This document provides background information on Colombia's oil and gas industry and upcoming licensing round. Some key points: - Colombia has significant oil and gas reserves and production and is seeking to increase foreign investment in the sector. - The National Hydrocarbons Agency of Colombia will hold an licensing round in June 2010 to auction exploration blocks. - The round will offer 225 blocks spanning a large area of Colombia. Bidders will commit to minimum exploration programs and can offer additional investment or production share percentages. - Exploration and production contracts and special technical evaluation agreements will be awarded. These contracts specify economic terms, work programs, environmental and social obligations, and confidentiality requirements. - Colombia has strong environmental and

1. for hydrocarbons

2. Contents – Part I Colombia Industry background Open Round Colombia 2010 Legal aspects and Contracts Communities and environmental priorities

4. 2nd population : 45 million

5. 3rd crude producer: 800,000 b/d (2010 est.)

7. - sedimentary (land) : ~ 0.8 million sq km

9. FDI by economic activity (2008) Source: Banco de la República

10. Growing investment in hydrocarbons Historic FDI in oil & gas *E = estimated Source: Banco de la República

11. Institutional framework - since 2003 Ministry of Mines and Energy

13. its efficient and transparent administration of the hydrocarbon resource and coordinated work with both industry and community; and

15. Oil in South America Proven reserves (Billion barrels) Venezuela 99,4 Production 2,5 Colombia (E) (2%) Growing Brazil Ecuador 3,8 12,6 Falling (*) 2,6 Argentina (12%) (*) Production as of December 2009 (E) = end-2009 estimate Sources: BP Statistical Review 2009; ANH Analysis

16. Gas in South America Proven reserves (Tera cubic feet) Venezuela 170 Production Trinidad & Tobago 17 Colombia (E) 4,1 Growing (2%) Falling Brazil 12 Bolivia (*) Argentina 15 (7%) (*) Production as of December 2009 *E = reserves estimated Sources: BP Statistical Review 2009; ANH Analysis

17. Reserves Oil Gas (E) (E) (E) = end-2010 estimate

18. Growing production Average annual production Average monthly production (last 12 months) Oil Gas Oil Gas

19. Exploration activity has increased considerably Million (Ha) Open Round TEA E&P Production

20. Licensing activity continues to increase and seismic data acquisition activity is high … * TEA: Technical Evaluation Agreement

21. … the highest number of exploratory wells and high success rates …

22. Perceptions on Colombia´s attractiveness Prospectivity 5 4 3 Fiscal terms Personal safety 2 1 Expected 0 Colombia Political stabilitya Legal security Source: Arthur D. Little, 2008 Economic stability

23. E&P operator companies in Colombia 18 Plus 70 non operators

25. A good business environment

26. An appropriate institutional framework

27. A competitive and fair contract

28. Competitive rounds

29. Stability remains in the sector

31. Community relations

32. Social investment

33. Employment of locals

34. Roads

35. Salaries

36. Local politics

38. Contents Colombia Industry background Open Round Colombia 2010 Legal aspects and Contracts Communities and environmental priorities

39. Areas on offer Number of Blocks Area (Ha) 138 5.893.685 8.459.046 31 56 33.253.683 Total 225 47.606.414 *TEA: Technical Evaluation Agreement

40. Minimum exploratory program

41. Minimum exploratory program

47. Key Milestones 15th October, 2009 Preliminary terms of reference Final terms of reference 19thFebruary, 2010 Pre qualification documents 19thFebruary - 19thApril, 2010 Pre qualification list 24thMay, 2010 Bidding 21st June, 2010

48. Road Show London, Edinburgh Toronto Singapore Shanghai Calgary Madrid Perth Houston Río de Janeiro New York Sydney

49. Data packs * Gives the right to participate in the process

51. Additional investment in seismic and wells shall be credited on the basis of Unitary Prices’ Table

53. Financial

54. Operational

55. Environmental

58. Documents as required for legal, financial, technical, operational, environmental and/or corporate social responsibility qualification criteria

59. Original documents in Spanish language, or translated by official translator (No apostille necessary at this stage)

61. Participation interest of Operator must be at least 40%.

62. Duration: at least for validity of E&P contract and/or Special TEA plus one more year

63. Each participant and its members shall be individually evaluatedNo participant may submit more than one bid for the same area or be part of more than one association or plural bidder for the same area Note: no temporary unions are allowed to bid

65. Type 2 Area: US$20 MM

66. Type 3 Area: US$200 MMFinancial statements with notes for last three (3) years in USD, dully audited The above requirements per block are cumulative (*) Individually or per consortium

69. Geologist

73. Last environmental management annual report

74. Corporate social responsibility policy document

76. Cover letter (model provided in ToR)

77. Bidding format with:

78. Additional investment proposed - in multiples of USD 100,000

79. “X%” – percent participationin production

80. Letter of intent to conform consortium, if applicable

82. Contents Colombia Industry background Open Round Colombia 2010 Legal aspects and Contracts Communities and environmental priorities

83. Contractual aspects Contents: Legal framework Contract generalities Main contract provisions Special TEA Contract Common aspects of E&P and special TEA contracts

85. Law 80 of 1993, Article 76.

86. Decree-Law 1760 of 2003.

89. obtain all required permits

90. indemnify the ANH free of any liabilities

91. observe best oil industry practices

94. Exploration: 6 years

95. Production: 24 years

96. Exploration period

97. Two phases of 36 months each.

99. Evaluation program must be submitted within six (6) months after notice of discovery

100. Maximum duration of evaluation is one (1) year, with possible extensions:

101. 1 additional year when exploratory wells are included

103. Starts after declaration of commerciality and submission of development plan

105. Use of subsoil (to cover administration costs)

106. Participation in high prices

107. Technology transferPlus: share of production offered in bidding round

108. Economic terms

110. Applied to gross average volume of production by field

111. Paid in cash or kind at ANH’s choiceProduction % (per field) For light crudes 25% 20% 8% 600 400 5 125 Production Level (1,000 boe/day)

112. High price participation (oil) A share of production (Q) equivalent to the established percent (S) of the part of the average monthly reference WTI price (P) that exceeds a base price (Po), divided by the average monthly reference price (P) – applies after cumulative production reaches 5MMBls table 1 Where: P = WTI monthly average price (in USD) Po = Base price (in USD) [table 1] S = established percentage [table 2] table 2

113. Illustration For API gravity = 20° -> Po = USD 34,6 Q(%) 50 40 34 27 17 P (WTI) 4P 0 34,6 69,2 103,8 138,4 173,1 o 5P P P 2P 3P o o o o o

116. Po = Reference base price (see table)

118. All information subject to confidentiality agreements:

119. Data : 5 years

121. Contracts general information

122. Exploration and Production Contract

123. Special TEA Contract

125. Economic terms:

127. Selection of one area for an E&P contract

128. Exclusivity period until selection of an E&P contract, or end of term

130. Selection of a second area for an E&P contract, waiving its rights to match a third party proposal

132. Nomination of additional areas for E&P contract

135. Contracts general information

136. Exploration and Production Contract

137. Special TEA Contract

139. Right to invoke arbitration for dispute resolution

141. Follow community consultation procedures when required

143. 100% of additional investment

144. 50% upon signature of the contract

145. 50% at end of first 18 months-> Additional investment guarantee may be reduced as the value of activities are credited after their completion

146. Contract relinquishment Opportunity: within the first 18 months of the first phase Condition: the contractor shall transfer to the ANH 50% of the value of all non-fulfilled activities of the Minimum Exploratory Program and 100% of the balance of additional investmentnotused in exploration.

147. Contents Colombia Industry background Open Round Colombia 2010 Legal aspects and Contracts Communities and environmental priorities

148. MINISTRY OF ENVIRONMENT, HOUSING AND TERRITORIAL DEVELOPMENT Environmental and Social Priorities Viceministry of Environment

150. 2nd country with more biodiversity in the world

151. 1st in species biodiversity by square kilometer

152. 68,7% of the continental surface is covered by natural ecosystems, including rainforests, grasslands and natural water bodies.

153. Colombia has 150 sp. of Corals and 2200 sp. marine molluscs.

154. 61 million ha. of natural rainforest

155. 2 million ha. of paramos

156. 16 million ha. of savannas

157. 24.5 million ha. of dry lands (arid and semiarid)

158. 2.5 million ha. of wetlands (natural continental water bodies, continental hydrophytes, coastal lagoons, mangrove swamps)

160. 87 Indigenous ethnics

161. 3 groups of Afro-Colombian population: San Basilio de Palenque raizals (roots of people), San Andrés, Providencia and Santa Catalina raizals and Afro-Colombian population in general

162. 1.392.623 Indigenous: 3.43%

163. 4.311.757 Afro-Colombians: 10.62%

165. 33 CARS: Regional Level

166. 6 AA: Urban Level

167. 5 institutes dedicated to environmental investigation

169. The permissions for water use, air use and species banned, among others, are implicit on the Environmental Licence.

170. Environmental Impact Studies are elaborated according with the existing terms of reference.

171. Any project could be considered by public hearing

173. Environmental Impact Studies are done by companies simultaneously with the project design.

174. Total process time at the hydrocarbon sector is 11 months. The user takes 6 months approximately. Source: Oil Colombian Association, 2008.

176. Land Area: 1.139.951 Km2

177. Coastal line: 3.513 Km

178. Territorial Water Area: 892.118 km2

181. Environmental Studies (DAA y EIA)

182. Procedure

183. Process of participation

184. Requirements

186. ENVIRONMENTAL LICENSING – KEY FACTS Identify if the project requires removal of forest reserve areas. Control of the quality of the environmental studies specifically. Collect primary information during the exploratory stage of the project Fulfill the guidelines of participation