PERU S S EXPLORATION FUTURE

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1 PERU S S EXPLORATION FUTURE Dr. Daniel Saba de Andrea Chairman of the Board PERUPETRO S.A. Rio de Janeiro March 2010

2 Peru Southern American Country Area : 1 285,215 km2. (496,224 sq. miles) Population: 27 million people Urban Population: 72 % (Lima 33%) Rural Population: 28% GDP: US$ 109 billion GDP Per Capita: US$ 4000

3 Peru s Geography Divided in 3 regions: -Coast -Andean Mountains -Amazon Rainforest.

4 Peru With more than 2,000 km shore in front the Pacific Ocean It is becoming a "regional hub" in the South American Pacific Area.

5 GDP GROWTH Sustained economic growth during last 10 years 12,0 10,0 GDP GROWTH (%) 8,0 6,0 4,0 2,0 0, YEAR

6 GDP GROWTH FORECAST We expect a sustanied growth of GDP in especially in Mining and Hydrocarbons GDP GROWTH FORECAST (%) GDP 9,8 0,9 5,0 5,8 6,0 -AGRICULTURE 7,2 2,3 3,8 4,0 4,0 -FISHING 6,3-7,9 2,2 3,1 3,2 -MINING & HYDROCARBONS 7,6 0,6 6,0 10,0 7,0 -MANUFACTURE 9,1-7,2 4,1 5,0 5,5 -ELECTRICITY & WATER 7,8 1,2 4,6 5,8 5,8 -CONSTRUCTION 16,5 6,1 9,4 8,5 10,0 -TRADE 12,8-0,3 4,6 5,3 5,9 -SERVICES 8,4 4,3 5,2 5,7 5,9 -PROD & IMPORT TAXES 11,8-1,5 4,1 5,3 6,2 (*) Ministry of Economy & Finance of Peru PERUPETRO S.A.

7 Inflation under Control (2.6 % Average last 10 Years) Inflation (%) ,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,00-1, Source: INEI

8 PERU Special Conditions to Attract Investment for exploration and exploitation of hydrocarbons

9 Peru is located within one of the most prolific mega tendencies in hydrocarbons in South America, the sub Andean south American mega tendency. Fuente: Adaptado de USGS

10 The areas with hydrocarbon potential in Peru are included in 18 Sedimentary Basins.

11 Hydrocarbon exploitation in Peru has been developed during 140 years. Productive areas are located in four areas of the territory: North Coast since Central Jungle since North Jungle since South Jungle since North Coast North Jungle Central Jungle South Jungle

12 PERU INSTITUTIONAL SAFEGAURDS THE CONTRACT LAW Defined under Article 62 of the 1993 Peruvian Constitution. Contracts between government agencies and private investors can only be amended by mutual agreement of the Parties. Neither Congress nor the Executive Branch can modify such contracts. The Constitution guarantees equal treatment to domestic and foreign investment.

13 PERU LEGAL FRAMEWORK ORGANIC LAW OF HYDROCARBONS In force and without changes since The Hydrocarbons Exploration & Exploitation License Contract is a Contract-Law. The property right over hydrocarbons is transferred to the Contractor at the moment of entering into a Exploration & Exploitation License Contract. The Contract-Law, is protected by the Peruvian Constitution, once it is subscribed it can only be modified by agreement of the Parties (PERUPETRO and the Contractor).

14 PERU LEGAL FRAMEWORK ORGANIC LAW FOR HYDROCARBONS Import of goods and supplies during the Exploration Phase are exempted of any tax. IGV (General Sales Tax) Anticipated Devolution during Exploration Phase. State guarantees fixed tax regimes in force at the date of entering into a Contract. The Contractor has free availability of hydrocarbons and can export them free of any tax.

15 PERU LEGAL FRAMEWORK ORGANIC LAW FOR HYDROCARBONS Central Bank of Reserve guarantees companies the availability of foreign currency. Freedom to bring in and repatriate funds to and from Peru. No permits required. Absolute freedom to fix hydrocarbon sales prices according to supply and demand.

16 PERUPETRO S. A. A State Company created by Law N Hydrocarbons Organic Law - in PERUPETRO started activities on November According to law, its social objectives include among others: To promote investment in hydrocarbons exploration and production activities. To negotiate and subscribe oil contracts on behalf of the Peruvian State. To exercise the supervision of oil contracts.

17 LICENSE CONTRACTS IN PERU Oil Companies own 100% property of hydrocarbons extracted by them. Contract Terms: 30 years for oil and 40 years for Natural Gas. Exploration Term: 7 years. Possible 3 years extension, to complete up to 10 years. 100% risk taken by Oil Companies. Contracts consider a Royalty payment. PERUPETRO S.A. DEC, 2007

18 STABILITY OF CONTRACTS IS BASED ON: Contract approved by Supreme Decree same level as a Congress Law - Contract Law. Contract signed by PERUPETRO S.A. as a Sociedad Anonima follows corporate rules: So, the Contract is signed Enterprise to enterprise. International Arbitration is part of the Contract; there is a specific Clause for this. PERUPETRO S.A. DEC- 2007

19 OIL & GAS COMPANIES OPERATING IN PERU There are 87 contracts in force in Peru and more than 40 international companies working as contractors: Petrobras, Repsol, Pluspetrol, Hunt Oil, Talisman, Perenco, Burlington, SK Corp., CNPC (Sapet), Sonatrach, KNOC, Tecpetrol, Occidental, Maple, Olympic, BPZ Energy, Ecopetrol, HOCOL, SIBOIL, Gran Tierra, CEPSA, Inter Oil, Petrolifera Petroleum...

20 CONTRACTED AREAS PERUPETRO S.A.

21 CONTRACTED AREAS As consequence of promotion and international biddings PERUPETRO has 87 License Contracts in force in At present investments are mainly focused in ligth and heavy oil production in the North Jungle and Natural Gas and Condensates production in Camisea and adjacent Blocks. There will be an important increase of exploration investment in different areas of the country.

22 Reserves of Natural Gas in Blocks 88 & 56 are 16 TCF. These areas are in production. Neighboring areas have an additional gas potential (+ 40 TCF). New discoveries: Block 57: Kinteroni (2009) 2 TCF Block 58: Urubamba (2009) Under Evaluation GREAT NATURAL GAS POTENTIAL Camisea and neighboring areas, Peruvian South Jungle

23 Heavy Oil in North Jungle (Marañon Basin) In 1970 and MMB were discovered in Block 1-AB. Within million barrels discovered between in Blocks 39 and 67. Blocks 39 and 67 are partially explored. Potential of additional resources: more than 500 million barrels. Oil Production in Block 67 will begin in 2013.

24 Light Oil in North Jungle (Marañon Basin) Development of new areas In 2005 light oil was discovered in Block 64. In 2009 with additional drilling in Block 64 the last discovery was confirmed and also the discovery of new reserves in depth formations. Reserves in Block 64 are estimated around 300 million barrels of light oil.

25 NORTH COAST Offshore & Onshore exploration in old and new areas TUMBES & TALARA BASIN Cum. Production: 1,300 MMBO Reserves: 1,200 MMBO Potential reserves in both basins:. UP TO 2,000 MMBO (70% OFFSHORE) First Oil well drilled in

26 MAIN PROJECTS IN COURSE PERUPETRO S.A.

27 CAMISEA NATURAL GAS PROJECT Block 56 Block 88 Location: South Jungle of Peru Blocks 88 & 56 Reserves: Natural Gas : 16 TCF Liquids (NGL): 1,000 Million Bls Total investment: 2,500 Million US $ Blocks 88 & 56 Production : Natural Gas : 1,300 MMscfd Liquids (NGL): 80,000 BPD Camisea Project (Block 88) started production on year Block 56 Project started production on year 2007.

28 Ecuador Colombia PERU LNG PROJECT Pacific Ocean Brazil B o l i v i a Project components: LNG Plant Gas Pipeline Dock and loading facilities Start of Operation: Year 2010 Status: Construction concluded Total Investment: 3,800 MM$ Production : 620 Million scfd Operator: Chile PERU LNG Pipeline TgP Pipeline

29 UP STREAM ACTIVITIES AND PRODUCTION FORECAST PERUPETRO S.A.

30 Up stream activities (Related to the 68 exploration contracts actualy in force) UP STREAM ACTIVITIES FORECAST TOTAL DRILLING DEVELOPMENT WELLS EXPLORATORY WELLS SEISMIC 2D Km D Km INVESTMENT (US$ MILLION) PERUPETRO S.A.

31 EXPLORATION ACTIVITIES EXPECTED RESULTS TOTAL EXPLORATORY WELLS 130 SUCCESS FACTOR 10% EXPECTED SUCCESSFUL WELLS 13 EXPECTED RESERVES 1300 MM BARRELS We expect discoveries of 1300 MM barrels (or barrels of oil equivalent) as a result of the exploration activieties related to the 68 exploration contracts actualy in force. PERUPETRO S.A.

32 LIQUID HYDROCARBON PRODUCTION AND FORCAST er day) MBPD Oil NGL Camisea Natural Gas Liquids Production overturned the declining tendency of production. Discoveries of light and heavy oil will increase the production.

33 MMCFD NATURAL GAS PRODUCTION AND FORECAST Petrochemical LNG Internal Market Production of Camisea Natural Gas originated a sales sustained growth. Natural Gas Reserves support continuous growth of domestic market and LNG export.

34 PERUPETRO 2010 BIDDING ROUND PERUPETRO S.A.

35 Promotional Campaigns Results Peru is performing promotional campaigns in order to intensify the Contracting and Hydrocarbon Exploration December, 2004: 31 Contracts ( 14 Ex, 17 Prod.) February 2010: 87 Contracts ( 68 Ex, 19 Prod.)

36 PERUPETRO S PROMOTIONAL CAMPAINGS Selection Process Bidding Round Bidding Blocks with Contracts Blocks Bid Winner in Force 2007 Process Process Process 23 Call for Bids: May 2010

37 Areas for new Exploration & Exploitation License Contracts (areas in yellow), mainly in Marañón, Ucayali and Huallaga sedimentary basins

38 Blocks considered for the Bidding Round 2010 (preliminary) N Block Basin Extension ha Marañón 526, Marañón 500, Marañón 294, Marañón 488, Ucayali 387, A y B Ucayali 142, Santiago 481, Ucayali 486, Ucayali 263, Ucayali 384, Ucayali 417, Marañón 302, Marañón 500, Marañón 350, Huallaga 535, Marañón 314, Huallaga 594, Marañón 396, Huallaga 634, Marañón 397, Marañón 334, Marañón 840, XXVIII Sechura 314,133 TOTAL 9,888,370 PERUPETRO S.A.

39 Bidding Round 2010: 23 Blocks (preliminary) (Block areas in yellow outlined in blue)

40 Thank you very much