Natural Gas Transportation

Natural Gas Transportation

CONCESSION CONTRACT FOR THE NATURAL GAS TRANSPORTATION BY PIPELINES FROM CAMISEA UP TO THE CITY GATE

SUMMARY

Contracting Parties

– Grantor:  Ministry of Energy and Mines

– Grantee Partnership: Consortium composed by Tecgas N.V., Pluspetrol Resources Corporation, Hunt Pipeline Company of Perú L.L.C., SK Corporation, L’ Entreprise Nationale Sonatrach and Graña y Montero S.A.A.

Contract Supervising Entity

OSINERG

Contract Purpose

Design, supply of goods and services, construction, operation and maintenance of the System of Natural Gas Transportation by pipelines from Camisea up to the City Gate, and rendering of the Natural Gas Transportation service from Camisea to the City Gate.

Natural Gas Transportation

Terms of the Contract

– BOOT Contract for the Concession of the Natural Gas Transportation from Camisea to the City Gate.

– The Grantee Partnership incorporated by virtue of the Contract hereof was granted the both, concessions of Natural Gas Distribution in Lima and Callao and Liquid Transportation, signing the corresponding concession contracts. Within a maximum term of fifteen months as of the closing date (Contract signing date), said Grantee Partnership shall assign the Concession Contract for the Natural Gas Distribution to a Distribution Grantee Partnership, being the original Grantee Partnership the holder of the Concessions of Natural Gas Transportation from Camisea to the City Gate and Liquid Transportation.

Concession Scope

The concession covers the route of the Natural Gas pipeline from Camisea up to the City Gate. The city Gate shall be located in Pampa Río Seco at Santa María del Mar in the Province of

Lima                                                                                                                                                                                             .

The granting of the concession doesn’t confer exclusiveness of the route

Concession Exploitation

– Concession Goods:

These are the whole realties and personalities, such as rights, pipes, equipment, compression stations, delivery systems, fittings and, in general, all works, equipment and facilities required for the Natural Gas Transportation, used by the Grantee Partnership, pursuant to the Regulation terms for Hydrocarbon Transportation by Pipelines and the Concession Contract for Natural Gas Transportation, to render the service of Natural Gas Transportation. The Concession goods shall be provided by the Grantee Partnership and transferred to the Grantor at the Concession

Natural Gas Transportation

Termination.

– Service of Natural Gas Transportation:

This is the utility rendered by the Grantee Partnership consisting of receiving, transporting and delivering a determined volume of Natural Gas, through the System of Natural Gas Transportation, from the reception point (Las Malvinas in Camisea) up to the delivery point (located in the City Gate), pursuant to the Concession Contract for the Natural Gas Transportation by Pipelines and the Applicable Laws. For the Service rendering, the Grantee Partnership shall operate the System of Natural Gas Transportation and use the rest of goods forming the Concession Goods.

Concession Term

The Concession is granted for a thirty-three year term as of the Closing Date. Four years before the termination, the Grantee Partnership may request the term extension, up to ten years and so forth until completing a maximum of sixty years, included the ordinary legal effect and extensions. The General Hydrocarbon Bureau of the Ministry of Energy and Mines shall assess and admit the extension applications. A Supreme Resolution shall be issued and an extension Agreement shall be subscribed. Likewise, new conditions that shall regulate the extension shall be determined on that occasion.

Payment terms of the Concession

– The granting of the concession shall be free of any charge.

– The Grantee Partnership, however, shall make a payment to OSINERG (Supervising Body of Investment in Energy), CTE (Energy Tariff Commission) and DGH (General Hydrocarbon Bureau), pursuant to what is provided in Article 3° of the Law No. 27116 provided by the Energy Tariff Commission. The total amount of said payment shall not exceed the 1% of its annual sales.

Natural Gas Transportation

Service of Natural Gas Transportation

– The Grantee Partnership shall account on a Strategic Operator of Transportation. This Prequalified Strategic Operator shall carry out the technical operations of the System of Natural Gas Transportation and Liquid Transportation, shall appoint the Transportation Operation Manager and shall be the holder of the Minimum Working Interest at least for a ten year-term, as of the closing date. The Minimum Working Interest of the said Operator is 30% of the Grantee Partnership’s capital stock.

– Tecgas N.V. Company is the said Prequalified Strategic Operator of Transportation.

– The Independent Consumers of Natural Gas located in the Distribution Concession Area (Department of Lima and Constitutional Province of Callao), that is, those which have a consumption higher than thirty thousand cubic meters per day (30 000m³ /day), consumers of Natural Gas located out of that area, the New Holder Grantee Partnership of the Concession for the Natural Gas Distribution in Lima and Callao after the corporate brake-up and the traders, all they shall have right to open access to the System of Natural Gas Transportation from Camisea to the City Gate, but only for transporting Gas produced by the Producer holder of the hydrocarbon exploitation license in block 88, Camisea, during the first 10 years as of the Commercial Operation Starting Up. After the expiration of that term, the gas produced by other producers may be transported.

– · The Service of Natural Gas Transportation must be rendered in equal treatment, without discrimination, in a trustful, confidential, continuous and efficient way.

Tariffs of Natural Gas Transportation

– · The tariffs for the Service of Natural Gas Transportation are fixed by direct consequence of the Economic Offer made in the bidding.

–  The Economic Offer of the Grantee Partnership was as follows:

Natural Gas Transportation

Cost of Gas Transportation Service from Camisea to the City Gate US$956,340.00

Cost of Liquid Transportation Service from Camisea to Coast

US$ 401,373.00

Cost of Gas Distribution Service in Lima and Callao

US $91,287.00

= Total Service Cost: US$ 1,449,000.00

– The Tariff is the compensation for the use of the Transportation Network. The said tariff shall be reviewed in the term and under the conditions provided by the Promotion Law for the Natural-Gas-Industry Development, its Regulation, the Regulation of Hydrocarbon Transportation by Pipelines in whichever it is applicable, and the dispositions of the CTE.

– The Economic Offer has been presented considering that the resulting tariff of the proposed Cost of Service for the Natural Gas Transportation (Cost of Service) shall be to compensate the construction and operation of a Natural Gas pipeline with a minimum capacity of four hundred and fifty million cubic feet per day (450 MCFD), which shall be reached gradually.

– The tariff shall be named Regulated Tariff. For the case of the Electric Generators, the Regulated Tariff shall be equal to the Basic Tariff, which is the quotient divided into the Cost of Gas Transportation Service and the total Guaranteed Capacity of the Transportation Network. The Total Guaranteed Capacity of the Transportation Network shall be equal to the present value of the monthly Guaranteed Capacities, considering the Period of Recovery (period between the Commercial Operation Setting Up and the due date of the Contract) and the Discount Rate fixed in the Concession Contract for the Gas Transportation. The Regulated Tariff for Other Consumers (other than the Electric Generators) shall be equal to the quotient of the present value of annual Guaranteed Revenues divided into the present value of the projections of the annual Contracted Capacities.

Natural Gas Transportation

Rights and Duties of the Grantee Partnership

– The Grantee Partnership shall design, supply the required goods and services for the construction of the System of Natural Gas Transportation by pipelines, operate and maintain the referred System, as well as render the service of Natural Gas Transportation from Camisea to the City Gate.

– The Grantee Partnership shall execute the works involved in such a way that the commercial operation starting up occurs within 44 months after the Closing Date. Once the Commercial Operation Starts Up, the System of Natural Gas Transportation shall be able to transport Natural Gas from the reception point to the delivery point, covering at least the guaranteed capacity, as it is indicated in the clause 14 of the Contract.

– The service shall be trustful, efficient, continuous, with equal treatment for each service category and it shall meet the quality standards of the Applicable Laws, the international standards recognized in the Applicable Laws and in the Appendix Nº 1 of the Concession Contract.

– The Grantee Partnership shall have contractual and non-contractual civil liability insurances. Likewise, it shall obtain a policy that covers the value of the system of Natural Gas Transportation and the gas losses.

Investments and Incentives

– The economic proposal of the Grantee Partnership is comprised by the Total Service Cost, which consists of the Cost of Gas Distribution Services, Gas Transportation and Liquid Transportation. The Cost of Natural Gas Transportation Service, as well as the costs of every segment, is formed by the investment cost plus the operation and maintenance cost. On the basis of the Cost of the Natural Gas Transportation Service, the Grantee Partnership shall be entitled to charge the Regulated Tariff for the use of the Gas Transportation Network. Its investment commitment shall be formed by the System of Natural Gas Transportation from Camisea to the City Gate.

Natural Gas Transportation

– The Grantee Partnership shall be granted the incentives provided by the Supreme Decree Nº 059-96-PCM, its regulation and other applicable supplementary dispositions for the investors that have been granted concessions under the scope of said rule. Additionally, the Ministry of Energy and Mines, by proposal of the CTE and by Supreme Decree Nº 057-99-EM dated

11.18.99 have granted to the Camisea project of transportation system main network and high pressure distribution, the guarantee considered in the Law Nº 27133, Promotion Law for the Natural-Gas-Industry Development. This mechanism guarantees the Grantee Partnership the annual revenues that properly compensate the costs of the high-pressure network services, subject matter of its economic offer. Likewise, the S.D.057-99-EM appointed the Empresa Transmisión Eléctrica Centro Norte S.A. (ETECEN) (Center North Electric Transmission Company) as the entity responsible for the collection of the annual amount fixed by the CTE to make effective the afore mentioned guarantee of main network, and its payment to the Grantee Partnership, in monthly installments.

Guarantee of Contract Fulfillment

– At the closing date, the Grantee Partnership submitted in favor of the Ministry of Energy and Mines, a guarantee (Stand By letter of credit) of faithful fulfillment for US $92 millions, with legal effect up to one hundred and fifty (150) calendar days after the commercial operation starting up. Said guarantee is the same one granted for the Concession Contract for the Natural Gas Distribution and the Concession Contract for Liquid Transportation from Camisea to the coast.

– On the date of the Commercial Operation Starting Up, a US$ 2 million bank guarantee shall be granted to cover all the Grantee Partnership’s liabilities until the expiration of the Contract term or its Forfeiture.

Concession Forfeiture

– Expiration of the Contract term.

– Agreement between the parties

– Rescission of the Concession Contract

– Declaration of forfeiture for the grounds and under the procedure considered in the Regulation of Hydrocarbon Transportation by Pipelines.

Natural Gas Transportation

– Acceptance of the Concession abandonment filed by the Grantee Partnership pursuant to the provisions of the Regulation for the Hydrocarbon Transportation by Pipelines.

Controversies Resolution

– All conflicts and controversies regarding the Contract shall be solved directly by the Parties.

– In case that the Parties do not solve directly the conflict or controversy in the term set for it, it shall be defined as follows:

– Technical controversy: Decision of an expert appointed by the parties.

– Non-Technical Controversy: International arbitration to be carried out in Washington D.C., United States of America, according to the rules of Reconciliation and Arbitration of the International Center of Disputes Arrangement on Investments (“CIADI”) established in the Agreement of Disputes Arrangement on Investments between States and Nations of other States, approved by Peru by Legislative Resolution No. 26210, if the non-technical controversy involves an amount higher than ten million of US Dollars or if it can not be quantified or valued in money or if the quantity of which is not agreed by the parties. For controversies of an amount equal or lesser than ten million of US Dollars, the mechanism will be the national arbitration according to the Regulations of Reconciliation and Arbitration of the Center of National and International Arbitration of the Chamber of Commerce of Lima, with supplementary application of Law No. 26572, General Arbitration Law.