Production Sharing Contract - Nugrohoadi's Weblog · PDF fileProduction sharing Contract Financial Aspects Introduction Basic Principles Exploration & Development Activities Production

Bambang YuwonoBambang Yuwono

Production sharing ContractProduction sharing ContractFinancial AspectsFinancial Aspects

IntroductionIntroductionBasic PrinciplesBasic PrinciplesExploration & Development ActivitiesExploration & Development ActivitiesProduction ActivitiesProduction ActivitiesSupporting ActivitiesSupporting ActivitiesLifting Lifting –– Sharing AnalysisSharing AnalysisAccounting Procedures Accounting Procedures Fiscal Terms Fiscal Terms Budgeting & Reporting Budgeting & Reporting Budget PreparationBudget Preparation

OutlineOutline

Field – 1 Production OperationsField Field –– 1 Production Operations1 Production Operations



Activities for Field Development Projects/POD (AFE)Activities for Field Development Projects/POD (AFE)Activities for Field Development Projects/POD (AFE)

Activities for Explorations & Other Projects (AFE)Activities for Explorations & Other Projects (AFE)Activities for Explorations & Other Projects (AFE)

Activities for RoutinesActivities for RoutinesActivities for Routines

Long Term Planning Long Term Planning -- Contract Years OverviewContract Years Overview

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Exploration PhaseExploration Phase Production PhaseProduction Phase

IntroductionIntroduction

Basic Principles Basic Principles –– termsterms

GeneralGeneral

The term of the PS Contract is The term of the PS Contract is 30 years30 years as from the date of the as from the date of the contract signed, and may be extended for 20 years.contract signed, and may be extended for 20 years.

Contract extension proposed to the Minister through BPMIGAS Contract extension proposed to the Minister through BPMIGAS within 10 to 2 years prior to the original contract expiry datewithin 10 to 2 years prior to the original contract expiry date. . When it involves the period of gas sales agreement which is When it involves the period of gas sales agreement which is beyond the beyond the efectiveefective date of the contract, the extension may be date of the contract, the extension may be proposed at a sooner date.proposed at a sooner date.

The activities shall commence The activities shall commence no later than 180 daysno later than 180 days as from as from the effective date (when the contract signed).the effective date (when the contract signed).

Contractor may propose to the Minister through BPMIGAS Contractor may propose to the Minister through BPMIGAS ammendmentsammendments to the terms and condition of the contract. The to the terms and condition of the contract. The proposal may be either approved or disapproved by the Minister proposal may be either approved or disapproved by the Minister based on the evaluation of BPMIGAS.based on the evaluation of BPMIGAS.

Basic Principles Basic Principles –– termsterms

ExplorationExploration6 years with a 46 years with a 4--year extension upon Contractoryear extension upon Contractor’’s request, s request, provided that the minimum requirements have been met.provided that the minimum requirements have been met.If no commercial discovery during the 10If no commercial discovery during the 10--year exploration year exploration period, the contract shall be terminated.period, the contract shall be terminated.During the first 3 years of exploration period, Contractor shallDuring the first 3 years of exploration period, Contractor shallperform committed work programs at the estimated amount as perform committed work programs at the estimated amount as set out in the contract. In the event Contractor terminates the set out in the contract. In the event Contractor terminates the contract before completing the committed work programs, the contract before completing the committed work programs, the outstanding commitments shall be payable to the government outstanding commitments shall be payable to the government through BPMIGAS.through BPMIGAS.

DevelopmentDevelopmentWhen the plan of development (POD) of the first field approved, When the plan of development (POD) of the first field approved, the field development shall commence no later than 5 years the field development shall commence no later than 5 years following the end of the exploration phase.following the end of the exploration phase.

Basic Principles Basic Principles –– Participating InterestParticipating Interest

OwnershipsOwnershipsThe holder of undivided interests in each PSC may be more The holder of undivided interests in each PSC may be more than one party.than one party.Each interest holder in a PSC is legally a single entity.Each interest holder in a PSC is legally a single entity.

AssignmentAssignmentContractor may assign all or any part of its undivided interest Contractor may assign all or any part of its undivided interest to to any any affiliated companyaffiliated company, then submit a notification to BPMIGAS., then submit a notification to BPMIGAS.Contractor may assign all or any part of its undivided interest Contractor may assign all or any part of its undivided interest to to a a nonnon--affiliated companyaffiliated company with the prior written consent of BPMIGAS.with the prior written consent of BPMIGAS.Government Regulation No.35/2004, effective 14 October 2004, Government Regulation No.35/2004, effective 14 October 2004, requires that the assignments to be approved by the Minister basrequires that the assignments to be approved by the Minister based ed on BPMIGAS evaluation. The Minister may require Contractor to on BPMIGAS evaluation. The Minister may require Contractor to prioritize the Indonesian national companiesprioritize the Indonesian national companies for the assignments to for the assignments to a nona non--affiliated company or to a nonaffiliated company or to a non--party of the PSCparty of the PSC. The majority . The majority interests cannot be assigned to a noninterests cannot be assigned to a non--affiliated company during the affiliated company during the first 3 years of exploration period.first 3 years of exploration period.

Basic Principles Basic Principles –– Participating InterestParticipating Interest

First Field DevelopmentFirst Field Development

Following the approval of the first plan of development (POD) Following the approval of the first plan of development (POD) Contractor is obligated to offer a ten percent (10%) undivided Contractor is obligated to offer a ten percent (10%) undivided interests to an Indonesian Participant.interests to an Indonesian Participant.

The Government Regulation No.35/2004 spells out that the The Government Regulation No.35/2004 spells out that the Indonesia Participant is a local government owned company.Indonesia Participant is a local government owned company.

Local companies shall response to this offer within 60 days as Local companies shall response to this offer within 60 days as from the date of the offering letter.from the date of the offering letter.

In the event no local company responses within 60 days, the In the event no local company responses within 60 days, the Contractor shall offer this participating interest to national Contractor shall offer this participating interest to national companies.companies.

National companies shall response to this offer within 60 days National companies shall response to this offer within 60 days as from the date offering letter.as from the date offering letter.

In the event no national company responses within the 60 days, In the event no national company responses within the 60 days, Contractor has no obligation to offer the 10% undivided interestContractor has no obligation to offer the 10% undivided interest..

Each block (Contract Area) may be owned by several interest holdEach block (Contract Area) may be owned by several interest holders;ers;An interest holder is legally treated as a single entity;An interest holder is legally treated as a single entity;When an oil company holds ownerships in several contract areas, When an oil company holds ownerships in several contract areas, a separate a separate legal entity has to be established for each interest in each conlegal entity has to be established for each interest in each contract area.tract area.

Basic PrinciplesBasic Principles -- RingfencingRingfencing

Field-1Field-1

Lead-1Lead-1

Lead-2Lead-2

Prospect-2Prospect-2

Prospect-1

Lead-3Lead-3

Implications:Implications:-- Scope of ReportingScope of Reporting-- ConsolidationConsolidation-- TaxationTaxation-- UnitizationUnitization

Field-2Field-2

Contract Area - B

LeadLeadProspect

Contract Area - A

Basic Principles Basic Principles –– RingfencingRingfencing

Refers to the previous slideRefers to the previous slide

Contract area Contract area ‘‘AA’’ is reported separately from Contract area is reported separately from Contract area ‘‘BB’’

No consolidation with regards to revenue, costs and taxation.No consolidation with regards to revenue, costs and taxation.

FieldField--2 lays in both contract areas represents a unitized field, 2 lays in both contract areas represents a unitized field, subject to a unitization agreement between block subject to a unitization agreement between block ‘‘AA’’ and and ‘‘BB’’..

The Minister appoints the operator of unitized field based on thThe Minister appoints the operator of unitized field based on the e BPMIGAS evaluation.BPMIGAS evaluation.

When the extent of a unitized field in the adjacent area is an When the extent of a unitized field in the adjacent area is an open area, Contractor may request to the Minister through open area, Contractor may request to the Minister through BPMIGAS to extend its contract area to cover the whole field. BPMIGAS to extend its contract area to cover the whole field.

Such a request is applicable if the extent of a unitized field Such a request is applicable if the extent of a unitized field remains an open area within 5 years as from the date of remains an open area within 5 years as from the date of ContractorContractor’’s report regarding the unitized field.s report regarding the unitized field.


Implications & Other MattersImplications & Other Matters

Operating Costs to be to be recovered from production in the Operating Costs to be to be recovered from production in the same contract area annually.same contract area annually.

Profit/loss resulted from a contract area never be consolidated Profit/loss resulted from a contract area never be consolidated with profit/loss from any other contract areas. Each interest with profit/loss from any other contract areas. Each interest holder in a PSC files for income tax separately.holder in a PSC files for income tax separately.

Costs incurred dedicated for several blocks are allocated to Costs incurred dedicated for several blocks are allocated to each block based on a method which is in accordance with each block based on a method which is in accordance with generally accepted and recognized accounting generally accepted and recognized accounting sistemssistems..

Production and costs of a unitized field to be allocated to eachProduction and costs of a unitized field to be allocated to eachblock typically based on estimated amounts of reserves.block typically based on estimated amounts of reserves.

The appointment of an operator for a unitized field is normally The appointment of an operator for a unitized field is normally based on technobased on techno--economic considerations.economic considerations.


Field DevelopmentField Development

A Study of a field development is required to determine the scalA Study of a field development is required to determine the scale, e, exploitation designs, and its economic forecast.exploitation designs, and its economic forecast.The study, known as The study, known as Plan of Development (Plan of Development (PoDPoD)), is proposed to , is proposed to BPMIGAS for approval. BPMIGAS for approval. Note:1Note:1stst field requires Ministerfield requires Minister’’s approval.s approval.

Major Economic MeasurementsMajor Economic Measurements: : -- Government Take & Contractor Take Government Take & Contractor Take -- Internal Rate of Return (IRR)Internal Rate of Return (IRR)-- Pay Back periodPay Back periodStandStand--alone approachalone approach & & blockblock--wise approachwise approach::

StandStand--alone approach calculates the revenue & costs within alone approach calculates the revenue & costs within the field, the field, to measure the to measure the thethe fieldfield’’s economic profiles economic profile..BlockBlock--wise approach calculates the whole revenue & costs wise approach calculates the whole revenue & costs within the block, within the block, to reflect the real calculation of the PSCto reflect the real calculation of the PSC. .

Basic Principles Basic Principles –– Typical SharingTypical Sharing

Gross RevenueGross Revenue

First Tranche PetroleumFirst Tranche Petroleum

Cost RecoveryCost Recovery

Equity to be SplitEquity to be Split

CONTRACTORShare

CONTRACTORShare

BPMIGASShare

BPMIGASShare

Net ContractorShare

Net ContractorShare

DMODMO

DMOFeeDMOFee

IndonesiaShare

IndonesiaShare

Gov’t TaxGov’t Tax

EXPENDITURES :EXPENDITURES :EXPENDITURES :

LIFTINGLIFTINGLIFTING

EXPLORATION &DEVELOPMENT

- G&G Studies- Drillings- Explor. Administration



PRODUCTION- Direct Prod Exp - Oil - Direct Prod Exp - Gas- Gas Processing- Utilities & Auxiliaies- Field Office, Services & General Admin


GENERAL & ADMINISTRATION

- Finance & Admin.- Engineering Services- Material Services- Transportation Costs- Personal Expenses- Public Relation- Community Devel- Gen.Office Expenses- Home Office O/H- Interest on Loan



CAPITALCOST

CAPITALCAPITALCOSTCOST

COSTRECOVERY

COSTCOSTRECOVERYRECOVERYGROSS REVENUEGROSS REVENUEGROSS REVENUE

PRICEPRICEPRICE

Contractor ShareIndonesia Share

Contractor ShareContractor ShareIndonesia ShareIndonesia Share

DEPRECIATIONDEPRECIATION

PRIOR YEARSPRIOR YEARSUNRECOV. COSTSUNRECOV. COSTS UNREC. COSTSUNREC. COSTSUNREC. COSTS

NON CAPITALCOST

NON CAPITALNON CAPITALCOSTCOST

OPERATING COSTSOPERATING COSTS :

Basic Principles Basic Principles –– Cost StructureCost Structure

Sharing MechanismSharing Mechanism

Exploration & Development ActivitiesExploration & Development Activities

ActivitiesActivitiesExplorationExplorationExploration activities are normally related to efforts in searchExploration activities are normally related to efforts in searching for oil and ing for oil and gas reserves.gas reserves.DevelopmentDevelopmentDevelopment activities are normally related to developing oil anDevelopment activities are normally related to developing oil and gas field, d gas field, based on an approved Plan of Development (POD).based on an approved Plan of Development (POD).

Cost StructuresCost StructuresExploration & Development Expenditures:Exploration & Development Expenditures:Exploratory and development studies & surveys, exploratory &Exploratory and development studies & surveys, exploratory & development development drillings, administrations drillings, administrations (allocated and non(allocated and non--allocated). allocated). Notes:Notes:-- The terms The terms ‘‘TangibleTangible’’ and and ‘‘IntangibleIntangible CostsCosts’’ are used for are used for drilling activities. drilling activities. -- Tangible CostsTangible Costs ofof development wellsdevelopment wells are treated as are treated as Capital CostsCapital Costs..-- Tangible CostsTangible Costs ofof exploratory wellsexploratory wells areare treated astreated as NonNon--Capital CostsCapital Costs..-- Intangible Costs are Intangible Costs are NonNon--CapitalCapital for both exploratory and for both exploratory and develdevel wells.wells.

Cost of Cost of production facilities and other related capital itemsproduction facilities and other related capital items are classified as are classified as production expenditures, and treated as production expenditures, and treated as Capital CostsCapital Costs..

Non Capital Exploratory Survey:Labor, materials & services used in aerial, geological, topographical, geophysical & seismic surveys, and core hole drilling.

Other Exploratory Expenditures:Temporary facilities used in exploration and purchase of G&G information.Exploratory Drilling:Labor, materials & services used in drilling exploratory wells.

Development Drilling:Intangible development drilling, including access road and canals to wells.

Administration allocable to exploration and development

Non Capital Non Capital Exploratory SurveyExploratory Survey::Labor, materials & services used in aerial, geological, topograpLabor, materials & services used in aerial, geological, topographical, geophysical & hical, geophysical & seismic surveys, and core hole drilling.seismic surveys, and core hole drilling.

Other Exploratory ExpendituresOther Exploratory Expenditures::Temporary facilities used in exploration and purchase of G&G infTemporary facilities used in exploration and purchase of G&G information.ormation.Exploratory DrillingExploratory Drilling::Labor, materials & services used in drilling exploratory wells.Labor, materials & services used in drilling exploratory wells.

Development Drilling:Development Drilling:Intangible development drilling, including access road and canalIntangible development drilling, including access road and canals to wells.s to wells.

AdministrationAdministration allocable to exploration and developmentallocable to exploration and development

CapitalTangible development drilling:Casing & Tubing, well equipment surface/subsurface

Miscellaneous capital items dedicated to exploration and development

CapitalCapitalTangible development drillingTangible development drilling::Casing & Tubing, well equipment surface/subsurfaceCasing & Tubing, well equipment surface/subsurface

Miscellaneous capital itemsMiscellaneous capital items dedicated to exploration and developmentdedicated to exploration and development

Exploration & Development Exploration & Development –– Cost ItemsCost Items

Development Development –– Production CapitalProduction Capital

Construction Utilities & Auxiliariesworkshops, power, water facilities, warehouse, field roads & canals

Construction Housing and Welfarehousing, recreational facilities, etc.

Production Facilitiestangible development drilling, wellhead, flow lines, gathering station, treating plant & equipment, secondary recovery system, gas plants and steam system, delivery lines, storage facilities, offshore platform, jetties and anchorages

Movablesdrilling & production tools, equipment & instruments, barges, aircraft, automotive, construction equipment, furniture & office equipment, and miscellaneous equipment

Construction Utilities & AuxiliariesConstruction Utilities & Auxiliariesworkshops, power, water facilities, warehouse, field roads & canworkshops, power, water facilities, warehouse, field roads & canalsals

Construction Housing and WelfareConstruction Housing and Welfarehousing, recreational facilities, etc.housing, recreational facilities, etc.

Production FacilitiesProduction Facilitiestangible development drilling, wellhead, flow lines, gathering stangible development drilling, wellhead, flow lines, gathering station, tation, treating plant & equipment, secondary recovery system, gas planttreating plant & equipment, secondary recovery system, gas plants and s and steam system, delivery lines, storage facilities, offshore platfsteam system, delivery lines, storage facilities, offshore platform, jetties orm, jetties and anchoragesand anchorages

MovablesMovablesdrilling & production tools, equipment & instruments, barges, aidrilling & production tools, equipment & instruments, barges, aircraft, rcraft, automotive, construction equipment, furniture & office equipmentautomotive, construction equipment, furniture & office equipment, and , and miscellaneous equipmentmiscellaneous equipment

Notes:Notes:-- Those classification relates to the Those classification relates to the ‘‘useful livesuseful lives’’ and and ‘‘raterate’’ of depreciation.of depreciation.-- Construction & Housing are normally built in the production phaConstruction & Housing are normally built in the production phase.se.

Production ActivitiesProduction ActivitiesActivitiesActivities

Production operationsProduction operationsrelates to well operations, field production facilities, secondarelates to well operations, field production facilities, secondary recovery ry recovery operations, storage, handling, transportation and delivery operaoperations, storage, handling, transportation and delivery operations, tions, repairs & maintenance, etc. repairs & maintenance, etc.

Production Supports (Field Office, Services and General AdministProduction Supports (Field Office, Services and General Administrationration)relates to supporting activities dedicated to production.relates to supporting activities dedicated to production.

Cost StructureCost Structure

Labor, materials (consumables) & services used in production actLabor, materials (consumables) & services used in production activities ivities are treated as Nonare treated as Non--Capital Costs.Capital Costs.Capital Costs are classified as listed in Development ActivitiesCapital Costs are classified as listed in Development Activities..

Production Operations: Production Operations: Production Supports:Production Supports:-- Direct Production Direct Production OilOil -- Field OfficeField Office-- Direct Production Direct Production Gas Gas -- ServicesServices-- Gas Processing Gas Processing -- Production AdministrationProduction Administration-- Utilities & Auxiliaries OperationsUtilities & Auxiliaries Operations

Non - capital

Office Service and General Administration:General Services incl. Technical services & related services, material services, transportation, rental of heavy engineering equipment, site rental & other rentals of services & property, personnel expenses, public relations, and other expenses abroad.

Overhead Allocation/Home Office charges:Direct charges: identifiable to certain activitiesOverhead: determined by a detailed study approved by BPMIGAS, applied consistently and subject to review by BPMIGAS and Contractor.

Interest Recovery:Interest on loans may be recoverable, not exceeding prevailing commercial rates, dedicated for capital investment (typically for developing production facilities). Details of financing plan shall be included in annual WP&B.

Non Non -- capitalcapital

Office Service and General AdministrationOffice Service and General Administration::General Services incl. Technical services & related services, maGeneral Services incl. Technical services & related services, material terial services, transportation, rental of heavy engineering equipment,services, transportation, rental of heavy engineering equipment, site rental & site rental & other rentals of services & property, personnel expenses, publicother rentals of services & property, personnel expenses, public relations, and relations, and other expenses abroad.other expenses abroad.

Overhead Allocation/Home Office chargesOverhead Allocation/Home Office charges::Direct chargesDirect charges: identifiable to certain activities: identifiable to certain activitiesOverheadOverhead: determined by a detailed study approved by BPMIGAS, applied : determined by a detailed study approved by BPMIGAS, applied consistently and subject to review by BPMIGAS and Contractor.consistently and subject to review by BPMIGAS and Contractor.

Interest RecoveryInterest Recovery::Interest on loans Interest on loans maymay be recoverable, not exceeding prevailing commercial be recoverable, not exceeding prevailing commercial rates, dedicated for capital investment (typically for developinrates, dedicated for capital investment (typically for developing production g production facilities). Details of financing plan shall be included in annufacilities). Details of financing plan shall be included in annual WP&B.al WP&B.

Capital

Furniture & Office Equipment, Automotive, and miscellaneous capital items.

CapitalCapital

Furniture & Office Equipment, Automotive, and miscellaneous capiFurniture & Office Equipment, Automotive, and miscellaneous capital itemstal items..

Supporting ActivitiesSupporting Activities

Supporting ActivitiesSupporting Activities

Notes on General Administrative ExpendituresNotes on General Administrative Expenditures ::

Costs fall into this category are mostly Costs fall into this category are mostly common support costscommon support costs, , allocated to Oil and Gas Operations based on allocated to Oil and Gas Operations based on an equitable an equitable basis agreed by both parties.basis agreed by both parties.

Overhead from Abroad is subject to cost ceiling.Overhead from Abroad is subject to cost ceiling.

Interest on Loans for Capital Investment is typically applicableInterest on Loans for Capital Investment is typically applicableto new field development with BPMIGAS approval.to new field development with BPMIGAS approval.

Community Development falls within this category; it should be Community Development falls within this category; it should be donated in the form of donated in the form of inkindinkind, not in cash., not in cash.

Under normal operations, Total General & Administrative Costs Under normal operations, Total General & Administrative Costs represent less than 10% Total Expenditures.represent less than 10% Total Expenditures.

Lifting & Sharing Analysis Lifting & Sharing Analysis

Total LiftingTotal LiftingTotal Lifting

ContractorLifting

ContractorLifting

BPMIGASLifting

BPMIGASLifting


FTP ShareFTP Share

Equity ShareEquity Share

FTP ShareFTP Share

Equity ShareEquity Share

DMODMO

ContractorEntitlement

BPMIGASEntitlement

Entitlement calculated after the year ends (January-December)Lifting implemented during the year, using estimated volume/amount (provisional)Imbalances are settled in cash (Cash Settlement)

ENTITLEMENTENTITLEMENTContractor and BPMIGAS are annually entitled to a portion of oilContractor and BPMIGAS are annually entitled to a portion of oil & & gas produced and sold from the block. gas produced and sold from the block. Actual entitlement is calculated after the year ends, when the Actual entitlement is calculated after the year ends, when the variables are actual (Price, Lifting & Cost Recovery).variables are actual (Price, Lifting & Cost Recovery).

LIFTINGLIFTINGOil & gas produced and sold thru Oil & gas produced and sold thru ‘‘joint liftingjoint lifting’’ or or ‘‘individual liftingindividual lifting’’..Joint LiftingJoint Lifting: lifting using : lifting using the same vessels/pipeline and destination. The the same vessels/pipeline and destination. The

`̀ proceed is shared between BPMIGAS and Contractor based proceed is shared between BPMIGAS and Contractor based `̀ on provisional (estimated) entitlement.on provisional (estimated) entitlement.

Individual LiftingIndividual Lifting: : Each party lifts its own estimated entitlement based on Each party lifts its own estimated entitlement based on provisional entitlement. provisional entitlement.

OVER/UNDER LIFTINGOVER/UNDER LIFTINGInbalancesInbalances resulted from the difference between Lifting & Entitlement resulted from the difference between Lifting & Entitlement will be settled in cash (Cash Settlement).will be settled in cash (Cash Settlement).

Entitlement & Lifting Entitlement & Lifting

288

2,861

ContractorEntitlement

361

GovernmentEntitlement

2,139

DMO

Gov't Share Contractor Share721

Cost Recovery2,500

1,500Equity to be Split

1,000

5,000Total Lifting

FTP - 20%

712

1,779

AssumesAssumes::Lifting 5,000 bbl, ICP $40/bblLifting 5,000 bbl, ICP $40/bblOperating Costs $100 MillionsOperating Costs $100 Millions

Contractor EntitlementContractor Entitlement::1. Cost Recovery1. Cost Recovery 2,5002,500

US$100 millions / US$40US$100 millions / US$402. FTP Share: 2. FTP Share: 288288

28.8462% x 1,000 bbl28.8462% x 1,000 bbl3. Equity Share3. Equity Share 433433

28.8462% x 1,500 bbl28.8462% x 1,500 bbl4. (4. (--) DMO) DMO 361361

28.8462% x 25% x 5,000 bbl28.8462% x 25% x 5,000 bblTOTALTOTAL 2,8612,861

Government EntitlementGovernment Entitlement::1. FTP Share: 1. FTP Share: 712712

71.1538% x 1,000 bbl71.1538% x 1,000 bbl2. Equity Share2. Equity Share 1,0671,067

71.1538% x 1,500 bbl71.1538% x 1,500 bbl3. (+) DMO3. (+) DMO 361361

28.8462% x 25% x 5,000 bbl28.8462% x 25% x 5,000 bblTOTALTOTAL 2,1392,139

Entitlement Calculation Entitlement Calculation Calculation after the year endsCalculation after the year ends

STANDARD COMMON SPLITSSTANDARD COMMON SPLITS

NOTESNOTES::New New PSCsPSCs require changes in sharing split when there is changes in Ratesrequire changes in sharing split when there is changes in Rates of Income of Income Tax and Branch Profit Tax, to keep the same after tax share.Tax and Branch Profit Tax, to keep the same after tax share.

NET GOV'T GROSSED-UP SPLITSPLIT TAX BPMIGAS CONTRACTOR

85/15 56% 65.9091 34.090948% 71.1538 28.846244% 73.2143 26.7857

65/35 56% 20.4545 79.545548% 32.6923 67.307744% 37.5000 62.5000

70/30 56% 31.8182 68.181848% 42.3077 57.692344% 46.4286 53.5714

NET GOV'T GROSSED-UP SPLITSPLIT TAX BPMIGAS CONTRACTOR

85/15 56% 65.9091 34.090948% 71.1538 28.846244% 73.2143 26.7857

65/35 56% 20.4545 79.545548% 32.6923 67.307744% 37.5000 62.5000

70/30 56% 31.8182 68.181848% 42.3077 57.692344% 46.4286 53.5714

Corporate TaxCorporate Tax 30%30%Branch Profit TaxBranch Profit Tax 14%14%(20% x 100%(20% x 100%--30%)30%) 44%44%



Notes on Government TaxNotes on Government Taxof 44%, 48% and 56%of 44%, 48% and 56%

GrossGross--Up Split for ContractorUp Split for Contractor

Net After TaxNet After Tax 15%15%Government TaxGovernment Tax 44%44%GrossedGrossed--Up Tax Up Tax 28.8462%28.8462%(15/52)(15/52)

Lifting & SharingLifting & Sharing

Crude OilCrude Oil

Share split : 71.1538% Share split : 71.1538% dandan 28.8462% (85/15):28.8462% (85/15):Estimated Lifting during the year : 1,000,000 barrel @ US$40.00 Estimated Lifting during the year : 1,000,000 barrel @ US$40.00 Estimated Operating CostsEstimated Operating Costs--Oil during the year : US$20,000,000.Oil during the year : US$20,000,000.


PROVISIONAL ENTITLEMENT TOTAL BPMIGAS CONTRACTORFirst Tranche Petroleum (FTP) 20.0000% 14.2308% 5.7692%Cost Recovery 50.0000% - 50.0000%Equity to be Split 30.0000% 21.3461% 8.6539%Domestic Market Obligation (DMO) 0.0000% 7.2115% (7.2115%)

TOTAL 100.0000% 42.7884% 57.2116%

Joint Lifting Joint Lifting ::If crude oil delivered to a refinery in January is 100,000 barrIf crude oil delivered to a refinery in January is 100,000 barrels at US$35.00/barrel, therefore els at US$35.00/barrel, therefore BPMIGAS portion would be BPMIGAS portion would be US$1,497,594US$1,497,594. . (42.7884% x 100,000 x 35.00)(42.7884% x 100,000 x 35.00)

Individual Lifting:Individual Lifting:If the crude oil available for lifting in January is estimated tIf the crude oil available for lifting in January is estimated to be 100,000 barrels, then BPMIGAS o be 100,000 barrels, then BPMIGAS nominates nominates ++ 42.788 barrel. Due to operational matters, BPMIGAS (through its42.788 barrel. Due to operational matters, BPMIGAS (through its appointed seller) appointed seller) nominates 40,000 barrel nominates 40,000 barrel dandan KontraktorKontraktor 50,000 barrel. If crude oil price is US$35.00/barrel, then 50,000 barrel. If crude oil price is US$35.00/barrel, then BPMIGAS portion is BPMIGAS portion is US$1,400,000US$1,400,000. . (40,000 x 35.00).(40,000 x 35.00).

Crude Oil Crude Oil –– DMO FeeDMO Fee

BPMIGAS portion includes Domestic Market Obligation (DMO) suppliBPMIGAS portion includes Domestic Market Obligation (DMO) supplied by ed by Contractor, The amount of DMO Fee payable to Contractor is :Contractor, The amount of DMO Fee payable to Contractor is :

If the crude oil classified as If the crude oil classified as ‘‘New OilNew Oil’’ (crude oil produced within the first(crude oil produced within the first60 months since commencement of production), then the DMO Fee 60 months since commencement of production), then the DMO Fee payable to contractor is payable to contractor is US$252,403US$252,403..

(7.2115% x 100(7.2115% x 100,000 barrels x US$35.00).,000 barrels x US$35.00).

If the crude oil classified as If the crude oil classified as ‘‘Old OilOld Oil’’,, (crude oil produced following the (crude oil produced following the firstfirst 60 months since commencement of production), then the DMO Fee 60 months since commencement of production), then the DMO Fee payable to contractor per barrel refers to the Contract.payable to contractor per barrel refers to the Contract. LetLet’’s say the DMO s say the DMO Fee per barrel is 10%, the DMO Fee is Fee per barrel is 10%, the DMO Fee is US$25,240.US$25,240.

(7.2115% x 100,000 barrels x US$3.50).(7.2115% x 100,000 barrels x US$3.50).

In December, adjustment required to be aligned with PSC.In December, adjustment required to be aligned with PSC.


GasGas

Share split 42.3077% Share split 42.3077% dandan 57.6923% (70/30)57.6923% (70/30)::Estimated Lifting during the year : 1,000,000 Estimated Lifting during the year : 1,000,000 mmscfmmscf @ US$2.00 per @ US$2.00 per mmscfmmscf..Estimated Operating CostsEstimated Operating Costs--Gas during the year : US$1,000,000.Gas during the year : US$1,000,000.


PROVISIONAL ENTITLEMENT TOTAL BPMIGAS CONTRACTORFirst Tranche Petroleum (FTP) 20.0000% 8.4615% 11.5385%Cost Recovery 50.0000% - 50.0000%Equity to be Split 30.0000% 12.6923% 13.3077%

TOTAL 100.0000% 21.1538% 78.8462%

Joint LiftingJoint Lifting::If during a month total gas delivered is 100,000 If during a month total gas delivered is 100,000 mmscfmmscf at US$2.00 per at US$2.00 per mmscfmmscf, then , then BPMIGAS portion is BPMIGAS portion is US$42,3077US$42,3077 (21.1538% x 100,000 x 2.00).(21.1538% x 100,000 x 2.00).

Notes:Notes:-- Simplified calculationSimplified calculation-- No DMO Gas (refers to the existing gas producing PSC)No DMO Gas (refers to the existing gas producing PSC)

Sales Agreement - 2

Sales Agreement - 2

Sales Agreement - 1

Sales Agreement - 1

Field - 1Field - 1

Field - 3Field - 3

Field - 5Field - 5

Field - 2Field - 2

Field - 4Field - 4

PSCBlock “A”

PSCBlock

“B”

PSCBlock

“C”

LNGPlantLNGPlant

LNGPlantLNGPlant

LNGBuyerLNGLNG

BuyerBuyer

LNGBuyerLNGLNG

BuyerBuyer

a. Sales Proceedsb. LNG Costs:

- Debt Service- Processing Costs- Transportation Costs- Administrative Costs

Netback Value : (a – b)

Netback Value of each Sales Contract is allocated to each PSC typically is based on contribution of supply (producer’s %)

Gross Revenue

Typical Gross Revenue of LNGTypical Gross Revenue of LNG


Gross Revenue LNG of each PSCGross Revenue LNG of each PSC(from previous slide for Sales Agreement (from previous slide for Sales Agreement –– 1)1) ::

Sales Proceeds 10 cargo (3 millions of (3 millions of mmbtummbtu @ US$5.00)@ US$5.00) . . . .. . . . US$150 millionsUS$150 millions

LNG Costs:LNG Costs:- Debt Service US$ 20 millions- Procesing Costs 3 millions- Transportation Costs 5 millions- Administration Costs 2 millions

Total LNG Costs . . . . . . . . . . . . . . . . . . US$ 30 millionsUS$ 30 millionsNetback Value Netback Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US$120 millionsUS$120 millions

Gross RevenueGross Revenue::- PSC Block “A” (50% x US$120 millions) . . . . . . . US$ 60 millionsUS$ 60 millions- PSC Block “B” (25% x US$120 millions) . . . . . . US$ 30 millionsUS$ 30 millions- PSC Block “C” (25% x US$120 millions) . . . . . . . US$ 30 millionsUS$ 30 millions


Variable Sharing AnalysisVariable Sharing Analysis

Assuming other variables were constant,Assuming other variables were constant,thenthen:1. Higher price results in:

- Higher Revenue- Lower Cost Recovery inkind (barrel/mcf/btu/mt)- Higher Equity Split for BPMIGAS & Contractor- FTP and DMO*) remain the same- Higher BPMIGAS entitlement percentage, lower for Contractor

2. Higher Higher liftinglifting results in:results in:- Higher Revenue- Lower Cost Recovery in bbl / mcf / btu- Higher Equity Split for Pertamina & Contractor- FTP and DMO*) remain the same- Higher BPMIGAS entitlement percentage, lower for Contractor

3. Higher 3. Higher cost recoverycost recovery results in:results in:- Higher Cost Recovery in bbl / mcf / btu- Lower Equity Split for Pertamina & Contractor- FTP and DMO*) remain the same- Lower BPMIGAS entitlement percentage, higher for Contractor

*) when Gross Revenue > (FTP+Cost Recovery)


Current ICP Formula : 20% APPI + 40% Platt’s + 40% RIM

CRUDE OILCRUDE OIL(Nature : develop the field then find the market)(Nature : develop the field then find the market)

QUOTED CRUDES : SLC, Senipah, Widuri, Cinta, Arjuna, Attaka, QUOTED CRUDES : SLC, Senipah, Widuri, Cinta, Arjuna, Attaka, DuriDuri

UNQUOTED CRUDES : related to a Quoted CrudeUNQUOTED CRUDES : related to a Quoted Crude

GASGAS(Nature : typically a gas field developed after the market has b(Nature : typically a gas field developed after the market has been een determined, the development often involves external financing)determined, the development often involves external financing)

-- LongLong--term contract term contract -- Pricing varies (Pricing varies (‘‘negotiablenegotiable’’, economically feasible), economically feasible)-- LNG Price formula mostly relates to crude oil export priceLNG Price formula mostly relates to crude oil export price

Example : Bula = Duri - $0.50

Pricing : Pricing : ((Current Policy Current Policy wapwap of 12 previous months) of 12 previous months)


FIELD - 6FIELD FIELD -- 66

-- Production may be from more than one different fields Production may be from more than one different fields -- They are grouped as per type of crude They are grouped as per type of crude

FIELD -1FIELD FIELD --11

FIELD - 3FIELD FIELD -- 33FIELD - 2FIELD - 2

CRUDE-2CRUDECRUDE--22

LIFTINGLIFTING

CRUDE-1CRUDECRUDE--11FIELD - 4FIELD FIELD -- 44

FIELD - 5FIELD FIELD -- 55 FIELD - nFIELD FIELD -- nnLIFTINGLIFTING

Production & Lifting Production & Lifting -- OilOil


FIELD - 6FIELD FIELD -- 66

-- Production may be from several different fields and blocksProduction may be from several different fields and blocks-- Grouped as per sales agreement, calculated as per PSC block Grouped as per sales agreement, calculated as per PSC block

FIELD -1FIELD FIELD --11

FIELD - 3FIELD FIELD -- 33FIELD - 2FIELD FIELD -- 22

SalesAgreement

2

SalesSalesAgreementAgreement

22

JOINT LIFTINGJOINT LIFTING

SalesAgreement

1

SalesSalesAgreementAgreement

11FIELD - 4FIELD FIELD -- 44

FIELD - 5FIELD FIELD -- 55 FIELD - 7FIELD FIELD -- 77JOINT LIFTINGJOINT LIFTING

Dedicated reservesDedicated reserves

Dedicated reservesDedicated reserves

Production & Lifting Production & Lifting -- GasGas


EXPENDITURES :EXPENDITURES :EXPENDITURES :

LIFTINGLIFTINGLIFTING











CAPITALCOST

CAPITALCAPITALCOSTCOST

COSTRECOVERY

COSTCOSTRECOVERYRECOVERYGROSS REVENUEGROSS REVENUEGROSS REVENUE

PRICEPRICEPRICE

Contractor ShareIndonesia Share

Contractor ShareContractor ShareIndonesia ShareIndonesia Share

DEPRECIATIONDEPRECIATION

PRIOR YEARSPRIOR YEARSUNRECOV. COSTSUNRECOV. COSTS UNREC. COSTSUNREC. COSTSUNREC. COSTS

NON CAPITALCOST

NON CAPITALNON CAPITALCOSTCOST

OPERATING COSTSOPERATING COSTS :




Capital expenditures are charged through depreciation beginning in the year when the corresponding assets are “placed into service”.

An asset is considered as “placed into service” (PIS) when:- It’s been completed, partially or wholly.- It starts rendering services according to its function,

For examples:- a well is considered as PIS when it starts producing,- a storage tank is considered as PIS when it starts receiving crude oil

to be stored, - an offloading equipment / facilities is considered as PIS when it starts

being ulitized for lifting operations, - a wellhead platform is considered as PIS when it starts being utilized

for placing wellheads on it.

Non capital expenditures are charged when they incur.

Capital expenditures are charged through Capital expenditures are charged through depreciation beginning in the depreciation beginning in the yearyear when the corresponding assets are when the corresponding assets are ““placed into serviceplaced into service””..

An asset is considered as An asset is considered as ““placed into serviceplaced into service”” (PIS) when:(PIS) when:-- ItIt’’s beens been completedcompleted, partially or wholly., partially or wholly.-- It It starts rendering servicesstarts rendering services according to its function,according to its function,

For examples:For examples:-- a wella well is considered as PIS when it is considered as PIS when it starts producingstarts producing,,-- a a storage tankstorage tank is considered as PIS when it is considered as PIS when it starts receivingstarts receiving crude oilcrude oil

to be stored, to be stored, -- an an offloading equipment / facilitiesoffloading equipment / facilities is considered as PIS when it is considered as PIS when it starts starts

being being ulitizedulitized for lifting operationsfor lifting operations, , -- a a wellhead platformwellhead platform is considered as PIS when it is considered as PIS when it starts being utilized starts being utilized

for placing wellheads on it.for placing wellheads on it.

Non capital expenditures are charged Non capital expenditures are charged when they incurwhen they incur..

Other Accounting ProceduresOther Accounting Procedures

Costs ChargingCosts Charging

Recovery of Gas Cost out of Oil Revenue (vice versa):

1. If after commencement of production, the natural gas revenues do not permit full recovery of natural gas costs, the excess shall be recovered from oil revenues (vice versa).

2. If production of either gas or oil has commenced while other has not, costs allocated in an equitable manner.

Recovery of Gas Cost out of Oil Revenue (vice versa):

1. If after commencement of production, the natural gas revenues do not permit full recovery of natural gas costs, the excess shall be recovered from oil revenues (vice versa).

2. If production of either gas or oil has commenced while other has not, costs allocated in an equitable manner.

1. Oil Costs – directly related to oil operations2. Gas Costs – directly related to gas operation 3. Common Costs – directly related to both oil and gas operations

allocated based on relative revenue4. Common Support Costs - indirectly related to both oil and gas operations

allocated based on equitable basis agreed by both parties

1. Oil Costs – directly related to oil operations2. Gas Costs – directly related to gas operation 3. Common Costs – directly related to both oil and gas operations

allocated based on relative revenue4. Common Support Costs - indirectly related to both oil and gas operations

allocated based on equitable basis agreed by both parties


Oil & Gas Allocation and Oil & Gas Allocation and ChargingsChargings

- Declining Balance Method, - Depreciation factor - Group 1 : 50%- Full year depreciation - Group 2 : 25%

- Group 3 : 10%

- Declining Balance Method, - Depreciation factor - Group 1 : 50%- Full year depreciation - Group 2 : 25%

- Group 3 : 10%

Group 2 :Construction Utilities & Auxiliaries 5.0 years 8.0 years Group 3Construction Housing & Welfare 10.0 years 20.0 years Group 3Production Facilities 5.0 years 8.0 years Group 3Railroad cars & Locomotives 7.5 years 15.0 years Group 3Water Transportation 9.0 years 18.0 years Group 2Drilling & Production Tools 5.0 years 8.0 years Group 2

Group 2 :Construction Utilities & Auxiliaries 5.0 years 8.0 years Group 3Construction Housing & Welfare 10.0 years 20.0 years Group 3Production Facilities 5.0 years 8.0 years Group 3Railroad cars & Locomotives 7.5 years 15.0 years Group 3Water Transportation 9.0 years 18.0 years Group 2Drilling & Production Tools 5.0 years 8.0 years Group 2

Oil & GasGroup 1 : Gas <7years Reserves > 7 yearsAutomobiles 1.5 years 3.0 years Group 1Light Trucks and Tractor Units 2.0 years 4.0 years Group 1Heavy Trucks 3.0 years 6.0 years Group 1Buses 4.5 yearsAircraft 3.0 years 6.0 years Group 2Construction Equipment 3.0 years 6.0 years Group 2Furniture & Office Equipment 5.0 years 10.0 years Group 2

Oil & GasGroup 1 : Gas <7years Reserves > 7 yearsAutomobiles 1.5 years 3.0 years Group 1Light Trucks and Tractor Units 2.0 years 4.0 years Group 1Heavy Trucks 3.0 years 6.0 years Group 1Buses 4.5 yearsAircraft 3.0 years 6.0 years Group 2Construction Equipment 3.0 years 6.0 years Group 2Furniture & Office Equipment 5.0 years 10.0 years Group 2


Typical Depreciation TableTypical Depreciation Table

Substance of TSATSA means all technical services from home office or affiliates; considered as inter-company billings (at costs); The estimated costs are presented in colum ‘Corporate Assistant” provided in the Attachment to Budget Schedules No 4, 8, 11 and summarized in Budget Schedule No 17. The actual figures are reported in colum ‘Corporate Assistant” provided in the Attachment to Reports No 4, 8 & 11.All TSAs proposed annualy to support activities proposed during the year. TSA is a temporary account to be allocated to each projects.

Substance of TSASubstance of TSATSA means all technical services from home office or affiliates;TSA means all technical services from home office or affiliates; considered as considered as interinter--company billings (at costs); company billings (at costs); The estimated costs are presented in The estimated costs are presented in columcolum ‘‘Corporate AssistantCorporate Assistant”” provided in the provided in the Attachment to Budget Schedules No 4, 8, 11 and summarized in BudAttachment to Budget Schedules No 4, 8, 11 and summarized in Budget get Schedule No 17. Schedule No 17. The actual figures are reported in The actual figures are reported in columcolum ‘‘Corporate AssistantCorporate Assistant”” provided in the provided in the AttachmentAttachment toto Reports No 4, 8 & 11.Reports No 4, 8 & 11.All All TSAsTSAs proposed proposed annualyannualy to support activities proposed during the year. to support activities proposed during the year. TSA is a temporary account to be allocated to each projects.TSA is a temporary account to be allocated to each projects.

Requirement for TSATSA is non-routine or extraordinary jobs.Upstream jobs relating to the Indonesian project planning.No inhouse personnel nor available domestic consulting company capable to perform the jobs.Competitive charges to domestic third party’s (as an agent).No overlap nor double charges to overhead from abroad.Included in the approved budget and be requested by the operator in Indonesia.

Requirement for TSATSA is nonTSA is non--routine or extraordinary jobs.routine or extraordinary jobs.Upstream jobs relating to the Indonesian project planning.Upstream jobs relating to the Indonesian project planning.No No inhouseinhouse personnel nor available domestic consulting company capable to personnel nor available domestic consulting company capable to perform the jobs.perform the jobs.Competitive charges to domestic third partyCompetitive charges to domestic third party’’s (as an agent).s (as an agent).No overlap nor double charges to overhead from abroad.No overlap nor double charges to overhead from abroad.Included in the approved budget and be requested by the operatorIncluded in the approved budget and be requested by the operator in Indonesia.in Indonesia.

Budget Preparation Budget Preparation –– Other SchedulesOther SchedulesOther Accounting ProceduresOther Accounting Procedures

STANDARD CLAUSE :“ . . . the Parties shall be entitled to take and receive each Year twenty percent of all Petroleum produced and saved and not used in Petroleum Operations in such Year before any deduction for the recovery of Investment Credit and Operating Costs . . . . Such First Tranche Petroleum shall be shared between BPMIGAS and CONTRACTOR in accordance with sharing splits . . .”

KEY WORDS :before any deductionshall be shared between BPMIGAS and CONTRACTOR

FTP DIFFERS FROM ROYALTY :- FTP is shared between the Parties- FTP has no impact when financial operation runs normally*)- FTP is merely to safeguard the minimum income of the property owner

*) In this context, normal operation means :Gross Revenue > (FTP + Investment Credit + Operating Costs)

Some new contracts : all FTP goes to BPMIGAS.

STANDARD CLAUSE :STANDARD CLAUSE :““ . . . the Parties shall be entitled to take and receive each Ye. . . the Parties shall be entitled to take and receive each Year twenty percent ar twenty percent of all Petroleum produced and saved and not used in Petroleum Opof all Petroleum produced and saved and not used in Petroleum Operations in erations in such Year before any deduction for the recovery of Investment Crsuch Year before any deduction for the recovery of Investment Credit and edit and Operating Costs . . . . Such First Tranche Petroleum shall be shOperating Costs . . . . Such First Tranche Petroleum shall be shared between ared between BPMIGAS and CONTRACTOR in accordance with sharing splits . . .BPMIGAS and CONTRACTOR in accordance with sharing splits . . .””

KEY WORDS :KEY WORDS :before any deductionbefore any deductionshall be shared between BPMIGAS and CONTRACTORshall be shared between BPMIGAS and CONTRACTOR

FTP DIFFERS FROM ROYALTY :FTP DIFFERS FROM ROYALTY :-- FTP is shared between the PartiesFTP is shared between the Parties-- FTP has no impact when financial operation runs normally*)FTP has no impact when financial operation runs normally*)-- FTP is merely to safeguard the minimum income of the property oFTP is merely to safeguard the minimum income of the property ownerwner

*) In this context, normal operation means :*) In this context, normal operation means :Gross Revenue > (FTP + Investment Credit + Operating Costs)Gross Revenue > (FTP + Investment Credit + Operating Costs)

Some new contracts : all FTP goes to BPMIGASSome new contracts : all FTP goes to BPMIGAS..

First First TrancheTranche PetroleumPetroleum

Fiscal TermsFiscal Terms

US DollarsOperating Costs 10,000 10,000 20,000 20,000

with FTP No FTP with FTP No FTP1 Lifting - mbbl 1,000 1,000 1,000 1,0002 Price per bbl - $/bbl 20.00 20.00 20.00 20.003 Gross Revenue 20,000 20,000 20,000 20,0004 First Tranche Petroleum 4,000 0 4,000 05 Gross Revenue after FTP 16,000 20,000 16,000 20,0006 Investment Credit 500 500 0 07 Cost Recovery 10,000 10,000 16,000 20,0008 Equity To Be Split 5,500 9,500 0 0

9 CONTRACTOR SHARE:FTP Share 1,154 0 1,154 0Equity Share 1,587 2,740 0 0D M O 1,442 1,442 0 0D M O Fee (New Oil) (1,442) (1,442) 0 0Taxable Share 3,240 3,240 0 0

10 Gov't Tax Entitlement (1,555) (1,555) 0 011 Net Contractor Share 1,685 1,685 1,154 012 Total Share 11,685 11,685 17,154 20,000

13 Unrecovered Costs 0 0 4,000 0

14 Indonesia Share 8,315 8,315 2,846 0

PRODUCTION SHARING CONTRACT - Conventional

Case on FTPCase on FTP


STANDARD CLAUSE :

“Contractor may recover an investment credit amounting to 17% of the capital investment costs directly required for developing Crude Oil production facilities . . . of each new field out of deduction from gross production before recovering operating costs, commencing in the earliest production Year or Years before tax deduction (to be paid in advance in such production Year when taken).The Investment Credit may be applied to new secondary recovery and tertiary recovery EOR projects but is not applicable to “interim production schemes” or further investment to enhance production and reservoir drainage in excess of what was contemplated in the original project as approved by PERTAMINA”.

KEY WORDS :• capital investment costs• developing Crude Oil production facilities (now it is applicable to gas)• each new field• commencing in the earliest Year or Years• to be paid in advance in such production Year when taken• new secondary recovery and tertiary recovery EOR projects• not applicable to interim production schemes or further investment

STANDARD CLAUSE :STANDARD CLAUSE :

““Contractor may recover an investment credit amounting to 17% of Contractor may recover an investment credit amounting to 17% of the capital the capital investment costsinvestment costs directly required for directly required for developing Crude Oil production facilitiesdeveloping Crude Oil production facilities . . . of . . . of each new fieldeach new field out of deduction from gross production before recovering operatout of deduction from gross production before recovering operating ing costs, costs, commencing in the earliest production Year or Yearscommencing in the earliest production Year or Years before tax deduction (before tax deduction (to to be paid in advance in such production Year when takenbe paid in advance in such production Year when taken).).The Investment Credit may be applied to The Investment Credit may be applied to new secondary recoverynew secondary recovery and and tertiary tertiary recovery EOR projectsrecovery EOR projects but is not applicable to but is not applicable to ““interim production schemesinterim production schemes”” or or further further investmentinvestment to enhance production and reservoir drainage in excess of what to enhance production and reservoir drainage in excess of what was was contemplated in the original project as approved by PERTAMINAcontemplated in the original project as approved by PERTAMINA””..

KEY WORDS :KEY WORDS :•• capital investment costscapital investment costs•• developing Crude Oil production facilities (developing Crude Oil production facilities (now it is applicable to gasnow it is applicable to gas))•• each new fieldeach new field•• commencing in the earliest Year or Yearscommencing in the earliest Year or Years•• to be paid in advance in such production Year when takento be paid in advance in such production Year when taken•• new secondary recovery and tertiary recovery EOR projectsnew secondary recovery and tertiary recovery EOR projects•• not applicable to not applicable to interim production schemesinterim production schemes or or further investmentfurther investment

Investment CreditInvestment Credit


Operating Costs 10,000 10,000 20,000 20,000No I/C with I/C No I/C with I/C *)

1 Lifting - mbbl 1,000 1,000 1,000 1,0002 Price per bbl - $/bbl 20.00 20.00 20.00 20.003 Gross Revenue 20,000 20,000 20,000 20,0004 First Tranche Petroleum 4,000 4,000 4,000 4,0005 Gross Revenue after FTP 16,000 16,000 16,000 16,0006 Investment Credit 0 2,000 0 1007 Cost Recovery 10,000 10,000 16,000 15,9008 Total Recoverables 10,000 12,000 16,000 16,0009 Equity To Be Split 6,000 4,000 0 0

10 CONTRACTOR SHARE :FTP Share 1,154 1,154 1,154 1,154Equity Share 1,731 1,154 0 0D M O 0 1,442 0 0D M O Fee (New Oil) 0 (1,442) 0 0Taxable Share 2,885 4,308 0 100

11 Gov't Tax Entitlement (1,385) (2,068) 0 (48)12 Net Contractor Share 1,500 240 1,154 1,10613 Total Contractor Share 11,500 12,240 17,154 17,10614 Unrecovered Costs 0 0 4,000 4,10015 Indonesia Share 8,500 7,760 2,846 2,894*) Inv.Credit is partially claimed starting in the first years of production

Case on Investment CreditCase on Investment Credit


STANDARD CLAUSE :after commercial production commences, . . . Contractor agree to sell and deliver a portion of the share of Crude oil to which it is entitled pursuant to Section 6.1.3 and 6.3.1 (Equity to be Split & FTP) for each Year as follows :

Σ National Supply(I) Production/Lifting X

Σ National Production(ii) 25% Production(iii) The lower under (i) or (ii) X Grossed-up Split

EXAMPLE :Production/Lifting 1,000 MBBL Contractor Split 28.8462% Σ National Supply 1,000 MBODΣ National Production 1,250 MBOD

(I) 1,000 MBBL X 1,000 / 1,250 = 800 MBBL higher(ii) 1,000 MBBL X 25% = 250 MBBL lower(iii) 250 MBBL X 28.8462% = 72 MBBL

STANDARD CLAUSE :STANDARD CLAUSE :after commercial production commences, . . . Contractor agree toafter commercial production commences, . . . Contractor agree to sell and deliver a sell and deliver a portion of the share of Crude oil to which it is entitled pursuaportion of the share of Crude oil to which it is entitled pursuant to Section 6.1.3 and 6.3.1 nt to Section 6.1.3 and 6.3.1 (Equity to be Split & FTP) for each Year as follows :(Equity to be Split & FTP) for each Year as follows :

ΣΣ National SupplyNational Supply(I) Production/Lifting X (I) Production/Lifting X

ΣΣ National ProductionNational Production(ii) 25% Production(ii) 25% Production(iii) The lower under (i) or (ii) X Grossed(iii) The lower under (i) or (ii) X Grossed--up Splitup Split

EXAMPLE :EXAMPLE :

Production/LiftingProduction/Lifting 1,000 MBBL1,000 MBBL Contractor Split 28.8462% Contractor Split 28.8462% ΣΣ National SupplyNational Supply 1,000 MBOD1,000 MBODΣΣ National ProductionNational Production 1,250 MBOD1,250 MBOD

(I) 1,000 MBBL X 1,000 / 1,250 = 800 MBBL higher(I) 1,000 MBBL X 1,000 / 1,250 = 800 MBBL higher(ii) 1,000 MBBL X 25%(ii) 1,000 MBBL X 25% = 250 MBBL= 250 MBBL lowerlower(iii) 250 MBBL X 28.8462% = (iii) 250 MBBL X 28.8462% = 72 MBBL72 MBBL

Domestic Market ObligationDomestic Market Obligation

Domestic Market ObligationDomestic Market Obligation


If Gross Revenue > (FTP + Investment Credit + Cost Recovery), thenContractor shall be relieved from the obligation.

Quantity to be supplied during the year- Constant percentage, when Gross Revenue > (FTP + Cost Recoverables).- Fluctuate percentage, when changes in lifting, price and cost recovery affectGross Revenue to become less than (FTP + Cost Recoverables).- shall be the maximum, no carry over for any deficiency.

DMO Fee - $0.20 / barrel for field starts producing prior to 23 February 1989- 10% or 15% or 25% of Price / barrel according to the contract

DMO Fees are billed monthly, adjustments may be necessary to reflect annualPSC calculation

If If Gross Revenue > (FTP + Investment Credit + Cost Recovery), thenthenContractor shall be relieved from the obligation.Contractor shall be relieved from the obligation.

Quantity to be supplied during the yearQuantity to be supplied during the year-- Constant percentage, when Constant percentage, when Gross Revenue > (FTP + Cost Recoverables).-- Fluctuate percentage, when changes in lifting, price and cost rFluctuate percentage, when changes in lifting, price and cost recovery affectecovery affectGross Revenue to become less than (FTP + Cost Recoverables).-- shall be the maximum, no carry over for any deficiency.shall be the maximum, no carry over for any deficiency.

DMO Fee DMO Fee -- $0.20 / barrel for field starts producing prior to 23 February $0.20 / barrel for field starts producing prior to 23 February 19891989-- 10% or 15% or 25% of Price / barrel according to the contract10% or 15% or 25% of Price / barrel according to the contract

DMO Fees are billed monthly, adjustments may be necessary to reDMO Fees are billed monthly, adjustments may be necessary to reflect annualflect annualPSC calculationPSC calculation

Notes on Domestic Market ObligationNotes on Domestic Market Obligation


BUDGET ACTUAL ACTUALPrice/bbl 25.00 20.00 23.00Total Lifting - mbbl 1,000 1,000 1,000 Cost Recovery - MUS$ 18,000 18,000 18,000 Gross Revenue - MUS$ 25,000 20,000 23,000

mbbl mbbl mbblTotal Lifting 1,000 1,000 1,000 FTP 200 200 200 Cost Recovery 720 800 783 Equity to be Split 80 0 17 Contractor Share:- FTP Share 58 58 58- Equity Share 23 0 5

Total 81 58 63DMO (normal) 72 72 72DMO Delivered 72 0 63

Case on Domestic Market ObligationCase on Domestic Market Obligation


Year Year -- 88 Year Year -- 99 Year Year -- 1010

Annual Budget (Part of WP&B)Annual Budget (Part of WP&B)

Introduction to Budgeting & ReportingIntroduction to Budgeting & Reporting

FinancialFinancialReportReport



Activities for Field Development Projects (POD/AFE)Activities for Field Development Projects (POD/AFE)Activities for Field Development Projects (POD/AFE)

Activities for Explorations & Other Projects (AFE)Activities for Explorations & Other Projects (AFE)Activities for Explorations & Other Projects (AFE)

Activities for RoutinesActivities for RoutinesActivities for Routines

Annual ContentsAnnual Contents

Budgeting & ReportingBudgeting & Reporting

Financial Control starts from Financial Reporting.Financial Control starts from Financial Reporting.

Financial Reporting captures all activities in each contract areFinancial Reporting captures all activities in each contract area a during reporting periods, including sharing of production, preseduring reporting periods, including sharing of production, presented nted mostly in a currency unit (US Dollars).mostly in a currency unit (US Dollars).

Main Financial Reporting :Main Financial Reporting :

Annual BudgetAnnual BudgetPart of Work Program and Budget (WP&B) itemizing planned Part of Work Program and Budget (WP&B) itemizing planned activities during the year.activities during the year.

Financial Report Financial Report Reporting the actual figures of all activities approved in the Reporting the actual figures of all activities approved in the Annual Budget (WP&B), presented quarterly for monitoring & Annual Budget (WP&B), presented quarterly for monitoring & controlling purposes.controlling purposes.

Annual Budget & Financial ReportAnnual Budget & Financial Report

ContentsBudget Year Overview summarizes forecast activities during the budget year. Areas subject to considerable variation should be discussed in the overview together with the possible impact.Annual Work Program provides technical descriptions of proposed exploratory, development, exploitation and supporting activities. Maps and other supporting documents are to be attached as appropriate.Submissions, at least 3 months prior to the beginning of each calendar year,or at such other time as agreed by the parties.Revisions/ChangesBPMIGAS may propose a revision within 30 days after receipt.Details of work program may be changed, provided they do not change the general objective nor increase the approve expenditures.In the event of emergency requiring immediate actions, proper actions may be taken, and costs incurred included as operating costs.Revisions on the WP&B should be submitted to BPMIGAS in the mid budget year (no later than August).

Budgeting & ReportingBudgeting & ReportingBudgeting & Reporting

The summary of quarterly expenditures, operating costs, cost recovery, sharing of production & others based on actuals.

Legal permanent document, source of reference for actual data.

Submitted to BPMIGAS not later than 20th calendar day after quarter-end. For the 4th quarter Report, it will be necessary to submit the corrected report not later than the following 1st of March.

Inclusion of estimated expenditures for the third month of any quarter. In the next succeeding quarterly reports the adjustment to convert estimated to actuals should be made in ‘This Quarter’ figures.

Expressed in US dollars, rounded off to the nearest thousand dollars, except for Report 16 and project control reports 18 to 26 should be rounded off to the nearest US dollar amount.

Explains variances, generally when YTD variance is + 10% or more, provided that it exceeds US$500,000.

Budgeting & ReportingBudgeting & ReportingBudgeting & Reporting

The actual figures of expenditures estimated in the Work ProgramThe actual figures of expenditures estimated in the Work Program & Budget are & Budget are reported inreported in Financial Report:Financial Report:


Budget & Financial ReportBudget & Financial Report

BUDGET(Part of WP&B)

BUDGET(Part of WP&B)

FINANCIALREPORT

FINANCIALREPORT

Actual(General Ledger)

Actual(General Ledger)

FinancialItems

FinancialItems

EstimatesEstimates

FinancialItems

FinancialItems

similar structuressimilar structures

variancevariance

PSC requires to meet:PSC requires to meet:-- generally accepted and recognized accounting systemsgenerally accepted and recognized accounting systems-- modern petroleum industry practices and proceduresmodern petroleum industry practices and procedures

- Balance Sheet- Income Statement- Other Reports

- Balance Sheet- Income Statement- Other Reports

PSC FinancialReporting ItemsPSC Financial

Reporting Items

PSC Section “Books and Account and Audit”

BPMIGAS shall be responsible for keeping complete books and accounts with the assistance of CONTRACTOR reflecting all Operating Costs as well as monies received from the sale of Crude Oil and Natural Gas, …

BPMIGAS may at its option delegate to CONTRACTOR its obligation to keep books and accounts.

PSC Exhibit ‘C’ “Accounting Procedure”

Accounting Records and books will be kept in accordance with generally accepted and recognized accounting systems, consistent with modern petroleum industry practices and procedures.

Books and Reports will be maintained and prepared in accordance with methods established by BPMIGAS.

The chart of accounts and related definitions will be prescribed by BPMIGAS.


Reporting RequirementReporting Requirement

B U D G E T R E P O R T DESCRIPTIONSchedule 1 Report 1 Financial Status ReportSchedule 2 Report 2 Key Operating StatisticsSchedule 3 Expense and Expenditures Summary

Schedule 3A Report 3 Expenditures SummarySchedule 4 *) Report 4 *) Exploration and Development Expenditures

Schedule 5 Exploratory Drilling Capital & Operating ExpenditureSchedule 6 Development Drilling Capital & Operating ExpenditureSchedule 7 Miscellaneous Exploratory Capital Expenditures

Schedule 8 *) Report 8 *) Production Expense SummarySchedule 9 Production Facilities Capital ExpendituresSchedule 10 Miscellaneous Facilities Capital Expenditures

Schedule 11 *) Report 11 *) Administrative Expense SummarySchedule 12 Miscellaneous Administrative Capital ExpendituresSchedule 13 Capital Assets to be Placed into ServiceSchedule 14 Report 14 Depreciation ScheduleSchedule 15 Report 15 Detailed Project Support Listing/Project Status ReportSchedule 16 Report 16 Lifting Forecast/Lifting Share AnalysisSchedule 17 Expenditures Summary by Category

B U D G E T R E P O R T DESCRIPTIONSchedule 1 Report 1 Financial Status ReportSchedule 2 Report 2 Key Operating StatisticsSchedule 3 Expense and Expenditures Summary

Schedule 3A Report 3 Expenditures SummarySchedule 4 *) Report 4 *) Exploration and Development Expenditures

Schedule 5 Exploratory Drilling Capital & Operating ExpenditureSchedule 6 Development Drilling Capital & Operating ExpenditureSchedule 7 Miscellaneous Exploratory Capital Expenditures

Schedule 8 *) Report 8 *) Production Expense SummarySchedule 9 Production Facilities Capital ExpendituresSchedule 10 Miscellaneous Facilities Capital Expenditures

Schedule 11 *) Report 11 *) Administrative Expense SummarySchedule 12 Miscellaneous Administrative Capital ExpendituresSchedule 13 Capital Assets to be Placed into ServiceSchedule 14 Report 14 Depreciation ScheduleSchedule 15 Report 15 Detailed Project Support Listing/Project Status ReportSchedule 16 Report 16 Lifting Forecast/Lifting Share AnalysisSchedule 17 Expenditures Summary by Category

Complete Sets of Budget & Financial ReportComplete Sets of Budget & Financial Report


*) Includes Attachment


Budgeting & Reporting SummarizedBudgeting & Reporting SummarizedWP&B is a means to WP&B is a means to controlcontrol activities, expenditures and revenues to activities, expenditures and revenues to achieve approved targets and goals.achieve approved targets and goals.WP&B is used WP&B is used internallyinternally for the purpose of running and finefor the purpose of running and fine--tuning tuning the journey of the business during the budget year; therefore, tthe journey of the business during the budget year; therefore, the he users of WP&B are BPMIGAS and Contractor including its partners.users of WP&B are BPMIGAS and Contractor including its partners.When the budget year is passed, WP&B becomes irrelevant.When the budget year is passed, WP&B becomes irrelevant.

Financial Report (FR) is the actual figures of WP&B presented Financial Report (FR) is the actual figures of WP&B presented quarterly; the quarterly; the 44thth quarter reportquarter report represents represents final annual actual figuresfinal annual actual figures..FR is a permanent legal document; any changes requires approved FR is a permanent legal document; any changes requires approved journal entries.journal entries.FR is used for use of internal and external relevant institutionFR is used for use of internal and external relevant institutions.s.Financial audits starts from Financial Report.Financial audits starts from Financial Report.When the reporting period is passed, FR is still relevant especiWhen the reporting period is passed, FR is still relevant especially ally during the contract years.during the contract years.

FinancialStatus

FinancialStatus

Exploration &Development

Exploration &Development

ProductionExpense

ProductionExpense

General &Administrative

General &Administrative

ExpendituresSummary

ExpendituresSummary

DepreciationDepreciation LiftingLifting

Main Budget SchedulesMain Budget Schedules

Sch. 4 Sch. 8 Sch. 11

Sch. 3

Sch. 1

Sch. 14 Sch. 16

Budget PreparationBudget Preparation

• Gross Revenue• Cost Recovery• Contractor Share• Indonesia Share


Sch.7Misc.Capital

Sch.7Misc.Capital

Sch.6Devl.Drilling

Sch.6Devl.Drilling

Sch.5Expl.Drilling

Sch.5Expl.Drilling

Sch.10Misc.CapitalSch.10

Misc.CapitalSch.9

Facilities CapSch.12

Misc.CapitalSch.12

Misc.Capital

Sch.4Expl. & Dev.

Sch.4Expl. & Dev.

Attachment

Sch.8Prod. Exp.Sch.8

Prod. Exp.

Attachment

Sch.11Gen.&Adm.Sch.11

Gen.&Adm.

Attachment

Sch.3, 3AExpd.SummarySch.3, 3A

Expd.SummarySch.1

Financial StatusSch.1

Financial Status

Sch.14DepreciationSch.14

Depreciation

Sch.16Lifting

Sch.16Lifting

Sch.15Project ListSch.15

Project ListSch.13

Assets PISSch.13

Assets PIS

Sch.17Bgt.Year Expd.

Sch.17Bgt.Year Expd.

Sch.2StatisticsSch.2

Statistics

Data Flows in Budget Schedules Data Flows in Budget Schedules

Step Step –– 11 : Identify planned activities as routines & projects: Identify planned activities as routines & projects

Step Step –– 22 : : Posting Exploration & Development ExpendituresPosting Exploration & Development Expenditures

Step Step –– 33 : Posting Production Expenditures: Posting Production Expenditures

Step Step –– 44 : : Posting General & Administration ExpendituresPosting General & Administration Expenditures

Step Step –– 55 : Classifying Assets Placed Into Service and Depreciation: Classifying Assets Placed Into Service and Depreciation

Step Step –– 66 : : Summarizing Expenditures & Operating CostsSummarizing Expenditures & Operating Costs

Step Step –– 77 : Matching Operating Costs to Lifting Value: Matching Operating Costs to Lifting Value

Step Step –– 88 : : Completing Other SchedulesCompleting Other Schedules


Developing BudgetDeveloping Budget


Step Step --11 : Projects & Routine : Projects & Routine IdentificationIdentification

ActivitiesActivities

• Geological & Geophysical (G&G) (BS#4)• Exploration Drilling (BS#5)• Development Drilling (BS#6)• G & G Capital (BS#7)• Misc. Expl & Devl Capital (BS#7)• Production Facilities (BS#9)• Misc. Production Facilities (BS#10)• Administrative Capital (BS#12)• TSA (Allocated to projects)

BUDGET SCHEDULE No 15BUDGET SCHEDULE No 15

Exploration & Development- Geological & Geophysical (G&G)- Administration- OtherProduction- Production Operations- Field Office, Services & Gen.AdminGeneral Administration- Finance & Administration- Eng & Material Services- Transportation- Personnel Expenses- Public Relation- Community Development- General Office Expenses

BUDGET SCHEDULE No 4, 8 & 11BUDGET SCHEDULE No 4, 8 & 11

Routine/NonRoutine/Non--ProjectsProjects

Projects (AFE Required)Projects (AFE Required)

-- Exploration ProgramsExploration Programs-- Plan of DevelopmentPlan of Development-- Other ProjectsOther Projects

-- Estimates of routine activitiesEstimates of routine activities-- Anticipated ActivitiesAnticipated Activities-- Anticipated ChangesAnticipated Changes

Budget Preparation Budget Preparation –– Lists of ProjectsLists of Projects

Budget Schedule Budget Schedule –– 1515List of Projects (AFE is required for each project) List of Projects (AFE is required for each project)

To simplify the illustrations, no Intangible Drilling Costs given

OPERATOR : BPMIGAS SCHEDULE 15CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : 2006 DETAILED PROGRAM SUPPORT LISTING

Page 1 of 31) 2) 3) C A P I T A L P O R T I O N NON - CAPITAL PORTION

1) ANTI- BUDGETED 7) 8) 9) ANTI- BUDGETED 12)Line D E S C R I P T I O N NEW OLD TOTAL CIPATED EXPENDITURES TO BE CIPATED EXPENDITURES

PROGRAMS PROGRAMS PROGRAMS EXPEND- 5) 6) TOTAL PLACED IN EXPEND- 10) 11) TOTALITURES CURRENT FUTURE SERVICE ITURES CURRENT FUTUREAS OF YEAR YEARS THIS YEAR AS OF YEAR YEARS

31/12/2005 31/12/20051 Exploration & Development2 - Office Equipment 0 25,000 25,000 15,000 10,000 0 25,000 25,0003 - Exploratory Drilling 6,000 6,000 12,000 3,000 7,000 2,000 12,0004 - Development Drilling 9,000 9,000 18,000 4,000 12,000 2,000 18,000 11,00056 Production7 - Production Facilities 50,000 50,000 100,000 25,000 65,000 10,000 100,000 100,0008 - Utilities & Auxiliaries 25,000 37,500 62,500 25,000 32,500 5,000 62,500 50,0009

10 General Administration11 - Furniture 4,000 0 4,000 0 4,000 0 4,000 4,000121314151617181920

Budget PreparationBudget PreparationStep Step -- 22 : Posting for Exploration: Posting for Exploration

& Development & Development ExpdExpd..

• Geological & Geophysical (BS#4)• Exploration Drilling (BS#5)• Development Drilling (BS#6)• G & G Capital (BS#7)• Misc. Expl & Devl Capital (BS#7)• Production Facilities (BS#9)• Misc. Production Facilities (BS#10)• Administrative Capital (BS#12)• TSA (Allocated to projects)




Schedule – 7Miscl. Exploratory

Capital

Schedule – 7Miscl. Exploratory

Capital

Schedule – 6Development

Drilling


Drilling Schedule – 5Exploratory

Drilling

Schedule – 5Exploratory

Drilling

Schedule – 4Exploration &Development

Schedule – 4Exploration &Development

Budget Preparation Budget Preparation –– Exploratory DrillingExploratory Drilling

Budget Schedule Budget Schedule –– 55

OPERATOR : BPMIGAS SCHEDULE 5CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : BUDGETED EXPLORATORY DRILLING CAPITAL & OPERATING EXPENDITURES

1) OLD 2) 3) 10) PROGRAMSPROGRAMS NEW TOTAL T I M E P H A S E D TOTAL EXPENDITURES TO BE PLACED

Line D E S C R I P T I O N UNSPENT PROGRAMS TO BE 4) 1st 5) 2nd 6) 3rd 7) 4th 8) THIS 9) SUBSEQ. IN SERVICEAMOUNT SPENT QUARTER QUARTER QUARTER QUARTER YEAR YEAR THIS YEAR

1 TANGIBLE COST :2 Casing and Tubing3 Well Equipment Surface4 Well Equipment Subsurface5 Other Tangible6 Total Tangible Costs 3,000 6,000 9,000 1,500 2,000 1,500 2,000 7,000 2,0007 INTANGIBLE COST :8 Preparation and Termination9 Drilling Operation

10 Completion11 General12 Other Intangible Costs13 Total Intangible Costs14 TOTAL COSTS

Unspent balances of previous years’ programs

Programs initiated in the budget year

Estimated to be spent during the budget year

Estimated to be spent for the next budget year

Budget Preparation Budget Preparation –– Development DrillingDevelopment Drilling


OPERATOR : BPMIGAS SCHEDULE 6CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : BUDGETED DEVELOPMENT DRILLING CAPITAL & OPERATING EXPENDITURES

1) OLD 2) 3) 10) PROGRAMSPROGRAMS NEW TOTAL T I M E P H A S E D TOTAL EXPENDITURES TO BE PLACED

Line D E S C R I P T I O N UNSPENT PROGRAMS TO BE 4) 1st 5) 2nd 6) 3rd 7) 4th 8) THIS 9) SUBSEQ. IN SERVICEAMOUNT SPENT QUARTER QUARTER QUARTER QUARTER YEAR YEAR THIS YEAR

1 TANGIBLE COST :2 Casing and Tubing3 Well Equipment Surface4 Well Equipment Subsurface5 Other Tangible6 Total Tangible Costs 5,000 9,000 14,000 2,000 3,000 3,000 4,000 12,000 2,000 11,0007 INTANGIBLE COST :8 Preparation and Termination9 Drilling Operation

10 Completion11 General12 Other Intangible Costs13 Total Intangible Costs14 TOTAL COSTS





Estimated to be placed in service this budget year(Transferred to Depreciation Analysis -Sch.13 & 14)

NOTESSch. 6.1 for OilSch. 6.2 for Gas

Budget Preparation Budget Preparation –– Misc.ExplMisc.Expl & & Devl.CapitalDevl.Capital


Estimated to be placed in service this budget year

OPERATOR : BPMIGAS SCHEDULE 7CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : BUDGETED MISCELLANEOUS CAPITAL EXPENDITURES

Functional : Exploration & Development1) OLD 2) 3) 10) PROGRAMS

Line D E S C R I P T I O N PROGRAMS NEW TOTAL T I M E P H A S E D TOTAL EXPENDITURES TO BE PLACEDUNSPENT PROGRAMS TO BE 4) 1st 5) 2nd 6) 3rd 7) 4th 8) THIS 9) SUBSEQ. IN SERVICEAMOUNT SPENT QUARTER QUARTER QUARTER QUARTER YEAR YEAR THIS YEAR

1 G & G Capital Expenditures2 Geol.& Geoph. Equipment3456789 Total G&G Capital

Expenditures10 Administration Capital

Expenditures111213141516171819 Total Administrative

Capital Expenditures 10,000 0 10,000 2,000 0 8,000 0 10,000 0 25,00020 TOTAL MISC.EXPL.AND DEV.

CAPITAL EXPENDITURES

(Transferred to Depreciation Analysis -Sch.13 & 14)


Budget Preparation Budget Preparation –– Exploration & Development Exploration & Development SumSum’’yy

Budget Schedule Budget Schedule –– 44OPERATOR : BPMIGAS SCHEDULE 4CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : EXPLORATION AND DEVELOPMENT EXPENDITURE

BUDGET SUMMARY

1) 2) 3) 4) 5)Line D E S C R I P T I O N 1st QUARTER 2nd QUARTER 3rd QUARTER 4th QUARTER TOTALS

1 DRILLING EXPENDITURES2 Development Drilling :3 Intangible Costs4 Tangible Costs 2,000 3,000 3,000 4,000 12,0005 Total Development Drilling6 Exploratory Drilling :7 Intangible Costs8 Tangible Costs 1,500 2,000 1,500 2,000 7,0009 Total Exploratory Drilling

10 Total Drilling Expenditures11 Total Intangible Expenditures12 Total Tangible Expenditures13 G&G EXPENDITURES14 Geological15 Geophysical16 Seismic & Other Surveys17 Capital Expenditures18 Total G&G Expenditures19 Total Non-Capital Expenditures20 EXPLORATION ADMINISTRATION EXPENDITURES21 Administration22 Other23 Capital Expenditures 2,000 0 8,000 0 10,00024 Total Administration Expenditures25 Total Non-Capital Expenditures26 TOTAL EXPLORATION & DEVELOPMENT EXPENDITURES27 TOTAL NON-CAPITAL EXPENDITURES28 TOTAL CAPITAL EXPENDITURES


Budget PreparationBudget PreparationStep Step -- 33 : Posting for Production: Posting for Production

ExpendituresExpenditures





Schedule – 10Miscl. Production

Facil. Capital

Schedule – 10Miscl. Production

Facil. Capital

Schedule – 9ProductionFacilities

Schedule – 9ProductionFacilities

Schedule – 8ProductionExpense

Schedule – 8ProductionExpense

Budget Preparation Budget Preparation –– Production FacilitiesProduction Facilities






OPERATOR : BPMIGAS SCHEDULE 9CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : PRODUCTION FACILITIES CAPITAL EXPENDITURES BUDGET

1) OLD 2) 3) 10)PROGRAMSPROGRAMS NEW TOTAL T I M E P H A S E D TOTAL EXPENDITURES TO BE PLACED

Line D E S C R I P T I O N UNSPENT PROGRAMS TO BE 4) 1st 5) 2nd 6) 3rd 7) 4th 8) THIS 9) SUBSEQ. IN SERVICEAMOUNT SPENT QUARTER QUARTER QUARTER QUARTER YEAR YEARS THIS YEAR

1 Civil2 Decks and Structural Steel3 Buildings4 Equipment and Machinery 25,000 50,000 75,000 15,000 20,000 10,000 20,000 65,000 10,000 100,0005 Piping6 Electrical7 Instrumentation8 Paint & Corrosion Protection9 Other

10 TOTAL PRODUCTION FACILITIES EXPENDITURES


Production FacilitiesProduction Facilitiesreported separatelyreported separatelyfor Investment Creditfor Investment Creditpurposes.purposes.



Budget Preparation Budget Preparation –– MisclMiscl.. Production CapitalProduction Capital







OPERATOR : BPMIGAS SCHEDULE 10CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : MISCELLANEOUS FACILITIES CAPITAL EXPENDITURES BUDGET

Functional Area : PRODUCTION

1) OLD 2) 3) 10)PROGRAMSPROGRAMS NEW TOTAL T I M E P H A S E D TOTAL EXPENDITURES TO BE PLACED

Line D E S C R I P T I O N UNSPENT PROGRAMS TO BE 4) 1st 5) 2nd 6) 3rd 7) 4th 8) THIS 9) SUBSEQ. IN SERVICEAMOUNT SPENT QUARTER QUARTER QUARTER QUARTER YEAR YEARS THIS YEAR

123456 Construction Utilities & Auxiliaries 12,500 25,000 37,500 7,500 10,000 5,000 10,000 32,500 5,000 50,000789

10 TOTAL PRODUCTION MISCELLANEOUS

Applied for capital items Applied for capital items which are not illegible which are not illegible for Investment Creditfor Investment Credit



Budget Preparation Budget Preparation –– Production Exp SummaryProduction Exp Summary

Budget Schedule Budget Schedule –– 8 (Line 1 8 (Line 1 –– 33)33)O P E R A TO R : B P M IG A S S C H E D U LE 8C O N T R A C T A R E A : P R O D U C TIO N S H A R IN G C O N TR A C T -B S -B U D G E T Y E A R : P R O D U C TIO N E XP E N S E B U D G E T S U M M A R Y

O N S H O R E / O FFS H O R ET I M E P H A S E D C A P IT A L E X P E N D IT U R E S

1) 2) 3 ) 4 ) 5 )TO TA L 6) 7)P LA C E DL ine D E S C R I P T I O N 1st 2nd 3rd 4 th FO R TH IS IN TO

Q TR Q TR Q TR Q TR T H E Y E A R YE A R S E R V IC E1 D IR E C T P R O D U C TIO N E XP E N S E S - O IL2 O il W e ll O pera tion3 O il P roduction and P rocess ing Fac ilities4 S econdary R ecove ry O pera tions5 S to rage , H and ling , T ranspo rta tion , D e live ry6 S uperv is ion7 M a in tenance8 O ther D irec t P roduction E xpenses - O il 5 ,000 5 ,000 5 ,000 6,000 21,000 65 ,000 100 ,0009 Tota l D irec t P roduction E xpenses - O il

10 D IR E C T P R O D U C TIO N E XP E N S E S - G A S11 G as W ell O pera tions12 G as P roduc tion Fac ilities O pera tions13 G as Transporta tion14 S uperv is ion15 M a in tenance16 O ther D irec t P roduction E xpenses - G as17 Tota l D irec t P roduction E xpenses - G as18 G A S P R O C E S S IN G19 G as P lan t20 S to rage , H and ling , T ransporta tion , D e live ry21 S uperv is ion22 M a in tenance23 O ther G as P roces .E xp .(Inc l.fla ring cos ts )24 Tota l G as P rocess ing25 U TIL IT IE S A N D A U XILL IA R Y O P E R A TIO N S26 P roduction Too ls and E qu ip t.M a in tenance27 S team S ervices28 E lec tric ity S erv ices29 Indus tria l and D om estic W ate r S e rvice30 C om pressed A ir S e rv ice31 O ther32 Tota l U tilities and A uxillia ries 2 ,000 2 ,000 2 ,000 2,000 8,000 32 ,500 50 ,00033 TO TA L P R O D U C TIO N O P E R A TIO N S

Budget Preparation Budget Preparation –– Production Exp SummaryProduction Exp Summary

Budget Schedule Budget Schedule –– 8 (Line 34 8 (Line 34 -- 53)53)

34 FIE LD O FFIC E , S V C S A N D G E N E R A L A D M IN .35 G enera l and A dm in is tra tion36 Techn ica l S upport S erv ice37 M ateria l S ervices38 Transporta tion C osts39 O ffice and M isc.B u ild ing O pera tions40 P ersonne l E xpenses41 P ub lic R e la tions42 D eprec ia tion43 O ther44 To ta l F ie ld O ffice , S vcs.and G enera l45 TO TA L P R O D U C TIO N E XP E N SE S46 Less D eprec ia tion E xpenses47 N O N -C A P ITA L P R O D . E XP E N D ITU R E S48 A LLO C A TE D TO O IL O PE R A TIO N S49 A LLO C A TE D TO G A S O P ER A TIO N S

P R O D U C TIO N C O S T S U M M A R YThousands o f E qu iva len t B arre ls8) M B B L 9) P R O D . C O S T

P E R IO D O F P R O D U C TIO N P ER B A R R E L50 1st Q U A R TE R51 2nd Q U A R TE R52 3rd Q U A R TE R53 4th Q U A R TE R

OPERATOR : BPMIGAS SCHEDULE 8CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : PRODUCTION EXPENSE BUDGET SUMMARY

ONSHORE / OFFSHORET I M E P H A S E D CAPITAL EXPENDITURES

1) 2) 3) 4) 5)TOTAL 6) 7)PLACEDLine D E S C R I P T I O N 1st 2nd 3rd 4th FOR THIS INTO

QTR QTR QTR QTR THE YEAR YEAR SERVICE

Budget PreparationBudget PreparationStep Step -- 44 : Posting for General &: Posting for General &

Admin. ExpendituresAdmin. Expenditures





Schedule – 12G&A

Capital

Schedule – 12G&A

Capital

Schedule – 11General &

Administration

Schedule – 11General &

Administration

Budget Preparation Budget Preparation –– MisclMiscl.. Administrative CapitalAdministrative Capital


No unspent balances of previous years’ programs



No estimated to be spent for the next budget year

Estimated to be placed in service this budget year(Transferred for Depreciation Analysis - Sch.13 & 14)

OPERATOR : BPMIGAS SCHEDULE 12CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : MISCELLANEOUS CAPITAL EXPENDITURES BUDGET

Functional Area : General & Administration

1) OLD 2) 3) 10) PROGRAMSLine D E S C R I P T I O N PROGRAMS NEW TOTAL T I M E P H A S E D TOTAL EXPENDITURES TO BE PLACED

UNSPENT PROGRAMS TO BE 4) 1st 5) 2nd 6) 3rd 7) 4th 8) THIS 9) SUBSEQ. IN SERVICEAMOUNT SPENT QTR QTR QTR QTR YEAR YEARS THIS YEAR

12 Furniture and Office Equipment 4,000 4,000 1,000 1,000 1,000 1,000 4,000 0 4,000345678910 TOTAL GEN.ADMIN.MISCELLANEOUS


Budget Preparation Budget Preparation –– Administrative SummaryAdministrative Summary

Budget Schedule Budget Schedule –– 11 (Line 1 11 (Line 1 –– 30)30)O PERATO R : BPM IG AS SCHEDULE 11CO NTRACT AREA : PRO DUCTIO N SHARING CO NTRACT -BS-BUDG ET YEAR : ADM INISTRATIVE EXPENSE BUDG ET SUM M ARY

T I M E P H A S E D C APITAL EXPEN D ITU R ES1) 2) 3) 4) 5) 6) 7)

Line D E S C R I P T I O N 1st 2nd 3rd 4th TO TAL FO R THIS YEAR PLACED INQ UARTER Q UARTER Q UARTER Q UARTER THE YEAR SERVICE

1 FINANCE & ADM INISTRATIO N2 Legal Services3 Audit Services4 Tax Services5 Business Insurance6 O ther7 Total F inance and Adm inistration8 ENG INEERING SERVICES9 M ATERIAL SERVICES

10 M ateria ls Adm inistration11 Handling and Transportation12 Stock D ifferences13 Deterioration, B reakage14 Reconditioning15 Salvage16 Scrap17 O ther18 Total M aterials Services19 TRANSPO RTATIO N CO STS20 Air21 Autom obile22 O ther23 Total T ransportation Costs24 PERSO NNEL EXPENSES25 Em ployee Relation26 Train ing27 Accom odation28 W elfare29 O ther30 Total Personnel Expenses

Budget Preparation Budget Preparation –– Administrative SummaryAdministrative Summary

Budget Schedule Budget Schedule –– 11 (Line 31 11 (Line 31 –– 64)64)

31 PUBLIC RELATIONS32 Trips33 Other34 Total Public Relation35 COMMUNITY DEVELOPMENT36 Community Projects37 Other38 Total Community Development39 GENERAL OFFICE EXPENSES40 Stationary and Supplies41 Communications42 Furniture and Equipment (Low Value)43 Rents, Licences44 Travel and Entertainment (non-allocated)45 Computerization46 Depreciation47 Other48 Total General Office Expenses 4,000 4,00049 OVERHEAD FROM ABROAD50 INTEREST ON LOANS FOR CAPITAL INVEST.51 TOTAL ADMINISTRATIVE EXPENSES52 Less Depreciation Expenses53 NON-CAPITAL ADMIN. EXPENDITURES54 ALLOCATED TO OIL OPERATIONS55 ALLOCATED TO GAS OPERATIONS

Explanation of Interest Claimed :

T I M E P H A S E D CAPITAL EXPENDITURES1) 2) 3) 4) 5) 6) 7)

Line D E S C R I P T I O N 1st 2nd 3rd 4th TOTAL FOR THIS YEAR PLACED INQUARTER QUARTER QUARTER QUARTER THE YEAR SERVICE

Budget PreparationBudget PreparationStep Step -- 55 : Assets Placed into Services: Assets Placed into Services

and Depreciation Analysisand Depreciation Analysis

BUDGET SCHEDULE 13BUDGET SCHEDULE 13Schedule – 6Development

Dilling


DillingSchedule – 7Expl & Devl

Capital

Schedule – 7Expl & Devl

Capital

Schedule – 9Production

Facilities

Schedule – 9Production

FacilitiesSchedule – 10

Miscl ProductionCapital

Schedule – 10Miscl Production

Capital

Schedule – 12Gen.& Admin.

Capital

Schedule – 12Gen.& Admin.

Capital

BUDGET SCHEDULE 14BUDGET SCHEDULE 14

ASSETS PLACED INTO SERVICETHIS YEAR

DEPRECIATIONANALYSIS

Budget Preparation Budget Preparation –– Assets PISAssets PIS


Tangible Cost of Development Drilling (Sch.6)Exploration Office equipment (Sch.7)

Production Facilities (Sch.9)Utilities & Auxiliaries (Sch.10)

General Admin Offife Equipment (sch.12)

OPERATOR : BPMIGAS SCHEDULE 13.1CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : BUDGETED CAPITAL ASSETS TO BE PLACED INTO SERVICE

F U N C T I O N A L A R E AE X P L O R A T I O N P R O D U C T I O N

Line ASSET DESCRIPTION 1) Development 2) Exploratory 3)Geological 4) General 5)Production 6) General 7)GENERAL 8) TOTALDrilling Drilling Geophysical & Admin. Operations & Admin. & ADMIN.

1 GROUP 12 Automobiles3 Light Trucks & Tractor Units4 Heavy Trucks & Trailers5 Buses6 Aircraft7 Construction Equipment8 Furniture & Office Equipment 25,000 4,000 29,0009 GROUP 2

10 Construction Utilities & Auxiliaries 50,000 50,00011 Construction Housing & Welfare12 Production Facilities 11,000 100,000 111,00013 Water Transportation Equipment14 Drilling Production Tools15 Railroad Cars & Locomotive16 TOTAL

NOTESSch 13.0 SummarySch. 13.1 < 7 years reservesSch. 13.2 > 7 years reserves

Budget Preparation Budget Preparation –– DepreciationDepreciation

Budget Schedule Budget Schedule –– 1414OPERATOR : BPMIGAS SCHEDULE 14.1CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : 2006 BUDGETED DEPRECIATION SCHEDULE

Page 4 of 41) Placed Into Service 1998 - 2004 Placed Into Service 2005 Current Year 12)

ASSET 2) 3) 4) 5) 6) 7) 8) 9) 10)Assets 11) TotalLine ASSET DESCRIPTION GROUP Orig. Accum. Dep. 2006 Orig. Accum. Dep. 2006 Placed Dep. 2006

LIFE Cost Deprec. Bal. Dep. D Cost Deprec. Bal. Dep. D in Service D Dep.1 GROUP 12 Automobiles3 Light Trucks & Tractor Units4 Heavy Trucks & Trailers5 Buses6 Aircraft7 Construction Equipment8 Furniture & Office Equipment 5/50% 29,000 14,500 D 14,5009 GROUP 2

10 Construction Utilities & Auxiliaries 5/25% 50,000 12,500 D 12,50011 Construction Housing & Welfare 10/25% 60,000 15,000 45,000 11,250 D 11,25012 Production Facilities 5/25% 111,000 27,750 D 27,75013 Water Transportation Equipment14 Drilling Production Tools15 Railroad Cars & Locomotive16 TOTAL 66,000

12) Total 2006 DEPRECIATION ANALYSIS Deprec.Expenses

17 Exploration/Development18 Production19 Administration20 Total

15,250 37,500 13,250 66,000

NOTESSch 14.0 SummarySch. 14.1 < 7 years reservesSch. 14.2 > 7 years reserves

Budget PreparationBudget PreparationStep Step -- 66 : Summarizing Expenditures : Summarizing Expenditures

and Operating Costsand Operating Costs

BUDGET SCHEDULE 3BUDGET SCHEDULE 3Sch – 4,5,6,7Exploration &Development

Sch – 4,5,6,7Exploration &Development

Sch – 8,9,10Production

Expenditures

Sch – 8,9,10Production

Expenditures

Sch – 11,12Gen.& Admin.Expenditures

Sch – 11,12Gen.& Admin.Expenditures

BUDGET SCHEDULE 3ABUDGET SCHEDULE 3A

EXPENDITURESCAPITAL & NON CAPITAL

EXPENDITURES &OPERATING

COSTS

Sch – 14Depreciation


Budget Preparation Budget Preparation –– Expenditures SummaryExpenditures Summary

Budget Schedule Budget Schedule –– 3 & 3A3 & 3AOPERATOR : BPMIGAS SCHEDULE 3CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : EXPENSE AND EXPENDITURES BUDGET SUMMARY

1) 2) 3) 4) CURRENT YEAR OPERATING EXPENSESTIME PHASED

LINE DESCRIPTION CURRENT CURRENT CURRENT 5) 6) 7) 8) 9)CAPITAL OPERATING T O T A L YEAR 1st 2nd 3nd 4nd T O T A L SEXPEND. EXPEND. EXPEND. DEPREC. QUARTER QUARTER QUARTER QUARTER

1 EXPLORATION & DEVELOPMENT2 Drilling 12,000 7,000 19,000 1,500 2,000 1,500 2,000 7,0003 Geological & Geophysical4 Administration 10,000 10,000 15,250 3,813 3,813 3,813 3,813 15,2505 Total Exploration & Development 22,000 29,000 15,250 5,313 5,813 5,313 5,813 22,2506 PRODUCTION7 Operations 97,500 29,000 126,500 7,000 7,000 7,000 8,000 29,0008 Administration 37,500 9,375 9,375 9,375 9,375 37,5009 Total Production 97,500 29,000 126,500 37,500 16,375 16,375 16,375 17,375 66,500

10 GENERAL & ADMINISTRATION 4,000 4,000 13,250 3,313 3,313 3,313 3,313 13,25011 T O T A L S 123,500 29,000 159,500 66,000 25,000 25,500 25,000 26,500 102,000

OPERATOR : BPMIGAS SCHEDULE 3ACONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : TOTAL BUDGETED EXPENDITURES

1) 2) 3) 4) 5)Line D E S C R I P T I O N 1st QTR 2nd QTR 3rd QTR 4th QTR TOTALS

1 Expl.& Dev. - Non Capital 1,500 2,000 1,500 2,000 7,0002 Expl.& Dev. - Capital 4,000 3,000 11,000 4,000 22,0003 Total Exploration 5,500 5,000 12,500 6,000 29,0004 Production - Non Capital 7,000 7,000 7,000 8,000 29,0005 Production - Capital 22,500 30,000 15,000 30,000 97,5006 Total Production 29,500 37,000 22,000 38,000 126,5007 Administration - Non Capital 0 0 0 0 08 Administration - Capital 1,000 1,000 1,000 1,000 4,0009 Total Administration 1,000 1,000 1,000 1,000 4,000

10 TOTAL EXPENDITURES - NON CAPITAL 8,500 9,000 8,500 10,000 36,00011 TOTAL EXPENDITURES - CAPITAL 27,500 34,000 27,000 35,000 123,50012 TOTAL EXPENDITURES 36,000 43,000 35,500 45,000 159,500


Budget PreparationBudget PreparationStep Step -- 77 : Matching Operating Costs: Matching Operating Costs

to Lifting Valueto Lifting Value

BUDGET SCHEDULE 1BUDGET SCHEDULE 1

Sch – 16Lifting

Forecast

Sch – 16Lifting

Forecast

Sch – 3Non Capital

Costs

Sch – 3Non Capital

Costs



FINANCIAL STATISTICAL REPORT

Operating Costs consist of :a) Current year non-capital costsb) Current year depreciation for capital costsc) Current year allowed recovery of prior year’s unrecovered Operating Costs

Gross Revenue

Operating Costs


Budget Preparation Budget Preparation –– Expenditures SummaryExpenditures Summary

Budget Schedule Budget Schedule –– 1616OPERATOR : BPMIGAS SCHEDULE 16.1CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : PRODUCTION LIFTING FORECAST

CRUDE OIL/CONDENSATE - MBBLSTIME PERIOD FIELD PRODUCTION

LINE 1) 2) 3) 4) 5) 15)YEAR MONTH TOTAL

1 2006 JANUARY 3502 FEBRUARY 2803 MARCH 3104 1ST QUARTER 94056 APRIL 3007 MAY 3108 JUNE 3009 2ND QUARTER 910

1011 JULY 31012 AUGUST 31013 SEPTEMBER 30014 3RD QUARTER 9201516 OCTOBER 31017 NOVEMBER 30018 DECEMBER 31019 4TH QUARTER 9202021 TOTALS 1994 3,6902223 2007 1ST QUARTER 81924 2ND QUARTER 81925 3RD QUARTER 82826 4TH QUARTER 8282728 TOTALS 2008 3,29429 TOTALS 2009 2,92030 TOTALS 2010 2,73831 TOTALS 2011 2,555

Based on Production ForecastConsider Begininng Inventory in January

28 x 10 mb


Budget Preparation Budget Preparation –– Financial Status ReportFinancial Status Report

Budget Schedule Budget Schedule –– 11OPERATOR : BPMIGAS SCHEDULE 1CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : BUDGETED FINANCIAL STATUS REPORT - OIL/GAS/SUMMARY

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter TOTALS1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

LINE DESCRIPTION $ $ $ $ $ $ $ $ $ $Amount B O E Amount B O E Amount B O E Amount B O E Amount B O E

1 LIFTINGS2 Oil/Condensate MBBLS 940 910 920 920 3,6903 Gas MMCF4 GROSS REVENUE 56,400 60.00 54,600 60.00 55,200 60.00 55,200 60.00 221,400 60.005 FIRST TRANCHE PETROLEUM 11,280 10,920 11,040 11,040 44,2806 GROSS REVENUE After FTP 45,120 43,680 44,160 44,160 177,1207 INVESTMENT CREDIT8 COST RECOVERY :9 Unrecovered Other Costs

10 Current Year Operating Costs 25,000 25,500 25,000 26,500 102,00011 Depreciation - Prior Year Assets 2,813 2,813 2,813 2,813 11,25012 Depreciation - Current Year Assets 13,688 13,688 13,688 13,688 54,75013 TOTAL COST RECOVERY 41,500 42,000 41,500 43,000 168,00014 TOTAL RECOVERABLES 41,500 42,000 41,500 43,000 168,00015 EQUITY TO BE SPLIT 3,620 1,680 2,660 1,160 9,12016 Indonesia Share17 Government FTP Share 8,026 7,770 7,855 7,855 31,50718 Government Equity Share 2,576 1,195 1,893 825 6,48919 Domestic Requirement 0 0 0 0 020 Government Tax Entitlement 2,063 1,745 1,897 1,689 7,39421 TOTAL INDONESIA SHARE 12,665 10,710 11,645 10,370 45,39022 Contractor Share 023 Contractor FTP Share 3,254 3,150 3,185 3,185 12,77324 Contractor Equity Share 1,044 485 767 335 2,63125 Less: Gross Domestic Requirement (4,067) (3,938) (3,981) (3,981) (15,966)26 Add : Domestic Requirement Adjustment 4,067 3,938 3,981 3,981 15,96627 Taxable Share 4,298 3,635 3,952 3,519 15,40428 Government Tax Entitlement (2,063) (1,745) (1,897) (1,689) (7,394)29 Net Contractor Share 2,235 1,890 2,055 1,830 8,01030 Total Recoverables 41,500 42,000 41,500 43,000 168,00031 TOTAL CONTRACTOR SHARE 43,735 43,890 43,555 44,830 176,010

TAX COMPUTATION 15) 16) 17) 18) 19)UNRECOVERED 11) 12) 13) 14) 1st QTR 2nd QTR 3rd QTR 4th QTR TOTALS

Line OTHER COST 1st QTR 2nd QTR 3rd QTR 4th QTR Taxable Share (Line 27) 4,298 3,635 3,952 3,519 15,40432 Balance Beginning Add : Investment Credit33 Additions Less: Bonus Payment34 Recovered Taxable Income 4,298 3,635 3,952 3,519 15,40435 Balance End of Quarter Gov't Tax Entitlement 2,063 1,745 1,897 1,689 7,394


Budget Preparation Budget Preparation –– Other SchedulesOther Schedules

Step Step -- 88 : Completing: CompletingOther Budget SchedulesOther Budget Schedules

Sch – 2Key Operating

Statistics

Sch – 2Key Operating

Statistics

Sch – 17ExpendituresBy Category

Sch – 17ExpendituresBy Category

Sch – 4, 8 & 11Sch – 4, 8 & 11

Attachment toSch – 4, 8 & 11

Attachment toSch – 4, 8 & 11

Sch – 1Financial Status

Sch – 1Financial Status

Sch – 8Production Exp

Sch – 8Production Exp

Sch – 16Lifting Forecast

Sch – 16Lifting Forecast


Attachment to Budget Schedule Attachment to Budget Schedule –– 44OPERATOR : BPMIGAS ATTACHMENT TOCONTRACT AREA : PRODUCTION SHARING CONTRACT SCHEDULE 4BUDGET YEAR : BUDGETED EXPLORATION AND DEVELOPMENT EXPENDITURES -BS-

TECHNICAL CONTRACT/ ENVIRON- D E S C R I P T I O N SERVICES SERVICES OVERSEAS DOMESTIC MENT CTRL OVERSEAS DOMESTIC OVERSEAS DOMESTIC TOTAL

EXPAT NATIONAL EXPAT NATIONAL OVERSEAS DOMESTIC Consumables Capital Consumables Capital DOMESTIC1 DRILLING EXPENDITURES2 Development Drilling :3 Intangible Costs4 Tangible Costs5 Total Development Drilling6 Exploratory Drilling :7 Intangible Costs8 Tangible Costs9 Total Exploratory Drilling10 Total Drilling Expenditures11 Total Intangible Expenditures12 Total Tangible Expenditures13 G&G EXPENDITURES14 Geological15 Geophysical16 Seismic & Other Surveys17 Capital Expenditures18 Total G&G Expenditures19 Total Non-Capital Expenditures20 EXPL. ADM. EXPENDITURES21 Administration22 Other23 Capital Expenditures24 Total Administration Expenditures25 Total Non-Capital Expenditures26 TOTAL EXP. & DEV. EXPENDITURES27 TOTAL NON-CAPITAL EXPENDITURES28 TOTAL CAPITAL EXPENDITURES

T O T A LSALARIES & WAGES EMPLOYEE BENEFIT IMPORT DOMESTIC

PERSONNEL COST MATERIALS INSURANCE SUNDRIES


Attachment to Budget Schedule Attachment to Budget Schedule –– 88OPERATOR : CONTRACT AREA : BUDGET YEAR :

TECHNICAL CONTRACT/ D E S C R I P T I O N SERVICES SERVICES

EXPAT NATIONAL EXPAT NATIONAL OVERSEAS DOMESTIC1 DIRECT PRODUCTION EXPENSES - OIL2 Oil Well Operation3 Oil Production and Processing Facilities4 Secondary Recovery Operations5 Storage, Handling, Transportation, Delivery6 Supervision7 Maintenance8 Other Direct Production Expenses - Oil9 Total Direct Production Expenses - Oil10 DIRECT PRODUCTION EXPENSES - GAS11 Gas Well Operations12 Gas Production Facilities Operations13 Gas Transportation14 Supervision15 Maintenance16 Other Direct Production Expenses - Gas

SALARIES & WAGES EMPLOYEE BENEFIT PERSONNEL COST

BPMIGAS ATTACHMENT TOPRODUCTION SHARING CONTRACT SCHEDULE 8BUDGETED PRODUCTION EXPENSE -BS-

ENVIRON-OVERSEAS DOMESTIC MENT CTRL OVERSEAS DOMESTIC OVERSEAS DOMESTIC TOTAL

Consumables Capital Consumables Capital DOMESTIC

T O T A LIMPORT DOMESTIC

MATERIALS INSURANCE SUNDRIES


Attachment to Budget Schedule Attachment to Budget Schedule –– 1111OPERATOR : BPMIGASCONTRACT AREA : PRODUCTION SHARING CONTRACTBUDGET YEAR : ADMINISTRATIVE EXPENSE BUDGET SUMMARY

TECHNICAL CONTRACT/Line D E S C R I P T I O N SERVICES SERVICES

EXPAT NATIONAL EXPAT NATIONAL OVERSEAS DOMESTIC Consumables Capital Consumables Capital

1 FINANCE & ADMINISTRATION2 Legal Services3 Audit Services4 Tax Services5 Business Insurance6 Other7 Total Finance and Administration8 ENGINEERING SERVICES9 MATERIAL SERVICES

10 Materials Administration11 Handling and Transportation

SALARIES & WAGES EMPLOYEE BENEFIT IMPORT DOMESTIC PERSONNEL COST MATERIALS

ATTACHMENT TOSCHEDULE 11

-BS-ENVIRON-

OVERSEAS DOMESTIC MENT CTRL OVERSEAS DOMESTIC OVERSEAS DOMESTIC TOTAL

DOMESTIC

T O T A LINSURANCE SUNDRIES



OPERATOR : BPMIGAS SCHEDULE 17CONTRACT AREA : PRODUCTION SHARING CONTRACT -BS-BUDGET YEAR : BUDGET YEAR EXPENDITURES

TECHNICAL CONTRACT/ ENVIRON-

DESCRIPTION SERVICES SERVICES OVERSEAS DOMESTIC MENT CTRL OVERSEAS DOMESTIC OVERSEAS DOMESTIC TOTAL

EXPAT NATIONAL EXPAT NATIONAL OVERSEAS DOMESTIC Consumables Capital Consumables Capital DOMESTIC

1 CAPITAL EXPENDITURES

2 Exploration & Development3 Production

4 Administration

5 Total Capital Expenditures

6 OPERATING EXPENDITURES

7 Exploration & Development

8 Production

9 Administration

10 Total Operating Expenditures

11 TOTAL EXPENDITURES

SUNDRIES T O T A LSALARIES & WAGES EMPLOYEE BENEFIT

PERSONNEL COST MATERIALSIMPORT DOMESTIC

INSURANCE


Attachment to Schedule 4,8 11, and Schedule Attachment to Schedule 4,8 11, and Schedule -- 1717

1 PERSONNEL COST :

~ Salaries & Wages- Expatriates : Expenditures for Gross Salaries & Wages of the PSC Expatriate Personnel.- National : Expenditures for Gross Salaries & Wages of the PSC National Employees.

~ Employee Benefits- Expatriates : Expenditures for Employee Benefits of the PSC's Expatriate personnel, provided domestically and treated as

Direct Charges.- National : Expenditures for Employee Benefits of the PSC's National Employees.

2 TECHNICAL SERVICES : Expenditures for non-routine/extraordinary, upstream jobs with competitive tariffs done by experts/consultant fromabroad that cannot be done by domestic personnel or consultants, such as Technical Services from Abroad.

3 CONTRACT / SERVICES : Expenditures for any job or project done by local company or consultant, not including material expenditures.

4 MATERIALS~ Import

- Consumables : Expenditures for consumable materials, purchased from/supplied by foreign market.- Capital : Expenditures for materials to be capitalized, purchased from/supplied by foreign market.

~ Domestic- Consumables : Expenditures for consumable materials, purchased from/supplied by domestic market.- Capital : Expenditures for materials to be capitalized, purchased from/supplied by domestic market.

5 INSURANCE~ Overseas : Expenditures for overseas insurance coverage, not including personnel costs.~ Domestic : Expenditures for domestic insurance coverage.

6 ENVIRONMENTAL : Expenditures to protect the area (location) or field from environmental damage, pollution, etc., including the cost ofCONTROL inspection done by Government Officials.

7 SUNDRIES~ Overseas : Expenditures other than mentioned earlier, spent overseas.~ Domestic : Domestic Expenditures other than mentioned earlier.

DESCRIPTION OF COLUMNS

Bambang YuwonoBambang Yuwono

1. Contractor Gross Income:(+) Cost Recovery(+) FTP & Equity Share(- ) DMO(+) DMO Fee(+/-) Over/Under Lifting

2. Costs/Tax Deductions:- PSC Operating Costs- Non PSC Costs

3. Taxable Income (1) – (2)Tax Payments:- Income Tax- Dividend Tax

1.1. Contractor Gross Income:Contractor Gross Income:(+) Cost Recovery(+) Cost Recovery(+) FTP & Equity Share(+) FTP & Equity Share((-- ) DMO) DMO(+) DMO Fee(+) DMO Fee(+/(+/--) Over/Under Lifting) Over/Under Lifting

2.2. Costs/Tax Deductions:Costs/Tax Deductions:-- PSC Operating CostsPSC Operating Costs-- Non PSC CostsNon PSC Costs

3.3. Taxable Income (1) Taxable Income (1) –– (2)(2)Tax Payments:Tax Payments:-- Income TaxIncome Tax-- Dividend TaxDividend Tax

Gross RevenueGross Revenue

FTPFTP


Equity to be SplitEquity to be Split

CONTRACTORShare

CONTRACTORShare

BPMIGASShare

BPMIGASShare

DMODMO

DMOFeeDMOFee

IndonesiaShare

IndonesiaShare

Gov’t TaxGov’t Tax

PSC Taxation - Overview PSC Taxation PSC Taxation -- Overview Overview

OTHER TAXES & LEVIESOTHER TAXES & LEVIES

Net Contr. Share

Net Contr. Share

CostRecovery

CostRecovery

Total Contr. ShareTotal Contr. Share

INCOME TAX & FINAL TAX ON PROFITINCOME TAX & FINAL TAX ON PROFIT

Thru 1983 Thru 1994 To Present

Income Tax 45% 35% 30%

Tax on Interest, Dividend & Royalty 20% 20% 20%

Total 56% 48% 44%Reference Ordonantie 1925

KMK 267/012/1978UU PPh No.7/1984KMK 458/012/1984

UU PPh No.10/1994

Income Tax 45% 35% 30%

Tax on Interest, Dividend & Royalty 10% 10% 30%Total 50.5% 41.5% 37%

Income Tax & Final Tax on Profit Income Tax & Final Tax on Profit Income Tax & Final Tax on Profit

When a partner in a PSC is subject to a tax treaty with a foreign country tax regime, the rate of Tax on Interest, Dividend and Royalty may be so affected that the total tax rate changes to a lower rate.

Examples of 10% Rate of Tax on Interest, Dividend and Royalty due to tax treaty:

- The application of tax treaty results in lower net after tax shares for the Government.- Some, including new contracts revise production splits to have the same net after tax shares.


Tax Reference:Tax Reference:Corporate Income Tax Ordinance 1925Corporate Income Tax Ordinance 1925MinistrialMinistrial Decree No. 267/KMK.012/1978 (Decree No. 267/KMK.012/1978 (KepMenKepMen 267267))

Initial Development (thru End of 1983)Initial Development (thru End of 1983)

1. Period of Prior to 1. Period of Prior to KepMenKepMen 267:267:Cost Recovery maximum 40% of Gross Revenue.Cost Recovery maximum 40% of Gross Revenue.Equity to be Split minimum 60%,shared between Equity to be Split minimum 60%,shared between PertaminaPertamina and Contractor.and Contractor.85%/15% for crude Oil and 70%/30% for Gas, net after tax.85%/15% for crude Oil and 70%/30% for Gas, net after tax.All taxes and duties are paid by All taxes and duties are paid by PertaminaPertamina..

2. Period of 2. Period of KepMenKepMen 267 thru 31/12/1983:267 thru 31/12/1983:Contractor required tax receipts for corporate (Contractor required tax receipts for corporate (PPsPPs) & dividend tax (PBDR).) & dividend tax (PBDR).Corporate Tax 45% and Dividend Tax 20% imposed on Taxable IncomeCorporate Tax 45% and Dividend Tax 20% imposed on Taxable Income..Taxable Income calculated from Taxable Income calculated from Gross IncomeGross Income minusminus costs of obtaining, costs of obtaining, collecting and maintaining income collecting and maintaining income ((‘‘tax deductionstax deductions’’).).KepMenKepMen 267 ruled out that the calculation of tax deductions to be simi267 ruled out that the calculation of tax deductions to be similar to lar to that of PSC Accounting Procedures (known as that of PSC Accounting Procedures (known as ‘‘Uniformity PrincipleUniformity Principle””))


Contractual Adjustments following Contractual Adjustments following KepMenKepMen 267267

Contractor(sContractor(s) paid Corporate tax () paid Corporate tax (PPsPPs) and Dividend Tax (PBDR) directly to the ) and Dividend Tax (PBDR) directly to the Government.Government.

Costs of obtaining, collecting and maintaining the income shall Costs of obtaining, collecting and maintaining the income shall be in accordance be in accordance with generally accepted and recognized accounting principles.with generally accepted and recognized accounting principles.GrossingGrossing--up contractual share splits to reflect the same net after tax.up contractual share splits to reflect the same net after tax.

For 85/15 Crude Oil at 45% For 85/15 Crude Oil at 45% PPsPPs and 20% PBDR, Total Tax Rate 56%, therefore and 20% PBDR, Total Tax Rate 56%, therefore Contractor Share Contractor Share 34.0909%;34.0909%; For 70/30 Gas, Contractor share For 70/30 Gas, Contractor share 68.1818%68.1818%Double declining balance method of depreciation with a switchoveDouble declining balance method of depreciation with a switchover to straight r to straight line method.line method.No more of Cost Recovery 40% ceiling.No more of Cost Recovery 40% ceiling.

Other Taxes and levies are paid by Other Taxes and levies are paid by PertaminaPertamina


Tax Reference:Tax Reference:Income Tax Law No. 7 / 1983 Income Tax Law No. 7 / 1983 MinistrialMinistrial Decree No. 458/KMK.012/1984 (Decree No. 458/KMK.012/1984 (KepMenKepMen 458458))MinistrialMinistrial Decree No. 267/KMK.012/1984 (Decree No. 267/KMK.012/1984 (KepMenKepMen 267267))

Period of 1984 thru End of 1994Period of 1984 thru End of 1994

Corporate Tax Tariff changed from 45% to 35%Corporate Tax Tariff changed from 45% to 35%

Dividend Tax remains the same (20%) Dividend Tax remains the same (20%) GrossingGrossing--up contractual share splits to reflect the same net after tax.up contractual share splits to reflect the same net after tax.

For 85/15 Crude Oil at 35% For 85/15 Crude Oil at 35% PPsPPs and 20% PBDR, Total Tax rate 48%, therefore and 20% PBDR, Total Tax rate 48%, therefore Contractor Share Contractor Share 28.8462%;28.8462%; For 70/30 Gas, Contractor share For 70/30 Gas, Contractor share 57.6923%57.6923%

PSC signed prior to 1/1/1984 may apply the previous share splitsPSC signed prior to 1/1/1984 may apply the previous share splits..All taxes and duties are paid by All taxes and duties are paid by PertaminaPertamina..


Tax Reference:Tax Reference:Income Tax Law No. 10 / 1994 Income Tax Law No. 10 / 1994 MinistrialMinistrial Decree No. 458/KMK.012/1984 (Decree No. 458/KMK.012/1984 (KepMenKepMen 458458))MinistrialMinistrial Decree No. 267/KMK.012/1984 (Decree No. 267/KMK.012/1984 (KepMenKepMen 267267))

Period of 1995 thru 23/11/2001Period of 1995 thru 23/11/2001

Corporate Tax Tariff changed from 35% to 30%Corporate Tax Tariff changed from 35% to 30%

Dividend Tax remains the same (20%) Dividend Tax remains the same (20%) GrossingGrossing--up contractual share splits to reflect the same net after tax.up contractual share splits to reflect the same net after tax.

For 85/15 Crude Oil at 35% For 85/15 Crude Oil at 35% PPsPPs and 20% PBDR, Total Tax Rate 44%, therefore and 20% PBDR, Total Tax Rate 44%, therefore Contractor Share 26.7857%; For 70/30 Gas, Contractor share 53.57Contractor Share 26.7857%; For 70/30 Gas, Contractor share 53.5714%14%

PSC signed prior to 1/1/1995 may apply the previous share splitsPSC signed prior to 1/1/1995 may apply the previous share splits..All taxes and duties are paid by All taxes and duties are paid by PertaminaPertamina..


Tax Reference:Tax Reference:Oil and Gas Law 2001Oil and Gas Law 2001Income Tax Law No. 17 / 2000 Income Tax Law No. 17 / 2000 MinistrialMinistrial Decree No. 458/KMK.012/1984 (Decree No. 458/KMK.012/1984 (KepMenKepMen 458458))MinistrialMinistrial Decree No. 267/KMK.012/1984 (Decree No. 267/KMK.012/1984 (KepMenKepMen 267267))

Period of following Law No.22 / 2001Period of following Law No.22 / 2001

PS Contracts following the enactment of the Oil & Gas Law 2001 :PS Contracts following the enactment of the Oil & Gas Law 2001 :•• Contractor has an option to apply Contractor has an option to apply ‘‘fixed taxationfixed taxation’’ or or ‘‘floating taxationfloating taxation’’..•• Contractor is obligated to pay exploration and exploitation fee Contractor is obligated to pay exploration and exploitation fee ((iuraniuran) for ) for

the the opportunityopportunity given to operate a block and as a given to operate a block and as a compensatiocompensation for n for extracting oil and gas reserves.extracting oil and gas reserves.

•• Contractor is obligated to pay Contractor is obligated to pay all taxes and levies other than Income Tax & all taxes and levies other than Income Tax & Final Tax on Profit. Final Tax on Profit.

•• Provisions related to Provisions related to Income Tax and Final Tax on Profit remain the sameIncome Tax and Final Tax on Profit remain the sameas previously set out.as previously set out.

Terms & conditions of PS Contracts signed prior to Oil & Gas LawTerms & conditions of PS Contracts signed prior to Oil & Gas Law remain remain unchanged, except unchanged, except PertaminaPertamina replaced by BPMIGAS.replaced by BPMIGAS.

Current IssuesCurrent IssuesCurrent Issues

PSCsPSCs signed after Oil & Gas Law contains the following clauses:signed after Oil & Gas Law contains the following clauses:

PSC Section V : Rights and ObligationsPSC Section V : Rights and Obligations

CONTRACTOR shall pay to the Government the Republic of IndonesiaCONTRACTOR shall pay to the Government the Republic of Indonesia the income the income tax and the final tax on profit after tax deductions imposed on tax and the final tax on profit after tax deductions imposed on it pursuant to the it pursuant to the Indonesia Income Tax Law and its implementing regulations.Indonesia Income Tax Law and its implementing regulations.

BPMIGAS shall, BPMIGAS shall, except with respect to except with respect to CONTRACTORCONTRACTOR’’ss obligation to pay Income Tax and obligation to pay Income Tax and the final tax on profit after tax deductions as set forth in thithe final tax on profit after tax deductions as set forth in this Section Vs Section V, assume and , assume and discharge all other Indonesian taxes of Contractor including valdischarge all other Indonesian taxes of Contractor including value added tax, ue added tax, transfer tax, import and export duties on materials, equipment atransfer tax, import and export duties on materials, equipment and supplies brought nd supplies brought into Indonesia by CONTRACTOR, its contractors or subcontractors,into Indonesia by CONTRACTOR, its contractors or subcontractors, …………. . ““

Law No.22 / 2001 (Applicable to PSC signed following 23/11/2001)Law No.22 / 2001 (Applicable to PSC signed following 23/11/2001)::

Business entities shall pay Income Tax and Final Tax on ProfitBusiness entities shall pay Income Tax and Final Tax on Profit and all other and all other Indonesian taxes, import duties, local taxes and levies.Indonesian taxes, import duties, local taxes and levies.

One Argument : The terms and conditions of PSC (i.e. 85/15, 70/30 and others) are based on the assumptions that Contractors are not obligated to pay taxes and levies other than income taxes and final tax on profit, as spelled out in the contract.

Another Argument : Compliance with the Law and prevailing regulations.

One Argument : One Argument : The terms and conditions of PSC (i.e. 85/15, 70/30 and others) The terms and conditions of PSC (i.e. 85/15, 70/30 and others) are based on the assumptions that Contractors are not obligated are based on the assumptions that Contractors are not obligated to pay taxes and to pay taxes and levies other than income taxes and final tax on profit, as spelllevies other than income taxes and final tax on profit, as spelled out in the contract.ed out in the contract.

Another ArgumentAnother Argument :: Compliance with the Law and prevailing regulations.Compliance with the Law and prevailing regulations.

Uniformity Principle Uniformity Principle Uniformity Principle

MinistrialMinistrial CirculerCirculer (SE(SE--75/PJ/1990, 12 October 1990) affirms 75/PJ/1990, 12 October 1990) affirms KepMenKepMen 267:267:Costs of obtaining, collecting and maintaining income shall be dCosts of obtaining, collecting and maintaining income shall be deemed as costs eemed as costs computed under the PSC Accounting Procedures (Exhibit computed under the PSC Accounting Procedures (Exhibit ““CC””).).

KepMenKepMen 267 :267 :(1) Contractor Gross Income(1) Contractor Gross Income, consists of :, consists of :

Cost RecoveryCost RecoveryEquity and FTP ShareEquity and FTP Share((--) DMO and (+) DMO Fee) DMO and (+) DMO Fee(+/(+/-- )Over/Under Lifting)Over/Under Lifting

(2) Costs of obtaining, collecting and (2) Costs of obtaining, collecting and maitainingmaitaining incomeincome = PSC Operating Costs := PSC Operating Costs :

Current Year NonCurrent Year Non--Capital CostsCapital CostsCurrent Year Depreciation of AssetsCurrent Year Depreciation of AssetsPrior Year Prior Year UnrecoveredUnrecovered CostsCosts

(3) Taxable Income = (1) minus (2)(3) Taxable Income = (1) minus (2)

PSC Accounting vs General Taxation (1)PSC Accounting PSC Accounting vsvs General Taxation (1)General Taxation (1)

Operating Costs computed based on PSC Accounting Procedures.

Pre-signing contract costs are non PSC Costs

Intangible Drilling Costs are chargeable when they incur.

Crude oil sold to affiliates is valued at ICP.

Tax paid monthly based on actual lifting, adjusted at end og March, the following year.

Unrecovered costs are carried over to succeeding years.

Operating Costs computed based on PSC Operating Costs computed based on PSC Accounting Procedures.Accounting Procedures.

PrePre--signing contract costs are non PSC Costssigning contract costs are non PSC Costs

Intangible Drilling Costs are chargeable when Intangible Drilling Costs are chargeable when they incur.they incur.

Crude oil sold to affiliates is valued at ICP.Crude oil sold to affiliates is valued at ICP.

Tax paid monthly based on actual lifting, Tax paid monthly based on actual lifting, adjusted at end adjusted at end ogog March, the following year.March, the following year.

UnrecoveredUnrecovered costs are carried over to costs are carried over to succeeding years.succeeding years.

Operating Costs computed as spelled out in the Income Tax Law, Article 6.

Pre-establishment costs having >1 year benefit shall be capitalized and amortized.

Costs having more than 1 year benefit shall be capitalized and amortized.

Crude oil sold to affiliates is valued at the actual price, but tax office has the right to determine the value for sales to affiliates.

Tax due is paid no later than end of March the following year.

Losses may be compensated for 5 years.

Operating Costs computed as spelled out in Operating Costs computed as spelled out in the Income Tax Law, Article 6.the Income Tax Law, Article 6.

PrePre--establishment costs having >1 year establishment costs having >1 year benefit shall be capitalized and amortized.benefit shall be capitalized and amortized.

Costs having more than 1 year benefit shall Costs having more than 1 year benefit shall be capitalized and amortized.be capitalized and amortized.

Crude oil sold to affiliates is valued at the Crude oil sold to affiliates is valued at the actual price, but tax office has the right to actual price, but tax office has the right to determine the value for sales to affiliates.determine the value for sales to affiliates.

Tax due is paid no later than end of March Tax due is paid no later than end of March the following year.the following year.

Losses may be compensated for 5 years.Losses may be compensated for 5 years.

PSC Accounting ProceduresPSC Accounting ProceduresPSC Accounting Procedures General Tax Accounting PrinciplesGeneral Tax Accounting PrinciplesGeneral Tax Accounting Principles

PSC Accounting vs General Taxation (2)PSC Accounting PSC Accounting vsvs General Taxation (2)General Taxation (2)

Community development is non capital costs and tax deductible.

Interest on loan may only be applicable to capital investment and requires approval.

Consumable items are chargeable when landed in Indonesia.

Depreciation starts beginning in the year when an asset is placed into service.

Assets belong to the State.

Revaluation of Assets is not possible.

Acquisition costs of economic interest shall not be charged to Operating costs according to PSC Accounting Procedures

Books and Accounts are reported in English language and in US Dollars currency.

Community development is non capital costs Community development is non capital costs and tax deductible.and tax deductible.

Interest on loan may only be applicable to Interest on loan may only be applicable to capital investment and requires approval.capital investment and requires approval.

Consumable items are chargeable when Consumable items are chargeable when landed in Indonesia.landed in Indonesia.

Depreciation starts beginning in the year when Depreciation starts beginning in the year when an asset is placed into service.an asset is placed into service.

Assets belong to the State.Assets belong to the State.

Revaluation of Assets is not possible.Revaluation of Assets is not possible.

Acquisition costs of economic interest shall Acquisition costs of economic interest shall not be charged to Operating costs according not be charged to Operating costs according to PSC Accounting Procedures to PSC Accounting Procedures

Books and Accounts are reported in English Books and Accounts are reported in English language and in US Dollars currency.language and in US Dollars currency.

Community development is not tax deductible

All interest on loan is tax deductible.

Consumable items are deductible when they are issued for usage.

Depreciation starts in the month of payment or completion of assets.

Assets belong to business entity.

Revaluation of Assets is possible.

Acquisition costs of economic interest shall be amortized based on unit of production.

Financial Reports in Bahasa Indonesia and in Indonesian Rupiah.

Community development is not tax deductibleCommunity development is not tax deductible

All interest on loan is tax deductible.All interest on loan is tax deductible.

Consumable items are deductible when they Consumable items are deductible when they are issued for usage.are issued for usage.

Depreciation starts in the month of payment Depreciation starts in the month of payment or completion of assets.or completion of assets.

Assets belong to business entity.Assets belong to business entity.

Revaluation of Assets is possible.Revaluation of Assets is possible.

Acquisition costs of economic interest shall Acquisition costs of economic interest shall be amortized based on unit of productionbe amortized based on unit of production..

Financial Reports in Financial Reports in BahasaBahasa Indonesia and in Indonesia and in Indonesian Indonesian RupiahRupiah..

PSC Accounting ProceduresPSC Accounting Procedures General Tax Accounting PrinciplesGeneral Tax Accounting Principles

Documents

Production Sharing Contract - Nugrohoadi's Weblog · PDF fileProduction sharing Contract Financial Aspects Introduction Basic Principles Exploration & Development Activities Production