Midstream Refining

Sales

Papua New Guinea is our principal market for the products our refinery produces, other than Naphtha and LSWR. Under our 30 year agreement with the State, the State has agreed to ensure that all domestic distributors purchase their refined petroleum product needs from our refinery, (and from any other refinery which may be constructed in Papua New Guinea), at IPP.

In general, the IPP is the price that would be paid in Papua New Guinea for a refined product that is being imported. In late 2007, the IPP was modified, most significantly by changing the Singapore benchmark price from the ”Singapore Posted Prices” which was no longer being updated, to ”Mean of Platts Singapore” (”MOPS”) which is the current benchmark price for refined products in the region in which we operate. The Project Agreement governing our relationship with the State is yet to be formally amended to reflect the revised formula which has been in use for the last four years.

The major export product from our refinery is the two grades of Naphtha. On January 1, 2010 a 12 month term agreement with Dalian Fujia Dahua Petrochemicals (“Dalian”), which operates a petrochemical plant in China, was entered into providing for export sales of Naphtha. This contract has been renewed subsequently and the current term agreement with Dalian runs for an 18 month period from January 1, 2011 until June 30, 2012.

Our refinery is fully certified to manufacture and market Jet A-1 fuel to international specifications and markets this product to both domestic Papua New Guinea and overseas airlines.

We were a net consumer of LPG until the conversion of the main process furnaces and commissioning of the Hyundai generators which burn LSWR in 2006. With the installation of the LSWR firing generators, heaters and boilers, plus improved facilities for recovering LPG from the reformer off-gas and increased percentages of sweet crudes containing LPG, we are now a net producer of LPG.

Customers

Domestically in Papua New Guinea we sell Jet A-1 fuel, diesel, gasoline and small parcels of LSWR to domestic distributors. Our main domestic customer is our downstream distribution business segment, however we also distribute fuel products to Niugini Oil Company, Islands Petroleum and Exxon Mobil.