Model Production Sharing Contract under the Petroleum Act

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PRODUCTION SHARING CONTRACT

[Dated]

This Agreement is a Production Sharing Contract made under the Petroleum Act

BETWEEN

the , acting on behalf of the Democratic Republic of Timor-Leste (the "Ministry")

AND

 and  (each a "Contractor" and collectively, the "Contractors")

(each referred to individually as a "Party" or collectively as the "Parties").

Whereas:

A.        Petroleum existing within the Territory of Timor-Leste is a resource to be exploited jointly by
          Timor-Leste and the Contractor;

B.        the Ministry has the power to enter into Petroleum Contracts for the benefit of the people of Timor-
          Leste;

C.        the Ministry wishes to promote Petroleum Operations in the Contract Area and the Contractor
          desires to join and assist the Ministry in exploring for, developing and exploiting Petroleum in the
          Contract Area; and

D.        a Contractor has the financial capability, and the technical knowledge and technical ability, to carry
          on the Petroleum Operations in a manner wholly consistent with the Act and this Agreement, and
          does not have a record of non-compliance with principles of good corporate citizenship,

NOW, THEREFORE, it is agreed:




Model PSC under the Petroleum Act
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                                          Article 1 Interpretation


1.1      Definitions

         In this Agreement:

         "Access Authorisation" has the meaning given in the Act;

         "Accounting Records" has the meaning given in Clause 1.2 of Annex C;

         "Act" means the Petroleum Act, as amended, varied, modified or replaced from time to time, and
         regulations made and directions given under it;

         "Affiliate" means, in respect of a person, a person that controls, is controlled by, or is under
         common control with, that person;

         "Agreement" means this Production Sharing Contract;

         "Appraisal" means any appraisal activities, including appraisal wells, the purpose of which at the
         time such activity is commenced is to appraise and evaluate the extent or the volume of Petroleum
         reserves contained in a Discovery (including the commerciality of them), and all related activities;

         "Appraisal Costs" has the meaning given in Clause 2.2 of Annex C;

         "Approved Contract" means a contract made by a Contractor and approved by the Ministry as a part
         of a Development Plan;

         "Associated Gas" means Natural Gas, commonly known as gas-cap gas, which overlies and is in
         contact with significant quantities of Crude Oil in a Reservoir, and solution gas dissolved in Crude
         Oil in a Reservoir;

         "Authorisation" has the meaning given in the Act;

         "Authorised Person" has the meaning given in the Act;

         "Calendar Year" means a period of twelve (12) months commencing with January 1 and ending on
         the following December 31 according to the Gregorian calendar;

         "Capital Costs" has the meaning given in Clause 2.3 of Annex C;

         "Commercial Discovery" means a discovery of Petroleum that a Contractor declares commercial as
         contemplated in Section 4.10;

         "Commercial Production" occurs on the first day of the first period of thirty (30) consecutive days
         during which production is not less than the level of regular production delivered for sale
         determined by the Ministry as part of the approval of, or amendment to, a Development Plan,
         averaged over not less than twenty five (25) days in the period;

         "Committee" has the meaning given in Section 16.1;

         "Contract Area" means the area specified in Annexes A and B, but not any part of it which has been
         relinquished under Article 3;


Model PSC under the Petroleum Act
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         "Contract Year" means a period commencing on the Effective Date, or on any anniversary of it, and
         ending immediately before the next anniversary of it;

         "Control" means, in relation to a person, the power of another person to secure:

                  (a)      by means of the holding of shares or the possession of voting power in or in relation
                           to the first person or any other person; or

                  (b)      by virtue of any power conferred by the articles of association of, or any other
                           document regulating, the first person or any other person,

         that the affairs of the first person are conducted in accordance with the wishes or directions of that
         other person;

         "Cost Recovery Statement" has the meaning given in Clause 7 of Annex C;

         "Crude Oil" means crude mineral oil and all liquid hydrocarbons in their natural state or obtained
         from Natural Gas by condensation or extraction;

         "Crude Oil Field" means:

                  (a)      a single Reservoir; or

                  (b)      multiple Reservoirs all grouped on, or related to, the same geographical structure,
                           or stratigraphic conditions;

         from which Crude Oil and Associated Gas may be produced;

         "Decommission" means, in respect of the Contract Area or a part of it, as the case may be, to
         abandon, decommission, transfer, remove and/or dispose of structures, facilities, installations,
         equipment and other property, and other works, used in Petroleum Operations in the area, to clean
         up the area and make it good and safe, and to protect the environment;

         "Decommissioning Cost" has the meaning given in sub-paragraph 4.14(d)(i).

         "Decommissioning Costs Reserve" has the meaning given in sub-paragraph 4.14(e)(v);

         "Decommissioning Plan" means a plan of works, and an estimate of expenditures therefor, for
         Decommissioning, including environmental, engineering and feasibility studies in support of the
         plan;

         "Decommissioning Security Agreement" means an agreement between the Ministry and the
         Contractor as mentioned in Section 4.15;

         "Development" means any development, including design, construction, installation, drilling,
         operations and all related activities;

         "Development Work Programme and Budget" has the meaning in Section 4.12;

         "Development Area" has the meaning given in Section 4.10;

         "Development Plan" means a development plan for a Development Area, as referred to in Section
         4.11;

         "Discovery" means a discovery of Petroleum in a Reservoir in which Petroleum has not previously
         been found that is recoverable at the surface in a flow measurable by conventional petroleum
         industry testing methods;
Model PSC under the Petroleum Act
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         "Effective Date" has the meaning given in Section 2.3;

         "Exploration" means any exploration activities, including geological, geophysical, geochemical and
         other surveys, investigations and tests, and the drilling of shot holes, core holes, stratigraphic tests,
         exploration wells and other drilling and testing operations for the purpose of making a Discovery,
         and all related activities;

         "Exploration Costs" has the meaning given in Clause 2.1 of Annex C;

         "Exploration Work Programme and Budget" has the meaning in Sections 4.1, 4.2 and 4.3;

         "Field" means a Gas Field or a Crude Oil Field from which Petroleum may be produced;

         "Field Export Point" means the point at which Petroleum produced pursuant to this Agreement,
         having gone through field level separation, is made ready for sale, further processing or
         transportation or such other point as designated in an approved Development Plan;

         "Force Majeure" has the meaning given in Article 20;

         "Gas Field" means:

                  (a)      a single Reservoir; or

                  (b)      multiple Reservoirs grouped on, or related to, the same geographical structure, or
                           stratigraphic conditions;

         from which Non-Associated Gas may be produced;

         "Gas Retention Area" has the meaning given in Section 3.5;

         "Good Oil Field Practice" means such practices and procedures employed in the petroleum industry
         worldwide by prudent and diligent operators under conditions and circumstances similar to those
         experienced in connection with the relevant aspect or aspects of the Petroleum Operations,
         principally aimed at guaranteeing:

                  a)       conservation of petroleum and gas resources, which implies the utilization of
                           adequate methods and processes to maximize the recovery of hydrocarbons in a
                           technically and economically sustainable manner, with a corresponding control of
                           reserves decline, and to minimize losses at the surface;

                  b)       operational safety, which entails the use of methods and processes that promote
                           occupational security and the prevention of accidents;

                  c)       environmental protection, that calls for the adoption of methods and processes
                           which minimise the impact of the Petroleum Operations on the environment;

         "Ineligible Costs" has the meaning given in Clause 2.8 of Annex C;

         "Joint Operating Agreement" means any agreement or contract among all of the Contractors with
         respect to their respective rights or obligations under the Agreement, as such agreement or contract
         may be amended or supplemented from time to time;

         "Loan Facility" means any overdraft, loan or other financial facility or accommodation (including
         any acceptance credit, bond, note, bill of exchange or commercial paper, finance lease, hire
         purchase agreement, trade bill, forward sale or purchase agreement, or conditional sale agreement,
         or other transaction having the commercial effect of a borrowing);


Model PSC under the Petroleum Act
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