MOGSC SUBSURFACE & DRILLING WORKING GROUP

ISSUES RELATING TO CONTRACT TERMS & CONDITIONS

Out of the MOGSC Subsurface & Drilling Working Group deliberation, it was proposed that some common issues on Terms & Condition of Petronas’ Services and Drilling Contracts be brought to the attention of Petronas. The following provide the list of repeated issues, in broad terms, that most contractors raised exceptions to. It would help the Contractors very much at the bidding stage, if Petronas and its PSC Contractors can review jointly with representatives of the industry to discuss and come to a standard set of Terms & Conditions which can be acceptable to all. This could save the time and cost of tender preparation and rates can be priced competitively into account all the penalties and potential punitive damages that the contract presents. Most often than not, Contractors were asked to withdraw all exceptions and priced them in the bid price or risked being disqualified. Most of the exceptions taken were difficult to price if not impossible due to no values attached to them or its only a matter of wordings for clarity of intentions. It had been known that Contractors were disqualified due to this and Petronas can be handicapped by the loss of a good bidder for its consideration.

1. Consequential Loss Most contract make no attempt to define consequential loss. We propose a proper definition to be in place for clarity for both parties. Further, Contractor’s corporate governance does not accept consequential loss in any shape or form.

2. Contractor’s Liability for Lack of Information Contractor should not be liable for any information that it cannot check and verify like seabed conditions and well fluid composition.

3. LD only applies to mobilization and delivery of goods and not apply to completion of services given the nature of services performed.

4. Right of audit shall not include the right to audit the make up of prices or unit rates contained in the contract.

5. Overall Limitation of Liability Cumulative liability does not exceed 100% of work order or release order. This is to be clear that whatever liability is not unlimited.

6. Changes in Tax Laws The contract to allow for discussion and contractors not to benefit or lose as a result of changes in the Tax Laws.

7. Liabilities & Indemnities We like to suggest to include a limited liability value in the contract to third party and pollution arising out of contractors’ performance of the contract. This would assist the contractor to price in these liability exposures.

8. Liabilities and Indemnities We would like to include “Company’s other contractors” as part of Company Group definition – which will help minimize and limit the third party exposure or alternatively assist in facilitating the execution of a mutual hold harmless regime with the Company’s other contractors.

9. Liabilities and Indemnities

Catastrophic exposure - to include indemnification for loss or damage to any third party resulting from Catastrophic risk.

10. Liabilities and Indemnities

We request for indemnification against loss or damage to Contractor’s equipment transported or while in the custody and control of Company.

11. Parent Company – to be removed entirely or marked as N/A. 12. Insurance – Furnishing of Insurance Certificate to Company should be sufficient evidence.

Request to waive Company’s examination of Contractor’s and its Sub-contractors insurance policies and premium receipts – as Contractor’s insurance is obtained on a global basis and is subject to confidential obligation.

The above are some thoughts on the issues to be raised. Please feel free to comment and add any other issues to be raised. This proposed issues are to be forwarded to Petronas Supply Chain department in the hope that they will accord us a meeting to discuss and come to a standard form of contract which can be agreeable to the Contractors. When such a meeting is agreeable by Petronas,, MOGSC will need to form a group of contractual specialist to deliberate the issues.