Stephen Thurston About 81% of the wells have been unsuccessful. On the mappable discoveries, it is hard to really say: right now we have one - we feel fairly comfortable in saying that the recently announced BC- 60 discovery by a Petrobras announcing 600 million barrels, sounds like they have hit the commercial threshold. We are keeping an eye on five other blocks - BC-2, BC-10, BS-4, BC-600 and BS-500. No firm development plans or commercial discoveries have yet been announced, but we see a lot of activities, so we are hopeful for those will yield commercial results. But the conclusion is about the same. It looks like the commercial success rate in the last couple of years may hover around one and ten or potentially higher risk than that. And certainly it is not in the lower range or 1 and 3 or 1 and 5.

So if we look at the resource opportunity today, 2002, we can only conclude that the discoveries to date are smaller than about half a billion barrels which is the average we saw, and it looks like in many cases, we are clustering smaller discoveries to come up with the commercial inertia.

Oil gravities have in many cases less than 18 API. The hopeful sign is that most of the E&P around 1, 2, 3 blocks have yet to be drilled and we see significant drilling campaigns being prepared for 2003 and 2004.

So, our overall conclusions, we would have to say, the risk has gone up; the prospects appear to be smaller, but we still have significant opportunities in the next couple of years on the blocks that have already been leased.

So, now let us turn to the next element to sustain the empty industry, and that is competitive terms and conditions. We recognize the initial terms and conditions that were put forth were competitive, they were based on a view of significant fields sizes found in deep water; we recognize there are some elements of those competitive terms, on commercial terms, which are less competitive. We recognize the complex tax regime, indirect taxes that are focused more on the yielding or upfront activity rather than on the revenue string; we see special participation taxes that were designed based on the view of the reserve that would be found at the time and some foreign exchange issues.

If we look at the fiscal regimes, all we can really say is that they are somewhat complex and somewhat numerous, and I am not going to go into them here. Just to say that on an undercounted basis, if you look at the Brazil fiscal regime, it is competitive when you look at on an undercounted basis with the OCS of the US, Angola, Nigeria. However, because a lot of the Brazilian fiscal regime is focused on taxes on transactions up front, and you recognize you are in long-term development projects over time, that the discounted government take is a differen

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