A Focus on New Heavy Oil Developments - Peru

A Focus on New Heavy Oil Developments - Peru Luis Ortigas Cuneo Chairman of the Board March, 2014 1

CONTENT 1. Peru: an under explored country 2. General Remarks 3. Contract Terms 4. New Bidding Rounds - 2014 5. The Data Bank 6. Hydrocarbons: General Considerations 7. Heavy Oils Occurrence in South America and Canada 8. Reserves of Heavy Oils 9. Final Remarks 2

1. Peru: An under explored Country 3

Large available areas for exploration Peru is located within one of the most prolific hydrocarbon trends in South America: The Sub Andean Megatrend 1 Light oil areas in Western Marañon Basin 2. Heavy oil areas in Eastern Marañon Basin 5 1 2 3 3. Hydrocarbon Occurrence in Ucayali Basin 4 4. Camisea and adjacent gas and condensate fields Areas with historical production of over 150 years 5. Light oil areas in Tumbes and Talara Basins 4

Hydrocarbon Producing Areas MARAÑÓN BASIN Accumulated 1,000 BBO Daily 25,000 BOD TALARA BASIN Accumulated 1,500 BBO Daily 38,000 BOD 0.3 BCFGD UCAYALI BASIN Accumulated 31BBO 130 BBC 0.8 TCFG Daily 300 BOD 106,000 BCD 1,181 BCFGD 5

Distribution of Wildcats in 18 Sedimentary Basins BASIN WILDCATS % Talara 1,299 84.68 Marañón 115 7.50 Ucayali 59 3.85 Sechura 24 1.56 Tumbes - Progreso 13 0.85 Santiago 7 0.46 Madre de Dios 6 0.39 Trujillo 4 0.26 Titicaca 4 0.07 Pisco 1 0.07 Huallaga 1 0.00 Lima 1 0.00 Mollendo 0 0.00 Salaverry 0 0.00 Moquegua 0 0.00 Bagua 0 0.00 Ene 0 0.00 1,534 100.00 Marañón Ucayali Sechura Talara 98% Wildcats: 4 basins Talara Marañón Ucayali Sechura Tumbes - Progreso Santiago Madre de Dios Trujillo Titicaca Pisco Huallaga Lima Mollendo Salaverry Moquegua Bagua Ene 6

2. Peru: General Remarks 7

Sustained GDP growth During the last 10 years the Peruvian economy increased very rapidly Source: Banco Central de Reserva del Perú, Ministerio de Economía y Finanzas, IMF y ProInversión * Estimated data 8

Sustained GDP growth and will continue leading the regional growth making the GDP to become higher than the world average by 2020 Source: Banco Central de Reserva del Perú, Ministerio de Economía y Finanzas, IMF y ProInversión 9

The economic growth The economic growth has been impelled by the high private investment Source: Banco Central de Reserva del Perú, Ministerio de Economía y Finanzas * Estimated data 10

Investment which represents near 22 % of the GDP Source: Banco Central de Reserva del Perú, Ministerio de Economía y Finanzas, IMF y ProInversión * Estimated data 11

Foreign Direct Investment Peru is attractive for Foreign Direct Investment, which registered a level up to 12,000 million US $ in 2012 12

Degree of Investment and Confidence Peru has deserved a good investment rate and the investors confidence due to its favorable economic policy Source: Banco Central de Reserva del Perú, Ministerio de Economía y Finanzas, IMF y ProInversión * Estimated data 13

3. Contract Terms 14

The model of the contract: A Contract Law PERU: CONSTITUTIONAL GUARANTY CONTRACT LAW Established under Article 62 of the Peruvian Constitution. Contracts between PERUPETRO and Contractors may only be modified by agreement of the Parties. The Constitution guarantees equal treatment for domestic investments and foreign investments. 15

License Contract Remarks Flexible Work Programs: can be set in Exploratory Work Units (EWU). Technical Information available free of charge. No signing bonus for the Contract. Free decision of the Contractor to continue the exploration during the production phase. International arbitration as part of the License Contract. 16

4. New bidding rounds - 2014 17

Contract term about to end Marañon basin BLOCK 1AB 18

Next Bidding Round Block 1 AB Block 1-AB: Active wells: 116 Fields under Production: 12 Production: Accumulated: 718 MMBO Daily: 14,800 BPD Reserves: 71.1 MMBO Access ways: air and river Rivers: Tigre, Corrientes and Pastaza 19

Next Bidding Round - New Blocks 26 Blocks for Exploration activities in the Jungle basins For further information: promocion@perupetro.com.pe 20

Next Bidding Round - New Blocks 6 Blocks for Exploration Activities in Offshore Basins For further information: promocion@perupetro.com.pe 21

5. The Data Bank 22

The Data Bank 1. All seismic, well data, well logs and technical reports available. 2. To be downloaded on request 3. No charge for Data and Reports http://www.perupetro.com.pe 23

A Focus on New Heavy Oil Developments - Peru Elmer Martinez G. Senior Geologist March, 2014 24

6. Hydrocarbons: General Considerations 25

Classification of Hydrocarbons 1. Gas and Condensates: Camisea, Aguaytía 2. Conventional Oils: >22º API 3. Heavy oils: <22º API 4. Extra-Heavy Oils: < 10º API 5. Oil Sands and Bitumen: Solid North Peruvian Pipeline transports oils from 23º API up 26

Characteristics of Heavy Oils 1. Conventional Oils: >22º API Brent-West Texas crude oil, 38 a 40 API Talara: 35 API 2. Heavy Oils: <22º API Viscosity: 1-10 cp PERU: 12-22º API,...12-15º (Block 67) 3. Extra-Heavy Oils: < 10º API Viscosity: < 20 - > 1MM cp 4. Oil Sands and Bitumen: Solid to Environment Temperature 27

Heavy Oils General Considerations Heavy oils have become a very important issue in the Petroleum Industry. There are more E&P operators for this type of resources all over the world every day. It is well known where the heavy oils are located. Heavy oils are needed now and for the future. PERU IS NOT AN EXCEPTION 28

7. Heavy Oils Occurrence in South America and Canada 29

Causes of oils degradation Microbial biodegradation is responsible of fractioning of heavy and light oils components. Light components escape leaving the heavy ones. Flushing, physical media. Origin of Heavy Oils Fractioning of phases, chemical media. 30

Occurrence of Heavy Oils The Resource / Reserves of heavy and extra heavy oils happen to be more than double of conventional oils...70 vs 30 % RESERVES and RESOURCES OF OIL IN THE WORLD 9-13 TBO (Oilfield Review, Schlumberger, 2006) Oil Sands and bitumen 30% Conventional oil 30% Extra heavy oil 25% Heavy oil 15% HEAVY AND EXTRA HEAVY OIL AND BITUMEN=70% 31

Occurrence of Heavy Oils In similar geological environments: In borders of Foreland basins. Long migration route since the kitchens. Super-giant surface deposits, frequently with no seal. PERU: reservoirs to 2,000 m deep. 32

Occurrence of Heavy Oils Examples of heavy oil fields 1. Venezuela 2. Canada 3. Ecuador 4. Peru 33

Occurrence of Heavy Oils 1. Venezuela North Central portion 34

Occurrence of Heavy Oils 1. Venezuela The first discovery: Mene Grande, 1914 Numerous fields, including the important Orinoco Belt 35

Occurrence of Heavy Oils Venezuela (cont.) 1.Recoverable conventional oil: 76.8 BBO 2.Orinoco Oil Belt, the biggest individual heavy and extra heavy oil accumulation of the world to Nov 1999: OOIP: 750 BBO, 6-12 API Recoverable: 36.6 BBO Bitumen OOIP: 277 BBls OOIP: Original Oil in Place 36

Occurrence of Heavy Oils 2.CANADA Alberta Basin, West Canada: o The world biggest combined accumulation of heavy, extra heavy oils and bitumen. o 81% World Recoverable Resources. The oil sands projects: become the first heavy oil source in West Canada. Reserves: 1,700 BBO 37

Occurrence of Heavy Oils 3. ECUADOR Ishpingo-Tambococha-Tiputini (ITT) o Ishpingo and Tiputini: 2,700 y 400 MMBO OOIP of heavy oil of 12-16 API Capiron, Tivacuno, Yuturi, Iro, Amo and Pañacocha: 20-22 API, NW of ITT o Yuturi and Iro: 600 MMBO OOIP each o Amo: 500 MMBO OOIP Remnant recoverable reserves to Dec 2,006: o 2 BBO 10-20 API 38

Occurrence of Heavy Oils Heavy oils in Peru 18 Hydrocarbon Sedimentary Basins Heavy oil only in North Marañon Basin 39

Bolivia Occurrence of Heavy Oils Ecuador SP CHONTA Colombia Petroleum Systems and Kitchens in Peruvian hydrocarbon basins Cuenca s Tumbes talara Lancones SP CRETACEO- TERCIARIO Cuenca s Trujillo Salaverry Cuenca Marañón SP PUCARA SP AMBO ARCO DE IQUITOS Cuenca Ucayali Brasil SP ENE Cuenca Pisco SP AMBO SP AMBO SP CABANILLAS Cuenca M. de Dios SP SIPIN Cuenca 200 km Titicaca Areas de Cocina 40 4

Bolivia Occurrence of Heavy Oils Ocurrencia... In the border of the Foreland Basin Marañón. Long Migration route since the kitchens in the Sub- Andean Trend. Surface Deposits, to 2,000 meters deep. Origin, Cretaceous Petroleum System. Barrier for heavy oil accumulation. Jurassic Petroleum System, Unknown Potential. Cuenca s Tumbes talara Lancones Ecuador SP CHONTA SP CRETACEO- TERCIARIO Cuenca s Trujillo Salaverry Cuenca Pisco Cuenca Marañón SP PUCARA SP AMBO SP AMBO Cuenca Ucayali SP ENE 200 km SP AMBO Colombia STILL UNKNOWN ARCO DE IQUITOS Brasil Areas de Cocina SP CABANILLAS Cuenca M. de Dios SP SIPIN Cuenca Titicaca 41 4

Basins: Marañon in Peru Oriente in Ecuador 2 Occurrence of Heavy Oils 1 6 5 3 4 ITT, 1970-93 BARRET, 1998 UNION, 1974 1 2 3 BARRET REPSOL UNION OXY 2 1 1 REPSOL,2005-06 4 3 3 2 OXY, 1978-88 42

8. Reserves of Heavy Oils 43

Reserves of Heavy Oils Piraña OOIP (MMstb) 30.1 0 125.7 227 383 Reserves (MMstb) 3 0 19.2 65.8 88 Recovery Factor (%) 10.00% 0.00% 15.30% 29.00% 23% Paiche ORIGINAL OIL IN PLACE (OOIP) AND RESERVES 2P (PROVEN + PROBABLE) - PER FIELD AND RESERVOIR Chonta Field Basal Tema Vivian Glauconitic and Upper Cetico TOTAL Member OOIP (MMstb) 193.7 58.1 54.3 128.4 435 Reserves (MMstb) 48.4 14.5 6.1 32.1 101 Recovery Factor (%) 25.00% 25.00% 11.20% 25.00% 23% Perenco Block 67 Dorado Sur OOIP (MMstb) 8.7 0 24.4 60.3 93 Reserves (MMstb) 0.7 0 2.8 17.5 21 Recovery Factor (%) 8.00% 0.00% 11.40% 29.00% 22% Dorado Central OOIP (MMstb) 3.9 0 23.3 14.4 42 Reserves (MMstb) 0.3 0 2.7 3.9 7 Recovery Factor (%) 8.00% 0.00% 11.50% 27.00% 17% Dorado Norte OOIP (MMstb) 0 0 19.5 101.1 121 Reserves (MMstb) 0 0 0 0 0 Recovery Factor (%) 0.00% 0.00% 0.00% 0.00% 0.00% Total Dorado OOIP (MMstb) 12.6 0 67.2 175.8 255.5 Reserves (MMstb) 1 0 5.5 21.4 27.9 Recovery Factor (%) 8.00% 0.00% 8.10% 12.20% 10.90% BLOCK 67 TOTAL OOIP (MMstb) 236.4 58.1 247.2 531.2 1073 Reserves (MMstb) 52.4 14.5 30.8 119.3 217 Recovery Factor (%) 22.20% 25.00% 12.50% 22.50% Source: Block 67 Reserves Yearly Book, to December 31, 2011 (Perenco Peru) 44

Reserves of Heavy Oils SUMMARY of Reserves Block 67 Perenco Total (2P) Total (3P) Proven + Probable Proven + Probable + Possible Fields Recovery Recovery OOIP Reserves OOIP Factor Factor Reserves MMBO % MMBO MMBO % MMBO Piraña 383 23% 88 521 24% 124 Dorado 256 11% 28 304 14% 114 Paiche 435 23% 101 501 23% 114 Total Block 67 1073 20% 217 1326 21% 280 Source: Block 67 Reserves Yearly Book, to December 31, 2011 (Perenco Peru) 45

Reserves of Heavy Oils Estimated Production Block 67 Perenco Source: Block 67 Reserves Yearly Book, to December 31, 2011 (Perenco Peru) 46

Reserves of Heavy Oils Reserves REPSOL Block 39 Recent Discoveries: 1. Buenavista 2. Delfín 3. Raya Old Wildcats: 1. Cunambo 1X, drilled in 1974 2. Arabela 1X, drilled in 1994 47

Reserves of Heavy Oils Repsol Block 39 Probable Oil Reserves Block Field MMBO/well N Wells MMBO Buena Vista 1.74 50 87 39 Delfin 1.74 53 92 Raya 1.74 55 96 Total Probable Reserves 275 Possible Oil Reserves Block Field MMBO/well N Wells MMBO Buena Vista 1.74 15 26 39 Delfin 1.74 20 34 Raya 1.74 24 41 Total Possible Reserves 100 Ministry of Energy and Mines (December 31, 2011) 48

Reserves of Heavy Oils Resources Repsol Block 39 Oil Resources Block Field MMBO/well N Wells MMBO Cunambo 1.5 12 18 39 Tangarana 1.5 17 26 Arabela 1.5 15 23 Raya 4 1.7 20 34 Total Resources 100 Probable MMBO Possible MMBO Resources MMBO TOTAL MMBO 275 100 100 475 Ministry of Energy and Mines (December 31, 2011) 49

Reserves of Heavy Oils PLUSPETROL Block 1AB HEAVY OIL (MMBO) PLUSPETROL BLOCK 1AB FIELDS PROVEN RESERVES OOIP (MMBO) API ACCUMULATED PRODUCTION (MMBO) BARTRA 242.4 11.4 30.74 JIBARO / JIBARITO 530.0 10.4 98.84 SAN JACINTO 673.4 15.6 67.08 TIGRE 50.8 11.0 - TOTAL 1,496.6 196.66 MER (Maximun Recovery Efficiency) Pulspetrol Norte S.A. Block 1AB January 2012 50

Reserves of Heavy Oils HEAVY OIL PRODUCTION PLUSPETROL BLOCK 1AB FIELDS 31 December 2013 BOPD API JIBARITO 2,904 10.4 JIBARO 1,221 10.5 SAN JACINTO 2,778 15.6 TOTAL 6,903 Reserves and Expectations of Resources, Pluspetrol Norte S.A. Block 1AB December 31, 2013 51

Prospects and Leads Blocks 67 y 39 52

9. Final Remarks 53

Final Remarks Occurrence of Heavy Oil (10-23º API) in portion North East of Marañon Basin, produced since the early 70 s - Iquitos Arch and surrounding areas. Heavy Oil in the Structural Alignment with ITT (Ishpingo, Tambococha y Tiputini) from Ecuador Numerous prospects and leads in areas where Cretaceous source rocks discoveries took place (Chonta formation) Highly attractive potential in Iquitos Arch where Jurassic Pucara formation source rocks are located. 54

Final Remarks Occurrence of Heavy Oils in Maranon Basin PERENCO commercial heavy oil, BLOCK 67, 3 fields 16.5 API o OOIP 1,073 MMBO, Estimated Reserves (2P) 217 MMBO (Recovery Factor 20%) o OOIP 1,326 MMBO, Estimated Reserves (3P) 280 MMBO (Recovery Factor 21%) REPSOL 3 heavy oil discoveries, BLOCK 39 10.5 13.2 API o Probable reserves: 275 MMbls o Possible reserves: 100 MMbls o Resources: 100 MMbls PLUSPETROL Old exploitation of heavy oil 10-15º API, Block 1AB, 4 fields (including Bartra) o Accumulated production: 196.66 MMBO, OOIP 1,496.6 MMBO (RF 18.7%) o Actual production: 6,903 BOPD 10-15º API 55

Final Remarks Peru has 18 sedimentary basins with 83 million hectares (ha), most of them under an immature exploration stage. There are 73 contracts of exploration and exploitation with 33 million hectares. There is a remaining of 50 million ha for new contracts. It is estimated that Peru will have a total of up to 4,000 million boe of proved reserves during 2014, in which the natural gas and NGL would be the major volume. As a result of the new discoveries, the proved reserves of oil, natural gas and NGL have had a sustained increment during the last 20 years. The maintenance of an investment level of around 2,000 million of US $ per year is required for the purpose of improving the actual reserves level. 56

Final Remarks New bidding rounds in 2014: a. 26 new blocks for hydrocarbon exploration activities in the Jungle Amazon region. b. 6 Offshore blocks for hydrocarbon exploration activities. c. 1 Block with current production Block 1-AB Excellent projects for a still underexplored country. 98% of the wildcats drilled is concentrated in just four basins. Peru offers the best economic framework and business environment as a destination for foreign investment. The Data Bank offers technical information regarding these basins free of charge for enterprises interested in hydrocarbon exploration and exploitation activities in Peru. 57

Thank you for your attention www.perupetro.com.pe 58