[insert on Buyer s letterhead]

Transcription

1 Page 1 of 7 October, 2011 [insert on Buyer s letterhead] BC LNG Export Co-Operative LLC c/o Blake, Cassels & Graydon LLP Burrard St. Vancouver, BC, Canada V7X 1L3 Attention: Thomas P. Tatham RE: Letter of Intent with respect to Back-Up LNG Purchase and Offtake Agreement (the Back-Up Purchase and Offtake Agreement ) among BC LNG Export Co-Operative LLC ( Export Co-Op or the Seller ) and DCEP Gas Management Ltd. ( GML ) in conjunction with the Nomination Procedures We reference our ongoing discussions with Export Co-Op and GML and confirm that [Name of Buyer] ( NAME or the Buyer ) is interested in providing a commitment for the back-up purchase and offtake of up to 1,800,000 metric tons of liquefied natural gas ( LNG ) per annum (if and as requested by Export Co-Op from time to time upon reasonable notice) produced by the proposed small scale LNG facility to be operated by Douglas Channel Energy Partnership and located in the vicinity of the western shore of the Douglas Channel, Kitimat Arm, British Columbia (the Project ). This letter and the non-binding term sheet (the Term Sheet ) attached hereto as Schedule A, is intended to summarize the indicative terms to be set forth in a Back-Up LNG Purchase and Offtake Agreement to be negotiated and finalized between Buyer, GML, and Export Co-Op (collectively, the Parties ), and which shall otherwise be in accordance with the requirements of the Project and the procedures (the Nomination Procedures ) established by Export Co-Op for the award of contracts for the purchase and offtake of LNG from the Project. Notwithstanding the foregoing, the Parties hereby confirm that neither this letter nor the Term Sheet represents binding obligations of or grants rights to, the Parties and only a Back-Up Purchase and Offtake Agreement executed by the Parties and duly approved by all necessary corporate actions (including partners and boards of directors) and other necessary or desirable approvals, will be legally binding on the Parties. With reference to the foregoing, by its execution of this letter, each Party hereby agrees to use commercially reasonable efforts to negotiate and execute a binding Back-Up LNG Purchase and Offtake Agreement on or before December 15, [Remainder of page intentionally left blank signature page to follow] - 1 -

2 If this letter and the attached Term Sheet accurately reflects our understanding, please acknowledge in the space provided below and forward a fully signed copy back at your earliest opportunity. Sincerely, [Name of Buyer] BC LNG Export Co-operative LLC (BC LNG) Page 2 of 7 By: Name: Title: AGREED AND ACKNOWLEDGED As of this day of October, 2011 BC LNG Export Co-Operative LLC By: Name: Title: DCEP Gas Management Ltd. By: Name: Thomas P. Tatham Title: - 2 -

3 Page 3 of 7 Schedule A Proposed Summary Terms of Back Up Purchase and Offtake Agreement October, 2011 This is the non-binding term sheet (the Term Sheet ) referenced in and forming part of the Letter of Intent (the Letter of Intent ) delivered by [Name of Buyer] to and agreed by Export Co-Op and GML. The Letter of Intent and this Term Sheet relate to the proposed Back-Up LNG Purchase and Offtake Agreement in respect of the potential purchase and offtake by PTTI of LNG produced by the Project. All capitalized terms used in this Term Sheet but not defined herein, shall have the same respective meanings attributed to such terms in the Letter of Intent. Seller: Buyer: Sale and Purchase: Contract Term: Price: BC LNG Export Co-Operative LLC, a Marshall Islands LLC. [Name of Buyer], a company or an affiliate thereof as agreed to by the Seller. Subject to the terms and conditions of the Back-Up LNG Purchase and Offtake Agreement to be negotiated between and mutually agreed by the Buyer and Seller. Twenty (20) years from the date of first LNG delivery under the Back-Up LNG Purchase and Offtake Agreement, with a minimum firm price term of 7 years or greater (the Firm Price Term ) to be agreed by the Buyer and the Seller and which will correspond with the minimum firm price contract term called for by Export Co-Op in connection with the Nomination Procedures. For the Firm Price Term, the purchase price for all LNG to be purchased by the Buyer, shall be purchased at a price equal to the price provided for under that certain Master F.O.B LNG Sale and Purchase Agreement dated March 7, 2011, entered into between Export Co-Op and GML. The purchase price for all LNG to be purchased by the Buyer subsequent to the Firm Price Term, shall be determined (a Price Determination ) by the Buyer and the Seller each acting reasonably and in good faith based upon a mutually agreed world market price. The first Price Determination shall be finalized not less than 180 days prior to the expiration of the Firm Price Term and thereafter, a Price Determination shall be agreed on an annual basis, on or before the day that marks the anniversary of the initial Price Determination

4 Page 4 of 7 Volume: Credit, BC LNG & GML Performance Guarantees: Delivery Point: LNG Shipping: Transfer of Title and Risk: Up to 1,800,000 metric tons per annum if and as requested by Export Co-Op from time to time upon reasonable notice, such requested amount not to exceed the then existing liquefaction capability of the Project. The Buyer shall have and maintain or shall have a guarantor (the Buyer s Guarantor ) that has and maintains, a minimum credit rating to be agreed by Export Co-Op and GML. The Buyer and/or the Buyer s Guarantor shall provide suitable guarantees of Export Co-Op and GML obligations including with respect to the purchase and transportation of natural gas supply, natural gas liquefaction and terminal use and LNG shipping as applicable. The delivery point (the Delivery Point ) will be mutually agreed between the Buyer and Seller based upon LNG shipping arrangements and other material considerations, including the final destination of the LNG being purchased, the location of the Buyer, the location of the LNG regasification terminal to which the LNG is being shipped and other considerations. However, within this framework the Delivery Point is anticipated to be either: (a) the outlet flange of Seller s loading facilities located at Seller s liquefaction terminal; or (b) the Buyer s designated regasification terminal in the case where the Seller provides shipping; or (c) in international waters aboard the LNG transportation vessel in the case where the Seller sub-charters the Buyers LNG transportation vessels. For greater certainty hereof, the Buyer and the Seller confirm that the Back-Up LNG Purchase and Offtake Agreement will provide a mechanism to cover LNG shipping costs for all delivery points other than as described in (a) herein. At the request of the Buyer, the Seller will provide or otherwise arrange for LNG shipping associated with contract deliveries to the Buyer in the event a Delivery Point outside Canadian waters is mutually agreed. In such event, the Seller will: (a) provide requisite shipping on a cost pass-through basis to the Buyer; or (b) the Seller will sub-charter the requisite shipping from the Buyer with full cost recovery. Each LNG vessel shall be designed, constructed, equipped, operated and maintained to safely load, unload and carry LNG. Title and risk of loss to LNG delivered by the Seller shall pass simultaneously from the Seller to the Buyer at the point in - 4 -

5 Page 5 of 7 time when LNG passes the Delivery Point and the Buyer shall assume all risk of, and full responsibility for, any loss, deterioration, evaporation and damage of whatsoever amount or nature to or in respect of or caused by the LNG howsoever arising after the LNG has passed the Delivery Point. All LNG sold shall be for Buyer s account or the account of Buyer s nominee only. Subject to mutually agreed arrangements regarding LNG shipping, the Buyer or the Buyer s nominee may change the cargo destination without the need to obtain the prior consent of the Seller. Payment: Taxes and Charges: Permissions and Approvals: Force Majeure: Unless agreed otherwise by the Seller, payment shall be made in immediately available funds by wire transfer in United States Dollars free of all charges and without asserting any setoff or counter-claim or making any deductions into the bank account nominated by Seller. The Buyer shall be required to pay for only the quantity of LNG delivered to the Buyer at the Delivery Point. All taxes, levies and other similar costs, charges or amounts ( Taxes ) imposed on the LNG sold hereunder subsequent to the Delivery Point shall be the sole responsibility of and be paid or borne by Buyer. The Buyer shall fully reimburse the Seller for any such Taxes, which the Seller is obliged to pay. All Taxes imposed on LNG at or prior to the Delivery Point as well as any export charges or similar charges imposed by a government or duly constituted authority having legal jurisdiction over the Project, shall be paid or borne by the Seller. The Seller shall reimburse the Buyer for any such Taxes and amounts, which Buyer is obliged to pay. The Seller and the Buyer shall obtain or cause to be obtained all necessary permissions, authorizations and approvals and shall satisfy such other requirements imposed by all relevant government or other duly constituted authorities which are necessary to enable the Buyer and the Seller, as applicable, to perform their respective obligations under the Back-Up LNG Purchase and Offtake Agreement. No Party shall be liable for a failure to fulfill an obligation under the Back-Up LNG Purchase and Offtake Agreement (other than an obligation to pay money or where a Party may perform its obligations under the Back-Up LNG Purchase and Offtake Agreement through the payment of money) and shall not be in breach of the Back-Up LNG Purchase and Offtake Agreement, if and to the extent to which fulfillment has been - 5 -

6 Page 6 of 7 delayed, interfered with or prevented by Force Majeure. For the purpose of this paragraph, Force Majeure shall be defined as any circumstance or event whatsoever which is beyond the reasonable control of the Party affected, such Party having acted reasonably, prudently and in good faith, with a view to the LNG industry generally for long term take or pay contracts and its obligations as Buyer or Seller, as the case may be and which cannot be overcome by the exercise of reasonable diligence. Provisions to be mutually agreed upon in final documentation. Safety: Other Provisions: The Seller and the Buyer recognize the importance of securing and maintaining safety in all matters arising in connection with or reasonably relating to the Back-Up LNG Purchase and Offtake Agreement and it is their respective intentions, in connection therewith, to secure and maintain international standards of safety in accordance with the generally accepted standards prevailing in the LNG industry from time to time. In addition to providing greater detail in respect of the matters reflected in this Term Sheet, the Back-Up LNG Purchase and Offtake Agreement will include such further and additional terms and provisions as are agreed to by the Buyer and Seller, including, but not limited to, terms and provisions in respect of the following: QUANTITY AND QUALITY MEASUREMENT, SAMPLING AND TESTING FAILURE TO LIFT; FAILURE TO SUPPLY LIMITATION OF LIABILITY GENERAL PROVISIONS LNG SALES CONFIRMATION NOTICE PROVISIONS LOADING TERMS AND RELATED MATTERS CALCULATION OF QUANTITY AND QUALITY Option to Enter into Back-Up Supply Agreement In the event that a Back-Up LNG Purchase and Offtake Agreement is executed between the Buyer and the Seller on or before December 15, 2011, the Buyer shall be granted an option, exercisable for days from the date that the Back-Up LNG Purchase and Offtake Agreement is so executed, to enter into a Back-Up natural gas supply contract with GML as agreed to by the Buyer and GML and in accordance with the - 6 -

7 Page 7 of 7 Nomination Procedures, relating to the supply of natural gas in such amount as is requested by GML from time to time upon reasonable notice, such requested amount not to exceed the then existing liquefaction capability of the Project. Governing Law: Non Non-Binding and Binding Provisions: Confidentiality: The construction, validity and performance of the Back-Up LNG Purchase and Offtake Agreement shall be governed by the laws of England and the Parties shall attorn to the jurisdiction of the Courts of England. This Term Sheet is a preliminary document only, intended to set forth certain basic terms to serve as a basis for discussion and, as applicable, preparation of the Back-Up LNG Purchase and Offtake Agreement. Except for the provisions in the immediately following paragraph relating to confidentiality and the non-disclosure of the existence or subject matter of this Term Sheet, which the Parties hereby agree shall be binding commencing on the date hereof, this Term Sheet is non-binding and does not in anyway or to any degree whatsoever create and is not intended to create, a binding and enforceable agreement and may not be relied upon by either party as the basis for a contract by estoppel or otherwise. Any such binding agreement will arise only upon the negotiation, execution and delivery of mutually satisfactory definitive agreement(s). Except as provided in that certain Confidentiality Agreement dated [insert applicable date], by and between [Name of Buyer] and LNG Partners, none of Export-Co-Op, GML or [Name of Buyer] may disclose to any individual or entity whatsoever, for any reason or to any degree whatsoever, the existence or subject matter of this Term Sheet, except if such disclosure is consented to by the other parties in writing or if otherwise required by applicable law or regulation, legal process or order or requirement of a court of competent jurisdiction or government department or agency