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Following the recent reports in various Peruvian newspapers stating that a Supreme Decree extending the term of oil lease licenses for independent oil companies in Peru is underway, Interoil requested a meeting with the Chairman of the board of PeruPetro Mr. Luis Enrique Ortigas Cúneo.
On 25 March 2013, CEO Thomas J. Fjell met with Mr. Ortigas Cúneo in Lima. In the meeting Mr. Ortigas Cúneo confirmed that a Supreme Decree extending the term of oil licenses was underway and would be presented for approval to the President of Peru, Mr Ollanta Humala.
The Supreme Decree will however not be applicable to Interoil Peru's licenses in Peru as the date of expiration of these licenses is under dispute. Perupetro is of the opinion that the license expiration dates were 5 and 4 March 2013 for Blocks III and IV respectively, while due to application of force majeure Interoil is of the opinion that Block III expires in January 2016 and Block IV in October 2014.
Mr. Ortigas Cúneo stated that PeruPetro is only willing to discuss an extension of Interoil's licenses in Peru if Interoil wins the arbitration case against PeruPetro, thereby establishing that the licenses have not expired. Interoil expects the arbitration proceedings to take approximately 8-15 months. The legal advisors of Interoil are of the opinion that Interoil has a strong case against PeruPetro.
In addition IOX has made organizational changes in the management team of Interoil Peru. The consultancy agreement with Jaime Mur Campoverde has been terminated and Mr. Hector Cornejo, Exploration Manager, has been appointed as interim General Manager.
Interoil has also engaged a consultancy firm to conduct a third party review of Interoil Peru. We expect the review to be completed by the end of April 2013.
All costs related to the review will be covered by Interoil Peru through its ordinary cash flows and no additional funding will be provided by IOX.
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