Brochure Promocional

 

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Brochure Promocional

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OIL & GAS INVESTMENT OPPORTUNITIES IN PERU

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OIL & GAS INVESTMENT

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OPPORTUNITIES IN PERU Table of Contents: PERUPETRO EXECUTIVE SUMMARY CONTRACT TERMS • Type of Contract • Contract Term • Exploration Phase • Work Programs • Release of Areas • Assignment • International Arbitration FISCAL REGIME • Tax Stability Guarantee • Income Tax • Value Added Tax (Sales tax) • No Remittance Tax • Import and Export Tax Exemptions • Accelerated Amortization • Pipeline Rates • Royalty • Free Availability of Hydrocarbons PROPOSALS • How to get an E&P contract • Legal, financial and technical information A) Legal Information B) Financial Information C) Technical Information PRIOR CONSULTATION AND CITIZEN PARTICIPATION

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Perupetro S.A. is a state corporation created in November 1993 under the Hydrocarbons Law # 26221, operating along the same lines as a private company. Its main responsibilities are: • To promote investments for the exploration and production of hydrocarbons in Peru. • To negotiate, enter into and supervise all upstream petroleum contracts and technical evaluation agreements on behalf of the Peruvian State. • To act as liaison between Contract holders and governmental agencies. Conditions for foreign investment in upstream contracts in Peru have been greatly improved. The Hydrocarbons Law establishes: • Freedom to enter and repatriate funds to and from Peru. No permits required. • Absolute freedom to sell or dispose of the hydrocarbons produced. • Absolute freedom to set sale prices according to market supply and demand. There are no state regulations. • International arbitration.

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Executive Summary Peru has an open door policy towards international oil companies. Besides a prospective and challenging geology, Peru offers an excellent working climate and very friendly terms. In Peru all exploration and production activities involving upstream petroleum and natural gas are carried out by companies who sign contracts with Perupetro on behalf of the Peruvian State. Perupetro is offering a special international promotion of exploration acreage that includes Peru’s most promising, jungle continental shelf and continental slope areas. Technical information covering these regions includes extensive geophysical seismic surveys, as well as a number of technical evaluations and geological field studies that help to determine the potential for hydrocarbons of the areas. This document is designed to: • Acquaint companies with the flexible contract terms and competitive fiscal regime in Peru. • Offer companies the availability of interesting acreage, so they can allocate resources to evaluate the prospects. The Peruvian coastal region can support extensive marine exploration activities and its storm free weather environment is accompanied by excellent transportation and operational infrastructure. The jungle region, in the eastern portion of Peru, is located within the Sub-Andean trend, which throughout South America is a prolific hydrocarbon producer. Hydrocarbons have been produced from the Marañon and Ucayali Basins since the seventies. At present new exploration is taking place within these basins, even though acreage in other Basins is available. This is an unrivaled opportunity to access the exploration potential of promising areas in Peru. Contract Terms Type of Contract Under the License Contract, the Contract holder acquires ownership of the hydrocarbons produced in the contracted area and pays a royalty to the state. The Contract holder assumes the exploration risk and provides all technical, economic and financial resources to carry out the contract. Contract Term The contract term includes 2 phases: exploration and exploitation. For oil, the contract runs for a total of 30 years. In the case of natural gas and condensates, the total term of the contract is 40 years. 5

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Exploration Phase The exploration phase has a duration of seven years with an eligible three years extension that may be divided into several periods as agreed upon in the contract. The Contract may be ended at the end of any of the periods, depending of the results of the exploration activities and the fulfillment of the Minimum Work Program. If during any period in the exploration phase the Contract holder strikes an oil discovery which is not commercial due to the lack of transportation infrastructure, he may request that the discovered field or fields be retained for a period of up to five years, in order to develop the infrastructure necessary to transport the hydrocarbons to market. Should the Contract holder discover non-associated gas or natural gas with condensates during any period in the exploration phase, he can request a retention period of up to ten years in order to develop a market for these products. In case of drilling one unsuccessful exploratory well, the Contract holder may request the extension of the exploratory period to study and integrate the exploration results before assuming the obligation of a new exploratory period. Work Programs Perupetro is open to negotiate flexible work programs for each of the exploration phase periods agreed upon the contract. The work program may be established in Exploratory Working Units (Unidades de Trabajo Exploratorio - UTE) according to which the Contract holder is free to execute a work program in order to fulfill the number of UTEs agreed upon for each period. Release of Areas Assignment Area relinquishments will be negotiated for each contract. Perupetro’s flexible criteria may allow the Contract holder to retain exploration areas beyond the exploration phase. The Contract holder, or any of the individuals or companies of which it consists, may assign its share of the contract or enter into association with third parties, subject to prior approval granted through Presidential Decree. International Arbitration Contract is under jurisdiction of Peruvian laws. International arbitration is considered an alternative for any controversy, difference, conflict or complaint regarding the contract that may arise between the Contract holder and Perupetro and which can not be resolved by mutual agreement. 6

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Fiscal Regime The fiscal framework applicable to the areas being offered can be summarized as follows: Tax Stability Guarantee The State guarantees the Contract holder that the tax and currency exchange systems in force at the time of the signature of the contract shall remain unchanged during the lifetime of each contract. The Central Bank on behalf of the Peruvian State, guarantees the free availability of foreign currency. Through this Tax Stability Guarantee, the Contract holder will be subject only to the tax system in force on the date the contract is signed. All taxes established after that date will not be applicable. Income Tax Income tax for hydrocarbon activities is 30%. Peruvian tax legislation allows losses to be carried forward for the following four years. The Contract holder can offset tax losses suffered in one contract against income generated in another contract. Similarly, tax losses resulting from related activities can be offset against income from one or more contracts. Related activities are those involving oil, natural gas and condensates. Value Added Tax (Sales tax) Value Added Tax of 18 % applies to sales of goods and services. VAT affects only end users and does not apply to certain exempted goods. Hydrocarbons legislation guarantees the transferable nature of the VAT. No Remittance Tax There is no tax on income and capital gains remitted abroad. Hydrocarbon legislation grants the freedom to enter and repatriate funds to and from Peru. No permits are required. Import and Export Tax Exemptions The imports of most of the equipment and supplies required for activities in the exploration phase are free from any taxes, in keeping with a list of exempted goods published by the government. Hydrocarbon exports are exempted from all taxes. 7

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Accelerated Amortization Tax legislation allows all exploration and development expenses incurred as well as all investments made by the Contract holder from the beginning of the contract until Date of Commencement of Commercial Extraction to be amortized under the 5 year straight line method. This method allows a rapid recovery of intangible and tangible investments such as those incurred in drilling wildcats and development wells, geological and geophysical studies, etc., with the consequent tax benefit for the Contract holder. Pipeline Rates In keeping with national legislation any individual or corporation may operate a pipeline. The law establishes the maximum rate that the Contract holder can be charged by concessionaires. The rate takes into account operating expenses, depreciation, an after-tax rate of return on investment and working capital as well as the volumes to be transported in such a way as to allow the concessionaires to recover their costs and to obtain a reasonable profit. Royalty The royalty will be paid on the value of the crude oil and condensates calculated on the basis of a basket of hydrocarbons minus transportation and storage expenses (assuming there is a third party transportation system). In the case of natural gas, the royalty will be applied to the selling price less transportation and storage expenses. However, Peruvian regulations allow Perupetro to negotiate different royalties for cases including non conventional operations, or when a contract becomes unfeasible due to the lack of infrastructure required to transport hydrocarbons. Free Availability of Hydrocarbons The hydrocarbons produced and measured in the contract area belong to the Contract holder. The Contract holder may freely sell or dispose of production in keeping with the contract. There are no quotas assigned for the domestic market. 8

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INTERNATIONAL PROMOTION OF EXPLORATION ACREAGE IN PERU Proposals Companies are welcome to submit a proposal, singly or in association, for one or more areas located in the offshore and jungle basins. Each block will be awarded to companies or associations on a bidding round basis. Participants will be required to submit their proposals, which will contain technical, legal and financial information about the company. How to get an E&P contract Perupetro is responsible for signing all upstream contracts on behalf of the Peruvian State and for supervising the Contract holder’s activities. E&P contracts can be awarded to companies through a bidding process. Companies may consult existing technical information at Perupetro’s Data Base. Technical data on offshore and jungle areas are offered free of cost. Interested companies should express their interest for any area by sending a letter of intent to Perupetro´s General Manager. Companies that have not worked previously with Perupetro shall include their latest Annual Report with a corporate profile including legal information and their principal oil and gas activities. Perupetro will evaluate the technical, economic and financial capacity of a company and will award a Qualification Certificate to start negotiations. Once the block is awarded, the Contract Project proceeds for approval by the Board of Directors of Perupetro, the Ministry of Energy and Mines and the Ministry of Economy and Finance. A Presidential Decree is issued and is followed by the signature of the License Contract. Legal, financial and technical information To get the Qualification Certificate, companies should submit the following information: A) Legal Information: Companies must accredit their legal existence by submitting: 1. A duly authenticated copy of the Articles of Incorporation (including by-laws), or any other document used as proof of legal existence in the country of origin. 2. An affidavit issued by a duly authorized officer of the company certifying that the company: • Is not in bankruptcy or other similar condition • Has no legal impediment to enter into contracts with the Peruvian Government Any document issued abroad must be certified by the authorized officer in the respective country. The signature of such officer must be certified by the Peruvian Consul. The Consul’s signature should be certified by the Peruvian Ministry of Foreign Affairs. 9

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B) Financial Information Audited Financial Reports for the last three years including Consolidated Balance Sheet, Profit and Loss Statement and Statements as to any changes in Net Equity. C) Technical Information Report on the company’s hydrocarbon exploration and production activities in the last 5 years, including information on exploration work performed, areas and fields operated, crude oil, natural gas and condensates production and proven reserves. In addition, companies should submit Annual Reports as well as any other information they deem convenient. All documents shall be translated into Spanish if not originally written in this language, except for pamphlets, Annual Reports and other documents that due to their nature must be submitted in English. Please see detailed information in our web site, including the case of non-expertise companies. Prior Consultation and Citizen Participation The Ministry of Energy and Mines and Perupetro, coordinate the opportunity of the regulatory compliance of the Right to Prior Consultation and Citizen Participation and the publicity and delivery mechanisms for relevant information. Both entities are combining efforts to achieve sustainability in the development of the hydrocarbons exploration and exploitation activities. The rules about Prior Consultation and Citizen Participation, establish the right of indigenous or native peoples to participate and be consulted in intercultural dialogues in good faith, on the legislative or administrative measures, which directly affect their collective rights, on their physical existence, cultural identity, quality of life or development. In such dialogues the State agencies analyze, value and respect the position of indigenous or native peoples. The purpose of intercultural dialogue is to create an atmosphere of trust, collaboration and mutual respect, where demonstrations seek to protect cultural, social and economic integrity and to guarantee the right to the participation of indigenous peoples. 10

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INTERNATIONAL PROMOTION OF EXPLORATION ACREAGE IN PERU References Perupetro’s contacts for further information on Peru’s oil and gas opportunities are: Chairman of the Board Phone: (511) 206 1800 Fax: (511) 206 1801 Email: chairmanship@perupetro.com.pe General Manager Phone: (511) 206 1800 ext: 1101 Email: general.management@perupetro.com.pe Promotion and Communications Management Phone: (511) 206 1800 ext: 1601 Email: promotion@perupetro.com.pe For available technical information please contact: www.perupetro.com.pe 11

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Contact us: Phone: (511) 206-1800 promotion@perupetro.com.pe www.perupetro.com.pe

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