Debt-ridden BY A STRANGE AND DESPAIR TEMPTED TO PAY THE GLOBAL BONDS

2015, President Rafael Correa "MOVED HEAVEN AND EARTH" TO ACHIEVE USD
1,000 MILLION. IT SIGNED A DECREE FOR AMENDING THE TAX RULES AND
CREATIVE INCORPORATED FIGURE OF "RIGHT INTANGIBLE" FIELD IN CONTRACT
SIGNED WITH SCHLUMBERGER AUCA.

SO, IS THE MULTINATIONAL hit the jackpot: USD 1,000 MILLION FOR
ADVANCEMENT, GET NET INCOME USD 6,235 MILLION, WHILE THE COUNTRY,
JUST GET MY USD 1,559 MILLION, IF OIL PRICE IS RECOVERING IN THE MARKET.
FOCUS DID VIOLATE THE SEVEN KEYS protecting THIS AGREEMENT AND MAKES A
CONSIDERATION OF CITIZENSHIP.

On December 11, 2015 (11D) it was a miraculous day. That day, President Rafael
Correa Delgado, amended the Regulations to the Organic Law of Internal Tax
Regime (RLORTI), to make possible the signing of the contract block 61 (Auca
field) with the multinational Schlumberger, disguised in the company Shaya
Ecuador S.A; but, with that "legal move" not only it has altered the Regulation
but the law itself. The creative reform enabled the government to receive the
coveted USD 1,000 million advance, using a brand new figure of Ecuadorian oil
glossary of " Intangible Contract law ".

The USD 1 billion only they were recorded in the books of accounts
Petroamazonas, because that amount, USD 650 million were diverted to pay
foreign debt (bonds Global 2015). Resta investigate who were the holders of
these bonds.

DECREE PREFERENCES

The contract "Specific Integrated Services with Financing for Block 61"
determines that the Contract Law Intangible shall be registered by the contractor
as "intangible assets in its accounting records" to be amortized within the term
of this contract, as set in the aforementioned tax reform introduced by Correa.

Indeed, the Executive Decree 844 published in Official Gazette 647, allows Shaya
Ecuador (Schlumberger) amortize the advancement delivered to the Government
as "intangible" during the contract period (20 years), through a fee $ 26 a barrel
(US / BL), although these resources have not been invested in the development
of the oil block. The USD 1 billion only they were recorded in the books of
accounts Petroamazonas, because that amount, USD 650 million were diverted
to pay foreign debt (bonds Global 2015). Resta investigate who were the holders
of these bonds.

EMBEZZLEMENT occurred?

In addition, by work and presidential pardon, he freed the company from

payment of Value Added Tax (VAT) after having a favorable criterion Ximena
Amoroso, the Internal Revenue Service (SRI). Without the tax reform, the
contractor had to pay additional taxes on the amount of approximately USD 800
million, which corresponds to income rate. According to the contract,
Petroamazonas issued a bill for the full value of contract law, ie by USD 1000
million.

According to several consulted jurists, it is revealed that the reform of the tax
legislation, by Rafael Correa, was aimed at making up an external credit of USD 1
billion, or delivered by Schlumberger someone his name with the bombastic
figure " intangible right ". They require that a reform of fiscal order in favor of a
particular person or company is an abuse of the system and a possible crime of
embezzlement.

Manager Petroamazonas, a Manual of Procedures, amended the scope of

legislation upper and transformed a contract for "Works, Goods and Specific
Services" in an exploration and exploitation of oil, incorporating the figure of
"intangible right" .
THE INVENTION OF THE CENTURY: THE "RIGHT INTANGIBLE"

Not only the hand of the President intervened in modifying the legal system, but
also the Petroamazonas Manager. The contract states that its "legal nature", is
based on paragraph 6.12 of the "Procedure for Procurement of Petroamazonas" a
lower standard output of the fist of the oil authority, which grants broad powers
likewise to model contract for the provision of specific tailored to the needs.

Clause 2.15 of the "Procedures" approved by the Manager, states: "...

PETROAMAZONAS EP may also enter into contracts that tend to monetise
intangibles arising from legal or contractual rights." Thus Manager
Petroamazonas with a manual "Procedures" amended the scope of legislation
superior and became an onerous contract "Works, Goods and Specific Services"
in an exploration and exploitation of oil, adding "creative" figure " intangible right
".

This modification of the hydrocarbon legislation, to facilitate the use of USD 1

billion in currencies other than the public company activities, contradicts the
provisions of Article 315 of the Constitution, which guarantees the autonomy of
Petroamazonas, and provides that only surplus not invested or reinvested will go
to the State Budget.

To keep low oil prices, the country would receive revenue of $ 1.559 billion,
however the contractor will have net income of USD 6,235 million during the
contract period.
USD 7,774 million for the company, USD 1,559 MILLION FOR ECUADOR

With this contract the government put a national strategic resource of 299
million barrels of proven oil reserves held by Shaya (Schlumberger), with a fee of
$ 26 per barrel, representing a gross income for the company of USD 7,774,000
over the 20 years of the contract. The economic result of the business,
considering the current reality of the oil market and projections supported in
international studies, leaves a dangerously negative balance for the state, while
the figures for the contractor are a real lottery. As will be seen later, the country
would receive revenue of $ 1.559 billion, however the contractor will have net
income of USD 6,235 million during the contract period.

PRODUCE A BARREL IN AUCA it COSTS 35 DOLLARS

The Auca field is one of the Crown Jewels, it has proven reserves of 300 million
barrels, daily production of 63,000 barrels, is located in the province of Orellana.
The contract is the "provision of specific services integrated with funding from
the contractor" in the fields of block 61 (Campo Auca) which includes Major and
Extraordinary Services. Only major services paid with established tariffs, which
are applied to the total production of Block 61, and defined in the Triennial Plan
(three-year programs) where Comprometidas specified activities.

1 MILLION AND A HALF PER DAY

Considering an audited Auca field production of 62 thousand barrels per day, to

February 2016, the average rate of 26 US / BL, the company receives 1 million
500 thousand dollars a day, by Main Services. The first year the company will
have a net profit of USD 510 million. In the first six years Shaya will have higher
net income to USD 3,000 million, ie at that time already written off 100% of their
investments.

During the first phase investment of USD 1.100 billion contractor is determined,
which will be amortized at a rate of 24 US / BL. For the second phase an amount
of USD 500 million and a fee of 25.80 US / BL is set. In the third phase
investment it is USD 500 million, with a rate of 27.60 US / BL. In total, the
contract provides for an investment of USD 2.100 billion for 20 years of
operation.
In the case of Extraordinary Services, these are not part of the tariffs agreed in
the contract. According to clause 9.1.6, Petroamazonas may require these
additional services to the contractor, which must pay Shaya additional costs.
That is, the Special Services are a new business in favor of the contractor.

Three "Triennial" phases, each with different investment amounts and rates
established in the contract. During the first phase investment of USD 1.100
billion contractor for "Core Services", which will be amortized through a rate of
24 US / BL it is determined. For the second phase an amount of USD 500 million
and a rate of 25.80 US / BL is set. Finally in the third phase the estimated
investment is $ 500 million, with a rate of 27.60 US / BL. In total, the contract
provides for an investment by the contractor of USD 2,100 million for the 20
years of operation.

In addition to these investments, consider the Intangible contract law, for USD
1,000 million, which was disbursed in two parts during the month of December

2015. In total contributions Shaya (Schlumberger), under the contract amounts

to USD 3,100 million, including payment for the "intangible right", which,
analysts say, should not be considered as investment and therefore should not
be amortizable with oil block 61. in addition, it is forced to talk USD 2,100 million
investment when the contractor receives 1 million 500 thousand dollars a day,
with an inflated by the total production rate. Then, the same leather straps come
underline.

Annex K of contract requires Petroamazonas to deliver Shaya, since the signing

of the contract (December 2015) until 31 December 2016, the equipment and
materials for compliance with the plan of activities for the first year.

Sector authorities spoke of an investment of USD 4.9 billion, of which USD 2.100
million will be used to increase production of the block, during the first nine years
to increase production by 20 thousand additional barrels.

By signing the contract, oil investments should come from the state budget, will
now be assumed by the contractor, freeing the government funding.

WE PAY THE CONTRACTOR OPERATING EXPENSES ...

Under the contract, activities Petroamazonas in block 61 include among others,

the evacuation of the oil produced in the area of activities to centers of control,
the supply of all electric power, transport it and the provision of fuel necessary
for the execution of the tasks of operation and maintenance.

According to clause 31.2.1, Petroamazonas must have the staff necessary for the
execution of the tasks of operation. This means that public company incurs
operating, in addition to the rate granted to the contractor spending, which
affects the overall cost structure and operating expenses of the block. According
to official figures from 2015, the average operating cost in mature fields is about
$ 9 per barrel. Ie produce a barrel of oil in the Auca field, with the new contract
specific services, it represents the country $ 35, while crude east in February
2016 traded at an average of $ 22.

With these variables can be projected net income of the contractor, the same as
can be seen in the chart. According to these projections the company Shaya in
20 years of operation, only by General Services, reach a net profit of
approximately USD 6,235 million, including potential remaining reserves of 299
million barrels and an average rate of $ 26 a barrel.

In this negotiation the Ecuadorian government in 20 years would reach a profit of

just USD 1,559 million. The figure is calculated with prices projected by major
financial and international banks such as Goldman Sachs barrel.

In 1972, the military government of Guillermo Rodriguez Lara, created the

Ecuadorian Oil UNECE State Corporation, and launched a process of modification
and improvement to the country's participation in the contract with Texaco
multinational, and laid the groundwork for what would be years after the reversal
of large fields, called Crown Jewels: Sacha, Auca, Shushufindi, Cononaco, Lago
Agrio.

The subsoil of these fields in the provinces of Sucumbios and Orellana, has
provided the main economic resources of the country for more than 40 years.
Since its reversion to Cepe-Petroecuador in 1989, various governments have
tried, unsuccessfully, to transfer to foreign capital, the operation of these areas.

"I made the decision that the five fields (Crown Jewels) contracted with the
utmost urgency by the system works and specific services", reported in 2003,
then-President Lucio Gutierrez.

TRAITOR, THAT DELIVERING THE "CROWN JEWEL" ...

In June 2003, when the young economist Rafael Correa, has not dreamed of
Carondelet, President Lucio Gutierrez, tried to deliver the Crown Jewels foreign
capital: "I have made the decision that the five fields (Crown Jewels ) contracted
with the utmost urgency by the system works and specific services, "said Correa

opposition today. Colonel Gutierrez failed to fulfill his dream, the rebellion of the
outlaws came forward and pulled him out of power.
In 2006, when Rafael Correa painted as a candidate of the left, denounced the
very idea of delivering the "Crown Jewels" foreign capital, it had been enough to
"send home to Colonel Lucio Gutierrez" motif.

In the former Radio La Luna, economist Correa, sentenced to pretend to deliver

those fields, it was "a treason (...) Are we idiots? We do not see the face of god
imbeciles "he exclaimed.
Once in power (October 2007), Correa announced the delivery of the Sacha field
to the joint venture Rio Napo (Petroecuador 70% and PDVSA 30%), and other
jewels: Auca, Shushufindi, Libertador, the Sinopec Chinese companies and
Pertamina of Indonesia. Until then, the orientation of the oil policy was to break
with the north (US), giving priority to their ideological allies: Venezuela, China
and other BRIC (Brazil, Russia, India, China). This provision only delivery Sacha
were executed Rio Napo.

"They have a period of six months to start the operation of all mature fields, this
will thank breached President of EP Petroecuador ask all his team submitting the
resignation." Rafael Correa, September 2010.

"I'm going privatization"

Given the delay in signing contracts, May 19, 2008, at a meeting of the Board of
Petroecuador, the president was furious and warned that bureaucratic negligence
was the "going privatization". The warnings did little, two years later (September
2010) Correa again pressed oil controls even threatened to chop off heads, this
time he did it in writing: "It's been almost four years and so far the only field that
is Sacha is being optimized, he said, by the way, the result of strenuous personal
follow-up. "he said. In addition, he issued an ultimatum: "have a period of six
months to start the operation of all mature fields, this will thank breached
President of EP Petroecuador ask his entire team to submit the resignation," he
said.
SERTECPEC, AND OTHER TRANSNATIONAL

Since 2012, Petroecuador and Petroamazonas, signed several specific service

contracts with funding for the recovery of production from mature fields operated
by the state historically.

The first contracts were signed in 2012 with Schlumberger, Tecpetrol, Canacol
and Ecuadorian Sertecpet transnational companies grouped in consortia
Pardaliservices and Shushufindi, Libertador and Shushufindi for fields.

Later, in 2014, 17 additional contracts signed Petroamazonas 9 private oil

companies, grouped in six consortia, in the form of "Provision of Specific
Integrated Services with Financing". According to the authorities, "the risk of
investments made, was exclusive of contractors".
The first integrated by Schlumberger and Tecpetrol, consortium was responsible
for Eden Yuturi, Paacocha and Tumali fields.

In the second and fourth group: Halliburton Latin America, in charge of the fields:
Lago Agrio, Palo Azul, Pata, Pucuna, Charapa, Victor Hugo Ruales, Tipishca
Huaico, Araz and Chanague.

Three group consisting of: Sinopec and Sinopec International Services, handled
Limoncocha, Indillana and Yanaquinchia.

The fifth group consists of: Sertecpet, Montecz and Edinpetrol by Pacoa in the
province of Santa Elena.

While the six group composed of the company YPF (Argentina) by the Yuralpa
field in the province of Napo.

CATASTROPHIC RESULTS

For the execution of these contracts the companies would invest USD 2.120
billion over five years, with the aim of increasing reserves at 171 million barrels.
According to the Vice President, Jorge Glas, in this type of contract 95% of the
income was for the people. He offered up production through enhanced recovery
technologies. The aforementioned contracts were signed in October 2014, with
an average rate of $ 35 a barrel for incremental production, when world oil
market already begun to experience a drop in oil prices.

The specific services contracts signed in 2014, failed. Actual results, according to
official figures, were catastrophic: the cost of developing and operating the year
2013 was $ 105.9 per incremental barrel; 2014 dropped to 84.4, and 2015 was $
65.7 per barrel.

Between 2013 and 2015, companies invested USD 3,290 million, to achieve
incremental cumulative production of only 57 million barrels. Although the
contractual incremental cost of production was in the order of $ 35 per barrel,
the actual results were catastrophic: the cost of developing and operating the
year 2013 was $ 105.9 per incremental barrel; 2014 dropped to 84.4, and 2015
was $ 65.7 per barrel.
With costs skyrocketing and prices across the floor, the decision to
Petroamazonas was notifying companies with the unilateral suspension of these
contracts: "I request the suspension of the activities that his client is executing,
which should resume once which has been completed the negotiation process ...
"said the text signed by then manager, Osvaldo Madrid.

During 8 years of the "Citizen Revolution" (2007-2015) investments in

exploration and exploitation of oil made by public companies Petroecuador and
Petroamazonas, they reached US $ 15.272,01 million, one of the highest in the
oil history but the results, especially the discovery and incorporation of new
proved reserves were negative. Not surprising that after such expense recorded
during the good times, now the country is forced to transfer to foreign capital its
main business for a disbursement of USD 1,000 million.

Faced with the failure of contracts signed specific services in 2012 and 2014,
before the economic crisis Petroamazonas, the government desperately opted to
transfer the investment and operating costs of large fields, foreign capital,
adding in contracts, a premium (advance) to refresh the national treasury. The
first contract was signed on the Auca field, new contracts, as Sacha, Cuyabeno,
ITT, the main are prepared. The difference between the contract block 61 with
the above specific financing services, is that in the current fee for all production
area is paid, while in the previous one by the new, incremental production.

BOO THE HAND IN THE CONTRACT

Following the jolt caused by falling oil prices and the substantial increase in
production costs, which has led to Petroamazonas to a condition of illiquidity, the
government began an international pilgrimage in search of financial resources to
support the oil operation . In that order proposals they were formalized several
foreign companies in the form of specific services with financing. The investment
regime sought not only to their fields, but tax money vein, an advance. The idea
excited Schlumberger and other companies.

Before the official invitation, July 22, 2015, Petroamazonas and Schlumberger
signed a confidentiality agreement in order to identify opportunities for the
development of integrated projects funded in blocks 60 (Sacha) and 61 (Auca). In
this direction, the Coordinator Strategical Sector Minister Rafael Poveda, in
September 2015, signed a memorandum of understanding and a "term sheet"
with Schlumberger, for block 61 (Auca field), providing the company all historical
information the said block.

After analyzing the information, notably the potential reserves exceeding 300
million barrels of light crude, November 5, 2015, Schlumberger formalized the
proposal entitled: "Support for the operation of the fields in block 61" document
it was known the next day by the Contracts Committee.
SHAYA A COMPANY OF 1000 DOLLARS WITH A PREVIEW OF 1000 MILLION

On November 13, 2015 was sworn Carlos Pareja Yannuzzelli as head of

Hydrocarbons, and 25 of the same month, his friend Jose Icaza Romero, took
over the management of Petroamazonas. The new authorities brought a lot of
will and the strong agenda from the highest command of the government. The
way was cleared for the signing of the contract, just needed to clear some legal
pitfalls. on the confidence that brought the new authorities, the company
Schlumberger went a step further. On November 20, 2015 created Shaya
Ecuador SA, the company that subscribe weeks after the multimillion-dollar
contract.

Shaya was born with a capital of $ 1000, as shareholders include Schlumberger

Ecuador, with $ 1 (1%), created in May 2015 and represented by the Venezuelan
citizen, Ronald Ayllon Palacios; and, as majority shareholder has the company
Schlumberger BV, established in the tax haven of the Netherlands, with $ 999
(99%) and represented by Javier Robalino Ecuador Orellana, Ferrere Abogados
law firm. Why not directly Schlumberger signed the contract and had to create a
related company?

Several analysts agree that, when much twists the law, must be cured in healthy.

CHLUMBERGER not risk your brand image

Intense meetings between the parties were held in luxury hotels in the capital, as
the Marriot. Senior officials from the Presidency and Vice Presidency of the
Republic parading in the hotel, together with representatives of Schlumberger:
Carlos Sarmiento, Andrs Donoso, Patricio Machado. It is worth remembering
that, Donoso and Machado were the authorities Hydrocarbons between 2012 and
2014 negotiated the specific service contracts with several companies, including
Schlumberger own for Shushufindi and Libertador fields. Now the fate put them
across the table.

To fulfill the formality, the Contracts Committee, dated December 1, 2015,

authorized the start of trading that day, the Committee appointed for the
purpose, the Committee presented the final report of the negotiation.

Seven days later, on December 8, 2015, the company Schlumberger,

Petroamazonas notified that the project would be executed by its related
company, Shaya Ecuador S.A. Apparently he guessed that three days later, on
December 11, 2015 (11D), the Contracts Committee approve the report of the
negotiating committee and recommend to the Board of Petroamazonas, direct
contracting with the company brand.

DECEMBER 11, DAY FOR NOT FORGET

As has been said, on December 11 it will be a day remembered in

Petroamazonas. They were hours of intense work, to stress, say witnesses.
Although the guidelines came from the pinnacle of power: Rafael Correa, Jorge
Glas, Alexis Mera, Rafael Poveda, in that order, it had to accommodate down.
That same day 11, the Contracts Committee prepared the technical, legal and
economic reports for signing the contract. They were bulky documents, hundreds
of pages, calculation formulas, maps, geological, geophysical, records, laws,
codes, regulations, manuals, read, analyzed. All qualifying documents were
delivered on the same day the Board of Petroamazonas, that after a detailed
analysis brainy and approved and recommended the direct contracting with
Shaya, the newly lit daughter of Schlumberger. Everyone was running, they were
by 1000 million to pay for Global Bonds.

And as if that were not enough, the same on December 11, the manager of
Petroamazonas, Jos Icaza, evoking the Constitution of the Republic, the Laws of
Hydrocarbons and Public Enterprises and the code of ethics of government,

ordered the signing of multimillion dollar contract . From that resolution lawyers
put the task of drafting the final document: 43 clauses, annexes from A to S, 264
pages.

One day before the adoption on December 10, 2015, the Management
Planificaci6n and Management Control, and was ahead score in the register of
budget planning (2016 to 2035), the economic terms of the contract to be signed
on December 14, 2015.

LOVING XIMENA closed the circle, FORGAVE VAT

On December 8, 2015, three days before the Board of Petroamazonas approve

the offer Shaya Ecuador, Jos lcaza, general manager Petroamazonas EP,
informed the SRI that was about to enter into a Contract Specific Integrated
Services with Financing in which delivery in advance and only once in the
amount of USD 1 billion by the contractor, in exchange for the availability and
use of the intangible asset Petroamazonas contemplated.

"The Intangible Contract Law will be amortized by the contractor in accordance

with applicable tax regulations," says the trade. That is, Icaza Romero, was
consulting at SRI respect to a still nonexistent regulation, which was released
three days later, on December 11, to be published in the Official Gazette.

The response of the SRI came Dec. 10, 2015, one day before the tax reform,
Ximena Amoroso and responded to the consultation Icaza, "If there is payment
for an intangible contract law on the part of the contractor, other than the
copyright, industrial property and related rights and contraprestaci6n to the
availability of intangible Petroamazonas EP (PAM), this is not a fact taxed with
VAT. "

L ATTORNEY IS NOT LEFT BEHIND

Until the State Attorney, Diego Carrion, he worked for the future. One day before
the Board of Petroamazonas approve the terms of the negotiations, he sent a
report authorizing agree on international arbitration in the UNCITRAL.

Finally, on December 14, 2015, Petroamazonas manager Jose Icaza Romero and
the legal representative of Shaya Ecuador, Iran Hooman Sadrpanah signed the
contract. As witnesses of honor was the high command of government: Rafael
Correa, Jorge Glas, Alexis Mera, Rafael Poveda, Carlos Pareja, among the main
ones.

Hiring support a strategic order, as the exploitation of major oilfields in

amendments to regulations, changes that alter the spirit of the law; or,
'procedures' dictations heat negotiation leaves a crumbly and battered legal
landscape that could be challenged.

INTEGRATED SERVICES WITH FINANCING, A EXIST ACCOMMODATIONS

As can be seen, the law does not speak of integrated services with funding, but
specific services, amendments were introduced through regulations and in the
case of Auca through less regulation, such as the Manual of Procedures for
Procurement.

Article 2 of the Hydrocarbons Law, in relevant part, provides:

"(...) The specific works or services that Petroecuador (Petroamazonas EP) has to
carry out, may make by itself or by entering into contracts for works or services,
giving preference on equal terms to domestic firms (...)".

Although the authorities intend to deny the delivery of the operation, there is a
delegation from the operation of block 61 to a foreign company, made directly.
Article 16 of Regulation Reforms to the Hydrocarbons Law says:

"The fields in production, whose management is currently in charge of public

companies or their subsidiaries shall not be delegated through the planned
contractual arrangements in Article 2 of the Hydrocarbons Law to state
enterprises of the international community or initiative private; without prejudice
to specific service contracts will be carried out in accordance with Article 17 of
the Hydrocarbons Law. "

Hiring support a strategic order, as is the exploitation of major oilfields in

amendments to regulations that go beyond changes and alter the spirit of the
law; or, 'procedures' dictations heat of contractual negotiation leaves a crumbly
and battered legal landscape that could be challenged in the constitutional order.

Having thus proceeded, in the opinion of several jurists is to expose the

contracting parties (The Republic of Ecuador and the contractor) a substantial
void the contract of the block 61 and therefore the urgent risk of costly lawsuits
for damages , regardless of insurance and guarantees granted tHEY MAY parties,

will constitute a commercial chaos and sooner rather than later, compensation
for the weaker party.