GUATEMALA AN UNEXPLOITED OPPORTUNITY

Field	Sulfur Content	API Gravity	Combustion (kcal/kg)	Cinematic Viscosity cSt @ 100F
Xan	6.18%	16.0	9997	287
Rubelsanto	3.20%	23.6	9850	26.65
Chocop	7.03%	13.7	10.167	423
Yalpemech	< 2%	32.9	NA	NA

The Pacific reservoir has a depth of over 10,000 feet and is associated with the presence of methane gas.  The exploration of this zone will start in 2009. 

The Government of Guatemala has committed to increase the production of oil, based on three actions:  increasing the drilling of the known reserves in Peten, increasing production to 100,000 barrels/day (it is estimated that the reserves will last approximately 20 years); increasing exploration efforts to promote production of over 200,000 barrels/day; and the opportunity to construct a refinery to offer refined products to the Central American region.

The Government of Guatemala has committed to increase the production of oil, based on two actions:

• Increasing the drilling of the known reserves in Peten, increasing production to 100,000 barrels/day (it is estimated that the reserves will last approximately 20 years);
• Increasing exploration efforts to promote production of over 200,000 barrels/day; and

GAME RULES:

• The potential of performing oil operations with contracts for a term of up to 25 years
  • Exploration and exploitation
  • Development
  • Production
  • Separation
  • Compression
  • Transformation
  • Hydrocarbon transportation and marketing
• Special authorizations that enable superficial investigation survey operations
• Establishment without operations –Free Trade Market
• Installation and operation of Free Service Stations
• Free installation and operation of Petrochemical Plants

The Oil Sector is developed in a free and competitive atmosphere and the legal framework governing the sector is based on the following:

• Hydrocarbon Law, Decree 109-83 and its reforms
• General Hydrocarbon Law Regulations, Government Agreement 1034-83 and its reforms
• Invitations to tender with the objective of entering into Hydrocarbon Exploration and Exploitation Agreements, Government Agreement 764-92; and its Regulations, Government Agreement 754-92.
• Hydrocarbon Marketing Law, Decree 109-97; and its Regulation, Government Agreement 522-99.

ROYALTIES AND STATE PARTICIPATION

• Royalties:  Structured around the average monthly API gravity, by volume or numeric value, as indicated below:
  • Fixed 20% at 30°API
  • ± 1% for each ± API Degree
  • 5% royalty minimum
• State Participation:  State Participation = Net Production – Royalties – Recoverable costs (all capital, exploration, exploitation and development, operation costs and administrative expenses), as per the following table:

INVESTORS GUARANTEE

Guatemala’s current legislation offers greater safety, granting equal rights and obligations to national and foreign investors.

The Government’s commitment regarding productive investment is to provide general rules that are clear, positive and stable.

The Guatemalan legislation guarantees the legal certainty and security required by investors according to the National Negotiation Principle: 

• Foreign Investment Law- Decree 9-98
• Code of Commerce

THE ROLE OF THE STATE/ RELATIONSHIP WITH THE OPERATOR

• PRIOR TO OPERATIONS
  • Contract and Guarantees (Tender, contract model)
  • Work schedules
  • Approval of works
  • Oil Prices and Pipeline Transportation Rates
  • EIA approval
• DURING OPERATIONS
  • Field and Office Operation Supervision
  • Expenses Auditing
  • Periodic Reports
  • Production Control
• THREE TYPES OF CONTRACTS
  • Hydrocarbon Exploration and Exploitation Contract
  • Incremental Production and Administration Contract in Oil Exploration and Exploitation Operations.
  • Oil Service Contract

CONTRACT GRANTING AND SIGNING PROCEDURE

1. Designing and selecting the areas for bidding
2. Invitation to tender
3. Promoting the areas
4. Receiving the bids
5. Grading the bids
6. Receiving the bids
7. Financial capacity
8. Technical capacity
9. Job offers that are equal to o greater than the minimum jobs set out for each area
10. Legal representation in Guatemala
11. Awarding the areas
12. Signing of the contract by the Legal Representative of the Company, Department of Power and Mining, and ratification by the President of the Republic during a cabinet meeting.
13. Publication in the Diario de Centro América (the official gazette) 

FOLLOWING AREAS THAT ARE UP FOR TENDER

Available areas: 

• The size of the available areas depends on the contracts granted and the protected areas surrounding such.
• An area may be made up of up to six blocks measuring 50,000 hectares each, for up to a total of 300,000 hectares.
• An off-shore area may contain up to six blocks measuring 80,000 hectares each, for up to a total of 480,000 hectares.
  

Areas on the Pacific Coast:

• Pacific Area 1. 

Located in the Pacific Mining Area, South of Guatemala
PROPOUNDED AREA: 469,505 hectares.
OBJECTIVE: Two possible stratigraphic traps have been established, resulting from the discordance between the Paleocene and the Eocene, and between the Eocene and the Miocene.  It has 1,840 kilometers of 2D seismic information and a well drilled in 1972. 

• Pacific Area  2.

Located in the Pacific Mining Area, South of Guatemala
PROPOUNDED AREA: 461,595 Hectares.
OBJECTIVE: . The San José Canyon is located in this area.  This is of interest since it has been evidenced that the turbiditic reservoirs (Golf of Mexico) associated with underwater reservoirs constitute fertile oilfields in other parts of the world

• Pacific Area 3.

Located in the Pacific Mining Area, South of Guatemala.
PROPOUNDED AREA: 475,574 hectares.
OBJECTIVE: The Deep Sea Drilling Project drilled 16 stratigraphic Wells in the area during its 67 and 84 travels, many of which showed the presence of gas and methane hydrate (also known as methane clathrate).

Structural and stratigraphic traps have been defined based on the seismic records and Wells that have been drilled.

Many occurrences of methane hydrates exist in the continental slope, evidenced by various wells drilled by DSDP in 1979 and 1982.  Bottom Simulating Reflectors (BSRs), which indicate the presence of methane hydrate, can be seen in different seismic sections.

Northern Areas

• Area 1- Cotzal.

Located in the Northwestern region of Guatemala, in the Petén Mining Area.
PROPOUNDED AREA: 93,333.09 hectares
OBJECTIVE: To determine the presence of hydrocarbons in the Mid-Cretaceous period, proceeding from the production evaluation of 4,000 bopd in the Lacantum well, drilled in the Mexican territory.

• Area 4 -Laguna Blanca.

Located in the Northwestern region of Guatemala, in the Petén Mining Area.
PROPOUNDED AREA: 126,649.35 hectares.
OBJECTIVE: To evaluate the potential of the Laguna Blanca structure.  Reports on the drilled well state that there are 330,000 cubic feet of gas a day, as well as the production in Belize of 500 bopd per well, located at a distance of 35 km from the propounded area.

• Area 9 -Piedras Negras.

Located in the Northwestern region of Guatemala, in the Petén Mining Area.
PROPOUNDED AREA: 108,028.64 hectares.
OBJECTIVE: To determine the hydrocarbon potential in different structures identified in the area and confirm the presence of oil obtained in channel and core samples, while the Piedras Blancas-1 well was being drilled.