Crude Supply Agreement between Petron and Saudi Aramco

July 2, 1999 PSE CIRCULAR FOR BROKERS NO. 1604-99 July 1, 1999 CRUDE SUPPLY AGREEMENT BETWEEN PETRON AND SAUDI ARAMCO The crude supply agreement between Petron and Saudi Aramco that had been originally drawn up in March 1994 was amended on June 27, 1999, following negotiations between the two companies that began last March. The amended contract is effective for three years, up to May 2002. Petron may negotiate for continuation of the current agreement, or for additional amendments, as needed. LibLex The original agreement, which was part of the deal where 40% of Petron's shares were acquired by Aramco, stipulated that Petron would source 90% of its crude requirements from the Middle East producer, with the flexibility to swap 15% of this volume with crude from other sources. The arrangement thus required Petron to run a minimum of 76% Aramco crude at its refinery. The amendments to the contract allow Petron to source from 63% to 90% of its crude from Aramco, depending on the economics and the availability of alternate crudes. This provides Petron with additional flexibility in choosing the optional crude mix for meeting domestic product requirements. The revised agreement gives Petron wider latitude in its crude purchasing decision, while assuring it of the availability of Aramco crude if no economical alternatives are available. Aramco controls 25% of known global oil reserves, and it is recognized by refiners throughout the world as a secure, long-term source of crude. The amended contract brings Petron to roughly the same arrangement it had prior to privatization, when it used to source more than half of its crudes from Aramco. An important difference between then and now is that the strategic partnership with Aramco has conferred certain privileges on Petron that it did not enjoy before. Today, Petron can lift any type and volume of crude oil from the producer, when and as needed. Before, it had to follow a strict lifting schedule based on pre-agreed, fixed types and quantities of crude. From its operational flexibility under the present system, Petron derives a significant amount of efficiency in its crude procurement operations. LexLib