volume 2 final cd

2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

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PETROLEUM INVESTMENTVOLUME 2

PETRONAS Proceduresand Guidelines for Upstream

Activities (PPGUA 3.0)

VOLUME 2PETROLEUM INVESTMENT

2 PPGUA/3.0/042/2013

Table of Contents

Executive SummaryContact InformationDefinitions Section 1: Block Acquisition 1.1 Introduction 1.2 Registering an Interest 1.3 Company Screening and Data Review 1.3.1 Establish Contact 1.3.2 Data Review 1.3.3 Expression of Interest (EOI) 1.4 Bidding and Award 1.4.1 Bidding 1.4.1.1 Issuance of Invitation to Bid 1.4.1.2 Bid Package Submission 1.4.1.3 Bid Evaluation 1.4.2 Conditional Award 1.4.3 FinalisationSection 2: Farm In/Farm Out Exercises and Media Announcement 2.1 Farm In/Farm Out 2.1.1 Farm in/Farm Out Process 2.2 Media Announcements 2.2.1 Procedures for Media Announcement - Specific CategoriesAbbreviations

33455555

5-66777788899

9-10111112


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Executive SummaryAs custodian of Malaysias oil and gas resources pursuant to the PetroleumDevelopment Act 1974, PETRONAS constantly strives to advance Exploration and Production (E&P) activities in the country. PETRONAS promotes exploration & exploitation of petroleum investments, optimise Malaysias E&P assets and manage all E&P activities in the country. Its aspiration is to provide a conducive and progressive business environment in the Malaysian oil and gas industry.

Petroleum Management Unit (PMU), acts for and on behalf of PETRONAS, and responsible for the overall management of Malaysias domestic oil and gas assets. Its main functions among others is to manage the optimal exploitation of hydrocarbon resources and enhance the prospectivity of domestic acreages in order to attract investment in the Malaysian oil and gas industry as well as protecting the national interest.

This volume shall contain two (2) main sections. Section 1 provides guidelines for block acquisition and Section 2 provides guidelines for Farm In/Farm Out exercises and media announcements.

PETRONAS reviews and approves the participation of investors in the Malaysianpetroleum operations.

Contact InformationGeneral inquiries regarding content of this volume shall be made to:

Senior General ManagerPetroleum Resource Exploration Petroleum Management Unit

and/or

Senior General ManagerPetroleum Resource DevelopmentPetroleum Management Unit


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Definitions

TERM DEFINITION

Bid Package A package that includes instructions and guidelines forinterested investors to participate in the bidding process.

Conditional Award An award of a block or field with the requirement forContractor to fulfill certain conditions prior to final award.

Confidentiality Agreement Non-disclosure agreement executed by Potential Investor(s) and PETRONAS to protect the confidentiality of PETRONAS data.

Farm In/Farm Out Whenever a company acquires/assigns participating interest from an existing Contractor in an existing Contract.

InternationalUnitisation Agreement

An agreement entered into between two (or more) hostGovernments in relation to the joint development andproduction of a straddling field(s) across the nationalboundaries of each country.

Potential Investor(s) Company(ies) that is interested in investing in Malaysias E&P activities including existing Contractor(s) intending to acquire additional Malaysian acreages.

Straddling Field(s) Petroleum field(s) that has geological communication and shares the same field structure with another petroleum field in another block.


PPGUA/3.0/042/2013 5

Section 1: Block Acquisition

1.1 Introduction Potential Investors with a genuine interest in acquiring exploration blocks within Malaysia are required to convey their interest formally to PETRONAS. All companies will be screened by PETRONAS to ensure that certain criteria for Malaysian investment are met. If the company is eligible to explore in Malaysia, a data review session will be arranged followed by a bidding exercise. All block acquisition processes are handled by PMU on behalf of PETRONAS.

1.2 Registering an Interest The Block Promotion unit from the Basin Assessment and Promotion (BAP) in Petroleum Resource Exploration (PREX), PMU is responsible among others to market and promote Malaysian exploration opportunities. Its aim is to attract and sustain foreign investments in domestic E&P. Since its establishment in 2004, the Block Promotion unit has moved from conventional to aggressive promotion by embarking on various marketing strategies to attract Potential Investors to undertake exploration activities in Malaysia.

A Potential Investor must formally express its interest to participate in Malaysian domestic exploration opportunities with the Petroleum Resource Exploration Department. The procedures are explained below.

1.3 Company Screening and Data Review 1.3.1 Establish Contact Potential Investor must submit its companys profile, together with latest audited financial statement, to PETRONAS for screening purposes. Successfully screened investors are eligible to participate in the review of Malaysian exploration opportunities. 1.3.2 Data Review PETRONAS will send an invitation to all successfully screened investors, together with a technical summary of the focus blocks. Potential Investor shall express its interest to participate in the data review to PETRONAS. A data review session will be scheduled. Potential Investor must execute Confidentiality Agreement (CA) prior to any data review session. Only information on the offered block(s) is available for review. PETRONAS will not permit data review in any other block. Removal and copy of data (in any format) from the data review room without prior written consent from PETRONAS, is strictly prohibited.


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Potential Investor may request additional data review visits in respect of the offered block, subject to room availability. Potential Investor shall submit a technical evaluation report of the reviewed block(s). This must be completed within two (2) months after the first data review session.

Figure 1: Data Review and Block Award Process

1.3.3 Expression of Interest (EOI) Once the Potential Investor has completed the data review of the offered block(s), PETRONAS will request the Potential Investor to submit an EOI on the reviewed block(s). Potential Investor must express in writing its interest to participate in the bidding process if it wishes to be considered.

EstablishContact

Courtesyvisit andreview ofcurrentopportunities

DataReview

ConditionalAward

ContractSigning

NegotiationBidding

. Companies establish contact with PMU and assessed for interest

. Data is available for review upon request and companies are requested to sign confidentiality agreement

. Shortlisted companies are invited for a closed tender for selected blocks

. Contract negotation and award to successful company

. Companies submit report on findings and interest within three (3) month


PPGUA/3.0/042/2013 7

1.4 Bidding and Award 1.4.1 Bidding 1.4.1.1 Issuance of Invitation to Bid (ITB) After the submission of the EOI to PETRONAS, Potential Investor will receive an ITB, together with a CA from PETRONAS at the beginning of the bidding exercise. The CA at this stage is to govern the confidentiality of the data and information related to the bid activity and is separate and different from the earlier CA signed for the data review. Potential Investor shall respond to the ITB before the given deadline if it wishes to participate in the bidding.

1.4.1.2 Bid Package Submission PETRONAS will provide written instructions and guidelines on the bidding process. The guidelines consist of the following documents:

a) An ITB; b) CA (executed); c) Attachment 1A: Tender information including rules for submission of proposal; d) Attachment 1B: Instructions to bidders with regards to conflict of interests; e) Attachment 2: Draft Contract; f ) Attachment 3: Location map; g) Attachment 4: Location map and coordinates of block; and h) Appendix A: A template for the bid.

Potential Investor needs to submit its bid within a month upon receiving the bid package in accordance with the template. Potential Investor must also provide:

a) company profile; b) geological and geophysical evaluation of the block; c) proposed exploration strategy for the block; d) proposed minimum exploration work for the block; and e) financial commitment to undertake the exploration activities for the block.


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1.4.1.3 Bid Evaluation All bid submissions will be evaluated by the Bid Evaluation Committee (BEC) which is a committee formed by PETRONAS. The BEC will evaluate the bid based on technical and financial criteria.

Clarification Meeting Upon recommendation from the BEC, the Business Development Team under PREX, PMU will conduct a clarification meeting with the shortlisted bidder. The shortlisted bidder is required to explain its bid proposal, focusing on the minimum work, financial commitment, and exploration strategy aspects of its bid. During the clarification meeting, PETRONAS may require the shortlisted bidder to revise its proposal to serve the best interests of both parties.

1.4.2 Conditional Award After the clarification meeting with the shortlisted bidder and the receipt of the revised proposal if any, PETRONAS will decide to give conditional award to the successful bidder.

1.4.3 Finalisation PMU together with the successful bidder will finalise all terms and conditions of the Contract for execution.


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Section 2: Farm In/Farm Out Exercises and Media Announcement

2.1 Farm In/Farm Out 2.1.1 Farm In/Farm Out Process A company may farm in or an existing Contractor may farm out its participating interest or equity in a Contract subject to the final approval of PETRONAS. Depending on the phase of petroleum operations of a Contract in which the farm in/farm out exercise occurs, the following departments within PMU are responsible to review such exercise:

The written application shall be submitted directly to PMU which includes:

a) Letter of Intent (LOI); b) Proposed farm in candidate(s) profile; and c) Proposed CA; d) Data package if applicable

A farm in/farm out exercise can only be executed upon PETRONAS approval. Figure 2 demonstrates the process farm in/farm out exercise.

PHASE DEPARTMENTS WITHIN PMU

Exploration Petroleum Resource Exploration (PREX)

Development Petroleum Resource Development (PRD)

Production Petroleum Operations Management (POM)


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Figure 2: Farm In/Farm Out Process Flow

START

END

Contractor sends LOI, draft CA, Data Packageand list of candidates to PETRONAS

Amendment

NO

YES

NO

YES

PETRONASapproval on the release of the reviewed CA

Contractor to submit to PETRONASthe signed CA with all the candidates

Bidding Process

Submit Farm Out application andevaluation report to PETRONAS

PETRONAS approval on Farm Out

Contractor to notify the approved candidatesand issue a Side Letter to JOA parties

PETRONAS issues Side Letter to Contract

Contractor to submit the acknowledged Side Letterto Contract and copy of Side Letter issued to JOA to PETRONAS


PPGUA/3.0/042/2013 11

2.2 Media Announcements Any media announcements relating to PETRONAS and petroleum operations of the Contract shall require PETRONAS prior approval.

All media enquiries, especially on sensitive issues and PETRONAS policies, shall be directed to PETRONAS for appropriate responses.

2.2.1 Procedures for Media Announcement - Specific Categories Media announcements of certain categories shall be directed to the respective Head of Departments in PMU:

CATEGORY RESPONSIBLE HEAD OF DEPARTMENT

Exploration Senior General Manager, PREX

Development Senior General Manager, PRD


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TERM IN FULL

BAP Basin Assessment and Promotion

BEC Bid Evaluation Committee

CA Confidentiality Agreement

E&P Exploration and Production

EOI Expressions of Interest

ITB Invitation to Bid

JOA Joint Operating Agreement

LOI Letter of Intent

PMU Petroleum Management Unit

POM Petroleum Operations Management

PRD Petroleum Resource Development

PREX Petroleum Resource Exploration

Abbreviations

volume 2 final cd

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