Common use of Material Costs Clause in Contracts

Material Costs. Costs of materials and supplies, equipment, machines, tools and any other goods of a similar nature used or consumed in the Hydrocarbons Operations subject to the following: a) Acquisition: Contractor shall only supply or purchase materials for use in the Hydrocarbons Operations that may be used in the foreseeable future. The accumulation of surplus stocks and inventory shall be avoided so far as is reasonably practical and consistent with efficient and economical operations. Inventory levels shall, however, take into account the time lag for replacement, emergency needs, weather conditions affecting operations and similar considerations. b) Components of costs, arm’s length transactions: Except as otherwise provided in paragraph 3.8(d) below, material purchased by the Contractor in arm’s length transactions in the open market for use in the Hydrocarbons Operations shall be valued to include invoice price less trade and cash discounts, purchase and procurement fees plus freight and forwarding charges between point of supply and point of shipment, freight of port of destination, insurance, taxes, customs duties, consular fees, excise taxes, other than items chargeable against important materials and, where applicable, handling and transportation expenses from point of importation to warehouse or operating site. c) Accounting: Such material costs shall be charged to the accounting records and books based in accordance with the “First in, First out” (FIFO) method; d) Material purchased from or sold to Affiliates of the Contractor of transferred from other activities of the Contractor to or from the Hydrocarbons Operations shall be valued and charged or credited at the prices specified in paragraphs (i) to

Material Costs. Costs Cost of materials and supplies, equipment, machines, tools and any other goods of a similar nature used or consumed in the Hydrocarbons Operations subject to the following: (a) Acquisition: Contractor shall only supply or purchase materials for use in the Hydrocarbons Operations that may be used in the foreseeable future. The accumulation of surplus stocks and inventory shall be avoided so far as is reasonably practical and consistent with efficient and economical operations. Inventory levels shall, however, take into account the time lag for replacement, emergency needs, weather conditions affecting operations and similar considerations. (b) Components of costs, arm’s length transactions: Except as otherwise provided in paragraph 3.8(d) below, material purchased by the Contractor in arm’s length transactions in the open market for use in the Hydrocarbons Operations shall be valued to include invoice price less trade and cash discounts, purchase and procurement fees plus freight and forwarding charges between point of supply and point of shipment, freight of port of destination, insurance, taxes, customs duties, consular fees, excise taxes, other than items chargeable against important imported materials and, where applicable, handling and transportation expenses from point of importation to warehouse or operating site. c) Accounting: Such material costs shall be charged to the accounting records and books based in accordance with the “First in, First out” (FIFO) method; d) Material purchased from or sold to Affiliates . Where an Affiliate of the Contractor of transferred from other activities has arranged the purchase, and coordinated the forwarding and expediting effort, a fee equal to four percent (4%) of the Contractor to or from value of the Hydrocarbons Operations materials shall be valued and charged or credited at added to the prices specified in paragraphs (i) tocost of the materials purchased.