BROWSE FLNG DEVELOPMENT DOMESTIC GAS AND SUPPLY CHAIN … · BROWSE FLNG DEVELOPMENT DOMESTIC GAS AND SUPPLY CHAIN KEY PRINCIPLES AGREEMENT This I

BROWSE FLNG DEVELOPMENT DOMESTIC GAS AND SUPPLY CHAIN KEY PRINCIPLES

AGREEMENT

This I<ey Principles Agreement ("Agreement") is made on 2015

Between

The Honourable Colin James Bamett, M.L.A., Premier of tile State of Western Austral ia and Minister for State Development, acting for and on behalf of the said State and its instrumentalities from time to time (the "State" or "Government");

and

BP Developments Australia Pty Ud (ABN 54 081 102 856) of 250 St Georges Terrace, Perth, Western Australia ("BP");

Japan Australia LNG (MIMI Browse) Pty Ud (ABN 94157 922 211) of Level 41, 152-158 St Georges Terrace, Perth, Western Australia ("MIMI Browse");

Petl'oChina Internat ional Investment (Australia) Pty Ltd (ABN 47 152 953 529) of Level 28, 111 Eagle Street, Brisbane, Queensland ("PetroChina");

Shell Australia Pty Ud (ABN 14 009 663 576) of 2 Victoria Avenue, Perth, Western Australia ("Shell");

Woodside Browse Pty Ltd (ABN 11 120 237 381) of 240 St Georges Terrace, Perth, Western Australia ("Woodside"),

(BP, MIMI Browse, PetroChina, Shell and Woodside are collectively referred to in this Agreement as the "Browse Joint Venturers" (or "BJV") and "Joint Venturer" means any one of them).

RECITALS

A. The BJV are the registered holders of the petroleum retention leases which contain the Calliance, Brecknock and Torosa gas and condensate fields ("Fields").

B. The BJV are currenlly undertaking engineering design and other related studies and propose to commercialise the Fields by three FLNG facilities owned by the BJV and operated by Woodside Energy Lld on behalf of the BJV ("Proposed Browse FLNG Development" or "the Development").

C. The BJV acknowtedge that the State has a domestic gas reservation po licy ("Domgas Policy") which applies to the development of the State's Torosa resources and have held discussions with the State in good faith to seek a domestic gas solution for the Proposed Browse FLNG Development.

D. The BJV also acknowledge that the State carries out long-term infrastructure and services planning for Western Australia including as part of the Department of State Development's Infrastructure and Services Assessment Framework. In support of this, the BJV have committed to establish ing a Western Australian anchored supply chain to support the Proposed Browse FLNG Development.

E. This Agreement records the key principles agreed between the State and the BJV ("Parties") for application of the Domgas Policy to the Proposed Browse FLNG Development and in relation to the BJV's commitment to a Western Australian

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anchored supply chain for the Proposed Browse FLNG Development ("I<ey Principles") and outlines the process for finalising a confidential, fully termed agreement ("Development Agreement") between the Parties that reflects the I<ey Principles.

IT IS HEREBY AGREED:

1. STATUS OF AGREEMENT

1.1 This Agreement records the agreement between the Parties with respect to:

(a) the I<ey Principles for application of the Domgas Policy to the Development and of the BJV's commitment to a Western Australia anchored supply chain for the Development; and

(b) the process for finalising the Development Agreement between the Parties that reflects the I<ey Principles.

1.2 This Agreement remains valid until the Development Agreement is executed between the Parties, with this Agreement superseded by the Development Agreement on and from the date of execution of the Development Agreement.

2. DOMESTIC GAS KEY PRINCIPLES

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The I<ey Principles agreed between the Parties for application of the Domgas Policy to the Proposed Browse FLNG Development are as follows:

2.1 The BJV will reserve for domestic use within Western Australia gas equivalent to 15% of the State's share of LNG production from the Torosa field. This reservation will accrue in line with LNG production from Torosa and be reduced by the quantity of gas delivered to customers under these key principles.

2.2 The BJV will market the Browse gas volumes reserved for the WA domestic market diligently and in good faith with potential buyers. The BJV will seek to give effect to this commitment by entering into an integrated set of gas transportation, processing and sales agreements. The integrated set of agreements may cover the provision of, or obtaining access to, domestic gas infrastructure (for transportation and processing) by the BJV and the supply of gas to the WA domestic market (gas sales). The BJV will enter into this integrated set of agreements on business to business arms-length commercial terms.

2.3 Nothing in these key principles will require the BJV to sell volumes reserved for use within Western Australia where mutually acceptable terms between the BJV and buyers cannot be reached through diligent, good faith marketing. If reserved gas is not sold it must be kept in reserve for future domestic use, and cannot be exported.

2.4 The Browse gas volumes will be offered to the WA domestic market coinciding with the commencement of Torosa production.

2.51n meeting its domestic gas commitment:

The BJV shall enter into gas transportation and processing agreements on mutually acceptable terms through diligent, good faith negotiations.

The BJV will provide or obtain access to domestic gas infrastructure necessary to enable gas to be delivered to buyers in Western Australia as set out in this agreement. The BJV will enter into domestic gas infrastructure arrangements in conjunction with the execution of a gas sales agreement between the BJV and gas buyer(s). This may be done

through commercia l arrangements with third parties, if suitable infrastructure is available or can be procured.

In obtaining access to the necessary infrastructure to meet their domestic gas commitment, the BJV may market or supply gas from sources other than the Browse LNG project, or procure such marketing or supply of gas or alternative equivalent energy by third parties, provided such offsetting supply results in a genuine net addition to energy supplied to the State (an "offset"). However, such arrangements will not preclude domestic gas being supplied in future from the Browse LNG project if the project's domestic gas obligation is not fully met.

2.6 The reserved gas will be reduced from time to time in line with energy supplied by the BJV to the WA domestic market under these key principles, whether supplied directly from the Browse LNG project or through an approved offset. Approval will be granted by the Minister where the BJV has demonstrated to the State's satisfaction that the offset provides equivalent energy that is a net additional supply to the State.

2.7 The BJV may request the Minister to consider reducing the reserved volume of gas to less than 15% of the State's share of Torosa production.

2.8 The BJV will report annually to the Minister on its progress towards meeting its domestic gas obligations, including:

information on the infrastructure used and sources of gas supplied, including evidence that there is a net additional supply to the domestic market, if offset energy is supplied;

the quantity of LNG and domestic gas sales over the previous year,

expected future sales of LNG and domestic gas; and

cumulative sales of domestic gas and LNG since the project's inception.

3. SUPPLY CHAIN KEY PRINCIPLES

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The Key Principles of the BJV's commitment to a Western Australia anchored supply chain for the Proposed Browse FLNG Development agreed between the Parties are as follows:

3.1 The BJV are committed to establishing a Western Australia anchored supply chain to support the Proposed Browse FLNG Development. Perth and the North West region of Western Australia will be the primary locations for delivery of long-term project support requirements (approximately 40 to 50 years).

The Browse integrated supply chain strategy looks to the private sector for the provision of supply chain logistics services and supporting infrastructure including:

Marine - access to adequate port facilities for berthing vessels for loading and unloading of supplies, materials and equipment bound for the FLNG facility or supporting vessels. Key requirements for port facilities include safe and efficient port operations, proximity to fields, proximity to transport networks, reliable access to port berths and marine support fleet maintenance services.

Aviation - access to fixed-wing aircraft and helicopters. There will also be a requirement to access search and rescue services.

Land-based (warehousing/storage/transport) - consisting of road transport, access to warehousing and appropriate lay-down area for

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picl<ing, packing, storing and staging of supplies for transport. It is expected that warehousing facilities will be distributed across multiple locations.

The BJV will seel< to leverage off existing and emerging infrastructure and services where available to support an efficient and cost effective supply chain solution and to assist with managing potential socia l impacts in sensitive communities.

The overall commitment is an integrated supply chain based in Perth and the North West region of Western Australia in support of the Development. The BJV will provide clear information to Government on the scale of the supply chain as the project is more clearly defined and prior to the conclusion of Front End Engineering and Design.

Key features underpinning the current planning assumptions of the Development's WA supply chain include:

Primary operations phase supply chain hub - Perth Freight consolidation and staging for further distribution. Large/heavy maintenance and preservation services. Procurement, materials and management contracting. Access to key vendors for spare parts and materials. Access to cost effective engineering and fabrication services.

Primary location for forward logistics and marine based support and supply vessels - West Kimberley including Broome and other North West Regional support location(s)

Receiving materials and goods despatched from the Perth supply chain hub. Receiving materials and goods despatched from the offshore facilities for storage or on forwarding to the Perth supply chain hub or vendor premises. Primary support base for Drilling and Completions activities.

Primary aviation support base (rotary-wing and fixed-wing services) - West Kimberley including Broome and other North West Regional support location(s)

Fixed-wing It is expected that Perth will be the primary feeder for fixed-wing transportation to the West Kimberley through existing flight routes. Aviation support will be staged through the West Kimberley.

Rotary-wing Rotary-wing facility requirements are expected to include access to airport(s) for receiving fixed-wing aircraft and rotary-wing aircraft, primarily for the transport of offshore personnel, as we ll as for transport of materials/equipment to and from the offshore facilities. This includes support for the drilling and subsea activities associated with the Development as well as FLNG operations.

3.2 Contracts for supply chain activities will provide full, fair and reasonable opportunity for local industry participation where it is capable and competitive on the basis of health, safety, environment, quality, cost and delivery. This will be consistent with the Australian Jobs Act 2013.

3.3 The BJV are conducting a Social Impact Assessment (SIA) to examine the potential impacts on communities where the Development is likely to have a presence. Findings from the SIA process will be used to identify appropriate management and mitigation strategies to maximize potential opportunities (including local business, employment and training and social investment outcomes), while minimising potential negative social impacts.

3.4 The BJV will develop and implement employment and training strategies to provide Western Australians, including Kimberley residents, the opportunity to pariicipate in the Development. This will include programs and initiatives involving contractors providing supply cilain infrastructure and services.

3.5 Further to Principle 3.4, the BJV will ensure major operations phase contractors develop and implement Indigenous Affairs Management Plans for the engagement of Indigenous businesses and Indigenous employment opportunities.

3.6 The BJV will maintain a West I<imberley social contribution program for the life of the Development.

3.7 These key principles are based on BOO phase assumptions and information. Tender and contracting processes are expected following a positive final investment decision ("FID"). Nothing in these key principles is intended to constrain the BJVs' ability to secure a safe, efficient and commercially competitive WA-anchored supply chain solution, consistent with these principles.

3.8 The BJV will inform the State on the Development's supply chain strategy when material changes are under consideration, including any change to the scope of the Development that has the potential to have significant impact on West Australian supply chain infrastructure and services. Such changes will require agreement between the BJV and Government with due consideration to the impact on the safety, efficiency and competitiveness of the supply chain solution.

4. PROCESS FOR FINALISING DEVELOPMENT AGREEMENT

4.1 The Key Principles in clauses 2 and 3 of this Agreement will be given effect through the Development Agreement (contract) agreed between the State and the BJV. The Development Agreement will be finalised and entered into after the Development has commenced front-end engineering and design ("FEED"), and before the BJV commence their assurance and approvals processes ahead of a final investment decision ("FID"). The Development Agreement will be subject to a positive FID being taken by the BJV and will contain a dispute settling procedure and provide for remedies where there is a breach of the Development Agreement by either Party.

4.2 The Parties agree that the Development Agreement will be confidential between the Parties.

4.3 The Parties will negotiate in good faith to give effect to the above commitment. Until finalisation of the Development Agreement, the Parties will act consistently with, and will not seek to depart from, the Key Principles.

5. APPLICABLE LAW

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This Agreement will be interpreted according to the law for the time being in force in the State of Western Australia.

EXECUTED AS AN AGREEMENT:

EXECUTED for the STATE

The Honourable Colin James Barnett

Premier of Western Australia

Signature

Date

EXECUTED by BP DEVELOPMENTS AUSTRALIA PTY L TD by its duly appointed attorney in the presence of:

Signature of at~ rney

Name

EXECUTED by PETROCHINA INTERNATIONAL INVESTMENT (AUSTRALIA) PTY L TO by its duly appointed attorney in the presence

Of j1I!CV rl &-G; h iA!/

SigM r: att~~(Zh-UL Name

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Signature of witness

Name

rgnature of witness

Name

Signature of attorney

Name

EXECUTED by JAPAN AUSTRALIA LNG (MIMI BROWSE) PTY L TO in accordance with section 127(1) of the COlporations Act 2001 (Cth):

Signature of director

Name

EXECUTED by WOODSIDE BROWSE PTY L TO in accordance with section 127(1) of the Corporations Act 2001 (Cth):

Si9::f~ Src-f'J-1 e.N Rv c--e.,eS

Name

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Name

:JL . Signature of dir~rY- >

Name

Signature of-dir9btQl;lsecretary

Name