PETRONAS Procedures

and Guidelines for Upstream

Activities (PPGUA 3.0)

PETROLEUM INVESTMENT
VOLUME 2

2013 PETROLIAM NASIONAL BERHAD (PETRONAS)

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Table of Contents
Executive Summary
Contact Information
Definitions
Section 1: Block Acquisition
1.1 Introduction
1.2 Registering an Interest
1.3 Company Screening and Data Review

1.3.1 Establish Contact

1.3.2 Data Review

1.3.3 Expression of Interest (EOI)
1.4 Bidding and Award
1.4.1 Bidding

1.4.1.1 Issuance of Invitation to Bid

1.4.1.2 Bid Package Submission

1.4.1.3 Bid Evaluation

1.4.2 Conditional Award
1.4.3 Finalisation
Section 2: Farm In/Farm Out Exercises and Media Announcement
2.1 Farm In/Farm Out

2.1.1 Farm in/Farm Out Process
2.2 Media Announcements

2.2.1 Procedures for Media Announcement - Specific Categories
Abbreviations

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Executive Summary
As custodian of Malaysias oil and gas resources pursuant to the Petroleum
Development Act 1974, PETRONAS constantly strives to advance Exploration and
Production (E&P) activities in the country. PETRONAS promotes exploration &
exploitation of petroleum investments, optimise Malaysias E&P assets and
manage all E&P activities in the country. Its aspiration is to provide a conducive and
progressive business environment in the Malaysian oil and gas industry.
Petroleum Management Unit (PMU), acts for and on behalf of PETRONAS,
and responsible for the overall management of Malaysias domestic oil and gas
assets. Its main functions among others is to manage the optimal exploitation of
hydrocarbon resources and enhance the prospectivity of domestic acreages in
order to attract investment in the Malaysian oil and gas industry as well as protecting
the national interest.
This volume shall contain two (2) main sections. Section 1 provides guidelines for
block acquisition and Section 2 provides guidelines for Farm In/Farm Out exercises
and media announcements.
PETRONAS reviews and approves the participation of investors in the Malaysian
petroleum operations.

Contact Information
General inquiries regarding content of this volume shall be made to:
Senior General Manager
Petroleum Resource Exploration
Petroleum Management Unit
and/or
Senior General Manager
Petroleum Resource Development
Petroleum Management Unit

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Definitions
TERM

DEFINITION

Bid Package

A package that includes instructions and guidelines for

interested investors to participate in the bidding process.

Conditional Award

An award of a block or field with the requirement for

Contractor to fulfill certain conditions prior to final award.

Confidentiality Agreement

Non-disclosure agreement executed by Potential Investor(s)

and PETRONAS to protect the confidentiality of PETRONAS
data.

Farm In/Farm Out

Whenever a company acquires/assigns participating interest

from an existing Contractor in an existing Contract.

International
Unitisation Agreement

An agreement entered into between two (or more) host

Governments in relation to the joint development and
production of a straddling field(s) across the national
boundaries of each country.

Potential Investor(s)

Company(ies) that is interested in investing in Malaysias E&P

activities including existing Contractor(s) intending to acquire
additional Malaysian acreages.

Straddling Field(s)

Petroleum field(s) that has geological communication and

shares the same field structure with another petroleum field in
another block.

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Section 1: Block Acquisition
1.1 Introduction

Potential Investors with a genuine interest in acquiring exploration blocks

within Malaysia are required to convey their interest formally to PETRONAS.
All companies will be screened by PETRONAS to ensure that certain criteria
for Malaysian investment are met. If the company is eligible to explore in
Malaysia, a data review session will be arranged followed by a bidding
exercise. All block acquisition processes are handled by PMU on behalf
of PETRONAS.

1.2 Registering an Interest

The Block Promotion unit from the Basin Assessment and Promotion (BAP) in
Petroleum Resource Exploration (PREX), PMU is responsible among others
to market and promote Malaysian exploration opportunities. Its aim is to
attract and sustain foreign investments in domestic E&P. Since its
establishment in 2004, the Block Promotion unit has moved from
conventional to aggressive promotion by embarking on various marketing
strategies to attract Potential Investors to undertake exploration activities
in Malaysia.

A Potential Investor must formally express its interest to participate in

Malaysian domestic exploration opportunities with the Petroleum Resource
Exploration Department. The procedures are explained below.

1.3

Company Screening and Data Review

1.3.1






1.3.2

Establish Contact
Potential Investor must submit its companys profile, together
with latest audited financial statement, to PETRONAS for screening
purposes. Successfully screened investors are eligible to participate in
the review of Malaysian exploration opportunities.
Data Review
PETRONAS will send an invitation to all successfully screened
investors, together with a technical summary of the focus blocks.
Potential Investor shall express its interest to participate in the
data review to PETRONAS. A data review session will be scheduled.
Potential Investor must execute Confidentiality Agreement (CA) prior
to any data review session. Only information on the offered block(s)
is available for review. PETRONAS will not permit data review in any
other
block. Removal and copy of data (in any format) from the
data review room without prior written consent from PETRONAS,
is strictly prohibited.
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Potential Investor may request additional data review visits in

respect of the offered block, subject to room availability. Potential
Investor shall submit a technical evaluation report of the reviewed
block(s). This must be completed within two (2) months after the first
data review session.
Figure 1: Data Review and Block Award Process

Establish
Contact

Courtesy
visit and
review of
current
opportunities

Companies
establish contact
with PMU and
assessed for interest

Data
Review

1.3.3

Data is
available for
review upon
request and
companies
are requested
to sign
confidentiality
agreement

Bidding

Conditional
Award

Shortlisted
companies are invited
for a closed tender for
selected blocks

Negotiation

Contract
Signing

Contract negotation and

award to successful
company

Companies
submit report
on findings
and interest
within three (3)
month

Expression of Interest (EOI)

Once the Potential Investor has completed the data review of the
offered block(s), PETRONAS will request the Potential Investor to
submit an EOI on the reviewed block(s). Potential Investor must
express in writing its interest to participate in the bidding process if
it wishes to be considered.

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1.4 Bidding and Award


1.4.1 Bidding
1.4.1.1

Issuance of Invitation to Bid (ITB)

After the submission of the EOI to PETRONAS, Potential
Investor will receive an ITB, together with a CA from
PETRONAS at the beginning of the bidding exercise. The
CA at this stage is to govern the confidentiality of the data
and information related to the bid activity and is separate
and different from the earlier CA signed for the data review.
Potential Investor shall respond to the ITB before the given
deadline if it wishes to participate in the bidding.

1.4.1.2

Bid Package Submission

PETRONAS will provide written instructions and guidelines
on the bidding process. The guidelines consist of the
following documents:

a) An ITB;

b) CA (executed);
c) Attachment 1A: Tender information including rules for

submission of proposal;

d) Attachment 1B: Instructions to bidders with regards to

conflict of interests;

e) Attachment 2: Draft Contract;

f ) Attachment 3: Location map;

g) Attachment 4: Location map and coordinates of block;
and

h) Appendix A: A template for the bid.

Potential Investor needs to submit its bid within a month upon

receiving the bid package in accordance with the template. Potential
Investor must also provide:

a)
b)
c)
d)
e)

company profile;
geological and geophysical evaluation of the block;
proposed exploration strategy for the block;
proposed minimum exploration work for the block; and
financial commitment to undertake the exploration activities for
the block.

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1.4.1.3

Bid Evaluation
All bid submissions will be evaluated by the Bid Evaluation
Committee (BEC) which is a committee formed by
PETRONAS. The BEC will evaluate the bid based on
technical and financial criteria.

Clarification Meeting
Upon recommendation from the BEC, the Business
Development Team under PREX, PMU will conduct a
clarification meeting with the shortlisted bidder. The
shortlisted bidder is required to explain its bid proposal,
focusing on the minimum work, financial commitment, and
exploration strategy aspects of its bid. During the
clarification meeting, PETRONAS may require the shortlisted
bidder to revise its proposal to serve the best interests of
both parties.

1.4.2

Conditional Award
After the clarification meeting with the shortlisted bidder and the
receipt of the revised proposal if any, PETRONAS will decide to give
conditional award to the successful bidder.

1.4.3 Finalisation
PMU together with the successful bidder will finalise all terms and
conditions of the Contract for execution.

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Section 2: Farm In/Farm Out Exercises and Media Announcement
2.1

Farm In/Farm Out

2.1.1

Farm In/Farm Out Process

A company may farm in or an existing Contractor may farm out
its participating interest or equity in a Contract subject to the final
approval of PETRONAS. Depending on the phase of petroleum
operations of a Contract in which the farm in/farm out exercise
occurs, the following departments within PMU are responsible to
review such exercise:

PHASE

DEPARTMENTS WITHIN PMU

Exploration

Petroleum Resource Exploration (PREX)

Development

Petroleum Resource Development (PRD)

Production

Petroleum Operations Management (POM)

The written application shall be submitted directly to PMU which

includes:

a)
b)
c)
d)

Letter of Intent (LOI);

Proposed farm in candidate(s) profile; and
Proposed CA;
Data package if applicable

A farm in/farm out exercise can only be executed upon PETRONAS

approval.

Figure 2 demonstrates the process farm in/farm out exercise.

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Figure 2: Farm In/Farm Out Process Flow

START

YES

Contractor sends LOI, draft CA, Data Package

and list of candidates to PETRONAS
Amendment
NO
PETRONAS
approval on the release of the reviewed CA
YES
Contractor to submit to PETRONAS
the signed CA with all the candidates
Bidding Process
Submit Farm Out application and
evaluation report to PETRONAS
NO
PETRONAS approval on Farm Out
Contractor to notify the approved candidates
and issue a Side Letter to JOA parties
PETRONAS issues Side Letter to Contract
Contractor to submit the acknowledged Side Letter
to Contract and copy of Side Letter issued to JOA to PETRONAS

END

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2.2 Media Announcements

Any media announcements relating to PETRONAS and petroleum operations

of the Contract shall require PETRONAS prior approval.

All media enquiries, especially on sensitive issues and PETRONAS policies,

shall be directed to PETRONAS for appropriate responses.

2.2.1 Procedures for Media Announcement - Specific Categories
Media announcements of certain categories shall be directed to the
respective Head of Departments in PMU:
CATEGORY

RESPONSIBLE HEAD OF DEPARTMENT

Exploration

Senior General Manager, PREX

Development

Senior General Manager, PRD

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Abbreviations
TERM

12

IN FULL

BAP

Basin Assessment and Promotion

BEC

Bid Evaluation Committee

CA

Confidentiality Agreement

E&P

Exploration and Production

EOI

Expressions of Interest

ITB

Invitation to Bid

JOA

Joint Operating Agreement

LOI

Letter of Intent

PMU

Petroleum Management Unit

POM

Petroleum Operations Management

PRD

Petroleum Resource Development

PREX

Petroleum Resource Exploration

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