Upstream Assets
We have been involved in upstream projects in Angola since 1982 and in Brazil since 1999.  Our upstream portfolio currently consists of interests in 6 blocks in Angola and 54 blocks in Brazil. Our net entitlement share of proved reserves as of 30 June 2006 was 35.6 million barrels of oil, which were located entirely within the Block 14 licence in Angola.  At the same date, our net entitlement share of proved and probable reserves is 41.4 million barrels and our contingent resources 43.2 million barrels.

    Angola
Block 14 in Angola is our only block currently producing oil.  In 2005, our net entitlement share of production in Block 14 was 1.6 million barrels (4.3 thousand barrels per day).  Based on the estimates of the operator of Block 14 (Chevron), our net entitlement share of production at the end of 2006 should be an average of approximately 9,000 barrels per day, and we expect it to reach more than 25,000 barrels per day by 2010.  These projections are based on the operator’s estimates relying on historical performance of the block, decline in the production curves and the future expenditures to sustain production. Block 14 has declared five development areas to date: Kuito; Benguela, Belize, Lobito and Tomboco (“BBLT”); Tombua Landana (“TL”); Negage; and Gabela.

    Brazil
We have been involved since 1999 in several onshore and offshore exploration projects in Brazil.  The Brazilian government has offered licences for oil and gas exploration on several blocks in successive bidding rounds commencing in 1999.  We have participated in four of these licensing rounds (2, 3, 6 and 7) and gathered a portfolio of 54 exploration blocks, always in partnership with Petrobrás.  Our partnership with Petrobrás has enabled us to enter the Brazilian upstream market and take advantage of Petrobrás’ thorough understanding of the potential of the areas, strong technical knowledge and its local infrastructure network.  We operate 29 of the 44 onshore blocks.

New Projects
We are focusing a large part of our E&P evaluation efforts on new opportunities in countries which we believe have high production potential. In East Timor, we recently participated in a bid for blocks located in offshore waters.  Although we did not win any of the blocks offered, there may be an opportunity for us to acquire rights in the blocks from ENI SpA after the project commences. We expect Brazil to offer another round of licences for oil and gas exploration and production during 2006 and are evaluating the hydrocarbon potential of the blocks on offer to decide whether to participate in the bidding process in partnership with Petrobrás. The Portuguese offshore contains a deep water exploration potential that has yet to be properly investigated.  We have recently requested government authorisation to explore these waters.

Selected Financial and Operating Data
The following table sets out selected financial and operating data relating to our E&P business segment:



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(1) We define EBITDA as operating result plus depreciation and amortisation plus provisions.  EBITDA is not a standardised measure and it therefore should not be used to compare one company against another.  EBITDA is not a direct measure of our liquidity and needs to be considered in connection with our actual cash flows provided by operating activities and in the context of our current financial commitments.  EBITDA may not be indicative of our historical operating results nor is it meant to be predictive of our potential future results.  
(2) Net fixed assets include total tangible and intangible net assets.
(3) EBIT after taxes divided by total consolidated assets excluding financial investments.
(4) Regarding the financial statements as of and for the period ended 31 December 2003, and for comparative purposes, a reclassification of €54.2 million was performed, mainly related to Blocks 32 and 33, from our Refining and Marketing business segment to our E&P business segment.
(5) Based on Block 14 Kuito field crude oil with an API grade of 21°.
(6) Includes direct operating expenses allocated by the operator of each block but excludes allocation of depreciation, abandonment and provision for oil taxes in Angola.