PRESIDENT OF

THE REPUBLIC OF INDONESIA

GOVERNMENT REGULATION OF THE REPUBLIC OF INDONESIA NUMBER 35 OF 2004

CONCERNING

OIL AND GAS UPSTREAM BUSINESS ACTIVITIES PRESIDENT OF THE REPUBLIC OF INDONESIA,

Considering : that to implement the provis ions o f Art ic les 8 , and 18; Art ic le

19, paragraph (2); Art ic le 20, paragraph (6); Art ic le 21, paragraph (3); Art ic le 22, paragraph (2); Art ic le 31, paragraph (5); Art ic les 37 and 43 of Law No. 22 of 2001 concerning Oil and Gas, i t is necessary to establ ish a Government Regulat ion on Oil and Gas Upstream Business Act iv i t ies;

In view of : 1 . Art ic le 5 , paragraph (2), o f the 1945 Const i tu t ion as

having been amended by the Fourth Amendment to the 1945 Const i tu t ion;

2 . Law No. 22 of 2001 on Oil and Gas (State Gazet te o f the

Republic o f Indonesia o f 2001 No. 136, Supplement to the S tate Gazet te No. 4152);

3 . Government Regulat ion No. 42 of 2002 on Oil and Gas

Upstream Business Act iv i t ies Implementing Body (State Gazet te o f the Republic o f Indonesia o f 2002 No. 81, Supplement to the S tate Gazet te No. 4216);

4 . Government Regulat ion No. 31 of 2003 on the

Transformation of Oil and Gas State Mining Company (PERTAMINA) in to a Limited Liabil i ty Company (Persero) (S tate Gazet te o f the Republic o f Indonesia o f 2003 No. 69);

DECIDES

To establ ish : A GOVERNMENT REGULATION CONCERNING OIL AND GAS UPSTREAM BUSINESS ACTIVITIES.

CHAPTER I

GENERAL PROVISIONS

Art icle 1

Referred to in th is Government Regulat ion as: 1 . Crude Oil , Natural Gas, Oil and Gas, Mining Authori ty , General Survey,

Upstream Business Act iv i t ies , Exploration, Exploi ta t ion, Indonesian Legal Mining Terri tory, Operat ional Area, Business Ent i ty , Permanent Establ ishment, Cooperat ion Contract , Central Government, Implementing Body, and Minis ter shal l be as def ined in Law No. 22 of 2001 on Oil and Gas.

2 . Coalbed Methane shal l mean natural gas (hydrocarbon) in which methane is the

main component that occurred natural ly in a calci f icat ions process in an entrapped and absorbed condit ion in the coal and/or coal layer.

3 . Open Area shal l mean any part o f the Indonesian Legal Mining Terri tory that

has not been designated as an Operat ional Area. 4 . Product ion Sharing Contract shal l mean a form of Cooperat ion Contract in

Upstream Business Act ivi t ies based on product ion sharing principles . 5 . Service Contract shall mean a form of Cooperat ion Contract for the

implementation of Oil and Gas Exploi ta t ion based on the principle o f provis ion of fee for the product ion made.

6 . Contractor shal l mean the Business Ent i ty or Permanent Establ ishment that is

authorized to carry out Oil and Gas Explorat ion and Exploi ta t ion in an Operat ional Area based on a Cooperat ion Contract with the Implementing Body.

7 . Data shal l mean al l facts , c lues , indicat ions, and in formation ei ther in the form

o f a wri t ing (character), f igure (d igi ta l) , drawing (analog), magnet ic media , document , rock sample, f lu id, or in another form, which are obtained from the resul t o f Oil and Gas General Survey, Explorat ion and Exploi ta t ion.

8 . Department shal l mean the department which areas of dut ies and authori ty

include Oil and Gas business act iv i t ies . 9 . Pertamina shal l mean the S tate Oil and Gas Mining Company which was

establ ished based on Law No. 8 o f 1971 on State Oil and Gas Mining Company vide Law No. 22 of 2001 on Oil and Gas.

10. PT. Pertamina (Persero) shal l mean a l imited l iabi l i ty (Persero) which was

establ ished based on Government Regulat ion No. 31 of 2003 on The Transformation of S tate Oil and Gas Mining Company (PERTAMINA) in to a Limited Liabi l i ty Company (Persero).

CHAPTER II

OPERATIONAL AREA

Art ic le 2

(1) The Upstream Business Act ivi t ies shal l be performed in an Operat ional Area . (2) The Operational Area referred to in paragraph (1) shal l be p lanned and

prepared by the Minister by considering the opinions of the Implementing Body.

Article 3

(1) The Minister shal l determine and announce the Operat ional Area to the

o f fered to Business Enti t ies and Permanent Establ ishments . (2) In determining the Operat ional Area referred to in paragraph (1), the

Minister shal l consul t wi th the Governor whose adminis trat ive terri tory encompasses the Operat ional Area to be o f fered.

(3) The consulta t ion re ferred to in paragraph (2) shal l be aimed at g iv ing

explanat ions and obtaining in formation about the p lanned of fer o f certa in areas that are deemed to be have potent ia l resources o f Oil and Gas to become Operat ional Areas .

Article 4

(1) The Minister shal l es tabl ish an Operat ional Area of fering pol icy based on technical , economic, and r isk level considerat ions and under the principles o f transparency, equi tabi l i ty , accountabi l i ty and competi t iveness .

(2) The Operational Area of fering policy provided for in paragraph (1) shal l be

in the form of a tender or a direct o f fer .

Article 5

(1) The of fer o f an Operat ional Area to the Business Ent i ty or Permanent

Establ ishment shal l be made by the Minis ter . (2) In making the o f fer o f an Operat ional Area referred to in paragraph (1), the

Minis ter shal l coordinate with the Implementing Body. (3) The Business Ent i ty or Permanent Establ ishment may submit a request to the

Minis ter to obtain an Operat ional Area. (4) In the event that PT. Pertamina (Persero) submits a request to the Minis ter to

obtain a certa in open Operat ional Area, the Minister may approve such a request by considering the work program, technical and f inancial capaci ty o f PT. Pertamina (Persero) and insofar as the shares o f PT. Pertamina (Persero) are 100% owned by the S tate .

(5) PT. Pertamina (Persero) referred to in paragraph (4) may not submit a

request for an Operat ional Area that has a lready been offered.

Article 6

(1) The Minis ter shall determine a Business Ent i ty or Permanent Establ ishment to be a Contractor that is authorized to perform the Upstream Business Act iv i t ies in an Operat ional Area as provided for in paragraph (1) o f Art icle 2.

(2) In determining the Business Enti ty or Permanent Establ ishment re ferred to in

paragraph (1), the Minis ter shal l coordinate with the Implementing Body. (3) To each Business Enti ty or Permanent Establ ishment referred to in paragraph

(1), only one Operat ional Area shall be provided.

Article 7

(1) The Contractor shal l return any part or the whole o f i ts Operat ional Area in s tages to the Minister through the Implementing Body in accordance with the Cooperat ion Contract .

(2) In addi t ion to those speci f ied in paragraph (1), the Contractor may return any

part or the whole o f i ts Operat ional Area to the Minister through the Implementing Body prior the expirat ion of the Cooperat ion Contract term.

(3) The Contractor shal l re turn the ent ire Operat ional Area to the Minis ter

through the Implementing Body af ter the Cooperat ion Contract term has expired.

Article 8

In the event that the Contractor returns i ts ent ire Operat ional Area ent irely as provided for in paragraph (2) o f Art ic le 7 , i t shal l f irs t fu l f i l l a l l commitments o f def in i te Explorat ion and other obl igat ions under the Cooperat ion Contract .

Article 9

An Operational Area that has been returned by the Business Enti ty or Permanent Establ ishment as set forth in Art ic le 7 shal l become an open Operat ional Area.

Article 10

Regarding any part o f an Operat ional Area that is not used by the Contractor, the Minister may, upon consul ta t ion with the Implementing Body, take such a part of Operat ional Area and set a policy on i ts exploi ta t ion based on the considerat ions o f opt imizat ion of Oil and Gas resources u t i l izat ion.

CHAPTER III

GENERAL SURVEY AND OIL AND GAS DATA

Art ic le 11

(1) To support the preparat ion of an Operat ional Area, the Minis ter shal l conduct a General Survey.

(2) The act iv i ty o f the General Survey referred to in paragraph (1) shall be

performed at an open Operat ional Area in the Legal Mining Terri tory.

(3) The General Survey shal l include geological , geophysical , and geochemical surveys .

Article 12

In addi t ion to those speci f ied in paragraph (2) o f Art ic le 11, the General Survey may be conducted across the Operat ional Area af ter making prior coordinat ion with the Implementing Body to not i fy the Contractor concerned.

Article 13

(1) As part o f General Survey implementat ion as provided for in Art ic le 11, the

Minister may give a l icense to a Business Enti ty to conduct a General Survey. (2) The General Survey conducted by a Business Enti ty as set forth in paragraph

(1) shal l be a t the expense and r isk o f the Business Enti ty concerned. (3) Before conduct ing a General Survey, the Business Ent i ty referred to in

paragraph (1) shall submit to the Minis ter the schedule and the implementation procedure of the General Survey.

Article 14

The Business Enti ty conduct ing the General Survey set forth in paragraph (1) o f Art ic le 13 may maintain and ut i l ize the data resul ted from the General Survey unt i l the expirat ion of the l icense referred to in paragraph (1) o f Art icle 13.

Article 15

(1) The data obtained from the General Survey and from the Exploration and

Exploi ta t ion shal l become the State’s property control led by the Government. (2) The Minis ter shal l es tabl ish a regulat ion on the process ing and use of the Data

obtained from the General Survey and from the Exploration and Exploi ta t ion as provided for in paragraph (1).

Article 16

The Data processing referred to in Art ic le 15 shal l comprise the acquirement, adminis trat ion, processing, arrangement , s torage, maintenance, and destruct ion of Data.

Art ic le 17

(1) Any consignment, del ivery and/or conveyance of the Data referred to in Art ic le 15 shal l have the consent o f the Minis ter .

(2) The Minis ter shal l determine the types of Data that require the consent

referred to in paragraph (1).

Article 18

(1) The Contractor may manage the Data resul ted from Explorat ion and Exploi ta t ion act iv i t ies in i ts Operat ional Area as speci f ied in Art ic le 16 during the term of Cooperat ion Contract , except for the destruct ion of Data.

(2) Any Contractor who appoints another party to perform the Data processing referred to in paragraph (1) shal l obtain the approval o f the Minis ter .

(3) The other party appointed to perform the Data processing referred to in

paragraph (2) shal l meet the requirements prescribed by the prevai l ing laws and regulat ions.

(4) The Contractor shal l s tore the Data that is used pursuant to paragraph (1) in

the Indonesian Legal Mining Terri tory. (5) The Contractor may retain the copy of Data beyond the Indonesian Legal

Mining Terri tory a f ter i t has obtained the consent o f the Minis ter .

Article 19 (1) The Business Ent i ty conduct ing the General Survey set for th in Art ic le 13 shal l

turn over al l the Data i t has acquired to the Minis ter a f ter the expirat ion of the l icense granted.

(2) At the expirat ion of Cooperat ion Contract as speci f ied in paragraph (3) of

Art ic le 7 , the Contractor shal l turn over a l l the Data derived from the resul ts o f Exploration and Exploi ta t ion to the Minis ter through the Implementing Body.

(3) The Contractor shal l del iver to the Minis ter , through the Implementing Body,

a l l the Data i t has obtained from the resul ts o f Explorat ion and Exploi ta t ion at i ts Operat ional Area when the Operat ional Area is returned as speci f ied in Art ic le 7 .

(4) The Contractor whose Cooperat ion Contract has expired or who transfers a l l

i ts in terests to another Business Enti ty or Permanent Establ ishment may submit a request for an approval to the Minis ter to reta in and use the copy of Data from i ts Operat ional Area.

(5) The Data referred to in paragraph (4) may not be transferred to another party

without the consent o f the Minis ter.

Article 20

The Contractor shal l del iver to the Minister , through the Implementing Body, the Data derived from the resul ts o f Explorat ion and Exploi ta t ion with in not more than three (3) months from the end of the Data acquirement, processing and in terpretat ion.

Article 21

Any exchange of Data between domest ic Contractors or between domest ic Contractors and other overseas part ies may be in i t ia ted af ter i t has obtained the consent of the Minis ter .

Article 22

In respect of the conf ident ia l i ty , the Data shal l be c lass i f ied as fo l lows: a . General Data, that is the data on the identi f icat ion and geographic locat ion of

the potent ial Oil and Gas, reserve and wel l and the Oil and Gas product ion.

b. Basic Data , that is the descript ions or quanti ty o f the resul ts o f geological , geophysical , geochemical exploration, dri l l ing and product ion recording.

c . Processed Data, that is the Data obtained from the resul ts o f analysis and

evaluat ion of Basic Data. d . In terpretat ion Data, that is the Data obtained from the resul ts o f

in terpretat ion of Basic Data and/or Processed Data.

Article 23 (1) The Basic Data, Processed Data and Interpretat ion Data referred to in Art ic le

22 shal l be conf ident ia l for a cer tain per iod of t ime. (2) The conf ident ia l i ty period set forth in paragraph (1) shal l be as determined

below: a . Basic Data: four (4) years. b . Processed Data: s ix (6) years . c . In terpretat ion Data: e ight (8) years . (3) In the event that an Operat ional Area is re turned to the Government as

provided for in Art ic le 7, a l l the Data from such an Operat ional Area shal l no longer be classi f ied as conf ident ia l Data .

CHAPTER IV

IMPLEMENTATION OF UPSTREAM BUSINESS ACTIVITIES

Art ic le 24

(1) The Upstream Business act iv i t ies shal l be carried out by a Business Ent i ty or a Permanent Establ ishment based on the Cooperat ion Contract made with the Implementing Body.

(2) The Cooperat ion Contract referred to in paragraph (1) shal l a t least contain the

fo l lowing provis ions :

a . The ownership of the Oil and Gas resource shal l remain with the Government unt i l the date o f turnover;

b . The management control over the operat ions carried out by the

Contractor shal l be performed by the Implementing Body; c . The capi ta l and r isk shal l be the fu l l l iabi l i ty o f the Contractor.

Article 25

(1) The Minis ter shal l determine the form and the principal provis ions o f the Cooperat ion Contract to be applied to a certa in Operat ional Area by considering the r isk level and the greatest possib le benef i ts to the S tate as wel l as the prevai l ing laws and regulat ions.

(2) The Minis ter shal l determine the form and the principal provis ions o f Cooperat ion Contract referred to in paragraph (1) a f ter considering the opinions o f the Head of Implementing Body.

Art ic le 26

The Cooperat ion Contract shal l a t least contain the fo l lowing principal provis ions: a . S tate revenue; b . Operat ional Area and i ts turnover; c . funding obl igat ion; d . transfer o f ownership of Oil and Gas produced; e . term and condit ions o f contract extension; f . set t lement of d isputes; g . obl igat ion to supply Oil and/or Gas for domest ic needs; h . expirat ion of contract; i . mining post-operat ion obl igat ions; j . industr ia l safety and heal th; k . environmental management; l . t ransfer o f r ights and obl igat ions; m. required report ing; n . f ie ld development p lan; o . the priori ty g iven to the use o f domest ic products and services; p . development o f the surrounding community and guaranty o f the community

customary rights; q . the employment priori ty g iven to Indonesian personnel .

Article 27

(1) The term of the Cooperat ion Contract referred to in Art ic le 24 shal l be for a

maximum period of th ir ty (30) years. (2) The term of Cooperat ion Contract referred to in paragraph (1) shal l consis t

o f the Explorat ion phase and the Exploi ta t ion phase. (3) The Explorat ion phase referred to in paragraph (2) shal l be s ix (6) years and

extendable one (1) t ime only for a maximum period of four (4) years based on the request o f the Contractor, provided that the Contractor has fu l f i l led i ts minimum obligat ion under the Cooperat ion Contract , the approval o f which shall be g iven by the Implementing Body.

(4) In the event that during the Explorat ion phase referred to in paragraph (3) the Contractor fa i ls to d iscover any Oil and/or Gas reserve that can be produced commercial ly , the Contractor shal l return the ent ire Operat ional Area.

Article 28

(1) The Cooperat ion Contract referred to in paragraph (1) of Art ic le 27 may be

extended for a maximum extension period of twenty (20) years for each extension.

(2) The condi t ions or form of Cooperat ion Contract in the Cooperat ion Contract

extension speci f ied in paragraph (1) shal l remain prof i table to the S tate . (3) The Contractor shal l submit a request for the Cooperat ion Contract extension

referred to in paragraph (1) to the Minister through the Implementing Body. (4) The Implementing Body shal l evaluate the request for a Cooperat ion Contract

extension, as the basis for the Minis ter 's considerat ions in approving or d isapproving the Contractor 's request .

(5) The request for a Cooperat ion Contract extension referred to in paragraph (3)

may be submit ted at the earl iest ten (10) years and at the la test two (2) years prior to the Cooperat ion Contract expirat ion.

(6) Excepted from the provis ions se t out in paragraph (5) shal l be a Contractor

who is bound to a Gas sale and purchase agreement, in which case the Contractor may submit a request for the extension of Cooperat ion Contract earl ier than the t ime l imit speci f ied in paragraph (5).

(7) In g iving the approval o f the Cooperat ion Contract extension referred to in

paragraph (1), the Minis ter shal l consider the factors such as Oil and/or Gas reserves of the re la ted Operat ional Area, the potent ials or the cer tainty of market /demand, and technical / economic acceptabi l i ty .

(8) Based on the resul ts o f the evaluat ion and considerations referred to in

paragraphs (4) and (7) the Minis ter may dismiss or approve the request for Cooperat ion Contract extension referred to in paragraph (1) with respect to certa in periods, forms and condi t ions o f Cooperat ion Contracts .

(9) PT. Pertamina (Persero) may submit the request to the Minis ter in the

case of an Operat ional Area which Contract has expired. (10) The Minister may approve the request referred to in paragraph (9) by

considering the work program, technical and f inancial capacity o f PT. Pertamina (Persero), insofar as the shares of PT. Pertamina (Persero) are 100% owned by the State , and other matters rela ted to the Cooperat ion Contract concerned.

Art ic le 29

(1) The Contractor may propose to the Minis ter through the Implementing Body an

amendment o f the terms and condit ions o f Cooperat ion Contract . (2) The Minis ter may approve or dismiss the recommendat ion referred to in

paragraph (1) based on the considerat ions/opinions o f the Implementing Body or the opt imum benef i ts to the s tate .

Article 30

(1) Within the period of 180 days as of the e f fect ive date of the Cooperat ion Contract , the Contractor shal l commence i ts operat ions.

(2) In the event o f the Contractor 's fa i lure to perform the obligat ion speci f ied in

paragraph (1), the Implementing Body may propose to the Minis ter to obtain the approval o f Cooperat ion Contract termination.

Art ic le 31

(1) Within the f irs t three (3) years during the Explorat ion phase referred to in

paragraph (3) o f Art ic le 27, the Contractor shal l carry out a def in i te work program with such est imated expendi tures as speci f ied in the Cooperat ion Contract .

(2) I f the def ini te work program referred to in paragraph (1) is technical ly or

economical ly impossible to be real ized, the Contractor may recommend an amendment to the Minister through the Implementing Body for approval.

(3) The Minis ter may approve or d ismiss the proposed def in i te work program

referred to in paragraph (2) by considering the opinions o f the Implementing Body.

(4) In the event that the Contractor terminates the Cooperat ion Contract and fa i ls

to perform any part or the whole o f the def ini te work program referred to in paragraph (2), the Contractor shal l pay to the Government through the Implementing Body an the amount equal to the expenditures incurred related to the unreal ized port ion of the def in i te work program.

Article 32

In the event that the Contract fa i ls to perform i ts obl igat ions in accordance with the Cooperat ion Contract and the prevai l ing laws and regulations, the Implementing Body may propose to the Minister to terminate the Cooperat ion Contract .

Article 33

(1) The Contractor may transfer , assign and convey any part any part or a l l o f i ts r ights (partic ipat ing interests) and obl igat ions to another party a f ter having obtained the approval o f the Minister , which shal l be g iven based on the considerat ions o f the Implementing Body.

(2) In the event that the transfer , assignment and conveyance of any part or a l l o f

the Contractor 's r ights and obl igat ions as provided for in paragraph (1) are made to a non-af f i l iated company or to the company other than business partners with in the same Operat ional Area, the Minister may request the Contractor to o f fer them f irs t to the nat ional companies .

(3) The disclosure o f Data for the transfer , assignment and conveyance of any part

or a l l o f the Contractor 's r ights and obl igat ions to another party as set forth in paragraph (1) shal l require the approval o f the Minis ter through the Implementing Body.

(4) The Contractor may not transfer any of i ts r ights and obl igat ions on a majori ty basis to another party , which is not i ts a f f i l ia te , wi th in the f irs t three years ' per iod of the Exploration phase.

Article 34

Commencing from the f ie ld development p lan to be in i t ia l ly produced in an Operat ional Area, the Contractor shal l o f fer 10% of i ts part ic ipat ing in terests to Regional Government’s Enterprises.

Article 35

(1) Let ters o f in tent to obtain the partic ipat ing interests referred to in Art ic le 34

shal l be delivered by the Regional Government’s Enterprises with in not more than s ixty (60) days from the date of the o f fer by the Contractor.

(2) In the event that the Regional Government’s Enterprises do not submit any

le t ter o f in tent wi th in the period speci f ied in paragraph (1), the Contractor shal l o f fer the same to the nat ional companies.

(3) In the event that no le t ter o f in tent is submit ted by the nat ional companies

with in the period of s ix ty (60) days from the date o f the Contractor 's o f fer to them, then the o f fer shall be declared closed.

Article 36

(1) The Contractor shal l a l locate a fund for the post-operat ional act iv i t ies o f

Upstream Business Act ivi t ies . (2) The obl igation referred to in paragraph (1) shal l be performed with ef fect

from the Explorat ion phase and carried out through a work plan and budget. (3) The fund al locat ion referred to in paragraphs (1) and (2) shal l be agreed upon

by the Contractor and the Implementing Body and funct ion as a fund reserve that is special ly earmarked for the post-operational act iv i t ies o f the Upstream Business Act iv i t ies in the rela ted Operat ional Area.

(4) The procedure on the use of the fund reserve special ly earmarked for post-

operat ions as referred to in paragraph (3) shall be def ined in the Cooperat ion Contract .

Article 37

(1) The Cooperat ion Contract shal l be made in Indonesian and/or English

language. (2) Where the Cooperat ion Contract is made in Indonesian and English

language, in the event o f any di f ference of construct ion thereof , the construct ion of e i ther the Indonesian or the English version shal l apply in accordance with the agreement o f the part ies .

Article 38

The Cooperat ion Contract shal l be governed by and subject to Indonesian law.

Article 39

(1) The Contractor shall report the discovery and resul ts o f cert i f icat ion of Oil and/or Gas reserve to the Minis ter through the Implementing Body.

(2) In developing and producing the Oil and Gas f ie ld the Contractor shal l carry

out a conservat ion and implement i t according to sound technical s tandards. (3) The conservat ion referred to in paragraph (2) shal l be carried out through the

opt imizat ion of exploi ta t ion and the ef f ic ient ut i l iza t ion of Oil and Gas. (4) The sound technical s tandards referred to in paragraph (1) shal l include:

a . fu l f i l l ing the safety and heal th as wel l as environmental requirements; b . producing Oil and Gas in accordance with the sound reservoir

management pract ices; c . producing Oil and Gas wel ls in an appropriate manner; d . using the appropriate Enhanced Oil Recovery (EOR) advanced

technology; e . promoting the ef forts o f reservoir capaci ty improvement to f low the

f lu ids using appropriate techniques; f . fu l f i l l ing the s tandard requirements o f the required equipment.

Article 40

The Contractor shall not i fy the Minister through the Implementing Body when evident is found or obtained that the spreading of an Oil and/or Gas reservoir enters the Operat ional Area of another Contractor or the terr i tory/ cont inental land of another country.

Article 41

(1) The Contractor shal l conduct a uni t izat ion when there is evident that the

spreading of a reservoir enters the Operat ional Area of another Contractor. (2) As regards the spreading of a reservoir that enters an Open Area, the

Contractor shal l conduct a uni t izat ion when such an Open Area subsequently becomes an Operat ional Area.

(3) In the event that up to a maximum period of f ive (5) years the Open Area

referred to in paragraph (2) has not turned in to an Operat ional Area, the Contractor concerned may request for the proport ional expansion of i ts Operat ional Area through the Implementing Body.

(4) The uni t izat ion referred to in paragraphs (1) and (2) shal l require the

approval o f the Minis ter .

Article 42

The Minis ter shal l determine the operator who should conduct the uni t izat ion based on the agreement between the Contractors conduct ing the uni t izat ion and the considerat ions o f the Implementing Body.

Article 43

As regards the spreading of a reservoir that enters the terr i tory/ cont inental land of another country, the set t lement wil l be determined by the Minis ter based on the cont inental land agreement between the Government o f the Republic o f Indonesia and the Government o f the o ther country concerned as wel l as the considerat ion on the opt imal benef i ts to the s ta te .

Article 44

(1) The act iv i t ies o f f ie ld processing, transportat ion, s torage, and trading of own products performed by the Contractor concerned shal l const i tu te the Upstream Business Act iv i t ies .

(2) In the event of excess capaci ty on the f ie ld processing, transportat ion, s torage

and trading faci l i t ies def ined in paragraph (1) , the Contractor may, subject to the approval o f the Implementing Body, take advantage of such excess capaci ty by a l lowing another party to use them based on the proport ional sharing of operat ing costs .

Article 45

(1) The faci l i t ies constructed by the Contractor to perform the act iv i t ies o f f ie ld processing, transportat ion, s torage and trading of own products as referred to in Art ic le 44, shal l not be in tended to gain profi ts and/or earnings.

(2) In the event that the faci l i t ies referred to in paragraph (1) are used jo int ly

wi th another party by imposing a charge or rent to gain prof i ts and/or earnings, the Contractor shal l organize a separate Upstream Business Act iv i t ies Body and obtain a Business License.

CHAPTER V

USE OF OIL AND GAS TO SUPPLY DOMESTIC NEEDS

Art ic le 46

(1) The Contractor shal l be responsible for part ic ipat ion in the supply o f domest ic

need for Oil and/or Gas. (2) The part ic ipat ion of the Contractor in the supply of domest ic needs as

provided for in paragraph (1) shal l be determined on a prorate basis according to the share of Oil and/or Gas product ion.

(3) The maximum amount of the Contractor 's partic ipat ion in the supply referred

to in paragraph (2) shal l be 25% (twenty f ive percent) o f the Oil and/or Gas product ion.

(4) The Minis ter shal l determine the amount o f supply of each Contractor to meet

the domest ic need for Oil and/or Gas as referred to in paragraph (3).

Article 47

The Minis ter shal l es tabl ish a pol icy on the supply o f Oil and/or Gas for the domest ic demands annually .

Article 48

(1) Any new Natural Gas reserve discovered by the Contractor shal l be reported

f irs t to the Minis ter to supply the domest ic demands as provided for in Art ic le 46.

(2) In the event that the Natural Gas reserve referred to in paragraph (1) is to be

produced, the Minis ter shal l f irs t g ive the domest ic consumers an opportuni ty to meet their needs wi thin a maximum period of one year.

(3) Within the period of three (3) months commencing from the expirat ion of the

t ime l imit of one year speci f ied in paragraph (2), the Minister shall g ive a not ice to the Contractor concerning the condit ion of the domest ic demands.

Art ic le 49

The mechanism of the Oil and/or Gas del ivery by the Contractor as speci f ied in paragraph 46 shal l be def ined in the Cooperat ion Contract .

Art ic le 50

(1) The Minis ter shal l es tabl ish the pol icy on the use o f Natural Gas from the Gas

reserve by ensuring that the domestic needs can be opt imally sat is f ied with due considerat ion of the publ ic in terests , s ta te interests , and the nat ional energy pol icy.

(2) In establ ishing the pol icy on the use o f Natural Gas referred to in paragraph

(1) the Minis ter shal l consider the technical aspects , which cover the Gas reserve and market opportuni ty , the good in frastructure avai lable or p lanned, and the recommendations o f the Implementing Body.

Article 51

(1) Any Oil and Gas discovered, produced and sold shal l be subject to a qual i ty

evaluat ion. (2) Any expenses aris ing out in the qual i ty evaluat ion provided for in paragraph

(1) shal l be charged as operat ing costs . (3) The further regulat ion on the procedure of Oil and Gas qual i ty evaluat ion

referred to in paragraph (1) shal l be s t ipulated by the Minis ter .

CHAPTER VI

STATE REVENUE

Art ic le 52

(1) The Contractor who performs Upstream Business Act iv i t ies shal l pay the s tate obl igat ions in the form of tax and non- tax s ta te revenues.

(2) The Tax State Revenue referred to in paragraph (1) shal l consis t o f: a . taxes; b . import dut ies and other levies on import and excises; c . regional taxes and charges. (3) The Non-Tax State Revenue referred to in paragraph (1) shal l consis t o f: a . the State 's share;

b . the S tate levies in the form of permanent contr ibut ions and Exploration and Exploi ta t ion contribut ions;

c . bonuses

Article 53

Prior to the execut ion of the Cooperat ion Contract , the Contractor may choose the obl igat ion to pay the tax speci f ied in paragraph (2) o f Artic le 52 under the fo l lowing opt ions: a . fo l low the provis ions o f laws concerning tax that are appl icable a t the t ime the

Contract is executed; or b . fo l low the provis ions o f the appl icable laws concerning on tax.

Article 54

The provis ions on the amount o f the s ta te share, s ta te charges and bonuses referred to in paragraph (3) o f Art ic le 52 and the method of payment shal l be set out in a separate Government Regulat ion.

Article 55

(1) The dis tr ibut ion of Oil and Gas on the Product ion Sharing Contract between

the Government and the Contractor shal l be made at the point o f del ivery. (2) For the del ivery o f Oil and Gas at the point o f del ivery as speci f ied in

paragraph (1) the measuring equipment determined by the Minister in accordance with the prevai l ing laws and regulations shal l be used.

Article 56

(1) The investment and operat ing expenses incurred under the Product ion Sharing

Contract shal l be approved by the Implementing Body. (2) The Contractor shal l recover (obtain the reimbursement for) the expenses i t

has incurred to carry out the Explorat ion and Exploi ta t ion as referred to in paragraph (1) according to the work plan and budget and the Authorizat ion of Financial Expenditure approved by the Implementing Body af ter the commercial product ion.

Article 57

All the Oil and Gas produced by the Contractor under the Service Contract shall be the property o f the State and del ivered/handed over by the Contractor to the Government.

Article 58

(1) The Contractor who carries out an Oil and/or Gas Exploi ta t ion based on a Service Contract shal l be provided with a fee.

(2) The amount o f the fee referred to in paragraph (1) shal l be calculated

according to the to ta l product ion of Oil and/or Gas and determined based on the o f fer o f Business Enti ty or Permanent Establ ishment.

(3) The Contractor conduct ing the Exploi ta t ion of Oil and/or Gas as set forth in

paragraph (1) shal l bear a l l expenses and r isks ar is ing during producing the Oil and/or Gas.

(4) The fee referred to in paragraph (1) shal l be provided af ter the commencement

o f commercial product ion.

Article 59

The provis ions concerning the Service Contract shal l be se t out in a Minis ter ia l Decree.

Article 60

The Non-Tax State Revenue def ined in paragraph (3) o f Art ic le 52 shal l be the revenues o f the Central Government and Regional Government, which dis tr ibution shal l be made in accordance with the appl icable laws and regulat ions.

Article 61

The Non-Tax State Revenue af ter being deducted by the Regional Government 's revenue shal l become the Non-Tax State Revenue originated from the Oil and Gas which can be part ly used by the Department in accordance with the appl icable laws and regulat ions.

CHAPTER VII

PROPRIETARY LAND AND STATE-OWNED LAND USE

SETTLEMENT PROCEDURE

Art ic le 62 (1) Any Contractor who wishes to use p lots o f proprietary land or s ta te-owned

land with in i ts Operat ional Area shal l f irs t make set t lement on the use o f land with the t i t le holder or the user o f the s ta te-owned land in accordance with the prevai l ing laws and regulat ions.

(2) The people holding the t i t les or the users o f the s ta te-owned land shal l a l low

the Contractor who presents a Cooperat ion Contract , or the legi t imate copy thereof , to conduct Explorat ion and Exploi ta t ion on the rela ted land, when the Contractor concerned has made a set t lement that is agreed by the holders or the users o f such s ta ted-owned land.

Article 63

(1) The land use set t lement by the Contractor shall be made through del iberat ions and consensus with the holders of t i t les or the users o f s ta te-owned land in accordance with the prevai l ing laws and regulations.

(2) The del iberat ions and consensus referred to in paragraph (1) may be held

d irect ly with the holders o f t i t les or the users o f the s ta te-owned land concerned by means of a sale and purchase transact ion, exchange, reasonable compensat ion, acknowledgement or o ther forms of indemnif icat ion.

(3) In the event that the aforementioned land is the communal land of a customary

community , the procedures of del iberat ions and consensus shal l observe the communal decis ion-making procedure under the local customary law.

Article 64

(1) In the event that the number of people who hold the t i t les or the users o f the

s ta te-owned land is so large that i t is not possible to hold ef fect ive del iberat ions, such del iberat ions may be held part ia l ly or with the representat ives appointed by and act ing as the agent o f the t i t le holders by means of a power of a t torney that is made in accordance with the prevai l ing laws and regulat ions.

(2) In the event that the del iberat ions and consensus referred to in paragraph (1)

o f Art ic le 63 are not achieved, the part ies may appoint another party in accordance with the prevai l ing laws and regulations.

Article 65

(1) The compensat ion for the land shal l be determined based on the resul ts o f

del iberat ions by taking in to considerat ion the la test Sel l ing Value of the Tax Object .

(2) The compensat ions for the bui ld ings, p lants and other objects exis t ing thereon

shal l be determined based on the rela ted technical s tandards.

Article 66

(1) The provis ion of a compensat ion shal l be accompanied by a wri t ten s ta tement o f rel inquishment or assignment o f the land t i t le , which is s igned by the part ies a t the presence of a t two (2) wi tnesses.

(2) At the t ime the wri t ten s ta tement referred to in paragraph (1) is made, the

holder o f the land t i t le shal l hand over the cert i f icate and/or the orig inal documents of the rela ted land to the Contractor.

Article 67

(1) The land, the set t lement o f which has been made by the Contractor as provided

for in Art ic le 62, shal l become the property o f the S tate and be managed by the Implementing Body, except leasehold es ta tes .

(2) A request for the cert i f icate of ownership of the land referred to in paragraph

(1) shal l be submit ted in accordance with the provis ions o f the prevai l ing laws and regulat ions.

Article 68

(1) The Operat ional Area of a Contractor that is not yet used for Explorat ion and Exploi ta t ion may be used for act iv i t ies o ther Explorat ion and Exploita t ion by another party a f ter obtaining the recommendation of the Minister and the u t i l iza t ion l icense from the related Regional Government .

(2) The other party referred to in paragraph (1) may, by the Minis ter 's

recommendation, submit a request for a land t i t le in accordance with the prevai l ing laws and regulat ions.

Article 69

(1) The Contractor may perform the Explorat ion and Exploi ta t ion act iv i t ies o ther

than the ones def ined in Art ic le 44 in the Operat ional Area of the Contractor concerned in accordance with the Cooperat ion Contract .

(2) The Contractor may bui ld such faci l i t ies as set forth in Art ic le 44 on the p lot

o f land and/or in the outs ide o f the Contractor 's Operat ional Area af ter the procurement thereof has been undertaken in accordance with th is Chapter .

(3) The provis ions of Art icle 68 shal l apply to the ownership, the regis trat ion of

the t i t le and the records o f the land used by the Contractor provided for in paragraph (2).

Article 70

(1) The Contractor who possesses the Right o f Way (ROW) of Oil and Gas transmiss ion pipel ines shal l g ive permiss ion to another Contractor to use such an ROW for the construct ion and ut i l iza t ion of Oil and Gas transmission pipel ines.

(2) The permission given pursuant to paragraph (1) shal l be based on technical

and economic as wel l as safety and securi ty considerat ions. (3) The Contractor who in tends to use the ROW referred to in paragraph (1) shal l

negot iate d irect ly with the Contractor/party who owns the ROW. (4) In the event that no agreement is achieved in the negot iat ion provided for in

paragraph (3), the Contractor shall submit a request to the Minis ter through the Implementing Body to decide a further set t lement .

Article 71

The t i t le o f the land that is used for the ROW of Oil and Gas transmission pipel ines referred to in Art ic le 69 may be requested in accordance with the prevai l ing laws and regulat ions.

CHAPTER VIII

INDUSTRIAL SAFETY AND HEALTH AND

ENVIRONMENTAL MANAGEMENT AND DEVELOPMENT OF LOCAL COMMUNITY

Art ic le 72

The Contractor who carries out Upstream Business Act ivi t ies shal l ensure and comply with the regulations on industr ia l safety and heal th as wel l as environmental management and local community development.

Article 73

The regulations on industr ia l safety and heal th as wel l as environmental management and local community development provided for in Art ic le 72 shal l be in conformity with the prevai l ing laws and regulations.

Article 74

(1) In performing i ts act iv i t ies the Contractor shal l a lso be responsible for the

development o f the local area and community . (2) The Contractor 's responsibi l i ty for the development o f the local area and

community provided for in paragraph (1) shal l be i ts part ic ipat ion in developing and ut i l iz ing the potency of the local community , among other th ings, by employing personnel in a certa in number and qual i ty conformed to the competence required, and improving the dwel l ing environment of the community in order to create harmony between the Contractor and the surrounding community .

Art ic le 75

In the part ic ipat ion for the development of the local area and community as provided for in paragraph (1) of Art ic le 74, the Contractor shal l a l locate funds in each of the work plans and annual budgets made.

Article 76

(1) In carrying out the local area and community development the Contractor shal l coordinate with the Regional Government.

(2) The local area and community development referred to in paragraph (1) shal l

priori t ize the community l iv ing around the area at which the Exploi ta t ion is carried out .

Article 77

The Contractor 's part ic ipat ion in the local area and community development as provided for in paragraph (1) o f Art ic le 74 shal l be g iven in kind, in the form of physical in frastructure and faci l i t ies or the empowerment o f the local undertakings and manpower.

CHAPTER IX

USE OF DOMESTIC GOODS, SERVICE, TECHNOLOGY AND ENGINEERING AND DESIGN SKILLS

Art ic le 78

(1) Al l mater ials and equipment which are direct ly used in the Upstream Business

Act ivi t ies and were bought by the Contractor shal l be the property o f the S tate and control led by the Government and managed by the Implementing Body.

(2) In the event that the materia ls and equipment referred to in paragraph (1) are

from foreign countr ies , the procedure of import o f such materials and equipment shal l be es tabl ished by the Minis ter , the Minis ter of Finance and the minis ters whose areas o f dut ies and responsibi l i ty include trading af fa irs .

(3) The materials and equipment bought by the Contractor as referred to in

paragraph (1) shal l meet the s tandards prescribed by the appl icable laws and regulat ions.

(4) The Contractor may use the materials and equipment referred to in paragraph

(1) during the val id i ty period of the Cooperat ion Contract .

Article 79

(1) The Contractor shal l priori t ize the use o f domest ic goods, service, technology as wel l as engineering and design ski l ls in a transparent and competi t ive manner.

(2) The priori ty to be g iven to the use o f domest ic goods, service, technology as

wel l as engineering and design ski l ls as provided for in paragraph (1) shal l be ef fected when such goods, service, technology as wel l as engineering and design ski l ls have been produced/avai lable in the country and meet the qual i ty , del ivery date , and price required in the procurement of goods and services.

Article 80

The goods, service, technology as wel l as engineering and design ski l ls referred to in Art ic le 79 may be imported insofar as they are not yet produced/avai lable in the country and as long as the goods, service, technology as wel l as engineering and design ski l ls to be imported meet the requirement o f s tandard/qual i ty , operat ing cost e f f ic iency, del ivery date warranty, and the a f ter-sale service is guaranteed.

Article 81

(1) The management o f materia ls and equipment that are used in Upstream Business Act ivi t ies shall be performed by the Implementing Body.

(2) Any excess s tock of the materia ls and equipment referred to in paragraph (1)

may be handed over to another Contractor to be used in Indonesian Legal Mining Terri tory by the approval o f the Implementing Body and shal l be reported periodical ly to the Minis ter and the Minis ter of Finance.

(3) In the event that the excess s tock of materials and equipment referred to in

paragraph (2) is not used by another Contractor, the Implementing Body

shal l matter to the Minis ter o f Finance through the Minis ter , so that the pol icy on i ts u t i l iza t ion can be establ ished.

(4) In the event that the materia ls and equipment referred to in paragraph (3) wil l

be assigned, sold, exchanged, turned in to the capi ta l investment o f the S tate , destroyed or used by another party by means of lending, leasing, and jo int use o f them, the approval of the Minis ter o f Finance shal l be obtained in advance based on the recommendations o f the Implementing Body given through the Minis ter

. (5) When the Cooperat ion Contract expires , the Contractor 's materia ls and

equipment shal l be handed over to the Government, so that the pol icy on their u t i l iza t ion can be establ ished in accordance with the prevail ing laws and regulat ions.

(6) CHAPTER X

MANPOWER

Art icle 82

(1) In meet ing i ts manpower requirement, the Contractor shal l pr iori t ize the use

o f Indonesian nat ional i ty personnel by g iving considerat ion to the use o f local work force in accordance with the required s tandard of competence.

(2) The Contractor may use expatria te personnel for certa in posi t ions and

expert ise , which s t i l l cannot be fu l f i l led by Indonesian personnel , in accordance with the required competence of the posi t ions concerned.

(3) The procedure on the use o f manpower as set forth in paragraph (2) shal l be in

conformity with the provis ions o f the prevai l ing laws and regulat ions.

Article 83

The provis ions on employment rela t ion/contract , protection and condit ions, and the transfer o f part ia l execut ion of the works to another company shal l be made in accordance with manpower laws and regulat ions.

Article 84

To develop the ski l ls of Indonesian personnel in order to meet the Contractor 's s tandards o f competence and job quali f icat ions, the Contractor shal l provide guidance and carry out an educat ional and training program for Indonesian personnel .

Article 85

The guidance and development of Indonesian personnel shal l be carried out in accordance with the applicable laws and regulat ions.

CHAPTER XI

DEVELOPMENT AND SUPERVISION OF UPSTREAM BUSINESS ACTIVITIES

Art ic le 86

(1) The development and supervis ion of Upstream Business Act ivi t ies shal l be

carr ied out by the Government , the implementat ion of which shal l be conducted by the Minis ter .

(2) The development referred to in paragraph (1) shal l include:

a . the handling of Government Af fa irs deal ing with Upstream Business Act iv i t ies; and

b . the establ ishment o f a pol icy on Upstream Business Act ivi t ies based on

the reserve and potent ia ls o f Oil and Gas resources owned, product ion capaci ty , and domest ic demand for Oil and Gas, the possession of technology, environmental aspects and l iv ing environmental preservat ion, and the nat ional capaci ty and development pol icy.

(3) The responsibi l i ty for the supervis ion of the work and the implementat ion of

Upstream Business Act ivi t ies in respect o f their compliance with the prevai l ing laws and regulat ions shal l rest wi th the Minis ter .

(4) The Upstream Business Act ivi t ies shal l be carried out and control led through

a Cooperat ion Contract between the Implementing Body and a Business Enti ty or Permanent Establ ishment.

(5) The Implementing Body shal l conduct the supervis ion and control over the

implementation of Cooperat ion Contract provided for in paragraph (4). (6) In carrying out the supervis ion and control over the implementat ion of

Cooperat ion Contract provided for in paragraph (5), the Implementing Body shal l be authorized to s ign other contracts that are associated with the Cooperat ion Contract .

(7) The supervis ion and control referred to in paragraph (5) shal l be carried

out by the Implementing Body through a management control over the implementation of the Cooperat ion Contract .

Article 87

(1) The handling of Government a f fa irs referred to in paragraph (2) i tem a of

Art ic le 86 shal l include: a . p lanning; b . l icense, approval and recommendation; c . Oil and Gas Data management and ut i l iza t ion; d . educat ion and training; e . technological research and development;

f . s tandardizat ion; g . accredi ta t ion; h . cert i f icat ion; i . development o f industr ies/support ing business ent i t ies; j . development o f small and medium scale enterprises; k . domest ic goods and service u t i l iza tion; l . safety and heal th; m. l iv ing environment preservat ion; n . the creat ion of a conducive investment cl imate; o . securi ty and order maintenance. (2) The establ ishment o f a policy on Upstream Business Act ivi t ies referred to in

paragraph (2), i tem b, of Art ic le 86 shal l include the regulat ion of: a . General Survey implementat ion; b . Oil and Gas Data management and ut i l iza t ion; c . Operat ional Area preparat ion, determination, o f fer and turnover; d . Cooperat ion Contract form and condit ions; e . Cooperat ion Contract extension; f . in i t ia l f ie ld development p lan; g . f ie ld development and Oil and Gas reserves product ion; h . Gas ut i l iza tion; i . sound technical s tandards appl icat ion; j . obl igat ion to supply the Contractor 's share of Oil and Gas to meet the

domestic needs (DMO); k . possession, development , and appl icat ion of Oil and Gas technology; l . obl igat ion to pay s ta te revenue; m. environmental management; n . safety and heal th; o . use o f expatr ia te personnel; p . Indonesian manpower development;

q . local area and community development; r . s tandardizat ion; s . use o f domest ic goods, service, technology, and engineering and design sk i l ls; t . Oi l and Gas reserves and resources conservat ion; u . coalbed methane exploi ta t ion; v . o ther Oil and Gas act ivi t ies that involve public in terests .

Article 88

The supervis ion speci f ied in paragraph (3) o f Art ic le 86 shal l include: a . Oil and Gas resources and reserves conservat ion; b . Oil and Gas data processing; c . sound technical s tandards; d . safety and heal th; f . environmental management; g . use o f domest ic goods, service, technology, and engineering and design ski l ls; h . use o f expatr ia te personnel; i . Indonesian manpower development; j . local area and community development; k . possession, development , and appl icat ion of Oil and Gas technology; l . o ther Oil and Gas act ivi t ies that involve public in terests .

Article 89

(1) The responsibi l i ty for the development referred to in Art ic le 87 shal l rest wi th the Department and the rela ted departments in accordance with their respect ive areas o f dut ies and authori ty .

(2) The responsibi l i ty for the supervis ion referred to in Artic le 88 shal l rest wi th

the Department and the rela ted departments in accordance with their respect ive areas o f dut ies and authori ty .

Article 90

As part o f the supervis ion and development provided for in paragraph (5) o f Artic le 86 the Implementing Body shal l perform the fo l lowing dut ies: a . to g ive opinions to the Minis ter on his pol icy with respect to the preparat ion and

of fer o f the Operat ional Areas and Cooperat ion Contracts .

b. to execute/s ign the Cooperat ion Contract; c . to review and submit the in i t ial development plan of f ie ld to be produced in an

Operat ional Area to the Minis ter for approval; e . to give approval to the f ie ld development plan other than the one referred to in

i tem c; f . to g ive approval to the work plan and budget; g . to conduct monitoring and submit report to the Minister about the

implementation of the Cooperat ion Contract; h . to appoint the sel ler o f the S tate 's share of Oil and Gas who is able to g ive the

greates t poss ible prof i ts to the State.

Article 91

The Implementing Body shal l per form the control and supervis ion over the implementation of the Cooperat ion Contract 's provis ions.

Article 92

In performing the supervis ion for the implementat ion of the Cooperat ion Contract 's provis ions as provided for in Art icle 91, the Implementing Body shall coordinate with the Contractor to l ia ise with the Department and the rela ted departments .

Article 93

(1) The Contractor shal l periodical ly submit wri t ten reports to the Minis ter concerning the matters rela ted to the supervis ion speci f ied in Art ic le 88.

(2) The Contractor shal l periodical ly submit wri t ten reports to the Minis ter

concerning the matters rela ted to the supervis ion provided for in Art ic le 91.

Article 94

(1) In the event o f the Cooperat ion Contract execut ion re ferred to in i tem b of Art ic le 90, the Implementing Body shal l act as the contract ing party in the contract with a Business Enti ty or a Permanent Establ ishment.

(2) The execut ion of the Cooperat ion Contract with a Business Enti ty or a

Permanent Establ ishment as referred to in paragraph (1) shal l be in i t ia ted af ter the approval o f the Minis ter on behal f o f the Government has been obtained.

(3) The Implementing Body shal l give a wri t ten not ice on the Cooperat ion

Contract i t has executed to the House of People’s Representat ives of the Republic o f Indonesia by accompanying the copy thereof .

Article 95

(1) The in i t ia l f ie ld development p lan to be produced in an Operat ional Area as

provided for in i tem c o f Art ic le 90, including any amendment thereof , shal l be subject to the Minis ter 's approval given based on the considerat ions of the Implementing Body.

(2) In g iving the approval referred to in paragraph (1) the Minis ter shal l consul t wi th the Governor whose adminis trat ive terr i tory encompasses the f ie ld to be developed.

(3) The consul ta t ion provided for in paragraph (2) shal l be a imed at g iving

explanat ions and obtaining in formation, especial ly those which are rela ted to the spat ia l p lan and the Regional Government 's project ion of revenues from Oil and Gas.

Article 96

(1) In the event that the Contractor who has obtained the approval provided for in paragraph 1 of Art ic le 95 fa i ls to perform any act ivi ty in accordance with the f ie ld development p lan, the Contractor shal l , wi th in f ive (5) years from the approval o f the in i t ia l f ie ld development p lan, return the ent ire Operat ional Area to the Minis ter.

(2) Excepted from the provis ions set out in paragraph (1), wi th respect to the

Natural Gas f ie ld development, shal l be a condi t ion where there is no Natural Gas sale contract has been made unt i l the elapse of the t ime period speci f ied in paragraph (1), in which case the Minister may establish a pol icy on the extension o f the period speci f ied in paragraph (1) for the Contractor concerned.

Article 97

In making the review provided for in i tem c o f Art ic le 90 and in g iving the approval referred to in i tem d of Art ic le 90, the Implementing Body shal l consider, among other th ings , the fo l lowings: a . es t imate o f Oil and Gas reserve and product ion; b . es t imate o f costs required for the f ie ld development and Oil and Gas product ion

costs; c . Oil and Gas ut i l iza t ion plan; d . Oil and Gas exploi tat ion process; e . es t imate o f S ta te revenue from Oil and Gas; f . use o f domest ic manpower, goods and product ion services; g . industr ia l safety and heal th, environmental management and local area and

community development .

Article 98

In g iving the approval o f the work plan and budget as set forth in i tem e o f Art ic le 90, the Implementing Body shal l consider the fo l lowings: a . long- term plan; b . success ful achievement of operat ional targets; c . e f forts to increase Oil and Gas product ion;

d. operat ional techniques and the fairness o f operat ing cost uni ts o f each operat ion to be carried out;

e . e f f ic iency ef forts; f . approved f ie ld development p lan; g . operat ion schedule and expirat ion of Cooperation Contract; h . industr ia l safety and heal th and environmental management; i . manpower ut i l iza t ion and development as wel l as industr ial rela t ions

development; j . local area and community development.

Article 99

Based on the monitoring provided for in i tem f o f Art ic le 90, the Implementing Body shal l submit periodic reports to the Minis ter covering the fo l lowings: a . work plan and budget of each Contractor and their real izat ion; b . es t imate o f Oil and Gas product ion and i ts real izat ion; c . es t imate o f S ta te revenue and i ts real izat ion; d . es t imated cost o f investment in Exploration and Exploi ta t ion and i ts

real izat ion; e . the real ization of operating expenses of each Contractor; f . the Contractor’s management and use o f assets and operat ional materia ls .

Article 100

(1) In appoint ing the sel ler o f the S tate 's share of Oil and/or Gas as provided for in

i tem g of Art ic le 90, the Implementing Body may appoint the Business Ent i ty or the Contractor concerned.

(2) The Business Ent i ty or the Contractor appointed to be the sel ler o f the S tate 's

share of Oil and/or Gas shal l be authorized to transfer the ownership r ight o f the State 's share of Oil and/or Gas to the buyer at the point o f del ivery based on the rela ted Oil and/or Gas sale and purchase agreement .

(3) The Implementing Body may appoint the Contractor to sel l for the Implementing

Body the State 's share of Oil and/or Gas derived from i ts Operational Area based on the Cooperat ion Contract .

(4) The Implementing Body may appoint the Contractor to sel l for the Implementing

Body the State 's share of Oil and/or Gas derived from i ts Operational Area based on the Cooperat ion Contract and from another Operat ional Area.

(5) Before appoint ing the sel ler o f the S tate ' s share of Oil and/or Gas referred to in

paragraph (1) the Implementing Body shal l consul t with the Contractor and consider the fo l lowings:

a . the smoothness, cont inuance and ef f ic iency of the Oil and/or Gas sale; b . the sel l ing abi l i ty; c . Oil and/or Gas sale pr ice; d . the sel ler 's r ights and obl igat ions; e . There is no conf l ic t o f in terests between the Business Ent i ty appointed as

the sel ler and the Contractor. (6) The appointment o f the Business Ent i ty or the Contractor to be the sel ler o f the

S tate 's share of Oil and/or Gas as provided for in paragraph (1) and the requirements thereof shal l be materia l ized in an agreement.

(7) Where the sel ler appointed is the Contractor concerned, the expenses aris ing

from the sale o f Oil and/or Gas shal l be treated as operat ing costs as set out in the Cooperat ion Contract wi th the Contractor , except to the extent that such expenses or consequences are caused by the wil l fu l faul t o f the Contractor.

(8) Where the appointed sel ler is not the Contractor concerned, the fee to be

provided to the sel ler shal l be o f fset against the S tate 's share of the Oil and/or Gas sale proceeds.

(9) The Implementing Body shal l submit a report to the Minis ter on the

appointment o f sel ler of the S tate 's share of Oil and/or Gas provided for in paragraph (1), and the agreement referred to in paragraph (2).

Article 101

(1) The sel ler referred to in paragraph (1) o f Artic le 100 shal l be fu l ly responsible

to the buyer for the smoothness and cont inuance of the Oil and/or Gas sale . (2) The sel ler referred to in paragraph (1) shal l conduct the market ing, negot ia t ion

with the prospect ive buyer and s ign the sale and purchase agreement as wel l as o ther rela ted agreements .

(3) The s igning of agreements provided for in paragraph (2) shal l be performed

af ter the approval o f the Implementing Body has been obtained. (4) The s igning of agreements provided for in paragraph (2) by the sel ler o ther than

the Contractor shal l be performed af ter the approval of the Contractor concerned has been obtained.

(5) The Implementing Body shal l supervise the implementat ion of the agreements

referred to in paragraph (3). (6) Further provis ions on the appointment o f sel ler o f the S tate 's share of Oil and/or

Gas shal l be def ined by the Decision of Head of Implementing Body.

Article 102

(1) The Minis ter may s t ipulate further the provis ions on the scope of Upstream Business Act iv i t ies supervis ion carried out by the Department as speci f ied in Art ic le 88.

(2) The Head of Implementing Body may def ine fur ther the provis ions on the scope of Upstream Business Act ivi t ies supervis ion by the Implementing Body speci f ied in Art ic le 91.

(3) Where necessary, the Minis ter and the Head of Implementing Body may jo int ly

def ines the scope of supervis ion of Upstream Business Act ivi t ies .

CHAPTER XII

OTHER PROVISIONS

Art icle 103

The provis ions concerning the coalbed methane including the form and condit ions o f the Cooperat ion Contract shal l be s t ipulated by the Decree of the Minister .

CHAPTER XIII

TRANSITIONAL PROVISIONS

Art icle 104

As of the e f fect ive date o f th is Government Regulat ion: a . The Product ion Sharing Contract and other contracts rela ted to the Product ion

Sharing Contract between Pertamina and other part ies shal l remain in force unt i l expirat ion thereof .

b . The Product ion Sharing Contract and other contracts rela ted to the Product ion

Sharing Contract referred to in i tem a shal l pass on to the Implementing Body. c . The Contracts between Pertamina and other part ies in the form of Joint

Operat ing Agreement (JOA)/Joint Operat ing Body (JOB) shal l pass on to the Implementing Body and be ef fect ive unt i l the expirat ion thereof .

d . The r ights and obl igations ( the part ic ipat ing in terests) in the JOA and JOB

referred to in i tem c shal l pass on from Pertamina to PT. Pertamina (Persero). e . The Contracts between Pertamina and other part ies in the form of Technical

Assis tance Contract (TAC), and Enhanced Oil Recovery (EOR) Contract shal l pass on to PT. Pertamina (Persero) and be ef fect ive unt i l the expirat ion there of .

f . Upon the expirat ion of the JOA/JOB referred to in i tem c, the Minis ter shall

es tabl ish a pol icy on the form and terms of cooperat ion in the former areas o f such contracts .

g . Upon the expirat ion of the Technical Assis tance Contract (TAC) and Enhanced

Oil Recovery (EOR) Contract re ferred to in i tem e that are avai lable a t the ex-Pertamina mining concess ion area, the former areas of such contracts shal l be part o f the Operat ional Area of PT. Pertamina (Persero).

h . In the event that prior to the expirat ion of the Contracts referred to i tem e an

agreement is achieved by the part ies , the Minis ter may es tabl ish a pol icy on the other form of the contract concerned.

i . PT. Pertamina (Persero) shal l enter in to a Cooperat ion Contract wi th the Implementing Body to cont inue the Explorat ion and Exploi ta t ion at the ex-Pertamina mining concession area.

j . Within a maximum period of two (2) years, PT. Pertamina (Persero) referred to

in i tem i shal l es tabl ish a subsidiary company and enter in to a Cooperat ion Contract with the Implementing Body for each of Operat ional Area, for the contract term of th ir ty (30) years , which is extendable in accordance with the prevai l ing laws and regulat ions.

k . The amount o f payment by PT. Pertamina (Persero) and the subsidiary company

as provided for in i tems d , i and j to the State shal l be in conformity with the provis ions appl icable a t the ex-Pertamina mining concession area.

l . The Minis ter shal l determine the form and condit ions o f the Cooperat ion

Contract for PT. Pertamina (Persero) and the subsidiary company as provided for in i tems h, i and j .

m. The transference of contracts provided for in i tem b shal l not change the

provis ions of such contracts . n . The Implementing Body and PT. Pertamina (Persero) shal l f in ish the amendment

o f the contracts referred to in i tem b to be approved by the Minister .

o . The LNG sale and transportat ion contracts between Pertamina and other part ies shall pass on to PT. Pertamina (Persero).

CHAPTER XIV

CONCLUSION

Art icle 105

This Government Regulat ion shal l come in to ef fect as o f the date o f i ts promulgat ion. In order that i t my be known to a l l , an order is hereby given to promulgate th is Government Regulat ion by inser t ing i t in the State Gazet te of the Republic of Indonesia .

Establ ished in Jakarta on October 14, 2004 PRESIDENT OF THEREPUBLICOF INDONESIA

( s igned ) MEGAWATI SOEKARNOPUTRI

Promulgated in Jakarta on October 14, 2004 STATE SECRETARY OF THE REPUBLIC OF INDONESIA ( s igned) BAMBANG KESOWO

THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NO. 123 OF 2004.

PRESIDENT OF

THE REPUBLIC OF INDONESIA

ELUCIDATION OF

GOVERNMENT REGULATION OF THE REPUBLIC OF INDONESIA

NO. 35 OF 2004

CONCERNING

OIL AND GAS UPSTREAM BUSINESS ACTIVITIES

GENERAL It has been affirmed since the enactment of Law No. 22 of 2001 on Oil and Gas that the Oil and Gas, as non-renewable strategic natural resources existing in the Indonesian Legal Mining Territory, constitute the national assets that are controlled by the State. This State's control is carried out by the Government as the holder of Mining Concession.

Being strategic natural resources, Oil and Gas are the national assets that play a significant role as sources of financing, energy and fuel for the development of the state economy.

Considering that Oil and Gas are non-renewable natural resources, the Oil and Gas Upstream Business Activities must be carried out in the optimum possible manner and the policy on their organization must be made based on the spirit of Article 33, paragraphs (2) and (3), of the 1945 Constitution.

The purpose of carrying out the Oil and Gas Upstream Business Activities is, among other things, to ensure the effective performance and control of Oil and Gas Exploration and Exploitation business activities in an efficient and effective and highly competitive and sustainable manner by means of an open and transparent mechanism.

Embarking from the underlying necessity for a legal basis in the execution of Upstream Business Activities, it is necessary to regulate these Business Activities in a Government Regulation.

This Government Regulation regulates Oil and Gas Upstream Business Activities and covers, among other things, the regulation of their execution including the development and supervision, and the mechanism of Operational Area allocation, General Survey, Data supply, and Cooperation Contract conclusion, the use of Oil and Gas to meet the domestic requirement, the state revenues, the allocation and use of land, the development of local areas and community, the utilization of domestic goods, service, engineering and design skills and the use of manpower in Oil and Gas Upstream Business Activities.

ARTICLE BY ARTICLE Article 1 Self-explanatory Art ic le 2 Self-explanatory

Article 3 Self-explanatory Article 4 Paragraph (1) Self-explanatory Paragraph (2) The direct offer of an Operational Area could be the offer of an Operational Area that is

made directly by the Minister to Permanent Establishments, or the submission or request for an Operational Area that is made directly by a Business Entity or Permanent Establishment to the Minister. The direct offer of an Operational Area is announced publicly in a mass media. The Business Entity and PermanentEstablishment authorized to conduct the Exploration and Exploitation at such an Operational Area are determined based on the results of technical and economic evaluations that are directly conducted by the Operational Area Offering Team.

Article 5 Self-explanatory Article 6 Paragraph (1) The Minister's decisions on the offer of an Operational Area through a tender shall be

based on the results of evaluation by the Operational Area Tender Team, and on the direct offer to Business Entities or Permanent Establishments shall be based on the results of the evaluation by the team established by the Minister.

Paragraph (2) The Implementing Body may give inputs to the Minister as to the performance of the

related Business Entity or Permanent Establishment based on the records of operations it has maintained.

Paragraph (3) Self-explanatory Article 7 Paragraph (1) Self-explanatory

Paragraph (2)

These provisions are intended to enable the Minister to appoint another Business Entity or Permanent Establishment to operate an Operational Area that has been turned over by the Contractor, so that the Oil and Gas resources can be utilized optimally.

Paragraph (3) Self-explanatory Article 8 Self-explanatory Article 9 Self-explanatory Article 10

These provisions are intended to optimize the utilization of Oil and/or Gas, which are considered unprofitable to the Contractor.

Article 11 Self-explanatory Article 12

The purpose of conducting the General Survey across the Operational Area is to map the overall condition of surface geology in a sedimentary basin, to meet the technical processing requirements of certain types of survey and for other purposes in terms of efficient operations on the field.

Article 13 Paragraph (1) The Business Entity mentioned in these provisions is the one that has expertise,

experience and financial capacity to carry out the General Survey. The issuance of a General Survey License to a Business Entity for a certain location does not preclude the issuance of a license to another Business Entity to carry out a General Survey at the same location.

Paragraph (2) Self-explanatory Paragraph (3) Self-explanatory Article 14 Self-explanatory Article 15 Paragraph (1) Self-explanatory

Paragraph (2) The management and utilization of Data is intended to facilitate the determination of

Operational Areas, the formulation of technical policies, the handling of Government affairs as well as the supervision and implementation of Exploration and Exploitation, the socialization of Data for the users and for Data exchange.

Article 16 Self-explanatory Article 17 Self-explanatory Article 18 Self-explanatory Article 19 Self-explanatory Article 20 Self-explanatory Article 21 Self-explanatory Article 22 Self-explanatory Article 23 Paragraph (1) Self-explanatory Paragraph (2) The Data confidentiality period is commenced from the dates on which the statuses of

Base Data, Processed Data and Interpretation Data are defined by the Government. Paragraph (3) In these provisions, the expression "no longer classified as confidential Data" means that

the Data is accessible to all parties interested in the Exploration and Exploitation. Article 24 Paragraph (1) Self-explanatory

Paragraph (2) Item a In these provisions, the term "point of delivery" means the point (location) at

which the Contractor shall deliver the State's share to the Government and be entitled to earn its share of production. This point of delivery is agreed by the Implementing Body and the Contractor and defined in the Cooperation Contract, and could be the point similar to the point of delivery to the purchaser of such a share of production.

Item b In these provisions, "operation management control" means either the issuance

of approvals for the work plan, budget, field development plan or the supervision of the plans realization.

Item c Self-explanatory Article 25 The form of Cooperation Contract is Production Sharing Contract, or such another form of

cooperation contract as Service Contract. The risk levels are based on the phases of activities, the location and availability of data and infrastructure.

Article 26 Self-explanatory Article 27 Paragraph (1) Self-explanatory Paragraph (2) Self-explanatory Paragraph (3) Self-explanatory Paragraph (4) The term "commercial production" in these provisions means the production that is

commercially profitable to either the State or the Contractor. The obligation to return the Operational Area in these provisions must be performed when the field development plan of the related reserve (the initial field development) has been disapproved by the Minister.

Article 28 Paragraph (1) In the event that the extension of the Gas sale and purchase agreement exceeds twenty

(20) years, the Contractor appointed to continue the Exploration and Exploitation at that

Operational Area shall ensure the continuation of the sale until the Sale and Purchase Agreement expires.

Paragraph (2) Self-explanatory Paragraph (3) Self-explanatory Paragraph (4) Self-explanatory Paragraph (5) Self-explanatory Paragraph (6) The "agreements" in these provisions means a Letter of Intent, Memorandum of

Understanding (MoU) or Head of Agreement (HoA) or sale and purchase contracts.

Paragraph (7) The technical acceptability in these provisions is based among others on production

deliverability, reservoir pressure and Gas specifications, and the economic acceptability is based among others on investment value, cost recovery, Oil and Gas price, and the State revenue.

Paragraph (8) Self-explanatory Paragraph (9) Self-explanatory Paragraph (10) Self-explanatory Article 29 Self-explanatory Article 30 Self-explanatory Article 31 Self-explanatory

Article 32 In these provisions, the expression "the Contractor fails to perform its obligation" means the

Contractor does not fulfill its obligations under the Cooperation Contract and the prevailing laws and regulations due to a willful act or negligence or the omission of good faith in performing its obligations, or due to the events other than farce majeure that make the Contractor failed to perform its obligations.

Article 33 Paragraph (1) Self-explanatory Paragraph (2) The term "national companies" in these provisions means the state-owned enterprises

(BUMN), Regional Government's enterprises (BUMD), cooperatives, small businesses and national private companies which shares are entirely owned by Indonesian citizens. The offer is made by the Contractor to the national companies according to normal business practices. In these provisions, if the offer has been made by the Contractor but none of the national companies is interested in it, then the Contractor may make an offer to another party.

Paragraph (3) Self-explanatory Paragraph (4) In these provisions, the term "affiliate" means a company or another body that controls

or is controlled by either of the parties, or a company or another body that controls or is controlled by a company or another body in which it controls either of the parties, and it is understood that, where the other body is not a company, 'controlling' signifies the holding by a company or another body of at least 50% of the voting shares or the shares with controlling rights or profits entitlement.

Article 34 The Regional Government's Enterprises (BUMD) in these provisions are the enterprises

established by the Regional Government, which administrative area encompasses the field concerned. Such enterprises must have financial capacity that is adequate for participation. This participation is performed (the participating interest is held) by the Contractor and the BUMD according to normal business practices.

If there are more than one BUMD in that area, the proportion of the participating interest will be determined by the Governor at his discretion

Article 35 Paragraph (1) Self-explanatory

Paragraph (2) The national companies in these provisions are the state-owned enterprises (BUMN),

cooperatives, small business and national private companies which shares are entirely owned by Indonesian citizens.

Paragraph (3) Self-explanatory Article 36 Self-explanatory Article 37 Self-explanatory Article 38 Self-explanatory Article 39 Paragraph (1) Self-explanatory Paragraph (2) Self-explanatory Paragraph (3) The expressions "optimization of exploitation" in these provisions means producing the

Oil and Gas for the longest possible period of time, and "efficient use" means reducing to the greatest possible extent any losses on the use of Oil and Gas and the gas flare on the field.

Paragraph (4) Self-explanatory Article 40 Self-explanatory Article 41 Paragraph (1) Self-explanatory

Paragraph (2) Self-explanatory Paragraph (3) The maximum period of five (5) years is specified, so that any required field development,

which should be carried out by means of unitization, will not be hindered, especially the development of natural gas to supply the market demands.

Paragraph (4) Self-explanatory Article 42 Self-explanatory Article 43 Self-explanatory Article 44 Paragraph (1) Self-explanatory Paragraph (2) In this paragraph, the provision of facilities to another party is part of the Upstream

Business Activities and do not require any license from the government. The charges to be imposed will be determined by calculating the costs of investment,

operation and maintenance. Article 45 Self-explanatory Article 46 Paragraph (1) The domestic needs in these provisions are the total amount of the national requirement

for Oil and/or Gas. The obligation to supply the gas in these provisions shall apply to the Cooperation Contracts which effective dates are after the date on which Law No. 22 of 2001 took effect.

Paragraph (2) The prorate system referred to in these provisions is the percentage of oil to be delivered

by the Contractor, up to a maximum amount of 25% of its share, to meet the domestic demands that are calculated based on the national requirement.

Paragraph (3) Self-explanatory Paragraph (4) Self-explanatory Article 47 Self-explanatory Article 48 Self-explanatory Article 49 Self-explanatory Article 50 Paragraph (1) Self-explanatory Paragraph (2) The expression "recommendations relating to the reserve" in this paragraph includes the

volume and specifications of Natural Gas and the locations, and "recommendations relating to the market opportunity" in this paragraph includes the market requirements (the volume and specifications of Natural Gas) and locations.

Article 51 Self-explanatory Article 52 Self-explanatory Article 53 Self-explanatory Article 54 Self-explanatory Article 55 Self-explanatory

Article 56 Paragraph (1) Self-explanatory

Paragraph (2)

The reimbursement of such expenses shall be approved by the Implementing Body by observing the relevant provisions in the related Cooperation Contract.

Article 57

In a Service Contract, all of the Oil and Gas produced by the Contractor is the State's share as defined in this Government Regulation.

Article 58 Self-explanatory Article 59 Self-explanatory Article 60 Self-explanatory Article 61 The partial use of the non-tax state revenues by the Department is in the framework of supporting

the Exploration and Exploitation activities and an effort to attract the investors as part of the search and discovery of new reserves. In addition, the partial use of the non-tax state revenues is also aimed at taking measures that are conducive to Upstream Business Activities, survey execution, Operational Area promotion, consultation with the Regional Government and the like.

Article 62

Paragraph (1)

The people holding the titles or the users of the state-owned land referred to in this paragraph are:

a. the holders of titles of the lands that either have already had certificates or have

not had any certificate. b. the customary law community whose communal land is affected by the

development; or c. the parties who control the land based on the agreements made with the land

owners; or d. the supervisor, in the case of donated land, or e. the users of State lands, or

f. the owners of buildings, plants or other objects related to the land concerned, or Paragraph (2)

The term "guaranty" used in these provisions includes a statement in which the Contractor undertakes to provide an indemnity that is agreed by the title holder.

Article 63 Paragraph (1) Self-explanatory

Paragraph (2)

The land use settlement by means of an acknowledgement or another indemnification could be in the forms of:

a. a compensation for communal land that is given based on deliberations and

consensus in accordance with the local customary law; b. ready-to-build parcels of land; c. replacement land; d. simple or very simple-style housing under a housing ownership credit (KPR)

facility/scheme; e. a flat under KPR facility; f. real estate under KPR facility; g. relocation; or h. such other forms of compensation as the Contractor and/or the local

District/Municipal Administration may provide. Paragraph (3) The compensation for the land that is possessed by the customary rights granted based on

Regional Government Regulation (Qonun, in the case of Nanggroe Aceh Darussalam Province, and Provincial Government Regulation, in the case of Papua Province), shall be provided in the form of public facility development or other forms that are useful for the local community, and in the case of wakaf (donated) or other religious service land, the compensation may be provided in the form of land, building, and the equipment required.

The criteria of the communal land existence is determined in accordance with the prevailing laws and regulations.

Article 64 Paragraph (1) Self-explanatory

Paragraph (2)

The other party referred to in this paragraph may be in the form of a team or a committee that is set up by the competent authority.

Article 65 Paragraph (1) Self-explanatory

Paragraph (2)

The technical standards referred to in this paragraph are the standards issued by the competent authority.

Article 66 Self-explanatory Article 67

Paragraph (1)

Self-explanatory

Paragraph (2)

The certificate referred to in this paragraph is issued in the name of the Government.

Article 68 Self-explanatory Article 69 Self-explanatory Article 70 Self-explanatory Article 71 Self-explanatory Article 72 Self-explanatory Article 73 Self-explanatory Article 74

Paragraph (1)

The local area and community development is carried out by the Contractor to assist the Government in increasing the people's productivity and people-based economic capability independently through the efficient use of the regional potency on an on-going basis.

Paragraph (2) Self-explanatory Article 75 Self-explanatory Article 76 Self-explanatory Article 77 Self-explanatory Article 78

Paragraph (1)

The development carried out by the Government in consequence of the status of a property being the State's property must comply with the prevailing laws and regulations, which are not intended to regulate the development of micro aspects of the State's Property utilization by the Contractor as prescribed in Article 12 item d of Law No. 42 of 2002 concerning The Implementing Body for Oil and Gas Upstream Business Activities.

Paragraph (2) Self-explanatory Paragraph (3) Self-explanatory

Paragraph (4)

Self-explanatory Article 79

Paragraph (1)

The prioritization on the use of the domestic goods and service in these provisions must consider the technical, quality, timely delivery and pricing requirements.

Paragraph (2) Self-explanatory Article 80 Self-explanatory Article 81

Paragraph (1)

Self-explanatory

Paragraph (2) Self-explanatory Paragraph (3) Self-explanatory Paragraph (4) In the event that the materials and equipment are sold to another party, the proceeds

from the sale shall be paid to the State Treasury. Paragraph (5) Self-explanatory Article 82 Self-explanatory Article 83 Self-explanatory Article 84

The term "Contractor" in these provisions include the supporting service companies.

Article 85 Self-explanatory Article 86

Paragraph (1)

Self-explanatory

Paragraph (2)

Self-explanatory

Paragraph (3)

Self-explanatory

Paragraph (4)

Self-explanatory

Paragraph (5)

Self-explanatory

Paragraph (6)

The term "other contracts" in these provisions means the contracts relating to the Contractor's activities as part of Cooperation Contract implementation such as Agreements concerning the financing by third parties, Off take Agreement, Supply Agreement/Seller Appointment Agreement, Producers Agreement, Processing Agreement, Trustee Paying Agent

Agreement, all of which constitutes an integral part of the Contracts that support the sale of Oil and Gas.

Paragraph (7)

Self-explanatory Article 87 Self-explanatory Article 88 Self-explanatory Article 89 Self-explanatory Article 90 Item a In rendering its opinions to the Minister regarding his policy on the preparation and

offer of an Operational Area and Cooperation Contract, the Implementing Body may recommend the terms and conditions of the Cooperation Contract, the Operational Area to be offered, and point out the investment climate development in the Upstream Business Activities.

Item b The term "Cooperation Contract" in this respect includes the extension and amendment

of the Cooperation Contract. Item c Self-explanatory Item d Self-explanatory Item e Self-explanatory Item f Self-explanatory

Item g In appointing the seller of the State's share of Oil and Gas, the Implementing Body is

authorized to transfer the ownership right of the State's share of Oil and Gas at the point of delivery to the Business Entity or the Contractor appointed as the seller.

Article 91 The supervision of the Cooperation Contract implementation by the Implementing Body shall be

initiated based on the scope of authority and not abridge the authority of the Minister and the related ministers in supervising the Cooperation Contract implementation.

Article 92 Self-explanatory Article 93 Self-explanatory Article 94 Paragraph (1) As the contracting party, in the execution of Cooperation Contract, the Government

guarantees that the Implementing Body is competent to perform the provisions set out in Cooperation Contract or other Contracts related thereto.

Paragraph (2)

Self-explanatory

Paragraph (3)

Self-explanatory Article 95

Paragraph (1)

The field development plan submitted to the Minister should at least contain the supporting data and the evaluations of exploration, rock characteristics, reservoir fluids, reservoir description, reserve calculation, methods of development well drilling, number and locations of wells produced and/or injection wells, production/well tests (including injection pilot test), draining system, production estimate, products lifting methods, production facilities, Oil and Gas utilization plan, post-operational plan, economy, and State and local government's revenues.

Paragraph (2)

Self-explanatory

Paragraph (3)

In such a consultation it is necessary to include the Head of Regency/Mayor, whose administrative territory encompasses the field to be developed. The purpose of such a consultation is not to request for the approval of the Regional Government.

Article 96

Paragraph (1)

The term "fails to perform the activities in accordance with the field development plan" means the failure to perform such activities due to a willful act or negligence of the Contractor, or the omission of good faith in performing such activities, or the events other than force majeure that result in the non-performance of such activities.

Paragraph (2)

The "contract" referred to in this paragraph is the sale and purchase agreement between the seller and the buyer.

Article 97

Self-explanatory

Article 98

Self-explanatory

Article 99

Self-explanatory

Article 100

Paragraph (1)

Self-explanatory

Paragraph (2)

Self-explanatory

Paragraph (3)

Self-explanatory

Paragraph (4)

Self-explanatory

Paragraph (5)

Self-explanatory

Paragraph (6)

Since the appointment of the seller of the State's share of Oil and Gas involves the rights and obligations of both parties (the Implementing Body and the appointed seller), for the legal certainty of such rights and obligations such an appointment should be formally materialized in a seller appointment agreement.

Paragraph (7)

Self-explanatory

Paragraph (8)

Self-explanatory

Paragraph (9)

Self-explanatory Article 101 Paragraph (1) Self-explanatory

Paragraph (2)

Where the appointed seller of Oil and Gas is not the Contractor, the seller shall, in negotiating with the purchaser, observe the provisions agreed upon by the seller, the Contractor and the Implementing Body. In the foregoing negotiation the seller shall observe the policy of the Minister on Oil and Gas pricing.

Paragraph (3) Where the appointed seller of Oil and Gas is not the Contractor, the approval of the

Implementing Body shall be given after it has made coordination with the Contractor.

Paragraph (4)

Self-explanatory

Paragraph (5)

Self-explanatory

Paragraph (6)

Self-explanatory Article 102

The further stipulation by the Minister and/or Head of the Implementing Body is to ensure that the supervision of Upstream Business Activities is carried out effectively and efficiently.

Article 103 Self-explanatory Article 104 Item a The other contracts referred to in this paragraph are contracts that relate to the

Contractor's activities as part of Cooperation Contract implementation such as Agreements relating the financing by third parties, Off take Agreement, Exchange Agreement, Supply Agreement, Producers Agreement, Transportation Agreement, Plant

Processing Agreement, Plant Use Agreement, all of which constitutes an integral part of the Contracts that support the sale of Oil and Gas.

Item b

Self-explanatory

Item c

Self-explanatory

Item d

Self-explanatory

Item e

Self-explanatory

Item f

Self-explanatory

Item g

Self-explanatory

Item h

Self-explanatory

Item i

Self-explanatory Item j The subsidiary company that enters into contract with the Implementing Body shall

maintain separate records for each of its Operational Areas. Item k These purpose of these provisions is to enable Pertamina as a State-Owned Enterprise

(BUMN) to grow and develop as a competitive Business Entity. If Pertamina requires that another party be included as the holder of the participating interests, a Cooperation Contract needs to be made by considering the purpose aforesaid.

Item l Self-explanatory Item m Self-explanatory Item n Self-explanatory

Item o Self-explanatory Article 105 Self-explanatory

SUPPLEMENT TO STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 4435