**Exhibit 10.9**

 

LAST SENT FILE PERUPETRO

 
| **NUMBER:** | ** ** | **KARDEX:86481** |
|-------------|------------|------------------|

 

**DRAFT:**

 

**LICENSE AGREEMENT FOR HYDROCARBONEXPLORATION AND DEVELOPMENT IN BLOCK XXII**

 

**BETWEEN**

 

**PERUPETRO S.A.**

 

**AND**

 

**BPZ EXPLORACION & PRODUCCION S.R.L.**

 

**WITH PARTICIPATION OF**

 

**BPZ ENERGY INC.**

 

**AND**

 

**THE CENTRAL RESERVE BANK OF PERU**

 

IN THE CITY OF LIMA, ON THETWENTY FIRST DAY OF NOVEMBER OF TWO THOUSAND SEVEN, I, RICARDO FERNANDINIBARREDA, NOTARY IN AND FOR LIMA, ISSUE THIS DEED WITH THE INTERVENTION OF

 

PURSUANT TO ARTICLE 54,PARAGRAPH H, OF LAW 26002.  

 

 THERE APPEARED BEFORE ME 

 

**PERUPETROS.A.** WITH SINGLE TAX PAYER REGISTRATION No 20196785044, ADDRESS OF RECORD ATAVENIDA LUÍS ALDANA No 320, SAN BORJA, LIMA, REPRESENTED BY ITS GENERAL MANAGER**CARLOS EDGAR VIVES SUÁREZ**, WHODECLARED BEING PERUVIAN, MARRIED, AN ENGINEER, IDENTIFIED WITH NATIONALIDENTITY DOCUMENT No 08725702, A VOTER, WITH POWER OF ATTORNEY REGISTERED UNDERENTRY C00039 OF ELECTRONIC DOCKET No 00259837, OF THE COMPANY REGISTRY OF LIMA,AND PURSUANT TO BOARD OF DIRECTORS’ AGREEMENT No 117-2007 DATED SEPTEMBER 27,2007 AND SUPREME DECREE No                      PUBLISHEDON ... OF 2007, SAME WHICH ARE INCLUDED IN THIS DEED. 

 

AND:  

 

**BPZ EXPLORACIÓN &PRODUCCIÓN S.R.L.**, IDENTIFIED WITH SINGLE TAX PAYER REGISTRATION  No 20503238463, A COMPANY ORGANIZED ANDEXISTING PURSUANT TO THE LAWS OF THE REPUBLIC OF PERU, REGISTERED IN ENTRYA00001 OF DOCKET N° 11985400 OF THE COMPANY REGISTRY OF LIMA, AND IN ENTRYA00002 OF DOCKET N° 11328132 OF THE BOOK OF OPERATIONS CONTRACTORS IN THE PUBLICHYDROCARBONS REGISTRY, WITH ADDRESS OF RECORD AT  CALLE MANUEL DE FALLA N° 297, DISTRICT OF SANBORJA, PROVINCE AND DEPARTMENT OF LIMA, REPRESENTED BY ITS GENERAL MANAGER **LUIS RAFAEL ZOEGER NÚÑEZ**, WHO DECLARED BEING PERUVIAN,MARRIED, AN ENGINEER, IDENTIFIED WITH NATIONAL IDENTITY DOCUMENT N° 08212579, AVOTER, AUTHORIZED BY POWER OF ATTORNEY REGISTERED UNDER ENTRY A00001 OF DOCKETN° 11985400 OF THE COMPANY REGISTRY OF THE REGISTRY OFFICE OF LIMA. 

 

WITH THE PARTICIPATIONOF:  

 

**BPZ ENERGY INC.**, WITH ADDRESS OFRECORD AT 580 WEST LAKE PARK BOULEVARD, SUITE 525, TEXAS 77079, UNITED STATESOF AMERICA, REPRESENTED BY **LUIS RAFAEL ZOEGER NÚÑEZ**,WHO DECLARED 

 

----

 

BEING PERUVIAN, MARRIED, ANENGINEER, IDENTIFIED WITH NATIONAL IDENTITY DOCUMENT N° 08212579, A VOTER,AUTHORIZED BY POWER OF ATTORNEY REGISTERED IN ENTRY A00001 OF DOCKET N°11992608 OF THE BOOK OF POWERS OF ATTORNEY GRANTED BY ESTABLISHED COMPANIES ORAFFILIATES ESTABLISHED OVERSEAS OF THE COMPANY REGISTRY OF LIMA. 

AND**THE CENTRAL RESERVE BANK OF PERU**, IDENTIFIED WITH SINGLE TAXPAYER REGISTRATION No 20122476309, WITH ADDRESS OF RECORD AT JR. ANTONIO MIROQUESADA No 441, LIMA, REPRESENTED BY ITS GENERAL MANAGER, **RENZO GUILLERMO ROSSINI MIÑAN**, WHO SAID HEWAS PERUVIAN, MARRIED AN ECONOMIST, IDENTIFIED WITH NATIONAL IDENTITY DOCUMENTNo 08727483, A VOTER, APPOINTED BY BOARD OF DIRECTORS’ AGREEMENT NUMBER No 4059AND **CARLOS AUGUSTO BALLON AVALOS**,WHO DECLAREDVHE WAS PERUVIAN, MARRIED, AN ECONOMIST, IDENTIFIED WITH NATIONALIDENTITY DOCUMENT No 08757380, A VOTER, IN HIS POSITION AS INTERNATIONALOPERATIONS MANAGER APPOINTED BY BOARD OF DIRECTORS’ AGREEMENT No 3737, BOTHDULY AUTHORIZED AS REPORTED IN THE LETTER FROM THE BANK’S GENERAL MANAGEMENTOFFICE No 129-2007-BCRP, DATED OCTOBER 25, 2007, ATTACHED TO THIS PUBLIC DEED,BOTH WITH ADDRESS OF RECORD AT JR. ANTONIO MIRO QUESADA No 441, LIMA. 

**I DECLARE IVERIFIED THE IDENTIFICATION OF THE PERSONS APPEARING BEFORE ME AND THAT THEYACT IN THEIR FULL CAPACITY, WITH FREEDOM AND KNOWLEDGE OF THEIR ACTS, THAT THEYARE SKILLED IN THE SPANISH LANGUAGE AND THAT THEY HAVE DELIVERED TO ME A DULYSIGNED AND AUTHORIZED DRAFT CONTRACT, WHICH I FILED IN THE CORRESPONDINGDOSSIER TO REGISTER IT AS A PUBLIC DEED, AND WHICH READS AS FOLLOWS:**

**DRAFT: MR. NOTARY RICARDO FERNANDINI BARREDA, Esq.:**

Pleaseregister in your Public Deed Registry the license contract for the explorationand development of hydrocarbons in Block XXII, entered into by and between, on the one hand **PERUPETROS.A.**, identified with RUC N° 20196785044, with address of record atAvenida Luis Aldana N° 320, District of San Borja, Province and Department ofLima, represented by its General Manager **Carlos Edgar Vives Suárez**,a Peruvian, identified with DNI N° 08725702, with address of record at Av. LuisAldana 320, San Borja, with power of attorney registered in Entry C00039 underElectronic Docket No 00259837 of the Company Registry of Lima, pursuant toprovisions of the PERUPETRO Board of Directors’ Agreement N° 117-2007 dated September 27,2007, the text of which, Mr. Notary, you will attach hereto.  And, on the other hand, **BPZEXPLORACIÓN & PRODUCCIÓN S.R.L.**, identified with RUC N°20503238463, a company organized and existing pursuant to the laws of theRepublic of Peru, registered in Entry A00001 under Docket N° 11985400 of theCompany Registry of Lima and in Entry A0002 under Docket N° 11328132 of theOperations Contractors Book of the Public Registry of Hydrocarbons, withaddress of record at Calle Manuel de Falla N° 297, District of San Borja,Province and Department of Lima, represented by its General Manager **Luis Rafael Zoeger Núñez**, a Peruvian, identified with DNI N°08212579, authorized by power of attorney registered in Entry A00001 of DocketN° 11985400 of the Company Registry of Lima; with the participation of **BPZ ENERGY INC.**, with address of record at 580 West LakePark Boulevard, Suite 525, Texas 77079, United States of America, 

 

----

 

representedby **Luis Rafael Zoeger Núñez**, a Peruvian,identified with DNI N° 08212579, authorized by power of attorney registered inEntry A00001 under Docket N° 11992608 ofthe Book of Powers of AttorneyGranted by Established Companies or Affiliates Established Overseas, of theCompany Registry of Lima, and the **Central Reserve Bank ofPerú**, with address of record at Jr. Antonio Miro Quesada N° 441,District of Cercado de Lima, Province and Department of Lima, represented byits officials **Renzo Rossini Miñán**, a Peruvian,identified with DNI N° 08727483, in his condition as General Manager appointedby the Board of Directors’ Agreement N° 4059 dated October 14, 2004 and **Carlos Augusto Ballón Avalos**, a Peruvian, identified withDNI N° 08757380, in his condition as Manager for International Operations,appointed by Board of Directors’ Agreement N° 3737, dated May 21, 1998,both authorized pursuant to the Bank’s General Management Office letter N°129-2007-BCRP dated October 25, 2007, which you Mr. notary willattach hereto, and by Supreme Decree N° XXX-2007-EM, published on XX November,2007 which approves and authorizes the signing of this Agreement under theterms and conditions described in the following clauses.

 

**LICENCE AGREEMENT FORHYDROCARBONS EXPLORATION AND DEVELOPMENT IN BLOCK XXII**

 

**BETWEEN**

 

**PERUPETRO S.A.**

 

**AND**

 

**BPZ EXPLORACION &PRODUCCION S.R.L.**

 

CONTENTS

 
| CLAUSE  INTRODUCTION |   | GENERAL                                       |
|----------------------|--------|-----------------------------------------------|
| CLAUSE  1            |   | DEFINITIONS                                   |
| CLAUSE  2            |   | OBJECT  OF THE CONTRACT                       |
| CLAUSE  3            |   | TENURE,  CONDITIONS AND GUARANTEE             |
| CLAUSE  4            |   | EXPLORATION                                   |
| CLAUSE  5            |   | DEVELOPMENT                                   |
| CLAUSE  6            |   | REPORTING AND STUDIES                         |
| CLAUSE  7            |   | OVERSIGHT  COMMITTEE                          |
| CLAUSE  8            |   | ROYALTIES  AND VALUATION                      |
| CLAUSE  9            |   | TAXES                                         |
| CLAUSE 10            |   | CUSTOMS  DUTIES                               |
| CLAUSE  11           |   | FINANCIAL  RIGHTS                             |
| CLAUSE  12           |   | LABOR                                         |
| CLAUSE  13           |   | ENVIRONMENT AND COMMUNITY RELATIONS           |
| CLAUSE  14           |   | HYDROCARBON  CONSERVATION AND LOSS PREVENTION |
| CLAUSE  15           |   | TRAINING AND TECHNOLOGY TRANSFER              |
| CLAUSE  16           |   | ASSIGNMENT  AND PARTNERSHIPS                  |
| CLAUSE  17           |   | ACT  OF GOD AND FORCE MAJEURE                 |
| CLAUSE  18           |   | ACCOUNTING                                    |
| CLAUSE  19           |   | SUNDRIES                                      |
| CLAUSE  20           |   | NOTIFICATIONS  AND COMMUNICATIONS             |
| CLAUSE  21           |   | PERUVIAN  LAW APPLIES AND CONFLICT RESOLUTION |
| CLAUSE  22           |   | TERMINATION                                   |
| ANNEX  “A” |   | DESCRIPTION OF AGREEMENT AREA                 |
| ANNEX  “B” |   | MAP OF AGREEMENT AREA                         |

 

----

 
| ANNEX  “C-1” to “C-5” |   | WARRANT  BONDS FOR MINIMUM WORK PROGRAM       |
|-------------------------------------------|--------|-----------------------------------------------|
| ANNEX “D”                       |   | CORPORATE GUARANTEE                           |
| ANNEX “E”                       |   | ACCOUNTING PROCEDURE                          |
| ANNEX  “F”                      |   | EXPLORATION WORK UNITS - TABLE OF EQUIVALENCE |

 

**LICENSE AGREEMENT FORHYDROCARBONS EXPLORATION AND DEVELOPMENT IN BLOCK XXII**

 

**BETWEEN**

 

**PERUPETRO S.A.**

 

**AND**

 

**BPZ EXPLORACION &PRODUCCION S.R.L.**

 

**PRELIMINARY CLAUSE.- GENERAL**

 

**I.**          With the participation of PERUPETRO, pursuant to thepowers grated by Law N° 26221 to sign the **License Agreement forHydrocarbons Exploration and Development in Block XXII**. 

 

**II**.         The “in situ” hydrocarbons are a property of theState. The property rights over the extracted hydrocarbons are transferred byPERUPETRO to the Contractor on the day of XXXX pursuant to the provisions inthe Agreement hereto and in Article 8o of Law N° 26221.

The Contractor commits to pay the State through PERUPETRO, the cashroyalties under the conditions and at the time established in the Agreement.

 

**III.**       Pursuant to Article 12oof Law N° 26221, this Agreement is governed by Peruvian private law, and iscomprised in the scope of Article 1357o of the Civil Code.

 

**IV.**       For all purposes related toand derived from this Agreement, the parties hereto agree that the names of theclauses do not modify the interpretation of the Agreement’s contents. 

 

**V.**         All references to the agreement include its annexes;in case of discrepancy between the annexes and the provisions in the body ofthe agreement, the latter will prevail.

 

**CLAUSE ONE.- DEFINITIONS**

 

The definitions accepted by the Parties by means of this clause servethe purpose of providing the meaning required by the terms used in theAgreement, and such meaning will be the only one accepted for purposes of interpretingand executing the Agreement, unless otherwise expressly provided by the Partiesin writing.

The terms defined and used in the Agreement, whether in singular orplural will be capitalized and will bear the following meanings: 

 

**1.1****                    ****Affiliate.**Any entity the voting share capital of which is the direct or theindirect property, to a proportion equal to fifty percent (50%) or more, ofPERUPETRO or the Contractor, or any entity or person who owns directly orindirectly fifty percent (50%) or more of the voting share capital of PERUPETROor the Contractor, or any entity who owns directly or indirectly fifty percent(50%) or more of the voting share capital of the same shareholder orshareholders who own, directly or 

 

----

 

indirectly, fifty percent(50%) or more of the voting share capital of PERUPETRO or the Contractor.

 

**1.2****                    ****Year.**A period oftwelve (12) months in the Gregorian Calendar, starting on a specific date. 

 

**1.3****                    ****AgreementArea. **The area described in Annex “A”hereto and appearing in Annex “B”, called Block XXII, located in the provincesof Sullana, Paita, Talara and Piura, in Piura Department over a surface area ofthree hundred seventy nine hundred forty three eight hundred seventeenhectares  (369,043.817 ha).  The Agreement Area will be redefined afterexcluding the areas released by the Contractor, pursuant to the terms of theAgreement.  Likewise, when theexploration results warrant a new Agreement Area configuration, and at therequest of the Contractor, supported by a report addressed to PERUPETRO,including proposals for working in the new area, and after approval byPERUPETRO, the Agreement Area may be re-demarcated.  The change will be approved pursuant toexisting law.  Under no circumstance thenew demarcation shall increase the original Agreement’s area.  Should any discrepancies arise between AnnexB and the description in Annex A, Annex A shall prevail. 

 

**1.4****                    ****Barrel.** A capacity measurement unit for ControlledLiquid Hydrocarbons, equivalent to forty two gallons of the United States ofAmerica at sixty degrees Fahrenheit (60° F), at sea level pressure, withoutwater, mud or other sediments (BS&W).

 

**1.5****                    ****Btu.** British thermal unit.  The unit measuring the amount of heatrequired to increase temperature one degree Fahrenheit (1° F) of one (1) poundof water equivalent to 1055.056 joules. 

 

**1.6****                    ****Act ofGod or Force Majeure. **These termsinclude, but are not limited to, fires, tremors, earthquakes, tidal waves,landslides, avalanches, floods, hurricanes, storms, explosions, unforeseeablefortuitous, war, guerrillas, terrorist acts, sabotage, civil unrest, blockades,uncontrollable delays in transportation, strikes, stoppages, inability tosecure the appropriate facilities and authorizations, licenses and permitsissued by competent authorities for the transport of materials, equipment andservices despite having taken the necessary precautions, or any other cause,similar to or different from those specifically listed here, beyond reasonablecontrol and that may have not been foreseen or which having been foreseen,could not be avoided.

 

**1.7****                    ****OversightCommittee.** A body createdby the Parties through which PERUPETRO oversees the compliance with and theexecution of the Agreement and the membership and attributions of which areestablished by clause seven. 

 

**1.8****                    ****TechnicalConciliation Committee.** Atransitory body created to give an opinion on the discrepancies that may emergeconnected to the Operations, same which will be organized pursuant to heading21.2 of the Agreement.

 

**1.9****                    ****Condensates.**Liquid hydrocarbons created by the condensation of hydrocarbons isolated

 

----

 

from natural gas by applyingpressure or temperature when the natural gas flowing from the reservoirs isproduced or resulting from one or more compression stages of natural gas. Theyremain liquid at atmospheric temperature and pressure. 

 

**1.10****             ****ControlledCondensates.**Condensates produced in the Agreement Area andmeasured at a Production Control Point. 

 

**1.11****             ****Contractor. **BPZ EXPLORACION &PRODUCCION S.R.L., registered in the Hydrocarbons Public Registry under DocketNo 11328132, Entry A00002 of the Operations Contractors Book.

 

**1.12****             ****Agreement.**This agreement, entered into by and between the Parties, which setsforth the terms and conditions included in this document and its Annexesincluding the additional agreements reached by the Parties by virtue of thisdocument, as amended, pursuant to law.

 

**1.13****             ****Development.** Any activity for the productionof hydrocarbons, including well drilling, completion and deepening, as well thedesign, construction and installation of equipment, tanks, storage tanks andother means and facilities, including the use of artificial production methodsand primary and improved recovery systems in the Agreement Area and outside ofit, as needed.  It includes theconstruction of the transportation and storage systems, the facilities at theProduction Control Point, the main pipeline and, if appropriate, primarydistillation plants for the manufacturing of products to be used in theoperations and facilities of the processing plants for treating gas and naturalgas.

 

**1.14****             ****CommercialDiscovery. **The discovery ofhydrocarbons reserves that in the opinion of the contractor warrant commercialdevelopment.

 

**1.15****             ****Day. **A period of twenty four (24)hours starting at zero hours (00:00) and ending at twenty four hours (24:00). 

 

**1.16****             ****BusinessDay. **All days, from Monday toFriday, excepting days declared totally or partially banking holidays, in thecity of Lima, by the competent authority.

 

**1.17****             ****Dollar orUS$.**Currency unit of the United States of America. 

 

**1.18****             ****MainPipeline. **Main pipeline theContactor may build and operate and which, starting at the end of theTransportation and Storage Systems, drives hydrocarbons produced in theAgreement Area to a third party property pipeline, to a sale or exportationpoint or to a production control point, notwithstanding, if required, theapproval provided in heading 2.3.  ThisMain Pipeline may include the measurement points connected to the pipeline, therequired storage and shipping areas, smaller pipelines, pumping or compressionstations, communications systems, access and maintenance roads, and any otherfacilities that may be necessary and required for transporting hydrocarbons ina permanent and timely manner, including the design or construction,maintenance and equipment of all the previously mentioned components.  Access will be granted to any main pipelinefrom the beginning of the fifth year starting on the Date of Beginning ofCommercial Extraction. 

 

----

 

**1.19****             ****Exploration. **The planning,execution and assessment of all types of geological, geophysical, geochemicaland all kind of studies, as well as the drilling of exploration wells and anyother related activities, required for the discovery of hydrocarbons, includingthe drilling of confirmation wells to assess the discovered reservoirs. 

 

**1.20****             ****Exploitation. **Development and/or Production.

 

**1.21****             ****Date ofBeginning of Commercial Extraction. **Date when thefirst measurement of hydrocarbons at a Production Control Point was made andwhich triggers the payment of the royalty. For purposes of this definition, the volume produced for testing orother purposes specifically accepted by the parties will not be considered. 

 

**1.22****             ****SigningDate. **November 21, 2007, thedate when PERUPETRO and the Contractor signed the Agreement. 

 

**1.23****             ****EffectiveDate. **Date when the Contractor willstart the operations, to be determined within sixty (60) starting on thesigning date. 

 

**1.24****             ****Control. **The actions that pursuant tolegal regulations and technical standards are undertaken by OSINERGMIN(Organismo Supervisor de la Inversión en Energía y Minería – Supervising Bodyfor Investments in Energy and Mining) regarding the Exploration and Developmentcarried out by the Contractor.

 

**1.25****             ****NaturalGas.  A** mix of hydrocarbons in gasstate or dissolved with oil at initial reservoir conditions. It includesassociated natural gas and non-associated natural gas. 

 

**1.26****             ****AssociatedNatural Gas. **Natural gasproduced together with the reservoir’s Liquid Hydrocarbons.

 

**1.27****             ****ControlledNatural Gas.**Natural gas produced in the Agreement Area andmeasured at a Production Control Point. 

 

**1.28****             ****Non-AssociatedNatural Gas. **Natural gas thatcomes from a reservoir where, under the initial conditions, no liquid hydrocarbonsare present.

 

**1.29****             ****Hydrocarbons. **All organic, gas, liquid orsolid compounds, consisting principally of carbon and hydrogen. 

 

**1.30****             ****ControlledHydrocarbons. **Hydrocarbonsproduced in the Agreement Area and measured at a Production Control Point. 

 

**1.31****             ****LiquidHydrocarbons. **Oil, condensate,and generally, all hydrocarbons, which at atmosphere temperature and pressureconditions, are found in liquid state at the measurement site, includinghydrocarbons found in liquid state at a temperature above atmospherictemperature.

 

**1.32****             ****ControlledLiquid Hydrocarbons. **Liquidhydrocarbons in the Agreement Area measured at a Production Control Point. 

 

**1.33****             ****Law N°26221. **Single Conformed Text of LawN° 26221, Organic Hydrocarbons Law, enacted by Supreme Decree N° 042-2005-EM,as expanded, regulated and amended.

 

**1.34****             ****LNG orLiquid Natural Gas. **Liquidhydrocarbons obtained from natural gas and made up 

 

----

 

by ethane, propane, butane andother heavier hydrocarbons.

 

**1.35****             ****ControlledLNG or Controlled Liquefied Natural Gas. **Liquefied Natural Gas measured at the Controlled Production Point. 

 

**1.36****             ****Month. **A period of timestarting any day of a calendar month that ends the same day of the followingcalendar month or, if such day does not exist, on the last day of the former. 

 

**1.37****             ****SCF. **One thousand (1000) standardcubic feet (scf).  One (1) scf isthe volume of gas needed to fill one (1) cubic foot at 14.6959 pound perinch absolute pressure at the base temperature of sixty degrees Fahrenheit (60°F). 

 

**1.38****             ****Operations. **All exploration anddevelopment operations as well as all other activities subject matter to theAgreement or related to its execution. 

 

**1.39****             ****Parties.**PERUPETRO and theContractor. 

 

**1.40****             ****PERUPETRO. **PERUPETRO S.A., is theState-owned private law company under the Ministry of Energy and Mines createdby Law N° 26221.

 

**1.41****             ****Oil. **Hydrocarbons, which underinitial pressure and temperature reservoir conditions, are found in liquidcondition, and which mostly remain in liquid state under atmospheric conditions;Condensates, Natural Gas Liquids or Liquefied Natural Gas are not included. 

 

**1.42****             ****ControlledOil. **Oil produced in the AgreementArea and measured at the Production Control Point. 

 

**1.43****             ****HeavyCrude. **Liquid hydrocarbons which,because of their density and viscosity, require using non-conventionalexploitation methods, and the transportation of which, requires heating orother procedures, excluding mixing with oil produced in the same deposit, whichwould result in light crude.

 

**1.44****             ****Confirmingwell. **A well drilled to confirmdiscovered reserves or to delimit a deposit’s area. 

 

**1.45****             ****Developmentwell. **A well drilled for theproduction of discovered hydrocarbons.

 

**1.46****             ****Exploratorywell. **A well drilled to discoverhydrocarbons reserves or to determine the stratigraphy of a exploration area. 

 

**1.47****             ****Production. **All activities performed in oroutside the Agreement Area, as required, for the extraction and handling ofhydrocarbons subject to the Agreement, including the operation and refurbishingof wells; the installation and operation of equipment, pipes, transportationand storage systems, Main Pipeline, hydrocarbon treatment and measurement, andall types of primary and improved recovery measures. 

 

**1.48****             ****ProductionControl Point. **The place or placesidentified by the Contractor within the Agreement Area, or identified outsidesuch areas through an agreement between the Parties, where the volumemeasurements and determination of water and sediment contents and othermeasurements are performed to calculate the volume and quality of thecontrolled hydrocarbons, pursuant to the AGA, API and ASTM standards are met. 

 

**1.49****             ****Reservoir. **Stratum or strata under thesurface which may be part of a deposit under

 

----

 

production or which has (orhave) proven hydrocarbon production capacity, under a common pressure systemthroughout their entire area. 

 

**1.50****             ****Transportationand Storage System. **The set ofpipelines, pumping stations, storage tanks, riverine facilities, deliverysystem and roads, and other types of facilities and means required and used forcarrying hydrocarbons produced in the Agreement Area from there to theProduction Control Point, the main pipeline or a third party pipeline,including the design, construction, maintenance and equipping of all theabovementioned elements.

 

**1.51****             ****Subcontractor. **Any individual or company,whether national or foreign, hired by the Contractor to provide servicesrelated to the Operations. 

 

**1.52****             ****Oversight. **An initiative by PERUPETRO toverify the Contractor’s compliance with its contract obligations. 

 

**1.53****             ****Taxes.**Taxes,contributions and rates, pursuant to the Tax Code. 

 

**1.54****             ****ExplorationWork Unit (UTE).**A measurement unit for the exploration activitiesaccepted by the Parties and detailed in the minimum work programs, and whichallows flexibility in executing the commitments made. Its values areestablished as a function of the most representative work unit for eachexploration activity (km2, km, m, etc.). 

 

**1.55****             ****Life ofthe Agreement. **The periodcomprised between the Signing Date and the end of the relevant periodestablished in heading 3.1 of the Agreement. 

 

**1.56****             ****Deposit. **Surface under which thereexist one or more reservoirs in production or with proven hydrocarbonproduction capacity. 

 

**CLAUSE TWO.- PURPOSE OF THEAGREEMENT.**

 

**2.1**                     PERUPETROauthorizes the Contractor to perform the Operations, pursuant to Law N° 26221,the relevant regulations and the Agreement’s provisions for the sharedobjectives of discovering and producing hydrocarbons in the Agreement Area. 

 

**2.2**                     The Contractorwill hold the ownership rights to the hydrocarbons extracted in the AgreementArea, pursuant to paragraph  2 above. 

 

**2.3**                     The Contractorwill perform the Operations pursuant to the provisions included in theAgreement and will perform them either directly or through subcontractors. Forfield operations outside the Agreement Area, PERUPETRO’S approval will berequired. 

 

**2.4****                    **PERUPETRO willoversee the Operations, pursuant to the law and the **A**greement.OSINERGMIN will be charged with control initiatives, as mandated by law. 

 

**2.5****                    **PERUPETROrepresentatives will carry out the oversight at any****time**,**afterserving the corresponding notice, shall provide proper personal identification,and be authorized to perform such functions by PERUPETRO. The Contractor willprovide its cooperation within the scope of its Operations so that thoserepresentatives may perform their mission, which will be carried so as not tointerfere with the Operations.  The costsand expenses of PERUPETRO’s representatives will be paid by PERUPETRO. 

 

**2.6**                     The Contractorwill provide and be responsible for all technical, economic and

 

----

 

financial resources requiredfor executing the Operations. 

 

**CLAUSE THREE.- TERM, CONDITIONSAND GUARANTEE**

 

**3.1**                     The term for thehydrocarbons’ exploration phase is seven (7) years which may be expandedas provided by the Law. This term starts on the effective date, unless suchperiod may be modified pursuant to other Agreement provisions. The term for thehydrocarbons development phase is the period remaining after the explorationphase is completed until completing a period of thirty (30) years starting onthe effective date, unless other Agreement provisions modify such term.  The term for the stage to developnon-associated natural gas and non-associate natural gas and condensates, willbe the period remaining after the end of the exploration stage and until aperiod of forty   (40) years iscompleted, starting on the effective date, unless other Agreement provisionschange that term.   

 

**3.2**                     The explorationstage is divided into five (5) periods: 

** **
| **Heading** | ** ** | **Period**       | ** ** | **Duration**                                                                          |
|-------------|------------|------------------|------------|---------------------------------------------------------------------------------------|
| 3.2.1       |       | First  period    |       | Eighteen  (18) months starting on the effective date.                                 |
| 3.2.2       |       | Second  period   |       | Eighteen  (18) months starting at the end of the term mentioned in heading 3.2.1.     |
| **3.2.3**   | ** ** | **Third period** | ** ** | **Eighteen (18) months starting  at the end of the term mentioned in heading 3.2.2.** |
| 3.2.4       |       | Fourth  period   |       | Eighteen  (18) months starting at the end of the term mentioned in heading 3.2.3.     |
| 3.2.5       |       | Fifth  period    |       | Twelve  (12) months starting at the end of the term mentioned in heading 3.2.4.       |

 

**3.3****                    **During theexploration****stage, the Contractor may beginthe subsequent period provided it notifies PERUPETRO thirty  (30) days in advance of the ending day forthe stage underway, or its intention to continue with the subsequent stage,provided the Contractor has not incurred any of the reasons for termination setforth in heading 22.3.1.  Termination forsuch reason(s) will result in the execution of the corresponding warrantbond. 

 

**3.4****                    **If during any ofthese stages described in heading 3.2, the Contractor is prevented, by properlygrounded technical or economic reasons, from concluding the correspondingminimum work program, such period may be extended for a maximum of six (6) months,provided PERUPETRO’s approval has been requested at least thirty (30) daysbefore the end of the period underway, and the reasons supporting the requesthave been verified and approved by PERUPETRO. If so, before the end of theperiod underway, the Contractor will post a new warrant bond or will extend thelife of the existing one, to cover the new required period, pursuant to theconditions set forth in heading 3.10. If the awarded extensions consume thetime for the last period of the exploration stage and the Contractor chooses tocontinue with it exploration work, the obligations for such period will be metduring an extension of the exploration stage to be agreed upon by the parties,pursuant to existing regulations. After the

 

----

 

completion of the minimum workprogram for the period underway and within the term established in heading 3.2,if the extensions described in the preceding paragraph have been exhausted, asrequired, and provided the work performed, included drilling at least oneexploration well, the Contractor may ask PERUPETRO to grant an extraordinaryperiod of six (6) months to examine all the information and findingsgathered until the period underway, and thus prepare a study that will lead toa decision whether or not to proceed to the next period.  The approvals described in this heading willbe awarded at PERUPETRO’s sole criterion. 

 

**3.5**                     The explorationphase may continue at the Contractor’s choice, after the Date of Beginning ofCommercial Extraction until the end of the term fixed for this stage, asmentioned in heading 3.1. If so, the tax exemption described in heading 10.3will remain in force until the expiration of the exploration stage, and theline amortization method described in heading 9.6 will be applied from the Dateof Beginning of Commercial Extraction, as mandated by law. 

 

**3.6**                     If the Contractormakes one or more hydrocarbon discoveries during any period of the explorationstage, which may not be rated as commercial only for reasons of transportation,it may request a withholding period of up to five (5) years for thediscovered deposit or deposits while the appropriate production transportationis arranged.  The withholding right willbe subject, at least, to meeting the following requisites: 

 

**a)**                  The Contractor must demonstrateto PERUPETRO’s satisfaction that the volumes of hydrocarbons found in theAgreement Area do not suffice to economically warrant the building of the mainpipeline; 

 

**b)**                  The combined discoveries inadjoining areas added to the Contractor’s discoveries are insufficient toeconomically warrant the building of a main pipeline; and, 

 

**c)**                  The Contractor shalldemonstrate, on economic grounds, that the discovery of hydrocarbons cannot becarried from the Agreement Area to another place for their marketing by nomeans of transportation whatsoever.  

 

**3.7**                     If the Contractorfinds Non-associated Natural Gas or Non-associated Natural Gas or Condensatesduring any period of the exploration stage, it may request a withholding periodof up to ten (10) years for the deposit found, while a market is created. 

 

**3.8**                     If the Contractorfinds oil and Non-associated Natural Gas or Non-associated Natural Gas orCondensates during any period of the exploration  stage, and the cases described in headings3.6 and 3.7 occur, the Contractor may request a withholding period for oil andanother one for Non-associated Natural Gas or Non-associated Natural Gas orCondensates for the purposes described under those headings. 

 

**3.9**                     The withholdingperiods described in headings 3.6 and 3.7 will provide an extension of theAgreement’s term for period equal to the withholding period granted byPERUPETRO. The withholding period will be granted in writing. For this purpose,the Contractor will submit a request to PERUPETRO, enclosing the supportingdocumentation

 

----

 

and a schedule of activitiesto be performed. The exploration stage concludes at the beginning of thewithholding period. The development stage starts when a commercial discoverystatement for that period is made. The award of the withholding periodsdescribed in headings 3.6 and 3.7 and their duration will be determined byPERUPETRO at its sole criterion, without any prejudice to or reduction of theobligation to undertake the minimum work programs for the period of theexploration stage underway.

 

**3.10**             The Contractorshall guarantee compliance with the minimum work program for each of theperiods of the exploration stage, pursuant to provisions under headings 3.2 and4.6, by providing a joint and several, unconditional, irrevocable and automaticwarrant bond, without the benefit of excussion to the executed automatically inPeru, issued by a properly qualified entity of the Peruvian financial system,and with address of record in Peru, that is acceptable to PERUPETRO.  At the request of PERUPETRO, the Contractorwill replace any warrant bond already posted, and shall post a new warrant bondwithin the period of fifteen (15) Business Days after the day when PERUPETRO’srequest was received by the Contractor. The amount of the warrant bond for the minimum work period for each ofthe periods of the exploration stage appears in Annexes “C-1” to “C-5”, and isthe result of multiplying the equivalent in dollars which for this purpose isestablished in Annex “F”, by the number of Exploration Work Units correspondingto each period, as described in heading 4.6. The warrant bonds will be issuedfor each minimum work program in the way described in Annexes “C-1” to “C-5”,as appropriate.  The warrant bonds forthe minimum work program in each of the periods of the exploration stage, asprovided for in heading 4.6, will be delivered to PERUPETRO before thebeginning of each period; otherwise subheading 22.3.3 shall apply. The warrantbond corresponding to the minimum work program for the first stage will bedelivered at the Date of Signing.   Thewarrant bonds, in case of extensions of the periods corresponding to theexploration stage, will be replaced or extended by the Contractor before thebeginning of the corresponding extension; otherwise, the approval granted byPERUPETRO for the extension requested by the Contractor will be null and void.The warrant bond for the minimum work program of the exploration stage willremain in full force and effect for a period exceeding by thirty (30) businessdays the duration of the former’s life. If any of the warrant bonds provided by the Contractor expires duringthe established term, the latter shall comply with delivering a new warrantbond or extending the existing one within fifteen (15) days after the receptionby the Contractor of  PERUPETRO’snotification. Otherwise, subheading 22.3.3 shall apply.  When the obligation guaranteed by eachwarrant bond is complied with, PERUPETRO will immediately proceed to return tothe issuer, through the Contractor, the corresponding warrant bond. Theexecution of any warrant bond will have as a consequence the termination of theContractor’s obligations to perform the minimum work program, notwithstandingthe enforcement of the provisions included in

 

----

 

subheading 22.3.1.  

 

**3.11****             **BPZ ENERGY INC.participates in this Agreement for purposes for providing the corporateguarantee enclosed herewith as Annex   “D”.The corporate guarantee will survive as long as the obligations of theContractor described in                Annex“D” remain enforceable. Subheading 22.3.5 will apply if any of the eventsforeseen in that heading occurs and the Contractor fails to provide a replacingguarantee within fifteen (15) business days after the Contractors receives aPERUPETRO notification requiring such replacement. 

 

**CLAUSEFOUR.- EXPLORATION**

 

**4.1**                     The Contractor shallstart exploration activities of the effective date.

 

**4.2**                     The Contractor mayrelease itself from the entire Agreement Area without any penalty by servingPERUPERTO notice with advance not under thirty (30) days, provided the minimumwork program for the corresponding period of the exploration stage underway hasbeen fulfilled. If the Contractor releases itself of the entire Agreement Area,abandons it or allows the term of the period underway to expire beforefulfilling the corresponding minimum work program, without any technical reasonapproved by PERUPETRO, the latter will execute the warrant bond,notwithstanding the enforcement of provisions included in subheading 22.3.3.  The Contractor may release parts of theAgreement Area by serving notice to PERUPETRO at least thirty (30) days inadvance, without being subject to any penalty. However, this will not affect orreduce its obligation to comply with the minimum work program for the period ofthe exploration stage underway.  TheParties will certify and register the portions the Contractor releases throughthe Oversight Committee. The Contractor may continue using the surface of thereleased areas where it may have built facilities related to the Operations. 

 

**4.3**                     During the executionof the Contract, releases will be made as follows: 

 

**a)**                  At least twentypercent (20%) of the original Agreement Area at the end of the third perioddescribed in subheading 3.2.3 and at least thirty percent (30%) of the originalAgreement area at the end of the forth period described in subheading 3.2.4. 

 

**b)**                  At the end of thefifth period described in subheading 3.2.5, the Contractor will have releasedfifty percent (50%) of the original Agreement Area including for this purposethe release carried out pursuant to paragraph a) above, unless the Contractorexpressly commits to carry out exploration activities pursuant to paragraph c)below.  

 

**c)**                  At the end of theexploration stage, the Contractor may keep the unreleased Agreement Area, andnot included in the provisions of paragraph d) below, for which purpose itshall drill one (1) exploration well every two (2) years. 

 

**d)**                  If the Contractordecides not to continue the exploration works described in paragraph c), or ifsuch commitments are not met, notwithstanding the enforcement

 

----

 

of the corresponding contract-base conditions, it willbe allowed to keep only thedeposits discovered and the surrounding five (5) kilometers area to thelimit of the Agreement Area.  

 

**4.4**                     For purposes ofenforcing heading 4.2, the Agreement Area has been divided into rectangularplots, to the extent possible, covering twenty thousand hectares (20,000.00 ha)each and when not possible, covering a different surface area. The areassubject to contractor release need not be adjacent.  

 

**4.5**                     Any area released bythe Contractor, including the deposits comprised within it, will return to theState at no cost to it or to PERUPETRO. 

 

**4.6****                    **The minimum workprogram for each of the periods during the exploration stage includes thefollowing: 

 
| **Heading** | ** ** | **Period**    | ** ** | **Activity**                                                                                                                                                                                                                            |
|-------------|------------|---------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **4.6.1**   |       | First Period  |       | ·     120 UTEs or·     Purchasing, processing and interpreting 200 kms of 2D Seismic, and·     Geological and  comprehensive engineering study for the area. |
| **4.6.2**   |       | Second Period |       | ·     130 UTEs or·     Drilling one (1) exploration well to a  minimum depth of 2600 meters.                                                                                     |
| **4.6.3**   |       | Third Period  |       | ·     130 UTEs or·     Drilling one  (1) exploration well to a minimum depth of 2600 meters.                                                                                     |
| **4.6.4**   |       | Forth Period  |       | ·     130 UTEs or·     Drilling one  (1) exploration well to a minimum depth of 2600 meters.                                                                                     |
| **4.6.5**   |       | Fifth Period  |       | ·     130 UTE sor·     Drilling one  (1) exploration well to a minimum depth of 2600 meters.                                                                                     |

 

To comply with the obligations described in thisheading, the following shall be borne in mind. 

 

**a)**      For registration of 2D seismic lines, thecorresponding kilometers will be recorded from the point where the initial shotwas made to the point of the final shot of each seismic line. 

For registration of 3D seismic lines, the squarekilometers will be calculated as the surface area covered by the executedprogram. 

 

**b)**      The Exploration Working Units mentioned in thisheading will be calculated pursuant to the table of equivalence attached asAnnex “F” hereto. 

 

**c)**      For drilling of exploration wells, the explorationwork units that will be accredited for future works will be calculated pursuantto Annex “F”, based on the difference between the final stage depth and thedepth established in heading 4.7. 

 

**d)**      Before the beginning of each period of the explorationstage, the Contractor will send PERUPETRO the program for the planned explorationactivities that will allow

 

----

 

to meet the number of committed exploration work unitsfor such period. The Contractor shall report to PERUPETRO any changes to thecontent of that program before its execution by providing a supportingtechnical report. 

 

**4.7**       The exploration wells drilled pursuant to theminimum work program described in heading 4.6, and the Contractor’s complianceof its performance obligation, will be deemed as completed and  met, respectively, when reaching a minimumvertical depth (TVD) measured from the rotating table, or a minimum fifty (50)meters depth within the formation agreed by the Parties before the beginning ofthe drilling stage of any exploration well. In addition, if during the drillingof any exploration well executed in compliance with a minimum work program asdescribed in heading 4.6, insurmountable problems, whether geologic omechanical, are met, the Contractor may request the acknowledgement of itsobligation to drill and shall support its request through a technical reportfor  PERUPETRO’s approval. 

 

**4.8**       If the Contractor chooses to make a commercialdiscovery statement, it will send such statement to PERUPETRO and submit withinone hundred eighty (180) days after such statement an Initial Development Planto make viable the hydrocarbon’s discovery development, same which shallinclude, among others, the following:  

 

**a)**                  Physical and chemicalcharacteristics of the discovered hydrocarbon and percent associated productand impurities. 

 

**b)**                  Estimated productionprofiles during the life of the agreement for the deposit(s). 

 

**c)**                  The estimated numberof development wells and their corresponding production capacity. 

 

**d)**                  The Transportationand Storage Systems and the projected Production Control Points.  

 

**e)**                  Planned MainPipeline, if appropriate.  

 

**f)**                    Securitymeasures.  

 

**g)**                 Preliminary schedulefor all activities to be undertaken. 

 

**h)**                 Estimated date whenthe commercial extraction will begin. 

 

The “Initial Development Plan” shall include theinvestments, expenditures and specific costs estimated for developing theCommercial Discovery as well as any other information the Contractor deemsappropriate.   

 

**4.9**                     PERUPETRO willforward to the Contractor its comments about the “Initial Development Plan”within sixty (60) days after having received it and may object to the Date ofBeginning of Commercial Extraction if it does not seem reasonable.  In case of discrepancy, heading 21.2 willapply. 

 

**4.10**              If the Contractorissues a announcement of commercial discovery, it will be obliged to startdevelopment within one hundred and eighty (180) days after the expiration ofthe sixty (60) days mentioned in heading 4.9 of the Agreement. The commercialdiscovery will not imply reducing or suspending the obligations of the minimumwork

 

----

 

program for the period underway.  

 

**4.11**              The development ofdiscovered hydrocarbons will take place pursuant to the work programs submittedby the Contractor to PERUPETRO, and pursuant to provisions in heading 5.3. TheParties agree that, when appropriate and necessary, the terms for submittingthe “Initial Development Plan” or annual work plans, as appropriate, may beadjusted, extended or modified.  For thispurpose, the Contractor will submit the necessary proposals to PERUPETRO sothat such adjustments, extensions or modifications may be agreed upon. 

 

**4.12**              The end of theexploration stage will not affect the terms and conditions for the proceduresdescribed above that may be underway at the time when such expiration datearrives.  

 

**4.13**              Under exceptionalcircumstances that make it impossible to comply with the obligations and/orterms for the period of the minimum work program provided in headings 4.6 and3.2, respectively, and at request of the Contractor who will submit asupporting report, the obligations comprised in the minimum work program may bereplaced and the deadlines for same postponed provided PERUPETRO accepts andapproves the Contractor’s request. Under no circumstance whatsoever will suchreplacement modify the initial commitment in exploration work units  for the exploration stage and in any wayreduce the Contractor’s obligations.  Thechanges accepted and approved by PERUPETRO to the enforcement of the provisionsof the preceding paragraph will lead to the revision of the amounts and termsof the existing warrant bonds for which purpose, if required, the Parties willrecalculate the amounts of the warrant bonds and the Contractor will complywith delivering a new warrant bond or extending the existing one until reachingthe new prescribed deadline, pursuant to the requirements set forth in headings3.4 and 3.10. The exploration work units will also be recalculated for the new areaincluded.   

 

**CLAUSEFIVE. - DEVELOPMENT**

 

**5.1**                     The development stagewill start on the next day after the end of the exploration stage providedduring the exploration stage a commercial discovery statement was made.However, at the Contractor’s choice the development stage may be started inadvance and terminate the exploration stage at the day of beginning ofcommercial extraction. In case a withholding period has been granted, thedevelopment stage will start once the commercial discovery statement has beenmade. 

 

**5.2**                     The Contractor willundertake reasonable initiatives so that the Date of Beginning of CommercialExtraction will effectively be the date established pursuant to headings 4.8and 4.9. 

 

**5.3**                     At least sixty (60)days before the ending of every calendar year, starting with the filing of theInitial Development Plan, the Contractor will submit to PERUPETRO, thefollowing: 

 

**a)****                 **An annual workprogram and the detailed budget for revenues, costs, expenses and

 

----

 

investments for the following calendaryear.  

 

**b)**      An annual work program and the detailed budget forrevenues, costs, expenses and investments for exploration aimed at identifyingadditional reserves, as applicable. 

 

**c)               **A work program andthe corresponding revenues, costs, expenses and investments estimates fordevelopment and/or production, for the next five calendar days.

The Contractor may adjust or change such programsthrough the Oversight Committee. 

 

**5.4**                     For the execution ofevery work program, the Contractor will deploy the equipment and/or methodsthat may be necessary or appropriate to assess and follow up the operations. 

 

**5.5**                     The Contractor isobliged to develop and undertake the economic recovery of hydrocarbon reservesin the Agreement Area, pursuant to the programs mentioned in this Clause Five,same which will be carried out following the technical and economicalprinciples generally accepted and in use by the international hydrocarbonsindustry.   

 

**5.6****                    **The Contractor hasthe right to use in its operations the hydrocarbons produced in the AgreementArea at no cost, same which, however, will not be considered for purposes ofdetermining the royalties. Such hydrocarbons may be processed in primarydistillation plants belonging to the Contractor to be used exclusively for theoperations.   If the primary distillationplant is located outside the Agreement Area, the parties will determine thevolume of hydrocarbons to be processed at the plant and the volume of productsobtained to be used as fuel. The balance of such volumes will be considered forpurposes of determining the royalty.  

 

**5.7**                     The Contractor willhave the right to recover the liquid hydrocarbons from any natural gas producedin the Agreement Area and extract them at any handling stage of such NaturalGas.  The liquids so separated will beconsidered as condensates for purposes of determining the Contractor’s royalty,excepting that for economic or operational reasons their gathering may not befeasible and they may be mixed with oil for controlling them together. 

 

**5.8**                     Natural gas not usedby the Contractor in the operations pursuant to heading 5.6 may be sold,reinjected into the reservoir or both by the Contractor. To the extent, thenatural gas is not used, sold or reinjected, the Contractor may fire the gas,after obtaining the Ministry of Energy and Mines’ approval. 

 

**5.9**                     When one or moredeposits that may be commercially developed extend continuously from theAgreement Area to one or more other areas, the Contractor and the contractorswho hold those areas shall reach an agreement to prepare a single developmentplan or a common development plan. If no such agreement is reached, theMinistry of Energy and Mines may decide to submit the divergence to theTechnical Conciliation Committee mentioned in article 32o under Law N° 26221,the decisions of which will be mandatory for the Parties.  Likewise, when one or more deposits subjectto commercial

 

----

 

development extend continuously from the AgreementArea to adjoining areas not allocated to a contractor or that may not becomprised in negotiations, competitions, deeds or contractor selection, andthere is no limitation as regards environmental protection issues, afterobtaining PERUPETRO approval to the Contractor’s request, those adjoining areasmay be included in the Agreement Area.   

 

**5.10**              After the drilling ofone (1) well has been concluded, the Contractor will report to PERUPETROthe date when the well will be tested, if appropriate. The well test shall becarried out within three (3) months after the end of drilling, exceptingthat for technical reasons, the Contractor may require a longer period for thetest. 

 

**5.11**              PERUPETRO may at anytime inspect and test the measurement equipment and devices used to determinethe volume and the quality of the controlled hydrocarbons.  The equipments and measurement instrumentswill be periodically calibrated in compliance with applicable standards.PERUPETRO representatives may be present.

 

**5.12****             **Before the Date ofBeginning of Commercial Extraction and the determination of the volume andquality of controlled hydrocarbons, the parties will agree on the correspondingmeasurement equipment and procedures. 

 

**5.13****             **Heavy crude producedin the Agreement Area may be mixed with light crude produced outside theAgreement Area. Such light crude will me measured and controlled by the Partiesat a measurement point when entering the Agreement Area. The volume of suchhydrocarbons produced outside the Agreement Area will be subtracted from thevolume controlled hydrocarbons produced in the Agreement Area for purposes ofdetermining the royalties to be paid by the Contractor. 

 

**CLAUSESIX.- INFORMATION AND STUDIES** 

 

**6.1****                    **The Contractor willkeep PERUPETRO timely and permanently informed about the Operation**s**and will providethe information as set forth****in thisclause, in the applicable regulations and in the form and format PERUPETRO willdetermine. Likewise, it will provide information about other natural resourcesor archaeological remains found or discovered during the execution of the operationswhile the Contract is in force. Technical information, studies, process andnon-process data, as well as the other findings that the Contractor may provideto PERUPETRO pursuant to this clause, will be of the best possible qualityavailable to the Contractor. If when obtaining the information and findings,methods or systems were used that are of a proprietary nature, the Contractorwill not be obligated to disclose such methods or systems when providing theinformation.   

 

**6.2**                     The Contractor shallprovide a copy of the geological, geophysical and reservoir studies related tothe deposits’ development prepared with technical information obtained for theAgreement Area. The Contractor will also provide any clarification that may berequired by PERUPETRO concerning such studies. 

 

**6.3**                     The Contractor willsubmit to PERUPETRO the information and studies corresponding to itsobligations under the minimum work program before the exploration of each one

 

----

 

such periods of the exploration stage as set forth inheading 3.2. In addition, within ninety (90)days after the expiration of eachperiod of the exploration stage, the Contractor will submit to PERUPETRO aconsolidation report including, as appropriate, the studies and/orinterpretation of the geological, geophysical, geochemical, petrophysical andreservoir analysis related to the exploration activities undertaken during thealready concluded period and also including those comprised in thecorresponding minimum work program. 

 

**6.4**                     The Contractor shallsubmit to PERUPETRO a “Monthly Production Report” and a “Monthly Revenues andExpenses Report”. Both reports will be submitted using the forms PERUPETRO willdeliver to the Contractor for such purpose at most thirty (30) days after theend of each calendar month. 

 

**6.5**                     The Contractor willdeliver to PERUPETRO a copy of all the information provided to the CentralReserve Bank of Peru, pursuant to clause 11, and whenever required by  PERUPETRO. 

 

**6.6**                     Within thirty (30)days after the end of each calendar month, the Contractor will submit toPERUPETRO a list of the contracts signed with its subcontractors for such monthand, when so required, shall also deliver a copy of the contracts if sorequested by   PERUPETRO.  

 

**6.7**                     PERUPETRO or theContractor may disclose the information obtained from the Operations withoutapproval from the other party, under the following circumstances: 

 

**a)**       When provided to an Affiliate; 

 

**b)**       Concerning financing or contracting ofinsurance, after signing a confidentiality agreement; 

 

**c)**       If so required by law, regulations or thedecision of a competent authority including, but not limited to, regulations ordecisions from government officials, insurance organizations or stock marketswhere the stock of such party or its affiliates may be registered; and,

 

**d)**       To consultants, accountants, auditors, lenders,professionals, potential buyers or assignees of the Parties  or the Agreement’s interest-holders asrequired by the Operations, after signing a confidentiality agreement.  

 

When the Parties agree to disclose certainconfidential or reserved information to third parties, a statement about theconfidential nature of such information will be made so that such informationwill not disseminated by third parties.  

 

**6.8**                     PERUPETRO has the rightto publish, or otherwise disclose, the geological, scientific and technicaldata and reports referred to the areas released by the Contractor. For theareas under operation, the right mentioned in the preceding paragraph may beexercised at the end the second year of having received such information orbefore, if the parties so agree. 

 

**CLAUSESEVEN.- OVERSIGHT COMMITTEE**

 

**7.1**                     The OversightCommittee will sit three (3) representatives of the Contractor or its

 

----

 

subordinates and three (3) members of PERUPETROor its alternates. A representative of PERUPETRO S.A. will chair the oversightCommittee.  Such Oversight Committee willbe installed and approve its regulation operations within sixty (60) days afterthe date of signing.  

 

**7.2****                    **The Oversight Committeewill enjoy the following attributions:**** 

 

**a)****                 **To exchange anddiscuss among its members all the information related to the operations; 

 

**b)****                 **To assess theexception of the minimum exploration work programs described in heading 4.6; 

 

**c)****                 **To assess the workplans and programs described in headings 4.8 and 5.3., as well as theirexecution; 

 

**d)****                 **To verify theexecution of the operations for which purposes the representatives accreditedbefore the Oversight Committee may rely on the necessary counseling;

 

**e)****                 **To verify compliancewith all the obligations related to the operations as set forth in theagreements or to which the parties may agree by virtue of a separate document;and, 

 

**f)****                   **All otherattributions that may be established in the Agreement or to which the Partiesmay agree. 

 

**7.3**                     The OversightCommittee will sit whenever requested by the Parties and with the frequencyestablished by its own regulations. At least one representing member from eachof the parties will be required for the Oversight Committee to be considered insession. Each of the parties will bear the expenses of their respective membersin the Oversight Committee. 

 

**7.4**                     If a discrepancyappears and subsists among the Parties at the Oversight Committee, each suchParty may request the technical or legal opinion it deems appropriate and itmay submit it to the Oversight Committee at an extraordinary meeting. If noagreement is reached in the extraordinary meeting, the matter will be referredto the Parties’ General Management Department for resolving the controversy. Ifthe discrepancy persists, provisions under heading 21.2 will apply. 

 

**CLAUSEEIGHT.- ROYALTIES AND VALUATION**

 

**8.1**                     The Contractor willpay the royalty in cash based on the value of Controlled Hydrocarbons measuredat one or more Production Control Points, pursuant to provisions under headings8.3, 8.4 and 8.5.  In case of loss ofhydrocarbons, provisions under heading 14.2 will apply. 

 

**8.2**                     For purposes of thisclause, the terms below will have the following meanings: 

 

**8.2.1****                     ****Transportationand storage costs:** the cost, in dollars per barrel or dollars per MMBtu, as appropriateincluding: 

 

**a)**         Rate paid to third parties or the EstimatedRate, expressed in dollars per barrel or dollar per million Btu, asappropriate, for the necessary transportation and storage of the controlledhydrocarbons from the

 

----

 

Production Control Point to the point of saleor transportation, including storage at that point; and, 

 

**b)**  The cost of handlingand dispatching, as well as for loading, as appropriate, of controlledHydrocarbons to the fixed ship connection clamp or to the facilities needed toperform the sale. 

 

**8.2.2****                     ****ValuationPeriod:** Fifteen days (fortnight) of a calendar month, in the understanding thefirst such fortnight is the period comprised between the first until thefifteenth day of a calendar month, and the second fortnight is the periodremaining until the end of a calendar month. By agreement of the Parties, and to extent allowed by existing regulations,the valuation period may be extended or reduced.  

 

**8.2.3****                     ****Basketprice:**The price expressed in dollar per barrel representing the FOB value at aPeruvian export port, determined pursuant to heading 8.4.1 and subheading 8.4.3for Controlled Natural Gas. 

 

**8.2.4**                      **RealizedPrice:**The price, expressed in dollars per MMBtu, actually paid or to be paid by abuyer to the Contractor for the Controlled Natural Gas and which should includeall other components directly derived from the sale of natural gas and thevolume actually delivered of Controlled Natural Gas. For the calculation of therealized price, the following will not be taken into consideration: 

 

**a)**         Any payment resulting from the reconciliationof natural gas volumes contained in the corresponding purchase contracts;and  

 

**b)****        **The Impuesto Generala las Ventas (Sales Tax), the Impuesto Selectivo al Consumo (Excise Tax), theImpuesto de Promoción Municipal (Municipal Tax) and/or any other tax levied onconsumption.   

 

**8.2.5****                     ****EstimatedRate:**Thecost in dollars per barrel ** **or dollars per MMBtu, asappropriate, for the transportation from a Production Control Point to a saleor export point or to a third party pipeline. This cost will take intoconsideration the items, methodology and procedures mentioned in the “Regulationsfor Transportation of Hydrocarbons by Pipelines” as amended, or itssuccessors.   

 

**8.2.6**                      **Value ofControlled Oil:** The product of multiplying the Controlled Oil for a valuation periodtimes the Basket Price Of Controlled Oil for such period, from which the costof transportation and storage if applicable, will be subtracted.

 

**8.2.7**                      **Value ofControlled Condensates:** The product of multiplying the Controlled Condensatesof a Valuation Period times the Basket Price of Controlled Condensates for suchperiod, from which price the cost of transportation and storage if applicable,will have been subtracted.

 

**8.2.8****                  ****Value ofControlled Natural Gas Liquids:** The product of multiplying the Controlled Natural GasLiquids for a Valuation Period times the basket price of

 

----

 

the Controlled Natural Gas Liquids for thatperiod, price from which the cost of Transportation and Storage, if applicablewill have been subtracted. 

 

**8.2.9**                      **Value ofControlled Natural Gas:** The product of multiplying the Controlled Natural Gasin terms of its caloric content in million BTU for a Valuation Period times theRealized Price for such period, from which price the cost of transportation andstorage, if applicable, will have been subtracted. 

 

**8.3**                     The Contractor, whenmaking a commercial discovery statement for hydrocarbons, will choose one ofthe two methodologies described in subheadings 8.3.1 and 8.3.2, after which it will not be allowed to change themethodology during the life of the Agreement. 

 

**8.3.1****                     ****Scale ofProduction Method:** Pursuant to this methodology, a royalty percentage for ControlledLiquid Hydrocarbons and Controlled Natural Gas Liquids will be established andanother royalty percentage will be established for the Controlled Natural Gasfor each valuation period, according to the following chart.

 
| **Controlled Production********MBCD** | ** ** | **Percent royalty (%)** |
|--------------------------------------------|------------|-----------------------------------|
| < 5                                     | ** ** | **15.00**                         |
| 5 – 100                               | ** ** | **15.00 –  30.00**           |
| >100                                    | ** ** | **30.00**                         |

 

MBDC: Millions of Barrels per Calendar Day

 

When the total average of Controlled LiquidHydrocarbons and Controlled Natural Gas Liquids is equal to or lower than 5MBDC, the 15% royalty will apply. When such average is equal to or higher than100 MBDC, a 30% royalty will apply. When said average falls between 5 MBDC and100 MBDC, the royalty percentage to be applied will result from applying alinear interpolation. The royalty paid by the Contractor for the ControlledLiquid Hydrocarbons and the Controlled Natural Gas Liquids will be the productof applying the royalty percentage obtained for such hydrocarbons to the valueof controlled oil, the value of the Controlled Natural Gas Liquids and thevalue of the Controlled Condensates, during the corresponding ValuationPeriod.  To determine the average inbarrels per day for Controlled Natural Gas, the following equation will beused: barrels will be equivalent to the volume of Controlled Natural Gas instandard cubic feet divided by five thousand six hundred twenty six (5,626)factor. The royalty the Contractor shall pay for the Controlled Natural Gaswill be the product of applying the royalty percentage calculated for suchhydrocarbon to the value of Controlled Natural Gas during the respectivevaluation period. 

 

**8.3.2**                      **EconomicResult Method (RRE):** Pursuant to this method, the royalty percentage willbe the product of adding the 15% fixed royalty percentage to the variable

 

----

 

royalty percentage as follows: 

 

RRE              =              15.00%           +             VR

                               

 

 

Where:

 

VR          :               Variable Royalty % t

 

FR t-1      :               R t-1 Factor

 

The Variable Royalty will apply when: FR t-13 1.15, within therange of:

 

0%         £             Variable Royalty       £        20%

 

For negative VR, 0% will apply; for VR above 20%, 20%will apply

 
| X t-1:        |   | Revenues corresponding to the annual period  preceding the time when the Variable Royalty calculation is made. They  include ìtems applicable to Factor R t-1 |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Y t-1:        |   | Expenses corresponding to the annual period  preceding the time when the Variable Royalty calculation is made. They  include items applicable to Factor R t-1      |
| R t-1 Factor: |   | Is the quotient between revenue and expenses from  the Date of Signing until period t-1, included                                                                  |
| Period t-1:   |   | Annual period before the time when the variable  royalty was calculated.                                                                                           |

 

where:

 

Accumulated revenues:

 

Acum[PFP*(PCP-CTAP)] + Acum[PFC*(PCC-CTAC)] +

Acum[PFG*(PRG-CTAG)] + Acum[PFL*(PCL-CTAL)] +Acum[OI]

 
| PFP  |   | Controlled Oil Production.                           |
|------|--------|------------------------------------------------------|
| PCP  |   | Oil Basket Price.                                    |
| CTAP |   | Oil Transportation and Storage Cost.                 |
| PFC  |   | Condensate Control Production.                       |
| PCC  |   | Condensate Basket Price.                             |
| CTAC |   | Condensate Transportation and Storage Cost.          |
| PFG  |   | Natural Gas Controlled Production.                   |
| PRG  |   | Natural Gas Realized Price.                          |
| CTAG |   | Natural Gas Transportation and Storage Cost.         |
| PFL  |   | Natural Gas Liquids Controlled Production.           |
| PCL  |   | Natural Gas Liquids Basket Price.                    |
| CTAL |   | Natural Gas Liquids Transportation and Storage Cost. |
| OI   |   | Other incomes.                                       |

 

Accumulated expenses:

 

Acum    (Investment+ Expenses + Royalties + Other Incomes)

 

Annex E-Accounting Procedures details the revenues andexpenses and the times for the registration the Factor Rt-1,component. The calculation of the variable royalty percentage will be madetwice yearly, once in January, with information about the revenues and expensesincurred from January to December of the prior calendar year;

 

----

 

and again in July with information from July ofthe prior calendar year to June of the current calendar year. 

 

**8.4**                     For purposes of theAgreement, the price for each class of Controlled Hydrocarbon will be expressedin dollars per barrel or dollars per million Btu, and will be determined asfollows: 

 

**8.4.1**                      To determine theBasket Price of Controlled Oil the following procedure shall apply: 

 

**a)**         UTE.  Atleast ninety (90) days before the Date of Beginning of Hydrocarbon CommercialExtraction, the Parties will decide the amounts of oil that will be produced inthe Agreement Area. 

 

**b)**         Within thirty (30) days after the determinationdescribed in the previous paragraph, the Parties will choose an Oil Basketincluding a maximum of four (4) crudes with followingcharacteristics.  

 

**1.**                          Their quality shallbe similar to that of the oil to be measured at a Production Control Point; 

 

**2.**                          Their quotations willappear periodically in “Platt’s Oilgram Price Report” or other sourceacceptable to the oil industry and to the Parties; and, 

 

**3.**                          They will becompetitive in the market(s) where the oil to be measured at a ProductionControlled Point may be sold. 

 

**c)**         Once the conditions described in the precedingparagraphs have been met, the Parties will sign a Valuation Agreementestablishing the additional terms and conditions to those described in thissubheading and which may be required for its appropriate enforcement. TheValuation Agreement will determine the adjustment procedures required forreasons of quality. The quality adjustments will introduce premiums and/orpenalties for improving and/or degrading the quality of Controlled Oil comparedto the types of oil included in the basket. Likewise, the Valuation Agreementwill determine a given period of existence as well as the frequency with whichthe agreed methods and procedures should be reviewed so that, at all times, arealistic determination of controlled oil prices will be ensured. If any of theparties, at any time, considers the enforcement of the methods and proceduresestablished in the Valuation Agreement does not result in a realisticdetermination of the FOB value at the Peruvian exportation port for theControlled Oil, the Parties may agree to enforce other methods and proceduresthat effectively provide such result. 

 

**d)**         Every six (6) months or before if any ofthe Parties so requests, the Parties may review the basket established for ControlledOil valuation, and thus ensure that the previously listed conditions continueto be met. If it is found that any of such conditions no longer applies, theParties may

 

----

 

modify the basket within thirty (30) days afterthe date when the basket review started. If that period expires and the Partieshave not reached an agreement about the new basket, the provisions set forth insubheading 8.4.5 shall apply. If it is found that API (weighted average)degree, sulphur content or other element used to measure the quality ofControlled Oil has changed significantly compared to the quality of the basketcomponents (simple arithmetical average), the Parties will change the basket sothat it will reflect the quality of the Controlled Oil. 

 

**e)**         In case the future price of one or more of thetypes of oil in the basket were quoted in a currency other than the US dollars,such prices will be converted into dollars at the exchange rate enforced on thedate when each of the referred quotations was taken. The exchange rate to be used will be the average of theexchange rate quoted by Citibank N.A. New York. If quotations from thatorganization are not available, the Parties will agree on an appropriatesubstitute. 

 

**f)**           The Basket Price used to calculate the value ofthe Controlled Oil for the Valuation Period will be determined as follows: 

 

**1.**                          For each type of oilin the basket, the arithmetical average of its published basket will bedetermined using quotations for the Valuation Period. Only the days where allthe components of the baskets wee quoted will be considered. It is understoodthat if the regular edition of “Platt’s Oilgram Price Report” shows two or morequotations for the same basket component, the quotation for the date closer tothe publication will be used (“Prompt Market”); and, 

 

**2.**                          The resulting averageprices calculated following the method above, for each basket component, willbe again averaged out to determine the basket price corresponding to the valueof Controlled Oil.  

 

**8.4.2****                     **To determine theBasket Price of Controlled Condensates, the guidelines detailed in subheading8.4.1 will apply, as appropriate. The Parties may agree to the adjustmentsneeded so the basket price will best reflect the value of the ControlledCondensates.  

 

**8.4.3**                      To determine theBasket Price for Controlled Natural Gas Liquids, the procedure established insubheading 8.4.1, will be followed, as applicable. The Parties may agree tocertain necessary adjustments so the Basket Price will reflect as best possiblethe value of Controlled Natural Gas Liquids. 

 

**8.4.4**                      The price ofControlled Natural Gas will be reflected by the Realized Price, which shouldreflect the selling price in the domestic market or at an export point withinthe national territory, as applicable. The minimum value to be used as RealizedPrice will be 0.60 US$ / MMBtu. 

 

**8.4.5**                      If the Parties cannotagree on any of the issues described in this heading, the

 

----

 

provisions in heading 21.2 will apply. 

 

**8.5**                     Notwithstandingprovisions in paragraph d) under section 2.5 of Annex “E”, AccountingProcedure, if at any time times the Parties identify a mistake in calculatingthe factor  Rt-1 and that adifferent Rt-1 should have been applied or that said factor shouldhave been applied at another time, the corresponding correction will beintroduced retroactively to the time when the error was made and the percentroyalty will be adjusted starting at that period. All adjustments resultingfrom the lower payment of a royalty will accrue interest on behalf of the affectedparty from the moment when the error was made. Refunds to the Contractor forthe payment of excess royalties will be charged against the balances PERUPETROmay have to transfer to Treasury.  

 

**8.6**                     The amount of theroyalty will be calculated for each valuation period. The corresponding paymentwill be made in dollars, at the latest in the second business day after the endof the corresponding fortnight, and PERUPETRO will issue the correspondingcertificate on behalf of the Contractor pursuant to law. The volume of Controlled Hydrocarbons for everyfortnight will be supported by the control vouchers PERUPETRO will deliver tothe Contractor after duly signing them, as proof of conformance. 

 

**8.7**                     On the contrary, ifthe Contractor fails to pay PERUPETRO the amount of royalties due, fully orpartially, within the deadline foreseen in heading 8.6, the Contractor willdeliver to PERUPETRO the hydrocarbons it owns and that were extracted from theAgreement Area in the amount needed to pay the amount due, as well as theexpenses incurred and interests accrued, pursuant to heading 19.6.  

 

**CLAUSENINE – TAXES**

 

**9.1**                     The Contractor willbe subject to the ordinary tax regime in force in the Republic of Peru,including the ordinary tax regime for income tax, as well as the specificregulations set forth in this respect by Law N° 26221, in force by the date ofsigning.  The State, through the Ministryof Economy and Finance, guarantees the Contractor the benefit of tax stabilityduring the life of the Agreement, as a result of which the latter will besubject only to the tax regime in force on the Date Of Signing, pursuant toprovisions in the “Reglamento de la Garantía de la Estabilidad Tributaria y delas Normas Tributarias de la Ley N° 26221, Ley Orgánica de Hidrocarburos(Regulations of the Tax and Tax Regulations Stability under Law  26221, Organic Hydrocarbons Law)”, approvedby Supreme Decree N° 32-95-EF, in the “Law regulating stability contracts withthe State under the protection of Sectorial Laws – Law N° 27343” as applicable,and in the “Updated Law for Hydrocarbons – Law N° 27377”. 

 

**9.2**                     Export ofhydrocarbons from the Agreement Area made by the Contractor are tax exempted,including tax exemptions that require an explicit statement. 

 

**9.3**                     PERUPETRO will paythe “canon”, “surplus canon” and participation in revenues and

 

----

 

profits. 

 

**9.4****                    **The Contractor,pursuant to legal provisions in force, will pay the taxes charged on imports ofgoods and services the Contractor may require to perform the Operations, asrequired by law. 

 

**9.5****                    **Pursuant toprovisions under article 87 of the Tax Code, the Contractor may carry its booksin dollars and, consequently, the calculation of the basis for  tax payments under his responsibility as wellas the amounts of such taxes and their actual payment, will proceed pursuant toexisting laws. 

 

**9.6**                     The Contractor willenforce the linear amortization method over a period of five (5) yearsstarting on the year of the Date for the Beginning of Commercial Extraction.This linear amortization will be applied to all exploration and developmentexpenses and to all investments made by the Contractor starting on the Date ofSigning of the Contract until the Date of Beginning of Commercial Extraction.It is hereby set forth that the above mentioned amortization period may beextended, but under no circumstance beyond the term of the Agreement, ifbecause of reasons related to prices or any other circumstance, agreed by theParties, and after applying the linear amortization described in the previousparagraph, the Contractor’s financial statements yield a negative bottom lineor a fiscal loss that, in the Contractor’s view, it may not be set off for taxpurposes pursuant to tax regulation in force. The extended amortization periodwill be reported in advance to the National Superintendence for TaxAdministration. 

 

**CLAUSETEN – CUSTOMS DUTIES**

 

**10.1**              The Contractor isauthorized to import on a final or temporary basis, and pursuant to legalprovisions in force, any good it may need for the economical and cost-effectiveand efficient execution of the operations. 

 

**10.2**              The Contractor mayimport on a temporary basis, for a period of two (2) years, all the goodsrequired for its activities and have the corresponding import duties suspended,including those requiring an express suspension statement. If an additional extensionis needed, the Contractor may request such extension from PERUPETRO for periodsof one year and for a maximum two (2) such periods. PERUPETRO will obtainthe Directorial Resolution from the General Hydrocarbons Bureau. The NationalSuperintendent for Tax Administration will authorize the extension of thetemporary importation regime based on the mentioned documents. The procedure,records and guarantees needed to enforce the temporary importation regime willfollow the rules set forth in the General Customs Law, as amended andregulated. 

 

**10.3****             **The importation ofgoods and inputs required by the Contractor during the exploration stage forexploration activities is exempt from all taxes, including exemptions requiringan express statement, provided they are also comprised in the list of goodssubject to such benefits, pursuant to provisions in Article 56o of Law N°26221. The benefit will apply during the entire exploration stage. 

 

----

 

**10.4****             **The taxes levied onthe importation of goods and inputs required by the Contractor for developmentand exploration activities during the development stage will be paid and borneby the importer. 

 

**10.5****             **PERUPETRO may inspectthe goods imported on either a definitive or temporary basis as provided for inthis clause for the exploration activities during the exploration stage tocertify whether those goods were imported exclusively for the Operations. 

 

**10.6**              The Contractor shallperiodically report to PERUPETRO the goods and inputs exempted from dutiespursuant to provisions in article 56o of Law N° 26221. The Contractor may notexport back or use for other purposes the goods and inputs described in theprevious paragraph without PERUPETRO’s authorization. After obtaining suchauthorization, the Contractor will pay the corresponding taxes, pursuant toarticle 57 under Law N° 26221. 

 

**CLAUSEELEVEN.- FINANCIAL RIGHTS**

 

**11.1****             ****StateGuarantee.**

 

The Central Reserve Bank of Peru is Party tothis Agreement, pursuant to provisions of Law No 26221 and Legislative DecreeNo 668, so as to provide the Contractor the State’s guarantees described inthis clause and pursuant to the legal regulations in force at the Date ofSigning. The guarantees provided by this clause also comprise an eventualcession, pursuant to the provisions of the Hydrocarbons Law and this Agreement.

 

**11.2****             ****ExchangeRate Regime**

 

TheCentral Reserve Bank of Peru, on behalf of the State and pursuant to legalprovisions in force at the date of signing guarantee the Contractor will enjoythe exchange rate regime in force on the Date of Signing and, consequently, theContractor will enjoy the right to the free availability, holding, use anddisposition, both internally and externally, of foreign currency as well asfree conversion of domestic currency into foreign currency in the open exchangemarket under terms and conditions set forth in this clause.  In this regard, the Central Reserve Bank ofPeru, on behalf of the State, guarantees the Contractor, pursuant to the legalregime in force on the Date of Signing, the following: 

 

**a)**                  Free availability tothe Contractor of up to one hundred percent (100%) of the foreign currencyearned by its exports of Controlled Hydrocarbons, same which may be depositeddirectly in its own bank accounts, locally or overseas. 

 

**b)**                  Free availability andright to freely convert into foreign currency up to one hundred percent (100%)of the national currency earned from its sales of Controlled Hydrocarbons inthe domestic market, and the right of deposit directly in its own bankaccounts, locally or overseas, both the foreign and domestic currencies. 

 

**c)**                  Right to maintain,control and manage bank accounts in any currency, both locally and overseas,and to control and freely use those accounts, and to freely

 

----

 

maintain and dispose of abroad the fundsdeposited in those accounts without any restriction whatsoever. 

 

**d****)**      Notwithstanding the above, the Contractor hasthe right to freely dispose of, distribute, send or withhold abroad without anyrestriction whatsoever its net annual profits calculated pursuant toregulations in force. 

 

**11.3****             ****ForeignCurrency Availability and Conversion**

 

It is hereby agreed that the Contractor willconvert currency through financial system entities established in Peru, asdescribed in paragraph b) under heading 11.2. If the availability of foreigncurrency may not be totally or partially served by the above mentionedentities, the Central Reserve Bank of Peru guarantees that it will provide thenecessary foreign currency. For that purpose, the Contractor will address theCentral Bank in writing and send a photocopy of the response letters receivedfrom not less than three (3) financial system entities reporting theirinability to serve, fully or partially, the Contractor’s foreign currencyrequirements.  The letters from thefinancial system entities will remain valid for two business days after thedate when they were sent.  Before 11:00 a.m.of the Business Day after the above described documents were submitted, theCentral Bank will inform the Contractor on the exchange rate to be used for therequired conversion, same which will remain in force provided the Contractordelivers the matching value in domestic currency for the requested transactionon the same day.  If, for any reason, thematching amount is not delivered by the Contractor at the appointed time, theCentral Reserve Bank of Peru will report on the following Business Day, withinthe same time restriction, the exchange rate to be used for the conversion ifundertaken on that same day. Notwithstanding the above, if the Central ReserveBank of Peru timely certifies said availability cannot be provided fully orpartially by the above mentioned entities, it may notify the Contractor todeliver to the Central Reserve Bank of Peru the domestic currency in the amountrequired to proceed to the currency conversion.

 

**11.4****             ****Changesto the exchange regime**

 

The Central Reserve Bank of Peru, on behalf ofthe State, guarantees the regime described in this clause will remain in forcefor the benefit of the Contractor during the life of the agreement. If for anyreason, the rates were not longer fixed by supply and demand, the exchange rateapplying to the Contractor will be as follows: 

 

**a)**                  If a single officialexchange rate was established at one single value for all currency transactionsor foreign currency related transactions, starting on the date of enforcement,the exchange rate will be that provided for in this agreement. 

 

**b)****                 **If a system ofmultiple, differential exchange rates were introduced or if different valueswere given to a single exchange rate, the exchange rate to be used for all theContractor transactions will be highest foreign currency value.

 

----

 

**11.5****             ****Enforcementof Other Legal Provisions**

 

The guarantees provided by the Central ReserveBank of Peru to the Contractor will remain in force during the life of theAgreement. The Contractor will have the right to embrace, totally or partially,as pertinent, the new legal provisions regarding exchange rates or regulationsissued during the life of the Agreement, including those dealing with foreigncurrency exchange issues not addressed in this clause, provided they are eitherof a general nature or apply to the hydrocarbons industry. Embracing the newprovisions  or regulations will notaffect the guarantees described in this clause, nor the exercise of guaranteesdealing with aspects other than those included in the new provisions orregulations which the Contractor may have embraced. It is expressly agreed thatthe Contractor may, at any time, adopt the guarantees it decided to dismiss ona temporary basis and that returning to those guarantees does not create anyrights or duties to the Contractor concerning the period during which itdecided to adopt the new provisions or regulations described above.  In addition, it is hereby explained thatadopting such guarantees will not hamper those or any other guarantees, nor does it create any additional rights orduties to the Contractor. The Contractor’s adopting the new legal exchangeprovisions or regulations, as well as its decisions to return to the guaranteesit decided to dismiss temporarily, shall be reported in writing to both theCentral Reserve Bank of Peru and PERUPETRO. The provisions under this headingare established notwithstanding those in the first paragraph under heading11.4. 

 

**11.6****             ****EconomicReporting**

 

The Contractor will send monthly reports to theCentral Reserve Bank of Peru  relatingits economic activity pursuant to article 74° of the Bank’s Organic law enactedby Decree Law N° 26123. 

 

**CLAUSETWELVE.- LABOR**

 

**12.1**              The Parties agreethat at the end of the fifth year after the Date of Beginning of CommercialExtraction, the Contractor will have replaced Peruvian personnel of equivalentprofessional qualifications for all its current personnel. Exempted from theabove are the foreign personnel filling management positions and those neededto perform some specialized technical jobs, for the Operations.  The Contractor agrees to train and form thePeruvian personnel to undertake specialized technical tasks so they maygradually substitute for the foreign personnel in performing such jobs. 

 

**12.2**              At the beginning ofOperations and the end of each calendar year, the Contractor will deliver toPERUPETRO a statistical chart of the personnel under its service who areperforming the Operations, using the form PERUPETRO will deliver to theContractor. 

 

**CLAUSETHIRTEEN.- ENVIRONMENTAL PROTECTION AND COMMUNITY RELATIONS**

 

**13.1**              The Contractorcommits to follow the provisions under the “Environmental ProtectionRegulations for Hydrocarbon Activities” enacted by Supreme Decree N°015-2006-EM as amended, Law N° 28611, the General Environmental Law, asamended, and all other

 

----

 

environmental provisions in force, asapplicable. 

 

**13.2**              The Contractor willundertake the operations in strict compliance with sustainable development,conservation and environmental protection guidelines, pursuant to the laws andregulations concerning environmental protection, Amazon indigenous and peasantcommunities, and international treaties ratified by the Peruvian State. Inaddition, it will respect the culture, habits, principles and values of suchcommunities and will maintain harmonious relations with the Peruvian State andcivil society. 

 

**13.3**              The Contractor willuse the best available methods available from international industry practice,pursuant to environmental laws and regulations, for prevention and control ofenvironmental pollution from the Operations; in addition, it will perform theOperations pursuant to existing regulations on the preservation of biologicaldiversity, natural resources, and health and safety of its people and its ownworkers.  

 

**CLAUSE FORTEEN – HYDROCARBONCONSERVATION AND LOSS PREVENTION**

 

**14.1****             **The Contractor shalladopt all reasonable measures to prevent the loss or waste of the hydrocarbonson the surface or in the ground in any possible during the prospecting anddevelopment activities. 

 

**14.2****             **The Contractor willimmediately to PERUPETRO any report surface oil spills in or outside theAgreement Area, pursuant to legal provisions in force, indicating an estimatedspill volume and the actions taken to remediate the spill. PERUPETRO has theright to verify the spill volume and analyze the underlying causes.  In case of surface losses in or outside theAgreement Area before the Production Control Point caused by the Contractor’sserious negligence or fraud, the loss volume will be valued according to ClauseEight herein and included in the royalty calculations, notwithstandingprovisions under heading 13.1. In case of losses before the Production ControlPoint, occurring under circumstances other than those described in thepreceding paragraph and that result in remedy pay to the Contractor by thirdparties, the amount of the received compensation for the lost hydrocarbons,multiplied by the factor resulting from a division between amount of theroyalty paid for the Controlled Hydrocarbons at the Production Control Pointcorresponding to the lost hydrocarbons during the fortnight when the lossoccurred times the value of said Controlled Hydrocarbons calculated pursuant toheading  8.2  for the same fortnight will be the amount theContractor shall pay for the royalty for the lost hydrocarbons, at the lateston the second business day after such remedy was paid, notwithstandingprovisions under heading 13.1. 

 

**CLAUSEFIFTEEN.- TRAINING AND TECHNOLOGY TRANSFER**

 

**15.1****             **Pursuant to article29o of Law N° 26221, the Contractor commits to make available to PERUPETRO,every year during the life of the Agreement, the following amounts:

 

----

 
| **Paragraph** | ** ** | ** **                                                                  | ** ** | **Annual  Contribution********(in US$)** | ** ** |
|---------------|------------|-----------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| a)            |       | Until the calendar year of the Date Of Beginning Of Commercial  Extraction. |       | 10,000.0                                      |       |
|          |       |                                                                        |       |                                          |       |
| b)            |       | After the Date Of Beginning Of Commercial Extraction.                       |       |                                          |       |
|          |       | Barrels per Day                                                             |       |                                          |       |
|          |       | From                                                                        | 0          | to                                            | 500        |   | 10,000.0 |   |
|          |       | From                                                                        | 501        | to                                            | 1,000      |   | 15,000.0 |   |
|          |       | From                                                                        | 1,001      | to                                            | 1,500      |   | 20,000.0 |   |
|          |       | From                                                                        | 1,501      | to                                            | 2,500      |   | 30,000.0 |   |
|          |       | From                                                                        | 2,501      | to                                            | 5,000      |   | 40,000.0 |   |
|          |       | More than 5,000                                                             |       | 50,000.0                                      |       |

 

The first payment will be made on the Date ofSigning in an amount that will be determined by multiplying the annualcontribution corresponding to paragraph a) above plus the fraction resultingfrom dividing the number of days before finishing the calendar year underwayplus three hundred sixty five (365). The annual training contribution underparagraph b) will correspond to the segment of average daily production ofControlled Hydrocarbons for the prior calendar year. This contribution will bedetermined by dividing the total volume of Controlled Hydrocarbons of such yearby the corresponding number of days. To determine the Barrels/Day in case ofcontrolled natural gas production, the following equation will be used: Barrelswill be equivalent to the volume of natural gas expressed in standard cubicfeet divided by the five thousand six hundred twenty six (5,626) value. Thepayments described in this heading, excepting the first payment, will be madein January each year. Payments may be effected by bank transfer followingPERUPETRO’s instructions in this regard. 

 

**15.2**              The Contractor willfulfill all the obligations stated by heading 15.1 by making a deposit for theaccount PERUPETRO shall indicate. PERUPETRO will deliver the Contractor acommunication showing conformance of payment within five (5) Business Daysafter receiving the contribution. 

 

**15.3**              Training programsorganized by the Contractor for its own personnel, both in Peru and overseas,will be reported to PERUPETRO. 

 

**15.4**              The Contractorcommits, during the development stage and if possible during the explorationstage, to put in place an internship program for university students that willprovide complementary training pursuant to their respective universities’requirements and existing law in Peru but without creating any labor relationshipbetween the Parties. In addition, the Contractor will report such program toPERUPETRO. 

 

**CLAUSESIXTEEN – CESSION AND ASSOCIATION**

 

**16.1**              If the Contractorenters into an agreement to assign its contract position or to partner with athird party within the Agreement, it will report such agreement to PERUPETRO.The letter should include a request to evaluate the potential assignee or thirdparty who will attach the necessary complementary information for its

 

----

 

qualificationas an oil company, pursuant to existing regulations. If PERUPETRO grants therequested qualification, the assignment or association will be performedthrough an amendment to the Agreement, pursuant to law. 

 

**16.2**              After notifyingPERUPETRO, the Contractor may assign its contractual position or associate withan affiliate, pursuant to law. 

 

**16.3**              The assignee or thirdparty will provide al the guarantees and will undertake all the rights,responsibilities and obligations flowing from the Agreement. 

 

**CLAUSESEVENTEEN - ACT OF GOD OR FORCE MAJEURE**

 

**17.1**              Neither of theParties may be imputed failure to execute an obligation or for its partial,late or defective compliance with same during the period while such Party isaffected by an Act of God or Force Majeure, provided it accredits such causeprevented it from complying. 

 

**17.2**              The Party affected bythe Act of God or Force Majeure will report it in writing within five (5) daysafter such event takes place to the other Party and will document the way inwhich such event prevents it from complying with the correspondingobligation.   The other Party will replyin writing accepting or rejecting such explanation within fifteen (15) daysafter receiving the above letter. Failure to respond by the notified Party within the term foreseen will beconstrued as an acceptance of the proposed explanation. In case of partial,late or defective execution of the obligation hampered by the Act of God orForce Majeure, the obligated party will make its best effort to carry it out soas to accomplish the objectives expressed jointly by the Parties in theAgreement and the Parties will continue to undertake their Contract-basedobligations affected in anyway by such event. The Party affected by the Act ofGod or Force Majeure will resume its obligations and contract-based conditionswithin a reasonable period of time after said cause or causes have been cured,and it will notify the other party in five(5) days after such cause wascured. The harmless Party will cooperate with the affected party in its effort.In cases of strike, stoppages or similar events, neither of the partieswill be allowed to impose the other a solution against its will. 

 

**17.3**              The period duringwhich the effect of the Act of God or Force Majeure prevents compliancewith  Contract-based obligations will beadded to the period foreseen to comply with such obligations and, ifappropriate, to the corresponding Agreement and the life of the Agreement.  If the Act of God or Force Majeure affectsthe execution of any of the minimum work programs described in heading 4.6, thewarrant bond posted to guarantee such program will remain in full force andeffect and will not be executed during the period while PERUPETRO does notissue a statement about the cause invoked by the Contractor, and if any discrepancyshall emerge about the existence of such cause while the discrepancy isresolved. With that goal in mind, the Contractor will extend or replace suchwarrant bond, as appropriate.  Likewise,as long as PERUPETRO does not make a statement about the reason invoked by theContractor or

 

----

 

while the discrepancysubsists about the existence of such cause, the period for executing theminimum work program will be suspended. If PERUPETR accepts the Act of God orForce Majeure invoked by the Contractor, the latter will resume the executionof the minimum work program as soon as the effect of the invoked cause ceases. 

 

**17.4****             **PERUPETRO will makeevery necessary effort to obtain the assistance or cooperation of thecorresponding document authorities so that the necessary measures will be takento ensure the continued and safe implementation and operations of theactivities foreseen in the Agreement.  Itis hereby agreed that when any of the Parties, at its sole criterion,considered its personnel or its subcontractors’ personnel cannot operate withinthe agreement area under appropriate conditions to guarantee their physicalintegrity, invoking such situation as an Act of God or Force Majeure, will notbe challenged by the other party. 

 

**17.5**              If the Contractor isaffected by an Act of God or Force Majeure preventing it for completing theexecution of a minimum work program for a period underway, at the end of twelve(12) consecutive months starting when such cause emerged the Contractor mayterminate the Agreement, for which purpose it will communicate its decision toPERUPETRO at least thirty (30) days before releasing the Agreement Area. 

 

**17.6**              The provisions inthis clause 17 do not apply to the obligations to pay money. 

 

**CLAUSEEIGHTEEN - ACCOUNTING **

 

**18.1**              The Contractor willkeep its accounting records following the accounting principles and practicesestablished and accepted in Peru. In addition, it will keep and maintain allits books, detailed records and documents as may be required to account for andoversee its activities in Peru and abroad, as related to the purpose of theAgreement, and for properly documenting its revenues, investments, costs,expenses and taxes for each fiscal year. Moreover, within one hundred twenty(120) days starting of the Date of Signing, the Contractor will deliver toPERUPETRO a copy in Spanish of the Manual of Accounting Procedures it proposesto record its operations. The “Manual of Accounting Procedures” shall include,among others, the following: 

 

**a)**                  The language and currencyfor the accounting records; 

 

**b)**                  Applicable accountingprinciples and practices; 

 

**c)****                 **Accounts****structure and plan pursuant to requirements made by theNational Commission for the Supervision of Companies and Securities  (Comisión Nacional Supervisora de Empresas yValores - CONASEV); 

 

**d)****                 **Mechanisms toidentify the accounts corresponding to the agreement and other hydrocarbonsagreements, their related activities and other activities; 

 

**e)****                 **Mechanisms toattribute shared revenues, investments, costs and expenses to the agreement,other hydrocarbon agreement, related activities and other activities; and, 

 

**f)****                   **Determining therevenues and expenses accounts, as well as the detailed records needed forcomputing the Rt-1 factor, and the detailed procedures described in

 

----

 

Annex “E” of the Agreement, as appropriate. 

 

**18.2**              If the “Manual ofAccounting Procedures” includes the items described in paragraph f) above,within thirty (30) days after having receive it, PERUPETRO will inform theContractor of the approved accounting procedures to calculate Rt-1factor described in that paragraph or alternatively, the suggestions itproposes to improve and/or expand such procedure. Failure by PERUPETRO toprovide such comment within the abovementioned period will be construed as thegranting of the approval to the procedure described in paragraph f) underheading 18.1 in every respect. Within the same period of thirty (30) days afterreceiving the “Manual of Accounting Procedures”, PERUPETRO may make suggestionsor remarks to improve, expand or delete one or several of the accountingprocedures proposed in the Manual.  Allchanges concerning the accounting procedures for the approved Rt-1factor will be previously proposed to PERUPETRO for approval, following forthat objective the procedure established in the first paragraph under thisheading.  

 

**18.3**              The Contractor’saccounting books, financial statements and supporting documents will be madeavailable to authorized PERUPETRO representatives for verification in the Contractor’soffices at its address of record, after having been served appropriate notice. 

 

**18.4**              The Contractor willkeep a record of all its movable and immovable properties used in connectionwith the Agreement’s Operations pursuant to the accounting regulations in forcein Peru and international oil industry generally accepted accounting practices.PERUPETRO may request the Contractor all the information about its propertieswhenever it deems appropriate. Likewise, PERUPETRO may request the Contractor tofurnish its schedule of physical inventory-taking of the goods used in itsOperations, segregated by type of property, whether belonging to the Contractoror third parties, and may request to be allowed to participate in suchinventory-taking, if it so considers appropriate. 

 

**18.5**              The Contractor willsend, within thirty (30) days after its issuance, a copy of its independentauditors’ report concerning the Contractor’s financial statement for the prioreconomic year. If the Contractor has signed more than one agreement withPERUPETRO or carries out activities other that those foreseen in the Agreement,it will carry separate accounting to prepare independent financial statementfor each agreement and/or activity and, therefore, the report prepared by itsindependent auditors shall also include the financial statements for eachcontract and/or activity.  

 

**18.6****             **The Contractor willsend PERUPETRO, at the latter’s request, the information included in its annualIncome Tax Statement, filed with the National Superintendence of TaxAdministration or its successor. 

 

**C.-****                   ****SUNDRIES**

 

**19.1**              If in one or morecases any of the Parties fails to invoke or insist on compliance

 

----

 

with any of the provisions under the Agreementor to exercise any of the rights awarded under the Agreement, such omission orfailure to insist will not be construed as a waiver of such provision orrights. 

 

**19.2**              In executing theOperations, the Contractor will comply with all the decisions made by competentauthorities in the exercise of their legal mandate.  Likewise, the Contractor commits to honor allthe decisions of competent authorities relating to national defense andsecurity. 

 

**19.3****             **The Contractor hasthe right to freely enter and leave the Agreement Area. 

 

**19.4****             **Pursuant tolegislation in force, the Contractor will have the right to utilize in theOperations, the water, wood, gravel and other construction materials foundwithin the Agreement Area with due respect for third parties rights asappropriate.  

 

**19.5**              The license to usetechnical information concerning the Agreement Area, and other areas, which theContractor may wish to purchase from PERUPETRO, will be granted pursuant toPERUPETRO’S policy for Managing Exploration and Development TechnicalInformation for which purpose the Parties will sign a Letter of Agreement.

 

**19.6**              If one of the Partiesfails to pay, within the agreed deadline, the amount due, it will pay followinginterest trade starting on the day after the date foreseen for that payment: 

 

**a)**                  For debts payabledenominated in domestic currency, the applicable rate will be the active ratein domestic currency (TAMN) for loans with tenure up to three hundred sixty(360) days as published by the Superintendence for Banking and InsuranceCompanies or its successor, and applied over the period elapsed between the duedate and the actual payment date; and, 

 

**b)**                  For debts denominatedin dollars, and payable in domestic currency or in dollars, the applicable ratewill be the U.S. Prime Rate plus three percent (3%) points published by theFederal Reserve of the United States of America, applied to the period runningfrom the due date to the actual date of payment, and in the absence of thelatter rate, the Parties will agree on an appropriate replacement.  

 

**19.7**              The provisions underheading 19.6 will apply to all debts between Parties flowing from thisAgreement or any other agreement or transaction between the Parties. By writtenagreement between the parties, a different provision may be introducedconcerning the payment of interest. The provisions herein applicable will notin any way modify the legal rights and resources available to the Parties toenforce the payment of amounts due.   

 

**19.8**              In case of nationalemergency declared by law, by virtue of which the State is obliged to purchasehydrocarbons from local producers, such purchase will be made at the pricesresulting from enforcing the valuation mechanisms established by clause eightand shall be  payable in dollars withinthirty (30) after the delivery has been effected. 

 

----

 

**19.9**              Through the Ministryof Defense and Ministry of Internal Affaire the State will give the Contractorwithin the Operations and to the extent possible all necessary securitymeasures. 

 

**19.****10****      **The Contractor will hold PERUPETRO and theState free, and indemnify them, as appropriate, from any claim, legal action orother charges, and encumbrances from third parties that may result from theOperations and the relations the Contractor may enter in connection with theAgreement and which may flow from any contractual or extra-contractualrelationship, excepting those originating by actions of PERUPETRO itself or theState. 

 

**19.****11****      **The Contractor will freely dispose of thehydrocarbons to which it is entitled pursuant to the Agreement. 

 

**CLAUSETWENTY – NOTIFICATIONS AND COMMUNICATIONS**

 

**20.1**              Every notification orcommunication relating to the Agreement will be considered as validly served ifmade in writing and delivered against a slip or received by certified mail orfacsimile or other means agreed upon by the parties or addressed to theaddressee during a business day at the following addresses of record:  

 

**PERUPETRO:**

PERUPETRO S.A.

General Manager

Av. Luis Aldana No 320

Lima 41 - Perú

Fax: 6171801

** **

**Contractor:**

BPZ EXPLORACION &PRODUCCION S.R.L.

General Manager

Manuel de Falla N° 297

Lima 41 - Perú

Telf. (511) 476-2244 /476-3276 / 476-9919

Fax:  (511) 225-3289 / 476-7686

** **

**Corporate Garantor:**

BPZ ENERGY INC.

President

580 Westlake Park Blvd., Suite 525

Houston, Texas 77079

Tel:  (281) 556-6200

Fax:  (281)556-6377

 

**20.2**              Either of the Partieshas the right to modify the address or the number of facsimile for purposes ofsending notifications and communications by means of a notice sent to the otherParty at least five (5) Business Days before the change takes place.  Provisions included in the first paragraphunder this heading apply also to the 

 

----

 

corporate guarantor. 

 

**CLAUSE TWENTY ONE.- PERUVIAN LAWAPPLIES. CONFLICT RESOLUTION**

 

**21.1****             ****PeruvianLaw applies. **This Agreement hasbeen negotiated, drafted and signed pursuant to legal regulations in force inPeru and its contents, execution and derived consequences will be governed bythe internal laws and regulations in force in the Republic of Peru. 

 

**21.2****             ****TechnicalConciliation Committee. **The Technical ConciliationCommittee will convene within fifteen (15) Business Days after it has beenconvoked by any of the Parties and will sit three (3) qualified memberswith expertise in the topic to be addressed. Each of the Parties will chooseone (1) member and the third member will be appointed by those membersalready designated by the Parties. If either of the Parties fails to designateits representative within the foreseen period or if the designated members failto agree on the third member within the foreseen period or if the TechnicalConciliation Committee fails to issue an opinion within the foreseen period,either of the Parties may submit the discrepancy for resolution pursuant toprovisions under heading 21.3 under this Agreement. Within sixty (60) daysstarting on the Date of Signing, The Parties will agree on the procedure to befollowed by this Committee. The Technical Conciliation Committee’s resolutionsmust be issued within thirty (30) days after its inauguration and will bemandatory until a final arbitration decision, if such procedure is invoked, isissued. Notwithstanding compliance with the decision issued by the TechnicalConciliation Committee any of the Parties may have recourse to arbitrationpursuant to heading 21.3 within sixty (60) days after the date when theabove-mentioned decision was notified and received. 

 

**21.3****             ****Arbitrationagreement.**Any litigation, controversy, difference or complaint resulting from orrelated to the Agreement, including its interpretation, compliance, termination,effectiveness or validity, between the Contractor and PERUPETRO, and whichcannot be resolved by mutual agreement between the Parties, will be resolvedthrough international de jure arbitration pursuant to article 68o of Law N°26221. The Parties commit to do their best effort to carry the arbitrationproceeding to a successful end and execution. The arbitration will be managedby the International Center for the Settlement of Investment Related Disputes(hereafter ICSID) for all issues not foreseen by this clause.  Arbitration will be organized and evolvepursuant to ICSID arbitration rules in force at the Date of Signing. Therewill be three (3) arbitrators, the Parties designating one each, and thethird one being appointed by the Party-designated arbitrators. In finding asolution to the litigation, controversy, difference or complaint submitted toarbitration, the arbitrators will enforce the domestic law of the Republic ofPeru. Arbitration may take place at the Permanent Arbitration Tribunal or at anyother appropriate institution, whether public or private, with which the Centerhas reached an agreement for that purpose, or at any other venue approved bythe Commission or

 

----

 

Tribunal after consultation with the SecretaryGeneral. During the arbitration, the Parties will continue to perform theirContract-derived obligations to the extent possible, including those subjectmatter to arbitration. Notwithstanding the above, if the issue underarbitration concerns compliance with Contract obligations guaranteed by thewarrant bond described in heading 3.10, the respective terms will be suspendedmomentarily and such warrant bonds may not be executed but shall be keptcurrent during the arbitration proceeding. To that end, the Contractor shallextend or replace such warrant bond as required. The decision will be mandatoryto the Parties and may not be appealed or in any other way challenged,excepting under the provisions of the Convention for the Settlement forDisputes Relating to Investments between States and Nationals from OtherStates, hereafter the Convention.  Thearbitration decision issued under the Convention will be executed within thePeruvian territory, pursuant to the regulations in force concerning the executionof court decisions. The Parties waive their rights to filing diplomaticcomplaints. 

 

**21.4**              This Agreement isdrafted and interpreted in the Spanish language for which reason the Partiesagree this version in the only and official version of same. 

 

**CLAUSETWENTY SECOND.- TERMINATION**

 

**22.1****             **Agreement termination will be governed by its ownprovision, complemented by regulations under Law N° 26221; and for whatever maynot be foreseen in that law, by Civil Code provisions. Excepting those casesforeseen in heading 22.3, when one of the Parties fails to honor any of itsobligations pursuant to the Agreement for causes other than an Act of God orForce Majure or other non-imputable causes, the other Party may notify theformer party about that breach and its intent to terminate the Agreement withinsixty days, unless the other non-complying party cures the above-mentionedbreach or demonstrates to the other Party proper cure is underway, within thatperiod. If the notified party challenges or rejects such breach, the party mayrefer the issue to arbitration pursuant to clause twenty one herein withinthirty (30) days after notification was served. If so, the sixty (60) dayperiod will be suspended until the arbitration decision is notified to theParty, and the agreement will be terminated, if after confirming the breach,the defending Party fails to provide cure or to demonstrate before the otherparty such cure is underway, within such period. The Agreement may beterminated before the expiration of the Agreement’s life by express agreementbetween the Parties. 

 

**22.2****             **At the termination ofthe Agreement, all the parties’ rights and obligations shall sees as specifiedin the Agreements while due consideration will be given to the following: 

 

**a)**                  The rights andobligations of the parties flowing from this Agreement before such terminationwill be honored, including, inter alia, the Contractor’s rights to the extracted hydrocarbons and the guaranteesset forth in the Agreement;   and,

 

**b)**                  In case of breach byany of the Parties before the termination of any of the

 

----

 

obligations set forth in the Agreement, saidbreach will be cured by the offending Party, excepting obligations which fortheir own nature are extinguished when the Agreement itself is terminated.  

 

**22.3**              The Agreement will beresolved de jure and without further procedure in the following cases: 

 

**22.3.1**                       If the Contractorfails to execute the minimum work program of any period during the explorationstage after having enjoyed the postponements provided for in heading 3.4, ifapplicable, and without an explanation provided to PERUPETRO’s satisfaction,excepting provisions under headings 4.7 and 4.13.

 

**22.3.2**                       If at the end of theexploration stage or the withholding period, whatever happens last, noannouncement of commercial discovery is made. 

 

**22.3.3**                       In the casesspecified under headings 3.10, 4.2 and 17.5. 

 

**22.3.4**                       If the Contractor isdeclared insolvent, dissolved, liquidated or bankrupt, and the Contractor failsto serve notice as described in heading 16.1 within fifteen (15) days, identifyingthe third party that will take its position in the Agreement.  

 

**22.3.5**                       If the corporateguarantee mentioned in heading 3.11 is not in force and the Contractor does notcomply in replacing it within fifteen (15) Business Days being served PERUPETRO’Snotification requiring such replacement, or if the entity that issued theguarantee described in heading 3.11 was declared insolvent, dissolved,liquidated or bankrupt and the Contractor fails to consequentially reportPERUPETRO within fifteen (15) business Days after the request made by PERUPETROand identify the third party that will provide the corporate guarantee,provided PERUPETRO evaluates and approves such candidate.

 

**22.3.6**                       By mandate of anarbitration decision declaring, in the cases provided for under heading 22.1,that failure to comply was not cured pursuant to provisions under that headingor by arbitration decision declaring the termination of the Contract. 

 

**22.4**              Pursuant toprovisions under article 87 of Law N° 26221, in case of breach by theContractor of the provisions concerning environmental issues, OSINERGMIN willimpose the corresponding sanctions and the Ministry of Energy and Mines mayterminate the Agreement, after reporting to OSINERGMIN. 

 

**22.5**              If the Contractor, orthe entity that provides the guarantee described in heading 3.11, requestsprotection against its creditors, PERUPETRO may terminate the Agreement if itconsiders its rights under the Agreement are not properly protected.

 

**22.6**              At the termination ofthe Agreement, the Contractor will turn over to the State through PERUPETRO, asownership, unless the latter does not require them, with no charge or cost toit, in good state of repair, maintenance and operation, taking account ofnormal wear resulting from normal wear and tear, the properties, powerfacilities, campsites, means of communication, pipelines and other productiongoods and facilities owned by the Contractor that will allow continuing withthe development operations. In case of joint development of oil, non-associatednatural gas and/or non-associated natural gas condensates at the end of theterm established in heading  3.1 for theoil development stage, the Contractor will deliver as property to the State,through PERUPETRO, unless the latter does not require them, without any chargeor cost to the latter, in good state of conservation and operation and takinginto account the normal wear and tear produced by the use of all the goods

 

----

 

and facilities needed for developing oil thatare not needed for developing non-associated natural gas and/or  non-associated natural gas andcondensates.  The goods and facilitieskept by the Contractor for developing non-associated natural gas and/ornon-associated natural gas or condensates that were also used for developingoil, although still owned by the Contractor, will be used for that development,for which purpose the Parties will sign an agreement. If the Contractor hasbeen using the goods and facilities described in the first paragraph under thisheading and they are not related exclusively to the operations or itsaccessories, in other words, they have also been used for operations in otherareas under contracts in force for the exploration and development ofhydrocarbons in Peru, the Contractor will continue to own and utilize suchgoods. 

 

**22.7**              For purposes of theprovisions under heading 22.6, during the last year of life of the Agreement,the Contractor will provide PERUPETRO all the facilities and will assist it inwhatever may be necessary without interfering with the Operations, so PERUPETROcan carry out all the acts and enter into all agreements that would allow anordered and uninterrupted transition of the Operations underway at the date oftermination of the Agreement.  

 

----

 

**ANNEX “A”**

 

**DESCRIPTIONOF BLOCK XXII**

 

**LOCATION**

 

Block XXII is located in provinces of Sullana,Paita, Talara and Piura in Piura Department, and it is demarcated as shown inAnnex “B” pursuant to the following description.

 

**REFERENCE POINT**

 

Reference Point (R.P.) is the Belco F-a stationlocated at the Punta Arenas site in Talara District, Province of Talara,Department of Piura.

 

**DEPARTUREPOINT**

 

From the Reference Point (R.P.) a distance of23,438.782 m is measured to the East, then 11,775.863 m south until reachingPoint (59) which is the Departure Point (D.P.) of the Block’s perimeter.

 

**BLOCK CONFIGURATION**

 

From Point (59) or (P.P.) 8,000.000 m East aremeasured in a straight line with Azimuth 90°00’00” until reaching Point (60).

 

From Point (60) 2,000.000 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (56).

 

From Point (56) 5,000.000 m are measured Eastin a straight line with Azimuth 90°00’00” until reaching Point (58).

 

From Point (58) 3,000.000 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (53).

 

From Point (53) 12,957.320 m are measured Eastin a straight line with Azimuth 90°00’00” until reaching Point (55).

 

From Point (55) 6,859.550 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (44).

 

From Point (44) 10,839.142 m are measuredNorthwest in a straight line with Azimuth 304°30’25”20 until reaching Point(42).

 

From Point (42) 7,067.930 m are measured Westin a straight line with Azimuth 270°00’00” until reaching Point (41).

 

From Point (41) 3,000.000 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (33).

 

From Point (33) 8,347.000 m are measured Westin a straight line with Azimuth 270°00’00” until reaching Point (31).

 

From Point (31) 3,822.000 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (27).

 

From Point (27) 8,047.000 m are measured Eastin a straight line with Azimuth 90°00’00” until reaching Point (28).

 

From Point (28) 4,428.000 m are measured Northin a straight line with Azimuth 00°00’00” 

 

----

 

until reaching Point (18).

 

From Point (18) 4,000.000 m are measured Eastin a straight line with Azimuth 90°00’00” until reaching Point (19).

 

From Point (19) 2,500.000 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (15).

 

From Point (15) 6,067.930 m are measured Eastin a straight line with Azimuth 90°00’00” until reaching Point (16).

 

From Point (16) 24,148.949 m are measuredSoutheast in a straight line with Azimuth 99°45’07”26 until reaching Point(26).

 

From Point (26) 10,700.000 m are measured Northin a straight line with Azimuth 00°00’00” until reaching Point (13).

 

From Point (13) 19,101.047 m are measuredNortheast in a straight line with Azimuth 53°43’48”13 until reaching Point (3).

 

From Point (3) 4,300.000 m are measuredEast in a straight line with Azimuth 90°00’00” until reaching Point (5).

 

From Point (5) 8,415.431 m are measuredNortheast in a straight line with Azimuth 54°58’43”19 until reaching Point (1) orInternational Intermediate South Milestone.

 

From Point (1) we continue along the PeruEcuador borderline around 63,774.478 m, through the Chorrera, Pulgueras, CeiboQuemado, El Salto, Catana, Papaando Pilares, Pilares Alamor Milestone, untilreaching Point (30) or International Chira Alamor Milestone.

 

From Point (30) 18,633.080 m are measuredSoutheast in a straight line with Azimuth 228°22’59”40 until reaching Point(45).

 

From Point (45) 4,657.252 m are measuredSouthwest in a straight line with Azimuth 194°55’53”10 until reaching Point(52).

 

From Point (52) 34,696.721 m are measuredSoutheast in a straight line with Azimuth 213°53’46”20  until reaching Point (95).

 

From Point (95) 19,000.000 m are measured Southin a straight line with Azimuth 180°00’00” until reaching Point (103).

 

From Point (103) 28,817.240 m are measured Westin a straight line with Azimuth 270°00’00” until reaching Point (100).

 

From Point (100) 21,762.490 m are measuredNorth in a straight line with Azimuth 360°00’00” until reaching Point (87).

 

From Point (87) 1,734.631 m are measuredSouthwest in a straight line with Azimuth 266°15’41”70 until reaching Point(86).

 

From Point (86) 1,195.908 m are measuredSouthwest in a straight line with Azimuth 255°30’16”30 until reaching Point(85).

 

From Point (85) 1,156.933 m are measuredSouthwest in a straight line with Azimuth 249°48’54”50 until reaching Point(84).

 

From Point (84) 2,208.385 m are measuredSouthwest in a straight line with Azimuth 242°55’56”30 until reaching Point(83).

 

----

 

From Point (83) 1,379.331 m are measuredNorthwest in a straight line with Azimuth 356°27’11”60 until reaching Point(82).

 

From Point (82) 1,499.920 m are measuredNortheast in a straight line with Azimuth 28°20’32”39 until reaching Point (81).

 

From Point (81) 768.224 m are measuredNortheast in a straight line with Azimuth 15°02’02”01 until reaching Point(80).

 

From Point (80) 3,141.192 m are measuredNorthwest in a straight line with Azimuth 340°13’51”00 until reaching Point(79).

 

From Point (79) 5,896.561 m are measuredSouthwest in a straight line with Azimuth 241°00’45”57 until reaching Point(78).

 

From Point (78) 1,851.007 m are measuredNorthwest in a straight line with Azimuth 340°39’14”00 until reaching Point(77).

 

From Point (77) 4,828.030 m are measured Northin a straight line with Azimuth 360°00’00” until reaching Point (72).

 

From Point (72) 1,609.340 m are measured Westin a straight line with Azimuth 270°00’00” until reaching Point (71).

 

From Point (71) 10,582.760 m are measured Northin a straight line with Azimuth 360°00’00” until reaching Point (59) or Pointof Departure (P.D.) thus closing the Block’s perimeter.

 

**Borders**

 

To the North Block XXV and free areas, to theEast with the Republic of Ecuador and free areas, to the South Blocks XIII andXXIV, to the west with Blocks XIII, III, IV and free areas.

 

**PLOTDEFINITION**

 

Plot1 surrounded by corner points 1, 2, 7, 6 and 5

 

Plot2 surrounded by corner points 2, 8 and 7

 

Plot3 surrounded by corner points 3, 4, 11, 10 and 9

 

Plot4 surrounded by corner points 4, 5, 6, 12 and 11

 

Plot5 surrounded by corner points 6, 7, 8, 14 and 12

 

Plot6 surrounded by corner points 9, 10, 22, 21 and 13

 

Plot7 surrounded by corner points 10, 11, 23 and 22

 

Plot8 surrounded by corner points 11, 12, 14, 24 and 23

 

Plot9 surrounded by corner points 15, 16, 17, 29, 28, 18 and 19

 

Plot10 surrounded by corner points 27, 28, 32 and 31

 

Plot 11 surrounded by corner points 28, 29, 34,43, 42, 41, 33 and 32

 

Plot12 surrounded by corner points 17, 20, 35, 34 and 29

 

Plot13 surrounded by corner points 20, 25, 36 and 35

 

Plot14 surrounded by corner points 21, 22, 37, 36, 25 and 26

 

Plot15 surrounded by corner points 22, 23, 38 and 37

 

Plot16 surrounded by corner points 23, 24, 39 and 38

 

----

 

Plot17 surrounded by corner points 24, 30, 40 and 39

 

Plot18 surrounded by corner points 34, 35, 47, 46, 44 and 43

 

Plot19 surrounded by corner points 35, 36, 48 and 47

 

Plot20 surrounded by corner points 36, 37, 49 and 48

 

Plot21 surrounded by corner points 37, 38, 50 and 49

 

Plot22 surrounded by corner points 38, 39, 40, 45, 51 and 50

 

Plot23 surrounded by corner points 53, 54, 62, 61, 57 and 58

 

Plot24 surrounded by corner points 46, 47, 63, 62, 54 and 55

 

Plot25 surrounded by corner points 47, 48, 64 and 63

 

Plot26 surrounded by corner points 48, 49, 65 and 64

 

Plot27 surrounded by corner points 49, 50, 51, 52, 66 and 65

 

Plot28 surrounded by corner points 56, 57, 61, 68, 67, 59 and 60

 

Plot29 surrounded by corner points 61, 62, 74, 73 and 68

 

Plot30 surrounded by corner points 62, 63, 75 and 74

 

Plot31 surrounded by corner points 63, 64, 69, 76 and 75

 

Plot32 surrounded by corner points 64, 65, 66, 70 and 69

 

Plot 33 surrounded by corner points 67, 68, 73,86, 85, 84, 83, 82, 81, 80, 79, 78, 77, 72 and 71

 

Plot34 surrounded by corner points 73, 74, 89, 88, 87 and 86

 

Plot35 surrounded by corner points 74, 75, 91, 90 and 89

 

Plot36 surrounded by corner points 75, 76, 93, 92 and 91

 

Plot37 surrounded by corner points 69, 70, 94, 93 and 76

 

Plot38 surrounded by corner points 88, 89, 90, 97 and 96

 

Plot39 surrounded by corner points 90, 91, 92, 98 and 97

 

Plot40 surrounded by corner points 92, 93, 94, 95, 99 and 98

 

Plot41 surrounded by corner points 96, 97, 101 and 100

 

Plot42 surrounded by corner points 97, 98, 102 and 101

 

Plot43 surrounded by corner points 98, 99, 103 and 102

 

----

** **

**LIST OF BLOCK CORNERCOORDINATES**

 
| ** **                       | ** ** | **GEOGRAPHIC COORDINATES** | ** ** | **U.T.M. FLAT COORDINATE** |
|----------------------------------|------------|---------------------------------|------------|--------------------------------------|
| **Point**                        | ** ** | **South Latitude**         | ** ** | **West Latitude**               | ** ** | **Meters North** | ** ** | **Meters East** |
| Belco F-a Station (PR)           |       | 04°35’31”419     |       | 81°17’23”863          |   | 9’492,416.313 |   | 467,835.968 |
| 59 (DP)                          |       | 04°41’55”140     |       | 81°04’43”210          |   | 9’480,640.450 |   | 491,274.750 |
| 60                               |       | 04°41’55”160     |       | 81°00’23”540          |   | 9’480,640.450 |   | 499,274.750 |
| 56                               |       | 04°40’50”020     |       | 81°00’23”540          |   | 9’482,640.450 |   | 499,274.750 |
| 58                               |       | 04°40’50”020     |       | 80°57’41”240          |   | 9’482,640.450 |   | 504,274.750 |
| 53                               |       | 04°39’12”310     |       | 80°57’41”250          |   | 9’485,640.450 |   | 504,274.750 |
| 55                               |       | 04°39’12”250     |       | 80°50’40”690          |   | 9’485,640.450 |   | 517,232.070 |
| 44                               |       | 04°35’28”845     |       | 80°50’40”743          |   | 9’492,500.000 |   | 517,232.070 |
| 42                               |       | 04°32’08”911     |       | 80°55’30”649          |   | 9’498,640.450 |   | 508,300.000 |
| 41                               |       | 04°32’08”930     |       | 80°59’20”010          |   | 9’498,640.450 |   | 501,232.070 |
| 33                               |       | 04°30’31”230     |       | 80°59’20”020          |   | 9’501,640.450 |   | 501,232.070 |
| 31                               |       | 04°30’31”211     |       | 80°03’50”885          |   | 9’501,640.450 |   | 492,885.070 |
| 27                               |       | 04°28’26”750     |       | 80°03’50”870          |   | 9’505,462.450 |   | 492,885.070 |
| 28                               |       | 04°28’26”750     |       | 80°59’29”750          |   | 9’505,462.450 |   | 500,932.070 |
| 18                               |       | 04°26’02”540     |       | 80°59’29”750          |   | 9’509,890.450 |   | 500,932.070 |
| 19                               |       | 04°26’02”540     |       | 80°57’19”960          |   | 9’509,890.450 |   | 504,932.070 |
| 15                               |       | 04°24’41”110     |       | 80°57’19”972          |   | 9’512,390.450 |   | 504,932.070 |
| 16                               |       | 04°24’41”091     |       | 80°54’03”089          |   | 9’512,390.450 |   | 511,000.000 |
| 26                               |       | 04°26’54”092     |       | 80°41’10”811          |   | 9’508,300.000 |   | 534,800.000 |
| 13                               |       | 04°21’05”619     |       | 80°41’10”957          |   | 9’519,000.000 |   | 534,800.000 |
| 3                                |       | 04°14’57”370     |       | 80°32’51”550          |   | 9’530,300.000 |   | 550,200.000 |
| 5                                |       | 04°14’57”280     |       | 80°30’32”060          |   | 9’530,300.000 |   | 554,500.000 |
| 1 (Milestone Intermediate South) |       | 04°12’19”840     |       | 80°26’48”620          |   | 9’535,129.460 |   | 561,391.720 |
| 30 (Chira Alamor Milestone)      |       | 04°28’51”470     |       | 80°23’09”250          |   | 9’504,675.080 |   | 568,130.150 |
| 45                               |       | 04°35’34”817     |       | 80°30’40”985          |   | 9’492,300.000 |   | 554,200.000 |
| 52                               |       | 04°38’01”394     |       | 80°31’19”831          |   | 9’487,800.000 |   | 553,000.000 |
| 95                               |       | 04°53’39”690     |       | 80°41’47”430          |   | 9’459,000.000 |   | 533,650.000 |
| 103                              |       | 05°03’58”460     |       | 80°41’47”150          |   | 9’440,000.000 |   | 533,650.000 |
| 100                              |       | 05°03’58”702     |       | 80°57’23”046          |   | 9’440,000.000 |   | 504,832.760 |
| 87                               |       | 04°52’09”960     |       | 80°57’23”090          |   | 9’461,762.490 |   | 504,832.760 |
| 86                               |       | 04°52’09”960     |       | 80°58’19”290          |   | 9’461,649.390 |   | 503,101.820 |
| 85                               |       | 04°52’23”400     |       | 80°58’56”880          |   | 9’461,350.050 |   | 501,943.980 |
| 84                               |       | 04°52’36”400     |       | 80°59’32”140          |   | 9’460,950.850 |   | 500,858.100 |
| 83                               |       | 04°53’09”130     |       | 81°00’35”980          |   | 9’459,945.940 |   | 498,891.600 |
| 82                               |       | 04°52’24”290     |       | 81°00’38”750          |   | 9’461,322.630 |   | 498,806.270 |
| 81                               |       | 04°51’41”300     |       | 81°00’15”630          |   | 9’462,642.750 |   | 499,518.340 |
| 80                               |       | 04°51’17”140     |       | 81°00’09”160          |   | 9’463,384.680 |   | 499,717.610 |
| 79                               |       | 04°49’40”860     |       | 81°00’43”660          |   | 9’466,340.740 |   | 498,655.160 |
| 78                               |       | 04°51’13”920     |       | 81°03’31”120          |   | 9’463,483.170 |   | 493,497.280 |
| 77                               |       | 04°50’17”030     |       | 81°03’51”020          |   | 9’465,229.660 |   | 492,884.090 |
| 72                               |       | 04°47’39”800     |       | 81°03’51”010          |   | 9’470,057.690 |   | 492,884.090 |
| 71                               |       | 04°47’39”800     |       | 81°04’43”250          |   | 9’470,057.690 |   | 491,274.750 |

 

----

** **

**LIST OF PLOT CORNER COORDINATES**

 
| **POINT** | ** ** | **U.T.M. FLAT COORDINATES** |
|-----------|------------|---------------------------------------|
| 1         |       | 9’535,129.460 m N                |   | 561,391.720 m E |
| 2         |       | 9’534,096.570 m N                |   | 565,605.160 m E |
| 3         |       | 9’530,300.000 m N                |   | 550,200.000 m E |
| 4         |       | 9’530,300.000 m N                |   | 551,274.750 m E |
| 5         |       | 9’530,300.000 m N                |   | 554,500.000 m E |
| 6         |       | 9’530,300.000 m N                |   | 561,672.902 m E |
| 7         |       | 9’530,300.000 m N                |   | 565,605.160 m E |
| 8         |       | 9’530,300.000 m N                |   | 571,872.292 m E |
| 9         |       | 9’523,750.952 m N                |   | 541,274.750 m E |
| 10        |       | 9’520,000.000 m N                |   | 541,274.750 m E |
| 11        |       | 9’520,000.000 m N                |   | 551,274.750 m E |
| 12        |       | 9’520,000.000 m N                |   | 561,672.902 m E |
| 13        |       | 9’519,000.000 m N                |   | 534,800.000 m E |
| 14        |       | 9’517,610.910 m N                |   | 561,672.902 m E |
| 15        |       | 9’512,390.450 m N                |   | 504,932.070 m E |
| 16        |       | 9’512,390.450 m N                |   | 511,000.000 m E |
| 17        |       | 9’512,126.458 m N                |   | 512,536.016 m E |
| 18        |       | 9’509,890.450 m N                |   | 500,932.070 m E |
| 19        |       | 9’509,890.450 m N                |   | 504,932.070 m E |
| 20        |       | 9’510,624.552 m N                |   | 521,274.750 m E |
| 21        |       | 9’510,000.000 m N                |   | 534,800.000 m E |
| 22        |       | 9’510,000.000 m N                |   | 541,274.750 m E |
| 23        |       | 9’510,000.000 m N                |   | 551,274.750 m E |
| 24        |       | 9’510,000.000 m N                |   | 561,460.467 m E |
| 25        |       | 9’508,905.876 m N                |   | 531,274.750 m E |
| 26        |       | 9’508,300.000 m N                |   | 534,800.000 m E |
| 27        |       | 9’505,462.450 m N                |   | 492,885.070 m E |
| 28        |       | 9’505,462.450 m N                |   | 500,932.070 m E |
| 29        |       | 9’505,462.450 m N                |   | 512,536.016 m E |
| 30        |       | 9’504,675.080 m N                |   | 568,130.150 m E |
| 31        |       | 9’501,640.450 m N                |   | 492,885.070 m E |
| 32        |       | 9’501,640.450 m N                |   | 500,932.070 m E |
| 33        |       | 9’501,640.450 m N                |   | 501,232.070 m E |
| 34        |       | 9’500,000.000 m N                |   | 512,536.016 m E |
| 35        |       | 9’500,000.000 m N                |   | 521,274.750 m E |
| 36        |       | 9’500,000.000 m N                |   | 531,274.750 m E |
| 37        |       | 9’500,000.000 m N                |   | 541,274.750 m E |
| 38        |       | 9’500,000.000 m N                |   | 551,274.750 m E |
| 39        |       | 9’500,000.000 m N                |   | 561,460.467 m E |
| 40        |       | 9’500,000.000 m N                |   | 562,867.592 m E |
| 41        |       | 9’498,640.450 m N                |   | 501,232.070 m E |
| 42        |       | 9’498,640.450 m N                |   | 508,300.000 m E |
| 43        |       | 9’495,728.354 m N                |   | 512,536.016 m E |
| 44        |       | 9’492,500.000 m N                |   | 517,232.070 m E |
| 45        |       | 9’492,300.000 m N                |   | 554,200.000 m E |
| 46        |       | 9’490,000.000 m N                |   | 517,232.070 m E |
| 47        |       | 9’490,000.000 m N                |   | 521,274.750 m E |
| 48        |       | 9’490,000.000 m N                |   | 531,274.750 m E |
| 49        |       | 9’490,000.000 m N                |   | 541,274.750 m E |
| 50        |       | 9’490,000.000 m N                |   | 551,274.750 m E |
| 51        |       | 9’490,000.000 m N                |   | 553,586.666 m E |
| 52        |       | 9’487,800.000 m N                |   | 553,000.000 m E |
| 53        |       | 9’485,640.450 m N                |   | 504,274.750 m E |

 

----

 
| 54  |   | 9’485,640.450 m N |   | 511,274.750 m E |
|-----|--------|------------------------|--------|-----------------|
| 55  |   | 9’485,640.450 m N |   | 517,232.070 m E |
| 56  |   | 9’482,640.450 m N |   | 499,274.750 m E |
| 57  |   | 9’482,640.450 m N |   | 503,101.820 m E |
| 58  |   | 9’482,640.450 m N |   | 504,274.750 m E |
| 59  |   | 9’480,640.450 m N |   | 491,274.750 m E |
| 60  |   | 9’480,640.450 m N |   | 499,274.750 m E |
| 61  |   | 9’480,000.000 m N |   | 503,101.820 m E |
| 62  |   | 9’480,000.000 m N |   | 511,274.750 m E |
| 63  |   | 9’480,000.000 m N |   | 521,274.750 m E |
| 64  |   | 9’480,000.000 m N |   | 531,274.750 m E |
| 65  |   | 9’480,000.000 m N |   | 541,274.750 m E |
| 66  |   | 9’480,000.000 m N |   | 547,759.375 m E |
| 67  |   | 9’472,596.678 m N |   | 491,274.750 m E |
| 68  |   | 9’472,596.678 m N |   | 503,101.820 m E |
| 69  |   | 9’472,071.665 m N |   | 531,274.750 m E |
| 70  |   | 9’472,596.678 m N |   | 542,432.525 m E |
| 71  |   | 9’470,057.690 m N |   | 491,274.750 m E |
| 72  |   | 9’470,057.690 m N |   | 492,884.090 m E |
| 73  |   | 9’470,000.000 m N |   | 503,101.820 m E |
| 74  |   | 9’470,000.000 m N |   | 511,274.750 m E |
| 75  |   | 9’470,000.000 m N |   | 521,274.750 m E |
| 76  |   | 9’470,000.000 m N |   | 531,274.750 m E |
| 77  |   | 9’465,229.660 m N |   | 492,884.090 m E |
| 78  |   | 9’463,483.170 m N |   | 493,497.280 m E |
| 79  |   | 9’466,340.740 m N |   | 498,655.160 m E |
| 80  |   | 9’463,384.680 m N |   | 499,717.610 m E |
| 81  |   | 9’462,642.750 m N |   | 499,518.340 m E |
| 82  |   | 9’461,322.630 m N |   | 498,806.270 m E |
| 83  |   | 9’459,945.940 m N |   | 498,891.600 m E |
| 84  |   | 9’460,950.850 m N |   | 500,858.100 m E |
| 85  |   | 9’461,350.050 m N |   | 501,943.980 m E |
| 86  |   | 9’461,649.390 m N |   | 503,101.820 m E |
| 87  |   | 9’461,762.490 m N |   | 504,832.760 m E |
| 88  |   | 9’460,000.000 m N |   | 504,832.760 m E |
| 89  |   | 9’460,000.000 m N |   | 511,274.750 m E |
| 90  |   | 9’460,000.000 m N |   | 514,832.760 m E |
| 91  |   | 9’460,000.000 m N |   | 521,274.750 m E |
| 92  |   | 9’460,000.000 m N |   | 524,832.760 m E |
| 93  |   | 9’460,000.000 m N |   | 531,274.750 m E |
| 94  |   | 9’460,000.000 m N |   | 534,321.875 m E |
| 95  |   | 9’459,000.000 m N |   | 533,650.000 m E |
| 96  |   | 9’450,000.000 m N |   | 504,832.760 m E |
| 97  |   | 9’450,000.000 m N |   | 514,832.760 m E |
| 98  |   | 9’450,000.000 m N |   | 524,832.760 m E |
| 99  |   | 9’450,000.000 m N |   | 533,650.000 m E |
| 100 |   | 9’440,000.000 m N |   | 504,832.760 m E |
| 101 |   | 9’440,000.000 m N |   | 514,832.760 m E |
| 102 |   | 9’440,000.000 m N |   | 524,832.760 m E |
| 103 |   | 9’440,000.000 m N |   | 533,650.000 m E |

 

----

 

**SURFACE AREAS**(Areas by Plots)

** **
| **Plot** | ** ** | **Area**       |
|----------|------------|----------------|
| 1        |       | 3,849.901 ha   |
| 2        |       | 4,088.664 ha   |
| 3        |       | 7,377.406 ha   |
| 4        |       | 10,710.097 ha  |
| 5        |       | 6,353.606 ha   |
| 6        |       | 7,365.337 ha   |
| 7        |       | 10,000.000 ha  |
| 8        |       | 10,074.517 ha  |
| 9        |       | 7,018.939 ha   |
| 10       |       | 3,075.563 ha   |
| 11       |       | 8,442.996 ha   |
| 12       |       | 9,940.752 ha   |
| 13       |       | 9,765.215 ha   |
| 14       |       | 9,507.501 ha   |
| 15       |       | 10,000.000 ha  |
| 16       |       | 10,185.718 ha  |
| 17       |       | 3,477.534 ha   |
| 18       |       | 6,806.694 ha   |
| 19       |       | 10,000.000 ha  |
| 20       |       | 10,000.000 ha  |
| 21       |       | 10,000.000 ha  |
| 22       |       | 6,191.740 ha   |
| 23       |       | 4,258.021 ha   |
| 24       |       | 7,402.877 ha   |
| 25       |       | 10,000.000 ha  |
| 26       |       | 10,000.000 ha  |
| 27       |       | 9,745.939 ha   |
| 28       |       | 10,278.839 ha  |
| 29       |       | 8,172.930 ha   |
| 30       |       | 10,000.000 ha  |
| 31       |       | 10,000.000 ha  |
| 32       |       | 10,957.909 ha  |
| 33       |       | 9,875.565 ha   |
| 34       |       | 7,877.642 ha   |
| 35       |       | 10,000.000 ha  |
| 36       |       | 10,000.000 ha  |
| 37       |       | 8,573.841 ha   |
| 38       |       | 10,000.000 ha  |
| 39       |       | 10,000.000 ha  |
| 40       |       | 8,850.834 ha   |
| 41       |       | 10,000.000 ha  |
| 42       |       | 10,000.000 ha  |
| 43       |       | 8,817.240 ha   |
| Total    |       | 369,043.817 ha |

 
| 15  regular plots10,000.000 ha each        |   | 150,000.000 ha |
|--------------------------------------------|--------|----------------|
| 28  irregular Plots, various surface areas |   | 219,043.817 ha |
| TOTAL 43 PLOTS                             |   | 369,043.817 ha |

 

----

 

Thecoordinates, distances, areas and azimuths described in this annex are based inthe Spheroid International Universal Transversal Mercator (U.T.M.) ProjectionSystem, Zone 17 (Central Meridian 81o00’00”).

 

TheGeodesic Datum is provisional for South America, La Canoa, 1956, located inVenezuela (PSAD 56).

 

Incase of discrepancy between the U.T.M. and geographic coordinates or betweenDistances, Areas and Azimuths, the U.T.M. coordinates will prevail.

** **

----

 

**ANNEX “B”**

** **

**MAP OF THE AGREEMENT AREA BLOCK XXII**

 

THISIS THE MAP OF BLOCK XXII SHOWING THE AREA UNDER THIS LICENSE AGREEMENT FOR THEEXPLORATION AND DEVELOPMENT OF HYDROCARBONS ENTERED INTO BY AND BETWEENPERUPETRO S.A. AND**BPZ EXPLORACION &PRODUCCION S.R.L**WHICH, DULY SIGNED BY THE PARTIES, IS ATTACHED TOTHE PUBLIC DEED HEREWITH.

 

**ANNEX C-1**

 

**WARRANT BOND FOR THE FIRST PERIODOF THE MINIMUM WORK PROGRAM**

 

**WARRANTBOND No**

Lima,

Gentlemen,

PERUPETROS.A.

 

Gentlemen:

 

Hereby,we (name of financial system entity) constitute ourselves as joint and severalguarantors of BPZ EXPLORACION & PRODUCCION S.R.L.(hereafter theContractor) before PERUPETRO S.A. (hereafter PERUPETRO) for the amount of$600,000.00 to guarantee the performance of the Contractor’s obligations underthe minimum work program for the first period of the exploration stage, asdescribed in Clause Four  of the LicenseAgreement for the Exploration and Development of Hydrocarbons in Block XXII,signed with PERUPETRO (hereafter the Agreement).

 

Theobligation assumed by (name of financial system entity) under this warrant bondis limited to pay PERUPETRO the amount of six hundred thousand dollars (US$600,000.00) as per a request of payment.

 

1. This guarantee is joint and several, withoutbenefit of excussion, irrevocable, unconditional and to be executedautomatically and paid on demand within its tenure, at  presentation of a notarized letter addressedby PERUPETRO to  (financial systementity) requesting the payment of six hundred thousand and 00/100 dollars (US$600,000.00) and declaring the Contractor has failed to comply fully orpartially with the obligation mentioned above, and enclosing with that letter,as only support and justification, a certified copy of the notarized letteraddressed by PERUPETRO to the Contractor demanding its compliance with theabovementioned obligation and notifying it of PERUPETRO’s intention to executethe warrant bond; said notarized letter sent by PERUPETRO to the Contractorwill have been delivered to the latter at least twenty (20) calendar daysbefore the date when PERUPETRO files the corresponding payment claim to(financial system entity).

 

2. This warrant bond will expire at the latest on XXXunless before that date(financial system entity) receives a letter fromPERUPETRO releasing (financial system entity) and 

 

----

 

the Contractor from all their responsibilitiesattached to this warrant bond, in which case this warrant bond will becancelled on the day when said PERUPETRO letter is received.

 

3. All delays on our side to honor this warrant bondon your behalf will accrue interest equivalent to the foreign currency activerate (Tasa Activa en Moneda Extranjera – TAMEX, or its successor, paid byfinancial system institutions and published by the Superintendence of Bankingand Insurance applicable during the period of delay. The interest will becalculated starting on the date when the notarized letter sent by PERUPETRO to(financial system entity) was received. After the expiration or cancellationdate, no complaint will be admitted concerning this warrant bond and (financialsystem entity) and the Contractor will be released from all responsibility orobligation concerning this warrant bond.

 

 

Sincerely,

 

 

(Financial system entity)

 

**ANNEX C-2**

 

**WARRANT BOND FOR THE SECONDPERIOD OF THE MINIMUM WORK PROGRAM**

 

**WARRANTBOND No**

Lima,

Messrs.

PERUPETROS.A.

 

Gentlemen,

 

Hereby,we (entity of financial system) constitute ourselves as joint and severalguarantors of BPZ EXPLORACION & PRODUCCION S.R.L.(hereafter theContractor) before PERUPETRO S.A. (hereafter PERUPETRO) for the amount of$650,000.00 to guarantee the performance of the Contractor’s obligations underthe minimum work program for the third period of the exploration phase, asdescribed in Clause Four  of the LicenseAgreement for the Exploration and Development of Hydrocarbons in Block XXII,signed with PERUPETRO (hereafter the Agreement).

 

Theobligation assumed by (name of financial system entity) under this warrant bondis limited to pay PERUPETRO the amount of six hundred fifty thousand dollars(US$ 650,000.00) when required.

 

1.This guarantee is joint and several, without benefit of excussion, irrevocable,unconditional and to be executed automatically and paid on demand within itstenure, at presentation of a notarized letter addressed by PERUPETRO to(financial system entity) requesting the payment of six hundred fifty thousandand 00/100 dollars (US$ 650,000.00) 

 

----

 

declaringthe Contractor has failed to comply in full or partially with the obligationmentioned above, and inclosing with that letter, as only support andjustification, a certified copy of the notarized letter addressed by PERUPETROto the Contractor demanding its compliance with the abovementioned obligationand notifying it of its intention to execute the warrant bond; said notarizedletter sent by PERUPETRO to the Contractor will have been delivered to thelatter at least twenty (20) calendar days before the date when PERUPETRO filesthe corresponding payment claim to (financial system entity).

 

2. This warrant bond will expire at the latest on XXXunless before that date (financial system entity) receives a letter fromPERUPETRO releasing (financial system entity) and the Contractor from all theirresponsibilities attached to this warrant bond, in which case this warrant bondwill be cancelled on the day when said PERUPETRO letter is received.

 

3. All delays on our side to honor this warrant bondon your behalf will accrue interest equivalent to the foreign currency activerate (Tasa Activa en Moneda Extranjera – TAMEX), or its successor, paid byfinancial system institutions and published by the Superintendence of Bankingand Insurance applicable during the period of delay. The interest will becalculated starting on the date when the notarized letter sent by PERUPETRO to(financial system entity) was received. After the expiration or cancellationdate, no complaint will be admitted concerning this warrant bond and (financialsystem entity) and the Contractor will be released from all responsibility orobligation concerning this warrant bond.

 

 

Sincerely,

 

 

(Financial system entity)

 

**ANNEX C-3**

 

**WARRANT BOND FOR THE THIRD PERIODOF THE MINIMUM WORK PROGRAM**

 

**WARRANTBOND No**

Lima,

Messrs.

PERUPETROS.A.

 

Gentlemen,

 

Hereby,we (entity of financial system) constitute ourselves as joint and severalguarantors of BPZ EXPLORACION & PRODUCCION S.R.L.(hereafter theContractor) before PERUPETRO S.A. (hereafter PERUPETRO) for the amount of$650,000.00 to guarantee the performance of the Contractor’s obligations underthe minimum work program for the first period of the exploration phase, asdescribed in Clause Four  of the LicenseAgreement 

 

----

 

forthe Exploration and Development of Hydrocarbons in Block XXII, signed withPERUPETRO (hereafter the Agreement).

 

Theobligation assumed by (name of financial system entity) under this warrant bondis limited to pay PERUPETRO the amount of six hundred fifty thousand dollars(US$ 650,000.00) when required.

 

1.This guarantee is joint and several, without benefit of excussion, irrevocable,unconditional and to be executed automatically and paid in demand within itstenure, by submission of a notarized letter addressed by PERUPETRO to(financial system entity) requesting the payment of six hundred fifty thousandand 00/100 dollars (US$ 650,000.00) declaring the Contractor has failed tocomply in full or partially with the obligation mentioned above, and enclosingwith that letter, as only support and justification, a certified copy of thenotarized letter addressed by PERUPETRO to the Contractor demanding its compliancewith the abovementioned obligation and notifying it of its intention to executethe warrant bond; said notarized letter sent by PERUPETRO to the Contractorwill have been delivered to the latter at least twenty (20) calendar daysbefore the date when PERUPETRO files the corresponding payment claim to(financial system entity).

 

2. This warrant bond will expire at the latest on XXXunless before that date (financial system entity) receives a letter fromPERUPETRO releasing (financial system entity) and the Contractor from all theirresponsibilities attached to this warrant bond, in which case this warrant bondwill be cancelled on the day of reception when said PERUPETRO letter isreceived.

 

3. All delays on our side to honor this warrant bondon your behalf will accrue interest equivalent to the foreign currency activerate (Tasa Activa en Moneda Extranjera – TAMEX), or its successor, paid byfinancial system institutions and published by the Superintendence of Bankingand Insurance applicable during the period of delay or its successor. Theinterest will be calculated starting on the date when the notarized letter sentby PERUPETRO to (financial system entity) was received. After the expiration orcancellation date, no complaint will be admitted concerning this warrant bondand (financial system entity) and the contractor will be released from allresponsibility or obligation concerning this warrant bond.

 

 

Sincerely,

 

 

(Financial system entity)

 

----

 

**ANNEX C-4**

 

**WARRANT BOND FOR THE FOURTHPERIOD OF THE MINIMUM WORK PROGRAM**

 

**WARRANTBOND No**

Lima,

Messrs.

PERUPETROS.A.

 

Gentlemen,

 

Hereby,we (entity of financial system) constitute ourselves as joint and severalguarantors of BPZ EXPLORACION & PRODUCCION S.R.L.(hereafter theContractor) before PERUPETRO S.A. (hereafter PERUPETRO) for the amount of$650,000.00 to guarantee the performance of the Contractor’s obligations underthe minimum work program for the first period of the exploration phase, asdescribed in Clause Four  of the LicenseAgreement for the Exploration and Development of Hydrocarbons in Block XXII,signed with PERUPETRO (hereafter the Agreement).

 

Theobligation assumed by (Name of Financial system entity) under this warrant bondis limited to pay PERUPETRO the amount of six hundred fifty thousand dollars(US$ 650,000.00) when required.

 

1.This guarantee is joint and several, without benefit of excussion, irrevocable,unconditional and to be executed automatically and paid in demand within itstenure, by submission of a notarized letter addressed by PERUPETRO to(financial system entity) requesting the payment of six hundred fifty thousandand 00/100 dollars (US$ 650,000.00) declaring the Contractor has failed tocomply in full or partially with the obligation mentioned above, and enclosingwith that letter, as only support and justification, a certified copy of thenotarized letter addressed by PERUPETRO to the Contractor demanding itscompliance with the abovementioned obligation and notifying it of its intentionto execute the warrant bond; said notarized letter sent by PERUPETRO to theContractor will have been delivered to the latter at least twenty (20) calendardays before the date when PERUPETRO files the corresponding payment claim to(financial system entity).

 

2. This warrant bond will expire at the latest on XXXunless before that date (financial system entity) receives a letter fromPERUPETRO releasing (financial system entity) and the Contractor from all theirresponsibilities attached to this warrant bond, in which case this warrant bondwill be cancelled on the day when said PERUPETRO letter is received.

 

3. All delays on our side to honor this warrant bondon your behalf will accrue interest equivalent to the foreign currency activerate (Tasa Activa en Moneda Extranjera – TAMEX), or its successor, paid byfinancial system institutions and published by the Superintendence of Bankingand Insurance applicable during the period of delay. The interest will becalculated starting on the date when the notarized letter sent by PERUPETRO to(financial system entity) was received. After the expiration or cancellationdate, no complaint will be admitted concerning this warrant bond and (financialsystem entity) and the Contractor will be released from all responsibility orobligation concerning this warrant bond.

 

 

Sincerely,

 

 

(Financial system entity)

 

----

 

**ANNEX C-5**

 

**WARRANT BOND FOR THE FIFTH PERIODOF THE MINIMUM WORK PROGRAM**

 

**WARRANTBOND No**

Lima,

Messrs.

PERUPETROS.A.

 

Gentlemen,

 

Hereby,we (entity of financial system) constitute ourselves as joint and severalguarantors of BPZ EXPLORACION & PRODUCCION S.R.L.(hereafter theContractor) before PERUPETRO S.A. (hereafter PERUPETRO) for the amount of$650,000.00 to guarantee the performance of the Contractor’s obligations underthe minimum work program for the first period of the exploration phase, asdescribed in Clause Four  of the LicenseAgreement for the Exploration and Development of Hydrocarbons in Block XXII,signed with PERUPETRO (hereafter the Agreement).

 

1.The obligation assumed by (Name of Financial system entity) under this warrantbond is limited to pay PERUPETRO the amount  of six hundred fifty thousand dollars (US$650,000.00) when required.

 

Thisguarantee is joint and several, without benefit of excussion, irrevocable, unconditionaland to be executed automatically and paid in demand within its life, bysubmission of a notarized letter addressed by PERUPETRO to (financial systementity) requesting the payment of six hundred fifty thousand and 00/100 dollars(US$ 650,000.00) declaring the Contractor has failed to comply in full orpartially with the obligation mentioned above, and enclosing with that letter,as only support and justification, a certified copy of the notarized letteraddressed by PERUPETRO to the Contractor demanding its compliance with theabovementioned obligation and notifying it of its intention to cash the warrantbond; said notarized letter sent by PERUPETRO to the Contractor will have beendelivered to the latter at least twenty (20) calendar days before the date whenPERUPETRO files the corresponding payment claim to (financial system entity).

 

2. This warrant bond will expire at the latest on XXXunless before that date (financial system entity) receives a letter fromPERUPETRO releasing (financial system entity) and the Contractor from all theirresponsibilities attached to this warrant bond, in which case this warrant bondwill be cancelled on the day when said PERUPETRO letter is received.

 

3. All delays on our side to honor this warrant bondon your behalf will accrue interest equivalent to the foreign currency activerate (Tasa Activa en Moneda Extranjera – TAMEX),

 

----

 

or its successor, paid by financial systeminstitutions and published by the Superintendence of Banking and Insuranceapplicable during the period of delay. The interest will be calculated startingon the date when the notarized letter sent by PERUPETRO to (financial systementity) was received. After the expiration or cancellation date, no complaintwill be admitted concerning this warrant bond and (financial system entity) andthe Contractor will be released from all responsibility or obligationconcerning this warrant bond.

 

 

Sincerely,

 

 

(financial system entity)

 

**ANNEX D**

 

**CORPORATE GUARANTEE**

 

Messrs.

PERUPETRO S.A.

Av. Luis Aldana 320

Lima 41

PERU

 

By these presents, BPZ ENERGY INC., pursuant to Section 3.11of the License Agreement for the Exploration and Development of Hydrocarbons inBlock XXII to be signed by PERUPETRO S.A. (“PERUPETRO”) and BPZ EXPLORACION &PRODUCCION S.R.L., provides a joint and several guarantee before PERUPETRO onbehalf of BPZ EXPLORACION & PRODUCCION S.R.L. that the latter willhonor all its obligations pursuant to the minimum work program described inheading 4.6 of the Agreement, as well as the execution by BPZ EXPLORACION YPRODUCCION S.R.L. of each of the annual development programs, as adjusted oramended, that may be submitted by BPZ EXPLORACIÓN Y PRODUCCIÓN S.R.L. withPERUPETRO pursuant to heading 5.3 under the Agreement.

 

This guarantee will survive while BPZ EXPLORACION YPRODUCCION S.R.L.’s obligations under the Agreement while BPZ EXPLORACION YPRODUCCION S.R.L. may be required. For purposes of this guarantee, BPZ ENERGYINC. submits to the laws of the Republic of Peru, expressly waives any diplomaticclaim and submits to the arbitration procedure for the solution ofcontroversies set forth in clause 21 of the Agreement.

 

Yours,

Corporate Guarantor

Legally Authorized Representative.

 

----

 

**ANNEX E**

 

**ACCOUNTING PROCEDURE**

 

**1.****                                     ****GENERALPROVISIONS**

 

**OBJECTIVE**

 

The objective of this annex is to establish theaccounting regulations and procedures that will allow determining the revenues,investments, expenses and operating costs of the Contractor for purposes ofcalculating Factor Rt-1 mentioned in Clause 8 under the Agreement.

 

**DEFINITIONS**

** **

The words used in this annex have been definedin Clause One to the Agreement and will have the meaning given to them in thatclause. The accounting terms included in this annex will have the meaning givento them in the accounting regulations and practices accepted in Peru and in theinternational petroleum industry.

 

**ACCOUNTING PRINCIPLES**

** **

a) The Contractor will carry its books pursuantto the legal regulations in force, the accounting principles and practicesestablished and accepted in Peru and in the international petroleum industry,and pursuant to provisions in this accounting procedure.

b) The Manual of Accounting Proceduresmentioned in heading 18.1 of the Agreement will take into account theprovisions detailed in this annex.

 

**2.****             ****ACCOUNTINGREGISTRIES, INSPECTION AND ADJUSTMENTS**

 

**ACCOUNT SYSTEM**

For purposes of determining factor Rt-1,the Contractor will carry a special accounting system to register, in dollars,the revenues earned and the expenses made, as related to the Agreement’soperations. This system will comprise two main accounts: the factor Rt-1 revenuesaccount and the factor Rt-1 expenses account.

 

**EXCHANGE RATE**

The accounts carried out in domestic currencyat the selling exchange rate in force on the day when the disbursement was madeor the revenue was earned. The transactions made in dollars and the evaluationof output will be recorded pursuant to provisions under 3.3 of this annex.

 

**SUPPORTING DOCUMENTATION**

The contractor will keep in its file the originalsupporting documents for the charges made against the account for factor Rt-1

 

----

 

**FACTOR Rt-1 ACCOUNTSTATEMENT**

 

During the exploration stage, the Contractorwill send, within thirty days after the end of each period, a detailed monthlystatement of the revenues and expenses accounts for factor Rt-1**,**corresponding to that period.if the contractor chose to use the method described under heading 8.3.2 tocalculate the royalty, it will submit to PERUPETRO, within thirty (30) daysafter the date of statement of commercial discovery, a detailed monthlystatement of the factor****Rt-1****revenues and expenses accounts for the period runningbetween the last statement submitted until the previous year’s month of July orDecember, as appropriate.Subsequently, the Contractor will send PERUPETRO, within fifteen (15) daysafter the end of the month of January and July of every calendaryear, a detailed monthly statement of the factor Rt-1 revenues andexpenses accounts for the prior half-year.

a) Factor Rt-1 Revenue AccountStatement.The Monthly Revenue Account Statement includes evaluation of the controlledproduction for the reporting semester. Additionally, it will include a detailedand classified record of all transactions for which the Contractor has earned revenues,including the date when the revenue was actually earned as well as a summarydescription of the transaction, number of the accounting voucher, amount indollars or in domestic currency and in dollars, if the revenue was earned indomestic currency, and the corresponding exchange rate.

b) Factor Rt-1 Expenses AccountStatementThe monthly expenses account statement will detail and classify all thetransactions for which the Contractor has made disbursements, including thedates when such disbursement was actually made, as well as a summarydescription of the transaction, number of the accounting voucher, amount indollars or in domestic currency and in dollars if the disbursement was made indomestic currency, and the corresponding exchange rate.

 

**ACCOUNTING INSPECTION ANDADJUSTMENTS**

a) The accounting ledgers and the originalsupporting****documents for the transactionsdescribed in each account statement will be made available, during businesshours, to the authorized PERUPETRO representatives for their inspection, whenthey so require.The inspection of the accounting books and the supporting documentation will beperformed pursuant to generally accepted auditing principles, including samplingprinciples, as required.

b) The factor Rt-1  on account statements will be considered asaccepted if PERUPETRO does not file a non objection in writing withintwenty-four (24)

 

----

 

months starting on the date when they were filed withPERUPETRO. The Contractor will provide a documented response to PERUPETRO’s remarks withinthree (3) months after receiving PERUPETRO’s remarks. PERUPETRO’s remarkswill be deemed as accepted if the Contractor fails to meet the abovementioneddeadline.

 

c)All discrepancies derived from an accounting inspection must be resolved by theparties within a maximum period of three (3) months starting on the datewhen PERUPETRO received the Contractor’s response. At the expiration of suchdeadline, the discrepancy will be submitted to the Oversight Committee toproceed as set forth in heading 7.3 of the agreement. If the discrepancypersists, the parties may agree to have it reviewed by an independent auditingfirm acceptable to PERUPETRO, or to proceed pursuant to provisions underheading 21.3 of the agreement. The arbitration decision or the independentauditor’s position will be considered as final.      

d)If as a result of the accounting inspection it were established that in a givenperiod a different factor Rt-1 should have been used, thecorresponding adjustments will be introduced. All adjustments will accrueinterest pursuant to provisions under heading 8.5 of the agreement.

 

**3.****    ****FACTOR Rt-1 REVENUES AND EXPENSESACCOUNT**

 

**REVENUES**

 

Revenues will be recognizedand recorded in the factor Rt-1 revenues account, as follows:

 

a)     The valuation ofthe hydrocarbons controlled production pursuant to clause 8 of the agreement.

 

b)    The sale ofassets purchased by the contractor for agreement operations, the cost of whichwas registered in the factor Rt-1 expenses account.

 

c)     Services renderedto third parties in which the participating personnel’s salaries and benefitsare recorded in factor Rt-1 expenses account and/or for which goodsare used and the cost of which was recorded in the factor Rt-1 expensesaccount.

 

d)    The rental ofgoods owned by the contractor, the purchasing cost of which was recorded in thefactor Rt-1 expenses account, or the sub-letting of goods the rentof which is charged to the factor Rt-1 expenses account.

 

e)     Indemnities frominsurance hired in connection with the agreement’s activities and/or claims forgoods, including insurance indemnities for business interruption. The revenuesearned from hedging contracts are not included.

 

f)     Other revenuesrepresenting credits against charges made in the factor Rt-1 

 

----

 

expenses account.

 

**EXPENSES**

 

Startingon the date of signing, all investments, expenses and operating costs will berecognized which are properly supported by the corresponding payment voucher.However, such recognition will be subject to the following restrictions:      

a)     Workers.

 

Wagesand benefits granted to the contractor’s workers who are deployed at theoperations on a permanent or temporary basis. For this purpose, the contractorshall make available to PERUPETRO S.A., at the latter’s request, the company’spayroll and hiring policy.

 

Generally,all salaries and benefits of the operations and administrative personnel hiredby the contractor will be recorded during the execution of the operations andclassified by type of work performed.

 

Ifthe contractor undertakes activities other than those comprised in theagreement, the cost of temporary or part time personnel deployed at the operationswill be charged against the expense account pursuant to provisions underparagraph H of this section 3.2.

 

b)    Affiliate’s Services

 

Servicesfrom affiliates will be charged at competitive rates with third parties’.

 

c)     Materials and Equipment

 

Materialsand equipment bought by the contractor will be recorded in the factor Rt-1expenses account pursuant to the provisions below:

 

·      Materials and equipment(Condition A):

 

ConditionA new materials and equipment are those that may be used without any refurbishingand will be registered at the price appearing in the commercial invoice plusgenerally accepted accounting costs, including additional importation costs, ifapplicable.

 

·      Used materials and equipment(Condition B):

 

ConditionB used materials and equipment are those which, although not new, may be usedwithout any refurbishing and will be posted at 75% of the price quoted for newmaterials and equipment on the date of purchase, or at the purchasing priceappearing in the corresponding commercial invoice, whichever is lower.

 

·      Materials and Equipment(Condition C):

 

ConditionC materials and equipment are those which may be used for their originalfunction after  proper refurbishing andwill be recorded at 50% and 50% of the price quoted for a similar new material 

 

----

 

andequipment, or the purchasing price appearing on the commercial invoice,whichever is lower.

 

d)    Freight andTransportation Costs:

 

Travelexpenses for the contractor’s personnel and their relatives, as well astransportation cost for personal items and household appliances will berecognized pursuant to the company’s internal policy.

 

Whentransporting equipment, materials and supplies for the operations, thecontractor will avoid paying “false freight”. If so, recognition of suchdisbursements will be subject to PERUPETRO’s explicit approval in writing.

 

e)     Insurance:                

Premiumsand net insurance costs placed totally or partially with the contractor’saffiliates will be recognized only to the extent they are charged competitivelycompared with insurance companies not related to the contractor.

 

Thepayments made for hedging contracts shall not be included.

 

f)     Taxes:       

Only taxes paid relating to activities performed in connection with theagreement will be recognized.

 

g)    ResearchExpenses:               

Researchexpenses for developing new equipment, materials, procedures and techniques tobe used in the search, development and production of hydrocarbons, as well asother improvements, will be recognized after receiving written approval fromPERUPETRO.

 

h)    ProportionalAllocation of General Expenses:  

Ifthe contractor performs other activities in addition to those foreseen in theagreement or has signed with PERUPETRO more than one agreement, the cost forthe technical and administrative personnel, administrative office maintenanceexpenses, warehouse operation expenses and cost, as well as other indirectexpenses and cost will be charged against the factor Rt-1 expenseaccount on a proportional basis pursuant to a policy previously proposed by thecontractor and accepted by PERUPETRO.

 

**TIME OF REGISTRATION**

 

**a)****    **Earnings from the valuation of the controlledhydrocarbons production for a given calendar month will be posted as revenuesfor the calendar month when the hydrocarbons were controlled.

 

**b)****    **Revenues described in paragraphs b), c), d), e) and f)under section 3.1 of this annex will be charged against the revenues account atthe time when they were actually earned.

 

----

 

**c)****    **Expenses will be recorded on the date when thecorresponding payment was made.

 

**4.****    ****NON RECOGNIZED REVENUES AND EXPENSES**

 

**NON RECOGNIZED REVENUES**

 

Forpurposes of calculating factor Rt-1, the following revenues will notbe recognized:

 

a)     Financialrevenues, generally.

 

b)    Revenues earnedfor services rendered or sales of goods owned by the contractor made before thedate of signing of the agreement.

 

c)     Revenues earnedfor activities not related with the agreement’s operations

 

**NON RECOGNIZED EXPENSES**

 

Forpurposes of calculating factor Rt-1, the disbursements made for thefollowing items will not be recognized as expenses:

 

a)       Investments,expenses and costs, incurred by the contractor before the date of signing ofthe agreement.

 

b)       Interest expensesfor the loans, including interest on supplier credits.

 

c)       Financial expenses,generally.

 

d)       Cost incurred forinventory taken in case of contractor assignment of rights under the agreement.

 

e)       Assetdepreciation and amortization.

 

f)        Amounts paid forbreach of agreement obligations, as well as fines, penalties and indemnitiesmandates by authorities, including those resulting from lawsuits.

 

g)       Fines, chargesand adjustments derived from failure to timely pay taxes in force in thecountry.

 

h)       Income taxapplicable to the contractor and taxes on profits available to overseas owners,as applicable.

 

i)        Value added tax(IGV) and municipal promotion tax, excepting when declared as expenses pursuantto the Income Tax Law.

 

j)        Donations, ingeneral, excepting those previously approved by PERUPETRO.

 

k)       Advertisingexpenses, excepting those previously approved by PERUPETRO.

 

l)        Hydrocarbontransportation and marketing costs and expenses beyond the production controlpoint.

 

m)      Investments onfacilities for the transportation and storage of hydrocarbons produced withinthe agreement area beyond the production control point.

 

n)       Other expensesand investments not related to the operations under the agreement.

 

----

 

**5.****    ****REVISIONS OF ACCOUNTING PROCEDURE**

 

Theprovisions under this accounting procedure may be modified by agreement of theparties with a proper indication of the date when they will become effective.

 

----

 

**ANNEX F**

 

**EXPLORATION WORK UNITS (UTE, IN SPANISH)**

 

**TABLE OF EQUIVALENCE**

** **
| **Activity**                 | ** ** | **UTE**    |
|------------------------------|------------|------------|
| **Seismic 2D – Km**     |       | 0.50       |
| **Seismic 3D – Km2**    |       | 1.30       |
| **Reprocessing 2D - Km**     |       | 0.02       |
| **Gravimetrics – Km**   |       | 0.02       |
| **Magnetometrics – Km** |       | 0.02       |
| **Studies per period**       |       | 20.00      |
| **Wells:  Depth – m**   | ** ** | ** ** |
| **0  – 1,000**          |       | 0.045 x m  |
| **1,001  – 2,000**      |       | 0.050 x m  |
| **2,001  – 3,000**      |       | 0.055 x m  |
| **3,001  – 4,000**      |       | 0.065 x m  |
| **4,001  and beyond**        |       | 0.075 x m  |

 

**Note.-**For purposes ofvaluation of the warrant bonds described under heading 3.10, the followingequivalence shall apply: 1 UTE = US$ 5,000.

 

----

 

Please,Mr. Notary, add below the corresponding clauses required by law and sendthe appropriate notification to the Hydrocarbons Public Registry forregistration of the following.

 

Limaon the 21st day of November of 2007

 

BYAND FOR PERUPETRO MR. CARLOS EDGAR VIVES SUÁREZ

 

BY AND FOR BPZ EXPLORACIÓN & PRODUCCIÓN S.R.L. MR. LUIS RAFAELZOEGER NÚÑEZ

 

BYAND FOR BPZ ENERGY MR. LUIS RAFAEL ZOEGER NÚÑEZ

 

BY AND FOR BANCOCENTRAL DE RESERVA DEL PERU, MESSERS. RENZO GUILLERMO ROSSINI MIÑAN AND CARLOSAUGUSTO BALLON AVALOS

 

THISDRAFT AGREEMENT WAS AUTHORIZED BY MR. ERNESTO CORDOVA V., ESQUIRE, REGISTEREDIN THE LIMA BAR ASSOCIATION UNDER MEMBER NUMBER 21982.

 

**INSERTNUMBER ONE**

 

**SUPREMEDECREE**

 

**INSERTNUMBER TWO**

 

PERUPETROAGREEMENT

 

TRANSCRIPTION

 

Knowall men by these presents that at its session No. 18-2007 of September 27th,2007, the Board of Directors adopted the following agreement.

 

APPROVALOF DRAFT AGREEMENT FOR LICENSING THE EXPLORATION AND DEVELOPMENT OFHYDROCARBONS IN BLOCK XXII.

 

BOARDOF DIRECTORS AGREEMENT Noo 117-2007

 

SanBorja, September 27th 2007

 

Havingread Memorandum No. CONT-GFCN-1853-2007 dated September 24th, 2007,requesting the approval of the draft agreement to license the Exploration andDevelopment of Hydrocarbons in Block XXII and

 

Whereas,

 

Theworking committees of PERUPETRO S.A. and BPZ EXPLORACIÓN & PRODUCCIÓNS.R.L. have reached an agreement about the text of the draft agreement forExploration and Development of Hydrocarbons in Block XXII.

 

Intechnical and legal report No. GFCN-1832-2007, the PERUPETRO S.A. workingcommission determines that, pursuant to its analyses of the legal, contract,economic and geological considerations, as well as the estimated minimum workprogram for the area, the draft agreement for licensing the Exploration andDevelopment of Hydrocarbons in Block XXII meets the provisions of the singleconformed text of law No. 26221, Organic Hydrocarbons Law, enacted bySupreme Decree NO. 042-2005-EM, as regulated, and that this draft agreementshould be filed with the general management department to proceed to thecorresponding paper work, as required by law;

 

----

 

Whereas,Article 11 of the Single Conformed Text of Law No. 26221, OrganicHydrocarbons Law, approved by Supreme Decree No. 042-2005-EM, establishesthat agreements will be approved by Supreme Decree signed by the Minister ofEconomy and Finance and Energy and Mines within sixty (60) days after startingthe procedures for obtaining their approval before the Ministry of Energy andMines, filed by the contracting entity; pursuant to article 44 of PERUPETROS.A. corporate by laws, the Board of Directors unanimously hereby

 

AGREES:

 

1.     To approve theDraft Agreement for Licensing the Exploration and Development of Hydrocarbonsin Block XXII to be signed between PERUPETRO S.A. and BPZ EXPLORACION &PRODUCCION S.R.L., as well as the Draft Supreme Decree to enact theabovementioned agreement, both of which documents are attached to thisagreement and are an integral part of same.

 

2.     To send theMinister of Energy and Mines the draft Supreme Decree and Licensing Agreementdescribed in paragraph 1 above for their corresponding approval by SupremeDecree, pursuant to article 11 of the single conformed text of Law No. 26221,Organic Hydrocarbons Law, enacted by Supreme Decree No. 042-2005-EM.

 

3.     AuthorizePERUPETRO S.A.’s general manager to sign the agreement mentioned in paragraph 1above once the corresponding Supreme Decree has been enacted.

 

4.     To exempt theminutes of this Agreement from reading and approval.

 

ThisAgreement is sent to you for your information and other related purposes.

 

InSan Borja, on the 27th day of September, 2007

 

SIGNED:DANIEL SABA DE ANDREA, CHAIRMAN OF THE BOARD, PERUPETRO S.A.

 

SIGNED:ISABEL TAFUR MARIN, SECRETARY GENERAL

 

**INSERTNUMBER THREE: TRANSCRIPT**

 

SUNARP

REGISTRATIONAREA No IX LIMA AREA

LIMAREGISTRATION AREA

DOCKETNo 00259837

CORPORATIONS REGISTRY

PERUPETRO S.A.

COMPANY REGISTRY

ITEM: APPOINTMENT OF PROXIES

C00039

 

----

·  By Ministry Decision N° 435-2006-MEM/DM dated 09/08/2006 publishedon 09/10/2006 in the El Peruano Official Gazette, it was decided.- 1. To accept the resignation of Dr. JOSE ABRAMOVITZ DELMAR from itsposition as member of the Board. 2. To appoint, as from this date, Mr. ALBERTOQUIMPER HERRERA as member of the Board on behalf of the 

 

----

 

Ministry of Energy and Mines. 3. To confirm EngineerGUSTAVO ADOLFO NAVARRO VALDIVIA as member of the Board on behalf of theMinistry of Energy and Mines.

 

·  By Ministry Decision N° 536-2006-EF/10 dated 09/20/2009 publishedon 09/28/2006 in the El Peruano official Gazette, it was decided.- 1. To acceptthe resignation of MR.  WILFREDO SALINAS RUIZ – CORNEJO to itsposition as member of the board. 2. To appoint, as from this date, MR. JOSEABRAMOVITZ DELMAR, as member of the Board on behalf of the Ministry of Economyand Finance. 3. To ratify Engineer LUIS ENRIQUE ORTIGAS CUNEO as member of theBoard, on behalf of the Ministry of Ministry of Economy and Finance.

 

·  AtBoard Meeting of 02/09/2007, the following was agreed: 1. To appoint Mr. CARLOSEDGAR VIVES SUAREZ (D.N.I. N° 08725702) as General Manager as from on the02/13/2007. 2. To appoint JOSE EDUARDO CHÁVEZ CÁCERES (D.N.I  N° 09343700) as Special Project, Planning,Environmental and Community Relations Manager, starting on the 02/13/2007. 3.To appoint Mr. JOSE ANTONIO COZ CALDERON (D.N.I. N° 07912299) as ContractManager as from 02/13/2007. 4. To appoint PEDRO SAMUEL ARCE CHIRINOS (D.N.I. N°08722832) as Administration Manager as from the day following this agreement.5. To appoint MILTON UBALDO RODRIGUEZ CORNEJO (D.N.I. N° 09150438) asInformation Technology and Budget Division Head as from the day following thisagreement. 6. To appoint Engineer PEDRO MANUEL ARCE CHIRINOS to Head the HumanResources and Personnel Development Division. Board of Directors’ Minutes BookNo7, notarized on 01/03/2007 before the Notary by and for Lima Dr. RicardoFernandini Barreda, ESQ. under entry N° 54684 on folios 281 to 327. Asappearing on the certified copy dated 03/01/2007 issued by the same notarypublic in the city of LIMA. This title was submitted on 03/01/2007 at 03:48:51PM under docket

 

N° 2007-00118351 in Logbook (0485).

 

Fee: S/. 224 recorded under vouchers Number00014319-07 and 00020129-07.- In Lima on March, 29, 2007.

 

SIGNATURES: TOMAS HUMBERTO CERDAN LIMAY

 

PUBLIC REGISTRAR ORLC

 

**INSERT NUMBER FOUR: TRANSCRIPT**

 

CENTRAL RESERVE BANK OF PERU

GENERAL MANAGER’S OFFICE

LETTER NUMBER No. 129-2007-BCRP

Lima, October 25th, 2007

Mr.

Ronald Egúsquiza S.

General Manager

PERUPETRO S.A.

 

I am pleased to address you concerning your letterNo GGRL-CONT-1 922-2007 about the 

 

----

 

clause dealing with the financial rights for theDraft Agreement for Licensing the Exploration and Development ofHydrocarbons in Block XXII entered into with BPZ EXPLORACIÓN Y PRODUCCIÓNS.R.L. The CENTRAL RESERVE BANK OF PERU has approved the text of clause 11 ofthe Draft Agreement sent to us with your letter, after noticing this text issimilar to the model approved by our board on November 18th,1993 for licensing contracts to be signed with companies.

 

Inaddition, for signing the Clause on Financial Rights included in thatagreement, the undersigned, in my position as General Manager, and Mr. Carlos Ballón Avalos, InternationalOperations Manager, and in case of impediment by either of us, Mr. ManuelMonteagudo Valdez, Legal Manager, have been designated to sign said agreement.

 

Yours sincerely,

Renzo Rossini Miñan, General Manager

PERUPETRO S.A. stamp

 

**INSERT NUMBER FIVE: TRANSCRIPT**

 

CENTRAL RESERVE BANK OF PERU BOARD OF DIRECTORMEETING DATED JANUARY 27, 1994, DESCRIBING THE POWERS AWARDED TO THE GENERALMANAGER (063-A) MINUTES No 3534. RELEVANT SECTION:

 

CENTRALRESERVE BANK OF PERU.

 

GENERALSECRETARIAT.

 

HUMBERTOPEIRANO PORTOCARRERO, SECRETARY GENERAL OF THE CENTRAL RESERVE BANK OF PERU, ASPER THE POWERS INVESTED UPON HIM BY ARTICLE 31 OF THIS ORGANIZATIONS ORGANICLAW, HEREBY CERTIFIES THAT IN MINUTES NUMBER 3534 OF THE BOARD OF DIRECTORSMEETING HELD ON JANUARY 27, 1994, ATTENDED BY BOARD MEMBERS MARIO TOVAR VELARDE(CHAIRMAN), HENRY BARCLAY REY DE CASTRO, ALBERTO BENAVIDES DE LA QUINTANA,SANDRO FUENTES ACURIO, ALFREDO JALILIE AWAPARA AND RAUL OTERO BOSSANO ANAGREEMENT WAS REACHED AS FOLLOWS:

 

POWERS OF THE GENERAL MANAGER (063-A)

 

THE BOARD OF DIRECTORS AGREED:

 

1-  TO GRANTTHE GENERAL MANAGER THE FOLLOWING POWERS:

 

a.   TOAPPROVE THE FINANCIAL CLAUSES OF PETROLEUM AGREEMENTS ONCE THE BOARD HAS AUTHORIZEDTHE CORRESPONDING MODELS

 

IN LIMA, ON SEPTEMBER 16, 1994. SIGNED BY HUMBERTOPEIRANO PORTOCARRERO, SECRETARY GENERAL OF THE CENTRAL RESERVE BANK OF PERU.

 

**INSERT NUMBER SIX: TRANSCRIPT**

 

MINUTES OF THE SESSION HELD BY THE BOARD OFDIRECTORS OF THE CENTRAL RESERVE BANK OF PERU ON MAY 21, 1998, CERTIFYINGTHE APPOINTMENT OF MR. CARLOS BALLON AVALOS AS INTERNATIONALOPERATIONS MANAGER OF THE CENTRAL RESERVE BANK OF PERU, MINUTES NUMBER 3737.RELEVANT SECTION.

 

CENTRALRESERVE BANK OF PERU.

 

----

 

GENERALSECRETARIAT.

 

HUMBERTOPEIRANO PORTOCARRERO, SECRETARY GENERAL OF THE CENTRAL RESERVE BANK OF PERU, ASPER THE POWERS INVESTED UPON HIM BY ARTICLE 31 OF THIS ORGANIZATION’S ORGANICLAW, HEREBY CERTIFIES THAT IN MINUTES NUMBER 3737 OF THE BOARD OF DIRECTORS MEETINGPERFORMED ON MAY 21, 1998, ATTENDED BY BOARD MEMBERS SEÑORES GERMAN SUAREZCHAVEZ (CHAIRMAN), MARIO TOVAR VELARDE, ALBERTO BENAVIDES DE LA QUINTANA, JORGEBACA CAMPODONICO, GUILLERMO CASTAÑEDA MUNGI AND GIANFRANCO CASTAGNOLA ZUÑIGA ANAGREEMENT WAS REACHED AS FOLLOWS:

 

APPOINTMENT OF SENIOR OFFICIALS (ORAL)

 

THE BOARD OF DIRECTORS AGREED:

 

1.  TO APPOINTMR. JUAN ANTONIO RAMIREZ ANDUEZA AS MANAGER FOR CREDITS AND FINANCIALREGULATIONS IN REPLACEMENT OF MISS MARIA ISABEL VALERA LOZA WHO WILL FILL THEPOSITION AS ADVISORS TO THE GENERAL MANAGER.

 

2.  TO PROMOTEMR. CARLOS BALLON AVALOS TO THE RANK OF MANAGER AND APPOINT HIM ASINTERNATIONAL OPERATIONS MANAGER.

 

LIMA,JUNE 3, 1998

 

SIGNED:HUMBERTO PEIRANO PORTOCARRERO – SECRETARY GENERAL OF THE CENTRAL RESERVE BANKOF PERU

 

**INSERTNUMBER SEVEN**

 

CENTRALRESERVE BANK OF PERU

 

GENERALSECRETARIAT

 

DEHERABRUCE MITRANI, Secretary General of the Central Reserve Bank of Peru, actingunder the powers invested upon her by Article 31 of the OrganizationsOrganic Law, hereby certifies that in Minutes No 4126 corresponding to theBoard of Directors meeting held on 15th December 2005, attendedby Board Members Oscar Dancourt Masías (Acting Vice-Chairman of the Board),Kurt Burneo Farfán, Gonzalo García Núñez, Eduardo Iriarte Jiménez, DanielSchdlowsky Rosenberg and Mr. Luis Carranza, on leave and not attending,the Central Reserve Bank of Peru’s Manual of Organizations and Functions wasreconfirmed, and the name of the Legal Bureau was changed to JuridicalManagement Department, and in Minutes No 4128, corresponding to the Board ofDirectors meeting held on 22nd December 2005, attended by BoardMembers Oscar Dancourt Masías (Acting Vice-Chairman of the Board), Kurt BurneoFarfán, Eduardo Iriarte Jiménez and Daniel Schdlowsky Rosenberg, with LuisCarranza Ugarte and Gonzalo García Núñez, on leave, Mr. Manuel MonteagudoValdez was confirmed, starting on January 1st 2006 as JuridicalManager.

 

Inaddition, I hereby certify that Mr. Manuel Monteagudo Valdez previouslyfilled the position of head of the Legal Office until December 31 2005 andthat pursuant to the previous agreement, as from January 1, 2005, he willbe acting as Juridical Manager.

 

InLima, on August 9, 2006

 

----

 

SignedDEHERA BRUCE MITRANI

 

**INSERTNUMBER EIGHT**

 

CENTRALRESERVE BANK OF PERU

 

GENERALSECRETARIAT

 

DEHERABRUCE MITRANI, Secretary General of the Central Reserve Bank of Peru, actingunder the powers invested upon her by Article 31 of the OrganizationsOrganic Law, hereby certifies that in Minutes No 4059 corresponding to theBoard of Directors meeting held on 14th October 2004, attendedby Board Members Javier Silva Ruete (Chairman), Kurt Burneo Farfán, LuísCarranza Ugarte, Oscar Dancourt Masías and Daniel Schdlowsky Rosenberg anagreement was reached as follows:

 

·  APPOINTMENT OF GENERAL MANAGER(ORAL)

 

·  The Board of Directors agreedto appoint Mr. Renzo Rossini Miñan as General Manager

 

InLima on December 22nd, 2004

 

IllegibleSignature

 

**C O N C L U S I O N:**

 

HAVING THE GRANTORS READ THEENTIRE DOCUMENT, THEY CONFIRMED AND DECLARED THAT THEY READ THE MINUTES AGAINSTTHE TEXT WHICH ATTACH HERETO, AND SIGNED IT AS PROOF OF THEIR ACCEPTANCE. THISDOCUMENT IS TRANSCRIBED IN FOLIOS SERIES B No XXX AND ENDS IN FOLIOS SERIES BNo

 

**PARTICIPANTS:MANUEL MONTEAGUDO VALDEZ, PERUVUIAN, MARRIED, LAWYER, IDENTIFIED WITH NATIONALIDENTITY DOCUMENT No 10275927, VOTER, JURIDICAL MANAGER APPOINTED BY BOARD OFDIRECTORS AGREEMENT No 4128 WHO REPRESENTS THE CENTRAL RESERVE BANK OF PERUAUTHORIZED BY GENERAL MANAGEMENT DEPARTMENT LETTER No 129-2007-BCRP DATEDOCTOBER 25 2007, ATTACHED HERETO AND WHO SIGNS THE MINUTES AND THE PUBLIC DEED,BY VIRTUE OF WHICH THE PRESSENCE OF MR. CARLOS AUGUSTO BALLON AVALOS IN THISACT SHALL NOT BE RECORDED IN THESE PRESENTS, THE MINUTES AND FINAL SIGNING OFTHE DRAFT AGREEMENT ENCLOSED HEREWITH, IN WITNESS WHEREOF**

 

 
|                                           | **By and for PERUPETRO**                                               |
|------------------------------------------------|------------------------------------------------------------------------|
| **CARLOS EDGAR VIVES SUÁREZ  SIGNED ON:** |
|                                           |
|                                           |
|                                           | **By and for BPZ  EXPLORACIÓN & PRODUCCIÓN S.R.L.** |
| **LUIS  RAFAEL ZOEGER NÚÑEZ**        |

 

----

 
| **SIGNED ON:**                                     |
|----------------------------------------------------|
| ** **                                         |
| ** **                                         |
| ** **                                         | **By and  for BPZ ENERGY INC.** |
| ** **                                         |
| **LUIS RAFAEL ZOEGER NÚÑEZ**

** ** |
| **SIGNED****ON:**                                  |
| ** **                                         |
| **By and for BANCO CENTRAL DE  RESERVA DEL PERU**  |
| ** **                                         | ** ** | ** ** |
| ** **                                         | ** ** | ** ** |
| ** **                                         | ** ** | ** ** |
| **RENZO GUILLERMO ROSSINI MIÑAN**             | ** ** | **ARLOS AUGUSTO BALLON AVALOS** |
| **SIGNED ON:**                                     | ** ** | **SIGNED ON:** |
| ** **                                         | ** ** | ** ** |
| ** **                                         | ** ** | ** ** |
| **END OF SIGNATURES:**                             | ** ** | ** ** |
|                                                    |  |  |  |

 

----