There are 2 issue in relation with the substance of the draft letter : 1. The reason of the termination; 2.

Time frame of the termination. 1. Re. Reason of the termination. As has been requested by Ibu Meiti, we should clearly state the reason of the termination, ie. 1) from the non economic point of view; and 2) from the declining condition of the production. In this letter, there are 2 reasons of the termination ie: 1. MOPU class might be revoked (par 7 of the letter : In the event ABS suspends or
revokes the MOPUs class, the MOPU will not be operable and production will immediately decline to 0 (zero) mmscfd on the Estimated Decline Date and result in Economic Termination of the project) 2. Declining of production (par 10 of the letter : However, should we continue to modify the MOPU without the price repair agreed, please be kindly advised that production will decrease to 110 BBtud as of 15 July 2011., and par 11 of the letter : The reason for such decrease is in anticipation of lower Maleo gas decline due to the Terang Sirasun Batur gas entering into the East Java Gas Pipeline on March 2012. My opinion, the reason of suspension or the revocation of MOPU class can not be considered as a non economic condition that might cause us deliver the economic termination notice. Therefore, we better include another paragraph clearly state that the uneconomic condition has caused among other by the price repair that has not been granted by PGN. Also, for the reason of the declining of production in par 11 of the letter, we better add another sentence to elaborate the condition of our reservoir condition. Futhermore, in this letter we did not mention the issue of compressor installation. I think it will be useful if we also inform about the compressor matter to justify our conditions of both declining of the production and the reason for asking price repair.

2. Re. Time frame of the termination. Article 20.3 says : The Sellers Representative may terminate this Agreement by giving a notice in writing to the Buyer (the Economic Termination Notice / ETN) no later than two (2) months prior to the commencement of any Half Year if, in respect of such Half Year (the Specified Half Year / SHY), the Sellers Representative believes, acting in accordance with the standard of a Reasonable and Prudent Operator, that it will not be economic to continue to make deliveries of Sales Gas to the Buyer under this Agreement after the last day of the SHY and which notice shall include : (a) The Final Subsequent Decline Notice as set out in Clause 7.6; and (b) The date upon which this Agreement shall terminate, Provided that the Sellers Representative shall endeavor to give the Buyer notice that it is considering issuing an ETN at least four (4) months prior to the commencement of the SHY, and provided further that the Seller shall not serve and ETN that would terminate this Agreement during the Plateau Period. The substance of article 20.3 are the words in yellow highlighted as follows

The Sellers Representative may terminate this Agreement by giving a ETN no later than two (2) months prior to the SHY, that it will not be economic to continue to make deliveries of Sales Gas to the Buyer under this Agreement after the last day of the SHY and which notice shall include The date upon which this Agreement shall terminate, Re. Paragraph 8 of the draft letter Paragraph 8 of the draft letter says : Therefore, we herewith notify you that the Estimated Decline Date (EDD) due to the MOPU class being suspended is 30 September 2011. Furthermore, this letter also serve as a notice that Santos is issuing an ETN. The economic termination is estimated to be the same date as the EDD. In accordance with 20.3, the paragraph 8 shall be interpreted as follows : The ETN : 30 September 2011. The SHY : 30 November 2011 The SHY will end at 30 May 2012 Therefore the GSA termination date shall be on 30 May 2012. Is that correct that we intend to terminate the GSA on 30 May 2012 ? If Santos intention that the GSA termination date is 30 September 2011, then we could not put the ETN as 30 September 2011. Also, in this paragraph 8, we didnt mention yet in this letter, the GSA termination date as required by article 20.3. Re. Paragraph 10-11-12-13 of the draft letter Par. 10 says: However, should we continue to modify MOPU without the price repair agreed, please be kindly advised that the production will decrease to 110 Bbtu as of 15 July 2011. Par. 11 says: The reason for such decrease is in anticipation of lower Maleo gas decline due to the Terang Sirasun Batur gas entering into the East Java Gas Pipeline on March 2012. Par 12 says: Please kindly note that 110 Bbtu is our best estimate of the production rate that we maintain with reasonable endeavours. Par 13 says: Therefore, this letter also serve as an Initial Decline Notice to which Maleo gas will be delivered for less than 110 Bbtu due to reservoir issues on the EDD of 16 January 2012. Comments: 1.

In this letter, it is not mention about the compressor installation issue. The conditions set forth in Par 10, 11, 12 that Santos production of 110 BBtu, the reader of this letter may interpret this condition occur because Santos did not install the compressor (or natural declining condition). Is that correct that Santos intends that this letter to be interpreted like that ? 2. In accordance with the time frame of GSA termination date as set forth in article 7.2 of the GSA, Par 13 states that the EDD is on 16 January 2012. The Half Year in which the EDD will occur shall be 16 Jan 2012 15 July 2012. Therefore, when will the actual decline date ? When will the GSA termination date ? Also, the article 7.2 says that in the event the Seller issue the Initial Decline Notice stating the EDD, the Seller shall also provide such data (article 7.2 a, b, c) : - Specify an estimated monthly DCQ for each of the remaining months of the Half Year (Jan 2012 to July 2012); - The monthly DCQs for each month of the next three Half Years following the Half Year (Jan 2012 to July 2012), ie. The monthly DCS for each month for the month of Aug 2012 up to Nov 2013); - All information reasonable necessary to support the EDD and estimated decline DCQs. Therefore, in our letter stating that the EDD is on 16 January 2012, my opinion is that Santos should incorporate this letter with an attachment containing such estimated monthy DCQs from Jan 2012 up to Nov 2012, in compliance with article 7.2 of the GSA. Re. Paragraph 14 of the draft letter Par 14 says: As the project itself is already uneconomic, and should we continue to modify the MOPU without the price repair agreed, please be kindly advised that we are considering issuing an ETN to be effective on 16 January 2012. Comments: It will be interpreted by the reader of this letter that : Santos has already modified the MOPU at Santos cost, and without new compressor installation (since we did not mention re new compressor installation in this letter), the production still decline and it caused Santos come to the consideration of declaring the ETN to be effective on 16 January 2012. So, the ETN is on 16 January 2012. In accordance with article 20.3 of the GSA, The ETN : 16 January 2012 . The SHY : 15 March 2012 The SHY will end at 15 Sept 2012 Therefore the GSA termination date shall be on 15 Sept 2012. Is that correct that we intend to terminate the GSA on 15 Sept 2012 ?

Thus for your considerations. Regards Chandra Triayu