RANIWORO SHIPMENT REPORT

Report Date: June 2010

Azhari Buang HSEQ Manager Far East

EXECUTIVE SUMMARY The purpose of this report is to identify the root causes of the incident and to take corrective actions to prevent recurrence. NOV Brandt Far East operations currently has no specific documented process or guideline pertaining to shipping of goods into Indonesia and its other locations. Generic information relating to shipping of goods from Singapore office can be found in Quality process map, QP-OP-SHP-01, Rev 2. This information was supported by a number of process activities and control points. Although, much of the existing documentation can be used as a guide for NOV Brandt Far East operations, it is recommended that specific documentation related to specific operations should be created, implemented and maintained with the focus of being fit for purpose for NOV Brandt Far East operations with the ultimate aims of efficiency and ease of use. This report presents a preliminary assessment of the incident and the findings are based on the chronology of the incident compiled by NOV Brandt Jakarta/Balikpapan personnel. This report has been prepared to the best of my knowledge. The incident happened when Brandt equipment were being held at Surabaya port customs for some documentation issues (shipping documents). This resulted in the delay (for about one month) of mobilisation of these equipments to Raniworo rig. Due to this delay, the job was not awarded to us thus resulting in loss of revenue and man-hours.

Raniworo Shipment Report

June 2010

CHRONOLOGY OF THE INCIDENT Below is the chronology of the incident - from job awarded until the current process. (Compiled by NOV Brandt Jakarta/Balikpapan personnel) 28 Jan, meeting Total and Apexindo for Raniworo (including Swaco and other Service providers for Total and Apexindo) 3 Feb, Teddy submitted the tech proposal within Brandt and Apexindo based on last survey report for Apexindo/Anardako 4 Feb, submitted our Quotation and meeting with Apexindo prior to approach Total. Brandt secured the Job. 9 Feb, Brandt confirmed awarded. 10 Feb, Teddy submitted RAR and listing material to Spore. 11 Feb, Teddy revisit the Rig for final set up proposal. 11 Feb, Teddy submitted revised RAR to JKT and Spore Office. 11Feb - 23Feb, Waiting for Proforma Invoice from Spore before import and masterlist process. 21 Feb, Teddy sent reminder to Spore for Proforma Invoice and asked either we still want to go by masterlist (due to Proforma invoice delay) or normal import as to start the masterlist process, Proforma Invoice and Bill of Landing required for the supporting documentation. 22 Feb, Draft of Proforma Invoice received on 22 Feb. 23 Feb, Final Proforma Invoice received from Spore and start to approach Total and Apexindo for masterlist option. 23 Feb, Teddy met Total asking permission from Total to use Total masterlist facilty and Total agreed. 23 Feb, Teddy met Total Intern (BRI building) for Masterlist procedures. 23 Feb, Teddy approached Apexindo for the documentation. 23 Feb, Teddy instructs Brandt Jkt to work out with Apexindo Jkt for the necessary document for the masterlist process. 22 February Submmit draft master list to Apexindo & Total Indonesia 25 February Shipment arrive at Surrabaya port, B/L Under Total Indonesia ( it required if we use Total Master list) Till 23 March Master list still review by Total and not register yet to BP Migas 24 March 2010 forward quotation from PERTAMINA TONGKANG to Teddy Amau 24 March get approval quotation from Singapore after long time master list still review by total intern (aggreement betwen Imeco and Apexindo not ready yet) 24 Feb 10 Apexindo issued LOI (letter of intent) 25 March 2010 we decide to pay the PIB and process reedress (get statement letter from Total that unit own by Imeco Friday 26 March I go to Surabaya to process reedress 29 March Interview with custom and get confirmation that to process reedrees need 1 weeks, after ask to Total by verbal we decide pay under Total name. Monday 29 March start to process doc require to be signed By Total.
June 2010 3

Raniworo Shipment Report

Tuesday 30 March Total not agree if PIB under Total name because make confusing asset at the end of the contract 31 March We try to use temporary import but we can't use it because the temporarry import should be under Balikpapan custom process (working area at Balikpapan) 1 April we decide use vourislag (use custom Bond/cash money) and process master list Tuesday night 30 April 2010 send 2 unit centrifuge to Raniworo 31 March 2010 send draft for application vourislag to Total and confirm to process continue master list Friday morning 1April 2010, 2 unit centrifuge arrived at Raniworo Friday afternoon 1 April 2010 Total confirm submmit master list to BP Migas and will be send the received to Brandt by Monday morning include application for Vourislag 5 April Get official receipt from Migas Jakarta ( planning start process vorislagh without offical receipt from custom/will be submmit lather but Total not agree) 6 8 April process master list forwarder by Telaga Biru (Apexindo Agent) 9 April Master lilst reject by Migas because Raniworo already have centrifuge (Centrifuge already re export but not report yet to Migas) 12 April Continue Process redress ( Warsono interview with custom Surabaya ) 13 April Djulianto from Total Interview with custom Surabaya 14 April Get confirmation from carries Singapore that confirm redress 15 April Shipping/carrier Agent interview with custom Surabaya 16 April Continue process redress 19 April show the original formalities document to custom and get skep redress 20 April process BCF 1.5 ( open custom Seal ) 21 April process online PIB / NSW (Nation Single Windows) 22 April process online reject by custom because system ask for LS ( Survey Report) 23 April Submit application to custom for Inspect by Surveyor Indonesia to get LS (Surveyor Report) 26 April Custom ask for permit from Trade & Industrial department 27 April submit application to get dispensation letter to inspect at Surabaya location the rule is unit should be inspect in Singapore. 1 May change forwarder use Prima Cipta 2 May from Prima Cipta go to Surabaya 3 May process clearance to make out the unit not include in category LS Get confirmation estimate unit will out the fastest 11 May 2010. 6/5 The new forwarder cancel and bock to the old forwarder (Pertamina Tongkang ) 6/5 Continue process dispensation letter to get inpection in location Surabaya Dispentation letter estimate will get next week After dispensation letter done need to submit to custom Custom will issued the letter to inspect the equipment which get the LS Surveyor Indonesia check the 6 item get the LS After physical check finish process LS LS finish continue process online custom to get red line or green line
June 2010 4

Raniworo Shipment Report

If green line continue process SPPB/permit to out deliver to Brandt warehouse If red line need physical check again Process redline about 3 days If every think as per document continue with SPPB/permit out and deliver to Brandt warehouse

Raniworo Shipment Report

June 2010

FINDINGS Documentation .i.e. contract agreement (between Apexindo and NOV Brandt/PT Imeco), MasterList preparation (temporary importation) not completed and signed when goods arrived in Surabaya port on 25th Feb 2010. This caused a huge delay in goods clearing through Surabaya customs (goods declaration). Letter of Intent was issued on 24th Feb 2010 by Apexindo to Brandt.

Recommendations All documentation i.e. contract agreement, customer POs, Master List documentation, etc are to be prepared/signed/approved and send to Singapore Operations Support by In-Country/Sales personnel prior to any shipment. Singapore Operations Support shall review all documentations for completeness prior to any shipment. Indonesia Importation Guideline shall be developed. The guideline describes the process flow, process for entry prior to clearance, destination import customs clearance, etc. Any variations to the above, requires Vice-President/Senior management approval for shipping. Singapore Operations Support shall furnish equipment details e.g. new or used, equipment serial no, part list, etc. to In-Country/Sales personnel upon equipment request (in a form of RAR). This information will be used to decide the mode of import clearance e.g. the use of masterlist documentation (temporary importation), to lodge the import declaration (PIB), etc. All documentation to be prepared in advance to avoid any disruption/delay in shipment. Decision on the mode of import clearance to be made in writing and confirmed by In-Country/Sales personnel prior to shipping. Contingency planning need to be established between Brandt Jakarta/Balikpapan and Singapore Operations support to cater for any emergency situations/unforeseen circumstances regarding the actual handling, tracking of goods as well as forecasting and reporting mechanisms.

Raniworo Shipment Report

June 2010

FINDINGS Delay (approx. two weeks due to Chinese New Year holidays in Singapore) in sending information i.e. status of equipment availability, Performa Invoice, etc back to In-Country/Sales personnel. RAR was first raised on 10th Feb 2010 and subsequently the RAR was revised and sent back to Singapore on 11th Feb 2010 after the rig visit. In-Country/Sales personnel received the information required from Singapore on 23rd Feb 2010. Process of preparation of masterlist documentation started on 23rd Feb 2010, after more than 2 weeks the job has been awarded.

Recommendations Singapore Operations shall furnish the information required to In-Country/Sales personnel within the recommended time frame (case by case basis and urgency of request) to avoid jeopardizing the final delivery dates taking into consideration the time needed to prepare the import clearance documentation by InCountry/Sales personnel. Singapore Operations Support shall furnish equipment details e.g. new or used, equipment serial no, part list, etc to In-Country/Sales personnel upon equipment request (in a form of RAR). This information will be used to decide the mode of import clearance e.g. the use of masterlist documentation (temporary importation), to lodge the import declaration (PIB), etc.

FINDINGS Lack of communication and coordination between various parties .i.e. Brandt Jakarta/Balikpapan office, freight forwarder, Apexindo and TOTAL regarding the whole process of import clearance documentation and re-addressing. Communication was done mostly in Balikpapan between Brandt Balikpapan and TOTAL Balikpapan. This includes means of transportation and sailing schedule for the shipment freight forwarder door to port and port to destination. (Destination Handling)

Recommendations Communications and coordination between various parties need to be established and relooked. To appoint a focal point to be in-charge of the whole process and coordinate all activities relating to import clearance documentation, etc. The focal point shall gather all information, attend clarification meetings as required with regards to import clearance and queries, record salient points, and ensure that all documents, etc. have been furnished. Input may be requested from other departments e.g. operations, sales, engineering, agents, intercompany representative, etc.

Raniworo Shipment Report

June 2010

Focal point shall follow-up with facility owner regarding temporary importation with the help of third party i.e. PT Imeco and Apexindo. Expediting process will be performed when necessary by focal point and third party. Focal point shall review any updates and make necessary actions regarding actual handling, tracking of import clearance documentation as well as forecasting and reporting mechanisms. Destination Import Customs Clearance and In-Country services in the receiving country to be discussed and arranged by focal point if required. This may involve the freight forwarder (door to port, port to destination) and other related parties e.g. agent, client, etc. Transportation from the point of entry up to receiving place in the receiving country to be discussed and arranged by focal point if required. This may involve the freight forwarder (door to port, port to destination) and other related parties e.g. agent, client, etc. Information concerning changes in customs clearance regulations in the receiving country to be advised to Brandt focal point at the earliest opportunity. Appointed freight forwarder shall be evaluated based on overall performance. Define the keys steps and responsibilities for the nomination, selection and authorization of approved vendors (freight forwarder) and for the monitoring of the performance of each vendor. Ensure the accuracy for the particulars/information in the import declaration (PIB) to avoid delay in custom handling.

Raniworo Shipment Report

June 2010

OTHER FINDINGS Equipment Masterlist was being rejected by MIGAS since the equipment was imported before and its Masterlist (under SANTOS) has yet to be closed.

Recommendations Focal point To check the equipment status. All temporary goods without any duty payment to be re-exported back within certain period of time. This is to prevent to pay the duty and taxes as well as fine amounting 100% of customs duty payable.