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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, Contractors corporate governance does not
accept consequential loss in any shape or form.

2. Contractors 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 Companys 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 Companys 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 Contractors 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 Companys examination of Contractors and its Sub-contractors insurance
policies and premium receipts as Contractors 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.