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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. Perupetro is offering a special international promotion of exploration acreage that includes Peru’s most promising, jungle continental shelf and continental slope areas.
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OIL & GASINVESTMENT
OPPORTUNITIES
IN PERU
OIL & GAS INVESTMENT OPPORTUNITIES IN PERU
OIL & GAS INVESTMENT OPPORTUNITIES IN PERUTable of Contents:PERUPETRO
EXECUTIVE SUMMARY
CONTRACT TERMS• TypeofContract• ContractTerm• ExplorationPhase• WorkPrograms• ReleaseofAreas• Assignment• InternationalArbitration
FISCAL REGIME• TaxStabilityGuarantee• IncomeTax• ValueAddedTax(Salestax)• NoRemittanceTax• ImportandExportTaxExemptions• AcceleratedAmortization• PipelineRates• Royalty• FreeAvailabilityofHydrocarbons
PROPOSALS• HowtogetanE&Pcontract• Legal,financialandtechnicalinformation
A)LegalInformationB)FinancialInformationC)TechnicalInformation
PRIOR CONSULTATION AND CITIZEN PARTICIPATION
PerupetroS.A.isastatecorporationcreatedinNovember1993undertheHydrocarbons Law # 26221, operating along the same lines as aprivatecompany.Itsmainresponsibilitiesare:
• TopromoteinvestmentsfortheexplorationandproductionofhydrocarbonsinPeru.
• Tonegotiate,enterintoandsuperviseallupstreampetroleumcontractsandtechnicalevaluationagreementsonbehalfofthePeruvianState.
• ToactasliaisonbetweenContractholdersandgovernmentalagencies.
Conditions for foreign investment inupstreamcontracts inPeruhavebeengreatlyimproved.TheHydrocarbonsLawestablishes:
• FreedomtoenterandrepatriatefundstoandfromPeru.Nopermitsrequired.
• Absolutefreedomtosellordisposeofthehydrocarbonsproduced.
• Absolutefreedomtosetsalepricesaccordingtomarketsupplyanddemand.Therearenostateregulations.
• Internationalarbitration.
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Executive SummaryPeruhasanopendoorpolicytowardsinternationaloilcompanies.Besidesaprospectiveandchallenginggeology,Peruoffersanexcellentworkingclimateandveryfriendlyterms.
InPeruallexplorationandproductionactivities involvingupstreampetroleumandnaturalgasarecarriedoutbycompanieswhosigncontractswithPerupetroonbehalfofthePeruvianState.
Perupetro is offeringa special internationalpromotionof explorationacreage that includesPeru’smostpromising,junglecontinentalshelfandcontinentalslopeareas.
Technicalinformationcoveringtheseregionsincludesextensivegeophysicalseismicsurveys,aswellasanumberoftechnicalevaluationsandgeologicalfieldstudiesthathelptodeterminethepotentialforhydrocarbonsoftheareas.
Thisdocumentisdesignedto:
• AcquaintcompanieswiththeflexiblecontracttermsandcompetitivefiscalregimeinPeru.
• Offercompaniestheavailabilityofinterestingacreage,sotheycanallocateresourcestoevaluatetheprospects.
ThePeruviancoastal regioncan supportextensivemarineexplorationactivitiesand its storm freeweatherenvironmentisaccompaniedbyexcellenttransportationandoperationalinfrastructure.
The jungle region, in the eastern portion of Peru, is locatedwithin the Sub-Andean trend,whichthroughoutSouthAmericaisaprolifichydrocarbonproducer.
Hydrocarbons have been produced from theMarañon and Ucayali Basins since the seventies. Atpresentnewexplorationistakingplacewithinthesebasins,eventhoughacreageinotherBasinsisavailable.
ThisisanunrivaledopportunitytoaccesstheexplorationpotentialofpromisingareasinPeru.
Contract Terms
Type of Contract
UndertheLicenseContract,theContractholderacquiresownershipofthehydrocarbonsproducedinthecontractedareaandpaysaroyaltytothestate.TheContractholderassumestheexplorationriskandprovidesalltechnical,economicandfinancialresourcestocarryoutthecontract.
Contract TermThecontracttermincludes2phases:explorationandexploitation.Foroil,thecontractrunsforatotalof30years.Inthecaseofnaturalgasandcondensates,thetotaltermofthecontractis40years.
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ExplorationPhaseTheexplorationphasehasadurationof sevenyearswithaneligible threeyearsextension thatmaybedividedintoseveralperiodsasagreeduponinthecontract.TheContractmaybeendedattheendofanyoftheperiods,dependingoftheresultsoftheexplorationactivitiesandthefulfillmentoftheMinimumWorkProgram.
IfduringanyperiodintheexplorationphasetheContractholderstrikesanoildiscoverywhichisnotcommercialduetothe lackoftransportationinfrastructure,hemayrequestthatthediscoveredfieldorfieldsberetainedforaperiodofuptofiveyears,inordertodeveloptheinfrastructurenecessarytotransportthehydrocarbonstomarket.
Should theContractholderdiscovernon-associatedgasornaturalgaswithcondensatesduringanyperiodintheexplorationphase,hecanrequestaretentionperiodofuptotenyearsinordertodevelopamarketfortheseproducts.
Incaseofdrillingoneunsuccessfulexploratorywell,theContractholdermayrequesttheextensionoftheexploratoryperiodtostudyandintegratetheexplorationresultsbeforeassumingtheobligationofanewexploratoryperiod.
WorkProgramsPerupetroisopentonegotiateflexibleworkprogramsforeachoftheexplorationphaseperiodsagreeduponthecontract.TheworkprogrammaybeestablishedinExploratoryWorkingUnits(UnidadesdeTrabajoExploratorio-UTE)accordingtowhichtheContractholderisfreetoexecuteaworkprograminordertofulfillthenumberofUTEsagreeduponforeachperiod.
ReleaseofAreasArea relinquishmentswillbenegotiated foreachcontract.Perupetro’sflexiblecriteriamayallow theContractholdertoretainexplorationareasbeyondtheexplorationphase.
AssignmentTheContractholder,oranyofthe individualsorcompaniesofwhich itconsists,mayassignitsshareofthecontractorenter intoassociationwiththirdparties,subjecttopriorapprovalgrantedthroughPresidentialDecree.
International ArbitrationContractisunderjurisdictionofPeruvianlaws.Internationalarbitrationisconsideredanalternativeforanycontroversy,difference,conflictorcomplaint regarding thecontract thatmayarisebetween theContractholderandPerupetroandwhichcannotberesolvedbymutualagreement.
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Fiscal RegimeThefiscalframeworkapplicabletotheareasbeingofferedcanbesummarizedasfollows:
Tax Stability GuaranteeTheStateguaranteestheContractholderthatthetaxandcurrencyexchangesystemsinforceatthetimeofthesignatureofthecontractshallremainunchangedduringthelifetimeofeachcontract.TheCentralBankonbehalfof thePeruvianState,guarantees the freeavailabilityofforeigncurrency.
ThroughthisTaxStabilityGuarantee,theContractholderwillbesubjectonlytothetaxsysteminforceonthedatethecontractissigned.Alltaxesestablishedafterthatdatewillnotbeapplicable.
IncomeTaxIncometaxforhydrocarbonactivitiesis30%.Peruviantaxlegislationallowslossestobecarriedforwardforthefollowingfouryears.
TheContract holder canoffset tax losses suffered in one contract against incomegeneratedinanothercontract. Similarly, tax losses resulting from relatedactivities canbeoffsetagainstincomefromoneormorecontracts.Relatedactivitiesarethose involvingoil,naturalgasandcondensates.
Value Added Tax(Salestax)ValueAddedTaxof18%appliestosalesofgoodsandservices.VATaffectsonlyendusersanddoesnotapplytocertainexemptedgoods.HydrocarbonslegislationguaranteesthetransferablenatureoftheVAT.
NoRemittanceTaxThereisnotaxonincomeandcapitalgainsremittedabroad.HydrocarbonlegislationgrantsthefreedomtoenterandrepatriatefundstoandfromPeru.Nopermitsarerequired.
Import and Export TaxExemptionsTheimportsofmostoftheequipmentandsuppliesrequiredforactivitiesintheexplorationphasearefreefromanytaxes,inkeepingwithalistofexemptedgoodspublishedbythegovernment.Hydrocarbonexportsareexemptedfromalltaxes.
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AcceleratedAmortizationTaxlegislationallowsallexplorationanddevelopmentexpensesincurredaswellasallinvestmentsmadebytheContractholderfromthebeginningofthecontractuntilDateofCommencementofCommercialExtractiontobeamortizedunderthe5yearstraightlinemethod.Thismethodallowsarapidrecoveryofintangibleandtangibleinvestmentssuchasthoseincurredindrillingwildcatsanddevelopmentwells,geologicalandgeophysicalstudies,etc.,withtheconsequenttaxbenefitfortheContractholder.
Pipeline RatesInkeepingwithnationallegislationanyindividualorcorporationmayoperateapipeline.ThelawestablishesthemaximumratethattheContractholdercanbechargedbyconcessionaires.Theratetakesintoaccountoperatingexpenses,depreciation,anafter-taxrateofreturnoninvestmentandworkingcapitalaswellasthevolumestobetransportedinsuchawayastoallowtheconcessionairestorecovertheircostsandtoobtainareasonableprofit.
RoyaltyTheroyaltywillbepaidonthevalueofthecrudeoilandcondensatescalculatedonthebasisofabasketofhydrocarbonsminustransportationandstorageexpenses(assumingthereisathirdpartytransportationsystem).Inthecaseofnaturalgas,theroyaltywillbeappliedtothesellingpricelesstransportationandstorageexpenses.
However,PeruvianregulationsallowPerupetrotonegotiatedifferentroyaltiesforcases includingnonconventionaloperations,orwhenacontractbecomesunfeasibleduetothelackofinfrastructurerequiredtotransporthydrocarbons.
Free Availability ofHydrocarbonsThehydrocarbonsproducedandmeasuredinthecontractareabelongtotheContractholder.TheContractholdermayfreelysellordisposeofproductioninkeepingwiththecontract.Therearenoquotasassignedforthedomesticmarket.
INTERNATIONAL PROMOTION OF EXPLORATION ACREAGE IN PERU
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ProposalsCompaniesarewelcometosubmitaproposal,singlyorinassociation,foroneormoreareaslocatedintheoffshoreandjunglebasins.
Eachblockwillbeawardedtocompaniesorassociationsonabiddingroundbasis.
Participantswillbe required tosubmit theirproposals,whichwill contain technical, legalandfinancialinformationaboutthecompany.
How to get an E&PcontractPerupetro is responsible for signing all upstream contracts on behalf of the Peruvian State and forsupervisingtheContractholder’sactivities.
E&Pcontractscanbeawardedtocompaniesthroughabiddingprocess.
CompaniesmayconsultexistingtechnicalinformationatPerupetro’sDataBase.
Technicaldataonoffshoreandjungleareasareofferedfreeofcost.
InterestedcompaniesshouldexpresstheirinterestforanyareabysendingaletterofintenttoPerupetro´sGeneralManager.
CompaniesthathavenotworkedpreviouslywithPerupetroshallincludetheirlatestAnnualReportwithacorporateprofileincludinglegalinformationandtheirprincipaloilandgasactivities.
Perupetrowill evaluate the technical, economic andfinancial capacity of a company andwill award aQualificationCertificatetostartnegotiations.
Once the block is awarded, the Contract Project proceeds for approval by the Board of Directors ofPerupetro, theMinistryof Energy andMines and theMinistryof EconomyandFinance.APresidentialDecreeisissuedandisfollowedbythesignatureoftheLicenseContract.
Legal, financial and technical informationTogettheQualificationCertificate,companiesshouldsubmitthefollowinginformation:
A) Legal Information:
Companiesmustaccredittheirlegalexistencebysubmitting:
1.AdulyauthenticatedcopyoftheArticlesofIncorporation(includingby-laws),oranyotherdocumentusedasproofoflegalexistenceinthecountryoforigin.
2.Anaffidavitissuedbyadulyauthorizedofficerofthecompanycertifyingthatthecompany:
•Isnotinbankruptcyorothersimilarcondition
•HasnolegalimpedimenttoenterintocontractswiththePeruvianGovernment
Anydocumentissuedabroadmustbecertifiedbytheauthorizedofficerintherespectivecountry.ThesignatureofsuchofficermustbecertifiedbythePeruvianConsul.TheConsul’ssignatureshouldbecertifiedbythePeruvianMinistryofForeignAffairs.
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B) Financial Information
AuditedFinancialReportsforthelastthreeyearsincludingConsolidatedBalanceSheet,ProfitandLossStatementandStatementsastoanychangesinNetEquity.
C) Technical Information
Report on the company’s hydrocarbon exploration and production activities in the last 5 years,includinginformationonexplorationworkperformed,areasandfieldsoperated,crudeoil,naturalgasandcondensatesproductionandprovenreserves.
Inaddition,companiesshouldsubmitAnnualReportsaswellasanyotherinformationtheydeemconvenient.AlldocumentsshallbetranslatedintoSpanishifnotoriginallywritteninthislanguage,except for pamphlets, Annual Reports and other documents that due to their nature must besubmittedinEnglish.
Pleaseseedetailedinformationinourwebsite,includingthecaseofnon-expertisecompanies.
Prior Consultation and CitizenParticipationTheMinistryofEnergyandMinesandPerupetro,coordinatetheopportunityoftheregulatorycomplianceoftheRighttoPriorConsultationandCitizenParticipationandthepublicityanddeliverymechanismsforrelevantinformation.Bothentitiesarecombiningeffortstoachievesustainabilityinthedevelopmentofthehydrocarbonsexplorationandexploitationactivities.
TherulesaboutPriorConsultationandCitizenParticipation,establishtherightofindigenousornativepeoplestoparticipateandbeconsultedin interculturaldialoguesingoodfaith,onthelegislativeoradministrativemeasures,whichdirectlyaffecttheircollectiverights,ontheirphysicalexistence,culturalidentity,qualityoflifeordevelopment.InsuchdialoguestheStateagenciesanalyze,valueandrespectthe position of indigenous or native peoples. The purpose of intercultural dialogue is to create anatmosphereoftrust,collaborationandmutualrespect,wheredemonstrationsseektoprotectcultural,socialandeconomicintegrityandtoguaranteetherighttotheparticipationofindigenouspeoples.
INTERNATIONAL PROMOTION OF EXPLORATION ACREAGE IN PERU
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ReferencesPerupetro’scontactsforfurtherinformationonPeru’soilandgasopportunitiesare:
Chairman oftheBoard
Phone: (511) 206 1800
Fax: (511) 206 1801
Email: [email protected]
General Manager
Phone: (511) 206 1800 ext: 1101
Email: [email protected]
Promotion and Communications Management
Phone: (511) 206 1800 ext: 1601
Email: [email protected]
Foravailabletechnicalinformationpleasecontact:
www.perupetro.com.pe
