The Peruvian Government approved Supreme Decree adding Methodologies to determine Royalties in License Contracts for the Exploration and Exploitation of Hydrocarbons

On May 29, 2003 was approved the Supreme Decree 017-2003-EM adding methodologies to determine Royalties in License Contracts for the Exploration and Exploitation of Hydrocarbons to the article 5° of Bylaws approved by Supreme Decree 049-93-EM. The new methodologies to determine Royalties are the following: Companies now have two options: - Selecting a royalty starting at 5% and producing as much as a registered 5,000 b/d of oil. Royalties in these cases will gradually increase up to a maximum of 20%, according to the volume of production. - Selecting a fixed royalty of 5% using an R factor of 1.15 until the contractor recovers its costs. The royalty will then vary between 0-20%, according to revenue and costs incurred by the company during the previous year. Under the new rules contractors already exploring certain blocks also can benefit.