parameters. Based on other parameters, the samples from Moose-2 have maturities in the early to mid oil window, so it is likely that the alkylbiphenyl ratios are insensitive to maturity variations in this well. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 57 Therefore, as for the Subu work, these ratios are not considered to be effective tools for this sample set. 3.10.6 Alkyldibenzothiophenes Alkyldibenzothiophenes can also be used as thermal maturity markers, thus two ratios (MDR and DMDR) are defined in Table 9f. These ratios were not very useful for determining thermal maturities in the Subu wells (George et al., 2003), and the same applies to the Moose-1 samples. The only correlation with other parameters is that sample 727 m is the most mature of the oil shows, based on MDR and DMDR. Aus-Tex has an anomalously high MDR, but this is not apparent in any of the samples suspected to be contaminated by Aus-Tex. Based on a calibration of MDR to vitrinite reflectance (Radke, 1988), VRE values for the three fine-grained samples are 0.65-0.73%, which is consistent with other geochemical ratios. The relative abundances of dibenzothiophenes to phenanthrene and 1,3,6,7-tetramethylnaphthalene are reported in Table 9f. The three fine-grained samples have low DBT/P ratios (<0.07) and DBT/1,3,6,7-TeMN ratios (<1.0), reflecting an overall low sulphur content (Fig. 12). In this respect they are similar to the Subu fine-grained samples (George et al., 2003). Aus-Tex has a very high PAH content, and therefore the DBT/P ratio is very low, even though the overall high relative content of sulphur compounds is reflected by quite a high DBT/1,3,6,7-TeMN ratio (Fig. 12). No oil show samples trend towards this composition. Diesel is similar to many of the oil shows, with relatively high DBT/P ratios (>0.3) and low DBT/1,3,6,7-TeMN ratios. In comparison, all the Subu data have DBT/P ratios <0.3, and the only oil shows with similar ratios are 727 m and 759.5-759.6 m. It is likely that the sulphur content of diesel is over-printing these ratios for the oil shows, particularly for samples 675.1 m, 686.2 m, 840 m, as was deduced from the overall high abundance of sulphur compounds in these samples and in diesel (Fig. 7). The exception is 809.7 m, which is the least diesel over-printed. The position of this sample on Fig. 12 is close to that of family B Subu solid bitumens, providing evidence that this sample has some affinities to the calcareous-sourced family B Subu solid bitumens, as well as to the Jurassic-sourced, family A solid bitumens (as was indicated by some of the hopane and sterane data, and by the terpane data). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 58 (CHART) Figure 12: Cross-plot of dibenzothiophene/phenanthrene ratio versus dibenzothiophene/1,3,6,7-TeMN ratio. The data from the Subu wells are shown as black dots (from George et al., 2003). 3.11 ORGANIC PETROLOGY RESULTS 3.11.1 Sample descriptions and maceral contents The dominant lithologies of the samples from between 811 m and 971 m are calcareous siltstones and mudstones, with lesser amounts of sandstone and claystone (Table 10). Consistent with their marine origin, the samples generally contain considerable amounts of carbonate and pyrite. The presence of shell fragments in many samples is also consistent with their marine nature and numerous samples contain glauconite, which is indicative of a shallow marine depositional environment (Table 10). The rocks studied generally contain common to abundant dispersed organic matter (DOM), which is dominated by liptinite and vitrinite, with lesser amounts of inertinite CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 59 Table 10: Maceral group compositions, vitrinite reflectance data and petrographic descriptions for samples from Moose-1 ST1.
DEPTH CSIRO MACERAL GROUP ABUNDANCE MEAN % (M) SAMPLE NO. RMO (WHOLE ROCK BASIS) (* CUTTINGS) LIPTINITE VITRINITE INERTINITE TOTAL 811 55420 <0.1 0.8 0.2 1 1.25
Description: Calcareous siltstone>calcareous mudstone. Rare lamalginite (mo), rare liptodetrinite (mo). Rare oil droplets (by-bo), generally 1- 3 um in diameter. Common reworked vitrinite. Rare graphite. Sparse shell fragments. Rare glauconite. Abundant pyrite (commonly as euhedral crystals up to 0.1 mm in diameter), common iron oxides. 820 55421 1 0.2 <0.1 1.2 0.63
Description: Calcareous siltstone>sandstone. Rare lamalginite (by-bo), sparse liptodetrinite (by-mo), sparse sporinite (my-mo), rare cutinite (mo), rare resinite (mo-mb), rare suberinite (mb). Rare vitrinite fluoresces do-mb. Sparse oil droplets (by-my), including fluid inclusions, generally 1-3 um in diameter. Rare bitumen (mo). Sparse reworked vitrinite. Rare graphite. Rare shell fragments. Sparse glauconite. Sparse reworked rock fragments. Abundant pyrite, common iron oxides. 861 55422 2 2 0.3 4.3 0.68
Description: Siltstone. Common lamalginite (by-my), common liptodetrinite (my-mo), sparse sporinite (mo), rare cutinite (mo), rare resinite (mo), rare suberinite (mb). Rare vitrinite fluoresces do-mb. Rare oil droplets (my), mostly as fluid inclusions, generally 1-3 um in diameter. Sparse reworked vitrinite. Rare graphite. Abundant fluorescing carbonate grains. Common pyrite, common iron oxides. 870 55423 3 0.2 <0.1 3.2 0.63
Description: Calcareous siltstone>mudstone>sandstone. Common lamalginite (by- bo), common liptodetrinite (by- mo), sparse sporinite (mo), rare cutinite (mo), rare resinite (mb). Rare vitrinite fluoresces mb. Rare oil droplets (by), mainly as fluid inclusions, generally 1-2 um in diameter. Sparse reworked vitrinite. Rare graphite. Rare shell fragments. Common pyrite, common iron oxides. 880 55424 1 1 0.5 2.5 0.65
Description: Calcareous mudstone>calcareous siltstone. Sparse lamalginite (my-bo), common liptodetrinite (my-mo), sparse sporinite (mo-do), rare cutinite (mo-do), rare resinite (mb). Rare vitrinite fluoresces mb. Common reworked vitrinite. Sparse shell fragments. Rare glauconite. Common pyrite, common iron oxides. 890 55425 1 1.5 0.5 3 0.69
Description: Calcareous mudstone=calcareous siltstone>sandstone. Sparse lamalginite (my-bo), common liptodetrinite (my-mo), rare cutinite (mo-do), rare resinite (do), rare suberinite (mb). Rare vitrinite fluoresces db. Rare oil droplets (by), including fluid inclusions, generally 1-2 um in diameter. Common reworked vitrinite. Rare graphite. Sparse shell fragments. Rare glauconite. Common pyrite, common iron oxides. 901 55426 0.1 <0.1 0.1 0.2 0.69
Description: Calcareous siltstone>calcareous sandstone. Rare lamalginite (my- mo), rare liptodetrinite (my-mo), rare cutinite (mo), rare sporinite (mo). Rare vitrinite fluoresces db. Rare oil droplets (by), including fluid inclusions, generally 1-2 um in diameter. Sparse reworked vitrinite. Rare graphite. Sparse glauconite. Sparse pyrite, common iron oxides. Continued...... CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 60 Table 10 continued: Maceral group compositions, vitrinite reflectance data and petrographic descriptions for samples from Moose-1 ST1.
DEPTH CSIRO MACERAL GROUP ABUNDANCE MEAN % (M) SAMPLE NO. RMO (WHOLE ROCK BASIS) (* CUTTINGS) LIPTINITE VITRINITE INERTINITE TOTAL 909 55427 3 1 0.5 4.5 0.68
Description: Mudstone>siltstone. Common lamalginite (my-bo), common liptodetrinite (my-mo), rare cutinite (mo-do), rare resinite (mo-mb). Rare vitrinite fluoresces mb. Rare oil droplets (by) generally 1-3 um in diameter. Sparse reworked vitrinite. Abundant fluorescing carbonate grains. Rare shell fragments. Abundant pyrite, common iron oxides. 920 55428 1 0.5 0.5 2 0.64
Description: Calcareous mudstone>calcareous siltstone>sandstone. Common lamalginite, including Veryhachium (my-mo), common liptodetrinite (my-mo), rare cutinite (mo), rare sporinite (mo). Rare vitrinite fluoresces db. Rare bitumen (mo). Sparse reworked vitrinite. Rare graphite. Sparse shell fragments. Common pyrite, common iron oxides. 930 55429 1 0.3 1 2.3 0.65
Description: Calcareous mudstone>calcareous siltstone. Sparse lamalginite (my-mo), common liptodetrinite (my-mo), rare cutinite (mo), sparse sporinite (mo). Rare vitrinite fluoresces db. Rare reworked vitrinite. Rare graphite. Sparse shell fragments. Common pyrite, common iron oxides. 937 55430 1 0.4 1 2.4 0.65
Description: Calcareous mudstone. Common lamalginite (my-mo), common liptodetrinite (my-mo), rare cutinite (mo), rare sporinite (mo). Rare vitrinite fluoresces db. Rare oil droplets (by), including fluid inclusions, generally 1-2 um in diameter. Sparse reworked vitrinite. Rare glauconite. Sparse shell fragments. Common pyrite, common iron oxides. 950 55431 1 <0.1 1 2 0.64
Description: Calcareous mudstone>claystone. Common lamalginite (my-mo), common liptodetrinite (my-mo), rare sporinite (mo). Rare vitrinite fluoresces db. Rare reworked vitrinite. Rare shell fragments. Common pyrite, common iron oxides. 960 55432 1 0.1 1 2.1 0.63
Description: Calcareous mudstone>>calcareous siltstone. Common lamalginite (my-mo), common liptodetrinite (my-mo), rare cutinite (do), rare sporinite (mo). Rare vitrinite fluoresces mb. Rare reworked vitrinite. Rare glauconite. Sparse shell fragments. Common pyrite, common iron oxides. 969.5 55433* 1 0.5 0.5 2 0.66
Description: Calcareous mudstone>>calcareous siltstone. Sparse lamalginite (my-mo), common liptodetrinite (my-mo), rare suberinite (mo), sparse sporinite (mo). Rare vitrinite fluoresces mb. Sparse reworked vitrinite. Rare graphite. Rare glauconite. Sparse shell fragments. Common pyrite, abundant iron oxides. Key: All samples core except where noted with an * (969.5 m is the cuttings interval from 968-971 m). - -Rmo%- mean vitrinite reflectance value taken on randomly oriented phytoclasts, in nonpolarised light - -rare: <0.1%; sparse: 0.1-0.5%; common: >0.5-2%; abundant: >2-10%. - -fluorescence colours designated as, b- bright; m- moderate; d- dull; y- yellow; o- orange; g- green; b- brown; nf- non-fluorescing. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 61
(Table 10; Appendix S). Reworked vitrinite, which has higher reflectances than the indigenous vitrinite and is commonly characterised by blocky form, cracks and extensive pyritisation, is widespread through the studied section. Liptinite ranges from rare to abundant and mainly comprises lamalginite derived from dinoflagellate/acritarch cysts, along with associated liptodetrinite although higher plant-derived liptinite, including sporinite, cutinite and subcrinite is also present in most of the rocks. Some of the terrestrially-derived liptinite occurs within reworked coaly grains. Small oil droplets (1-3um in diameter) have been identified in numerous samples and include fluid inclusions as well as trace amounts of `free oil' occurring between mineral grains. On the basis of the maceral contents of the samples studied, in particular liptinite contents, the original oil generation potential of the section ranges from poor to very good. 3.11.2 Thermal maturity: FAMM and vitrinite reflectance analyses FAMM analyses have been carried out on three samples from the studied section and vitrinite reflectance (VR) data are available for all samples (Table 11: Appendix S). The quality of these analyses depends upon the total OM content as well as on maceral content and maceral characteristics. Because vitrinite is generally sparse to common in the rocks studied, confidence in the results is high. Some samples are complicated by the presence of reworked populations of organic matter but this material has been delineated where possible, such that confidence in the results remains good. In some cases however delineation of the reworked macerals is not straightforward and at least some measurements may be from this population. In particular, vitrinite in the sample from 811 m is dominated by a reworked population and has anomalously high VR values; the readings may include measurements from reworked vitrinite. With the exception of the sample from 811 m, the VR data are similar for all samples studied, ranging from 0.63%-0.69%. The FAMM-derived equivalent vitrinite reflectance (EqVR) values, however, are about 0.9% and the vitrinite plots in the `perhydrous field' of the FAMM diagram, such that considerable VR suppression is expected. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 62
Table 11: FAMM-derived equivalent vitrinite reflectance (EqVR) and measured vitrinite reflectance (VR) data for samples from Moose-1 ST1.
SAMPLE EqVR DATA VR DATA - ------------------------- --------------------------------- ------------------------------------------ CSIRO EqVR RANGE (1)VR DEPTH (m) SAMPLE NO. (%) (%) SUPPRESSION RM(0) RANGE (%) n ? - --------- ---------- ----- ---------- ----------- ----- ----------- --- ---- 811 55420 1.25 1.05-1.36 27 0.07 820 55421 0.63 0.52-0.78 26 0.07 861 55422 0.93 0.87-1.00 severe 0.68 0.54-0.80 41 0.07 870 55423 0.63 0.53-0.74 26 0.07 880 55424 0.65 0.53-0.80 31 0.07 890 55425 0.69 0.56-0.80 32 0.07 901 55426 0.69 0.58-0.80 14 0.06 909 55427 0.92 0.84-0.98 severe 0.68 0.56-0.80 32 0.07 920 55428 0.64 0.56-0.74 29 0.06 930 55429 0.65 0.57-0.76 30 0.06 937 55430 0.66 0.54-0.78 32 0.06 950 55431 0.64 0.52-0.76 17 0.07 960 55432 0.63 0.52-0.70 25 0.05 969.5 55433* 0.91 0.83-1.00 severe 0.66 0.54-0.76 30 0.06
All samples core except where noted with an * (969.5 m is the cuttings interval from 968-971 m). EqVR = FAMM-derived equivalent vitrinite reflectance calibrated against Rm(o)%. Rm(o)% = Mean vitrinite reflectance measured under oil immersion on randomly oriented phytoclasts in nonpolarised light. n = Number of vitrinite reflectance readings; ? = standard deviation. Readings taken from dispersed organic matter (DOM). The ranges in EqVR are based on plotted positions of vitrinite data in relation to iso-EqVR lines on the FAMM diagrams (1) The degree of vitrinite reflectance suppression/enhancement is based on the position of the vitrinite data points in relation to iso-correction curves superimposed on the fluorescence alteration diagram; minimal (0.0-0.1%), moderate (>0.1-0.2%) and severe (>0.2%); enhancement shown in parentheses n/a = not available CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 63
Important insights into the quality and consistency of the data set can be made from a comparison of EqVR and VR values, with consideration of the interpreted corrections to VR on the basis of the iso-correction curves presented in Fig. 1a. The average plotted position of the vitrinites on the FAMM diagrams indicate VR suppression of slightly >0.2%. Where the corrections are applied, the EqVR values for the samples are in general agreement with the VR values, both for the `spot' measurements (Appendix R) and the average values, although the EqVR values are slightly higher than the `corrected' VR values in some instances. As mentioned above, the corrected VR values are approximate and are simply used to for cross-checking the data; the EqVR values are used to give the thermal maturity level. Because of the general agreement in the two determinations, a high degree of confidence exists for both the VR and FAMM data. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 64
4 INTERPRETATION AND SYNTHESIS 4.1 THE FINE-GRAINED ROCKS IN MOOSE-1ST1 4.1.1 Source potential The low TOC values (<1.2%) and the low hydrogen indices (mostly <155 mg/g) indicate type III organic matter, with low hydrocarbon generation potential. This organic matter type is supported by the molecular geochemistry, which indicate a marine depositional environment with major terrestrial organic matter input. One Moose-1ST1 sample (811 m) has a very small S(2) peak, despite a TOC content of 1.1%, indicating that most of the organic carbon in this sample is refractory and non-generative. The thermal maturity of this sample may be considerably greater than the other samples (see Section 4.1.3), indicating that any source potential has been exhausted. One sample (968-971 m) has a higher hydrogen index 2(17 mg/g), but a moderate TOC (1.1%). This is the most prospective sample, although based on the Rock-Eval data alone it cannot be considered to be a potential effective source rock. Note that the fine-grained rocks at Moose-1ST1 have better source potential than the fine-grained rocks at the Subu wells (George et al., 2003), which have very poor oil generating potential. On the basis of the maceral contents of the samples studied, in particular the liptinite contents, the original oil generation potential of the section studied ranges from poor to very good. This is better than is apparent from the Rock-Eval results, probably because of the diluting effect of inertinite on hydrogen indices, and also the maturity level that this sequence has reached (peak oil window, see Section 4.1.3), resulting in oil generation and reduction of the residual hydrogen indices. 4.1.2 Source characteristics A marine depositional environment is indicated by the C(30)/(C(27)+C(28)+C(29)) ? ? ? 20R ratios >4, and by the presence of glauconite and lamalginite derived from dinoflagellate/acritarch cysts (Section 3.11.1). However, major terrestrial input to this setting is indicated by the common occurrence of higher plant-derived macerals such as vitrinite, by the slight odd predominance of the n-alkanes, by two high tricyclic terpane ratios [C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) and C(19) tricyclic terpane/(C(19) tricyclic terpane + C(23) tricyclic terpane)], and by the high higher plant index. There are indications of a coniferous organic matter component in this mix, notably the presence of relatively high amounts of retene, 1,7-dimethylphenanthrene, 1- CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 65
methylphenanthrene, 4?(H)-19-isopimarane and isopimarane in these samples, which are resin-derived compounds. This correlates with the presence of minor amounts of resinous material in samples 820 m and 968-971 m (Table 10). This resinous material may be reworked from the Jurassic. The sulphur content was low. The depositional environment was oxic, as indicated by high Pr/Ph ratios and low C(35)??C(35) + C(34)) homohopane ratios. In these respects, the fine-grained samples from Moose-1ST1 have many similarities to the non-overprinted fine-grained samples from the Subu wells (George et al., 2003). This is also partly indicated by source-correlation diagrams (Figs. 13-15). The presence of small amounts of C(26) steranes in the clastics below the Mendi Formation limestones (below 810m) from Moose-1ST1 enables a degree of age control to be suggested. The fine-grained rocks in Moose-1ST1 have NDR ratios varying between 0.37-0.41, and NCR ratios varying between 0.37-0.5. These values are consistent with Cretaceous or younger ages for these strata (Holba et al., 1998a, b). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 66
- - Subu fine-grained samples - Bujon-1 1476m FIO - Hovare oil seep - - Subu family 2 solid bitumens - Barune Sandstone FIO - Chim oil seep - - Subu family 3 solid bitumens - Koko-1 1162m FIO - Gobe 3X DST3 crude oil - - Ouha anticline bitumen, CN746 - Koko-1 1163m RFT crude oil - Omati-1 crude oil - - Subu FIO, CN392 - Kimu-1 1873-79m FIO - Angore-1A crude oil - - Subu rod grease contaminant, CN679 - Aure Thrust Belt oil seeps - Moose-1ST1 oil shows - - Puri-1 crude oil - Aure Scarp oil stained rocks - Moose-1ST1 fine grained rocks - - Bwata-1 condensate - Lufa oil seep - Moose-1 diesel - - Iagifu, Hedinia and P'nyang FIOs - Puri anticline oil seep - Moose-1 Aus-Tex - - Iagifu DST crude oils
[CHART] Figure 13: Cross-plot of C(29) Ts/C(29) ?? hopane versus C(30)*/C(30) ?? hopane for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-1 and Moose-1ST1 well. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 67
- - Subu fine-grained samples - Bujon-1 1476m FIO Hovare oil seep - - Subu family 2 solid bitumens - Barune Sandstone FIO - Chim oil seep - - Subu family 3 solid bitumens - Koko-1 1162m FIO - Gobe 3X DST3 crude oil - - Ouha anticline bitumen, CN746 - Koko-1 1163m RFT crude oil - Omati-1 crude oil - - Subu FIO, CN392 - Kimu-1 1873-79m FIO - Angore-1A crude oil - - Subu rod grease contaminant, CN679 - Aure Thrust Belt oil seeps - Moose-1ST1 oil shows - - Puri-1 crude oil - Aure Scarp oil stained rocks - Moose-1ST1 fine grained rocks - - Bwata-1 condensate - Lufa oil seep - Moose-1 diesel - - Iagifu, Hedinia and P'nyang FIOs - Puri anticline oil seep - Moose-1 Aus-Tex - - Iagifu DST crude oils
[CHART] Figure 14: Cross-plot of C(29) ?? hopane/C(30) ?? hopane versus C(31) ?? hopane/C(30) ? ? hopane ratios for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-1 and Moose-1ST1 well. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 68
- - Subu fine-grained samples - Bujon-1 1476m FIO - Hovare oil seep - - Subu family 2 solid bitumens - Barune Sandstone FIO - Chim oil seep - - Subu family 3 solid bitumens - Koko-1 1162m FIO - Gobe 3X DST3 crude oil - - Ouha anticline bitumen, CN746 - Koko-1 1163m RFT crude oil - Omati-1 crude oil - - Subu FIO, CN392 - Kimu-1 1873-79m FIO - Angore-1A crude oil - - Subu rod grease contaminant, CN679 - Aure Thrust Belt oil seeps - Moose-1ST1 oil shows - - Puri-1 crude oil - Aure Scarp oil stained rocks - Moose-1ST1 fine grained rocks - - Bwata-1 condensate - Lufa oil seep - Moose-1 diesel - - Iagifu, Hedinia and P'nyang FIOs - Puri anticline oil seep - Moose-1 Aus-Tex - - Iagifu DST crude oils
[CHART] Figure 15: Cross-plot of Pr/Ph versus C(35)??C(35) + C(34) homohopane ratios for the samples from this project compared to Subu well, literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-1 and Moose-1ST1 well. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 69 4.1.3 Thermal maturity characteristics It is possible to assign vitrinite reflectance (VR) boundaries as a general guide to the level of OM thermal maturity for petroleum generation. Based on the generally accepted values that appear in the literature, the following VR boundaries are used:
VR RANGE TYPE OF PETROLEUM GENERATION - -------- ---------------------------- 0.50% Immature with respect to petroleum generation 0.50-0.70% Early stages of thermal maturity for petroleum generation 0.70-1.00% Main stage of oil generation 1.00-1.35% Late stage of oil generation/condensate 1.35-2.00% Wet Gas and methane 2.00% Dry gas only
With the exception of the sample from 811 m, the mean VR for the section studied ranges from about 0.6% to about 0.7%, indicating early maturity. Largely due to the limited extent of the sequence analysed, a systematic increase of thermal maturity with depth is not evident and the sequence is essentially isometamorphic. The anomalously high maturity indicated for the uppermost sample (VR of 1.25%) may be due to overthrusting, localised thermal effects from igneous activity and associated hydrothermal fluids, or, as mentioned above, complicating effects of reworked material. The FAMM-derived equivalent vitrinite reflectance (EqVR) indicates that the measured VR considerably underestimates thermal maturity and that the section studied is within the main zone of oil generation (about 0.9% EqVR). The perhydrous vitrinite compositions that lead to VR suppression are likely to be controlled by a combination of the precursor plant types/plant parts and the Eh/pH conditions of the depositional environments. Vitrinite reflectance suppression is commonly associated with sediments from marine or marine-influenced depositional environments (e.g. Wilkins et al., 1992) and therefore the VR suppression determined in the present study is not unexpected. Rock-Eval T (max) data for the fine-grained samples from Moose-1ST1 mostly vary from 442-448(DEGREE)C, corresponding to a vitrinite reflectance of ca. 0.7-0.9% when applying a correlation for type III organic matter established by Teichmuller and Durand (1982). The molecular geochemical data indicate that the fine-grained samples from Moose-1ST1 have lower thermal maturities than the oil shows. This is consistent with the oil shows not being derived from the fine-grained samples in Moose-1ST1. Parameters that show this maturity difference include Ts/Tm, hopane ????????? ) ratios, sterane maturity-dependent ratios [(20S/(20S+20R), ?????? ? ? ? ? ? ? ?], trimethylnaphthalene ratios, CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 70 tetramethylnaphthalene ratios, and alkylphenanthrene ratios. Note also that most source parameters also clearly distinguish the fine-grained samples in Moose-1ST1 from the oil shows in Moose-1ST1, and these parameters are for the most part not masked by the overprinting effects of diesel and Aus-Tex. These ratios also show that the fine-grained samples from Moose-1ST1 are slightly more mature than the fine-grained samples from the Subu wells (e.g. see Fig. 16). Establishing an absolute maturity from geochemical parameters is more difficult than the relative maturities described above, as this relies on calibrations which may or may not be applicable. Vitrinite reflectance equivalent (VRE) from the C(29) 20S/20R ratio (Sofer et al., 1993) is 0.71-0.84% for the three samples. VRE values from the methylphenanthrene index (MPI-1; 0.60-0.72%; Radke and Welte, 1983) are similar to those from the methyldibenzothiophene ratio (0.65-0.73%; Radke, 1988), but are lower than the values from the methylphenanthrene ratios (0.72-0.85%; Radke et al., 1984). Care has to be exercised in the application of any of these calibrations, as they may not be directly applicable to the type of kerogen in these rocks, or to basins other than the ones they were originally calibrated on. For example, it is known that the MPI-1 gives inaccurate results for marine source rocks containing type II kerogen (Radke et al., 1986). A different approach for interpreting geochemical maturity ratios is to compare the various maturity indicators with sequences with known thermal maturities. This has been carried out for the Proterozoic middle Velkerri member (George and Ahmed, 2002), and this provides a convenient calibration set, with wells known to have maturities in the early oil window (Walton-2), the peak oil window (Shea-1) and the late oil window (McManus-1). For the fine-grained samples in Moose-1ST1, the DNR-1, TNR-2 and DMPR values are similar to those in Shea-1, indicating a peak oil window maturity. The MPI-1, MPDF, MPR are similar to those in Walton-2, indicating an early to peak oil window maturity. The TMNr, TeMNr and PMNr values are very low (0.1-0.25), indicative of early oil window maturities (van Aarssen et al., 1999; George and Ahmed, 2002). However, these latter three ratios may have been influenced by the large proportion of terrestrial organic matter in these samples. In summary, the molecular geochemical data for the fine-grained samples from Moose-1ST1 provides somewhat variable absolute maturities, although these are undoubtedly less than that of the oil shows in the overlying limestone. On the basis of the geochemical data, the best estimate of their thermal maturity is about 0.7-0.8% (mid oil window), which is consistent with the Rock Eval data but is somewhat lower than the equivalent vitrinite reflectance data from FAMM (about 0.9%). Undoubtedly, the CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 71 - - Subu fine-grained samples - Bujon-1 1476m FIO - Hovare oil seep - - Subu family 2 solid bitumens - Barune Sandstone FIO - Chim oil seep - - Subu family 3 solid bitumens - Koko-1 1162m FIO - Gobe 3X DST3 crude oil - - Ouha anticline bitumen, CN746 - Koko-1 1163m RFT crude oil - Omati-1 crude oil - - Subu FIO, CN392 - Kimu-1 1873-79m FIO - Angore-1A crude oil - - Subu rod grease contaminant, CN679 - Aure Thrust Belt oil seeps - Moose-1ST1 oil shows - - Puri-1 crude oil - Aure Scarp oil stained rocks - Moose-1ST1 fine grained rocks - - Bwata-1 condensate - Lufa oil seep - Moose-1 diesel - - Iagifu, Hedinia and P'nyang FIOs - Puri anticline oil seep - Moose-1 Aus-Tex - - Iagifu DST crude oils
[CHART] Figure 16: Cross-plot of C(29) sterane ? ? ? 20S/(20S+20R) versus C(29) sterane ?????? ? ? ? ? ? ? ? for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. measured vitrinite reflectance values (0.65-0.70%) have been significantly suppressed, by at least 0.2%. FAMM and VR analyses of additional samples from above 811 m and from below 971 m would enable a thermal maturity profile to be established for the Moose-1 sequence and would better constrain the maturity evaluation for the sample from 811 m. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 72 4.2 OVERPRINTING OF OIL SHOWS BY DIESEL, AUS-TEX AND GREASE The main issue to consider regarding the observed oil shows in the limestone in Moose-1 is whether and by how much their identity and their geochemistry has been influenced by wellbore contaminants, specifically the diesel and the Aus-Tex which have been analysed in detail in this report, and to some extent the pipe grease and the grease from the grease gun. To this end, in this Section the geochemical distinguishing features of each contaminant are briefly summarised (Sections 4.2.1 to 4.2.3). Then, each oil show is considered in turn, with respect to how much its geochemical composition has been altered by the contaminants (Sections 4.2.4 to 4.2.10). 4.2.1 Diesel (Appendices J and K) Two samples of the diesel, from the line and the tank, were analysed. These have similar n-alkane compositions, so only the tank diesel sample was analysed in detail. The diesel is aliphatic rich (85%), is dominated by n-alkanes (n-C(8) to n-C(25), maxima n-C(16)), and has an aromatic fraction dominated by alkylnaphthalenes, alkylphenanthrenes and alkyldibenzothiophenes. It contains only a minor UCM hump. The pattern of branched and cyclic alkanes in the diesel is characteristic and was useful for correlating the diesel with oil shows (Fig. 4). Many oil shows have similar n-alkanes and branched and cyclic alkane distributions as the diesel. The diesel has a higher Pr/Ph ratio than many of the oil shows, and a maturity based on aromatic hydrocarbons in the peak oil window. Sulphur compounds in the diesel have strongly influenced the sulphur compound distribution in several of the oil shows. The diesel contains abundant tricyclic terpanes, a small amount of isopimarane but no other diterpanes, and highly unusual hopane, sterane and diasterane distributions, which are skewed heavily in favour of the low molecular weight homologues. These hopane, sterane and diasterane distributions are unlike any found in the oil shows. Some of the diesel biomarker ratios (e.g. Ts/Tm, drimane/homodrimane) are clearly distinct from the oil shows. Furthermore, the diesel does not contain some biomarkers that are present in all the oil shows, for example methylhopanes and 4?(H)-19-isopimarane. For these reasons, it can be concluded that most of the biomarkers in the oil shows are not derived from the diesel. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 73 4.2.2 Aus-Tex (Appendix L) This drilling additive has a substantially different n-alkane distribution to the diesel and the oil shows. The Aus-Tex has an n-alkane maxima at n-C(28), a different UCM profile, and is characterised by unusually high abundances of some PAH (phenanthrene, fluoranthene, pyrene, chrysene, benzofluoranthene, benzopyrene, and dibenzochrysene, and related isomers). These PAH serve as a very useful marker for a contribution of Aus-Tex to the oil shows. The Aus-Tex contains a small amount of isopimarane but no 4?(H)-19-isopimarane, and contains significant amounts of C(28) and C(29) tricyclic terpanes and gammacerane, and traces of 3?-methylhopanes. Aus-Tex contains unusual sterane distributions, strongly dominated by the ? ? ? R isomers. In other respects, the compounds present in the oil shows (e.g. hopanes, steranes, aromatic hydrocarbons) are also usually present in Aus-Tex, albeit sometimes in different distributions. Therefore, if the presence of PAH in an oil show indicates a likely Aus-Tex contribution, then great care has to be exercised with many molecular parameters, as these are very likely influenced by the Aus-Tex. This is clearly the case for oil show sample 759.5 m, which is strongly overprinted by Aus-Tex, and for which alkylphenanthrene ratios trend towards the position of Aus-Tex (Figs. 10 and 11). 4.2.3 Grease samples: Pipe Dope and Grease Gun (Appendices M and N) These grease samples were not analysed in detail, as they both consist mainly of a very prominent UCM hump. Most oil show samples do not contain a large UCM hump. The only exception is sample 727 m, which does have a significant UCM and therefore potentially could be overprinted by a grease. 4.2.4 Moose-1 530 m, open hole slurry sample (Appendix B) This sample has a very similar n-alkane distribution to the diesel. It has a larger UCM hump than diesel, indicating that it has undergone a phase of biodegradation. It contains no evidence of any overprinting by Aus-Tex or grease. Alkylnaphthalene and alkylphenanthrene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. This indicates that a portion of this open hole slurry sample is derived from a natural oil show, particularly higher molecular weight compounds (>C(27)). Therefore, these compounds can be used with caution to type the natural portion of this oil show. Other parameters are likely to be CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 74 partially or completely compromised by the interpreted overprinting of this oil show by diesel. 4.2.5 Moose-1ST1, 675.1 m, core (Appendix C) This sample has a very similar n-alkane distribution to the diesel. The pattern of branched and cyclic alkanes in this sample is very similar to that of diesel. It contains no evidence of any overprinting by Aus-Tex or grease. Alkylnaphthalene and alkylphenanthrene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. This indicates that a portion of the extractable organic matter in this core is derived from a natural oil show, particularly higher molecular weight compounds (>C(27)). Therefore, these compounds can be used with caution to type the natural portion of this oil show. Other parameters are likely to be partially or completely compromised by the interpreted overprinting of this oil show by diesel. 4.2.6 Moose-1ST1, 686.2 m, core (Appendices D and E) This sample has a very similar n-alkane distribution to the diesel. Most of the extract resides deep within the limestone matrix, rather than in the open porosity and on any fracture surfaces. The pattern of branched and cyclic alkanes in this sample is very similar to that of diesel. It contains no evidence of overprinting by grease. However, the presence of substantial amounts of PAH indicate that is has been overprinted by Aus-Tex. Other effects of the Aus-Tex overprinting of this sample are the higher relative abundances of ? ? ? R steranes and gammacerane in this sample. Alkylnaphthalene and alkylphenanthrene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. However, the biomarkers in this sample have been affected by the overprinted by Aus-Tex, so it is recommended that these are not used to help type the natural portion of this oil show. 4.2.7 Moose-1ST1,727 m, oil mixed with water (Appendix F) This sample has a very similar n-alkane distribution to the diesel, but also contains a large UCM hump. The pattern of branched and cyclic alkanes in this sample is similar to that of diesel. The UCM hump could be the product of biodegradation of a natural oil CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 75 show, but it also has similarities to the grease samples. Therefore, care has to be exercised in the interpretation of this sample, as biomarkers may be derived from grease, or from a natural oil show. It contains no evidence of any overprinting by Aus-Tex. Alkylnaphthalene and alkylphenanthrene maturity parameters indicate a similar maturity as the diesel, and a higher maturity than the fine-grained rocks. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. This indicates that a portion of the extractable organic matter in this core may be derived from a natural biodegraded oil show, particularly higher molecular weight compounds (>C(27)). Therefore, these compounds can be used with caution (because of the possibility of grease overprinting) to type the natural portion of this oil show. Other parameters are likely to be partially or completely compromised by the interpreted overprinting of this oil show by diesel. 4.2.8 Moose-1ST1, 759.5 m, core (Appendix G) This sample has a very similar n-alkane distribution to the diesel. The pattern of branched and cyclic alkanes in this sample is very similar to that of diesel. It contains no evidence of overprinting by grease. However, the presence of substantial amounts of PAH indicate that is has been overprinted by Aus-Tex. Other effects of the Aus-Tex overprinting of this sample are the higher relative abundances of ? ? ? R steranes and gammacerane in this sample, and a trend of alkylphenanthrene parameters towards the Aus-Tex composition (Figs. 10 and 11). Alkylnaphthalene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. However, the biomarkers in this sample have been affected by the overprinted by Aus-Tex, so it is recommended that these are not used to help type the natural portion of this oil show. 4.2.9 Moose-1ST1, 809.7 m, core (Appendix H) This sample has a different n-alkane distribution to the diesel, and the pattern of branched and cyclic alkanes is different to that of diesel. Aromatic hydrocarbons in this sample are dominated by alkylphenanthrenes and biphenyl, and thus it has a very different composition compared to diesel and the other oil shows. Therefore, this oil show sample is regarded as the most natural and pristine from Moose-1 ST1, and it appears to have not been overprinted significantly by diesel. It also contains no evidence of any overprinting by Aus-Tex or grease. Alkylnaphthalene and alkylphenanthrene maturity parameters indicate a similar maturity as the diesel, and a higher maturity than the fine-grained rocks CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 76 and the other oil shows. In this respect, these aromatic hydrocarbons may be dominantly derived from diesel and not from the natural oil show. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. This indicates that the hydrocarbon distributions in this sample are the best for determining the origin and characteristics of the natural oil shows in Moose-1 ST1. 4.2.10 Moose-1ST1, 840 m, fluid sample (Appendix I) This sample has a very similar n-alkane distribution to the diesel. The pattern of branched and cyclic alkanes in this sample is very similar to that of diesel. It contains no evidence of any overprinting by Aus-Tex or grease. Alkylnaphthalene and alkylphenanthrene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. It contains a more complete series of biomarkers than the diesel, and these have a different distribution. This indicates that a portion of the extractable organic matter in this core is derived from a natural oil show, particularly higher molecular weight compounds (>C(27)). Therefore, these compounds can be used with caution to type the natural portion of this oil show. Other parameters are likely to be partially or completely compromised by the interpreted overprinting of this oil show by diesel. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 77 4.3 THE SOURCE OF THE NATURAL COMPONENT OF THE OIL SHOWS AT MOOSE-1 AND MOOSE-1ST1 Two distinct source signatures that are not related to any wellbore overprinting can be distinguished in the Moose-1 and Moose-1 ST1 oil shows. The oil shows that were used to make this assessment are: 530 m, 675.1 m, 727 m, 809.7 m, and 840 m. 4.3.1 "Calcareous" source signature Four of these five oil shows (not 809.7 m) have a dominant source signature that is similar to that exhibited by the Family B solid bitumens and the fluid inclusion oil in the Subu wells (George et al., 2003). The "Family B" solid bitumens were ascribed to having an origin from a calcareous source with a high proportion of prokaryotic and a low proportion of terrestrial organic matter input. The characteristics of the four Moose-1 and Moose-1 ST1 oil shows that lead to this correlation are: 1. The high relative abundance of 2? - methylhopanes (Section 3.8.4), 2. The high relative abundance of 30-norhopanes (Section 3.8.5), 3. The high C(29) /C(30) ?? hopane ratios (Section 3.8.5), 4. The low content of rearranged hopanes and diasteranes, including low Ts/Tm, C(29)Ts/C(29) ?? hopane, C(30)*/C(30) ?? hopane and diasterane /sterane ratios (Sections 3.8.5 and 3.8.6), and 5. The lack of a significant terrestrial signature in the terpanes, diterpanes, or aromatic hydrocarbons. Note that some of these characteristics could be inherited from diesel overprinting, for example some 30-norhopanes are present in the diesel. However, some of these characteristics are certainly not inherited from the diesel, for example the presence of 2?-methylhopanes in the oil shows but not in the diesel. Another pertinent features of these oil shows which is unlikely to be related to the diesel is the presence of C(30) steranes, which indicates a marine depositional environment. The C(26) sterane distribution provides some age-specific information. The NDR ratios for the oil shows in Moose-1 vary between 0.32-0.51, and the NCR ratios for the oil shows vary between 0.29-0.66. These values therefore indicate that the oil shows contain C(26) steranes derived principally from Cretaceous or younger strata (Section 3.9). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 78
The Pr/Ph ratios of 1.1-1.3 for three of these oil shows indicates an oxygen-depleted depositional environment. The oil show sample 727 m has a higher Pr/Ph ratio (1.9), which is likely influenced by the diesel (1.8). As the Pr/Ph ratio of the diesel is higher than that of the oil shows, the true non-diesel overprinted Pr/Ph ratios of these oils shows is likely to be even lower, suggesting even more strongly an oxygen-depleted depositional environment. These Pr/Ph values are lower than those of the non-altered "Family B" solid bitumens from the Subu wells (predominantly 1.3 to 2.9). Regarding thermal maturity of these oils shows, this is quite difficult to establish accurately due to the effects of the diesel (and the Aus-Tex in other oils shows). The alkylnaphthalene and alkylphenanthrene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. The best estimate is peak oil window, about 0.8 to 0.9% VRE. These biomarker and other data have to be interpreted very carefully, due to the effects of overprinting. However, the accumulated data enable a confident correlation to me made with Family B solid bitumens in the Subu wells. Therefore, most of the natural portion of the Moose-1 oil shows are thought to have been derived from the same source rock as the one from which the Family B solid bitumens in the Subu wells were derived. 4.3.2 "Jurassic" source signature Oil show sample 809.7 m has the least interference of any of the oil shows with contaminants. No diesel, Aus-Tex or grease could be confidently discerned in this sample, and it is only slightly biodegraded. Therefore, it is quite ironic that its hydrocarbon composition indicates a mixture of oil signatures. The dominant signature of this oil show sample is "Jurassic", in that it correlates best with the Family A solid bitumens in the Subu wells, which are thought to have been derived from a clay-rich, marine source rock low in sulphur, which had significant input of terrestrial organic matter and was deposited in an oxic depositional environment (George et al., 2003). In that report, this signature was correlated with the Jurassic-sourced oils in the Foldbelt and at Puri-1. The characteristics of the 809.7 m oil show that lead to this correlation are: 1. The high abundance of 4?(H)-19-isopimarane, ent-beyerane and isopimarane (diterpanes indicative of a coniferous source; Section 3.8.2), 2. The high [C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) ratio, indicative of a strong terrestrial influence (Section 3.8.3), 3. The moderate to high content of rearranged hopanes and diasteranes (Sections 3.8.5 and 3.8.6). CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 79
However, a complication about the 809.7 m oil show sample is that it contains moderate amounts of 2? -methylhopanes, 30-norhopanes, a high C(29)/C(30) ? ? hopane ratio, a high sulphur content and a relatively low Pr/Ph ratio (1.4). These characteristics are not typical of Jurassic-sourced oils in PNG, and enable correlation of this oil also with the "Calcareous" source signature that is apparent in the other oil shows (see Section 4.3.1). Therefore, the 809.7 m oil show sample is interpreted to be a mixture of both oil signatures. The mixture explains why some biomarker signatures for "Jurassic" are strong (e.g. the diterpanes, which have not been significantly diluted), whilst others are much less obvious than in the Family A solid bitumens in the Subu wells (e.g. the terpane distribution and the relative abundance of rearranged hopanes). Other oil shows are also likely to be mixtures to some extent. For example, oil show sample 727 m has a high [C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) ratio, which is a terrestrial indicator and may indicate a contribution of Jurassic-sourced oil at this interval too. Regarding the thermal maturity of the 809.7 m oil show, this is easier to establish as there are no interfering overprints. The alkylnaphthalene and alkylphenanthrene maturity parameters indicate a lower maturity than the diesel, and a higher maturity than the fine-grained rocks. Based on these data, and the biomarker maturity parameters, the best estimate is peak oil window, about 0.8 to 0.9% VRE. 4.4 DISTRIBUTION OF OIL SHOWS AND CONTAMINANTS IN MOOSE-1 AND MOOSE-1 ST1 According to the drilling records, neat diesel was only put down the Moose-1 well once at 460m, when while air drilling with a hammer they became stuck and needed lubrication. Subsequently diesel was only put in the Moose-1 well as a minor component, used mainly to aid the solution of Aus-Tex and Cr650 mud products. No diesel is recorded as having been used in Moose-1 ST1. The geochemical detection of diesel in most of the oil show samples from Moose-1 ST1, and also the clear presence of Aus-Tex in some of the oil shows in Moose-1 ST1, thus needs explanation. There are two possibilities: Firstly, there was only 1(degree) of separation between the parent Moose-1 well and the sidetrack (Moose-1 ST1). This separation means that from 664 m (the depth at which the sidetrack well was deviated) and the bottom oil show recorded that contained diesel (840 m), there was only up to about 3 m of lateral separation between the two wells. Thus it is possible that diesel and/or Aus-Tex passed between the two wellbores along fractures or other permeable horizons. Secondly, there could have been unofficial or unrecorded addition of diesel and/or Aus-Tex directly into Moose-1 ST1. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 80
In Section 3.4 a preliminary assessment of the origin of the oil shows was presented (Table 6), based on overall and gross distributions. Now, a final summary (Table 12) is presented, showing a complete summary of the origin of oil shows, based on all geochemical data. Table 12: Summary of the origin of oil shows, based on all geochemical data.
CSIRO code Description Origin - ------------ ----------------------------- ------------------------------------------------------- 530 m brown slurry Diesel plus minor natural oil show, biodegraded, from "Calcareous" source (Cretaceous or Tertiary) 675.1 m suspected oil show Diesel plus minor natural oil show, from "Calcareous" source (Cretaceous or Tertiary) 686.2 m suspected oil show Diesel, Aus-Tex (minor) and minor natural oil show 727 m suspected oil mixed with Minor diesel and major biodegraded component. The water biodegraded component could possibly be a grease (pipe dope or grease gun??), but also possibly a natural oil show, from "Calcareous" source (Cretaceous or Tertiary) 759.5-759.6 m suspected oil show, oil/water Diesel, mix of Aus-Tex (minor) and minor natural oil wet sample show 809.7 m suspected oil show Natural oil show, slightly biodegraded. No discernible wellbore contaminants. Mixture of "Jurassic" oil from a clay-rich, marine source rock with significant input of terrestrial organic matter, and "Calcareous" source (Cretaceous or Tertiary) 840 m water with oil Diesel plus natural oil show, from "Calcareous" source (Cretaceous or Tertiary)
CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 81
5 CONCLUSIONS 1. The Mendi Formation limestone section penetrated by Moose-1 and Moose-1 ST1 contains several natural oil shows, but these were variably overprinted by wellbore contaminants which have been analysed in detail. 2. Oil shows from 530 m (Moose-1), 675.1 m, 686.2 m, 727 m, 759.5-759.6 m and 840 m (all Moose-1 ST1) were strongly overprinted by diesel. Careful application of high resolution organic geochemistry has enabled the indigenous signature of some of these oil shows to be separated from that of the diesel. The diesel has a characteristic n-alkane distribution maximising at n-C(16), and also a distinctive pattern of branched and cyclic alkanes, but contains few biomarkers. 3. Oil shows from 686.2 m and 759.5-759.6 m (Moose-1 ST1) were also strongly overprinted by a drilling additive called Aus-Tex, which is characterised by unusually high abundances of some polycyclic aromatic hydrocarbons, but which also contains abundant biomarkers that strongly interfere with the natural geochemistry of these oil shows. These oil shows were essentially unusable for obtaining information on the natural component. 4. An oil show from 809.7 m contains no discernible wellbore contaminants and indicated a mixture of oil signatures. 5. The main natural component of all the interpretable oil shows is an oil with an origin from a calcareous source with a high proportion of prokaryotic and a low proportion of terrestrial organic matter input, which correlates well with the "Family B" solid bitumens in the Subu wells and the fluid inclusion oil from Subu -1. Geochemical features of this oil type are high amounts of 2?- methylhopanes and 30- norhopanes, high C(29)/C(30) ?? hopane ratios and lack of a significant terrestrial signature. 6. The oil show from 809.7 m contains a mixture of the calcareous sourced oil, and an oil derived from a clay-rich, marine source rock low in sulphur, which had significant input of terrestrial organic matter and was deposited in an oxic depositional environment. This signature correlates with the Jurassic-sourced oils in the Foldbelt and at Puri-1, and with the "Family A" solid bitumens in the rocks intersected by the Subu wells. Geochemical features of this oil type are high amounts of diterpanes and a high [C(24) tetracyclic terpane/(C(24) tetracyclic terpane + C(23) tricyclic terpane) ratio, indicative of a strong terrestrial influence, and a moderate to high content of rearranged hopanes and diasteranes. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 82
7. The oil shows in Moose-1 and Moose-1 ST1 have a maturity in the peak oil window (about 0.8 to 0.9% VRE), which is slightly higher than that indicated by the geochemical signatures for the underlying fine-grained samples. The difference in maturity, but more importantly the major difference in source characteristics, means that these fine-grained samples did not source the oil shows in the Mendi Formation limestones. 8. The fine-grained samples in Moose-1ST1 were deposited in an oxic marine depositional environment with major terrestrial organic matter input, including a minor coniferous organic matter component that could be derived from re-worked Jurassic rocks. They correlate reasonably well with the fine-grained samples analysed from the Subu wells. C(26) sterane distributions are consistent with Cretaceous or younger ages for these strata. 9. The fine-grained samples in Moose-1ST1 have low TOC values (<1.2%) and low hydrogen indices (mostly <155 mg/g), indicating type III organic matter, with low liquid hydrocarbon generation potential. On the basis of the maceral contents, in particular the liptinite contents, the original oil generation potential ranges from poor to very good. This is better than is apparent from the Rock-Eval results, probably because of the diluting effect of inertinite on hydrogen indices, and also the maturity level that this sequence has reached. 10. The fine-grained samples in Moose-1ST1 have measured vitrinite reflectance values (~0.65 to ~0.70%) that are `suppressed', by at least 0.2%. The FAMM-derived equivalent vitrinite reflectance, which is free from the effects of VR suppression, is about 0.9%, indicating full maturity for oil generation. 11. The anomalously high maturity indicated for the uppermost sample (vitrinite reflectance value of 1.25%) may be due to overthrusting, localised thermal effects from igneous activity and associated hydrothermal fluids, or the complicating effects of reworked material. 12. On the basis of the geochemical data, the best estimate of the thermal maturity of the fine-grained samples is about 0.7-0.8% (mid oil window), which is consistent with the Rock Eval data but is somewhat lower than the equivalent vitrinite reflectance data from FAMM. 6 ACKNOWLEDGEMENTS We thank Paul Marvig for sample preparation. CSIRO Petroleum InterOil: Moose-1 and Moose-1ST1 geochemistry, Page 83
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EX-99.28 23 h19854exv99w28.txt CSIRO PETROLEUM CONFIDENTIAL REPORT NO. 04-059 EXHIBIT 28 [CSIRO LOGO] CSIRO Petroleum Confidential Report No. 04-059 (Part I) SEPTEMBER 2004 THE GEOCHEMISTRY OF OIL SHOWS IN THE MOOSE-2 WELL, EAST PAPUAN BASIN PART I: TEXT AND DIAGRAMS, APPENDICES A TO C A Report to InterOil Corporation M. Ahmed, S. C. George and R. A. Quezada FOR FURTHER INFORMATION CONTACT: Dr. Simon C. George CSIRO Petroleum, PO Box 136, North Ryde, NSW, Australia 1670 Telephone: +61 2 9490 8718, Facsimile: +61 9490 8197 E-mail: Simon.George@csiro.au THIS IS A CONFIDENTIAL REPORT FOR RESTRICTED DISTRIBUTION ONLY Copies to: InterOil Corporation (4 hard copies, electronic copy) CSIRO authors Confidential CSIRO archives (2 hard copies, electronic copy) EXECUTIVE SUMMARY During drilling of the Moose-2 well in PPL 238 of Papua New Guinea, oil shows were identified at depth intervals between 513 m and 790 m in the Mendi Formation limestone. Geochemical analyses were carried out to assess the origin of these oil shows, and in particular to geochemically correlate the oil shows with other oils in the region. Geochemical evidence indicate the migration of mature thermogenic oil into the different rock sections encountered in Moose-2 well. No evidence has been observed to suggest that these oil shows were affected by diesel, Aus-Tex or any other drilling mud additives, such as were found in the Moose-1 well. SECONDARY ALTERATION The Moose-2 oil shows have been affected by various levels of biodegradation. Based on a 1 to 9 level scale of biodegradation (Volkman et al., 1984), the 614 m, 614.5 m and 753 m samples appear to have been moderately biodegraded (level 4 or higher); the 513 m, 671 m, 746 m, 766 m and 790 m samples have been altered by minor biodegradation (level 3 or higher) and the 634 m and 660 m samples underwent only very minor biodegradation (level 2). CORRELATION AND SOURCE CHARACTERISATION The Moose-2 oil shows, like those of the Family B samples from the Subu wells, were generated from a calcareous source rock deposited in a suboxic environment, with a high proportion of prokaryotic and a low proportion of terrestrial organic matter. The 513 m oil show has unusual biomarkers that indicate a mixed source, partly correlating with the calcareous Family B samples, but also probably partially co-sourced by a highly reducing lacustrine (?) facies. This oil show may also have been influenced by the extraction of some indigenous hydrocarbons from the migration pathway. THERMAL MATURITY The majority of the maturity parameters deduced from the aliphatic and aromatic hydrocarbon biomarkers indicate that the Moose-2 oil show samples were generated at thermal maturities of 0.7 to 0.9% vitrinite reflectance equivalent, i.e., within the early to peak stages of the oil generation window. The variation in maturity and the relatively higher maturities of some of the shallower samples (compared to the deeper samples) may be indicative of the migration of mature Family B oil to the Mendi Formation, and its subsequent mixing with the variable proportions of less mature indigenous hydrocarbons from the migration pathway. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 2
TABLE OF CONTENTS
Page number EXECUTIVE SUMMARY ...................................................................... 2 TABLE OF CONTENTS ...................................................................... 3-5 LIST OF TABLES ......................................................................... 6 LIST OF FIGURES ........................................................................ 7-8 1 INTRODUCTION ......................................................................... 9 2 SAMPLES AND EXPERIMENTAL PROCEDURE ................................................... 10 2.1 Samples .......................................................................... 10 2.2 Solvent extraction ............................................................... 10 2.2.1 Soxhlet Extraction ........................................................... 11 2.2.2 Ultrasonication .............................................................. 11 2.3 Column chromatography ............................................................ 12 2.3.1 Long column method ........................................................... 12 2.3.2 Short column method .......................................................... 12 2.4 Gas Chromatography ............................................................... 12 2.5 Gas Chromatography - Mass Spectrometry (GC - MS) ................................. 13 3 RESULTS AND DISCUSSION ............................................................... 13 3.1 Extractability ................................................................... 14 3.2 Extract gross compositions ....................................................... 14 3.3 Overall character of aliphatic and aromatic hydrocarbon fractions, including n-alkane distributions ............................................................... 15 3.4 n-Alkane and isoprenoid parameters ............................................... 17 3.5 Alkylcyclohexanes and methylalkylcyclohexanes .................................... 18 3.6 Terpanes ......................................................................... 19 3.6.1 Bicyclic sesquiterpanes ...................................................... 19 3.6.2 Diterpanes ................................................................... 19 3.6.3 Tricyclic and tetracyclic terpanes ........................................... 20 3.6.4 Methylhopanes ................................................................ 22 3.6.5 Hopanes ...................................................................... 24 3.7 Steranes and Diasteranes ......................................................... 27 3.8 Aromatic Hydrocarbons ............................................................ 32
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3.8.1 Overall aromatic hydrocarbon composition ..................................... 32 3.8.2 Alkylbenzenes ................................................................ 32 3.8.3 Alkylnaphthalenes ............................................................ 35 3.8.4 Alkylphenanthrenes ........................................................... 39 3.8.5 Alkylbiphenyls ............................................................... 41 3.8.6 Alkyldibenzothiophenes ....................................................... 41 4 INTERPRETATION ....................................................................... 42 4.1 Secondary Alteration Information ................................................. 42 4.2 Source characteristics ........................................................... 42 4.3 Thermal maturity characteristics ................................................. 48 5 CONCLUSIONS .......................................................................... 50 6 ACKNOWLEDGEMENTS ..................................................................... 51 7 REFERENCES ........................................................................... 51 APPENDIX A: Peak assignments and abbreviations ......................................... 10 pages APPENDIX B: Moose-2 513 m (oil show in core sample): gas and mass chromatograms and peak identifications .................................... 25 pages APPENDIX C: Moose-2 614 m (oil show in core sample): gas and mass chromatograms and peak identifications ............................................................... 25 pages APPENDIX D: Moose-2 614.5 m (oil show in core sample): gas and mass chromatograms and peak identifications .................................... 19 pages APPENDIX E: Moose-2 634 m (oil show in core sample): gas and mass chromatograms and peak identifications .................................... 25 pages APPENDIX F: Moose-2 660.19 m (oil show in core sample): gas and mass chromatograms and peak identifications ........................... 8 pages APPENDIX G: Moose-2 671.95m (oil show in core sample): gas and mass chromatograms and peak identifications .................................... 19 pages APPENDIX H: Moose-2 746.5 m (oil show in core sample): gas and mass chromatograms and peak identifications .................................... 8 pages APPENDIX I: Moose-2 753.88 m (oil show in core sample): gas and mass chromatograms and peak identifications ........................... 25 pages APPENDIX J: Moose-2 766.05 m Diesel Sample (oil show in core sample): gas and mass chromatograms and peak identifications ............................................ 8 pages APPENDIX K: Moose-2 790.2m (oil show in core sample): gas and mass chromatograms and peak identifications .................................... 11 pages
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The report is presented in two volumes: Part I: Text and diagrams, Appendices A to C Part II: Appendices D to K CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 5
LIST OF TABLES Table 1: Sample details ................................................................ 10 Table 2: List of geochemical analyses carried out on the Moose-2 samples ............... 11 Table 3: Extractability and gross compositional data ................................... 14 Table 4: Aliphatic hydrocarbon parameters .............................................. 17 Table 5a: Terpane parameters for Moose-2 oil show samples .............................. 20 Table 5b: Terpane parameters for Moose-2 oil show samples (continued from Table 5a) .... 21 Table 6a: Sterane and diasterane parameters for Moose-2 oil show samples ............... 28 Table 6b: Sterane and diasterane parameters for Moose-2 oil show samples (continued from Table 6a) ......................................................................... 29 Table 7a: Aromatic hydrocarbon parameters of Moose-2 oil show samples .................. 33 Table 7b: Aromatic hydrocarbon parameters of Moose-2 oil show samples (continued from Table 7a) ......................................................................... 34
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LIST OF FIGURES Figure 1: Location map of the Moose-2 well relative to the other prospects in PPL 238 of Papua New Guinea ......................................................................... 9 Figure 2: Normalised n-alkane profiles of samples ............................................. 16 Figure 3: Cross-plot of two carbon preference indices (defined in Table 4). The Subu samples are those reported in George et al. (2003) .......................................... 18 Figure 4: Cross-plot of C(31) 2(Alpha) Me/(C(31) 2(Alpha) Me+C(30)(Alpha)(Beta) hopane) versus C(32) 2(Alpha) Me/(C(32) 2(Alpha) Me+C(31)(Alpha)(Beta) hopane). The two families refer to solid bitumens extracted from the sandstones in the Subu wells, the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (data shown as black dots: from George et al., 2003) ............................. 23 Figure 5: Cross-plot of C(35)/(C(35)+C(34)) homohopanes versus homohopanes/(C(30) (Alpha)(Beta) hopane). The two families refer to solid bitumens extracted from the sandstones in the Subu wells, the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (data shown as black dots, from George et al., 2003) ............................. 26 Figure 6: Cross-plot of C(27) sterane (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha) (Alpha)) versus C(29) sterane (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha) ratios. The family refers to solid bitumens extracted from the sandstones in the Subu wells (data shown as black dots, from George et al., 2003)................................... 31 Figure 7: Normalised aromatic hydrocarbon compositions of the Moose-2 samples ................. 35 Figure 8: Cross-plot of the trimethylnaphthalene ratio versus the tetramethylnaphthalene ratio. The data from the Subu wells are shown as black dots (from George et al., 2003) ....................................................................................... 37 Figure 9: Cross-plot of log (1,2,7-TMN/1,3,7-TMN) versus log (1,2,5-TMN/ 1,3,6-TMN). The boundaries on this trimethylnaphthalene graph are taken from Strachan et al. (1988). The data from the Subu wells are shown as black dots (from George et al., 2003) ........................................................................ 38 Figure 10: Cross-plot of methylphenanthrene index 1.5*[3-MP+2-MP]/[P+9-MP+1-MP]) versus methylphenanthrene distribution fraction ((3-MP+2-MP)/MPs). The data from the Subu wells are shown as black dots (from George et al., 2003)....................... 39 Figure 11: Cross-plot of methylphenanthrene ratio (2-MP/1-MP) versus dimethylphenanthrene ratio (3,5-+2,6-DMP+2,7-DMP)/
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(1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP). The data from the Subu wells are shown as black dots (from George et al., 2003) .......................................... 40 Figure 12: Cross-plot of C29Ts/C29(Alpha)(Beta) hopane versus C30*/C30 (Alpha)(Beta) hopane for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well ....................................................................... 45 Figure 13: Cross-plot of C29 (Alpha)(Beta) hopane/C30 (Alpha)(Beta) hopane versus C31 (Alpha)(Beta) hopane/C30 (Alpha)(Beta) hopane ratios for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well .................................... 46 Figure 14: Cross-plot of Pr/Ph versus C35/(C35 + C34) homohopane ratios for the samples from this project compared to Subu well, literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well ................ 47 Figure 15: Cross-plot of C29 sterane (Alpha)(Alpha)(Alpha) 20S/(20S+20R) versus C29 sterane (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well ............................................................................ 49
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1 INTRODUCTION The Moose prospect was identified as the first prospect to be drilled by InterOil in PPL 238 (formerly PPL 230) in Papua New Guinea (Fig. 1). In order to determine the hydrocarbon potential of the Moose structure, InterOil decided to drill and test the Moose-2 exploration/appraisal well just 4.5 km to the south-east of the Moose-1 well. The Moose-2 well was spudded in December 2003. The well is located at Long: 145(Degree)12'18"E, Lat: 06(Degree)59'41.47"S. The nearest wells include the two Subu stratigraphic wells (27 km towards south-east of Moose wells) drilled by InterOil in August 2001 (George et al., 2003), and the Puri-1 well (26 km to the south-west of Moose wells) drilled in 1957-9. The nearest commercial production is at the South East Gobe field approximately 166 km to the northwest. [GULF OF PAPUA MAP] Figure 1: Location map of the Moose-2 well relative to the other prospects in PPL 238 of Papua New Guinea. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 9
A total of 10 oil shows collected from the Moose-2 well were analysed in the CSIRO Petroleum Geochemistry Laboratory in order to assess their origin, and the palaeo-environmental conditions of their source rocks. The main objectives were to geochemically correlate the oil shows with other crude oils in the region, and thus to ascertain their probable source rocks. The geochemical characteristics of the oil shows have been compared with previously analysed oils, bitumens, oil inclusions and oil seeps from nearby in Papua New Guinea. 2 SAMPLES AND EXPERIMENTAL PROCEDURE 2.1 SAMPLES Details of the 10 samples studied in this report are provided in Table 1, including CSIRO code, depth interval, type of sample and a brief description. A summary of the analyses carried out on each sample is provided in Table 2. 2.2 SOLVENT EXTRACTION Samples were extracted using two different methods (Table 2). Table 1: Sample details.
Type of CSIRO code Appendix Well Depth (m) sample Description - ---------- -------- ------- -------- ------- ------------------------------------- 513 m B Moose-2 513 m core Shaly limestone with suspected oil show 614 m C Moose-2 614 m core Stains of oil/bitumen on the core surface and the aluminium foil cover 614.5 m D Moose-2 614.5 m* core Stains of oil/bitumen on the core surface 634 m E Moose-2 634.2 m core Limestone with stains of oil/bitumen on the core surface 660 m F Moose-2 660.19 m core Limestone with suspected oil show 671 m G Moose-2 671.95 m core Limestone with suspected oil show 746 m H Moose-2 746.5 m core Limestone with suspected oil show 753 m I Moose-2 753.88 m core Limestone with suspected oil show 766 m J Moose-2 766.05 m core Limestone with suspected oil show 790 m K Moose-2 790.2 m core Limestone with suspected oil show
* The depth of this sample was originally reported as 414m CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 10
Table 2: List of geochemical analyses carried out on the Moose-2 samples.
CSIRO GC-FID GC-MS GC-FID GC-MS code Extract EOM EOM CC Fract Fract Remarks - ------- ------- ------ ----- -- ------ ----- ---------------------------------------- 513 m |X | | |S | | Produced good quality data on aliphatic/ aromatic hydrocarbons and biomarker compounds. 614 m |U | | |L | | Produced good quality data on aliphatic/ aromatic hydrocarbons and biomarker compounds. 614.5 m |U | | No No No Produced only n-alkane data. The gas chromatogram and TIC of the EOM indicate that this sample is identical to the 614 m sample. No ratios have been calculated from the aromatic and biomarker EOM data. 634 m |X | | |L | | Produced good quality data on aliphatic/ aromatic hydrocarbons and biomarker compounds. 660 m |X | | No No No Produced only n-alkane data. Full scan run of the EOM did not produce good quality aromatic and biomarker data. 671 m |X | | No No No Produced n-alkane data with some ratios from phenanthrenes, dibenzothiophenes, hopanes and steranes. Full scan run of the EOM did not produce good quality aromatic and biomarker data. 746 m |X | | No No No Produced only n-alkane data. Full scan run of the EOM did not produce good quality aromatic and biomarker data. 753 m |X | | |L | | Produced good quality data on aliphatic/ aromatic hydrocarbons and biomarker compounds. 766 m |X | | No No No Produced only n-alkane data. Full scan run of the EOM did not produce good quality aromatic and biomarker data. 790 m |X | | No No No Produced n-alkane data with some ratios from phenanthrenes, hopanes and steranes.
Extract = Extracted, with method used (X = Soxhlet extraction; U = ultrasonication); GC-FID EOM = gas chromatography with flame ionisation detection of extractable organic matter; GC-MS EOM = gas chromatography-mass spectrometry of extractable organic matter; CC = Column chromatography, with method used (L = long column fractionation; S = short column fractionation); GC-FID Fract = gas chromatography with flame ionisation detection of aliphatic and aromatic fractions; GC-MS Fract = gas chromatography-mass spectrometry of aliphatic and aromatic fractions. 2.2.1 Soxhlet Extraction After crushing to a fine powder, samples were solvent extracted with a mixture of dichloromethane (DCM) and methanol (MeOH) (93:7 vol%) for 24-72 hours using a Soxhlet apparatus. An aliquot of the extractable organic matter (EOM) was blown to dryness to provide a gravimetric weight of the total EOM. 2.2.2 Ultrasonication Pieces of the oil stained core were ultrasonicated in an excess of DCM in a large beaker. Where possible, an aliquot of the EOM was blown to dryness to provide a gravimetric weight. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 11
2.3 COLUMN CHROMATOGRAPHY Samples were fractionated by column chromatography in two different ways (Table 2). 2.3.1 Long column method Samples in which sufficient EOM was recovered (>20 mg) were fractionated by a long column chromatography method. An accurate amount of un-evaporated EOM was adsorbed onto alumina and all solvent was removed by gently blowing with nitrogen. The extracts were fractionated using column chromatography on silica gel (C60: 60-210 (Mu)m) below alumina. Elution with petroleum ether (40-60(Degree)C, 100 mL) produced the aliphatic hydrocarbon fraction, elution with a 4:1 mixture of DCM : petroleum ether (150 mL) produced the aromatic hydrocarbon fraction, and elution by a 1:1 mixture of DCM : MeOH (100 mL) produced the polar compounds. All solvent was evaporated from 1/10th aliquots of the aliphatic and aromatic hydrocarbon fractions, and from the whole polar compounds fraction, to give the total weights of the respective fractions. 2.3.2 Short column method Samples in which only a small amount of EOM was recovered (<20 mg) were fractionated by a short column chromatography method. The extracts were fractionated using column chromatography on silica gel (C60: 60-210 (Mu)m) below alumina in a Pasteur pipette. Elution with petroleum ether (40-60(Degree)C, 5 mL) produced the aliphatic hydrocarbon fraction, elution with a 4:1 mixture of DCM : petroleum ether (5 mL) produced the aromatic hydrocarbon fraction and elution by a 1:1 mixture of DCM : MeOH (5 mL) produced the polar compounds. Generally, too little of the fractions was recovered using this method to enable gravimetric weights to be obtained. 2.4 GAS CHROMATOGRAPHY Gas chromatography (GC) of the aliphatic and aromatic hydrocarbon fractions and most of the EOM fractions (Table 2) was performed on a Varian 3400 gas chromatograph equipped with a flame ionisation detector. Chromatography was carried out on a fused silica column (60 m x 0.25 mm i.d.) coated with DB5MS (modified 5% phenyl 95% methyl silicone, 0.25 (Mu)m film thickness) or with DB1 (dimethylpolysiloxane, 0.25 (Mu)m film thickness), using a splitless injection technique. The oven was programmed for an CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 12
initial temperature of 40(Degree)C for 2 min., followed by heating at 4(Degree)C min.-1 to 310(Degree)C, and a hold for 30 mins. 2.5 GAS CHROMATOGRAPHY - MASS SPECTROMETRY (GC - MS) GC - MS of the aliphatic and aromatic hydrocarbon fractions and most of the EOM fractions (Table 2) was performed on a Hewlett Packard 5890 gas chromatograph interfaced to a VG AutoSpecQ Ultima (electron energy 70 eV; electron multiplier 250 V; filament current 200 (Mu)A; source temperature 250(Degree)C) tuned to 1000 resolution. Chromatography was carried out on a fused silica column (60 m x 0.25 mm i.d.) coated with DB5MS, using a splitless injection technique. The oven was programmed in two ways for different GC - MS runs: (a) for an initial temperature of 40(Degree)C for 2 min., followed by heating at 4(Degree)C min.-1 to 310(Degree)C, and (b) for an initial temperature of 40(Degree)C for 2 min., followed by heating at 20(Degree)C min.-1 to 200(Degree)C and then a second heating ramp at 2(Degree)C min.-1 to 310(Degree)C. All the fractions were analysed using a magnet scan programme (m/z 50 to 550; 0.5 s/decade), using GC programme a. The aliphatic fractions were analysed using a single ion monitoring (SIM) programme (SIRV_INCD), using GC programme b: (m/z 177, 183, 191, 205, 217, 218, 231.11, 231.21, 253, 259). The aliphatic fractions were also analysed using two metastable reaction monitoring (MRM) programmes, using GC programme b: MRM_HOPS: m/z 370, 384, 398, 412, 426, 440, 454, 468, 482-->191. MRM_STER: m/z 358, 372, 386, 400, 414-->217; 414-->231. 3 RESULTS AND DISCUSSION All of the gas chromatograms and mass chromatograms referred to in the text are provided in Appendices B to K, with peak identifications in Appendix A. The oil shows from the 614 m and 614.5 m samples are identical to each other, as evident for the GC traces and TICs of their EOMs. The 614 m oil show yielded much better quality data than the 614.5 m oil show. Accordingly only limited ratios were determined from the latter. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 13
3.1 EXTRACTABILITY Extractability data are expressed as extractable organic matter (EOM) ppm of rock (= (Mu)g EOM / g rock) (Table 3). Widely varying amounts of EOM, ranging from only 17 ppm to as high as 4982 ppm of rock, were recovered from the samples. High extractabilities (>2000 ppm of rock) for the 614.5 m and 753 m samples may be an indication of hydrocarbon migration to these rocks. The extractability for the 614 m sample could not be determined due to lack of measurement of the weight of the whole rock. The extract yield of this sample is very high, possibly indicating the migration of petroleum hydrocarbons to this rock section. Moderate extractability (~1000 ppm) for the 634 m sample may, as well, be indicative of some level of hydrocarbon migration. Other samples have lean to poor extractability (<200 ppm). 3.2 EXTRACT GROSS COMPOSITIONS Extract gross compositions are shown in Table 3. The Moose-2 samples were fractionated without any prior separation of asphaltenes. The 614 m and 634 m samples are highly enriched in aliphatic hydrocarbons (aliphatic/aromatic hydrocarbon ratios ~2) with very little polar compounds (hydrocarbons/polars ratio > 12). On the other hand, the 513 m and 753 m samples contain almost equal proportions of aliphatic and aromatic hydrocarbons (aliphatic/aromatic hydrocarbon ratios ~1) and significant amounts of polar compounds (hydrocarbons/polars ratios ~5). Gross composition data were not determined for the other six samples. Table 3: Extractability and gross compositional data.
Extract Extract Aliph. Arom. Aliph./ recovered (ppm of HCs HCs Polars arom. HC HCs / CSIRO code (mg) rock) (%) (%) (%) ratio Polars - ---------- --------- ------- ------ ----- ------ -------- ------ 513 m 7.9 227 31.0 54.3 14.7 0.6 5.8 614 m 88.7 n.d. 62.6 30.2 7.2 2.1 12.9 614.5 m 56.9 4982 n.d. n.d. n.d. n.d. n.d. 634 m 23.7 907 64.6 35.2 0.1 1.8 779.2 660 m 4.2 101 n.d. n.d. n.d. n.d. n.d. 671 m 4.8 172 n.d. n.d. n.d. n.d. n.d. 746 m 2.2 210 n.d. n.d. n.d. n.d. n.d. 753 m 147.7 2729 43.7 37.6 18.6 1.2 4.4 766 m 2.8 105 n.d. n.d. n.d. n.d. n.d. 790 m 0.9 17 n.d. n.d. n.d. n.d. n.d.
Alip. = aliphatic; Arom. = aromatic; HC = hydrocarbon; Polars = polar compounds eluted during column chromatography; n.d. = not determined. Note that (1) these samples were fractionated without asphaltene precipitation and (2) quantitation of hydrocarbon fractions are partially affected by evaporation loss, and polar compounds are affected by partial recovery of these fractions. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 14
3.3 OVERALL CHARACTER OF ALIPHATIC AND AROMATIC HYDROCARBON FRACTIONS, INCLUDING N-ALKANE DISTRIBUTIONS The GC trace and total ion chromatogram (TIC) of the extractable organic matter (EOM) (Appendix Figures *1) of the oil shows together with the TICs of their aliphatic and aromatic hydrocarbons (Appendix Figures *2) provide best judgement of the overall character of the aliphatic and aromatic hydrocarbon fractions. These figures show considerable variation throughout the sample set, mainly due to the presence / absence and extent of an Unresolved Complex Mixture (UCM) or "hump". A UCM of varying amount is present in both the aliphatic and aromatic hydrocarbon fractions of all the Moose-2 oil show samples. The effects of biodegradation on the overall composition of the aliphatic and aromatic hydrocarbons can be visualised on the GC traces and TICs of the EOM (Appendix Figures *1). The n-alkane distribution patterns of the 10 oil show samples clearly demonstrate their alteration to different extent by different levels of biodegradation (Appendix Figures *1). The 614 m, 614.5 m and 753 m samples appeared to be the most biodegraded among this sample set, which is indicated by the presence of very large UCM humps with relatively much lesser amounts of C15 to C27 n-alkanes. These distribution patterns indicate biodegradation of level 4 or higher, when compared with the 1 (least degraded) to 9 (most degraded) level scale of Volkman et al. (1984). The 513 m, 671 m, 746 m, 766 m and 790 m samples shows the presence of a large UCM hump with reduced amounts of n-alkanes over the entire range, indicating a biodegradation of level 3 or higher. On the other hand, the 634 m and 660 m samples with minor UCM humps and abundant n-alkanes may have undergone a minor biodegradation of level 2. GC traces (Appendix Figures *2) of the aromatic hydrocarbons for the 614 m and 753 m samples demonstrate the near complete removal of almost all the aromatic compounds and the presence of large UCM humps. This is consistent with their relatively higher level of biodegradation. The 513 m and 634 m samples show the removal of more susceptible low molecular weight aromatic compounds, but the presence of significant amount of less susceptible high molecular weight alkylnaphthalenes and alkylphenanthrenes, indicating their alteration by a relatively lower level of biodegradation. Only four out of the 10 oil show samples (513 m, 614 m, 634 m, and 753 m) were fractionated into aliphatic and aromatic hydrocarbons and analysed in detail for biomarker distributions, using both the SIM and MRM data acquisition programmes. Accordingly, direct comparison of the ten samples for the effects of biodegradation on their aromatic hydrocarbons and biomarker compounds could not be established. n-Alkane distribution pattern of the oil shows were assessed from the m/z 85 chromatograms of the EOM or the aliphatic hydrocarbon fractions (Appendix Figures *3) CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 15
and the normalised n-alkane profiles are presented in Fig. 2. The 513 m sample is characterised by unimodal distribution of C13 to C33 n-alkanes with maxima at n-C20. The n-alkane envelopes for the 614 m, 614.5 m, 634 m, and 660 m oil shows are similar and show unimodal distributions of C12 to C36 n-alkanes with maxima between n-C21 and nC23. The 671 m sample shows a bimodal distribution of n-alkanes maximizing at n-C16 and n-C26. The very high amount of n-C17 in this oil show might indicate a direct heritage from the hydrocarbons present in algae and from the related acids (Tissot and Welte, 1984), or could be related to preferential removal by biodegradation and/or migration-related recharge. The n-alkane distribution for the 746 m and 753 m oil shows are similar and are characterised by unimodal distributions of C13 to C36 n-alkanes, with maxima between n-C25 and n-C26. The 766 m and 790 m samples exhibit a unimodal distribution of C14 to C36 n-alkanes, with increasing predominance of C20 to C30 even numbered n- alkanes with increasing depths. None of the Moose-2 samples resemble the n-alkane distribution of the diesel or Aus-Tex as described in George et al. (2004), suggesting that all the oil shows analysed in this study are natural crude oils. [CHART] Figure 2: Normalised n-alkane profiles of samples. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 16
3.4 N-ALKANE AND ISOPRENOID PARAMETERS Aliphatic hydrocarbon parameters are provided in Table 4. The CPI(22-32) values of the 614 m, 614.5 m, 634 m, 660 m, 671 m, 746 m and 753 m oil shows varies between a very narrow range of 1.00 to 1.06, which may be indicative of a maturity level within the oil generation window. This level of maturity is corroborated by relatively low ratios of Pr/n-C(17) (0.17 to 0.52) and Ph/n-C(18) (0.15 to 0.52). Biodegradation has likely raised some of these ratios, by preferential removal of n-alkanes relative to isoprenoids. The CPI22-32 values for the 513 m, 766 m and 790 m oil shows vary between 0.81 to 0.94, consistent with even carbon number n-alkane predominance over the C(22)-C(32) range, but this predominance is more marked in the deeper samples (Fig. 3). This distribution is indicative of some contribution from a calcareous source rock. The Pr/Ph ratios of 1.1-2.5 for these oil shows (except for the 790 m sample) are similar to those of the non-altered "Family B" solid bitumens from the Subu wells (predominantly 1.3 to 2.9), and indicates a suboxic depositional environment (Didyk et al., 1978). However, the 790 m sample has a relatively lower Pr/Ph ratio of 0.7, which again may have been influenced by biodegradation. Table 4: Aliphatic hydrocarbon parameters.
Pr / Ph / CPI CPI2 n-Alkane n-C31 / Wax CSIRO code Pr/Ph n-C17 n-C18 22-32 26-28 maxima n-C19 Index - ---------- ----- ----- ----- ----- ----- -------- ------- ----- 513 m 1.1 1.11 0.79 0.94 0.95 19 0.07 4.35 614 m 2.0 0.39 0.19 1.00 1.00 22 0.08 4.05 614.5 m 1.9 0.33 0.15 1.04 1.06 23 0.13 3.03 634 m 2.1 0.40 0.15 1.03 1.08 22 0.17 2.54 660 m 2.5 0.52 0.17 1.05 1.01 21 0.10 3.41 671 m 1.1 0.17 0.43 1.02 1.05 16 0.77 0.55 746 m 1.0 0.46 0.52 1.06 1.09 26 1.01 0.70 753 m 2.3 0.41 0.17 1.06 1.08 26 0.65 0.95 766 m 1.9 1.16 0.46 0.93 0.92 26 0.54 1.51 790 m 0.7 0.30 0.48 0.81 0.91 20 0.27 2.04
Pr = pristane; Ph = phytane, CPI = Carbon Preference Index. All ratios were measured in m/z 85 mass chromatograms. 2*(C(23)+C(25)+C(27)+C(29)+C(31)) CPI(22 32) = [-----------------------------------------------------------------] C(22)+2*(C(24)+C(26)+C(28)+C(30))+C(32) 2 X C(27) C(21) + C(22) CPI 2(26 28) = [-------------] Wax Index = [---------------] C(26)+C(28) C(28) + C(29) CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 17
[CHART] Figure 3: Cross-plot of two carbon preference indices (defined in Table 4). The Subu samples are those reported in George et al. (2003). 3.5 ALKYLCYCLOHEXANES AND METHYLALKYLCYCLOHEXANES Alkylcyclohexanes are present in high abundances in the 513 m, 634 m and 660 m oil shows, in low abundances in the 614 m, 614.5 m and 746 m oil shows and in moderate abundance in the other oil show samples. Their distribution in the sample set follows that of the n-alkanes very closely (see Appendix Figure *5). Methylalkylcyclohexanes have a low abundance in all samples. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 18
3.6 TERPANES Terpane distributions are summarised in Tables 5a and 5b. These biomarkers are useful for characterising the samples in terms of their source and maturity, as well as for specific oil-oil correlations. 3.6.1 Bicyclic sesquiterpanes Bicyclic sesquiterpanes were detected using the m/z 123 mass chromatogram (Appendix Fig. *6a). These compounds are either absent or present in very low abundances in the 671 m, 746 m, 766 m and 790 m oil shows, possibly due to their removal by biodegradation. The other samples have variability in their bicyclic sesquiterpane distribution, as shown by three ratios (Table 5a). The 513 m and 614 m oils show samples have relatively higher drimane/homodrimane ratios, due to the relatively higher abundances of drimane. The other samples are dominated by much larger abundances of homodrimane, as indicated by their lower drimane/homodrimane ratios (Table 5a). 3.6.2 Diterpanes Moose-2 oil show samples (except 746 m and 790 m) contain diterpanes, as identified in the m/z 123 and 191 mass chromatograms (Appendix Figs. *6b and 6c). Large amounts of diterpenoid compounds (4(Beta)(H)-19-isopimarane, ent-beyerane and isopimarane) have been suggested as indicators of Jurassic-sourced oils and solid bitumens (George et al., 2003). The 19NIP/C30(Alpha)(Beta) hopane and IP/C30(Alpha)(Beta) hopane ratios of the 614 m and 634 m oil shows (0.24-0.35; Table 5a) are relatively higher than those of the other Moose-2 samples, but are lower than those of the normal Jurassic-sourced Family A solid bitumens (e.g. CN383, CN415 and CN381) from the Subu-1 well (1.0-3.7; George et al., 2003). The moderate values for the 614 m and 634 m oil shows are similar to those of the low maturity Family A solid bitumen from Subu-1 (CN250) and to Puri-1 crude oil (0.2-0.7; George et al., 2003). The 513 m, 660 m, 671 m, 753 m and 766 m oil show samples contain very low amounts of 4(Beta)(H)-19-isopimarane, ent-beyerane and isopimarane relative to hopanes, with 19NIP/C30(Alpha)(Beta) hopane and IP/C30(Alpha)(Beta) hopane ratios of 0.01-0.11 (Table 5a). However, relative to tricyclic terpanes, 4(Beta)(H)-19-isopimarane and isopimarane are moderately abundant (19NIP/C23 tricyclic and IP/C23 tricyclic ratios = 0.21-2.66). The diterpenoids are probably derived from conifer resins (Noble et al., 1985, 1986). Thus it can be concluded that these oil shows were derived from a source rock containing low amounts of coniferous organic matter. In these respects, these oil CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 19
Table 5a: Terpane parameters for Moose-2 oil show samples.
CSIRO Code -------------------------------------------------------------------------- Calcula- Parameter 513m 614m 634m 660m* 671m* 746m* 753m 766m* 790m* tion - --------------------------------------------- ---- ---- ---- ---- ----- ----- ---- ----- ----- -------- Drimane/Homodrimane 0.73 0.86 0.38 0.20 n.d. n.d. 0.31 n.d. n.d. S123 Rearranged C(15) BS/(Drimane + Homodrimane) 1.20 0.25 0.55 0.26 n.d. n.d. 0.34 n.d. n.d. S123 C(14) BS/(Drimane + Homodrimane) 0.45 0.23 0.17 n.d. n.d. n.d. 0.13 n.d. n.d. S123 19NIP/C30 (Alpha)(Beta) hopane 0.01 0.26 0.24 0.06 0.01 n.d. 0.03 0.04 n.d. S191 IP/C(30) (Alpha)(Beta) hopane 0.02 0.33 0.35 0.07 0.02 n.d. 0.04 0.11 n.d. S191 19NIP/C(23) tricyclic 0.21 1.6 4.52 1.51 0.42 n.d. 2.0 0.88 n.d. S191 IP/C(23) tricyclic 0.28 1.98 6.70 1.75 0.71 n.d. 2.66 2.50 n.d. S191 C(26)/C(25) tricyclic terpanes 0.87 n.d. 0.95 n.d. 0.66 n.d. n.d. n.d. 0.56 S191 C(23) tricyclic terpane/C(30) (Alpha)(Beta) hopane 0.06 0.16 0.05 0.04 0.03 n.d. 0.02 0.05 0.07 S191 C(24) tetracyclic terpane/C(30) (Alpha)(Beta) hopane 0.08 0.59 0.32 0.17 0.12 n.d. 0.19 0.20 0.09 S191 C(23)/C(21) tricyclic terpanes 1.95 n.d. 0.73 1.77 3.16 n.d. 1.19 n.d. n.d. S191 C(23-26) /C(19-21) tricyclic terpanes 2.48 0.50 0.35 0.32 0.73 n.d. 0.58 0.37 13.5 S191 C(24) tetracyclic/C(26) tricyclic terpanes 2.05 n.d. 9.76 n.d. 10.4 n.d. n.d. n.d. 4.1 S191 C(24) tetracyclic/C(23) tricyclic terpanes 1.35 3.57 6.12 3.93 3.66 n.d. 11.1 4.42 1.25 S191 (C(19)+C(20))/C(23) tricyclic terpanes 0.78 3.22 6.91 4.97 2.69 n.d. 2.76 5.31 0.16 S191 C(24) tetracyclic/(C(24) tetracyclic + C(23) tricyclic terpane) 0.57 0.78 0.86 0.80 0.79 n.d. 0.92 0.82 0.55 S191 C(19)/(C(19) + C(23) tricyclic terpanes) 0.31 0.65 0.78 0.72 0.39 n.d. 0.57 0.66 0.14 S191 Ts/Tm 1.0 0.69 0.7 0.50 1.27 0.8 0.60 0.68 1.38 M Ts/Ts+Tm 0.49 0.41 0.41 0.34 0.56 0.45 0.37 0.41 0.58 M Ts/C(30) (Alpha)(Beta) hopane 0.2 0.71 0.4 0.20 0.35 0.3 0.31 0.29 0.32 S191 Tm/C(27)(Beta) 20.5 19.8 18.0 n.d. n.d. n.d. 20.5 n.d. n.d. M C(29)Ts/C(29) (Alpha)(Beta) hopane 0.31 0.20 0.27 0.25 0.20 0.21 0.26 0.20 0.20 M C(29)Ts/(C(29)Ts+C(29) (Alpha)(Beta) hopane) 0.24 0.17 0.21 0.20 0.17 0.17 0.21 0.17 0.17 M C(30)*/C(29) Ts 0.23 0.94 0.81 n.d. n.d. n.d. 0.70 n.d. n.d. M C(27)*/Ts 0.05 0.08 0.09 n.d. n.d. n.d. 0.10 n.d. n.d. M C(29)*/C(29) (Alpha)(Beta) hopane 0.06 0.12 0.14 n.d. n.d. n.d. 0.12 n.d. n.d. M C(30)*/C(30) (Alpha)(Beta) hopane 0.05 0.56 0.33 n.d. n.d. n.d. 0.30 n.d. n.d. M
continued in Table 5b Terpane abbreviations are listed in Table A1. n.d. = not determined. Ratios were calculated from MRM data (M) or SIM data (S). The transition used for SIM is indicated. * = All the ratios of these samples were calculated from the relevant extracted ion chromatograms of the full scan run. show samples are similar to the Family B solid bitumens from the Subu well (George et al., 2003). The diterpenoids are either absent or present in extremely low amounts in the 746 m and 790 m oil shows, indicating that the contribution of coniferous organic matter into their source rocks was insignificant. 3.6.3 Tricyclic and tetracyclic terpanes Some or all of the generally occurring C19 to C26 tricyclic terpanes and C24 tetracyclic terpane were detected in all the Moose-2 oil shows except in 746 m sample (Appendix Figs. *6c). The overall abundance of these terpanes could most conveniently be measured against the relative abundance of the C30 (Alpha)(Beta) hopane in the m/z 191 mass chromatogram CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 20
Table 5b: Terpane parameters for Moose-2 oil show samples (continued from Table 5a).
CSIRO Code ----------------------------------------------------------------------- Calcula- Parameter 513m 614m 634m 660m* 671m* 746m* 753m 766m* 790m* tion - ------------------------------------------ ---- ---- ---- ----- ----- ----- ---- ----- ----- -------- C(29) Section/C(29) (Alpha)(Beta) hopane n.d. 0.02 0.02 0.06 n.d. 0.17 0.01 0.05 0.11 M C(30) Section/C(30) (Alpha)(Beta) hopane n.d. 0.16 0.09 0.11 n.d. 0.05 0.06 0.09 0.04 M C(29) (Alpha)(Beta)/((Alpha)(Beta) 0.93 0.89 0.89 0.82 0.93 0.90 0.88 0.90 0.91 M +(Beta)(Alpha)) hopanes C(30) (Alpha)(Beta)/((Alpha)(Beta) 0.95 0.74 0.80 0.83 0.92 0.85 0.81 0.86 0.89 M +(Beta)(Alpha)) hopanes C(31) (Alpha)(Beta) 22S/(22S+22R) hopanes 0.59 0.58 0.59 0.60 0.58 0.59 0.58 0.57 0.58 M C(32) (Alpha)(Beta) 22S/(22S+22R) hopanes 0.59 0.58 0.59 0.60 0.60 0.68 0.56 0.62 0.58 M C(33) (Alpha)(Beta) 22S/(22S+22R) hopanes 0.61 0.65 0.60 0.75 0.61 0.62 0.60 0.60 0.63 M % C(31) of total (Alpha)(Beta) homohopanes 30.0 44.2 44.0 63.5 46.3 59.4 49.7 42.4 44.8 S191 % C(32) of total (Alpha)(Beta) homohopanes 24.8 24.1 25.5 29.2 23.1 28.9 27.1 28.2 25.9 S191 % C(33) of total (Alpha)(Beta) homohopanes 14.7 14.6 12.4 7.3 14.0 11.7 12.2 14.1 14.2 S191 % C(34) of total (Alpha)(Beta) homohopanes 11.8 8.1 6.5 n.d. 8.5 n.d. 5.5 8.0 8.5 S191 % C(35) of total (Alpha)(Beta) homohopanes 18.7 9.0 11.6 n.d. 8.2 n.d. 5.5 7.3 6.6 S191 C(35)/(C(35)+C(34)) homohopanes 0.61 0.53 0.64 n.d. 0.49 n.d. 0.50 0.48 0.44 S191 Homohopanes/C(30) (Alpha)(Beta) hopane 2.8 1.2 1.4 0.91 2.46 1.4 1.1 2.0 2.4 S191 Oleanane/C(30) (Alpha)(Beta) hopane 0.26 n.d. n.d. n.d. n.d. n.d. n.d. n.d. n.d. M Gammacerane/C(30) (Alpha)(Beta) hopane n.d. 0.05 0.03 n.d. n.d. n.d. 0.03 n.d. 0.11 M C(30) 30-norhopane/C(30) (Alpha)(Beta) hopane 0.05 0.09 0.04 n.d. n.d. n.d. 0.05 n.d. n.d. M C(27) hopanes/C(30) (Alpha)(Beta) hopane 0.4 1.77 1.1 0.60 0.63 0.7 0.90 0.71 0.55 S191 28,30-BNH/C(30) (Alpha)(Beta) hopane 0.01 0.08 0.05 n.d. n.d. n.d. 0.06 n.d. n.d. M 29,30-BNH/C(30) (Alpha)(Beta) hopane 0.05 0.08 0.06 n.d. n.d. n.d. 0.04 n.d. n.d. M 28,30-BNH/Ts 0.02 0.04 0.04 n.d. n.d. n.d. 0.05 n.d. n.d. M C(29) (Alpha)(Beta) hopane/C(30) (Alpha)(Beta) hopane 0.61 1.87 1.37 0.70 1.34 1.01 1.26 0.99 1.15 S191 C(31) (Alpha)(Beta) hopanes/C(30) (Alpha)(Beta) hopane 0.84 0.52 0.59 0.58 1.14 0.82 0.54 0.86 1.09 S191 C(29) steranes/C(29) (Alpha)(Beta) hopanes 0.48 0.34 0.21 n.d. 0.19 n.d. 0.18 n.d. 0.24 S191 C(31) 2(Alpha) Me/(C(31) 2(Alpha) Me+C(30) (Alpha)(Beta) hopane) 0.34 0.59 0.45 n.d. 0.60 0.51 0.54 0.50 0.61 S205 C(32) 2(Alpha) Me/(C(32) 2(Alpha) Me+C(31) (Alpha)(Beta) hopanes) 0.21 0.37 0.24 n.d. 0.48 0.43 0.23 0.36 0.49 S205 C(33) 2(Alpha) Me/(C(33) 2(Alpha) Me+C(32) (Alpha)(Beta) hopanes) 0.54 1.0 0.59 n.d. 0.78 n.d. 0.50 0.80 0.75 S205
Terpane abbreviations are listed in Table A1. n.d. = not determined. Ratios were calculated from MRM data (M) or SIM data (S). The transition used for SIM data is indicated. * = All the ratios of these samples were calculated from the relevant extracted ion chromatograms of the full scan run. (Table 5a). One likely control on these ratios is thermal maturity: higher maturity samples generally contain larger amounts of tricyclic terpanes relative to hopanes, although source differences can also be important factors. C23 tricyclic terpane/C30 (Alpha)(Beta) hopane ratios are very low (<0.16) in these oil shows, whereas the C24 tetracyclic terpane/C30 (Alpha)(Beta) hopane ratios are low in the 513 m, 660 m, 671 m and 790 m oil shows (0.08 - 0.17), moderate in the 634 m, 753 m and 766 moil shows (0.19 - 0.32), and high in the 614 m oil show (0.59). This likely reflects variability in the source and/or maturity of these oil shows. Two other terpane ratios [C24 tetracyclic terpane/(C24 tetracyclic terpane + C23 tricyclic terpane) and C19 tricyclic terpane/(C19 tricyclic terpane + C23 tricyclic terpane)] can be used to gain a broad approximation of the relative amounts of terrestrial and marine organic matter in a source rock (Preston and Edwards, 2000; George et al., 2002a). These ratios for the Moose-2 oil shows vary over a wide range (0.31 to 0.92; Table 5a), suggesting variable amounts of terrestrial organic matter input into their source rocks. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 21
The 614 m and 634 m oil shows have higher ratios, and this indicates higher input of terrestrial organic matter into their source rock, a finding which is consistent with the relatively higher amount of diterpenoids in these two samples (see Section 3.6.2). The C(26) tricyclic terpanes are either absent or present in very low amounts in the 614 m, 660 m, 746 m, 753 m and 766m oil shows. However, these compounds have a similar or lower abundance relative to the C(25) tricyclic terpanes in the 513 m, 634 m, 671m and 790m oil shows (C(26)/C(25) tricyclic ratios 0.56 - 0.95; Table 5a). Therefore this is evidence against these oil shows being sourced from a lacustrine source rock facies (Schiefelbein et al., 1999). The 513 m oil show contains significant amounts of C(28) and C(29) (extended) tricyclic terpanes, which are of lower abundance in the 671 m and 790 m oil shows, and could not be detected at all in the other samples. Higher amounts of C(28) and C(29) tricyclic terpanes are sometimes present in oils derived from low oxygenated depositional environments (e.g. George et al., 2002a). These biomarkers are of low abundance in most of the solid bitumens from the Subu wells, except for one Family B sample (CN540) from Subu-2. 3.6.4 Methylhopanes Methylhopanes were detected in all the samples, except the 660 m oil show, by monitoring the m/z 205 mass chromatogram (Appendix Figs. *7c). Two isomer classes were identified: 2(Alpha)-methylhopanes and 3(Beta)-methylhopanes. The 3(Beta)-methylhopanes comprise only one isomer (C(31)) and are less abundant than the 2(Alpha)-methylhopanes in all the samples, except for the 513 m oil show. In this sample, a series of 3(Beta)-methylhopanes from C(31) to C(35) is present, and these are significantly more abundant than 2(Alpha)-methylhopanes, which are of relatively low abundance. The high abundance of 3(Beta)-methylhopanes in the 513 m oil show is suggestive of a lacustrine input to this oil show, because these have been related to inputs of specific methanotrophic bacteria in saline lacustrine sediments (Collister et al., 1992, Farrimond et al., in press). Only some lacustrine-derived oils contain high amounts of 3(Beta)-methylhopanes, such as those derived from the Green River Shale and one oil family from Angola (Collister et al., 1992, Farrimond et al., in press). In the Papuan Foreland, high abundances of 3(Beta)-methylhopanes have been found in Koko-1 FI and RFT oils (Volk et al., 2004), but similar lacustrine signatures have not previously been reported for the Eastern Papuan Basin. There is significant variation across the sample set in the abundance of the 2(Alpha)-methylhopanes compared to hopanes (Table 5b), as shown by the cross-plot of C(31) 2(Alpha)Me/(C(31) 2(Alpha) Me+C(30)(Alpha)(Beta) hopane) versus C(32) 2(Alpha)Me/(C(32)2(Alpha)Me+C(31)(Alpha)(Beta) hopane) (Fig. 4). These ratios were found to be useful for distinguishing two families of solid bitumens in CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 22 the sandstone samples from the Subu wells, together with the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (George et al., 2003). The "Family A" [CHART] Figure 4: Cross-plot of C(31) 2(Alpha)Me/(C(31)2(Alpha)Me+C(30)(Alpha)(Beta) hopane) versus C(32) 2(Alpha)Me/(C(32)2(Alpha)Me+C(31)(Alpha)(Beta) hopane). The two families refer to solid bitumens extracted from the sandstones in the Subu wells, the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (data shown as black dots: from George et al., 2003). samples (low amounts of 2(Alpha)-methylhopanes) were suggested to have been derived from a Jurassic-age source rock that contained high amounts of terrestrial organic matter, and in particular coniferous organic matter. The origin of 2(Alpha)-methylhopanes is thought to be related to high prokaryotic source input (Summons and Jahnke, 1990). 2(Alpha)-methylhopanes are commonly found in high abundance in oils derived from source rocks deposited in calcareous environments. Thus the "Family B" solid bitumens were ascribed to having an origin from a calcareous source with a high proportion of prokaryotic and a low proportion of terrestrial organic matter input. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 23 The 513 m oil show with low 2(Alpha)-methylhopane/hopane ratios plots well within the cluster of Family A Subu samples (Fig. 4). The presence of significant amounts C(19) tricyclic terpane and C(24) tetracyclic terpane relative to C(23) tricyclic terpane may be consistent with the terrestrial organic matter input into the source rock of this sample. In these respects, the 513 m oil show may be similar to the Family A Subu samples. However, compared to Family A members of Subu samples, this oil show contains much less diterpanes. For these reasons, and based on the high extended tricyclic terpanes and 3(Beta)-methylhopanes in this oil show, a different and probable lacustrine source for this oil show is considered most likely. The 614 m, 671 m, 790 m and 746 m oil shows have relatively higher 2(Alpha)-methylhopane/hopane ratios, and cluster around the Family B Subu population on the cross plot (Fig. 4). This indicates that these oil shows were produced from the same or a similar source as that which sourced the Family B solid bitumens and the fluid inclusion oil in the Subu wells. The 634 m, 753 m and 766 m oil shows with intermediate 2(Alpha)-methylhopane/hopane ratios appeared to be similar to the Family B (weak) Subu samples (CN377, CN405, CN540 and the Bwata-1 condensate) (George et al., 2003). These samples may have originated from mixed sources, or may be members of family B but with lower contents of 2(Alpha)-methylhopanes than the other samples. 3.6.5 Hopanes Hopanes and moretanes were monitored using the m/z 191 mass chromatograms. MRM chromatograms were also run in order to examine the distribution of the C(27) to C(35) hopanes in greater detail and to provide a cleaner distribution with less interfering peaks that can complicate the interpretation of m/z 191 mass chromatograms. Various biomarker parameters related to source and maturity were calculated from the distribution of the terpanes in the SIM and MRM chromatograms and are shown in Tables 5a and 5b. The ratio Tm/C(27)(Beta) is mainly controlled by maturity, and is most sensitive in the early part of the oil window, whereas the Ts/Tm ratio is both maturity and source controlled. The ratio Tm/C(27)(Beta) varies over a narrow range of 18 to 20.5 for the 513 m, 614 m, 634 m and 753 m samples indicating they have a similar oil window maturity. This ratio for the other samples could not be determined, due to the absence of C(27)(Beta), possibly because of its removal by thermal maturation. The Ts/Tm ratio for all the oil shows varies between 0.5 and 1.4, indicating that they have passed the early stage of oil generation window. The Ts/Tm ratios for the oil shows are similar to those found for the Family B solid bitumens (0.12 to 1.65) in the Subu wells, and are significantly lower than those for the CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 24 Family A solid bitumens in the Subu wells (3-6) (George et al., 2003). This is consistent with the generation of the oil shows (except for 513 m) from the same or a similar source rock as the one from which the Family B solid bitumens in the Subu wells were derived. The C(29)Ts/C(29)(Alpha)(Beta) hopane ratio varies between 0.20-0.31 for the Moose-2 oil show samples (Table 5a). Again, these ratios correlate with the Family B solid bitumens in the Subu wells, and are very different from the Family A solid bitumens (ratios 3.5-6; George et al., 2003). Based on the 2(Alpha)-methylhopane/hopane ratios, the 513 m oil show appears to be similar to Family A Subu solid bitumens. However, the distribution of hopanes in this sample exhibit some similarities to the Family B solid bitumens in the Subu well, e.g., low abundances of the rearranged hopanes, including C(29) and C(30) diahopane, and the absence of the unidentified C(29)ss and C(30)ss rearranged hopanes. The other Moose-2 oil show samples are also characterised by lower abundances of the diahopanes and the unidentified C(29)ss and C(30)ss rearranged hopanes, as indicated by the C(29)*/(C29) (Alpha)(Beta) hopane ratios (0.12 to 0.14; Table 5a)), the C(30)*/C(30)(Alpha)(Beta) hopane ratios (0.30 to 0.56; Table 5a) and the C(30)ss rearranged hopane/C(30)(Alpha)(Beta) hopane ratios (0.04 to 0.16; Table 5b). These parameters suggest a less oxic and more clay-poor depositional environment than the source of the Subu Family A solid bitumens. In these respects, all the Moose-2 samples, including the 513 m oil show, correlate better with the Family B solid bitumens in the Subu wells. Previous work in Papua New Guinea has indicated that high abundances of diahopanes are characteristic of Jurassic, terrestrially-derived, oils (Waples and Wulff, 1996; George et al., 1997). Thus, low abundances of diahopanes in the Moose-2 oil shows are evidence against their origin from a Jurassic source rock. Homohopane S/(S+R) maturity ratios for all the oil shows are either at or near the equilibrium values (Table 5b). The C(29) hopane (Alpha)(Beta)/((Alpha)(Beta)+(Beta)(Alpha)) and C(30) hopane(Alpha)(Beta)/((Alpha)(Beta)+(Beta)(Alpha)) ratios are mostly at or near equilibrium values (0.8-0.95) for the Moose-2 oil shows (Table 5b). This is indicative of a maturity level close to the peak stage of the oil generation window. Homohopane proportions are similar for all the oil shows, except for the 513 m oil show in which the C(35) homohopanes are very large peaks, and are more abundant than the C(33) and C(34) homohopanes. The C(35)/(C(35)+C(34)) homohopane ratio for this sample (0.61) is higher than for the other samples, which vary between 0.44 and 0.53 (Table 5b), except for the 634 m oil show which has very low overall abundances. These values for the other samples are similar to those of the Family B solid bitumens in the Subu wells (Fig. 5). The abundant C(35) homohopanes in the 513 m oil show suggest this sample was derived from a source rock deposited under a highly reducing environment (possibly CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 25 either marine or lacustrine), as was also indicated by the presence of extended tricyclic terpanes. [CHART] Figure 5: Cross-plot of C(35)/(C(35)+C(34)) homohopanes versus homohopanes/(C(30)(Alpha)(Beta) hopane). The two families refer to solid bitumens extracted from the sandstones in the Subu wells, the fluid inclusion oil from Subu-1, the Puri-1 oil and the Bwata-1 condensate (data shown as black dots, from George et al., 2003). C(29)/C(30) hopane ratios (greater than or equal to) 1 for all the oil show samples, except for the 513 m and 660 m oil show, are indicative of their calcareous source, similar to that of the Family B solid bitumens in the Subu wells. Oleanane is a biomarker for angiosperm input into the source rock. The 513 m sample contains significant amounts of oleanane (and/or lupane; see George et al., 1998; Nytoft et al., 2002). The oleanane/C(30)(Alpha)(Beta) hopane ratio = 0.26 (Table 5b), which provides an age CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 26 control on this sample of Cretaceous or younger (postdating the evolution of angiosperms). This indicates that it originated from a source rock different from that of the Jurassic sourced Family A members of the Subu solid bitumens. Low to moderate amounts of gammacerane was detected in the 614 m, 634 m, 753 m and 790 m oil show samples. Gammacerane is biomarker for either saline or stratified marine and nonmarine depositional conditions, and is commonly abundant in calcareous and evaporitic rocks (e.g. Moldowan et al., 1992). Therefore, the presence of gammacerane in these Moose-2 oil shows is consistent with the other hopane data, suggesting a suboxic, calcareous influenced marine source rock. However, this compound is either absent or below the detection limits in the 513 m, 660 m, 671 m, 746 m and 766 m oil shows. Significant amounts of 28,30- and 29,30-bisnorhopanes were identified in the MRM runs of the 513 m, 614 m, 634 m and 753 oil shows. Higher relative amounts of 28,30-BNH are commonly associated with more reducing and less oxic depositional environments, whereas 29,30-BNH is commonly associated with calcareous source components (Subroto et al., 1991; Moldowan et al., 1992). The 28,30-BNH/C(30) (Alpha)(Beta) hopane and 29,30-BNH/C(30) (Alpha)(Beta) hopane ratios of these oil show samples indicate their affinity towards Family B solid bitumens in Subu wells. The presence of C(30) 30-norhopane is also consistent with the calcareous source. 25-Norhopanes, a series of biomarkers indicative of severe biodegradation, are absent in all the samples. As was found for the Family B solid bitumens in the Subu wells (George et al., 2003), hopanes are more abundant in all the Moose-2 oil shows (sterane/hopane ratios <1: Table 5b) indicating significant prokaryotic input into their source rock, as is typical for marine, calcareous rocks. In summary, hopane distributions are indicative of many similarities between most of the Moose-2 oil shows and the Family B solid bitumens in the Subu wells. The 513 m oil show, however, has similarities with both the Family A and Family B solid bitumens, and additionally has some biomarker distributions that are dissimilar to all the Subu solid bitumens. A suboxic lacustrine source rock with limited terrestrial organic matter input is suggested for this oil show. 3.7 STERANES AND DIASTERANES Sterane distributions in the samples were monitored by SIM analyses using both the m/z 217 and m/z 218 mass chromatograms, while the diasteranes (rearranged steranes) were analysed using the m/z 217 and m/z 259 mass chromatograms. MRM chromatograms CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 27 were also run, in order to examine the distribution of the C(27) to C(30) steranes, diasteranes and methylsteranes in greater detail. The MRM data provided better quality data than the SIM data, due to co-elutions and some interfering contaminants in the SIM chromatograms. Sterane and diasterane ratios are reported in Tables 6a and 6b. The commonly occurring series of C(27) to C(29) (Alpha)(Alpha)(Alpha) and (Alpha)(Beta)(Beta) steranes and (Beta)(Alpha) diasteranes were detected in the 513 m, 614 m, 634 m, 671 m, 753 m and 790 m oil shows. Carbon Table 6a: Sterane and diasterane parameters for Moose-2 oil show samples.
Parameter CSIRO Code ---------------------------------------------------- Calcula- 513m 614m 634m 671m* 753m 790m* tion - -------------------------------------------------------- ----- ----- ----- ----- ----- ----- -------- C27 AlphaAlphaAlpha 20R (% of total C27 to C29 AlphaAlphaAlpha 20R steranes) 31.41 66.93 28.46 51.59 16.68 50.80 S217 C28 AlphaAlphaAlpha 20R (% of total C27 to C29 AlphaAlphaAlpha 20R steranes) 24.33 10.54 16.96 17.07 22.80 15.37 S217 C29 AlphaAlphaAlpha 20R (% of total C27 to C29 AlphaAlphaAlpha 20R steranes) 44.26 22.53 54.57 31.34 60.53 33.83 S217 C29 AlphaAlphaAlpha 20R /C27 AlphaAlphaAlpha 20R steranes 1.41 0.34 1.92 0.61 3.63 0.67 S217 C28 AlphaAlphaAlpha 20R AlphaAlphaAlpha 20R steranes (%) 0.55 0.47 0.31 0.54 0.38 0.45 S217 C30/(C27+C28+C29) AlphaAlphaAlpha 20R steranes (%) 0.72 2.00 1.34 n.d. 1.72 n.d. M Terrestrial/marine index ((TM)I = C29 BetaAlpha diasteranes/(C27 BetaAlpha diasteranes + C 30 BetaAlpha C27 AlphaBetaBeta steranes 20S +R (% of total C27 to 32.97 30.97 31.73 28.91 22.19 30.21 S218 C29 AlphaBetaBeta 20R steranes in 218 SIM) C28 AlphaBetaBeta steranes 20S +R (% of total C27 to 19.52 14.87 17.87 18.97 16.25 16.77 S218 C29 AlphaBetaBeta 20R steranes in 218 SIM) C29 AlphaBetaBeta steranes 20S +R (% of total C27 to 47.51 54.16 50.41 52.12 61.56 53.02 S218 C29 AlphaBetaBeta 20R steranes in 218 SIM) C27 steranes (% of total C27 to C29 regular steranes) 39.22 19.99 33.03 n.d. 22.35 n.d. M C28 steranes (% of total C27 to C29 regular steranes) 19.60 19.99 17.72 n.d. 21.75 n.d. M C29 steranes (% of total C27 to C29 regular steranes) 41.18 60.02 49.24 n.d. 55.90 n.d. M C27 BetaAlpha diasterane 20S +R (% of total C27 to 32.83 16.90 19.60 27.29 14.06 31.16 S259 C29 BetaAlpha 20S + R diasteranes in 259 SIM) C28 BetaAlpha diasterane 20S +R (% of total C27 to 26.40 31.89 27.73 27.29 26.96 28.01 S259 C29 BetaAlpha 20S + R diasteranes in 259 SIM) C29 BetaAlpha diasterane 20S +R (% of total C27 to 40.77 51.20 52.67 45.41 58.98 40.83 S259 C29 BetaAlpha 20S + R diasteranes in 259 SIM)
continued in Table 6b Sterane and diasterane abbreviations are listed in Table A2. Ratios were calculated from MRM data (M) or SIM data (S). The transition used for SIM data is indicated. * = All the ratios of these samples were calculated from the relevant extracted ion chromatograms of the full scan run. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 28 number distributions of the steranes are variable throughout the sample set (Tables 6a and 6b). Based on (Alpha)(Alpha)(Alpha) (S+R) and (Alpha)(Beta)(Beta) (S+R) steranes, carbon number distributions follow the trend of C(29)>C(27)>C(28) but based on (Beta)(Alpha) (S+R) diasteranes follows the trend of C(29)>C(28)>C(27). Considering that biodegradation of steranes favours C(27) >C(28)>C(29) (Peter and Moldowan, 1993), these carbon number distributions of the Moose-2 oil shows are indicative of their origin from a marine source rock containing substantial inputs of terrestrial organic matter. Table 6b: Sterane and diasterane parameters for Moose-2 oil show samples (continued from Table 6a).
Parameter CSIRO Code ---------------------------------------- Calcula- 513m 614m 634m 671m* 753m 790m* tion - ------------------------------------------------------------------ ---- ---- ---- ----- ---- ----- -------- C27 BetaAlpha diasteranes/(AlphaAlphaAlpha+AlphaBetaBeta steranes) 0.46 2.36 1.68 n.d. 1.58 n.d. M C28 BetaAlpha diasteranes/(AlphaAlphaAlpha+AlphaBetaBeta steranes) 0.39 2.31 2.44 n.d. 1.55 n.d. M C29 BetaAlpha diasteranes/(AlphaAlphaAlpha+AlphaBetaBeta steranes) 0.33 1.87 1.71 n.d. 1.29 n.d. M C27+C28+C29 BetaAlpha diasteranes/(AlphaAlphaAlpha+AlphaBetaBeta steranes) 0.39 2.06 1.83 n.d. 1.41 n.d. M C27 AlphaAlphaAlpha 20S /(20S +20R ) 0.54 0.59 0.58 0.34 0.56 0.27 M C28 AlphaAlphaAlpha 20S /(20S +20R ) 0.51 0.59 0.55 n.d. 0.57 n.d. M C29 AlphaAlphaAlpha 20S /(20S +20R ) 0.43 0.47 0.50 0.51 0.47 0.41 M C29 AlphaAlphaAlpha 20S /20R 0.74 0.90 1.02 1.05 0.88 0.71 M C29 AlphaAlphaAlpha 0.72 0.80 0.86 0.88 0.79 0.70 M Vitrinite reflectance equivalent from 20S /20R (Sofer et al. , 1993) C27 AlphaBetaBeta /(AlphaBetaBeta+AlphaAlphaAlpha ) 0.51 0.40 0.46 n.d. 0.43 n.d. M C28 AlphaBetaBeta/(AlphaBetaBeta+AlphaAlphaAlpha) 0.57 0.45 0.52 n.d. 0.49 n.d. M C29 AlphaBetaBeta/(AlphaBetaBeta+AlphaAlphaAlpha) 0.62 0.58 0.56 0.62 0.52 0.60 M C29 BetaAlpha diasterane 20S /(20S +20R ) (MRM) 0.60 0.65 0.60 n.d. 0.57 n.d. M C29 BetaAlpha diasterane 20S /(20S +20R ) in 259 SIM 0.60 0.55 0.55 0.55 0.56 0.57 S259 NDR (24-nor/(24-nor+27-nor) nordiacholestanes 0.32 0.30 0.28 n.d. 0.27 n.d. M NCR (24-nor/(24-nor+27-nor) norcholestanes 0.44 0.41 0.44 n.d. 0.44 n.d. M C26 steranes: 21-nor/(21-nor+AlphaAlphaAlpha 20R 24- nor) 0.55 0.45 0.51 n.d. 0.42 n.d. M C26 steranes: 21-nor/(21-nor+AlphaAlphaAlpha 20R 27- nor) 0.50 0.42 0.62 n.d. 0.40 n.d. M
Sterane and diasterane abbreviations are listed in Table A2. Ratios were calculated from MRM data (M) or SIM data (S). The transition used for SIM data is indicated. n.d. = not determined. * = All the ratios of these samples were calculated from the relevant extracted ion chromatograms of the full scan run. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 29 In contrast to the Family B solid bitumens in the Subu wells, diasteranes are much more abundant than steranes in the Moose-2 oil shows from the 614 m, 634 m, and 790 m depth intervals, as indicated by the diasterane/sterane ratios >1 for all the carbon numbers (Table 6b). It is possible that preferential removal of more susceptible steranes by biodegradation may have produced these higher ratios. Another alterative is that the greater diasterane content is caused by high maturity of these Moose- 2 oil shows than the Family B solid bitumens in the Subu wells (although this possibility is not supported by other sterane maturity parameters; see below). Diasterane/sterane ratios for the 513 m oil show are much lower (<0.5) for all carbon numbers and similar to those of the Family B solid bitumens in the Subu wells, consistent with its origin from a suboxic, clay-poor source rock. Significant amounts of C(30) steranes and diasteranes were identified in the 513 m, 614 m, 634 m and 753 m oil shows (Table 6a), indicating variable proportions of marine derived organic inputs into their source rocks. The 513 m oil show has a relatively lower C(30)/(C(27)+C(28)+C(29)) (Alpha)(Alpha)(Alpha) 20R sterane ratio (2.4), whilst the 614 m, 634 m and 753 m oil shows have higher C(30)/(C(27)+C(28)+C(29)) (Alpha)(Alpha)(Alpha) 20R sterane ratios (>5), similar to those of the Family B solid bitumens in Subu wells (George et al., 2003). Based on these data, the 513 m oil show may have a mixed source, with a contribution from a marine calcareous source rock (as for the Family B solid bitumens in the Subu wells), as well as the possible lacustrine source. The C(27) - C(29) (Alpha)(Alpha)(Alpha) 20S/(20S+20R) sterane ratios are either at or close to equilibrium for all the Moose-2 oils shows, and indicate some differences in thermal maturities among the samples (Table 6b). Using an equation from Sofer et al. (1993), a vitrinite reflectance equivalent (VRE) can be calculated from the C(29) (Alpha)(Alpha)(Alpha) steranes 20S/20R ratio. This indicates variable maturities (0.70-0.88% in VRE), in the early to peak stages of the oil generation window (Table 6b). This observation is corroborated by the C(27)-C(29) (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) sterane ratios for the 513 m, 614 m, 634 m oil shows, which allow slightly more differentiation of the sample set based on thermal maturities, because these ratios only reach equilibrium at higher maturities (Fig. 6). Such a variation in maturities may be indicative of the migration of mature thermogenic oil into these rock sections and subsequent mixing with some indigenous hydrocarbons of slightly lower maturities. However, these levels of early to mid oil window maturities of the Moose-2 oil shows are similar to many of those of the solid bitumens from Subu area. The 513 m, 614 m, 634 m and 753 m oil shows contain significant amounts of C(26) steranes (norcholestanes) and diasteranes (nordiacholestanes) (Appendix Figs. *14a). These compounds have been suggested as age-diagnostic biomarkers (Holba et al., CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 30 1998a, b). Apart from the 21-norcholestane isomer (peak 9), which may increase in relative abundance with maturity, there are two main series of norcholestanes and nordiacholestanes. The 27-nor series (peaks 3,4,10-13) is dominant in older rocks, whereas in Cretaceous and Tertiary rocks the 24-nor series (peaks 1,2,5-8) becomes more abundant (Holba et al., 1998a, b). Two ratios, the NDR (nordiacholestanes ratio) and the NCR (norcholestanes ratio), quantify this (Table 6b). NDR values above a threshold of [CHART] Figure 6: Cross-plot of C(27) sterane (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) versus C(29) sterane (Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha)(Alpha)) ratios. The family refers to solid bitumens extracted from the sandstones in the Subu wells (data shown as black dots, from George et al., 2003). 0.25 and NCR values above a threshold of 0.35 are consistent with Cretaceous or younger rocks. NDR values above a threshold of 0.5 and NCR values above a threshold of 0.6 are consistent with Tertiary rocks. The NDR ratios for the Moose-2 oil shows vary between 0.27-0.32, and the NCR ratios for the oil shows vary between 0.41-0.44. These values therefore indicate that the oil shows contain C(26) steranes derived principally from Cretaceous or younger strata. This observation is corroborated by the presence of oleanane in the 513 m oil show. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 31 3.8 AROMATIC HYDROCARBONS Eight major classes of aromatic hydrocarbons were monitored to assess variations in thermal maturity and to characterise source-related geochemical parameters. These compound classes were the alkylbenzenes, alkylnaphthalenes, alkylphenanthrenes, alkylbiphenyls, alkylfluorenes, alkylpyrenes, alkylfluoranthenes and alkyldibenzothiophenes. All chromatograms are included in the appendices. A wide variety of source and maturity related parameters were calculated from the integrated SIM mass chromatograms and are reported in Tables 7a and 7b. Abbreviations for aromatic hydrocarbons are defined in Appendix Table A3. 3.8.1 Overall aromatic hydrocarbon composition Almost all classes of aromatic compounds were identified in five of the oil shows (513 m, 614 m, 634 m, 671 m and 753 m). These compounds have been mostly or completely removed by biodegradation from the other oil shows. The overall aromatic hydrocarbon compositions of the Moose-2 samples are shown in Figure 7. All the samples contain low amounts of alkylbenzenes but strongly dominant amounts of phenanthrene and alkylphenanthrenes. The 671 m oil show also contains high amounts of alkylnaphthalenes and significant amounts of dibenzothiophenes. 3.8.2 Alkylbenzenes Alkylbenzenes, including the xylenes, trimethylbenzenes and tetramethylbenzenes, were detected in four oil shows (see Appendix Figs. *16). These compounds are in such low abundance in some samples (634 m and 753 m) that their distribution is not interpretable. Low abundances of alkylbenzenes may be due to partial evaporative loss during sample work-up, or to the effects of water washing and/or biodegradation. There are at least two potential controls on the distribution of alkylbenzenes. Firstly, some isomers may be more thermally stable than others, so maturity-dependent ratios can be configured (TMBI-1, TMBI-2, MEBI-1, TeMBI-x, TeMBI-y; Table 7a). A second control on alkylbenzene distributions is biodegradation. Moderate biodegradation of oils has been shown to result in the preferential retention of 1,2,3-trimethylbenzene and 1,2,3,4-tetramethylbenzene relative to other trimethylbenzene and tetramethylbenzene isomers (George et al., 2002b). More extensive biodegradation results in the removal of all alkylbenzenes. The Moose-2 oil show samples where alkylbenzenes could be CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 32 Table 7a: Aromatic hydrocarbon parameters of Moose-2 oil show samples.
Parameters CSIRO Code - --------------------------------------------------------------------- ------------------------------------------------- 513m 614m 634m 671m 753m 790m TMBI-1 (1,3,5-TMB/[1,3,5-TMB+1,2,3-TMB]) n.d. 0.38 0.51 n.d. 0.50 n.d. TMBI-2 (1,2,4-TMB/[1,2,4-TMB+1,2,3-TMB]) n.d. 0.81 0.78 n.d. 0.79 n.d. MEBI-1 (1M3EB+1M4EB)/(1M3EB+1M4EB+1M2EB) n.d. 0.88 0.78 n.d. 0.82 n.d. TeMBI-x (1,2,3,5-TeMB/[1,2,3,5-TeMB+1,2,3,4-TeMB]) 0.48 0.54 0.45 n.d. 0.45 n.d. TeMBI-y (1,2,4,5-TeMB/[1,2,4,5-TeMB+1,2,3,4-TeMB]) n.d. 0.55 0.31 n.d. 0.16 n.d. Methylnaphthalene ratio (MNR: 2-MN/1-MN) 1.61 1.64 2.34 0.70 1.70 n.d. Naphthalene/? methylnaphthalenes 0.20 0.70 0.34 0.07 0.68 n.d. Ethylnaphthalene ratio (ENR: 2-EN/1-EN) 2.52 0.01 2.84 n.d. 13.05 n.d. DNR-1 ([2,6-+2,7-DMN]/1,5-DMN) 6.19 1.65 27.65 n.d. 1.10 n.d. DNR-x ([2,6-+2,7-DMN]/1,6-DMN) 1.34 1.03 2.59 n.d. 1.12 n.d. DNR-y ([2,6-+2,7-DMN]/[2,6-+2,7-DMN+1,3+1,7-DMN]) 0.49 0.41 0.59 n.d. 0.45 n.d. DNR-z (1,5-/[1,5-+1,2-DMN]) 0.32 0.67 0.16 n.d. 0.71 n.d. TNR-1 (2,3,6-TMN/[1,4,6-+1,3,5-TMN]) 1.01 1.12 3.10 1.06 1.85 n.d. TNR-2 ([2,3,6-+1,3,7-TMN]/[1,4,6-+1,3,5-+1,3,6-TMN]) 1.29 0.90 1.86 0.81 1.52 n.d. TNRs ([1,3,7-+2,3,6-TMN]/1,3,6-TMN) 2.83 2.38 2.93 1.39 3.71 n.d. TNR-x (1,2,5-TMN/[1,2,5-+1,2,4-+1,2,3-TMN]) 0.57 0.53 0.80 0.66 0.58 n.d. DBR (1,6-DMN/1,5-DMN) 4.61 1.60 10.65 n.d. 0.98 n.d. TBR (1,3,6-TMN/1,2,4-TMN) 7.57 1.11 14.58 8.77 1.43 n.d. TeBR2 (1,2,6,7-TeMN/1,2,3,7-TeMN) 3.16 n.d. 3.56 2.03 5.15 n.d. 1,3,6-TMN/1,3,7-TMN 0.62 1.84 0.88 1.59 0.95 n.d. Log (1,2,5-TMN/1,3,6-TMN) -0.37 0.04 -0.08 -0.40 0.26 n.d. Log (1,2,7-TMN/1,3,7-TMN) -0.86 -0.20 -0.55 -0.57 0.55 n.d. TeMNR-1 (2,3,6,7-TeMN/1,2,3,6-TeMN) 2.18 n.d. 1.27 0.91 0.71 n.d. TeMNR-2 (1,2,5,6+1,2,3,5-TeMN)/1,2,3,6-TeMN 3.67 n.d. 5.24 2.09 3.82 n.d. TMNr (1,3,7-TMN/[1,3,7-+1,2,5-TMN]) 0.79 0.33 0.58 0.61 0.37 n.d. TeMNr (1,3,6,7-TeMN/[1,3,6,7+1,2,5,6-TeMN]) 0.69 n.d. 0.50 0.73 0.41 n.d. PMNr (1,2,4,6,7-PMN/[1,2,4,6,7+1,2,3,5,6-PMN]) 0.31 n.d. 0.15 0.70 0.14 n.d. HPI (Higher plant index) ([Retene + Cadalene + IP-iHMN]/1,3,6,7-TeMN) 0.18 n.d. 1.80 0.15 n.d. n.d. % IP-iHMN (of total Retene + Cadalene + IP-iHMN) 16.52 n.d. 5.98 100 n.d. n.d. % Cadalene (of total Retene + Cadalene + IP-iHMN) n.d. n.d. n.d. n.d. n.d. n.d. % Retene (of total Retene + Cadalene + IP-iHMN) 83.48 n.d. 94.02 n.d. n.d. 100
-----continued in Table 7b TMBI = trimethylbenzene index, MEBI = methylbenzene index, TeMBI = tetramethylbenzene index, DNR = dimethylnaphthalene ratio; TNR = trimethylnaphthalene ratio; TeMNr = tetramethylnaphthalene ratio; PMNr = pentamethylnaphthalene ratio. For compound abbreviations see Table A3. n.d. = not determined. All ratios were calculated from the relevant extracted ion chromatograms of the full scan run of aromatic hydrocarbon fractions (Samples: 513 m, 614 m, 634 m and 753 m) or EOM (Samples: 671 m and 790 m). positively identified (513 m, 634 m, and 753 mm) have alkylbenzene distributions dominated by 1,2,3-trimethylbenzene and/or 1,2,3,4-tetramethylbenzene relative to other trimethylbenzene and tetramethylbenzene isomers. This is evidence that the alkylbenzenes in these samples have been affected by biodegradation. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 33 Table 7b: Aromatic hydrocarbon parameters of Moose-2 oil show samples (continued from Table 7a).
Parameter CSIRO Code ---------------------------------------------------------- 513m 614m 634m 671m 753m 790m - ---------------------------------------------------------- ----- ------ ----- ----- ----- ----- Methylphenanthrene index (MPI-1) 1.55 2.03 1.31 0.78 1.03 0.71 =1.5*[3-MP+2-MP]/[P+9-MP+1-MP]) Calculated vitrinite reflectance %Rc (MPI-1) 1.33 1.62 1.19 0.87 1.02 0.83 0.6*MPI-1+0.4 (for Ro <1.35), from Radke and Welte, 1983 Methylphenanthrene distribution fraction (MPDF) 0.54 0.63 0.63 0.48 0.55 0.42 =(3-MP+2-MP)/ (E) MPs) 1-MP/9-MP 0.44 0.81 0.58 0.94 0.64 0.96 log (1-MP/9-MP) -0.35 -0.09 -0.23 -0.03 -0.20 -0.02 Methylphenanthrene ratio (MPR)=2-MP/1-MP 2.10 1.89 2.03 1.17 1.73 0.93 Calculated vitrinite reflectance %Rc (MPR) 1.26 1.21 1.24 1.01 1.18 0.91 =0.99*log MPR+0.94, from Radke et al., 1984 Dimethylphenanthrene ratio (DPR) = (3,5-+2,6-DMP+2,7-DMP)/ 0.48 0.34 0.44 0.24 nd 0.32 (1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP) Log (1,7-DMP/1,3-+3,9-+2,10-+3,10-DMP) -0.45 -0.78 -0.51 -0.55 nd -0.78 DPR-x (1,7-DMP/1,7-+1,3-+3,9-+2,10-+3,10-DMP) 0.26 0.14 0.23 0.22 nd 0.14 Log (Retene/9-MP) -1.36 nd -0.17 nd nd -0.32 Fluoranthene/(fluoranthene + pyrene) 0.22 nd 0.26 0.31 nd nd Methylpyrene index (MPyI2)=2-MPy/1-+4-MPy 0.41 nd 0.45 0.30 nd nd from Garrigues et al., 1988 3-MBp/Bp 2.08 2.57 2.56 nd 2.57 nd Methylbiphenyl ratio (MBpR)=3-MBp/2-MBp 51.99 46.84 76.51 nd 58.89 nd 3-MBp/4-MBp 2.17 2.16 2.60 nd 2.58 nd Dimethylbiphenyl ratio (DMBpR-x)=3,5-DMBp/2,5-DMBp 15.79 32.19 34.72 nd 50.70 nd Dimethylbiphenyl ratio (DMBpR-y)=3,3'-DMBp/2,3'-DMBp 42.39 29.41 79.08 nd 30.09 nd Phenanthrene/dibenzothiophene 6.24 6.89 12.66 2.32 18.62 11.66 Dibenzothiophene/phenanthrene 0.16 0.15 0.08 0.43 0.05 0.09 Methyldibenzothiophene ratio (MDR)=4-MDBT/1-MDBT 5.21 2.35 6.02 2.70 4.43 nd Calculated vitrinite reflectance %Rc (MDR) 0.89 0.68 0.95 0.71 0.83 nd =0.073*MDR+0.51, from Radke, 1988 Dimethyldibenzothiophene Ratio (DMDR) 0.70 nd 0.78 nd nd nd =4,6-DMDBT/3,6-+2,6-DMDBT Dibenzothiophene/1,3,6,7-TeMN 0.20 nd 0.51 1.50 0.60 nd Dibenzothiophene/1,2,5,6-+1,2,3,5-TeMN 0.45 nd 0.50 4.04 0.42 nd
For compound abbreviations see Table A3. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 34 [CHART] Figure 7: Normalised aromatic hydrocarbon compositions of the Moose-2 samples. 3.8.3 Alkylnaphthalenes Alkylnaphthalenes provide information on the thermal maturity, biodegradation history and source characteristics of the samples analysed. Biodegradation favours less alkylated isomers, those with (Beta)-substitution patterns, and those with a 1,6-substitution pattern, whereas aromatic hydrocarbons with methyl groups on adjacent positions and with greater alkylation are more resistant to biodegradation (Volkman et al., 1984; Fisher et al., 1998). Alkylnaphthalene distributions in the 513 m, 614 m, 634 m, 671 m and 753 m oil shows display an increasing abundance of compounds with increasing degree of alkylation (i.e. trimethylnaphthalenes> CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 35 dimethylnaphthalenes> methylnaphthalenes, Fig. 7), reduced abundances of 1,6-dimethynaphthalenes and increased abundances of 1,2-dimethylnaphthalenes relative to other isomers. These are indicative of various levels of biodegradation of the Moose-2 oil show samples. The ENR of these samples are low (<3, except for 753 m), likely due to preferential removal of 2-ethylnaphthalene by biodegradation, and retention of 1-ethylnaphthalene (Volkman et al., 1984). For the same reasons the methylnaphthalene ratios (MNR) of these samples are also low (<3). Fisher et al. (1998) suggested the dimethylnaphthalene biodegradation ratio (DBR) as a way of monitoring preferential loss of 1,6-dimithylnaphthalene due to biodegradation. This parameter varies over a wide range for the sample set (Table 7a) with DBR values from 0.98 for the 753 m to 10.6 for the 634 m oil show. The higher values (>4) may reflect an additional thermal maturity control on this ratio. The two samples with DBR values <1.6 have had their dimethylnaphthalene distributions significantly altered, and based on data in Fisher et al. (1998) have been biodegraded to at least level 3 (moderate). Two other biodegradation ratios (TBR and TeBR2) can be used to assess the effect of biodegradation on trimethylnaphthalenes and tetramethylnaphthalenes, respectively (Fisher et al., 1998). Note that the TeBR2 ratio used here is different from the original TeBR defined by Fisher et al. (1998), because 1,3,5,7-tetramethylnaphthalene was not identified unambiguously in this study. TeBR2 is expected to behave in the same way as was TeBR. TBR values for the sample set varies between 1.1 and 14.6. The higher values (>8) may reflect thermal maturity control. The three other samples from the 513 m, 614m and 753 m with TBR values between 1.1 and 7.5, based on data in Fisher et al. (1998) have been biodegraded to a level of 3 to 5 (moderate to severe). TeBR2 values do not exhibit significant signs of alteration of tetramethylnaphthalenes by biodegradation in any samples. The alkylbenzene and alkylnaphthalene biodegradation parameters are consistent with the data from the aliphatic hydrocarbons, which showed most biodegradation in the 614 m, 641.5 m and 753 m samples. The MNR (0.7 to 2.3), ENR (0.01 to 13.1) and DNR-1 (1.1 to 27.7) of the Moose-2 samples vary over a wide range, indicating significant effects of biodegradation on these thermal maturity ratios. However, the TMNr (0.33 to 0.79) and TeMNr (0.41 to 0.73) values for these samples vary over relatively narrow ranges, indicating less influence of biodegradation on these ratios. These two ratios are consistent with various biomarker ratios (see Sections 3.6 and 3.7), and indicate an early to peak stage of oil window maturity (van Aarssen et al., 1999) for most of the Moose-2 oil show samples, similar to many of the solid bitumens from the Subu wells (Fig. 8). CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 36 Other alkylnaphthalene ratios provide information on source. The ratio (1,2,5-TMN/1,3,6-TMN) increases with greater input from higher plants (Strachan et al., 1988), although clearly this ratio is also influenced by maturity, with low maturity samples containing greater amounts of 1,2,5-TMN which is a precursor compound (van Aarssen et al., 1999). The ratio (1,2,7-TMN/1,3,7-TMN) increases with greater input from angiosperms (Strachan et al., 1988), and thus is often high in samples with high oleanane. The cross-plot of the logs of these ratios is shown in Fig. 9, with boundaries on this trimethylnaphthalene graph taken from Strachan et al. (1988). The ratio (1,2,7-TMN/1,3,7-TMN) is high for both the 614 m and 753 m samples, reflecting relatively greater inputs from angiosperm derived organic matter; however, the slightly higher (1,2,5-TMN/1,3,6-TMN) ratio for 753 m may be indicative of its lower maturity. Interestingly, oleanane was not detected in either of these two samples. The 513 m, 634 m and 671 m oil show samples have these two ratios in the lower left quadrant, meaning no clear evidence for angiosperm organic matter input, despite the detection of oleanane and/or lupane in the 513 m sample. [GRAPH] Figure 8: Cross-plot of the trimethylnaphthalene ratio versus the tetramethylnaphthalene ratio. The data from the Subu wells are shown as black dots (from George et al., 2003). CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 37 [GRAPH] Figure 9: Cross-plot of log (1,2,7-TMN/1,3,7-TMN) versus log (1,2,5-TMN/ 1,3,6-TMN). The boundaries on this trimethylnaphthalene graph are taken from Strachan et al. (1988). The data from the Subu wells are shown as black dots (from George et al., 2003). The higher plant index (HPI) varies from 0.15 to 1.8 for the 513, 634 and 671 m oil shows (Table 7a). The higher plant fingerprint (varying proportions of retene + cadalene + IP-iHMN; Table 7a) shows that these samples contain dominantly retene, not cadalene. Retene is likely to be resin-derived, and this evidence corroborates the presence of 4(Beta)(H)-19-isopimarane and isopimarane in some of the Moose-2 oil show samples, which are also resin-derived compounds. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 38 3.8.4 Alkylphenanthrenes The cross plots of methylphenanthrene index (MPI-1) vs the methylphenanthrene distribution fraction (Fig. 10) and the methylphenanthrene ratio vs the dimethylphenanthrene ratio (Fig. 11) displays some differences in molecular maturities of the Moose-2 samples: the shallower 513 m, 614 m, 634 m oil show samples are more mature than the relatively the deeper 671 m and 790 m samples, indicating the mixing of variable amounts of less mature indigenous hydrocarbons into these deeper samples. Calculated reflectance (R(c)) from MPI-1 is 0.83 to 1.33% (except for one sample) for the Moose-2 samples, which is significantly higher than the maturities estimated from the other aromatic and biomarker maturity parameters. This enhancement may have been caused from the preferential removal of the more susceptible phenanthrene by biodegradation and/or water washing, although it also may simply reflect the lack of universal applicability of the different calibrations. [GRAPH] Figure 10: Cross-plot of methylphenanthrene index 1.5*[3-MP+2-MP]/ [P+9-MP+1-MP]) versus methylphenanthrene distribution fraction((3-MP+2-MP)/MPs). The data from the Subu wells are shown as black dots (from George et al., 2003). CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 39 [GRAPH] Figure 11: Cross-plot of methylphenanthrene ratio (2-MP/1-MP) versus dimethylphenanthrene ratio (3,5-+2,6-DMP+2,7-DMP)/ (1,3-+3,9-+2,10-+3,10-DMP+1,6-+2,9-+2,5-DMP). The data from the Subu wells are shown as black dots (from George et al., 2003). Three alkylphenanthrene ratios can be used to assess the degree of contribution of coniferous organic matter into a rock, in particular Araucariaceae input (Alexander et al., 1988). These are 1-MP/9-MP, retene/9-MP and 1,7-DMP/(1,3-+3,9-+2,10-+3,10-DMP) (Table 7). The majority of the Moose-2 samples have values for the logs of these ratios below the threshold suggested by Alexander et al. (1988). This is evidence against any coniferous organic matter input. This observation, however, is inconsistent with the presence of relatively smaller amounts of retene and 4(Beta)(H)-19-isopimarane and isopimarane in some of these oil show samples, which are believed to be resin-derived compounds (Section 3.6.2), and may reflect different diagenetic pathways. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 40 3.8.5 Alkylbiphenyls Alkylbiphenyls provide information about thermal maturity (Alexander et al., 1986, although these ratios may only be sensitive to variations in the upper part of the oil window (George and Ahmed, 2002). There are rather low amounts of the ortho-substituted 2-MBp and dimethylbiphenyls in the oil show samples, suggesting a higher maturity (e.g. Cumbers et al., 1987). However, the methylbiphenyl ratio and two dimethylbiphenyl ratios (Table 7a) are much higher than those expected from the maturation levels estimated from the biomarker and other aromatic maturity parameters. So it is likely that the alkylbiphenyl ratios are insensitive to maturity variations in Moose-2 well. Therefore, as for the Moose-1 (George et al., 2004) and Subu well (George et al., 2003) works, these ratios are not considered to be effective tools for this sample set. 3.8.6 Alkyldibenzothiophenes Alkyldibenzothiophenes can be used as thermal maturity markers; two ratios (MDR and DMDR) are defined in Table 7b. Although, these ratios were not useful for determining thermal maturities in the Subu (George et al., 2003) and Moose-1 (George et al., 2004) wells, they do provide reliable estimates of maturities for the Moose-2 samples. The MDR values of Moose-2 samples vary between 2.4 and 6.0, and based on a calibration of MDR to vitrinite reflectance (Radke, 1988), VRE values for these samples are 0.71-0.89%, which are consistent with the maturities estimated from the other ratios derived from the biomarker and aromatic compounds. The relative abundances of sulphur compounds can be estimated from the dibenzothiophene to phenanthrene and tetramethylnaphthalene ratios (Table 7b). The DBT/P ratios (0.05 - 0.43) of the Moose-2 oil shows are similar to those of the Family B solid bitumens (0.06 - 0.23) but higher than those of the Family A solid bitumens (0.01 - 0.12) of Subu area (George et al., 2003), indicating that the source rock of the Moose-2 samples, like those of the Family B solid bitumens, had a high sulphur content. The DBT/1,3,6,7-tetra-methylnaphthalene ratios (0.20 - 1.50) of the Moose-2 samples are also indicative of the significant inputs of the sulfur compounds into their source rocks. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 41 4 INTERPRETATION 4.1 SECONDARY ALTERATION INFORMATION The overall composition of the aliphatic and aromatic hydrocarbon compounds of the ten Moose-2 oil show samples can be visualised on the GC traces and TICs of their EOM (Appendix Figures *1). These demonstrate that these samples have undergone different levels of secondary alteration by biodegradation. Effects of secondary processes such as biodegradation are usually readily apparent in the distribution of the straight-chained hydrocarbons, as these are generally the first compound class removed by microbial activity (Volkman, et al., 1984). The n-alkanes distribution patterns of the 10 oil show samples clearly demonstrate their alteration to different extent by different levels of biodegradation (Appendix Figures *1). The 614 m, 614.5 m and 753 m samples are the most biodegraded among this sample set, which is indicated by the presence of very large UCM humps with relatively much lesser amounts of C(15) to C(27) n-alkanes. These distribution patterns indicate a biodegradation of level 4 or higher when compared with the 1 (least degraded) to 9 (most degraded) level scale of Volkman et al. (1984). The 513 m, 671 m, 746 m, 766 m and 790 m samples shows the presence of large UCM hump with a reduced amount of n-alkanes over the entire range, indicating a minor biodegradation of level 3 or higher. On the other hand 634 m and 660 m samples with minor UCM humps and abundant n-alkanes may have undergone a very minor biodegradation of level 2. The aromatic hydrocarbon distributions (Appendix Figures *2) for the 614 m and 753 m samples demonstrate the near complete removal of almost all the aromatic compounds and the presence of large UCM humps. As suggested by Fisher et al. (1998), this is consistent with their relatively higher level of biodegradation. The 513 m and 634 m samples show the removal of the more susceptible low molecular weight aromatic compounds but the presence of a significant amount of the less susceptible high molecular weight alkylnaphthalenes and alkylphenanthrenes, indicating their alteration by a relatively lower level of biodegradation. Only four (513 m, 614 m, 634 and 753 m) out of 10 oil show samples have been fractionated into aliphatic and aromatic hydrocarbons, and analysed in detail for biomarker distributions (both SIM and MRM). Accordingly, direct comparison among the ten samples with respect to the effects of biodegradation on the aromatic hydrocarbons and biomarkers could not be established. 4.2 SOURCE CHARACTERISTICS CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 42 The Moose-2 oil shows, with the probable exception of the 513 m sample, exhibit source characteristics similar to those exhibited by the Family B solid bitumens and the fluid inclusion oil in the Subu wells. The "Family B" solid bitumens were ascribed to having an origin from a calcareous source with a high proportion of prokaryotic and a low proportion of terrestrial organic matter input. On the other hand "Family A" solid bitumen are thought to have been derived from a clay-rich, marine source rock low in sulphur, which had significant input of terrestrial organic matter and was deposited in an oxic depositional environment (George et al., 2003). The characteristics of the Moose-2 oil shows (except the 513 m sample) that are similar to the calcareous source of the Family B samples are: - the high relative abundance of 2(Alpha)-methylhopanes, - the high relative abundance of 30-norhopanes, - the high C(29)/C(30) (Alpha)(Beta) hopane ratios, - the low content of rearranged hopanes including low Ts/Tm and C(29)Ts/C(29)(Alpha)(Beta) hopane ratios, - the high relative abundance of aromatic sulphur compounds, and - the lack of a significant terrestrial signature in the terpanes, diterpanes, or aromatic hydrocarbons. The NDR and NCR ratios indicate an age of Cretaceous or younger for these samples. However, unlike the Family B solid bitumens, these samples have relatively higher proportions of rearranged steranes, as indicated by the higher diasterane/sterane ratios. This might have been caused by the preferential removal of more susceptible steranes (compared to diasteranes) by biodegradation, or by a higher maturity. In addition, C(30)*/C(30) (Alpha)(Beta) hopane ratios of these samples are slightly higher than those of the Family B solid bitumens, which again could be due to a higher maturity, or these may have been introduced by mixing with traces of non-indigenous Family A oil or less mature indigenous hydrocarbons from the migration pathway. The 513 m oil show sample, however, exhibits mixed source signatures: like the Family B members it has low amounts of coniferous organic matter; low abundances of the rearranged hopanes, including C(29) and C(30) diahopane; the absence of the unidentified C(29)ss. and C(30)ss. rearranged terpanes; low sterane/hopane and diasteranes/steranes ratios; and high relative abundance of sulphur compounds. On the other hand, this sample exhibits some features similar to Jurassic-sourced Family A solid bitumens in the Subu CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 43 well: lower abundances of 2(Alpha) methylhopanes and a lower C(30)/(C(27)+C(28)+C(29)) (Alpha)(Alpha)(Alpha) 20R sterane ratio. It contains oleanane providing an age control on this sample of Cretaceous or younger age, after the evolution of angiosperm flowering plants. The NDR and NCR also indicate similar age for this sample. Other notable biomarker signatures include the abundance of C(35) homohopanes and the presence of significant amounts of extended tricyclic terpanes, which indicate a highly reducing environment (possibly either marine or lacustrine) with algal and/or bacterial organic matter inputs, and the abundance of 3(Beta)-methylhopanes, which suggest a lacustrine input to this oil show. However, it should be noted that other lacustrine biomarkers (higher C(26)/C(25) tricyclic terpane ratios >1.2; high gammacerane) are absent for this oil show. In summary, it is likely that the 513 m oil show, like the other Moose-2 samples, originated mainly from a Family B source rock, but that it may have been partially co-sourced by a highly reducing lacustrine (?) facies, or it may have extracted some indigenous hydrocarbons from lacustrine sediments along the migration pathway. The affinity of the Moose-2 oil shows with the Family B solid bitumens of the Subu well and its relevance to the other previously analysed oils of Papua New Guinea is displayed on three source correlation diagrams (Fig. 12-14). CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 44 [GRAPH] Figure 12: Cross-plot of C(29)Ts/C(29)(Alpha)(Beta) hopane versus C(30)*/C(30) (Alpha)(Beta) hopane for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 45 [GRAPH] Figure 13: Cross-plot of C(29)(Alpha)(Beta) hopane/C(30) (Alpha)(Beta) hopane versus C(31) (Alpha)(Beta) hopane/C(30) (Alpha)(Beta) hopane ratios for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 46 [GRAPH] Figure 14: Cross-plot of Pr/Ph versus C(35)/( C(35) + C(34)) homohopane ratios for the samples from this project compared to Subu well, literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 47 4.3 THERMAL MATURITY CHARACTERISTICS Most of the molecular maturity parameters based upon medium to high molecular weight aliphatic hydrocarbon biomarkers suggest that the Moose-2 oil show samples were derived from a source rock in its early to peak stages of the oil generation window. For example, the extended homohopane 22S/(22S+22R) ratios, the C(29) hopane (Alpha)(Beta)/((Alpha)(Beta)+(Beta)(Alpha)) ratios and C(30) hopane (Alpha)(Beta)/((Alpha)(Beta)+(Beta)(Alpha)) ratios are mostly at or near equilibrium values, indicating thermal maturities have passed at least the early stage of the oil generation window. The C(27) and C(29) (Alpha)(Alpha)(Alpha) 20S/(20S+20R) steranes ratios are indicative of maturities from the early to peak stages of the oil generation window. Based on a calibration of C(29) (Alpha)(Alpha)(Alpha) 20S/20R) steranes to vitrinite reflectance equivalent (VRE) (Sofer et al., 1993) these oil shows have maturities from 0.70 to 0.88%. Aromatic hydrocarbon maturity parameters provide slightly ambiguous maturity information, possibly because of the variable effects of biodegradation on different compounds and minor variations in source organic matter inputs and/or palaeoenvironment of deposition, and also likely reflecting uncertainty and lack of universal applicability of the different calibrations. For example, a widely quoted thermal maturity parameter, MPI-1 is moderate to high for these samples (0.71 to 2.03), suggesting maturities in vitrinite reflectance equivalent (VRE) of 0.83 to 1.6% when using a calibration of Radke and Welte (1983). The MPR values of 0.93 to 2.1 suggest relatively lower maturation level, between 0.91 to 1.26% in VRE when using a calibration of Radke et al. (1984). Using the calibration of Radke (1988), the methyldibenzothiophene ratios of 2.4 to 6.0, suggest lower maturities from 0.71 to 0.95% in VRE, which are very similar to those estimated from the aliphatic biomarker ratios. This level of maturity is also corroborated by the moderate TMNr and TeMNr values (0.33-0.79), indicating early to peak oil window maturities (van Aarssen et al., 1999). A comparison of the Moose-2 oil shows with the solid bitumens in the Subu well and other previously analysed oils in Papua New Guinea is shown in the maturity correlation diagram (Fig. 15). CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 48 [GRAPH] Figure 15: Cross-plot of C(29) sterane (Alpha)(Alpha)(Alpha) 20S/(20S+20R) versus C(29) sterane(Alpha)(Beta)(Beta)/((Alpha)(Beta)(Beta)+(Alpha)(Alpha) (Alpha)) for the samples from this project compared to literature and unpublished data. Solid symbols are analyses carried out at the CSIRO laboratory. Open symbols are analyses derived from literature data, some of which were derived from ruler-measured peak heights from published chromatograms and thus are subject to inaccuracies. Black symbols are samples in this report from the Moose-2 well. CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 49 5 CONCLUSIONS - The high extractabilities of two samples (614.5 m and 753 m) are indicative of hydrocarbon migration to the Mendi Formation in the Moose-2 well. - None of the Moose-2 oil shows resemble the n-alkane distribution of diesel or Aus-Tex (drilling mud additives), indicating that all the samples analysed in this study are natural crude oils. SECONDARY ALTERATION - Geochemical evidence suggests that the Moose-2 oil shows have been affected by various levels of biodegradation. - Based on a 1 to 9 level scale of biodegradation (Volkman et al., 1984), the 614 m, 614.5 m and 753 m samples appeared to have been most altered by moderate biodegradation (level 4 or higher); the 513 m, 671 m, 746 m, 766 and 790 m samples by minor biodegradation (level 3); and the 634 m and 660 m samples by very minor biodegradation (level of 2). CORRELATION AND SOURCE CHARACTERIZATION - Most of the Moose-2 oil shows correlate well with the Family B samples from Subu well. These were generated from a calcareous source rock deposited in a suboxic depositional environment, with a high input of prokaryotic organic matter and a low proportion of terrestrial organic matter. - The 513 m oil show has unusual biomarker signatures that indicate a mixed source, partly correlating with the Family B members of Subu samples, but also probably partially co-sourced by a highly reducing lacustrine (?) facies. This oil show may also have been influenced by the extraction of indigenous hydrocarbons from the migration pathway. THERMAL MATURITY - The majority of the maturity parameters deduced from the aliphatic and aromatic hydrocarbon biomarkers indicate that the Moose-2 oil show samples were generated at maturities 0.7 to 0.9% in VRE, within the early to peak stages of the oil generation window. - The relatively higher maturities of some of the shallower samples (compared to deeper samples) may be due to the migration of a mature Family B oil to the CSIRO Petroleum InterOil: Moose-2 oil show geochemistry, Page 50
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APPENDIX A PEAK ASSIGNMENTS AND ABBREVIATIONS CSIRO Petroleum InterOil: Moose-2, peak assignments, Page Ai
TABLE OF CONTENTS Table A1: Peak assignments for terpanes in the m/z 123, 191, 177 and 205 mass and MRM chromatograms. Table A2: Peak assignments for steranes, diasteranes and methylsteranes in the m/z 217, 218, 259 and 231 mass chromatograms and MRM chromatograms. Table A3: Peak abbreviations for aromatic hydrocarbons, with the diagnostic m/z ions. CSIRO Petroleum InterOil: Moose-2, peak assignments, Page Aii
Table A1: Peak assignments for terpanes in the m/z 123, 191, 177 and 205 mass and MRM chromatograms.
Peak Terpane assignments ---- ------------------- BS Bicyclic sesquiterpane C(29)Section C(29) rearranged triterpane Ts C(27) 18(Alpha)(H),22,29,30-trisnorneohopane TNH C(27) 17(Alpha)(H),18(Alpha) (H),21(Beta)(H)-trisnorhopane C(30)Section C(30) rearranged triterpane Tm C(27) 17(Alpha)(H),22,29,30-trisnorhopane C(27)(Beta) C(27) 17(Beta)(H),22,29,30-trisnorhopane 25,30-BNH C(28) 17(Alpha)(H),25,30-bisnorhopane 29,30-BNH C(28) 17(Alpha)(H),29,30-bisnorhopane 28,30-BNH C(28) 28,30-bisnorhopane 25-nor C(29) 25-nor-17(Alpha) (H)-hopane C(29)* C(29) 17(Alpha)(H)-diahopane C(31)Section C(31) rearranged triterpane C(29)(Alpha)(Beta) 17(Alpha)(H),21(Beta) (H)-30-norhopane C(29)Ts 18(Alpha)(H)-30-norneohopane C(30)* C(30) 17(Alpha)(H)-diahopane C(29)(Beta)(Alpha) 17(Beta)(H),21(Alpha)(H)-30-norhopane C(30) 25-nor S C(30) 25-nor-17(Alpha)(H)-hopane (22S) C(30) 25-nor R C(30) 25-nor-17(Alpha)(H)-hopane (22R) Oleanane 18(Alpha)(H)-oleanane(+ 18(Beta)(H)-oleanane) C(30)(Alpha)(Beta) 17(Alpha)(H),21(Beta)(H)-hopane C(30) 30-nor C(30) 30-nor-17(Alpha)(H)-hopane C(30)(Beta)(Alpha) 17(Beta)(H),21(Alpha)(H)-hopane C(31)* C(31) 17(Alpha)(H)-diahopane C(31)(Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-homohopane (22S) C(31)(Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-homohopane (22R) G Gammacerane C(31) 30-nor C(31) 30-nor-17(Alpha)(H)-hopane C(31)(Beta)(Alpha) 22S+R 17(Beta)(H),21(Alpha)(H)-homohopane (22S and 22R) C(32)* C(32) 17(Alpha) (H)-diahopane C(32)(Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-bishomohopane (22S) C(32)(Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-bishomohopane (22R) C(32) 30-nor C(32) 30-nor-17(Alpha)(H)-hopane C(33)(Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-trishomohopane (22S) C(33)(Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-trishomohopane (22R) C(33) 30-nor C(33) 30-nor-17(Alpha)(H)-hopane C(34)(Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-tetrakishomohopane (22S) C(34)(Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-tetrakishomohopane (22R) C(34) 30-nor C(34) 30-nor-17(Alpha)(H)-hopane
Continued... CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A1
Table A1 (Continued): Peak assignments for terpanes in the m/z 123, 191, 177 and 205 mass and MRM chromatograms.
Peak Terpane assignments ---- ------------------- C(35)(Alpha)(Beta) 22S 17(Alpha)(H),21(Beta)(H)-pentakishomohopane (22S) C(35)(Alpha)(Beta) 22R 17(Alpha)(H),21(Beta)(H)-pentakishomohopane (22R) 2(Alpha)(Me) 2(Alpha)-methylhopane 3(Beta)(Me) 3(Beta)-methylhopane 19/3 etc C(19) tricyclic terpane (etc, for C(20) to C(26)) 24/4 C(24) tetracyclic terpane 19NIP 4(Beta)(H)-19-Isopimarane IP Isopimarane B ent-Beyerane
CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A2
Table A2: Peak assignments for steranes, diasteranes and methylsteranes in the m/z 217, 218, 259 and 231 mass chromatograms and MRM chromatograms.
Peak Sterane, diasterane and methylsterane assignments Abbreviation - ---- ------------------------------------------------- ------------ 1 13(Beta)(H),17(Alpha)(H)-24-nordiacholestane (20S) C(26) (Beta)(Alpha)20S 24-nor-dia 2 13(Beta)(H),17(Alpha)(H)-24-nordiacholestane (20R) C(26) (Beta)(Alpha)20R 24-nor-dia 3 13(Beta)(H),17(Alpha)(H)-27-nordiacholestane (20S) C(26) (Beta)(Alpha)20S 27-nor-dia 4 13(Beta)(H),17(Alpha)(H)-27-nordiacholestane (20R) C(26) (Beta)(Alpha)20R 27-nor-dia 5 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-24-norcholestane (20S) C(26) (Alpha)(Alpha)(Alpha) 20S 24-nor-ster 6 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-24-norcholestane (20R) C(26) (Alpha)(Beta)(Beta)20R 24-nor-ster 7 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-24-norcholestane (20S) C(26) (Alpha)(Beta)(Beta)20S 24-nor-ster 8 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-24-norcholestane (20R) C(26) (Alpha)(Alpha)(Alpha)20R 24-nor-ster 9 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-21-norcholestane + C(26) (Alpha)(Alpha)(Alpha)+(Alpha)(Beta)(Beta)21- 5(Alpha)(H),14(Beta)(H), 17(Beta)(H)-21-norcholestane nor-steranes 10 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-27-norcholestane (20S) C(26) (Alpha)(Alpha)(Alpha) 20S 27-nor-ster 11 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-27-norcholestane (20R) C(26) (Alpha)(Beta)(Beta) 20R 27-nor-ster 12 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-27-norcholestane (20S) C(26) (Alpha)(Beta)(Beta) 20S 27-nor-ster 13 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-27-norcholestane (20R) C(26) (Alpha)(Alpha)(Alpha) 20R 27-nor-ster a 13(Beta)(H),17(Alpha)(H)-diacholestane (20S) C(27) (Beta)(Alpha) 20S diasterane b 13(Beta)(H),17(Alpha)(H)-diacholestane (20R) C(27) (Beta)(Alpha) 20R diasterane c 13(Alpha)(H),17(Beta)(H)-diacholestane (20S) C(27) (Alpha)(Beta) 20S diasterane d 13(Alpha)(H),17(Beta)(H)-diacholestane (20R) C(27) (Alpha)(Beta) 20R diasterane e 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane (20S) C(27) (Alpha)(Alpha)(Alpha) 20S sterane f 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20R) C(27) (Alpha)(Beta)(Beta) 20R sterane g 5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20S) C(27) (Alpha)(Beta)(Beta) 20S sterane h 5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane (20R) C(27) (Alpha)(Alpha)(Alpha) 20R sterane i 24-methyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20S) C(28) (Beta)(Alpha) 20S diasterane j 24-methyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20R) C(28) (Beta)(Alpha) 20R diasterane k 24-methyl-13(Alpha)(H),17(Beta)(H)-diacholestane (20S) C(28) (Alpha)(Beta) 20S diasterane l 24-methyl-13(Alpha)(H),17(Beta)(H)-diacholestane (20R) C(28) (Alpha)(Beta) 20R diasterane m 24-methyl-5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane (20S) C(28) (Alpha)(Alpha)(Alpha) 20S sterane n 24-methyl-5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20R) C(28) (Alpha)(Beta)(Beta) 20R sterane o 24-methyl-5(Alpha)(H),14(Beta)(H),17(Beta)(H)-cholestane (20S) C(28) (Alpha)(Beta)(Beta) 20S sterane p 24-methyl-5(Alpha)(H),14(Alpha)(H),17(Alpha)(H)-cholestane (20R) C(28) (Alpha)(Alpha)(Alpha) 20R sterane q 24-ethyl-13(Beta)(H),17(Alpha)(H)-diacholestane (20S) C(29) (Beta)(Alpha) 20S diasterane
Continued... CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A3 Table A2 (Continued): Peak assignments for steranes, diasteranes and methylsteranes in the m/z 217, 218, 259 and 231 mass chromatograms and MRM chromatograms.
Peak Sterane, diasterane and methylsterane assignments Abbreviation - ---- ------------------------------------------------- ------------ r 24-ethyl-13(Beta) (H),17(Alpha) (H)-diacholestane (20R) C(29) (Beta)(Alpha) 20R diasterane s 24-ethyl-13(Alpha) (H),17(Beta) (H)-diacholestane (20S) C(29) (Alpha)(Beta) 20S diasterane t 24-ethyl-13(Alpha) (H),17(Beta) (H)-diacholestane (20R) C(29) (Alpha)(Beta) 20R diasterane u 24-ethyl-5(Alpha) (H),14(Alpha) (H), 17(Alpha) (H)-cholestane C(29) (Alpha)(Alpha)(Alpha) 20S sterane (20S) v 24-ethyl-5(Alpha) (H),14(Beta) (H), 17(Beta) (H)-cholestane C(29) (Alpha)(Beta)(Beta) 20R sterane (20R) w 24-ethyl-5(Alpha) (H),14(Beta) (H), 17(Beta) (H)-cholestane C(29) (Alpha)(Beta)(Beta) 20S sterane (20S) x 24-ethyl-5(Alpha) (H),14(Alpha) (H), 17(Alpha) (H)-cholestane C(29) (Alpha)(Alpha)(Alpha) 20R sterane (20R) y 24-n-propyl-13(Beta) (H),17(Alpha) (H)-diacholestane (20S) C(30) (Beta)(Alpha) 20S diasterane z 24-n-propyl-13(Beta) (H),17(Alpha) (H)-diacholestane (20R) C(30) (Beta)(Alpha) 20R diasterane A 24-n-propyl-5(Alpha) (H),14(Alpha) (H), 17(Alpha) C(30) (Alpha)(Alpha)(Alpha) 20S sterane (H)-cholestane (20S) B 24-n-propyl-5(Alpha) (H),14(Beta) (H), 17(Beta) C(30) (Alpha)(Beta)(Beta) 20R sterane (H)-cholestane (20R) C 24-n-propyl-5(Alpha) (H),14(Beta) (H), 17(Beta) C(30) (Alpha)(Beta)(Beta) 20S sterane (H)-cholestane (20S) D 24-n-propyl-5(Alpha) (H),14(Alpha) (H), 17(Alpha) C(30) (Alpha)(Alpha)(Alpha) 20R sterane (H)-cholestane (20R) E 2(Alpha) -methyl-24-ethylcholestane (20S) 2(Alpha) -methyl 20S F 3(Beta) -methyl-24-ethylcholestane (20S) 3(Beta) -methyl 20S G 2(Alpha) -methyl-24-ethylcholestane (14(Beta) ,17(Beta) (H), 2(Alpha) -methyl (Beta)(Beta) 20R 20R) H 2(Alpha) -methyl-24-ethylcholestane (14(Beta) ,17(Beta) (H), 2(Alpha) -methyl (Beta)(Beta) 20S 20S) I 3(Beta) -methyl-24-ethylcholestane (14(Beta) ,17(Beta) (H), 3(Beta) -methyl (Beta)(Beta) 20R 20R) J 3(Beta) -methyl-24-ethylcholestane (14(Beta) ,17(Beta) (H), 3(Beta) -methyl (Beta)(Beta) 20S 20S) K 4(Alpha) -methyl-24-ethylcholestane (20S) 4(Alpha) -methyl 20S L 4(Alpha) -methyl-24-ethylcholestane (14(Beta) ,17(Beta) (H), 4(Alpha) -methyl (Beta)(Beta) 20R 20R) M 4(Alpha) -methyl-24-ethylcholestane (14(Beta) ,17(Beta) (H), 4(Alpha) -methyl (Beta)(Beta) 20S 20S) N 2(Alpha) -methyl-24-ethylcholestane (20R) 2(Alpha) -methyl 20R O 3(Beta) -methyl-24-ethylcholestane (20R) 3(Beta) -methyl 20R P 4(Alpha), 23S, 24S-trimethylcholestane (20R) 4(Alpha), 23S,24S dinost 20R Q 4(Alpha), 23S, 24R-trimethylcholestane (20R) 4(Alpha), 23S,24R dinost 20R R 4(Alpha) -methyl-24-ethylcholestane (20R) 4(Alpha) -methyl 20R S 4(Alpha), 23R, 24R-trimethylcholestane (20R) 4(Alpha), 23R,24R dinost 20R T 4(Alpha), 23R, 24S-trimethylcholestane (20R) 4(Alpha), 23R,24S dinost 20R
* = isomeric peaks (24S and 24R); dinost = dinosterane isomers. CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A4 Table A3: Peak abbreviations for the aromatic hydrocarbons, with diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion - ---------------------------- ------------ --- Ethylbenzene EB 106 meta- and para-Xylene m-+p-x 106 ortho-Xylene o-x 106 Isopropylbenzene iPB 120 n-Propylbenzene nPB 120 1-Methyl-3-ethylbenzene 1M3EB 120 1-Methyl-4-ethylbenzene 1M4EB 120 1,3,5-Trimethylbenzene 1,3,5-TMB 120 1-Methyl-2-ethylbenzene 1M2EB 120 1,2,4-Trimethylbenzene 1,2,4-TMB 120 1,2,3-Trimethylbenzene 1,2,3-TMB 120 Isobutylbenzene iBB 134 sec-Butylbenzene sBB 134 1-Methyl-3-isopropylbenzene 1M3IB 134 1-Methyl-4-isopropylbenzene 1M4IB 134 1-Methyl-2-isopropylbenzene 1M2IB 134 1,3-Diethylbenzene 1,3-DEB 134 1-Methyl-3-propylbenzene 1M3PB 134 1-Methyl-4-propylbenzene 1M4PB 134 1,4-Diethylbenzene 1,4-DEB 134 n-Butylbenzene nBB 134 1,2-Diethylbenzene 1,2-DEB 134 1,3-Dimethyl-5-ethylbenzene 1,3-D5EB 134 1-Methyl-2-propylbenzene 1M2PB 134 1,4-Dimethyl-2-ethylbenzene 1,4-D2EB 134 1,3-Dimethyl-4-ethylbenzene 1,3-D4EB 134 1,2-Dimethyl-4-ethylbenzene 1,2-D4EB 134 1,3-Dimethyl-2-ethylbenzene 1,3-D2EB 134 1,2-Dimethyl-3-ethylbenzene 1,2-D3EB 134 1,2,4,5-Tetramethylbenzene 1,2,4,5-TeMB 134 1,2,3,5-Tetramethylbenzene 1,2,3,5-TeMB 134 1,2,3,4-Tetramethylbenzene 1,2,3,4-TeMB 134
Continued... CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A5 Table A3 (Continued): Peak abbreviations for the aromatic hydrocarbons, with the diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion ---------------------------- ------------ --- Naphthalene N 128 2-Methylnaphthalene 2-MN 142 1-Methylnaphthalene 1-MN 142 2-Ethylnaphthalene 2-EN 156 1-Ethylnaphthalene 1-EN 156 2,6-Dimethylnaphthalene 2,6-DMN 156 2,7-Dimethylnaphthalene 2,7-DMN 156 1,3- and 1,7-Dimethylnaphthalene 1,3- and 1,7-DMN 156 1,6-Dimethylnaphthalene 1,6-DMN 156 1,4- and 2,3-Dimethylnaphthalene 1,4- and 2,3-DMN 156 1,5-Dimethylnaphthalene 1,5-DMN 156 1,2-Dimethylnaphthalene 1,2-DMN 156 1,8-Dimethylnaphthalene 1,8-DMN 156 1,3,7-Trimethylnaphthalene 1,3,7-TMN 170 1,3,6-Trimethylnaphthalene 1,3,6-TMN 170 1,3,5- and 1,4,6-Trimethylnaphthalene 1,3,5- and 1,4,6-TMN 170 2,3,6-Trimethylnaphthalene 2,3,6-TMN 170 1,2,7-Trimethylnaphthalene 1,2,7-TMN 170 1,6,7-Trimethylnaphthalene 1,6,7-TMN 170 1,2,6-Trimethylnaphthalene 1,2,6-TMN 170 1,2,4-Trimethylnaphthalene 1,2,4-TMN 170 1,2,5-Trimethylnaphthalene 1,2,5-TMN 170 1,2,3-Trimethylnaphthalene 1,2,3-TMN 170 1,3,6,7-Tetramethylnaphthalene 1,3,6,7-TeMN 184 1,2,4,6-, 1,2,4,7- and 1,2,4,6-, 1,2,4,7- and 184 1,4,6,7-Tetramethylnaphthalene 1,4,6,7-TeMN 1,2,5,7-Tetramethylnaphthalene 1,2,5,7-TeMN 184 2,3,6,7-Tetramethylnaphthalene 2,3,6,7-TeMN 184 1,2,6,7-Tetramethylnaphthalene 1,2,6,7-TeMN 184 1,2,3,7-Tetramethylnaphthalene 1,2,3,7-TeMN 184 1,2,3,6-Tetramethylnaphthalene 1,2,3,6-TeMN 184 1,2,5,6- and 1,2,3,5-Tetramethylnaphthalene 1,3,6,7- and 1,2,3,5-TeMN 184
Continued... CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A6 Table A3 (Continued): Peak abbreviations for the aromatic hydrocarbons, with the diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion ---------------------------- ------------ --- 1,2,4,6,7-Pentamethylnaphthalenes 1,2,4,6,7-PMN 198 1,2,3,5,7-Pentamethylnaphthalenes 1,2,3,5,7-PMN 198 1,2,3,6,7-Pentamethylnaphthalenes 1,2,3,6,7-PMN 198 1,2,3,5,6-Pentamethylnaphthalenes 1,2,3,5,6-PMN 198 Phenanthrene P 178 Anthracene A 178 3-Methylphenanthrene 3-MP 192 2-Methylphenanthrene 2-MP 192 9-Methylphenanthrene 9-MP 192 1-Methylphenanthrene 1-MP 192 2-Methylanthracene 2-MA 192 1-Methylanthracene 1-MA 192 3-Ethylphenanthrene 3-EP 206 9-, 2- and 1 + Ethylphenanthrene + 9-EP, 2-EP, 1-EP, 3,6-DMP 206 3,6-Dimethylphenanthene 3,5- and 2,6-Dimethylphenanthrene 3,5- and 2,6-DMP 206 2,7-Dimethylphenanthrene 2,7-DMP 206 1,3-, 3,9-, 2,10- and 3,10-Dimethylphenanthrene 1,3-, 3,9-, 2,10- and 3,10- 206 1,6-, 2,9- and 2,5-Dimethylphenanthrene 1,6-, 2,9- and 2,5-DMP 206 1,7-Dimethylphenanthrene 1,7-DMP 206 2,3-, 1,9-, 4,9- and 4,10-Dimethylphenanthrene 2,3-, 1,9-, 4,9- and 4,10-DMP 206 1,8-Dimethylphenanthrene 1,8-DMP 206 1,2-Dimethylphenanthrene 1,2-DMP 206 Trimethylphenanthrenes TMPs 220 Tetramethylphenanthrenes TeMPs 234 1-Isohexyl-2-methyl-6-isopropylnaphthalene i-HMN 197 Biphenyl Bp 154 2-Methylbiphenyl 2-MBp 168 Diphenylmethane DPM 168 3-Methylbiphenyl 3-MBp 168 4-Methylbiphenyl 4-MBp 168 Dibenzofuran DBF 168 2,3'-Dimethylbiphenyl 2,3'-DMBp 182 2,5-Dimethylbiphenyl 2,5-DMBp 182 2,4- + 2,4'-Dimethylbiphenyl 2,4- + 2,4'-DMBp 182 2,3-Dimethylbiphenyl 2,3-DMBp 182 3-Methyldiphenylmethane 3-MDPM 182 4-Methyldiphenylmethane 4-MDPM 182
Continued... CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A7 Table A3 (Continued): Peak abbreviations for the aromatic hydrocarbons, with the diagnostic m/z ions.
Aromatic compound assignment Abbreviation Ion - ---------------------------- ------------ --- 3-Ethylbiphenyl 3-EBp 182 3,5-Dimethylbiphenyl 3,5-DMBp 182 3,3'-Dimethylbiphenyl 3,3'-DMBp 182 4-Ethylbiphenyl 4-EBp 182 3,4'-Dimethylbiphenyl 3,4'-DMBp 182 4,4'-Dimethylbiphenyl 4,4'-DMBp 182 Fluorene Fl 166 2-Methylfluorene 2-MFl 180 3-Methylfluorene 3-MFl 180 1-Methylfluorene 1-MFl 180 4-Methylfluorene 4-MFl 180 Fluoranthene Fa 202 Pyrene Py 202 Methylfluoranthenes MFa 216 2-Methylpyrene 2-MPy 216 4-Methylpyrene 4-MPy 216 1-Methylpyrene 1-MPy 216 Dibenzothiophene DBT 184 4-Methyldibenzothiophene 4-MDBT 198 2-Methyldibenzothiophene 2-MDBT 198 3-Methyldibenzothiophene 3-MDBT 198 1-Methyldibenzothiophene 1-MDBT 198 4-Ethyldibenzothiophene 4-ETDBT 212 4,6-Dimethyldibenzothiophene 4,6-DMDBT 212 2,4-Dimethyldibenzothiophene 2,4-DMDBT 212 2,6-Dimethyldibenzothiophene 2,6-DMDBT 212 3,6-Dimethyldibenzothiophene 3,6-DMDBT 212 3,7-Dimethyldibenzothiophene 3,7-DMDBT 212 1,4-Dimethyldibenzothiophene 1,4-DMDBT 212 1,6-Dimethyldibenzothiophene 1,6-DMDBT 212 1,8-Dimethyldibenzothiophene 1,8-DMDBT 212 1,3-Dimethyldibenzothiophene 1,3-DMDBT 212 1,9-Dimethyldibenzothiophene 1,9-DMDBT 212 1,2-Dimethyldibenzothiophene 1,2-DMDBT 212
CSIRO Petroleum InterOil: Moose-2, peak assignments, Page A8 APPENDIX B MOOSE-2 513 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page Bi
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure B1: (a) Gas chromatogram (FID) and (b) total ion chromatogram (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 513 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane. UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B1
[A: FID, ALIPHATIC HYDROCARBONS CHART] [B: FID, AROMATIC HYDROCARBONS CHART] Figure B2: Gas chromatograms (FID) of the oil show in core sample (Moose-2, 513 m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B2
[N-ALKANES CHART] [CHART] Figure B3: Partial m/z 85.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of n-alkanes, methylal-kanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B3 [ISOPRENOIDS CHART] [CHART] [CHART] Figure B4: Partial m/z 113.13 and 125.13 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of iso-prenoids and (beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B4
[A: M/Z 83.09 N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure B5: Partial m/z 83.09 and 97.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B5 [BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure B6: Partial m/z 123.12 and 191.18 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure B7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B7
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure B8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B8
[C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure B9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C30, (b) C31 and (c) C32 hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B9
[C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure B10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C33, (b) C34 and (c) C35 hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B10
[STERANES AND DIASTERANES CHART] [STERANES (ALPHA)(BETA)(BETA) CHART] Figure B11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B11
[DIASTERANES (BETA)(ALPHA)CHART] [METHYLSTERANES CHART] Figure B12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B12
[C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure B13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4 -> 217.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C27, (b) C28 and (c) C29 steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B13
[C(26)STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-N-PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure B14: Partial MRM chromatograms (m/z 358.4, 414.4 -> 217.2; 414.4 -> 231.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes. Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B14
[HOPANES CHART] [STERANES AND DIASTERANES CHART] Figure B15: Partial added MRM chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing (a) the distribution of C(27) to C(35) hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 482.4 -> 191.2), and (b) the distribution of C(27) to C(29) steranes and diasteranes (m/z 372.4 + 386.4 + 400.4 -> 217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 513 m,oil show in core sample Page B15
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure B16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B16
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure B17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure B18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B18
[CHART] [CHART] [CHART] Figure B19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure B20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure B21: Partial m/z 220.13 and 234.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) tri-methylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B21
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure B22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethyl-biphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B22
[FLUORENE CHART] [METHYLFLUORENES B: M/Z 180.09 CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure B23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B23
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure B24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 513 m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 513 m, oil show in core sample Page B24
APPENDIX C MOOSE-2 614 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page Ci
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure C1: (a) Gas chromatogram (FID) and (b) total ion chromatogram (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 614 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C1
[A: FID, ALIPHATIC HYDROCARBONS CHART] [B: FID, AROMATIC HYDROCARBONS CHART] Figure C2: Gas chromatograms (FID) of the oil show in core sample (Moose-2, 614 m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C2
[N-ALKANES CHART] [CHART] Figure C3: Partial m/z 85.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C3
[ISOPRENOIDS CHART] [CHART] [CHART] Figure C4: Partial m/z 113.13 and 125.13 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of isoprenoids and (beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C4
[N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure C5: Partial m/z 83.09 and 97.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure C6: Partial m/z 123.12 and 191.18 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure C7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C7
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure C8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C8
[C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure C9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(30), (b) C(31) and (c) C(32) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C9
[C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure C10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(33), (b) C(34) and (c) C(35) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C10
[STERANES AND DIASTERANES CHART] [STERANES (ALPHA)(BETA)(BETA) CHART] Figure C11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C11
[DIASTERANES (BETA)(ALPHA) CHART] [METHYLSTERANES CHART] Figure C12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C12
[C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure C13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4 -> 217.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C13
[C(26) STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-N-PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure C14: Partial MRM chromatograms (m/z 358.4, 414.4 -> 217.2; 414.4 -> 231.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes. Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C14
[HOPANES CHART] [STERANES AND DIASTERANES CHART] Figure C15: Partial added MRM chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing (a) the distribution of C(27) to C(35) hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 482.4 -> 191.2), and (b) the distribution of C(27) to C(29) steranes and diasteranes (m/z 372.4 + 386.4 + 400.4 -> 217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C15
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure C16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C16
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure C17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure C18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C18
[CHART] [CHART] [CHART] Figure C19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure C20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure C21: Partial m/z 220.13 and 234.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C21 [BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure C22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C22 [FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure C23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C23 [DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure C24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 614 m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614 m, oil show in core sample Page C24 EX-99.29 24 h19854exv99w29.txt CSIRO PETROLEUM CONFIDENTIAL REPORT NO. 04-059 EXHIBIT 29 [CSIRO LOGO] CSIRO Petroleum Confidential Report No. 04-059 (Part II) SEPTEMBER 2004 THE GEOCHEMISTRY OF OIL SHOWS IN THE MOOSE-2 WELL, EAST PAPUAN BASIN PART II: APPENDICES D TO K A Report to InterOil Corporation M. Ahmed, S. C. George and R. A. Quezada FOR FURTHER INFORMATION CONTACT: Dr. Simon C. George CSIRO Petroleum, PO Box 136, North Ryde, NSW, Australia 1670 Telephone: +61 2 9490 8718, Facsimile: +61 2 9490 8197 E-mail: Simon.George@csiro.au THIS IS A CONFIDENTIAL REPORT FOR RESTRICTED DISTRIBUTION ONLY Copies to: InterOil Corporation (4 hard copies, electronic copy) CSIRO authors Confidential CSIRO archives (2 hard copies, electronic copy) APPENDIX D MOOSE-2 614.5 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page Di
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure D1: (a) Gas chromatogram (FID) and (b) total ion chromatogram (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane. UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D1
Figure D2: Sample not fractionated. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D2
[N-ALKANES CHART] [CHART] Figure D3: Partial m/z 85.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D3 [ISOPRENOIDS CHART] [CHART] [CHART] Figure D4: Partial m/z 113.13 and 125.13 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of isoprenoids and (beta)- carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D4
[N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure D5: Partial m/z 83.09 and 97.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure D6: Partial m/z 123.12 and 191.18 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) C14 to C16 bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C14 bicyclic sesquiterpanes, 19/3 refers to C19 tricyclic terpane, 24/4 refers to C24 tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D6 [HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure D7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D7
[STERANES AND DIASTERANES CHART] [STERANES (ALPHA)(BETA)(BETA) CHART] Figure D11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D11
[DIASTERANES (BETA)(ALPHA) CHART] [METHYLSTERANES CHART] Figure D12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D12
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure D16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D16 [NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure D17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D17 [C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure D18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D18 [CHART] [CHART] [CHART] Figure D19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure D20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure D21: Partial m/z 220.13 and 234.14 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D21
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure D22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D22
[FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure D23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D23
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure D24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 614.5 m), showing the distribution of (a) dibenzo-thiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldiben-zothiophenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 614.5 m, oil show in core sample Page D24
APPENDIX E MOOSE-2 634 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 634, m oil show in core sample Page Ei
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure E1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter from the oil show in core sample (Moose-2, 634 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E1
[A: FID, ALIPHATIC HYDROCARBONS CHART] [B: FID, AROMATIC HYDROCARBONS CHART] Figure E2: Gas chromatograms (FID) of the oil show in core sample (Moose-2, 634 m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture, other peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E2
[N-ALKANES CHART] [CHART] Figure E3: Partial m/z 85.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E3
[ISOPRENOIDS CHART] [CHART] [CHART] Figure E4: Partial m/z 113.13 and 125.13 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of isoprenoids and (Beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E4 [N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure E5: Partial m/z 83.09 and 97.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E5 [BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure E6: Partial m/z 123.12 and 191.18 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E6 [HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure E7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E7
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure E8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4 - 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E8 [C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure E9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4 -- 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(30), (b) C(31) and (c) C(32) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E9
[C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure E10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5 -- 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(33), (b) C(34) and (c) C(35) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E10
[STERANES AND DIASTERANES CHART] [STERANES (Alpha Beta Beta) CHART] Figure E11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E11
[DIASTERANES (Beta Alpha) CHART] [METHYLSTERANES CHART] Figure E12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E12
[C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure E13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4 -- 217.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E13
[C(26) STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-N-PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure E14: Partial MRM chromatograms (m/z 358.4, 414.4 - 217.2; 414.4 - 231.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes. Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E14
[HOPANES CHART] [STERANES AND DIASTERANES CHART] Figure E15: Partial added MRM chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing (a) the distribution of C(27) to C(35) hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 482.4 - 191.2), and (b) the distribution of C(27) to C(29) steranes and diasteranes (m/z 372.4 + 386.4 + 400.4 - 217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E15
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure E16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E16
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure E17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure E18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E18
[CHART] [CHART] [CHART] Figure E19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure E20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure E21: Partial m/z 220.13 and 234.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E21
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure E22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E22
[FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure E23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E23
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure E24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 634 m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 634 m, oil show in core sample Page E24
APPENDIX F MOOSE-2 660.19 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 660.19, m oil show in core sample Page Fi
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure F1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 660.19 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F1
Figure F2: Sample not fractionated CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F2
[N-ALKANES CHART] [CHART] Figure F3: Partial m/z 85.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 660.19 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F3
[ISOPRENOIDS CHART] [M/Z 113.13 CHART] [M/Z 125.13 CHART] Figure F4: Partial m/z 113.13 and 125.13 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 660.19 m), showing the distribution of isoprenoids and (beta)- carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F4
[N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure F5: Partial m/z 83.09 and 97.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 660.19 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure F6: Partial m/z 123.12 and 191.18 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 660.19 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure F7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 660.19 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 660.19 m, oil show in core sample Page F7
APPENDIX G MOOSE-2 671.95 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page Gi
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure G1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G1
Figure G2: Sample not fractionated CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G2
[N-ALKANES M/Z 85.1 CHART] [M/Z 85.1 CHART] Figure G3: Partial m/z 85.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G3
[ISOPRENOIDS M/Z 113.13 CHART] [M/Z 113.13 CHART] [M/Z 125.13 CHART] Figure G4: Partial m/z 113.13 and 125.13 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of isoprenoids and (beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G4
[A: M/Z 83.09 N-ALKYLCYCLOHEXANES CHART] [B: M/Z 97.10 METHYLALKYLCYCLOHEXANES CHART] Figure G5: Partial m/z 83.09 and 97.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure G6: Partial m/z 123.12 and 191.18 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure G7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G7
[STERANES AND DIASTERANES CHART] [STERANES (Alpha Beta Beta) CHART] Figure G11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G11
[DIASTERANES (Beta Alpha) CHART] [METHYLSTERANES CHART] Figure G12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G12
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure G16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G16
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure G17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure G18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G18
[CHART] [CHART] [CHART] Figure G19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G19
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure G20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G20
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure G21: Partial m/z 220.13 and 234.14 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G21
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C2 ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure G22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G22
[FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure G23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G23
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure G24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 671.95 m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 671.95 m, oil show in core sample Page G24
APPENDIX H MOOSE-2 746.5 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page Hi
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure H1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 746.5 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H1
Figure H2: Sample not fractionated CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H2
[N-ALKANES CHART] [CHART] Figure H3: Partial m/z 85.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 746.5 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H3 [ISOPRENOIDS CHART] [CHART] [CHART] Figure H4: Partial m/z 113.13 and 125.13 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 746.5 m), showing the distribution of isoprenoids and (beta)- carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H4 [N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure H5: Partial m/z 83.09 and 97.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 746.5 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure H6: Partial m/z 123.12 and 191.18 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 746.5 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/ tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H6 [HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure H7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 746.5 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 746.5 m, oil show in core sample Page H7
APPENDIX I MOOSE-2 753.88 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page Ii
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure I1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I1
[A: FID, ALIPHATIC HYDROCARBONS CHART] [B: FID, AROMATIC HYDROCARBONS CHART] Figure I2: Gas chromatograms (FID) of the oil show in core sample (Moose-2, 753.88 m), showing (a) the distribution of aliphatic hydrocarbons and (b) the distribution of aromatic hydrocarbons. UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I2
[N-ALKANES CHART] [CHART] Figure I3: Partial m/z 85.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I3
[ISOPRENOIDS CHART] [m/z 113.13 CHART] [m/z 125.13] Figure I4: Partial m/z 113.13 and 125.13 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of isoprenoids and (Beta)-carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I4
[n-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure I5: Partial m/z 83.09 and 97.10 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure I6: Partial m/z 123.12 and 191.18 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes, 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure I7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I7
[C(27) HOPANES CHART] [C(28) HOPANES CHART] [C(29) HOPANES CHART] Figure I8: Partial MRM chromatograms (m/z 370.4, 384.4, and 398.4 -> 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I8
[C(30) HOPANES CHART] [C(31) HOPANES CHART] [C(32) HOPANES CHART] Figure I9: Partial MRM chromatograms (m/z 412.4, 426.4, and 440.4 (right arrow) 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(30), (b) C(31) and (c) C(32) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I9 [C(33) HOPANES CHART] [C(34) HOPANES CHART] [C(35) HOPANES CHART] Figure I10: Partial MRM chromatograms (m/z 454.5, 468.5, and 482.5 (right arrow) 191.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(33), (b) C(34) and (c) C(35) hopanes. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I10 [STERANES AND DIASTERANES CHART] [STERANES ((Alpha)(Beta)(Beta)) CHART] Figure I11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I11 [DIASTERANES ((Beta)(Alpha)) CHART] [METHYLSTERANES CHART] Figure I12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I12 [C(27) STERANES AND DIASTERANES CHART] [C(28) STERANES AND DIASTERANES CHART] [C(29) STERANES AND DIASTERANES CHART] Figure I13: Partial MRM chromatograms (m/z 372.4, 386.4, and 400.4 (right arrow) 217.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(27), (b) C(28) and (c) C(29) steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I13 [C(26) STERANES AND DIASTERANES CHART] [C(30) STERANES AND DIASTERANES (24-N-PROPYLCHOLESTANES) CHART] [C(30) METHYLSTERANES CHART] Figure I14: Partial MRM chromatograms (m/z 358.4, 414.4 -> 217.2; 414.4 -> 231.2) of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(26) and (b) C(30) steranes and diasteranes, and (c) C(30) methylsteranes. Sterane, diasterane and methylsterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I14
[HOPANES CHART] [STERANES AND DIASTERANES CHART] Figure I15: Partial added MRM chromatograms of the aliphatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing (a) the distribution of C(27) to C(35) hopanes (m/z 370.4 + 384.4 + 398.4 + 412.4 + 426.4 + 440.4 + 454.4 + 468.4 + 482.4 -> 191.2), and (b) the distribution of C(27) to C(29) steranes and diasteranes (m/z 372.4 + 386.4 + 400.4 -> 217.2). Hopane abbreviations are listed in Table A1, sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I15
[C(2) ALKYLBENZENES CHART] [C(3) ALKYLBENZENES CHART] [C(4) ALKYLBENZENES CHART] Figure I16: Partial m/z 106.08, 120.09 and 134.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) C(2) alkylbenzenes, (b) C(3) alkylbenzenes and (c) C(4) alkylbenzenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I16
[NAPHTHALENE CHART] [METHYLNAPHTHALENES CHART] [C(2) ALKYLNAPHTHALENES CHART] Figure I17: Partial m/z 128.06, 142.08 and 156.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) naphthalene, (b) methylnaphthalenes and (c) ethylnaphthalenes and dimethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I17
[C(3) ALKYLNAPHTHALENES CHART] [C(4) ALKYLNAPHTHALENES CHART] [C(5) ALKYLNAPHTHALENES CHART] Figure I18: Partial m/z 170.11, 184.13 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) trimethylnaphthalenes, (b) tetramethylnaphthalenes and (c) pentamethylnaphthalenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I18
[NO ISO-HEXYLMETHYLNAPHALENE CHART] [NO CADALENE CHART] [NO CADALENE CHART] Figure I19: Partial m/z 197.13, 183.12 and 198.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) iso-hexylmethylnaphthalene, and (b) and (c) cadalene. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page 119 [PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure I20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page 120
[C(3) ALKYLPHENANTHRENES CHART] [C(4) ALKYLPHENANTHRENES CHART] Figure I21: Partial m/z 220.13 and 234.14 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) trimethylphenanthrenes and (b) retene and tetramethylphenanthrenes. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page 121
[BIPHENYL CHART] [METHYLBIPHENYLS, DIPHENYLMETHANE AND DIBENZOFURAN CHART] [C(2) ALKYLBIPHENYLS AND METHYLDIPHENYLMETHANES CHART] Figure I22: Partial m/z 154.08, 168.09 and 182.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) biphenyl, (b) methylbiphenyls, diphenylmethane and dibenzofuran, and (c) dimethylbiphenyls, ethylbiphenyls and methyldiphenylmethanes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page 122
[FLUORENE CHART] [METHYLFLUORENES CHART] [FLUORANTHENE AND PYRENE CHART] [METHYLPYRENES AND METHYLFLUORANTHENES CHART] Figure I23: Partial m/z 166.08, 180.09, 202.08 and 216.09 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) fluorene, (b) methylfluorenes, (c) fluoranthene and pyrene, and (d) methylfluoranthenes and methylpyrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page 123
[DIBENZOTHIOPHENE CHART] [METHYLDIBENZOTHIOPHENES CHART] [C(2) ALKYLDIBENZOTHIOPHENES CHART] Figure I24: Partial m/z 184.03, 198.05 and 212.07 mass chromatograms of the aromatic hydrocarbons from the oil show in core sample (Moose-2, 753.88 m), showing the distribution of (a) dibenzothiophene, (b) methyldibenzothiophenes and (c) dimethyldibenzothiophenes and ethyldibenzothiophenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 753.88 m, oil show in core sample Page I24 APPENDIX J MOOSE-2 766.05 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page Ji
[A: FID, EXTRACTABLE ORGANIC MATTER CHART] [B: TIC, EXTRACTABLE ORGANIC MATTER CHART] Figure J1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 766.05 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J1
Figure J2: Sample not fractionated CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J2
[N-ALKANES CHART] [CHART] Figure J3: Partial m/z 85.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 766.05 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J3 [ISOPRENOIDS CHART] [CHART] [CHART] Figure J4: Partial m/z 113.13 and 125.13 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 766.05 m), showing the distribution of isoprenoids and (beta)- carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J4 [N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure J5: Partial m/z 83.09 and 97.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 766.05 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure J6: Partial m/z 123.12 and 191.18 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 766.05 m), showing the distribution of (a) C(14) to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/ tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J6 [HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure J7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 766.05 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 766.05 m, oil show in core sample Page J7
APPENDIX K MOOSE-2 790.2 M (OIL SHOW IN CORE SAMPLE) GAS AND MASS CHROMATOGRAMS AND PEAK IDENTIFICATIONS CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page Ki
[A: FID. EXTRACTABLE ORGANIC MATTER CHART] [B: TIC. EXTRACTABLE ORGANIC MATTER CHART] Figure K1: (a) Gas chromatogram (FID) and (b) total ion chromatograms (TIC) for the total extractable organic matter (EOM) from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of total hydrocarbons. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, UCM = undifferentiated complex mixture. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K1
Figure K2: Sample not fractionated CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K2
[N-ALKANES CHART] [CHART] Figure K3: Partial m/z 85.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of n-alkanes, methylalkanes and isoprenoids. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C13 isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K3
[ISOPRENOIDS CHART] [CHART[ [CHART] Figure K4: Partial m/z 113.13 and 125.13 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of isoprenoids and (beta)- carotane. Numbers refer to n-alkane chain length, Pr = pristane, Ph = phytane, iC13 = C(13) isoprenoid, etc. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K4
[N-ALKYLCYCLOHEXANES CHART] [METHYLALKYLCYCLOHEXANES CHART] Figure K5: Partial m/z 83.09 and 97.10 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of (a) n-alkylcyclohexanes and (b) methylalkylcyclohexanes. Numbers refer to n-alkylcyclohexane and methylalkylcyclohexane chain length. Peaks marked with "x" are due to n-alkane interference. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K5
[BICYCLIC SESQUITERPANES CHART] [DITERPANES CHART] [TRICYCLIC AND TETRACYCLIC TERPANES CHART] Figure K6: Partial m/z 123.12 and 191.18 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of (a) C14 to C(16) bicyclic sesquiterpanes, (b) diterpanes and (c) tricyclic/tetracyclic terpanes. 14b refers to C(14) bicyclic sesquiterpanes, 19/3 refers to C(19) tricyclic terpane, 24/4 refers to C(24) tetracyclic terpane, and so on. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K6
[HOPANES CHART] [DEMETHYLHOPANES CHART] [METHYLHOPANES CHART] Figure K7: Partial m/z 191.18, 177.16 and 205.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of (a) hopanes, (b) demethylhopanes and (c) methylhopanes respectively. Hopane abbreviations are listed in Table A1. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K7
[STERANES AND DIASTERANES CHART] [STERANES ((Alpha)(Beta)(Beta)) CHART] Figure K11: Partial m/z (a) 217.20 and (b) 218.20 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of steranes and diasteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K11
[Diasteranes ((Beta)(Alpha)) CHART] [METHYLSTERANES CHART] Figure K12: Partial m/z (a) 259.24 and (b) 231.21 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of diasteranes and methylsteranes. Sterane and diasterane abbreviations are listed in Table A2. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K12
[PHENANTHRENE CHART] [METHYLPHENANTHRENES CHART] [C(2) ALKYLPHENANTHRENES CHART] Figure K20: Partial m/z 178.08, 192.09 and 206.11 mass chromatograms of the EOM from the oil show in core sample (Moose-2, 790.2 m), showing the distribution of (a) phenanthrene, (b) methylphenanthrenes and (c) ethylphenanthrenes and dimethylphenanthrenes respectively. Peak abbreviations are listed in Table A3. CSIRO Petroleum InterOil: Moose-2, 790.2 m, oil show in core sample Page K20 EX-99.30 25 h19854exv99w30.txt CONSENT OF KPMG EXHIBIT 30 AUDITORS' CONSENT TO THE BOARD OF DIRECTORS OF INTEROIL CORPORATION We have read the prospectus dated November 10, 2004 relating to the distribution of certain common shares of the Company. We have complied with Canadian generally accepted standards for an auditors' involvement with offering documents. We consent to the incorporation by reference in the above-mentioned prospectus of our auditor's report to the shareholders of the Company on the consolidated balance sheets of the Company as at December 31, 2003 and 2002 and the consolidated statements of earnings, retained earnings and cash flows for each of the years then ended and to the reference to our firm under the heading "Experts" in the prospectus. Our report is dated March 4, 2004 (except as to note 13 which is as of March 24, 2004). Sydney, Australia November 10, 2004 /s/ KPMG EX-99.31 26 h19854exv99w31.txt CONSENT OF PRICEWATERHOUSECOOPERS EXHIBIT 31 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form F-10 of our report dated November 9, 2004, relating to the financial statements of BP Papua New Guinea Limited, which appear in such Registration Statement. We also consent to the references to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers PricewaterhouseCoopers By Stephen Beach Partner Lae, Papua New Guinea November 10, 2004. -----END PRIVACY-ENHANCED MESSAGE-----