The Borrower, Pan American Energy LLC, Argentine Branch is the Argentine branch of Pan American Energy LLC, a company formed in the State of Delaware between BP and Bridas Corporation for specific oil and gas E&P activities in Southern Cone. BP plc now owns 60% of the equity interest in PAE, and Bridas owns the remaining 40%.

BP plc is an integrated oil and gas company with operations in over 70 countries and worldwide proved reserves of 16.1 billion barrels of oil equivalent (boe) as of December 31, 2008. Bridas is a private company engaged in three principal areas of operation: (i) the exploration, development and production of oil and gas; (ii) the gathering, treatment and processing of gas, and (iii) the transportation and marketing of oil and gas products.

The Capex program for the Project is estimated at $692 million. IFC proposes to invest $50 million for its own account and mobilize up to $200 million in B loan and Parallel loans. The Company will meet the remainder of its funding requirements through internally generated cash.

50.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

* These investment figures are indicative

The Project activities are all located in the GSJ in the provinces of Chubut and Santa Cruz in Argentina. PAE Argentine Branch is headquartered in Buenos Aires, Argentina.

Alleviation of domestic oil and gas shortage: Gas demand growth has outpaced gas supply in Argentina in recent years. The growing gap has been driven by under-investment in the sector on the one hand and sustained economic expansion on the other. The latter was fuelled by a combination of growth in the industrial sectors, increased use of natural gas in vehicles and further distorted by energy pricing policies. In this context PAE is one of the few operators in the country continuing to increase its oil and gas production. Gas represents around 38% of the Company’s proven reserves and part of the 2009 investment program will go towards increasing gas production. In the past 7 years PAE has grown its oil production by 39% while nationwide production (including PAE) has declined by 20%. In the same period, PAE grew its gas production by 84% compared to a 28% increase in nationwide production.

The impact of the Company’s investment program in the GSJ region is expected to result in an average annual increase of production of approximately 2.7% p.a. or 14% total over the next four years.

Creation/Preservation of local employment: PAE is a key employer in the regions where it operates, especially in the GSJ basin where it employs 914 direct staff and almost 6730 contractors. The IFC investment will contribute to the Company’s growth, which has lead to an average of 200 new direct jobs created per annum since 2005. In addition, the investment will help maintain the employment level on a company-wide basis in the provinces of Chubut and Santa Cruz, where the oil and gas industry offers significant employment opportunities.

Strong community development and linkages program: PAE continues to spend increasing amounts on social development programs ranging from education and health programs to Small Medium Enterprise support programs in its areas of operation. In 2007 and 2008, the Company spent $3.6 million and $5.5 million, respectively, on these programs.

Local/National Sourcing: The Company procures most of its goods and services in Argentina. In 2008, PAE spent approximately $896 million on Argentine investments, goods and services from national and regional suppliers, and a large portion of the 2009 capital expenditure is expected to be sourced locally/nationally.

Contribution to government revenues: PAE contributes significant fiscal revenues to all levels of government. During 2008, PAE made approximately US$1.3 billion in payments to various levels of government consisting of income taxes, royalties, export tariff and other taxes. The Company submits financial statements on quarterly basis to the Argentina’s National Securities Commission as part of its obligation, and such disclosures are available publicly. In addition to remaining a significant contributor of tax revenues for both the federal and regional budgets and is also expected to continue contributing to Argentina’s foreign currency earning over the life of the IFC loans.

Indicators to monitor development impact include (i) gas production, (ii) payments to government, (iii) employment maintained/created, (iv) local/national purchasing; and (iv) community development programs.

Access to Capital Markets
In today’s difficult financial environment, PAE has very limited access to international capital markets and local financial markets remain short term focused. Company management has stated it would not likely get medium term financing without IFC’s involvement. Consequently IFC’s own funding and leadership in mobilizing medium term financing for PAE is key to the Company.

IFC will help to mobilize up to $200 million in B loans from participations and in parallel loans from DFIs. It will allow the Company to get access to capital markets and IFC expects to achieve a strong mobilization ratio.

Enhancing Strategic Framework for Community and Social Development
PAE has an excellent track record with respect to the environmental and social aspects of its operations on which it continues to work closely with IFC. Over the past several years its investments in social and community development have increased significantly. The Company has been working, and expects to continue to work with IFC in articulating its investment strategy, prioritizing clear objectives and further enhancing the monitoring of its social development activities.

IFC’s early review of this investment has identified the following potential environmental, social, health, and safety issues: regional footprint, air emissions, venting and flaring, greenhouse gases, solid waste management, drilling muds and cutting, completion and workover fluids, pollution control, use of natural resources, spills, occupational health and safety, contractors'' EHS performance, land transportation safety, emergency preparedness and response, community engagement and land acquisition, cultural and archaeological findings preservation. As an existing client, PAE is complying with the current IFC Performance Standards.

Performance standards that are expected to be applicable for this investment will include:

- PS1: Social and Environmental Assessment and Management System
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
- PS5: Land Acquisition and Involuntary Resettlement
- PS8: Cultural Heritage

Based on this early review, it is anticipated that this investment will require 30 days disclosure by IFC prior to Board and has been provisionally categorized as B.

The Project is expected to generate a number of benefits: jobs, business for local suppliers, increase in supply in oil and gas, and revenues to governments. Tax paid to the government will remain sizable, with a significant portion paid to provincial governments. Most of the development impacts are the result of the Company’s direct action (i.e. contacts with local suppliers, employment, and community development). As a result, IFC expects the governance risk to these benefits to be low.