HYDROCARBON LAW LAW N° 3058 LAW OF MAY 17, 2005 Dr HORMANDO VACADIEZ VACADIEZ PRESIDENT Of the HONORABLE NATIONAL CONGRESS Inasmuch as the Honorable National Congress has sanctioned the following Law, in accordance with the prescribed thing by Article 78 of the Political Constitution of the State, I promulgate it so that it is had and it fulfilled like Law of the Republic: THE HONORABLE NATIONAL CONGRESS, DECREES: HYDROCARBON LAW TITLE I REACHES OF The HYDROCARBON LAW And EXECUTION And FULFILLMENT Of the REFERENDUM OF JULIO 18, 2004 ABOUT HYDROCARBONS POLICIES IN BOLIVIA CHAPTER I ARTICLE 1°. - (It reaches). The dispositions of the present Law Norman the hydrocarbons activities according to the Political Constitution of the State and establish the fundamental principles, norms and procedures that they prevail in all the national territory for hydrocarbons sector. All individual or collective, national or foreign, public the people, of societies of mixed and deprived economy that makes and/or makes activities in the hydrocarbons sector, Oil fields Fiscal Bolivians (YPFB), the servants public, consumers and users of the services public, are put under the present Law. CHAPTER II EXECUTION And FULFILLMENT Of THE REFERENDUM I ARTICLE 2°. - (Object). This chapter intends the execution and fulfillment of the results of the Referendum of July, 18, 2004 that formulates the decision of the town of Bolivia. ARTICLE 3°. - (Abrogation). The Hydrocarbon Law is repealed N° 1689, of April, 30, 1996. ARTICLE 4°. - (Natural Gas like Strategic Resource). One recognizes the value of the Natural Gas and other hydrocarbons like strategic resources, that they help to the objectives of economic and social development of the

country and to the foreign policy of the Bolivian State, including the profit of a useful and sovereign exit to the Pacific Ocean. ARTICLE 5°. - (Property of Hydrocarbons). By sovereign mandate of the Bolivian town, expressed in the answer to the question number 2 of the Binding Referendum of 18 of 2004 July, and in application of the Article 139° of the Political Constitution of the State, recovers the property of all hydrocarbons in Well Mouth for the Bolivian State. The State will exert, through Oil fields Fiscal Bolivians (YPFB), its proprietary right on the totality of hydrocarbons. Holders that had subscribed Contracts of Shared Risk to execute the activities of Exploration, Operation and Commercialization, and had obtained licenses and concessions under protection of the Hydrocarbon Law, N° 1689, of 30 of April of 1996, they will have to become obligatorily to the established contract modalities the present Law, and to adapt to its dispositions in the term of one hundred eighty (180) days calendar computable from its use. ARTICLE 6°. - (Refunded of Oil fields Fiscal Bolivians - YPFB). Refunded Oil fields Fiscal Bolivians (YPFB), recovering the state property of the actions of the Bolivians in the oil companies capitalized, so that this Estate Company can participate in all the productive chain of hydrocarbons, reconstructing the Bottoms of Collective Capitalization and guaranteeing the financing of the BONOSOL. ARTICLE 7°. - (Export and Industrialization of the Gas). The Executive authority, within the established Economic regime in the Political Constitution of the State, will be responsible for:

a) To establish the policy for the development and opening of markets for the Export of the gas.

b) To promote the massive consumption of the gas in all the national territory to improve the quality of life of the Bolivians, to dynamic the productive base and to elevate the competitiveness of the national economy.

c) To develop to the policy and the incentives for the Industrialization of the Gas in the national territory.

d) To foment the participation of the sector deprived in the Export of the Gas and its Industrialization. The Executive authority will destine the originating national income of the export and industrialization of the gas, mainly, to the attention of the education, health, ways and uses.

ARTICLE 8°. - (Economic regime). Is arranged that the State will retain the fifty percent (50%) of the value of the gas production and petroleum, according to the mandate contained in the answer of the question 5 of the Law of the National Referendum of July,18 2004 TITLE II GENERAL DISPOTITIONS ARTICLE 9°. - (Political of Hydrocarbons, National Development and Sovereignty).

The State, through its competent organs, in exercise and defense of its sovereignty, will establish the Hidrocarbonsa Policy of the country in all its scopes. The advantage of hydrocarbons will have to promote the integral, sustainable and equitable development of the country, guaranteeing the supplying from hydrocarbons to the internal market, stimulating the expansion of the consumption in all the sectors of the society, developing its industrialization in the national territory and promoting la export of excessive in conditions that favor the interests of the State and the profit of their objectives of internal and external policy, according to a Planning of Hydrocarbons Policy. In the integral, the well-being of the society will look for as a whole. In the sustainable thing, the development balanced with the environment, protecting the rights of the towns, guarding by its well-being and preserving its cultures. In the equitable thing, the greater benefit for the country will look for, stimulating the investment, granting legal security and generating favorable conditions for the development of the sector. The plans, programs and activities of the hydrocarbon sector will be framed in the principles of the Sustainable Development, occurring to fulfillment to the dispositions established in the Article 171° of the Political Constitution of the State, the Law of the Environment and the Law N° 1257, of 11 of 1991 July, that ratifies the N° Agreement 169 of the QIT and connected Regulations. ARTICLE 10°. - (Principles of the Regime of Hydrocarbons). The oil activities will be governed by the following principles:

a) Efficiency: that it forces to the fulfillment of the objectives with optimal allocation and use of the resources for the sustainable development of the sector; b) Transparency: that it forces the authorities responsible for the sector to lead the administrative procedures of public way, assuring the access to the information to all competent authority and individual and collective people who demonstrate interest. Also, it forces the authorities to fulfill and to enforce the present Law applying of correct way the principles, objectives and policies of the sector and to that they render account of his management of the form established in the applicable legal norms. This principle also forces the companies of the hydrocarbons sector that operate in the country to offer without restriction some the information that is required by competent authority. c) Quality: that it forces to fulfill established the technical requirements and of security; d) Continuity: that it forces that the supplying of hydrocarbons and the transport services and distribution, assure to satisfy the demand of the internal market of permanent and uninterrupted way, as well as the fulfillment of export contracts; e) Neutrality: that it forces to an impartial treatment to all the people and companies that make oil activities and to all the consumers and users; f) Competition: that it forces all the individual or collective people dedicated to the oil activities to operate in a frame of competition with subjection to the Law; g) Adaptability: The adaptability principle promotes the incorporation of technology and modern management systems, that contribute greater quality, efficiency, opportunity and minor cost in the benefit of the services. I ARTICLE 11°. - (Objective of the National Hydrocarbon Policy). They constitute general missions of the National Hydrocarbon Policy:

a) To use hydrocarbons as factor of the national and integral development of sustainable and sustainable form in all the economic activities and services, as much public as prevailed.

b) To exert the control and the effective direction, on the part of the State, of the hydrocarbons activity in defense of its political and economic sovereignty.

c) To generate resources economic to fortify a sustainable process of economic and social development.

d) To guarantee, to short, medium and long term, the power security, satisfying suitably the national demand of hydrocarbons.

e) To fortify, technique and economically, to Oil fields Fiscal Bolivians (YPFB) like the state company in charge to execute the National Hydrocarbon Policy to guarantee the sovereign advantage of the hydrocarbons industry.

f) To guarantee and to foment the rational advantage of hydrocarbons, supplying with priority to the internal necessities of the country.

g) To guarantee and to foment industrialization, commercialization and export of hydrocarbons with added value.

h) To establish competitive policies of export, industrialization and commercialization of hydrocarbons and its derivatives, in benefit of the strategic targets of the country

ARTICLE 12°. - (Planning of Hydrocarbon Policy). The Hydrocarbon Ministry will elaborate the Hydrocarbons Policy in coordination with Oil fields Fiscal Bolivians (YPFB), within the framework of the National Hydrocarbon Policy defined by the State. The Hydrocarbon Holders, Concessionaires, Licensee and Supervision will have to provide the information that is required, in the form and the terms established in the request. ARTICLE 13°. - (Political of Hydrocarbon Industrialization). The Bolivian State will foment the industrialization of hydrocarbons and the execution of other activities directed to the use and the processing of these in its territory in benefit of the National Development, granting incentives and creating favorable conditions for the national and foreign investment. ARTICLE 14°. - (Public Service). The activities of transport, refinement, storage, commercialization, the Natural Gas distribution by Networks, the provision and distribution of refined products of petroleum and plants of process in the internal market, are services public, who must be lent of regular and continuous way to satisfy the power necessities with the population and the industry oriented to the development of the country. I ARTICLE 15°. - (Hiring of Personnel). The companies that make the activities to which refer the present Law, in the personnel hiring, they will not be able to exceed the fifteen percent (15%) of foreign civil employees, and will include/understand the administrative, technical and operative areas, reason why they will have to contract personnel of national origin, the one that will be protected by the General Law of the Work.

CHAPTER II OF The PROPERTY And EXECUTION OF The POLITICA OF HYDROCARBONS ARTICLE 16°. - (Property of Hydrocarbons). Deposits of hydrocarbons, whatever it is the state in which they are or the form in that they appear, are of direct, inalienable and imprescriptibly dominion of the State. No contract can confer the property of the hydrocarbon deposits neither of hydrocarbons in Mouth of Well nor until the point of control. Titular of a Contract of Shared Production, Operation or Association is forced to give to the State, the totality of Hydrocarbons produced in the contractual terms that are established by this one. ARTICLE 17°. - (Execution of the Policy of Hydrocarbons) The hydrocarbons activity, the use, we enjoyed and disposition of the hydrocarbons natural resources, is executed within the framework of the National Hydrocarbon Policy. I. The exploration, operation, commercialization, transport, storage, refinement and industrialization of hydrocarbons and its derivatives correspond to the State, right that will be exerted by himself, by means of autarkic organizations or through concessions and contracts per limited time, to mixed societies or deprived people, according to Law. II The commercialization activity in the internal market of products derived from hydrocarbons, will be able to be made by Oil fields Fiscal Bolivians (YPFB), mixed societies or by individual or collective people of the public or deprived scope, according to Law. III The activity of commercialization for Natural Gas export, will be made by the State, through Oil fields Fiscal Bolivians (YPFB) like aggregator and shipper, by individual or collective people, public or deprived or associated with them, according to Law. IV The activity of commercialization for export of crude petroleum, condensed, natural gasoline and Liquefied Oil Gas (GLP), will be made by the State, through Oil fields Fiscal Bolivians (YPFB), by individual or collective people, public or deprived or associated with them, according to Law. V. The activity of commercialization for refined product export of petroleum and products derived from the Natural Gas will be made by the State, through Oil fields Fiscal Bolivians (YPFB), by individual or collective people, public or deprived or associated with them, according to Law. I SAW The hydrocarbon import will be made by Oil fields Fiscal Bolivians (YPFB), by himself or contracts celebrated with individual or collective, public or deprived people, or associated with them, subject to regulation. VII. The refinement, storage, industrialization, transport, and natural gas distribution by networks, could be executed by the State, through Oil fields Fiscal Bolivians (YPFB), by individual or collective people, public or deprived or associated with them. The State will make with priority the established activities in paragraphs III, IV, V and I SAW precedents and, in his case, it will exert the option to be associated for the execution of those. ARTICLE 18°. - (Hydrocarbon Adjustment and Mediation). Holders of Contracts of Shared Production, Operation and Association, will install modern systems of adjustment, required according to the quality of hydrocarbons,

and mediation in the Point of Control. The controlled volumes of hydrocarbons will be those that have been adapted for the transport and commercialization, discounting the used volumes indeed in the operations of field, like injection, fuel, burns and wind according to Regulation that will establish the Executive authority. Of the controlled volumes, Titular will have right to a repayment or participation according to the established thing in the respective contract. Oil fields Fiscal Bolivians (YPFB), in coordination with the competent hydrocarbon instances, will constitute, organize, he will install and operate the National Center of Measurement and Control of Production and Hydrocarbon Transport. The hydrocarbon volumes and composition produced as much for the export as for the internal consumption and its transport, will be controlled by this Center that will count on the technical, administrative capacity, of necessary infrastructure and equipment. The Center will have measurement systems, of the Scada type or another similar, sampling, analysis, acquisition and remote transmission of data for its centralized processing. The points of measurement and monitored of quality and composition of hydrocarbons, will be the control points, the distributing points to extraction plants, refinement, industrialization, system of transport and points of export. The producing companies, of extraction, refinement, industrialization and hydrocarbon transport, are forced to install all the necessary instruments in the control points. The competent authority will install the command teams that consider necessary in other points different from the control points, as much in the areas of production like in the transport systems. In addition, it will be able to arrange that the own points of measurement of the producers and hydrocarbon transporters, are of free access to the authority of control and with remote connection to the National Center of Measurement and Control of Production and Hydrocarbon Transport with free access and remote connection. The Center will qualify all the necessary systems for the continuous registry and storage of security of the data collected in all the points of measurement. ARTICLE 19. - (Zone of Exclusion). The hydrocarbons activity will subject in all the cases to the Article 25° of the Political Constitution of the State. CHAPTER III INSTITUTIONAL ORGANIZACION OF THE SECTOR HYDROCARBONS ARTICLE 20°. - (Competent Authority). The Hydrocarbon Ministry is the Competent Authority that elaborates, promotes and supervises the state policies in the matter of hydrocarbons. ARTICLE 21°. - (Attributions of the Competent Authority). The Hydrocarbon Ministry, in the matter of hydrocarbons, has like attributions the following ones: a) To formulate, to evaluate and to control the fulfillment of the National

Hydrocarbon Policy.

b) Norma within the framework of its competition, for the suitable application of the present Law and the execution of the National Hydrocarbon Policy.

c) To supervise to the fulfillment of legal dispositions and norms in the matter of hydrocarbons.

d) To determine the prices of hydrocarbons in the Point of Control for the payment of the exemptions, repayments and participation, according to the norms established in the present Law.

e) To establish the Policy of prices for the internal market. f) To establish the Policy of export for the hydrocarbon sale. g) the other

attributions established by Law. ARTICLE 22°. - (Structure and Attributions of Oil fields Fiscal Bolivians). Refund Oil fields Fiscal Bolivians (YPFB) like Company Autárquica of Public law, under the tuition of the Hydrocarbon Ministry. YPFB will be constituted by a Directory, President Executive and two Vice-presidencies. First of Administration and Control and the second Operative one so that they participate in all the oil activities. I. YPFB to name of the Bolivian State it will exert the proprietary right on the

totality of hydrocarbons and will represent the State in the Oil Contract subscription and execution of the activities of all the established productive chain in the present Law.

II. The structure, functions and the conformation of the Directory, with participation of the Producing Departments, will settle down in its Statutes, such that will be approved according to the effective norms.

III. President Executive is the Maxim YPFB authority and Presides over the Directory.

IV. The Vice-presidency of Administration and Control will have the following competitions: a) To negotiate the subscription of established Oil Contracts in the present

Law, with individual or collective people, national or foreign, of public or deprived right, the ones that will be approved by the Directory and subscribed by the President of YPFB.

b) To administer Oil Contracts. c) To control the activities of Exploration and Operation, coming up

damages to the deposits and maximizing the production. d) To control the hydrocarbon production in quality and volume for tax

effects, exemptions and participation. e) To assume the roll of aggregator, salesman and administrator in

Contracts of Natural Gas Export, where YPFB subscribes such and the Bolivian State is the manager.

f) To assume the administration of the National Center of Information Hydrocarbons (CNIH).

g) Other inherent functions to its nature or that emerge from the present Law.

V. The Vice-presidency of Operations, will have the following competitions: a) To operate and/or to participate in all the activities of the productive

chain of hydrocarbons by himself or by means of the conformation of societies according to the Code of Commerce.

b) To negotiate the conformation of societies of mixed economy to participate in the activities of Exploration and Operation and in any other activity of the productive chain of Hydrocarbons.

c) To receive and to contribute assets, concessions, privileges, projects and other goods or rights, for the constitution or participation in societies.

ARTICLE 23°. - (Host). The Directory and the Executive Presidency will have like Seat to the city of La Paz; the Vice-presidency of Administration, Contracts and Control of YPFB will have as Host and will work with all its structure and dependencies, the National Management of Control and the National Center of Hydrocarbons Information in the Province Great Chaco of the Department of Tarija. By its side the National Vice-presidency of Operations will have as Host and will work with its structure in Santa Cruz; establishing in Camiri the National Management of Exploration and Operation. The Vice-presidency of Operations will have the following Decentralized Managements: The Management of Industrialization will have its Seat in the city of Cochabamba and will exert competition on the Industries of Transformation of Hydrocarbons in the country; the Management of Duels and Gas Networks will have as Host to the city of Sucre and on her all the infrastructure of Transport will depend; Hydrocarbons, Products and Projects of Natural Gas Networks and the Management of Commercialization will work in the city of La Paz. The Oil Companies that operate in the country will have to establish offices in the mentioned Seats and the Departments in which they operate. ARTICLE 24°. - (Regulating Being). The Hydrocarbon Supervision of the System of Regulation Sectorial (SIRESE) is the Regulating Being of the transport activities, product refinement, commercialization derived and natural gas distribution by networks. ARTICLE 25°. - (Attributions of the Regulating Being).

In addition to the established ones in the Law N° 1600, to 28 of October of 1994, and in the present Law, the Hydrocarbon Supervision will have the following specific attributions: a) To protect the rights of the consumers. b) To grant concessions, licenses and authorizations for the subject

activities to regulation. c) To authorize leave for the hydrocarbon export and its derivatives

according to Regulation. d) To authorize the hydrocarbon import. e) To take a national registry of the individual and collective people who

make hydrocarbons activities in the country. f) To approve tariffs them regulated activities and to fix prices according

to Regulation. g) To guard by the fulfillment of the rights and obligations of the subject

organizations to its competition.

h) To require of the individual and collective people who make hydrocarbons activities, information, data, contracts and other that consider necessary for the exercise of their attributions.

i) View by the supplying of products derived from hydrocarbons and periodically to establish the volumes necessary of these to satisfy the internal consumption and raw materials required by projects with industrialization with the sector.

j) The other faculties and attributions that derive from the present Law and the effective legal economy in the country and that are necessary for the suitable fulfillment of their responsibilities.

k) To apply administrative to economic and technical sanctions according to norms and Regulations. All the established regulated hydrocarbons activities in the present Law are put under the norms and to the System of Sectorial Regulation, contained in the Law N° 1600, of 28 of October of 1994.

ARTICLE 26°. - (Income of the Regulating Being). The costs of operation of the Supervision of Hydrocarbons and to the aliquot one that it corresponds to the General Supervision of the System of Regulation Sectorial (SIRESE), will be covered by the following rates that will have to cancel the individual or collective people, national or foreign, public or deprived that makes the activities of Refinement, Hydrocarbon Transport by Ductos and Distribution of Natural Gas by Networks. a) Until the one percent (1%) of the obtained gross value of the tariffs of

hydrocarbon transport by ductos. b) Until the one percent (1%) of the gross value of the sales of the Petroleum

Refineries. c) Until the one percent (1%) of the gross sales of the Concessionaires for the

natural gas distribution by networks. The Hydrocarbon Supervision, in attention to its quality of autarkic organization that generates its own resources, will approve through Administrative Resolution, the structure of expenses according to its necessities, without exceeding the budgetary limit approved by the Law of the Ministry of Property for its inscription in the General Budget of the Nation.

ARTICLE 27°. - (Payment of Exemptions, Retributions and Participation of the Operating Organ and Executor). When Oil fields Fiscal Bolivians (YPFB) directly execute the hydrocarbons activities like autarkic company, he is forced to pay the exemptions, repayments and participation according to the established thing in the present Law. CHAPTER IV PROHIBITIONS And INCAPACITATIONS ARTICLE 28°. - (Prohibitions and Incapacitations). Fiscal Bolivians can participate with Oil fields (YPFB) in anyone of the settled down contract modalities in the present Law, neither to obtain concessions nor

licenses, directly or indirectly, nor to comprise of commercial societies to make the hydrocarbons activities described in the Article 30°, under sanction of invalidity of the act: a) The people who exert the positions of: President and Vice-president of the

Republic; Senators and Deputies; Ministers of State; President and Ministers of the Supreme Court of Justice, the Constitutional Court and the Council of the Judicature; General prosecutor of the Republic and Public prosecutors of District; President of the Central bank of Bolivia; Defender of the Town; Controller and Sub controllers of the Republic; Superintendents of all the Systems and civil employees of the System of Regulation Sectorial (SIRESE); civil employees of the Hydrocarbon Ministry and the organizations of its dependency; Director of the Environmental Unit of the Vice ministry of Hydrocarbons; Ordered of the Hydrocarbon Area of the Ministry of Sustainable Development; Director of Offices of Pursuit and Control of the environment (OSCA) of the Vice ministry of Hydrocarbons, civil employees of YPFB; Presidential Delegates; Generals, Heads and Officials of the Armed Forces and the National, in good condition active Police; Departmental prefects, Subprefectos and Counsel; Municipal mayors and Councilmen;

b) The spouses of the people to that the previous interjection, their ascending, descending ones talks about and collateral relatives until the second degree of consanguinity or affinity. The prohibitions mentioned in interjection a) of the present Article will extend up to two years after stopping in their functions.

ARTICLE 29°. - (Exceptions). The prohibitions established in the previous Article are not applied: a) To the emergent rights of contracts celebrated by the people to that the

preceding Article talks about, previously or posteriori to the exercise of the respective functions;

b) To the emergent rights of the societies constituted before the exercise of the public functions of the disqualified one and in which this one does not exert any activity;

c) To the rights referred in the first part of the following Article that are own of the spouse of the disqualified one, acquired before the marriage;

d) To right sayings when they are acquired by succession. ARTICLE 30°. - (Prohibitions for Officials Government). The servants public who have carried out the positions of Hydrocarbon Minister, Hydrocarbon Vice-minister and Chiefs of a main directorate in the Hydrocarbon Area in the Hydrocarbon Ministry; Presidential delegate for the Revision and Improvement of the Capitalization, members of the Directory of YPFB, President Executive, Vice-presidents and Managers or their equivalent one in YPFB that had concluded their stopped mandate or in their functions or had retired of the organization that correspond, will not be able to work directly in the hydrocarbons companies that have relation with Oil fields Fiscal Bolivians (YPFB), by four years from the cease of their functions in the public administration.

TITLE III OF ACTIVITIES HYDROCARBONS CHAPTER I CLASSIFICATION OF ACTIVITIES HYDROCARBONS AND SUPERFICIAL RECOGNITION ARTICLE 31°. - (Classification of the Hydrocarbons Activities). The Hydrocarbons Activities are of interest and public utility and enjoy the protection of the State, and they are classified in: a) Exploration; b) Operation; c) Refinement and Industrialization; d) Transport and Storage; e) Commercialization; f) Natural Gas Distribution by Networks. ARTICLE 32°. - (Of the Hydrocarbons Activities and the Protected Areas). The Hydrocarbon Ministry, the Ministry of Sustainable Development and the National Service of Protected Areas (SERNAP), previous to the nominations of areas of hydrocarbons interest, will coordinate activities of their competitions within the framework, when the same ones agree in geographic areas. The hydrocarbon activities, in their different phases, will be able to be developed in protected areas, forest reserves, territories of permanent forest production, reserves of natural private patrimony respecting their category and zone, when the Strategic, previous Environmental Study to the authorization or concession, approves it and the environmental objectives of conservation, services, genetic resources, archaeological and socio cultural spaces are not put in risk, in the scope of the sustainable development. These activities will be subject to specific Regulations, requiring in all the cases a Study of Evaluation of Environmental Impact. ARTICLE 33°. - (Superficial Recognition). Previous authorization of the Hydrocarbon Ministry, any person will be able to make works of superficial recognition, consisting of topographic, geologic, geophysical, geochemical studies, seismic prospection and well perforation for geophysical aims, in areas under contract or free areas, subject pursuant to regulation or rule. The Hydrocarbon Ministry will grant to the permissions previous notification to Holders. Who make activities of superficial recognition, will execute their workings without interfering nor causing to damage some to the operations under contract and will be forced to compensate to Titular, State or to third, by any environmental damage or of another nature that produces. The execution of works of superficial recognition does not grant to the executants priority nor straight some to subscribe Hydrocarbons Contracts. The obtained data of the superficial recognition will be given in

copy to the Hydrocarbon Ministry, who will put it in knowledge of the competent organizations. CHAPTER II EXPLORATION And OPERATION ARTICLE 34°. - (Division of Parcels for Contract Area). To the effects to define the Area of Contracts established in the present Law, the Executive authority by means of Supreme Decree, it will divide the national territory in parcels that will conform the Contract Areas, as much in Traditional declared Zones as non Traditional. Of periodic way and by means of Supreme Decree the Executive authority will determine the incorporation of new Traditional Zones on the basis of criteria of geologic knowledge, commercial hydrocarbon production and existing infrastructure. For the indicated activities in interjections a) and b) of the Article 31° of the present Law, the area of a Contract, will be conformed by a Maxim extension of forty (40) parcels in Traditional Zones and of four hundred (400) parcels in nontraditional Zones. Areas of hydrocarbons interest in nontraditional Traditional Zones as in favor of YPFB will be reserved as much, so that it develops to activities of Exploration and Operation by himself or in association. These areas will be granted and granted to Oil fields Fiscal Bolivians (YPFB) with priority and will be adjudged of direct way. ARTICLE 35° (Tenders for Activities of Exploration and Criteria of Awarding). The free areas within the area of hydrocarbons interest, will be adjudged by means of international public tender, excluding the areas reserved for Oil fields Fiscal Bolivians (YPFB). The Executive authority by means of Prescribed Decree, will establish the regularity of the nominations and tenders and also will name of office or will admit requests for the nomination of areas and will fix the guarantee of seriousness of the proposals. The Hydrocarbon Ministry will define for the tender of each name area the valuation of awarding, having in consideration one or more of the following criteria: a) Units of Work for obligatory first stage of the period of Exploration, in

addition to the minimum number of Units determined by means of Prescribed Decree.

b) Payment of a Bond to the Contract company/signature, with destiny to the General Treasure of the Nation (TGN).

c) Payment of an additional participation to the fixed one to the present Law, with destiny to the General Treasure of the Nation (TGN).

d) Payment of a participation in the utilities after taxes. e) Percentage of participation of Titular in the production. The call to

international public tenders and the awarding of name areas will be made by Oil fields Fiscal Bolivians (YPFB) in act witnessed by notary public. They are prohibited the modalities of hiring by direct invitation or exception specifically.

ARTICLE 35°. - (Tenders for Activities of Exploration and Criteria of Awarding). The free areas within the area of hidrocarbonso interest, will be adjudged by means of international public tender, excluding the areas reserved for Oil fields Fiscal Bolivians (YPFB). The Executive authority by means of Prescribed Decree, will establish the regularity of the nominations and tenders and also will name of office or will admit requests for the nomination of areas and will fix the guarantee of seriousness of the proposals. The Hydrocarbon Ministry will define for the tender of each name area the valuation of awarding, having in consideration one or more of the following criteria: a) Units of Work for obligatory first stage of the period of Exploration, in

addition to the minimum number of Units determined by means of Prescribed Decree.

b) Payment of a Bond to the Contract company/signature, with destiny to the General Treasure of the Nation (TGN).

c) Payment of an additional participation to the fixed one to the present Law, with destiny to the General Treasure of the Nation (TGN).

d) Payment of a participation in the utilities after taxes. e) Percentage of participation of Titular in the production. The call to

international public tenders and the awarding of name areas will be made by Oil fields Fiscal Bolivians (YPFB) in act witnessed by notary public. They are prohibited the modalities of hiring by direct invitation or exception specifically.

ARTICLE 36°. - (Terms of Exploration and Return of Area). The initial term of Exploration will not be able to exceed seven (7) years in Traditional Zone and ten (10) years in nontraditional Zone, divided in three phases: Traditional Zone Nontraditional Phase 1: The 3 years 1 to Phase 1: The 5 years 1 to Phase 2: 5 years 4 and Phase 2: Aged to the 8 Phase 3: 7 years 6 and Phase 3: Years 9 and 10 For the reconnaissance areas whose original extension is greater to ten (10) parcels, an amount of area according to the following detail will be due to resign and to give back: When finalizing Phase 1, will be due to resign and to give back not less than the twenty percent (20%) of the original area of Exploration in excess of ten (10) parcels. When finalizing Phase 2, will be due to resign and to give back not less than the thirty percent (30%) of the original area of Exploration in excess of ten (10) parcels. When finalizing Phase 3, will be due to resign and to give back the one hundred percent (100%) of the remaining reconnaissance area, in case that Titular had not declared until then a commercial discovery, or is not making use of the period of retention. The minimum of Units of Work for each phase will be determined by means of Prescribed Supreme Decree. ARTICLE 37°. - (Additional Period of Exploration and Return of Area). If one were declared or more commercial discoveries during anyone of the phases of the initial period of Exploration or if it were making use of the period of retention in anyone of the mentioned phases established in the preceding Article, Titular will be able to accede to the Additional Period of Exploration that will last of up to seven (7) years, computable from the conclusion of the

third phase, being able conserving additionally to the area of Operation or of Retention, until the thirty percent (30%) of the original area of Exploration, that will denominate area surplus, to continue with these exploratory tasks. The additional period of Exploration will include/understand the following phases: Traditional Zone Nontraditional Phase 4: The 10 years 8 to Phase 4: The 13 years 11 to Phase 5: The 12 years 11 to Phase 5: The 15 years 14 to Phase 6: The 14 years 13 to Phase 6: Years 16 to the 17 When finalizing Phase 4, will be due to resign and to give back not less than the twenty percent (20%) of the area surplus, in excess of ten (10) parcels for Traditional and nontraditional Zone. When finalizing Phase 5, will be due to resign and to give back not less than the thirty percent (30%) of the area surplus, in excess of ten (10) parcels for Traditional and nontraditional Zone. When finalizing Phase 6, will be due to resign and to give back the one hundred percent (100%) of the remaining reconnaissance area. The minimum of Units of Work for each phase will be determined by means of Prescribed Supreme Decree. ARTICLE 38°. - (Declaration of Commerce). Titular of an exploration contract, operation, shared production, operation and association subscribed within the framework of the present Law, that has made a Commercial Discovery will have to declare the commerce of the field for its approval, based on the combination of technical, economic factors and of market that makes their operation profitable. The Declaration of Marketability will become before Oil fields Fiscal Bolivians (YPFB). ARTICLE 39°. - (Selection of Area and Operations of Operation). I. Titular of a contract that has made a Declaration of Commerce, will be able to select an area for its Operation that includes/understands a field without solution of continuity in observance to the Law of the environment. II. The Area of Operation selected within the area of the contract, by each commercial discovery will be the area that covers the discovered field and of no way it will have to include/understand other structures. III. As of the date of Declaration of Commerce and knowledge of same by Oil fields the Fiscal Bolivians (YPFB), Titular within the term of two (2) years, will have to present/display the Development plan of the Field. From the approval of the plan by YPFB, Titular it will have to develop the Field within the term of five (5) years. In case Titular does not fulfill this obligation must pay to the General Treasure of the Nation (TGN), in thirty (30) days calendar, a sum equivalent to the total cost of the last well perforated in this field. In case of failing to fulfill with the presentation of the Development plan of the Field or the obligation of the payment of the equivalent sum in the indicated terms, it will have to give back all the Field. IV. The discoveries that have been declared commercial prior to the use of the present Law, which they have not been developed, will adapt to the dispositions and terms described in the previous paragraph, within the framework of established Oil Contracts in the present Law.

V. In the case of commercial discoveries within the framework produced of subscribed contracts under protection of the Law N° 1689 in which the disposition of perforation of at least a well by selected parcel has not been

fulfilled, according to established by the Article 30° of the mentioned Law, these parcels obligatorily they will be given back to the State.

ARTICLE 40°. - (Retention of Area by Insufficiency of Transport, Market and Others). When Titular carried out the discovery of one or more hydrocarbon fields, those that by nonexistence or insufficiency of transport and/or lack of market or limitations to their access, were not declared commercial according to the Certification of YPFB, will be able to retain the area of the field, by a term of up to ten (10) years, computable from the date of communication of the commercial discovery to Oil fields Fiscal Bolivians (YPFB) and to the Hydrocarbon Ministry. I ARTICLE 41°. - (Return of Area and Contract Completion). To the victory of the term of anyone of contracts or to its completion by any cause, the area will be given back by Titular to the State by means of Oil fields Fiscal Bolivians (YPFB), later to be name, to be bid and/or to be adjudged according to hereby arranged the Law. Titular, that fulfills its contractual obligations in any phase of Exploration, will be able unilaterally to finish the contract without later responsibility, except for the obligations established by Law, communicating this decision to Oil fields Fiscal Bolivians (YPFB) with copy to the Hydrocarbon Ministry, coming to the return of the area of the contract and giving all the free obtained and obligatory data. ARTICLE 42°. - (Environmental Delivery of Facilities and Liabilities). To the conclusion of a contract by victory of term or any other cause, Titular is forced to leave to the facilities in operative conditions to Oil fields Fiscal Bolivians (YPFB) for the continuity of the activities. In this case, Titular will assume the generated Environmental Liabilities until the moment of the transference. In the contracts that celebrate the State forecasts will be contemplated to compensate the productive investments made in buildings and facilities no depreciated that are in operation in the contract area by Titular. To the conclusion of the contract, these buildings and facilities will be transferred to Oil fields Fiscal Bolivians (YPFB) under gratuitous title. If the fields of the area of the contract will be in production on time to finalize the same one, Oil fields Fiscal Bolivians (YPFB) will be able to operate them directly or under contract of Association. The contractors will not be able to alienate, to burden or to retire in the course of the contract, divides some of the goods and facilities, without authorization of Oil fields Fiscal Bolivians (YPFB) and of the Hydrocarbon Ministry. ARTICLE 43°. - (Hydrocarbon Operation by means of Modern Use de Techniques and Practices, Burn and wind of Natural Gas). The Hydrocarbon Operation in the fields will have to be executed using technical and accepted modern procedures in the oil industry, in order to establish agreed levels of production with efficient and rational practices of recovery of hydrocarbons reserves and conservation of reservations. Burn and wind de Natural Gas will have to be authorized by the Hydrocarbon Ministry, and its execution will be subject to

the Supervision and Control of Oil fields Fiscal Bolivians (YPFB), according to Regulation. ARTICLE 44°. - (Interchange of Volumes of Natural Gas). Holders that is making activities of Operation will be able, temporarily, to carry out interchanges of volumes of Natural Gas according to the operative necessities of the internal market and the export, with the authorization of the Ministry of Hydrocarbons and the control of Oil fields Fiscal Bolivians (YPFB) according to Regulation. I ARTICLE 45°. - (Reservations Shared). With the purpose of maximizing the recovery of the hydrocarbon reserves contained in Reservations Shared by the two or Most titular ones, these will have to elaborate jointly an integral plan of development and operation of the Shared Reservation, using practical efficient and rational and, exercising technical and modern procedures of operation of fields, with the purpose of obtaining the Maxim efficient production, the same one that will have to appear to the Hydrocarbon Ministry, for its approval according to Regulation and to be put under the control of Oil fields Fiscal Bolivians (YPFB). When fields located in two exist or more Shared departments than have Reservations, or Holders will have to carry out the studies detailed through companies of recognized international prestige to establish the proportion of the reserves in each department. In the case in that reservation is shared by two or more departments, the exemptions will be cancelled proportionally to their reserves, projecting vertically the limit or you limit departmental the ceiling of each reservation producing. When the hydrocarbons are in two or more departments with base to the study described in the present I ARTICLE, the payment of exemptions will be distributed between each contract area involved in proportion to the factors of hydrocarbon distribution in site, independently of the location of producing wells. ARTICLE 46°. - (Natural Gas Injection). All request of Titular for the Natural Gas Injection of a Producing Reservation to a Receiving Reservation will have to be under the control of Oil fields Fiscal Bolivians (YPFB) and to be approved by the Hydrocarbon Ministry and to persecute the following objectives: a) To conserve the productive conditions of the deposit. b) To conserve the Natural Gas that of another way it would have to be burned. c) To execute projects of improved Liquid Hydrocarbon recovery. d) To improve the capacity of delivery of the Bolivian Natural Gas during periods

of high demand. e) To optimize the production of Liquid Hydrocarbons and other components

associated to the gas in the Producing Reservation, when market for the gas does not exist. All the re injection that implies a transference of a Producing Reservation to a Receiving Reservation located in different departments, will be subject pursuant to regulation or rule that will contemplate to the calculation and the payment of the departmental Exemptions corresponding to Producing Reservation at the moment of the transference of the Natural Gas.

TITLE IV REGIME OF PATENTS, ROYAL RIGTHS, PARTICIPATION And RATES CHAPTER I ARTICLE 47°. - (Of the Patents). Oil fields Fiscal Bolivians (YPFB) will cancel to the General Treasure of the Nation (TGN) the settled down annual Patents in the present Law, by the subject areas to Oil Contracts. The Patents will be paid by advanced annuities and to the subscription of each contract initially, by twelfth if the term with (1) a year did not agree calendar, independently of the taxes that correspond to the indicated activities. ARTICLE 48°. - (Reimbursement by Payment of Patents). Titular will reimbursement to Oil fields Fiscal Bolivians (YPFB) the totality of the amounts paid by concept of Patents, reimbursement that will become cash within the thirty (30) days of being notified with the corresponding certification of payment. The amounts reimbursed by this concept will constitute a cost to enter themselves by whom it carries out the reimbursement, but will not be able to be used like fiscal credit. ARTICLE 49°. - (Partial Return of Contract Area). If the area of one of Oil Contracts is reduced by partial resignation, the Patents will be paid only by the area that is retained after the reduction and they will become effective from first of January of the following year, being place to return or no compensation per smaller periods (1) to a year calendar. ARTICLE 50°. - (Base of Calculation). In areas described like Traditional Zones, the annual Patents will be paid in national currency with value maintenance, according to the following updated scale to the month of March of 2005: 1, Phase 1 Bs. 4,93 by hectare. 2, Phase 2 Bs. 9,86 by hectare. 3, Phase 3 Bs. 19,71 by hectare. 4, Phase 4 in ahead, Bs. 39.42 by hectare. The Patents for nontraditional Zones, settle down in the fifty percent (50%) of the values indicated for the Traditional Zones. Any period of Retention and Operation in Traditional or nontraditional Zones, will force to the payment of Bs. 39.42 by hectare, with value maintenance. The modality of payment and maintenance of value of the Patents will be regulation object. ARTICLE 51°. - (Distribution). The General Treasure of the Nation (TGN) in a period of thirty (30) days of received the Patents will transfer the fifty percent (50%) of the value from the same ones to the Municipalities in whose circumscriptions are the oil concessions that they generate the payment of those with destiny solely to programs and investment projects publishes and/or environmental management. The rest fifty percent (50%) will be used by the Ministry of Sustainable Development for programs and projects of public investment and environmental management in the producing hydrocarbon departments.

CHAPTER II ROYAL RIGTHS, PARTICIPATION AND TRIBUTARY RAGIMEN SECTION I ROYAL RIGTHS AND PARTICIPATION ARTICLE 52°. - (Royal rigths and Participation and Taxes). Titular is subject to the payment of the following exemptions and participation on the controlled production, payable of monthly way in American Dollars, or their equivalent one in national currency, or species to election of the beneficiary. 1. An Exemption Departmental, equivalent to the eleven percent (11%) of the Controlled Departmental Hydrocarbon Production, in benefit of the Department where the production is originated. 2. A National Exemption Compensatory of the one percent (1%) of the National Production Controlled of Hydrocarbons, payable the Departments of Beni (2/3) and Bulging (1/3), of conformity to the arranged thing in the Law N° 981, of 7 of March of 1988. 3. A participation of the six percent (6%) of the Controlled National Production in favor of the General Treasure of the Nation (TGN). SECTION II DIRECT IMPOSED TRIBUTARY REGIME To HYDROCARBONS ARTICLE 53°. - (Creation of the Direct Tax to Hydrocarbons - IDH). Create the Direct Tax to Hydrocarbons (IDH), that will be applied, in all the national territory, to the hydrocarbon production in Well Mouth, that will be moderate and pay like the exemptions, according to established in the present Law and its regulation. I ARTICLE 54°. - (Object, Generating Fact and Subject Liabilities).

1. The object of the IDH is the production Hydrocarbons in all the national territory.

2. The generating fact of the tributary obligation corresponding to this Tax is perfected in the point of control of produced hydrocarbons, on time of the adjustment for its transport.

3. All natural or legal, public or deprived person is subject liabilities of the IDH, who produces hydrocarbons in any point of the national territory.

ARTICLE 55°. - (Tax basis, Aliquot, Liquidation and Period of Payment). 1. Taxable Base of the IDH is identical to the corresponding one to exemptions

and participation and are applied on the total of the volumes or energy of produced hydrocarbons.

2. The Aliquot one of the IDH is of the thirty and two percents (32%) of the total of the hydrocarbon production measured in the point of control, that is applied of no progressive direct way on the one hundred percent (100%) of the volumes of hydrocarbons measured in the Point of Control, in his first stage of commercialization. This tax will be moderate and it will be paid as it is moderate and it pays the exemption of the eighteen percent (18%).

3. Add of the established income of 18% by Exemptions and 32% of the Direct Tax to Hydrocarbons (IDH), will not be in any smaller case to the fifty percent (50%) of the value of the production of hydrocarbons in favor of the Bolivian State, in agreement with the Article 8° of the present Law.

4. . Once determined the taxable base for each product, the passive subject will express it in Bolivians (Bs.), applying the prices to that the Article talks about 56° of the present Law.

5. For the liquidation of the IDH, the passive subject will apply to the expressed taxable base in Bolivians, like Aliquot, the percentage indicated in numeral 2 precedents.

ARTICLE 56°. - (Prices for the valuation of exemptions, participation and IDH). The departmental exemptions, participation and the Direct Tax to Hydrocarbons (IDH) were paid in species or Dollars of the United States of America, according to the following criteria of valuation: a) The prices of petroleum o'clock of Control: 1. For the sale in the internal market, the price will be based on the real prices of sale of the internal market. 2. For the export, the real price of adjustable export by quality or the price of the WTI that is published in the bulletin Plats Oil gram Price Report, the one that is greater. b) The price of the Natural Gas o'clock of Control, sera ': 1. The price indeed paid for the exports. 2. The price indeed paid in the Internal Market. These prices, for the internal and external market, will be fit by quality. c) the prices of the Liquefied Petroleum Gas (GLP) o'clock of Control: 1. For the sale in the internal market, the price will be based on the real prices of sale of the internal market. 2. For the export, the real price of export: The present Law makes established the term clear Point of Control like the place where it is participated, it is valorized and the eleven percent (11%) of the gross production of hydrocarbons is paid holds to the payment of the exemptions of the producing departments, reason for which no consumption, compensation or costs, call of exploration, operation, adjustment, transport or others, are deductible of the exemptions. ARTICLE 57°. - (Distribution of the Direct Tax to Hydrocarbons). The Direct Tax to Hydrocarbons (IDH), will be co participated in the following way:

a) Four percents (4%) for each one of hydrocarbon the producing departments of its corresponding controlled departmental production.

b) Two percents (2%) for each no producing Department. c) In case of existing a producing hydrocarbon department with smaller

entrance to the one of some no producing department, the General Treasure of the Nation (TGN) will make level its entrance until the amount perceived by the no producing Department that receives the greater entrance by concept of co-participation in the Direct Tax to Hydrocarbons (IDH). d) the Executive authority will assign the balance of the Direct Tax to Hydrocarbons (IDH) in favor of the TGN, Indigenous and Original Towns, Communities Farmers, of the Municipalities, Universities, Armed Forces, National Police and others. All the beneficiaries will destine the resources received by Direct Tax to Hydrocarbons (IDH), for the sectors of education, health and ways,

productive development and everything what contributes to the generation of work sources. The producing departments will please prioritize the distribution of the resources perceived by Direct Tax to Hydrocarbons (IDH) in their producing hydrocarbon provinces.

d) SECCIION II TRIBUTARY STATE

ARTICLE 58°. - (Tributary State). Holders will be subject, in all their reaches, to the Tributary State established in the Law N° 843 and other effective laws. ARTICLE 59°. - (Prohibition of Direct Payment to the First House). The Oil Companies that operate in Bolivia, will not have to make deposit or direct payment to their First House of the originating resources of the sale or hydrocarbon export, without previous fulfillment with established in the Article 51° of the Law N° 843 (Ordered Text effective). In case of breach the passive subjects will be sanctioned according to the forecasts of Law Not 2492 of the Tributary Code. ARTICLE 60°. - (Tributary Incentives for the Projects of Industrialization, Domiciliary Networks of Gas pipelines, Facilities and Change of Power Matrix). The natural or legal people interested in installing Projects of Natural Gas Industrialization in Bolivia will have the following incentives: a) The definitive imports of goods, equipment, materials, machineries and

other that require for the installation of the plant or industrial complex, destined to the industrialization of hydrocarbons, as well as of construction equipments of ductos and pipes to establish Domiciliary Gas facilities, and to the process of construction of plants until the moment of their operation, will be released of the payment of Tariff obligation (GA), and of the Tax to Valor Aggregator (IVA).

b) Liberation of the Tax on Utilities by a term non greater to eight (8) years computable from the beginning of operations.

c) Fiscal land Granting in usufruct, when availability for the infrastructure installation or plant of Natural Gas Industrialization exists.

d) Temporary Exemption of the Tax to the Property of Real estate destined to the industrial infrastructure, by a minimum term of five (5) years incapable of being extended

e) The imports of goods, equipment and materials for the change of the Power Matrix of the vehicle park to Gas Natural Compressed (GNC), will be released of the payment of the tariff burden and the Tax Valor Aggregator (IVA).

ARTICLE 61°. - (To promote the Investment). The State guarantees and will promote the conducted investments and to take place in national territory for industrialization in all and each one of the oil activities and in anyone of the forms of economic or contractual units

allowed by the national and concordant legislation to had in the Article 100° the present Law. ARTICLE 62°. - (Access to the Incentives of the Investment). They will accede the present to the incentives anticipated in Chapter, all the natural or legal people who carry out the investment to the activities of Natural Gas industrialization, when they fulfill the following conditions or requirements: 1. That the investment is made after the publication of this Law. 2. Jeopardize a minimum permanence of ten (10) years in the national

territory. 3. Be propose by an investor who adopts a constituent, participative legal

form or associative, recognized by the Code of Commerce, the Civil Code, hereby Law, or by special legal dispositions and is in the Registry of Commerce or the registry that corresponds.

ARTICLE 63°. - (Agreements of Tributary Stability To promote Industrialization). The Ministry of Property and Hydrocarbons in joint form, in representation of the State, will be able to celebrate with the investors, previous to the accomplishment of the investment and the corresponding registry agreements of stability of the effective tributary regime at the time of being celebrated the Agreement, by incapable of being extended a term no greater to ten (10) years. The National Congress will approve these Agreements. ARTICLE 64°. - (Incentive to the Hydrocarbon Production of Marginal and Small Fields). The originating hydrocarbon production of marginal and small fields will have a prize according to the level of production and the quality of hydrocarbon, according to Regulation. TITLE V OF OIL CONTRACTS CHAPTER I GENERAL CONDITIONS ARTICLE 65°. - (Of Contracts and Terms). Any individual or collective, national or foreign, public or deprived person will be able to celebrate with Oil fields Fiscal Bolivians (YPFB) one or more Contracts of Shared Production, Operation or Association to execute activities of Exploration and Operation, by a term that will not exceed the forty (40) years. ARTICLE 66°. - (Retribution or Participation to Titular). Once initiate the production, Titular is forced to give to Oil fields Fiscal Bolivians (YPFB), the totality of produced hydrocarbons. Of the total

produced and given to Oil fields Fiscal Bolivians (YPFB), Titular will have right to a repayment under the Contract of Operation and to a participation in the hydrocarbon production in Contracts of Shared Production and Association, the same one that will be contemplated in the respective Contract. CHAPTER II OF THE COMMON CONDITIONS TO CONTRACTS OF SHARED PRODUCTION, OPERATION AND ASSOCIATION ARTICLE 67°. - (Obligatory Clauses of Oil Contracts). The Contracts of Shared Production, Operation and Association that Oil fields Fiscal Bolivians (YPFB) subscribe with individual or collective, national or foreign, public or deprived people, as well as their modifications and amendments, will have to be celebrated by means of writing granted before a Notary of Government and to contain, under sanction of invalidity, referring Clauses : a) Antecedents; b) Parts of the Contract; Capacity and Function and position of agent; c) the object and term; d) Guarantee of fulfillment of the contract, according to the established

thing in the regulation. In case of subsidiary or tie companies the First House will grant the guarantee. Banking guarantee of fulfillment of Units of Work for Exploration (UTE);

e) It will establish the area and its location object of the Contract, will identify if one is Traditional or nontraditional Zone, indicating the number of parcels;

f) Amount of Units of Work for Exploration (UTE) jeopardizes and its equivalence in money;

g) The repayment or participation corresponding to Titular; h) Regime of Patents, Exemptions, Participation, Taxes and Bonds; i) Obligation to give technical information, economic, commercial,

studies of reservations by means of mathematical models, other methods and any other relative one to the object of the contract, that Oil fields Fiscal Bolivians (YPFB) consider excellent;

j) Obligations and rights of the parts, among others, the right to commercialize the production that could correspond to Titular and the obligation to take care of the demand of the internal market;

k) Causal of contractual unentailment and the regime of damages and damages by breach of the agreed obligations;

l) Regime of solution of controversies, m) Of the Cession, Transfer and Subrogation of the Contract, n) Stipulations relative to the protection and conservation within the

framework of the Law of the Medium ambient. o) To contract of preferred way manual labor, national goods and services,

as well as for the qualification of the personnel of Oil fields Fiscal Bolivians (YPFB),

p) To resign to all claim by via diplomat, q) Address constituted and indicated in Bolivia.

ARTICLE 68°. - (Contract Authorization and Approval). The Contracts of Shared Production, Operation, Association and its modifications, will have authorized and to be approved, of conformity to arranged the Article 59°, attribution, of the Political Constitution of the State. ARTICLE 69°. - (Solution of Controversies). The Controversies that provoke between Oil fields Fiscal Bolivians (YPFB) and Holders or Contractor, in the occasion of the interpretation, application and execution of contracts will solve of conformity to the norms established in Articles 24°, 135°, 228° and others of the Political Constitution of the State and the Laws of the Republic. ARTICLE 70°. (Cession, Transfer and Subrogation of Contracts) Who subscribe Contracts of Operation, Shared Production or Association with Oil fields Fiscal Bolivians (YPFB), they will not be able to yield, to transfer nor to subrogate, in total or partial form, directly or indirectly, its emergent rights and obligations of such, except for acceptance of Oil fields Fiscal Bolivians (YPFB) and authorization of the Hydrocarbon Ministry. Oil fields Fiscal Bolivians (YPFB) will accept the Cession, Transfer and Subrogation when the beneficiary of the operation has the technical and financial capacity that allows him to fulfill the obligations established in the respective contract, with the authorization and approval to that the Article talks about 68° of the present Law. ARTICLE 71°. - (Guarantee of Free Availability). The companies that subscribe Oil Contracts by virtue of the present Law, enjoy the guarantee of the State of the Free originating Availability of Makes out of their income of export; also, the free convertibility of its income by sales in the internal market is guaranteed. CHAPTER III OF THE CONDITIONS YOU SPECIFY OF CONTRACTS OF SHARED PRODUCTION ARTICLE 72°. - (Contract of Shared Production). The Contract of Shared Production to be subscribed with Oil fields Fiscal Bolivians (YPFB), is that by which a collective, national or foreign person, executes with her own means and by their exclusive account and risk the activities of Exploration and Operation to name and representation of Oil fields Fiscal Bolivians (YPFB). Titular in the Contract of Shared Production has a participation in the production, in the control point, once deduced exemptions, taxes and participation established in the Law. The participation of Titular will be established in the respective contract.

ARTICLE 73°. - (Amortization of Investments). The organism administrator and supervise YPFB in the Contract of Shared Production has a participation in the production, once it has determined the amortization that correspond to Titular by the made investments developing, production of hydrocarbons and abandonment of the field and by the payment of exemptions and participation. In order to establish the costs incurred the obtaining of hydrocarbons, the organism administrator and supervise YPFB will carry out an external audit and Titular to this intention will properly present/display the information endorsed. With base to the results of the audit the organism administrator and supervise YPFB will recognize Titular the made investments, exemptions and participation, and between parts they will decide a same program of amortization, the payable one with the production of the field. ARTICLE 74°. - (Board of directors). For each Contract of Shared Production a Board of directors composed by the parts of the Contract will be satisfied, to supervise and to control all the operations and actions that are executed during the use of the same one. Their attributions and form of representation will be established by Regulation approved by the Hydrocarbon Ministry. ARTICLE 75°. - (Uniform System of Accounts and Valuation of the Net Production). Titular will take its accounting with base to a uniform system of accounts to be approved by Oil fields Fiscal Bolivians (YPFB). The Net Production will be certified by Oil fields Fiscal Bolivians (YPFB) monthly to determine the production costs. Oil fields Fiscal Bolivians (YPFB) will annually determine the valuation of the Net Production with base to an audit, that will determine the costs of the production. ARTICLE 76°. - (Payment of Exemptions, Participation and Taxes). Oil fields Fiscal Bolivians (YPFB) and Titular of a Contract of Shared Production, will pay the Exemptions, Participation and the Taxes in proportion to their participation in the production commercialized, according to established in the present Law and taxes established in the Law N° 843 (Ordered Text). CHAPTER IV OF THE CONDITIONS YOU SPECIFY OF OPERATION CONTRACTS ARTICLE 77°. - (Contract of Operation). Contract of Operation, is that by which Titular will execute with its own means and by their exclusive account and risk, to name and representation

of Oil fields Fiscal Bolivians (YPFB), the operations corresponding to the activities of Exploration and Operation within the area matter of the contract, under the system of repayment, according to the established thing in the present Law, in case of entering to the activity of Operation. Oil fields Fiscal Bolivians (YPFB) will not carry out investment some and he will not assume any risk or responsibility in the investments or results obtained related to the contract, having to be exclusively Titular that contributes the totality of the capitals, facilities, equipment, materials, personnel, technology and other necessary ones. ARTICLE 78°. - (Repayment of Titular). Oil fields Fiscal Bolivians (YPFB) will repay to Titular by the services of operation, with a percentage of the production, in money or species. This payment will cover the totality with its costs of operation and utility. ARTICLE 79°. - (Payment of Exemptions, Participation and Taxes). Oil fields Fiscal Bolivians (YPFB) on the other hand will pay the Exemptions, Taxes and Participation on the production plus the taxes that correspond to him. ARTICLE 80°. - (Unit of Pursuit and Control). The Unit of Pursuit will supervise the execution of all the operations and Control integrated by representatives of Oil fields Fiscal Bolivians (YPFB) and of Titular, same that will begin to work so soon subscribes the contract. Their attributions and form of representation will be established in a Regulation approved by the Hydrocarbon Ministry. CHAPTER V OF The CONDITIONS YOU SPECIFY OF ASSOCIATION CONTRACTS ARTICLE 81°. - (Contract of Association). Oil fields Fiscal Bolivians (YPFB) will have the option to be associated with Titular of a Contract of Operation that had carried out a commercial discovery; for this effect the Contract of Operation will be able to anticipate stipulations to exercise the option to be associated. The Contract of Association will establish the participation on the production for each one of the parts. The administration and operation of this contract will be under the responsibility of an Operator designated by the Associate. ARTICLE 82°. - (Reimbursement of Investments). In order to exert their option to be associated, Oil fields Fiscal Bolivians (YPFB) will reimburse to Titular a percentage of the direct costs of Exploration of or the Wells that have been producing, previous report of external audit. The quota leaves from the direct costs of Exploration

corresponding to its participation will be reimbursed by Oil fields Fiscal Bolivians (YPFB) to Titular or Associated, in money or with part of the production that corresponds to him. YPFB assumes the benefits and risks derived from the operations that the Association conducts in proportional function to its participation from the subscription of the contract. ARTICLE 83°. - (Executive Unit of Pursuit and Control). For each Contract of Association an Executive Unit of Pursuit and Control will be satisfied, to supervise, to control and to approve all the operations and actions that are executed during the use of the contract. The attributions and form of representation of Oil fields Fiscal Bolivians (YPFB) will be established in a Regulation approved by the Hydrocarbon Ministry. ARTICLE 84°. - (Distribution of the Participation and Pay of Taxes and Royal rights). The Operator will distribute to the associate his net participation after the payment of Royal rights and Participation. The Operator is forced to pay to the Exemptions, Participation and Taxes settled down in the present Law and the settled down Taxes of the General Regime in the Law N° 843 (Ordered Text). TITLE I SAW COMMERCIALIZATION OF PRODUCTION OF REFINED PRODUCT FIELD And INDUSTRIALIZED, HYDROCARBON TRANSPORT BY DUCTOS, NATURAL GAS REFINEMENT, STORAGE AND DISTRIBUTION BY NETWORKS CHAPTER I COMMERCIALIZATION OF THE FIELD PRODUCTION ARTICLE 85°. - (Authorizations of Hydrocarbon Export). The export of Natural Gas, Crude Petroleum, Condensed, Natural Gasoline, excessive GLP and of Refined Petroleum Products, will be authorized by the Regulator on the base of a certification of existence of excessive to the national demand sent by the Committee of Production and Demand, verification of the payment of taxes and information on prices and facilities of transport within the framework of the effective legal dispositions. ARTICLE 86°. - (Oil fields Fiscal Bolivians Agregador and salesman in the Natural Gas Export). Oil fields Fiscal Bolivians (YPFB) will be the Agregador and/or salesman for all Natural Gas export that becomes from and the Bolivian territory, assigning the required volumes to the producing companies, according to the following thing. 1. The allocation of volumes for existing contracts of export, will become

according to the norms of the present Law.

2. The Producing Companies that obtain markets of Natural Gas export by direct negotiation, will establish with Oil fields Fiscal Bolivians (YPFB) the allocation of corresponding volumes for the aggregation.

3. When the Natural Gas export is direct consequence of agreements between the Bolivian State, other States or Companies, Oil fields Fiscal Bolivians (YPFB), previous invitation to legally settled down Holders in the country, will assign the volumes required for the export on the base of the lineaments of the Planning of Oil Policy.

4. In order to cover the costs with Agregador, Oil fields Fiscal Bolivians (YPFB) by all export that makes like Agregador, will emit to each producer an invoice by services of aggregation by an amount equivalent to the average percent (0.5%) of the gross amount invoiced in the distributing point to the buyer, excluding the cost from the transport, and in the proportion that corresponds to him to each producer.

ARTICLE 87°. - (Price of the Natural Gas). The price of export of the Natural Gas will be able to frame in the prices of competition liquid gas where consumption of gas and gas-gas in the markets does not exist where gas consumption exists.' In no case the prices of the internal market for the Natural Gas will be able to exceed the fifty percent (50%) of the minimum price of the export contract. The Price of the Natural Gas Rico of export could be made up of the Natural Gas Undressed and its content of liquefiable. The Undressed Natural Gas will have a maximum content of one and average percent (1.5%) to molar of dioxide of carbon, means percent (0.5%) to molar of nitrogen and a superior calorific power in maximum Dry Base of thousand (1.000) BTU by cubical foot. In order to settle down the characteristics of the Undressed Natural Gas of Export Rico of export will be applied to the Natural Gas the yields of separation of liquefiable of an disturb-expansion plant. ARTICLE 88°. - (Prohibitions). It is prohibited the Lateral Hydrocarbon Export through Ductos Smaller or Lines or Branches except for projects of authorized border development by Law. CHAPTER II COMMERCIALIZATION IN THE INTERNAL MARKET ARTICLE 89°. - (Prices of Hydrocarbons). The Regulator will fix for the internal market, the maximum prices, in national currency, and the respective parameters of update, according to Regulation, for following products: a) Crude petroleum and GLP, taking like reference the Parity of Export of

the reference product. b) Regulated Products, taking like reference the prices from the indicated

raw material in interjection a preceding. c) For regulated products mattered, they will pay attention taking like

reference the Parity from Import.

d) Natural Gas, considering the prices of existing contracts and opportunity of market.

ARTICLE 90°. - (Norms of Competition of the Markets). The Hydrocarbon Supervision will regulate the competition by and in the markets of Oil Activities, with base to Title V of the Law of the System of Regulation Sectorial (SIRESE), N° 1600 of 28 of October of 1994, to that it will be complemented with the following norm: The Regulating Being will not allow economic concentrations that limit, harm the competition and that give like result positions of dominion in the market. The procedure, as well as the indicators to be used to determine the concentrations in the market, properly will be established according to Regulation. Of the Regulation: a) The Regulation will look for, where it is possible, that the markets are

developed under competitive structures to reach economic efficiency. b) In the cases of monopolies, the exceptions specifically authorized and

the markets where competitive structures do not work, will be regulated simulating the competition. The established dispositions of competition in the present Article will be applied to the activities before indicated, observing the characteristics of the service and the consumption.

c) The Regulator will take the necessary actions for safeguard it of the competition, being understood like the set of the actions directed to the promotion, protection and elimination of the barriers un justified to the competition. Also, it will exert prevention and/or sanction when the access to goods and services does not exist that must be presented/displayed in conditions of competition in the markets.

d) The companies dedicated to the oil activities, will have to inform annually to the Hydrocarbon Supervision on their excellent shareholders, tie companies and tie partners or shareholders who exert control and decision in the company, information with which a public file will be constituted.

e) Of The Market: a) The companies that participate in the Excellent Market will have right to the exercise of the activity in competition, to a right treatment, in conditions equitable or equivalent with access to information available, under the neutrality principle. Also, they will have the right to demand or to inform to the Regulator on potential facts or well-known actions that they harm the competition. b) is prohibited the acts and conducts whose result is to limit, to restrict, to falsifying or to distort the competition, to concentrate or to manipulate prices or quality, to obtain legitimate advantages, to limit access the market or that constitutes abuse of a dominant position in a similar market and other acts, so that can cause to damage to the particular, general economic interest or for the consumer or user. c) Without damage of the action that corresponds before ordinary justice, the Hydrocarbon Superintendent will condemn to the violator the payment of a sanction settled down in Regulation and will define the conduct guidelines that will have to observe in the future. In case of recidivism or according to the gravity of the facts, he will be able to have revocation the license or the concession of the violator, the disintegration of his company or to determine the activity that will be able to exert in the future.

f) Of the Rights of the Consumer: a) The Regulator and the Companies Concessionaries and Licensees will inform, in relation to the goods and the services that offer in the markets, so that the consumer or user makes his decision to buy or to accede to the service in free form with base to information from price, quality and opportunity. b) the consumer or user has right to the repair of the damages by the goods or acquired or contracted services that presents/displays deficiencies, that do not fulfill the conditions of quality, amount, price, security and opportunity, among others established for the product or the service.

CHAPTER III HYDROCARBON TRANSPORT BY DUCTOS ARTICLE 91°. - (Concessions of the Hydrocarbon Transport and Open Access). The Concessions of the Transport by ductos will be granted by the Regulator, previous the fulfillment of legal, technical and economic requirements to request of part or by means of public tender, according to Regulation. The activity of Hydrocarbon Transport by Ductos, is governed by the Principle of Free Access by virtue of as all person has right, without discrimination to accede to conduit. For aims of this operation, it is presumed that always capacity availability exists, while the concessionaire does not demonstrate the opposite before the Regulating Being. The Concessionaire will destine a minimum of the fifteen percent (15%) of the cargo capacity for other users who use the Gas in Projects of Industrialization in national territory. Overcome the term of a concession for the transport by ductos, or in revocation case of or lapsing, the concession will be bid on to adjudge it to a new concessionaire. Throughout the length of the existing gas pipeline s and on the basis of the National Census and taking into account the area from influence from these gas pipeline s and the proximity to the populations with more than two thousand inhabitants, lateral connections of process will be due to qualify (hot tap) that supply to these populations, for domestic consumption, generation of energy and small industry, considering that the technology exists and national companies that can conduct these operations. I ARTICLE 92°. - (Approval of Tariffs of Transport by Ductos). The Tariffs for the Hydrocarbon Transport by Ductos, will have to be approved by the Regulating Being according to Prescribed and low Decree the following principles: a) To assure the lowest cost to the users, preventing the security and continuity of the service through the expansion of the transport systems, in the national territory. b) To allow the concessionaires, under a rational administration, prudent and efficient, to perceive the income sufficient to cover all its operative and imposed costs, financial depreciations and costs and to obtain a suitable and reasonable yield on its net patrimony. It will not be considered within the cover of costs to the retentions by remittances to the outside of the Tax on the Utilities of the Companies. c) To assure efficiency the operations and to

optimize the investments and costs of the concessionaires. The scale economies that generate the ductos of export must benefit the internal tariffs from Transport by Ductos. ARTICLE 93°. - (Expansions of the Facilities of Transport). With the intention of stimulating and protecting the consumption in the internal market, the Regulating Being on the basis of the analysis of the real demand, and the projections of the demand, will arrange that the concessionaire extends the capacity until a level that assures the continuity the service, considering the rate of I retake settled down by means of Regulation. ARTICLE 94°. - (New Projects and Operations). When one grants concessions of transport, it will be taken care of that the tariffs do not increase in price by New Projects and Operations. In the case that determines that a new project or operation cause damages to the existing system, one will settle down the compensations that that new concessionaire must pay to the system. ARTICLE 95°. - (Prohibitions for the Transport). The concessionaires or licensees for the Hydrocarbon Transport by Duels will not be able, under penalty of lapsing of their concession: a) To be concessionary nor to participate in concessions for the Natural Gas distribution by Networks. b) To be buying and hydrocarbon salesmen, except for the exceptions established in the present Law. c) To participate like shareholder in generating companies of electricity or to be licensee of such activity. ARTICLE 96°. - (Exceptions for Specific Projects). The prohibitions of the preceding Article are excepted, previous evaluation: a) The projects that correspond to isolated systems, that cannot be interconnected to the System of Transport. b) the projects that are not economically feasible without vertical integration. c) the projects that develop new international and domestic markets of hydrocarbons and new networks of Natural Gas distribution in the national territory. In these cases, the concessionaires will have to take a separated accounting for their activities of transport. ARTICLE 97°. - (Tariffs of Transport). The Tariffs of Transport in national territory, will be based on one of the following methodologies. a) Internal market and market of export Stamp Unique or Different for the internal and external market will be applied Tariff, according to the interests of the country. b) Projects of national interest, certified by the Ministry of Hydrocarbons, or new projects in the

markets internal and of export, in which case will be able to be applied increments rates. CHAPTER IV REFINEMENT And INDUSTRIALIZATION I ARTICLE 98°. - (Industrialization). One declares of necessity and national priority the Industrialization of Hydrocarbons in Bolivian territory. ARTICLE 99°. - (Concession of License). For the activity of hydrocarbon refinement the administrative license will be granted, previous the fulfillment of legal, technical, economic and administrative requirements, those that will be detailed in the prescribed norm. The concessionaire will have to fulfill the Forest Law, Law of Municipalities, Law of Irrigation, Potable Water Law and Basic Cleaning, Norms of Security and environment in the industrialization processes, refinement and storage. ARTICLE 100°. - (Margins of Refinement). For the activity of Refinement, the Regulating Being, using analytical methods, according to Regulation and under the following criteria, will determine the Margins for Refined Products: a) To assure the continuity the service. To guarantee the supplying of

products in volume and quality, under the principle of economic efficiency.

b) To allow the operators, under a rational administration, prudent and efficient, to perceive the income sufficient to cover all its operative costs, financial depreciations, investments, costs and taxes with exception of the Tax to the Remission of Utilities to Exterior (IRUE) and to obtain a suitable and reasonable yield.

c) To stimulate the expansion of the units of process and services to guarantee the power security.

ARTICLE 101°. - (Norms of the Companies that Industrialize Hydrocarbons). The Companies that industrialize hydrocarbons, they will be able to construct and to operate the Ductos dedicated for the transport of hydrocarbons to be used like raw material for its production. These facilities do not contemplate tariff, nor are subject to free access, these industries will not be able to participate in co-generation of electricity except for express authorization of the Hydrocarbon Ministry, for isolated systems with social character. ARTICLE 102°. - (Incentives for the Manufacturing). The companies interested in installing projects of Natural Gas industrialization in Bolivia, within the framework of the policy of the State, will have to present/display the

feasibility studies so that the Executive authority carries out a cost analysis benefit of the way project to identify the social impact, economic and political, in these cases they will be able to have the following incentives:

a) Liberation of the payment of rates and taxes to the internment of the equipment, materials and other inputs that require for the installation of the plant or industrial complex;

b) The Projects of Gas Industrialization that are located in Producing Municipalities, will pay Incremental rate. The Projects of Gas Industrialization that are located in no Producing Municipalities, will pay Rate of transportation stamp

c) Liberation of the Tax on utilities by eight (8) years computable from the beginning of operations, together with a regime of depreciation by the same period. The administrative authorities will impel of office the proceedings of the industrial companies for the obtaining of legal personality, licenses, concessions, permissions and others required to settle down and to operate legally in Bolivia.

CHAPTER V STORAGE ARTICULO 103°. - (Plants of Storage). Para to exert the activity of liquid and gaseous fuel Storage, will grant by the Regulating Being authorizations and licenses of construction and operation for Plants of Storage to legally established companies, previous fulfillment of legal, economic, technical requirements and of industrial and environmental security. The maximum margins perceived by storage will be determined on the basis of Criteria of technical and economic efficiency. The companies dedicated to this activity assume the responsibility on the reception, storage, quality and office of the hydrocarbons, for whose effect they will have to adopt the necessary safety measures. CHAPTER I SAW NATURAL GAS DISTRIBUTION BY NETWORKS ARTICLE 104°. - (Tender of the Concessions of Gas Distribution Natural) The Concessions for the service of Natural Gas Distribution by Networks will grant previous public tender summoned by the competent authority, to individual people or collective, national or foreign, public or prevailed, who demonstrate technical and financial capacity, they fulfill the norms of municipal development, security, protection of the environment and the requirements that settle down within the framework by means of Regulation of the present Law. Before bidding on the service of distribution, it will be coordinated with the municipalities Governments, the regulating plans of the respective urban centers and all those subjects that they have to do with the competitions of the municipalities. ARTICLE 105°. - (Rat Regulation).

The Executive authority will regulate the Natural Gas Distribution by Networks in a maximum term of forty (40) days from the promulgation of the present East Law Regulation will contain a rat methodology and the procedure to grant concessions; also, the obligations referred to the investment commitments and plans of expansion and the rights of the concessionaires. ARTICLE 106°. - (Concessionary Obligations of the Area of Concession). Los of Natural Gas Distribution by Networks will have the exclusive right to provide Natural Gas to all the consumers with the geographic area of their concession, with exception of Plants Generating Thermoelectrically, the Refineries and the Projects of Industrialization of the Natural Gas. The Concessionaire commits itself to give continuity in the service to all consumer, within his zone of concession and to satisfy all the demand of Natural Gas in the indicated zone according to an expansion plan of the networks. To the effect, when he is not producing must have effective contracts in firm with producing companies, that guarantee the provision and the producers will subscribe contracts of provision obligation. The fulfillment of the plan of expansion of '' networks established with the concessionaire, will be evaluated every two (2) years, whose evaluation will determine the remedial actions of the zone of concession. The Concessionaire will have to expand the service in economically depressed areas with his own resources, including these expansions in his program of development. Vertical relation between the wholesale distributor and the Gas retailer will not exist Natural Vehicular (GNV). ARTICLE 107°. - (Political of Expansion of the Networks of Gas Distribution Natural).

l Regulating Being, with previous character to the tender of concession areas, YPFB will invite to the operating company so that, by himself or in association with high-priority character and of direct way, the zone of concession is adjudged, fulfilling all the requirements and obligations that the present Law demands. When the operating company YPFB in the term that fixes the Hydrocarbon Supervision does not fulfill the technical requirements, legal and economic, it will bid on the concession. ARTICLE 108°. - (Rates of Natural Gas Distribution by Networks). The Rates for Natural Gas Distribution by Networks, will be approved according to the principles established in the Article 89° of the present Law, in which outside applicable. The Rates of Natural Gas Distribution by Networks for their application to the zone of concession will have to contemplate subsidies to be granted to the consumers of smaller income, according to a classification by consumption destined by the Hydrocarbon Ministry. Of equal way, subsidies will be due to contemplate to be granted to the small industry, public health, asylums, orphanages, fiscal education, rural electrification, supplying of Natural Gas to the rural area according to the social impact of these activities, to the tourism and Gas Natural Vehicular (GNV), according to a classification by consumption. The Industry classified like great Natural Gas consumer, will have tariffs based on economic principles being able to negotiate smaller prices with the producers, happening the benefits to the final consumers. The present companies of Natural Gas distribution will be adapted to had in the Article 105° the present Law

CHAPTER VII COMMON DISPOSITIONS FOR PUBLIC SERVICES Of THE HYDROCARBON SECTOR ARTICLE 109°. - (Concessions, Licenses and Authorizations). The Concessions for the execution of the activities of Refinement, Natural Gas Transport and Distribution by Networks, will be granted by the Regulating Being to name of the State, per maximum periods of thirty (30) years, previous the fulfillment of legal, technical, economic requirements and of the environment, by means of public tender. The Licenses and Authorizations for the execution of the activities of Industrialization, Regulated Product Storage and Commercialization to retailers, will be granted to request of part, previous the fulfillment of legal, technical, economic requirements and of the environment. For the correct benefit of the services public and when it is necessary, Concessionaries or Licensees they will have to present/display banking guarantees for the fulfillment of investments or obligations, considering the nature and particularity of the service . ARTICLE 110°. - (Revocation and expiration) .El Regulating Being will be able to revoke or to declare the lapsing of concessionaire's right, Licenses and Authorizations, in administrative process to the lending companies of services, by following causal and with subjection to the present Law and corresponding legal norms: a) It does not initiate, it completes works or facilities, nor it carries out the

investments it jeopardize in the terms and conditions established in his Concession, License or Authorization, except for impossibility happened properly verified by the Regulating Being.

b) Modifies the object of the Concession, License or Authorization or fails to fulfill with the obligations established by the same ones.

c) It fails to fulfill the present Law, the prescribed norms and the corresponding contracts and it does not correct his conduct after to have received notification it express so that it does it.

d) It suspends the services to his position without previous authorization, or fails to fulfill in repeated and negligent form the norms of System ODECO.

e) Fail to fulfill the open access. f) Denies, repeatedly and negligently, to lend information in the terms and the form

established or denies the access to programmed facilities when it is inspection. g) Fails to fulfill the sanctions applied by infractions, lack and contraventions to the

Regulation, in legal process. h) the revocation one of the Environmental License, will be causal of rescission of the

concession. i) is declared judicially in bankruptcy. ARTICLE 111°. - (Preventive). When Intervention puts in risk the normal provision or attention of the service, the Regulating Being will be able to have the Preventive Intervention Concessionary or

Licensee by a no greater term to (1) a year by means of public procedure and founded administrative resolution. The designation of the inspector, their attributions, remuneration and others, will settle down in the regulation. ARTICLE 112°. - (Infractions and Sanctions). Regulating Being will impose to Concessionaries or Licensees of the services public economic sanctions and fines, when in the benefit of the services to his position they commit lack, infractions and contraventions, described according to regulation, without damage to repay the damage caused to the consumers, users or third. The amount of the received fines will be destined to the expansion of Natural Gas networks in needed social areas. ARTICLE 113°. - (System of ODECO). The Claims Hydrocarbon Supervision, Concessionaries and Licensees, by means of the System Office of Consumer "ODECO", will free take care of and solve the reclamations and consultations of the consumers, of efficient and opportune way. The regulator, will guard by the rights of the consumers, will control the effective operation of the claim systems and consultations and will sanction, according to the regulation, to the companies that fail to fulfill the norms of attention to the consumer and benefit of the service, as well as will be able to take preventive actions that avoid a greater number of reclamations. Concessionaries and Licensees are responsible to take care of, in first instance, the reclamations and consultations of the consumers. The regulator will solve the claims in second instance, with procedures that adjust to the characteristics of each service and the advantage of modern technology, that allows to take care of, in effective form, to the universe of the consumers. The present Article will be regulated observing, in which outside applicable, the Law of Administrative Procedure, N° 2341, and its regulation. The Hydrocarbon Superintendent by means of founded resolution will be able to delegate his competitions in the matter of attention of consultations and claims to the civil employees responsible for the offices ODECO in the departments or regions according to regulation. TITLE VII RIGHT OF THE TOWNS FARMERS, INDIGENAS AND ORIGINAL CHAPTER I OF THE RIGHTS TO THE CONSULTATION AND PARTICIPATION OF THE TOWNS FARMERS, INDIGENAS AND ORIGINARIOS ARTICLE 114°. - (Ambit of Application)

In fulfillment to Articles 4°, 5°, 6°, 15° and 18° of Agreement 169 of the OIT, ratified by Law of the Republic N° 1257, of 11 of 1991 July, the communities and towns original farmers, natives and, independently of their type of organization will have to be consulted of previous, obligatory way and opportune when it is tried to develop any predicted hydrocarbons activity in the present Law

ARTICLE 115°. - (Consult).

In agreement with Articles 6° and 15° of Agreement 169 of the OIT, the consultation will take place of good faith, with principles of veracity, transparency, information and opportunity. It will have to be made by the competent authorities of the Bolivian Government and with appropriate procedures and according to the circumstances and characteristics of each indigenous town, to determine to what extent would be affected and with the purpose of reaching an agreement or of obtaining the Indigenous and Original consent of the Communities and Towns. Consult has obligatory character and the resulting decisions of the process of Consultation must be respected. In all the cases, Consult will be made in two moments: a) Previously to the tender, authorization, hiring, call and approval of the measures,

hydrocarbons works or projects, being necessary condition for it; and, b) Previously to the approval of the Studies of Evaluation of Environmental Impact.

When one is Studies of Evaluation of Environmental Impact for hydrocarbons activities, works or projects to be developed in places of occupation of the Communities and Towns Original Farmers, Natives and areas of high value of biodiversity, necessarily they will have to be those of category 1 (Study of Evaluation of Environmental Impact Analytical Integral).

ARTICLE 116°. - (State) The Responsibility resolutions and consensuses registered by the Competent Authorities as product of the process of consultation at their two moments, has validity for the hydrocarbons activities of the project object of the consultation. In case of having the consultation, recognized in the Article 115°, a negative result, the State will be able to promote a process of conciliation in the best national interest. ARTICLE 117°. - (Competent Authority To execute the Process of Consult). are responsible in joint form for the execution of the Process of Consultation the authorities of the Hydrocarbon Ministry, the Ministry of Sustainable Development, and the Ministry of Indigenous Subjects and Original Towns, considered competent authorities, for the aims of the present Chapter. The Process of Consultation will have to be financed by the Executive authority, with position to the project, builds or in question hidrocarbonsa activity. ARTICLE 118°. - (Representation). The settled down processes of consultation in the present Chapter, Farmers will be made with the representative instances of the Communities and the Indigenous and Original Towns, independently of their type of organization, respecting their territorial, their uses and customs, being null any other type of individual or sectorial consultation. CHAPTER II COMPENSATIONS AND INDEMNIFICATIONS ARTICLE 119°. - (Of the Compensations). When the hydrocarbons activities are developed in communitarian territories of origin, communal, indigenous or farmers, titled or no, all direct, accumulated and long

term impact socio environmental negative, that the same ones produce, must financially be compensated on the part of the holders of the hydrocarbons activities, of right way, respecting the territorial, the uses and customs of the affected ones, taking as she bases, the Study of Evaluation of Environmental Impact and other means that allow to value the non quantifiable damages. The Ministry of Sustainable Development and Competent the Environmental Authority Maxim, the Hydrocarbon Ministry, Ministry of Subjects Farming Farmers and the Original Ministry of Indigenous Subjects and Towns are forced to prevent that the compensations are executed and materialized in a term of fifteen (15) days after decided the right amount compensatory that corresponds. The fulfillment of this obligation on the part of the holders of the hydrocarbons activities, is requisite for the development of the following productive stages. ARTICLE 120°. - (From the compensations). It will come to compensate by damages and emergent damages of the activities, hydrocarbons works or projects that affect to communitarian territories of origin, communal, indigenous or farmers, titled or no, on the part of the holders and/or operators of the hydrocarbons activities, respecting the territorial the uses and customs. The indemnification must contemplate the damages derived from the loss of benefits by productive activities, of traditional knowledge and/or advantage of natural resources that the Communities or Towns Original Farmers, Natives and could develop in the hit zones. CHAPTER III INTANGIBILIDAD OF SACRED SITES AND AREA OF SPECIAL NATURAL VALUE AND CULTURAL ARTICLE 121°. - (Exclusion of the Procedure of Expropriation). The agricultural, cattle, forest earth or of conservation, that is of individual or collective property, of Communities and Towns Indigenous and Original Farmers, independently of their type of organization and the type of property, is excluded from the reaches of the Procedure of Expropriation, unless by means of Law it express declares of utility and public necessity the activities, hydrocarbons works or projects to execute itself in indicated earth or where there are pre constituted rights of Communities and Towns Original Farmers, Natives and. The Law expresses that it declares the utility and public necessity for each case, will be approved according to the Legislative Procedure established in Articles 71° to 81° of the Political Constitution of the State. ARTICLE 122°. - (Declaration of Public Necessity). For the cases included/understood in the preceding Article, any request of Declaration of Necessity and Public Utility by means of express Law, will have to count necessarily on the studies of evaluation of economic, social, cultural and environmental impacts properly approved by the representative instance of the Communities Farmers and Towns Indigenous and Original and certified by the National Environmental Authority, according to established in the Chapter "Of the Rights to Consult and Participation of the Towns the Original Farmers, and Natives ".

ARTICLE 123°. - (Inappropriateness of Expropriation). No will come the acceptance from an expropriation request, in communitarian territories of origin when Titular has not previously made know the necessities the expropriation in Committee of Monitored Environmental Partner the respective area the contract. ARTICLE 124°. - (Right to the Defense of the Communities Farmers, Towns and Natives ). Once time approved by Law it express the public utility of the activities, works or projects that put on march the Procedure of Expropriation, it will be come to transact a right procedure of expropriation, that guarantees the Right plenary session to the Defense of the Communities Farmers, Indigenous and Original Towns where the expropriation will be executed, whom fixes, taking as it bases the capital gain as a result of the emergent infrastructure of same and the damage permanent environmental partner who will suffer, considered in the Study of Environmental Impact. ARTICLE 125°. - (Request of Expropriation). The Request of earth Expropriation in the cases included/understood in preceding Articles, will be presented/displayed by the oil operating companies directly interested, to the Hydrocarbon Ministry, who will send to the antecedents to the Ministry of Subjects Farming Farmers and, Original Ministry of Indigenous Subjects and Towns, like competent organization in indigenous subjects, to the Defender of the Town, in quality of instance of the process, and to the Parliament, for the consideration of the declaration of necessity and public utility by express Law. Once approved the declaration of necessity and utility public, the Hydrocarbon Ministry, will have to put in knowledge of or the Municipal Governments and the representative instances of the Communities Indigenous and Original Farmers or Towns, in whose jurisdictions the expropriations will take place, the antecedents for the expropriation proceedings. The respective Municipal Government, will act in first instance, and will embody the procedure of expropriation in fulfillment of the Chapters SAW and VII, Articles 122°, 123°, 124° and 125°, of the "Law of Municipalities" (Law N° 2028, of 28 of October of 1999), being able the affected part to interpose the Resources of Revision, Modification and Revocation against the resolution that establishes the price of the expropriation. The part affected with the resolution that establishes just price of the expropriation, also will be able to demand in ordinary process, the fixation of just price before the Superior Court of District that corresponds, according to the norms established in the Civil Procedure. ARTICLE 126°. - (Places that cannot be expropriated ). The expropriation in the rural area will not be able to include/understand to the houses and their dependencies including those of communities farmers and those of indigenous towns, either the cemeteries, iron routes, airports and any other public or deprived construction that is stable and permanent. ARTICLE 127°. - (Territorial Compensations).

The National Government, obligatorily will make Territorial Compensations to the Communities Indigenous and Original Farmers and Towns affected by procedures of oil expropriation. The territorial compensation, will have obligatorily to fall to places with characteristics similar to the expropriates ones, that they allow to the survival and development of the Communities Farmers, Indigenous and Original Towns. CHAPTER IV OF THE SERVANTS ARTICLE 128°. - (Of the Servants) In the agricultural, cattle, forest earth or of conservation, that is of property or individual or collective possession of Communities Farmers, Indigenous and Original Towns, independently of their type of organization and the type of property, as well as the earth to which they have had access for his traditional activities and of subsistence or that are within their area of influence, will only be able to be asked for the constitution of servitudes for the activities of Transport and Gas Distribution by Networks. The Servitude does not mean loss of the property right or earth possession by the Communities Farmers, Indigenous and Original Towns. For the cases included/understood in the preceding paragraph, the oil Servitudes will be constituted, they will modify and extinguish by disposition of the Law or agreement of parts. The constitution of Servitudes by agreement of parts, necessarily will have to be accredited by the Hydrocarbon Ministry and the Ministry of Subjects Farming Farmers and, Ministry of Indigenous and Original Subjects, for its later inscription in the Registry of Real Rights of the Department that corresponds. When agreement of parts does not exist, for the process of constitution of Servitudes the Civil Procedure will be applied. For the constitution of oil Servitudes in the cases included/understood in the present Article, an amount of compensation for the Communities will be defined Farmers, Indigenous and original Towns, by the partner-environmental affectations that can suffer, considered of the Studies of Evaluation of Environmental Impact. The expenses that the constitution of Servitudes demands will be paid by the interested one. TITLE VIII CHAPTER I ACTIVITY HIDROCARBURIFERA, ENVIRONMENT AND NATURAL RESOURCES ARTICLE 129°. - (Hydrocarbons, Environment and Natural Resources ). The hydrocarbons activities will subject with respect to the environmental subjects and to the Natural Resources to the had thing on this thematic one in the Political Constitution the State, Law of the Environment and its Regulations, Forest Law, Special Legal Regime of Protected Areas and to the Environmental International treaties ratified by the State within the framework of the National Development Sustainable. ARTICLE 130°. - (Legal Control, Pursuit, Control and Environment).Los Audit Responsible for activities, works or projects, AOP's de Hydrocarbons, will have to

deposit in the account of the Ministry of Sustainable development (MDS) denominated "Control, Audit, Control and Environmental Pursuit of the Sector of Hydrocarbons", previous at the beginning of each none exploratory AOP's an equivalent amount until the average percent (0.5 %) of the total investment according to Regulation. These resources could not be used for aims different from the anticipated ones in the present Law and will be exclusively destined to activities of control of the competent environmental authority and involved sectorial organisms. ARTICLE 131°. - (Committees of Monitored Associate). Each under contract Oil area will have a Committee of Monitored Socio-Environmental of Area, composed of a representative of each municipal section covered by the area, two representatives of the indigenous communities and a representative of Titular, to evaluate the possible produced socioeconomic impacts at local level, and in TCO and to implement actions that harness the positive impacts and mitigate the negative impacts of the hydrocarbons activity in this area. When in the Committee of Monitored Socio Environmental of Area they are not arrived at agreements, anyone of the parts will be able to resort in appeal to the Committee of Monitored National Socio- Environmental that determined on the mitigations that must be applied. The Committee of Monitored National Socio-Environmental is created that will be conformed by the Hydrocarbon Ministry, Ministry of Sustainable Development, Ministry of Popular Participation, organism administrator and supervise YPFB and a representative of the indigenous towns, to evaluate and to consider like final instance on the socioeconomic impacts in indigenous populations produced by the Oil Activities. The information, consults and participation of the town and indigenous community, affecting by an Activity, Work or Project (AOP) within its Communitarian Land of Origins (TCO), with obligatory during the process of elaboration of the Study of Evaluation of Environment Impact (EEIA), according to the dispositions of the Law N° 1257, of 11 of Julio of 1991. CHAPTER II SACRED SITES And AREA OF NATURAL And CULTURAL VALUE ARTICLE 132°. - (Areas of Natural Value, Cultural and Spiritual).No will be able to be bid on, to be granted, to be authorized, nor to concessionary the hydrocarbons activities, works or projects, in protected areas, sites RAMSAR, archaeological and pale ontological sites, as well as in the sacred places for the Communities and Towns Original Farmers, Natives and, who have spiritual value like patrimony of historical value, or other areas recognized by its biodiversity, established by competent authority. Hydrocarbons activities in protected areas will be allowed exceptionally, when the Study of Evaluation of Environment Impact Strategic (EEIAE) within the framework establishes the viability of the activity of an Integral Development National Sustainable. ARTICLE 133°. - (Protected Areas) The activities Areas related to the hydrocarbon use in their different phases, will be able to be developed in Areas Protected in strict subjection to the category and zone, plan of handling, accomplishment of public consultation and fulfillment to

environmental dispositions, requiring for the effect a Study of Evaluation of Environmental Impact, when they do not put in risk his objectives of conservation. ARTICLE 134°. - (Environment). Every Impact the operations of the productive hydrocarbon chain will have to use the best technology than the negative risks of Environmental Impact diminish. In application of the principle caution , the Ministry of Sustainable Development and the National Service of Protected Areas (SERNAP), and the Ministry of Hydrocarbons, previous to the nominations of areas of hydrocarbons interest and dowry of Concessions and Licenses, will coordinate activities of their competitions within the framework, when the same ones agree in geographic areas. The treatment of the environmental, passive damages environmental and restoration of natural atmospheres affected by the hydrocarbons activity, will subject to compensation according to Specific Regulation. ARTICLE 135°. - (Passive Environmental). At the time of producing the Environmental Liabilities, the company is forced to inform to the Competent Environmental Authority, and to immediately initiate the measures of mitigation and environmental restoration. ARTICLE 136°. - (Specific Environmental Regulations). The Municipal Governments, of individual way or jointly in the scope of their jurisdiction and competition within the framework of the Law of the Environment and its Regulation, will be authorized to propose and to apply Specific Environmental Regulations, to preserve their environmental patrimony in relation to the hydrocarbons activity, those that will be approved by the Competent Environmental Authority. ARTICLE 137°. - (Environment). In Cleaning no case the emergent costs of works of recovery or resulting Cleaning of the Environment of accidents directly attributable to the companies that make oil activities, could be considered like operation costs. TITLE IX DEFINITIONS ARTICLE 138°. - (Definitions). For the effects of the present Law, are adopted the following definitions: Agregador. - YPFB is, that will establish the sources and the destinies of the production, assigning the quotas of supplying of the Natural Gas to Titular of the production for the markets of export according to contracts "back to back". Storage. - It is the activity to accumulate hydrocarbons, refined products of Petroleum and GLP in stationary tanks for his Commercialization. Name Area. - It is the area of oil interest to be bid, to be selected by the Hydrocarbon Ministry or an individual or collective person. Authorization. - It is the administrative act by means of which the Bolivian State,

through the Hydrocarbon Supervision, grants a right in favor of legally established an individual or collective person, to develop a commercial or economic management of the activity of hydrocarbons, in temporary form or for an only objective, according to the present Law Well Mouth. - It is the flowed starting point of the total current of that produces a well (Petroleum, Natural Gas, Water of Formation and Sediments), before being lead to a System of Adjustment. Field. - Ground area underneath as exists one or reservoirs of hydrocarbons, in one or more formation in the same structure or geologic organization. Shared Field. - Ground area underneath as exists one or reservoirs, in one or more formation in the same structure or geologic organization that can be found located between two or more departments than must be developed of efficient form, in which the production will be shared in proportion to the reserve located in each Department. The Executive authority, will complement the definition. Marginal Field. - It is that field that has produced 90% of its proven hydrocarbon reserves. Resulting Product commercialization of the Operation. - The purchase - sale of Petroleum, Natural Gas, GLP of Plants and other hydrocarbons measured in the Point of Control. Refined and Industrialized Petroleum Product commercialization. - The purchase - resulting product sale of the processes of Petroleum Refinement and Industrialization. Compensation of Area. - When Titular cannot operate in the contract area, YPFB will use the criterion of Compensation with similar Areas in zones where their operation is viable. Committee of Production and Demand (PRODE). - Institution conformed by representatives of the producing companies, refiners, transporters by duels, the Hydrocarbon commerce, YPFB and Supervision. One meets monthly to evaluate the production balance demands executed in the previous month and to program the supplying to the internal market and the export for the three following months. It consults Public. - Procedure by means of which the competent authority in the consultation process puts in knowledge of the representative instances of the Communities Farmers, Indigenous and Original Towns, before undertaking any activity or project, all the technical information legal that the purpose is arranged with of reaching an agreement or of obtaining the consent of these towns, as it establishes Agreement 169 of the OIT, ratified by the Law N° 1257 of year 1991. Contract of Association. - It is the subscribed contract between YPFB and Titular of a Contract of Operation, to execute the activities of Operation and Commercialization, adopting the regime of Contracts of Accidental Association or Accounts of Participation, established in the Code of Commerce. Contract of Operation. - He is that by which, Titular will execute with its own means and by their exclusive account and risk to name and representation of YPFB, the operations corresponding to the activities of Exploration and Operation within the area matter of the contract, under the system of repayment, in case of entering to the activity of Operation. YPFB will not carry out investment some and it will not assume any risk or responsibility in the investments or results obtained related to the contract, having to be exclusively Titular that contributes the totality of the capitals, facilities, equipment, materials, personnel, technology and other necessary ones. Contract of Shared Production. - He is that by which a collective, national or foreign person, executes with her own means and by their exclusive account and risk the activities of Exploration and Operation to name and representation of YPFB. Titular in the Contract of Shared Production has a participation in the production, in the control point, once deduced exemptions, taxes and participation. Contract "back to back". - Contract of transference of obligations and rights. Oil Contracts. - They are the contracts of Shared Production, Operation and Association. Natural Gas conversion in Liquids. - It is the chemical process by means of which Natural Gas is transformed

into Liquids (GNL). Concession. - It is the act by means of which the Bolivian State, through the Hydrocarbon Supervision, grants the right of administration to an individual or collective person legally established to develop or to execute the activities of Hydrocarbon Transport by Ductos, Natural Gas Distribution by Networks, Supply and Distribution of refined petroleum products and the refinement. Declaration of Commerce. - It is the notification of the commercial discovery by reservoir of a field, that in opinion of YPFB and Titular, justifies its development and operation. Development of Field. - They are the activities of perforation and development well completion, as well as the construction of production facilities and hydrocarbon processing in a declared field commercial. Commercial Discovery. - It is the hydrocarbon finding, in one or reservoirs, a field within the area of the contract, whose operation and production are endorsed by an economic analysis that demonstrates their yield. The holder will have to notify to YPFB. Natural Gas Distribution by Networks. - It is the activity to provide Natural Gas, in public quality on watch, to the users of the concession area, besides to construct the Networks, to administer and to operate the service under the terms indicated in the present Dedicated Ductos Law. - They are the facilities for the transfer of hydrocarbons destined exclusively to the supplying like raw material to the industrialization activity excluding refinement. Regulating Being. - It is the Hydrocarbon Supervision. Exploration. - It is the geologic recognition of surface, aero photo grammaticism, topographic, gravimetric rises, magneto metric, well seismologic, geo chemical, perforation and any other work to determine the hydrocarbon existence in an area or geographic zone. Operation. - It is the well perforation of development and production, laying of lines of harvesting, construction and installation of Plants of Storage, processing and separation of liquefiable liquids and, of primary recovery, secondary and improved and all other activity in the ground and the subsoil dedicated to the production, separation, processing, compression and storage of hydrocarbons. Liquefied Petroleum gas (GLP). - It is the mixture of propane and butane in variable proportions. The GLP is produced in plants and refineries. Natural Gas. - They are the hydrocarbons, with methane predominance, that in standardized conditions of pressure and temperature appears in the nature in gaseous state. Natural Gas Rico. - It is the Natural Gas before extracting the liquefiable ones. Undressed Natural Gas. - It is the Natural Gas after extracting the liquefiable ones. GLP of Plants. - It is Petroleum the Liquefied Gas (GLP) extracted of the Natural Gas in plants of extraction of liquefiable in production fields. Hydrocarbons. - They are the compounds of carbon and hydrogen, including the associated elements, that appear in the nature, or in the ground or the subsoil, anyone is his physical state, which they conform the Natural Gas, derived Petroleum and its products, including the Liquefied Petroleum Gas produced in refineries and plants of extraction of liquefiable. Industrialization. - They are the industrial and thermoelectrically activities of chemical transformation of hydrocarbons and processes that they have by purpose of adding added value to the Natural Gas: Petrochemical, Gas to Liquids (GTL), fertilizer production, urea, ammonium, methanol and others. Liquefiable of the Natural Gas. - Hydrocarbons that in Extraction plants happen to the liquid state. Superior Propane and butane (component of the GLP) and pentanes and (component of the Natural Gasoline). Natural Gas liquefaction. - It is the physical process, that allows to happen of the gaseous state to the liquid state. Lateral line or Branch. - They are all those pipes that are interconnected with the Main System of Hydrocarbon Transport by duels. Lines of Harvesting. - They are the pipes by means of which the producer collects and transfers the production of its wells until the entrance of the

System of Adjustment. Licenses. - It is the administrative act by means of which the Bolivian State, through the Hydrocarbon Supervision, authorizes leave or authorization to an individual or collective person legally established to develop a commercial or economic management of the activity of hydrocarbons according to the present Operating Law. - It is the executor of anyone of contracts established in the present Law to carry out the activities of Exploration and Operation, designated Titular. Parcel. - The Hydrocarbon Operation and unit of measurement of the reconnaissance areas. Plan metrically, it corresponds to a square of 5,000 (five thousands) meters of side and to a total surface of You have 2,500 (two thousand Five hundred hectares). Their superficial vertices are certain by means of coordinates of the Universal and Cross-sectional Projection of Mercator (UTM), referred to the Geodesic System the International WGS - 84. Each parcel is identified by the number of the National Map and by a system matrix of oil grids established by the Hydrocarbon Ministry. Parity of Export. - It corresponds at the cost of the market of export in the distributing point, discounting the costs of transport and insurances associated to the export until the distributing point. Parity of Import. - It corresponds at the cost of international reference, added the costs of Transport and insurances associated to the import from the point of origin to the internal market. Participation. - They are the payments in species that correspond to Titular in the Point of Control, according to established in the Contract of Shared Production or the Contract of Association, point in which assumes the proprietary right. Petroleum. - The hydrocarbons that in standardized conditions of temperature and pressure appear in liquid state, as well as the Natural Gasoline and the Liquid Hydrocarbons that are obtained in the processes of separation of the gas. Petrochemical. - They are the chemical processes that allow to reconstruct molecules of Hydrocarbons, in polymers, resins, plastics, fertilizers and others, that commonly are denominated petrochemical products. Planning of Oil Policy. - It is the indicative proposal of the development of the hydrocarbon sector, that will allow to establish the long term policies, looking for the best advantage of the hydrocarbons resources, by means of the analysis of certain indicators such as the reserves, the production, infrastructure and hydrocarbon the market within the framework of the National System of Planning. Political happiness will respect the existing agreements of commercialization and the markets of export obtained by the companies. Those markets that are obtained by the State will be assigned following the lineaments of this policy, according to the best interest of the Nation. Gross Production. - It is the total volume of fluid that produces a well: Petroleum, natural gas, water of formation and sediments, before being lead to a adjustment system. Controlled Production. - They are the volumes of hydrocarbons measured in the Point of Control of the Production. Products Derived from the Gas - They are the products that come from the separation and/or industrialization of the gas. Regulated Products. - Any product derived from the hydrocarbons that has a final price regulated by the competent authority. Refined Hydrocarbon products. - Fuels, fuels, lubricants, fats, paraffin, asphalts, reliable, the intermediate GLP and by-products and products are the denominated products that are obtained from the processes of Refinement of Petroleum. Point of Control of the Production. - It is the place where the resulting hydrocarbons of the operation in the field are measured after such they have been put under a System of Adjustment to be transported. For fields with extraction facilities, the Point of Control of the Production, will be when coming out of the plant located before the System of Transport and must fulfill the requirements of adjustment of the gas or the liquids according to regulation. In the fields where facilities of extraction of GLP and/or Natural Gasoline do not exist, the

Point of Control of the Production will be when coming out of the system of separation of fluids. For this effect, the producers will install the necessary instruments like being: mass gravitómetros, recorders multi flow, measurers, chromatographs for qualitative and quantitative analyses, pressure indicators and temperature and all equipment that allows to establish the incorporated amounts of GLP and Natural Gasoline in Natural Gas current the dispatched. Refinement. - They are the intermediate processes that turn Petroleum denominated products fuels, fuels, lubricants, fats, paraffin, asphalts, reliable, GLP and by-products and products that generate these processes. Exemptions. - Payable obligatory economic compensation to the State, in money or species, please the producing Departments by the operation of its nonrenewable natural resources. National Exemption Compensatory. - Economic benefit granted the Departments of Beni and Pando, conformity to the Law N° 981, of 7 of March of 1988. Regulation. - It is the activity made by the Hydrocarbon Supervision to fulfill and to make obey the Law and the sectorial norm, promote the competition in economic matter, assure the fulfillment the ant monopolistic dispositions and defense of the competition, as well as the practical standards and of security. Registered Reserves. - They are the hydrocarbon reserves quantified by specialized companies that correspond to the sum of Reserves Proven and Probable Reserves. Proven Reserves. - They are the amounts of hydrocarbons that, according to geologic information and of engineering of reservoirs, demonstrate with reasonable certainty, that in the future, the hydrocarbons of the reservoirs under existing the economic and operational conditions will be recoverable. Probable Reserves. - Are hydrocarbon reserves no proven, in which the geologic studies and the scientific dates suggest it probability that they are recoverable is greater to the probability that they are not it. Shared Reservoir. - He is reservoir that is under oil contracts, that it extends beyond the limits of a contract area, with dynamic continuity of the phase of hydrocarbons. Reservoir de Hydrocarbons. - He is one or several layers under the surface that are producing or are able to produce hydrocarbons, with a system common of pressure in all his extension, in which the hydrocarbons are surrounded by impermeable rock or water. For aims of the present Law, Deposit and Reservoir de Hydrocarbons they are synonymous. System of Adjustment. - They are the facilities necessary to prepare hydrocarbons to be transported, according to regulation. The System of Adjustment will have to adjust to the nature of the hydrocarbons that produces the field. System of Transport. - It is the Main System of Transport, plus the lateral lines or branches. It does not include the lines of harvesting. Main system of Transport. - It is the set of pipes of Hydrocarbon Transport by duct, that has concession granted by the Hydrocarbon Supervision. It prices Stamp. - It is the methodology that the Hydrocarbon Supervision applies to the hydrocarbon transport by ductos by means of which an only tariff pays attention stops the Concessions without discriminating distance between origin and destiny. It quarrels Incremental. - She is the one that considers the costs necessary to extend and to maintain the cargo capacity of specific shippers, and that will be loaded through tariffs to the beneficiaries with this extension and/or maintenance. One pays attention by distances. Communitarian territories of Origin (TCO). - They are the geographic spaces which they constitute the habitat of the towns and indigenous and original communities, to which traditionally have had access and where they maintain and they develop his own forms of economic organization, social and cultural, so that they assure his experience and development. Territories Communitarian of Origin will be considered those that are titled, those that are demands with Car of Admission, those immobilized ones with traditionally recognized Resolution of Immobilization and all

like such. To title. - She is all individual or collective, national or foreign person, who has subscribed Contracts of Shared Development, Contracts of Shared Production, Contracts of Shared Risk and Contracts of Association with YPFB. Transport. - It is the activity to transfer Hydrocarbons, Refined Products of Petroleum and GLP from a place to another one by means of ductos, using complementary facilities. One excludes from this definition the Gas Distribution by Networks and lines of harvesting. Units of Work. - They are the expressed obligations of work in numbers, for the exploratory activities (geophysical, exploratory well magnetometría, gravimetric, perforation exploratory and other activities), that will have to be executed by Titular in the different phases from Exploration. Unitización of Field. - Agreement of operation celebrated between Holders with adjacent contract areas, that will allow the efficient development of a shared field, avoiding damage to the deposit. Oil fields Fiscal Bolivians (YPFB). - Public company created by Decree Law of 21 of December of 1936. Traditional Zone. - Region with geologic information where hydrocarbon production exists with commercial operation. The Executive authority, by means of Supreme Decree, will designate the Traditional Zones Hydrocarbons. Nontraditional Zone. - Region no included/understood in the definition of Traditional Zone. TITLE X NATIONAL SOCIALIZATION Of THE GAS CHAPTER UNIQUE USE Of THE GAS FOR The INTERNAL DEVELOPMENT CONTRACTS OF SERVICES BY GAS EXTRACTION FOR THE STATE ARTICULO 139°. - (Gas for the Internal Development of the Country). Been Bolivian, in exercise of its sovereignty and of the proprietary right that attends to him on hydrocarbons, will use the Natural Gas to support and to foment the Internal Development of the country and to fight against the poverty and the social exclusion. ARTICLE 140°. - (Contract of Compensation of Services). Yacimientos Petroliferos Fiscales Bolivianos (YPFB), will subscribe with Titular a Contract of Compensation of Services that will intend the hydrocarbon extraction in Well Mouth in the amount and volumes that fixes the State according to the power demand of the country. The cost of extraction of the Natural Gas from the Deposit to Well Mouth, will be paid by the State in species, with Gas of the Deposit that operates Titular according to Regulation. In the tenders of area for exploration and operation the supply of the proponent company will be due to consider like an awarding criterion that contemplates a percentage of Natural Gas for the subscription of the Contract of Compensation of Services. In the cases in that Oil fields Fiscal Bolivians (YPFB) are associated directly, the respective contract will have to contemplate a percentage of Natural Gas for the subscription of the Contract of Compensation of Services. ARTICLE 141°. - (Social and Productive Use of the Gas Natural)

.El Been will subsidize with gas and/or transformed into electrical energy, the consumption destined to the educational centers, social centers of health, services, domiciliary consumption and asylums, according to Regulation. Of equal way, this subsidy will be granted to support the national productive development with the use of the Natural Gas, like gas and/or energy for the irrigation of the field, the industry and agro industrial national, the small industry and crafts, the generation of electricity, the mining, the transport and the tourism among others according to a classification by consumption and to the National Plan that is elaborated for the effect, on the basis of the National Policy of Social Economic Development, that contemplates the increase of work sources, elevation of wages and reduction in price of prices and other benefits for shelves and habitants of the country. ARTICLE 142°. - (Bottom of Internal Aid to the National). Development the Bottom of Internal Aid to the National Development destined to the overcrowding of the Natural Gas use in the country, with the following resources: a) The Monetización of the Natural Gas extracted within the framework of Contracts

of Compensation of Services. b) The five percent (5%) of the balance of the Direct Tax to Hydrocarbons (IDH)

that receives the General Treasure of the Nation (TGN), by concept of operation of hydrocarbons. It is authorized to the Executive authority to contract the credits necessary and/or the obtaining of no reimbursable resources to obtain the financing that. allow to develop the infrastructure of Gas Networks of equitable way between all the Departments with base to the resources described in the previous paragraph.

c) The fines and sanctions of the regulation system will be destined to the development of the infrastructure.

d) Tuition. - The Bottom of Internal Aid to the National Development, to regulate itself by Supreme Decree, will be the low tuición of the Ministry of Property.

ARTICLE 143°. - (Gas with Destiny to Social and Productive Uses). In contracts of Gas export, Oil fields Fiscal Bolivians (YPFB), as aggregator it will negotiate, with the holders who have quotas of export, a percentage of the same ones, with the purpose of monetizar the gas by means of sales to the outside to create resources destined to the Bottom of Internal Aid.

ARTICLE 144°. -

.They are exempts of the payment of taxes the volumes of gas destined to the social and productive use in the internal market, referred in the present Title. TRANSITORY DISPOSITIONS FIRST. With the object of making special audits, in the areas financial, operative, legal and technical of the oil, resulting companies of the call process of capitalization, contract of shared risk and the process of privatization, the General Contraloría of the Republic is entrusted and to fulfill this assignment, in a term no greater to 180 days, with the intention of establishing the strict fulfillment of the laws in use, arranging

itself that for this objective it is the Public Ministry, the organization that supports in the scopes that are of their competition. SECOND. { Passive Environmental of YPFB). For the Environmental Liabilities of YPFB that existed to the date of publication of the present Law, the Ministry of Sustainable Development, in coordination with reconstructed YPFB, will manage cooperation resources stops to evaluation and remedying of such. THIRD. They eliminate themselves of the Chain of Distribution of Hydrocarbons the wholesale distributors, and Oil fields Fiscal Bolivians (YPFB) will be the only importer and distributing wholesaler in the country. FOURTH. The established tributary effects in the present Law, will enter use from their publication.

FINAL DISPOSITIONS

FIRST. They are abolished and countermanded all the opposite dispositions to present Law. SECOND. (Of Fuels of no Fossil Origin). The production, the fossil fuel mixture with fuel of vegetal origin, storage, distribution, commercialization and promotion, will be regulated by Special Law. Remits to the Executive authority, for constitutional aims. Congress is given in the Room of Sessions of the H. National, to the five days of the month of May of two thousand five years. Fdo. Hormando Vaca diez Vaca Diez , Mario Cossío Cortez, Juan Luis Hits Armijo, Marcelo Aramayo Perez, Erick Kings Villa B., Ernesto Poppe Murillo. Therefore, I promulgate it so that it is had and it fulfilled like Law of the Republic. Legislative palace, city of La Paz, to the seventeen days of the month of May of two thousand five years. FDO. HORMANDO VACA DIEZ VACA DIEZ PRESIDENT Of the HONORABLE NATIONAL CONGRESS