NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more hereLICENSE CONTRACT FOR THE EXPLORATION
AND EXPLOITATION OF HYDROCARBONS
PRELIMINARY CLAUSE: GENERAL POINTS
CLAUSE ONE: DEFINITIONS
CLAUSE TWO: PURPOSE OF THE CONTRACT
CLAUSE THREE: TERM, CONDITIONS & GUARANTY
CLAUSE FOUR: EXPLORATION
CLAUSE FIVE: EXPLOITATION
CLAUSE SIX: SUBMISSION OF INFORMATION & STUDIES
CLAUSE SEVEN: SUPERVISION COMMITTEE
CLAUSE EIGHT: ROYALTY & VALUATION
CLAUSE NINE: TAXES
CLAUSE TEN: CUSTOMS DUTIES
CLAUSE ELEVEN: FINANCIAL RIGHTS
CLAUSE TWELVE: EMPLOYEES
CLAUSE THIRTEEN: ENVIRONMENTAL PROTECTION
CLAUSE FOURTEEN: CONSERVATION OF HYDROCARBONS & LOSS
CLAUSE FIFTEEN: TRAINING & TECHNOLOGY TRANSFER
CLAUSE SIXTEEN: ASSIGNMENT
CLAUSE SEVENTEEN: ACT OF GOD OR FORCE MAJEURE
CLAUSE EIGHTEEN: ACCOUNTING
CLAUSE NINETEEN: MISCELLANEOUS
CLAUSE TWENTY: NOTICES & COMMUNICATIONS
CLAUSE TWENTYONE: SUBMISSION TO PERUVIAN LAW AND DISPUTES
CLAUSE TWENTYTWO: TERMINATION
ANNEX “A”: DESCRIPTION OF CONTRACT AREA
ANNEX “B”: MAP OF CONTRACT AREA
ANNEXES “C-1” TO “C-X”: LETTERS OF GUARANTY FOR THE MINIMUM WORK
ANNEX “D”: CORPORATE GUARANTY
ANNEX “E”: ACCOUNTING PROCEDURE
ANNEX “F”: EXPLORATION WORKING UNITS - Table of Equivalencies
LICENSE CONTRACT FOR THE EXPLORATION AND EXPLOITATION OF
HYDROCARBONS - BLOCK ……
PRELIMINARY CLAUSE - GENERAL POINT
PERUPETRO participates in compliance with Law Nº26221 to enter into this
License Contract for the Exploration and Exploitation of Hydrocarbons in Block …
“In situ” hydrocarbons are property of the State. The ownership rights over
extracted hydrocarbons are transferred from PERUPETRO to the Contractor on
the Signature Date, in accordance with the provisions of the Contract and under
the terms of Article 8, Law Nº 26221.
The Contractor shall pay the State, through PERUPETRO, a cash royalty at the
times and under the conditions set forth in the Contract.
In accordance with the provisions of Article 12°, Law 26221, the Contract is
governed by Peruvian private law and the provisions of Article 1357 of the Civil
For all purposes relative to and derived from the Contract, the Parties agree that
the headings of the clauses are irrelevant to the interpretation of their content.
Any reference to the Contract includes the annexes. In the event of discrepancy
between the annexes and the provisions contained in the body of the Contract,
the latter shall prevail.
CLAUSE ONE - DEFINITIONS
The definitions agreed by the Parties in this clause are aimed at given the required
meaning to the terms used herein and these meanings shall be the only ones
accepted in interpreting the Contract, unless the Parties expressly agree otherwise in
The terms defined and used herein, whether singular or plural, shall be capitalized in
the first letter and shall have the following meanings:
Any entity, fifty per cent (50%) or more of voting share capital of which is owned,
either directly or indirectly, by any of the Parties, or any entity or person who
owns, either directly or indirectly, fifty per cent (50%) or more of the voting share
capital of one of the Parties, or any entity, fifty per cent (50%) or more of whose
voting share capital of which is owned, either directly or indirectly, by a
shareholder or share holders who owns or own, either directly or indirectly, fifty
per cent (50%) or more of the voting share capital of any of the Parties.
A period of twelve (12) consecutive months, using the Gregorian Calendar,
counted from a specific date.
The area described in Annex “A” and shown in Annex “B”; known as Block ….,
with an extension of ……… hectares.
The Contract Area shall be redefined after excluding those areas released by the
Contractor under the terms of the Contract. In the event of any discrepancy
between Annex “A” and Annex “B”, Annex “A” shall prevail.
Is the unit of measurement for Liquid hydrocarbons consisting of forty two (42)
United States gallons at a temperature of sixty degrees Fahrenheit (60º F) at sea
level pressure, without water, mud or other sediments (BS&W).
British Thermal Unit - BTU
British Thermal Unit. Is the unit of measurement of the quantity of heat required
to raise the temperature of one pound of water by one degree Fahrenheit,
equivalent to 1055.056 Joules.
Act of God or Force Majeure.
Includes, among others: fires, earth tremors and earthquakes, tidal waves, land
slides, avalanches, floods, hurricanes, storms, explosions, unforeseeable events,
wars, guerrilla actions, sabotage, civil strife, blockades, unavoidable delays in
transport, strikes and stoppages, the unavailability, even when foreseen, of
adequate facilities for the transport of materials, licenses and permits, equipment
and services, or any other event whether similar to or different from those
specified herein, which cannot be reasonably controlled or foreseen or, when
foreseen, cannot be avoided.
The entity made up by the Parties, through which PERUPETRO verifies and
coordinates compliance with and execution of the Contract, whose conformation
and powers are set forth in Clause Seven.
Technical Conciliation Committee
A temporary body, formed to decide on discrepancies arising from the
Operations, which shall be established in accordance with the provisions of
section 21.2 of the Contract.
Liquid hydrocarbons formed by the condensation of Hydrocarbons separated
from Natural Gas, as a result of changes in pressure and temperature when
Natural Gas is extracted from the Reservoir, or in one or more stages in the
compression of Natural Gas. Remains liquid at the atmospheric temperature and
1.10 Fiscalized Condensates
Condensates produced in the Contract Area and measured at the Production
……….., recorded in the Public Hydrocarbons Registry under entry .., page … of
volume … of the Book of Operations Contractors, subject to what is established
for in this Contract.
Notice: In the event the Contractor is made up of more than one individual or
body corporate, the text model will be modified as it may corresponds.
This agreement between the Parties, which stipulates the terms and conditions
contained in this document and the appendices which form part thereof, including
additional agreements which may be arrived at by the Parties by virtue of this
document and any modifications thereto in accordance with the law.
The execution of any activity appropriate to the Production of Hydrocarbons,
such as: drilling, completion and deepening of wells, the design, construction and
installation of equipment, pipelines, storage tanks and other installations,
including the use of artificial lift production methods and primary and enhanced
recovery methods , in the Contract Area and outside it when necessary.
This includes the construction of the Transport and Storage Systems, facilities at
the Production Fiscalization Point of the Main Pipeline and if applicable, primary
distillation plants for the manufacture of products to be used in the Operations, or
Natural Gas Processing Plants.
1.14 Commercial Discovery
A discovery of Hydrocarbons which, in the opinion of the Contractor, can be
A period of twenty four (24) hours which starts at zero hours (00:00) and ends at
twenty four hours (24:00).
1.16 Business Day
All days from Monday to Friday, except those days declared either total or partial
holidays in the city of Lima, by the competent authority.
1.17 Dollar or US$
The currency unit of the United States of America.
1.18 Main Pipeline
A main pipeline that the Contractor may build and operate and which, starting at
the end of the Transport and Storage System, carries the Hydrocarbons
produced in the Contract Area to a third party property point, to a sale or export
point or to a Production Fiscalization Point without prejudice to the approval
described in section 2.3, if applicable. It may include measurement points
connected to the pipeline, any necessary storage and shipping areas, secondary
pipelines, pumping or compression stations, communication systems, roads for
access and maintenance and any other installations necessary and required for
the prompt and permanent conveyance of Hydrocarbons, including the design,
construction, maintenance and equipment of all of the above. The open access
to any Main Pipeline will be from the beginning of the Fifth Year (as a maximum)
to be counted from the Date of Commencing Commercial Production.
The planning, execution and evaluation of all geological, geophysical,
geochemical and other studies, as well as the drilling of Exploratory Wells and
related activities necessary to discover Hydrocarbons, including the drilling of
Appraisal Wells for evaluating the discovered Reservoirs..
Development and/or Production.
1.21 Date of Commencing Commercial Production
The date of the first measurement of Hydrocarbons at the Production
Fiscalization Point which gives rise to the payment of royalties.
Volumes produced for testing and other purposes agreed specifically between
the Parties are not included in this definition.
1.22 Signing Date
The …………..day of …… of ……, on which the Parties sign the Contract.
1.23 Effective Date
The date within the sixty (60) Days after the Signature Date in which the
Contractor shall begin Operations.
Activities which, according to legal dispositions and technical standards, are
carried out by the Supervisory Body of Investment in Energy (OSINERG) over
the Exploration and Exploitation activities executed by the Contractor.
1.25 Natural Gas
A mixture of hydrocarbons found in a gaseous state or in solution with oil under
initial reservoir conditions. Includes Associated Natural Gas and Non-associated
1.26 Associated Natural Gas
Natural Gas produced with the Liquid Hydrocarbons of the Reservoir.
1.27 Fiscalized Natural Gas
Natural Gas produced in the Contract Area and measured at a Production
1.28 Non-associated Natural Gas
Gas occurring in a reservoir where, under initial conditions, Liquid Hydrocarbons
are not present.
Any organic compound, whether gaseous, Liquid or solid, which consists
principally of carbon and hydrogen.
1.30 Fiscalized Hydrocarbons
Hydrocarbons produced in the Contract Area and measured at a Production
1.31 Liquid Hydrocarbons.
Oil, Condensates and generally all those Hydrocarbons that under atmospheric
conditions of temperature and pressure, remain in a Liquid state at the site of
their measurement, including those Hydrocarbons that are in a Liquid state at a
temperature higher than the atmospheric temperature.
1.32 Fiscalized Liquid Hydrocarbons
Liquid Hydrocarbons produced in the Contract Area and measured at a
Production Fiscalization Point.
1.33 Law Nº 26221
Law Nº 26221 - Organic Law of Hydrocarbons, extensions, regulations and
NGL or Natural Gas Liquids
Liquid Hydrocarbons obtained from Natural Gas composed by mixes of ethane,
propane, butane and other heavier hydrocarbons.
Fiscalized NGL or Fiscalized Natural Gas Liquids
Natural Gas Liquids measured at a Production Fiscalization Point.
Period counted from any Day in a calendar month which ends on the Day before
the same Day of the following calendar month or, if there is no such day, the last
day of said month.
One thousand (1000) standard cubic feet (scf). One (1) SCF is the volume of gas
necessary to fill a space of one (1) cubic foot at 14.695 pounds per square inch
absolute pressure at a temperature of sixty degrees Fahrenheit (60º F).
All Exploration and Exploitation activities, as well as those related to the
Transport and Storage System, and all other activities covered by the Contract or
related to the performance thereof.
In case of one company the Operator is the Contractor. In case of more than one
Company which made up the Contractor, the Company that has been designated
by those companies to carry out the Operations for and on behalf of the
On the Signing Date, ........................, has been designated as Operator.
PERUPETRO and the Contractor.
PERUPETRO S.A., is the Private Law State Company from the Energy and
Mines Sector, created by Law Nº26221.
Hydrocarbons which, under initial temperature and pressure conditions in the
Reservoir are in the Liquid state, and which are mainly kept in a liquid state
under atmospheric conditions; do not include Condensates, Natural Gas Liquids
or Liquefied Natural Gas.
1.42 Fiscalized Oil
Oil produced in the Contract Area and measured at a Production Fiscalization
1.43 Heavy Oil
Liquid Hydrocarbons, that due to its density and viscosity require of non
conventional recovery methods for its Exploitation, and for its transport require of
surface heating processes, or other procedures, excluding the mixing of oil
produced in the same Field.
1.44 Appraisal Well
A well drilled to evaluate the discovered Hydrocarbon Reservoirs.
1.45 Development Well
A well drilled to extract the discovered Hydrocarbons.
1.46 Exploratory Well
A well drilled for the purpose of discovering a new Reservoir or to determine the
stratigraphy of an area, as well as the wells drilled in the structural culminations
which are geologically separated from the part of the same previously studied
All activities in the Contract Area, or outside it if necessary, for the purpose of
extracting and handling Hydrocarbons, including the operation and recompletion
of wells, the installation and operation of equipment, pipelines, Transport and
Storage System, treatment and measurement of Hydrocarbons, and all methods
of primary and enhanced recovery.
1.48 Production Fiscalization Point
Place or places to be agreed between the Parties, located inside or outside the
Contract Area, where volumetric measurements are taken, the water and
sediment content determined and other measurements made in order to
determine the volume and quality of Fiscalized Hydrocarbons, in accordance with
the respective API and ASTM standards.
Underground stratum or strata, forming part of a Field, which are producing or
have been defined to be capable of producing Hydrocarbons, and which have a
common pressure system throughout its extension.
1.50 Transport and Storage System
System of pipelines, pumping stations, compression stations, storage tanks,
river facilities, delivery systems, roads, other facilities and all other means
necessary and useful for the transportation of the Hydrocarbons produced in
the Contract Area to a Production Fiscalization Point, (or to a Main Pipeline)
or to a pipeline belonging to third parties, including the design, construction,
maintenance and equipment of all the above.
Any individual or body corporate, whether Peruvian or foreign hired by the
Contractor to provide services related to the Operations.
Activities carried out by PERUPETRO to verify compliance with the Contractor’s
Taxes and contributions set forth in the Tax Code.
1.54 Term of the Contract
Period between the Date of Signing and the end of the term established in
section 3.1 of the Contract.
Surface below which one or more Reservoirs exist which are producing or have
been defined to be capable of producing Hydrocarbons.
CLAUSE TWO - PURPOSE OF THE CONTRACT
PERUPETRO authorizes the Contractor to carry out the Operations, in
accordance with Law Nº 26221, the pertinent legislation and the provisions of the
Contract, with the common purpose of discovering and producing Hydrocarbons
in the Contract Area
The Contractor shall have the rights of ownership over the Hydrocarbons
produced from the Contract Area, according to the provisions of Preliminary
Clause, paragraph II.
The Contractor shall carry out the Operations according to the terms of the
Contract, either directly or through Sub-contractors. Field operations outside the
Contract Area shall require the approval of PERUPETRO.
PERUPETRO shall carry out the Supervision of the Operations according to the
law and in agreement with the Contract.
Osinerg shall carry out the Fiscalization activities according to the law.
Representatives of PERUPETRO shall carry out the Supervision at any time,
with prior notification, they must identify themselves and be authorized for such
a purpose by PERUPETRO. The Contractor shall provide all facilities reasonably
possible in the Operations to allow the representatives to carry out their duties,
which shall not interfere with the Operations.
Costs and expenditures corresponding to the representatives of PERUPETRO
shall be borne by PERUPETRO.
The Contractor shall provide, and be responsible for, all technical, economic and
financial resources required for the execution of the Operations.
CLAUSE THREE - TERM, CONDITIONS & GUARANTY
3.1 The Hydrocarbons exploration phase shall last seven (7) years, which can be
extended according to the law. This period is counted from the Effective Date,
unless this term varies in accordance with other provisions contained in the
The Oil exploitation phase is the term remaining after the end of the exploration
phase until the completion of the term of thirty (30) years from the Effective Date
unless this term varies in accordance with other provisions contained in the
The exploitation phase for Non-associated Natural Gas and Non-associated
Natural Gas and Condensates is the time remaining after the end of the
Exploration phase until the completion of forty (40) years, from the Effective
Date unless this term varies in accordance with other provisions contained in
Notice: It is possible exploitation of Oil and Non Associated Natural Gas and of
Non Associated Natural Gas and Condensates.
The exploration phase is divided into …….. (X) periods:
(Duration of first and second period will depend on the agreed Work Program,
the quantity and quality of available technical information, hydrological seasons,
etc. For the next periods, duration period has been fixed in 15 months,
excepting the last period which shall be adjusted as to complete the exploration
3.2.1 A first period lasting ……..(….) months, counted from the Effective Date.
3.2.2 A second period lasting ….. (….) months, counted from the end of the
period specified in sub-section 3.2.1
3.2.3 A third period lasting fifteen (15) months, counted from the end of the
period specified in sub-section 3.2.2.
3.2.X A X period lasting …… (X months, counted from the end of the period
specified in sub-section 3.2.X-1.
During the exploration phase the Contractor shall notify PERUPETRO of its
intention to continue with the following period, thirty (30) Days before the end of
the period in progress. In case the Contractor has not complied with the
obligations corresponding to the present period, the provisions of sub-section
22.3.1 shall apply, and the corresponding guaranty executed.
If, during the periods indicated in section 3.2, the Contractor is prevented for
economical or technical reasons duly substantiated from completing the
respective minimum work programs described in sub-sections 4.6. it may extend
the said periods up to a maximum of six (6) Months provided that it has
requested authorization from PERUPETRO for such extension at least thirty (30)
Days before the end of the period in progress, and the reasons stated in such
request have been proven and accepted by PERUPETRO. In this case, the
Contractor shall, before the end of the period in progress, provide a new
guaranty or extend the existing guaranty to cover the new term, in accordance
with the provisions of section 3.10. In case these extensions result in the
extinction of the term of the last exploration phase period, and the Contractor
decides to continue with the exploration works, obligations for such period shall
be complied during an extension of the exploration phase to be agreed within the
Parties, according to the law.
After the fulfillment of the minimum program obligations of the current period,
with in the correspondent term established in section 3.2, and after having used
the extension, referred to in the above paragraph, if applicable, as long as that
obligation has been the drilling of at least one Exploratory Well; the Contractor
could request an extraordinary term up to a maximum of six (6) months, to reevaluate all the information and results obtained until that period, with the
purpose of preparing and integral and complete survey in order to take the
decision of going through the next period.
Approvals, referred to in this section, shall be granted at the criteria of
The exploration phase may continue, at the Contractor’s discretion, after the
Date of Commencement of Commercial production until the end of that phase as
indicated in section 3.1. In this case the provisions of section 10.3 shall apply
until the end of the exploration phase. At the same time, the straight-line method
of depreciation referred to in section 9.6 shall be applied from the Date of
Commencement of Commercial Extraction.
If the Contractor makes one or more Hydrocarbon discoveries during any period
of the exploration phase which is, or are, not commercial solely due to r transport
reasons , it may request a retention period of up to five (5) years for the Field or
Fields discovered, in which to make transport of the production possible.
The right to that retention is subject to at least the following requirements:
That the Contractor can prove to the satisfaction of PERUPETRO, that the
volumes of the Hydrocarbons discovered in the Contract Area are
insufficient to justify the construction of a Main Pipeline.
That the aggregation of discoveries in adjoining areas and in that of the
Contractor are insufficient to economically justify the construction of a Main
That the Contractor can demonstrate on economic grounds that the
Hydrocarbons discovered cannot be transported from the Contract Area to
a place where they can be sold, by any means of transportation.
If the Contractor makes a discovery of Non-associated Natural Gas or Nonassociated Natural Gas and Condensates during any period of the exploration
phase, it may request a retention period of up to ten (10) years for the Field or
Fields discovered, in which to develop the market.
3.8 If the Contractor discovers Oil or Non-associated Natural Gas or Non-associated
Natural Gas and Condensates during any period of the exploration phase, and
the conditions described in sections 3.6 and 3.7 apply, the Contractor may
request a retention period for Oil and another for Non-associated Natural Gas or
Non-associated Natural Gas and Condensates, for the purposes indicated in the
The retention periods referred to in sections 3.6 and 3.7, extend the term of the
Contract by a period equal to the retention period granted by PERUPETRO.
The retention period shall be established in writing. The Contractor shall request
the retention period and submit supporting documentation to PERUPETRO,
including a schedule of activities to be carried out. The exploration phase shall
terminate at the beginning of the retention period. The exploitation phase shall
commence with the declaration of a Commercial Discovery during this period.
The granting of the retention period referred to in sections 3.6 and 3.7 and their
duration shall be determined at the criteria of PERUPETRO, such not affecting or
diminishing the obligation of the fulfillment of the work minimum program of the
current exploratory phase.
3.10 The Contractor shall guarantee fulfillment compliance of each minimum work
program for the exploration phase in accordance with the provisions of sections
3.2 and 4.6, through a joint and several guaranty, which shall exclude the
requirements that remedies be exhausted against the Contractor prior to
executing on the guarantee, and which shall be unconditional irrevocable and
automatically executable in Peru. Such guaranties shall be issued by a duly
qualified entity of the financial system domiciled in Peru and accepted by
PERUPETRO. PERUPETRO may request the Contractor to substitute a
guaranty and the Contractor must provide a new guaranty no later than fifteen
(15) Business Days after receipt of the request from PERUPETRO.
The amount of the guaranty for the minimum work program for each period, will
be the result from multiplying the equivalence in dollars established in Annex “F”
by the number of Exploration Unit Works corresponding for each period, referred
in sub-section 4.6
The guaranty for the minimum work program of the first period shall be delivered
to PERUPETRO on the Signing Date. The guaranties corresponding to the work
minimum program of each period, according to period 4.6, shall be delivered to
PERUPETRO before the commencement of each period. If not, the provisions of
sub-section 22.3.3 shall apply.
The guaranty in case of extension of exploration phase period terms, shall be
delivered to PERUPETRO by the Contractor, before starting the mentioned
extension, on the contrary PERUPETRO shall not approved the requested
extension, independently from what is set forth in section 3.4.
The guaranties, following the models given in Annexes “C-1” to “C-X”, shall be
issued for each period of the minimum work program.
The guaranty for the minimum work program for each period shall remain in force
for a term which exceeds that of each minimum work program by thirty (30)
If any of the guaranties delivered by the Contractor are not maintained in effect
for the term established, the Contractor must provide a new guaranty or extend
the existing guaranty, no later than fifteen (15) Business Days after receipt by the
Contractor of PERUPETRO’s notification. If not, the provisions of sub-section
22.3.3 shall apply.
On compliance with the obligations covered by each guaranty, PERUPETRO
shall immediately return the corresponding guaranty to the guarantor through the
Contractor. Execution of any guaranty shall have the effect of discharging the
Contractor from its obligation to carry out the minimum work program, without
affecting application of the provisions of sub-section 22.3.1.
3.11 (The Head Office Company), participates to provide the corporate guaranty set
forth in Annex “D”, which shall be delivered to PERUPETRO on the Date of
The corporate guaranty shall be effective whilst the Contractors obligations are
enforceable. The provisions of sub-section 22.3.5 shall apply if, on occurrence of
any event which affects its validity or nature, the Contractor fails to provide a
replacement within a period of fifteen (15) Business Days.
CLAUSE FOUR - EXPLORATION
The Contractor shall commence exploration activities starting on the Effective
The Contractor may relinquish the entire Contract Area, without penalty, by
notifying PERUPETRO at least thirty (30) Days in advance, provided that it has
completed the minimum work program of the period of the exploration phase in
If the Contractor relinquish the entire Contract Area, abandons it or fails to
complete the corresponding minimum work program within the term of the period
in progress, without giving technical reasons which are approved by
PERUPETRO, the latter shall execute the guaranty, without affecting application
of the provisions of sub-section 22.3.3.
The Contractor may make partial relinquishments of the Contract Area by
notifying PERUPETRO at least thirty (30) Days in advance, without incurring a
fine or other penalty, but this shall not affect or diminish its obligation to complete
the minimum work program for the period of the exploration phase in progress.
The Parties shall leave a record of the areas relinquished by the Contractor in the
form of a Minute of the Supervision Committee.
The Contractor may continue to make use of the surface of the areas
relinquished on which facilities related to the Operations have been built.
During the execution of the Contract relinquishments will be performed as
At least twenty five (25%) of the original Contract Area at the end of the
second period described in sub-section 3.2.2
b) At the end of the third or fourth period described in sub-sections 3.2.3 and
3.2.4, the Contractor shall have relinquished at lest fifty per cent (50%) of the
original Contract Area, including for such purposes the relinquishment
performed according preceding literal a); unless the Contractor pledges
himself to perform exploration activities (seismic or well drilling) additional to
that of the following period, and that the activity to be performed corresponds
to the respective area relinquishment. In this case, at the end of the fourth or
fifth period, Contractor shall relinquish at least fifty per cent (50%) of the
original Contract Area, including for such purposes the relinquishment
performed according preceding literal a).
c) At the end of the exploration phase, Contractor shall keep the remaining
Contract Area, for which he must pledge himself to drill one (01) Exploratory
Well or perform five (5) Exploration Work Units for each ten thousand
hectares (10,000.00) of Contract Area, each two (2) years, up to a maximum
period of six years.
d) In the event the Contractor decides not to continue executing the exploration
activities described in literal c), or in the event he does not fulfills such
pledge , and without detriment of the application of the respective contractual
provisions, he will keep only those Fields included in the Initial Development
Plan, or in the work programs referred to in section 5.3, as it may correspond,
in Production or subject to a retention period plus a surrounding area of five
(5) kilometers up to the boundary of the Contract Area.
For the purposes of sections 4.2 and 4.3, Parties will opportunely
coordinate, in order that PERUPETRO divides the Contract Area into
rectangular parcels, as far as possible with an area of twenty thousand
hectares (20,000.00 has.) and if this is not possible, with a different area. It
is not necessary for the areas released by the Contractor to be adjoining.
All the areas relinquished by the Contractor, including Fields within such
areas, shall revert to the State at no cost to the State or to PERUPETRO.
The minimum work program for each of the periods of the exploration
phase, which the Contractor is obliged to carry out, is as follows:
UTE / 10 mha
(Work Exploration Units for each 10,000
ha or portion)
-----------------4.0 or drilling of one exploratory well
5.0 or drilling of one exploratory well
5.0 or drilling of one exploratory well
Works for the first and second period of the work minimum
program are agreed between the parties, according to the area potential, quantity and
quality of available technical information, hydrologic season, etc, works agreed are
turned into Exploration Work Units. For the following periods Exploration Work Units
for each ten thousand hectares are established.
The established Work Minimum Program, expressed in Exploration Work Units for
each 10,000 ha, includes the original area and the minimum area relinquishments
established for each period in section 4.3, for such effect relinquishments established
in section 4.2 are not considered.
In order to comply with the obligations described in this paragraph, the following
must be taken into account:
In case of the recording of seismic lines, the corresponding kilometers will
be counted from the initial shot point to the final shot point of each seismic
The exploration working units referred to in this paragraph will be fulfilled
according to the table of equivalencies established in Annex “F”.
Only the exploration working units resulting from the registry of 2D or 3D
seismic lines, as well as from the drilling of Exploration Wells, performed in
excess at any period of the exploration phase, in relation with what is
established in paragraph 4.6, will be considered as fulfillment of the
obligations of the following periods without being necessary to deliver the
guaranty corresponding to the period in which those work units are
guaranteed, as long as the minimum work program has been completely
executed in advance; if not, the guaranty shall be submitted according to
the terms and procedures established in paragraph 3.10.
In case of drilling Exploratory Wells, exploration work units effectively
executed will be determined according to the table of equivalences
established in Annex “F”, setting the difference with the number of
exploration work units represented by the drilling obligation according to
this section , the same which will be used to accredit future works, if it is
pertinent, or to complete other exploration works, as it may correspond.
Before the beginning of each period of the exploration phase the
Contractor shall inform PERUPETRO in detail about the scheduled
exploration activities in order to fulfill the number of exploration working
units committed for such period. The Contractor shall inform PERUPETRO
any modification of the contents of such program through a supporting
technical report, before its execution. In case the modification refers to
switching the obligation of drilling a exploratory well by other exploration
activities, according the equivalences table of Annex “F”, prior approval of
PERUPETRO will be necessary.
The Exploratory Wells corresponding to the Minimum Work Program and referred
to in section 4.6, shall be considered drilled and, therefore, the Contractor’s
obligations fulfilled, when a minimum vertical depth (TVD) of ….. meters,
measured from the surface, or a minimum of 100 meters into the ……. formation,
is reached, whichever occurs first, according to the activities program delivered
to PERUPETRO at the beginning of each period.
If, before starting to drill any of the Exploratory Wells corresponding to the work
minimum program, referred to in section 4.6, the Contractor demonstrates to
PERUPETRO’s satisfaction, based on geological and geophysical evaluations,
that it cannot comply with the objective agreed in the first paragraph of this
section, the Parties may agree a new geological objective and/or depth.
Likewise, if during drilling of any of the Exploratory Wells corresponding to the
work minimum program, referred to in section 4.6, geological or mechanical
problems arise which cannot be overcome, the Contractor may request
PERUPETRO to recognize that its obligation to drill has been complied with, by
submitting a supporting technical report for the approval of PERUPETRO.
If the Contractor decides to declare a Commercial Discovery, it shall notify
PERUPETRO of its declaration and submit an “Initial Development Plan” to make
viable the Exploitation of the Hydrocarbons discovered, no later than one
hundred and eighty (180) Days after making the declaration. This Plan shall
include the following:
The physical and chemical characteristics of the Hydrocarbons discovered,
the percentage of associated products and the impurities they contain.
Estimated production profiles during the Term of the Contract for the Field
Estimated number of development wells and their production capacity.
Transport and Storage System and Projected Production Fiscalization
Main Pipeline, if applicable.
Schedule of work to be carried out.
The period which will elapse before the Date of Commencement of
The “Initial Development Plan” must include the specific investments, costs and
expenditure estimated for Exploitation of the Commercial Discovery as well as
any other information considered suitable by the Contractor.
PERUPETRO must advise the Contractor of its comments on the “Initial
Development Plan” within sixty (60) Days of having received it. It may question
the Date of Commencement of Commercial Production if this is not reasonable.
In the event of dispute, the Technical Conciliation Committee shall be convened.
4.10 If the Contractor makes a declaration of Commercial Discovery, it shall be obliged
to commence Development no later than one hundred and eighty (180) Days
following the expiration of the sixty (60) Days period indicated in section 4.9 of
A declaration of Commercial Discovery does not imply the reduction or
suspension of obligations under the minimum work program.
4.11 Development of the Hydrocarbons discovered shall be carried out in accordance
with the work program submitted by the Contractor to PERUPETRO in
accordance with the provisions of section 5.3.
The Parties agree that when appropriate and necessary, the terms for
submission of the “Initial Development Plan” or the annual work program, may be
adjusted, extended or modified. For this purpose, the Contractor shall submit its
proposals to PERUPETRO so that agreement on such adjustment, extension or
modification can be reached.
4.12 The end of the exploration phase shall not affect any of the terms and periods for
the above mentioned procedures which may be in progress at the time of
produced such expiration.
4.13 In exceptional cases, due to technical and economic reasons, which make
unfeasible the fulfillment of the obligations and/or terms of the work minimum
program periods established in sections 4.6 and 3.2 respectively, and at request
of the Contractor, through the submission of a supporting report about the
change, obligations and/or terms of the work minimum program periods shall be
replaced, provided that PERUPETRO accepts and approves the requested
replacement. In any case, such replacement shall modify the initial commitment
of Exploration Work Units for the exploration phase, reducing obligations.
Likewise, when the exploration results justify a new Contract Area configuration
and upon request of the Contractor, through the submission of a supporting
report to PERUPETRO, the Contract Area shall be delimited again, as well as it
is complied the established in section 4.3, the Contractor submits work
proposals for the new area, and PERUPETRO accepts and approves the new
delimitation requested. In any case, the new delimitation will increase the total
original Contract Area.
The above-mentioned replacements and new delimitations accepted and
approved by PERUPETRO, may originate changes in the amounts and terms of
the established guaranties; if applicable, the Parties shall calculate the new
guaranties amounts and the Contractor shall comply to submit a new guaranty or
shall extend the one in force, replacing it with the new amount and/or term
established, according to the requirements set forth in sections 3.4 and 3.10,
likewise the Exploration Working Units for the new area will be calculated.
CLAUSE FIVE - EXPLOITATION
The exploitation phase shall commence the Day after the end of the exploration
phase, provided that a declaration of Commercial Discovery has been made
during the exploration phase. However, the Contractor has the option of
commencing the exploitation phase and ending the exploration phase earlier, on
the Date of Commencement of Commercial Production. If a retention period
applies, the exploitation phase shall commence once the declaration of
Commercial Discovery is made.
The Contractor is obliged that the Date of Commencement of Commercial
Production must take place within the period established in sections 4.8 and 4.9.
The Contractor shall submit to PERUPETRO, no less than sixty (60) Days before
the end of each calendar Year after a declaration of Commercial Discovery, the
An annual work program and detailed budget showing income, costs,
expenditure and investment for the following calendar Year.
An annual work program and detailed budget showing income, costs,
expenditure and investment for Exploration aimed at discovering additional
reserves, if applicable.
A work program and projected income, costs, expenditure and investment
covering Development and/or Production for the next five (5) calendar
In carrying out each work programs, the Contractor shall use the equipment
and/or methods necessary and appropriate to allow operations evaluation and
The Contractor is obliged to produce and recover the Hydrocarbon reserves in
the Contract Area economically, in accordance with the programs referred to in
this Clause Five and shall carry out this work in accordance with technical and
economic principles generally accepted and employed in the international
The Contractor has the right to use the Hydrocarbons produced in the Contract
Area in its Operations at no cost whatever, which are not considered in the
royalty determination. At the same time, such hydrocarbons could be processed
within the Contract Area to be exclusively used in the Operations.
Notice: Hydrocarbons processing is only accepted for remote areas.
The Contractor shall have the right to recover Liquid Hydrocarbons from any
Natural Gas which may be produced in the Contract Area and extract them at
any stage of handling the said Natural Gas.
Liquids thus separated shall be considered as Condensates for the purposes of
determining the royalty, except when, for economic or operational reasons, it is
not possible to collect them, in which case they may be mixed with Oil and
Natural Gas not used by the Contractor in the Operations in accordance with
section 5.6, may be sold, re-injected into the Reservoir, or both, by the
Contractor. Natural Gas not used, nor sold or re-injected may be flared by the
Contractor after obtaining authorization from the Ministry of Energy and Mines.
When a commercially exploitable Field or Fields extend continuously from the
Contract Area to another area or areas, the Contractor and the contractors
operating these other areas must reach agreement on a single Exploitation plan
or common Exploitation plan. If agreement cannot be reached, the Ministry of
Energy and Mines shall order the differences to be submitted to the technical
conciliation committee referred to in Article 32, of Law 26221. The decision of this
committee shall be binding.
If the area adjacent to the commercially exploitable Field is not assigned to a
contractor, or is not in a process of negotiation or bidding and there are no
environmental constraints, the Contractor shall have first refusal to negotiate and
incorporate the said adjacent area into the Contract Area, provided that it submits
its request within the Exploration phase.
5.10 After drilling one (1) well, the Contractor must inform PERUPETRO when the well
will be tested and, if applicable. The well test shall be performed within the three
(3) Months following to the end of drilling.
5.11 PERUPETRO may at any time examine and test the equipment and measuring
instruments used to measure the volume and determine the quality of Fiscalized
The equipment and measuring instruments shall be periodically calibrated in
accordance with applicable regulations. Representatives of PERUPETRO may
be present during calibration.
5.12 Before the Date of Commencing of Commercial Production and in order to
determine the volume and quality of Fiscalized Hydrocarbons, the Parties shall
agree the equipment, the methods and the corresponding measuring procedures.
5.13 For the production of Heavy Oil in the Contract Area, it could be blended with
Light Oil produced out of the Contract Area. Such Light Oil will be measured and
fiscalized by the parties in a measuring point at the entrance of the Contract
The volume of such hydrocarbons produced out of the Contract Area will be
discounted from the volume of Fiscalized Hydrocarbons in the Contract Area in
order to determine the royalty to be paid by the Contractor.
CLAUSE SIX - SUBMISSION OF INFORMATION & STUDIES
The Contractor shall keep PERUPETRO permanently, promptly and regularly
informed regarding the Operations, providing all information in the manner set
forth in this clause and in any applicable legislation. It shall also provide
information on other natural resources or archaeological remains found or
discovered in the course of the Operations during the term of the Contract. The
technical information, studies, processed and unprocessed data as well as
results provided by the Contractor to PERUPETRO in accordance with this
Clause shall be of the best quality that has been obtained by the Contractor. If
when securing information and results, methods or systems are used that solely
belong to him or to of any of his companies, it will not be obliged to disclose
those methods or systems when he provides the information.
6.2 The Contractor must provide a copy of all studies concerning the Development of
the Fields, prepared from technical information obtained in the Contract Area.
The Contractor shall also provide any further explanatory information regarding
such studies required by PERUPETRO.
Contractor must submit to PERUPETRO, the information and studies
corresponding to the obligations of the minimum work program no later than the
date in which each period of the exploration phase covered in section 3.2.
No later than ninety (90) Days after the end of each period of the exploration
phase, Contractor must submit to PERUPETRO a report containing an
evaluation, including a study and interpretation of the geological, geophysical,
geochemical, petrophysical and reservoir analyses carried out in relation to the
minimum work program for each period.
The Contractor shall submit the to PERUPETRO a “Monthly Production Report”
an a “Monthly Income and Expenditure Report”. Both reports will be submitted
in the forms delivered to the Contractor by PERUPETRO for such purpose, at the
latest at the thirtieth (30) calendar day of each month.
As PERUPETRO requires, the Contractor must provide PERUPETRO with a
copy of all information supplied to the Central Reserve Bank of Peru in
accordance with the provisions of Clause Eleven..
Within the thirty (30) days after the end of each calendar Month, the Contractor
must provide PERUPETRO with a list of the contracts entered into with
Subcontractors during that Month, as well as copies of any of these contracts
which PERUPETRO may require.
PERUPETRO or any of the enterprises conforming the ContractorEither Party
may reveal information obtained from the Operations without obtaining the
approval of the other Party in the following circumstances:
a) To an Affiliate of the Party.
b) In relation to financing or insurance hiring, provided that a confidentiality
agreement is obtained.
c) If required by law, regulation or resolution of the competent authority
including, without limitation, regulations and resolutions of government
authorities, insurance companies or the stock exchange on which the shares
of the Parties or Affiliates of the Parties are registered.
e) To consultants, accountants, auditors, financiers, professionals, possible
purchasers or assignees of the Parties or of a share in the Contract, as far as
is necessary in relation to the Operations, provided that a confidentiality
agreement is obtained.
When the Parties agree to communicate certain confidential or reserved
information to third parties, the character of such information must be expressly
stated so that it shall not be divulged by those third parties.
CLAUSE SEVEN - SUPERVISORY COMMITTEE
The Supervisory Committee shall be convened and shall approve up regulations
governing its functioning within sixty (60) Days after the Effective Date .
The Supervisory Committee shall have the following duties:
To discuss and exchange, among its members, all information relative to
To evaluate the execution of the Exploration minimum work program
referred to in section 4.6.
To evaluate the work programs and plans referred to in sections 4.8 and
5.3, and coordinate the execution of them.
Verify and coordinate the execution of the Operations, for which the
representatives of the Parties accredited to the Supervisory Committee
shall have available all necessary advice.
Verify and coordinate the fulfillment of all obligations relative to the
Operations set forth in the Contract or agreed by the Parties in any other
Other powers established in the Contract or agreed between the Parties.
The Committee shall meet whenever requested by either Party, and at a
frequency established by its regulation. At least one representative or each Party
must be present for the Supervisory Committee to be validly constituted.
Each one of the Parties shall bear the costs incurred in maintaining its respective
members in the Supervisory Committee.
Whenever a discrepancy between the Parties arises and continues in the
Supervisory Committee, each one may request any legal or technical opinion it
deems appropriate, which shall be submitted to an extraordinary meeting of the
Supervisory Committee. If during the extraordinary meeting no agreement is
reached, the subject shall raised to the General Managements of the Parties in
order to solve it. If the discrepancy continues, the Technical Conciliation
Committee shall be convened.
CLAUSE EIGHT - ROYALTY & VALUATION
The Contractor shall pay a royalty in cash, based on the Fiscalized
Hydrocarbons valued at one or more Production Fiscalization Points, in
accordance with sections 8.3, 8.4 and 8.5. In the event of a loss of
Hydrocarbons, the provisions of section 14.2 shall apply.
For the purposes of this Clause, the following terms shall have the meanings
set forth below:
Transportation and Storage Cost: is the cost, expressed in Dollars
per Barrel or Dollars per MMBtu as the case may be, which includes:
The tariff paid to third parties or the Estimated Tariff, expressed
in Dollars per Barrel or Dollars per MMBtu, as the case may be,
for transportation and storage of Fiscalized Hydrocarbons from a
Production Fiscalization Point to the point of sale or export.
Costs of handling and carrying Fiscalized Hydrocarbons to a
vessel’s manifold or to the sale installations.
Valuation Period: is each fortnight of a given calendar Month, the first
fortnight being the period from the first to the fifteenth Day of that
calendar Month and the second fortnight being the remainder of the said
Insofar as the relevant legislation permits, the Valuation Period may be
extended or shortened by agreement between the Parties.
Basket Price: is a price, expressed in Dollars per Barrel, representing
the Peruvian export port FOB value, based upon a basket of prices for
Liquid Hydrocarbons defined in accordance with sub-section 8.4.1 for
the Oil Basket Price, sub-section 8.4.3 for the Natural Gas Liquids
Basket Price and sub-section 8.4.4 for the Condensate Basket Price.
Sale Price: is the agreed price, expressed in Dollars per million BTU,
effectively paid or payable by a purchaser to the Contractor for
Fiscalized Natural Gas produced in the Contract Area. This must also
include other concept derived directly from the respective sales of
Fiscalized Natural Gas and from the volume of Fiscalized Natural Gas
produced in the Contract Area effectively delivered, expressed in Dollars
The following shall not be taken into account in the calculation of the
Payments resulting from the reconciliation of Natural Gas
volumes contained in the respective sales/purchase contracts.
General Sales Tax, Selective Consumption Tax, Municipal
Promotion Tax and/or any other consumption tax.
Estimated Tariff: the cost, expressed in Dollars per Barrel or Dollars
per MMBtu as it may be applicable, of transportation from a Production
Fiscalization Point to the point of sale or export or to a pipeline
belonging to a third party. This cost must take into account the concepts,
methodologies and procedures referred to in the “Regulations for
Hydrocarbon Transportation by Pipeline”, its amendments and any
regulation replacing it.
Value of Fiscalized Oil Production: is the result of multiplying the
Fiscalized Oil for a given Valuation Period by the Oil Basket Price for
that period from which the corresponding Transportation and Storage
Cost has been deducted, if it is pertinent.
Value of Fiscalized Natural Gas Production: is the result of
multiplying the Fiscalized Natural Gas, in terms of its heat content in
millions of BTUs for a given Valuation Period by the Sale Price for that
period from which the corresponding Transportation and Storage Cost
has been deducted, if it is pertinent.
Value of Fiscalized NGL Production: is the result of multiplying the
Fiscalized Volume of Natural Gas Liquids for a given Valuation Period
by the Natural Gas Liquid Basket price for the Fiscalized Natural Gas
Liquids for that period, from which the corresponding Transportation and
Storage Price has been deducted, if it is pertinent.
Value of Fiscalized Condensate Production: is the result of
multiplying the Fiscalized Condensates for a given Valuation Period by
the Condensate Basket Price for that period from which the
corresponding Transportation and Storage Cost has been deducted, if it
8.3 The Contractor at the moment of declaring Hydrocarbons Commercial Discovery
will choose the application of one of the two methodologies established in
paragraphs 8.3.1 and 8.3.2. Once chosen, the Contractor could not change the
methodology during remaining of the Contract Period.
Methodologies based on Production Scales: It will be applied according to the
Liquid Hydrocarbons and/or Natural Gas Liquids Fiscalized Production. The
Fiscalized Production levels and the royalty percentages, are the following:
Fiscalized Production Levels
5 – 20
5 – 100
MBDC: Thousand of barrels per calendar day.
For a Fiscalized Production which is less than 5 MBDC a royalty percentage of
5% is applied. For a Fiscalized Production greater than 100 MBDC a royalty
percentage of 20% is applied. For a Fiscalized Production within the average of
5 MBDC to 100 MBDC the royalty percentage resulting from the calculation
performed by the linear interpolation method is applied.
For the Natural Gas Fiscalized Production the same royalty percentages and
the Fiscalized Production Levels used for Liquid Hydrocarbons will be applied,
for which the following formula will be used: Barrels shall be equivalent to the
Natural Gas volume expressed in standard cubic feet divided between the
factor five thousand six hundred twenty six (5,626).
Methodology based on Economic Results (RRE) : Will be applied according to
the following ratio:
RRE = 5% + % t Variable Royalty
Variable Royalty (%t) = ((Xt-1 – Yt-1 ) / Xt-1)*(1-(1/(1+(Factor Rt-1 - 1.15 )))) * 100
It is applied when
Rt-1 Factor 1.15 and the range of:
For negative results it is considered 0% and for
results the same or greater than 20% it is
considered 20 %
Revenue corresponding to the former annual period at the moment of
executing the calculation of the Variable Royalty (%t). Include concepts
applicable to Rt-1 Factor.
Expenditure corresponding to the former annual period at the moment of
executing the calculation of the Variable Royalty (%t). Include concepts
applicable to Rt-1 Factor.
Factor R t-1:
Is the quotient between the income and expenditure
accumulated since the signing date up to the period t-1.
Cum[PFP*(PCP - CTAP)] + Cum[PFC*(PCC - CTAC)] +
Cum[PFG*(PRG - CTAG)] + Cum [PFL*(PCL - CTAL)] + Cum[OI]
Fiscalized Oil Production
Oil Basket Price
Oil Transportation & Storage Cost
Fiscalized Condensate Production
Condensate Basket Price
Condensate Transportation & Storage Cost
Fiscalized Natural Gas Production
Natural Gas Sale Price
Natural Gas Transportation & Storage Cost
Natural Gas Liquids Fiscalized Production
Basket Price for Natural Gas Liquids
Natural Gas Liquids Transportation & Storage
Cum (Investment + Costs + Royalties + Other Expenditure)
Details of revenue and expenditure and the occasions for recording the
components of the “R” Factor are given in Appendix “E”, Accounting
The Variable Royalty Percentage calculation is performed twice a year. One
during January, with Revenue and Expenditure information from January to
December from the last calendar year; and the other in July, with information
from July of last calendar year to June of current calendar year.
For the purposes of the Contract, the value of each class of Fiscalized
Hydrocarbons shall be expressed in Dollars per Barrel or Dollars per million Btu
as the case may be, and determined as indicated below:
To determine the Value and calculate the Basket Price for Oil, the
following procedure shall be used:
At least ninety (90) Days before the Date of Commencement of
Commercial Production, the Parties shall determine the quality of
Oil to be produced in the Contract Area.
No later than thirty (30) Days after the determination referred to
in a) above, the Parties shall select a basket of Oil consisting of
a maximum of four (4) components which must fulfill the
They should be of a similar quality like the Oil to be
produced in the Contract Area.
Their prices should appear regularly in “Platts” publication
or another source recognized by the petroleum industry
and agreed between the Parties.
They should be competitive in the market or markets in
which the Oil to be produced in the Contract Area could
Every six (6) Months, or earlier if requested by either of the
Parties, the Parties must review the basket established for the
valuation of the Liquid Hydrocarbons produced in the Contract
Area, in order to verify that they still comply with the above
conditions. If it is shown that any of the above conditions no
longer applies, the Parties must modify the basket no later than
thirty (30) Days after the date on which the review of the basket
commences. If, at the end of this period the Parties are unable to
agree on a new basket, the procedures set forth in sub-section
8.6.4 of the Contract shall be applied.
Regarding the quality, if it is shown that the API density
(weighted average), sulphur content or other quality element of
the Oil produced in the Contract Area has varied significantly
from the quality of the Oil which make up the basket (simple
arithmetic average), the Parties must modify the composition of
the basket to reflect the quality of the Oil in the Contract Area.
Once the quality of the Oil referred to in the previous paragraph
has been determined, the Parties shall sign a “Valuation
Agreement” in which terms and conditions additional to those
detailed in this paragraph shall be established, which are
necessary for correct application.
The “Valuation Agreement” shall define the procedures for
adjustments which may be necessary for quality reasons. Quality
adjustments shall take into account awards and/or penalties for
improvement and/or deterioration of the quality of the Oil
produced in the Contract Area, compared to the quality of the
oils making up the basket. The “Valuation Agreement” shall also
establish the in force period and frequency when the agreed
methods and procedures shall be reviewed, so as to guarantee
at all times a realistic determination of the prices of the Oil
produced in the Contract Area. If, at any time, either Party
considers that application of the methods and procedures
established in the “Valuation Agreement” does not result in a
realistic determination of the value of Oil produced in the
Contract Area, the Parties may agree to apply other methods
and procedures to achieve that result.
If, in the future, the price of one or more of the oils making up the
basket is quoted in a currency different than the Dollar, those
prices shall be converted into Dollars using the exchange rates
applicable on the dates of each of the above mentioned
quotations to the average of the exchange rates quoted by New
York Citibank N.A., New York,. In the absence of this, the
Parties may agree on an adequate substitute.
The Basket Price used to calculate the value of the Oil produced
in the Contract Area during a Valuation Period shall be
determined as follows:
The average price of each of the Oils making up the
basket shall be determined by calculating the arithmetic
mean of its quotations published during the Valuation
Period. Only those Days on which all the Oils making up
the basket are quoted shall be used.
The average prices resulting from the above procedure,
for each of the Oils making up the basket, shall, in turn,
be averaged to obtain the Basket Price corresponding to
the value of the Oil produced in the Contract Area.
The Value of Natural Gas for the royalty payment shall be represented
by the Sale Price, which must reflect the national market or export price,
referred to an established point within the national territory, as it may
correspond. The minimum Sale Price to be applied shall be US$ 0.6
The applicable parts of the procedure laid down in sub-section 8.4.1
shall be applied in the case of Natural Gas Liquids The Parties may
agree the necessary adjustments to the Basket Price in order to
establish the Natural Gas Liquids Basket Price, as to reflect as accurate
as possible, the value of the Natural Gas Liquids produced in the
The applicable parts of the procedure laid down in sub-section 8.4.1
shall be applied in the case of Condensates. The Parties may agree on
the necessary adjustments to the Basket Price in order to establish the
Condensate Basket Price, as to reflect as accurate as possible, the
value of the Condensates produced in the Contract Area.
In case the Parties cannot reach any of the agreements considered in
this section, the Technical Conciliation Committee shall be convened.
Without detriment of what is established for in literal d) of paragraph 2.5 of
“Appendix E”, Accounting Procedure; if at any moment the parties found out
that a mistake in the calculation of Rt-1 Factor had produced, and that as a result
of that mistake it is necessary to apply a Rt-1 factor different to the one
previously applied, or that it should have been applied at a different moment to
that in which it was applied, the corresponding correction will be executed
affecting the period in which the mistake occurred, readjusting the royalty
percentage since that period. Every adjustment resulting from a minor royalty
payment, will accrue interests in favor of the affected Party since the moment
the mistake occurred. Devolutions made to the Contractor as a result of a
greater royalty payment, will be performed during the next fortnights against the
balances that PERUPETRO has to transfer to the Treasury because of the
Contract, according to literal g) of article 6° of Law N° 26221.
The amount of the royalty shall be calculated for each Valuation Period.
Payment shall be made, in Dollars, no later than the second Working Day after
the end of the corresponding fortnight. The volume of Fiscalized Hydrocarbons
for each fortnight shall be supported by fiscalization tickets which PERUPETRO
shall provide, duly signed in agreement, to the Contractor.
If the Contractor fails to pay PERUPETRO all or part of the royalty during the
period stipulated in section 8.6, the Contractor hereby makes available to
PERUPETRO a sufficient quantity of Hydrocarbons extracted from the Contract
Area as to cover the owed amount , incurred costs and corresponding interests
according to the provisions of section 19.6.
CLAUSE NINE – TAXES
The Contractor is subject to the ordinary tax regime of the Republic of Peru,
including the ordinary Income Tax regime and specific regulations set forth in
Law Nº 26221, in force on the Signing Date.
The State, through the Ministry of Economy and Finance guarantees the
Contractor a tax stability during the Term of the Contract, so it shall be subject
solely to the tax regime in force on the Date of Signing, according to the
provisions of the “Guaranty Tax Stability Regime and Taxation Regulations of
Law Nº26221, Organic Law of Hydrocarbons”, approved by Supreme Decree
Nº32-95-EF, the “Law Governing the Stability with the State under the Sector
Laws .- Law N° 27343”, as it is applicable, and the “Updated Law of
Hydrocarbons – Law N° 27377”.
Hydrocarbon Exports from the Contract Area made by the Contractor are
exempted from all Taxes, including those requiring specific mention.
Payments by means of “canon”, “sobrecanon”, and “participacion en la renta” to
state entities, shall be made by PERUPETRO.
Regarding the current legislation, the Contractor shall pay those taxes applicable
to imports of goods and supplies require by the Contractor to carry out the
Operations, according to the law.
Regarding the provisions of Article 87 of the Tax Code, the Contractor may keep
its accounts in Dollars and, therefore, determination of the basis for Taxes
payable by the Contractor, the amount of such Taxes and payment thereof shall
be carried out according to the law.
It is established that the Contractor shall use the straight-line method of
depreciation over a period of five (5) Years starting from the financial year
corresponding to the Date of Commencement of Commercial Production.
This straight-line depreciation shall be applied to all Exploration and
Development expenditure and to all investments made by the Contractor from
the Signature Date until the Date of Commencement Commercial Production.
The above mentioned depreciation period shall be extended, without exceeding
the term of the Contract, if for price reasons or due to any other factor agreed by
the Parties and after applying the linear depreciation referred to above, the
Contractor’s (or any of the enterprises that made up the Contractor) accounts
show a loss or a fiscal loss which, in the Contractor’s judgement (or such
enterprise), will not be compensated by fiscal effects according to the current
tax legislation. Extensions of the depreciation period shall be made known in
advance to the National Superintendence of Tax Administration.
CLAUSE TEN - CUSTOM DUTIES.
10.1 The Contractor is authorized to import, either permanently or temporarily,
according to the current legislation, all goods necessary for the efficient and
economic execution of the Operations.
10.2 The Contractor may import temporarily, for a period of two (2) Years, goods to be
used for its activities without paying import Duties, including those requiring
specific mention. If an extension is required, a request shall be made to
PERUPETRO up to two (2) times, for periods of one (1) Year each, and
PERUPETRO shall make arrangements with the General Hydrocarbons Bureau
for the corresponding Directorial Resolution. With this documentation, the
National Superintendence of Tax Administration shall authorize an extension of
the temporary import regime.
The procedure, requirements and guarantees necessary for the application of the
temporary import regime shall be subject to the regulations contained in the
General Customs Law, its Regulation and Amendments.
10.3 The importing of goods and supplies required by the Contractor for Exploration
activities in the exploration phase are exempt from all Taxes, including those
requiring specific mention, provided that they are contained in the list of goods to
which this entitlement applies, according to the provisions of Article 56 of Law Nº
26221. This entitlement shall be applied for the duration of the said phase.
10.4 Taxes levied on imports of goods and supplies required by the Contractor for the
Exploitation activities and Exploration activities in the exploitation phase shall be
borne by the importer.
10.5 PERUPETRO may inspect the goods imported either permanently or temporarily
under the provisions of this Clause, for the Exploration activities in the
exploration phase, in order to verify that such goods have been imported
exclusively for the Operations.
10.6 The Contractor must periodically inform PERUPETRO about the goods and
supplies which have been exonerated from Taxes, according to the provisions of
Article 56 of Law Nº 26221.
The Contractor may not re-export or use for other purposes, the goods and
supplies referred to in the previous paragraph, without the authorization of
PERUPETRO. Once such authorization is obtained, the Contractor must apply
the corresponding Taxes, in accordance with the provisions of Article 57 of Law
CLAUSE ELEVEN - FINANCIAL RIGHTS
11.1 State Guaranty
The Central Reserve Bank of Peru participates in the Contract, according to the
provisions of Law Nº26221 and Legislative Decree Nº668, to grant to the
Contractor on behalf of the State the guarantees indicated in this clause,
according with the regime in force on the Signing Date.
The guarantees mentioned in this clause also cover the assignee in the event of
assignment, subject to the Organic Hydrocarbons Law and to this Contract.
11.2 Exchange Rate Regime
The Central Reserve Bank of Peru, on behalf of the Peruvian State and in
compliance with the legislation in force at the Signing Date, guarantees that the
Contractor shall be subject to the exchange rate regime in force on the Signing
Date and, therefore, that the Contractor shall have the right to free possession,
availability, use and disposal, both internally and externally, of foreign currency,
as well as the freedom to exchange local currency into foreign currency on the
open market, under the terms and conditions set forth in this Clause.
The Central Reserve Bank of Peru, on behalf of the Peruvian State, guarantees
the Contractor (or each one of the enterprises which made up the Contractor) the
following, according to with the regime in force on the Signature Date.
Free disposal for Contractor of up to one hundred per cent (100%) of the
foreign currency generated by its exports of Fiscalized Hydrocarbons,
which may be deposited in its bank accounts in Peru or abroad.
Free disposal of and the right to convert freely into foreign currency, up to
one hundred per cent (100%) of the Local currency generated by the sale
of Fiscalized Hydrocarbons in the Peruvian market and the right to deposit
directly in its bank accounts in Peru or abroad, both foreign currency and
The right to maintain, control and operate bank accounts in any currency,
either in Peru or abroad, to exercise control over and enjoy free use of
such accounts and to maintain and freely dispose of the funds in such
accounts, abroad, with no restriction whatsoever.
Notwithstanding, the above paragraphs the Contractor’s right to freely
dispose, distribute, remit or retain abroad with no restriction whatsoever, its
net annual profits determined in accordance with the law.
11.3 Availability and Conversion to Foreign Currency
It is agreed that the Contractor shall use the entities of the Peruvian financial
system to have access to foreign currency as referred to in paragraph b) of
In case the foreign currency referred to in the previous paragraph cannot be
supplied, either wholly or in part, by the said entities, the Central Reserve Bank
of Peru shall guarantee the supply of the necessary foreign currency. For this
purpose, the Contractor must apply in writing to the Central Bank enclosing
photocopies of communications received from at least three (3) entities of the
financial system stating that it is impossible to supply, either wholly or in part, the
Contractor’s foreign currency requirements. The communications referred to
above shall be valid for two (2) Business Days after the date of issue.
Before 11:00 a.m. on the following Business Day after the above mentioned
documents have been submitted, the Central Bank shall communicate the
Contractor the exchange rate to be used for the purchase, which rate shall be
applied provided that the Contractor supplies the exchange value in Peruvian
currency on the same day.
If, for any reason, the exchange value in Peruvian currency is not provided by the
Contractor on the same day, the Central Reserve Bank of Peru shall inform the
Contractor on the following Business Day, with the same time limit, the exchange
rate to be used if the purchase takes place on that day.
Notwithstanding the above, if the Central Reserve Bank of Peru finds that the
foreign currency required cannot be supplied, either wholly or in part, by the
above mentioned entities, it shall request the Contractor to supply the Central
Bank with the corresponding Peruvian currency so that the foreign currency
purchase can be effected.
11.4 Modification of Exchange Rate Regime
The Central Reserve Bank of Peru, on behalf of the Peruvian State, guarantees
that the regime set forth in this clause shall continue to be applied to the
Contractor for the term of the Contract. If, for any reason, the exchange rate is
not determined by supply and demand, the exchange rate applicable to the
Contractor shall be:
a) If a unique official exchange rate is established having the same value for all
foreign currency and related operations, this rate shall be applied to the
Contract from the date on which it takes effect.
b) In case of multiple exchange rates are established, or different values are
given to a unique exchange rate, the exchange rate to be used for all the
Contractor’s operations shall be the highest with respect to the foreign
11.5 Application of other Legislation
The guarantees granted by the Central Reserve Bank of Peru to the Contractor
shall apply during the Term of the Contract.
The Contractor shall have the right to avail itself /themselves, totally or partially
when pertinent, of new exchange rate legislation or regulations issued during the
Term of the Contract , including those concerning exchange rate aspects not
considered in this clause, provided that they are general in nature or apply to
Hydrocarbon activities. Such a decision shall not affect the validity of the
guarantees covering aspects other than those considered in the new exchange
rate legislation or regulations of which the Contractor may have availed itself.
It is expressly agreed that the Contractor may, at any time, revert to the
guarantees it decided not to make use of temporarily and that reversion to such
guarantees does not create rights or obligations on the Contractor with respect to
the period during which it availed itself of the above mentioned new legislation or
It is also agreed that reverting to such guarantees does not affect these or any
other guarantees, nor creates additional rights or obligations on the Contractor.
The Contractor’s decision to avail itself of new exchange rate legislation or
regulations, as well as any decision to revert the guarantees that it/(they)
decided not to make use of temporarily, must be communicated in writing to the
Central Reserve Bank of Peru and to PERUPETRO.
The provisions of this section do not affect the provisions of the first paragraph of
11.6 Economic Information.
The Contractor shall provide monthly information to the Central Reserve Bank of
Peru relating to its economic activity, according with Article 74 of the Organic
Banking Law approved by Legislative Decree Nº26123.
CLAUSE TWELVE - EMPLOYEES
12.1 The Parties agree that at the end of the fifth Year from the Date of
Commencement of Commercial Production, the Contractor shall have replaced
all its foreign personnel by Peruvian personnel with equivalent professional
qualifications. Foreign personnel in management positions and those necessary
for specialized t technical work related to the Operations are exempted from the
above. The Contractor agrees to train Peruvian personnel in specialized
technical work in order to that Peruvian personnel may progressively replace
foreign personnel in such positions.
12.2 At the commencement of the Operations, and at the end of each calendar Year,
the Contractor shall provide PERUPETRO an statistical chart of the personnel
involved in the Operations, According to the form provided by PERUPETRO to
CLAUSE THIRTEEN - ENVIRONMENTAL PROTECTION AND COMMUNITY
13.1 The Contractor according to law, shall comply with the provisions and regulations
of the “Environmental Regulations for Hydrocarbon Activities” approved by
Supreme Decree Nº046-93-EM and its amendments; Legislative Decree Nº613,
the “Environment and Natural Resources Code” and other relevant regulations.
For such purpose, if pertinent, PERUPETRO will facilitate the coordinations
between the Contractor and the competent authorities.
13.2 The Contractor in coordination with PERUPETRO, each time it is necessary, will
divulge the scope of the Exploration and Exploitation activities derived from the
Contract to local authorities and native communities, located within the direct
influence of Contract Area,.
CLAUSE FOURTEEN - CONSERVATION OF HYDROCARBONS AND LOSS
14.1 The Contractor must adopt all reasonable measures as to prevent any form of
loss of Hydrocarbons on the surface or in the subsoil, during Exploration and
14.2 In the event of a spillage of Hydrocarbons on the surface either inside or outside
the Contract Area, that must be informed in accordance to the legal regulations in
force, the Contractor must inform PERUPETRO immediately, indicating the
estimated volume spilled and the measures taken to correct the causes thereof.
PERUPETRO has the right to verify the volume spilled and to investigate the
cause of the spillage.
If Hydrocarbons are lost on the surface either inside or out side the Contract Area
before the Production Fiscalization Point, due to serious negligence or fraud on
the part of the Contractor, the volume lost shall be valued in accordance with the
provisions of Clause Eight and included in the royalty calculation, notwithstanding
the provisions of section 13.1.
In the event of losses before the Production Fiscalization Point in circumstances
other than those described in the previous paragraph and which give rise to
compensation to the Contractor from third parties, the compensation obtained for
the hydrocarbons lost, multiplied by the factor resulted from dividing the amount
of the paid Royalty for the Fiscalized Hydrocarbons in the Production
Fiscalization Point to which correspond the lost hydrocarbons, during the
“fortnight” in which occurred the loss, between the value of such Fiscalized
Hydrocarbons, established according to section 8.2, during the same fortnight,
will be the amount the Contractor shall pay for the Royalty of the loss
hydrocarbons, at the latest the second working day of receiving such
compensation, without detriment of what is set forth in section 13.1.
CLAUSE FIFTEEN - TRAINING AND TECHNOLOGY TRANSFER
15.1 In compliance with the provisions of Article 29 of Law 26221, the Contractor is
obliged to provide PERUPETRO with the following sum, each calendar Year
during the Term of the Contract:
Until the calendar Year of the Date
of Commencement of Commercial Production
The Year of the Date of Commercial Production onwards
Barrels per Day
From 0 to 10,000
From 10,001 to 30,000
From 30,001 to 50,000
More than 50,001
The first payment shall be made on the Signature Date and shall be determined
by multiplying the annual contribution corresponding to a) above by the fraction
resulting from dividing the number of Days remaining in the calendar Year in
progress by three hundred and sixty five (365).
The annual training contribution for b) above shall be that corresponding to the
range which includes the average daily production of fiscalized Hydrocarbons in
the previous calendar Year, which will be obtained by dividing the total volume of
the Hydrocarbons that were supervised during that Year by the respective
number of days.
The payments referred to in this section, with the exception of the first payment,
shall be made during the Month of January of each calendar Year.
To determine the Barrels/Day equivalent for Natural Gas, the following formula
shall be used: Barrels shall be equivalent to the volume of Natural gas expressed
in standard cubic feet divided by a factor of 5,626.
15.2 The Contractor shall comply with its obligations set forth in section 15.1 by
depositing its contributions in an account indicated by PERUPETRO.
PERUPETRO shall provide the Contractor a letter establishing its conformity to
the payment, within five (5) Business Days after receiving the contribution.
15.3 The Contractor and PERUPETRO shall agree on the execution of technical cooperation programs for research and development in subjects of mutual interest.
Within ninety (90) Days before the end of each calendar Year, the Parties shall
submit to the Supervisory Committee the projects to be implemented in the
following calendar Year.
15.4 Training programs established by the Contractor for its personnel, whether in
Peru or abroad, shall be notified to PERUPETRO.
CLAUSE SIXTEEN - ASSIGNMENT
16.1 If the Contractor agrees to assign all or part of its share in the Contract, and is
disposed to accept said offer, it shall notify PERUPETRO about the proposal.
This notification must be accompanied by a request for qualification of the
assignee as well as the complementary information necessary for obtaining
qualification as a petroleum contractor, in accordance with the law.
If PERUPETRO grants the qualification requested, the assignment shall take
place through an amendment to the Contract, carried out in accordance with the
16.2 The Contractor shall assign, previous notification to PERUPETRO, according to
the law all or part of its share in the Contract to an Affiliate
16.3 The assignee shall provide all the guaranties and assume all the rights,
responsibilities and obligations of the assignor.
16.4 Each one of the enterprises which made up the Contractor shall be jointly
responsible for all the obligations derived from the Contract.
Without detriment of the above-mentioned, one of the enterprises which made up
the Contractor shall be designated as the “Operator” as per an “Operations
Agreement” to be signed within the Operator and the other enterprises which
made up the Contractor.
The Operator will represent the enterprises which made up the Contractor before
PERUPETRO in the fulfillment of all the Contractor’s obligations derived from the
Contract, for which they are jointly responsible before PERUPETRO, and to
exercise the rights and duties granted by the Contract to the Contractor and that
by its nature shall not be exercised in separate by each one of the mentioned
When a change of Operator occurs, within those enterprises conforming the
Contractor, such change shall be previously approved in written by
PERUPETRO, which shall not be denied without justification.
Each one of the enterprises which made up the Contractor are individually
responsible of their tax responsibilities and for such responsibilities derived from
these. At the same time, in relation to the financial rights established in eleventh
clause, those which separately and proportionally correspond to them.
16.5 In all cases of partial assignment of sharing percentages, within the same
enterprises which made up the Contractor, which not imply withdrawal of one or
more than one from the Contract or the partnership with third parties, Contractor
shall previously notify PERUPETRO. PERUPETRO will evaluate and determine
about the qualification granted; and the Contractor shall submit documents
including the new sharing percentages, for PERUPETRO’s approval, if it is
according to law and rules.
CLAUSE SEVENTEEN - ACT OF GOD OR FORCE MAJEURE
17.1 Neither Party shall be liable for failure to comply with an obligation, or partial, later
or defective compliance therewith, during any period in which that Party is
affected by Act of God or Force Majeure, provided it can prove that Act of God or
Force Majeure has prevented due compliance.
17.2 The Party affected by Act of God or Force Majeure shall notify the other Party
within five (5) Days of the event and provide evidence of how this has affected
compliance with the corresponding obligation. The other Party shall reply in
writing accepting, or not, the reason no later than fifteen (15) Days after receiving
the above mentioned notification. The lack of response from the notified Party
within the established term will be understood as an acceptation of the invoked
In the event of partial, late or defective compliance with an obligation due to Act
of God or Force Majeure, the Party obliged to comply shall do its utmost to
comply in accordance with the common intention of the Parties expressed in the
Contract, and the Parties must continue to comply with the contractual
obligations not affected by Act of God or Force Majeure.
The Party affected by Act of God or Force Majeure must resume compliance with
its contractual obligations and conditions within a reasonable period of time, after
the reason or reasons have disappeared, and must notify the other Party within
five (5) Days of disappearance of the reason. The Party not affected shall
collaborate with the affected Party in this respect.
In the event of strikes, stoppages or similar occurrences, one Party may not
impose a solution on the other against its will.
17.3 The period during which Act of God or Force Majeure affects compliance with
contractual obligations shall be added to the period envisaged for compliance
with those obligations and to the corresponding phase of the Contract and to the
Term of the Contact, if necessary.
If Act of God or Force Majeure affects compliance with any of the minimum work
programs referred to in section 4.6, the guaranty covering this period shall
remain in force without being executed for the period during which compliance is
affected by Act of God or Force Majeure or until PERUPETRO makes a decision
on the reasons invoked by the Contractor and, if any discrepancy arises
regarding the existence of Act of God or Force Majeure, until such discrepancy is
resolved. To this end the Contractor must extend or replace the guaranty as
Likewise, until PERUPETRO makes a decision on the reasons invoked by the
Contractor, or while any discrepancy on the existence of Act of God or Force
Majeure remains unresolved, the period for completion of the minimum work
program shall be suspended. If PERUPETRO accepts the existence of the Act of
God or Force Majeure invoked by the Contractor, the latter shall resume
compliance with the minimum work program as soon as possible after the
disappearance of the Act of God or Force Majeure.
17.4 PERUPETRO shall take all necessary steps to obtain the aid and co-operation of
the appropriate government authorities to ensure the continuity and safety of the
activities covered by the Contract.
It is agreed that when either of the Parties, at its sole discretion, considers that its
personnel or that of its sub-contractors cannot operate in the Contract Area
because of risks to their personal safety, the other Party shall not dispute that
this constitutes Act of God or Force Majeure, provided that the provisions of
Articles 1314 and 1315 of the Civil Code have been complied with.
17.5 If the Contractor is affected by Act of God or Force Majeure preventing it from
complying with the minimum work program in progress, after twelve (12)
consecutive Months commencing on the date the Act of God or Force Majeure
occurs, the Contractor may terminate the Contract, giving PERUPETRO a thirty
(30) Days notice before relinquishing the Contract Area.
17.6 The provisions of this Clause Seventeen do not apply to obligations involving the
payment of sums of money.
CLAUSE EIGHTEEN ACCOUNTING
18.1 The Contractor shall keep its accounts according to the accounting principles and
practices established and accepted in Peru. It must also keep all books, detailed
registers and documentation necessary to account for and control its activities in
Peru and abroad, related to the purpose of the Contract, as well as to adequately
support the income, investments, costs, expenditure and Taxes incurred in each
financial year. No later than one hundred and twenty (120) Days after the
Signature Date, (each company making up) the Contractor shall provide
PERUPETRO with a copy of a “Manual of Accounting Procedures” which it
proposes to use for recording its operations.
The “Manual of Accounting Procedures” must contain, among other points, the
The language and currency in which the accounts are to be kept.
Applicable accounting principles and practices.
Accounts Plan and Structure, in accordance with the provisions of the
Companies Supervision Commission (CONASEV).
Mechanisms for distinguishing accounts corresponding to the Contract and
other Hydrocarbons contacts from those related to other activities.
Mechanisms for attributing revenues, investments, common expenditures
and costs to the Contracts, to other hydrocarbons contracts to related
activities and to other activities.
Determination of income and expenditure accounts and the detailed
registers for the purpose of calculating the “Rt-1” Factor, as well as details
of the procedures described in Appendix “E” herein, if pertinent.
18.2 If what is established in the preceding literal f) is included in the “Manual of
Accounting Procedures”, PERUPETRO, no later than thirty (30) Days after
receiving it, shall inform the Contractor of its approval of the “Rt-1” Factor
accounting procedure referred to in such literal,,or, of its suggestions for
improving and/or extending this procedure. If no notification is received from
PERUPETRO within the said period, the procedure referred to in literal f) of
section 18.1 shall be considered as approved in its entirety.
Within the same period of thirty (30) Days after receiving the “Manual of
Accounting Procedures”, PERUPETRO may make suggestions and/or
observations to improve, extend or eliminate one or more of the other accounting
procedures set forth in the Manual. All changes to the approved “Rt-1” Factor
accounting procedure shall previously be submitted to PERUPETRO for approval
and for this purpose the procedure set forth in the first paragraph of this section
shall be followed.
In case of modifications in the sharing of the enterprises which made up the
Contractor, the new enterprises shall be obliged to submit its corresponding
“Manual of Accounting Procedures”. The enterprises which, after modifying the
participation, continue to be constituent part of the Contractor shall submit a
modification of their “Manual of Accounting Procedures”.
18.3 The Contractor accounts, financial statements and their support documentation
shall be made available to the authorized representatives of PERUPETRO for
inspection after prior notice has been given.
18.4 The Contractor shall carry out records of the assets , used in the Contract
Operations, according to the Peruvian accounting regulation in force and to the
accounting practices generally accepted within the world oil industry.
PERUPETRO may, at its own criteria, request the Contractor information about
its properties. At the same time, PERUPETRO may request the Contractor its
physical inventories schedule of the goods inherent to the Operations, classifying
them according to their ownership, the Contractor or third parties. PERUPETRO
may also request to take part in the inventories if considered convenient.
18.5 The Contractor shall submit within thirty (30) Days of publication, a copy of the
external auditors’ report on the financial statements corresponding to the
previous financial year. In case the Contractor has entered into more than one
contract with PERUPETRO, or performs activities different than those of the
Contract, it is obliged to carry out separated accounts with the purpose of
formulating financial statements for each contract and/or activity, and as a
consequence, the report executed by its external auditors shall include also
financial statements by each contract and/or activity.
18.6 Contractor shall submit, within the fifteen (15) Days of having submitted before
the National Superintendence of Tax Administration or any entity replacing it,
copy of all the documents enclosed to the income tax affidavit.
18.7 The agreement entered into the enterprises which made up the Contractor,
governing the relations between them and the capacities, rights and obligations
of the Operator, named “Operations Agreement”, amendments or extensions or
new “Operations Agreements” shall be delivered to PERUPETRO in Spanish
language, within the thirty (30) days following the Signing Date.
The enterprise designated as Operator will keep a special accounts system in
which shall be registered everything related to Operations.
CLAUSE NINETEEN - VARIOUS
19.1 If, on one or more occasions, either Party fails to invoke or insist on compliance
with any of the provisions of the Contract, or on exercising any of the rights
granted under this Contract, this shall not be construed as waiving such provision
19.2 In carrying out the Operations, the Contractor shall comply with all the resolutions
issued by the competent authorities in the exercise of their legal powers. The
Contractor is also obliged to comply with all the dispositions of the competent
authorities relating to defense and national security.
19.3 The Contractor has the right to free entry to and exit from the Contract Area.
19.4 In accordance with current legislation, the Contractor shall have the right to use
for the Operations timber, water, gravel and other construction materials found in
the Contract Area, respecting the rights of third parties if applicable.
19.5 Technical information from the Contract Area or other areas which the Contractor
wishes to acquire must be requested from PERUPETRO, which will provide it in
accordance with its Use and Transference Policy for PERUPETRO’s technical
information. For this purpose the Parties shall sign a “Letter of Agreement”.
19.6 If either Party fails to make payments within the agreed period, the amount of the
payment shall be subject to the following rates of interest commencing on the
Day after the date on which it should have been paid:
For accounts expressed and payable in Peruvian currency, the applicable
rate shall be the local currency lending rate (TAMN) for loans of up to three
hundred and sixty (360) Days, published by the Banking and Insurance
Superintendent, or that which replaces it, applicable to the period between
the due date and the effective date of payment.
For accounts expressed in Dollars, and payable in local currency or
Dollars, the applicable rate shall be the Prime Rate plus three (3)
percentage points, published by the Federal Reserve of the United States
of America, applicable to the period between the due date and the effective
date of payment or, failing this, the Parties shall agree another adequate
19.7 The provisions of section 19.6 shall apply to all accounts between the Parties
arising from the Contract or any other agreement or transaction between the
Parties. Different arrangements for the payment of interest may be established
by written agreement between the parties. The provisions contained herein for
the application of interest shall not modify in any way the Parties’ legal rights and
means to ensure payment of sums owed.
19.8 In the event of a national emergency decreed by law, in virtue of which the State
must acquire Hydrocarbons from local producers, these shall be acquired at
prices according to the provisions of Clause Eight and payment shall be made
thirty (30) Days after delivery.
19.9 The Peruvian State, through the Ministry of Defense and Ministry of the Interior,
shall provide the Contractor, as far as possible, with all necessary security
measures for the Operations.
19.10 The Contractor shall release and, if necessary, compensate PERUPETRO and
the Peruvian State as the case may be, from any third party claim, legal action,
charge or lien resulting from the Operations and relations covered by the
Contract, and arising from any contractual or non-contractual relationship, except
those arising from the actions of PERUPETRO or the Peruvian State.
19.11 Contractor shall have free availability of the Hydrocarbons corresponding to it,
according to the Contract.
19.12 In the event of variation in the participation percentages of natural persons or
legal entities constituting the Contractor, and as long as there is no assignment
of contractual position, the Contractor shall notify PERUPETRO, before
performing the mentioned variation, in order that PERUPETRO evaluates and
declares itself about the qualification granted to the Contractor. If the participation
variation proceeds, Contractor shall enclose the documents reflecting the new
(Se eliminó de está cláusula pero se puso en la 18)
CLAUSE TWENTY - NOTICES AND COMMUNICATION
20.1 All notices and communications related to the Contract shall be considered validly
delivered if in writing and with proof of delivery, or received by means of register
post or facsimile or other method agreed between the Parties on a Business Day
at the following addresses:
Av. Luis Aldana Nº 320
Lima 41 - Peru.Fax: 475 7722 / 475 9644
----------------------------------------Fax: -------------Corporate Guarantor:
----------------------------------------Fax: -------------20.2 Either Party shall have the right to change its address or facsimile number for the
purposes of notices and communications, through a notice to the other Party at
least five (5) Business Days before the change takes effect.
The provisions of the first paragraph of this section also apply to the Corporate
CLAUSE TWENTY ONE - SUBMISSION TO PERUVIAN LAW AND SETTLEMENT
21.1 Submission to Peruvian Law
The Contract has been negotiated, drafted and signed in accordance with the
laws of Peru, and its content, execution and other consequences arising
therefrom are governed by the domestic legislation of the Republic of Peru.
21.2 Technical Conciliation Committee
The Technical Conciliation Committee shall meet no later than fifteen (15)
Business Days after being called by either Party and shall consist of three.(3)
members qualified in the subject under discussion. Each of the Parties shall
select one (1) member and the third by the members appointed by the Parties. If
either Party fails to nominate its representative within the time allowed, or if the
members nominated by them cannot agree on the third member within the time
allowed, or if the Technical Conciliation Committee fails to reach a decision within
the time allowed, either Party may submit the discrepancy to arbitration as set
forth in section 21.3 of the Contract.
The Parties shall agree on the procedures which are to govern this Committee no
later than sixty (60) Days after the Signature Date.
The decisions of the Technical Conciliation Committee shall be published no later
than thirty (30) Days after it has been installed and shall be binding until an
arbitration tribunal, if applicable, arrives at a final decision. Without affecting
compliance with the decision of the Technical Conciliation Committee, either
Party may resort to arbitration in accordance with the provisions of section 21.3,
within sixty (60) Days after the date of receipt of the above mentioned decision.
21.3 Arbitration Agreement
Any lawsuit, controversy, dispute or claim between the Contractor and
PERUPETRO arising from the Contract or concerning the interpretation,
compliance, resolution, termination, effectiveness or validity thereof, which
cannot be resolved by mutual agreement between the Parties must be resolved
through international arbitration, in accordance with the provisions of Article 68 of
Arbitration shall take place in Spanish, in accordance with the provisions of this
clause. The arbitration shall be administered by the International Chamber of
Commerce, hereinafter referred to as ICC. In all matters not considered in this
clause, the arbitration shall be organized and carried out in accordance with the
ICC Arbitration Regulations in force on the Signature Date. In addition to this
clause and the said Regulation, the regulations contained in Law Nº 26572,
General Arbitration Law, or any legislation which may replace it, shall apply.
Three (3) arbitrators shall be appointed, one by each of the Parties and the third
by the arbitrators appointed by the Parties. If, after thirty (30) Days from the
appointment of the arbitrators by the Parties, these have not appointed the third,
either Party may request the ICC to make the appointment.
The matter in dispute shall be determined by the petition, its plea and eventually,
if applicable, by the counterclaim and its plea. At request of any of the Parties,
after fifteen (15) Working Days counted upon the corresponding summons, if
there is no reply to the petition or counterclaim, the arbitrators are empowered to
precise the dispute if any of the Parties denies to do it.
The arbitrators shall apply the domestic law of the Republic of Peru in arriving at
a solution to the lawsuit, controversy, dispute or claim submitted to arbitration.
Arbitration shall take place in the city of Lima, Peru, unless the Arbitral Court
could not meet in this city due to circumstances foreign to the will of its members.
Under these circumstances, the Parties shall agree other place to carry out the
arbitration. If after fifteen (15) Days, counted upon the summons of the
arbitrators impediment to the Parties, these would not reach an agreement about
the new place to carry out the arbitration, the CCI will establish the place.
If the amount at issue exceeds five hundred thousand and 00/100 Dollars
(US$500,000.00) and one of the Parties considers that the arbitration should take
place in another city and country, it shall be sufficient to state this and propose
another city and country in the first written communication notifying the other
Party of the decision to resort to arbitration. If the Parties have not reached
agreement on an alternative location for the arbitration after fifteen (15) Days
from the above mentioned notification, the ICC shall decide where the arbitration
is to be held.
If there is a discrepancy over the amount at issue, or if the amount cannot be
determined, it is the responsibility of the ICC to fix the place where the arbitration
is to be held, taking into account the provisions of the previous paragraph.
The Parties waive all rights of appeal, annulment or protest against the decision
of the arbitrators. An appeal for annulment against the decision shall only be
allowed under those circumstances envisaged by law. The Parties declare that
the arbitrators’ decision is final and binding and shall be acted upon immediately.
The Parties bind themselves to do everything necessary to ensure that the
arbitration process is carried to completion and execution.
The maximum duration of the arbitration process shall be one hundred and
eighty (180) Business Days, commencing on the date of the Act of installation of
the arbitration tribunal, or other similar Act. If an extension to this period is
required, the provisions of the ICC Arbitration Regulations shall apply.
If the arbitrators’ decision is reached outside Peru, acknowledgement and
execution thereof shall be governed by the “Convention on the
Acknowledgement and Execution of Foreign Arbitration Decisions - New York
10th June 1958” (the New York Convention) or the “Interamerican Convention on
International Commercial Arbitration - Panama, 30th January 1975” (the Panama
Convention), or the provisions concerning this matter of Law Nº 26572, General
Arbitration Law, or any legislation which may replace it, as determined by the
Party requesting acknowledgement and execution of the decision.
Whilst arbitration is taking place, the Parties shall continue to comply with their
contractual obligations, as far as possible, including those subject to the
arbitration process. If the arbitration concerns compliance with the contractual
obligations covered by the guaranties referred to in section 3.10, these
guaranties cannot be executed and must be maintained in force in a period that
exceeds in thirty (30) during the arbitration process.
During the development of the arbitration the Parties shall continue fulfilling their
contractual obligations, as it may be possible, including those which are matter of
Without detriment of the above-mentioned, if the arbitration matter is related to
the fulfillment of the contractual obligations guaranteed with the guaranties to
which are referred to in section 3.10, the calculation of the respective term will
remain in suspense, and the guaranties could not be executed. Those guaranties
shall be maintained un force during the arbitration proceeding. For such purpose
the Contractor shall extent or replace such guaranties, as it may be necessary.
21.4 The Parties waive the right to claim through diplomatic channels.
21.5 This Contract is drafted and interpreted in Spanish, and the Parties agree that this
is the only and the official version.
CLAUSE TWENTY TWO - TERMINATION.
22.1 Termination of this Contract is governed by the provisions contained herein and,
additionally, by the regulations contained in Law Nº 26221; and, regarding
anything not envisaged therein, by the regulations contained in the Civil Code.
Except in the cases envisaged in section 22.3, when either Party fails to comply
with any of the obligations set forth in the Contract for reasons other Act of God
or Force Majeure, the other Party may notify said Party of the failure to comply
and its intention to terminate the Contract after sixty (60) Days if the non
compliance is not made good within this period or the first Party cannot show that
it is making good the non compliance to the satisfaction of the other Party.
If the Party which receives a notification of non compliance questions or denies
the existence of such non compliance, that Party may refer the matter to
arbitration in accordance with the provisions of Clause Twenty One, within a
period of thirty (30) Days after receiving the notification. In this case, the above
mentioned period of sixty (60) Days shall be suspended until the arbitrators’
decision has been communicated to the Parties; the Contract shall be terminated
if the non compliance is confirmed and is not made good within the said period.
The Contract may terminate before the end of its Term, by express agreement
between the Parties.
22.2 On termination of the Contract, all rights and obligations of the Parties specified in
the Contract shall cease entirely and the following shall be taken into account:
The rights and obligations of the Parties derived from this Contract before
the date of termination should be respected; including, within others, the
right of the Contractor over the hydrocarbons extracted and the guaranties
established in the Contract; and
In the event of non compliance with and responsibility for any of the
obligations specified in the Contract, incurred before the date of termination
by either Party these shall be made good by the infringing Party, with the
exception of the obligations specified in the Contract which cease on
22.3 The Contract shall terminate as by operation of law and without prior proceedings
in the following cases:
If the Contractor has failed to comply with the execution of the
minimum work program for any period of the exploration phase after
making use of the extensions contemplated in section 3.4, if
appropriate, and without giving satisfactory reasons to PERUPETRO,
unless the provisions of sections 4.7 and 4.13 apply.
If at the end of the exploration phase, or retention period, whichever
occurs last, no declaration of Commercial Discovery has been made.
In the specific cases set forth in sections 3.10, 4.2 and 17.5.
If the Contractor has been declared insolvent, bankrupt, dissolved or
Liquidated, and the other enterprise or other enterprises that are part
of the Contractor, or a third party duly qualified by PERUPETRO do
not take over the participation in the Contract of the enterprise
dissolved, liquidated or bankrupted within the fifteen business days.
If the corporate guaranty(ies) referred to in section 3.11 are not in
force or should the insolvency, dissolution, Liquidation or bankruptcy
of any entity that granted the guarantee mentioned in section 3.11
have been declared and said guarantee has not been assumed by a
third party and accepted by PERUPETRO.
By order of an arbitration tribunal declaring, in the cases set forth in
section 22.1, non compliance and this is not made good in
accordance with the provisions of that section, or by order of an
arbitration tribunal which declares the Contract terminated.
At the end of the Contract Term.
22.4 In accordance with the provisions of Article 87 of Law Nº 26221, the Contract
may also be terminated when activities cease permanently as a result of applying
the “Environmental Regulations for Hydrocarbons Activities” approved by
Supreme Decree Nº 046-93-EM and its modifications.
22.5 If the Contractor or any of the entities providing the guaranty referred to in section
3.11 seeks judicially protection through the Courts against the actions of
creditors, PERUPETRO may terminate the Contract if it deems that its rights
under the Contract are not duly protected.
22.6 At the termination of the Contract, the Contractor shall return to the Peruvian
State, through PETROPERU, at no charge whatsoever to the latter, unless it
does not require them, the buildings, energy installations, encampments, means
of communication, pipelines and other production assets belonging to the
Contractor, which will allow the Operations to continue. Such assets must be
returned in good condition, well maintained and in working order, taking into
account fair wear and tear.
If joint Oil Production, Non-associated Natural gas and/or Non-associated Natural
gas and Condensates is taking place, at the end of the period established in
section 3.1 for the Petroleum exploration phase, the Contractor shall return to the
Peruvian State, through PETROPERU, at no charge whatsoever to the latter,
unless it does not require them, the assets and installations used for Oil
Production which are not necessary for the Production of Non-associated Natural
gas and/or Non-associated Natural gas and Condensates. Such assets must be
returned in good condition, well maintained and in working order, taking into
account fair wear and tear.
The assets and installations retained by the Contractor for the Production of Nonassociated Natural gas and/or Non-associated Natural gas and Condensates
which have also been utilized in Oil Production, even when these continue as the
Contractor’s property, shall be used in the production of both products and an
agreement shall be entered into between the Parties to this effect.
If the Contractor has been using the assets and installations described in the first
paragraph of this section, but they are not devoted exclusively to the Operations,
that is, they have also been used for operations in other areas covered by a
current contract for the Exploration and Exploitation of Hydrocarbons in Peru, the
Contractor shall continue to own and make use of such assets.
22.7 For the purpose of complying with the provisions of section 22.6, during the last
Year of the Contract Term, the Contractor shall carry out those actions and enter
into those agreements required by PERUPETRO and aimed at ensuring an
ordered and uninterrupted transition of the Operations being carried out at the
date of termination of the Contract.
BLOCK …… DESCRIPTION
Block …… is located offshore, Pacific Ocean, in front of ...........…………Department,
and its boundaries are shown in Annex “B” (map) and described as follows:
The Reference Point (P.R.) is the Geodesic Station..........,known as ……..located in
the Province of ………….., Department of ……………..
From Station ....... (P.R.), measure …………….. m. West and then ……………m. North
to arrive at Point ………., which is the Departure Point (P.P.) on the perimeter of the
CONFIGURATION OF THE BLOCK
Description of each corner
To the North, ……..
To the South, ……..
To the West, ……..
To the East, ……..
LIST OF COORDINATES OF REFERENCE POINT AND CORNERS OF BLOCK
ANNEX “C-1”, “C-X”,
LETTER OF GUARANTY FOR THE .............. PERIOD OF THE MINIMUM WORK
LETTER OF GUARANTY Nº
We, ……(entity of the financial system)…… hereby stand as joint and several
with ……………………….., hereinafter referred to as the Contractor, to PERUPETRO
hereinafter referred to as PERUPETRO, for the sum of ………. and 00/100 Dollars
(US$………..) in order to guarantee faithful compliance of the Contractor’s obligation to
............................................................................................... under the minimum work
program for the ......... period, contained in sub-section 4.6..... of Clause Four of the
License Contract for the Exploration and Exploitation of Hydrocarbons in the Block …,
entered into with PERUPETRO, (hereinafter referred to as the Contract).
The obligation assumed by ……(entity of the financial system)…… under this
Guaranty is limited to paying PERUPETRO the sum of …………. and 00/100 Dollars
(US$……….) against their request for payment.
This is an irrevocable, unconditional, joint and several guaranty, without
excussio, automatically executable and payable, whilst it is in force, against
presentation of a notarial letter sent by PERUPETRO to ……(entity of the
financial system)……, requesting payment of …………… and 00/100 Dollars
This guaranty shall expire on the ……………, unless ……(entity of the financial
system)…… has received, prior to this date, a letter from PERUPETRO,
absolving ……(entity of the financial system)…… and the Contractor from all
responsibility under this guaranty, in which case this guaranty shall cease to be
effective from the reception date of the said letter from PERUPETRO.
Any delay on our part in honouring this guaranty in your favor shall accrue
interest equivalent to the Foreign Currency Lending Rate (TAMEX), used by
financial institutions and published by the Banking and Insurance
Superintendent, applicable during the period of the delay, or any rate which may
replace it. Interest shall be calculated from the reception date of the notarial
request sent by PERUPETRO to ……(entity of the financial system)…….
No claim whatsoever regarding this guaranty may be made after the date of
expiry, or the date on which it ceases to be effective, and ……(entity of the
financial system)…… and the Contractor shall be absolved of all responsibility
and obligation arising from this guaranty.
(entity of the financial system)
Luis Aldana 320
In accordance with the provisions of section 3.11 of the License Contract for the
Exploration and Exploitation of Hydrocarbons in Block 70, to be entered into between
PERUPETRO S.A. (“PERUPETRO”) and ……………(“Contractor”), we, ……., hereby
stand as joint and several guarantors with …….., to PERUPETRO, in order to
guarantee compliance with all its obligations assumed under the minimum work
program described in section 4.6 of the Contract of each one of the annual Exploration
programs, however amended or changed, submitted by the Contractor to
PERUPETRO in compliance with section 5.3 of the Contract.
This guaranty shall remain in force while the obligations derived from the Contract are
enforceable. For the purposes of this Guaranty, ……………….., submits itself to the
laws of the Republic of Peru, expressly waives all claims through diplomatic channels
and submits itself to the arbitration procedure for the solution of disputes set forth in
Clause Twenty One of the Contract.
The purpose of this Annex is to establish accounting rules and procedures
enabling the Contractor’s income, investments, expenditure and operating costs
to be determined for the purposes of calculating the “Rt-1” Factor referred to in
Clause Eight of the Contract.
The terms used in this Annex which have been defined in Clause One of the
Contract shall have the meaning assigned to them in that clause. The accounting
terms included in this Annex shall have the meanings given to them by the
accounting rules and practices accepted in Peru and in the international
The Contractor shall keep its accounts in accordance with current legislation and
the accounting principles and practices established and accepted in Peru and in
the international Petroleum industry, and in accordance with the provisions of
these Accounting Procedures.
The “Accounting Procedures Manual” referred to in section 18.1 of the Contract
must take into account the stipulations of this Appendix.
ACCOUNTS LEDGERS, INSPECTION AND ADJUSTMENTS
SYSTEM OF ACCOUNTS
In order to determine the “R t-1” Factor, the Contractor shall keep a special system
of accounts to record, in Dollars, income and expenditure related to the Contract
Operations. This system shall consist of two main accounts: the “R t-1” Factor
Income Account, and the “R t-1” Factor Expenditure Account.
Transactions carried out in Peruvian currency shall be recorded using the sales
exchange rate current on the Day in which the expenditure was effected or the
income received. Transactions carried out in Dollars and valuation of the
production shall be recorded in accordance with the provisions of point 3.3
The Contractor shall keep the original documentation supporting the charges
made to the “R t-1” Factor accounts.
“Rt-1” FACTOR STATEMENT OF ACCOUNT
During the exploration phase, the Contractor shall submit to PERUPETRO, no
later than thirty (30) Days after the end of each period, a Month per Moth
Statement of Account for the “Rt-1” corresponding to such period.
If Contractor chooses to apply the methodology described in section 8.3.2, for the
royalty calculation, he shall submit PERUPETRO, within thirty (30) Days
following the date of Declaring Commercial Discovery, a detailed statement
Month per Month of Accounts for the R t-1 Factor Income and Expenditure
corresponding to the period elapsed since last statement submitted until July or
December of the preceding year, as it may correspond.
Henceforth, Contractor shall submit to PERUPETRO, within the fifteen (15) Days
following the end of January and July of each calendar year, a detailed month
per month Statement of Accounts for the Rt-1 Factor Income and Expenditure,
corresponding to the preceding semester.
Statement of Account of “Rt-1” Factor Income
The Month per Month Statement of Account of the “R t-1” Factor Income
includes the valuation of Fiscalized Production corresponding to the
reported semester. It shall also include, in detail and classified according to
nature, all transactions by which the Contractor has received income,
including the dates on which this income was effectively received, a short
description of the transaction, the number of the accounts receipt, amount
in Dollars or in local currency and in Dollars if the income is received in
local currency, and the corresponding exchange rate.
Statement of Account of “R t-1” Factor Expenditure
The Statement of Account of the “R t-1” Factor Expenditure shall contain,
in detail and classified by nature, all transactions by which the Contractor
has made payments including the dates on which these payments were
effectively made, a short description of the transaction, the number of the
accounts receipt, amount in Dollars or in local currency and in Dollars if the
income is received in local currency, and the corresponding exchange rate.
INSPECTION OF THE ACCOUNTS AND ADJUSTMENTS
The account ledgers and original documentation supporting the
transactions included in each Monthly Statement shall be placed at the
disposal of authorized representatives of PERUPETRO, during office
hours, for inspection, whenever required.
Inspections of the account ledgers and supporting documentation shall be
carried out in accordance with generally accepted auditing rules, including
sampling procedures if necessary.
The Statements of Account of the “R t-1” Factor shall be considered to
have been accepted if PERUPETRO makes no written objection within a
maximum period of twenty four (24) Months commencing on the date they
were submitted to PERUPETRO.
The Contractor must reply, providing documents, to comments made by
PERUPETRO no later than three (3) Months after receipt of the
communication in which PERUPETRO states its comments. If the
Contractor fails to do so within the above mentioned period,
PERUPETRO’s comments shall be taken as accepted.
Any discrepancy arising from an inspection of the accounts must be
resolved by the Parties within a maximum period of three (3) Months
commencing on the date on which PERUPETRO receives the Contractor’s
reply. At the end of this period, the discrepancy shall be put to the
Supervisory Committee which shall proceed in accordance with the
provisions of section 7.4 of the Contract. If the discrepancy persists, the
Parties may agree that it be examined by a firm of external auditors
previously accepted by PERUPETRO, or that the procedures set forth in
section 21.3 of the Contract be followed. The decision of the external
auditors or arbitration tribunal shall be final.
If an inspection of the accounts establishes that in a given Month a
different “R t-1” Factor to that which was actually used should have been
applied, every adjustment shall accrue interests as it is set forth in section
8.5 of the Contract.
REVENUES AND EXPENDITURES IN THE “R t-1” FACTOR ACCOUNTS
The following shall be recognized as revenues and recorded in the “R
Factor Revenue Account:
The valuation of Fiscalized Hydrocarbon Production in accordance
with Clause Eight of the Contract.
Sales of assets acquired by the Contractor for Contract Operations,
the cost of which was recorded in the “R t-1” Factor Expenditure
Services rendered to third parties involving personnel whose
remuneration and benefits are recorded in the “R t-1” Factor
Expenditure Account and/or involving goods whose acquisition cost
has been recorded in the “R t-1” Factor Expenditure Account.
Revenues from letting assets belonging to the Contractor, whose
acquisition cost has been recorded in the “R t-1” Factor Expenditure
Account or sub-letting of goods whose hire is charged to the “R t-1”
Factor Expenditure Account.
Compensation received from insurance policies taken out in relation
to Contract activities for damaged goods, including compensation for
loss of profits. The income obtained as a result of a Hedging is not
Other revenues representing credits applicable to charges to the “R t1” Factor Expenditure Account.
From the Date of Signing, all investments, expenditures and operating
costs which are duly supported by a corresponding receipt shall be
recognized. This recognition shall nevertheless be subject to the following
The remuneration and benefits granted to Contractor’s personnel
assigned permanently or temporarily to the Operations. For such
purpose the Contractor shall put at disposal of PERUPETRO, as it
may deem convenient, the payroll and the internal personnel policy of
In general, all remuneration and benefits of the Contractor’s
operations and administrative personnel incurred in the execution of
the Operations shall be recorded, classified according to their nature.
If the Contractor carries out activities other than those of the
Contract, the cost of personnel assigned temporarily or partially to
the Operations shall be charged to the Expenditure Account in
accordance with the provisions of line h) of this point 3.2.
Regarding services of Affiliates:
When services are provided by Affiliates, the prices charged shall be
competitive with those of other companies.
Regarding materials and equipment:
Materials and equipment acquired by the Contractor shall be recorded in
the “R t-1” Factor Expenditure Account in accordance with the following
New materials and equipment (condition “A”)
Condition “A” includes new materials and equipment which can be
used without any reconditioning whatsoever and they shall be
recorded at the price appearing on the corresponding commercial
invoice plus those costs generally accepted in accounting practice,
including additional importing costs if applicable.
Used materials and equipment (condition “B”)
Condition “B” includes those materials and equipment which,
although not new, can be used without any reconditioning
whatsoever and they shall be recorded at seventy five per cent (75%)
of the prices being quoted at that time for new materials and
equipment, or at the purchase price shown on the corresponding
commercial invoice, whichever value is lower.
Materials and equipment (condition “C”)
Condition “C” includes those materials and equipment which can be
used for their original function after adequate reconditioning and they
shall be recorded at fifty per cent (50%) of the prices being quoted at
that time for new materials and equipment, or at the purchase price
shown on the corresponding commercial invoice, whichever value is
Regarding freight and transport costs:
Only travel expenses for Contractor’s personnel and their families shall be
recognized, as well as transport costs for personal and household effects,
according to the internal policy of the enterprise.
In transport of equipment, materials and supplies necessary for the
Operations, the Contractor shall avoid payment of “false freights”. If this
occurs, recognition of such payments shall require PERUPETRO’s express
acceptance in writing.
Premiums and net costs of insurance taken out wholly or partially with
Affiliates of the Contractor shall be recognized only insofar as they are
competitive compared to insurance companies which are unconnected to
It shall not be considered payments performed as a results of Hedging
Only taxes paid in relation to activities inherent in the Contract shall be
Regarding expenditure on research:
Research expenditure for the development of new equipment, materials,
procedures and techniques to be used in the search for, development and
production of Hydrocarbons, as well as expenditure on improvement to
these, shall be recognized after approval in writing has been obtained from
Regarding the proportional assignment of general expenditure:
If the Contractor is carrying out activities other than those of the Contract or
has entered into more than one contract with PERUPETRO, a proportion of
the costs of technical and administrative personnel, the costs of
maintaining administrative offices, warehousing costs and expenditure as
well as other indirect costs and expenditure shall be charged to the “R t-1”
Factor Expenditure Account in accordance with a policy previously
proposed by the Contractor and accepted by PERUPETRO.
TIME OF RECORDING
Income corresponding to the valuation of Fiscalized Hydrocarbons
Production in a given calendar Month, shall be recorded as income for the
calendar Month in which it was monitored.
The income referred to in lines b), c), d), e) and f) of point 3.1 herein, shall
be charged to the Income Account at the moment at which it is effectively
Expenditures shall be recorded at the moment at which the corresponding
payments are made.
4. UNRECOGNISED INCOME AND EXPENDITURE
The following shall not be recognized as income for the purposes of calculating
the “R t-1” Factor:
Financial income in general.
Income received for services rendered by the Contractor or sales of
Contractor’s assets occurring before the Signing Date of the Contract.
Income received for activities not related to the Contract Operations.
Payments made for the following concepts shall not be recognized as
expenditures for the purposes of calculating the “R t-1” Factor:
Investments, expenditure and costs incurred by the Contractor before the
Interest paid on loans, including interest on suppliers’ credit.
Financial costs in general.
The cost of inventories in the event of a transfer of Contractor’s rights in
virtue of the Contract.
Depreciation and amortization of assets.
Amounts payable as a result of failing to comply with contractual
obligations, as well as fines, penalties and compensation payments
imposed by the authorities.
Fines, surcharges and adjustments derived from failure to comply with
prompt payment of taxes currently in force in Peru.
Income Tax applicable to the Contractor and Tax on to profits available to
the parent company abroad, if applicable.
Value Added Tax and Municipal Promotion Tax, unless it is an expenditure
according to Income Tax Law.
Donations in general, except those approved by PERUPETRO.
Publicity expenses, except those approved by PERUPETRO.
Costs and expenditures incurred for transport and sale of Hydrocarbons
beyond the Production Fiscalization Point.
Investment in facilities for the transportation and storage of Hydrocarbons
produced in the Contract Area, after the Production Fiscalization Point.
Other investments and expenditures not connected with the Contract
REVIEW OF THE ACCOUNTING PROCEDURES
The provisions of these Accounting Procedures may be modified by agreement
between the Parties, indicating the date on which such modifications take effect,
without detriment of the corresponding regulations.
EXPLORATION WORKING UNITS
Table of Equivalencies
TABLE OF EQUIVALENCIES OF THE
EXPLORATORY WORKING UNITS - UTE
UTE – Jungle UTE
Seismic 2D – Km-Onshore
Seismic 3D – Km2 -Onshore
Reprocessing 2D – Km
Gravimetry – Km
Magnetometry – Km
Studies per period
Depth in meters – m
0 – 1000
0,10 x m
1001 – 2000
0,13 x m
2001 – 3000
0,18 x m
3001 – 4000
0,22 x m
0,25 x m
0,10 x m
0,13 x m
0,18 x m
0,22 x m
0,25 x m
Notice: To the effect of valuation of the guaranties established in section 3.10, it shall
be used the following equivalence: 1UTE = US$ 5,000