Let’s learn how Bakrie launder the money from PT Bumi Resources Tbk in Gallo Oil (Jersey) Ltd in Yaman

Production Sharing Agreement (PSA)
On February 25, 1999, Gallo Oil (Jersey) entered into assignment agreements with Minarak Labuan Company Ltd. of Malaysia in relation to participating interest in the Production Sharing Agreement (PSA) with the Ministry of Oil and Mineral Resources (MOMR) of the Republic of Yemen.

Based on PSA dated October 8, 1996, the contract areas are Block-R2 and Block-13, which are located in Republic of Yemen.

The major provisions under the PSA are as follows:

1. Scope

Contractors are willing to undertake the obligations provided under this PSA as a Contractor with respect to the Exploration, Development, Production, Storing and Transporting of Crude Oil in the PSA Area, and possesses all the necessary financial resources and the technical and professional competence to carry out the Petroleum Operations according to PSA.

2. Royalties

The Government of Yemen shall own and be entitled to take royalty from the total Crude Oil produced and saved from PSA Area and not used in Petroleum Operation prior to the deduction of Cost Oil, a non-recoverable amount of Crude Oil equal to ten percent (10%) of such Crude Oil commencing with the first Barrel produced and saved from PSA Area (s) and not used in Petroleum Operations.

3. Term

The term of PSA shall include first and second Exploration Periods and a development period. Exploration periods shall be a First Exploration Period of forty-two (42) months commencing from the Effective Date, divided in two (2) phases: Phase I of twenty-one (21) Months, commencing from the Effective Date; Phase II of twenty-one (21) Months, commencing from the end of Phase I of the First Exploration Period. Second Exploration shall be of forty-two (42) Months

The Development Period shall commence on the date of the first Commercial Discovery of Oil and shall continue for the period of twenty (20) Years and can be extended up to five (5) Years.

Commercial Discovery of Oil period may consist of one producing reservoir or a group of producing reservoirs that are worthy of being developed commercially.

4. Relinquishments of Areas
The contractor at the end of the First Exploration Period shall relinquish a total of twenty-five percent (25%) of the original Development Area if it does not elect to enter into Second Exploration Period. The Contractor shall relinquish the whole of the Development Area not then converted to a Development Area.

5. Recovery of Operating Cost
The Contractor shall recover all costs, expenses and expenditures incurred for all Petroleum Operation out of and to the extent of a maximum of forty percent (40%) per Quarter of all the Crude Oil produced and saved from the Development Area and not used in Petroleum Operations and after Royalty payments to the state. Operating expenses incurred and paid after the date of initial Commercial Production shall be recoverable in the Tax Year in which such costs and expenses are incurred and paid.

6. Signature Bonus

The Contractor shall pay to the Ministry a US$ 4,500,000 as Signature Bonus.

7. Production Bonuses

Amounts (US$) Conditions

1,000,000 Within 30 days after the date of first commercial production from the Block R2 and Block 13
2,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 50,000 barrels per day
3,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 100,000 barrels per day
3,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 150,000 barrels per day

As of December 31, 2005, such production bonus is not yet applicable since production has not yet commenced.

8. Training, Institutional and Social Contributions

The Contractor shall pay annually to MMOR for Training, Institutional and social Bonuses amounting to US$ 150,000, US$ 150,000, US$ 300,000 respectively within thirty (30) days from the start of each year, starting on the effective date and at the beginning of each calendar year thereafter during the term of this PSA and any extension.

In 2005, several bonuses were paid by Gallo Oil (Jersey).

9. Production Sharing Oil

Based on PSA, MOMR and contractors’ shares are computed based on remaining quantity after deducting Royalty and Cost Oil from the total Crude Oil produced and saved from the Development Area, and not used in Petroleum Operations. The PSA also provides specific percentages of each party’s shares based on the portion on movement of production quantity.

Oil and Gas Properties

Gallo, the Subsidiary that engages in oil mining, adopted the full cost method of accounting in recognizing oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs of developing proven reserves, are amortized using the unit-of-production method based on the total estimated proven reserves. Investments in unproven properties and major development projects are not amortized until proven reserves associated with the projects can be determined or until impairment occurs. If the result of an assessment indicates that the properties are impaired, the amount of the impairment is added to the costs to be amortized.

OIL AND GAS PROPERTIES

This represents costs incurred in connection with exploration of Gallo Oil in Yemen that consist of:

2004: $59,861,549
2005 $65,583,312
2006: $83,357,752

On February 8, 2006, Gallo and Alkor Petroo Limited (Alkor) (the Parties) signed a Memorandum of Understanding (MOU), relating to the assignment of fifty percent (50%) participating interest in Block 13 in Yemen (the Block) (see Note 40b). This MOU was amended on February 21, 2006 for the change of period that the Parties should enter into the FIA and JOA.

On March 3, 2006, the Parties entered into Farm In Agreement (FIA), and Joint Operating Agreement (JOA). The consideration shall consist of the payment by Alkor to Gallo of fifty percent (50%) of the annual bonus payable by Gallo to Ministry of Mineral Resources of Yemen (MOMR) commencing from 2006 onwards. In addition, Alkor undertakes to pay 50% of all costs incurred under the project contracts with effect from the Execution Date. Gallo shall be entitled to receive 60% and Alkor 40% of all cost of oil until Gallo has recovered the previous cost allowed under the cost recovery.

Conditions precedent with this FIA:
a. Alkor agreed to pay the amounts stipulated;
b. MOMR giving its consent to the assignment of the participating interest to Alkor and the implementation of all matters provided for in this FIA; and
c. JOA’s execution.

Neither Gallo nor Alkor shall be liable to the other for breach of warranties unless the amount of the claim exceeds US$ 25,000, with the maximum liability of US$ 500,000.

On May 23, 2006, MOMR approved the assignment of the participating interest to Alkor and the implementation of all matters provided for in this FIA.

2005 and 2006
Book Value: $1,270,925,504
Acquisition cost: $37,224,848
Capital gain: $1,233,700,656

Production Sharing Agreement (PSA) between Gallo and Ministry of Oil and Mineral Resources (MOMR)

On February 25, 1999, Gallo entered into an assignment agreement with Minarak Labuan Company Ltd of Malaysia under which Gallo took over the participating interest in the Production Sharing Agreement (PSA) with the Ministry of Oil and Mineral Resources (MOMR) of the Republic of Yemen.

The major provisions under the PSA are as follows:

1. Scope

Contractors are willing to undertake the obligations provided under this PSA as a Contractor with respect to the Exploration, Development, Production, Storing and Transporting of Crude Oil in the PSA Area, and possesses all the necessary financial resources and the technical and professional competence to carry out the Petroleum Operations according to PSA.

2. Royalties

The Government of Yemen shall own and be entitled to take royalty from the total Crude Oil produced and saved from PSA Area and not used in Petroleum Operation prior to the deduction of Cost Oil, a non-recoverable amount of Crude Oil equal to ten percent (10%) of such Crude Oil commencing with the first Barrel produced and saved from PSA Area (s) and not used in Petroleum Operations.

3. Term

The term of PSA shall include first and second Exploration Periods and a development period. Exploration periods shall be a First Exploration Period of forty-two (42) months commencing from the Effective Date, divided in two (2) phases: Phase I of twenty-one (21) Months, commencing from the Effective Date; Phase II of twenty-one (21) Months, commencing from the end of Phase I of the First Exploration Period. Second Exploration shall be of forty-two (42) Months.

The Development Period shall commence on the date of the first Commercial Discovery of Oil and shall continue for the period of twenty (20) years and can be extended up to a further five (5) years.

Commercial Discovery of Oil period may consist of one producing reservoir or a group of producing reservoirs that are worthy of being developed commercially.

4. Relinquishments of Areas

The contractor at the end of the First Exploration Period shall relinquish a total of twenty-five percent (25%) of the original Development Area if it does not elect to enter into Second Exploration Period. The Contractor shall relinquish the whole of the Development Area not then converted to a Development Area

5. Recovery of Operating Cost

The Contractor shall recover all costs, expenses and expenditures incurred for all Petroleum Operation out of and to the extent of a maximum of forty percent (40%) per quarter of all the Crude Oil produced and saved from the Development Area and not used in Petroleum Operations and after Royalty payments to the state. Operating expenses incurred and paid after the date of initial Commercial Production shall be recoverable in the Tax Year in which such costs and expenses are incurred and paid.

6. Signature Bonus

The Contractor shall pay to the Ministry of Oil and Mineral Resources of Government of Yaman amounting to US$ 4.5 million as Signature Bonus.

7. Production Bonuses

Amounts (US$) Conditions

1,000,000 Within 30 days after the date of first commercial production from the Block R2 and Block 13.
2,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 50,000 barrels per day.
3,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 100,000 barrels per day.
3,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 150,000 barrels per day.

As of December 31, 2006, such production bonus is not yet applicable as production has not yet commenced.

8. Training, Institutional and Social Contributions

The Contractor shall pay annually to MMOR for Training, Institutional and social Bonuses amounting to US$ 150,000, US$ 150,000 and US$ 300,000, respectively, within thirty (30) days from the start of each year, starting on the effective date and at the beginning of each calendar year thereafter during the term of this PSA and any extension.

In 2006 and 2005, several social donations were paid by Gallo Oil (Jersey).

9. Production Sharing Oil

Based on PSA, MOMR and contractors’ shares are computed based on remaining quantity after deducting Royalty and Cost Oil from the total Crude Oil produced and saved from the Development Area, and not used in Petroleum Operations. The PSA also provides specific percentages of each party’s shares based on the portion on movement of production quantity.

September 15, 2006, Gallo Oil (Jersey) Ltd. (Gallo) has finished drilling on the Tasilah-1 well with the total depth is 1,352 m, pumping 3,000 barrel of water only.

Gallo will drill Al-Murat-1 well and Government of Yemen ask Gallo to drill up to 500 m within the basement.

Gallo has already established Joint Operating with Alkor Petroo Limited for Block 13 (see Note 12).

Oil and Gas Properties

Gallo, the Subsidiary that engages in oil mining, adopted the full cost method of accounting in recognizing oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs of developing proven reserves, are amortized using the unit-of-production method based on the total estimated proven reserves. Investments in unproven properties and major development projects are not amortized until proven reserves associated with the projects can be determined or until impairment occurs. If the result of an assessment indicates that the properties are impaired, the amount of the impairment is added to the costs to be amortized.

OIL AND GAS PROPERTIES

This represents costs incurred in connection with exploration of Gallo Oil in Yemen that consists of:

2005: $65,583,312
2006: $83,357,752
2007: $111,069,347

On September 15, 2006, Gallo finished drilling on the Tasilah-1 well of Block R2 with a total depth of 1,355 m, pumping 3,000 barrel of water only. In addition, on October 11, 2006, Gallo finished drilling on the Al Murad-1 well of Block R2 with a total depth of 1,663 m, resulting to the completion fluid in 99 swabs. Gallo will drill Al Murad-1 well and the Government of Yemen has asked Gallo to drill up to 500 m within the basement.

On September 13, 2005, Gallo was able to secure its 4th extension letter from MOMR to extend the term of exploration period until December 31, 2007 (see Note 39l).

During 2006, Gallo has completed reprocessing and remapping in Block 13 area, as part of Gallo’s extensive effort to follow the requirements of PSA and in meeting planned activities. On February 8, 2006, Gallo and Alkor Petroo Limited (Alkor) (the “Parties”) signed a Memorandum of Understanding (MOU), relating to the assignment of fifty percent (50%) participating interest in Block 13 in Yemen (the “Block”) (see Notes 39l). This MOU was amended on February 21, 2006 for the change of period that the Parties should enter into the Farm In Agreement (FIA) and Joint Operating Agreement (JOA).

On March 3, 2006, the Parties entered into FIA, and JOA, in which the consideration shall consist of the payment by Alkor to Gallo of fifty percent (50%) of the annual bonus payable by Gallo to Ministry of Mineral Resources of Yemen (MOMR) commencing from 2006 onwards. In addition, Alkor undertakes to pay 50% of all costs incurred under the project contracts effective from the Execution Date. Gallo shall be entitled to receive 60% and Alkor 40% of all cost of oil until Gallo has recovered the previous cost allowed under the cost recovery. Neither Gallo nor Alkor shall be liable to the other for breach of warranties unless the amount of the claim exceeds US$ 25,000, with the maximum liability of US$ 500,000. Subsequently, on May 23, 2006, MOMR approved the assignment of the participating interest to Alkor and the implementation of all matters provided for in this FIA.

On October 2, 2007, Alkor wishes to re-assign and transfer all of its rights, title and interests in and to the 50% Participating Interest to Gallo and Gallo has consented to the proposed re-assignment on the terms and subject to the conditions set out in the Deed of Reassignment. Gallo and Alkor have agreed to enter into this Deed to terminate the Project Contracts and to release and discharge each other from all duties, obligations or liabilities owing to each other under the Project Contracts on terms and subject to the conditions set out in this Deed.

2005 and 2006
Book Value: $1,270,925,504
Acquisition cost: $37,224,848
Capital gain: $1,233,700,656

2006 and 2007
Book Value: $37,224,848
Acquisition cost: $1,270,925,504
Capital gain: Negative $1,233,700,656

Production Sharing Agreement (PSA) between Gallo and Ministry of Oil and Mineral Resources (MOMR)

On February 25, 1999, Gallo entered into an assignment agreement with Minarak Labuan Company Ltd of Malaysia under which Gallo took over the participating interest in the Production Sharing Agreement (PSA) with the Ministry of Oil and Mineral Resources (MOMR) of the Republic of Yemen.

The major provisions under the PSA are as follows:

1. Scope

Contractors are willing to undertake the obligations provided under this PSA as a Contractor with respect to the Exploration, Development, Production, Storing and Transporting of Crude Oil in the PSA Area, and possesses all the necessary financial resources and the technical and professional competence to carry out the Petroleum Operations according to PSA.

2. Royalties

The Government of Yemen shall own and be entitled to take royalty from the total Crude Oil produced and saved from PSA Area and not used in Petroleum Operation prior to the deduction of Cost Oil, a non-recoverable amount of Crude Oil equal to ten percent (10%) of such Crude Oil commencing with the first barrel produced and saved from PSA Area (s) and not used in Petroleum Operations.

3. Term

The term of PSA shall include first and second Exploration Periods and a development period. Exploration periods shall be a First Exploration Period of forty-two (42) months commencing from the Effective Date, divided in two (2) phases: Phase I of twenty-one (21) months, commencing from the Effective Date; Phase II of twenty-one (21) months, commencing from the end of Phase I of the First Exploration Period. Second Exploration shall be of forty-two (42) months.

The Development Period shall commence on the date of the first Commercial Discovery of Oil and shall continue for the period of twenty (20) years and can be extended up to a further five (5) years. The commercial discovery of oil period may consist of one producing reservoir or a group of producing reservoirs that are worthy of being developed commercially (see Note 12b).

4. Relinquishments of Areas

The Contractor at the end of the First Exploration Period shall relinquish a total of twenty-five percent (25%) of the original Development Area if it does not elect to enter into Second Exploration Period. The Contractor shall relinquish the whole of the PSA Area except those Areas categorized in Development stage.

5. Recovery of Operating Cost

The Contractor shall recover all costs, expenses and expenditures incurred for all Petroleum Operation out of and to the extent of a maximum of forty percent (40%) per quarter of all the Crude Oil produced and saved from the Development Area and not used in Petroleum Operations and after Royalty payments to the State. Operating expenses incurred and paid after the date of initial Commercial Production shall be recoverable in the Tax Year in which such costs and expenses are incurred and paid.

6. Signature Bonus

The Contractor shall pay to the MOMR of Government of Yemen amounting to US$ 4.5 million as Signature Bonus.

7. Production Bonuses

Amounts (US$) Conditions

1,000,000 Within 30 days after the date of first commercial production from the Block R2 and Block 13.
2,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 50,000 barrels per day.
3,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 100,000 barrels per day.
3,000,000 Within 30 days after cumulative oil production from agreement area has been sustained at the rate of 150,000 barrels per day.

As of December 31, 2007, such production bonus is not yet applicable as Gallo’s production has not yet commenced.

8. Training, Institutional and Social Contributions

The Contractor shall pay annually to MOMR for training, institutional and social bonuses amounts of US$ 150,000, US$ 150,000 and US$ 300,000, respectively, within thirty (30) days from the start of each year, starting on the effective date and at the beginning of each calendar year thereafter during the term of this PSA and any extension.

9. Production Sharing Oil

Based on PSA, MOMR and Contractors’ shares are computed based on remaining quantity after deducting Royalty and Oil cost from the total Crude Oil produced and saved from the Development Area, and not used in Petroleum Operations. The PSA also provides specific percentages of each party’s shares based on the portion on movement of production quantity.

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