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 The Hydrocarbon Law is repealed N° 1689, of April,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