##### 



EXHIBIT 1
 FORM 51-102F3
 MATERIAL CHANGE REPORT
 1.
    
    Name and Address of CompanyInterOil Corporation (InterOil)
60-92 Cook Street Portsmith,
Queensland 4870 Australia2.
    
    Date of Material ChangeJuly 31, 20073.
    
    News ReleaseA news release was issued in Canada by CCN Matthews on July 31, 2007 and subsequently
filed on SEDAR.4.
    
    Summary of Material ChangeOn July 31, 2007, InterOil Corporation announced that it had (through its wholly owned
subsidiary InterOil LNG Holdings Inc.) entered into a shareholder agreement with a Merrill
Lynch entity and Pacific LNG Operations Ltd for the development of a liquefied natural gas
(LNG) project in Papua New Guinea.5.
    
    Full Description of Material ChangeThe material change is described in more detail in the press release attached as
Schedule A. Finalisation and execution of this Shareholder Agreement represents an
important step in developing the companys LNG project in Papua New Guinea. The Shareholder
Agreement is attached as Schedule B.6.
    
    Reliance on subsection 7.1(2) or (3) of National Instrument 51-102
Not applicable.7.
    
    Omitted InformationIn relation to the press release, no information has been omitted on the basis that it is
confidential information.In relation to the Shareholder Agreement, the following clauses have been omitted on the
basis that they are confidential:
 1.
    
    Clause 3.1 (g);2.
    
    Clause 5.1 (b);




---



##### 



3.
    
    Clause 5.12;4.
    
    Clause 12.1(c);5.
    
    Clause 13.5;6.
    
    Schedule 1, Parts 1 and 3; and7.
    
    Schedules 3 and 4. 8.
    
    Executive OfficerFor further information regarding the matters described in this material change report, please
contact Phil Mulacek, the Companys Chairman & Chief Executive Officer, at +61 7 4046
4600.9.
    
    Date of ReportAugust 22, 2007.
 InterOil CorporationBy:
    
    /s/ William Jasper

William JasperPresident & ChiefOperating Officer




---



##### 



NEWS RELEASE
 MERRILL LYNCH COMMODITIES, PACIFIC LNG
AND INTEROIL SIGN SHAREHOLDER AGREEMENT
 FOR LNG PROJECT
 HOUSTON, TEXAS, July 31, 2007  Merrill Lynch Commodities Inc., Pacific LNG Operations Ltd InterOil
Corporation
  PNG LNG Inc Liquid Niugini Gas Ltd.




---



##### 



InterOil Corporation
 Merrill Lynch
 Pacific LNG
 Contact Information:InterOil CorporationDavid Larson
    
    Anesti Dermedgogloudavid.larson@interoil.com
    
    anesti@interoil.com+1 281 292 1800
    
    +61 7 4046 4600Merrill LynchTerez HanhanTerez_Hanhan@ml.com+1 713 544 4085




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##### 



InterOil Corporation
   reserves Standards of
Disclosure for Oil and Gas Activities undiscovered resources




---



##### 



EXECUTION COPY
 SHAREHOLDERS AGREEMENT
 PNG LNG, INC.
 by and among
 INTEROIL LNG HOLDINGS, INC.,
 PACIFIC LNG OPERATIONS LTD.,
 MERRILL LYNCH PNG LNG CORP.,
 - and -
 PNG LNG, INC.
 Dated as of
 July 30, 2007




---



##### 



TABLE OF CONTENTS
 ARTICLE I DEFINITIONS
    
    
    21.1 Certain Definitions
    
    
    21.2 Other References
    
    
    161.3 Governing Language
    
    
    16ARTICLE II PURPOSE OF HOLDCO
    
    
    162.1 Holdco; Subsidiaries
    
    
    16ARTICLE III CAPITALIZATION OF PROJECT COMPANY GROUP
    
    
    173.1
***
    
    
    173.2 ***
    
    
    183.3 ***
    
    
    193.4 ***
    
    
    19ARTICLE IV THE PROJECT
    
    
    194.1 The Project
    
    
    194.2 Development of the Phase I Facilities
    
    
    214.3 Project-Related Approvals
    
    
    214.4 Supply of Gas for the Project
    
    
    224.5 Offtake of LNG Produced by the Project
    
    
    23ARTICLE V PROJECT FUNDING
    
    
    235.1 Mandatory Funding During Development Phase
    
    
    235.2 Funding of Project Development Costs and Long Lead Items
    
    
    235.3 Final Investment Decision; Mandatory Funding During Construction Phase
    
    
    245.4 Capital Calls
    
    
    265.5 Failure to Meet Capital Call
    
    
    265.6 Purchase of Contribution Deficit Amount
    
    
    275.7 Default Buy-out
    
    
    295.8 Emergency Shareholder Loans
    
    
    305.9 Emergency Debt
    
    
    315.10 Optional Funding During Operations Phase
    
    
    325.11 General
    
    
    335.12 ***
    
    
    335.13 Status of Escrowed Class B Shares
    
    
    345.14 Priority Purchase of Escrowed Class B Shares
    
    
    34ARTICLE VI GENERAL MEETINGS OF SHAREHOLDERS
    
    
    346.1 General Meetings
    
    
    346.2 Calling a General Meeting; Agenda; Unanimous Written Resolutions
    
    
    34




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##### 



6.3 Meeting Chair; Secretary; Minutes
    
    
    356.4 Quorum for General Meeting
    
    
    356.5 Voting Generally; Proxies
    
    
    356.6 Shareholders Resolutions
    
    
    366.7 Applicability to Subsidiaries
    
    
    36ARTICLE VII BOARD OF DIRECTORS; SUBSIDIARY BOARDS
    
    
    367.1 HoldCo Board Of Directors; Members of the Initial Board
    
    
    367.2 Term and Vacancies
    
    
    377.3 Removal of Directors and Alternate Directors
    
    
    377.4 Meetings; Agenda; Unanimous Written Resolutions
    
    
    377.5 Quorum; Alternate Directors; Minutes
    
    
    387.6 Voting
    
    
    397.7 Powers of the Board of Directors
    
    
    397.8 Delegation
    
    
    407.9 Board Committees
    
    
    407.10 Execution of Documents
    
    
    407.11 Remuneration
    
    
    417.12 Subsidiary Boards of Directors
    
    
    417.13 Applicability to Subsidiaries
    
    
    42ARTICLE VIII MANAGEMENT; EMPLOYEES AND SECONDEES
    
    
    428.1 Management of HoldCo
    
    
    428.2 Management of the Project Company
    
    
    428.3 Duties and Responsibilities of Management of Project Company
    
    
    438.4 Management of Subsidiaries
    
    
    438.5 Employees
    
    
    438.6 Secondees
    
    
    43ARTICLE IX BUDGETS
    
    
    449.1 Development Budget
    
    
    449.2 Construction Budget
    
    
    449.3 Operating Budget
    
    
    449.4 Expenditure in Excess of Budget
    
    
    45ARTICLE X FINANCIAL MATTERS; REPORTING AND INFORMATION
    
    
    4510.1 Accounting; Fiscal Year; Tax Information
    
    
    4510.2 Annual Financial Statements and Auditing
    
    
    4510.3 Inspections and Other Information
    
    
    4610.4 Development Reports
    
    
    4610.5 Construction Reports
    
    
    4610.6 Operations Reports
    
    
    4710.7 Project Company Group Funds
    
    
    4710.8 Tax Returns
    
    
    47
 iii




---



##### 



10.9 Exchange of Information
    
    
    4710.10 Compliance by Subsidiaries
    
    
    4710.11 Taxes; Domicile
    
    
    47ARTICLE XI DIVIDENDS AND RESERVES
    
    
    4811.1 Distribution of Cash
    
    
    4811.2 Share Dividends
    
    
    4811.3 Reserves
    
    
    4811.4 Subsidiary Policies Concerning Dividends and Reserves
    
    
    48ARTICLE XII TRANSFERS AND ENCUMBRANCES OF SHARES; SPECIAL
PURCHASE RIGHTS; RIGHT OF SHAREHOLDERS TO WITHDRAW
    
    
    4912.1 Restrictions on Share Transfers, Encumbrances and New Issues
    
    
    4912.2 Admission of New Shareholders
    
    
    5112.3 Preferential Purchase Rights
    
    
    5112.4 Tag-Along Rights
    
    
    5312.5
Special Purchase Rights in the
Event of a Shareholder Change of Control
    
    
    5412.6 Special Purchase Rights in the Event of a Violation of Section 13.3(a)
    
    
    5512.7
Right of Shareholders to
Withdraw Prior to Financial Investment Decision; Consequences of Withdrawal
    
    
    5612.8 Determination of Fair Market Value
    
    
    5812.9 Closing of Sales and Purchases of Shares
    
    
    5812.10 Disposition of Project Contracts
    
    
    5912.11 Amendment of Agreement
    
    
    5912.12 Escrowed Class B Shares
    
    
    59ARTICLE XIII OBLIGATIONS OF THE PARTIES
    
    
    5913.1 Compliance
    
    
    5913.2 Observance of Laws
    
    
    5913.3 Conduct Relative to Governmental Officials
    
    
    6013.4 Affiliate Transactions; Shareholder Conflicts of Interest
    
    
    6113.5
***
    
    
    6113.6 Applicability to Subsidiaries
    
    
    6213.7 Agreement to File Notice of Agreement
    
    
    6213.8 Parent Company Guarantees
    
    
    62ARTICLE XIV REPRESENTATIONS AND WARRANTIES
    
    
    63ARTICLE XV LIABILITY OF DIRECTORS AND OFFICERS; LIMITATION OF
LIABILITY
    
    
    6415.1
Liability of Directors and Officers; Indemnification by HoldCo
    
    
    6415.2 Limitation of Liability
    
    
    6415.3 Specific Performance
    
    
    6515.4 Sovereign Immunity
    
    
    65
 
  iv




---



##### 



ARTICLE XVI CONFIDENTIALITY
    
    
    6516.1 Confidentiality; Confidential Information
    
    
    6516.2 Duration of Confidentiality Obligations
    
    
    6716.3 Publicity
    
    
    67ARTICLE XVII ASSIGNMENTS
    
    
    6717.1 Assignments
    
    
    6717.2 Permitted Assignments
    
    
    68ARTICLE XVIII GOVERNING LAW
    
    
    68ARTICLE XIX RESOLUTION OF DISPUTES
    
    
    6819.1 Exclusive Means for Resolving Disputes
    
    
    6819.2 Negotiation
    
    
    6819.3 Arbitration
    
    
    69ARTICLE XX MANAGEMENT DEADLOCK
    
    
    7020.1 Management Deadlock
    
    
    7020.2 Responsibility for Board Management Deadlock
    
    
    7020.3 Responsibility for Shareholder Deadlock
    
    
    70ARTICLE XXI TERM; DISSOLUTION AND WINDING UP
    
    
    7021.1 Term of Agreement; Survival of Provisions
    
    
    70ARTICLE XXII DEFAULTS
    
    
    7222.1 Defaults
    
    
    7222.2 Consequences
    
    
    72ARTICLE XXIII MISCELLANEOUS PROVISIONS
    
    
    7323.1 Notices
    
    
    7323.2 Change of Address for Notices
    
    
    7323.3 Expenses
    
    
    7323.4 Interest
    
    
    7323.5 Further Assurances
    
    
    7323.6 No Further Relationships
    
    
    7323.7 Conflict of Terms
    
    
    7423.8 Entire Agreement
    
    
    7423.9 Amendments
    
    
    7423.10 Waivers
    
    
    7423.11 No Third Party Beneficiaries
    
    
    7423.12 Severability
    
    
    7423.13 Counterparts
    
    
    74
 v




---



##### 



SCHEDULESSchedule One
    
    ***Schedule Two
    
    Initial Members of the Board of Directors and Alternate DirectorsSchedule Three
    
    ***Schedule Three A
    
    ***Schedule Four
    
    ***Schedule Five
    
    Form of Shareholder Loan Note (Section 5.6(d))Schedule Six
    
    Form of Note Pursuant to Sale by Defaulting Shareholder (Section 5.7(c))Schedule Seven
    
    Project Principles; Shareholders Phase I Responsibilities; Shareholder Project CommitteeAppendix 7-1
    
    Major Project ContractsAppendix 7-2
    
    ***Appendix 7-3
    
    ***Appendix 7-4
    
    Construction Report RequirementsSchedule Eight
    
    Addresses for Notices (Section 23.1)
 
  vi




---



##### 



SHAREHOLDERS AGREEMENT  PNG LNG, INC.
 Agreement Effective Date
 (1)
    
    INTEROIL LNG
HOLDINGS, INC., a corporation organized under the laws of The Bahamas (IOC);(2)
    
    MERRILL LYNCH PNG
LNG CORP., a company organized under the laws of the Cayman Islands (MLPLC);(3)
    
    PACIFIC LNG
OPERATIONS LTD, a corporation organized under the laws of the British Virgin Islands
(PacLNG); and(4)
    
    PNG LNG, INC., a company organized under the laws of The Bahamas (HoldCo),
 Party Parties
 RECITALS
 Share Purchase Agreement
 Initial Shareholders percent
 Project Company




---



##### 



ARTICLE I
 DEFINITIONS
 Certain Definitions
 Act
 Action or Proceeding
 Additional Capital
 Additional Phases
 Affiliate control controlled by provided, however
 Agreement
 Applicable Law
 Articles of Association 
 Bahamas The Bahamas
 Bankruptcy Action
 2




---



##### 



Board of Directors Board
 Board Resolution
 Budget
 Business Day
 Buy-out Price
 Buy-out Transaction
 Buy-out Transaction Notice
 Capital Call
 Capital Interest
 Capital Surplus
 CD
Purchase Amount
 CD Purchase Right
 CEO
 CFO
 Chairman Chairman of the Board
 Change Notice
 Change of Control
 3




---



##### 



Changed Circumstance
 Changed Shareholder
 Claims
 Class A Shareholder
 Class A Shares
 Class B Shareholder
 Class B Shares
 Closing Actions Shareholder(s)
 Commercial Operations Date rd
 Competing Project
 Confidential Information
 Construction Budget
 4




---



##### 



Construction Phase
 Construction Plan
 Contribution Amount
 Contribution Date
 Contribution Deficit Amount
 Contribution Obligation Percentage
 Convention
 Cure Period
 Deadlock Unanimous Issue Schedule Three A.
 Dedicated Reserves
 Default
 Defaulted Capital Interests
 Defaulting Shareholder
 Development Budget
 Development Phase Section 5.3(e).
 Development Plan
 5




---



##### 



Dispute
 Disputing
Party
 Dollars $ US$
 Effective Date
 Eligible Assignee
 Emergency Shareholder Loan
 Emergency Shareholder Loan Notice
 Encumbrance Encumber
 Escrow Agent
 Escrow Agreement
 Escrowed Class B Shares
 Exercise Notice
 Fair Market Value
 6




---



##### 



FCPA
 FEED
 FID Conditions
 FID Date
 FID Recommendation
 Final Investment Decision
 Financial Closing
 Financing Agreement
   Financing Plan provided,
 FMV Determination Request
 FOB
 Fully Paid
 7




---



##### 



GAAP
 General Meeting
 GM-Commercial
 GM-Projects
 GM-Technical
 Government Official
 Governmental Approval
 Governmental Authority
 GSPA
 HOA
 HoldCo
 HoldCo Confidential Information
 ICC
 8




---



##### 



ICC Rules
 Indemnified Acts 
 Independent Appraiser
 Initial IOC Shares
 Initial MLPLC Shares
 Initial PacLNG Shares
 Initial Shareholder Schedule One
 Initial Shares
 Interested Party
 IOC
 IPI Agreement
 KBPs
 Lenders
 Lending Shareholder
 Liquidating Party
 LNG
 LNGSPA
 Loan Note Schedule Five
 LPG
 Major Contract
 9




---



##### 



Major Decision Schedule Four
 Major Project Contracts Appendix 7-1 of Schedule Seven
 Management Deadlock
 Material Governmental Approval .
 Memorandum of Association
 MLPLC
 Negative FID
 NGL
 Non-Deadlock Unanimous Issue Schedule Three A
 Notice of Default
 Notice of Proposed Transfer
 OECD
 Offer
 Offeree
 Operating Budget
 10




---



##### 



Operations Phase
 Order
 Ordinary Board Resolution
 Organizational Documents
 PacLNG
 Papua New Guinea PNG
 Par Value
 Parent Company Guarantee
 Participate
 Participating Shareholder
 Party
 Party Group
 Person
 Phase I Facilities
 Raw Gas Pipeline
 11




---



##### 



LNG Facility 1 2 1 2 NGL Facility
    Phase II Facilities
 PNG Government
 Positive FID
 Potential Acquirer
 PPL
 Pro Rata
   12




---



##### 



Project
 Project Company
 Project Company Board
 Project Company Group
 Project Company Share
 Project Company Shareholders Agreement
 Project Contract
 Purchase Contract
 Purchasing
Shareholder
 Recipient
 13




---



##### 



Representatives Representative
 Share .
 Share Purchase Agreement
 Shareholder
 Shareholder Buy-out Amount
 Shareholder Confidential Information
 Shareholder Conflict of Interest
    Shareholder Loan
 Shareholder Phase I Responsibilities
 Shareholder Project Committee
 Shareholders
Resolution
 Shortfall Amount
 14




---



##### 



Specified Number
 Specified Rate The Wall Street Journal
 Strategic Investor Strategic Investors
 Subject Interests
 Subsidiary
 Subsidiary Boards
 Subsidiary Shareholders
 Supermajority Board Resolution
 Tag-Along Notice
 Tag-Along
Sale
 Transfer
 Transfer Notice
 Transferring Shareholder
 Ultimate Parent Schedule One
 15




---



##### 



Unacquired Contribution Deficit Amount
 Unanimous
Board Resolution
 Unanimous Decisions Schedule Three A
 United States US
 Voting Percentage
 Willful Misconduct
 Withdrawal Notice
 Withdrawing Shareholder
 Other References
 Governing Language
 ARTICLE II
 PURPOSE OF HOLDCO
 Holdco; Subsidiaries
  16




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##### 



ARTICLE III
 CAPITALIZATION OF PROJECT COMPANY GROUP
 Initial Share Capital of HoldCo; Share Issuance.
 Par Value Schedule One
   Schedule One
 (i)
    
    IOC
    
    è
    
    Two (2) Class A Shares(ii)
    
    MLPLC
    
    è
    
    Two (2) Class A Shares(iii)
    
    PacLNG
    
    è
    
    One (1) Class A Share
   17




---



##### 



(i)
    
    IOC
    
    331/3 %(ii)
    
    MLPLC
    
    331/3 %(iii)
    
    PacLNG
    
    331/3 %
  Escrowed Class B Shares
 percent
  Changes in Share Capital; New Classes of Shares.
  
  18




---



##### 



provided
 Class B Subscription Rights
 Minimum Capital Requirements
 ARTICLE IV
 THE PROJECT
 The Project
 19
       provided Schedule Seven.
 st nd nd
  3 4 LPG
 Additional Phases
 20
        Development of the Phase I Facilities
  Shareholder Phase
I Responsibilities Schedule Seven provided
 Shareholder Project Committee Schedule Seven provided
  Project-Related Approvals
 21




---



##### 



Supply of Gas for the Project
 KBPs Dedicated Reserves GSPA Appendix 7-2 of Schedule Seven HOA inter alia
 PPL
 22




---



##### 



provided
 Offtake of LNG Produced by the Project LNGSPA Appendix 7-3 of Schedule Seven inter alia
 ARTICLE V
 PROJECT FUNDING
 Mandatory Funding During Development Phase
   Funding of Project Development Costs and Long Lead Items
 
  23




---



##### 



Final Investment Decision; Mandatory Funding During Construction Phase
  nd mutatis mutandis
 FID Conditions
 FEED
 Appendix 7-1 of Schedule Seven
    FID Recommendation Final Investment Decision
  24




---



##### 



Positive FID Negative FID Positive FID Negative FID
    25




---



##### 



Capital Calls
 Additional
Capital Capital Call Contribution Amount Contribution
Date provided
 Schedule One
 Failure to Meet Capital Call
 Contribution Deficit Amount plus
 26




---



##### 



percent 1 2
 provided, however
    27




---



##### 



Purchase of Contribution Deficit Amount
 CD Purchase Right CD
Purchase Amount
 provided
 Unacquired Contribution Deficit Amount provided, however
 28




---



##### 



Schedule Five
  Default Buy-out
 Buy-out
Transaction Notice Buy-out Transaction Defaulted Capital
Interests Buy-out Price percent percent
 multiplied Shareholder Buy-out Amount
 29




---



##### 







provided Schedule Six


provided, however


Emergency Shareholder Loans


Emergency Shareholder Loan 30




---



##### 



provided pari passu
 Emergency Shareholder Loan Notice Lending Shareholder Schedule Five.
  Emergency Debt
 31




---



##### 



Optional Funding During Operations Phase
  th
 th Shortfall Amount Participating Shareholder
 32




---



##### 



General
     
  33




---



##### 



Status of Escrowed Class B Shares
   Priority Purchase of Escrowed Class B Shares
 ARTICLE VI
 GENERAL MEETINGS OF SHAREHOLDERS
 General Meetings provided
 Calling a General Meeting; Agenda; Unanimous Written Resolutions
 34




---



##### 



Meeting Chair; Secretary; Minutes
 Quorum for General Meeting percent
 Voting Generally; Proxies
 35




---



##### 



Shareholders Resolutions percent Shareholders Resolution Schedule
Three
 Applicability to Subsidiaries
 ARTICLE VII
 BOARD OF DIRECTORS; SUBSIDIARY BOARDS
 HoldCo Board of Directors; Members of the Initial Board
   36




---



##### 



Schedule Two Schedule Two
 Term and Vacancies
  Removal of Directors and Alternate Directors
 provided
  Meetings; Agenda; Unanimous Written Resolutions
  37




---



##### 



Quorum; Alternate Directors; Minutes
   38




---



##### 



Voting
  Schedule Three A Unanimous Board Resolution
 Schedule Four Supermajority Board Resolution
 Schedule Three A Schedule Four Ordinary Board Resolution
  Powers of the Board of Directors
 39




---



##### 



Delegation
 Board Committees
  2 3
 2 3
  Execution of Documents
 40




---



##### 



Remuneration
 Subsidiary Boards of Directors
  provided however
    41




---



##### 



2 3
 2 3
  Applicability to Subsidiaries
 ARTICLE VIII
 MANAGEMENT; EMPLOYEES AND SECONDEES
 Management of HoldCo
 Management of the Project Company percent
 CEO
 CFO
 42




---



##### 



(c)
    
    a General Manager, Commercial Operations (GM  Commercial);(d)
    
    a General Manager, Technical Development (GM  Technical);(e)
    
    a General Manager, Projects (GM  Projects); and(f)
    
    the Board of Directors may also identify and, by a Supermajority
Board Resolution, cause the Project Company to appoint any additional officers and
senior managers from time to time, and such other personnel as it deems necessary
to carry out the business of the Project Company.
 Duties and Responsibilities of Management of Project Company
 Management of Subsidiaries
 Employees
 Secondees provided however
 43




---



##### 



ARTICLE IX
 BUDGETS
 Development Budget Development Budget provided
 Construction Budget Construction Budget
 Operating Budget
 Operating Budget
    44




---



##### 



Expenditure in Excess of Budget percent percent
 ARTICLE X
 FINANCIAL MATTERS; REPORTING AND INFORMATION
 Accounting; Fiscal Year; Tax Information
    Annual Financial Statements and Auditing
 th
 45




---



##### 



Inspections and Other Information
 percent percent
     Development Reports
 Construction Reports Appendix 7-4 of Schedule Seven
 46




---



##### 



Operations Reports
       Project Company Group Funds
 Tax Returns th
 Exchange of Information provided however
 Compliance by Subsidiaries
 Taxes; Domicile
 47




---



##### 



ARTICLE XI
 DIVIDENDS AND RESERVES
 Distribution of Cash provided,
however
 Share Dividends
 Reserves provided however
 Subsidiary Policies Concerning Dividends and Reserves
 ARTICLE XII
 48




---



##### 



TRANSFERS
AND ENCUMBRANCES OF SHARES; SPECIAL PURCHASE RIGHTS;
RIGHT OF SHAREHOLDERS TO WITHDRAW
 Restrictions on Share Transfers, Encumbrances and New Issues
         49




---



##### 



provided however Strategic Investor Strategic Investors Schedule One
   provided
  
  50




---



##### 



Admission of New Shareholders
 Preferential Purchase Rights
 provided however provided, further,
 Potential Acquirer Transferring Shareholder Transfer Notice
 51




---



##### 



Subject Interests Exercise Notice Purchasing Shareholder provided
 th
  52




---



##### 



Tag-Along Rights
 percent Purchase Contract
 Notice of Proposed Transfer Tag-Along Sale
 Tag-Along Notice
   st th
 53




---



##### 



Special Purchase Rights in the Event of a Shareholder Change of Control
 Change of
Control Changed
Circumstance ) Changed Shareholder Change
Notice th
 th
 54




---



##### 



st th
  Special Purchase Rights in the Event of a Violation of Section 13.3(a)
 FCPA OECD Convention
 55




---



##### 



Right of Shareholders to Withdraw Prior to Financial Investment Decision; Consequences of
Withdrawal
 Withdrawing Shareholder Withdrawal Notice th FID Date
 percent
  56




---



##### 



st th
    57




---



##### 



Determination of Fair Market Value
 Independent Appraiser
 FMV
Determination Reques t
  Closing of Sales and Purchases of Shares
  58




---



##### 



Disposition of Project Contracts
 Amendment of Agreement
 Escrowed Class B Shares
 ARTICLE XIII
 OBLIGATIONS OF THE PARTIES
 Compliance
 Observance of Laws
 59




---



##### 



Conduct Relative to Governmental Officials
        60




---



##### 



Affiliate Transactions; Shareholder Conflicts of Interest
 provided
 IPI Agreement
 Competing Projects
  
  61




---



##### 



Applicability to Subsidiaries
 Agreement to File Notice of Agreement
 Parent Company Guarantees
 
  62




---



##### 



ARTICLE XIV
 REPRESENTATIONS AND WARRANTIES
            63




---



##### 



ARTICLE XV
 LIABILITY OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY
 Liability of Directors and Officers; Indemnification by HoldCo.
 Indemnified
Acts
   provided
  Limitation of Liability
   64




---



##### 



Specific Performance
 Sovereign Immunity .
 ARTICLE XVI
 CONFIDENTIALITY
 Confidentiality; Confidential Information
 Recipient
   65




---



##### 



Confidential Information Shareholder Confidential Information  HoldCo Confidential Information
  provided
  66




---



##### 



provided, however
    .
  Duration of Confidentiality Obligations
 Publicity provided
 ARTICLE XVII
 ASSIGNMENTS
 Assignments
 67




---



##### 



provided, however,
 Permitted Assignments
 ARTICLE XVIII
 GOVERNING LAW
  ARTICLE XIX
 RESOLUTION OF DISPUTES
 Exclusive Means for Resolving Disputes Dispute Disputing Party.
 Negotiation
  68




---



##### 



Arbitration ICC Rules ICC
 
    ex aequo et bono
   th
 69




---



##### 



ARTICLE XX
 MANAGEMENT DEADLOCK
 Management Deadlock Management Deadlock
 Responsibility for Board Management Deadlock
 Responsibility for Shareholder Deadlock
 ARTICLE XXI
 TERM; DISSOLUTION AND WINDING UP
 Term of Agreement; Survival of Provisions
  70




---



##### 



Dissolution and Winding Up
  Liquidating Party
     71




---



##### 



ARTICLE XXII
 DEFAULTS
 Defaults Notice of Default Cure Period
 Consequences
     72




---



##### 



ARTICLE XXIII
 MISCELLANEOUS PROVISIONS
 Notices Schedule
Eight Schedule Eight
 Change of Address for Notices
 Expenses .
 Interest
 Further Assurances
 No Further Relationships
 73




---



##### 



Conflict of Terms
 Entire Agreement provided, however
 Amendments
 Waivers
 No Third Party Beneficiaries
 Severability
 Counterparts
 74




---



##### 



INTEROIL LNG HOLDINGS, INCBy:Name:Title:MERRILL LYNCH PNG LNG CORP.By:Name:Title:PACIFIC LNG OPERATIONS LTD.By:Name:Title:
 ACKNOWLEDGED AND AGREED TO:
 PNG LNG, INC. acknowledges and agrees to
be bound by, and to discharge, its obligations to
the extent set forth in this Agreement.
 PNG LNG, INC.
 
 75




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SCHEDULE ONE
 Initial Authorized Share Capital
  Part II: Escrowed Class B Shares
 Escrowed Class B Shares
    
    
    75,992,339
 Part III:
  Part IV:
    
    Initial Shareholders; Voting Percentages and Ultimate Parents of the Initial
Shareholders
 Number of Issued Class AInitial Shareholder
    
    Shares
    Voting Percentage
    Ultimate ParentMLPLC
    
    2 Class A Shares
    
    40%
    
    Merrill Lynch & Co., Inc.IOC
    
    2 Class A Shares
    
    40%
    
    InterOil CorporationPacLNG
    
    1 Class A Share
    
    20%
    
    N/ATotal
    
    5 Class A Shares
    
    100%
    
    N/A




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SCHEDULE TWO
 Initial Members of the Board of Directors
 Name of Director
    
    Name of Alternate Director
    
    Appointing ShareholderPhil E. Mulacek
    
    Collin Visaggio
    
    IOCChristian Vinson
    
    Neil Dolinsky
    
    IOCRob Jones
    
    Brad Hitch
    
    MLPLCDick Jefferis
    
    Dennis Albrecht
    
    MLPLCCarlo Civelli
    
    Mark R. Holcombe
    
    PacLNG




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SCHEDULE THREE




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SCHEDULE THREE A




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SCHEDULE FOUR
 Matters Requiring Approval by Supermajority Board Resolution




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SCHEDULE FIVE
 Form of Shareholder Loan Note (Section 5.6(d))
 [Date]
    
    New York, New York
 Payor Holder      Stated Maturity Date  Maturity
 Interest Payment Date 
 Definitions Agreement
 Debt
 Event of Default
 Senior Debt pari passu




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Payments: Prepayment
   Legal and Binding Effect
 Severability
 Default
 Subordination
 Waiver
 Costs of Collection and Attorneys Fees




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Applicable Law
 No Waiver by Holder
 
 PNG LNG, INC.By:Name:Title:




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SCHEDULE SIX
 Form of Loan Note Pursuant to Sale by a Defaulting Shareholder (Section 5.7(c))
 [Date]
    
    New York, New York
 name of purchasing shareholder   Payor DEFAULTING
SHAREHOLDER Holder  Loan
 Definitions. Agreement
 Distributable Cash
 Event of Default
 Default.
 Legal and Binding Effect.
 Severability




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Waiver.
 Costs of Collection and Attorneys Fees.
 Applicable Law.
 Prepayment.
 No Waiver by Holder.
 
 [PAYOR]By:Name:Title:




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SCHEDULE SEVEN
 Project Principles; Shareholders Phase I Responsibilities; Shareholder Project
Committee;
 Project Principles
       Shareholder Phase I Responsibilities
 Strategic Investors
 Financing




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Gas Supply
 Marketing of LNG. percent Schedule Seven
 Shareholder Project Committee




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SCHEDULE SEVEN
 APPENDIX 7-1
 Major Project Contracts
 Major Project Contracts
     EPC Contracts




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SCHEDULE SEVEN
APPENDIX 7-2
 KEY BUSINESS PRINCIPLES FOR THE
GAS SUPPLY AND PURCHASE AGREEMENT







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SCHEDULE SEVEN
APPENDIX 7-3
 KEY BUSINESS PRINCIPLES FOR THE
LNG SUPPLY AND PURCHASE AGREEMENT




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SCHEDULE SEVEN
APPENDIX 7-4
 Construction Report Requirements
  Work




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SCHEDULE EIGHT
 Addresses for Notices
(Section 23.1)
 HOLDCO
    
    PNG LNG, Inc.c/o Harry B. Sands, Lobosky and CompanyShirley House50 Shirley StreetNassauThe BahamasPO Box N-624Nassau,BahamasTel: +1-242-322-2670Fax: +1-242-323-8914Attention: (i) Phil Mulacek  President(ii) Mrs. Sarah Lobosky  Assistant SecretaryIOC
    
    InterOil LNG HOLDINGS, INC.c/o Harry B. Sands, Lobosky and CompanyShirley House50 Shirley StreetNassauThe BahamasPO Box N-624NassauBahamasTel: +1-242-322-2670Fax: +1-242-323-8914Attention: (i) Phil Mulacek  President(ii) Mrs. Sarah Lobosky  Assistant Secretarywith a copy which shall not constitute notice to:Haynes and Boone, LLP1615 L Street, NW, Suite 800Washington, DC 20036United States of AmericaTel: +1-202-654-4559




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Attention: Arthur Cohen, Esq.MLPLC
    
    MERRILL LYNCH PNG LNG CORP.Office of General CounselGlobal Markets & Investment Banking GroupMerrill Lynch Global Commodities, Inc.20 Greenway Plaza, Suite 950Houston, TX 77046United States of AmericaTel: +1-713-544-7400with a copy which shall not constitute notice to:Milbank, Tweed, Hadley & McCloy LLP10 Gresham StreetLondonEC2V 7JDEnglandTel: +44 (0)20 7615 3115Attention: Phillip Fletcher, Esq.William Belcher, Esq.PacLNG
    
    PACIFIC LNG OPERATIONS LTD.Gerbergasse 5P.O. Box 7427, CH  8023ZurichSwitzerlandTel: +41 44 22 6060Fax: +41 44 22 6010Attention: Carlo Civelliwith a copy which shall not constitute notice to:Morrison & Foerster LLP1290 Avenue of the AmericasNew York, N.Y. 10104United States of AmericaTel: +1-212-468-8007Attention: Jana Mansour, Esq.