Annual Report 2016

ENAP ANNUAL REPORT 2016

ANNUAL REPORT 2016

1 / ENAP ANNUAL REPORT 2016

Company Name: Empresa Nacional del Petróleo. Address: Avenida Vitacura 2736 10th Floor, Las Condes, Santiago, Chile. Chilean Tax Identification Number: 92.604.000-6. Organization: State-owned entity created by Law 9,618. Ownership: State of Chile. Telephone: (56-2) 280 3000. Fax: (56-2) 280 3199 / 280 3179. Zip Code: 7550597. Web site: www.enap.cl. External Auditors: Deloitte Auditores y Consultores Limitada. Securities Registry: Nº 783, of the Superintendency of Securities and Insurance (SVS), dated October 4, 2002. Line of Business: Exploration, production and sales of hydrocarbon and its derivatives; production, transport and sales of energy and electric power. Main Subsidiaries: ENAP Refinerías S.A., Tax Identification Number: 87.756.500-9, SVS Special Register of Reporting Entities Nº 95. ENAP Sipetrol S.A, Tax Identification Number: 96.579.730-0, SVS Special Register of Reporting Entities Nº 187, according to Law 20.382. Contact Information: Investor Relations: [email protected] 2 / ENAP ANNUAL REPORT 2016

iNDex

Chapter 1:

2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS...... PAGE 12

Chapter 2:

MANAGEMENT OF PEOPLE AND THE ORGANIZATION...... PAGE 42

Chapter 3:

BUSINESS ENVIRONMENT...... PAGE 64

Chapter 4:

CORPORATE MANAGEMENT...... PAGE 74

Chapter 5:

BUSINESS LINES...... PAGE 162

Chapter 6:

CONSOLIDATED FINANCIAL STATEMENTS...... PAGE 250

3 / “LThe company has been able to rebuild its equity and consolidate its financial strength to carry out all the projects that will transform ENAP into a leading player for the country. That is why as a minister I value the company’s serious commitment to this mission” Andrés Rebolledo Smitmans Chairman of the Board of Directors ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

LETTER FROM THE CHAIRMAN OF THE BOARD

There is no doubt that the world energy industry is taking 2016. Despite this, the company adapted and today we can new roads, and heading towards a more responsible and say that it has managed to overcome this difficulty. conscious energy development, modifying the way in which energy companies participate today. Therefore, now we face The results obtained during this last year support this. The a double mission: first as a country to join this change, and company has been able to rebuild its equity and consolidate second, to count on the State, with an entity that promotes its financial strength to carry out all the projects that will trans- this vision. In that sense, ENAP understood that it should not form ENAP into a leading player for the country. That is why withdraw from that scenario and it has taken the decision to as a minister I value the company’s serious commitment to be the company leading this task, transforming itself into a this mission. robust, sustainable, dynamic and articulating company of energy solutions for Chile. Chile must be part of this change and take advantage of its natural potential to become a reference in the development In line with these objectives, as the Ministry of Energy, we en- of clean energy and achieve a diversified matrix. We can not trusted ENAP with the task of strengthening its role in energy stay behind, our territory will require more and more energy, matters, assuming a differentiating and pioneering role in the but we must change the way we use and produce it. sector. In other words, that ENAP manages to become a true engine for the development of the country. Today our country is already evolving towards the energy of the future, a more efficient, responsible and conscious ener- The task was difficult, even more so when from the second gy. In this scenario, ENAP has assumed a role as coordinator half of 2014 the international context impact with oil prices of Chile’s energy development. The company is committed to that remained steady, reaching an average of US $ 45 in being the energy pillar, introducing new technologies as the

5 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

first geothermal plant in South America, Cerro Pabellón; the There is no doubt that we still have some way to go to reach Cabo Negro wind farm in Magallanes; and other projects that the goals set, but we are heading in the right direction. There seek to encourage the entry of new world-class players, lower is a country need to move forward in the permanent improve- electricity prices for Chileans and diversify the energy matrix ment of our energy policies; and today ENAP must lead so- with more natural gas. lutions that allow for a future for Chile, including new forms of energy and an efficient and sustainable state-owned com- But to become this new company of the future requires proj- pany. ects that are important for the development of Chile from the energy point of view, and also actions that seek that ENAP, I invite you to continue along this path and transform ENAP as a state-owned company become an example in matters of into the state-owned company that our country requires, all of security, environment and relation with the communities. us Directors, administration and workers.

ANDRÉS REBOLLEDO SMITMANS

Minister of Energy Chairman of the Board of Directors Empresa Nacional del Petróleo

6 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

7 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

LETTER FROM THE CHIEF EXECUTIVE OFFICER

2016 was a complex year for ENAP given a difficult interna- The important thing is that together with solid financial results, tional scenario, where crude oil prices were even lower than during 2016 several milestones were achieved for the com- in 2015, as well as worse refining margins. However, thanks pany, reinforcing its strategic role and projecting it into the to a tremendous effort in terms of management, focusing on future. Among the most outstanding are the approval in Con- efficiency and reducing operational costs, we managed to gress of the Law that allows the expansion of the line of busi- close a very good year in terms of achievements and results. ness, which led us to participate for the first time in an electric tender; the record production of gasoline, which allows us to During fiscal year 2016 ENAP obtained an EBIDTA of US$ 678 continue to supply 100% of the growing national consump- million and a consolidated profit of US$ 183 million. These fig- tion; the daily production of two million cubic meters (MMm3) ures fill us with satisfaction, since they confirm a trend of posi- of tight gas from Tierra del Fuego, which guarantees long- tive results over the last years, which allows us to continue term regional consumption of Magallanes; signing an agree- strengthening the company financially and to advance at a ment with Methanex to supply them with gas throughout the steady pace with our historic investment plan. year; the partnership with ConocoPhillips for the exploration of unconventional hydrocarbons in the Magallanes continen- In the case of EBITDA, in 2016 we finished for the fourth con- tal area; the export of gas to Argentina from the GNL Quintero secutive year over the US $ 600 million that we proposed as Terminal, which opens new opportunities for regional integra- a floor when we took over as Administration. Likewise, we tion; the agreement with the Ministry of Hydrocarbons of Ec- closed a fourth year with an increase in profits and positive uador to extend and renegotiate the tariffs of the PBH and financial indicators. These results have allowed us to achieve MDC concessions; the launching of Magallanes Incremental another of our objectives: to rebuild the company’s assets. Project, which will mean doubling our gas production in Ar- In 2016, we ended up with US$ 807 million worth of assets, gentina; the beginning of the construction of Aconcagua co- which represents almost 10 times more than the US $ 83 mil- generation power plant; the acquisition of 100% of the Petro- lion recorded in 2012, bringing us closer to the record wealth power Plant, an operation that consolidates our position in the of almost US$ 1 billion in 2007. electricity market; and the approval of the Corporate Gover-

8 / nance Bill by the Chamber of Deputies, which we hope will be completed this year and which, in addition to representing a fundamental step towards the modernization of the company, includes a capitalization of US$ 400 million.

Special mention should be made of the good results obtained in terms of safety. In 2016, as ENAP we achieved a significant reduction in our accident rate, achieving a Frequency Index of 2.6, which means a decrease of 23.5% compared to 2015. Although this figure is still far from the goal Of 1.8 that we set for 2018, in line with the best companies in the global oil industry, it shows that we have been applying stricter processes and standards in our operations and that we are moving in the right direction.

In general terms, when we took over as Management we proposed to reposition ENAP as a strategic company for Chile’s energy development. In order to do this, we elaborated a Stra- tegic Plan to 2025, which included the objectives of the Ener- gy Agenda of the government of President Michelle Bachelet and established clear guidelines for our different business lines, in order to ensure the sustainability of the company in the long term. Thanks to a serious and systematic work that has had the commitment and collaboration of the whole orga- ENAP ANNUAL REPORT 2016 Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS “The important achievements to date are the result of the joint work of the entire company, in particular the commitment of our workers.” Marcelo Tokman Ramos Chief Executive Officer

10 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

nization (executives, workers, collaborators and union lead- The important achievements to date are the result of the joint ers), we have been progressing in the execution of our invest- work of the entire company, in particular the commitment of ment plan and in closing the gaps that we initially identified in our workers. Consequently, the invitation today is to maintain safety, environmental and community relations issues. the effort and the commitment, so that we continue to progress together in the task of consolidating ENAP as the strate- Thus, for an average annual investment of US $ 349 million gic energy company that the country needs. between 2007 and 2013, in 2014 we invested over US$ 400 million, in 2015 we invested US$ 635 million, and we closed Affectionately, 2016 with investments of US$ 754 million. This sustained increase in the level of investments has been made responsibly and progressively, to ensure the excellence in the execution of projects. For us this is fundamental, considering that in the coming years we will invest similar amounts, which will require external financing, even if the good level of results is maintained.

In summary, while we can be satisfied for having achieved a series of milestones for the company and finished with excel- lent financial results in spite of the complicated international scenario, there is still a long way to go towards our final objective of being a model state-owned company, not only in terms of efficiency and results, but also in areas such as safety, Marcelo Tokman Ramos respect for the environment and relationship with our neigh- Chief Executive Officer boring communities. Empresa Nacional del Petróleo

11 / ENAP ANNUAL REPORT 2016

CHAPTER 1 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

12 / ENAP ANNUAL REPORT 2016

13 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS HIGHLIGHTS

January 8 February 2 February 5

Ten-Year Extension of the US Geological Survey Promulgated Law that Allows Concession of Hydrocarbon Confirms Potential for ENAP to Enter the Power Exploitation in the Magallanes Unconventional Hydrocarbons Generation Market Area. in Magallanes The Law 20,897 promulgated by the The Government of Argentina After a thorough geological analysis President of the Republic, Michelle announced the Administrative of the Glauconite Zone (GZ) in the Bachelet, became effective on Decision No. 1 whereby the National Magallanes Basin, the US Geological February 1 with its publication in the Government extended for ten years Survey (USGS) published a document Official Gazette. This law extends the the Concession of Hydrocarbon confirming the existence of a significant line of business of ENAP, enabling Exploitation that YPF has in the offshore potential for unconventional gas in the the state-owned company to enter the zone, Area Magallanes, located in the region. electricity market and develop power Marina Austral Basin in the neighboring generation projects. country, operation in which ENAP holds The study, together with the good a participation interest. results obtained by ENAP in the perforations made over the past two On October 2014, the bill entered With this extension, both companies years in the Arenal Block, confirms the Parliament for the procedure and will be able to materialize Area the information given by the company: final legislative process was held Magallanes Incremental Project (PIAM), that the supply of the region would on January 12 after the Chamber of through which it seeks to optimize be secured in the long term, and that Deputies and the Senate approved the considerably the production of the there would be sufficient resources initiative. existing gas reserves, and those of oil to consider supplying industrial to a lesser extent, involving an overall customers and, eventually, deliver gas investments plan of over US$ 165 to the rest of the country. million.

14 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

March 22 April 21 May 12

“Magallanes in 100 Words” ENAP Aconcagua Refinery Chile and Argentina Sign receives more than 2,000 short Presents Environmental Natural Gas Supply Agreement stories in its first version in Monitoring Website to Inform the region the Community The agreement allows Chile to send natural gas to Argentina during the The contest of short stories, sponsored The website nuevaerainforma.enap.cl winter months, thanks to the articulating by ENAP as part of the celebration of has three areas of information updated role of ENAP, which, in addition to its 70th Anniversary, and organized by the minute: status of the operation, delivering gas from its own production, by Fundación Cultural Plagio, quality of the air (shows PM 10, PM 2.5 acts as a reviewer and integrator of the captivated the people of Magallanes, and gases indicators), and monitoring available volumes of different players in who presented more than 1,900 of water and noise level. the local market. unpublished stories that rescue the traditions and idiosyncrasies of the The page also provides information The officers of the state-owned southernmost part of Chile. regarding complaints of the community companies, ENAP (Chile) and Enarsa on environmental issues, received (Argentina) signed contracts involving the delivery of a total volume of This first version called the participation at the refinery since 2015, as well 3 of amateurs from several locations of as details of the environmental 3 MMm /day, supplied by ENAP, Magallanes, such as Punta Arenas, monitoring and relevant information Endesa Chile and Metrogas, which Puerto Natales, Porvenir, Primavera, sent periodically to the municipality of was delivered through the GasAndes Antártica, Torres del Paine, San Concón and authorities. pipeline in the central area. Gregorio, Cabo de Hornos and Laguna Blanca, thus showing the great interest and literary talent of the people of Magallanes.

15 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

May 30 June 2 June 13

Secretary of Hydrocarbons ENAP and YPF Announced ENAP and ConocoPhillips Highlights Good Practices of Startup of Project that create partnership to exploit ENAP in Ecuador Increases Gas Production in unconventional hydrocarbons Argentina in Magallanes As an “exemplary” business in the use of good practices, with high standards Area Magallanes Incremental Project ENAP and the U.S. oil company that contribute to the development of (PIAM), developed by ENAP through its ConocoPhillips signed an agreement Ecuador, René De Mora Moncayo, subsidiary ENAP Sipetrol and YPF, will for the exploration and production of Secretary of Hydrocarbons of that allow increasing natural gas production unconventional gas in the block Coirón, country, identified ENAP SIPEC, the from the current 2.4 MMm3/day to 4 in the Region of Magallanes. Through subsidiary ENAP in Ecuador. MMm3/day, as from the second half of this agreement, ConocoPhillips com- 2017. mits to participate in the development The Secretary of Hydrocarbons of exploration and exploitation, provid- of Ecuador also highlighted the This initiative, which is associated ing its ample expertise, technology and importance of the human capital for the with the Magallanes deposit, located resources in successive stages, which, operations of excellence that the state- in the Austral Basin of Argentina, was if successful, could reach an estimated owned company shows today in that one of the most important in terms of investment of US$70 million to US$100 country as well as the environmental investment of ENAP’s project portfolio million over the next four years. and community management. for 2016. In particular, he referred to the According to this agreement, ENAP “Integrated Farming” project, a center remains the operator partner with a for training and technology transfer in participating interest of 51%. agricultural issues that has been able to create jobs, growth and welfare for the residents of the areas of influence of the company operations.

16 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

July 15 July 29 August 1

ENAP supplies with own gas Bío Bío Refinery Celebrates its ENAP Signed a New Gas 100% of the Consumption of 50th Anniversary Supply Agreement with Magallanes Methanex With a moving ceremony held in the ENAP Magallanes Manager, Ramiro Sports Club gymnasium, the workers ENAP signed a new gas supply Parra, announced the progress and employees of Bio Bio Refinery agreement with Methanex, valid from achieved in the exploratory campaign celebrated the anniversary of the August 1, 2016, to May 31, 2018. The during the first half of 2016, which startup of the first six plants of ENAP in agreement considers the delivery of he described as “successful” for the Hualpén, on July 29, 1966. a total volume of about 600 MMm3 for company. the next 22 months, which will improve The event was attended by various the scale of production in the Region of The executive said that during the authorities. The President, Michelle Magallanes by reducing costs, favoring first half of the year 28 of the 36 wells Bachelet, sent a warm greeting, business on the long term and ensuring considered for 2016 were drilled, which which highlighted the commitment, a stable market for ENAP. represents a 78% of advance. Thanks enthusiasm and dedication of those who to this, since June, and exceeding all integrate such subsidiary of ENAP and expectations, the company has been make possible to achieve every year the able to fully supply the region with its goals and challenges. own gas production.

17 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

August 2 September 2 October 17

ENAP Achieves a Record ENAP DAO Plants in San ENAP and Fundación Puente Placement of Bonds Fernando and Linares Sign Agreement to Promote Reached 9 and 8 Years without Labor Inclusion of Youth at ENAP closed an operation for US$ 700 Accidents Social Risk million, the highest amount and at the lowest rate in its history for an issue in San Fernando and Linares plants To promote the development of a dollars. The proceeds of this placement reached 9 and 8 years without Lost more inclusive culture, the Chairman will be used mainly for the prepayment Time Accidents, respectively, thus of Fundación Puente, Sebastián of debt bonds whose maturity was showing that for the workers, profes- Cereceda, and ENAP’s CEO, Marcelo initially considered for the years 2019, sionals and executives of the ENAP Tokman, signed an agreement, valid 2020 and 2021. Storage and Pipelines Division (DAO), for five years, that seeks to generate safety is a priority. initiatives that promote the employment The repurchase of these bonds will of socially vulnerable youth. improve ENAP’s debt maturity profile In this way, workers of the DAO reiter- and liquidity, and will allow continuing ate their absolute commitment to one In this way, the agreement will allow with the plan of financial strengthening, of the central objectives of ENAP’s ENAP workers to make contributions to which has been one of the main administration in relation to the care of the Foundation through training and the objectives of this administration. the people. students will be able to do professional internships in the company to improve their employability.

18 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

October 19 October 20 November 23

Appointed New Chairman of ENAP Sipec in Ecuador Com- ENAP, ENGIE and the ENAP Board of Directors pletes 7 Years without Lost Government of France Sign Time Accidents an Agreement to Transform The President of the Republic, the First Energy Technical Michelle Bachelet Jeria, appointed the ENAP’s subsidiary in Ecuador, Education Center into a Center economist of Universidad de Chile, achieved an unprecedented milestone Mr. Andrés Rebolledo Smitmans as for the Exploration and Production (E & of Excellence Minister of Energy, and as such, he P) Business Line by completing 7 years assumes automatically as Chairman without Lost Time Accidents. In order to transform the country’s of ENAP’s Board of Directors. In both first Technical Education Center of Energy into a Center of Excellence, positions he assumes in replacement This milestone is the result of the work, ENAP, ENGIE and the French Embassy of Máximo Pacheco Matte. commitment, attitude and leadership signed a cooperation agreement of workers, professionals and execu- that will support the training of new Andrés Rebolledo (age 48) has a tives of ENAP Sipec, who believe that professional technicians in energy postgraduate degree in International people are first, the environment and efficiency and electrical maintenance Economics from the Complutense communities are second, and produc- for the country. University of Madrid, in Spain (1994 – tion is third. 1997). The agreement will be valid for three Prior to his appointment as Minister of years and includes the commitment Energy, he served as General Director of the parties to share resources and of International Economic Relations. experience, to update the knowledge and skills of teachers, students and professionals of the educational center and allow a successful professional insertion.

19 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

December 9 December 13

ENAP Acquires 100% of Chamber of Deputies Petropower Power Plant Approves Bill that Establishes ENAP’s New Corporate Through its subsidiary ENAP Governance Refinerías S.A. (ERSA), ENAP closed an agreement with AMEC-Foster The Chamber of Deputies approved Wheeler Plc for the purchase of 85% in general and in particular the bill of the property of Petropower Energía that establishes a new Corporate Ltda., whose main operation is the Governance for ENAP, in order co-generation plant of electricity and to establish the creation of an steam, located in the Eighth Region. independent and professional Board of Directors that focus its objectives With this operation, ENAP now controls towards the medium and long term. 100% of the energy company and consolidates its decisive entry into the In this way, ENAP’s Board of electricity generation market, as part of Directors will be composed of seven the strategic role defined for the state- members: two appointed directly by owned company in the Government the President of the Republic, four Energy Agenda. chosen from proposals of the High Public Management System (ADP, Alta Dirección Pública), and one chosen by the workers of the company.

20 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

December 15 December 28

Opening of Photographic ENAP Launches its Energy Exhibition About the First Oil Policy to Optimize its Camps in Magallanes Operations

ENAP’s CEO, Marcelo Tokman, The new policy of ENAP includes participated in the inauguration of promoting energy management and the unprecedented exhibition of the the use of efficient equipment, as well National History Museum (MHN), as encouraging the implementation of highlighting the patrimonial value projects that contribute to innovation of the five oil camps built by the and culture in the good use of energy company during the second half of the in ENAP Refinerías as well as at the twentieth century, in Tierra del Fuego various hydrocarbon exploitation and (Manantiales, Puerto Percy, Clarencia, production units in ENAP Magallanes. Cerro Sombrero and Cullen). Thus, the company joins the country The exhibition “Enapinos. Los challenge set by the Government to campamentos petroleros del Fin cut by 20% the energy consumption by del Mundo” (Enapinos: The oil 2025. camps of the End of the World) was supported by the Instituto de Estudios Patrimoniales and the Illustrious Municipality of Primavera, and will be open until March 2017.

21 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS The Company

Company Profile and Structure

Empresa Nacional del Petróleo (ENAP) is a Chilean state- Meanwhile, the Gas and Energy (G&E) Business Line, creat- owned company, whose purpose is the exploration, production ed in August 2014, is in charge of the gas business and some and marketing of hydrocarbons and its derivatives. In 2016, projects of Non-Conventional Renewable Energy (NCRE), through the publication of the law N ° 20,897 in the Official such as the Cerro Pabellón Geothermal Power Plant, where Gazette, ENAP was authorized to enter the electricity market ENAP participates as a minority partner. This Business Line and develop projects, which strengthened the strategic role it also has the mission of promoting a greater presence of gas plays in fuels supply and the energy sector in general. ENAP in the energy matrix of the country, according to the Energy has activities in Chile and abroad, through the international Agenda promoted by the Government of Chile. subsidiaries in Argentina, Ecuador and Egypt. In Chile, it operates through three business lines: Exploration and Produc- In this context, the sale of Liquefied Natural Gas made by tion (E&P), which is responsible for managing the search and ENAP, distributing it from the Terminal of Quintero, where it production of hydrocarbons and is in charge of the tender and receives the imported volumes, has allowed dealing with the subscription of special oil operation contracts (CEOP). These challenge of diversifying the country’s energy grid. contracts allow the companies in the industry to associate with ENAP for the exploration of blocks located in the Magallanes ENAP operations in Ecuador, Egypt and Argentina include Region. The international subsidiary Sipetrol that develops the production of crude oil and gas, through alliances with ENAP’s operations abroad, report to this Business Line. leading companies in the oil business.

The Refining and Commercialization (R&C) Business Line op- The central administration of ENAP is based in the Head Of- erates Aconcagua, Bío Bío and Gregorio Refineries, where fice, located in Santiago, Chile. the crude oil is refined to transform it into fuel. This line includes the activities of the Storage and Pipelines Division (DAO).

22 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Legal Constitution: Ownership and Control of the Company

As noted, Empresa Nacional del Petróleo is owned by the State ENAP’s senior management is directed by a Board of Direc- of Chile. It was constituted by Law 9,618 of June 19, 1950, tors of eight members, headed by the Minister of Energy, who and its bylaws were approved on October 10, 1950, by Decree acts as Chairman of the Board. The vice-chairman is the Ex- 1,208 of the Ministry of Economy and Trade at that time. ecutive Vice President of the Chilean Economic Development Agency (CORFO), an entity that appoints three Directors. It operates as a commercial company under public law and The other three members of the Board represent the follow- is administered independently. To do so, it has legal capacity ing private entities: Federation of Chilean Industry (SOFOFA, and patrimony, and relates to the Government through the Sociedad de Fomento Fabril), Sociedad Nacional de Minería Ministry of Energy and the Ministry of Finance, with the latter (National Mining Companies Association), and the Insttituto for budgetary purposes. de Ingenieros de Minas de Chile (IIMCh, Chilean Institute of Mining Engineers). Law 9.618 has been amended by subsequent laws. The updated text was approved by Decree Law No.1 of 1986, of the Ministry of Mining.

23 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

24 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS Brief History

On December 29, 1945, a group of heroic workers of CORFO, Another milestone was the creation of the Comando Unido de led by the engineer Eduardo Simián, brought forth the first jet los Trabajadores del Petróleo, predecessor of the FENATRA- of oil in Springhill, Tierra del Fuego. It was the same team led PECH, Federación Nacional de Trabajadores del Petróleo de by Simián that recommended the creation of a company to Chile on July 24, 1961. commercially exploit the oil wells discovered in the southern part of Chile. The Comando Unido de los Trabajadores del Petróleo was created from the Unión de Obreros Petrolíferos (oil workers Thus, while ENAP was created formally by the State five years union) and the Asociación de Empleados de ENAP (ENAP after this discovery, since its inception it already promised to workers association), and was a leading organization for all become a strategic asset for the country. the trade union movements in Chile, helping oil workers to have a historical view of the importance of ENAP as a strate- After some years and after forming a strategic development gic company for Chile. pole in Magallanes, which included the process of production of liquid fuels and gas treatment in small volumes in the area Later, on July 29, 1966, with the opening of the company’s of Manantiales, the company was ready for its next step. second oil refinery, this time located in Talcahuano (currently Hualpén), and the construction of two storage terminals, On November 12, 1955, under the presidency of Carlos Iba- ENAP begins its consolidation phase as a company dedicat- ñez del Campo, the Oil Refinery of Concón (today Aconcagua ed to the oil exploration and production, and fuels refining, Refinery) was inaugurated. Its purpose was to produce fuels storage and marketing. on a large scale and begin to compete in the commercial and industrial refining business. After reaching a critical mass of Since then its growth has been irreversible: the Logistics clients in the central zone of Chile, the company built a Stor- business was created in 1981 and ENAP became a company age Plant in Maipú (current Storage and Pipelines Division holding. Later on, the company expanded abroad through (DAO)), which was connected to a multipurpose pipeline to Sociedad Internacional Petrolera S.A., created in May 1990 transport crude oil derivatives to the Metropolitan Region. (today Sipetrol), and has shown exploration successes in Ec-

25 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

uador, Argentina and Egypt. In 2004, the refineries of the Fifth The investment committed in the CEOPs will increase the hy- and Eighth regions, along with the subsidiary responsible for drocarbon exploration and production activity in Magallanes. the storage of fuels, Emalco, merged and formed a single According to recent studies of hydrocarbon potential, the company: ENAP Refinerías S.A. development of unconventional hydrocarbon has great prospects in the region. As a result of an alliance with British Gas (BG), Endesa and Metrogas, in October 2009, the liquefied natural gas terminal, Thus, in recent years ENAP has intervened exploration wells LNG, was inaugurated in Quintero, which marked a milestone through hydraulic fracturing to produce unconventional gas in in the ENAP’s development as a company integrated into the the Arenal Block in Tierra del Fuego and El Dorado-Riquelme energy sector. Block, in the continental area of Magallanes.

In the last decade, the company has carried out extensive As part of the investment plan, in 2016 59 new wells were exploratory campaigns to find new oil and gas reserves in drilled (5 of crude oil and 54 gas wells). The results in Arenal Magallanes, through a policy of alliances known as special oil Block in Magallanes, operated by ENAP, were outstanding: operation contracts (CEOP), which began in 2007. 47 wells were drilled, of which 37 development wells (28 fractured wells were successful and 9 are yet to be fractured), In 2011, a new stage was completed in the use of this and 10 fractured exploratory wells, also successful. mechanism: ENAP, together with Geopark, Wintershall and YPF, submitted applications to the Ministry of Energy for five blocks, two of which were formalized and became effective in November 2012.

26 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

27 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS Management

The members of ENAP’s senior management are:

Board of Directors

Compliance Manager Comptroller Alejandro Charme Chávez Humberto Riquelme Villalobos

CEO Executive Director Marcelo Tokman Ramos Francisco Peralta Cortés

Corporate Affairs and Sustainability HS Manager Manager Leonardo Canales Moreno Gabriel Méndez Serqueira

Strategic Planning and Enviromental Manager Control Management Cristián Núñez Riveros Denisse Abudinen Butto

Risk Control Manager Finance and Administration Manager Fernando Promis Baeza Ariel Azar Núñez

NEW BUSINESS DEVELOPMENT MANAGEMENT Services Manager Alfredo del Carril Caviglia Georg Sternal

Human Resources Manager Legal Counsel Javier Fuenzalida Santander Alfredo del Carril Caviglia

Exploration and Production (E&P) Manager Refining & Commercialization (R&C) Manager Gas & Energy Manager Hesketh Streeter Evans Marc Llambías Bernaus Marco Arróspide Rivera

28 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Joining Date of ENAP Senior Executives

Id. Number Name Profession Joining Date

16.654.431-9 Marcelo Tokman Ramos Economist 12.05.2014

23.991.729-1 Hesketh Streeter Evans Geologist 16.04.2012

7.014.843-9 Marc Llambías Bernaus Civil Industrial Engineer 01.10.2013

9.784.402-K Marco Arróspide Rivera Civil Electric Engineer 01.06.2016

12.247.409-7 Javier Fuenzalida Santander Professor and Graduate in History 20.07.2015

9.907.068-4 Gabriel Méndez Serqueira Lawyer 15.07.2014

23.687.801-5 Alfredo del Carril Caviglia Lawyer 12.05.2014

6.971.003-4 Ariel Azar Núñez Audit Accountant 22.10.2014

9.584.826-5 Alejandro Charme Chávez Lawyer 01.09.2014

11.476.504-K Leonardo Canales Moreno Execution Mining Engineer 02.11.2016

14.168.642-9 Denisse Abudinen Butto Industrial Civil Engineer 08.06.2016

8.541.023-7 Francisco Peralta Cortés Business Administrator 01.07.2014

9.528.042-0 Humberto Riquelme Villalobos Audit Accountant 01.07.2016

29 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Joining Date of ENAP Directors (Directors are elected for three years and can be reelected indefinitely).

Name Date Joined the Board Board Session Number

Andrés Rebolledo Smitmans 19.10.2016 1.138

Eduardo Bitran Colodro 11.03.2014 1.100

Carlos Carmona Acosta 26.03.2015 1.117

Alejandro Jadresic Marinovic 20.08.2015 1.122

María Isabel González Rodríguez 05.03.2015 1.116

Bernardita Piedrabuena Keymer 05.01.2016 1.128

Paul Schiodtz Obilinovich 28.01.2016 1.129

Jorge Fierro Andrade 22.03.2012 1.067

Note: In 2016, the following Directors of ENAP resigned: Janet Awad Pérez (declined her nomination as Director made by SOFOFA).

30 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

BOARD OF DIRECTORS

CHAIRMAN OF THE BOARD VICE-CHAIRMAN OF THE BOARD Andrés Rebolledo Smitmans Eduardo Bitran Colodro Economist Civil Industrial Engineer Minister of Energy Executive Vice-Chairman of Corporación de Fomento de la Id. No.: 8.127.608-0 Producción (CORFO). Id. No.: 7.950.535-8.

31 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Director Director Director Bernardita Piedrabuena Keymer María Isabel González Rodríguez Jorge Fierro Andrade

Economist Civil Mining Engineer Chemical Plant Technical Operator Chilean Economic Develop- Chilean Economic Development Chilean Economic Development ment Agency (CORFO). Agency (CORFO). Agency (CORFO). Id. No.: 10.173.277-0. Id. No.: 7.201.750-1. Id. No.: 9.925.434-3.

32 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Director Director Director Alejandro Jadresic Marinovic Carlos Carmona Acosta Paul Schiodtz Obilinovich

Civil Industrial Engineer Carlos Carmona Acosta Mechanical Civil Engineer Federation of Chilean Industry (SO- Civil Mining Engineer Federation of Chilean Industry FOFA). Instituto de Ingenieros (SOFOFA). Id. No.: 7.746.199-K. de Minas de Chile. Id. No.: 7.170.719-9. Id. No.: 9.003.935-0.

33 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

BOARD OF DIRECTORS OF ENAP REFINERÍAS S.A. AND ENAP SIPETROL S.A.

CHAIRMAN OF THE BOARD VICE-CHAIRMAN OF THE BOARD Eduardo Bitran Colodro Marcelo Tokman Ramos Civil Industrial Engineer Economist Id. No.: 7.950.535-8. Id. No.: 16.654.431-9.

Director Director* Bernardita Piedrabuena Keymer Alejandro Jadresic Marinovic Economist Civil Industrial Engineer Chilean Economic Development Agency (CORFO). Sociedad Nacional de Minería (SONAMI). Id. No.: 10.173.277-0. Id. No.: 7.746.199-K.

Director Director María Isabel González Rodríguez Carlos Carmona Acosta Ingeniero Civil de Minas. Civil Mining Engineer Corporación de Fomento de la Producción (CORFO). Instituto de Ingenieros de Minas de Chile. RUT: 7.201.750-1. Id. No.: 9.003.935-0.

Director Director** Jorge Fierro Andrade Paul Schiodtz Obilinovich Chemical Plant Technical Operator Mechanical Civil Engineer Chilean Economic Development Agency (CORFO). Federation of Chilean Industry (SOFOFA). Id. No.: 9.925.434-3. Id. No.: 7.170.719-9.

Notes: *Mr. Alejandro Jadresic Marinovic is member of the Boards of Directors of ENAP and ERSA, not of Sipetrol. **Mr. Paul Schiodtz Obilinovich is member of the Boards of Directors of ENAP and Sipetrol, not of ERSA.

34 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Remunerations of Senior Severance Payments Variable Remuneration Executives System

The remunerations paid in 2016 to the In 2016, the company paid severance ENAP has a Variable Remuneration senior executives of ENAP and its sub- payments to senior executives amount- System (SRV) that is applicable to its sidiaries amounted Ch$ 5,587,245,278. ing to Ch$ 144,175,732. The previous executives. The factors considered in This amount is compared with the remu- period (2015), the company paid Ch$ the model for determining the incen- neration paid in 2015 for the same con- 260,600,553 for this same concept. tive are the financial results obtained by cept, which was Ch$5,939,254,767. the company, the individual results and results per area, in addition to an indi- The positions considered in the referred vidual behavioral factor. amount correspond to 42 management positions existing as of Decem- ber 31, 2016: Chief Executive Officer, Business Line Managers, Managers of ENAP Head Office, Managers of ENAP Magallanes and the subsidiaries ENAP Refinerías S.A. and ENAP Sipetrol S.A.

35 / ENAP ANNUAL REPORT 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

Board Member Remunerations /Comparison 2015 - 2016

Board Member Remunerations 2015

Id. No. Name Gross Tax Retention Net Amount

4.461.192-9 Gazmuri Plaza, Fernán Ramiro Ch$ 12,379,498 Ch$ 1,237,949 Ch$ 11,141,549

7.201.750-1 González Rodríguez, María Isabel Ch$ 6,351,166 Ch$ 635,118 Ch$ 5,716,048

5.899.738-2 Bande Bruck, Jorge Arturo Ch$ 561,574 Ch$ 56,157 Ch$ 505,417

6.923.830-0 Miranda Bravo, Fidel Antonio Ch$ 7,717,984 Ch$ 771,798 Ch$ 6,946,186

9.003.935-0 Carmona Acosta, Carlos Jesús Ch$ 6,423,465 Ch$ 642,347 Ch$ 5,781,118

10.173.277-0 Piedrabuena Keymer, Bernardita Ch$ 1,166,503 Ch$ 116,651 Ch$ 1,049,852

7.876.527-5 Ramírez Pendibene, Fernando Gustavo Ch$ 1,633,392 Ch$ 163,339 Ch$ 1,470,053

9.925.434-3 Fierro Andrade, Jorge René Ch$ 8,339,581 Ch$ 833,957 Ch$ 7,505,624

7.746.199-K Jadresic Marinovic, Alejandro Daslav Ch$ 3,126,555 Ch$ 312,657 Ch$ 2,813,898

Total Ch$ 47,699,718 Ch$ 4,769,973 Ch$ 42,929,745

Board Member Remunerations 2016

Id. No. Name Gross Tax Retention Net Amount

7.201.750-1 González Rodríguez, María Isabel Ch$ 9,564,743 Ch$ 956,475 Ch$ 8,608,268

9.003.935-0 Carmona Acosta, Carlos Jesús Ch$ 9,886,395 Ch$ 988,640 Ch$ 8,897,755

10.173.277-0 Piedrabuena Keymer, Bernardita Ch$ 9,611,559 Ch$ 961,156 Ch$ 8,650,403

7.170.719-9 Schiodtz Obilinovic Paul George Ch$ 8,458,252 Ch$ 845,826 Ch$ 7,612,426

9.925.434-3 Fierro Andrade, Jorge René Ch$ 6,981,856 Ch$ 698,186 Ch$ 6,283,670

7.746.199-K Jadresic Marinovic, Alejandro Daslav Ch$ 4,589,999 Ch$ 459,001 Ch$ 4,130,998

Total Ch$ 49.092.804 Ch$ 4,909,284 Ch$ 44,183,520

36 / ENAP MEMORIA ANUAL 2016

Chapter 1 / 2016: A YEAR OF CHALLENGES AND ACHIEVEMENTS

37 / ENAP ANNUAL REPORT 2016

PRODUCTS

LIQUEFIED PETROLEUM GAS PROPANE Butane

GASOLINES Gasoline 97 Oct low RVP/Olefins (RM*) Gasoline 93 Oct low RVP/Olefins (RM*) Gasoline 97 Oct (RC**) Gasoline 93 Oct (RC**) DIESEL Gasoline 100/130 Grade A1 Diesel B Diesel B2 Diesel KEROSENES Antarctic Diesel Household Kerosene Marine Diesel A1 Jet Kerosene SOLVENTS Turpentine FUEL OILS Xylene Fuel Oil N° 6 White Benzene Combustible Marino IFO 380 Combustible Marino IFO 180 PETROCHEMICALS Propylene

SULFUR

NATURAL GAS ASPHALTS Industrial and Residential Natural Gas Waterproofing Products Liquefied Natural Gas (LNG) Asphaltic Cement Asphalt CA14 Asphalt CA24

FUELS INDUSTRIAL PRODUCTS PETROCHEMICALS AND NATURAL GAS

* metropolitan Region ** rest of the Country CRUDE OIL NATURAL GAS

38 / ENAP ANNUAL REPORT 2016

INTERNATIONAL PRESENCE

EGYPT East Ras Qattara Block

Ecuador MDC and PBHI Block 3J Block

Chile Headquarters (Santiago) Aconcagua Refinery Argentina

Bío Bío Refinery Sipetrol Buenos Aires Office Sipetrol Río Gallegos Office Maipú, San Fernando and Linares Plants Sipetrol Comodoro Rivadavia Office ENAP in Magallanes Austral Basin: Easter Island: Vinapu Fuel Storage Terminal - Area Magallanes Block - CAM 2-A Sur - E2 (ex CAM 1-CAM 3) San Jorge Gulf Basin: -Campamento Central-Cañadón Perdido Block -Pampa del Castillo-La Guitarra Block

39 / ENAP ANNUAL REPORT 2016

OIL PROCESSING

EXPLORATION PRODUCTION

DRILLING RIG

BEAM PUMP

SEISMIC TRUCKS OIL PIPELINE

GAS

OIL

40 / ENAP ANNUAL REPORT 2016

TRANSPORTATION LOGISTICS REFINING DISTRIBUTION

OIL TANKERS

CRUDE OIL FURNACE DISTILLATION DEPOSITS TOWER

41 / ENAP ANNUAL REPORT 2016

CHAPTER 2 MANAGEMENT OF PEOPLE AND THE ORGANIZATION

42 / ENAP ANNUAL REPORT 2016

43 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

PEOPLE MANAGEMENT

In 2016, Human Resources Management continued strength- On the other hand, work continued on the training of criti- ening bonds with ENAP workers and employees, with two key cal competencies for ENAP, with the aim of responding to foci: maintain harmonious labor relations and monitoring and the current and future needs of the company. In addition, im- influencing the labor management of third-party companies, provements in internal processes, to make management more to contribute to the achievement of the strategic objectives efficient and provide services that add value to the business. of ENAP; and being an exemplary company that promotes In this respect, it was addressed the challenge of working to inclusion and gender equality, both within the Organization improve, prioritize and simplify the internal customer service and in the community. experience, with the conviction that workers are ENAP’s most valuable asset. This management also promoted important initiatives to generate a closer relationship with leaders, listening to the It should be noted that for the second consecutive year, workers and addressing their needs, regardless of the place ENAP was awarded the first place for the energy category, in where they carry out their work. the study “Employer brand”, research that explores the market perception about the most valued attributes of companies There was also progress in the creation of better working con- in Chile. ditions, promoting safety, self-care and encourage workers to have a better quality of life, implementing activities to promote The organization’s staffing data is reported below; it includes general well-being. the criteria of diversity and gender pay gap. The main progress in management per areas of the Human Resources Man- agement is reviewed next.

44 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

ENAP’S PERSONNEL 2016

Diversity in the Board of Directors Diversity in General Management and Area Managements

Number of people per gender Number of people per gender Women 2 Women 1 Men 6 Men 11 Number of people per nationality Number of people per nationality Chilean 8 Chilean 10 Number of people per age range Argentinean 1 41 to 50 years 2 British 1 51 to 60 years 6 Number of people per age range Number of people per seniority < 30 years 0 < 3 years 7 30 to 40 years 2 From 3 to 6 years 1 41 to 50 years 7 51 to 60 years 2 61 to 70 years 1 Diversity in the Organization > 70 years 0 Number or people per gender Number of people per seniority Chile Argentina Egypt Egipto TOTAL < 3 years 8 Women 382 35 17 7 441 From 3 to 6 years 2 Men 2.926 224 108 28 3.286 From 9 to 12 years 2

45 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Number of people per nationality

ENAP ENAP Sipetrol Sipetrol Sipetrol Sipetrol Nationality ERA* ERBB** TOTAL Santiago Magallanes Chile Argentina Ecuador Egypt German 1 1 Argentinean 7 3 1 255 266 Brazilian 1 1 British 1 1 2 Egyptian 35 35 Chilean 260 1.269 909 778 68 4 2 3.290 Chinese 1 1 Costa Rican 1 1 Ecuadorian 123 123 Peruvian 1 1 2 Uruguayan 1 1 Venezuelan 1 3 4 TOTAL 274 1276 909 779 70 259 125 35 3.727

*ERA: Enap Refinería Aconcagua / **ERBB: Enap Refinería Bío Bío.

Number of people per age range

Chile Argentina Ecuador Egypt TOTAL < 30 years 413 6 11 1 431 30 to 40 years 939 91 61 24 1.115 41 to 50 years 809 91 33 6 939 51 to 60 years 834 45 15 4 898 61 to 70 years 311 26 5 0 342 > 70 years 2 2

46 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Number of people per seniority

Chile Argentina Ecuador Egypt TOTAL < 3 years 751 90 29 3 873 From 3 to 6 years 593 65 52 5 715 From 6 to 9 years 203 28 32 7 270 From 9 to 12 years 459 30 8 10 507 > 12 years 1.302 46 4 10 1.362

47 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

ENAP’s staff per position/function and Business Line

Business Line Managers Head of Dept. / Director Skilled Professional Worker Total

E&P 10 33 6 1.440 1.489 ENAP Santiago 2 2 ENAP Magallanes 2 7 4 1.017 1.030 Sipetrol Chile 5 1 2 30 38 Sipetrol Argentina 1 15 243 259 Sipetrol Ecuador 1 10 114 125 Sipetrol Egypt 1 0 34 35 R&C 9 33 15 1.656 1.713 ENAP Santiago 5 14 2 45 66 ENAP Magallanes 2 1 115 118 ERSA Aconcagua 3 10 6 704 723 ERSA DAO 1 97 98 ERSA Bío Bío 1 7 5 695 708 G&E 5 3 3 12 23 ENAP Santiago 4 3 2 11 20 ERSA Aconcagua 1 1 2 ERSA Bío Bío 1 1 Gerencias ENAP 24 62 30 386 502 ENAP Santiago 17 38 27 104 186 ENAP Magallanes 1 7 120 128 ERSA Aconcagua 1 5 1 79 86 ERSA Bío Bío 1 5 2 62 70 Sipetrol 4 7 21 32 Total 48 131 54 3.494 3.727

48 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Own Staff and Contractors The Framework Agreement of Collaboration between ENAP and Fundación Descúbreme promotes the employment inclu- ENAP Workers 3.727 sion of people with cognitive disabilities within the organiza- Contractors 8.017 tion. This step seeks to build a more inclusive culture that Total 11.744 recognizes the dignity, value and contribution of people with different capacities and, gradually, generate a change that will have a positive impact on the entire social structure. Gender Pay Gap Meanwhile, the collaboration framework agreement between Percentage representing the average gross salary, by type ENAP and Fundación Puente aims to develop initiatives that of position, responsibility and role, of female executives and promote the occupational integration of young people living workers with respect to male executives and workers. in situations of social vulnerability. At the same time, it seeks to promote training to ENAP workers as well as organizations ENAP local operations (Chile) and suppliers who are linked to the company, and that are interested in accompanying, forming and collaborate with young people at social risk. Position, Responsibility or Men Women Role Thanks to this initiative, on December 19, 2016, nine young Executive 100% 84% people began their working practice at ENAP, most of them General role 100% 111% women and also the first generation of their families that have access to the University. The company welcomed this outstanding group of students at a breakfast with the Human Diversity and Inclusion Resources Corporate Manager, the Head Office Human Re- sources Manager and other workers who have participated in Contribute to the generation of job opportunities, under the the process. criteria of diversity and inclusion. In 2016, this challenge materialized through the signing of agreements with the foun- Finally, the agreement with ONAR seeks to promote the har- dations Descúbreme and Puente, and the National Office of monious coexistence of all religious faiths within the organi- Religious Affairs (ONAR), with the aim of being a model com- zation. Thus, ENAP is responsible for generating an environ- pany in this field. ment connected with the interreligious reality of their workers, promoting a positive appreciation of cultural and religious

49 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

identity differences, and promoting respect in the greetings Culture and Work Climate to employees and civil society. Continuing with the implementation of the Strategic Plan, during 2016, special emphasis was placed on culture and work- In addition to these conventions, workshops and activities are ing environment management, to have workers committed carried out in some business units to sensitize managers and not only to their work, but also to their teams and units. supervisors on disability, legal regulations and benefits of labor inclusion, in order to raise awareness and have better and To this end, actions were taken to improve the working envi- more internal tools to assume this important challenge. ronment in the different business units and subsidiaries. The focus areas were: Development, Recognition and Communi- Workshops aimed at workers who have children with dis- cation. In line with this work, and in accordance with the com- abilities were also carried out in some business units. These mitments made, the second Corporate Workplace Climate workshops are on specific issues that help to understand and Study was carried out between October and November 2016 recognize this reality. and was applied in all the subsidiaries in Chile and abroad (Argentina, Ecuador and Egypt). In the field of gender equality actions, in 2016 a round table called “Gender equality at work, progress and challenges”, On this occasion, an 82% participation rate was recorded, involving different companies in the oil and mining industry which was an improvement compared to the 74% achieved in was held in the Region of Magallanes. Its aim was to pub- 2015. This allows a greater representativeness of the results licize the best labor practices and identify those aspects to in each Business Unit and subsidiary. improve in this area. There was also a recognition of the work Among the 16 aspects consulted, the best evaluated by the of two workers of Enap Magallanes, in the context of “Women workers remained Work Safety, Identification and Commit- in Mining”. ment, Corporate Social Responsibility and Physical Working Conditions. There were also significant improvements in the In addition, the company participated in the seminar “Chal- aspects related to Local Managers’ Vision and Quality of Life, lenges for the productive development in mining”, which and opportunities for improvement were identified in the ar- dealt with initiatives and proposals on issues of diversity and eas related to Recognition (non-monetary), Development and gender equality, from the perspective of different actors be- Company Communication. longing to the mining industry in the region.

50 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

In December, began the implementation of the results’ dis- At the mid-management level, field consultations were con- semination plan to all workers, a stage that ends in the first ducted in the refineries to facilitate people management, ac- quarter of 2017, together with the definition of action plans to cording to the specific needs of each work area. be implemented. The focus was set on delivering tools for conflict resolution In the area of organizational culture, a cross-cutting plan was within teams. drawn up focusing on the strengthening of the executive and management teams of each Business Unit and subsidiary, Training through team buildings and coaching processes. An executive leadership agenda was also worked out among the man- Learning management is a fundamental tool to promote the agers in order to improve coordination between areas and development of workers and ensure the correct fulfillment of generate more closeness and mutual knowledge between projects and objectives of the business, by facilitating the ac- senior management and workers. quisition of knowledge, new technologies and skills training.

The main lines of work in leadership were feedback skills and As part of the annual programs, a total of 380,390 hours of capabilities and teams management. Thus, teamwork pro- training were completed during 2016, including external and grams were implemented for the first time, starting with the internal activities in the Business Units in Chile and subsidiar- executive teams of all the business units and subsidiaries and ies (Argentina and Ecuador), with an average of 86.2 hours the most critical areas of the organization. This initiative culmi- of training per person, and a coverage corresponding to 88% nated in a great meeting of all ENAP leaders in Santiago, with of the personnel. the purpose of generating a shared vision of the company and knowing the role that this team is expected to fulfill in the The participation in instances of sectoral discussion is anoth- Strategic Plan. er way to contribute to the continuous development of workers. In this sense, the Organizational Development area of In addition, a Mentoring Program focused on leadership was ENAP had a relevant role in the co-organization of the First held for the first time in the subsidiary in Ecuador to promote Congress in Chile of the Regional Association of Companies leadership development and support the company’s succes- of the Oil, Gas and Biofuel Sector (ARPEL), on “Best prac- sion plan. tices in the operation Of FCC units”. Representatives of YPF, SHELL, and KBR were present at the event among other representatives of the industry at the Latin American level.

51 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

52 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Cross-cutting programs

The following are the main cross-cutting programs carried out workers receive the knowledge and experience on strategy by the Directorate of Organizational Development of ENAP. and critical contents of the different business processes di- It should be noted that the programs related to Safety and rectly from managers. This program consists of 56 teaching Occupational Health are reported in the section Sustainable hours and, in the case of Santiago and Sipetrol, it includes a Development. geological visit. The objective is to ensure a homogeneous knowledge about the entire value chain of operations, includ- Diploma in Business Management for the Energy Indus- ing subjects on Exploration and Production, Refining and try: During the year, the second version of the Diploma in Commercialization, and Gas and Energy. Business Management of the Energy Industry was carried out for 53 professionals from the different Business Units in Chile Change Management Workshops: Different Change Man- in partnership with the Pontificia Universidad Católica de agement workshops were carried out in ERA, ERBB and the Chile as an initiative aimed at enhancing talent in ENAP and Main Office, aimed at project managers and / or professionals reinforcing its strategic axes. The objective was to empower in charge of the implementation of projects with impact in the professionals of the most critical processes of the company, organization. The main purpose is to provide knowledge and to provide them with tools related to strategy and leadership. tools of change management from a comprehensive point of view and treatment, incorporating cultural and people man- Along with attending to 158 hours of classes and the approval agement elements in a cross-cutting manner. of the different subjects of the diploma, students must design and implement an innovation project that can be scaled in CAMPUSENAP Knowledge Platform: CAMPUSENAP was different areas of the business and that generates value to launched in 2016 with the purpose of having a unique knowl- the company. As a result of this activity, projects were imple- edge management platform that allows the management of mented in all Business Lines, generating significant savings courses in an e-Learning format, and a library of documents and optimizations with initiatives at a minimum cost. to reinforce this learning method.

Oil and Energy Internal Business Program (NPYE, in Span- Career Development: Another outstanding initiative are the ish): As part of Knowledge Management, the NPYE Program Career Development Programs that have been carried out by was designed and implemented in all Business Units, where the refineries. These include a training plan for the deploy-

53 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

ment of competencies and acquisition of skills associated Therefore, the main advances were focused on providing a with certain jobs (technical and leadership), aimed at ensur- common base to the processes of the people’s basic cycle. In ing productivity and maximizing the performance of workers this context, each management began the implementation of in their job. In general, these programs represent on average a job mapping process to establish their relative weight in their 61% of the total training hours. management area, and create a methodology that would grant common criteria, based on efficiency, for the Design and / or Strengthening of the Performance Management System: redesign of organizational structures. The implementation and improvement of ENAP’s Performance Management System continued during 2016, by working with On the other hand, the challenge was to modernize the plat- two main areas. The first, aimed at strengthening the role of forms that support the processes of Compensation and Per- supervisors in evaluation competencies and feedback, to ef- sonnel Management, in order to have a more integrated and fectively promote better performance. The second area was timely vision in this area. Thus, a control panel was designed the implementation of a technology platform for the evalua- that measures management and delivers information of the tion process (Success Factors module), to facilitate process workers profile. This world-class platform is the basis for the re- implementation and traceability. cruitment and selection, performance, goal management and compensation processes in Chile and the subsidiaries abroad. The initiatives related to this area, carried out in all business units in Chile, include workshops and direct advisory to the Work Relations Management headquarters in the evaluation process. The Work Relations Management was created on August 1, During 2016, 53.31% of the staff of ENAP was evaluated. 2016, which is responsible for the Directorate of Third Party About this figure, it should be noted that in Magallanes only Management and the Directorate of Work Relations. the people that reported to an executive were evaluated. This new organizational structure seeks to institutionalize the Compensation and Management strategic management of labor relations as a participatory instrument for the organization of work and people manage- In this area, special emphasis was placed on strengthening ment, aligning efforts in those functions and processes with practices aimed at non-discrimination and allowing a remu- greater impact. On the other hand, it seeks to generate syner- neration according to the responsibility of the role played, also gies between the two Directorates, through the development reinforcing the pillars of internal equity and efficiency. of cross-cutting projects that contribute to the improvement of internal and external labor relations.

54 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

With the idea of working in the interlocution of social dialogue Directorate of Third Party Management with trade union organizations and contributing to the implementation of initiatives relevant to the company, since the cre- The objective of the Directorate of Third Party Management ation of the Work Relations Management the following mile- is to supervise and influence on the comprehensive manage- stones can be highlighted: ment of third parties, for the collaborative strengthening of labor relations between the actors of the subcontracting line 1. Diagnosis of the relationship model existing in the com- that enable the operational continuity of the business. pany, with the design, facilitation and systematization of the workshop “Discovering our model of employment rela- Its focus is to contribute to the creation of balanced labor tionship”. relations that allow to achieve the fulfillment of the strategic objectives of ENAP. 2. Signing of an agreement with Universidad de Chile for the certification of the standard of gender equality and work, Areas of Action: family and personal life reconciliation. Under this project, • Control and Compliance the forum “ Challenge of Gender Equality and Work, Fam- • Management and Development ily and Personal Life Reconciliation in ENAP: Towards the • Work Relations with Third Parties Certification of the Chilean Standard 3,262” was conducted in December.

55 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

MILESTONS IN THIRD PARTY MANAGEMENT 2016

Diagnosis Model of Social Dialogue with Third Parties carried out by ILO

As part of the Memorandum of Understanding that ENAP and ENAP’s Executive Director, Corporate Managers and key ILO signed in 2015, during 2016 an in-depth diagnosis was executives in the relationship and management of Third Par- made by this international organization of the existing models ties participated in this Technical Committee. A draft, which of social dialogue with third-party trade union organizations is currently being validated, was prepared in the four work and contractors. sessions led by ILO.

In order to carry out this diagnosis, several meetings were The document is expected to be published in 2017 and to held with stakeholders from the Third Party Management Di- incorporate it to ENAP’s corporate policies. rectorate, in order to identify strengths and weaknesses of the existing relationship model. Diagnosis of Third Party Management at Enap SIPEC and Sipetrol Argentina Once the diagnosis concluded, the results and recommendations of the ILO were presented in various instances, including In 2016, the Directorate of Third Party Management commit- the CEO, Line Managers, Fenatrapech, Fesenap, Trade Unions ted to carry out a diagnosis of Third Party Management in of ENAP, Contractors Federation and Contractor Companies. ENAP’s subsidiaries abroad as an important part of the work program defined by this area, to recognize those practices Design of Third Party Management Policy or initiatives that may be transferred or replicated in order to standardize the Model of relationship existing in Chile. As part of the ILO’s recommendations to improve the existing social dialogue models with contractors, a Technical Commit- To meet this objective, visits were made to both business tee was formed at the Corporate level, whose purpose was to units and meetings were held with managers and executives jointly design the Third Party Management Policy to standard- that were relevant in the Third Party Management processes. ize principles and guidelines that ENAP considered crucial in the relationship with third parties.

56 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Global Compact Network Chile awards As part of this diagnosis, the course “Good working practices recognition to ENAP in the area of good as part of CSR” was developed for executives of Enap SIPEC. labor practices for the creation of the It is expected to replicate this course at Enap Sipetrol Argen- Directorate of Third Party Management tina in 2017.

Global Compact Network Chile, an organization that ensures Regional Seminars “Governance and the adoption of the principles and declarations of the United participatory management for the Nations, rewarded ENAP for its good practices in the field of strengthening of Labor Relations” Labor Relations. The seminars held in Concepción and Valparaíso aimed to The recognition was given as part of the delivery of the sixth contribute to the national and international debate that is held version of the study “System of Integration of the Global Com- on the model of labor relations management with trade unions, pact Principles” and highlights the creation by ENAP of the as a key axis for the fulfillment of the strategic objectives of a Directorate of Third Party Management in 2014. company or institution. At the same time, it has deepened the Among the milestones generated by the Directorate of Third fact that participatory management has a direct impact on the Party Management are the Global Compact-ENAP Round improvement of employability and the sustainable develop- Table on Subcontracting; Labor climate surveys to contractor ment of organizations. workers; climate management in critical companies, as well The seminars were held in November and were organized by as the permanent dialogue with contractor’s trade union or- the Directorate of Labor Relations of ENAP, the Directorate of ganizations through a permanent schedule of work meetings. Third Party Management, Bío Bío Refinery and Aconcagua This recognition, based on the ILO Declaration on Business Refinery. Respect for Freedom of Association, Collective Bargaining Rights and Non-Discrimination, highlights the fact that ENAP Land Logistic Services Round Table contributes to the creation of balanced labor relations allowing growth and the development of workers, along with the In order to facilitate instances of Social Dialogue, a Round- fulfillment of the strategic objectives of the company. table with Land Logistics contractors was created to address and supervise the legal compliance of the working conditions

57 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

of the workers under these contracts, and therefore, generate Business Units refer periodically, describing eventual and / or instances of Improvement in employability and safety. potential conflicts involving contractors.

As a result of this instance, these contracts were incorporated The analysis and management of this report complements the into the process of certification of work obligations and a proj- actions necessary to safeguard the operational continuity of ect will be started to certify the labor competencies of the Op- ENAP, through support and / or mitigation actions. erator Drivers that perform in these services that are critical for the operational continuity of ENAP. Certification of work obligations

Entry into force of Law 20,940 During 2016, the new contract of certification of labor obligations was awarded to the company Deloitte Certificadora, for In order to analyze the effects that can be generated in the a period of 48 months. relationship with Third Parties as a result of the entry into force of Law 20.940, which modernizes the Labor Relations Sys- The new contract incorporates improvements related to the tem, various initiatives were developed, including: digitization of the documentation of the contractor companies, issuance of reports, mechanisms of control and orga- • Training to members of the Directorate of Third Party Man- nization of deadlines, in order to optimize the process and agement and Procurement Areas. improve the quality of the information. • Training sessions in each Business Unit, in conjunction with the Provincial Labor Directorates, both for Service With the information gathered in the certification processes, Providers and Trade Union Officers. monthly reports are issued with the labor compliance of the • Meetings with critical suppliers to anticipate and mitigate contractor companies. In addition, this information is incor- potential conflict scenarios. porated in the quarterly report designed by the Directorate of Third Party Management to present and analyze the results of Conflict Reports the labor management of contractors.

The Conflict Reports have been defined and validated as a In March, contractors had four training days in all Business management tool that the Labor Relations Directorates of the Units and Headquarters.

58 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Labor Audits The systematization of the contents of the applied surveys leads to a socioeconomic report by Business Unit, together In 2016, a total of 76 labor audits were applied in current with an individual report for each worker. contracts of collaborating companies of Aconcagua, Bío Bío, Magallanes, DAO and Head Office, increasing the number of The coverage of the program since its inception in 2015 reg- these revisions by 85% in relation to the period 2015. isters, in December 2016, a total of 1,649 workers surveyed in Aconcagua and Bío Bío Refineries, DAO and Main Office. The results of this review are transferred to each audited During the second half of 2016, the program was implemented company for the management of those aspects that present at Enap Magallanes, where 852 contract workers participated. deficient indicators. The contractor companies submit a report with the measures taken to close each of the breaches In addition, the second phase of the program was carried out in detected. 2016, which included the delivery of reports and individualized social services for the surveyed contract workers. The idea of Thanks to the management and monitoring carried out with this stage is to provide direct guidance to the workers about the the contractors, the overall compliance of the audits was im- state benefits to which they have the possibility to apply. proved by 19% compared to 2015.

Advances in the area of labor control and compliance have The second phase of social care is planned for March 2017 been key, both for the improvement in labor relations with the at Enap Magallanes. subcontractor sector and to contribute to the operational continuity of the organization. Consultancy for strengthening the Labor Climate in ENAP Contractors “We Want to Meet You” Program Based on the results obtained in the Climate Survey applied This program is a computer platform of social management, to contractors in 2015, a consultancy was executed for Con- which works as a support tool for the collaborating compa- tractor Companies focused on the elaboration and design of nies, allowing to guide contractor workers around the benefits improvement actions that support the strengthening of the provided by the public services network. Labor Climate in the aspects with lower evaluation. This pro-

59 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

gram was executed between April and November, for a total It should be noted that certification is the result of a hard work of 26 companies. that began in 2012, promoted by the Federación de Traba- jadores Contratistas de Aconcagua, sponsored by ChileVal- The contractor companies selected for this program were ora, and the support and participation of ENAP, the Superin- voluntarily invited to participate, taking into consideration the tendency of Electricity and Fuels and contractor companies. result of their Labor Climate survey and the level of relevance that the services provided have for ENAP. Social Management Trade Shows

This consultancy allowed to intervene those aspects in which During 2016, two social management trade shows were risk alerts were observed that could affect the services pro- held in the Aconcagua Refinery: the first, in May, at the Bar- vided by the contractors in Refinery Aconcagua, Bío Bío Re- rio Contratistas; and the second, in December, at the prem- finery and Enap Magallanes. ises of the contractor company Carreño Mar from Quintero. In both, the Provincial Government of Valparaíso and several Certification of competencies for public institutions, such as SERVIU and Civil Registry, were contractor workers involved. This facilitates the access, by subcontracted workers and neighbors, to information about the State’s network of In 2016, numerous Ceremonies of Certification of Labor Com- social benefits. petencies were held in Aconcagua and Bío Bío Refineries for a total of 380 contractor workers as a result of the various On the other hand, Bío Bío Refinery contributed to the execu- evaluation processes carried out during 2015 and 2016. tion of the Safety Fair, where the concept of “Occupational Health” was included and had the participation of ILO. In ad- Although they began in 2015, in 2016 these initiatives dition, the first Higher Education Fair was held in October, with achieved a stable and permanent position as a continuous the participation of the main universities, professional institutes process of development and recognition of the labor compe- and technical training centers in that region, providing informa- tencies of contractor workers in their specific trades in the oil tion on scholarships and training offers for contractors. and gas sector.

60 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

61 / ENAP ANNUAL REPORT 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

Year’s end Celebration Training

As in previous years, Refinery Aconcagua and Bío Bío Refin- The Federation of Contract Workers (FETRACON, a trade ery held a celebration party as a year’s end activity, aimed at union organization representing the base workers’ unions of contractors and their families. Both events were highly recog- Aconcagua Refinery), together with the Technical Training nized and appreciated by attendees. Center of Universidad Católica de Valparaíso and Enap Acon- cagua Refinery, signed a collaboration agreement to provide For those who provide services in the Head Office and DAO, technical degrees in Industrial Technology in the areas of In- a cocktail was prepared that allowed sharing with the work- dustrial Maintenance, Construction and Electricity, to a total of ers, who also received a Christmas gift. 150 subcontracted workers. This process that began in 2015 will conclude in July 2017. In addition, in 2016 several training activities were carried out for contractor workers on the following subjects:

• Tank Mechanical Master: 66 workers. • Safety Standards: 125 workers. • IMO (International Maritime Organization) courses: 29 workers related to maritime transport. • Rescue at Height Course at the CEDUC Technical Training Center: 6 workers. • Training workshop for Joint Committees.

62 / ENAP MEMORIA ANUAL 2016

Chapter 2 / MANAGEMENT OF PEOPLE AND THE ORGANIZATION

63 / ENAP ANNUAL REPORT 2016

CHAPTER 3 BUSINESS ENVIRONMENT

64 / ENAP ANNUAL REPORT 2016

65 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

Oil International Market

Price of Crude Oil

In 2016, the price of Brent crude oil benchmark recorded and the first half of 2016. Specifically, according to prelimi- an average of US$45.1 per barrel in the Intercontinental nary estimates from the U.S. Department of Energy (Short Exchange in London, 16 % lower than the average in 2015 Term Energy Outlook, January 2017) global oil consumption (US$53.6 per barrel). reached 95.6 million barrels per day (MM bpd) in 2016, while global offer was 96,4 MM bpd, therefore generating a stock This fall in the price is explained mainly by an oversupply in accumulation, globally, of 0.9 MM bpd. the global market that began in 2014 and continued in 2015

Global Oil Market 2016 (Figures in MM bpd)

Jan-Dec 2016 Jan-Dec 2015 Variation DEMAND 95,58 94,15 1,43 OCDE 46,71 46,42 0,29 NON-OCDE 48,86 47,73 1,14 OFFER 96,44 96,14 0,30 North America 21,88 22,25 -0,38 Rest NON-OPEC 34,97 35,21 -0,24 OPEC LNG and Condensates 6,70 6,59 0,11 OPEC Crude Oil 32,89 32,08 0,81 INVENTORIES 0,9 2,0 -1,1

Source: U.S. Department of Energy, “Short Term Energy Outlook January 2017”

66 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

At the beginning of 2016, the price of crude oil was around OPEC, the arrival of summer in the northern hemisphere and US$ 37 per barrel, being strongly influenced by an oversup- disruptions in the production of important oil countries such ply of 3 MM bpd and low expectations around it. Specifically, as Canada (fires in Alberta) and Nigeria (attacks by rebel the abandonment of OPEC’s joint production goal, coupled bands in the Niger Delta), became relevant factors, along with the imminent fact that in the short term sanctions that with the teapots, to continue holding prices on top of US$ 40 restricted its Iran exports would be lifted, continued to heav- per barrel. ily depress its valuation. This, together with reports of a large amount of stored crude and stranded ships at the main oil In the last quarter of the year, the market continued to have ports, caused crude oil price to reach US$ 27 per barrel in an oversupply of about 700,000 bpd, which was substantially late February, its lowest level in 14 years. lower than at the beginning of the year. Thus, a clear trend towards the balance between market forces had been set up. Subsequently, the strengthening of Asian markets, reflected As a consequence, the subsequent announcement of a meet- in an increase in their imports of crude oil driven by their in- ing to be held between OPEC and non-OPEC countries, to- dependent refiners (teapots), began to be a relevant vari- gether with its final result of agreeing to reduce its total crude able in the strengthening of demand and crude oil prices. production by 1.8 million bpd, contributed to accelerate the Consequently, together with the announcement of a meeting growth rate of the prices. Consequently, at this stage of the in Doha in April with the aim of negotiating some production year prices ended up averaging US $50 per barrel. policy between OPEC countries and Russia, it was possible to recover the value of crude oil, which ended up averaging Even in this context, the year 2016 ended with risks for the US$ 49.6 during the first quarter. oil market. In this sense, the exclusion of Libya and Iran from the agreement signed by OPEC, together with greater invest- Over the year, prices continued to fluctuate around US$ 40 ment and lower costs in the shale oil industry, are the main and US$ 50 per barrel. A new inter-ministerial meeting of elements on which the market will be attentive.

67 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

2016 ICE Brent crude oil daily price

US$/bbl

60 Period of strikes in Kuwait, attacks in Nigeria and fires OPEC manages in Alberta, Canada to coordinate cuts 55 OPEC informal plan meeting agreement Countries 50 outside OPEC add to cuts New OPEC meeting 45 without agreement Doubts about feasibility of cuts. Iran, Iraq, Libya and OPEC meeting: no cut-off Announcement Nigeria increasing their 40 agreement. But speculation of OPEC informal production rate. Significant held prices during the first meeting accumulation of crude oil quarter along with develop- stocks in the U.S. at the 35 ment of Teapots beginning of November

30 Lifting of sanctions to Iran

01-01-2016 01-02-2016 01-03-2016 01-04-2016 01-05-2016 01-06-2016 01-07-2016 01-08-2016 01-09-2016 01-10-2016 01-11-2016 01-12-2016

Product Prices on the Gulf Coast

In the international market of the US Gulf Coast (Gulf Coast, fell in line with the price of crude, and while the creation of hereinafter), the prices of different fuels decreased in 2016 demand for this product In the United States remained posi- compared to 2015, following broadly the fall in the price of tive, was lower than in 2015. Brent ICE crude oil. In the case of the diesel price, the average for 2016 was US $ The price of gasoline averaged US $ 57.1 per barrel in 2016, 55.8 per barrel, 16% lower than the average for 2015. dropping by 15% compared to 2015. The price of gasoline

68 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

Precios Internacionales Productos 2016

US$/bbl

GASOLINE 60

50 DIÉSEL

40 KEROSENE

30 BRENT ICE

20 FUEL OIL 6

ene. 2016 feb. 2016 mar. 2016 abr. 2016 may. 2016 jun. 2016 jul. 2016 ago. 2016 sep. 2016 oct. 2016 nov. 2016 dic. 2016

The price of fuel oil No. 6 registered an average of US $32.0 The price of fuel oil N ° 6 thus decreased proportionally more per barrel during 2016, with a 21% drop compared to 2015. than Crude oil, due to a higher supply in the United States, higher refining levels, and lower exports to the Asian market.

69 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

Domestic Market

In 2016, the domestic consumption of refined petroleum Domestic consumption of vehicular gasoline was the second products reached 19.32 MMm3, equivalent to 332,074 bpd, largest in volume, with 4.56 MMm3 (78,393 bpd), growing increasing by 1.4% in relation to the previous year. 5.6% in relation to 2015. The greater consumption of this fuel was favored by the decrease of 9% of the real price of this The increase in consumption is explained by the economic fuel, minus the effect of inflation 2015/2016. activity. According to preliminary estimates by the Central Bank of Chile in its Monetary Policy Report (IPOM), Chile’s Liquefied petroleum gas (LPG) was the third most important GDP expanded by 1.5% in 2016, contrasting with a growth product in terms of consumption, with 2.13 MMm3 (36,605 of 2.3% in 2015. Less dynamism in the economy in 2016 was bpd), a decrease of 9.2% over the previous year. In this case, mainly due to lower production in the copper mining sector, the lower consumption is explained by natural gas market a large demand for petroleum-derived fuels, as well as the losses. stagnation in the construction sector. Kerosene consumption increased by 6.7% to 1.47 MMm3 When analyzing the variation of consumption per product in (25,218 bpd). Within the total, aviation kerosene, which rep- relation to 2015, there are very different behaviors, especially resents 91% of consumption, increased by 6.8%, while do- the decreases in consumption of fuel oil and liquefied pe- mestic kerosene increased by 5.7%, both favored by a 19% troleum gas (LPG), in contrast with the increase in gasoline, decrease in its real price. kerosene and diesel. Fuel oil consumption decreased by 9.2% and reached 0.91 Total diesel consumption increased by 2.4% to 9.85 MMm3 MMm3 (15,615 bpd). The consumption of fuel oil for industrial (169,210 bpd), maintaining its status as the most consumed uses fell by 10% (68,854 m3), and sales of fuel oil as marine product among fuels derived from petroleum. Diesel con- fuel in the country’s ports decreased by 7.7% (26,835 m3). sumption expanded due to increased economic activity and Despite a 24% decrease in price in real terms, the consump- a 20% drop in the price to the end-user, in real terms, that is, tion of fuel oil for industrial uses continued in the decreasing minus the effect of inflation 2015/2016. trend of recent years, mainly due to the substitution of natural

70 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

gas, a phenomenon that does not affect until now the use of fuel oil as marine fuel.

Finally, consumption of industrial products (solvents, olefins, basic raw materials for the petrochemical industry, and asphalt products) totaled 0.41 MMm3 (7,032 bpd), an increase of 0.6% over 2015.

Domestic Consumption

2016 2015 Variation Domestic Consumption Mm3 Mm3 2016 / 2015

Liquefied Petroleum Gas 2.130 2.345 -0,2%

Vehicular Gasoline 4.582 4.320 5,6%

Kerosene 1.467 1.375 6,7%

Diesel 9.846 9.616 2,4%

Fuel Oil 909 1.000 -9,2%

Industrial Products and others 409 406,584 0,6%

TOTAL 19.323 19.063 1,4%

71 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

Total sales

Total sales reached 11.79 MM m3 (202,666 bpd), slightly drop in the national LPG market share, from 15.5% in 2015 to higher than the previous year. This increase is mainly ex- 15.2% in 2016. However, thanks to the production of this Al- plained by the higher level of sales to the domestic market, kylation Plant, ENAP increased its sales of gasoline, of much which increased from 11.28 MM m3 in 2015 to 11.37 MMm3 greater value than LPG. in 2016 and a decrease in the level of export sales of 0.45 MMm3 in 2015 to 0.42 MMm3 in 2016. Among domestic sales, the most sold product was vehicular gasoline, with 4.53 MM m3 (77,870 bpd), achieving a market The products with the largest share of ENAP sales correspond- share of 99.3%. ed to gasoline and diesel, with 38% and 37%, respectively. The second most sold product was diesel, with 4.36 MM m3 Of the total sales volume, 10.09 MM m3 (173,822 bpd) cor- (74,874 bpd) and a market share of 44.2%. responded to own production, which represents 85.5% of the total sold. The remaining 14.5%, 1.70 MM m3 (29,393 bpd), In order of magnitude of sales, the following volumes corre- was supplied mainly by imports and also, to a lesser extent, spond to kerosene, with 0.95 MM m3 (16,272 bpd) and a mar- by purchases from domestic third parties. ket share of 64.5%; Fuel oil, with 0.90 MM m3 (15,536 bpd) and a market share of 99.5%; LPG, with 0.32 MM m3 (5,550 Sales to the Domestic Market bpd) and a market share of 15.2%. Finally, industrial products, with 0.31 MM m3 (5,372 bpd) and a market share of Sales to the domestic market were 11.37 million m3 (195,473 76.4%. bpd), with a market share of 58.9%, which is 0.3 percentage points lower than in 2015. Exports

The lower market share led to a drop in LPG sales (- 42,000 ENAP’s exports reached 0.42 MMm3 of oil-based products, m3), due in part to lower availability of butane from the re- equivalent to 3.8% of the total production of its refineries. fineries, as part of the production was destined as load for the Aconcagua Refinery Alkylation Plant. This resulted in a

72 / ENAP ANNUAL REPORT 2016

Chapter 3 / BUSINESS ENVIRONMENT

ENAP’s Sales and market share in 2016 (Figures in Mm3)

Domestic Domestic Domestic ENAP Exports Import Sales ENAP 2016 / 2015 Variations Consumption Sales ENAP Market Share Products 2016 2015 2016 2015 2016 2015 2016 2015 Consumo Ventas Nac. 2016 2015 Mm3 Mm3 Mm3 Mm3 Mm3 Mm3 Mm3 Mm3 Nacional ENAP Liquefied Petroleum 2.130 2.345 323 365 12,2% 15,5% 22 68 11 0 -9,2% -11,4% Gas

Vehicular 4.562 4.320 4.531 4.382 99,3% 100,0% 0 0 568 673 5,6% 3,4% Gasoline

Kerosene 1.467 1.375 947 927 64,5% 67,5% 0 0 119 65 6,7% 2,1%

Diesel 9.846 9.616 4.357 4.305 44,2% 44,8% 10 0 904 801 2,4% 1,2%

Fuel Oil 909 1.000 904 1.020 99,5% 100,0% 343 273 19 0 -9,2% -11,4%

Industrial Products 409 407 313 282 76,4% 69,4% 43 112 3 0 0,6% 10,8% and others

TOTAL 19.323 19.063 11.374 11.281 58,9% 59,2% 419 453 1.625 1.540 1,4% 0,8%

73 / ENAP ANNUAL REPORT 2016

CHAPTER 4 CORPORATE GOVERNANCE

74 / ENAP ANNUAL REPORT 2016

75 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Sustainable Development

Safety and Occupational Health

Highlights in Safety and Occupational Health

The preparation process of ENAP’s Corporate Occupational • Identification, Evaluation and Management of physical, Health Standard concluded in 2016, and its implementation will chemical and ergonomic risk agents, focusing on action begin in 2017, to strengthen the technical and operational as- plans to mitigate these agents and reduce exposures to pects of its operations in order to respond to current demands, them. in line with ENAP’s policies and commitments in this area. • Implementation of the protocols on Minimum Standards for All business units and subsidiaries of ENAP participated in a the development of programs to monitor hearing loss due multidisciplinary team specialized in occupational medicine, to exposure to noise in the workplace (Prexor); improve- hygiene and industrial safety, which led the review of the dif- ment of the processes of manual handling of loads and ferent practices in terms of health requirements in occupa- prevention of musculoskeletal disorders in upper limbs; tional examinations, health surveillance programs, improve- prevention of exposure to UV radiation; eradication of ex- ment programs in the management of industrial hygiene and posure to silica, asbestos, among other concrete action workstation ergonomics, among others. plans in occupational health aspects.

Based on this review and analysis, in a series of workshops One of the most recent problems in the industry is the na- the aforementioned Corporate Occupational Health Standard tionwide increase of mental illnesses, which has led ENAP to was prepared, this document will guide how ENAP will work deepen awareness of the importance of Psychosocial Risks next year on the prevention of people’s exposure to harmful and the application of the protocol that regulates them. agents and how to avoid that such physical, chemical, ergonomic or psycho-social agents be the cause of an occupa- A second evaluation, conducted in 2016, has achieved a re- tional disease. sponse rate of 84% on average, four points higher than the participation in 2015. Coordinated measures have been es- In addition to these initiatives, ENAP continues to implement tablished with the Work Climate Plan to reduce the risk levels the following actions in its operations: of the work centers evaluated. Currently, more than 40% of

76 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Advances in the Safety Strategy the work centers measured are without risk or low risk, after In 2016 continued the deployment of the security strategy de- this second assessment and the actions taken. fined as part of ENAP Strategic Plan 2014-2025, and that has among its cross-cutting axes the Safety of People and Secu- Likewise, the Occupational Health teams have encouraged rity of Processes as a key element of the corporate strategy. activities to promote and update the regulations associated with the prevention of occupational diseases, for example, by During the reporting period, highlights the progress made in inviting the participation of both the Ministry of Health and the implementation of the Operating Standards of the Rules the Union Institute of Work, Environment and Health (ISTAS) for Life in each Business Unit or Branch. Thus, through the of Spain, to a Seminar that ENAP organized in 2016 for the coordination and leadership of multidisciplinary technical psycho-social risk protocol implementation committees, suc- groups, plans have been addressed for the standardization ceeding in positioning the state-owned company within com- of controls associated with facilities and inactive equipment, panies that have made significant progress in applying the updating and development of the local documentation re- ISTAS 21 psycho-social risk protocol in our country. quired for the correct compliance of each standard and the closure of other gaps detected during the evaluation process, carried out at the end of 2015.

The technical discussion tables have been regularly advised by international consultants from the Oil & Gas industry, ensuring that the development of internal work practices consistent with the best industry practices.

In addition to this, the Operational Standards of the Rules for Life were distributed to the organization through 70 internal monitors from all Business Units and Subsidiaries of ENAP, who were internationally certified by the International Consul-

77 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

tant DuPont Sustainable Solutions for that purpose, in a pro- Other initiatives highlighted during the period, which are part cess of training of qualified internal trainers. of the Safety Strategy, were the following:

During 2016, the monitors conducted 157 training activities • Consolidation of a culture of self-care, through the for 2,272 attendees, in eight-hour courses, informing and rais- SafeStart Program: This is one of the HS Management ing awareness among their colleagues about the importance Cross-Cutting Programs that have progressed the most to the organization of the controls established through these and had most adherence among workers. Since 2013, standards and the Structural Safety Program (PES, Programa when it started at the corporate level and until the end of Estructural de Seguridad). 2016, more than 5,000 workers have been trained in the 5 modules that are part of the program. One of the important milestones that show the management’s Commitment to Safety, was the commemoration of ENAP’s For this purpose, there are more than 230 internal moni- Second Safety Plenary, established in 2015 to celebrate the tors, distributed in all ENAP subsidiaries that have been International Day of Safety and Health at Work and establish trained to facilitate the transfer of knowledge. Together it as ENAP’s day of safety. with this, the module was launched in 2016, which is a course developed by ENAP that seeks to reinforce peri- The 2016 Safety Plenary was attended by the Minister of En- odically the people who have already been trained in the 5 ergy, the main executives of ENAP, trade union leaders, pro- modules required in previous years. fessionals and members of Hygiene and Safety Joint Com- mittees. In addition to disseminating future advances and In addition, an e-learning course on SafeStart Guidance challenges, those people and areas of the organization that was launched, and is available for visitors and as an ele- have demonstrated greater commitment and exemplary per- ment of induction of new staff, prior to the development of formance in safety issues and results were recognized and the formal course. This module will be reinforced and put rewarded. on-line at ENAP e-campus starting in 2017 for mass use.

78 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Finally, as planned in the project, various activities were pational Health and the Environment, and an independent carried out with the families, community, technical col- and differentiated evaluation to select only those compa- leges and contractors, for the dissemination of a safety nies that present management systems and results in ac- culture beyond work activities. cordance with ENAP’s expectations, in order to have the best companies in terms of safety management and results. • Consolidation of learning management through Tap- Root: During 2016 70 new research leaders from different It is also worth noting that in 2016 the joint work with the rep- subsidiaries and business units were trained. With this, resentatives of the different unions existing in the company more than 140 certified leaders are already in place, in continued through the working group created in late 2013 by order to implement this method for the determination of a ENAP’s administration: the Bipartite Safety Committee. The basal cause of incidents and to strengthen its use as a key National Federation of Petroleum and Allied Workers of Chile safety tool, aimed at reducing and controlling the risks of (FENATRAPECH, Federación Nacional de Trabajadores del the operation. Petróleo y Afines de Chile) and the Federation of Profession- als, Technicians and Supervisors of ENAP (FESENAP, Feder- In the same way, the First TapRoot Congress was held in ación de Profesionales, Técnicos y Supervisores de ENAP) Chile, attended by representatives of all the subsidiaries participate in this instance. Its focus is to monitor and ensure of ENAP. Prominent world-class exhibitors participated in the effectiveness of the measures taken as part of the deploy- the activity to share international experiences in research ment of the Security Strategy, as well as proposing correc- processes and determination of root causes, corrective tions, improvements or new initiatives based on the results actions and to highlight the best practices of the industry. and lessons learned from incidents.

• Consolidation of the “HSE Management Methodology Based on these analyses, in 2016, awareness campaigns in the Supply Process”: One of the important issues in were carried out and improvements were made in tool han- terms of safety was the deployment of the HSE Manage- dling tasks to avoid cuts and blows, or to minimize risks of en- ment Methodology in all operations, which incorporates, trapment with moving parts of machinery, among others. This from the early stages of the request for a service or project, hand-to-hand campaign, developed jointly with the Mutual de the analysis of the requirements in matters of Safety, Occu- Seguridad, is justified by the high percentage of hand and

79 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

toe injuries as the first area of damage in accidents with inca- tion to the Operational Integrity Management System model, pacitating injuries in ENAP, with more than 40% of the cases. together with other cross-cutting initiatives that are worked in parallel, such as the new Model and Methodology of Com- “Step by step” campaigns were also deployed to prevent prehensive Risk Management, developed during 2016 and slips, falls and injuries in the lower extremities, and “Ojo con formalized in the last quarter of that year, and the processes los ojos” (caution with the eyes) to prevent eye injuries. These of change management (MoC), Crisis and Emergency Man- campaigns included activities that had a high participation of agement, among other priorities. workers in the design, implementation and dissemination of audiovisual materials. On the other hand, from ENAP’s Man- One of the advances of 2016 regarding these challenges is agement, new rules and operational requirements were de- related to the completion of a survey of HS processes as part fined to reduce the probability of this type of accidents. These of the initiative called “Technological Solution to Support Cor- campaigns were recognized by the Mutual de Seguridad as porate HSE Management”, and the definition of SAP as the the best nationwide in several of the evaluated areas. Platform to use, to take advantage of the corporate agreement signed with SAP in the development of different man- Finally, it should be noted that, in terms of functional struc- agement modules. ture, in November 2016 the Health, Safety and Environment Management (HSE) was modified, becoming the Occupa- In this context, the Health and Safety Management has en- tional Safety and Health (HS) Management, In charge of the trusted SAP with the development of a road map for future respective Manager, Mr. Leonardo Canales Moreno. The En- digital innovation in the areas that are the responsibility of this vironmental Management was integrated to ENAP’s Manage- Management and the integration of this initiative with other ment of Corporate Affairs and Sustainability. areas of the company to implement the SAP EHSM solution.

Start of optimization and integration stage The initiative aims to install and deploy a set of integrated towards operational excellence technological solutions to support the management of HSE processes, among others: Occupational Health Manage- The optimization stage designed in ENAP’s Security Strategy ment, Incident Management, Compliance Management, should begin in 2017, and entails the search for the improve- Waste Management, Emissions Management and Risks Man- ments of the aforementioned initiatives, through their integra- agement.

80 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Accident Rate

It should be noted that in 2014 the target set for Frequency Along with this, the Severity Index (IG) also generated a 19% Index (FI) projected for the next 3 years was: 3.4 for 2015, decrease over the previous year, with almost 200 lost days 2.7 for 2016, to reach 1.8 in 2018. The result obtained at the less (as a result of days lost in work accidents), and a 28% end of 2015 was 3.4, and in 2016 was 2.6, which is less than accumulated reduction over the three last years. However, projected. despite considerable decreases in the IF and IG indices, a fa- tality occurred in July 2016 at ENAP Magallanes, associated In addition, there was a decrease of 18% in the total number with the loss of control and overturning of a contractor vehicle of accidents with incapacitating injuries (60 LTA in 2016, ver- on a frosty route. This regrettable death, which mourned the sus 73 LTA in 2015), in a context of a 12% increase of the staff whole organization, led to reinforce the preventive measures and hours of exposure, equivalent to more than 2,500,000 and controls implemented to prevent such accidents. hours worked. These figures were mainly related to the increase of personnel as a result of the plant stoppage in Acon- In terms of professional diseases declared by the competent cagua Refinery and the beginning of the construction of the authority, three new cases were registered, associated with PIAM Project at the operations of Sipetrol Argentina, activities hearing loss of work origin. which also entail high-risk tasks.

Likewise, there was a 25% decrease in the frequency of ENAP incapacitating accidents, compared to the previous year. This achievement is part of the projections and expected results, which have allowed a sustained decline that reached 48% in the last three years.

81 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

82 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Sustainable development

Environmental management

Important advances in environmental management in all Another milestone of the period was the presentation and ENAP subsidiaries were achieved in 2016. Thus, and in line subsequent approval by the Superintendency of the Envi- with the 2014-2025 Strategic Plan, a structure adjustment was ronment of the protocol for quantifying emissions from fixed implemented in February 2016, placing the Environmental sources subject to the green tax (Article 8 of Law 20,780) for Management under the direction of the Corporate Affairs and the refineries and PetroPower co-generation power plant. Sustainability Management, aimed at strengthening syner- While these advances are significant, we can not fail to men- gies in the joint work carried out with communities. tion in this synthesis some incidents that occurred this year, In addition, the Environmental Departments were created in as is the leakage of slurry oil from the Ikaros tanker to the sea- both refineries, which highlights the importance that the envi- bed of a sector of the Quintero Terminal, on May 15, 2016. As ronmental performance has for ENAP and shows its commit- a result of this, the Emergency Plan was promptly activated, ment to improve it. which allowed the deployment of all human and technical resources to contain and mitigate potential externalities. On the other hand, as regards the guidelines that frame the performance objectives and risk management in this area, the In June 2016, a multidisciplinary team was able to verify the Corporate Environmental Management Standard was evalu- success of the cleaning operations, in which fishermen from ated internally by each subsidiary, in order to identify those the area also participated thanks to the collaboration agree- elements where the efforts and resources should be focused, ments signed with ENAP. aimed at defining the road map for achieving environmental Also, due to work carried out by a third party on a public high- excellence. In the case of E & P operations, the issue of Biodi- way, the pipeline that transports fuel from Bío Bío Refinery to versity was evaluated as a priority; In R & C, in addition to this the San Fernando plant was damaged on October 26, 2016, scope of action, it was determined that the foci should also be causing a spill of diesel in the communes of Rio Claro and oriented to the Efficient Management of the Water Resource. San Rafael.

83 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

As in the previous incident, ENAP’s prompt and effective re- sions. The document is under internal review to be submit- sponse in containment, cleaning and repair works prevented ted to the environmental authority in the first half of 2017. greater consequences for people, the environment and the • The Environmental Impact Statement (EIS) of Hazardous fuel supply in the country. Substances Storage was presented in September 2016. Its objective is to comply with the new regulations on the Next is a list of the milestones for each of ENAP operations storage of hazardous substances, improving the safety in 2016. standard of the facilities. The addendum is in the process of being prepared for presentation to the environmental Enap Aconcagua Refinery (ERA) authority in the first half of 2017.

Preparation and Presentation of Environmental Impact First simulation exercise of containment and recovery of Studies and Statement to the Environmental Assessment hydrocarbons in the Estuary of the Aconcagua River: Service (SEA): • Artisan fishermen from San Pedro de Concón Cove par- • Addendum 1 of the Environmental Impact Study (EIA) of ticipated on September 27 in the first exercise of hydro- the Nueva ERA Power Plant: 510 MW generated exclu- carbon containment and recovery in the Aconcagua River sively with Natural Gas and a 16 km High Voltage Line, Estuary, as part of the training they receive under the Pro- which passes through the communes of Concón, Quin- gram “Bomberos del Mar” (Sea firefighters), developed by tero and Quillota. The addendum was presented in De- Aconcagua Refinery. The activity took place in one of the cember 2016. arms of this watercourse, where the channels of evacua- • Coker industrial complex update, to adapt the plant’s en- tion of rainwater of this subsidiary of ENAP are located. As vironmental permit to the reality of the crude oil market, in part of the simulation exercise, fishermen, on board two addition to incorporating more advanced technology for a vessels, deployed containment barriers and absorbent more stable operation and with lower generation of emis- sleeves intended to recover spilled product.

84 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

First Session of the Discussion Table for the Conserva- In addition, the site reports the claims received in ERA for tion of the Aconcagua River Wetland: environmental issues (since 2015), as well as the details of environmental monitoring and relevant information sent • The first session of the “Discussion Table for the Effective periodically to the Municipality of Concón and authorities. Conservation of the Mouth of the Aconcagua River” was held on Thursday, March 31, at the headquarters of ENAP Competitive Funds for initiatives that promote the care of Open House, with the participation of the SEREMI of the the environment: Environment, representatives of the Municipality of Con- cón and ERA. Its objective is the consensual generation • In 2016, a series of competitive funds were launched for of concrete and planned initiatives, through studies and territorial and functional organizations of Concón, Quintero proposals of management and monitoring, that allow es- and Quillota to present initiatives for recycling, waste re- tablishing a baseline of the mouth of the Aconcagua River duction, efficient use of water or energy saving, among and to elaborate a category project for conservation pur- others, as well as projects focused on promoting knowl- poses and management plans. edge and appreciation of the local environment among the community. Environmental monitoring website to inform the community: First Clean Spot of Concón: • Aconcagua Refinery has created a website that gathers all the environmental measurements associated with the • At the end of the first half of 2016, the first Clean Point ERA operation to have the company’s daily environmental was installed on the front of ENAP Open House Cultural information in an easy-to-use platform. The website www. Center, thanks to an initiative developed by ERA and the nuevaerainforma.enap.cl has three areas of information: Ecoruta Vecinal Group. At this point the community can state of the operation, air quality (that shows MP 10, MP deposit cans, plastic bags, disposable bottles, tetra pack 2.5 and gases indicators) and water and noise monitoring, containers, newspaper, white paper, cartons, ink cartridg- which are updated minute by minute. es, toner and batteries.

85 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

First International Seminar on Wetland Management: inaugurated. The infrastructure is associated with the En- vironmental Protection Fund (FPA), called “Recovery of • The first International Seminar on Environmental Services Terrestrial Ecosystems and Wetlands of the Nature Sanc- and Local Management of Wetlands was held in Novem- tuary of the Peninsula of Hualpén, to Improve Human Well- ber 2016, which seeks to be an instance of discussion on being: Rescuing Biodiversity and Ecosystem Services”, environmental services and local management initiatives implemented by the Center Of Environmental Sciences and the development of these ecosystems. The event in- EULA-Chile, of Universidad de Concepción, under the su- cluded exhibitions by international guests and local ex- pervision of the SEREMI of Environment of Biobío. perts from the SEREMI of Environment of Valparaíso, San Antonio Maritime Authority, Fundación para la Fauna Sil- International Seminar on Operation of Catalytic Cracking vestre Ñamku (Ñamku Wildlife Foundation), Universidad Units (FCCU) in Oil Refineries: de Chile, Universidad de Valparaíso and ENAP. • More than 120 professionals of 11 refineries from six coun- Enap Bío Bío Refinery (ERBB) tries in Latin America and the United States met on Octo- ber 5-7 at an international seminar that sought to exchange First Clean Spot on ERBB Contractors Yard: experiences and best practices in the FCCU operation. On that occasion, ERBB explained about the next installa- • In September 2016, in the ERBB Contractors Yard area, tion of the Wet Gas Scrubber system in its Catalytic Crack- the first clean point was installed for the collection of plas- ing Unit, which will be the first of its kind in Latin America tic bottles, paper and cardboard, as well as aluminum and whose objective is to reduce by 80% the emission of cans. The idea of this clean point came from the workers particulate matter from this plant. of a contractor and was sponsored by ENAP as a pilot project, which will be extended to other units of the plant.

Inauguration of works in the Nature Sanctuary of Hualpén with ENAP contributions: • In September 2016, and with the presence of the Minister of Environment, the new environmental education facilities of the Nature Sanctuary of the Hualpén Peninsula were

86 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

87 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Enap Magallanes

Design and Training of a Bird Rescue Plan in the area of Diffusion of the vegetal cover recovery process of pads: Bahia Lomas: • The recovery process of the vegetal cover of the pads cor- • The plan was developed by the Faculty of Sciences of responds to one of the commitments established in each of Universidad Santo Tomás, with the participation of a team the Environmental Qualification Resolutions (RCA), which of recognized experience led by the Dean, Carmen Es- approve the projects presented by ENAP Magallanes and poz, national experts from the International Fund for Ani- is ruled through the Law 20,551, which regulates the clo- mal Welfare (IFAW) and local environmental authorities. sure of works and mining facilities. Authorities from the SEA Its objective is to raise operational safety standards in the Regional Directorate, SERNAGEOMIN Regional Director- area and train staff, from a risk prevention approach and ate, Directorate of the Agricultural and Livestock Service in case of a potential environmental emergency. (SAG) and professionals from the SEREMIs of Environ- ment, Energy and Agriculture participated in this activity. Convention for the Protection of Canquén Colorado: • As part of the Colorado Canquén Recovery, Conservation Disposal of Electronic Waste: and Management Plan, whose objective is to facilitate ac- • As a result of the administrative activities of ENAP Ma- tions to prevent this species from being affected, ENAP gallanes, a certain volume of electronic waste is generat- Magallanes signed a collaboration agreement with the ed. For this reason, the Environmental Unit conducted an Ministry of Environment, represented by the Undersecre- internal campaign in the camps of Posesión, Cerro Som- tary of the Environment that establishes a commitment to brero and in the facilities of Bahía Laredo and Gregorio, to carry out annual monitoring of the presence of the Can- collect electronic boards, computers, screens, televisions, quén Colorado, in order to strengthen the registers held printers and cell phones, among other articles in disuse. by the Ministry.

In addition, these data will be considered when deciding the location of new investments and projects.

88 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Sipetrol Ecuador

Follow-up to the Environmental Management Plans of Environmental Licenses: PBHI and MDC Blocks: • An ex-post Environmental Study was carried out in 2016, • Under the precautionary and risk-based management ap- in order to unify the environmental licenses of the different proach as part of the organizational culture, during 2016, activities developed in Block 47, Paraíso, Biguno, Huachi- environmental monitoring was carried out in the PBHI and to and Intracampos, to handle a single Environmental License of the PBHI Block. The Ministry of Environment MDC Blocks, determining compliance to 100% of the granted ENAP SIPETROL S.A. the Environmental License maximum allowable limits in the parameters monitored for for the PBHI Block Development and Production Phase. liquid discharges of platforms. • In relation to Block 46 MDC, during 2016, the Environmen- Likewise, with respect to the monitoring of emissions to the tal Re-evaluation of the MDC Block was carried out for the atmosphere from fixed combustion sources, monitoring drilling of three development wells and an injection well reports determine compliance with 100% of the permissi- in the existing Block platforms, a report that was present- ble limits specified in the current environmental legislation. ed to the Ministry of the Environment through the Single These were carried out by an environmental laboratory ac- Environmental Information System (SUIA), for review and credited to the Ecuadorian Accreditation Service (SAE). approval. Currently, there is the Resolution where the inclusion of the projects presented to the MDC Block Envi- Management of Environmental Liabilities: ronmental License is included. • In 2016, ENAP SIPEC intervened the liabilities located in PSO-11 and PSO-17 (preexisting environmental liabilities of other operations), according to the Environmental Re- mediation Program duly approved by the Ministry of the Environment. On the other hand, technical studies were carried out to characterize the sources of interest and, based on this information, during 2017, a report will be issued to the environmental control authority for approval.

89 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Enap Sipetrol Argentina

Renewal of the Emergency Plan for spills at sea Magallanes Area Incremental Project (PIAM): (PLANACON): • The environmental management of the PIAM Project fo- • In early 2016, the renewal of the Emergency Plan for spills cused on the implementation of the preventive and envi- at sea (PLANACON) was carried out in the Southern Basin; ronmental monitoring measures established in the Envi- the plan is updated every five years. This work included a ronmental Protection Plan, which was committed to the simulation of oil spill at sea with the deployment of bar- authorities in the Environmental Impact Study approved riers and the participation of the Oil Recovery boat, and by Disp. No. 478-SMA-15. exercises with the simultaneous participation of the crisis As a complementary measure, a framework agreement committees of the Cuenca Austral and Buenos Aires busi- was established for mutual assistance and collaboration ness units. with the Provincial Agrarian Council for the sustainable The process was audited by the Argentine Naval Prefec- management of the fauna in the Faro Vírgenes Reserve, ture, obtaining as a result its approval without observa- including the participation of animal keepers for the pro- tions. This achievement accredits the company before the tection and care of penguins that could access eventually authority and provides a fundamental tool for its operation. the Areas.

Another activity developed jointly with the Provincial Agrar- Recertification of the Environmental Management System: ian Council was the survey of the pipeline trace in a zone • The Recertification of the Environmental Management of shore approach, in which “Lamb’s ears”, a vegetal spe- System was obtained at the Pampa del Castillo site in Co- cies endemic of the Faro Vírgenes Reserve, were identi- modoro Rivadavia, according to the international standard fied and 240 specimens were transplanted. ISO 14001. • It was possible to verify with gratifying satisfaction that PIAM’s land and shore approach works concluded without Declaration of Environmental Impact in Cuenca Austral: environmental incidents and, especially, without affecting • The Environmental Impact Statement of the submarine the penguin colony of the Faro Vírgenes Reserve, at the pipeline replacement project was obtained in Cuenca seasonal peak of its population. Austral, through Res. Nº068-SEA / 16.

90 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

91 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Sustainable Development

Commitment to Communities

The Strategic Plan in force at the organization since 2014 ers. Thus, in terms of structure, from 2016 the Corporate Af- defines the road map to consistently manage the objectives fairs Management incorporated the area of Environment, be- that are priority, not only in terms of financial results, but also coming the Corporate Affairs and Sustainability Management those goals that sustainable development demands from to- of ENAP. This will allow us to adopt a comprehensive vision of day’s society. environmental and social objectives, in line with the commitments of the aforementioned Strategic Plan. In this sense, Management is fully aware that ENAP’s performance depends on both internal and external factors, and is Also, the executive line reporting directly to management in binding in the ability to generate bonds of trust and mutual relation with the interest groups was strengthened, being or- benefit with the community. ganized in four Directorates: Communications, Institutional Relations, Strategic Social Responsibility and Community Re- An example of this approach are the pillars that support the lationships. 2014-2025 Strategic Plan, among which are commitments associated with the Environment and Communities, together In terms of performance, the main developments in the areas with Efficiency and People’s Health and Safety. of Strategic Social Responsibility and Community Manage- ment, which together develop the main lines of direct action In the face of these challenges, there are many milestones with local communities, are discussed below. that in the last years have been framing the management of shared value initiatives, the care of the environment and the The amount of social investment demanded by these initia- strengthening of the relationship with ENAP’s main stakehold- tives executed in Chile in 2016 amounts to US$ 3,847,089.

92 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Strategic Social Responsibility (RSE)

The following are the 2016 management milestones of the 1.- Stakeholders Consideration, whose objective is to es- CSR Directorate. tablish and maintain relationships of trust and mutual benefit with priority stakeholders, seeking opportunities for the cre- Corporate Sustainability Policy Update: ation of social, environmental and economic value.

In 2016, we worked on updating ENAP’s Sustainability Policy, 2.- Environment, through the promotion of social and envi- in accordance with the Sustainable Development criteria rec- ronmental responsibilities in all business areas, complying ognized in the Strategic Plan 2014-2025. with applicable regulatory frameworks.

This work was carried out based on of action and international 3.- Integrated Management, whose challenge is to promote protocols frameworks, such as the Guide on Social Respon- the continuous improvement of sustainability in all business sibility ISO 26000; Global Reporting Initiative (GRI); AA1000 units, through integrated management systems, establishing Stakeholders Engagement Standard (SES), and the Global indicators to be able to evaluate, verify and report goals and Compact Principles, among others. objectives.

The Corporate Sustainability Policy is part of the business 4.- Human Rights, a pillar whose main concern is to promote strategy and its main areas of action are communicated respect for human rights, especially for minorities and the through the Sustainability Report. Its update was approved in most vulnerable groups. ENAP considers discrimination and a Board session held in September 2016. exclusion based on ethnic, gender, religious and any other type of behavior that affects the dignity of the people are at The renewed Policy is organized into four pillars: odds with its corporate values.

93 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Among the tasks to be developed in the short and medium Corporate volunteering term in relation to the Corporate Sustainability Policy are: In addition to contributing to the positioning objectives, vol- • Its distribution to all stakeholders. unteering facilitates the deployment of talent, motivation and • Ensure that the policy guidelines are incorporated, under- energy of the workers, fulfilling the requirement of delivering stood and met crosswise by all ENAP workers and col- value to the company, the communities and the volunteers laborators. themselves. • The management of the policy, through indicators reported in the Sustainability Report. In order to identify the expectations regarding this initiative, a survey was applied to all ENAP workers in Chile, whose re- CSR Committee sults showed a great interest in participating in environmental programs, especially the topic of Wetland Protection. This committee has been constituted as a collegiate body where all social responsibility actions are analyzed and the In this way, a pilot program called “Wetlands, Conservation new programs are validated at the Business Units (UN) level. Assets” began in 2016, which is also consistent with the fact that ENAP has wetlands near its areas of influence: Parque The committee is composed of the Business Unit Managers, La Isla Wetland (Concón); Aconcagua River Mouth Wetland the HR managers, and CSR, Communities, Communications (located in Santo Domingo beach resort); Lenga Wetland and Environment Directorates. In addition, a representative (Concepción), Tres Puentes Wetland and Ramsar Site Bahía of the Workers Union and one of the Professionals Union are Lomas (Magallanes). invited to each session. If required, this committee may invite representatives from other areas of the company, as it deems The pilot plan was carried out with volunteers from the Head Of- appropriate. fice and the Business Units, highlighting the following activities: • Training volunteers to publicize the importance of these During the reporting period, the ERA, ERBB and Magallanes ecosystems, through talks given by experts on wetlands CSR Committees were held. and coastal birds.

94 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

• Field trips to the Aconcagua River Mouth Wetland and La Isla Under the coordination of the Strategic Social Responsibility Park Wetland, in which participated officials from the Head Department and in partnership with the ENAP Santiago Sports Office and volunteers from ENAP Aconcagua Refinery. Club, ENAP participated in the Cool Place to Bike Program, which promotes the use of bicycles as a means of transport • Beach cleaning, an activity organized by the Chilean Navy and consists of three annual competitions carried out in the and the Seremi of Environment, with the collaboration of months of April, July and November. ENAP. It was carried out with the participation of the community in Playa La Boca of Concón, Playa Lenga of Hual- The competition consists of cycling trips carried out during a pén and in Punta Arenas, in a sector of the coast, from the month and registering them through the smartphone applica- mouth of the River Las Minas to the Prat Pier. tion “Kappo”. The more miles you cycle, the more points you Likewise, we joined the invitation of the Patagonia Tres Pu- get. This score is the one that finally defines an internal and entes Ecological Group, whose purpose was to collabo- a national ranking, which rewards the companies or institu- rate with the operation of cleaning the environment and tions that encourage the most the use of the bicycle among removing waste from the Tres Puentes Wetland, so that its workers, seeking to enhance the quality of life, motivation the birds can nest. and well-being. • Celebration of the arrival of migratory birds and bird censuses. Likewise, this project reflects the commitment of the participating companies to sustainability by encouraging sustain- “Cool Place to Bike” Program able mobility, which is reflected in the measurement of non- emitted Co2, among other parameters of impact reported to Bajo la coordinación de la Dirección de Responsabilidad So- competing organizations. cial Estratégica y en alianza con el Club Deportivo de ENAP Santiago, ENAP participó en el Programa Cool Place to Bike, Among all companies, ENAP ranked in the first place in the que promueve el uso de la bicicleta como medio de trans- events of April and July, and had the second place in Novem- porte y consta de tres competencias anuales que se realizan ber 2016. The most outstanding participants were: en los meses de abril, julio y noviembre.

95 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

• ENAP’s best score in individual ladies: Vania Strello, with Participation in the Diversity and Inclusion Committee 202 km covered in one month. On August 24, 2016, ENAP’s CEO appointed a group of ENAP • ENAP’s best score in individual male: Carlos Espinoza, Corporate workers to participate in the Diversity and Inclu- with 1,462 km; Sergio Alvarez with 1,215 km, and Nathan sion Committee. The objective of this committee is to manage Arzola, with 1,001 kilometers covered in one month. the commitments of the new Diversity and Inclusion Policy, through a formally established governance structure. On the other hand, the CSR Office participated in the process aimed at signing agreements with the foundations This body is composed of representatives of the workers and Descúbreme and Puente, for job inclusion purposes. The the Administration, corresponding to the Ethics and Compli- details of these initiatives are reported in the chapter on ance, Human Resources and Corporate Affairs and Sustain- People Management. ability managements. From this last management participate the directors of CSR and Communications. Roundtable with Quintero Chamber of Commerce

During 2016 a roundtable was held with the Chamber of Com- merce of Quintero to develop a plan that would collaborate with the tourist development of the commune. Thus, it was agreed to manage the installation of trash cans and tourist signage, work that began to develop in conjunction with the Municipality of Quintero and the Aconcagua Refinery team.

96 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

97 /

Foto cortesía de Sergio Edgardo García. Foto cortesía de Sergio Edgardo García. ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Community Management

The Community Relations Directorate was created in 2016 During 2016, this Directorate continued implementing the Cor- with its own approach, complementary to the CSR Direc- porate Strategy of Community Relations, initiated in 2015, for- torate. Its objective is to contribute to the development of a malizing it in ENAP business units at the local level. This strat- framework of social and environmental respect in the areas in egy is based on the commitment made by ENAP to become which ENAP is inserted. This purpose is addressed through an environmentally and socially responsible company with its the promotion of participatory relationships and trust with neighbors, committing themselves to improving their quality of neighbors, which are the basis for the implementation of so- life, through the implementation of a value offer according to cial investment initiatives that are in accordance with the in- the peculiarities of the territories in which it is present. terests and aspirations of the communities, contributing to the improvement of their quality of Life, in a logic of shared value. The structure of the Corporate Strategy on Community En- gagement is based on three stages:

STAGES OF THE CORPORATE STRATEGY ON COMMUNITY ENGAGEMENT

• Baseline • Characterization • Identification and • Strategic • Action plan. • Strategy • Perception of the environment location of definitions. management Measurement • Territorial range Stakeholders and monitoring

PHASE 1 PHASE 2 PHASE 3 Stage of analysis PHASE 1 PHASE 2 PHASE 3

RISKS COMMUNITY BREACHES Diagnosis MANAGEMENT IMPACTS STRATEGY DESIGN OPPORTUNITIES

PHASE 4 • Measurement of Results

98 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

1. Stage of diagnosis of concerns, aspirations and inter- • Storage and Pipeline Division (DAO): Phase 3 of Stage 3 ests of the communities and their territories, which were was implemented during 2016, i.e. the management and collected through a systematic process of dialogue and follow-up of the Community Engagement Action Plan pre- community consultation. At the same time, a baseline of pared in 2015. the geographical, demographic, anthropological, social, economic and basic social welfare aspects of the territo- • ERBB: the evaluation of the action plan implemented dur- ries in which ENAP is inserted was carried out. Likewise, ing 2016 (Phase 4, Stage 3) was developed. To this end, the mapping of stakeholders was done according to the a perception consultation was conducted for a total of characteristics of recognition and allocation of influence 244 people (140 neighbors, 20 authorities and community by the community. leaders, 84 direct beneficiaries of Hualpén Suma Program initiatives.) See details of this plan below, in the itemized 2. Stage of analysis, in which the main social, community information of this subsidiary). and environmental risks and impacts of operations were identified, as well as the main areas of interest and devel- The questionnaire applied had the objective of updating opment opportunities in the territories. and verifying the evolution of certain indicators1 that were measured at the beginning of 2015. The main results in- 3. Action Plan Stage, in which, considering the contents of clude a decrease in the negative perception of the envi- both stages and validating the information collected with ronmental situation of the sector; the significant increase the communities, the lines of action or initiatives to be de- in knowledge of the initiatives developed by the Hualpén veloped in each territory were constructed jointly. This Suma Program (2015: 30% declared to know the initia- stage culminates in the measurement of compliance with tives of the Hualpén Suma Program, while in 2016 64% the plan according to indicators and associated verifiers; declared to know them); and knowledge of the ERBB the evaluation of the social return of the implemented plan community engagement team (2015: 24% of respondents and a community consultation process. reported knowing the team, by 2016 the percentage increased to 40%). The following is the state of progress of the Corporate Strat- egy of Community Engagement of each of the Business Units during 2016:

1 Among the main key performance indicators are the following: knowled- • Aconcagua Refinery: Phase 3 of Stage 3 was carried out ge and evaluation Hualpén Suma initiatives, knowledge and evaluation of the (see previous graph), that is, the management and moni- ERBB Community team, perception of the social and environmental situation of the area, main social, economic and environmental concerns of the com- toring of the Community Action Plan developed in 2015. munity, perception of the social and environmental situation, assessment of the quality of life.

99 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

• Magallanes: In this business unit, the first and second neighbors and, finally, the Collective Responsibility, which stages of the strategy were carried out, the diagnosis seeks to integrate the relationship with the communities in a and analysis process entirely implemented, which al- cross-cutting way in the management of the company, as- lowed for a plan of actions and initiatives to be devel- suming this as a responsibility of all ENAP workers. oped during 2017. The implementation of the Corporate Strategy of Community The initiatives developed in each of the Business Units are Engagement in the international subsidiaries of Ecuador, Ar- based on four Strategic Axes that correspond to the com- gentina and Egypt is scheduled to begin in 2017. mitments acquired with the neighbors and workers: Open Dialogue, through the promotion of instances of relationship The main initiatives implemented in 2016 by each Business and permanent communication; Transparency and En- Unit within the framework of the aforementioned areas are vironmental Responsibility, based on the delivery of ac- detailed below. It should be noted that the data correspond- curate and timely information on the environmental impacts ing to the Open Dialogue Axis of all local subsidiaries are of the organization and measures to mitigate them; Mutual integrated after the actions deployed for the Mutual Benefit Benefit Relationship, through the development of initiatives Relationship, Collective Responsibility and Transparency consistent with the problems and issues of interest of the and Environmental Responsibility axes.

100 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

ENAP ACONCAGUA REFINERY (ERA) School Leveling: The Workers’ Union of Aconcagua Refin- ery and Escuela N° 20 San Luis have conducted this pro- Mutual Benefit Relationship Axis gram since 2007, with the support of Aconcagua Refinery, to offer the possibility to contract workers and their families to Education and Culture Area level their middle and high school studies and complete their schooling. In the reporting period, 20 people obtained their Robotics Education Program: This CSR initiative is carried out in all Business Units, together with the Spark Talents High School License thanks to this initiative. Foundation. It is a didactic proposal based on LEGO Mind- storms, which uses controllable and programmable robots, SENCE Social Scholarships: In 2016, the courses in this with the aim of developing skills and knowledge in teachers initiative continued in Concón, Quintero and Puchuncaví, fos- and students, through the use of new technologies. In the tered by ERA, thanks to the alliance with Corporación de Ca- case of Concón, it was implemented in the schools Oro Negro pacitación de la Construcción through the use of the SENCE and Puente Colmo, and in Quintero, in Escuela República de tax exemption. Francia. Christmas Party: On December 21, 2016, over 600 kids from eight kindergartens of Junji and Integra of Concón, Quintero Scholarships of the CFT (Technical Education Center) and Puchuncaví, enjoyed an amusing day. The Christmas Universidad Católica de Valparaíso (UCV): In 2016, a second agreement was signed with UCV to grant 158 scholar- Party was held at ENAP Sports Field by the Workers’ Union, ships co-financed by ERA, ENAP (Third Party Management) ERA, Concón Refinery Sports Club and the Shifts Union. and FETRACON (Federación de Trabajadores Contratistas) This initiative for contractor workers in the specialties of High-Level Techni- ERA Institutional Museographic Project: arose from the discovery of archaeological pieces in the cian in Construction and Industrial Maintenance. grounds of the refinery, a situation that was reported to the authorities and competent institutions, with whom they work Academic Excellence Scholarship: Thanks to this program, 15 students from Concón, Quillota and Quintero were award- together (Ministry of National Assets). Its objective is to con- ed full tuition and / or fee scholarships. tribute to the protection and dissemination of this cultural and biological heritage, embodying ENAP’s CSR commitments.

101 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

In a first phase, during 2016 work was done on the prepara- • Open House Radio Station, a community radio station tion of technical reports and also on the preparation of the in which neighbors find a space for free expression and archaeological rescue, the reconditioning of a temporary de- communal debate. posit and the channeling of rainwater, work to be executed • School Radio Station Program, extension of the Open in 2017. In the medium term it is contemplated to build and House Radio Station program to the municipal schools of enable an Institutional Museum, where the community can the commune, where children are formed and schools are know this valuable heritage, in an environment suitable for set up to develop social communication projects. During conservation. 2016 this project was developed with great success in seven educational establishments. Open House Activities: In its 11 years of operation, Open House has positioned itself as an important cultural center • Plaza Cultural Program: Space for children and young and community development pole, supported by Aconcagua people, which promotes participation through scenic Refinery. and circus arts workshops, held in the Carlos Pezoa Véliz square, located opposite of the cultural center. Among the programs developed during 2016 are: Training and Economic Development Area • Annual Workshops Program, with more than 1,200 active users per week. Concón Tourist Services Node Pole Program: ENAP is • Cultural Extension Program, consisting of exhibitions, mu- developing this program in conjunction with CORFO in Val- sic cycles, 24 film billboards per year, and the traditional paraiso. Its purpose is to link the local lodging and food sup- Concón Jazz Festival, in which six national bands partici- ply with the needs of the contractor companies that carry out pated in 2016. maintenance work in the plant, in particular, during scheduled shutdowns. • Open House in your Neighborhood Program, which takes place in 13 territories, supporting the management of so- Thus, a total of 800 hours of technical assistance, has been cial organizations present in the areas. developed for the beneficiaries of the project, with the aim of improving aspects of hygiene, manipulation, commercializa-

102 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

tion, booking, safety and labor legislation. This professional Health and Sports Area assistance will be carried out in office and on the field, and are addressed to each of the 50 participating establishments. Surf School: Its purpose is that the vulnerable children and teenagers of Concón, can access to the guided practice of Agreements with the Fire Department: As part of the ac- this sport. It should be noted that in 2016 the Inclusive Surf- tions in community engagement, the company has agreeing Program implemented, aimed at children with disabilities. ments with the fire departments of Viña del Mar and Quin- During the reporting period we worked with five surf schools, tero. Their purpose is to formalize cooperation to prevent and generating spaces for integration and promotion of healthy combat forest fire emergencies in the vicinity of the refinery living. or industrial incidents, as well as to coordinate training and exercises, inspections and safety audits. School Olympics: The 34th version of the School Sports Olympics, organized by ENAP and its Sports Club, brought Competitive Funds: In 2016, 45 projects were evaluated, of together in October 2016, more than 500 students from 10 which 39 were approved by the evaluation committee. The schools in Concón, Quintero, Puchuncaví and Limache, at thematic axes of the Contest Fund were Environment, Educa- the Aconcagua Refinery sports facilities. The Olympic Cup tion, Culture, Sport and Social and Productive Development. was won by Escuela Francia of Quintero.

Energy Efficiency Training Program: Its objective was to ENAP Second Half Marathon in Quintero: ERA and the Mu- contribute to the development of the surrounding communi- nicipality of Quintero organized this activity that was held on ties’ capacity towards energy saving and efficient lighting. Sunday, March 20, to position this commune as a privileged setting for this type of events. Two training courses were held in Photovoltaic Solar Energy, with 40 hours of theory and practice. At the end of the course, each of the 32 beneficiaries, from the Neighbor Councils Los Tres Esfuerzos and Villa Independencia, received a solar panel and installed them at their homes.

103 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Transparency and Environmental Responsibility Axis

Agreement with fishermen: During 2016, collaboration scope, technological improvements and environmental stan- agreements were extended with the Artisan Fishermen’s dards with which ENAP addressed the projects of the plan Unions of Caleta Horcón, Caleta Ventanas, Caleta El Pa- called Nueva ERA Concón. This comprehensive investment pagayo, Caleta San Pedro and with the group of Caletas program aims to develop and modernize ERA operations in Unidas de Quintero. Its purpose was to jointly monitor with areas such as control of emissions, energy supply and stor- ENAP sectors and management areas of Quintero Bay, fol- age of hazardous supplies. Among its initiatives is the con- lowing an underwater spill of slurry oil, in order to support struction of a natural gas power plant, which will provide 510 containment work and ensure that the cleaning conditions MW of power to the Central Interconnected System (SIC). were maintained. The details of the agenda developed with the stakeholders Socialization of the Project Portfolio: Meetings were held are found in the paragraph regarding the Open Dialogue with different territorial social organizations to publicize the Axis.

104 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

105 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

STORAGE AND PIPELINES DIVISION (DAO) Education and Culture Area

Mutual Benefit Relationship Axis During 2016, ENAP signed a Collaboration Agreement with the Municipality of Easter Island, to support the realization of Tapa- Infrastructure Area ti Rapa Nui, a traditional festival in which the different manifes- tations of this culture are revalued. As part of the commitment to support the management of the installation of speed bumps, luminaires and road paving, in Health and Sports Area 2016 luminaries were purchased for the locality of San Ga- briel, in the commune of Longaví. The 25 photovoltaic lumi- Support for sports institutions: Among the initiatives imple- naires with LED spotlights will be distributed in sectors with- mented is the acquisition of sports equipment for the Rugby out public lighting and their installation will be in charge of the Club of Linares, an institution that participates in the interre- Municipality of Longaví. gional center-south championship of the discipline. Through this agreement, the club’s T-shirt has ENAP’s logo. Also, in order to support the educational community, the construction of a mobile shading structure was managed to pro- In the same line, ENAP supported the implementation of ad- tect children during the school’s events and festivities, at the vertising elements for the International Rugby Championship request of the Parent Center of Escuela G-388 of San Miguel. on Easter Island, which was attended by representatives from New Zealand and Australia. In addition, ENAP collaborated in the installation of signage in the Vinapú sector, in Isla de Pascua. This initiative is the Finally, a collaborative agreement was signed with the Colch- milestone that closes an agreement signed between ENAP, agua Sports Club, in San Fernando, which aims to implement CONAF and SERNATUR, which aimed to contribute to the an ENAP-Colchagua Football School. In its first phase, the enhancement of the Ahu Tahira, or site of Vinapú cultural rel- contribution included sports implements and accessories. evance.

106 / Training and Economic Development Area ENAP BÍO BÍO REFINERY (ERBB)

Agreements with Firefighters: Taking into account the objec- Mutual Benefit Relationship Axis tive of establishing a long-term and constant relationship with Infrastructure Area public utility services (Firemen, ONEMI, among others), in 2016, Collaboration Agreements were signed with eight Fire Relocation of El Triángulo and Nueva El Triángulo Superintendencies of the communes close to the Plants of Neighborhoods: During 2015, the Hualpén Suma Plan was Maipú, San Fernando, Linares and Pemuco. launched, whose objective is to improve the quality of life of the neighbors of ERBB, considering three axes of action: These agreements include training, safety and fuel cards for Relocation of the families of Nueva El Triángulo and Villa El the fire-trucks of the institutions of Pemuco, Bulnes, Chillán, Triángulo; Master Plan of the nearby neighborhoods that will Linares, Longaví, Cumpeo, San Fernando and Maipú. continue to be neighbors of ERBB operations, and a set of Integral Development Programs designed with and for the Transparency and Environmental Responsibility Axis neighbors.

Information systems support for emergency management: In this context, during 2016, the respective housing commit- During 2016, the DAO 2017 Calendar was issued and dis- tees were set up for the 289 families who live in the sector tributed to the 1,000 owners of the properties through which to be relocated, and the commitment of SERVIU Bío-Bío was the pipeline passes, and includes the warning mechanisms negotiated with the Ministry of Housing and Urban Planning to in case of emergencies. This year the photographs included act as Social Property Management Entities (EGIS, Entidades records of people and traditional activities from the south- de Gestión Inmbiliaria Social), in the development and subse- central zone. quent execution of the housing project.

Hualpén Suma Master Plan: The urban improvement projects prioritized by the Community in open voting carried out in late 2015, and designed with the collaboration of the Uni- ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

versidad del Bío Bío began during the second half of 2016. future “Parque Hualpén Suma”. With this purpose, the neces- Specifically, the works executed were: sary design and studies at the preliminary stage of the project • Inclusive healthy plaza, located in the Neighborhood were contracted. Irene Frei. Design of the Gym Escuela República del Perú, an initia- • Paving designs in the Neighborhoods Irene Frei and tive that is part of the agreement signed with the Municipality Patricio Aylwin. of Hualpén and consists of the design of a gymnasium for the • of the Neighborhoods 18 Improvement of Public Spaces school located in the intervention territory, in front of the refin- de Septiembre and Bernardo O’Higgins. ery, place where most of the activities between ENAP and the • Zones 30 in the Neighborhood El Solar, where speed community take place. bumps, zebra crossing and signs of speed restriction at 30 km / h were installed. Education and Culture Area • Implementation of healthy plazas in the neighborhood Esfuerzo Unido, sector in which exercise machines, play Technical Education Center on Energy CEDUC-UCN: After grounds and furniture were installed. the agreement signed in late 2015 with Universidad Católica del Norte, in 2016 began the classes of three careers (Busi- • Pedestrianization of Calle Sarajevo of the neighborhood Patricio Aylwin. ness Administration, Industrial Instrumentation and Control and Electricity and Energy Efficiency) for a total of 124 stu- • Improvement Public Spaces of Calle Rumania in the dents, who received a scholarship granted by ENAP. neighborhood El Triángulo.

It should be noted that in November 2016, a Cooperation The residents of El Triángulo and Nueva El Triángulo neigh- Agreement with the French Ministry of National Education, CE- borhoods to be relocated decided, through their participa- DUC-UCN and the company ENGIE, was signed in Santiago tion in forums and assemblies, to assign the land on which for the creation of a Franco-Chilean Center of Excellence for their homes are currently located, for the construction of the the Maintenance of Electricity and Energy Efficiency, which

108 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

109 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

will result in the retraining of teachers, better equipment and Collaboration with Fundación Ciudad del Niño: It is a implementation and professional practices in ENGIE plants in benefactor institution that receives vulnerable children and France for the best students. young people and is located in Hualpén, in a sector bordering the area of intervention. They annually carry out an activity School Leveling: This initiative was requested by the resi- to raise funds and ENAP collaborated with the publication of a dents of the community and ENAP managed with the Ministry magazine that disseminates its mission and activities. of Education the funds to execute a program of leveling of studies (lower and high school). Centenary of Violeta Parra at Universidad de Concepción: Cultural activity held in the Forum of that campus and was Educational Robotics Workshop: In the case of ERBB, this part of the celebration of 100 years since the birth of the illus- program is developed in the schools of Hualpén and Talca- trious singer and songwriter, native of this region. huano. This last one stands out for the level reached, which has allowed them to participate two consecutive years in the Health and Sports Area national tournament in Santiago, with the support of ENAP. Hualpén Suma Football School: a formative and recreation- 50th Anniversary of Bío Bío Refinery: Among the celebra- al instance, which runs from January to December with 100 tion activities that were held with the community and which girls and boys aged 5 to 14 years, divided into four catego- had a massive attendance, they include: Civic Parade; Folk ries. ENAP makes an annual contribution to finance teachers, Gala and the Concert “50 years of Music and History”, a show monitors, transportation and implements, among others. attended by more than 3,000 people. Cheerleaders’ Workshop, Black Oil team: Sports activity Support to Big Band: ENAP supported the acquisition and to which ENAP supports also financing teachers, monitors, renovation of some instruments of this band that depends on transportation and implements. They train 50 girls and boys the Municipality of Hualpén. aged 4 to 14, divided into two categories.

110 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Swimming Course: Summer activity that takes place in al- Solar Car: Project of students of Universidad de Concepción, liance with the Local Council of Sports and Recreation of which was co-financed by ENAP, in order to guarantee the Talcahuano, which manages the public swimming pool of the participation of the team in the race held in Atacama, where commune. It lasted for four weeks and involved around 700 they got the first place. boys and girls aged between 6 and 14 from the intervention territory. ENAP provided the necessary resources to finance Support to the Corporación de Ayuda al Limitado Visual teachers / lifeguards, monitors and transportation, among (COALIVI, Limited Vision Support Corporation): ENAP others. provided a contribution to this charity that supports visually impaired people, for which it carries out annually an activity in Self-care workshop and personal development of older order to raise funds. adults: An initiative that benefits 380 older adults belonging to the intervention territory, who are organized into 19 groups Training and Economic Development Area or clubs, one of them composed of people with disabilities. In these workshops activities such as: brain gymnastics, bio ENAP organized the II Hualpén Suma Christmas Fair, in which dance, meditation, yoga, literature, among others. ENAP pro- 26 entrepreneurs from the area participated and for a week vided resources to finance teachers, monitors and supplies. exhibited and sold their products to the company’s workers.

Healthy Cooking Workshop: It originated from the need Another aspect addressed was the Labor Training, devel- to improve people’s eating habits and was executed by the oping several courses funded through the ENAP franchise, Healthy Life Center of Universidad de Concepción, thanks both in the pre-contract modality and through labor or social to ENAP funding. Twenty-five girls from 10 to 14 years old scholarships. Among the courses most demanded are “Care participated during a week, during which time they learned of Hands and Feet” and “Creation, Preparation and Presenta- basic nutrition guidelines and easy, healthy and entertaining tion of Pastry and their Control”. preparations.

111 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Also, the “Rescue at Height” training course, run by CEDU, Transparency and Environmental Responsibility Axis had as beneficiaries members of the Fire Department of Hual- pén, and was financed with the ENAP franchise, pre-contract Safety and Environment Talks: Activities agreed with the modality and own resources. neighbors to train them on prevention and safety issues, mainly related to the operation of the plant and also regard- Axis Collective Responsibility ing possible environmental impacts and measures adopted by ENAP to minimize risks and mitigate them. The ERBB Communities Department conducts inductions to new refinery workers to report on the Community Engage- During 2016 five talks took place with the participation of ment Strategy and major development initiatives with the lo- more than 30 neighbors in each one, in different social head- cal community. quarters of the sector.

The Management also meets periodically with the leaders of “Desafía tu Energía” (Challenge your Energy): Regional Sindicato 1 and its Organized Centers, and the Sindicato de initiative developed in partnership with SEREMI of Energy that Profesionales y sus Delegados (Professionals Union and its consisted of a student audiovisual contest, in which groups of Delegates), to inform them of the progress made in the imple- schoolchildren made videos shaping their vision of the con- mentation of said strategy. cept of energy. Subsequently, they were uploaded to a web platform, where they were voted online. The Communities Directorate also participates in the Refinery Active Guards, which consists of attending every weekend The contribution of ENAP was used to finance the dissemina- with an official of the team to the Guard meeting and be avail- tion of the competition and the prize for the first place, which able to go to the plant if necessary. consisted of a trip for the winning team to know the facilities of Magallanes.

112 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

ENAP MAGALLANES

Mutual Benefit Relationship Axis

Education and Culture Area

Educational Robotics Program: During 2016, Enap Ma- Visits of students to facilities: In 2016, nine student del- gallanes developed this CSR initiative with teachers from egations, mainly from engineering careers of Universidad Punta Arenas and Cerro Sombrero, so that teachers can im- de Magallanes had the possibility of knowing areas such as plement the workshops in their respective schools. Gregorio, Posesión and Cabo Negro Plants. In addition, students from Instituto Santo Tomas de Magallanes visited the Scholarships: As in the previous year, in 2016, seven stu- drilling rig No. 6 and the town of Cerro Sombrero. Students dents from Universidad de Magallanes, mainly from careers from Liceo Pedro Pablo Lemaitre visited the historic well of of the construction area, were awarded scholarships. Manantiales and Cerro Sombrero, and students from Escuela Villa Las Nieves visited Cabo Negro facilities. SafeStart Program: This successful program provides self- care tools and key safety concepts to students and faculty at Geology Workshop for Children of Explora Program: The technical educational institutions. In 2016, it was extended to Scientific School Camp was held in January, organized by the leaders of neighborhood councils, older adults and children Explora Program of Conicyt and Universidad de Magallanes. of San Gregorio, Laguna Blanca and Río Verde. And in October a workshop was held for students and teachers of Universidad de Magallanes. As is tradition, training was provided by ENAP workers as program monitors. Six teachers, 194 students, 12 members Alejandro Pérez, ENAP geologist, is in charge of the theoreti- of the Punta Arenas Community Union and 22 members of the cal classes, which are complemented by field trips to sites of Community Union of Older Adults participated in this year’s geological interest, such as Puerto del Hambre and Pali Aike. version.

113 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Winter Carnival: In the 2016 version, Enap Magallanes got The exhibition was organized jointly by ENAP CSR Director- the second place in the main category, with its parade float ate, the MHN, the Institute of Heritage Studies and the Illustri- Ballenap, which was built largely with recycled materials pro- ous Municipality of Primavera. vided by ENAP workers and, once the activity was completed, were delivered to a recycling company. The presentation “Magallanes in 100 words”: During 2016 was the prize of the murga allusive to the film “Finding Dory”, composed of award ceremony of this important literary contest, which in its about 80 people, among officials, relatives and neighbors of first version received about two thousand stories from all the the city, was also highlighted. communes of the region. The jury highlighted the story “Los Mauricios”, from the Magellanic and visual arts teacher, Ma- Cultural Heritage Day: On the occasion of this national cel- carena Perich Rosas, who won the first place and one million ebration, Enap Magallanes reopened the doors of its central pesos. A Young Talent mention for authors under 18 years building in Punta Arenas, located at one end of the Plaza de old, was awarded to Bastián Aribel, 16, with his story “Joshua Armas. The tour was guided by staff of the company and had Mambero”. more than 200 visits. Health and Sports Area “Enapinos, los campamentos petroleros del Fin del Mun- do” (Enapinos, End of the World Oil Camps): A photo- Estrecho Marathon: The event brought together more than graphic exhibition was inaugurated in the National Historical 1,000 athletes this year, whose main collaborator was Enap Museum (MHN) in December 2016, with the aim of highlight- Magallanes. The activity is organized by the Municipality of ing the heritage value of the five camps built by ENAP in Tier- Punta Arenas. ra del Fuego (Manantiales , Puerto Percy, Clarencia, Cerro Sombrero and Cullen) for the purposes of oil extraction, and Support Management for Dental Care: Thanks to the man- which constitute historical vestiges of those who settled them agement carried out by Enap Magallanes with Fundación during the second half of the 20th century. Endodoncia, five dentists, along with three assistants, visited Punta Arenas to attend approximately 60 patients free of charge.

114 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Open Dialogue Axis

The main instances of dialogue that ENAP’s local business this Directorate implemented Enap TV, as a pilot plan in the units maintain with the community (main stakeholders with Head Office. The main news about the progress of the orga- which they are usually related) are mentioned below, accord- nization, as well as relevant projects and acknowledgments ing to the guidelines provided by the Corporate Affairs and are disseminated through this means. Sustainability Division and the CSR, Community Relations, Communications and Institutional Relations Directorates. Among the digital media, it is worth mentioning the Enap Con- tigo application, implemented by ERBB in 2016, aimed at in- It should be noted that the Communications Directorate is forming timely about management and operation (especially in charge of the internal and external communication chan- before incidents), facilitate interaction between neighbors nels, massive and segmented at the corporate level and in and ENAP, and channel their Concerns. the Business Units, including the Bulletin to Stakeholders (which is sent to local and regional authorities, in addition of In addition, the environmental monitoring website www.nue- public services and neighborhood groups); daily and monthly vaerainforma.enap.cl, under the responsibility of ERA, serves newsletters (e-mailed to all ENAP workers); press releases, the function of informing online the state of the operation, air public statements, speeches and the management of web quality and analysis of water and noise. In addition, it pro- platforms, intranet and social networks. In addition, in 2016 vides information regarding the claims received since 2015 at the refinery, related to environmental issues.

115 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

116 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Main Instances of Dialogue ENAP 2016

Name of the Situation that Number of Activities Objective / goals Participants Dialog instance justified the instance / Frequency

ERA

Communal authorities and local Workshop on citizen community of Quillota, Santa Processing of the Environmental participation as part of the Inform the public about the Rosa de Colmo, Quintero, Con- Two workshops were held during Impact Study (EIA) Nueva ERA Environmental Impact As- content of the EIA. cón and Puchuncaví (between the year. Power Plant. sessment System. 37 and 161 persons participated in each instance).

"Bomberos del Mar" Work agreement with communi- To train fishing communities in Leaders and fishermen of Caleta Program (Firefighters of ties of artisan fishermen (which basic techniques to respond, as San Pedro de Concón, El Em- During the year, three workshops the Sea). Training of fish- has remained in force since external support, to a hydro- barcadero de Quintero, Caletas were held with these associa- ing communities in Bahía the spill occurred in September carbon spill in the sea or in the Unidas de Quintero, Caleta El tions. Quintero and Estuary of the 2014). Aconcagua Estuary. Papagayo and Caleta Ventanas. Aconcagua River.

Preparation and execution of the Social leaders, representatives Council for the Envi- Social demand against the State "Program for the Environmental Eleven meetings were convened of the municipalities of Quintero ronmental and Social for reparation and compensation and Social Recovery of Quintero by the Ministerial Secretariat and Puchuncaví and guests, and Recovery of Quintero and due to environmental externali- - Puchuncaví", to improve the for the Environment, Region of representatives of companies of Puchuncaví. ties in the area. quality of life of the residents of Valparaiso. the sector. these territories.

Participation of representatives Six meetings were held con- Roundtable for the effec- Signing of usufruct with Build agreements for the man- of SEREMI of Environment of vened by the Ministerial Environ- tive conservation of the Municipality of Concón, for the agement and effective conserva- Valparaiso, ERA, municipality ment Secretariat of the Region of Aconcagua river mouth. administration of the Park La Isla. tion of the wetland. and of environmental NGOs. Valparaiso.

Establish links with techni- Working Group Biodiversity ENAP's corporate participation Three meetings convened by cal agencies that support the 12 institutions related to this area of the National Oceano- since 1972, through the Wise Enap Aconcagua Refinery were development of the ENAP Wise of management. graphic Committee (CONA). Use of Wetlands Program. held. Use of Wetlands Program.

117 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Name of the Situation that Number of Activities Objective / goals Participants Dialog instance justified the instance / Frequency

Establish links with the gas- Comité Turístico de Concón, tronomic and hotel sector of Consultora Innovativa, Empresa Hub project for the Com- Concón, in order to enhance Implementation and development Operadora FEDEFRUTA, gastro- petitiveness of the hotel competitiveness and establish Three workshop meetings were of the Hub Project, co-financed nomic and hotel entrepreneurs and gastronomic sector of cooperation networks among held. with CORFO. of Concón and Quintero and Concón. them, in addition to linking contractors of ENAP and, espe- them with the demand of ENAP cially, ERA contractors. Implementation and develop- Project Clean Point Instal- Installation of the First Clean Organization Eco Ruta Vecinal Three meetings were held before ment of the Clean Point Project, lation in Concón. Point of Concón. and ERA. the initiative was finalized. for recycling purposes. Present project portfolio to the Urban and rural social organiza- There were 28 meetings during Nueva Era of Community Aconcagua Refinery Projects community, establish links and tions in Concón, Quillota and 2016 (two with each of the 14 Engagement Program. Portfolio 2015-2025 jointly build cooperation alterna- Quintero (14 in total). organizations). tives. Establish an entity made up of Concón neighbors, which serves Two meetings were held in Citizen Council Nueva Era Project Portfolio 20 neighbors of Concón. as a verifier of compliance with December 2016. the commitments.

To optimize jointly the project and Meetings and Assemblies approved design of afforesta- with representatives of the Leaders and neighbors of the Plan for the Recovery of Green tion and improvement in an area Neighborhood Councils two neighborhood councils Three meetings and an assembly and Wooded Areas of the destined to green areas and equip- of El Carmen, Los Tres related and bordering the project were held. Pantanal Sector ment, which today is in a strategic Esfuerzos and kindergarten (36 people on average). location next to the route F-30E, in of the sector. the main access to Concón.

Contribute to the development of Relate with the community of Program of Efficient Light- the capacity of the surrounding Neighborhood council Villa Concón, through the accom- There were 20 sessions of 4 ing and Energy Saving for communities to the installations Independencia and Los Tres plishment of environmental hours each. communities. of ERA in the matter of efficient Esfuerzos (32 people in total). activities (energy saving). lighting.

118 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Name of the Situation that justified Number of Activities Objective / goals Participants Dialog instance the instance / Frequency

DAO

Compliance with the Minutes of the SEREMI of Health. Requirements arising from Rural Drinking Water Board A monthly meeting, until the end Water Monitoring the emergency resulting from Perform the required monitoring. (APR), on the occasion of the of the monitoring. the rupture of the pipeline, an delivery of results (5 people). incident occurred on October 26 in Rio Claro, VII Region.

Houses contiguous to where Informed community regarding Workshop on Emergency 12 people from the sector Los It was carried out once in the emergency of rupture of the the Emergency Management in Management in Pipeline. Aromos, in Rio Claro. December. pipeline occurred. Oil Pipeline.

Coordination roundtable 30 neighbors on average. Local- Monitoring the status of joint Implement initiatives to benefit One monthly meeting (the first with Neighborhood Council ity of San Gabriel, commune of work initiatives communities. Sunday of each month). Saint Gabriel. Longaví.

Meetings have been held Establish communication with Generate and implement perma- according to the implementa- Instances of permanent Neighborhood Council San the locality adjacent to Pemuco nent dialogue mechanisms with tion requirements of initiatives, dialogue. Miguel. Plant. the local community. on average, once every two months.

ERBB

Provide training to the com- Have trained and informed Talks on Safety and Envi- Neighbors of the local community neighboring the Bío Bío neighbors about safety and the Five talks were held. ronment. munity. Refinery on topics of interest. environment.

Inform the refinery community That the neighbors know what is Two representatives of each Coordination rountable about the general operating the work done in the refinery and neighborhood council, 24 A monthly meeting was held. with ENAP conditions of the plant and the appreciate it. people on average. work plans.

119 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Name of the Situation that Number of Activities Objective / goals Participants Dialog instance justified the instance / Frequency

Inform the refinery community Three representatives from Dialogue roundtable with Scheduled bi-monthly frequency about the main events of the Build trust with the community. each neighborhood council, 36 the ERBB Manager was met. operation. people on average.

ENAP MAGALLANES

Heritage Day, at the invitation of To publicize the work of Enap General public, about 200 Informative talks An annual talk was held. the Regional Council of Culture Magallanes people.

Journalists, environmental Talk about hydraulic Workshop to stakeholders and Introduce the hydraulic fracture groups, academics, community An annual talk was held. fracture the media process and clear doubts. union, among others.

To present the work of Enap, in Maritime Fair held on May 2 and Participation in local fairs Due to invitation. particular the process of hydrau- General public. 3. Provincial Governor's Fair held lic fracturing. on November 23.

Energy situation of Cerro At least 5 during the year, at Energy Primavera round- Sombrero, at the request of the Improve the energy situation of Municipality, Energy SEREMI, the request of the SEREMI of table Municipality authorities and the the town of Cerro Sombrero. sectoral representatives, Enap. Energy. SEREMI of the area.

Meetings with Universidad Exchange of information and Deans of the UMAG and execu- Two were held in the second half Required by UMAG. de Magallanes (UMAG) joint work approach. tives of ENAP. of the year.

Answer consultations of neigh- Neighborhood Councils Virgen Citizen meetings with Upon request and in conjunction bors regarding Enap, gas supply Two were held on March 6 and de Covadonga and Juan Pablo Neighborhood Councils with SEREMI Energy and inform about the process of November 7. Segundo. hydraulic fracture.

120 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

INTERNATIONAL SUBSIDIARIES

Sipetrol Ecuador (SIPEC)

Community Management Plan 2016

The work of Enap SIPEC Community Engagement contributes ducted for representatives of the surrounding communities of significantly to the development of the operation in Mauro Blocks Mauro Dávalos Cordero (MDC) and Paraíso Biguno Dávalos Cordero (MDC) and Paraíso Biguno Huachito e In- Huachito and Intracampos (PBHI). tracampos (PBHI) Blocks. In recent years, the approach of daily relationships with communities has been restructured to Coverage of health care: 23 Communities and 17 Educa- go beyond the socialization of new projects and to work from tional Centers (attention is recorded in daily reports). the management point of view to the benefit of the communities in areas of direct influence. Health Education: Talks were given on food management, prevention of venereal diseases, responsible use of medi- During 2016, total investment in health, education, commu- cines, use of toothbrushes, prevention of tooth decay and nity strengthening and compensation projects amounted to proper use of water. US$1,239,011. Education Area Below is the progress of the main actions of the Community Management Plan in the reported period. Scholarship Program: Scholarships were awarded to 20 students from the MDC Block and 14 from the PBHI Block. Health Area University Scholarship Program: The regulations govern- The medical and dental care to the neighbors of the local ing this program were approved, under which the university communities was developed in 2016 by the company “Misión scholarship program was incorporated. During 2016, schol- Salud”. arships were awarded to three university students.

In addition, the Health Promoter is a volunteer of the commu- School Food Garden Project: Support was provided for the nity, who is trained to fulfill the mission of motivating people activities of schools Luis Urdaneta (10 de Agosto Commu- in disease prevention and promotion of healthy habits. During nity); Gabriel Tanguila (Corazón de Oriente commune) and 2016, 18 health volunteers were trained in a joint activity con- Yaguachi (Las Minas Community).

121 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

School Backpack Project: As is tradition, ENAP SIPEC col- dynamics that allowed the active participation of beneficiary laborated with the delivery of a school kit for the beginning of groups, in addition to the use of audiovisual media. A total of the school year in the communities of the Area of Direct Influ- 1,434 men hours of training is reported. ence (AID) of its operations. In 2016 2,400 backpacks were delivered, the confection was carried out by two Community Recycling Environmental Project: Children and parents of Associations recognized under the Superintendency of Popu- Escuela Luis Urdaneta of the community 10 de Agosto were lar and Solidarity Economy: Asomayana and Asotexshuar. trained to take care of their environment and learn the importance of recycling. In addition, a container made of recycled Project “Enapito, Guardian of the Earth”: This initiative material was delivered to Escuela Luis Urdaneta. trains the children of communities in Basic Environmental Education, using innovative methodologies. During the year, School Transportation: It was supported through the main- craft workshops were held in the schools beneficiary of the tenance service of a vehicle for the transportation of children project and the different crafts were exhibited in the educa- from the Kichwa Community Corazón de Oriente (PBHI Block) tional centers. and the MDC Field.

“Enapito Educates” Volunteer Project: It is an initiative of School Infrastructure: A survey of needs was carried out in the members of the Department of Environment and Com- schools in the areas of influence, supporting repair work on munity Relations, whose objective is to give educational talks, existing infrastructure, restoration of water wells and delivery training and workshops regarding health and environmental of teaching materials. care, taking advantage of the potential and experience of the staff Of ENAP SIPEC. It was a project under the scheme of Community Development and Strengthening corporate volunteering, with the participation of direct workers, who contributed a total of 407 men hours of training. Local labor recruitment: ENAP SIPEC currently has contracts for local services (cleaning and hydration of road) with Alcoholism and Drug Addiction Prevention Project: Work- the Corazón de Oriente Commune, Chinchayacu company shops were held with youth and adults focused on alcohol- (domiciled in the community 10 de Agosto), Unión Chimbo- ism and drug abuse prevention, through the application of razo Farmers Association, Community Las Minas de Huata-

122 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

raco and the Community of Las Cayanas. In addition, there garden project continues in the schools Gabriel Tanguila of are civil contracts with groups of independent farmers who Corazón de Oriente commune and Yaguachi of Las Minas do similar tasks. commune, both of the PBH Block. The monitoring and technical assistance is done weekly. Community Projects Food Garden Demonstration Project at the MDC Compre- Cocoa Project hensive Farm: Vegetable species have been planted for ex- perimentation and the plants were optimally developed being • With technical assistance contracted by ENAP SIPEC, a able to harvest the products. project was carried out to make chocolate with the cocoa produced in the communities of the direct area of influence. Gastronomy Course with the use of local products: The Asociación de Mujeres de Multi-Servicios Santa Rosa (ASO- • Training sessions were held with the 10 de Agosto and MULSAR), was trained in gastronomic preparations with the Pepa de Oro associations. use of Amazonian products, hygiene issues and customer service. • Visits were made to the farms of the beneficiaries, where it is observed that the plantations are improving. The advice Activities of the Comprehensive Farm: Among the activi- is constant. ties carried out in 2016 are: pinto peanut pruning, maintenance of roads and intensive cocoa and traditional cocoa Soccer School Project: The project was developed for chil- projects, phytosanitary control and maintenance of the Sacha dren between 10 and 12 years old, with a total of 60 par- Inchi area. ticipants, who were given the equipment to enable them to practice this sport. In addition, they receive support with Relationship with Stakeholders transportation and food service. ENAP SIPEC maintains a permanent link with different institu- Family Food Garden Project: Several families have already tions, including: harvested in the communities belonging to the MDC Block • Orellana Governor: Responsible for managing the Territori- and have benefited from their products. Also, the school food al Political Team, which addresses possible social conflicts.

123 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

• ANT, Police, and Transport Division Joya de los Sachas: These agreements include the delivery of building materials, The pertinent management was made to request permis- water purification systems, computers, furniture and land ac- sion to continue supporting with the community transport quisition for the community. service. Socialization of Projects • Asotexshuar and Asomallana to qualify as part of the school backpack project. Inchi C Project: The project was socialized with the commu- • GAPO: visit to the Planning Office, to follow up on the proj- nity of direct influence, La Magdalena. ect of territorial reorganization of the Yanayacu community.

• NGO International Plan: Working meeting to determine Reassessment of the MDC Block: Information desks were lines of action in communities of common intervention. installed, holding public hearings within the process of social participation in the Nueva Esmeralda, Santa Rosa and Hua- Social Compensation mayacu II communities.

ENAP SIPEC develops its activities with responsibility towards Sipetrol Argentina the environment and local communities. In this context, its guidelines for community management include, among other During 2016, Sipetrol Argentina continued to strengthen rela- aspects, initiatives of social compensation for the possible tions with its stakeholders in the areas described below. It impacts of its operations. should be noted that the total amount allocated to these activities was US$868,100. Agreements signed in 2016 include agreements with the Eu- genio Espejo and Yanayacu communities for the develop- Contribution for the construction of a municipal gymna- ment projects of Inchi A and Inchi B fields. sium: Enap Sipetrol Argentina, together with its partner YPF, made the necessary contributions for the construction of a Other communities with which agreements have been signed new municipal gymnasium in the northern area of Comodoro are those of Huamayacu, Luz de América and Comunidad La Rivadavia, one of the most vulnerable in the city. Parker.

124 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

125 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

It is the largest municipal sports center in the province, with Local relationships 3,600 m2. It is an area of integration to which the neighbors of the sector, mainly children, began to attend. Also, the sum- The organization continues to work in permanent relationship mer colonies that the Municipality of Comodoro Rivadavia de- with stakeholders relevant to the operations of ENAP Sipetrol velops for the community attend during summer. Argentina, among whose focus we can highlight the following:

Internships at the Pampa del Castillo - La Guitarra Field: • Firefighters of the region: Collaboration with various fire- Enap Sipetrol Argentina continued during 2016, with the In- fighter brigades in the areas of influence where the com- ternship Program launched in 2014. Its objective is to pro- pany develops its operations. vide a first opportunity to enter the labor market to advanced university students from different communities in which the • Universities and provincial bodies: Through agree- organization develops its activities. ments with Universidad de la Patagonia Austral (UNPA), the Consejo Agrario Provincial of Santa Cruz (CAP, Provin- To date, the company’s operations in the Golfo San Jorge cial Agrarian Council) and Universidad Nacional San Juan Basin (Pampa del Castillo-La Guitarra, in the province of Bosco (UNSJB). Chubut) have received two interns, whose incorporation was coordinated together with Universidad Nacional de la Pata- • Energy supply: As part of a cooperation policy, the com- gonia San Juan Bosco (UNPSJB). pany supplies natural gas to the following stakeholders: Es- tancia Monte Dinero, Argentine Naval Prefecture (PNA) and The students of the integrated engineering careers were de- Argentine Navy of Faro Vírgenes, in southern Argentina. veloped in the Maintenance and Works Engineering sectors.

The Internship Program allowed the link with one of the most important universities in Patagonia, generating a very benefi- cial alliance for this and other future actions.

126 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Sipetrol Egypt

The following were some of the activities in institutional rela- Chile Independence Day Celebration: Sipetrol management tions and corporate responsibility, where representatives of team participated in the commemoration activities of Chile’s this subsidiary of Enap participated during 2016. Independence Day on September 18, 2016, sharing with the diplomatic mission of the Chilean Embassy in Egypt. Round table “The future of natural gas in Egypt”: The Se- nior Management of Sipetrol participated in this meeting held Anniversary of Enap Sipetrol Egypt: On the 20th and 21st on February 23, 2016, attended by Egypt’s Minister of Petro- of May 2016, the 14th Anniversary of Enap Sipetrol Egypt was leum, EGPC CEO, high level representatives of the sector and celebrated in Luxor, Upper Egypt. Luxor is one of the most executives from private and state-owned companies. important tourist attractions worldwide, with almost one third of the world’s monuments. The visit covered the main ancient Its objective was to provide a platform for the exchange of temples of the city and was also an occasion to celebrate the ideas on the different obstacles hindering the growth of the workers with 5 and 10 years of service in Sipetrol. Egyptian natural gas sector, considering important recent findings in the area. The prospects and challenges of explo- “Sipetrol Family Day”: All the workers at the branch shared ration and production activities, the liberalization of the natu- a special day to celebrate the traditional Sipetrol Family Day, ral gas market and reform strategies to encourage investment this time in Sharm El Sheikh, Sinai Peninsula. The event was in the sector were also analyzed. also designed to support and promote local tourism.

Chilean ambassador visits the East Ras Qattara conces- Football Championship: The Sipetrol & Petroshahd football sion: Fernando Zalaquett, Chile’s Ambassador to Egypt, team was crowned champion of the 10th Ramadan Petroleum and Consul Guillermo Fernández visited the East Ras Qat- Football Tournament, organized by Egypt’s Oil & Gas indus- tara block in the Western Desert in April, accompanied by the try. El Hadidi, CEO of EGPC, handed the cup to the winners, General Manager of Sipetrol and the President of Petroshahd. in the presence of the General Manager of Sipetrol and a The officers arrived at the Petroshahd Reception Station in group of executives and official sponsors of the tournament. the Qarun area and the Al Zahraa camp. Later, they shared a lunch of camaraderie in the camp of Ghard. Round table on human capital: Sipetrol sponsored this event called “People Development Roundtable”, attended by the Deputy General Manager of Sipetrol, authorities and the

127 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

main managers of the area. The purpose was to identify new Egyptian Petroleum Exploration Society (EPEX) in El Sokhna, mechanisms for the preparation of workers with a focus on a structural domain of Wadi Araba, western side of the Gulf the oil and gas industry in Egypt, confirming that the Gov- of Suez. ernment has recognized that the development of world-class human capital is one of the crucial assets for this industry’s For two days, visitors were able to observe the geological modernization to be successful. characteristics of the area, discuss the interaction between structural events and sedimentary models, as real examples Excursion with EPEX: A team composed of members of Sip- for exploration of hydrocarbons in the northeast province of etrol and Petroshahd participated in a tour organized by the Goz.

128 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Awards and Recognition 2016

Global Compact Award Employer Brand CSR Distinction to ERA The recognition was given in the At Expo Human Capital, Trabajando. Asociación de Empresas de la V context of the presentation of the com released the results of the third Región awarded to the Aconcagua sixth version of the study “System version of the study “Employer Brand”, Refinery the RSE award entitled “Good of Integration of the Principles of a survey that investigates the market’s Practices in the Relationship between Global Compact” and highlighted perception about the most valued Company and Higher Education”, the initiatives of the Third Party attributes of companies in Chile. by the Higher Technical Training Management Directorate of ENAP, Program for contract workers, which which contribute to creating balanced In the Energy sector, ENAP was ERA develops in conjunction with the labor relations with Contractors, recognized with the first place for CFT (Technical Education Center) of allowing the growth and development the second consecutive year. The Universidad Católica de Valparaiso. of the workers, along with the fulfillment attributes most valued by the voters were their salaries, job stability, work- of the company’s strategic goals. family compatibility and the company’s reputation and tradition.

129 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Consejo Nacional de Recognition for certification of Good Practices in SIPEC Seguridad competences René De Mora Moncayo, Hydrocarbons Secretary of Ecuador, described Enap (National Security Council) ERA was distinguished as the most SIPEC, a subsidiary of ENAP in that outstanding company for evaluating The National Safety Council country, as an exemplary company, and certifying the competencies of distinguished Aconcagua Refinery which manages high standards in its its workers during the year 2016. The for its preventive management and to contribution to Ecuador’s development. obtain (in the previous period, 2015) award was given by SENCE of the the lowest accident frequency rate in Region of Valparaiso, as part of the In this recognition, the Hydrocarbons its area in category B, which classifies “Encourage People Program” (former Secretary of Ecuador stressed the companies with staffs between 500 and Tax Franchise). importance of the human capital for 1,500 workers. the operations of excellence that the Chilean state-owned company in that country demonstrates today and the environmental and community management. In particular, he referred to the “Comprehensive Farm” project, a training and technology transfer center on agricultural issues that has been able to generate employment, growth and welfare for the inhabitants of the areas of influence of the company’s operations. Also, on December 24, 2016, the Huamayacu Community awarded a recognition plaque to Enap SIPEC, for its contribution to the construction of the multipurpose sports field stage.

130 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Distinctions of SENCE Awards by the Mutual de SEREMI of Labor Awarded Magallanes Seguridad CChC Recognition to Enap The Training and Employment Service During 2016, Enap Magallanes, Magallanes (SENCE) recognized Enap Magallanes, through the HSE Directorate Enap Magallanes obtained a through its Human Resources and together with the three Joint recognition from SEREMI of Labor Management, for the permanent Committees on Health and Safety Trabajo for its unconditional support in contribution to the training, especially and the technical support of the carrying out activities framed within the of those people who are in situation of Communications Unit, participated strategy for eradicating child labor. greater social vulnerability. in two preventive campaigns of the Mutual de Seguridad de la Cámara Likewise, in December the entity Chilena de la Construcción (Safety awarded all those companies that Mutual of the Chilean Chamber of collaborated in the improvement of Construction): “Mano a Mano” and regional employability during 2016, “Ojo con tus Ojos”. As a result of among which, is Enap Magallanes. implementing such initiatives, Enap Magallanes was honored with five awards: Mano a Mano (Hand in hand) Campaign, Outstanding Video Award. Mano a Mano Campaign, Committed Company Award. Campaign Ojo con tus Ojos (Watch Cultural Distinction your eyes), Outstanding Poster Award. Campaign Ojo con tus Ojos, It was a recognition of the PROA Outstanding Video Award. Cultural Association, for the support of Campaign Ojo con tus Ojos, Enap Magallanes in the 10 years of the Committed Company Award. Latin American South Pole Film Show.

131 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

ETHICS AND COMPLIANCE MANAGEMENT

The Ethics and Compliance Management reports to ENAP Main Management Milestones Board of Directors, through its Audit, Risk and Compliance Committee. This Management aims to realize the commitment E-Learning Course of the Corporate Code of Ethics: In assumed with ethics, good practices in business and com- December, the e-Learning course “Strengthening the Ethi- pliance with the standards, contributing to the organization’s cal Culture of ENAP” was made available to all executives sustainability. of the company, nationally and internationally (Argentina and Ecuador). Which, through a didactic tool and case analysis, This management’s mission manifests itself in two dimen- presents the main content of the Corporate Code of Ethics. sions: Approving the course was part of the executives’ individual 1. Promote the values of ENAP, by adopting Good Practices goals, thus achieving the incorporation of ethical aspects as in all areas of the business between the company and its a relevant element in the training of ENAP members. Continu- stakeholders. ing with this objective, it is expected that next year the course will be made available to workers, in all business units and 2. Mitigate the materialization of certain risks that expose the subsidiaries. company’s assets or reputation, focusing its action on the development of an appropriate Corporate Compliance Program. Executive Report of ENAP’s Ethical Values, Benchmark and Definitions: In 2016, an executive report was consolidat- This program, which considers the strengthening of an ethical ed in which the perceptions and experiences of ENAP’s work- culture and a model of anti-corruption management, involves ers were gathered around the values declared in the Code all employees of the company, delivering a certain method to of Ethics. In addition, experiences of other companies were act, within the framework of ethics and corporate compliance. reviewed on the topic to collect good practices. As a result of this work, each of the six corporate values of ENAP were defined, which have begun to be socialized in the company, in order to cascade these definitions in 2017.

132 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Diagnosis and Improvement of the Crime Prevention The objective in 2016, was to make them aware of the Code Model Risk Matrix: In order to strengthen the Crime Preven- of Ethical Conduct of Suppliers, whose main contents were tion Model (MPD), an operational initiative was developed in shared and socialized with them, to obtain feedback that 2016, to keep the risk matrix of the model up to date, which would strengthen the document. is its main element. An external consultancy by a company expert in the matter provided support in the execution of this Having a Code of Ethical Conduct for Suppliers, through a project. participatory process, strengthens the value chain, transfer- ring ENAP good practices to them. The final result allowed to have an updated matrix according to the new regulations and changes in the company structure, Socialization, training and continuous education pro- thus fulfilling the fundamental guideline of Law 20,393, which gram: For management, one of the central pillars in the con- considers the existence of an “Effective” model to prevent the solidation of an organizational ethical culture is the socializa- commission of crimes that could affect the criminal responsi- tion and continuous training of different stakeholders, both in bility of the company. face-to-face and in e-learning and through Information documents. Thus, in 2016, the library of management courses was This strengthening work will continue during 2017, with the strengthened by the above-mentioned Code of Ethics course implementation of mitigation measures that have been raised for all executives of the company, together with a video re- in the project. lated to the investigation procedure of complaints and the dissemination of different actions and topics of management, Meetings with suppliers and contractors: As part of the through the bulletins “Compliance Informs”. Third Party Compliance Program, during the second half of the year meetings were held with the main suppliers and con- As for face-to-face training, a significant number of workers tractors of each Business Unit in the country. were addressed in all business units, in Chile and in the subsidiaries of Argentina and Ecuador, covering staff from head-

133 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

quarters and operations. The instances addressed issues re- making and management of declarations of gifts, invitations lated to Compliance management: policies, regulations and and benefits; Conflicts of interest, and meetings with public Crime Prevention Model, among others. Preventive programs officials, as outlined in ENAP’s internal regulations. focused on issues of mobbing and sexual harassment and transparency in companies. Regarding suppliers, they were Management and investigation of the Inquiries and trained mainly in matters of the Code of Ethics and the Crime Complaints Line ENAP Responds: In 2016, the ENAP Prevention Model. Responds system received a total of 54 complaints for vio- lations to the Code of Ethics. Regarding the distribution of Diversity and Inclusion Policy (D&I): ENAP has a Corporate complaints by Business Unit, 41% were complaints about Policy of Diversity and Inclusion, which covers all vulnerable situations in ENAP Magallanes, which is proportional to the groups defined by the United Nations Organization and de- number of employees of that Business Unit, in relation to the termines actions aimed at advancing in matters of non-dis- total of the company. crimination and inclusion. During 2016, the governance of the Policy was structured, creating in the Main Office (Chile) a It is noteworthy that 69% of the complaints received (37) cor- Corporate Committee on Diversity and Inclusion. This com- respond to registered reports, which speaks of a moral devel- mittee is composed of executives and workers representing opment as an organization. Of the complaints received, 25% the different business units. correspond to inadmissible complaints, either because they are matters that are not within the scope of the Ethics and In Argentina, a local committee representing the branch was Compliance Department, or they are complaints that do not established. Likewise, the members of both committees were have supporting background. trained in matters of diversity and inclusion, to form work committees in 2017, focused on gender and disability issues. Regarding the management of the Ethics Committee, it met five times, with a total of 37 complaints being resolved. The Launching of the Declarations System: In order to strength- recommendations of the Ethics Committee had impacts on en the management of conflicts of interest and transparency people (verbal, written warnings, disengagement and finan- and probity in business, the Integrated Declarations System, cial penalties) and also generated initiatives to improve com- available in Chile, Argentina and Ecuador, was enabled for pany procedures in order to promote good practices in inter- workers. The purpose of such a system is to facilitate the personal relations and development of processes.

134 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

The following graph shows the complaints received in 2016, by Business Unit and issues:

Complaints per business Unit Complaints per Issue / % Discrimination 41 Mistreatment 41 MAG 11 Conflicts of Interest

18 ERA 11 Others 5 Drugs / Alcohol 17 ERBB 5 Embezzlement / Theft 15 Main Office 4 Sexual Harassment

5 DAO 4 Labor Safety 4 Fraud 4 Argentina 2 Acceptance of Gifts

Complaints per issue / Number of cases

Discrimination – Mistreatment 22 Violation to Purchase or Hiring Regulations 6 Conflicts of Interest 6 Embezzlement / Theft 3 Misuse of company assets 3 Sexual Harassment 2 Fraud 2 Labor Safety 2 Acceptance of Gifts 1 Drugs/Alcohol 1 Others 6

135 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Risk management

Together with the expert support of a leading consulting firm Risk Governance Model in this field, the organization continued to develop its Risk Management Model in 2016, with significant advances in The Risk Governance Model consists of a structure of three governance and risk identification and assessment method. lines of defense, which are configured and operated according to the different risk classifications and by the internal Among the achievements in this Management Model were the structure of the organization. approval by the General Management of the Integrated Risk Management Model in the second half of 2016. Likewise, at Three Defensive Lines the end of November, the Audit, Risks and Compliance Com- A structure of three lines of defense endows ENAP with those mittee of ENAP Board of Directors approved the Risk Appetite organizational elements (positions and functions) necessary and Risk Tolerance Criteria, as well as the Risk Management to adequately carry out the processes of identification, evalu- Governance and Reportability System implemented annually ation, mitigation and monitoring of the risks, in a sustained by the Company Management. way and in accordance with the best practices of the industry in this matter. It should be noted that, in line with these new challenges imposed by ENAP, during the reporting period the structure, The three lines of defense are described below: objectives and guidelines of the new Risk Management De- partment were defined, whose dependence was subordinat- • First Line of Defense: is responsible for the direct man- ed to the Corporate Planning and Control Management. This agement of risks (“owners of their risks”), execute pro- change will include efforts to strengthen performance in this cesses according to methodology and policies, identify key area, throughout the organization. and inform risks as necessary, constantly mitigate and monitor them. ENAP Risk Management Model is composed of the following elements: • Second Line of Defense: It is in charge of advising, ensuring quality, providing guidelines, challenging the first

136 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

line of defense in Risk Management; advise and ensure • Project Execution: Risks resulting from deviations in spe- the quality of the management of the first line of defense, cific objectives of a project. define policies and standards, monitor and report risks at a consolidated level. • Market / Financial: Risks resulting from uncertainty in returns and financial losses. • Third Line of Defense: It is in charge of auditing, verifying compliance with policies and methodologies, as well as • Strategic: Risks resulting from deviations from a business observing and scaling exceptions of the general process / strategic plan due to internal or external effects to the of risk management. organization.

The Management Model thus defined ensures a clear separa- • Organization: Risks related to aspects of Human Re- tion of specific tasks and responsibilities in the Risk Manage- sources that have an impact on the business. ment process, so that its control and verification of compliance are carried out in accordance with the highest standards • Political / Social: Risks resulting from political decisions, applicable today. events or conditions that affect the results of the business.

For these purposes, the following types of risks were defined: RISK MANAGEMENT METHODOLOGY

Classification of Risks The Risk Management Methodology is based on a four-step process designed to identify risks, assess their likelihood and • Risks in specific production processes re- Operational: quantify their impact level, as well as define their mitigation sulting from improper use of procedures, systems and plans and monitor and update them continuously. policies.

137 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

The Risk Management Methodology defined, at the organi- its probability of occurrence and of the impact that they zational level, a unique evaluation matrix with 6 levels of im- would have in case one of them occurs. This evaluation is pact (or consequence) in the areas of Health and Safety, En- based on a Monte Carlo Simulation Methodology, and for vironmental, Financial and Reputation. At the same time, four this the organization has a technological tool for facilitating probability levels with ranges associated with probabilities its execution. less than 1%, between 1 and 10%, between 10 and 30% and greater than 30% were defined. The main characteristics of • Risk Management: At this stage, and according to the each methodological stage are presented below: risk assessment, the effectiveness of the implementation of possible mitigation plans in terms of their “usefulness” • Identification of Risks: A stage of collection and analysis in reducing risks is defined and weighted. In this way, both of information, both historical and recent, which together mitigation plans that reduce the probability of occurrence, with the expert judgment of a group of professionals, man- and plans that reduce their impact (if materialized) could age to identify the main risks of a process, their most prob- be defined. In addition, mitigation plans could be defined able causes and the controls that the organization has de- that point in both directions. fined to prevent that risk from materializing. • Monitoring and Updating of Risks: A stage in which the With the analysis of the above mentioned information, level of risk and the progress, both financial and physical, a qualitative first evaluation of probability and impact is that the different mitigation plans are carried out are moni- made. tored and reported to the different organizational levels. At the same time, at this stage, the Risk Matrix is updated, as • Risk Assessment: For the risks that in the previous stage new risks are identified and evaluated. have been evaluated as High or Mega Risks hazards (according to the criteria established in the Risk Matrix), the methodology now focuses on a quantitative evaluation of

138 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

RISK APPETITE AND TOLERANCE

The Risk Management Model also managed to define the cri- This will allow to quantify the areas and limits (risk capacity) teria that make up the concept of “Risk Appetite” for ENAP. that were authorized to expose the company. Otherwise, they In that sense, the definition of Risk Appetite sought to answer will be forced to adopt risk mitigation plans in order not to questions such as: What are the correct metrics for measur- exceed the limits established as Risk Appetite. ing risks? What are the acceptable exposure thresholds? What kind of priority is there for risk mitigation? What are the A look forward... limits for the number of risks? And, last but not least, the time frame for measuring its level of exposure. Currently, organizations face changing environments where the decisions they make are always uncertain and ENAP is no The Risk Appetite Framework is based on the definition of exception, so risks become inherent to the business. guiding principles that will provide a quantitative guideline to the executive team of ENAP, in the areas that for the Board of Under the premise that the risks “We can not eliminate them, Directors represent the major problems in fulfilling its strate- but we can learn to manage and mitigate them and control gic objectives. These guiding principles relate to: their potential impacts”, is that the challenges for ENAP in 2017 relate to the implementation of the Management Model • Capital Requirement. of Risks within the organization, to identify, evaluate and de- • Health, safety and environment. fine the best mitigation plans, with the goal of continuously • Operations and Asset Management. reducing the company’s exposure to risks it faces daily.

• Compliance with Regulations and Reputation.

• Liquidity.

139 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

140 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

MARKET RISK FACTORS

Market Risk Analysis

ENAP participates in the exploration and production of hydro- 65 million barrels per year, a variation of US$1 per barrel in carbons through its subsidiary ENAP Sipetrol S.A. and, in the the crack would have, ceteris paribus, an impact on results of refining, transportation, storage and commercialization of pe- US$6.5 million in one way or another. troleum products through ENAP Refinerías S.A. The refining and marketing of its products in Chile represents a substantial As a core strategy to address the risk of changes in refining part of ENAP’s operations. margins, ENAP has directed its investments to increase its production flexibility and product quality. So far no financial deriv- The company accesses the international market for the supply atives have been hired to fix the refining margin, but the price of crude oil and products. This allows the company to ensure levels offered by the market are being monitored constantly. supply and fulfillment of its trade commitments. The supply of crude oil of ENAP Refinerías S.A. is mainly obtained from The relevant risks to the business are essentially the refining South America and the North Sea. Its main suppliers are Bra- margin and the price fluctuations in international oil markets zil, Colombia, Ecuador, Argentina and the UK. The company’s and products, due to the time delay between the purchase refineries have the necessary facilities for the reception and (shipment) of the raw material and sale of the refined products. storage of this raw material. As for the origin of the imported Hedges such as Time Spread Swaps are made to cover the refined products, during the last year these products came latter risks. Such hedging strategies are complemented with mainly from the United States. the use of swap sales contracts of refined products.

The business of ENAP Refinerías S.A. consists mainly of buy- Given the high volatility in oil prices, the administration has con- ing crude oil in the international market for refining and sale of tinued with the hedging contracting policy that allow minimize the products thus produced in the domestic market, accord- the impact of any sudden and significant declines in oil prices, ing to its policy of import parity prices. The refining margin is considering the refining business cycle, the gap between sell- subject to fluctuations in international prices of crude oil, the re- ing prices of the products and the cost of crude oil refining. fined products and the difference between them (international Notwithstanding the foregoing, it is important to mention that margin or “crack”). Considering an average refining level of these instruments, by their nature and way of operation, pro-

141 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

tect from changes in crude oil prices, but do not ensure 100% swap is calculated using relevant markers’ futures contracts elimination of effects on results due to the volatility in the pur- tables (Nymex WTI, Brent DTD or ICE Brent). chase of raw material. Synthesis of Results Likewise, the company has conducted swap rate differential operations, which aim to set the price of those shipments in- ENAP achieved a positive result of US$ 182.6 million as of dexed to WTI or DTD markers to Brent ICE marker. In each December 31, 2016. EBITDA generated during the year crude oil purchase tender, the decision to buy one alternative amounted to US$ 678.0 million, representing an increase in over another is based on an optimization model that takes into the EBITDA margin of 13.0 %, compared to 11.7% in the pre- account, among other variables, a projected refining margin vious year. ENAP’s equity reached US$ 807.3 million as of using the ICE Brent marker. Therefore, when awarding a ten- December 31, 2016, compared to US $700.7 million at the der for crude oil to an offer denominated in WTI or DTD marker end of December 2015. is important to ensure that the differential between such marker and the ICE Brent, at the moment of the decision to purchase, Consolidated gross margin reached US$ 547.2 million (US$ does not deteriorate significantly, in order to maintain the op- 642.9 million in 2015), explained by the gross margin of the timization criterion that prevailed at the time of awarding the Refining and Marketing (R&C) Business Line of US$ 427.9 purchase of crude oil. million, Exploration & Production Business Line (E&P) of US$ 132.8 and Gas & Energy Business Line of US$-13.5 million. The exchange rate is another business risk factor because an important part of revenues is in pesos and the liabilities The R&C Business Line had a negative variation of gross marin dollars. This factor is minimized by the hedging policy of gin of US$96.3 million compared to the previous year, and is exchange rate of accounts receivable and prices of products mainly explained by lower margins of own and imported pro- based on import parity indexed in dollars, a situation that is duction. In the case of own production the margin decreased analyzed periodically to maintain a competitive position, taking to an average of US$ 15.5 per barrel in 2016, 26.5% with into account the freedom of prices and importation that exists respect to the US$ 21.1 of previous year; the latter resulting in Chile. from an oversupply of refined products at the international level during the current year. This decrease in the margins The fair value of forward currency contracts is calculated tak- of the refining business was offset by the increase in the pro- ing as reference current forward exchange rates for contracts duction of valuable products obtained by a high level of op- with similar maturity profiles. The fair value of the differential erational availability of both refineries.

142 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

The E&P Business Line had a positive variation of the gross has an impact on sales prices in the local market, offset by margin of US$ 33.5 million compared to the previous year. an increase in the volume sold; the average selling price of This is explained by: E&P Magallanes increased the margin own products decreased from US$71.72 per barrel in 2015, by US$26.7 million due to a higher volume of gas sales sold to to US$56.98 per barrel in 2016 (20.5%). In the case of vol- Methanex; Argentina presented an increase of US$19.3 mil- ume, this increased by 1.5% in 2016, compared to the previ- lion in cost reduction due to currency devaluation and lower ous year. The sales volume of own production increased to share of depletion in PDC as a result of the increase in re- 10,223.89 Mm3 compared to 10,073.0 Mm3 as of December serves due to the extension of the concession until 2026; Ec- 2015. uador increased the margin by US$2.3 million due to higher crude oil revenues for higher volume in PBH-I and lower costs Regarding the sale of imported and purchased products by due to optimizations. Finally, the gross margin was offset by R&C (Diesel, Gasoline and Fuel Oil), these totaled a sale of a lower margin in Egypt of US$ 15 million, as revenues are 1,899.1 Mm3 during 2016, which is compared with 1,910.37 indexed to the international price of crude oil. Mm3 of the previous year. This 0.6% decrease is mainly explained by the fact that the demand was covered by own It should be noted that during December the Group acquired products existing in stock and derived from the normal op- the Petropower Complex, generating a positive impact on eration of the plants. In addition, the sale price dropped from results of US$92.7 million. The acquisition of this business US$ 78.8 per barrel to US$ 59.8 per barrel, which explains allows us to fulfill two fundamental objectives: to ensure the that the income level reflects a decrease of US$118.3 million operational continuity of Bío Bío Refinery and to sell surplus between the two years. energy to third parties, injecting it into the Central Intercon- nected System. E&P sales decreased by US$15.1 million, mainly in Egypt, with a US$ 21.5 million decrease, due to lower crude oil pric- In 2016, the price of Brent crude oil benchmark averaged US$ es (Brent 2016: US$45.1 per barrel vs. Brent 2015 : US$53.6 45.1 per barrel on the London Intercontinental Exchange, per barrel), and lower volume. Argentina shows a decrease down 15.9% compared to 2015 (US$ 53.6 per barrel). of US$39.6 million due to lower prices and volume on sales due to the difficulty of allocating crude oil in the local mar- Income ket. This is compensated by an increase in revenues in E&P Magallanes of US$40.7 million due to the higher volume of The decrease in ordinary revenues of US$1,133.9 million is gas sold to Methanex and in Ecuador of US$5.3 million, as- mainly due to lower sales of own products (872.6 million), due sociated with higher crude oil revenues in PBH -I for greater to the reduction in the international price of products, which volume.

143 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

During 2016, revenues from sales on the G&E business line Costs of sales have increased due to export of natural gas to Argentina under the agreement signed between the state-owned compa- In line with the decline in revenues, sales costs in 2016 de- nies of both countries, which meant for ENAP US$21, 9 mil- creased by US$1,038.2 million, with the gross profit margin lion in revenues. On the other hand, sales in the local market remaining at 10%. compared to the previous year, decreased by US$50.6 million; the electricity generation segment decreased by US$42 The cost of purchase of crude oil decreased US$582.7 mil- million, as a result of a decline in the average marginal cost lion (17.9%), which is explained by a decrease in the average from US$88.69 per MWh as of December 2015, to US$59.64 price of raw material, which went from US$50.91 per barrel per MWh for 2016, implying a decrease of US$4.4 per MMBtu in the year 2015 to US$41.68 per barrel during 2016, related in the sale price. Regarding sales to Distributors, these de- to the fall in international prices and the optimization of the creased by US$ 7.8 million, mainly explained by a price re- crude oil purchase process. duction of US$1.53 per MMBtu due to the drop in the price of alternative fuels. As part of the cost of purchase of crude oil, including the net effect (debit or credit) from the settlement of hedging Time Revenues from services sales decreased US$20.2 million, Spread Swap during the year, net credit of MUS$ 26.002 and since in 2015 this amount included an extraordinary income MUS$ 84.712 for 2016 and 2015 respectively, which were associated with the modification of contracts for the supply of aimed at moving, financially, the price window for crude oil natural gas. shipments and adjust it to the dates where refined products takes price to have inventory costs that are in line with the Revenues from sales of imported crude oil correspond to ex- prices of the products to be sold, mitigating through the cov- ceptional sales in the spot market by R&C. erage of the cost of sale, the time spread to which the company is naturally exposed. The revenues associated with the compensation by the State of Chile that covers the lowest value obtained from sales Among non-crude oil costs, the largest variation in 2016 com- of gas produced in the Magallanes Region amounted to pared to fiscal year 2015 corresponds to variable costs, which US$95.5 million (US$79.8 million in 2015). decreased by US$200.6 million, mainly due to lower energy costs (LNG, electricity, steam and domestic consumption).

144 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

145 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

The Primary Unitary Margin decreased by 26.5%, that is, by devaluation of the Egyptian pound. In addition, both secu- US$5.6 per barrel compared to the previous year, which re- rities include the cost of accounts receivable coverage, which lates to the performance of international margins oil-based consist of forward contracts that allow the exchange rate to products during the year. be set in the future, anticipating the risk of loss on accounts receivable, denominated in local currency. Variations in other categories Additionally, since accounts receivable coverage begins be- Other gains (Losses) increased by US$113.0 million as it went tween 7 and 10 days before the account receivable arises, from a loss of US$7.1 million in 2015 to a gain of US$105.9 date in which inventory takes price, the counterpart to this million in 2016, mainly due to the fact that during the month hedge offsets the hedging costs. of December 2016 the Group acquired the Petropower Com- plex (Petropower Energía Ltda. - PPW), generating a posi- Taxes reflected a profit of US$55.4 million as of December tive impact on results of US$92.7 million. The acquisition of 31, 2016, which compares with the benefit of US$77.6 million this business allows us to fulfill two fundamental objectives: obtained as of December 31, 2015. to ensure the operational continuity of Bío Bío Refinery and to sell surplus energy to third parties, injecting it into the Central Assets Interconnected System. On December 31, 2016, total assets increased by US$451.5 Other Income increased by US$41.0 million, from US$26.8 million compared to the existing assets as of December 31, million on December 31, 2015 to US$67.8 million on Decem- 2015. This increase is mainly generated by the offsetting ef- ber 31, 2016. This increase is due additional sales in 2016 of fect of changes in the balances of the following items: surplus energy to the SIC for US$20.5 million (including reclassification of previous years), compensation recovery and - Property, Plant and Equipment account increased US$339.9 others for US$16.3 million over the previous year, and recov- million from US$2,797.7 million on December 31, 2015, to ery of provisional payments for profits absorbed on foreign US$3,137.6 on December 31, 2016 (12.1%). This mainly earnings totaling US$4.2 million. includes the incorporation of the acquired assets to PPW, through a business combination and the assets of Petrofaro The exchange difference went from a negative balance of S.A. (Subsidiary of Enap Sipetrol S.A.); in addition to an in- US$3.3 million on December 31, 2015, to a negative balance crease in construction in progress, due to the construction of US$18.4 million on December 31, 2016. Influenced mainly of the Cogeneration Power Plant in Aconcagua Refinery, and maintenance of tanks and pipelines.

146 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

On the other hand, E&P business line in 2015 shows a de- • The current tax assets account increased US$43.1 million, crease of US$20.9 million. from US$92.2 million on December 31, 2015, to US$135.3 on December 31, 2016 (46.7%), mainly due to an increase • Inventories reflect an increase of US$162.2 million (28.7%) in the VAT Tax credit account for investments in Proper- compared to December 31, 2015. The main variations are ties, Plant and Equipment. the effect of: • An increase in assets for deferred taxes of US$8.9 million, • Products Inventory increased by US$94.2 million from from US$825.8 million at the end of 2015, to US$834.7 mil- US$272.0 million on December 31, 2015, to US$366.3 lion on December 31, 2016 (1.1%), related to tax losses, million on December 31, 2016, which is explained by an which increased by US$160.0 million, partially offset by adjustment of US$59 million of the book value at the net deferred liabilities for deferred expenses in bond place- realizable value as of December 31, 2015. Meanwhile, ment, US$81.0 million; a decrease in deferred assets re- the unit cost of inventories increased from US$56.46 lated to net realizable value of inventories, US$23.0 million; per barrel on December 31, 2015, to US$59.80 per and the reduction of deferred taxes related to property, barrel on December 31, 2016, and the volume of prod- plant and equipment, and other effects, for US$56 million. uct inventory increased from 946.34 Mm3 in 2015 to 973.36 Mm3 in 2016. • An increase in current accounts receivable from related entities, of US$21.8 million, from US$26.8 million at the • The Crude Oil Inventory increased US$68.5 million, end of 2015 to US$48.6 million at December 31, 2016 (81, from US$220.8 million to US$289.3 million, which is ex- 3%), which is explained as a consequence of the closing plained by a US$25 million adjustment of the book value position, with the account receivable for gas compensa- to the net realizable value at 31 In December 2015, and tion to the Ministry of Energy. an increase in the unit price, which went from US$36.4 per barrel to December 31, 2015, to US$48.4 per barrel • Other Current Assets increased by US$24.9 million as as of December 31, 2016. a whole, from US$5.2 million on December 31, 2015, to US$30.1 on December 31, 2016, for the recognition of • On the other hand, there was a decrease in the stock insurance premiums paid in advance for US$12.1 mil- of materials from warehouses and in transit for US$0.5 lion (duration of 18 months), and the recognition of As- million. sets held for sale corresponding to corporate offices, for US$12.8 million.

147 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

The above is partly offset, mainly by: Liabilities As of December 31, 2016, liabilities as a whole increased by • A decrease of US$78.1 million (87.0%) in the account US$344.9 million (7.4%) in relation to the existing liabilities as Other current financial assets with respect to December of December 31, 2015. The main variations relate to: 2015, as a result of the hedging derivatives’ closing position, mainly Time Spread Swap - TSS, which decreases • Other current and non-current financial liabilities, items US$86.7 million, offset by US$8.6 million, corresponding that increased US$205.6 million mainly due to the net po- to the reclassification of the short-term portion of Argen- sition of short-term hedge instruments (TSS), resulting in tine nation bonds, of the Petróleo Plus program. a higher liability of US$47.4 million with respect to 31 De- cember 2015; new debt associated with the PIAM project • A decrease in cash and cash equivalents of US$47.5 mil- for US$79.3 million, and a net increase in short-term debt lion (41.8%) from the closing position, given the short-term of US$78.9 million to finance the purchase of PPW and commitments assumed. other investments.

• A decrease of US$25.1 million (17.1%) in Investments ac- • Trade payable and other accounts payable increased by counted for using the equity method, due to the adjust- US$148.4 million (34.1%), mainly due to the relationship ment in related company GNL Quintero S.A., where it was with suppliers of crude oil, associated with the increase in reclassified in its financial statements for 2015, the pre- inventories. sentation of the unwind of the derivative contract associ- • Other non-current liabilities increased by US$6.6 million ated to the refinancing of its debt (whose amount in ENAP (2.3%), mainly due to the increase in provisions for dis- was recognized in 2016, as a decrease in investment of mantling, costs of restoration and rehabilitation. US$17.6 million) and due to the de-recognition of the in- This is compensated mainly by: vestment in PPW of US$14.6 million, since it became part of the consolidation scope as of December 31, offset by • The decrease in current accounts payable to related enti- recognition of the proportional result for the year and other ties, of US$26.2 million (66.8%), from 39.2 million as of effects of US$7.1 million. December 31, 2015, to US$13.0 million as of December 31, 2016. This decrease corresponds to the fact that the company Petropower Energía Ltda., as of December 31, 2016, was presented within the scope of consolidation for US$21.6 million and a lower closing balance with Codelco, US$2 , 5 million, and other variations for US$2.1 million.

148 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Equity

Equity increased by US$106.6 million (15.2%) as of Decem- May 20, 2013, under the financial situation of the company, ber 31, 2016, as compared to December 31, 2015, as a re- decided to authorize a profit distribution policy with the aim of sult of the net income of US$182.6 million, offset by hedges contributing to stability and reconstruction of the company’s of US$44.6 million and other charges to other reserves of equity, which is to maintain the annual review of the financial US$31.4 million. situation of the company, to decide whether to authorize the capitalization of the subsidiaries’ and parent company’s prof- Dividend Policy / Distributable Earnings its in a tax loss situation.

The Chilean Treasury, through the Ministry of Finance, can The dividend policy of the subsidiaries of Empresa Nacional order the transfer of ENAP’s advances and/or profits to the Del Petróleo, is based on the instructions given in Resolution State’s General Revenue Account, in accordance with the No. 526 dated July 3, 2006, of the Ministry of Finance, which provisions of Article 29 of Decree Law 1,263 of 1975. establishes the transfer of 100% of the annual profits. The Ministry of Finance, according to Resolution No. 1497/ 2016 Subsequently, the Ministry of Finance through Resolution No. and 2,150/2014, decided to suspend for the years 2015 and 1292 dated July 15, 2012, and Resolution No. 1125 dated 2016 the distribution policy of 100% of the profits of ENAP’s subsidiaries.

745,00 Exchange Rate Observed US Dollar 730,00

715,00

700,00

685,00

670,00

655,00

640,00

625,00

610,00

595,00

580,00

April May June July March August January February October September November December

149 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

150 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

2016 Dividend Policy of ENAP Subsidiaries Dividends from ENAP Subsidiaries

Enap Refinerías S.A.: In the 35th General Shareholders’ Meet- Enap Refinerías S.A., in its 35th General Shareholders’ Meet- ing of ENAP Refinerías S.A., held on April 28, 2016, share- ing, held on April 28, 2016, shareholders unanimously agreed holders put on record that there would be no distribution of to put on record that there would be no distribution of divi- dividends from the profits earned by the Company during the dends from the profits earned by the Company during the 2015 financial period, until the Company has absorbed the 2015 financial period, since the company records accumu- accumulated losses that exceed the amount of such profits, lated losses that exceed the amount of such profits (Article 78 which amounts to US$830 million as of December 31, 2015. of Corporation Law 18,046).

Enap Sipetrol S.A.: At the 26th Annual Shareholders’ General Enap Sipetrol S.A., in its 26th Annual Shareholders’ General Meeting, held on April 28, 2016, the shareholders voted unan- Meeting, held on April 28, 2016, shareholders agreed unani- imously not to distribute 2015 profits as dividends to share- mously not to distribute the profits generated in the fiscal year holders. 2015.

On June 21, 2016, the Ministry of Finance, according to Reso- lution No. 1497, authorized the subsidiary Sipetrol S.A. to capitalize profits for the year 2015, amounting to MUS$9,251.3. That Resolution also suspended the application of the measure to distribute 100% of the profits of the subsidiaries for 2016, established by the Ministry of Finance in the Resolution N°526/2006.

151 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

PROCUREMENT

Purchase Volume and Contracts

In 2016, ENAP made purchases of goods and services con- 3. With a human team recognized for its technical-commer- tracts totaling US$1,350 million (excluding the purchase of cial expertise and its high proactivity, harmony and inter- crude oil). More than 75% of the total amount corresponds nal coordination with its customers and suppliers. to service contracts, and the remaining percentage corresponds to purchase of goods. 4. With agile and efficient Procurement and Contracting processes, maintaining full integrity and transparency. 2020 Procurement Vision 5. Management of business critical categories based on a The work of this Management is guided by the 2020 Procure- model of shared value relationship with suppliers. ment Vision, which is framed in the guidelines given by the Energy Agenda and ENAP Strategic Plan. The 2020 Vision Each of the aspects of this Vision 2020 is based on a set of ini- aims to turn the area into a world-class Procurement and in- tiatives embodied in the 2016-2020 Procurement Roadmap. cludes five aspects: Supplier Management 1. Contribute to the achievement of outstanding safety indices - both from collaborating companies and ENAP’s own The Supplier Management in ENAP is part of the concept of processes of warehouse operation -, and aligning the col- Sustainability, which considers four areas: Safety and Acci- laborating companies with ENAP’s value proposition of dent Prevention, Environmental Care, Economic Sustainabil- being a company integrated with the community and Envi- ity and Relationship with Communities. The importance of the ronmentally responsible. different areas of sustainability in Procurement management is specifically expressed in the program “Supplier Integrated 2. To be valued in the organization for its contribution and Management” (GIP in Spanish). impact in the BUSINESS, its creation of economic value and as agents of change that inspire creative solutions.

152 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

In the context of this program, in 2016 Procurement promot- A good example of a project focused on Relationship with ed the identification and development of more than 15 chal- Communities is the Concón Service Pole Challenge. In its first lenges of high importance and value in the lines of business, year of development, this initiative focused its efforts on set- evaluated and prioritized in the aforementioned aspects, and ting up, in partnership with Corfo, a Development Program then presented these challenges to current and new suppli- for the Pole of Gastronomy and Tourism of the Region of Val- ers and Contractors, and thus generate innovative proposals paraíso. Through it, 50 entrepreneurs from the Concón area and relevant solutions. participate in seminars for a whole year, focused on reducing existing gaps, and improvement of service and offer in their ENAP Magallanes Challenge of “Ensuring operational fea- respective businesses. In addition to the direct benefit it has sibility of a pitless drilling” is a project that impacts on two for entrepreneurs, the development of the program allowed dimensions of sustainability: on the one hand, in terms of En- expanding the food supply and accommodation during the vironmental Care, its main objective is to eliminate definitively plant stoppage of October 2016, in Aconcagua Refinery, thus the construction of sludge and cutting pits, anticipating pos- improving the conditions for ENAP contracting workers. sible changes in the Chilean environmental standard. On the other hand, from the point of view of generating savings, it Another initiative that demonstrates ENAP’s commitment to lo- would no longer incur in operating costs associated with the cal suppliers was the Encounter with nine leading technology existence of such pits. At present, there are two pilot projects companies from the Region of Valparaíso, the second devel- committed to test different technologies, one with a Chilean opment focus of the region approached together with Corfo. SHE company from the Magallanes Region and the other with Its purpose is to stimulate innovation and connect the needs of a foreign company. ENAP with the offer of these companies, besides contributing directly to the development and promotion of the region.

153 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

Benchmarking Gestión de Inventarios

The Procurement Management has adopted as practice to As part of the company’s strategic initiative, which seeks to carry out frequent benchmarking exercises, comparing the improve the use of working capital, Procurement is executing processes, strategies and results of ENAP Procurement with a project of optimization of their inventories of materials and the respective management in other companies, both nation- spare parts management. al and international. In this context, it should be noted that, in October 2016, this Management organized the 4th GPL10 Among other activities, in 2016, the processes and proce- Meeting (Grupo de Procura Latino America) in Chile, bring- dures of physical inventory taking, the segmentation of mate- ing together the Procurement and Supply managers of state- rials in different categories according to the criticality, avail- owned oil and gas companies in Latin America, among which ability and frequency of consumption of each material, as well are Pemex, YPF Argentina, Ecopetrol Colombia, YPF Bolivia as the optimization of The Material Requirements Planning and ANCAP Uruguay. (MRP) system parameters have been implemented.

Besides the optimization of the use of working capital, the project aims to strengthen the control and inventory management, to ensure adequate availability and optimal levels of stocks, as well as to continue to improve safety in the operation of the warehouses.

154 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

155 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

ICAT Management

In line with the relevance of the technological contribution Together with the aforementioned restructuring, ICAT Man- for the development of ENAP Strategic Plan, the Information, agement created a plan to align ICAT with the business strat- Communications and Automation Technology Management egy. The plan aims to make sure that the incorporation of new (ICAT) carried out during 2016 a redesign in its structure to technologies is consistent with the projects and initiatives of face the challenges of the organization. In this sense, ICAT the lines of business. There was a great participation in the Project Directorates were created for the R&C, E&P and G&E creation of the plan, obtaining the contribution of more than business lines, and the ICAT Project Management for cross- 50 participants of different ENAP managements, which al- cutting corporate managements. These new units will act as lowed to define more than 30 work programs and over 160 business partners with specific expertise in creating value projects in a four-year horizon. with technologies in their fields of action. In this context, ICAT Management has made progress in four In addition, the Directorate of Technological Innovation and main objectives in developing the plan for alignment to the Automation was created, which will be focused on implement- business strategy: ing and leading a repetitive technological innovation model that will allow ENAP to have an early approach and the ability to adopt cutting-edge technologies in operations.

ICAT Goal

Deliver standards of excellence in the Continuity of Operations and the regulations on the 1 Operational continuity security of information relating to the services that support critical business processes.

To contribute in the creation of value to the business based on the implementation of digi- 2 tal technologies, originated in the offer of selected innovation initiatives, which originate IT value management from the understanding of the business processes of the internal clients.

3 Simplify and standardize the support model for processes, services and technologies Operational Efficiency

The ICAT team is a reference in its contribution to materialize the strategy of ENAP, in the evolution of satisfaction of its internal customers, and bases its action on: high agreement 4 Operational Excellence with its counterparts, fulfillment of commitments, highly effective coordination and development of offers based on their real contribution to the business.

156 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

1. Operational Continuity munications, during 2016 an experimental pilot was implemented in the Arenal area, on Tierra del Fuego Island. This I. ICAT Services: During 2016, substantive improvements technology allows transmitting video, data and voice in an were made to ICAT services through the incorporation of area of about 400 km2 interoperating with the trunked ra- ITIL practices, which have had a positive impact on the dio system and IP telephony. responsiveness and improvement of business continuity. In addition to this, the project “Reliability of Technological The results of the pilot were successful, giving the possi- Infrastructure” was started, where the technological com- bility to ENAP to prospect the implementation of new tech- ponents that support critical processes will be reviewed, nological solutions that improve the efficiency and safety from which reliability and continuity parameters will be es- of the people. Likewise, this project can set a precedent tablished in line with the requirements of the operation. for the development of new communications technologies, which can be replicated in a variety of industries at the II. II. Information Security: The implementation of controls national level. aligned with ISO 27000 has continued, along with analysis and improvements of industrial and administrative net- II. Development of SAP corporate agreement: Consistent works through Ethical Hacking to detect gaps. In addition with the strategic agreement signed with SAP in 2015, to this, a cyber security model was developed for ENAP, during this year important advances were made in the which will be deepened in 2017, with the aim of safeguard- implementation of SAP solutions, among which the im- ing the company’s operations against possible external or plementation of Phase 1 of the budgeting solutions (SAP internal cyber-attacks. BPC), Human Resources (SAP Payroll and SAP Success Factors), preliminary designs of Safety, Health and Envi- 2. IT Value Management ronment (SAP EHS) and vertical of the Oil & Gas industry (SAP IS Oil & Gas). During 2016, ICAT Management made a significant contribution to the implementation of ENAP’s strategy, participating III. Balance of Crude Oils and Products: Successful com- in more than 40 projects of different business managements, pletion of this project in the facilities of the Refining and among which are: Commercialization business line throughout the country. It stands out as one of the first projects that enhances the I. Pilot Implementation of the eLTE Arenal Zone: Follow- logic of the convergence of Operational Technology with ing an agreement with the Undersecretariat of Telecom- Information Technology (OT / IT).

157 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

In addition, it was one of the drivers in the processes, con- I. Development of new corporate agreements: In line with cepts and nomenclature standardization within the com- the simplification and reduction of applications, during pany, thanks to the work of a multidisciplinary team com- 2016, corporate agreements were signed to unify produc- posed of personnel from the various areas that interact tion management platforms for the E&P business and op- along the supply chain, consolidating a system that com- erational information management for all operations. This plies with audit recommendations and industry trends. will allow working with standardized platforms at the corporate level, improving information management capacity, IV. Optimization of R&C operations: Within the context of as well as reducing the costs of technological operation. ICAT’s alignment plan with the business strategy, during 2016 advances were made in a series of operational and II. New corporate telecommunications model: During 2016, technological initiatives, which aim to collaborate in the ef- a new model for the provision of telecommunication ser- ficiency of processes and Provision of reliable and timely vices was developed, which consists of a consolidated, information in some areas for the Refining and Commer- integrated and standardized service that will allow con- cialization business. solidating current contracts by 80%. It will also enable new high added value services to be achieved in the areas The development of automation projects in the loading yards, of information security, collaboration platforms and unified the implementation of the customer portal and the start of the communications. asset management project based on reliability and risk management stand out. 4. Operational Excellence

3. Operational Efficiency I. User Satisfaction: Consistent with the Operational Ex- cellence objective, ICAT, in collaboration with the Center During 2016, an improvement was made to the ICAT Manage- for IT Studies of the Pontificia Universidad Católica (CETI ment Governance Model in all ENAP units, to generate the UC), conducted in May 2016, the first study of user satis- necessary efficiencies and optimize the value delivered to the faction in all national subsidiaries, whose objective was to business, reducing operating costs: identify the main opportunities for improvement.

158 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

With a high level of user participation, the results showed a • This was complemented by continuous training of per- net satisfaction level of 20.3%, which is a very good basis sonnel in the tools used by the organization. to start working on this topic, since it surpasses the national averages measured by CETI-UC. However, a series of im- During 2017, ICAT’s objectives will be further developed and mediate action plans were identified to strengthen some deepened in order to encourage ENAP to follow the path of services and practices to deliver a better service every day. adopting business digitization, according to the trends of the 4.0 Industry. All this supported by a model of innovation II. Development of people: The challenges posed as part of that allows us to be leaders in supporting the business with ICAT’s strategic alignment plan require the development technology. of internal capacities, where people are a fundamental pillar. For this reason, during 2016, important activities were developed in this line, of which we highlight the following:

• Training in eLTE technology: A team of ENAP ICAT people attended the Huawei facilities, with the aim of training in this new technology implemented in Ma- gallanes.

• Silicon Valley was visited to learn about new telecommunications technologies and their applicability in the Oil & Gas industry.

• Participation in a series of conferences and workshops that allowed ENAP’s team to know state-of-the-art technology in the areas of Software, industrial automation, business processes, among others.

159 / ENAP ANNUAL REPORT 2016

Chapter 4 / CORPORATE MANAGEMENT

INSURANCE

In 2016, ENAP and its subsidiary ENAP Refinerías S.A. signed Seguros Generales Penta Security S.A.; and Protection & In- fire insurance contracts to cover their facilities, buildings, ma- demnity insurance for vessel chartering, issued by West of chinery, stocks, stoppage losses and other physical assets, England and Gard P&I Ltd. with the insurers ACE Seguros S.A. and Penta Security S.A. In 2016, Enap Sipetrol S.A., through the corporate insurance Additionally, and among ENAP’s and its subsidiaries’ main programs contracted by ENAP, which included Civil Liability, insurance policies of in force in 2016, they also include Trans- kept the risks arising from its operation covered. The Civil Li- portation and Civil Liability insurance issued by Compañía de ability policy was issued by Compañía de Seguros Generales Penta Security S.A.

160 / ENAP ANNUAL REPORT 2016

BRANDS AND PATENTS

ENAP REFINERÍAS S.A. The brands of ENAP Refinerías S.A. ENAP SIPETROL S.A. The brand ENAP Sipetrol S.A. Is are registered and protected, according to the current legal duly registered and in force in Chile, Argentina, Colombia, regulations. These include the word and mixed brands Pe- Peru, Panama, Egypt and Uruguay. In Brazil and Venezuela trox, RPC, and Refinería de Petróleo Concón. are registered, but in the process of renewal or acceptance. There are no registered patents.

161 / ENAP ANNUAL REPORT 2016

CHAPTER 5 BUSINESS LINES

162 / ENAP ANNUAL REPORT 2016

BUSINESS LINES

163 / ENAP ANNUAL REPORT 2016

Exploration and Production Business Line

164 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Management summary

In 2016, ENAP’s Exploration and Production (E&P) Business of the military permits of the area. This is slightly offset by the Line, including ENAP Magallanes, produced 20.6 million bar- good performance in Ecuador, where the drilling campaign rels of oil equivalent (MMboe) of hydrocarbons, down 1% in the PBH-I block had successful results in the Inchi wells. from 2015 production. In Magallanes there was greater gas production, due to the This is explained by the cancellation of drilling activities in good results obtained in the exploration and development the Pampa del Castillo block (PDC), in Argentina, given the wells in the Arenal Block. international economic context of the industry and a decline larger than expected in the Campamento Central-Cañadón Under the investment plan, 59 new wells were drilled in the Perdido (CCCP) block. E&P business line (5 crude oil wells and 54 gas wells). The results in the Arenal block in Magallanes, operated by ENAP, are In addition, Egypt shows a lower production compared to highlighted. Forty-seven wells were drilled, of which 37 were 2015, due to the natural decline of Shahd area wells and a development wells (28 successful fractures and 9 yet to be drilling campaign that was not executed due to the restriction fractured) and 10 fractured exploration wells, also successful.

165 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

ENAP 2015 AND 2016 PETROLEUM AND GAS PRODUCTION

2015 2016 Variation 2016/2015 Country Oil Gas Total Oil Gas Total Oil Gas Total (MBBLS) (MBOE) (MBOE) (MBBLS) (MBOE) (MBOE) (MBBLS) (MBOE) (MBOE)

Argentina 3.471,8 2.344,6 5.816,4 3.038,8 2.325,8 5.364,6 -12,5% -0,8% -7,8%

Ecuador 4.628,9 - 4.628,9 4.770,6 0,0 4.770,6 3,1% - 3,1%

Egypt 4.297,0 - 4.297,0 3.590,6 0,0 3.590,6 -16,4% - -16,4%

E&P International 12.397,8 2.344,6 14.742,3 11.400,0 2.325,8 13.725,8 -8,0% -0,8% -6,9%

Magallanes (Chile) 1.069,6 4.919,7 5.989,2 987,3 5.908,8 6.896,1 -7,7% 20,1% 15,1%

E&P National 1.069,6 4.919,7 5.989,2 987,3 5.908,8 6.896,1 -7,7% 20,1% 15,1%

TOTAL E&P 13.467,4 7.264,2 20.731,6 12.387,3 8.234,6 20.621,9 -8,0% 13,4% -0,5%

Oil production

The volume of oil produced abroad in 2016 by ENAP was 11.4 However, this decrease is slightly offset by Ecuador, since million barrels, which represents a decrease of 8% compared there the production grew by 3.1% in 2016, compared to 2015, to the previous year. This decline is explained by lower pro- given the good results of the Inchi wells from to the PBH-I block. duction in Egypt, down 16.4% compared to 2015, due to the natural decline of Shahd wells and the postponement of the Oil production in Chile, Region of Magallanes, reached 987 drilling campaign. thousand barrels, 7.7% lower than the volume produced in 2015. The decrease in production is mainly explained by the In Argentina, production was reduced by 12.5% compared to closure of wells of the Artificial Lift System initiative due to opti- 2015, due to a greater decline in the Bellavista Sur area (CCCP) mizations and lower production of the CEOP’s. and the cancellation of the drilling campaign in PDC, given the international economic context mentioned above.

166 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

ENAP SIPETROL MONTHLY PRODUCTION OF OIL (IN THOUSANDS OF BARRILS)

Oil Sipetrol (Mbbls) 1.200 1.012 1.011 964 946 939 958 951 941 960 1.000 911 909 898

800

600

400 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Oil Magallanes (Mbbls) 140

120 97 100 88 85 83 82 85 78 79 77 81 76 76 80

20 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

167 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Natural gas production

ENAP’s 2016 natural gas production in the international subsid- Meanwhile, natural gas production in Chile (Magallanes) iaries (Sipetrol) reached 395 MMm3 (2,325,814 barrels equiva- reached 1 million standard cubic meters (5,908,814 barrels lent), a decrease of 0.8% compared to 2015. This decrease is equivalent), which represents a 20.1% increase in production explained by an incident occurred in Magallanes Area, which compared to the previous year. This increased production in caused the production restriction until verifying that the AM2 2016 was associated with the success of the Arenal Project’s platform Riser was in proper condition of integrity. exploration and development campaign.

Gas Sipetrol (MBoe) 250 224 219 210 204 207 209 186 195 200 180 183 163 146 150

100

50 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Gas Magallanes (MBoe) 593 557 555 569 600 528 484 493 447 423 426 443 391 100

200

20 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

168 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

169 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

NATIONAL EXPLORATION AND PRODUCTION

ENAP’s exploration activity in Chile continued to be developed with an active drilling campaign, particularly in the Ma- gallanes Region.

Block Dorado-Riquelme

ENAP has a 50% stake in this block (being the operator), in fracturing was performed for the Dorado ZG-1 and Palenque partnership with Methanex Chile, under the CEOP scheme, Oeste ZG-1 wells, in addition to the Dorado Sur 12 well; and signed in May 2009 between both partners and the State of between March and June 2014, production tests were carried Chile. out on these wells, resulting in the production of gas at the Dorado 5 well. This project aims to explore the presence of gas and develop the commercial reserves that are found, to ensure compli- In July 2014, it was decided to continue with the Block Ex- ance with the deliveries of this hydrocarbon required by the ploitation Phase and not the Exploration Phase. As a result, cities of the area, and contribute to satisfy the gas demand of during the last quarter of 2014, the closure operations were the Methanex plant. initiated in five wells that resulted nonproductive. In February 2015, the surface closure of the wells Vellón 2, Dorado 1T, In 2013, the Environmental Assessment Service (SEA in Quirquincho Este 1 and Palenque Este 1 was carried out. Spanish) approved the Environmental Impact Statement to perform hydraulic fracturing work on four drilled wells. Thus, On March 22, 2016, the Palenque Norte ZG-1 Ex C well be- during January and February 2014, completion work was car- gan to be drilled, which was completed on April 14, reach- ried out at the Palenque Norte 12 well (Springhill), leaving this ing a final depth of 3,275 m, with objective sandstone of the well ready for hydraulic fracturing. Subsequently, hydraulic Glauconitic Zone.

170 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

On May 22, the drilling of the Puerto Sara Oeste ZG-1 Ex A Investment disbursements in 2016 were US$37,393 million. well was started, which was completed on June 25, with a final depth of 3,066 m., also with objective sandstone of the Intracampos Block Glauconitic Zone. This block belongs 100% to ENAP. During 2015, studies were During the same month, the Palenque Norte ZG-1 well was carried out in the block. fractured, which was interrupted by a tool caught in the well and that was recovered in July. In 2016 the investment disbursements were US$47,000.

During the period July-September 2016, two wells with a Arenal Block Glauconitic Zone objective were drilled: South Dorado ZG-1 Ex A, with a final depth of 2,348 m, and Pilchero Sur ZG-1 Ex This block belongs 100% to ENAP. By 2015, 52 wells have B, with a final depth of 2,581 m. In addition, the drilling of the been drilled, which complied with the program of the year. In Cahuil ZG-1 well began, and as of September 30, 2016, was addition, 7 appraisal wells were drilled in 2016. being drilled. During 2016, 47 gas wells were drilled, of which 37 were de- Between October and November 2016, sowing work was car- velopment wells and 10 exploratory wells. ried out to recover the vegetation in the intervened areas of 8 wells. Investment disbursements in 2016 were US$173,169 million.

At the end of December 2016, the accumulated net investment in the CEOP Dorado Riquelme Block amounted to MMUS$276.4, and the accumulated gas production was 848.5 MMm3.

171 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

SPECIAL CONTRACTS OF OIL OPERATION (CEOP)

In 2011, ENAP signed a series of agreements to participate riod, but also included the drilling of four other development in five blocks located on Tierra del Fuego Island: with Geopa- wells, of which two were drilled: Chercan 2 and Tenca 3, plus rk, regarding Isla Norte, Campanario and Flamenco blocks; the re-intervention of 2 existing wells, Bandurria 12 and Fla- with the consortium YPF Chile and Wintershall Chile, regard- menco 28. Exploratory wells were also put into production, ing San Sebastián Block; and with YPF Chile regarding the which were preliminarily successful, where ENAP - according Marazzi-Lago Mercedes block. to Exhibit H - had to contribute with 50% of the costs to complete the works: Chirihue x-1, Tenca x -1, Chercan x-1 and As a result of this procedure, ENAP and the mentioned com- x-2, Omeling x-1. panies submitted to the Ministry of Energy the respective requests for the subscription of Special Petroleum Operations In November 2015, Geopark informed the Ministry of Energy Contracts (CEOP) for the indicated blocks. of the passage to the second exploratory period, noting that ENAP decided not to continue in the next phase, with which Flamenco Block the state-owned company participated in those areas with declared commerciality. This CEOP became effective in November 2012, with the purpose of exploring and exploiting the Flamenco Block hy- In the third quarter of 2016, Chirihue X-1 and Chercan X-1 drocarbon deposit. The contract was signed by the State of wells are in operation, reaching a gas production of 18.5 Chile, Geopark TdF (operator) and ENAP, both with a 50% Mm3s per d and 2.23 m3e per d of condensate in September. stake. During the last quarter of 2016 ENAP did not carry out activi- Thus, the first exploration period began, which lasts for three ties in this CEOP. years. Then there are two more periods, of two years each, to reach a contract for a maximum of 25 years. The cumulative net annual investment carried out by ENAP as of December 31, 2016 is US$ 4,000, associated with the 2015 The execution of the 2014 Work Program made it possible to activity (carry over payments). meet the minimum commitments of the first exploration pe-

172 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Isla Norte Block At the Coordination Committee held on August 8, 2016, it was reported that there were no investment activities in the block. In November 2012, this CEOP entered into force for the ex- The wells are closed. ploration and exploitation of the hydrocarbon deposit called Isla Norte Block, signed by the State of Chile, Geopark TdF Thus, during the last quarter of the year, ENAP was not active (operator with a 60% stake), and ENAP, with a participation in this CEOP. of 40%. The cumulative annual net investment made by ENAP as of As in the previous CEOP, the first exploration period lasted December 31, 2016, is US$ 32,000, associated with the 2015 for three years and subsequently there were two periods of activity (carry over payments). more than two years each, in order to reach a contract for a maximum of 25 years. Campanario Block

During 2015, the Ministry of Energy accepted the consor- In January 2013, the CEOP entered into force for the explora- tium’s request to extend the first exploratory period for 18 tion and exploitation of the Campanario Block hydrocarbon months, with the aim of completing the studies of the block. deposit, subscribed by the State of Chile, Geopark TdF (operator, with a 50% stake), and ENAP, with a 50% stake. Currently, the operator works on updating geological and geophysical models that will allow a better definition of new In 2015, the Ministry of Energy approved the consortium’s re- well proposals. quest to extend the first exploratory period for 18 months, in order to complete the block’s studies. In June 2016, the Ministry of Energy authorized the modification of the minimum commitments acquired for the First, Sec- During 2016 continued the work of updating the geological ond and Third Exploration Periods of this CEOP. and geophysical models that will allow defining with better accuracy the new proposals of wells. Also, on June 30, the Currently, the CEOP has no production; The Pantano Oeste Ministry of Energy authorized the modification of the minimum X-1 well has an oversupply of water, which makes the opera- commitments acquired for the First, Second and Third Explo- tion non-commercial. ration Periods of this CEOP.

173 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Currently, the CEOP has no production; The Bellavista Sur During 2015, six exploratory wells were drilled in the block: X-1 well has an excessive water supply, which makes the op- Sur X-1 of 2,330 m; Gaviota Sur X-1, with a depth of 2,356 m; eration non-commercial. Cisne Oeste X-1, with a depth of 2,241 m; Falco X-1, with a depth of 1,621 m; Chincol X-1, with a depth of 1,615 m; and At the Coordination Committee held in August 2016 it was Huala X-1, with a depth of 2,501 m. The drilling of Carpintero reported that there were no investment activities in the block. X-1 well was also started. The wells are closed. It should be noted that in this CEOP, ENAP is 100% Carry. As in the blocks described above, during the last quarter of 2016, ENAP did not carry out activities in this CEOP. An OCM was held on December 9, 2015, to review the status of the project to date and the consortium transition to the The cumulative annual net investment made by ENAP as of next period. Wintershall and ENAP decided not to continue to December 31, 2016, is US$ 24,000 associated with the 2015 the next period. YPF continues to the second exploration pe- activity (carry over payments). riod, with a minimum commitment of 1 well to be drilled during 2017 and the completion of 2 wells drilled in 2015. San Sebastián Block At present, YPF is completing production tests for Cisne This CEOP came into force in 2013, with the purpose of ex- Oeste X-1 and Carpintero X-1 wells. Early reports indicate the ploring and exploiting the San Sebastián Block hydrocarbon presence of hydrocarbons in both wells. deposit. This contract was signed by the State of Chile, YPF Tierra del Fuego (operator, with a 40% stake); Wintershall, Marazzi-Lago Mercedes Block with a 10% stake, and ENAP, with a 50% stake. This CEOP has also been in force since 2013, with the objec- The first exploratory period had the same scope as the tive of exploring and exploiting the Marazzi-Lago Mercedes CEOP’s previously described, with similar extension options: Block hydrocarbon deposit. The contract was signed by the two more periods, of two years each, to reach a contract for a State of Chile, YPF Tierra del Fuego (operator, with a 50% maximum of 25 years. stake), and ENAP, with a 50% stake.

174 / The scope of the first exploratory period and its successive extensions are identical to those of the above mentioned blocks.

During the second quarter of 2015, the exploratory well Loica X-1, of 3,650 m., was drilled, aiming the Springhill formation. In this CEOP, ENAP is 100% Carry.

The OCM was held on December 9 of that year, where the status of the project was reviewed to date. YPF and ENAP decided not to continue to the next period.

Currently, it is in the process of returning the area to the State. ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

INTERNATIONAL EXPLORATION AND PRODUCTION LATIN AMERICA

Argentina

Located in the Austral Basin, ENAP Sipetrol Argentina acts interventions were carried out with workover equipment, and as operator of the exploitation concessions in the Area Ma- well-repair activities were also continued at the Campamento gallanes deposit and in CAM 2 / A Sur (Lot Poseidon), with a Central-Cañadón Perdido. 50% participation, and also as operator, with 33.33%, on the exploration permit E2 (ex CAM-1 and CAM-3). In the marketing area, during 2016, the price of gas registered a positive evolution and the “Incentive to the Injection It is operator and holds 100% of the participation interest in of Natural Gas Surplus” Program continues until December the exploitation concession Pampa del Castillo-La Guitarra, 2017, for which it considers a payment of US$7.5 per MMbtu in the San Jorge Gulf Basin. In addition, it participates as a for the gas injected into the system above a base production partner, with a 50% stake, in the exploitation concession of curve. Campamento Central-Cañadón Perdido, where the operator is YPF. With respect to the extension of concessions, the current status per block is as follows: In Area Magallanes during 2016 tasks were carried out to improve operational reliability and started the works of the Área Magallanes (AM): A Binding Contract was signed for Magallanes Incremental Project (PIAM), developed by the the extension of the partnership agreement with YPF in Area Temporary Business Association (UTE in Spanish) between Magallanes (AM). Subsequently, on January 8, 2016, the ENAP Sipetrol Argentina and YPF. Its objective is to substan- Argentine Government issued Administrative Decision No. tially increase the production of natural gas and associated 1, which extends for 10 years the jurisdiction of the National crude oil from the Magallanes Field, located in the eastern State, which corresponds to one of the three jurisdictions of mouth of the Magellan Strait. In Pampa del Castillo-La Gui- the Concession of Exploitation of Hydrocarbons from the Area tarra, development was focused on secondary recovery and Magallanes offshore zone.

176 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Pampa del Castillo (PDC): on October 1, 2015, the Legisla- CAM 2/A Sur ture of the Province of Chubut ratified the extension agreement until 2026 of the exploitation Concession of the area. For this reason, after studying the case, with the partner YPF it was decided to reverse CAM 2 /A Sur Area to the Province Área Campamento Central-Cañadón Perdido (CCCP): In this of Tierra del Fuego, for which the negotiations with YPF and area that is shared in equal percentages with YPF S.A., the the province itself were initiated. concession extension signed in 2013 with the Province of Chubut, continues. From 2014, driven by the improvement in gas prices and the coming into force of the Stimulus to Surplus Injection Program Production of the Area Magallanes Argentina until December 31, 2017, it was decided to continue developing alternatives to reactivate the area, in order to assess the The production of Enap Sipetrol Argentina, in the reservoir remaining gas resources. Area Magallanes, totaled 777,962 barrels of oil and 395.16 Mm3 of natural gas (2,325,814 BOE) in 2016, which gives a E2 (EX CAM-1/CAM-3) Area total aggregate production of 3.1 million barrels oil equivalent (BOE). During 2014 some studies for E2 (EX CAM1 / CAM-3) area were completed. It should be noted that Enap Sipetrol Argen- These results show a decrease compared to 2015, mainly tina is the operator of Area E2 in the Austral Basin (CAM in due to two incidents: one occurred in March in the General Spanish), under the association agreement (signed in Sep- San Martin gas pipeline (gas pipeline rupture), which meant tember 2006) with state-owned company Energía Argentina that the area was stopped for 1 day as a preventive measure; Sociedad Anónima (ENARSA) and YPF, which ratified the the second Incident affected the AM2 in May 2016, which previous agreement signed in February 2006. required the preventive detention of the entire Magallanes Area for three days. In addition, a failure in the Norwalk turbo- Subsequently, it signed the E2 Temporary Business Associa- charger occurred in September. In October, the production of tion Agreement, which regulates the relationship of the com- the asset was fully normalized. panies that participate in this alliance and ratifies Enap Sipet- rol Argentina as operator of the E2 Area.

177 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Pampa del Castillo-La Guitarra 2016, the scheduled drilling campaign was executed, due to the delay in the construction of the multilocation due to con- The production of Sipetrol Argentina in Pampa del Castillo- flicts with the community. Only six wells were subjected to La Guitarra deposit reached 1.4 million barrels in 2016, 14% workovers. lower than the volume obtained in 2015, due to the decline of the production baseline and the cancellation of the drilling Ecuador campaign. The 13-year presence of ENAP SIPEC in Ecuador has allowed In 2015, the drilling campaign scheduled was not executed, it to consolidate its position in that country, through explo- only 12 workovers of wells were carried out. ration, development and exploitation in the Blocks Mauro Dávalos Cordero (MDC) and Paraíso, Biguno, Huachito and During 2016, and given the international context of the indus- Intracampos ( PBH-I). try, the drilling activity (5 new wells) was suspended. Repairs were made with two workover equipment. Specifically, 15 On the other hand, it continues the participation in exploration workovers of primary wells and nine workovers of secondary activities in the Consortium Block 28, through the company of wells were executed. ENAP, EOP Operaciones Petroleras S.A.

Campamento Central-Cañadón Perdido Exploration Activity

The production of Enap Sipetrol Argentina at the Campa- In the Intracampos Area of the PBH-I Block, incorporated into mento Central-Cañadón Perdido deposit, totaled 0.9 million the portfolio of Ecuador in 2011, the exploration activities car- barrels of crude oil in 2016, representing a decrease of 13% ried out included the acquisition and interpretation of seismic compared to the production in 2015, due to the natural de- and the subsequent drilling of two exploratory wells (Inchi 1 cline of the reservoir. and Copal 1).

By 2015, three development wells, all of them producers, had During 2015 and 2016 a total of six development and apprais- been drilled, and ten well workovers were carried out. During al wells were drilled in the Inchi field. The successful results

178 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

of these drillings allow to maintain the exploratory potential of On the other hand, in 2016 the drilling of four successful de- this area. velopment and appraisal wells (Inchi B-2, Inchi B-6, Inchi B-7 and Inchi A-8) was carried out. Initial daily production of these Block 28 was incorporated in 2015, where EOP Operaciones six wells has fluctuated between 400 bopd and 1100 bopd. Petroleras S.A. participates with 42%, as operator in the consortium formed by Petroamazonas EP (51%) and Belorusneft Also, during 2016, Ecuador produced 4.7 million barrels, (7%). In this block progress was made in previous activities which allowed for a seventh consecutive year to maintain a to obtain the Environmental License and drilling of a strati- daily production plateau of approximately 13,000 barrels. In graphic well began to reduce the geological risk of the Mira- addition, a historic milestone was achieved by reaching a cu- dor prospect. mulative production of 70 million barrels.

Development and exploitation activity

During 2016, and based on the update of the static and dynamic models, it was possible to identify additional potential in the MDC Block, which allowed to renegotiate a new modifying contract with the Hydrocarbons Secretariat. This contract expands the operation in this field from 2025 to 2034 and improves the incremental rate in exchange for new secondary recovery investments, including: drilling a Re-entry (MDC-12 RE injector, made in 2016), two producing wells and an injector well (to be executed in 2017).

At the end of the 2015 period, the drilling of two development wells (Inchi A-4 and Inchi A-5) was completed in the Inchi Field of the PBHI Block; their production was incorporated in 2016.

179 / NORTH AFRICA

Egypt

The volume of crude oil produced by ENAP Sipetrol Egypt ENAP Sipetrol, through Sipetrol International S.A., is the was 3.6 million barrels, 16% over the production in 2015, giv- operator of block East Ras Qattara, with a 50.5% stake, en by the good results of the wells in the Shahd field. in partnership with Kuwait Energy Company (KEC), which has the remaining 49.5%. Sipetrol and KEC form East Ras Qattara Block the contractor Consortium.

A number of discoveries have been made in the East Ras Qattara Block since 2007 to date. The commercial development of these discoveries is carried out by the joint venture formed between the Contractor Consortium and the Egyptian General Petroleum Corporation (EGPC), each party with 50% of the shares.

During 2014 three development wells were drilled, Shahd- SE8, Al Zahraa-4 and Shahd-SE9, with positive results. More- over, concluded the drilling of the exploration well Diaa-2 and a second exploratory well was drilled, Shahd-4, all successful.

In 2015 there were no drilling activities, however progress was made in the building of the Pipeline Project.

In 2016, the drilling campaign had to be suspended due to restrictions on military permits. However, the construction of the oil pipeline was successfully completed. ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

ENAP SIPETROL S.A. / RESULTS

ENAP Sipetrol S.A. reached a profit of US$ 25.5 million, com- of US$19.3 million due to the cost reduction as a result of the pared to US$9.1 million obtained on December 31, 2015. On devaluation of the currency, and lower share of depletion in the other hand, EBITDA reached US$135.6 million, which PDC due to the deferral of the extension in 2015. Likewise, in compares with US$174.8 million obtained as of December Ecuador there is an increase in the margin of US$2.3 million, 31, 2015. due to increased crude oil revenues as a result of higher volume in PBH-I, and lower costs, due to optimizations. The equity of Enap Sipetrol S.A. was US$609.6 million. On the other hand, there is a decrease in the margin in Egypt The positive variation of the Gross Margin of US$6.9 million, of US$15 million, due to the lower crude price of 16%, com- compared to the previous year, can be explained by: the re- pared to 2015, and lower volume, which has a negative im- sult in Argentina, which presents an increase in the margin pact on revenues.

181 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

E&P INVESTMENT IN CHILE

The investment of E&P Business Line focused primarily on Arenal the exploration and exploitation of gas in Magallanes. The investment was US$224 million, distributed in the following (Exploration Project. ENAP is the operator with full ownership). projects: In 2015, 59 wells with gas target were drilled (41 unconven- CEOP Dorado-Riquelme tional and 5 Springhill): i) 10 exploratory wells, of which 7 were 100% successful and 3 are awaiting production tests (Exploitation and Exploration Project. ENAP is the operator and/or fracture; (ii) 49 development wells, of which 47 were and has a 50% participation interest). productive, with a success rate of 100%, and two wells were left pending production and / or fracture testing. In 2014, Dorado 5 well was drilled, resulting gas producer. In addition, the 3 exploratory wells drilled in 2013 (Dorado ZG-1, In 2016, 47 gas-target wells (46 ZG and 1 Springhill-ZG well) Palenque Oeste ZG-1 and Dorado Sur 12) were fractured; the were drilled, of which 37 were successfully developed; 9 are fracture of the well Palenque Norte 12 is still pending due to pending fracture and 10 were successful exploration wells. mechanical problems. The well in Springhill was unsuccessful, but it was finally completed as ZG. At the end of December 2016, the CEOP Dorado-Riquelme block reached a net accumulated investment of US$276.4 For 2017, it has been considered the drilling of 20 wells with million and 848.5 Mm3 of cumulative gas production. ZG target, 2 exploratory wells and 45 fractures, in addition to the construction of the surface facilities for wells to begin The drilling of the sixth well ZG and the realization of a frac- production. ture of shale oil is scheduled for 2017.

182 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Intracampos Cullen-Lynch

(Exploration Project. ENAP is the operator with full ownership). erating Agreement (JOA) for the operation of the Block, both with 50% participation, an instrument by which PAE was des- During 2014 five oil wells were drilled: Cullen-201 (ex PK-A), ignated Operator of the Coirón Block. Lynch 42 (ex V1 (Pk)), Fortuna Sur 1, Fortuna 2 (ex C) and Paraguaya PK 4 (ex -E), of which 2 are in production, 1 is be- On September 14, 2015, ENAP transferred part of its partici- ing evaluated, 1 in completion and the other was abandoned. pation interest in the CEOP to Conocophillips South America Ventures LTD. (“COP”); the participation of the parties is as During 2016, continued the area studies started in 2015. follows: a) PAE, 50%; (b) ENAP, 45%; and (c) COP, 5%. Sub- sequently, on September 17, 2015, ENAP acquired the en- No activity is considered for 2017. tire stake of PAE in the CEOP, becoming operator of Coirón Block. EOP Coirón Thus, the ownership was set as follows: a) ENAP, 95% and, b) Background COP, 5%. The respective assignment contracts have the approval of the Ministry of Energy and the Comptroller General The Special Operation Contract for the exploration and exploi- of the Republic took cognizance of it. tation of hydrocarbon deposits in the area known as “Block Coirón” was originally signed between the State of Chile, as On June 13, 2016, the contracting parties and ConocoPhil- Principal, and the Contractor formed by Pan American En- lips Chile Ventures SpA (“COP Chile”) signed an Agreement ergy Chile Limited (PAE) and ENAP. whereby, subject to the approval of the Ministry of Energy and the Comptroller General of the Republic have taken cogni- This CEOP entered into force on July 29, 2008. Subsequently, zance, ENAP will assign 44% of the Contractor’s rights, inter- on November 10, 2008, PAE and ENAP signed the Joint Op- ests and obligations to COP Chile.

183 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Validity and evolution of the CEOP Coirón Block Roles of ENAP

The CEOP Coirón Block is a contract signed for a maximum In addition to being partner, ENAP has fulfilled the following term of 35 years, counted from the date of its coming into roles in the Coirón Block: force, and consists of an Exploratory Stage of three exploratory periods of 36, 24 and 24 months, and a Stage of Exploita- (a) Service Provider: ENAP acted as contractor of PAE-Op- tion. The first exploration period, originally 36 months and with erator in the exploration, development and operation stages. 3 extensions of 6, 3 and 3 months, ended on July 28, 2012. This was fulfilled based on the option of rendering services by At the end, PAE and ENAP communicated to the Ministry of one of the parties is agreed in the Joint Operation Agreement Energy their decision not to continue to the second Explora- (JOA) signed by PAE and ENAP, and that the exploitation in tion period and to return to the State of Chile the part of the question is a Joint Operation. Coirón Block area provided for in the CEOP, maintaining only the exploitation areas. (b) Product Buyer: In the case of gas, following the public bidding for gas from a Gas Exploitation Pilot Project, devel- Financing of Projects in the Coirón Block oped in the Los Cerros-El Fierro sector, the State exercised the right of reacquisition contemplated in Art. 9 of the CEOP, The development of exploration projects was carried out at through ENAP, which signed the gas purchase contract with full cost of PAE (ENAP is Carry) and included the registra- PAE-Operador in representation of the State. In the case of tion of 3D seismic data and the drilling of exploratory wells in oil, which has a marginal production, following private ten- the Coirón Block, above a minimum plan established in the ders authorized by the Ministry of Energy to PAE-CEOP Op- CEOP for the Exploration Stage. The development of exploita- erator, ENAP made oil spot purchases to PAE. tion projects was financed in equal parts by PAE and ENAP. Considering the low production of gas and oil of the Coirón Block, on January 18, 2016, the Coirón Block gas and oil pro-

184 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

duction was stopped, which was reported by ENAP to the d) The Ministry of Energy was requested to authorize the Ministry of Energy. marketing of the products obtained during the production tests, to market them directly and exempt the Contractor 2016-2017 Plan from tendering these products.

El proyecto ZG (gas no convencional en la Zona Glauconíti- e) In all cases, given the success, the installation of the cor- ca-ZG) en el Bloque Coirón-Plan 2016, consideró: responding surface production infrastructure has been considered for 2017. a) The workover and fracture of the well El Fierro 1 in the ZG play. To this date, after completing the workover and the Regarding point a), ENAP will participate in 100% of the in- scheduled fracture, it is planned to carry out expanded vestment associated with the activities planned in the El Fi- production tests in this well. erro 1 well. b) The construction of access roads and location, drilling, Points (b) and (c) are Phase I of the project agreed by ENAP completion-fracture of the Ñanco ZG-1 well, in the ZG with ConocoPhillips in the NGC 1 and Kalkin ZG-1 wells, and play. To this date, after completion of the drilling and in which ENAP participates in carry in the drilling and comple- fracture, it is scheduled to conduct expanded production tion stage, providing for disbursement Investments only in the tests in this well. productive phase. c) The construction of access roads and the location, drill- Depending on the success of this Phase I, and on the result ing, completion-fracture of the Kalkin ZG-1 well in the ZG of a vote to be held at a meeting of the Operative Commit- play, as well as recognizing the Cretaceous sequence. tee, which will take place in February 2017, the consortium At this time, well drilling has been completed and drill- will go on to Phase II, consisting of drilling a horizontal well ing, fracture testing and expanded production testing is (4th Quarter of 2017), in which ENAP would also participate in scheduled for this well. carry in the drilling and completion stage.

185 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

The success of this ZG project would represent the beginning ing equipment, were conducted. Caupolicán 2 well reached of a new productive cycle in the Coirón Block. the main objective (Fm. Springhill) at 3846 m. and at a final depth of 3910 m., with a design of well with technical limita- The cumulative net investment made by ENAP as of Decem- tions, presenting a very low supply of gas. The well is cur- ber 31, 2016, amounts to MUS$44,015.20. rently closed (BU) waiting for pressure recovery to define possible future actions. On the other hand, during 2017, the fractures of El Fierro, Ñanco and Kalkin wells will be paid and the infrastructure will 3. A technical audit is carried out to Río Oro-Cabaña pipeline. be developed. ENAP informs the Operator that the recommendations made by the Auditor must be incorporated before putting into op- CEOP Caupolicán eration the facilities, for which PetroMagallanes presented an implementation program. (Exploitation Project. ENAP has a 40% participation interest, Methanex 20% and PetroMagallanes the remaining 40%). 4. On June 15, 2015, the seismic group declared finished the operations of 3-D Seismic acquisition in the Clarencia Seis- Background mic Campaign. ENAP received the processed cube on the first week of October, which was subjected to quality control In 2015, the following activities are carried out: and turned out to be positive. The stage of interpretation is in progress at ENAP, which is pending by the operator. 1. The extension of the Second Exploration Period until De- cember 20, 2015, was requested to the Ministry of Energy. To date, ENAP’s investment for this second exploration pe- This extension was granted on June 22, 2015, by means of riod is US$12.4 million. For the first exploratory period, ENAP public deed until the date already mentioned. contributed a total of US$11.3 million.

2. On May 2015, the Operator decides to unilaterally initiate As of December 2016, no operational activities were carried the drilling of the well Caupolicán 2. A series of technical in- out in the block. spections requested by ENAP to determine conditions of drill-

186 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

187 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

E&P INVESTMENT ABROAD

Argentina Egypt

E&P investment in this country focused on: E&P investment in this country focused on:

Pampa del Castillo-La Guitarra Guitarra (Exploitation proj- East Ras Qattara (Exploitation and exploration project. ENAP ect. Sipetrol is the operator, with full ownership). Sipetrol is the operator, with a 50.5% stake in the Contractor Consortium, which, in turn, commercially develops this block In 2016 no drilling activities were conducted, only 24 work- through a joint venture with EGPC, where each party partici- overs of wells were carried out. pates with 50% each).

Campamento Central-Cañadón Perdido (Exploitation proj- On November 24, 2016, the pipeline that was under con- ect. Sipetrol has a 50% participation interest). struction (87 km) was inaugurated, with a capacity to transport 30,000 barrels a day. The investment was MMUS$11.2 In 2015, 3 development wells were drilled with positive results. (50.5%).

In 2016 no drilling activities were conducted, only 6 workovers of wells were carried out.

188 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Ecuador

E&P investment in this country focused on the following For 2017 the drilling of three wells is considered. blocks: In 2016, in the PBHI Block, the following activities were car- Mauro Dávalos Cordero (MDC) and Paraíso Biguno ried out in Intracampos: Huachito Intracampos (PBH-I) (Exploration and exploitation • Drilling at a lower cost than budgeted and without incident projects. Enap SIPEC is the operator, with full ownership). from four successful development and appraisal wells (In- chi B-2, Inchi B-6, Inchi B-7 and Inchi A-8). In addition, In the MDC Block three phases of Secondary Recovery have these wells were drilled with technologies that ensured the been considered, of which the first two have been completed. early incorporation of the production and the stimulation of the reservoirs during their completion. In 2016, the following activities were carried out in MDC Block: • Construction of a 10.5 km oil pipeline from the Inchi A - • Updating of environmental permits. Sacha platform.

• Start of seismic reprocessing. • Construction in the Inchi A platform of early facilities. The electric generation project for the use of associated gas • Drilling of an injector well. was also started.

• Construction of a flow line connecting the Inchi A and Inchi • Updating of the static and dynamic models of the block, B platforms. which provided the basis for the negotiation of a third phase. • Installation of Lact Unit to supervise field production.

The drilling of two wells are considered for 2017.

189 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

Block 28 Consortium (Exploration and Exploitation Project. Block 3 Jambelí (Exploration project. Enap SIPEC is the op- EOP Operaciones Petroleras S.A. is the operator, with a par- erator, with full ownership). ticipation of 42%). The exploratory commitment with the Ecuadorian State, in- In 2015 the Consortium Block 28 was formed by EOP Op- cluding seismic studies, was met, and there were no impedi- eraciones Petroleras S.A. (operator), Petroamazonas EP and ments or contingencies. Belorusneft. In 2015, the project was closed and the block was returned. During 2016, exploratory investment activities were carried out, including: During 2016, the environmental audit of the closure was carried out for approval by the Ministry of Environment and the • Start of activities to obtain the Environmental License for return of the block. exploratory well drilling.

• Start of drilling of stratigraphic well to reduce the geological risk of the Mirador prospect.

• Implementation of the Community Engagement Program.

• Definition of the location of the exploratory well, both bottom and surface. Topographic study and acquisition of land for access roads to the exploration platform.

In addition, the execution of civil works and community activities are planned.

190 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Exploration and Production

191 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

REFINING AND COMMERCIALIZATION BUSINESS LINE (R&C)

192 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Management Summary

2016 was a good year for ENAP. For the fourth consecutive During the year 2016, the Petropower thermal plant was ac- year, the company achieved profits and an EBITDA of more quired (an asset in which ENAP already had a stake), which than MMUS$600, added to an overall improvement in the fi- guarantees the electricity supply for the operation of the re- nancial situation. This result was achieved despite the fact fineries. that the external scenario, from the perspective of oil prices, was considerably more negative than what the market and The achievement of a high level in the operational availability ENAP projected. of refineries and the achievement of a higher production of valuable products (diesel, gasoline and kerosene) allowed to Thus, the company has stabilized financially, existing proj- obtain a higher yield per refined barrel. Indeed, in 2016 80% ects under development and others to be executed, in a his- of production of valuable products was achieved. toric investment plan of more than US$3,000 million between 2017 and 2020.

Crude Oil Total R&C Origin of Refined Crude Oil in 2016 Mm3 % Can. Light 343 3 97 Intermediate 5.591 49 South America Heavy 3.880 34 3 National Supplementary Loads 1.655 14 TOTAL 11.468 100

The production of fuels and other products in 2016 was 11.0 94.0%, figures that were similar or exceeded those recorded million m3. Of this total highlight gasoline with 36% and diesel in 2015 (74.6% and 92.4%). with 31%. The period’s volumetric yield was 95,9%. Without supplementary loads, in 2016 the refineries of ENAP, The average utilization rate of both Aconcagua and Bío Bío Aconcagua, Bío Bío and Gregorio, processed 9.8 million m3 Refineries was 74.3% and the plant availability reached of crude oil, imported mainly from South America (97%).

193 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Net Production Total R&C When analyzing the variation of consumption per product in Mm3 % Can. relation to 2015, there are very different behaviors, especially the decreases in consumption of fuel oil and liquefied pe- Liquefied Gas 456 4 troleum gas (LPG), in contrast with the increase in gasoline, Gasoline 3.954 36 kerosene and diesel. Kerosene 880 8 Diesel 3.460 31 Total diesel consumption increased by 2.4% to 9.85 MMm3 Fuel Oil 1.284 12 (169,210 bpd), maintaining its status as the most consumed Industrial Products and Others 965 9 product among fuels derived from petroleum. Diesel con- TOTAL 10.998 100 sumption expanded due to increased economic activity and Volumetric Yield 95.9% a 20% drop in the price to the end-user, in real terms, that is, minus the effect of inflation 2015/2016.

Domestic Market Domestic consumption of vehicular gasoline was the second largest in volume, with 4.56 MMm3 (78,393 bpd), growing In 2016, the domestic consumption of refined petroleum 5.6% in relation to 2015. The greater consumption of this fuel products reached 19.32 MMm3, equivalent to 332,074 bpd, was favored by the decrease of 9% of the real price of this increasing by 1.4% in relation to the previous year. fuel, minus the effect of inflation 2015/2016. The increase in consumption is explained by the economic Liquefied petroleum gas (LPG) was the third most important activity. According to preliminary estimates by the Central product in terms of consumption, with 2.13 MMm3 (36,605 Bank of Chile in its Monetary Policy Report (IPOM), Chile’s bpd), a decrease of 9.2% over the previous year. In this case, GDP expanded by 1.5% in 2016, contrasting with a growth the lower consumption is explained by natural gas market of 2.3% in 2015. Less dynamism in the economy in 2016 was losses. mainly due to lower production in the copper mining sector, a large demand for petroleum-derived fuels, as well as the Kerosene consumption increased by 6.7% to 1.47 MMm3 stagnation in the construction sector. (25,218 bpd). Within the total, aviation kerosene, which represents 91% of consumption, increased by 6.8%, while do-

194 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

mestic kerosene increased by 5.7%, both favored by a 19% Finally, consumption of industrial products (solvents, olefins, decrease in its real price. basic raw materials for the petrochemical industry, and asphalt products) totaled 0.41 MMm3 (7,032 bpd), an increase Fuel oil consumption decreased by 9.2% and reached 0.91 of 0.6% over 2015. MMm3 (15,615 bpd). The consumption of fuel oil for industrial uses fell by 10% (68,854 m3), and sales of fuel oil as marine fuel in the country’s ports decreased by 7.7% (26,835 m3). Despite a 24% decrease in price in real terms, the consumption of fuel oil for industrial uses continued in the decreasing trend of recent years, mainly due to the substitution of natural gas, a phenomenon that does not affect until now the use of fuel oil as marine fuel.

Domestic Consumption

2016 2015 Variation Domestic Consumption Mm3 Mm3 2016/2015 Liquefied Petroleum Gas 2.130 2.345 -9.2% Vehicular gasoline 4.562 4.320 5.6% Kerosene 1.467 1.375 6.7% Diesel 9.846 9.616 2.4% Fuel oil 909 1.000 -9.2% Industrial Products and others 409 406.584 0.6% Total 19.323 19.063 1.4%

195 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

DOMESTIC CONSUMPTION OF FUELS AND ENAP’S IMPORT SALES IN 2016-2015 (in Mm3)

Domestic ENAP Share of ENAP Exports ENAP Import Sales Variations Consumption Domestic Sales Domestic Market Products ENAP 2016 2015 2016 2015 2016 2015 2016 2015 Domestic 2016 2015 Domestic Mm3 Mm3 Mm3 Mm3 Mm3 Mm3 Mm3 Mm3 Consumption Sales

LPG 2.130 2.345 323 365 15.2% 15.5% 22 68 11 0 -9.2% -11.4%

Vehicular 4.562 4.320 4.531 4.376 99,3% 100,0% 0 0 568 673 5,6% 3,5% Gasoline

Kerosene 1.467 1.375 947 927 64,5% 67,4% 0 0 119 65 6,7% 2,1%

Diesel 9.846 9.616 4.357 4.305 44,2% 44,8% 10 0 904 801 2,4% 1,2%

Fuel oil 909 1.000 904 1.020 99,5% 100,0% 343 273 19 0 -9,2% -11,4%

Industrial 409 407 313 288 76,4% 70,8% 43 112 3 0 0,6% 8,5% Products/Others

Total 19.323 19.063 11.374 11.281 58,9% 59,2% 419 453 1.625 1.540 1,4% 0,8%

196 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Total Sales

Total sales reached 11.79 MM m3 (202,666 bpd), slightly eries, as part of the production was destined as load for the higher than the previous year. This increase is mainly ex- Aconcagua Refinery Alkylation Plant. This resulted in a drop in plained by the higher level of sales to the domestic market, the national LPG market share, from 15.5% in 2015 to 15.2% which increased from 11.28 MM m3 in 2015 to 11.37 MM m3 in in 2016. However, thanks to the production of this Alkylation 2016 and a decrease in the level of export sales of 0.45 MM Plant, ENAP increased its sales of gasoline, of greater value m3 in 2015 to 0.42 MM m3 in 2016. than LPG.

The products with the largest share of ENAP sales corre- Among domestic sales, the most sold product was vehicular sponded to gasoline and diesel, with 38% and 37%, respec- gasoline, with 4.53 MM m3 (77,870 bpd), achieving a market tively. share of 99.3%.

Of the total sales volume, 10.09 MM m3 (173,822 bpd) cor- The second most sold product was diesel, with 4.36 MM m3 responded to own production, which represents 85.5% of the (74,874 bpd) and a market share of 44.2%. total sold. The remaining 14.5%, 1.70 MM m3 (29,393 bpd), was supplied mainly by imports and also, to a lesser extent, In order of magnitude of sales, the following volumes corre- by purchases from domestic third parties. spond to kerosene, with 0.95 MM m3 (16,272 bpd) and a market share of 64.5%; Fuel oil, with 0.90 MM m3 (15,536 bpd) and Sales to the Domestic Market a market share of 99.5%; LPG, with 0.32 MM m3 (5,550 bpd) and a market share of 15.2%. Finally, industrial products, with Sales to the domestic market were 11.37 million m3 (195,473 0.31 MM m3 (5,372 bpd) and a market share of 76.4%. bpd), with a market share of 58.9%, which is 0.3 percentage points lower than in 2015. Exports

The lower market share led to a drop in LPG sales (- 42,000 ENAP’s exports reached 0.42 MMm3 of oil-based products, m3), due in part to lower availability of butane from the refin- equivalent to 3.8% of the total production of its refineries.

197 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

ENAP’s Refining and Marketing in Magallanes

Fuels supply for the Region of Magallanes y Antártica Gregorio Refinery Chilena 305.200 m3 of light crude oil was refined (° API > 27). The ENAP’s Refining and Commercialization Business Line in Ma- basket consists of 89% oil of national origin and 11% from gallanes distributed a total volume of 284.151 m3 of liquid fuels Argentina. (gasoline, aviation kerosene, vehicle and marine diesel), 2.0% higher than 2015, thus fully supplying the regional demand. Of the total volume produced in Gregorio Refinery, 32% corresponded to naphtha; 14% to kerosene; 21% to marine diesel and 33% to reduced crude oil.

Fuel Supply for the XII Region Origin of Refined Crude Oils

Mm3

300,0 100% 250,0 80% 200,0 60% 150,0 40% 100,0 20% 50,0 0% 2011 2012 2013 2014 2015 2016 0,0 2011 2012 2013 2014 2015 2016

National Argentina Gasoline Kerojet Diésel B MGO

198 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Refined Crude Oil Basket MGO Diesel Annual Sales

300,0

80 250,0 70

200,0 60 3 3 50 Mm 150,0 Mm 40

100,0 30

20 50,0 10

0,0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

E&P Magallanes Sipetrol Geopark Others *Includes transfers between lines

During the 2016 sales were as follows: 72,151 m3 of MGO, MGO regional sales in 2016 increased compared to 2015, 37,494 of Kerojet, 85,602 naphtha and 89,776 of reduced reflecting the results obtained in the management of MGO crude oil. market development at local level. However, total sales, decreased slightly due to transfers between lines.

199 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Cabo Negro Plant Training and learning The raw product in the Cabo Negro Plant corresponded to Training activities amounted to approximately 7,815 hours. 94,516 m3, 100% of national origin. 70,434 m3 of LPG (propane The different courses by area were: and butane) and 24,082 m3 of Natural Gasoline were obtained. Laboratory: Training in the application of new technologies for the certification of fuels.

Maritime Operations: Meteorological Forecast, OSPR Level 2 Fractioned Raw Product Certification in the United States. X Forum and International Fair of Maritime and Port Protection in Colombia.

Maintenance: Ruggedcom Ethernet basic switch training, Ba- 1.000 sic configuration of PLC MODICOM, Basic configuration of INTOUCH software. 800 Plants and Terminals: Process of measurement and calculation of quantities, Technical training in desalination, fouling 600 and corrosion, Volumetric balance and HYSYS.

400 With the participation of all the areas, training in PES standards, “SafeStart”, teamwork skills development, 4x4 Ad- 200 vanced Defensive Driving, Supervisor role empowerment, Microsoft Excel application and Practice and Best Practices 0 for the management of Projects. 2010 2011 2012 2013 2014 2015 2016 In addition, the commercial area participated in IHS Latin America LPG Seminar & Workshops 2016. National Raw Product Imported Raw Product Focus of the Business in 2017 For 2017, the main foci are to continue the development of Of the total LPG processed in Cabo Negro, 27,407 m3 (equiv- markets in the southern zone, especially Marine Diesel and alent to 14 MTon) were used to supply the demand for lique- Liquefied Petroleum Gas (propane and butane), which, as- fied gas in Regions XI, Aysén del General Carlos Ibáñez del sociated with the investment program and actions for im- Campo, and XII, Magallanes y Antártica Chilena. provement in safety and operational excellence, allow us to strengthen the strategic role of ENAP in the supply of prod- LPG exports amounted 22,169 m3 (equivalent to 12.65 Mton), ucts for the Magallanes Region and other localities in the with destinations such as Uruguay and Nigeria. southern zone.

200 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

INVESTMENT AND FINANCING MANAGEMENT

2016 R&C Investments Construction and Qualification of Loading Yard - San Fer- nando: This project will allow to strengthen the loading yards The refineries Aconcagua (including Logistics investments), within the commercial strategy of ENAP, to approach the in- Bío Bío and R&C Magallanes facilities made disburse- dustrial market and the development of retail distributors, ex- ments for investment projects amounting to US$6.46 million, panding the geographic coverage and the mix of products. US$18.25 million and US$2.95 million, respectively. In 2016, main equipment was purchased and received, and Details of the progress of the main industrial projects are as the EPC contract for the development of the works was initi- follows: ated. The new yard is expected to be working in 2017. The project had a disbursement of US$1,166 million in 2016. Hydrogen recovery in gases from the Catalytic Reform- ing Unit - Aconcagua Refinery: This project will allow the Construction of Acid Water Pond - Bío Bío Refinery: This hydrogen concentration of the Aconcagua Refinery fuel gas project will reduce the probability of odor events caused (ERA) to be maintained at levels adequate for the operation by uncontrolled emissions of sulfur dioxide (SO2), from sul- of existing furnaces and boilers, avoiding a potential unsafe fur plants, and / or hydrogen sulfide (H2S) from acid water operation of these. plants. In addition, it will make operations more flexible and facilitate the maintenance of the acid water plants, and stabi- During 2016, the purchase order was placed for the hydro- lize the operation of the sulfur plants. gen recovery plant. By 2017, it is expected that the plant will be installed and operational. In 2016, the project had a dis- In 2016 the EPC contract was terminated and the pond was bursement of US$1,322 million. put into operation. In 2016 the project had a disbursement of US$5,570 million.

201 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

FCC emissions abatement system in Bío Bío (Wet Gas loading yard was completed and the start-up process was Scrubber) - Bío Bío Refinery: This project will reduce emis- started. By 2017, the project will be fully completed, with a sions of fine particulate matter, reduce emissions of sulfur disbursement of US$2,950 million in 2016. compounds and fulfill the commitment made to the environmental authority. Suppliers

The manufacture of main equipment (Scrubber, Heat Recov- In 2016 Enap Refinerías S.A. covered almost all of its require- ery) began in 2016, and an EPC contract was awarded. The ments of crude oil with imports from Latin America, given the development of both activities will continue in 2017. The proj- prevailing price and quality conditions. ect had an outlay of US$ 9.631 million in 2016. Purchases of crude oil were conducted, in part, through contracts with international producers, in addition to purchases in Construction of Isomerization Plant - Bío Bío Refinery: This project will increase the production of Isomerate with a mini- the spot market. The main suppliers of crude oil during 2016 mum octane of 82, in order to have greater flexibility in the were: Petrobras, Shell (and former BG), Core, Unipec and formulation of gasolines, as well as increase the production of Galp. final gasolines (93 and 97 octane) at ENAP refineries. The main origins of purchases of refined products were the The development of the Basic Engineering of the Plant began United States and Netherland, and the main suppliers of in 2016. In 2017, Basic Engineering will be completed, the these imports are the companies Valero, BP, Lyondell, Exxon process to obtain environmental permits will begin, and de- and Koch. tail engineering and other activities will be developed before ERSA S.A. / Results obtaining the RCA. The project had an outlay of US$ 2.306 million in 2016. ENAP Refinerías S.A. (ERSA), had profits of US$233.4 million for the year, compared to the US$245.8 million profit as of Construction of New Islands in the Loading Yard of Cabo December 31, 2015. The EBITDA generated as of Decem- Negro – Magallanes: This project aims to make the necessary modifications to the current loading system and update it ber 31, 2016, was US$493.2 million, positively compared with according to legislation. During 2016, the construction of the US$597.6 million generated as of December 31, 2015.

202 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

203 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

The equity of ENAP Refinerías S.A., was US$770.6 million as market conditions. In ERSA, own production margin declined of December 31, 2016, an increase of US$74.2 million com- from US$21.1 per barrel on December 2015, to US$15.5 per pared to December 2015. barrel on December 2016, which represents a 26.5% direct reduction in Margin of selling price during the current year. Consolidated gross margin reached US$420.4 million, which This drop in margins is a result of an oversupply of refined is explained by the gross margin of ERSA (R&C ERSA) Re- products at the international level, which was offset by the fining and Marketing Business Line of US$429.3 million, and increase in production of valuable products, achieved thanks the Gas and Energy Business Line (G&E ERSA) of US$-8.9 to a high level of operational availability in both refineries. million. The gross margin as of December 31, 2015, was US$574.6 million. During 2016, the ERSA G&E Line of Business had a negative variation of the Gross Margin of US$33.5 million, mainly The ERSA R&C Business Line had a negative variation of explained by: Lower Electricity Marginal Costs, which gener- Gross Margin of US$129.6 million compared to the previ- ated a drop in the sales prices to electricity generation com- ous year. This is mainly explained by lower margins of own panies, equivalent to US$4.4 per MMBtu; and lower selling and imported production, which are indexed to international prices of alternative fuels, which negatively impacted the industrial segment by US $1.5 per MMBtu.

204 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

QUALITY MANAGEMENT IN REFINING AND MARKETING

The commitment of Enap Refinerías S.A. is to refine and store Since November 2006, R&C Magallanes has ISO 9001 Qual- hydrocarbons and their derivatives to meet the needs and re- ity Certification. During 2016, the certifying company Bureau quirements agreed upon with its customers in quality, quan- Veritas successfully completed two surveillance audits corre- tity and timeliness. The Quality Management System (SGC) is sponding to the Planning, Crude Oil Refining and LPG Frac- part of the Integrated Management System, and is aimed to tionation processes for the production and commercialization run and develop its processes and products, complying with of fuels. its requirements and continually improving the effectiveness of the system, in order to increase its reliability and competi- Specifically, the processes of Quality Certification of Prod- tiveness in the market. ucts, Maintenance, Operations, Plants and Terminals, Logis- tics and Supply Planning, Marketing and R&C Directorates In this sense, Aconcagua Refinery and Bío Bío Refinery per- Management in Magallanes, as well as the support process- manently seek the development of their quality management es: Training and Development, Management of Materials Pro- systems, preparing a body of internal auditors in both organi- curement and Contracting of Services, maintaining its certifi- zations for the execution of follow-ups and evaluations, through cate in force until September 2018. internal quality audits that respond to an annual planning. In 2017, an essential part of the Quality Management System The system is tested and evaluated by external independent will be the transition from ISO 9001 Standard version 2008 auditors, through monitoring audits, carried out by the certifi- to the 2015 version to maintain the current certificate, a work cation agency Bureau Veritas Certification every six months. that will be focused on encouraging greater attention of inter- In December 2016 and February 2017, Bío Bío Refinery and nal and external stakeholders. This challenge lies in the adop- Aconcagua Refinery, respectively, obtained the fifth Recerti- tion of a risk-based approach and the concept of leadership, fication of their Quality Management System under ISO 9001: which raise the level of demand and commitment to quality 2008, ratifying the commitment of their management and management at the companies’ management level, and as a work team to the development of the system framed in the strategic decision for an organization. The ultimate goal will principles of quality, and of the normative, legal and regu- be to achieve the successful upgrade with Bureau Veritas. latory requirements applicable, from the perspective of continuous improvement.

205 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Logistics and Transport Management

Logistics Management

In 2016, and consistent with the company’s Strategic Plan, In order to achieve an adequate communication of its cross- the Logistics Management carried out a series of activities cutting functions and to generate internal work teams, it is and initiatives focused on the following challenges: worth noting the realization of the first workshops in coordination with the commercial areas, in Aconcagua Refinery and • Promote compliance with environmental and maintenance Bío Bío Refinery, as well as the permanent work during the requirements. year of ENAP Maritime Terminals team. • Preserve the commercial positioning.

• Develop improvement projects in processes and opera- Commitment to Safety tional excellence. Among the most relevant advances in security, are the fol- • Improve procurement policies. lowing: In the same way, and with respect to the specific objectives of the Business Unit, special emphasis has been placed on: • The goal of obtaining a consolidated Accident Frequency Indicator below 4.4 (lost time accidents by millions of man- • Generate transportation capacity to mobilize a greater hours) was met. quantity of valuable products from the refineries, as well as the intermediate products necessary for their elaboration. • Nine and ten years were completed without Lost Time • Achieve greater competitiveness in relation to a future Accidents at the plants of Linares and San Fernando, re- competence, enhancing the management of the supply spectively. chain and capture efficiencies.

• To highlight the importance of service quality concepts to clients.

206 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

• The Vetting area, which reports to the Maritime Transport erational Standards of ENAP Rules for Life (PES Structural Directorate, evaluated a total of 308 vessels, reducing risk Security Program). Certification of DAO plant monitors, exposure and, to a large extent, managing this exposure. who dictate the workshops.

• Introduction of the Vetting evaluation to the maritime termi- • In terms of preventive management we must highlight the nal area, allowing to actively participate in the evaluation follow-up of the conditions and actions raised through the of vessels that moor in ENAP terminals, but which are not “I Report” application, updating of the risk matrix of DAO part of the time charter fleet, nor of the spot import fleet, plants, compliance with the programs of talks and inspec- ships of industrial products, occasional or special cases. tions and activities of the Response Brigade to Emergen- cies (BRE). • Active participation in joint drills with terminals and maritime authority, in the face of incidents associated with • Activities of Health and Safety Joint Committees: the meet- spills and commitments with the aquatic environment, in ing of the Health and Safety Joint Committees (April 2016) different bays at the national level. was highlighted.

• Permanent work with the different suppliers of the Logis- • Realization of simulation of incidents in the Land Transport tics Management to materialize the progress of the imple- Directorate, including emergency agencies, to review the mentation of the SafeStart security management system. response capabilities and coordination necessary to control these critical situations on time. • Constitution of the Vinapú Terminal work joint committee, which incorporates representatives of contracting • Finally, during 2016, land transportation supervisors were companies. trained in defensive driving techniques to reduce critical errors, and thus help to prevent incidents and / or accidents. • Execution of training activities, infrastructure improvements and equipment for the implementation of the Op-

207 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

208 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Milestones of Management in the Directorates of the Logistics Management

Directorate of Maritime Transport Inventory Control Management System: The objective is to have an approved process of inventory control, which consid- During 2016, tug contract renewal was carried out at the na- ers administrative procedures, definition of roles and respon- tional level, strengthening aspects of safety, service and ob- sibilities and training for all R&C units. taining an approximate reduction of 20% of the total cost of the contracts, consistent with the Strategic Plan pillar on ef- It considers the homologation of methods of measurement, ficiency in our operations. delivery, reception and task registration and control, aligning them with the available software tools (SAP and S-TMS), the Planning of the series of expirations of four time charter con- regulations and good practices of the hydrocarbon industry. tracts of ENAP’s fleet. At the same time, changes are incorpo- This system was presented and started the training process rated in the circuits of distribution of cabotage to customers, started during the second half of 2016. as well as movements of inter-refinery products. The objec- Directorate of Land Transport tives are to free the supply of the Magallanes area, to carry out the necessary movements of complementary loads, to re- Incorporation of 4 PSR LNG: During 2016, four new Re- duce demurrage costs and to improve the service to coastal gasification Satellite Plants (PSR) were successfully incorpo- customers. rated, which meant distributing 20% more LNG.

Directorate of Inventory Control Fleet Control and Optimization: A restructuring of the Man- agement was carried out, incorporating the concept of Trans- Crude Oil and Products Balance Data Reconciliation Tool port Center. This action made it possible to improve risk pre- (S-TMS): This integrated production accounting tool allows vention in road distribution and control of the truck fleet. In obtaining timely and reliable information about the inven- this way, it was possible to reduce the number of trucks in the tory of crude oil and products, to monitor the production in LPG circuit, generating a significant reduction of the kilome- the process units, inputs and outputs, as well as the internal ters traveled and associated costs. movements for the entire R&C Business Line. Currently, it operates in all R&C units.

209 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Storage and Pipelines Division (DAO)

The Quality Management System was recertified under ISO eration parameters of engines and pumps. The main conclu- 9001: 2008 for all its plants, for a period of three years. sion was that without further physical modifications, with the use of additives, the yields obtained using only 2 pumps and Oil Pipeline South Hualpén-San Fernando: Within the in- less discharge pressure were the same achieved in the past vestment plan of the Logistics Management, stand out ac- with 3 pumps in service. In 2016 the Basic Engineering of this tivities focused on the integrity, maintenance, control and project was carried out. increase of the transport capacity of the southern pipeline. The objective considers a long-term perspective, in order to Hualpén - San Fernando Oil Pipeline Maintenance Plan: In guarantee actions that allow a safe and adequate operation 2016 the following tasks were carried out: to the projections of demand until the year 2030. These solu- • Repair of defects for a total of 712 meters of oil pipeline. tions derive from the studies that began in 2015 and are cur- • Repair and remediation of rupture of the oil pipeline in the rently under development. Tinguiririca River area.

• Repair and remediation of rupture of the pipeline in the area Ensuring the Integrity of the Pipeline: During 2016 be- of the Maule Channel, Rio Claro commune, Maule Region. gan the diagnosis of the different mechanisms or factors of damage that affect the integrity of the southern pipeline. This Southern Pipeline Automation: The pipeline automation study will provide an improvement plan and a list of recom- was a milestone in 2016 when implementing the SCADA (Su- mendations, economically optimizing the pipeline, with a stra- pervision, Control and Data Acquisition) Control and Monitor- tegic focus. ing System, which allows remote processes to be monitored in order to facilitate and make the pipeline operations more Increase of the transport capacity of the southern pipeline: reliable, accurate and safe. This system was implemented In 2015 and 2016, successful tests for increasing transport from ERBB to Chillán, Molina and San Fernando, with the capacity were performed on the southern pipeline, through guarantee of control in remote stands in the Biobío-Chillán the application of additive (Flow) and modifications in the op- section.

210 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

DAO Plants

Vinapú Terminal, Easter Island Linares Plant

• Marker systems of kerosene were installed in the plants of Maintenance of ponds: In 2016, at the Vinapú Terminal of Linares and Chillán. This minimizes the risk, both in handling Eastern Island, the major maintenance concluded with certi- and transfer of this additive. fication under the existing regulations of the tanks T-03 and T-02, both of jet kerosene, with a capacity of 800 m3. Major • The process of updating the Linares and Chillán control sys- maintenance of the T-05 tank of aviation kerosene and the tem began, migrating from SIC 21 to HC900 and improving construction of a new water tank of 1,800 m3 of capacity be- operational control and safety of these facilities. gan in September. • The CCTV system was upgraded, improving security of facilities and safeguarding assets. Replacement of submarine line: Work was carried out to in- • The laboratory equipment was renewed, incorporating mod- stall new supports for the submarine line, previous phase for ern instruments for the quality control of the products. the repair and normalization of this pipeline (to be realized in 2017). Maipú Plant

Standardization of the electrical system of the terminal: • The maintenance and certification of liquefied petroleum This included a new electrical distribution room, a new back- gas (LPG) tanks concluded at Maipú Plant. The initiative up generator and replacement of piping and wiring of equip- considered the intervention of 45 ponds that store propane. ment feeders. • Work began on the installation of the hydraulic system for opening and closing LPG ponds, the works have an 85% In addition, during 2016 began the construction of the water progress. tank, as part of the replacement of the fire network and the adequacy of the fire system to the current regulations. • Major maintenance work began on slop ponds T-590 and T-591.

Also, major maintenance was carried out on refueler trucks • Inspection of internal underground lines in LPG and aerial that supply Mataveri airport. In addition, a new truck for the areas, in the clean products zone. The same inspection in delivery of diesel oil was incorporated to the company SA- external underground lines is expected to be carried out in SIPA, responsible for the island’s electricity generation. 2017.

211 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Pemuco Satellite Regasification Plant (PSR) San Fernando Plant

Maintenance and repair were carried out to environmental va- Construction of San Fernando Loading Yard: During this porizers bases. year, began the execution phase of the loading yard construction. This project aims to incorporate a new yard to im- During 2016, the Plant worked without problems, supplying prove ENAP’s strategic position, particularly in the industrial the necessary LNG for the operation of the Bío Bío Refinery. market, wholesale distributors and retailers.

Automation of ERSA Loading Yards: This initiative considers a technological tool (software) to guarantee the security in the control of loads and the integral administration of all ERSA loading yards.

212 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

ASSETS AND EQUIPEMENT PER SUBSIDIARY

Exploration and Production Business Line (E&P)

Magallanes Argentina

ENAP has production camps and services and operations It has participation in the blocks of the Magallanes Area facilities at Cerro Sombrero and Cullen, in Tierra del Fuego; (50%), CAM 2 A Sur (50%); Pampa del Castillo – La Guitarra and in Possession, Gregorio, Cabo Negro-Laredo and Punta (100%); and Campamento Central – Cañadón Perdido (50%). Arenas on the continent. It also participates in exploration studies in Argentine territory, in block E2 (33.3%), ex CAM 1 and CAM 3. Also, it develops activities of exploration and exploitation of oil and natural gas deposits in this Region, which are geo- Ecuador graphically distributed in three areas: Tierra del Fuego Island, continent and offshore in the Strait of Magellan. ENAP SIPEC has for specific service contracts for the exploration and production of crude oil in the fields Mauro Dávalos In addition, ENAP has an extensive network of oil pipelines, gas Cordero (MDC) and Paraíso, Biguno, Huachito and Intracam- pipelines and multi-purpose pipelines in the Magallanes Region pos (PBHI), of the Amazon Region in Ecuador, whose opera- (around 4,000 km). These pipelines transport oil and natural gas tion is conducted by Enap SIPEC. from areas of production to the gas processing plants, Gregorio refinery, terminals and storage and distribution centers, both on In addition, since the beginning of 2015, EOP Operaciones Tierra Del Fuego Island and in the continent. Petroleras S.A. is the operator and owner of 42% of Block 28 Moreover, the industrial facilities also include gas processing in the South-East area of Ecuador. plants in Cullen and Posesión, a fractionation plant in Cabo Negro and Gregorio Refinery and Terminal; a port complex Egypt and shipyard in the Industrial Park of Cabo Negro-Laredo; as In Egypt, Enap Sipetrol S.A. participates with hydrocarbon well as two administrative buildings in Punta Arenas. exploration and production activities in the block East Ras Subsidiary ENAP Sipetrol S.A. Qattara where it has 50.5% of the shares in the Contractor Consortium. This consortium commercially develops this The subsidiary of ENAP, ENAP Sipetrol S.A., owner of the hy- block through a joint venture with Egyptian General Petroleum drocarbon exploration and exploitation operations abroad, Corporation (EGPC), in which each participates with 50%. has the following assets:

213 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Refining and Commercialization Business Line (R&C)

Aconcagua Refinery

At this refinery the main crude oil and complementary load a natural gas interconnection system to be used as fuel in processing plants are: Topping and Vacuum I, Topping and boilers and to generate steam; and facilities for contractors. Vacuum II, Visbreaking, Catalytic Cracking, Continuous Cata- lytic Reforming, Hydrocracking, Mild Hydrocracking (MHC), The company also owns the following real estate in Concón: Gasoline Hydrodesulphurization (HDG), Diesel Hydrotreat- Avenida Borgoño 25777 building (industry), C-9 Sports Field ment, Isomerization, Alkylation, DIPE, Sulfur Plant, and De- Lot; S-Sonacol Lots (industry); Lot E7/B6 (vacant); Dos Norte, layed Coker Complex. Lot R-1 (industry); Vía 2 to 5, Lot E7/B1 (vacant); Calle 2 Norte, Lot R-3, (industry); Tierra del Fuego and Magallanes Also, there are a Sulfuric Acid Regeneration plant, a Sulfur (Open House); Vía 2-A-5, Lot R-5 (vacant); ERSA Aconcagua Fixation plant, a Kerosene, Liquefied Gas and Fuel Gas Treat- private road, Lot R-4 (vacant); Lot R-6-3 (industrial); Lot R-6-4 ment plant, an Effluent and other treatment plant; closed cool- (vacant); Lot R-7 (vacant), Dos Norte, Lot H-4 (vacant); Bar- ing system; oil pipeline from the refinery to the Quintero Mari- ros Borgoño 25175, Rotonda Concón, Lot 1, offices; Fundo time Terminal; internal piping facilities from the pool areas to Colmito, Lot 1 Well 23 (vacant); Fundo Colmito Lot 2 Well 25 processing plants and from these plants to pools of intermedi- (vacant). ate and final products; pumping areas to send products from the refinery to the Metropolitan Region through an oil pipeline It also owns parking 152, on the street Blanco 625 in Val- owned by Sonacol; pumping areas and maritime terminals, paraíso; and other two in Avenida Manantiales LT 3A-B, and including one single buoy in Quintero; a chemical laboratory; ST 420. headquarters for the Fire Department in 24-hour shifts; fire engines, equipment and elements for fire-fighting; specialized In Quintero, the real estate are: Camino Costero N° 701, Vía maintenance and repair workshops for all the plants; emer- 5-6 P.I.V.; Camino Costero N° 1201, Vía 5-6 P.I.V.; Lot 117 gency electrical equipment powered by diesel fuel and gas; (vacant); Lot 172 (vacant); Plot 16 Mantagua (vacant); y Lots 11, 12 and 13, Fundo Las Gaviotas (vacant).

214 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

215 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Bío Bío Refinery

At this refinery, the main crude oil and complementary load Vicente Maritime Terminal for the transportation of crude oil processing plants are: Topping and Vacuum I; Topping and and finished products; San Vicente maritime terminal, which Vacuum II; Visbreaking; Catalytic Cracking; Continuous has a new dock and two maritime terminals with submarine Catalytic Reformation; Diesel Hydrotreatment 1; Diesel Hy- piping, internal piping from the tank areas to the processing drotreatment 2; Gasoline Cracking Desulfurization (HDG); plants and from these to the intermediate and final product Hydrocracking; Benzene Saturation; Isomerization; Propyl- tanks; gas pipeline for the reception and delivery of liquefied ene Separator and Purifier; CHT Hydrogen Plant; Delayed gas; motor-pumps for sending products from the Refinery to Coking (Coker) and Diesel Hydrotreatment (HDT), Cogenera- San Fernando and San Vicente; motor-pumps in San Vicente tion Power Plant; Bío Bío Hydrogen Plant, co-owned with Sig- for shipments of products by sea and the reception of import- do Kopper S.A.; Mild Hydrocracking Plant of Gas Oil (MHC); ed crude oil also by sea; chemical laboratory; facilities and and Liquefied Natural Gas Regasification Plant at Pemuco, fire station for the Emergency Response Brigade operated by Eighth Region. the volunteer workers of the plant; specialized workshops for maintenance and repairing of all the plants; electricity emer- There are also Merox Kerosene Treatment plant, Gasoline and gency equipment that works with diesel and natural gas, and Liquefied Gas Treatment plants, Sodium Hydrosulfide plant; an interconnection system for natural gas to be used as fuel Sulfur Recovery plants No1 and No2; Gas Treatment plant; in boilers and furnaces (steam generation). Acid Water Treatment plant; Oily Water Treatment plant; Cool- ing Water, Steam and Power Supply; storage pools for crude In the Eighth Region Enap Refinerías S.A. owns the follow- oil and intermediate and final products. ing properties: Bío Bío Refinery’s land, a building located on Camino a Lenga 2001, Hualpén District (for industrial purpos- Other industrial facilities are the pipelines for the transporta- es); Faja Fundo Las Golondrinas, Hualpén; Cerro Las Pulgas tion of crude oil and end products from the refinery to the city (used as a pool area), Hualpén; San Vicente Terminal: real es- of San Fernando, where it connects with the Sonacol pipeline tate and Lot A-1 Talcahuano; Bocatoma Bío Bío land, located (San Fernando-Maipú) and pumping stations at Bío Bío Refin- in Hualpén District; rest of Lot C and Lot A1, both are next to ery, Chillán and Molina; oil pipelines from the refinery to San the Refinery; Chillán Terminal Lot 7, Route 5, Chillán; Molina

216 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

Terminal, Talca; Hijuela Rucalhue, San Pedro de la Paz Dis- Storage and Pipelines Division (DAO) trict (vacant); Lot B6, subdivision of Lot B of Fundo Hualpén, Hualpén; land at the Talcahuano General Cemetery, used The main real estate are: Huerto El Milagro, Maipú (Agricul- for cathodic protection of the oil pipeline at facilities; Lot B-2, tural); Hijuela Norte of San Juan de Chena, Maipú (industrial); subdivision of Lot B, San Miguel de Diguillín, Pemuco District; North-western portion of Fundo San Gabriel and San Manuel, usufruct for a period of 99 years of part of the estate located Linares; part of Fundo or Chacra Palermo, San Fernando; in Talcahuano, patch A. and Lot N° 7, part of Fundo Las Acacias, Chillán.

217 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Refining and Commercialization

GAS AND ENERGY (G&E) BUSINESS LINE

218 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

During 2016, and in accordance with the guidelines estab- With the approval by Congress of the extension of ENAP line lished in ENAP’s Strategic Plan, the efforts of this line of busi- of business, through the promulgation of Law 20,897, the ness continued to focus on promoting greater use of natural company took another step towards becoming a relevant gas, for residential, commercial and industrial use as well as player in the energy development of the country, thus help- for electricity generation; and to improve the competitiveness ing to create more competitiveness in the electricity market of the electricity market and the supply of cleaner energy. In by participating for the first time in the bidding of electricity addition, the Energy Efficiency Directorate, currently Energy distribution companies. Control Management, is being added to the Line, continuing with the progress of the initiatives that comply with the Coop- In relation to the economic performance of the Business Line, eration Agreement signed in 2014, by ENAP and the Ministry there was a decrease in EBITDA compared to 2015 of MMUS of Energy, which seeks to promote the efficient use of energy $38.5. This is due to a sharp drop in the marginal cost of elec- resources in all its operating units. tric power compared to 2015, which is the main index of LNG sales prices to electricity generation companies. In 2016, the These objectives were addressed through a series of projects marginal cost of energy reached an average of US $59.64 and initiatives, among which are: the boost to the capacity ex- per MWh, 33% lower than the previous year, directly affecting pansion of the GNL Quintero Terminal; the search for natural the revenues received. In addition, the average Brent marker gas supply alternatives to the southern part of the country; the for 2016, was reduced by 16% compared to the Brent marker cogeneration project in Aconcagua; the Cerro Pabellón geo- of 2015, which also impacted LNG sales prices to industrial thermal project; the articulation of the first natural gas export customers. operation to Argentina, via GNL Quintero terminal and GNL Mejillones terminal; the implementation of the Energy Man- Finally, it should be noted that the GNL Quintero Terminal agement System, the signing and dissemination of the En- obtained the RCA for the project to expand its vaporization ergy Efficiency Policy; the acquisition of Petropower, through capacity from 15 to 20 MMm3 per day in May 2016, which the subsidiary ERSA; and ENAP’s participation in the bidding will allow GNL Chile, a company whose board is chaired by of the electricity distributors, with its new project ERA, in as- ENAP, achieve the placement of larger volumes of natural sociation with Japan’s Mitsui. gas through its Open Season process.

219 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

GAS AND ENERGY MANAGEMENT ORGANIZATION

GAS & ENERGY MANAGEMENT

PROJECT MANAGEMENT ELECTRICITY MANAGEMENT DIRECTORATE OF ENERGY GAS MANAGEMENT

ACONCAGUA CO-GENERATION ENERGY MANAGEMENT DEVELOPMENT DIRECTORATE DIRECTORATE

DIRECTORATE OF MARKETING DIRECTORATE COMBINED CYCLES

DIRECTORATE OF GEOTHERMAL ENERGY

PEMUCO PSR DIRECTORATE

PROJECTS DGP

220 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

GAS MANAGEMENT

Among the main objectives of the management is the devel- the increase in the price of electricity during the period of opment of initiatives that promote the use of the Liquefied drought that has affected the country since 2010. Natural Gas (LNG) in the national energy matrix, through the marketing of volumes of LNG or natural gas to customers in Gas Commercialization through Gas Pipelines the industrial, thermoelectric, transport and distribution sectors. In addition, the Gas Management must set associative The regasified LNG at the Quintero Terminal is injected into figures for the development of strategic projects to promote the Electrogas pipeline and transported to the points of con- the commercialization and improve ENAP’s position in the sumption, including ENAP’s Aconcagua Refinery, the main natural gas domestic market. thermoelectric plants located in the central zone, industrial consumers and residential and commercial gas distributors. Brief History Regarding the electricity generation companies, it is high- In May 2004 the Government of Chile commissioned ENAP to lighted that in 2016, ENAP supplied natural gas to Colbún lead the development of a project to import LNG that would and AES Gener, which allowed it to place a significant part of allow the country to obtain greater independence and secu- its regasification capacity and availability of LNG during that rity of supply by diversifying its energy matrix. period.

Thus, a pool of consumers was created that generated the Virtual gas pipeline necessary demand to access the international LNG market, creating the companies GNL Chile and GNL Quintero for the Given that to date there is no logistic alternative for the sup- development, construction and operation of the regasifica- ply of natural gas to the Eighth Region, where ENAP owns its tion terminal project. Currently, ENAP has a 33.3% and 20% Bío Bío Refinery, a virtual gas pipeline was developed using participation in these companies, respectively. cryogenic LNG trucks, which are unloaded at a Regasifica- tion Satellite Plant (PSR) located in Pemuco, Eighth Region. This regasification terminal began operations in September There, LNG is regasified and injected into the Pacific Pipeline, 2009 and has had a high utilization rate, contributing signifi- which supplies natural gas to the refinery, distribution compa- cantly to the use of a clean fuel and at lower-cost, reducing nies and industries of the Eighth Region.

221 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

Mobile LNG Gas Exports to Argentina

Mobile LNG corresponds to a business model based on the In a historical event, ENAP’s G&E Business Line, through its marketing of liquefied natural gas, by loading cryogenic tank Gas Management, coordinated the first natural gas export to trucks at the Quintero LNG Terminal, that transport the prod- Argentina, both from GNL Mejillones where it acted as coor- uct at -162°C to industrial plants under a valid supply con- dinator, and from GNL Quintero as the exporting company. tract. There, LNG is downloaded in Satellite Regasification In addition to placing its gas production, ENAP led a group Power Plants (PSR) and vaporized to be used as fuel in its formed the main companies in the domestic natural gas mar- respective production processes. This process is performed ket, in the negotiations with its Argentine partner ENARSA, under corporate safety standards whose requirements ex- that jointly materialized deliveries to the neighboring country ceed the existing legislation. during winter, equivalent to about 4.5 MMm3 per day.

By the end of 2016 20 industrial PSR were operating with ENAP This historic milestone in regional energy integration was LNG, located between the IV and X regions, belonging to dif- awarded the 3rd place in the category Best Public-Private Ini- ferent production areas leader in their respective markets. tiative 2016, awarded by Diario Financiero.

222 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

223 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

ELECTRICITY MANAGEMENT

The Electricity Management aims to promote and participate Enap Representation before Regulating Bodies and in the management and development of new projects for Coordinators of the Chilean Electricity System power generation in our country, in order to generate more competition in the electricity market. It also participates in the One of the main actions for managing the requirements made procurement and management of contracts of power supply by the regulatory bodies of our country’s electric system dur- with final customers. ing 2016, was to centralize the representation of ENAP before local coordinators through the Electricity Management, repre- In the same way, undertakes to support different areas of the senting the company before the Directorate of Operation and company and its subsidiaries on issues related to the opera- Tolls of the Coordinador Eléctrico Nacional (CEN). Therefore, tion of the electricity sector. Another objective of the manage- we have emphasized the fulfilment of the requests and de- ment relates to the representation of ENAP and its different mands from the different agencies, developing action plans subsidiaries before regulatory bodies and coordinators of the together with the Aconcagua and Bío Bío Refineries, in order Chilean electricity sector. to comply with the standards required by the electric regulations in the facilities, for the proper operation of the Electrical Extension of ENAP’s Line of Business System.

On February 5, 2016, in the Official Gazette was published Development of Power Generation Projects the Law 20,897, which extends ENAP’s line of business and allows it to enter the electricity generation market. With this, In order to reduce consumption and the costs of natural the company is able to develop projects and commercial ac- gas supply to the customers of the Magallanes Region, the tivities related with the electricity market, introducing greater Electricity Management promoted the incorporation of a new competition to the sector. power generation capacity into the region, using competitive sources other than natural gas. Therefore, we continue work- The bill was admitted for processing in the Parliament in Oc- ing in the Wind Park Cabo Negro development project, which tober 2014, and the approval of the last legislative procedure aims to incorporate new and more competitive sources of was carried out on January 12, 2016, after the Chamber of electricity generation that will optimize the power supply and Deputies and the Senate approved the initiative. diversify the energy matrix of the region.

224 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

Purchase of Petropower LNG In Generation of Electricity in the Central Intercon- nected System Through its subsidiary Enap Refinerías, ENAP acquired 100% of the Petropower plant, located in facilities adjacent to the In terms of energy generated in the Central Interconnected Bío Bío Refinery, completing its entry into the electricity gen- System (SIC), in 2016, gross production was 53.906 GWh, of eration sector. In this way, ENAP will continue to supply the which 10.381 GWh were generated based on LNG, which is refinery autonomously by delivering electricity and steam. In equivalent to approximately 19% of the total production. addition, it was possible to commercialize the surplus of energy of the Petropower plant, with a backup contract for the The following figure shows the generation of power energy, purchase of energy with the company Parque Eólico Cabo from the different technologies and fuels during 2016: Leones I S.A.

Participation in Power Supply Tenders

In 2016, ENAP participated in the tender for power supply to distribution companies, through the projects Cogeneradora 36 Hydro Aconcagua (ERSA), Nueva ERA (together with the strategic Coal partner Mitsui) and the geothermal project Cerro Pabellón (to- 32 gether with Enel Green Power). Despite not being awarded a 19 LNG supply block, ENAP contributed to the competitiveness of the Biomass /Biogas offers in the process, with the lowest average prices awarded 5 and with the largest number of participants since the current 4 Wind format of power supply tenders was established in 2006. 3 Solar In addition, ENAP submitted offers in private electricity sup- 1 Diesel ply tenders developed by mining and industrial companies in November and December 2016, with the Petropower plant and the Cogeneradora Aconcagua project.

225 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

PROJECT MANAGEMENT

Brief History

Project Management has among its main functions the defi- which is also expected to start the commercial operation of nition, management, control, planning and execution of the one of the turbines during 2017. projects of the Gas & Energy Business Line, until their start-up and implementation. Likewise, in 2016, construction and assembly projects were developed, as well as the management of permits, which are In 2015 the Nueva ERA Power Plant Project entered the Envi- detailed below. ronmental Assessment System (SEA); the project consists of a generator of 510 MW in Aconcagua Refinery, marking one Aconcagua Steam Cogeneration Project of the relevant milestones in ENAP’s process of entering the electricity market. The Nueva ERA Power Plant will be devel- The Cogeneradora Aconcagua project consists of the con- oped jointly with a strategic partner of ENAP, and will allow struction of a cogeneration plant based on natural gas that the company to participate in tenders of power supply, thus, will produce high pressure steam to feed the conversion pro- increasing competition in the generation market, which trans- cesses of Aconcagua Refinery. In addition, it will produce lates into a direct contribution to the reduction in the prices electricity, supplying the entire demand for this plant and in- of electricity. jecting surplus into the Central Interconnected System (SIC).

This project has had an active process of socialization with This project is part of the Government’s Energy Agenda, the communities involved, allowing ENAP to become closer which has given an active role to ENAP, with the objective to the residents of Concón, Quintero and Quillota, whose con- of reducing energy costs by contributing with the generation cerns and suggestions have been considered for the imple- new projects based on natural gas. mentation of the Nueva ERA Comprehensive Program. The safe and stable operation with cutting-edge technology Other important milestones of this Management are the con- allows a more harmonious coexistence with communities and struction of the cogeneration power plant, work that is ex- the environment. The operation of the cogeneration plant will pected to begin its commercial operation in late 2017; and involve the cessation of operation of two of the refinery’s boil- the implementation of the Cerro Pabellón Geothermal Plant, ers, fulfilling the commitment assumed with the communities.

226 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

The Aconcagua Cogeneration plant consists of the installa- The cogeneration company is located in an industrial sector tion of a natural gas turbine, with its respective power genera- away from populated areas, surrounded only by other indus- tor, with a capacity to produce 77 MW of power coupled to tries. This land is located approximately 2 km east of the coast- a heat recovery boiler that will produce 125 ton / h of steam, al Concón and 1.5 km from the point of steam connection. overheated at high pressure (Representing 40% of the current output of the refinery’s boilers). The following figure summarizes schematically the distribution flow of the Refinery - Cogeneration complex. The refinery will consume in full the steam produced by the cogeneration plant and 35 MW of the electrical power generated, injecting the surplus to the SIC.

ACONCAGUA COGENERATION POWER PLANT

77 MW 35 MW 42 MW

ACONCAGUA MAUCO TORQUEMADA SUBSTATION REFINERY SUBSTATION (enap) (aes gener)

227 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

It is important to indicate that, given the current water condi- The project also includes the construction of a new park by tions in which the Aconcagua river basin is located, the co- means of participatory design with the neighborhood coun- generation plant will not require additional water supply, as cils involved, ensuring the preservation of green areas and it will operate in a closed condensate / steam cycle with the strengthening ENAP’s relationship with its surrounding com- refinery, maintaining the overall consumption of water in rela- munities. tion to the current situation. Nueva ERA Power Plant As of December 2016, the works of the Aconcagua cogeneration plant are 59% of advance with respect to the estimated Progress in the Environmental Process of the Nueva ERA Cen- 53% in their original planning. tral Project: This project will generate 510 MW, through a combined cycle plant, using exclusively natural gas as fuel, which Regarding safety statistics, at the end of 2016, 270,000 hours is environmentally friendlier. During February and March for- were reported without lost time accidents, a clear sign of mal presentations of the project were made to the communities ENAP’s commitment to the safety of its workers. of Concón, Quintero and Quillota, to clear doubts regarding the environmental effects and the commitments that ENAP ac- Likewise, as of December 2016, more than 300 people are quires as part of this project. participating in the construction, assembly and interconnection works with Aconcagua Refinery. The plant is expected to Since March intense work has been done on complementary start operating in December 2017. studies, highlighting new air quality modeling, marine environment study and a health risk study prepared by the Pontificia Some mitigation measures committed by Environmental Universidad Católica de Chile. Qualification Resolution 318/2007 of this project, include the paving of Concón streets, the improvement of the air qual- In December 2016, the replies to the observations of the au- ity measurement network and online monitoring of emissions thority were presented. In addition, the project was socialized from the plant and refinery boilers. with the community through the implementation of various

228 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

works of trust in Concón, Quintero and Quillota, as part of the year, equivalent to the consumption needs of about 154,000 “Nueva ERA Comprehensive Program”. Chilean homes, avoiding the annual emission into the atmosphere of more than 155,000 tons of CO2. The generation of Pemuco LNG Satellite Regasification Plant (PSR) the first 20 MW is scheduled for the first half of 2017 and the whole 40 MW during the first half of 2018. The LNG Satellite Regasification Plant (PSR) of ENAP located in Pemuco, Eighth Region, is operating since June 2011. It is The project is located in the Atacama Desert, at an altitude supplied through tanker trucks that transport LNG from Quin- of 4500 meters, about 130 kilometers northeast from Calama. tero Terminal and is aimed at supplying natural gas to the Bío In recent years (2009-2010) deep exploratory stage activities Bío Refinery, as well as to the RESCOM and industrial seg- were conducted, four wells were drilled between 1,300 and ment of Region VIII, through the Pacific Pipeline. 2,000 meters deep, of which the first two were optimal for production (8 MW) and the remaining were fit for reinjection. To improve the plant reliability standard, during 2016, the ex- Additionally, environmental permissions were processed re- isting tube-type LNG vaporizers and casing were replaced, garding the plant, wells and power lines, and the processes and some instrumentation and control systems were im- of international tender for drilling equipment, main equipment proved. In relation to emergency response systems, improve- and construction of the plant were conducted. ments included the incorporation of new gas sensors, fire de- tectors and firewater network sprinklers in LNG tanks. The activities for the construction of the plant began in 2015, and have been progressively developed and according to Cerro Pabellón Geothermal Plant the program in 2016, reaching a physical advance of 82.9% in December. The activities carried out relate to civil works, Early in 2015, Geotérmica del Norte S.A. (GDN), subsidiary the construction of the camp for more than 800 people, the of ENAP, began the construction of the plant Cerro Pabellón. construction of two binary cycle units with the company OR- The plant will be capable of producing nearly 340 GWh per MAT, construction of the 80 km power line, installation of Sub- stations and the execution of the drilling campaign.

229 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

Regarding the drilling campaign, it began in November 2015 Thus, Cerro Pabellón could become the first geothermal and had positive results in terms of reservoir location and po- power project in South America, which would generate clean tential. To date, two wells have been drilled, two producing electricity in a market growing strongly and in high demand wells and a re-entry well CP-3, which present a high potential. for sustainable energy.

An important milestone in the progress of the project was the Additionally, ENAP and its partner ENEL, participates in other agreement with the communities belonging to its area of in- geothermal projects: the concessions of exploitation El Tatio, fluence. In July 2015, socialization agreements were signed La Torta, Chillán and Calabozo, which continue with develop- with six communities: Taira, Cupo, Estación San Pedro y Ol- ment activities, as well as the exploratory concessions Azu- lagüe, Toconce and Conchi Viejo. fre Norte, Azufre Oeste and Ollagüe, where surface geological, geochemical and geophysical studies of the exploration stage in which they are, have been conducted.

230 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

ENERGY CONTROL MANAGEMENT

The initiatives to comply with the Cooperation Agreement Portfolio, with 32 projects to be implemented in this period, signed in 2014 by ENAP and the Ministry of Energy, aimed whose expected annual total saving is of MMUS$42.5 with an at promoting the efficient use of energy resources in all its associated investment of MMUS$84.5. operating units continued during 2016. It should be noted that nine of the projects to be implemented The following is a summary of the main activities carried out in the Action Plan correspond to Quick Win projects, related during this year: to operational improvements that do not involve investment, and that already generated annual savings of approximately Energy Audits and Action Plan US$4.5 million in 2016.

The Energy Audits completed at Aconcagua Refinery (ERA), Implementation of the Energy Management System Bío Bío Refinery (ERBB) and Enap Magallanes concluded in April, and were carried out with the support of the French The activities required to implement the Energy Manage- company Axens. The purpose of these Energy Audits was to ment System (SGE), based on the international standard ISO generate a diagnosis of the production processes of crude oil 50001: 2011, continued in ERA, ERBB and Magallanes op- refining and gas production, as well as of the electric genera- erations. tion systems. Energy Policy In parallel, an Action Plan for the implementation of Energy Efficiency projects was prepared, resulting from the improve- ENAP established its Energy Policy, with the participation of ment opportunities detected in the use and consumption of senior management and workers of all its operating units, be- energy in these operating units. ing approved by the Board in August and disseminated in ERA, ERBB and ENAP Magallanes during December. This action plan has initiatives ranging from operational adjustments to the incorporation of new technologies for the period 2016-2021. As a result, there is an Energy Efficiency

231 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

Energy Control Management Technical Cooperation

The Energy Control Management was created in November, In 2016, ENAP signed a Technical Cooperation Agreement replacing the Energy Efficiency Directorate. This new man- with the Development Bank of Latin America and the Carib- agement reports directly to the Gas and Energy Business bean. On the other hand, the Inter-American Development Line Manager and its main objective is to improve the en- Bank (IDB) provided funding to develop initiatives in DAO. ergy performance of all ENAP’s operating units, through the efficient use of energy resources and equipment, as well as Energy Efficiency in the development of Projects promoting the execution of projects that contribute to inno- The “Energy Management Manual in the Development of vation and culture in the good use of energy throughout the ENAP Projects” was prepared to incorporate energy efficien- organization. cy in the evaluation and design of projects, and will serve Incorporation of DAO in Energy Management as support to the Energy Management Team Leader (LEGE) of the different Functional units of ENAP, to incorporate the Energy audits were carried out at the plants of Vinapú, Maipú, variables of energy management in the evaluation of projects. San Fernando, Molina, Linares and Chillán, receiving the final report in December. The study identified the main points of Energy Efficiency Awareness energy consumption, significant uses of energy and opportu- The Energy Management Department planned and devel- nities for improvement in energy performance, resulting in a oped different training and awareness-raising activities in the total of 23 measures, which saves about 15% of the total en- operating units to support the implementation of the SGE in ergy consumption of the Storage and Pipeline Division (DAO). ENAP and to make energy efficiency an integral part of the company’s culture.

232 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

MANAGEMENT SUMMARY

In 2016, ENAP was the recipient of 29% of deliveries of natu- Enap’s Market Share In 2016 ral gas from the Quintero LNG Terminal, either via gas pipeline or tanker trucks loading yard, maintaining its share in the 71 Others terminal. 29 ENAP

Comparison of Deliveries 2015-2016 During 2016, the volume of sales of natural gas through GNL Quintero showed an increase of 18% over the previous year; this is explained by LNG shipments that were used for off- LNG Quintero Terminal shore sales in previous years, were placed in the Quintero 120 Terminal to supply the demand of customers in the central area and export to Argentina. 100 Natural Gas Deliveries in 2016 80 3 Power 39 Generation MMm 60 24 ENAP Aconcagua Refinery 40 13 ENAP Bío Bío Refinery 20 9 RESCOM-Industries Fifth Region Exports 0 7 2015 2016 5 RESCOM-Industries Eighth Region ENAP Others 3 LNG Mobile

233 / ENAP ANNUAL REPORT 2016

Chapter 5 / BUSINESS LINES / Gas and Energy

Sales to the residential and industrial segments (Rescom) of At the end of the exercise, ENAP was positioned as a leader in the V and VIII Regions remained at the same levels of recent the Mobile LNG market, concentrating 55% at national level, years, representing 14% of total deliveries, as well as the con- of the installed Regasification Satellite Plants (PSR) for sup- sumption of the internal client ERSA. ply of natural gas to industrial customers, which added to the deliveries through the virtual gas pipeline towards Pemuco The coordination of the first natural gas export operation to PSR, represents 83% of the deliveries through the Quintero Argentina, via GNL Quintero terminal and GNL Mejillones ter- LNG Loading Yard. minal, allowed ENAP to place gas, equivalent to 7% of the company’s total deliveries, in that country. 2016 Share in Delivered Volume TLF Quintero lite Re- gasification Plants During 2016, a total of 20 industrial customers were reached with PSR through the LNG Mobile business, and agreements were signed to supply natural gas to three additional projects 83 ENAP from 2017. 17 Others

The sales of the thermal electricity sector reached 39% of the total deliveries of ENAP and, according to the SIC electricity 2016 Share in LNG Mobile Segment per Quantity of Satel- generation matrix, during 2016 ENAP had a 20% share of the lite Regasification Plants LNG electricity production.

2016 Power Generation based on ENAP LNG 55 ENAP 32 Metrogas 20 ENAP 13 ENDESA 80 Others

234 / ENAP ANNUAL REPORT 2016

AFFILIATE COMPANIES

235 / ENAP ANNUAL REPORT 2016

ENAP EXECUTIVES COMPANY’S BOARD IN BOARD OF AFFILIATED COMPANY INVESTMENT TO TOTAL ENAP ASSETS RATIO TAX ENAP’S ACTS OR COMPANY IDENTIFICATION CAPITAL INVESTMENT BUSINESS PURPOSE CHAIRMAN OF BOARD MEMBERS ALTERNATE CEO PARTICIPATING BOARD MEMBERS ALTERNATE COMMERCIAL CONTRACTS NUMBER THE BOARD BOARD MEMBERS INTEREST BOARD MEMBERS RELATIONS SUBSCRIBED

REFINING & COMMERCIALIZATION (R&C) REFINING & COMMERCIALIZATION (R&C)

Fernando Prado Lorena Oliver; Lorenzo Gazmuri; Ramiro Méndez; Frederic Chaveyriat; Juan Carlos Carrasco; Transportation of oil Alejandro Alvarez; Leonard Ljubetic; ENAP, through ERSA, ENAP, through ERSA, SOCIEDAD NACIONAL 81.095.400-0 M$ 59.575.440 derivatives and Fernando Prado Erio Augusto Mathias; Patricia Figueroa; Roberto Hetz 10.06% Marc Llambías None Received transportation Received transportation 0,18% DE OLEODUCTOS S.A related services. Pablo Munita; Mariangela Monteiro; services of products services of products Nicolás Correa; Alan Sherwin; through oil pipelines through oil pipelines Jose Odone; Eduardo Navarro; Marc Llambías Nicolás García

Gabriel Grzona; Mariel Augusto; A&C PIPELINE General investment financing Guillermo Rocchetti; Ricardo Aguirre; HOLDING COMPANY 0-E MUS$ 900 company. Controls OTA Gabriel Cesar Grzona Gustavo Chaab; Raúl Rodriguez; 36.25% None None None None 0,00% and OTC. Martín Cittadini Walter Fernandez Cicco

Gabriel César Grzona; Mauricio Alejandro Martín Transportation of oil Miguel Angel Zubizarreta; Rubén Pablo Ottossen OLEODUCTO TRASANDINO 0-E MARS$ 34.143 derivatives and related Gabriel Cesar Grzona Guillermo Rocchetti; Ricardo Aguirre Mario Pablo Leder 35.79% Marc Llambías Alfredo del Carril None None 0,04% ARGENTINA S.A. services. Marc Llambías; Alfredo del Carril Martín Cittadini Walter Fernández

Marc Llambías Alfredo del Carril ENAP Refinerías S.A received services of crude OLEODUCTO TRASANDINO Transportation of oil Martín Cittadini Walter Fernández Tanks and pipelines leasing 96.655.490-8 M$ 12.771.107 derivatives and Gabriel César Grzona Gabriel César Grzona Mauricio Alejandro Martín Jaime Pulido 35.83% Marc Llambías Alfredo del Carril oil transportation, loading, service 0,04% CHILE S.A. related services. Alejandro Zubizarreta Pablo Ottosen lease of pipelines and lease Guillermo Rocchetti Ricardo Aguirre of crude oil storage tanks

Purchase, sell, import and export hydrocarbons, refine and commercialize them, process and industrialize them. Transport and store hydrocarbons. Participate Purchase and sale of prod- together with ENAP in a Marcelo Tokman, Marcelo Tokman ucts for MUS$ 55,589 and - Current trading account. ENAP REFINERIAS S.A. company dedicated to the Jorge Fierro Jorge Fierro, MUS$ 115,393, interest - Financing of imports of (ERSA) exploration and production Carlos Carmona Marc Llambías Carlos Carmona payment on current trading crude oil and products Closed stock company, SVS 87.756.500-9 MUS$ 1.403.668 of hydrocarbons outside Eduardo Bitrán Alejandro Jadresic Non applicable (Main executive of ENAP) 99,98% Alejandro Jadresic None account for MUS$70,105. through payment made 13,77% Special Register of Reporting Chile. Receive and store Bernardita Piedrabuena Bernardita Piedrabuena ENAP paid suppliers on be- directly by ENAP to foreign Entities Nº 95. hydrocarbons in facilities built María Isabel González María Isabel González half of Enap Refinerías S.A. suppliers. to that effect and provide for MUS$ 7,680,228. related services. Build and operate oil and gas pipelines and provide transport services for fuels, fuels land and maritime terminals.

236 / ENAP ANNUAL REPORT 2016

REFINING & COMMERCIALIZATION (R&C) REFINING & COMMERCIALIZATION (R&C)

237 / ENAP ANNUAL REPORT 2016

REFINING & COMMERCIALIZATION (R&C) REFINING & COMMERCIALIZATION (R&C)

Construction, implementation, operation and exploitation of a coker plant, to Maria Luisa Aguayo provide processing services Marisol Aravena Gonzalo Vásquez ENERGÍA CONCÓN S.A. 99.519.820-7 MUS$ 21.579 to Enap Refinerías S.A, from Maria Luisa Aguayo Fernanda Nash Paula Valenzuela Marc Llambías ENAP 17,5% Alfredo del Carril Ariel Azar None None 1,12% bottom of the barrel crude Marco Antonio Guzmán Ariel Azar (Main executive of ENAP) ERSA 82,5% oil to transform them into Alfredo del Carril Lorena Hirmas light products (diesel and gasoline).

Construction, implementation, operation and exploita- Maria Luisa Aguayo Gonzalo Vásquez tion of two sulfur plants in Marisol Aravena Paula Valenzuela PETROSUL S.A. 96.969.000-4 M$ 3.373.000 order to exclusively provide Maria Luisa Aguayo Fernanda Nash Claudia Escobar Marc Llambías ENAP 15,79% Alfredo del Carril Ariel Azar None None 0,38% processing services to Enap Marco Antonio Guzmán Ariel Azar (Main executive of ENAP) ERSA 84,21% Refinerías SA of its acid gas Alfredo del Carril Lorena Hirmas streams.

Construction and operation of a plant for the refining of Maria Luisa Aguayo Gonzalo Vásquez PRODUCTORA DE 99.548.320-3 MUS$ 8.000 oil products, providing oil Maria Luisa Aguayo Marisol Aravena Paula Valenzuela Marc Llambías ENAP 10% Alfredo del Carril Ariel Azar None None 0.41% DIÉSEL S.A. and gas processing services Marco Antonio Guzmán Ariel Azar (Main executive of ENAP) ERSA 90% to ERSA exclusively. Alfredo del Carril Lorena Hirmas

To produce and process fuel by means of the development, construction Marc Llambías PETROPOWER and operation of a delayed Fernando Promis Marc Llambías ERSA 92,5% ; ENAP Marc Llambías Co-generation operation Co-generation power plant ENERGÍA LTDA. 78.335.760-7 MUS$ 70.461 coker plant, including a co- Not assigned to this date Carlos Alberto Reyes Non applicable (Main executive of ENAP) 7,5% Fernando Promis No hay and maintenance services Operation and Maintenance 3,98% generation plant for power, Comandari through ERSA Contract steam and demineralized Juan José Eyzaguirre Lira water

Juan Eduardo Errázuriz Construction and operation Naoshi Matsumoto COMPAÑÍA DE HIDRÓGENO 99.519.810-K MUS$ 6.597 of a high purity hydrogen Juan Eduardo Errázuriz Juan Pablo Aboitiz Non applicable Juan Pablo Aboitiz ERSA 5% None None None None 0,02% BÍOBÍO S.A. production plant from natural Gonzalo Cavada ENAP 5% gas and other loads. Luis Manríquez

Angel Mafucci José Miguel Bambach Distribution of liquefied gas Osvaldo Rosa Mylene Iribarne Various LPG transportation NORGAS S.A. 78.889.940-8 M$ 2.758.365 to Regions I and II in Chile. Angel Mafucci Esteban Rodríguez Luis Alberto Orlandi Morris Pessó 42% Marc Llambías Designation of ENAP direc- services, and purchase of LPG Supply Contract. 0,03% Import gas from Argentina. Marc Llambías Luis Manriquez tors still pending. bulk LPG. Denisse Abudinén Andrea Sabignoso

238 / ENAP ANNUAL REPORT 2016

REFINING & COMMERCIALIZATION (R&C) REFINING & COMMERCIALIZATION (R&C)

239 / ENAP ANNUAL REPORT 2016

EXPLORATION & PRODUCTION (E&P) EXPLORATION & PRODUCTION (E&P)

Perform hydrocarbon exploration and exploitation activities outside the national territory; sell inside or outside Eduardo Bitran Eduardo Bitran Purchase and sale of ser- ENAP SIPETROL S.A. the national territory the Marcelo Tokman Marcelo Tokman vices for MUS$ 1,994 and - Current trading account. (SIPETROL) hydrocarbons product of the Bernardita Piedrabuena Hesketh Streeter ENAP 99,613 % Bernardita Piedrabuena MUS$ 1,253. In addition - Provision of oilfield Closed stock company, SVS 96.579.730-0 MUS$ 639.222 activities of its subsidiaries; Eduardo Bitran Paul Schiodtz Non applicable (Main executive of ENAP) ERSA 0,386%” Paul Schiodtz None gave loans and collected and administrative 13,17% Special Register of Reporting provide consulting services Jorge Fierro Jorge Fierro loans for MUS$ 31,715 services Entities Nº 187. in Chile and abroad, in María Isabel González María Isabel González and MUS$ 33,106, exploration, exploitation, Carlos Carmona Carlos Carmona respectively. benefit from hydrocarbon deposits.

The exploration and - ENAP rendered services exploitation of hydrocarbons, for an annual amount purchase, sale, import, of MMUSD 0.4. It is export, storage and expected to continue transportation of Provision, by ENAP, of in 2017. hydrocarbons and their services of different nature - Crude oil sales to and by-products; its refining Martin Cittadinni (e.g. consultancy) and from ENAP: for an annual ENAP SIPETROL and marketing; Assembly, Roberto Abraham ENAP SIPETROL S.A. sporadic internal sales of amount of MUSD 8,836 ARGENTINA S.A. 0-E MARS$ 15.029 construction, and operation Hesketh Streeter Hernán Flores Lisandro Rojas Martin Cittadini 99,5 % Hesketh Streeter None products to ENAP (crude in 2016, plus sale of 2,64% of facilities and structures Miguel Pesque ENAP 0,5% oil). It is expected to crude oil Petrofaro for for mining and oil drilling, maintain these commercial MUSD 1,496, this may production and processing; links from both sides during not be repeated in 2017 provision of consultancy the year 2017 as it depends sale tenders. related to previous activities; - Service sales by ENAP operation of petrochemical for artifacts and plants. maritime services.

Study, exploration and exploitation of liquid and/ or gaseous hydrocarbons and other minerals, their industrialization, transport and marketing and of their derivatives. Generation of Luis Díaz Walter Fernández ENAP SIPETROL PETROFARO S.A. 0-E MUS$ 20.318 electricity from hydrocarbons; Daniel Abraham Alberto Rivero Non applicable ARGENTINA S.A. 100% None None None None 0,17% carry out investments and Francisco García Marcos Cristóbal Hirsch capital contributions with the exception of those provided for in the law on financial institutions, and others for which the public competition is required.

240 / ENAP ANNUAL REPORT 2016

EXPLORATION & PRODUCTION (E&P) EXPLORATION & PRODUCTION (E&P)

241 / ENAP ANNUAL REPORT 2016

EXPLORATION & PRODUCTION (E&P) EXPLORATION & PRODUCTION (E&P)

Execution of works for the exploration, exploitation, study, research, leasing of equipment, machinery and camps, provision of services ENAP SIPETROL S.A. PETRO SERVICIO CORP S.A. 0-E MARS$ 2.000 for the exploration and ex- Ariel Azar Nuñez Diego Blanco Not applicable Not applicable 99,5% Ariel Azar Nuñez None None None 0,01% ploitation of hydrocarbon Andrea Sabignoso ENAP 0,5% deposits, and in general, any industrial, mining and commercial activity related to hydrocarbon deposits.

Abroad: Investments; International trade operations; Financial operations; commercial and industrial SIPETROL 0-E MUS$ 66.747 operations in various areas; Hesketh Streeter Hesketh Streeter Not applicable Not applicable ENAP SIPETROL S.A. Hesketh Streeter None None None 4,25% INTERNATIONAL S.A. all kinds of real estate trans- Lisandro Rojas Galliani 100% actions. In the country it can carry out activities permitted by Law 11,073.

Hydrocarbon activity includ- EOP OPERACIONES ing exploration, exploitation, ENAP SIPETROL S.A. 99% PETROLERAS S.A. 0-E MUS$ 2.659 transport and marketing of Diego Díaz Not applicable Not applicable Eduardo Tapia ERSA 1% None None None None 0,03% hydrocarbons.

CLASE A CLASE A: Luis Federico De Ridder Gustavo Carlos Monti Alberto Danny Massacese Daniel Eduardo Valencio Esteban Rivarola TERMINALES MARÍTIMAS Provides hydrocarbons stor- Rodolfo Eduardo Berisso Walter Fernández Cicco ENAP SIPETROL S.A. Enap, through SIPETROL, PATAGÓNICAS S.A. 0-E MUS$ 15.939 age and shipping services Federico Caldora Néstor Hugo Falivene Daniel Gustavo Ciaffone Daniel Scalise 13.79% None None received hydrocarbon stor- None 0,17% Carlos Martín Cittadini Walter José Ramón Tomás. age and shipping services. Clase B: CLASE B: Andrés Marcelo Scarone Raúl Ángel Rodríguez José Miguel Márquez Gustavo Ernesto Di Luzio

Lorenzo Gazmuri Schleyer Ramiro Méndez Through SIPETROL, they COMPAÑÍA Leonardo Ljubetic Juan Carlos Carrasco ENAP 20% are commercial partners LATINOAMERICANA 96.668.110-1 M$ 3.101.208 Exploration and production of Lorenzo Gazmuri Federic Chaveyriat Ramon Concha Ramón Concha Barrientos ENAP SIPETROL S.A. Heskeet Streeter None in foreign projects for None 0,00% PETROLERA S.A. hydrocarbons abroad. Heskeet Streeter Lisandro Rojas Galliani 20% “ exploration and production Alvaro Hercolani Denisse Abudinen of hydrocarbons

242 / ENAP ANNUAL REPORT 2016

EXPLORATION & PRODUCTION (E&P) EXPLORATION & PRODUCTION (E&P)

243 / ENAP ANNUAL REPORT 2016

EXPLORATION & PRODUCTION (E&P) EXPLORATION & PRODUCTION (E&P)

EX FARO VIRGENES International businesses FINANCIAL COMPANY INC. according to International Martin Cittadini ENAP SIPETROL (in the process of dissolu- MCAD 41.699 Business Companies Act of Not applicable Hernan Flores Gomez Not applicable Not applicable ARGENTINA S.A. 100% None None None None tion) the Republic of Barbados. Daniel Abraham

EX FARO VÍRGENES International businesses ENERGY COMPANY INC. according to International Martin Cittadini ENAP SIPETROL (in the process of dissolu- MCAD 33.990 Business Companies Act of Not applicable Hernan Flores Gomez Not applicable Not applicable ARGENTINA S.A. 100% None None None None tion) the Republic of Barbados. Daniel Abraham

Production and sales of second-generation Alvaro Hercolani Gerardo Passeron biodiesel produced using Alvaro Araya José Barriga FORENERGY S.A. 76.932.370-8 M$ 508.542 forest biomass, including Peter Hiller Exequiel Gonzalez Jeria Paulina Valenzuela Paulina Valenzuela S. ERSA 40.00% None None None None 0,00% viability studies and pilot plant Peter Hiller Daniel Hiller installation, construction and Juan Jose Cueto Antonio García E. development Pablo Vargas Antonio García.

GAS & ENERGY (G&E) GAS & ENERGY (G&E)

Exploiting, storing, transport- ing, distributing, marketing, importing, exporting and Ariel Azar Patricio Perez Cotapos intermediating all kinds of Andrea Sabignoso Alvaro Hercolani Marco Arróspide ENAP 95% GAS DE CHILE S.A 96.694.400-5 MUS$ 1.896 fuels and by-products or Ariel Azar Fernando Promis Fernanda Nash (Ejecutivo Principal ENAP) ERSA 5%” Ariel Azar None None None 0,00% derivatives, and especially Yasna Ross Oscar Santibañez natural gas in any form or state. Matias Hepp Pablo Silva Stockholding in companies Carmen Figueroa Ernesto Peñafiel Enap bought natural gas, whose purpose is to buy, Rafael Salas Gonzalo Ojeda including transportation sell, market and supply Mauricio Midon Pablo Sanchez service. Also, through ERSA, - Natural gas purchase INNERGY HOLDING S.A. 96.856.650-4 MUS$ 191.513 natural gas, Carmen Figueroa David Minchot Mara Teresa Rojas Patricia Palacios 25% None None Enap received transporta- contract 0,10% or build, exploit, Francisco Sanchez Edmunod Latorre tion capacity, reinvoicing - PSR Operation and and operate networks for the Jorge Lembeye Paula Valenzuela of PSR expenses and Maintenance Service transportation of natural gas. Roberto Piriz Patricio Perez-Cotapos purchase of natural gas. Yasna Ross Ignacio Nogera

244 / ENAP ANNUAL REPORT 2016

EXPLORATION & PRODUCTION (E&P) EXPLORATION & PRODUCTION (E&P)

GAS & ENERGY (G&E) GAS & ENERGY (G&E)

245 / ENAP ANNUAL REPORT 2016

GAS & ENERGY (G&E) GAS & ENERGY (G&E)

Horacio Cristiani Matias Hepp Gabriel Wilkinson Pablo Sobarzo Uriel O´Farrel Carmen Figueroa General investment and Agustín Siboldi Klaus Lurhmann GASODUCTO DEL PACIFICO financing company. Controls Mauricio Midon Gonzalo Soto CAYMAN S.A. 0-E MUS$ 50 Gasoducto del Pacífico Horacio Cristiani Walter Fernandez Rafael Salas Mauricio Midón 22.80% None None None None 0,00% Argentina S.A. Jorge Lembeye Paula Valenzuela Martín Cittadinni Yasna Ross Roberto Piriz Ignacio Noguera Alejandro Fernández Marcos Miguel Browne

Horacio Cristiani Matias Hepp Gabriel Wilkinson Pablo Sobarzo Uriel O´Farrel Carmen Figueroa Operate the gas pipeline to Agustín Siboldi Klaus Lurhmann GASODUCTO DEL PACÍFICO transport natural gas from Mauricio Midon Gonzalo Soto ARGENTINA S.A. 0-E MARS$ 155.811 Argentina to Chile and carry Horacio Cristiani Walter Fernandez Rafael Salas Mauricio Midón 22,8% None None None None 0,14% out all activities related to Jorge Lembeye Paula Valenzuela that service Martín Cittadinni Yasna Ross Roberto Piriz Ignacio Noguera Alejandro Fernandez Marcos Miguel Browne

Pablo Sobarso Pablo Silva Carmen Figueroa Rafael Salas Gonzalo Soto Ernesto Peñafiel Construction, ownership, Matias Hepp Pablo Sanchez GASODUCTO DEL exploration and technical and Klaus, Lurmann Gonzalo Ojeda PACÍFICO S.A. 96.762.250-8 MUS$ 105.842 commercial operation of gas Pablo Sobarso Yasna Ross, David Minchot Patricia Palacios 25% None None None None 0,04% to transport natural gas. Jorge Lembeye Paula Valenzuela Oscar Santibañez Patricio Perez Cotapos Roberto Piriz Fernanda Nash Mauricio Midón Ignacio Noguera. Closely-held corporation whose purpose is to provide the transportation of natural Marco Arróspide (3) Patricio Pérez-Cotapos Electrogas provided gas gas and other fuels on its Eduardo Lauer Rodríguez Ítalo Cuneo transportation services to own or through third parties. Carlos Luna C. Patricio Troncoso ENAP and its subsidiary. Zone 1 and Zone 2 gas ELECTROGAS S.A. 96.806.130-5 MUS$ 21.266 To achieve this goal it will Eduardo Lauer Juan Oliva Vásquez Alex Diaz Sanzana Alan Fischer 15% Marco Arróspide Rivera None It also provided ERSA op- transportation agreement 0,10% build, operate, and maintain Pedro de la Sotta Ricardo Santibáñez eration services of El Colmo gas pipelines, oil pipelines, or Sánchez Zamorano measuring station. multi-purpose pipelines and the complementary facilities.

Gas Sales Agreement between Yasna Ross Javier Fuenzalida Through ERSA, ENAP ERSA and GNL Chile S.A. GNL CHILE S.A. 76.418.940-K MUS$ 3.026 Natural gas import and com- Yasna Ross Klaus Luhrmann Luisa Arancibia Alejandro Palma 33.33% None Javier Fuenzalida purchased natural gas to (GNLC). 0,10% mercialization services. Alez Díaz Humberto Espejo GNL Chile S.A. for MUS$ SPA between ERSA, 316,353. GNLC, and BG LNG Trading.

246 / ENAP ANNUAL REPORT 2016

GAS & ENERGY (G&E) GAS & ENERGY (G&E)

247 / ENAP ANNUAL REPORT 2016

GAS & ENERGY (G&E) GAS & ENERGY (G&E)

- Sales and Purchase Agreement between ERSA and GNLQ - Stock Options Agreement between ENAP and GNLQ - Assignment of Environ- mental Permits Agreement from ERSA to GNLQ. - Authorization Agreement, ERSA a GNLQ. - TUA Direct Agreement between ERSA, among others, and GNLQ. - Umbrella Arbitration Jesus Saldaña Antonio Manzamo Agreement. Development, construction, Luis Romero Javier Alfaro ENAP maintained com- - Company Guarantee operation and maintenance Carlos Ruiz de Gauna Álvaro Pérez mercial relations with this from ENAP to CB&I. GNL QUINTERO S.A. 76.788.080-4 MUS$ 114.058 of a liquefied natural gas Pending nomination Jose Antonio de las Heras Iñigo Echáñiz Antonio Bacigalupo 20% Marco Arróspide Rivera Alfredo del Carril company through GNL - Second Amendment 0,11% regasification terminal Rafael Gonzalez Joaquín Marin Chile S.A to Umbrella Arbitration Sultan AL Bartamani Hilal Al-Kharusi Agreement. Marco Arróspide Rivera Alfredo del Carril. - Fast Track Period Opera- tional Protocol. - Granting, Acceptance, and Other: Engineering, Supply, and Construction Agreement and Umbrella Agreement for Engineering, Supply, and Construction from ENAP and Metrogas to GNL Quintero S.A., dated June 15, 2010 with Montaje Industrial Cons- orcio Echeverría Izquierdo, Parés y Álvarez Ltda.

Research, exploration, devel- Salvatore Bernabei Ali Shakhtur GEOTERMICA DEL NORTE opment and exploitation of Eugenio Calderón Denny Carrasco S.A. 96.971.330-6 M$ 242.363.020 geothermal energy and all of Salvatore Bernabei Martino Pasti Víctor Tavera Guido Cappetti 18,30% Marco Arróspide No hay No hay No hay 1,26% its complementary activities. Marco Arróspide Álvaro Hercolani

Research, exploration, development, and exploitation of Salvatore Bernabei Eugenio Calderón EMPRESA NACIONAL DE 99.577.350-3 M$ 12.647.753 Geothermal energy, including Marco Arróspide Martino Pasti Ali Shaktur Guido Cappetti 49.00% Marco Arróspide None None None 0,03% GEOTERMIA S.A. all of the complementary Marco Arróspide Andrea Sabignoso activities. Alvaro Hercolani Banchini Lisandro Rojas

248 / ENAP ANNUAL REPORT 2016

GAS & ENERGY (G&E) GAS & ENERGY (G&E)

249 / ENAP ANNUAL REPORT 2016

CHAPTER 6 CONSOLIDATED FINANCIAL STATEMENTS

250 /

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

EMPRESA NACIONAL DEL PETRÓLEO

2016

ENAP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2016 AND 2015 (In thousands of US dollars - ThUS$)

Notes 12.31.2016 12.31.2015 ASSETS ThUS$ ThUS$

Current assets: Cash and cash equivalents 8 66,104 113,587 Other current financial assets 9 11,733 89,802 Other current non-financial assets 10 17,315 5,321 Trade and other receivables 11 644,062 631,759 Due from related companies 12 48,636 26,751 Inventories 13 727,890 565,686 Current tax assets 14 135,260 92,231 Current assets other than assets classified as held for sale 1,651,000 1,525,137 Non-current assets classified as held for sale 15 12,775 -

Total current assets 1,663,775 1,525,137

Non-current assets: Other non-current financial assets 9 13,915 41,909 Other non-current non-financial assets 10 36,829 28,870 Non current receivable 11 23,117 13,361 Due from related companies 12 1,066 1,671 Investment accounted for using the equity method 16 121,632 146,718 Intangible assets other than goodwill 3,082 3,083 Property, plant and equipment 17 3,137,639 2,797,661 Investment property 21 7,461 7,551 Deferred tax assets 14 834,731 825,840

Total non-current assets 4,179,472 3,866,664

TOTAL ASSETS 5,843,247 5,391,801

The accompaning notes are an integral part of these consolidated financial statements

ENAP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2016 AND 2015 (In thousands of US dollars - ThUS$)

Notes 12.31.2016 12.31.2015 EQUITY AND LIABILITIES ThUS$ ThUS$

Current liabilities: Other current financial liabilities 22 867,592 491,545 Trade creditors and other accounts payable 23 584,079 435,670 Due to related companies 12 13,000 39,197 Other short-term accruals 24 1,944 4,764 Current tax liabilities 14 74,280 72,355 Current accruals for employee benefits 25 48,885 41,798 Other current non-financial liabilities 10,619 9,407 Current liabilities other than liabilities included in disposal groups 1,600,399 1,094,736 classified as held for sale Liabilities included in disposal groups classified as held for sale 15 3,099 -

Total current liabilities 1,603,498 1,094,736

Non-current liabilities: Other non-current financial liabilities 22 3,139,718 3,310,191 Other non-current accounts payable 23 1,681 1,086 Other non-current long-term accruals 24 127,697 115,352 Deferred tax liabilities 14 70,197 79,740 Non-current accruals for employee benefits 25 92,841 89,480 Other non-current non-financial liabilities 293 489

Total non-current liabilities 3,432,427 3,596,338

Total liabilities 5,035,925 4,691,074

Equity: Paid-in capital 26 1,232,332 1,232,332 Retained earnings (accumulated deficit) 26 (287,612) (470,726) Other reserves 26 (146,544) (73,272)

Equity attributable to owners of the Parent Company 798,176 688,334 Non - controlling interest 27 9,146 12,393

Total equity 807,322 700,727

TOTAL EQUITY AND LIABILITIES 5,843,247 5,391,801 0.00 0.00

The accompaning notes are an integral part of these consolidated financial statements

ENAP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED AT DECEMBER 31, 2016 AND 2015 (In thousands of US dollars - ThUS$)

Notes 12.31.2016 12.31.2015 ThUS$ ThUS$

Revenues 29 5,217,063 6,351,011 Cost of sales 30 (4,669,858) (5,708,056)

Gross margin 547,205 642,955 Other income 31 67,782 26,785 Distribution cost 32 (206,421) (204,160) Administrative expenses (100,505) (87,831) Other expenses, per function 33 (106,748) (104,187)

Income from operational activities 201,313 273,562 Other income (loss) 36 105,931 (7,098) Financial income 7,200 5,911 Financial expense 34 (186,990) (190,969) Equity in earnings of associates recorded using the equity method 16 18,153 14,861 Exchange differences 37 (18,449) (3,352) Income before taxes 127,158 92,915 Income tax benefit 14 55,422 77,567

Net income 182,580 170,482

Net income attributed to: Net income attributable to owners of parent company 181,296 168,919 Net income attributable to non - controlling interest 26 1,284 1,563 Net income 182,580 170,482

The accompaning notes are an integral part of these consolidated financial statements

ENAP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME PER FUNCTION FOR THE YEARS ENDED AT DECEMBER 31, 2016 AND 2015 (In thousands of US dollars - ThUS$)

12.31.2016 12.31.2015 ThUS$ ThUS$

Net income 182,580 170,482

Components of other comprehensive income that may not be reclassified to income or loss before tax Other comprehensive income before tax actuarial, gain (losses) of defined benefit plans (949) (3,109) Total of other comprehensive income that may not be reclassified to income or loss before tax (949) (3,109)

Components of other comprehensive income that may be reclassified to income or loss before tax Currency translation differences Gain (losses) on currency translation differences, before taxes 1,791 (3,511) Cash Flow Hedges Gain (losses) from cash flow hedges, before taxes 3,374 211,434 Reclassification adjustments on cash flow hedges before tax (50,403) (227,643) Other comprehensive loss before taxes, cash flow hedges (47,029) (16,209) Other components from other comprehensive income, that may be reclassified to income or loss before taxes (45,238) (19,720)

Income tax relating to components of other comprehensive income that may not be reclassified to income or loss Income tax relating to remeasurements of defined benefit plans of other comprehensive income 196 1,955 Income tax relating to components of other comprehensive income that may be reclassified to income or loss Income taxes related to cash flow hedges 2,435 9,002 Total income tax relating to components of other comprehensive income that may be reclassified to income or loss 2,631 10,957

Other comprehensive loss (43,556) (11,872)

Total comprehensive income 139,024 158,610

Income attributable to owners of parent company 137,740 157,047 Income attributable to non-controlling interest 1,284 1,563

Total comprehensive income 139,024 158,610

The accompaning notes are an integral part of these consolidated financial statements

ENAP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED AT DECEMBER 31, 2016 AND 2015 (In thousands of US dollars - ThUS$)

Changes in other reserves Revaluation Reserves for reserve on Retained Net equity exchange Reserves for Actuarial reserves financial assets Other Total earnuings attributable to Non - Paid in differences for cash flow on defined available miscellaneous other (accumulated the owners of the controlling Total capital translation hedges benefit plans for sale reserves reserves deficit) Parent Company interest Equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Opening balance at 01/01/2016 1,232,332 (79,282) (15,891) (6,559) 1,190 27,270 (73,272) (470,726) 688,334 12,393 700,727 Increase (decrease) due to correction of errors ------Restated initial balance 1,232,332 (79,282) (15,891) (6,559) 1,190 27,270 (73,272) (470,726) 688,334 12,393 700,727 Changes in Equity Comprehensive income Net income 181,296 181,296 1,284 182,580 Other comprehensive income 1,791 (44,594) (753) - - (43,556) - (43,556) - (43,556) Total comprehensive income 1,791 (44,594) (753) - - (43,556) 181,296 137,740 1,284 139,024 Increase (decrease) due to transfers and other changes - - - - - (29,716) (29,716) 1,818 (27,898) (4,531) (32,430) Total changes in equity - 1,791 (44,594) (753) - (29,716) (73,272) 183,114 109,842 (3,247) 106,594

Final balance at 12/31/2016 1,232,332 (77,491) (60,485) (7,312) 1,190 (2,446) (146,544) (287,612) 798,176 9,146 807,322

Opening balance at 01/01/2015 1,232,332 (76,561) (8,684) (4,615) 1,190 27,270 (61,400) (637,827) 533,105 12,471 545,576 Increase (decrease) due to correction of errors ------Restated initial balance 1,232,332 (76,561) (8,684) (4,615) 1,190 27,270 (61,400) (637,827) 533,105 12,471 545,576 Changes in Equity Comprehensive income Net income 168,919 168,919 1,563 170,482 Other comprehensive income (2,721) (7,207) (1,944) - - (11,872) (11,872) - (11,872) Total comprehensive income (2,721) (7,207) (1,944) - - (11,872) 168,919 157,047 1,563 158,610 Increase (decrease) due to transfers and other changes ------(1,818) (1,818) (1,641) (3,459) Total changes in equity - (2,721) (7,207) (1,944) - - (11,872) 167,101 155,229 (78) 155,151

Final balance at 12/31/2015 1,232,332 (79,282) (15,891) (6,559) 1,190 27,270 (73,272) (470,726) 688,334 12,393 700,727

The accompaning notes are an integral part of these consolidated financial statements

ENAP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, DIRECT METHOD FOR THE YEARS ENDED AT DECEMBER 31, 2016 AND 2015 (In thousands of US dollars - ThUS$)

Notes 12.31.2016 12.31.2015 ThUS$ ThUS$

Net cash flows provided by (used in) operating activities Proceeds from sales of goods and services 8,274,401 9,469,494 Other receipts (payments) from operating activities 41,110 40,583 Payments to suppliers for goods and services (5,225,139) (6,233,558) Payments to and on behalf of employees (328,399) (321,864) Other payments for operating activities (2,156,285) (2,080,457) Dividends paid (4,590) (1,665) Dividends received 16,616 20,123 Interest paid (1,035) (728) Interest received 1,542 2,397 Income taxes refunded (11,246) (110,668) Other inputs in cash 12,012 21,705

Cash flows from operating activities 618,987 805,362

Net cash flows from (used in) investing activities Cash flows used In obtaining control of subsidiaries or other businesses (59,150) - Purchase of non - controlling interest - (20,000) Loans to related parties - (3,268) Purchases of property, plant and equipment 17 (623,893) (589,493) Cash advances and loans to third parties (1,307) (617) Collections from the reimbursement of advance payments and loans granted to third parties 1,447 2,033 Collections from related entities 2,731 2,631 Interest received 3,261 1,424 Other inputs in cash 3,823 -

Cash flows used in investing activities (673,088) (607,290)

Net cash flows from (used in) financing activities Proceeds from long-term loans 128,848 - Proceeds from short-term loans 326,820 149,677 Loan payments (291,164) (222,988) Payments of finance lease liabilities (1,934) (2,084) Interest paid (165,388) (165,441) Other inputs in cash 22,689 7,352

Cash flows from (used in) financing activities 19,871 (233,484) Net increase (decrease) in cash and cash equivalents, before the effect of changes in the exchange rate (34,230) (35,412)

Effects of variation in the exchange rate on cash and cash equivalents Effects of variation in the exchange rate on cash and cash equivalents (13,253) (4,512) Decrease in cash and cash equivalents of the year (47,483) (39,924) Cash and cash equivalents at the beginning of the year 113,587 153,511

Cash and cash equivalents at the end of the year 6 66,104 113,587

The accompaning notes are an integral part of these consolidated financial statements

ENAP AND SUBSIDIARIES

Contents Page

1. General information 1 2. Description of the business 1 3. Summary of significant accounting policies 2 4. Financial risk management and hedge definition 17 5. Business combination 22 6. Critical accounting estimates and judgments 24 7. Financial assets 26 8. Cash and cash equivalents 27 9. Other financial assets current and non-current 28 10. Other non-financial assets current and non-current 29 11. Trade receivables and other receivables 29 12. Balances and transactions with related companies 30 13. Inventories 33 14. Current assets and liabilities, deferred tax and income tax benefit 34 15. Non-current assets and liabilities classified as held for sale 38 16. Investments recorded using the equity method 39 17. Property, plant and equipment 42 18. Impairment loss and provisions 45 19. Participation in joint operation 46 20. Other business 53 21. Investment properties 55 22. Other financial liabilities 55 23. Trade debtors and other accounts payable 65 24. Other accruals 66 25. Employee benefits accruals 67 26. Equity 69 27. Non-controlling interest 72 28. Operating segments 72 29. Revenues from ordinary activities 76 30. Cost of sales 76 31. Other income 77 32. Distribution costs 77 33. Other expense by function 78 34. Financial costs 78 35. Personnel costs 79 36. Other income (loss) 79 37. Exchange differences 79 38. Foreign currency 80 39. Environments activities 81 40. Lawsuits and commercial commitments 82 41. Guarantees committed with third parties 86 42. Consolidation scope 87 43. Subsequent events 88

ENAP AND SUBSIDIARIES

1. GENERAL INFORMATION

Empresa Nacional del Petróleo (hereinafter “ENAP” or the “parent company”) is the parent entity of the group of companies (hereinafter the “ENAP Group”) referred to in these consolidated financial statements.

ENAP was created through Law 9,618, dated June 19, 1950 and is owned by the Republic of Chile, and its corporate purpose is the exploration, production and marketing of hydrocarbons and its by-products. The addresses of ENAP are Avenida Vitacura 2736 Floor 10, Las Condes in Santiago and José Nogueira 1101 in Punta Arenas. On October 4, 2002, ENAP was registered in the Securities Register of the Superintendency of Securities and Insurance (SVS, Superintendencia de Valores y Seguros), under number 783. As such, ENAP is subject to the regulations of the above mentioned Superintendency.

ENAP is related to the Chilean government through the Ministry of Energy and The Minister of Energy is the chairman of the Honorable Board.

ENAP's corporate purpose is the exploration, production and marketing of hydrocarbons and their derivatives; it may also participate in companies whose activities are related to geothermal energy and the production, transportation and marketing of electric energy and power.

The Company’s consolidated financial statements for the year ended December 31, 2016, were approved by its Board of Directors at Extraordinary Meeting held on March 2, 2017.

2. DESCRIPTION OF THE BUSINESS

According to the previously mentioned law and its subsequent amendments, ENAP’s main activity is exploring, operating or processing of hydrocarbon deposits, which is authorized to be performed both inside and outside the country.

Its main subsidiary ENAP Refinerías S.A. (“ERSA”) is a private company, which officially began operating in January 2004. It was created according to an agreement that was approved at the general meeting of shareholders of Petrox S.A. Refinería de Petróleo (Petrox), on December 23, 2003, under which this subsidiary of ENAP merged with Refinería de Petróleo de Concón S.A. (RPC). Petrox, now ERSA, was organized as a private company on July 16, 1981, before the notary Raúl Undurraga Laso, from Santiago, and its registered address is Avenida Borgoño 25,777, Concón. Its line of business is the import, processing, storage and marketing of hydrocarbons and its derivatives and all other activities that are directly or indirectly related and which are expressed in detail in the third article of its statutes.

The direct subsidiary ENAP Sipetrol S.A. performs one or more of the upstream activities abroad. ENAP Sipetrol S.A. has branches in Ecuador and associates in Argentina, Ecuador and Uruguay. Through the subsidiary in Uruguay, it participates in production activities through joint ventures in Egypt.

The subsidiaries ENAP Refinerías S.A. and ENAP Sipetrol S.A. are privately held corporations, voluntarily registered in the Special Register of Reporting Entities of the SVS under N° 95 and N° 187, respectively, which they are regulated by the General Regulation No. 364.

ENAP AND SUBSIDIARIES

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Accounting policies

These consolidated financial statements are stated in thousands of US dollars and were prepared from the accounting records kept by ENAP and its subsidiaries. The Company’s consolidated financial statements for the year ended December 31, 2016 and 2015 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

Preparation of these consolidated financial statements under IFRS requires the use of estimates and assumptions by the Management of the ENAP Group. These estimates are based on the best knowledge of Management on the amounts reported, events or actions. The detail of significant accounting estimates is shown in Note 6.

The following describes the main accounting policies adopted in the preparation of these consolidated financial statements. These policies have been defined according to the IAS and IFRS effective as of December 31, 2016, and have been applied consistently over the years over which these consolidated financial statements are presented. a. Bases of preparation – These consolidated financial statements of the ENAP Group include the statement of financial position as of December 31, 2016 and 2015, the statement of income, the statement of comprehensive income, changes in equity and cash flows for the year ended December 31, 2016 and 2015.

The consolidated statement of financial position as of December 31, 2015 and the statements of comprehensive income, of changes in equity and of cash flows for the year ended December 31, 2015, were originally prepared in accordance with instructions and standards issued by the Superintendence of Securities and Insurance of Chile (SVS), which are composed of IFRS, plus specific instructions issued by the SVS. These instructions are directly related to Circular Letter No. 856 issued by the SVS on October 17, 2014, and instructed the audited entities to record directly in equity the changes in assets and liabilities for deferred taxes arising as direct result of the increase in the first category income tax rate introduced in Chile by Law 20.780. This instruction differs from the one established by the International Financial Reporting Standards (IFRS), which require that such effect is recorded against income for the year. The effect of this change in accounting bases meant recognizing in 2014 a credit to retained earnings amounting to ThUS$109,495, which according to IFRS should have been presented with a credit to income of that year.

In the re-adoption of IFRS as of January 1, 2016, the Group has applied these standards as if it had never stopped applying them, according to the option provided for in paragraph 4A of IFRS 1 "First-time Adoption of International Financial Reporting Standards". This re-adoption of IFRS did not involve adjustments to the consolidated statement of financial position as of December 31, 2015 and the statements of comprehensive income, of changes in equity and of cash flows for the year ended as of December 31, 2015, originally issued.

The accompanying consolidated financial statements reflect the financial position of the ENAP Group and its subsidiaries at December 31, 2016 and 2015 and the results of its operations, changes in equity and cash flows for the years ended December 31, 2016 and 2015. For comparatives purposes as of December 31, 2015 the assets and liabilities for deferred taxes have been reclassified, this reclassification does not modify the equity or the results of the year 2015.

These consolidated financial statements have been prepared on the basis of historical cost, except for financial instruments which are measured at fair value, as explained in the policies described. The historical cost is based on the fair value of the consideration delivered in an asset exchange. b. Bases of consolidation – These consolidated financial statements of ENAP include all the assets, liabilities, revenues, expenses and cash flows of ENAP and ENAP–controlled entities, whether subsidiaries or structured entities, after eliminating intercompany transactions. 2

ENAP AND SUBSIDIARIES

The financial statements of controlled entities use US Dollars as their functional currency and presentation currency. i) Subsidiaries

Subsidiaries (including the Structured Entity - SE) are those companies over which ENAP directly or indirectly exercises control, control is achieved when the Company: i) has power over the investee, ii) is exposed, or has rights, to the variable returns from its involvement with this investee; and iii) has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of income or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

To account for the acquisition of affiliated is used the acquisition method, according to which the acquisition cost is the fair value of the delivered assets, of the equity instruments issued and of the liabilities incurred or assumed at the exchange date. The identifiable assets acquired and the identifiable liabilities and contingencies assumed in a business combination are initially measured at fair value at the acquisition date. The excess of acquisition cost over the fair value of the participation of the ENAP Group in identifiable net assets acquired is recognized as "Goodwill". If the cost of acquisition is less than the fair value of the net assets of the acquired subsidiary, the difference is recognized directly as income in the statement of income.

Income or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Detailed in the following chart are the direct and indirect subsidiaries (including the Structured Entity – SE), which are included in the consolidation of the ENAP Group.

ENAP AND SUBSIDIARIES

Relationship Shareholder Company Domicile with the parent company percentage 12.31.2016 12.31.2015

Enap Refinerías S.A. Chile Direct Subsidiary 99.98% 99.98% Enap Sipetrol S.A. Chile Direct Subsidiary 100.00% 100.00% Gas de Chile S.A. Chile Direct Subsidiary 100.00% 100.00% Enap Sipetrol Argentina S.A. Argentina Indirect Subsidiary 100.00% 100.00% Petro Servicios Corp. S.A. Argentina Indirect Subsidiary 100.00% 100.00% Petrofaro S.A. Argentina Indirect Subsidiary 100.00% - Enap Sipetrol (UK) Limited U. Kingdom Indirect Subsidiary - 100.00% Sipetrol International S.A. Uruguay Indirect Subsidiary 100.00% 100.00% EOP Operaciones Petroleras S.A. Ecuador Indirect Subsidiary 100.00% - Energía Concón S.A. Chile Indirect Subsidiary 100.00% 100.00% Petrosul S.A. Chile Indirect Subsidiary 100.00% 100.00% Productora de Diesel S.A. Chile Indirect Subsidiary 100.00% 100.00% Petropower Energía Ltda. Chile Indirect Subsidiary 100.00% 15.00% Compañía de Hidrógeno del Bío-Bío S.A. Chile Structured entity 10.00% 10.00%

Changes during 2016:

ENAP Sipetrol (UK) Limited As of March 31, 2016, Enap Sipetrol (UK) Limited, was dissolved through an administrative decision of the Register of Companies of UK for being without operations. Enap Sipetrol S.A. maintained a 100% interest.

Petrofaro S.A. On May 19, 2016, Enap Sipetrol Argentina S.A. subsidiary of ENAP acquired ArPetrol International Financial Company, which controls 100% of the shares of ArPetrol Argentina S.A. with an estimated value of ThUS$11,084, of which THUS$2,250 remained under warranty. This purchase implied an increase in the statement of financial position of ThUS$4,818 in current assets, ThUS$8,896 in non-current assets, ThUS$1,234 in current liabilities and ThUS$1,395 in non-current liabilities.

Petrofaro S.A. is holder of the Faro Virgenes concession granted by the province of Santa Cruz and of the gas treatment plant Faro Virgenes located in such concession area.

Petropower Energía Ltda.

During December 2016, the Group acquired 100% of the related company Petróleo Energía Limitada, through the purchase of an additional 85% stake held by Enap Refinerías S.A. (See note 5). As a result of this operation, the Group acquired control over this company.

The entry of Petropower Energía Limitada into the scope of consolidation of the Enap Group resulted in an increase in the consolidated financial position of ThUS$ 188,797 in total assets, and ThUS$ 5,552 in total liabilities.

Changes during 2015:

EOP Operaciones Petroleras S.A. On January 5, 2015 the subsidiary EOP Operaciones Petroleras S.A. was registered in the Public Deed Register of the city of Quito, Ecuador, with a 99% interest (99,000 shares) for ENAP Sipetrol S.A. and 1% (1,000 shares) for ENAP Refinerías S.A. and share capital of ThUS$ 100. 4

ENAP AND SUBSIDIARIES

On September 3, 2015 a capital increase amounting to ThUS$ 1,386 was performed, equivalent to 1,386,000 new shares. Thus the share capital remains at ThUS$ 1,486, with a 99% interest for Enap Sipetrol S.A. (1,471,140 shares) and 1% for Enap Refinerías S.A. (14,860 shares).

EOP Operaciones Petroleras S.A. is a member-operator in a service agreement with the Secretaría de Hidrocarburos de Ecuador, for the exploration and exploitation of hydrocarbons of Block 28 of the Ecuadorian Amazon region, through the Consortium of Block 28 created on April 7, 2015 by Empresa Pública de Exploración y Explotación de Hidrocarburos Petroamazonas (EP), with 51%; EOP Operaciones Petroleras S.A., with 42%; and Empresa Estatal Unitaria Unión de Empresas Productoras Belorusneft, with 7%.

Sociedad Internacional Petrolera Enap Ecuador S.A. On September 2, 2015 the registration of this company in the Trade Register of the Metropolitan District of Quito, Ecuador was cancelled.

Petro Servicios Corp S.A. On October 29, 2015 the Group transferred the ownership of Petro Servicios Corp S.A., as of December 31, 2015 the ownership is as follows: Enap Sipetrol S.A., with 99.5% and ENAP, with 0.5%. ii) Joint Operation

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

When a group entity understake s its activities under joint operations, the Group as a joint operator recognizes in relation to its interest in a joint operation:

(i) its assets, including its share of any assets held jointly; (ii) its liabilities, including its share of any liabilities incurred jointly; (iii) its revenue from the sale of its share of the output arising from the joint operation; (iv) its share of the revenue from the sale of the output by the joint operation; and (v) its expenses, including its share of any expenses incurred jointly. iii) Structured Entity

A Structured Entity (SE) is an entity set up for a specific purpose or limited duration. These SE frequently function as agent organizations. Such entities serve to isolate financial risk.

Thus, although the ENAP Group’s ownership interest in the Compañía de Hidrógeno del Bío-Bío S.A. (hereinafter “CHBB”) is less than 50%, it is considered to be a “Subsidiary”, because, pursuant to agreements or covenants between shareholders, or as a result of their structure, ENAP Group directly or indirectly exercises control over the above company. The minority interests corresponding to the percentage of third party participation in this Subsidiary has also been recognized.

The accounting principles and procedures used by the ENAP Group’s companies were conformed with those of the Parent in order to present consolidated financial statements.

ENAP AND SUBSIDIARIES c. Business Combination - Consolidation of the operations of the parent company and subsidiaries has been carried out in accordance with the following basic principles:

At the date of the acquisition of control, assets acquired and liabilities assumed from the subsidiary are recorded at fair value, except for certain assets and liabilities that are recorded in accordance with the valuation principles established under IFRS. In the event of a positive difference between the fair value of the consideration transferred plus the amount of any non-controlling interest and the fair value of the subsidiary's assets and liabilities, including contingent liabilities, corresponding to the parent's interest, the resulting difference is recorded as goodwill. If the difference is negative, the resulting gain is recorded as a credit to results, after reassessing whether all assets acquired and liabilities assumed have been correctly identified and a review of the procedures used to measure these amounts has been performed.

For each business combination, the Group chooses whether to value the non-controlling interests of the acquiree at fair value or by the pro rata share of the identifiable net assets of the acquiree.

If it is not possible to determine the fair value of all assets acquired and liabilities assumed at the acquisition date, the group will report the provisional values recorded. During the measurement period, one year from the date of acquisition, the provisional amounts recognized will be retroactively adjusted and additional assets or liabilities will also be recognized to reflect new information obtained on facts and circumstances that existed at the date of acquisition, but which were not known by the administration at that time.

The value of non-controlling interest in equity and comprehensive income of subsidiaries is presented under "Total Equity: Non-controlling interests" in the consolidated statement of financial position and the "Gain (loss) Attributable to non-controlling interests"and the "Comprehensive income attributable to non-controlling interests " in the consolidated statement of comprehensive income. d. Functional Currency - The functional and presentation currency of the ENAP Group is the US Dollar. The functional currency for each entity of the ENAP Group is determined as the currency of the main economic environment in which it operates. Transactions other than those performed in the entity’s functional currency will be converted at the exchange rate in effect on the date of the transaction. Monetary assets and liabilities denominated in currencies other than the functional one will be converted at the year-end exchange rates. Net equity is kept at the historical exchange rate at the date of acquisition or contribution. Gains or losses from the conversion will be included in net income or losses for the year. e. Foreign currency translation and indexation - Assets and liabilities denominated in Chilean pesos, in Unidades de Fomento (UF) and other currencies are translated into US dollars at the closing rates of exchange, as per the following detail: 12.31.2016 12.31.2015 US$ US$ Chilean Peso 669.47 710.16 Argentinian Peso 15.84 12.97 British Pound 0.81 0.67 Egyptian Pound 18.11 7.81 UF 0.03 0.03 Swiss Franc 1.02 0.99 EURO 0.95 0.92 Yen 116.83 120.59

ENAP AND SUBSIDIARIES f. Offsetting balances and transactions - As a general standard, assets and liabilities, income and expenses, are not offset in the interim financial statements, except for those cases in which offsetting is required or is allowed by some standard or based on management intention, and the presentation is a reflection of the substance of the transaction.

Income or expenses originating in transactions, which, for contractual or legal reasons, consider the possibility of offsetting and which the ENAP Group intends to liquidate for their net value or realize the assets and pay the liabilities simultaneously, are stated net in the statement of comprehensive income and the Consolidated Statement of Financial Position.

The financial statements do not present net income and expenses in their consolidated statement of comprehensive income.

At the level of balances in the Statement of Financial Position, the following entries have been offset:

 The assets and current tax liabilities are presented net at the level of subsidiary, when the latter has a legally applicable right to offset current tax assets with current tax liabilities when they relate to taxes demanded by the same taxation authority, and the latter allows the entity to liquidate or receive a single net payment.

As a result, deferred tax assets and liabilities are offset if, and only if, they relate to income taxes corresponding to the same tax administration, provided that the entity has the legally enforceable right to offset current tax assets , with current tax liabilities.

 Derivative instruments are presented net as their respective contracts provide for exchange for offsetting of differences upon liquidation of the operation. g. Foreign currency – Transactions in a currency other than a company’s functional one are considered to be foreign currency transactions and they are converted at the exchange rate in effect on the date of the operation. At each period end, the balance sheet amounts of monetary items in a foreign currency are valued at the year-end exchange rate, and the exchange rate differences arising from such valuation are recorded in the statements of comprehensive income, in the item “Exchange differences”. h. Property, plant and equipment - Property, plant and equipment are recorded at cost, excluding regular maintenance costs and less accumulated depreciation and impairment losses.

The cost of property, plant and equipment includes their purchase price plus all costs directly related to placing the asset in service and bringing it into an operating condition, as provided by management, and the initial estimate of any cost involved in dismantling and removing the asset or restoring the physical site where it is located.

Financing interest costs directly attributable to the purchase or construction of assets requiring a substantial period of time before being ready for use or sale will also be capitalized as a property, plant and equipment cost.

Repair and maintenance expenses are charged to income during the period in which they occur. Some ENAP Group property, plant and equipment elements require regular inspections. In this regard, elements subject to replacement are recognized separately from the rest of the asset (componentization), detailed at such a level that they can be depreciated in the period from the current replacement to the next one.

Whenever there is an indication that there might be an impairment of the value of the assets, their recoverable value is compared to their net book value.

Any impairment or reversal of impairment arising as a result of such a comparison will be recorded and charged or credited to net income for the year, as appropriate. 7

ENAP AND SUBSIDIARIES

i. Exploration and production of hydrocarbons - The exploration operations are recorded in conformity with the standards established in IFRS 6 “Exploration for and Evaluation of Mineral Resources.”

The Hydrocarbon Exploration and Production operations are recorded in conformity with the successful-efforts method. The accounting treatment of the various costs incurred under this method is as follows: i) Costs from the acquisition of new rights or interests in areas with proven or unproven reserves. ii) Costs involved in acquiring interests in exploration areas are capitalized at purchase cost and amortized with a charge to income in “Exploration costs”, in accordance with the criterion indicated in exploration costs below, if no reserves are found, these previously capitalized expenses are expensed in the statement of income. If the exploration produces positive results, leading to a commercially workable discovery, the costs are reclassified in Property, Plant and Equipment, at their net book value when so determined. Wells are only classified as commercial if they are expected to generate sufficient volume of reserves to justify their commercial development. iii) The exploration costs, as for example geology and geophysics expenses, costs associated with maintaining unproven reserves and other exploration-related costs, prior to drilling are charged to income when incurred. iv) Drilling costs incurred in prospecting campaigns, including stratigraphic test wells, are capitalized and presented in the item Properties, Plant and Equipment, pending the decision as to whether proven reserves justifying their commercial development are discovered. If no proven reserves have been found, these initially capitalized costs are charged to profit or loss. v) The drilling costs of wells leading to a positive discovery of commercially workable reserves are capitalized and presented in Property, Plant and Equipment. vi) Development costs incurred in extracting proven reserves and treating and storing the oil and gas (including the drilling costs of production wells and developing dry wells, platforms, recovery improvement systems, etc.) are capitalized and presented in Property, Plant and Equipment. vii) Costs for the future abandonment and dismantling of oil fields are calculated on a field by field basis and capitalized at present value. This capitalization is credited to Non-current accruals.

Investments capitalized according to the above criteria are amortized as follows:

. Investments involved in the acquisition of proven reserves are amortized using the units of production method.

. Investments related to unproven reserves or fields in the process of being evaluated are not amortized. These investments are analyzed at least once a year, or earlier if there is any indication of impairment, and in case of impairment, this is recognized and charged to income for the period.

. Costs from drillings and subsequent investments made to develop and extract the reserves of hydrocarbons are amortized using the units of production method.

Changes in estimates of reserves are considered in calculating the amortization on a prospective basis.

j. Depreciation - Property, plant and equipment, except those related to hydrocarbon exploration and production activities, are depreciated using the straight line method by distributing the acquisition cost of the assets less the

ENAP AND SUBSIDIARIES estimated residual value over the estimated useful life of the assets. The main components of property, plant and equipment and their useful lives are presented below:

Years of useful life

Buildings Between 30 - 50 Plant and equipment: Plant Between 10 - 30 Equipment Between 10 - 18 Computer equipment Between 4 - 6 Fixed facilities and accessories Between 10 - 20 Motor vehicles 7 Improvements to leased assets - buildings Between 5 - 10 Investments in exploration and production Depletion rate Other property, plants and equipment Between 3 - 20

Property, plant and equipment related to hydrocarbon exploration and production activities are amortized using the production unit amortization method (depletion rate).

The residual value and useful life of the fixed assets are reviewed every year and their depreciation begins when the assets are in a condition to be used.

Land is recorded separately from any buildings or facilities that may be constructed on it, and has an indefinite useful life; therefore, it is not subject to depreciation.

The ENAP Group considers the existence of impairment of fixed assets, when there are impairment indicators. Through the method of discounting future cash flows, forecasts consider a target date of 5 years plus perpetuity for the R&C Segment (Refining and Marketing) and a target date of 20 years without perpetuity for the E&P Segment (Exploration and Production). The last analysis was performed on December, 2015 and it concluded that investments of R&C and E&P Segments do not require adjustments. There are not impairment indicators as of December 31, 2016 k. Investment property - The item “Investment property” includes mainly buildings and land assets that are used for earning income through leases or held in anticipation of appreciation in their value over time.

Investment properties are stated at their acquisition value net of their corresponding depreciation and the impairment losses that they have experienced. Investment properties, excluding land, are depreciated by distributing the cost of their components using the straight-line method over their useful life. l. Associates – Associates are companies over which the ENAP Group has significant influence; significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method of accounting an investment in an associate is initially recognize in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group’s share of the income or loss and the other comprehensive income of the associate. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate.

ENAP AND SUBSIDIARIES

When ENAP's participation in the losses of an associate or joint venture exceeds its participation in these, the entity discontinues recognizing its participation in further losses. The participation in an associate or joint venture will be the carrying amount of the investment in the associate or joint venture determined according to the equity method together with any long-term involvement that, in fact, is part of the net investment of the entity in the associate or joint venture.

An investment is accounted for using the equity method from the date on which it becomes an associate. At the time of the acquisition of the investment any difference between the cost of investment and the portion of the entity in the net fair value of identifiable assets and liabilities of the subsidiary shall be accounted for as goodwill, and will be included in the carrying value of the investment. Any excess of the participation of the entity in the net fair value of identifiable assets and liabilities of the subsidiary on the cost of the investment, after a reassessment, will be recognized immediately in comprehensive income.

When the Company reduces its participation in an associate and continued using the equity method, the effects that had been previously been recognized in other comprehensive income must be reclassified to profit or loss according to the proportion of the decrease of participation in such associate.

When the Group’s share in loss of an associate exceeds the investment in that associate, the Group discontinues recognizing its share in further losses. Further losses are only recognized when the Group incurs legal or constructive obligations or has made payments in the name of the associate. m. Non-current assets or groups of assets to dispose of - Non-current assets are classified as held for sale if it is considered that their carrying amount will be recovered through a sale transaction rather than continued use. This condition is considered fulfilled only when the sale is highly probable, it is available for immediate sale in its current condition and is expected to be completed within one year from the date of classification. The total of these assets is recorded on a single line and valued at the lower of book value and fair value less costs to sell. n. Impairment of other non-financial assets – At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the assets belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash- generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in income or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash- generating unit) in prior years. A reversal of an impairment loss is recognized immediately in income or loss.

ENAP AND SUBSIDIARIES o. Other financial assets – The ENAP Group classifies its financial assets in the following categories: at fair value with changes taken to net income, loans and accounts receivable, financial assets held to maturity and financial assets available for sale. The classification depends on the purpose for which the financial assets are acquired and it is determined at the time of initial recognition.

. Financial assets at fair value with changes taken to net income: Financial assets at fair value with changes taken to net income are financial assets held for trading. A financial asset is classified in this category if it is acquired mainly with the purpose of selling it in the short-term.

. Loans and accounts receivable: Loans and accounts receivable are non-derivative financial assets with fixed or determinable payments, which are not quoted on an active market. They are included in current assets, except for maturities over 12 months as of the date of the balance sheet that are classified as non-current assets. Loans and accounts receivable include commercial debtors and other accounts receivable.

. Financial assets held to maturity: Financial assets held to maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities, which the ENAP Group has the positive intent and ability to hold to maturity. As of December 31, 2016 and 2015 there are no significant assets classified in to this category.

. Financial assets available for sale: Financial assets available for sale are non-derivative financial assets designated specifically in this category, or not classified in any other category. They are included in non-current assets, unless the Management intends to dispose of the investment within 12 months after the date of the Statement of Financial Position. i) Impairment of financial assets: Financial assets, other than those valued at fair value with changes taken to net income, are assessed for indicators of impairment at the date of each statement of financial position. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected negatively.

The financial investments of the ENAP Group are carried out in institutions of the highest credit quality and maintained in the short term, and therefore they do not present signs of impairment in relation to their carrying value.

For financial assets carried at amortized cost, the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. The financial investments of the ENAP Group are maintained at institutions with the highest credit quality and maintained in the short-term, and therefore they do not present at this date any indication of impairment compared to their book value.

Securities classified as available for sale will have experienced impairment losses, if there has been a significant or prolonged decline in their fair value (amongst other factors in the case of equity financial instruments classified as available for sale). If there is any such evidence, the cumulative loss on financial assets available for sale is the difference between the acquisition cost and the current fair value which amount is reversed from equity and recognized in the income statement in “Other expenses, by function.” ii) Valuations at the time of initial recognition and sale: The acquisition and sale of financial assets are recognized on the trade date, that is the date when the ENAP Group promises to acquire or sell the asset. Investments in financial assets not classified at fair value with changes taken to net income are initially recognized at fair value, plus transaction costs. Financial assets at fair value with changes taken to net income are initially recognized at their fair value and the transaction costs are carried to income. Investments are derecognized from the books when the rights to receive cash flows from the investments have expired or have been transferred and the Group has substantially transferred all risks and benefits resulting from holding them.

ENAP AND SUBSIDIARIES iii) Subsequent valuation: Financial assets available for sale and financial assets at the fair value with changes taken to net income are subsequently recorded at their fair value. Loans and accounts receivable and financial assets held to maturity are recorded at their amortized cost using the effective interest rate method.

Losses and earnings from changes in the fair value of financial assets at fair value with changes taken to net income are included in the statement of income under “Other income / losses” in the period in which they occur. Income from dividends on financial assets at fair value with changes taken to net income are recognized in the statement of income under “Other income / losses” when the right of the Group to receive the payment is established.

When a security classified as available for sale is sold or its value becomes impaired, the cumulative adjustments for fluctuations in the fair value recognized in equity are recognized in the statement of income under “Other income / losses.”

Interest on securities available for sale calculated using the effective interest method is recognized in the statement of income under “Other income by function.” Dividends earned by instruments available for sale are recognized in the statement of income under “Other income by function” when the right of the Group to receive the dividend payment has been established.

The fair value of traded investments is based on the exit price. If the market for a financial asset is not active (or the instrument is not exchange-traded), the ENAP Group sets the fair value using valuation techniques that include using reported prices in recent open market transactions, references to other substantially similar instruments, an analysis of discounted cash flows and option pricing models, with maximum use of market information and minimum use of specific internal information of the ENAP Group. If no such technique can be used to set the fair value, the investments are recorded at their acquisition cost, net of any impairment loss, if any. p. Derivative and hedging financial instruments – The ENAP Group usually holds derivative financial instruments, such as forward currency contracts, cross currency swap and interest rate swaps, to hedge risks associated with fluctuations in interest rates and exchange rates. Also time spread swaps (TSS), to cover the risk associated with the time elapsed between the purchase of crude oil and the sale of its refined products. These are the principally hedge contracts, and therefore the changes in fair value of these instruments are recorded in derivative assets and liabilities, as long as the hedging of this entry has been stated as effective, in accordance with its hedging purpose.

The corresponding income or loss is recognized in net income only when the contracts are liquidated or when they no longer comply with hedging characteristics.

Such derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is signed, and they are then marked to market to fair value. The method to recognize the loss or gain depends on whether the derivative has been designated as a hedge instrument and, if so, the nature of the item that is being hedged. The ENAP Group currently only has instruments designated as hedges for a risk associated with a recognized liability or a highly probable forecast transaction (cash flow hedges).

The fair value of forward currency contracts is calculated in reference to other current forward exchange rates of contracts with similar maturity profiles. The fair value of interest rate swap contracts is calculated based on the market values of similar instruments. The fair value of TSS contracts is calculated taking as a reference the market values of the Brent marker for the ICE Brent Crude Futures in London.

The total fair value of hedge derivatives is classified as a non-current asset or liability if the remaining maturity of the hedged item is higher than 12 months and as a current asset or liability if the remaining maturity of the hedged item is lower than 12 months.

ENAP AND SUBSIDIARIES i) Cash flow hedges: The effective portion of the changes in fair value of derivatives that are assigned and which qualify as cash flow hedges are recognized in equity through the statement of comprehensive income. The income or loss related to the ineffective portion is recognized immediately in the statement of net income.

The amounts accumulated in net equity are reclassified in the statement of income when the hedged item affects net income (for example, when the hedged forecasted sale occurs or when the hedged flow is executed). However, when the hedged forecast transaction results in the recognition of a non-financial asset (for example inventories), the gains or losses previously recognized in net equity are reclassified as part of the initial cost of the asset. Deferred amounts are recognized in the costs of goods sold, in case of inventories, where applicable.

When a hedge instrument matures or when it is sold, or when it does not comply with the criteria to be recognized as a hedge, any accumulated loss or gain in net equity to this date stays in the net equity and is recognized when the expected transaction affects the statement of net income. When a forecast transaction is not expected to occur, the accumulated gain or loss in equity is transferred to the statement of net income. ii) Embedded derivatives: ENAP assesses the existence of embedded derivatives in contracts of financial instruments to determine whether their characteristics and risks are closely related to the host contract, provided that the host contract is not recorded at fair value. Embedded derivatives are separated from the host contract (except in the case of a hybrid contract valued in its entirety at fair value) when the analysis shows that the financial characteristics and risks of the embedded derivatives are not closely related to the main contract. q. Recognition of revenue - Revenue from sales and services are recognized by the ENAP Group when the relevant risks and benefits of ownership of the products are transferred to the buyer, and the products are delivered to their agreed location. Revenue is measured at the fair value of the consideration received or receivable, and represents the receivable amounts for the rendered services during the ordinary course of operations, net of any discount or related tax. The ENAP Group recognizes revenue when it can be reliably measured, and it is probable that future economic benefits will flow to the Group, as described below: i) Sale of goods: Sales revenues from goods are recognized when the Group has delivered the products to the customer and when there exists no pending obligation to be complied with which could affect the acceptance of the products by the customer. The delivery will not occur until the products have been sent to the location indicated by the buyer, the obsolescence and loss risks have been transferred to the customer, and the customer has accepted that the products comply with the sales contract, the acceptance period has expired, or when the ENAP Group has objective evidence that the necessary acceptance criteria have been complied with. Sales are recognized according to the price established in the sales contract, net of volume discounts and the expected returns at the sales date. It is presumed that there exists no significant financing component, as the sales are performed with a reduced average collection period, which is in line with the normal practices of the market. ii) Sale of services: Revenues from the sale of services are recognized when they can be reliably estimated and in accordance with the services actually provided at the closing date of the interim financial statements. iii) Income from dividends: Dividends are recognized when the right of the ENAP Group to receive payment is established. iv) Interest income: Interest income is recognized using the effective interest rate method. v) Deferred income: Deferred income is income received in advance from a signed contract. This income is amortized using the straight-line method on an accrual basis.

ENAP AND SUBSIDIARIES r. Inventories – Raw materials, work in progress, finished goods and materials are valued initially at cost. After initial recognition, they are valued at the lesser of net realizable value and cost. The ENAP Group uses the first-in first-out (FIFO) method for all the inventory items, except for materials which are valued using the Weighted Average Cost method.

The net realizable value represents the estimated price of sale at year-end less all estimated finishing costs and costs that will be incurred in the marketing, selling and distributing processes. s. Provision for employee benefits – Costs associated with employees’ contractual benefits, related to services rendered by employees during the year, are charged to income for the respective year. Actuarial gains and losses are recognized in “Actuarial reserves on defined benefit plans” in Equity reserves.

The obligations recognized for the concept of severance payments arise as a consequence of the collective agreements signed with the employees of the Group, which states the commitment agreed to by the company. The ENAP Group recognizes the cost of employee benefits according to an actuarial calculation, as required by IAS 19 "Employee benefits”, which includes variables such as life expectation, salary increases, etc. To determine this calculation as of December 31, 2016 an annual discount rate of 5.91% has been used (5.91% at December 31, 2015).

The Company recognizes a liability and an expense related to the Variable Remunerations System (VRS) that is applicable to all its executives, with the sole exception of the General Manager. This system is based on the annual net income of the Company, departmental results and goal accomplishment for each management area. A provision is recorded when the company is contractually obliged or when an implicit obligation arises. t. Provisions and contingent liabilities – Provisions are recorded for current, legal or assumed obligations arising as a result of a past event, whose payment is expected to involve a disbursement of resources and whose amount and time of payment can be reliably estimated.

Contingent liabilities are possible obligations arising from past events and whose existence can only be confirmed when one or more uncertain future events occur that are not entirely under the Company’s control; or a present obligation arising from past events that has not been accounted for because it is not probable that an outflow of resources will be required to settle the obligation and incorporate economic benefits; or because the amount of the obligation cannot be reliably measured.

The ENAP Group does not record contingent assets or liabilities, except for those stemming from onerous contracts, which are recorded as a provision and then reviewed at each balance sheet date and, if necessary, adjusted to reflect the best estimate at the time. u. Income taxes and deferred taxes - The Parent Company and its Chilean subsidiaries determine the tax base and calculate their income taxes in conformity with the legal provisions in force during each period. In the case of the foreign subsidiaries, these submit their tax returns individually, in conformity with current tax standards in their respective countries.

The deferred taxes generated by temporary differences and other events giving rise to differences between the accounting and tax base of assets and liabilities are recorded in accordance with IAS 12 “Income Taxes”. Current and deferred income tax is recorded in the income statement unless related to an item recognized in Other comprehensive income, directly in equity or resulting from a business combination. In that case, the tax is also recognized in other comprehensive income or directly in net income, or with a credit to goodwill, respectively.

The company does not record deferred taxes on the temporary differences arising from investments in subsidiaries and associates, provided that the timing in which temporary differences are reversed is controlled by the Company and the temporary difference will not be reversed in the foreseeable future. 14

ENAP AND SUBSIDIARIES

Income tax is recorded in the Consolidated Net Income Statement or in the net equity of the Consolidated Statement of Financial Position according to the nature of the underlying transaction. The differences between the accounting value of assets and liabilities, and their tax basis generates deferred tax assets or liabilities which are calculated using the tax rates that are expected to be in force when the assets and liabilities are realized.

The variations generated in the year in deferred tax assets or liabilities are recorded in the income statement or directly in the net equity of the financial statement, as appropriate.

Deferred tax assets are recognized only when it is expected that the Company will have sufficient future taxable income to recover the temporary differences. v. Other financial liabilities - Loans accruing interest, bonds payable and financial liabilities of a similar nature are recognized initially at their fair value, net of any transaction costs incurred. Subsequently, they are valued at amortized cost and any difference between the funds obtained (net of the costs necessary to obtain them) and the repayment value is recognized in the income statement over the life of the debt in accordance with the effective interest rate method.

Financial obligations are classified as current liabilities unless the ENAP Group has the unconditional right to defer its liquidation for at least 12 months after the balance sheet date. w. Financial leases – Financial leases are recorded when the lessor transfers substantially all the inherent risks and advantages of the ownership of the asset to the lessee. The ownership of the asset may or may be not be transferred, as the case may be. The cost of leased assets is presented in the consolidated statement of financial position, according to the nature of the asset referred to in the contract, and, simultaneously, a liability for the same amount is recorded in the statement of financial position. This amount will be the lesser of the fair value of the leased asset and the sum of the present values of the minimum lease payments plus, if applicable, the price of exercising the purchase option. These assets are depreciated using similar criteria to those applied to the property, plant and equipment used by the Company itself or over the term of the lease, whichever is shorter.

Financial expenses arising from the financial liability are charged to “Financial expenses” in the consolidated statement of net income. x. Issued capital – Issued capital is contributions and/or capitalized profits, authorized through rulings and/or decrees issued by the Ministry of Finance, which constitute the legal obligation that gives rise to its registration. y. Distribution of dividends – The dividend distribution policy used by ENAP is the one established through official letters and/or decrees issued by the Ministry of Finance, which constitutes the legal obligation that gives rise to its registration. z. Environment –The accounting policy establishes that environmental disbursements related to capital expenditure projects required for safety and environmental reasons are capitalized. All other disbursements are charged to income. aa. Commercial creditors and other accounts payable – Commercial creditors and other accounts payable are recognized initially at fair value and subsequently at amortized cost. ab. Cash and cash equivalents – The cash flow statement recognizes cash movements throughout the year, determined by the direct method. In these cash flow statements the following expressions are used:

. Cash and cash equivalents: The ENAP Group considers liquid financial assets, deposits or liquid financial investments, which may be easily converted into cash within no more than three months and where the risk of a change in their value is insignificant, to be cash equivalents. 15

ENAP AND SUBSIDIARIES

. Operating activities: these are the activities that constitute the main source of ordinary income of the ENAP Group, as well as other activities that cannot be classified as investment or financing activities.

“Other payments from operating activities” includes ThUS$ 2,154,996 for the payment of specific tax on fuel in subsidiary ENAP Refinerías S.A., for the year 2016 and ThUS$ 2,070,910 for the year 2015.

. Investing activities: these correspond to activities of acquisition, sale or disposal through other methods of long- term assets and other investments not included in cash and cash equivalents.

. Financing activities: these are the activities that cause variations in the composition of the net equity, and of the financial liabilities.

3.2 Application of new and revised International Financial Reporting Standards (IFRS

a) New and revised IFRS effective in the current year

Amendments to Standards Effective date Accounting for Acquisitions of interests in Joint Operations Annual periods beginning on or after January 1, 2016 (Amendments to IFRS 11) Clarification of Acceptable Methods of Depreciation and Annual periods beginning on or after January 1, 2016 Amortization (Amendments to IAS 16 and IAS 38) Agriculture: Bearer Plants (amendments to IAS 16 and IAS Annual periods beginning on or after January 1, 2016 41) Equity Method in Separate Financial Statements (Amendments Annual periods beginning on or after January 1, 2016 to IAS 27) Disclosure Initiative (Amendments to IAS 1) Annual periods beginning on or after January 1, 2016

Investment Entities: Applying the Consolidation Exception Annual periods beginning on or after January 1, 2016 (Amendments to IFRS 10, IFRS 12 and IAS 28) Annual Improvements 2012-2014 Cycle Annual periods beginning on or after January 1, 2016

The application of these amendments has not had a significant effect on the amounts reported in these financial statements, however could affect the accounting for future transactions or agreements. b) New and revised IFRS in issue but not yet effective:

New Standards Effective date

IFRS 9 Financial Instruments Annual periods beginning on or after January 1, 2018

IFRS 15 Revenue from Contracts with Customers Annual periods beginning on or after January 1, 2018

IFRS 16 Leases Annual periods beginning on or after January 1, 2019

ENAP AND SUBSIDIARIES

Amendments to Standards Effective date Sale or Contribution of Assets between an Investor and its Effective date deferred indefinitely Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) Recognition of Deferred Tax Assets for Unrealized Losses Annual periods beginning on or after January 1, 2017 (Amendments to IAS 12) Disclosure Initiative (Amendments to IAS 7) Annual periods beginning on or after January 1, 2017

Clarifications to IFRS 15 “Revenue from Contracts with Annual periods beginning on or after January 1, 2018 Customers” Classification and Measurement of Share-based Payment Annual periods beginning on or after January 1, 2018 Transactions (Amendments to IFRS 2) Applying IFRS 9 “Financial Instruments” with IFRS 4 Overlay approach to be applied when IFRS 9 is first applied. “Insurance Contracts” (Amendments to IFRS 4) Deferral approach effective for annual periods beginning on or after 1 January 2018 and only available for three years after that date. Transfers of Investment Property (Amendments to IAS 40) Annual periods beginning on or after January 1, 2018

Annual Improvements to IFRS Standards 2014-2016 Cycle The amendments to IFRS 1 and IAS 28 are effective for annual (amendments to IFRS 1, IFRS 12 and IAS 28) periods beginning on or after Jan. 1, 2018. Amendment to IFRS 12 for annual periods beginning on or after Jan. 1, 2017. New Interpretations Effective date IFRIC 22 Foreign Currency Transactions and Advance Annual periods beginning on or after January 1, 2018 Consideration

The Management is evaluating the impact of the application of IFRS 9, IFRS 15, IFRS 16, nevertheless it is not possible to provide an accurate estimation of the effects that this Standards will have before a detailed analysis. The Group’s Management estimates that the adoption of the other Standards and amendments will not affect significantly the consolidated financial statements.

4. FINANCIAL RISK MANAGEMENT AND HEDGE DEFINITION

During the normal course of its business and financing activities, ENAP is exposed to different financial risks that could have a significant effect on the economic value of its cash flows and assets and, therefore, on its net income.

The Group has organization and information systems, managed by Corporate Financial Management, to identify such risks, calculating their magnitude, proposing mitigating measures to the Board, implementing such measures and controlling their effectiveness.

A definition of the risks faced by the Company is presented, including their features and value for ENAP, and a description of the mitigating measures currently being used by the Company, if applicable. a) Market risk

This is the possibility that the fluctuations of market variables, such as interest rates, foreign currency exchange rates, prices or indices of crude oil and by-products, etc., may cause financial losses due the devaluation of cash flows or assets or the revaluation of liabilities, as a result of their being denominated in, or indexed to, such variables. a.1) Interest rate risk – ENAP’s financing structure considers a mixture of sources of funds subject to a fixed rate (mainly bonds) and variable rate (bilateral loans, syndicated loans, notes payable or forfeiting, short-term bank loans and suppliers credit). 17

ENAP AND SUBSIDIARIES

The portion of financing subject to a variable interest rate, usually consisting of the 3 or 6 month LIBOR floating rate plus a spread, exposes the company to changes in its financial expenses due to fluctuations in the LIBOR rate.

ENAP's total financial debt as of December 31, 2016 is summarized in the table below, separating the fixed rate debt from the floating rate debt – Post Hedge:

In millions of US dollars Fixed Rate Floating Rate Total

Current bank debt - 486 486 Non-current bank debt 224 347 571 International bonds 2,211 - 2,211 Local bonds 620 - 620

Total 3,055 833 3,888

Note: The data in the attached table corresponds solely to the principal, not to any accrued interest or other concepts. The international and local bonds are presented at face value, and not on an amortized cost basis as on the balance sheet. As the interest rate is applied at face value of the bonds, such value allows quantifying adequately the exposure of the Group at fixed or variable rate, as observed in this section. The local bonds denominated in UF are presented at their face value equivalent to US$ as of December 31, 2016.

Risk mitigating instruments:

In order to reduce the variability of its financial expenses, ENAP obtained several hedging instruments for some of the debt items in the above table.

Interest rate swaps were obtained to swap floating rate of ThUS$ 161,509 of the long-term bank debt to fixed rate and cross currency swaps were also obtained to fix the interest rate and exchange rate of the bond issued in UF and CHF (the notional value amounts to ThUS$ 831,125).

Residual risk exposure:

Considering the existence of the hedge instruments indicated above, the net balance of obligations of the Group whose financing cost is fully subject to fluctuations in the LIBOR rate is ThUS$ 833,062, which amounts to 21.40% of the total. As such, a 1% increase in the applicable LIBOR rate (quarterly or half yearly, depending on the type of debt) would generate an annual increase of about ThUS$ 8,331. a.2) Exchange rate risk: The functional currency of the ENAP Group is the US dollar. However, there are some relevant items of the interim financial statements denominated in local currency (Chilean pesos or UF - inflation index-linked unit of account), such as sales invoicing and financial obligations, and in Swiss Francs (CHF). These are exposed to exchange rate fluctuations as a result of fluctuations in the Chilean peso/USD, UF/USD or CHF/USD parities.

Mitigating measures:

The exposure of the exchange rate variations from invoicing is minimized basically via a product pricing policy, based on import parity pricing, a mechanism whereby the local sale price for products is recalculated on a weekly basis in accordance with the current exchange rate.

ENAP AND SUBSIDIARIES

Other main balance sheet items exposed are local bonds (denominated in UF - inflation index-linked unit of account) and accounts receivable relating to local sales (denominated in pesos). The ENAP Group carries out hedging operations to mitigate the exchange rate risk associated with both items.

The principal owed under ENAP’s local bonds as of December 31, 2016 was UF 15.75 million. Based on that amount and the CLP/USD and CLP/UF parities in effect on that date ($ 669.47 and $ 26,347.98), a change of $50 in the CLP/USD exchange rate would produce the following effects on the bond’s value measured in dollars:

Exchange rate Bond valuation ThUS$

Increase by $50 ($719.47) 43,078 Decrease by $50 ($619.47) (50,032) In order to mitigate this risk, ENAP has entered into cross-currency swap contracts, whereby the company receives cash flows in UF from the other parties equal to the cash flows payable to the bond holders and pays them fixed cash flows in US dollars, thereby being free from the above exchange rate risk.

The balance of accounts receivable from local sales as of December 31, 2016 was ThUS$ 401,637. As such an increase of CLP $50 in the exchange rate would produce a reduction of ThUS$ 27,912 in the dollar value of the accounts receivable.

In order to minimize this risk, ENAP has a hedging policy in place, which consists of entering into weekly forward exchange rate contracts for an amount equivalent to 100% of the estimated sales for the corresponding week and for terms based on the estimated collection dates of the respective invoicing. a.3) Commodities price risk: ENAP’s Downstream business line consists mainly of buying crude oil in the international markets for refining and the subsequent sale of its by-products in the domestic market, based on import parity prices.

The refining margin obtained by ENAP is subject to the fluctuation in the international prices of crude oil, of refined products and the difference between them (international margin or “crack spread”). Considering an average level of refining of 66 million barrels per year, a variation of USD 1/barrel in the crack spread all things being equal, would have a quarterly effect on net income of ThUS$ 66,000.

The central strategy of the ENAP Group to confront the risk of a variation in the refining margin is to orient its investments toward increasing its flexibility in production and the quality of its products. Until now, no derivative contracts have been signed to set the refining margin, but market price levels are constantly being monitored.

Moreover, due to the time elapsing between the purchase of crude oil and the sale of refined products, ENAP is also exposed to a time spread or risk that prices at the time of sale of the products are below the price prevailing at the time of purchase of the crude oil. Earnings or losses for this reason increase the volatility of ENAP’s Group operating income.

On average, ENAP imports about 5.5 million barrels of crude oil per month. A drop of USD 1/barrel in the price of the by-product during the refining inventory cycle has an immediate effect of US$5.5 million on refining margin per month.

The hedging policy to mitigate the risk of inventory devaluation (crude oil shipments) consists of entering in time- spread swap hedge contracts, which are intended to move the financial pricing window of a crude oil shipment (which is usually during the days that are near the loading date) and adjust it to the dates when the refined products made from 19

ENAP AND SUBSIDIARIES that crude oil are priced. This will bring inventory costs in line with the prices of the products that will be sold. This mitigates quite well the time spread to which the company is naturally exposed. However, it should be mentioned that these instruments, by their nature and mode of operation, protect against the fluctuation in the crude oil prices but do not fully ensure the elimination of effects on income as a result of the volatility in the purchase of raw material.

At this time, Brent crude oil is the most relevant marker in the oil market and has direct effects on the prices of the products that ENAP uses as a reference to determine the sales prices of the products that we produce, because these sales prices are strongly correlated to this marker. For that reason, when the trading area awards purchases of crude oil priced on the WTI (West Texas Intermediate), a “differential swap” is contracted to financially transfer a WTI position to an ICE Brent position and thus maintain the standard of optimization that prevailed at the time the purchase of that crude oil was awarded.

Furthermore, the E&P business Line consists mainly in the exploration and exploitation activities of hydrocarbon reserves and their sales in the international market. Consequently, its results are directly related with international oil and gas prices.

In order to mitigate such risk, ENAP centers its efforts on constant operational improvements in order to maintain a cost efficient structure. The Company does not systematically use derivatives as a hedging mechanism for the sales of its own production, although certain specific operations of this kind have been performed. b) Liquidity risk

This risk arises from the funds required to meet capital expenditure commitments and the normal operation of the business, debt maturities, derivatives settlement etc. The Group has a financial policy with guidelines to manage this risk, consisting in long-term committed credit facilities and temporary financial investments, for amounts sufficient to meet projected requirements for a period which requirements correlate with the situation and the expectations of the debt and capital markets.

The Market Risk Management and Financial Transactions Department and the Corporate Finance Department, both reporting to Financial Management, continuously monitor the Group’s funding requirements.

In addition to the balance sheet balances, the Group has additional liquidity resources currently available: (i) a committed credit line for US$ 100 million with Santander Bank, NA (ii) a committed credit line for Ch$ 15,000 million with Banco de Chile (iii) a committed credit line for Ch$ 15,000 million with Banco Santander and (iv) uncommitted credit lines for approx. US$ 1,000 million with different domestic and foreign banks.

The projected needs mentioned above include net financial debt maturities, i.e., after financial derivatives. The table below shows the balance of financial obligations at December 31, 2016, according to their maturity dates:

In millions of U.S. dollars 2017 2018 2019 2020 2021 2022 Total onwards Current bank debt 486 - - - - - 486 Non-current bank debt 190 181 83 86 31 - 571 International bonds - 211 115 174 411 1,300 2,211 Local bonds 79 - 384 - - 157 620 Total 755 392 582 260 442 1,457 3,888

For more details on the features and conditions of financial debts and derivatives, see note 22.

ENAP AND SUBSIDIARIES

The following table shows the maturity profile of the financial obligations (additional to those presented in the above table) of the ENAP Group as of December 31, 2016:

In millions of U.S. dollars 2017 2018 2019 2020 2021 Total Trade payables 584 - - - - 584 Accouts payable to related entities 13 - - - - 13 Hedging derivatives 88 17 50 8 34 197 Total 685 17 50 8 34 794

c) Credit risks

This risk refers to the ability of third parties to fulfill their financial obligations towards ENAP. There are three different categories: c.1) Financial assets - These are the balances of cash and cash equivalents, time deposits, operations with repurchase agreements and marketable securities as a whole. ENAP’s ability to recover these funds at maturity depends on the creditworthiness of the bank in which they are deposited.

In order to mitigate this risk, ENAP has a financial policy specifying the creditworthiness parameters that must be met by financial institutions in order to be considered eligible as a depositary of the above products, as well as each institution’s concentration ceilings. c.2) Obligations of counter-parties in derivatives - These are the ENAP market values of current derivative contracts with banks.

In order to mitigate this risk, ENAP has a derivative management policy specifying creditworthiness parameters that must be met by financial institutions in order to be considered eligible as counter-parties to derivative contracts. c.3) Trade debtors - The risk of uncollectibility of Group trade debtors is significantly low, insofar as nearly all local sales (>95%) are invoiced to the 4 main fuel distributors or liquefied petroleum gas distributing companies.

Meanwhile, the incorporation of new clients is subject to an analysis of their financial creditworthiness and their approval by ENAP’s Credit Committee. This committee coordinates the collection actions required, if payments are delinquent.

As of December 31, 2016, the total exposure of the Group to accounts receivable amounts to ThUS$ 555,570 as indicated in Note 11.

There are no guarantees for significant amounts to cover such exposure, because as indicated above, almost all sales correspond to distributing companies of fuel or liquefied petroleum gas, with whom the Group operates based on credit sales without guarantees. The estimation of the doubtful accounts as of December 31, 2016 amounts to ThUS$15,177.

Information regarding capital management is included in Note 26.

ENAP AND SUBSIDIARIES

5. BUSINESS COMBINATION

On December 7, 2016, the subsidiary Enap Refinerías S.A. acquired 85% of the social rights of Petropower Energía Limitada (PPW). PPW was incorporated in 1993, and its main focus is the production of energy and steam. PPW includes a cogeneration unit for electricity and steam, a diesel hydro-treatment plant and a delayed coking plant.

The control of PPW allows us to fulfill two fundamental objectives: to ensure the operational continuity of the Bío Bío Refinery by supplying it with high pressure steam, demineralized water and electrical energy and to sell surplus energy to third parties, injecting it into the Central Interconnected System.

As of the date of acquisition, PPW has not contributed to the Group's operating results, since for financial-accounting purposes it was considered as the purchase date on December 31, 2016. If the business combination had occurred on January 1 2016, revenues from consolidated ordinary activities would had amounted to ThUS$ 5,228,608 and the pre- tax gain to ThUS$ 244,471. a) Transferred consideration: This increase in PPW participation meant a total cash outlay of ThUS$ 50,300. b) Costs related to the acquisition, recognized as an expense: Costs associated with the acquisition of PPW recognized as an expense amounted to ThUS$ 518. These costs are mainly composed of fees for financial, tax and legal advice and were recognized in the consolidated statement of comprehensive income under administrative expenses. c) Identified acquired assets and liabilities assumed identifiable: The amounts recognized for assets acquired and liabilities assumed at the acquisition date are as follows:

Identifiable net Assets and Liabilities Aquired Fair Value ThUS$ Cash and cash equivalents 3,823 Trade and other receivables, current 4,497 Related party receivables, current 25,118 Tax assets, current 3,889 Property, plant and equipment, net (1) 208,822 Trade creditors and other accounts payables (4,519) Related party payables, current (1,033) Deferred tax liabilities (57,353) Identifiable net Assets and Liabilities Aquired 183,244

(1) See Note 17.

Considering the nature of PPW's business and assets, the measurement of the fair value of assets acquired and liabilities assumed was made using the following valuation approaches: i.- Market approach, by means of the comparison method, based on quoted market prices for identical or comparable items when these are available.

ENAP AND SUBSIDIARIES ii.- Income approach, which by means of valuation techniques that convert future amounts (for example, cash flows or income and expenses) into a single present amount (that is, discounted). The measurement of fair value is determined on the basis of the value indicated by the market expectations present on these future amounts. iii.- Cost approach, or depreciated replacement cost, which reflects the adjustments related to the physical deterioration as well as the functional and economic obsolescence, used for the property, plant and equipment item. This was complemented with the realization of a survey of the fair value of the assets of Petropower Energia Ltda., using the Discounted Cash Flow method, with a Free Cash Flow approach. Both methods supported the fair values of the assets acquired.

Reconciliation of values

Fair values arise as a result of an evaluation and reconciliation of the results of the selected methods, based on the nature of each of the assets acquired and liabilities assumed.

If, within a period of one year from the date of acquisition, new information obtained on facts and circumstances that existed on the date of acquisition, gives rise to the recognition of additional assets or liabilities, the acquisition accounting will be reviewed and they will make the corrections that proceed, following the criterion described in Note 3.bi d) Recognition at fair value of pre-existing participation

At the date of acquisition, the Company recognized its pre-existing fair value participation, as follows:

12.31.2016 ThUS$ Fair value of pre-existing participation 27,487 Book value of pre-existing participation and other (13,314) Total 14,173

e) Positive impact on results from PPW purchase

The net amount of the identifiable liabilities acquired and the assumed liabilities of PPW and the consideration transferred plus the fair value of the pre-existing participation are presented as part of the “Other gains (losses)” heading and are as follows:

12.31.2016 ThUS$ Fair value of identifiable net assets acquired 183,245 Fair value of pre-existing participation (27,487) Other changes associated with the transaction (12,718) Consideration paid in cash (50,300)

Badwill arising on acquisition (1) 92,740

(1) See Note 36.

ENAP AND SUBSIDIARIES

The positive effect on results from the business combination, results from AMEC Foster Wheeler's determination to put its share of the Petropower Energia Ltda. business for sale. In this way, the Administration carried out an economic evaluation considering the option to acquire they maintained as partners over the assets at the end of 2018. Once the company was acquired, Management, through specialists in this type of valuation, carried out the process of measuring the identifiable net assets acquired according to IFRS 3 "Business combination." The value thus determined was higher than the price paid for the equity interest in the business of Petropower Energia Ltda.

6. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Responsibility for the information and estimates

Corporate Management of the ENAP Group is responsible for the information contained in these consolidated financial statements.

In these consolidated financial statements the Corporate Management of the ENAP Group and its consolidated entities have used estimates to quantify some of the assets, liabilities, income, expenses and commitments recorded therein.

Regardless of the fact that these estimates were made with the best information available at the time, they may possibly need to be revised in future years as a result of future events (upwards or downwards). This would be done prospectively, as stipulated in IAS 8, by recognizing the effect of the change in the estimate if the review affects this year only, or in the year of review and future years if the change affects both.

In applying the accounting policies of the ENAP Group, which are described in Note 3, management makes future estimates and judgments regarding the book values of its assets and liabilities. The estimates and associated assumptions are based on past experience and on other factors considered relevant. The results could differ from these estimates.

Management has made estimates and judgments that have significant effects on the figures presented in the financial statements. Any changes in assumptions and estimations could have a significant impact on the consolidated financial statements.

Critical accounting estimates and judgments made by Management are detailed below:

1. Impairment of assets – At year-end, or on such date on which it is considered necessary, we analyze the value of assets to determine whether there is any sign that such assets have suffered an impairment loss. In case such evidence exists, an estimate of the recoverable amount of such asset is performed to determine, in each case, the amount of the necessary correction. In case of identifiable assets that do not generate independent cash inflows, the recovery of the cash generating unit to which the asset belongs is estimated. There are no impairment indicators as of December 31, 2016.

2. Useful lives of Property, Plant and Equipment – ENAP Group Management estimates the useful lives that are used to calculate the respective depreciation charges for its fixed assets. This estimate is based on technical studies prepared by internal and external experts. Where there are indications which recommend changes in the useful lives of these assets, it must be done using technical estimates for this purpose. Management will increase the charge for depreciation when the useful lives are less than the estimate or depreciate or eliminate technically obsolete assets that are abandoned or sold. The ENAP Group reviews the estimated useful lives of its property, plant and equipment assets at the end of each annual financial reporting year.

ENAP AND SUBSIDIARIES

3. Provision for obsolescence of materials and spare parts – Materials and spare parts presented under Inventories and Property, plant and equipment can be affected by various factors such as technological changes, abandonment, environmental exposure, among others, for which the ENAP Group makes estimates and judgments in order to determine obsolescence provision with the most updated information available. These estimates are regularly reviewed on the basis of additional information and greater experience possibly affecting the values determined.

4. Reserves of crude oil and gas – Estimates of reserves of crude oil and gas are an integral part of the ENAP Group's decision-making process. The volume of reserves of crude oil and gas is used for calculating the depreciation, using the production unit ratios, and also for evaluating the recoverability of the investment in Upstream assets.

5. Fair value of derivative instruments and other financial instruments – The fair value of the financial instruments not traded in an active market is determined using valuation techniques. The ENAP Group uses its judgment to select a variety of methods and make assumptions based mainly on existing market conditions at each balance sheet date. The assumptions for derivative financial instruments are based on market rates quoted and adjusted to the specific characteristics of the instrument. Other financial instruments are valued using the discounted cash flow analysis based on assumptions supported, whenever possible, by observed market prices or rates.

6. Provisions for litigation and other contingencies – The final cost for claims and lawsuits could vary due to estimates based on different interpretations of the regulations, opinions and final evaluations of the amount of damages. Therefore, any change in the circumstances involved could have a significant effect on the amount of the contingency provision recorded.

The ENAP Group makes estimates and relies on its judgment when recording costs and stipulating provisions for environmental remediation and clean-up. These estimates and judgments are based on current information about expected remediation costs and plans, the timing of disbursements, the interest rate used for discounting future flows, etc., in order to calculate their fair value. The costs of environmental provisions could differ from the estimates due to changes in laws and regulations, the discovery and analysis of the conditions at the location, and also changes in clean- up technology. Therefore, any change in the factors or circumstances involved in this provision, and also in the standards and regulations, could have a significant effect on the provisions recorded for such costs.

7. Calculation of income tax and deferred tax assets – Tax assets and liabilities are reviewed regularly and balances are adjusted as appropriate. The ENAP Group considers that an adequate provision has been made for future tax effects, based on facts, circumstances and current tax laws. Also, the assets from accumulated tax losses from Chilean companies at the date of these consolidated financial statements have been estimated as totally recoverable by management. However, the tax position might change, creating different results with an impact on the amounts reported in these consolidated financial statements.

ENAP AND SUBSIDIARIES

7. FINANCIAL ASSETS

The ENAP Group classifies its financial assets using the following categories: at fair value with changes taken to net income, financial assets held to maturity, loans and accounts receivable, assets available for sale and hedge derivatives, as itemized below as of December 31, 2016 and 2015:

Changes to profit and (loss)

Financial assets at fair Financial value with Investment Loans and assets changes taken held to accounts available for Hedge December 31, 2016 to net income maturity receivable sale derivatives ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Cash and cash equivalents 66,104 - - - - Other current financial assets 11,678 - - - 55 Trade and other receivables - - 644,062 - - Due from related companies - - 48,636 - -

Total current assets 77,782 - 692,698 - 55

Other financial assets - 13,788 127 - Non-current receivable - - 23,117 - - Due from related companies - - 1,066 - -

Total non-current assets - 13,788 24,310 - -

Changes to profit and (loss)

Financial assets at fair Financial value with Investment Loans and assets changes taken held to accounts available for Hedge December 31, 2015 to net income maturity receivable sale derivatives ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Cash and cash equivalents 113,587 - - - - Other current financial assets 3,040 - - - 86,762 Trade and other receivables - - 631,759 - - Due from related companies - - 26,751 - -

Total current assets 116,627 - 658,510 - 86,762

Other financial assets - 13,788 28,121 - - Non-current receivable - - 13,361 - - Due from related companies - - 1,671 - -

Total non-current assets - 13,788 43,153 - -

ENAP AND SUBSIDIARIES

CASH AND CASH EQUIVALENTS

As of December 31, 2016 and 2015 this item is composed of:

12.31.2016 12.31.2015 Detail: ThUS$ ThUS$

Cash 281 196 Bank 55,671 102,739 Time deposits 10,152 10,652 Total 66,104 113,587

Cash and cash equivalents by currency of origin is as follows:

12.31.2016 12.31.2015 Detail: Currency ThUS$ ThUS$

Cash and cash equivalents US$ 36,970 65,904 Cash and cash equivalents Ch$ 12,360 18,919 Cash and cash equivalents AR$ 5,451 2,270 Cash and cash equivalents UK £ - 82 Cash and cash equivalents EG £ 11,323 26,412 Total 66,104 113,587

Time deposits expire in a period of less than three months from the date of acquisition and accrue market interest for this type of investment. In cash and cash equivalents there are no cash flows subject to restrictions.

As of December 31, 2016 and 2015 there are no bank overdrafts presented as cash and cash equivalents.

ENAP AND SUBSIDIARIES

8. OTHER FINANCIAL ASSETS CURRENT AND NON-CURRENT

As of December 31, 2016 and 2015 the detail of this is as follows:

Current Non-Current 12.31.2016 31.12.2015 12.31.2016 31.12.2015 Detail: ThUS$ ThUS$ ThUS$ ThUS$

Hedging derivatives (a) 55 86,762 - - Investments in other companies (b) - - 13,762 13,762 Argentine National Bonds (c) 11,678 3,040 - 13,875 Escrow account (d) - - 35 14,000 Other receivable - - 118 272

Total 11,733 89,802 13,915 41,909

(a) See detail in Note 22 a). (b) The detail of investment in other companies at December 31, 2016 and 2015 is as follows:

Participación Ownership % 12.31.2016 31.12.2015 Details: Country 2016 2015 ThUS$ ThUS$

Terminales Marítimos Patagónicos S.A. Argentina 13.79 13.79 7,664 7,664 Electrogas S.A. Chile 15.00 15.00 6,091 6,091 Asociación Gremial de Industriales Químicos C.P.A. Chile N/A N/A 7 7 Total 13,762 13,762

(c) On July 6, 2015, the Argentine Government, through Decree 1330 invalidated the Program named as “Petróleo Plus”. On August 29, 2015 the subsidiary Enap Sipetrol S.A. gave its approval and accepted the incentives pending settlement paid through the delivery of public debt securities named as “Bonos de la Nación Argentina”. The financial instruments are detailed as follows:

Total current Total non-current Maturity Nominal Market 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Instrument Country date rate % rate % ThUS$ ThUS$ ThUS$ ThUS$ BONAD 2018 Argentina 03.18.2018 2.4 2.4 - - - 2,965 BONAR 2024 Argentina 05.07.2024 8.75 8.75 11,678 3,040 - 10,910 Total 11,678 3,040 - 13,875

2018 BONAD: Securities linked value to the dollar with nominal value equivalent to the ThUS$3,567.

2024 BONAR: Securities in dollar with an annual rate of 8.75%. These securities include sale restrictions, so that up until December 2016, Enap Sipetrol Argentina S.A. cannot sell more than 2% per month of the total BONAR 2024. If its right to sell is not exercised, such sale percentage can be exercised on an accumulated basis but, in no case can the sale in one month can exceed 10% of the total 2024 BONAR received. From 2017 onwards, there will be no restrictions on the sale of the 2024 BONAR.

(d) As of December 31, 2015 an advance associated with the investment of the PIAM project in the subsidiary ENAP Sipetrol Argentina S.A., used for the purchase of the subsidiary Petrofaro S.A., which occurred in the first half of 2016, is presented.

ENAP AND SUBSIDIARIES

9. OTHER NON-FINANCIAL ASSETS CURRENT AND NON- CURRENT

As of December 31, 2016 and 2015 the detail of this is as follows:

Current Non-Current 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Details: ThUS$ ThUS$ ThUS$ ThUS$

Prepaid vessel lease 4,085 4,218 - - Prepaid expenses of Torquemada Substation 582 582 2,956 3,974 Prepaid insurance 12,431 - - - Catalyst and platinum incorporated in catalyst - - 32,519 23,978 Other 217 521 1,354 918

Total 17,315 5,321 36,829 28,870

10. TRADE RECEIVABLES AND OTHER RECEIVABLES

As of December 31, 2016 and 2015 this item is composed as follows:

Current Non-Current 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Items: ThUS$ ThUS$ ThUS$ ThUS$

Trade debtors 555,570 504,654 - - Sundry debtors 66,418 90,044 14 13 Other receivables 37,251 38,343 23,103 13,348 Allowance for doubtful accounts (15,177) (1,282) - -

Total 644,062 631,759 23,117 13,361

The fair values of trade receivables, sundry debtors and other receivables approximate to their book value. a) Age of overdue accounts receivable but not impaired: The maturity of non-impaired overdue accounts receivable, is detailed below: 12.31.2016 12.31.2015 ThUS$ ThUS$

Over 1 day to 5 days 1,208 21,105 Over 6 days to 30 days 27,568 38,426 Over 31 days to 60 days 5,329 8,892 Over 61 days to 90 days 6,742 7,342 Over 91 days to 1 year 69,604 14,020 Over 1 year 3,572 1,785 Total 114,023 91,570

ENAP AND SUBSIDIARIES

The amounts included bear interest, calculated using the maximum conventional rate published in the Official Newspaper of Chile (Diario Oficial de Chile).

The average collection period from customers at December 31, 2016 and 2015 is around 20 days for the R&C segment, and between 60 and 90 days for the E&P segment. b) Allowance for doubtful accounts: The allowance for doubtful accounts as of December 31, 2016 and 2015 is as follows: 12.31.2016 12.31.2015 ThUS$ ThUS$ Up to 90 days (13,895) - Over 1 year (1,282) (1,282)

Total (15,177) (1,282)

Considering the creditworthiness of debtors and historical collection performance, the ENAP Group has estimated that the provision for doubtful accounts at December 31, 2016 and 2015, is sufficient.

11. BALANCES AND TRANSACTIONS WITH RELATED COMPANIES

The accounts receivable, accounts payable and transactions with related parties are the following: a) Accounts receivable, current and non-current:

Current: 12.31.2016 12.31.2015 Tax Number Company Country Relationship Currency ThUS$ ThUS$

61.979.830-9 Ministry of Energy Chile Indirect US$ 28,611 6,206 76.418.940-K GNL Chile S.A. Chile Associate US$ 14,745 9,610 78.335.760-7 Petropower Energía Ltda. (1) Chile Associate US$ - 6,161 0-E Gasoducto del Pacífico Argentina S.A. Argentina Associate US$ 632 754 96.762.250-8 Gasoducto del Pacífico Chile S.A. Chile Associate US$ 2,933 2,933 96.861.390-1 Innergy Soluciones Energéticas S.A. Chile Associate US$ 560 592 78.889.940-8 Norgas S.A. Chile Associate US$ 188 - 96.655.490-8 Oleoducto Trasandino (Chile) S.A. Chile Associate US$ 140 - 81.095.400-0 Sociedad Nacional de Oleoductos S.A. Chile Associate US$ 827 495

Total 48,636 26,751

(1) As of december 31, 2016 has been reclassified to Subsidiaries - See Note 5.

ENAP AND SUBSIDIARIES

Non-current: 12.31.2016 12.31.2015 Tax Number Company Country Relationship Currency ThUS$ ThUS$

96.861.390-1 Innergy Soluciones Energeticas S.A. Chile Associate US$ 674 1,279 76.418.940-K GNL Chile S.A. Chile Associate US$ 392 392

Total 1,066 1,671 The non-current balances receivables from Innergy Soluciones Energéticas S.A. and from GNL Chile S.A., have Libor 360 + 3% established as a base interest rate and Libor 180 + 3% respectively. b) Accounts payable

Current: 12.31.2016 12.31.2015 Tax Number Company Country Relationship Currency ThUS$ ThUS$

78.335.760-7 Petropower Energía Ltda. (1) Chile Associate US$ - 21,573 81.095.400-0 Sociedad Nacional de Oleoductos S.A. Chile Associate US$ 1,913 2,871 76.418.940-K GNL Chile S.A. Chile Associate US$ 8,036 8,820 61.704.000-k Codelco Chile Indirect US$ 2,550 5,066 96.655.490-8 Oleoducto Trasandino (Chile) S.A. Chile Associate US$ 105 375 - Otras US$ 396 492

Total 13,000 39,197

(1) As of december 31, 2016 has been reclassified to Subsidiaries - See Note 5.

The balances and transactions with related parties are in accordance with Article 89 of Law No. 18,046, which establishes that transactions between investees, between the parent company and its subsidiaries, and those with a publicly traded company have to be on arm’s length terms, similar to those that usually prevail in the market, which means, performed under conditions of mutual independence between the parties. At each year-end, the balances receivable from and payable to related companies, current, originate mainly from transactions in the consolidated lines of business. They are agreed in Chilean pesos and dollars, their terms for collection and/or payment do not exceed 60 days and, in general, they have no indexation adjustment or interest clauses.

ENAP AND SUBSIDIARIES c) Transactions with related companies 01.01.2016 01.01.2015 Effect in income 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Tax Number Company Country Relationship Description of the transaction MUS$ MUS$ MUS$ MUS$

76.418.940-K GNL Chile S.A. Chile Associate Purchase of natural gas 316,353 379,900 - - Loans payments 1,700 - - - Interest accrued 22 65 22 65 78.889.940-8 Norgas S.A. Chile Associate Sale of products - 10,343 - 271 Interests - 1 - 1 Dividend received 625 242 - - 78.335.760-7 Petropower Energia Ltda. (1) Chile Associate Purchase of services 45,437 48,198 - - Distribution of profits 3,472 2,290 - - Surplus and insurance 5,579 5,194 5,579 5,194 81.095.400-0 Sociedad Nacional de Oleoducto S.A. Chile Associate Purchase of services 42,807 42,071 - - Sale of services 8 10 7 10 Sale of products - 26 - 3 Dividend received 3,389 3,063 - - Accrued dividend 824 711 - - 96.856.650-4 Innergy Holding S.A. Chile Associate Purchase of natural gas 2,303 2,531 - - Sale of products 7,772 13,183 844 453 Interests 1 10 1 10 96.861.390-1 Innergy Soluciones Energéticas S.A. Chile Associate Subscription promissory notes - 3,264 - - Partial payment promissory notes 633 2,013 - - Interest accrued 24 28 24 28 96.856.700-4 Innergy Transportes S.A. Chile Associate Plant operation 1,543 1,283 - - 76.788.080-4 GNL Quintero S.A. Chile Associate Dividend received 6,083 7,808 - - 96.655.490-8 Oleoducto Trasandino Chile S.A. Chile Associate Purchase of services 3,879 4,702 - - Dividend received - 650 - - Accrued dividend 657 - - - 0-E Gasoducto del Pacífico Argentina S.A. Argentina Associate Dividend received - 3,513 - - 61.979.830-9 Ministerio de Energía Chile Indirect Gas subsidy 95,549 79,849 95,549 79,849 61.704.000-k Codelco Chile Indirect Purchase of energy 5,588 200 5,588 200

(1) As of December 31, 2016 has been reclassified to Subsidiaries - See Note 5. d) Remuneration of the Board of Directors

The details of the remuneration paid to the Board of Directors are as follows:

Actual members of the Board Tax 01.01.2016 01.01.2015 identification 12.31.2016 12.31.2015 Name number Position ThUS$ ThUS$

Andrés Ignacio Rebolledo Smitmans 8.127.608-0 President - - Eduardo Bitrán Colodro 7.950.535-8 Vice president - - Jorge Fierro Andrade 9.925.434-3 Director 11 11 María Isabel González Rodríguez 7.201.750-1 Director 12 6 Carlos Carmona Acosta 9.003.935-0 Director 12 6 Alejandro Jadresic Miranovic 7.746.199-k Director 6 2 Bernardita Piedrabuena Keymer 10.173.277-0 Director 12 - Paul Schiodtz Obilinovich 7.170.719-9 Director 10 -

Subtotal 63 25

ENAP AND SUBSIDIARIES

Former members of the Board Tax 01.01.2016 01.01.2015 identification 12.31.2016 12.31.2015 Name number Position ThUS$ ThUS$ Fernán Gazmuri Plaza 4.461.192-9 Director - 15 Fidel Miranda Bravo 6.923.830-0 Director - 6 Fernando Ramirez Pendibene 7.876.527-5 Director - 2 Jorge Bande Bruck 5.899.738-2 Director - 1

Subtotal - 24

Total 63 49

Board compensation bears no relationship to the Company’s performance.

Key management personnel – The executive area’s gross remuneration, paid during the year 2016, amounts to ThUS$ 2,839 and takes into account the executive positions of ENAP Group; the gross remuneration paid during the year 2015, amounted to ThUS$ 2,839. The positions considered in the reported amounts are those executives who have authority and responsibility to plan, direct and control the entity activities.

The company has no accrued obligations for the Executives under the concept of long and short-term benefits and share-based payments.

Incentive plans for executives – ENAP has a Variable Remunerations System (VRS) that is applicable to all its executives, with the sole exception of the General Manager, and at the end of each year it provisions an estimate of such disbursement during the first quarter of the following year.

The purpose of this bonus plan is to encourage them to add value to the company, improve teamwork and individual performance. The incentive factors considered in this model are the following:

- The financial results obtained by the company. - The results per area, including the goals achieved for each management area. - Individual performance results.

12. INVENTORIES

As of December 31, 2016 and 2015 this item was composed as follows:

12.31.2016 12.31.2015 Detail: ThUS$ ThUS$

Crude oil in inventories 228,045 201,707 Crude oil in transit 61,249 19,090 Finished products 340,256 245,193 Products in transit 25,994 26,853 Material in warehouse and in transit 72,346 72,843 Total 727,890 565,686

ENAP AND SUBSIDIARIES

01.01.2016 01.01.2015 12.31.2016 12.31.2015 Additional Inventory Information ThUS$ ThUS$

Write-off of inventory amounts to net realisable value - (84,712) Inventory costs recognized as cost of sales during the year (4,138,761) (5,415,568)

13. CURRENT ASSETS AND LIABILITIES, DEFERRED TAX AND INCOME TAX BENEFITS a) Current tax assets and liabilities: The detail as of December 31, 2016 and 2015 is as follows:

12.31.2016 12.31.2015 Current tax assets: ThUS$ ThUS$ VAT fiscal credit 118,838 57,542 Recoverable tax, foreign 5,410 13,621 Specific tax on fuel 2,491 3,916 Customs duties 1,187 1,035 Monthly provisional payments, net 2,415 9,226 Recoverable taxes, other 4,415 6,102 Other taxes 504 789

Total 135,260 92,231

12.31.2016 12.31.2015 Current tax liabilities: ThUS$ ThUS$ Specific tax on fuel 53,575 36,132 Withholding taxes 4,989 4,194 Royalties and exploitation rights 2,589 2,718 Income tax payable 11,064 28,347 Other taxes 2,063 964

Total 74,280 72,355

ENAP AND SUBSIDIARIES

b) Deferred tax assets and liabilities: The origin of the deferred taxes recorded as of December 31, 2016 and 2015 is as follows:

Net assets for deferred taxes 12.31.2016 12.31.2015 Assets Liabilities Assets Liabilities Temporary differences ThUS$ ThUS$ ThUS$ ThUS$

Related to tax loss carryforwards 855,755 - 695,731 - Related to net realisable value of inventories - - 22,977 - Related to provisions 57,640 - 72,566 - Related to property, plant and equipment 50,478 69,837 62,721 28,111 Related to financial lease 2,014 2,685 2,903 3,244 Related to reserves for cash flow hedges 2,983 - 6,755 - Related to material accruals 21,978 - 24,030 - Related to deferred expenses - 78,012 - 24,854 Related to obligations for severance benefits - 5,583 - 5,634

Subtotal 990,848 156,117 887,683 61,843 Total 834,731 - 825,840 -

Net liabilities for deferred taxes 12.31.2016 12.31.2015 Assets Liabilities Assets Liabilities Temporary differences ThUS$ ThUS$ ThUS$ ThUS$

Related to depreciations - 70,197 - 79,740 Total - 70,197 - 79,740

Movements in deferred taxes 12.31.2016 12.31.2015 ThUS$ ThUS$ Amount recognized in income of the year 74,193 101,521 Amount recognized in other comprehensive 2,631 10,167 Adquisitions under business combinations, deferred taxes (57,353) - Related to other (1,038) 2,329 Changes in deferred taxes assets and liabilities 18,433 114,017

ENAP AND SUBSIDIARIES

c) Current tax expenses: All companies of the ENAP Group individually submit their tax returns, in compliance with the tax laws in their countries.

The tax and deferred tax income (expense) for the years ended December 31, 2016 and 2015 is the following:

01.01.2016 01.01.2015 12.31.2016 12.31.2015 (Expense) income for income taxes: ThUS$ ThUS$

(Expense) income - current tax (17,481) (22,760) Other (expense) income for current taxes (1,290) (1,194)

(Expense) income for current taxes, net, total (18,771) (23,954)

Deferred (expense) income for taxes related to the creation and reversal of temporary differences 74,193 101,521

Income (expense) for deferred taxes, net, total 74,193 101,521

Income (expense) for income taxes 55,422 77,567

01.01.2016 01.01.2015 12.31.2016 12.31.2015 (Expense) income for deferred and income taxes by source ThUS$ ThUS$ (Expense) income for current taxes, net, foreign (9,730) (5,181) (Expense) income for current taxes, net, national (9,041) (18,773)

(Expense) income for current taxes, net, total (18,771) (23,954) ThUS$ ThUS$ (Expense) income for deferred taxes, net foreign 1,100 (4,357) (Expense) income for deferred taxes, net, national 73,093 105,878 (Expense) income for deferred taxes, net, total 74,193 101,521

ENAP AND SUBSIDIARIES d) Reconciliation of the income tax rate

The reconciliation from the statutory tax rate in Chile to the effective tax rate applicable to the ENAP Group is as follows: 01.01.2016 01.01.2015 12.31.2016 31.12.2015 ThUS$ ThUS$ (Expense) income for taxes using the legal rate (30,518) (20,906) Tax effects of rates in other jurisdictions 6,869 15,003 Tax effect of ordinary income, not taxable 18,428 (6,746) Tax effect of expenses, not deductible from taxes 798 (7,287) Tax decree Law N°2398 65,864 94,371 Other increase (decrease) in charge for legal taxes (6,019) 3,132 Adjustment to tax expenses using the legal rate, total 85,940 98,473

Income for taxes using the effective rate 55,422 77,567

Additional information:

Legal rate used in Chile is 24% in 2016 and 22.5% in 2015, which is the legal income tax rate in Chile. Tax rates for other jurisdictions are: Argentina, 35% both years; Ecuador, 22% both years;, since the Uruguayan subsidiary is not operating in that country, it is subject to a special regime without tax; Egypt, the joint operation agreement with EGPC grants a special regime without tax for ENAP.

ENAP Parent is subject, additionally, to a 40% rate corresponding to a single tax imposed on the companies of the Chilean State, in accordance with Decree Law N° 2.398.

Tax Reform in Chile

On September 29, 2014 Law N° 20.780 “Tax Reform that changes income tax system and introduces several adjustments in the tax system” was published.

In addition, a progressive increase in the corporate income tax rate was introduced for the fiscal years 2014, 2015 and 2016, increasing the rate to 21%, 22.5% and 24% respectively. From 2017 onwards, the increase in this tax rate will depend on the regime chosen by the taxpayer, i.e., if the attributed income regime has been chosen, the rate will be 25% from 2017 onwards; and if the partially integrated regime has been chosen, the rate will be 25.5% in 2017 and 27% from 2018 onwards.

Among the main changes, these laws specify, in Article 14, two systems of taxation: the attributed income system and the partially integrated system. In the case of taxpayers that are corporations, these may only benefit from the partially integrated income system mentioned above. Similarly, through Circular No. 66 issued in 2015, the Internal Revenue Service Internal instructed that in the case of public companies, these are excluded from the application of Article 14 due to the lack of a direct or indirect link with people who have the quality of owners, community members, partners or shareholders and are taxed with final taxes, as all of their income is subject to taxation under Article 2 of the DL No. 2,398. While, as a rule, public companies are required to determine their actual income through full accounting, such obligation is for the sole purpose of determining the income subject to the CPI, under the rules contained in Title II of the Income Tax Law relating to such tax, whose rate in these cases is 25%.

ENAP AND SUBSIDIARIES

Regarding other increases (decreases) made to the legal tax rate, these are permanent differences for the year, arising mainly from the accrued income in subsidiaries and related entities and associates, and to ENAP´s single tax rate mentioned above.

The taxes for foreign companies are calculated according to the tax rates in their corresponding jurisdictions. e) Results and tax rates

01.01.2016 01.01.2015 12.31.2016 12.31.2015 Subtotal Total Subtotal Total Income ThUS$ ThUS$ ThUS$ ThUS$

Income before taxes 127,158 92,915

Income taxes (10,442) (16,804) Income tax - current (1,392) (11,039) Deferred tax (420) 3,773 Foreign tax (8,630) (9,538) Income after income taxes 116,716 76,111

Special Tax - decree Law N°2398 - Rate 40% 65,864 94,371 Income tax (5,995) (7,734) Deferred tax 71,859 102,105

Net income 182,580 170,482

Income non - controlling Interest 1,284 1,563

Income controlling Interest 181,296 168,919

14. NON-CURRENT ASSETS AND LIABILITIES AS HELD FOR SALE

As of December 31, 2016, the Company maintains assets for sale of assets acquired under the financial leasing modality, which correspond to the facilities of its Head Office, located in Vitacura 2736, Las Condes district, the assets and liabilities are as follows:

Assets ThUS$ Non current assets Property, plant and equipment - Fixed Asset Leasing 16,370 Property, plant and equipment - Depreciation of Leasing (3,595) Total Current Assets Classified as Held for Sale 12,775 Liabilities Other Current Financial Liabilities 1,836 Other Non-current Financial Liabilities 1,263 Current Liabilities Other Than Liabilities Included In Disposal Groups Classified As Held For Sale 3,099

ENAP AND SUBSIDIARIES

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Below is a description of the investments accounted for using the equity method and their movement as of December 31, 2016 and 2015: a) Detail of the investments: Functional Ownership % Companies Main Activity Country Currency 2016 2015 A&C Pipeline Holding Investment and financing in general. I.Cayman USD 36.25 36.25 Compañía Latinoamericana Petrolera S.A. Exploration and exploitation projects related to oil, gas and derivatives. Chile CLP 40.00 40.00 Empresa Nacional de Geotermia S.A. Exploration and exploitation of geothermal energy. Chile USD 49.00 49.00 Forenergy S.A. Biodiesel production and comercialization. Chile CLP 40.00 40.00 Gasoducto del Pacífico (Chile) S.A. Transport natural gas. Chile USD 25.00 25.00 Gasoducto del Pacífico (Argentina) S.A. Transport natural gas. Argentina USD 22.80 22.80 Gasoducto del Pacífico (Cayman) Ltd. Investing and financing in general. I.Cayman USD 22.80 22.80 Geotermica del Norte S.A. Exploration and exploitation of geothermal energy. Chile USD 18.30 31.69 GNL Chile S.A. Storage, processing and regasification capacities of liquid natural gas. Chile USD 33.33 33.33 GNL Quintero S.A. Operation and maintenance of a LNG regasification terminal. Chile USD 20.00 20.00 Golfo Guayaquil Petroenap Cía. de E. Execution of activities in all and any of its phases of the oil industry. Ecuador USD - 40.00 Innergy Holding S.A. Exploit and operate all kinds of transport networks of natural gas. Chile USD 25.00 25.00 Norgas S.A. Import, export and purchase of LPG and its sale. Chile CLP 42.00 42.00 Oleoducto Trasandino (Argentina) S.A. Construction and exploitation of an oil pipeline between Argentina and Chile. Argentina USD 35.79 35.79 Oleoducto Trasandino (Chile ) S.A. Construction and exploitation of an oil pipeline between Argentina and Chile. Chile USD 35.83 35.83 Petropower Energía Ltda. (see Note 5) Generation of energy and processing of fuels. Chile USD - 15.00 Sociedad Nacional de Oleoducto S.A. Transport fuels and their derivatives. Chile CLP 10.06 10.06 b) Movement of investments as of December 31, 2016

Opening Equity in Final balance earnings Dividends Translation Other Increase balance 01.01.2016 Addition (loss) received Difference (Decrease) 12.31.2016 Companies ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

A&C Pipeline Holding 152 - - - - - 152 Compañía Latinoamericana Petrolera S.A. 235 - (6) - 14 - 243 Empresa Nacional de Geotermia S.A. 1,432 - 246 - - - 1,678 Forenergy S.A. 225 - - - - 14 239 Gasoducto del Pacífico (Chile) S.A. 2,711 - (134) - - 1 2,578 Gasoducto del Pacífico (Argentina) S.A. 6,882 - 1,143 - - - 8,025 Gasoducto del Pacífico (Cayman) Ltd. 1 - - - - - 1 Geotérmica del Norte S.A. 69,716 - 3,667 - - - 73,383 GNL Chile S.A. 3,751 - 2,205 - - - 5,956 GNL Quintero S.A. 24,144 - 5,619 (6,083) - (17,151) 6,529 Golfo Guayaquil Petroenap Compañía de Economía Mixta 10 - - - - (10) - Innergy Holding S.A. 5,052 - 594 - - - 5,646 Norgas S.A. 2,184 - 263 (625) 13 - 1,835 Oleoducto Trasandino (Argentina) S.A. 2,643 - (164) - - - 2,479 Oleoducto Trasandino (Chile ) S.A. 2,769 - (9) (657) - 3 2,106 Petropower Energía Ltda. (See Note 5) 14,646 - 1,284 (3,473) 857 (13,314) - Sociedad Nacional de Oleoducto S.A. 10,165 - 3,445 (3,477) 649 - 10,782

Total 146,718 - 18,153 (14,315) 1,533 (30,457) 121,632

ENAP AND SUBSIDIARIES

December 31, 2015 Opening Equity in Final balance earnings Dividends Translation Other Increase balance 01.01.2015 Addition (loss) received Difference (Decrease) 12.31.2015 Companies ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

A&C Pipeline Holding 152 - - - - - 152 Biocomsa S.A. 1 - - - - (1) - Compañía Latinoamericana Petrolera S.A. 276 - (1) - (40) - 235 Empresa Nacional de Geotermia S.A. 1,432 - - - - - 1,432 Forenergy S.A. 165 86 - - - (26) 225 Gasoducto del Pacífico (Chile) S.A. 2,534 - 177 - - - 2,711 Gasoducto del Pacífico (Argentina) S.A. 8,116 - 221 (1,455) - - 6,882 Gasoducto del Pacífico (Cayman) Ltda. 1 - (1) - - 1 1 Geotérmica del Norte S.A. 49,716 20,000 - - - - 69,716 GNL Chile S.A. 2,994 - 757 - - - 3,751 GNL Quintero S.A. 25,027 - 6,926 (7,809) - - 24,144 Golfo Guayaquil Petroenap Compañía de Economía Mixta 10 - - - - - 10 Innergy Holding S.A. 4,553 - 499 - - - 5,052 Norgas S.A. 2,426 - - (242) - - 2,184 Oleoducto Trasandino (Argentina) S.A. 2,649 - (6) - - - 2,643 Oleoducto Trasandino (Chile ) S.A. 3,418 - 44 (693) - - 2,769 Petropower Energía Ltda. 11,555 - 3,001 - - 90 14,646 Sociedad Nacional de Oleoducto S.A. 11,897 - 3,244 (2,978) (1,998) - 10,165

Total 126,922 20,086 14,861 (13,177) (2,038) 64 146,718

c) Additional information on investments accounted by the equity method:

Fair Value

None of the investments accounted by the equity method is traded publicly, so the fair value is not disclosed.

Interest below 20% in Sociedad Nacional de Oleoductos S.A., Petropower Energía Ltda and Geotérmica del Norte S.A.

The ENAP Group exercises a significant influence in Sociedad Nacional de Oleoductos S.A. even though it holds less than 20%. The reason is the relatively important transactions between the investor and the investee. It also is involved in commercial and financial decisions. The same situation was observed in Petropower Energía Ltda. As of December 31, 2015, where the interest is below 20%; however, the ENAP Group had a significant influence over this investment given the existing commercial contracts and agreements.

Regarding the investment in the company Geotérmica del Norte S.A., even though the participation at Dec-2016 is 18.30%, the Group maintains one director, out of a total of four.

Investments in ThUS$1

The interests in Gasoducto del Pacífico Cayman Ltda. is shown at ThUS$1 since it had negative equity on the closing date.

Changes and/or modification in share in associates

- In the year ended December 31, 2016, the following changes or modification in interests were effected:

ENAP AND SUBSIDIARIES

An increase of Capital during the first quarter 2016 in Geotérmica del Norte S.A. amounting to ThUS$170,000, in which ENAP did not take part, reducing its interest to 18.30%.

On December 7, 2016, Enap Refinerías S.A. Acquired 85% of the sharheolding of Petropower Energía Limitada, obtaining control over this company and becoming part of the consolidation scope. (See Note 5).

- In the year ended December 31, 2015, the following changes or modification in interests were effected:

During March 2015, capital contributions totaling ThUS$20,000 were made in Geotérmica del Norte S.A., corresponding to 8,933,986,623 shares. ENAP did not take part in the capital increases during 2015, thus its interest decreased to 31.69%.

The Extraordinary shareholder meeting of “Consorcio Tecnológico de Biocombustibles S.A. (Biocomsa S.A.)”, held on October 28, 2015 unanimously agreed upon its dissolution and wind up under Art. 103 N° 3 of Law N° 18,046 published in the Official Gazette dated November 17, 2015.

During December 2015, Enap Refinerías S.A. performed a capital contribution in Forengergy S.A., totaling ThCh$ 60,000 (equivalent to ThUS$ 86) corresponding to its 40% equity ownership. d) Detail of financial information:

The summary of the financial statements of the investees with significant influence is as follows:

As of and for the year ended December 31, 2016 Current Non-current Current Non-current Income / Companies Ownership Revenues Assets Assets Liabilities Liabilities (Loss) % ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Geotérmica del Norte S.A. 20.76 59,315 385,433 43,747 - 3,650 8,040 Gnl Chile S.A. 33.33 135,001 176 117,309 - 910,420 6,616 Gnl Quintero S.A. 20.00 281,577 928,817 35,496 1,142,251 188,294 28,093 Sonacol S.A. 10.06 7,112 278,910 55,735 123,133 74,037 34,240 Other investments - 86,142 51,160 14,962 28,975 33,664 7,416 Total 569,147 1,644,496 267,249 1,294,359 1,210,065 84,405

As of and for the year ended December 31, 2015 Current Non-current Current Non-current Income / Companies Ownership Revenues Assets Assets Liabilities Liabilities (Loss) % ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Geotérmica del Norte S.A. 25.06 2,116 147,896 6,565 - - - Gnl Chile S.A. 33.33 103,260 27,958 83,421 36,545 1,002,425 2,270 Gnl Quintero S.A. 20.00 217,214 957,013 31,144 1,022,358 199,388 34,629 Petropower Energía Ltda. 15.00 45,521 74,514 38,693 20,902 47,224 23,356 Sonacol S.A. 10.06 7,834 259,999 52,272 114,547 72,210 32,239 Other investments - 81,801 88,327 33,690 49,911 31,514 4,058 Total 457,746 1,555,707 245,785 1,244,263 1,352,761 96,552

ENAP AND SUBSIDIARIES

16. PROPERTY, PLANT AND EQUIPMENT

Changes in property, plant and equipment items as of December 31, 2016 and 2015 are presented below:

Plant and Investment in Works in Current year Buildings, Equipment, Installa- Exploration & Progress Land Net Net tions Production Other Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Initial balance as of January 1, 2016 230,342 11,210 1,246,042 54,491 175,844 1,029,436 50,296 2,797,661 Additions - - 49,442 132 182,808 377,054 14,457 623,893 Business combinations (1) - - 208,822 - - - - 208,822 Exploratory dry holes and exploratory campaigns - - - - - (62,642) - (62,642) Withdrawals and write-offs - - 575 - (12,184) (3,175) (37) (14,821) Depreciation expenses - (1,277) (199,385) (7,471) - (168,038) (16,233) (392,404) Geological studies and unabsorbed costs - - - - - (5,201) - (5,201) Transfers - 1,660 15,851 1,229 (13,681) (9,330) 4,271 - Other increases (decreases) - - (8,269) - (5,900) 8,670 (12,170) (17,669) Change, Total - 383 67,036 (6,110) 151,043 137,338 (9,712) 339,978

Ending Balance as of December 31, 2016 230,342 11,593 1,313,078 48,381 326,887 1,166,774 40,584 3,137,639

(1) See note 5 “Business combination” Plant and Investment in Works in Buildings, Equipment, Installa- Exploration & Progress Prior Year Land Net Net tions Production Other Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Initial balance as of January 1, 2015 230,342 11,682 1,325,632 50,317 143,561 924,784 49,579 2,735,897 Additions - 726 95,031 164 123,039 362,015 9,014 589,989 Exploratory dry holes and exploratory campaigns - - - - - (44,983) - (44,983) Withdrawals and write-offs - - (3,566) - (521) (263) (257) (4,607) Impairments - - - - - (20,900) - (20,900) Depreciation expenses - (1,254) (194,888) (6,484) - (176,976) (12,817) (392,419) Geological studies and unabsorbed costs - - - - - (6,322) - (6,322) Transfers - 56 74,908 10,494 (90,235) - 4,777 - Other increases (decreases) - - (51,075) - - (7,919) - (58,994) Change, Total - (472) (79,590) 4,174 32,283 104,652 717 61,764

Ending Balance as of December 31, 2015 230,342 11,210 1,246,042 54,491 175,844 1,029,436 50,296 2,797,661

The balances of the items as of December 31, 2016 and 2015 are presented below:

12.31.2016 12.31.2015 Property, Plant and Equipment, Gross ThUS$ ThUS$ Land 230,342 230,342 Buildings 70,586 68,926 Plant and Equipment 3,396,514 3,130,093 Installations 125,785 124,424 Works in Progress 326,887 175,844 Investment in Exploration and Production 4,489,164 4,183,705 Other 171,137 168,690

Total 8,810,415 8,082,024

ENAP AND SUBSIDIARIES

12.31.2016 12.31.2015 Property, Plant and Equipment, Acumulated Depreciation ThUS$ ThUS$ Buildings 58,993 57,716 Plant and Equipment 2,083,436 1,884,051 Installations 77,404 69,933 Investment in Exploration and Production 3,322,390 3,154,269 Other 130,553 118,394 Total 5,672,776 5,284,363

12.31.2016 12.31.2015 Property, Plant and Equipment, Net ThUS$ ThUS$ Land 230,342 230,342 Buildings 11,593 11,210 Plant and Equipment 1,313,078 1,246,042 Installations 48,381 54,491 Works in Progress 326,887 175,844 Investment in Exploration and Production 1,166,774 1,029,436 Other 40,584 50,296

Total 3,137,639 2,797,661

No assets included in property, plant and equipment have been encumbered, whether by mortgage or as pledge.

Additional information a) Works in progress: As of December 31, 2016, works in progress correspond mainly to adaptation works of the plant for refining of heavy crudes in the Biobío refinery, construction of the Co-generating Plant in the Aconcagua Refinery and maintenance of tanks and pipes. b) Leased assets: As of December 31, 2016 the following assets acquired under financial leases are presented in Other Property, Plant and Equipment:

Corporate offices acquired under a financial leasing that included purchase option with Banco Santander Chile, the net value is ThUS$ 13,097. Payments are made on a monthly basis. On October 2016, the Board authorized its sale. As of December 31, 2016, the Company does not maintain other contracts under at financial leasing scheme. c) Decommissioning, withdrawal or restoration costs: As part of its fixed asset costs the Group has included decommissioning costs of platforms and oil fields, for a net amount as of December 31, 2016 of ThUS$ 9,226 and December 31, 2015 of ThUS$ 10,844. d) Interest compounding: The ENAP Group during the period ended December 31, 2016 has capitalized interests in the amount of ThUS$ 3,629 from the financing used in the construction of the Aconcagua Refinery Cogeneration Plant and the PIAM Project in Argentina. ENAP Group has not capitalized interest during the year ended on December 31, 2016.

ENAP AND SUBSIDIARIES e) Insurance: The Group has insurance policies to cover any potential risks to property, plant and equipment, as well as any potential claims that could be filed in connection with their use. These insurance policies are sufficient to cover any pertinent risks. Additionally, the loss that might occur as a consequence of a business interruption is covered. f) Depreciation cost: The charge to income for depreciation included in cost of sales, distribution costs and administrative expenses is as follows:

01.01.2016 01.01.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ In cost of sales 379,338 378,928 In distribution cost 11,723 11,935 In administrative expenses 1,343 1,556

Total 392,404 392,419 g) Asset impairment: See Note 18. h) Other increase (decrease): As of December 31, 2016 mainly it includes the acquisition of the assets of the subsidiary Petrofaro S.A.. As of December 31, 2015 additional provisions for materials and spare parts are included within Plant and equipment mainly. Investment in E&P includes the transfer of the 12% interest in the Pampa del Castillo area to Petro Minera Chubut S.E as part of the agreement relating to the area extensions, with the Chubut province for 10 years (until November 2026), extensible for 20 years. The amount of the transfer is ThUS$ 7,919 and is presented as part of Other gains (losses) in the statement of income (see Note 36). i) Investment in exploration and production through joint operations and operating contracts

Exploration and production item include investments in foreign countries through its direct subsidiary ENAP Sipetrol S.A. as of December 31, 2016 and 2015, as follows:

Net amount of the Less: Net amount of the Ownership investment, before Cumulative investment in percentage impairment losses impairment losses joint operations Operaciones Conjuntos 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 % % ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ a. Explotación Área Magallanes (*) 50.00 50.00 214,397 179,633 - - 214,397 179,633 Campamento Central Cañadón Perdido (*) 50.00 50.00 85,908 95,536 20,900 20,900 65,008 74,636 Cam 2A Sur (*) 50.00 50.00 118 110 - - 118 110 East Rast Qattara (*) 50.50 50.50 28,245 27,834 - - 28,245 27,834 b. Exploración E2 (ex CAM3 y CAM1) (*) 33.33 33.33 ------Bloque 2 - Rommana 40.00 40.00 8,571 8,571 8,447 8,447 124 124 Bloque 8 - Sidi Abd El Rahman 30.00 30.00 ------Bloque Mehr (*) 33.00 33.00 27,262 27,262 27,262 27,262 - - Consorcio Bloque 28 (*) 42.00 42.00 ------

Total 364,501 338,946 56,609 56,609 307,892 282,337

ENAP AND SUBSIDIARIES

In addition to the above, at December 31, 2016 and 2015, the subsidiaries of Enap Sipetrol S.A., in Argentina and Ecuador, operate the following businesses:

Net amount of the Less: Net amount of the Ownership investment, before Cumulative investment in percentage impairment losses impairment losses joint operations Other Business 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 % % ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Pampa el Castillo (*) 100.00 100.00 76,995 65,674 - - 76,995 65,674 Paraíso, Biguno, Huachito (*) 100.00 100.00 64,410 70,674 - - 64,410 70,674 Mauro Dávalos Cordero (*) 100.00 100.00 60,596 68,904 - - 60,596 68,904 Intracampos (*) 100.00 100.00 20,673 2,792 - - 20,673 2,792 Petrofaro S.A. 8,647 - - - 8,647 -

Total 231,321 208,044 - - 231,321 208,044

(*) Note 19 and 20 explain and provide the status of each of these projects.

17. IMPAIRMENT LOSS AND PROVISIONS i) Asset impairment

The subsidiary Enap Sipetrol Argentina S.A. performed a test of impairment of assets during the fourth quarter of 2015, according to what is established in the International Financial Reporting Standards (IFRS) given the deepening of the scenario of low international prices of the crude oil registered during 2015, the test result led recognizing an impairment loss of US $ 20.9 million as of December 2015, corresponding to property, plant and equipment, specifically in the ‘Campamento Central Cañadón Perdido’ reservoir.

As of December 31, 2016 there are no additional adjustments related to impairment tests. ii) Accruals a) Mehr Block - Iran

Investments in Exploration and Production includes a decrease relating to the investment made in the Mehr block, Iran.

Through its subsidiary Sipetrol International S.A., ENAP participates in a consortium integrated by Sipetrol International S.A., Repsol S.A. (Spain) and OMV (Austria), the latter company being the operator. Between 2001 and 2007 the consortium carried out exploration works in the referred block according to a contract with the National Iranian Oil Company (“NIOC”), a state-owned company. However, at the end of the exploration stage, it was not possible to establish an agreement with NIOC in relation to a development plan for the exploitation of the reserves discovered by the consortium (Band-e-Karkhehf oil field).

Consequently, on January 24, 2009 OMV, as the block’s operator, notified the NIOC Director of Exploration of the consortium’s unanimous decision not to continue with the negotiations relating to the development of the oil field. Given that the contractual obligations have been complied with, NIOC was also notified of the activation of the clause that gives the consortium the right to recover the exploration expenses and to the receipt of a Remuneration Fee, under the terms established in the Exploration Service Agreement signed between the parties.

On October 21, 2010, NIOC informed the block’s operator (OMV) about the acceptance of the exploratory expenses incurred by the consortium.

ENAP AND SUBSIDIARIES

Notwithstanding the preceding paragraph, and taking into account the management’s judgment and estimates, in December 2008 the subsidiary Sipetrol International S.A. recorded a provision for the total value of the net investment made during the exploration works, amounting to ThUS$ 27,262.

The Consortium continues now negotiating with NIOC the refund of the exploratory expenses incurred, as well as the payment of the fee for the exploration services, reimbursement that has been delayed in its execution as a result of the restrictions that have affected Iran due to the embargo imposed by the US and the European Union.

Besides the arrangements for the recovery of the account receivable from NIOC, since 2008 the consortium does not perform operating or commercial activities in the Mehr Block or in Iran. iii) Abandonment of dry exploratory wells with no commercially exploitable reserves

Exploration and Production Investments within property, plant and equipment, shows decreases as of December 31, 2016 and 2015 due to the abandonment of dry exploratory wells with no commercially exploitable reserves. They are itemized below: 12.31.2016 31.12.2015 ThUS$ ThUS$

Exploratory dry holes and exploratory campaigns 62,642 44,983

Total 62,642 44,983

The charges mentioned above are included in the statements of comprehensive income under the section “other expenses by function” (see Note 33).

18. PARTICIPATION IN JOINT OPERATION

Detail of the main joint exploitation and exploration operations through which revenues are obtained and expenses are incurred, is presented below.

The assets and liabilities of each of the joint operations are detailed below:

Current assets Non-current assets in Current liabilities Non-current liabilities in joint ventures joint ventures in joint ventures in joint ventures Joint operations 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ a. Exploitation Área Magallanes (a) 55,702 22,367 213,850 197,584 73,155 94,224 155,445 84,238 Campamento Central Cañadón Perdido (b) 8,645 13,185 67,522 85,699 21,491 25,129 16,956 14,569 Cam 2A Sur (c) 143 577 304 805 12,658 11,413 11,173 10,841 East Rast Qattara (d) 81,146 48,229 28,266 27,841 4,119 8,307 - - b. Exploration LaE2 Invernada(ex CAM3 (b) y CAM1) (a) - 61 - 58 - 6 - 26 540- 479- - 14 - 30 Bloque 2 - Rommana 177 191 124 124 34 109 - - Bloque 8 - Sidi Abd El Rahman - - - - 229 235 - - Bloque Mehr (b) ------Consorcio Bloque 28 (c) ------

Total 145,874 84,607 310,072 312,079 112,226 139,896 183,588 109,678

ENAP AND SUBSIDIARIES

The amounts specified below detail the ordinary revenue, costs of sales and net income (loss) of each of the joint operations.

Ordinary Revenue Cost of sales Net income (loss) Joint operations 12.31.2016 31.12.2015 12.31.2016 31.12.2015 12.31.2016 31.12.2015 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ a. Exploitation Área Magallanes (a) 105,694 106,729 91,878 83,722 6,116 9,706 Campamento Central Cañadón Perdido (b) 41,931 60,843 44,739 77,633 (6,523) (9,255) Cam 2A Sur (c) - - 3,258 3,450 (5,619) (3,160) East Rast Qattara (d) 61,135 85,593 21,670 28,209 38,668 50,299 b. Exploration E2 (ex CAM3 y CAM1) (a) - - 418 113 (362) (35) Bloque 2 - Rommana - - - - 62 (38) Bloque 8 - Sidi Abd El Rahman - - - - 6 - Bloque Mehr (b) ------Consorcio Bloque 28 506 - - - - -

Total 209,266 253,165 161,963 193,127 32,348 47,517 a) Exploitation

(a) Magallanes area

On January 4, 1991, ENAP Sipetrol Argentina S.A. and YPF S.A. entered into a Temporary Company Union (joint operation) contract, for hydrocarbon development and drilling activities in the Magellan Block Area, located in the eastern mouth of the Magellan Strait, Argentina.

On November 17, 2014, the Company, represented by its General Manager and by YPF’s president and CEO, signed an agreement to extend the Temporary Company Union (joint operation) contract, that both companies share in equal parts in the Magallanes area in the south of Argentina. This agreement extends the amortization term of the proven reserves.

ENAP Sipetrol Argentina S.A., as operator of this contract, is responsible for performing all operations and activities in this area.

(b) Campamento Central - Cañadón Perdido

In December 2000, ENAP Sipetrol S.A. (later ENAP Sipetrol Argentina S.A.) signed an agreement with YPF S.A. whereby the latter assigns and transfers to ENAP Sipetrol Argentina S.A. 50% of the concession that YPF S.A. holds for exploiting hydrocarbons in the areas known as Campamento Central - Cañadón Perdido in the province of Chubut, Argentina, which is subject to Law 24,145 and its regulations. YPF S.A. operates this concession.

On December 26, 2013, YPF S.A. and Enap Sipetrol Argentina S.A. obtained from the province of Chubut the extension of this exploitation concession for an additional period of 10 years until 2027, which may be extended for an additional period of 20 years, until 14 November 2047.

ENAP AND SUBSIDIARIES

Regulatory decision 14 dated January 29, 1999, awarded YPF and ENAP Sipetrol Argentina S.A. the right to explore the area known as CAM 2A Sur. On October 7, 2002, ENAP Sipetrol Argentina S.A. and YPF S.A. entered into a Temporary Company Union (joint operation) in the Tierra del Fuego Province.

The exploitation concession’s term is 25 years (expires in 2028), which can be extended for an additional period of 10 years.

(d) East Rast Qattara – Egypt

As part of the bidding process opened in 2002 by the Egyptian General Petroleum Company (EGPC) for tenders to be submitted for various blocks in the Western Desert, the East Rast Qattara block was awarded to the subsidiary Sipetrol International S.A., together with the Australian company Oil Search Ltd., on April 16, 2003.

The contract was signed on March 30, 2004 in the presence of the Egyptian Oil Ministry, with an ownership interest of 50.5% for Sipetrol International S.A., Egyptian branch, as the operator, and 49.5% for Oil Search Ltd. In December 2007 started the exploitation stage.

b) Exploration

(a) E2 (Formerly CAM 3 and CAM 1) - Argentine

The CAM-1 (Cuenca Austral Marina 1) area was awarded on September 4, 2003 to ENAP Sipetrol Argentina S.A. and Repsol-YPF S.A. by the Energy Secretariat of the Ministry of Federal Planning, Public Investments and Services, who accepted the tender submitted by the companies during the International Public Bidding process for this project. The area is located in the Atlantic Ocean in southern Argentina and is adjacent to other concessions where ENAP Sipetrol Argentina S.A. is currently exploring and producing hydrocarbons.

On September 26, 2006, ENARSA, ENAP Sipetrol Argentina S.A. and YPF S.A. signed a joint operation agreement, whereby the parties agreed to enter into a Temporary Company Union with each party holding a 33.33% interest. ENARSA, as the owner of CAM 1 (hereinafter E2), contributed this block, and ENAP Sipetrol Argentina S.A., jointly with YPF S.A., contributed the CAM 3 block. ENAP Sipetrol and Repsol YPF expressly reverted CAM-3 to the Energy Secretariat, so that the latter could then award it to the new consortium.

Within the framework of the agreement signed, the Energy Secretariat accepted the transfer of the CAM-3 area to ENARSA, which, together with the former CAM-1 area, now make up the E2 area that is the subject of the agreement. Likewise, the Energy Secretariat accepted offsetting of the investments committed to in the CAM-3 area with the promise to drill a second exploration well in the new E2 area.

On March 31, 2008, the parties signed the E2 Area Hydrocarbon Exploration and Exploitation Temporary Company Union (joint operation), with the purpose of regulating the rights and obligations of ENAP Sipetrol Argentina S.A., YPF S.A. and Energía Argentina S.A. (ENARSA) as partners and co-participants in exploring and exploiting the E2 area. The exploration permit finishes its third period in 2018, which can be extended for an additional period of 5 years.

ENAP AND SUBSIDIARIES

(b) Mehr Block – Iran

In 2001, through its subsidiary Sipetrol International S.A., Enap acquired a 33% share in the Exploration Service Agreement of the Mehr Block located in Iran, as a partnership with Repsol S.A. and OMV, with the latter being its operator.

On June 30, 2007, National Iranian Oil Company (NIOC) declared the marketability of a finding made in the Block named as Band-e-Karkheh, which started the negotiation of the development plan and respective agreement. In December 2008, given that the terms and conditions of the development plan negotiated with NIOC were not economically viable for the companies, it was unanimously decided not to continue with the development stage of the finding, but reserving the right to require disbursement of the expenses incurred in the exploration stage plus a fee for the services, as set forth in the exploration service agreement.

As described in Note 18. ii), the refund of the exploratory expenses incurred, as well as the payment of a fee for the exploration services associated with the Mehr Block has not taken place yet; consequently a 100% provision has been debited to expenses.

Besides the arrangements for the recovery of the account receivable from NIOC, since 2008 the consortium does not perform operating or commercial activities in the Mehr Block or in Iran.

On April 16, 2014, EOP Operaciones Petroleras S.A. (42%), Petroamazonas (51%) y Belorusneft (7%), hereon the Block 28 Consortium, and the Ministry of Oil of Ecuador, subscribe a service contract for the exploration and exploitation of hydrocarbons (crude oil) at Block 28, located in the central west part of eastern Ecuador which is in the sector called Zona Subandina (foothill) and which comprises the provinces of Napo and Pastaza which extends over an area of 1,750 km2. EOP Operaciones Petroleras S.A. is the Consortium Operator.

For the exploratory phase a minimum investment was agreed upon and this consisted of 2 phases ((US$17.35 and US$8.15 million), the risk of this investment to be borne exclusively by the private partners of the Consortium (Enap: 85, 71% and Belorusneft: 14,29%), with an option to cancel their participation depending on the results of each phase. In the event of success at the exploratory stage, in the first years of the development stage Petroamazonas must pay the partners the portion taken on by them in the exploratory stage by means of the production percentage rights of the Block. The negotiated fee amounts to US$ 52,9 / barrel.

The minimum investment commitment includes all of the geoscience studies, environmental studies, permits, licensing, civil works, as well the perforation in the Prospecto Mirador. At this date the geoscience studies are ongoing, as well as environmental studies prior to obtaining the environmental license.

c) Agreements of ENAP in Chile – CEOP (Special Operation Contract):

In addition to the participation of Enap Sipetrol Argentina S.A. in exploration and exploitation operations, ENAP in Chile, in the Magallanes area, developed in conjunction with private companies Special Contracts of Oil Operation (CEOP), which are detailed below.

ENAP AND SUBSIDIARIES

Dorado Riquelme Block:

On August 26 2009, the Special Operations Contract was signed for the exploration and exploitation of the Bloque Dorado Riquelme hydrocarbon reservoirs , between the government of Chile and Methanex Chile S.A. and the Empresa Nacional del Petróleo (ENAP). The Joint Operating Agreement between the parties involved in the block operation was endorsed, with 50% participation from Methanex and 50% from ENAP, the latter operating the concession.

At a meeting on July 23, 2014 it was decided not to continue with the exploration stage, thus continuing with the block’s exploitation stage only.

At the end of December 2016, the accumulated investment in the Dorado Riquelme Block was US$ 276.4 million and accumulated production was 848.5 million cubic meters of gas.

Lenga Block

On July 28, 2008 the Special Operations Contract (CEOP) for the exploration and exploitation of the hydrocarbon reservoir, Lenga block, was signed between the government of Chile and the companies Apache Chile Energía Spa and the Empresa Nacional del Petróleo (ENAP). On June 15, 2009, the Joint Operating Agreement was signed between the parties partaking in the Block with a 50% participation of ENAP and 50% from Apache Chile Energía Spa, the latter operating the concession. At the end of 2011, Apache Chile Energía SpA transferred its interest in the CEOP for the Lenga Block to Methanex, and the transfer the role of Concession Operator in the CEOP for the Lenga Block, from Apache Chile Energía SpA to ENAP. These were then approved by the Ministry of Energy and General Comptroller of the Republic of Chile.

At the end of 2014 a letter was sent to the Minister of Energy communicating the contractor’s decision to terminate the agreement with the State and return the oil field exploitation area of the CEOP Lenga Block, which was accepted on January 8, 2015, thus terminating the agreement.

Between the months of January and February of 2016, work was carried out to restore the vegetation cover of the intervened areas. No activity until September 2016.

Between the months of October and November 2016, grass sowing was undertaken to regenerate the vegetation in the intervened areas of the Carmen BX-1, Carmen AX-1 and Lenga 1 wells.

Bloque Coirón

On July 28, 2008, the Special Operations Contract (CEOP) for the exploration and exploitation of the hydrocarbon reserve Coirón Block was signed between the government of Chile and the companies Pan American Energy Chile Limitada and ENAP. Subsequently, on November 10, 2008, the Joint Operating Agreement was signed between the parties involved in the block operation with a 50% participation from ENAP and 50% from Pan American Energy Chile Ltda., the latter being the concession operator.

On September 14, 2015 ENAP transferred part of its interests in the CEOP to Conocophillips South America Ventures LTD. (Conocophillips), with the interests of the participants remaining as follows a) PAE, 50%; b) ENAP, 45%; and c) Conocophillips, 5%. Then, on September 17, 2015 ENAP acquired the total interest of PAE in the CEOP, with the current interests of the participants remaining as follows a) ENAP, 95%; and b) Conocophillips, 5%.

Finally, in the context of the assignment contracts, ENAP ceded 44% of the Contractor's rights, interests and obligations to COP Chile, which was approved by the Ministry of Energy and the Taking of Reason by the General

ENAP AND SUBSIDIARIES

Comptroller of the Republic (November 17, 2016). After this process, the participation of the partners was as follows: ENAP 51% and COP Chile 49%.

On December 13, 2016, both partners signed the Joint Operating Agreement (JOA) for the Coirón Block operation.

The CEOP Coirón Block includes a maximum term of 35 years, counted from the date of its entry into force. For the year 2016 the plan has been reformulated, focusing mainly on the Glaucontic Zone (ZG Project).

The cumulative net investment made by ENAP as of December 31, 2016 is US $ 44 million.

Caupolicán Block

On April 28, 2009, the Special Operations Contract (CEOP) for the exploration and exploitation of the hydrocarbon reserve Caupolicán Block was signed between the government of Chile and the companies Petro Magallanes Operaciones Ltda. (Concession Operator) and ENAP. In March 2012, Methanex Chile S.A. was incorporated into the CEOP with a 20% interest, which was formalized by the Ministry of Energy.

Currently, ENAP’s investment for the 2° exploratory period is US$12.4 million. For the 1° exploratory period, ENAP’s investment was US$11.3 million.

During the year 2016 no operating activities were conducted on the block.

Flamenco Block

On November 7, 2012 the Special Operations Contracts (CEOP) for the exploration and exploitation of the Flamenco Block hydrocarbon field was signed by the State of Chile, Geopark (Concession Operator) and the Empresa Nacional del Petróleo (ENAP), both with a 50% interest. Afterwards, as of December 3, 2012, the Joint Operating Agreement (JOA) was signed between both parties in order to operate the Block.

In October 2015, the Geopark Operator proposed CEOP to pass to the second exploratory stage. ENAP decided not to pass to that stage, given the results of the drilled wells. During November, Geopark sent a letter to the Ministry of Energy indicating the moving on to the second exploratory stage as well as the ENAP’s decision.

During the last quarter of the year, ENAP was not active in this CEOP. The cumulative annual net investment made by ENAP as of December 31, 2016 is US $ 4 million, associated with activity in 2015 (back payments).

Currently in production are the chirihue x-1, Chercán X-1 and X-2 wells.

Isla Norte Block

On November 7, 2012 the Special Operations Contract (CEOP) for the exploration and exploitation of the Isla Norte Block hydrocarbon field was signed by the State of Chile, Geopark TdF(Concession Operator) with a 60% interest and the Empresa Nacional del Petróleo (ENAP) with a 40% interest. Afterwards, on December 3, 2012; the Joint Operating Agreement (JOA) was subscribed between both parties in order to operate the Block.

The ENAP’s investment in this phase amounts to US$ 1.3 million. In August 2015, the Ministry of Energy accepted the Consortium’s request with regard to extending the first exploratory period for 18 months, in order to complete the block’s studies. The Operator is currently working on the update of the geological and geophysical model which will allow defining more accurately the new well proposals.

During the year 2016 no operating activities were conducted on the block. 51

ENAP AND SUBSIDIARIES

Campanario Block

On January 9, 2013, the Special Operations Contract (CEOP) for the exploration and exploitation of the Campanario Block hydrocarbon field was signed by the State of Chile, Geopark TdF(Concession Operator) with a 50% interest and the Empresa Nacional del Petróleo (ENAP) with the remaining 50% interest.

ENAP’s investment in this stage is US$ 2.9 million. In August 2015, the Ministry of Energy accepted the request of the Consortium regarding the extension of the first exploratory period for a 18-month term, in order to complete the block studies. The Operator is currently working in the update of the geological and geophysical models that will allow to accurately define the new wells proposals.

During the year 2016 no operating activities were conducted on the block.

San Sebastián Block

As of January 4, 2013, the Special Operations Contract (CEOP) for the exploration and exploitation of the San Sebastián Block hydrocarbon field was signed by the State of Chile,YPF Tierra del Fuego (Operator) with a 40% interest; Wintershall with a 10% interest and the Empresa Nacional del Petróleo (ENAP) with the remaining 50%.

In this CEOP, the partner bears 100% of the investment during the first exploratory period.

During December 2015, the status of the project up-to-date and the consortium move on to the following period were reviewed. Wintershall and ENAP decided not to move on to the following stage. YPF moves on to the second exploratory stage with a minimum commitment of 1 well to be drilled during 2017 and the completion of two drilled wells during 2015.

Marazzi – Lago Mercedes Block

On January 7, 2013 the Special Operations Contract (CEOP) for the exploration and exploitation of the Marazzi – Lago Mercedes Block hydrocarbon field was signed by the State of Chile, YPF Tierra del Fuego (Concession Operator) with a 50% interest and the Empresa Nacional del Petróleo (ENAP) with the remaining 50%.

In this CEOP, the partner bears 100% of the investment during the first exploratory period.

During December 2015, the status of the project up-to-date and the consortium move on to the following stage were reviewed. YPF and ENAP decided not to move on to the following stage. The area is currently in the process of reverting to the State.

ENAP AND SUBSIDIARIES

19. OTHER BUSINESS

Next, we include a detail of the information at December 31, 2016 and 2015, of the financial statements of Other businesses that have been used in the consolidation process:

Current assets Non-current assets Current liabilities Non-current liabilities Projects 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Pampa el Castillo (a) 13,457 18,289 81,530 88,448 25,193 34,669 13,303 22,755 Paraíso, Biguno, Huachito (b) 5,652 4,928 29,407 27,737 29,058 2,745 698 323 Mauro Dávalos Cordero (b) 24,522 21,385 127,600 120,351 126,082 11,908 3,029 1,404 Petrofaro 9,703 - 9,040 - 7,444 - 1,106 - Bloque 3 Jambelí ------Total 53,334 44,602 247,577 236,536 187,777 49,322 18,136 24,482

Ordinary Revenue Net Income (loss) Net Income (loss) Projects 12.31.2016 31.12.2015 12.31.2016 31.12.2015 12.31.2016 31.12.2015 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Pampa el Castillo (a) 73,930 99,382 63,114 115,346 (1,098) (29,620) Paraíso, Biguno, Huachito (b) 43,941 35,621 24,654 20,150 12,412 7,842 Mauro Dávalos Cordero (b) 53,303 56,706 32,337 35,549 9,379 5,770 Petrofaro 5,815 - 5,550 - 291 - Bloque 3 Jambelí ------Total 176,989 191,709 125,655 171,045 20,984 (16,008)

The main operations for exploitation activities are detailed next. a) Pampa del Castillo - La Guitarra

On September 25, 2001, Pecom Energía S.A. assigned to Enap Sipetrol Argentina S.A. 100% of the rights to the exploitation concession of the hydrocarbon area referred to as Pampa del Castillo - La Guitarra, located in the province of Chubut, Argentina. On May 15, 2015, the extension of the Concession for 10 more years was announced, with an additional extension option of 20 years.

b) Paraíso, Biguno, Huachito y Mauro Dávalos Cordero e Intracampos

On October 7, 2002, a contract was signed with Empresa de Petróleos del Ecuador - PETROECUADOR and its subsidiary Empresa Estatal de Exploración y Producción de Petróleos del Ecuador - Petroproducción, to exploit and develop the oilfields Paraíso, Biguno, Huachito (PBH) and Mauro Dávalos Cordero (MDC), located in the eastern Ecuador basin. By means of this specific service contract, the Company committed to make investments in the development of these fields for an amount estimated in US$90 million, which include drilling 16 wells (9 in PBH and 7 in MDC), the construction of a production station in MDC, the adaptation of facilities and a camp. At the same time, it acquired the exploration and operations rights, assuming 100% of the operation and management costs of the fields.

On August 8, 2006, the MDC field contract with PETROECUADOR was modified, and ENAP SIPEC agreed to increase the investment program to include the drilling of 7 wells and expansion of production facilities. These new wells will certify additional reserves, increasing current reserves from 31.6 to 57.0 million barrels of crude oil.

ENAP AND SUBSIDIARIES

These contracts stipulated that ENAP Sipetrol S.A. could exploit a maximum of 57 million barrels in MDC and 20.1 million barrels in PBH.

On July 27, 2010, the Reform to the Hydrocarbon Law and the Internal Taxation Law was enacted in Ecuador. The first transitory provision provides that existing contracts, including for MDC and PBH, had to be amended within 180 days and the reformed model had to be adopted for hydrocarbon exploration and exploitation services contained in Article 16 of the Hydrocarbon Law.

According to the aforesaid first Transitory Provision, ENAP Sipetrol S.A. began the renegotiation of the MDC and PBH contracts, which concluded on November 23, 2010 with the signature of two amendments to the Service Contracts for the Exploration and Exploitation of Hydrocarbons (crude oil) in the Mauro Dávalos Cordero (MDC) Block and Paraíso, Biguno, Huachito and Intracampos (PBHI) Block in the Ecuadorian Amazon Region.

According to governing law, those amendments were registered with the Department of Hydrocarbons on December 15, 2010. The effective date of the amendment was January 1, 2011. Accordingly, the terms of the contracts signed on October 7, 2002 were in effect through December 31, 2010. The terms of the amendments governed became effective on January 1, 2011, effective for 15 years.

On April 2015, the Company signed two contracts with the Government of Ecuador. The first contract corresponds to an extension of the effectiveness of Bloque Paraíso Biguno Huachito e Intracampos (PBHI) until 2034, granted by the Ecuadorian Government. The second contract, signed in the form of Consortium, composed by ENAP SIPEC, the Ecuadorian state oil company Petroamazonas and Belorusneft, grants ENAP SIPEC the right to perform exploratory activities as operator sequentially, that is, to gradually commit more investments according to the results as they are obtained. c) 3 Jambelí Block

On October 3, 2011, ENAP Sipetrol S.A. (branch Ecuador) and the Department of Hydrocarbons of Ecuador signed a service contract for the exploration and exploitation of hydrocarbons (oil-crude) in the “3 Jambelí Block”, located in the Gulf of Guayaquil.

During 2012 the contract requirements related to Block 3J's existing seismic reprocessing were completed, as well as obtaining permits for the acquisition of an offshore 2D seismic.

On May 8, 2013 the offshore 2D seismic acquisition was initiated, with the Russian company Sevmorgeo. On May 31 the first stage of seismic acquisition was finished (35% progressed: 130.5 Km). During the second week of December the 2D Seismic acquisition program was concluded (518 Km vs. the planned 500 Km), thus complying with the minimum contractual commitment of investments and activities.

In July and August 2014, together with Company Lumina Geophysical, the 518 km acquired in the 2013 campaign was reprocessed, whose interpretation indicated the existence of favorable conditions for the placing of traps in the coastal area outside of the block limited to two prospective areas.

Between October and December 2014, French-American Company Stat Marine performed a conceptual study for the development of production scenarios in the defined prospective areas. With this information and the updated interpretation of reserves, an update of the economic model of the Block was carried out. With the results of the new evaluation, the strategy to be applied in the future will be defined, since the exploratory period of the B-3J finishes in October 2015.

ENAP AND SUBSIDIARIES

On April 22, 2016 the Secretaría de Hidrocarburos de Ecuador (Ecuador Oil Ministry ) was advised of the decision to return Block 3 Jambelí. The exploratory commitment with the State of Ecuador which included the seismic studies was completed and there were no impediments or contingencies regarding the return of this Block. The balance of the execution of the environmental audit (US$200 million approximately) will be concluded in 2016 and will be handled by Enap Sipetrol S.A., Ecuador Branch.

20. INVESTMENT PROPERTIES

The detail and movements in investment properties of the ENAP Group as of December 31, 2016 and 2015 are as follows: 12.31.2016 12.31.2015 ThUS$ ThUS$ Opening balance 7,551 7,642 Depreciation expense (90) (91) Final Balance 7,461 7,551

Investment properties of the ENAP Group are mainly land and properties held for operating leasing. The company has selected the cost method of accounting to measure its investment property after the initial recognition. The depreciation method in use is the straight-line method and the useful life period assigned to such items fluctuates between 10 and 20 years.

21. OTHER FINANCIAL LIABILITIES

Details of the ENAP Group’s financial liabilities as of December 31, 2016 and 2015 are as follows:

December 31, 2016 Financial Financial liabilities Total liabilities at fair value with Loans and other held for changes taken to accounts Hedge financial negotiation net income payable derivative liabilities Item ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Other current financial liabilities - - 793,649 73,943 867,592 Trade creditors and other accounts payable - - 584,079 - 584,079 Due to related companies - - 13,000 - 13,000

Total current financial liabilities - - 1,390,728 73,943 1,464,671

Other non-current financial liabilities - - 3,016,301 123,417 3,139,718 Other accounts payable, non-current - 1,681 - 1,681

Total non-current financial liabilities - - 3,017,982 123,417 3,141,399

ENAP AND SUBSIDIARIES

December 31, 2015 Financial Financial liabilities Total liabilities at fair value with Loans and other held for changes taken to accounts Hedge financial negotiation net income payable derivative liabilities Item ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Other current financial liabilities - - 484,747 6,798 491,545 Trade creditors and other accounts payable - - 435,670 - 435,670 Due to related companies - - 39,197 - 39,197

Total current financial liabilities - - 959,614 6,798 966,412

Other non-current financial liabilities - - 3,109,509 200,682 3,310,191 Other accounts payable, non-current - - 1,086 - 1,086

Total non-current financial liabilities - - 3,110,595 200,682 3,311,277

a) Hedging derivatives

The ENAP Group, in compliance with financial risk management policy described in Note 4, acquires financial derivatives to cover its exposure to the interest rate variations, currency (exchange rate) and commodities (crude oil and imported products).

The interest rate derivatives are used to fix or limit the variable interest rate of the financial obligations and are interest rate swaps.

The currency derivatives are used to fix the exchange rate for the US dollars in comparison to the Chilean peso (CLP) and Unidad de Fomento (UF), due to investments or existing obligations in currencies other than the US dollar. These instruments are mainly in Forwards and Cross Currency Swaps.

Crude oil derivatives are intended to hedge against a negative variation in the price of crude oil shipments from the moment of purchase until the sale of the products refined from that crude oil.

The energy derivative is intended to limit the exposure to the variability of the marginal cost of the energy used in the refining process.

ENAP AND SUBSIDIARIES i) Presentation of assets and liabilities - The detail of the hedging instruments, considering the nature of the operations, is as follows:

12.31.2016 12.31.2015 Derivative assets Current Non-Current Current Non-Current ThUS$ ThUS$ ThUS$ ThUS$ Exchange rate hedging Cash flow hedge 55 - 3,911 - Diferential Swap WTI / Brent hedging Cash flow hedge - - 572 - Brent hedge - TSS Cash flow hedge - - 82,279 -

Total 55 - 86,762 -

12.31.2016 12.31.2015 Derivative liabilities Current Non-Current Current Non-Current ThUS$ ThUS$ ThUS$ ThUS$ Exchange rate hedging Cash flow hedge 2,541 120,440 3,378 190,511 Cross Currency Swap guarantees (5,650) (25,650) Interest rate hedging Cash flow hedge 2,422 8,627 3,420 14,308 Electric Energy Price hedging Cash flow hedge 11,540 - - 21,513 Brent hedge - TSS Cash flow hedge 57,350 - - -

Total 73,943 123,417 6,798 200,682 ii) Fair value of hedging derivatives

The detail of the hedging instruments portfolio of ENAP is as follows:

Detail of hedge Description of hedge Description of instruments Fair value of instruments instruments instruments against which is hedged against which is hedged 12.31.2016 12.31.2015 ThUS$ ThUS$

Cross-Currency Swap Exchange rate and interest rate Obligations (bonds) (117,801) (194,173) Cross-Currency Swap Exchange rate and interest rate Leasing 470 283 SWAP Interest rate Bank loans (11,049) (17,728) SWAP Electric Power Contract Cost of Sales (11,540) (21,513) TSS Petroleum Crude Inventories (57,350) 82,279 SDI Diferential WTI - Brent Inventories (90) 572 Forward Exchange rate Trade receivables 55 3,911

Total (197,305) (146,369)

ENAP AND SUBSIDIARIES iii) Effect in net income of hedging derivatives

The amounts recorded in comprehensive income as of December 31, 2016 and 2015 that were transferred from net equity to the income statement during the year were as follows:

12.31.2016 31.12.2015 ThUS$ ThUS$

(Debit) credit charge in other comprehensive income during the year (44,594) (7,207) Credit (debit) transfer from equity to net income during the year 41,944 211,804

iv) Other data on financial instruments

The maturities of hedges are detailed below:

December 31, 2016 Notional

Fair value 2017 2018 2019 2020 2021 Total Financial derivatives ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Exchange rate hedging Cash flow hedge (117,276) 597,836 238,262 110,000 - 192,000 1,138,098 Electric Power hedging Cash flow hedge (11,540) 11,540 11,540 Interest rate hedging Cash flow hedge (11,049) 36,991 39,150 41,363 44,005 - 161,509

Total (139,865) 646,367 277,412 151,363 44,005 192,000 1,311,147

Thousands of Fair value barrels ThUS$ MBbl

WTI/Brent and TSS hedging: Cash flow hedge (57,440) 22,290

December 31, 2015 Notional

Fair value 2016 2017 2018 2019 2020 2021 Total Financial derivatives ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Exchange rate hedging Cash flow hedge (189,979) 461,623 97,684 238,158 430,000 - 192,000 1,419,465 Electric Power hedging Cash flow hedge (21,513) - Interest rate hedging Cash flow hedge (17,728) 37,937 36,991 39,150 41,363 44,005 - 199,446

Total (229,220) 499,560 134,675 277,308 471,363 44,005 192,000 1,618,911

Thousands of Fair value barrels ThUS$ MBbl

WTI/Brent and TSS hedging: Cash flow hedge (1) 82,851 36,490

ENAP AND SUBSIDIARIES

(1) As of December 31, 2015, Management proceeded to reclassify ThUS$ 84,712, of the accrued effect of Time Spread Swap from Other reserves to income of the year, in order to offset with that value the negative effect on income, for the same amount, of the adjustment of inventories to realizable value.

The contractual notional amount of the contracts entered into does not represent the risk taken on by ENAP, as this amount is only the nominal basis on which the settlement of the derivative is calculated. v) Hierarchies of Fair Value

The ENAP Group calculates the fair value for the financial derivatives by using market parameters, which are adjusted to the maturity profile of each operation.

The forward operations hedging the exchange rate exposure of the accounts receivable from sales invoices in Chilean pesos are recorded using as reference the forward peso-US dollar curve available in the market.

The cross currency swap operations hedging the exposure to the fluctuation of the US dollar of the financial liabilities denominated in UF are recorded at the present value of the future flows in UF (asset) and US dollar (liability). To calculate such present values the rate curves of the UF and market LIBOR are used, which are adjusted to the relevant dates of the flows included in each operation.

The interest rate swap operations hedging the exposure to the fluctuation of the LIBOR rate of the financial liabilities that accrue a variable rate based on LIBOR are recorded at the present value of future flows. To calculate such present values the rate curves of the market LIBOR are used, which are adjusted to the relevant dates of the flows included in each operation.

The operations with options on ICE Brent, hedging the exposure to the variation of the international price of the crude oil imports of ENAP, are recorded by using calculation tools provided by financial information platforms. Such tools use the future curves of the ICE Brent prices in the market, adjusting these to the maturity profile of each operation.

The financial instruments recognized at fair value in the statement of financial situation are classified according to the following hierarchies:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the assets or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the assets or liability.

Total Financial instruments rank 12.31.2016 Level 1 Level 2 Level 3 Financial instruments measured at fair value ThUS$ ThUS$ ThUS$ ThUS$

Hedge assets - Cash flow hedge 55 - 55 -

Hedge Liabilities - Cash flow hedge 197,360 - 197,360 -

Total Financial instruments rank 12.31.2015 Level 1 Level 2 Level 3 Financial instruments measured at fair value ThUS$ ThUS$ ThUS$ ThUS$

Hedge assets - Cash flow hedge 86,762 - 86,762 -

Hedge Liabilities - Cash flow hedge 207,480 - 207,480 -

ENAP AND SUBSIDIARIES

b) Loans accruing interest i) Summary of loans - The detail of the loans accruing interest as of December 31, 2016 and 2015 is the following: Current Non-current 12.31.2016 12.31.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$ Non-guaranteed Borrowings from financial institutions 622,839 380,178 252,748 289,610 Bank overdrafts (a) 16,403 21,684 - - Bonds payable 113,060 36,209 2,639,035 2,652,759 Financial lease - 1,761 - 2,842 Subtotal 752,302 439,832 2,891,783 2,945,211

Guaranteed Borrowings from financial institutions 41,347 44,915 124,518 164,298

Subtotal 41,347 44,915 124,518 164,298

Total 793,649 484,747 3,016,301 3,109,509

(a) Bank overdrafts: As of December 31, 2016, in subsidiary Enap Sipetrol S.A., bank overdrafts are recorded by its Argentinean subsidiary: amounting to ThUS$ 16,403. (ThUS$ 21,684 as of December 31, 2015) ii) Detail of loans accruing interest - The detail per currency and maturity of the loans from financial entities (guaranteed and not guaranteed) accruing interest as of December 31, 2016 and 2015, is the following:

December 31, 2016 Current Non-current Nominal Up to 3 From 3 to From 1 to From 3 to 5 years Interests Nominal Effective value months 12 month Total 3 years 5 years and more Total Creditor name payment rate rate ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ BNP - Paribas (1) Half-yearly 3.75% 3.75% 410,000 19,713 18,795 38,508 80,513 44,004 - 124,517 BNP - Paribas (Cesce) (2) Half-yearly 4.38% 4.38% 53,215 2,840 - 2,840 - - - YPF S.A. (5) Quarterly 8.00% 8.00% 73,600 879 26,796 27,675 - - - - The Bank of New York Mellon (6) At maturity 2.78% 2.89% 130,000 478 478 64,424 64,424 - 128,848 Argentina BBVA - Banco Francés S.A. At maturity 2.4% 2.4% 8,000 8,002 8,002 - - Banco ITAU Argentina S.A. At maturity 3.5% 3.5% 12,000 12,013 12,013 - - Société Générale (3) Half-yearly 2.49% 2.73% 100,000 - 16,082 16,082 - - - - BNP Paribas (Cesce)(3) Half-yearly 4.07% 5.19% 68,682 3,998 3,586 7,584 13,725 10,755 24,480 Banco de Crédito e Inversiones At maturity 1.04% 1.04% 100,000 - 100,583 100,583 - - - - Banco Santander At maturity 1.36% 1.36% 100,000 - 100,603 100,603 - - - - Scotiabank Chile At maturity 1.11% 1.11% 100,000 - 100,449 100,449 - - - - Banco de Chile At maturity 1.81% 1.75% 150,000 149,032 149,032 - HSBC Bank USA (4) Quarterly 2.34% 2.53% 200,000 - 100,337 100,337 99,421 - - 99,421

Total 47,923 616,263 664,186 258,083 119,183 - 377,266 The nominal interest rates presented are annual.

ENAP AND SUBSIDIARIES

Other information related to loans from financial entities as of December 31, 2016:

Name Tax number Currency Country Entity Tax number Country Warranty BNP - Paribas (1) 0-E Dollar EE.UU. Enercón S.A. 99519820-7 Chile Guaranteed BNP - Paribas (Cesce) (2) 0-E Dollar España Prodisa S.A. 99548320-3 Chile Guaranteed YPF S.A. (5) 0-E Dollar Argentina Enap Sipetrol Argentina S.A. 0-E Argentina Not guaranteed The Bank of New York Mellon (6) 0-E Dollar EE.UU. Enap Sipetrol Argentina S.A. 0-E Argentina Not guaranteed Argentina BBVA - Banco Francés S.A. 0-E Dollar EE.UU. Enap Sipetrol Argentina S.A. 0-E Argentina Not guaranteed Banco ITAU Argentina S.A. 0-E Dollar Argentina Enap Sipetrol Argentina S.A. 0-E Argentina Not guaranteed Société Générale (3) 0-E Dollar Francia ENAP 92604000-6 Chile Not guaranteed BNP Paribas (Cesce)(3) 0-E Dollar España ENAP 92604000-6 Chile Not guaranteed Banco de Crédito e Inversiones 97006000-6 Dollar Chile ENAP 92604000-6 Chile Not guaranteed Banco Santander 97036000-K Dollar Chile ENAP 92604000-6 Chile Not guaranteed Scotiabank Chile 97018000-1 Dollar Chile ENAP 92604000-6 Chile Not guaranteed Banco de Chile 97004000-5 Dollar Chile ENAP 92604000-6 Chile Not guaranteed HSBC Bank USA (4) 0-E Dollar EE.UU. ENAP 92604000-6 Chile Not guaranteed

December 31, 2015 Current Non-current

Nominal Up to 3 From 3 to From 1 to From 3 to 5 years Interests Nominal Effective value months 12 month Total 3 years 5 years and more Total Creditor name payment rate rate ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ BNP - Paribas (1) Semestral 3.75% 3.75% 410,000 18,558 17,736 36,294 76,141 85,368 - 161,509 BNP - Paribas (2) Half-yearly 3.1% 3.1% 34,459 2,145 2,145 - - - - BNP - Paribas (2) Half-yearly 6.04% 6.04% 13,917 873 873 - - - - BNP - Paribas (Cesce) (2) Half-yearly 4.38% 4.38% 53,215 2,874 2,729 5,603 2,789 - - 2,789 YPF S.A. (5) Quarterly 8.00% 8.00% 100,000 266 49,000 49,266 43,000 - - 43,000 Société Générale (3) Half-yearly 1.78% 2.28% 100,000 8,485 8,333 16,818 15,986 - - 15,986 BNP Paribas (Cesce)(3) Half-yearly 4.07% 5.19% 78,258 4,087 3,585 7,672 13,960 13,960 3,585 31,505 Banco de Chile At maturity 0.52% 0.52% 100,000 286 102,631 102,917 - - - - Banco Santander At maturity 0.82% 0.82% 100,000 367 102,631 102,998 - - - - Scotiabank Chile At maturity 0.51% 0.51% 100,000 208 100,000 100,208 - - - - HSBC Bank USA (4) Quarterly 1.84% 1.92% 200,000 299 - 299 199,119 - - 199,119 Total 38,448 386,645 425,093 350,995 99,328 3,585 453,908

The nominal interest rates presented are annual.

Other information related to loans from financial entities as of December 31, 2015:

Name Tax number Currency Country Entity Tax number Country Warranty BNP - Paribas (1) 0-E Dollar EE.UU. Enercón S.A. 99519820-7 Chile Guaranteed BNP - Paribas (2) 0-E Dollar España Prodisa S.A. 99548320-3 Chile Guaranteed BNP - Paribas (2) 0-E Dollar España Prodisa S.A. 99548320-3 Chile Guaranteed BNP - Paribas (Cesce) (2) 0-E Dollar España Prodisa S.A. 99548320-3 Chile Guaranteed YPF S.A. (5) 0-E Dollar Argentina Enap Sipetrol Argentina S.A. 0-E Argentina Not guaranteed Société Générale (3) 0-E Dollar Francia ENAP 92604000-6 Chile Not guaranteed BNP Paribas (Cesce)(3) 0-E Dollar España ENAP 92604000-6 Chile Not guaranteed Banco de Chile 97004000-5 Dollar Chile ENAP 92604000-6 Chile Not guaranteed Banco Santander 97036000-K Dollar Chile ENAP 92604000-6 Chile Not guaranteed Scotiabank Chile 97018000-1 Dollar Chile ENAP 92604000-6 Chile Not guaranteed HSBC Bank USA (4) 0-E Dollar EE.UU. ENAP 92604000-6 Chile Not guaranteed (1) BNP – PARIBAS

On June 15, 2005, Energía Concón S.A. signed a Loan Agreement with a bank syndicate, with BNP Paribas being the Administrative Agent Bank and Citibank the Guarantee Agent Bank (see note “Guarantee Commitments with Third Parties”); for an amount of ThUS$ 410,000 and a 15-year term. Annual interest rate ranging from Libor + 50 basis points to + 175 basis points.

ENAP AND SUBSIDIARIES

(2) BNP – PARIBAS

During 2005 and 2006, Productora de Diesel S.A., subscribed Credit Contracts with a syndicate of banks, with BNP Paribas being the Administrative Agent Bank and Citibank the Guarantee Agent Bank (see note “Guarantee Commitments with Third Parties”); amounting to US$ 102 million with semi-annual repayments until 2017. The interest rate for tranches A and B varies between Libor + 0.875% and Libor + 2.0%; and for tranche C it varies between 0.875% and Libor + 4.31%.

(3) BANCO BNP PARIBAS Y SOCIÉTÉ GÉNÉRALE

On 2010, ENAP entered into two loan agreements, with BNP Paribas and Société Générale for ThUS$ 68,682 and ThUS$ 100,000 where each hold 50% of the participation, in order to construct an alkylation plant for Refinería Aconcagua. Both credits function as revolving credit lines, from which they can make partial withdrawals when they comply with certain conditions. Annual interest rate is 4.07% and Libor + 150 basis points, with maturities in 2021 and 2017 respectively.

(4) HSBC BANK EEUU

On November 18, 2013, the Company signed a funding contract with HSBC Bank USA, National Association and Scotiabank & Trust (Cayman) Ltd., with the former acting as administrative agent. The contract amounts to ThUS 200,000 and has a 5-year term from December 3, 2013. The principal will be paid off in 4 biannual installments on the 42nd, 48th ,54th and 60th months respectively. This loan will accrue interest calculated on the basis of LIBOR rate plus a margin or spread of 1.5% annually.

(5) YPF S.A.

On November 17, 2014, ENAP Sipetrol Argentina S.A. submitted to YPF S.A. a proposed agreement for TCU Contract Extension in the Magallanes area. This proposal seeks to extend the rights and obligations of ENAP Sipetrol Argentina S.A. with the TCU Contract and its nature as operator, keeping its current 50% share until the end of the extensions.

In return for the extension, ENAP Sipetrol Argentina S.A. will pay YPF S.A., as contributions for the TCU, ThUS$ 100,000. This amount will be paid as follows: a) ThUS$ 8,000 at the agreement date, b) ThUS$ 6,000 until the final decision date of the incremental project, being 50% of bonuses, contributions and/or moneys incurred by YPF S.A. with State of Argentina, c) one year after the final decision date of the project, 50% of the balance, and d) the remaining 50% during the following year.

ENAP Sipetrol Argentina S.A. will pay YPF S.A. an 8% annual fixed interest rate, with quarterly payment periods.

(6) CITIBANK N.A. AND BANCO BILBAO VISCAYA ARGENTARIA

On July 6, 2016, ENAP Sipetrol Argentina S.A. signed a loan agreement to finance the Magallanes Incremental Project (PIAM) with Citibank, N.A. (Citi) and Banco Bilbao Viscaya Argentaria, S.A. (BBVA), with the Bank of New York Mellon as administrative agent. The contract is guaranteed by ENAP. The amount isUS$150 million , which will be disbursed in stages at the request of our Company for a year. The payment term is 5 years (with a unpaid period of 18 months) and the agreed rate is Libor quarterly plus 1.85% applicable margin.

As of December 31, 2016, disbursements have been received for US 130 million.

ENAP AND SUBSIDIARIES iii) Detail of Bonds Payable

The detail and maturities of the bonds payable as of December 31, 2016 and 2015 classified as current and non-current is indicated in the following table:

December 31, 2016 Current Non-current Up to 3 From 3 to 12 From 1 to From 3 to 5 5 years and Nominal Nominal Effective months month Total 3 years years more Total Description Country Currency value rate rate ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ B-ENAP - B ( a.1 ) Chile UF 9,750 4.55% 4.28% 8,491 - 8,491 384,691 384,691 Tipo 144 A ( b.1 ) EE.UU US$ 115,308 6.25% 6.58% 3,463 - 3,463 114,491 - 114,491 Tipo 144 A ( b.2 ) EE.UU US$ 174,411 5.25% 5.46% 3,558 - 3,558 172,828 172,828 Tipo 144 A ( b.3 ) EE.UU US$ 410,281 4.75% 5.12% - 1,384 1,384 403,956 403,956 B-ENAP - D ( a.2 ) Chile UF 2,000 3.4% 4.28% 671 78,284 78,955 - B-ENAP - E ( a.2 ) Chile UF 4,000 3.7% 4.28% 1,459 - 1,459 150,091 150,091 SIX Swiss ( b.4 ) Suiza CHF 215,000 2.88% 2.88% - 427 427 210,401 210,401 Tipo 144 A ( b.5 ) EE.UU US$ 600,000 4.37% 4.56% 4,693 - 4,693 593,434 593,434 Tipo 144 A ( b.6 ) EE.UU US$ 700,000 3.75% 5.50% 10,630 - 10,630 609,143 609,143 Total 32,965 80,095 113,060 709,583 576,784 1,352,668 2,639,035

December 31, 2015 Current Non-current Up to 3 From 3 to 12 From 1 to From 3 to 5 5 years and Nominal Nominal Effective months month Total 3 years years more Total Description Country Currency value rate rate ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ B-ENAP - B ( a.1 ) Chile UF 9,750 4.55% 4.28% 7,647 7,647 353,652 353,652 Tipo 144 A ( b.1 ) EE.UU US$ 300,000 6.25% 6.58% 9,219 9,219 298,231 298,231 Tipo 144 A ( b.2 ) EE.UU US$ 500,000 5.25% 5.46% 10,646 10,646 495,836 495,836 Tipo 144 A ( b.3 ) EE.UU US$ 500,000 4.75% 5.12% 1,771 1,771 490,905 490,905 B-ENAP - D ( a.2 ) Chile UF 2,000 3.4% 4.28% 615 615 71,106 71,106 B-ENAP - E ( a.2 ) Chile UF 4,000 3.7% 4.28% 1,335 1,335 134,566 134,566 SIX Swiss (b.4) Suiza CHF 215,000 2.88% 2.88% 458 458 215,865 215,865 Tipo 144 A ( b.5 ) EE.UU US$ 600,000 4.37% 4.56% 4,518 4,518 592,598 592,598

Total 29,462 6,747 36,209 71,106 1,363,584 1,218,069 2,652,759

Other information related to public obligations as of December 31, 2016 and 2015:

Tax Local / Com- Coun- Tax Interest Creditor name number Foreign pany try number payment Capital payment Maturity Guarantee ( a.1 ) Banco de Chile 97.004.000-5 Local ENAP Chile 92.604.000-6 Half-yearly Single time 12/1/2019 No Guarantee ( b.1 ) Bank of New York Mellon 0-E Foreign ENAP Chile 92.604.000-6 Half-yearly Single time 8/7/2019 No Guarantee ( b.2 ) Bank of New York Mellon 0-E Foreign ENAP Chile 92.604.000-6 Half-yearly Single time 10/8/2020 No Guarantee ( b.3 ) Bank of New York Mellon 0-E Foreign ENAP Chile 92.604.000-6 Half-yearly Single time 6/12/2021 No Guarantee ( a.2 ) Banco de Chile 97.004.000-5 Local ENAP Chile 92.604.000-6 Half-yearly Single time 1/10/2017 No Guarantee ( a.2 ) Banco de Chile 97.004.000-5 Local ENAP Chile 92.604.000-6 Half-yearly Single time 1/10/2033 No Guarantee ( b.4 ) Credit Suisse AG 0-E Foreign ENAP Chile 92.604.000-6 Yearly Single time 5/12/2018 No Guarantee ( b.5 ) Bank of New York Mellon 0-E Foreign ENAP Chile 92.604.000-6 Half-yearly Single time 30/10/2024 No Guarantee ( b.6 ) Bank of New York Mellon 0-E Foreign ENAP Chile 92.604.000-6 Half-yearly Single time 5/8/2026 No Guarantee a) Local bonds

1. On January 15, 2009, the Company registered at the Securities Register of the Superintendency of Securities and Insurance under No. 303, the issuance of indexed UF bonds in the local market.

The placement of bonds in the local market was performed during January, 2009 and amounted to UF 9,750,000. The maturity period is 10 years, the payments of interests are semiannual, the annual interest rate is of U.F. + 4.33% and the repayment of principal is at the end of the period (bullet).

2. On January 17, 2013 the Company placed indexed bonds in “unidades de fomento” (U.F.) in the local market, chargeable to the line registered under No. 585 in the Securities Register of the Superintendency of Securities and Insurance dated May 7, 2009. 63

ENAP AND SUBSIDIARIES

The bond placement amounted to UF 6,000,000 and was performed in two subseries:

- D Class Bonds: for an amount of UF 2,000,000; the maturity period is 5 years, only with a single final repayment on October 1, 2017 and semi-annual interest payments. The coupon interest rate is 3.4% annually and the yield at issue was 3.75% annually.

- E Class Bonds: for an amount of UF 4,000,000, the maturity period is 21 years, only with a single final repayment on October 1, 2033 and semi-annual interest payments. The coupon interest rate is 3.7% annually and the yield at issue was 4.09% annually. b) International bonds:

1. On December 31, 2009, ENAP issued and placed 144 A-type bonds in the Unites States market at a 6.25% interest annually for ThUS$ 300,000.

The maturity period is 10 years. Interest is paid on a semiannual basis and the repayment of principal will be performed upon maturity (bullet). On August 5, 2016 a prepayment of principal was made for ThUS$ 184,692.

2. On August 5, 2010, the company issued and placed144 A type bonds in the US market, at a yearly interest rate of 5.25% for ThUS$ 500,000.

3. On December 1, 2011, ENAP issued and placed a ThUS$500,000 144 A bond in the US market at an interest rate of 4.75% annually.

The bond issue expires in 10 years. Interest payments are semi-annually and the principal will be repaid at maturity. On August 5, 2016 a prepayment of principal was made for ThUS$ 89,719.

4. On December 5, 2013; ENAP issued and placed a bond on the public Swiss stock market (SIX Swiss Exchange AG, in Zurich) with an interest rate of 2.875% annually and a spread of 2.28% for ThCHF $215,000.

The maturity period is 5 years. Interest will be paid annually and principal will be repaid at maturity.

5. On October 27, 2014, ENAP issued and placed a 144 A bond in the United States market, a 4.375% per annum, for ThUS$ 600,000.

The bond matures within 10 years. Interest payments are semi-annually and principal repayment will be upon maturity.

6. On August 5, 2016, ENAP issued and placed a 144 A bond in the US market, at an interest rate of 3.75% per annum for ThUS $ 700,000.

The maturity is 10 years. Interest payments are semi-annual and the repayment of principal will be made on maturity.

The proceeds from this placement were used to prepay bonds previously issued in international markets, maturing in 2019, 2020 and 2021 (see b.1, b.2 and b.3), and prepaid expenses associated with transaction.

ENAP AND SUBSIDIARIES iv) Financial leases

As of December 31, 2016, financial leases have been reclassified to "Liabilities included in groups of assets classified as held for sale", (see Note 15). As of December 31, 2015, the detail was as follows:

12.31.2015 Present Gross Interest Value ThUS$ ThUS$ ThUS$ Up to 90 days 440 (40) 400 Between 90 days and 1 year 1,457 (96) 1,361 Between 1 and 3 years 2,936 (94) 2,842

Total 4,833 (230) 4,603

22. TRADE CREDITORS AND OTHER ACCOUNTS PAYABLE a) The detail is as follows: Current Non-current 12.31.2016 12.31.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$

Trade accounts payable 568,101 417,307 1,751 475 Other creditors 13,372 11,460 (70) 244 Other payables 2,606 6,903 - 367

Total 584,079 435,670 1,681 1,086

b) Detail of future maturities 12.31.2016 12.31.2015 ThUS$ ThUS$

Up to 30 days 577,711 427,780 Between 31 and 60 days 200 3,216 Between 61 and 90 days 2,363 242 Between 91 and 180 days 336 62 Over 180 days 3,469 4,370

Total 584,079 435,670

ENAP AND SUBSIDIARIES

23. OTHER ACCRUALS i) Detail - As of December 31, 2016 and 2015 the detail is as follows:

Current Non-current Detail: 12.31.2016 12.31.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ ThUS$ ThUS$

Dismantling, restoration and rehabilitation costs (a) - - 112,068 94,391 Onerous contracts - - 13,919 16,419 Other provisions 1,944 4,764 1,710 4,542

Total 1,944 4,764 127,697 115,352

a) This provision covers the estimated disbursements which the ENAP Group should perform in the future for environmental remediation at its platforms and wells. At the end of concessions, the exploitation zones can then be used for other ends. This present value of this provision is calculated using the same discount rate as the project. ii) Movement: Movement of provisions, described by concept, was as follows:

Dismantling restoration and Onerous Other rehabilitation costs contracts accruals Total ThUS$ ThUS$ ThUS$ ThUS$ Initial balance as of January 1, 2016 94,391 16,419 9,306 120,116 Additional provisions 25,149 - 5,852 31,001 Used provision (7,471) (2,490) (8,138) (18,099) Reversión de provisión - - (3,724) (3,724) Other increase (decrease) of exchange rate - (10) (24) (34) Other increase (decrease) 381 - - 381

Ending balance as of December 31, 2016 112,450 13,919 3,272 129,641

Dismantling restoration and Onerous Other rehabilitation costs contracts accruals Total ThUS$ ThUS$ ThUS$ ThUS$ Initial balance as of January 1, 2015 81,788 11,419 15,152 108,359 Additional provisions 17,536 5,000 6,235 28,771 Used provision (5,208) - (12,046) (17,254) Other increase (decrease) of exchange rate - - (35) (35) Other increase (decrease) 275 - - 275 Ending balance as of December 31, 2015 94,391 16,419 9,306 120,116

ENAP AND SUBSIDIARIES

24. EMPLOYEE BENEFITS ACCRUALS

The detail of the provisions for employee benefits as of December 31, 2016 and 2015, is the following:

Current Non-current 31.12.2016 31.12.2015 31.12.2016 31.12.2015 Concept: ThUS$ ThUS$ ThUS$ ThUS$ Severance payments ( a ) 828 884 92,841 89,480 Share in profits and bonus for employees ( b ) 20,690 14,042 - - Vacation accrual 20,850 18,134 - - Others provisions ( c ) 6,517 8,738 - - Total 48,885 41,798 92,841 89,480

a) It refers to severance indemnities in any event due from the ENAP Group to employees, which are detailed in the collective contracts current at that date. The liability recognized in the balance sheet is the present value of the obligations on those defined benefits (severance indemnities) at the presentation date of the consolidated financial statements.

The severance indemnity obligation is estimated annually based on an actuarial model prepared by an independent actuary, following the Projected Credit Unit method. The present value of the severance indemnity obligations is determined by discounting the future estimated cash flows using the interest rate of the corporate bond class E denominated in the currency in which benefits will be paid and taking into consideration the obligations’ maturity dates. b) This is the profit sharing scheme at the Ecuador branch, established by law and the variable bonus relating to production in refineries, which is established in the current collective agreements contracts, and participation in profits and other benefits established in collective agreements and labor contracts as the case may be. c) These other benefits for personnel, such as annual bonuses, vacation bonuses, etc.

25. 1 Current severance indemnities movement:

The movement of current severance payments during the year detailed by item is as follows:

December 31, 2016 Current Share in profits Severance and bonus Vacation Other payments for employees accruals accruals Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Initial balance as of January 1, 2016 884 14,042 18,134 8,738 41,798 Additional accruals 3,320 32,336 8,344 22,031 66,031 Used accruals (3,350) (25,990) (6,457) (24,620) (60,417) Increase (decrease) in the foreign currency exchange (26) 302 829 368 1,473

Ending balance as of December 31, 2016 828 20,690 20,850 6,517 48,885

ENAP AND SUBSIDIARIES

December 31, 2015 Current Share in profits Severance and bonus Vacation Other payments for employees accruals accruals Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Initial balance as of January 1, 2015 643 15,892 19,172 9,220 44,927 Additional accruals 3,401 44,836 8,718 27,074 84,029 Used accruals (3,130) (46,588) (7,492) (26,515) (83,725) Increase (decrease) in the foreign currency exchange (30) (98) (2,264) (1,041) (3,433)

Ending balance as of December 31, 2015 884 14,042 18,134 8,738 41,798

Note: as part of the used provision of “Share in profit and bonus for employee” is included in the mandatory share to the Ecuador State and subcontractors.

25.2 Movement of the non-current severance indemnities

The movement of the severance indemnities associated with past services and interest are immediately recognized in the net income statement. Actuarial gains and losses from adjustments and changes in the actuarial assumptions are recognized in equity in the year they arise. Non-current severance indemnities are detailed as follows:

Non current 12.31.2016 12.31.2015 Movement: ThUS$ ThUS$ Opening balance 89,480 105,657 Service costs 812 799 Interest costs 5,166 4,881 Actuarial reserve 1,017 2,975 Paid benefits (9,722) (8,425) Increase (decrease) in foreign exchange rate 6,088 (16,407) Total 92,841 89,480

Severance and Termination Benefits – These indemnities are paid when the employment relationship is terminated before the normal date of retirement. Severance and termination benefits are recognized according to current collective agreements. Benefits that mature over 12 months after the year end are discounted to their present value.

Bonuses and shares in profits plan - The entity recognizes a liability and an expense for bonuses and shares in profits based on the formula which takes into account the results for the year. A provision is recognized where the entity is contractually obliged or where there is a past practice that has created a constructive obligation.

ENAP AND SUBSIDIARIES

25.3 Actuarial Assumptions

The actuarial assumptions used to calculate the non-current severance indemnities are as follows:

Assumptions: 12.31.2016 12.31.2015 Dicount rate Chile 5.91% 5.91% Dicount rate Ecuador 3.50% 6.54% Wages increase estimate rate Chile 3.67% 3.67% Wages increase estimate rate Ecuador 3.00% 3.00% Volunteer retirement rate Chile 2.29% 2.29% Volunteer retirement rate Ecuador 2.00% 2.50% Lay-offs turnover rate Chile 0.10% 0.10% Lay-offs turnover rate Ecuador 9.19% 13.14% Mortality index Chile RV-2004 RV-2004 Mortality index Ecuador IESS2002 IESS2002 Women retirement age 60 60 Men retirement age 65 65

On an annual basis, the Company has reviewed its actuarial assumptions in accordance with IAS 19 “Employee benefits”, changing the discount rate it applied in reference to new curves of market interest rates. See sensitivity effect in Note 25.4.

Mortality assumptions were determined according to the actuarial advice provided by our independent actuary, according to the information available and representative of the country. The turnover assumptions arise from internal analysis by the Company’s management.

25.4 Sensitivity Analysis

The following detail shows the effects of sensitivity analysis of the discount rate used to determine the actuarial value of the severance indemnity provision: Carrying Item amount Sensitivity analysis Actuarial value ThUS$ 92,841 94,899 88,738 Discount rate 5.91% 5.33% 6.49% Percentage sensitivity - -10.00% 10.00% Sensitivity in ThUS$ - 2,058 (4,103)

25. EQUITY a) Changes in equity:

Article 2 of Law No. 20,278 authorized the Ministry of Finance, through Supreme Decree N°1389 dated October 29, 2008, to perform once, an extraordinary contribution of capital to ENAP of ThUS$ 250,000, which will be financed with available resources in financial assets of the National Treasury. That contribution was concluded by modification of the current budget of the National Treasury, which enabled the capital contribution that became effective on November 10, 2008.

ENAP AND SUBSIDIARIES

The dividend distribution policy that governs ENAP, established by Finance Ministry Resolution No. 25 of August 11, 2005, established that ENAP had to transfer a minimum amount of resources to the National Treasury, whether as income tax (40%) and/or as anticipated profits calculated as 14% of equity, using retained earnings from prior years.

By Order N° 1,292 dated June 15, 2012 the Finance Ministry authorized a policy of profit distribution in order to contribute to the equity company’s stability and recomposition, on the following terms: a) Authorized the subsidiary ENAP Sipetrol S.A. to capitalize the profits obtained in 2010. b) Authorized the subsidiary ENAP Sipetrol S.A. to capitalize 100% of the profits obtained in 2011, according to the audited financial statements. c) Reviewed the Company’s financial position, to decide whether authorizing the capitalization of the subsidiaries’ and parent’s profit is appropriate, as long as the tax losses continue.

During the Thirtieth Extraordinary Meeting of Shareholders of the subsidiary Enap Sipetrol SA, held on November 16, 2015, it was agreed to increase the capital of the company from ThUS$524,628 to ThUS$639,222, i.e. a capital increase of ThUS$114,594 through the capitalization of profits earned in the year 2014, without issuing new shares and maintaining the current interest participation of ENAP and Enap Refinerías S.A. b) Paid-in capital

The detail of the paid in capital as of December 31, 2016 and 2015 is the following:

Issued capital 12.31.2016 12.31.2015 ThUS$ ThUS$ Paid-in capital 1,232,332 1,232,332 Total 1,232,332 1,232,332

ENAP is a state-owned company (100% property of the Republic of Chile) and its capital is not divided into shares.

Capital management

The main purpose of capital management, referring to management of the company’s equity, is management of ENAP Group’s capital, according to the following detail:

 Ensure the normal functioning of its operations and the continuity of its business in the long-term and secures the supply of liquid fuel for the country.

 Ensure the financing of new investments in order to maintain continuous growth in the future and full compliance with the specifications of the fuels authorized in Chile.

 Maintains an adequate capital structure according to the economic cycles that impact the business and the corresponding nature of the industry.

For these purposes, and considering the current capital strengthening at ENAP, its value and evolution are controlled and reported to the Company’s Board of Directors every month. They decide in each case the steps to be followed, communication with the Ministry of Finance, and management of the company.

ENAP AND SUBSIDIARIES c) Other Reserves

As of December 31, 2016 and 2015 this item is composed as follows:

12.31.2016 12.31.2015 ThUS$ ThUS$

Foreign exchange differences on translation (i) (77,491) (79,282) Cash flow hedge (ii) (60,485) (15,891) Actuarial reserves in defined benefit plans (7,312) (6,559) Available for sale 1,190 1,190 Other sundry reserves (iii) (2,446) 27,270

Total (146,544) (73,272) i) Foreign exchange differences on translation 12.31.2016 12.31.2015 ThUS$ ThUS$

Balance at the beginning of the year (79,282) (76,561) Results of changesin investees with accounting in foreign currency 1,791 (2,721) Total (77,491) (79,282) ii) Cash flow hedging Total Movement Total 12.31.2015 2016 12.31.2016 ThUS$ ThUS$ ThUS$ Composition of other reserves in the cash flow hedge of: Cross-currency swap / Bonds and financial leases (21,371) 24,335 2,964 SWAP and Option ZCC interest rate bank loans (14,304) 5,679 (8,625) Forward of foreign exchange contracts 2,082 (3,623) (1,541) Electric power Swap (21,509) 9,971 (11,538) TSS y SDI 20,818 (83,391) (62,573) Deferred income tax derivatives 18,393 2,435 20,828 Total (15,891) (44,594) (60,485)

ENAP AND SUBSIDIARIES iii) Other sundry reserves 12.31.2016 12.31.2015 ThUS$ ThUS$

Opening balance 27,270 27,270 Changes in GNL Quintero S.A. reserves (17,151) - Changes in Petropower Energía Ltda. reserves (12,565) - Total (2,446) 27,270

d) Retained earnings (accumulated deficit) 12.31.2016 12.31.2015 ThUS$ ThUS$ Balance at the beginning of the year (470,726) (637,827) Income for the year 181,296 168,919 Other changes in retained earnings 1,818 (1,818) Total (287,612) (470,726)

26. NON – CONTROLLING INTEREST

The detail by company of the participation of third parties in the equity and results of subsidiaries as of December 31, 2016 and 2015, is the following:

Non - controlling Income (loss) attributable interest in equity to non - controlling interest Entity 12.31.2016 12.31.2015 12.31.2016 31.12.2015 ThUS$ ThUS$ ThUS$ ThUS$ Structured Entity 9,019 12,280 1,258 1,514 Enap Refinerías S.A. 127 113 26 49 Total 9,146 12,393 1,284 1,563

27. OPERATING SEGMENTS

Segment criteria

The segment structure used by ENAP and defined by the Board of Directors of ENAP, and in accordance of IFRS 8, therefore based on the information that the Chief Operating Decision Maker receives in order to make decisions concerning the operations of each segment is firstly related to its business lines and secondly, according to its geographical distribution.

The aforementioned lines of business are E&P (Exploration and Production); R&C (Refining and Marketing); and G&E (Gas & Energy).

Main segments of the consolidated group:

ENAP AND SUBSIDIARIES

. E&P includes exploration for hydrocarbons (oil and natural gas) and geothermal resources, as well as their development, production and marketing, inside and outside Chile, in Argentina, Ecuador and Egypt. Abroad, ENAP operates through its subsidiary Sipetrol S.A. and in Chile through ENAP in Magallanes Region where it manages hydrocarbon exploration and production assets in the XII Region. Furthermore, it conducts gas exploration through Special Operations Contracts (CEOP) on the Coirón, Caupolicán, Lenga and Dorado-Riquelme Blocks, in alliance with Pan American Energy LLC, Greymount and Methanex respectively, all located in the Magallanes Region.

. R&C includes Refining, Optimizing, Logistics, Trading, Market Development and Sales. ENAP’s Refining and Commercial activities are managed by the subsidiary ENAP Refinerias S.A.. Its business is purchasing crude oil on the international market and subsequently refining and selling the finished products.

ENAP Refinerías S.A.’s crude oil supply is mostly obtained from South America and Europe. ENAP Refinerías S.A. is the only company in Chile that refines petroleum and the most important one on the pacific coast of Central and South America. It has three refineries:

Aconcagua Refinery located in the Valparaiso Region, Bio Bio Refinery in the Bio Bio Region and Gregorio Refinery in the Magellan Region. These refineries have the facilities needed to receive and store the raw material, among them there are 5 seaport terminals located at Quintero, San Vicente, Easter Island, Cabo Negro and Gregorio, these last two in the Magallanes Region.

Liquid and gas fuel storage and transport, its wholesale and export is the Storage and Pipeline Department’s responsibility (DAO, for its acronym in Spanish: Dirección de Almacenamiento y Oleoducto) which manages the logistics infrastructure.

. Gas & Energy, among the measures taken by Management to adopt the implementation of the Government’s energy agenda, on July 14, 2014, a Third segment in ENAP was constituted, intended to promote the use of Liquefied Natural Gas (LNG) in the national energy matrix, along with the addition of new electric power generation capacity. It includes gas marketing processes and activities through pipelines, virtual pipelines and GNL Móvil, management of new electric energy projects.

The Board of Directors and General Manager of ENAP are in charge of the decision making process regarding the administration, allocation of resources and regarding the performance assessment of each of the above described operating segments.

The following is the information by segments regarding these activities as of December 31, 2016 and 2015:

ENAP AND SUBSIDIARIES

December 31, 2016 E&P R&C G&E (1) Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Revenues 558,630 4,450,911 207,522 - 5,217,063 Revenues, intercompanies 57,200 117,835 73,112 (248,147) - Cost of sales (429,531) (4,021,047) (219,280) - (4,669,858) Cost of sales, intercompanies (53,945) (121,090) (73,112) 248,147 -

Gross margin 132,354 426,609 (11,758) - 547,205

Other income 4,960 57,732 - 5,090 67,782 Distribution costs (46,828) (158,706) (887) - (206,421) Administrative expenses (32,756) (33,177) (2,433) (32,139) (100,505) Other expenses by function (83,039) (22,262) - (1,447) (106,748)

Income (loss) operating activities (25,309) 270,196 (15,078) (28,496) 201,313

Other income (expenses) - 105,931 - - 105,931 Financial income 5,810 1,452 - (62) 7,200 Financial costs (20,311) (79,456) - (87,223) (186,990) Participation in the earnings of associates (3) 1,285 - 16,871 18,153 Exchange differences (17,068) (13,951) - 12,570 (18,449)

Income (loss) before taxes (56,881) 285,457 (15,078) (86,340) 127,158

(Expense) revenues for income taxes 10,418 (50,259) 3,619 91,644 55,422 Income (loss) (46,463) 235,198 (11,459) 5,304 182,580

Income (loss) attributable to: Income (loss) attributable to owners of the parent company (46,417) 232,930 (11,459) 6,242 181,296 Income (loss) attributable to non-controlling interests (46) 2,268 - (938) 1,284 Income (Loss) (46,463) 235,198 (11,459) 5,304 182,580

December 31, 2016 E&P R&C G&E (1) Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Revenues 574,310 5,500,439 276,262 - 6,351,011 Revenues, intercompanies 56,612 184,573 85,233 (326,418) - Cost of sales (481,849) (4,971,971) (254,236) - (5,708,056) Cost of sales, intercompanies (54,219) (186,966) (85,233) 326,418 -

Gross margin 94,854 526,075 22,026 - 642,955

Other income 6,031 17,037 - 3,717 26,785 Distribution costs (46,628) (153,154) (20) (4,358) (204,160) Administrative expenses (32,310) (27,792) - (27,729) (87,831) Other expenses by function (85,545) (17,182) - (1,460) (104,187)

Income (loss) operating activities (63,598) 344,984 22,006 (29,830) 273,562

Other income (expenses) (7,232) 112 - 22 (7,098) Financial income 4,494 880 - 537 5,911 Financial costs (15,939) (104,855) - (70,175) (190,969) Participation in the earnings of associates - 1,546 - 13,315 14,861 Exchange differences (6,623) 11,385 - (8,114) (3,352)

Income (loss) before taxes (88,898) 254,052 22,006 (94,245) 92,915

(Expense) revenues for income taxes 4,764 (49,994) (5,533) 128,330 77,567

Income (loss) (84,134) 204,058 16,473 34,085 170,482

Income (loss) attributable to: Income (loss) attributable to owners of the parent company (83,971) 201,962 16,473 34,455 168,919 Income (loss) attributable to non-controlling interests (163) 2,096 - (370) 1,563 Income (Loss) (84,134) 204,058 16,473 34,085 170,482

ENAP AND SUBSIDIARIES

(1) This column contains the elimination adjustments on consolidation, the transactions of revenues and costs for the purchase/sale of products and raw material between the companies of the ENAP Group as the most relevant items. Also included are the costs not distributed to the segments such as administrative costs associated with corporate items, results of associates, other gains and losses and finance income and costs.

A detail of income by products and geographical area is as follows:

12.31.2016 12.31.2015 Exploration Refining Exploration Refining and and Gas and and and Gas and Sale by products Production Marketing Energy Total Production Marketing Energy Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Crude 196,615 31,088 - 227,703 270,850 75,490 - 346,340 Gas 221,279 - 207,522 428,801 170,728 19,804 276,262 466,794 Liquefied petroleum gas - 78,602 - 78,602 - 107,394 - 107,394 Gasoline - 1,975,923 - 1,975,923 - 2,312,228 - 2,312,228 Kerosene - 369,817 - 369,817 - 446,524 - 446,524 Diesel - 1,564,871 - 1,564,871 - 2,018,293 - 2,018,293 Fuel Oil - 286,273 - 286,273 - 364,755 - 364,755 Petrochemical - 49,461 - 49,461 - 64,335 - 64,335 Other products - 80,078 - 80,078 - 80,830 - 80,830 Sale of services, national 12,479 14,798 - 27,277 6,279 10,786 - 17,065 Sale of services, foreign 128,257 - - 128,257 126,453 - - 126,453

Total 558,630 4,450,911 207,522 5,217,063 574,310 5,500,439 276,262 6,351,011

12.31.2016 12.31.2015 Exploration Refining Exploration Refining and and Gas and and and Gas and Geographical sales Production Marketing Energy Total Production Marketing Energy Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

National 182,462 4,303,131 185,610 4,671,203 136,065 5,339,167 276,262 5,751,494 Foreign 376,168 147,781 21,912 545,860 438,245 161,272 - 599,517

Total 558,630 4,450,911 207,522 5,217,063 574,310 5,500,439 276,262 6,351,011

The marketing of refined products by ENAP Refinerias S.A. is channeled through wholesale distribution companies of fuels and other products. This subsidiary has contracts to supply its major clients, ensuring an adequate supply of fuel throughout the country. The ENAP Group’s main clients at a national level are Copec, Petrobras, Terpel, Lipigas, Abastecedora de Combustibles S.A. and Methanex.

Assets and liabilities for by Operating Segments

Currently the ENAP Group does not control and record its assets by reportable segments in its internal reporting system; consequently such information is not used by the Board as part of the decision-making process and allocation of resources. The financial liabilities of ENAP are centralized and controlled at a corporate level and are not presented by operating segment.

ENAP AND SUBSIDIARIES

28. REVENUES FROM ORDINARY ACTIVITIES

The detail of this item as of December 31, 2016 and 2015 is as follows:

01.01.2016 01.01.2015 Detail: 12.31.2016 31.12.2015 ThUS$ ThUS$

Sale of crude oil 227,703 346,341 Sale of gas 333,252 386,946 Gas subsidy income (1) 95,549 79,849 Sale of refined products 4,405,025 5,394,358 Sale of oil services 121,948 103,502 Other operating income 33,586 40,015

Total 5,217,063 6,351,011 (1) The Ministry of energy is empowered to compensate ENAP for a maximum amount of ThCh$ 64,759,170 for 2016 and ThCh$ 54,112,500 for 2015, according to the Public-Sector Budget Act passed by the National Congress.

29. COSTS OF SALES

The detail of this item as of December 31, 2016 and 2015 is as follows

01.01.2016 01.01.2015 12.31.2016 31.12.2015 ThUS$ ThUS$

Crude oil and gas cost 558,106 490,285 Cost of refined products (1) 3,541,193 4,628,632 Cost on service sale 94,683 76,047 Other operating costs 475,876 513,092 Total 4,669,858 5,708,056

(1) As a part of the cost of refined products, the net effect (charge of credit) of the TSS hedges settlement during the period are included, which were intended to financially move the price window of the crude oil shipments and adjust it to the dates on which the refined product prices are agreed, thus having inventory costs that are in line with the products to be sold, mitigating the time spread to which the Company is naturally exposed by means of the cost of sales hedging.

ENAP AND SUBSIDIARIES

30. OTHER INCOME

As of December 2016 and 2015, distribution costs are detailed as follows:

01.01.2016 01.01.2015 12.31.2016 12.31.2015 ThUS$ ThUS$

Sales of surplus energy and other similar 29,029 8,484 Contract settlements, fines, insurance recoveries and other 20,768 5,829 Sale of services and goods 5,066 4,490 Tax recovery 4,186 1,827 Dividends received 3,064 2,665 Other income 5,667 3,490 Total 67,782 26,785

31. DISTRIBUTION COSTS

As of December 31, 2016 and 2015, distribution costs are detailed as follows:

01.01.2016 01.01.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ Logistics services 8,929 10,804 Oil pipeline transportation 35,188 35,365 Maritime transportation 74,158 76,587 Ground products transportation 18,557 14,019 Personnel 23,192 21,377 Other 46,397 46,008 Total 206,421 204,160

ENAP AND SUBSIDIARIES

32. OTHER EXPENSES BY FUNCTION

The detail of this item as of December 31, 2016 and 2015 is as follows: 01.01.2016 01.01.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ Cost of exploratory campaigns 11,754 27,406 Impairment of investment in E&P (see Note No. 17) - 20,900 Provisions 19,732 19,863 Dry exploration and abandoned wells 50,888 17,577 Disposal of property, plant and equipment 10,518 3,335 Differences in inventory 4,161 3,970 Cost of sale internal energy 1,110 1,377 Exploration costs and others 8,585 9,759 Total 106,748 104,187

33. FINANCIAL COSTS

The detail of this item as of December 31, 2016 and 2015 is as follows:

01.01.2016 01.01.2015 12.31.2016 12.31.2015 Concepts: ThUS$ ThUS$

Interests from overdraft and bank borrowings 40,074 31,209 Interests from bonds payable 132,229 135,882 Interests from lease obligations 150 160 Expenses for interest account payable and other non financial liabilities 6,803 7,300 Other expense related to interests 1,212 3,879

Total expenses for interests 180,468 178,430

Income / Loss for liquidations from derivatives (swap) 7,610 9,161 Accrued interests for swap 2,541 3,378 Less: Capitalized interest (3,629) -

Total 186,990 190,969

ENAP AND SUBSIDIARIES

34. PERSONNEL COSTS

The detail of this item as of December 31, 2016 and 2015 is as follows: 01.01.2016 01.01.2015 12.31.2016 12.31.2015 ThUS$ ThUS$ Wages and salaries 170,622 170,578 Short term benefits for employees 125,304 123,778 Other personnel expenses 16,167 13,241 Other long-term benefits 29,617 29,810 Total 341,710 337,407

35. OTHER INCOME (LOSS)

The detail of this item as of December 31, 2016 and 2015 is as follows: 31.12.2016 31.12.2015 ThUS$ ThUS$ Badwill arising on acquisition ( see Note 5) 92,740 - Adjutments for Fair value of pre-existing participation (see Note 5) 14,173 - Transfer of 12% of Pampa del Castillo (see Note 16 h) - (7,919) Other (982) 821 Total 105,931 (7,098)

36. EXCHANGE DIFFERENCES

As of December 31, 2016 and 2015, the detail of the assets and liabilities generating exchange differences which are (debited) credited to net income are as follows:

01.01.2016 01.01.2015 12.31.2016 12.31.2015 Concepts: ThUS$ ThUS$ Cash and cash equivalents (12,734) (10,909) Trade and other receivables 20,496 (67,609) Forward income (loss) (28,542) 52,497 Due from related companies, current (1,107) 1,221 Income tax, net 10,457 (11,421) Trade creditors and other accounts payable (3,022) 16,354 Current accruals (2,159) 4,014 Non-current accruals (769) 17,881 Other financial liabilities, current and non-current (48,403) 71,559 Income (loss) hedging other financial liabilities, current and non-current 45,736 (72,166) Other 1,598 (4,773) Total (18,449) (3,352)

ENAP AND SUBSIDIARIES

37. FOREIGN CURRENCY

As of December 31, 2016 and 2015, the detail of the assets and liabilities generating in other currencies are as follows:

Funcional 12.31.2016 12.31.2015 Assets Currency Currency ThUS$ ThUS$ Cash and cash equivalents Chilean Pesos Dólar 12,360 18,919 Argentinian Peso Dólar 5,451 2,270 British Pound Dólar - 82 Egyptian Pound Dólar 11,323 26,415 Trade and other receivables, current Chilean Pesos Dólar 449,317 512,806 UF Dólar (227) (26) Argentinian Peso Dólar 23,901 18,458 Current tax assets Chilean Pesos Dólar 80,926 64,381 UF Dólar 30,832 8,581 Argentinian Peso Dólar 16,019 15,646 Accounts receivable, non-current Chilean Pesos Dólar 13 13 UF Dólar 13,363 13,349 Investments recorded using the equity method UF Dólar 9,741 437 Deferred taxes assets Chilean Pesos Dólar 492 3,848 Argentinian Peso Dólar - 21,982 Total 653,511 707,161

12.31.2016 31.12.2015 Funcional Up to 90 91 days to 1 year up More than Up to 90 91 days to 1 year up More than days 1 year to 5 years 5 years days 1 year to 5 years 5 years Liabilities Currency Currency ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Other financial liabilities, current UF Dólar 11,486 79,668 - - 10,591 1,220 - - Argentinian Peso Dólar 16,405 - - - 21,391 99 - - Swiss Franc Dólar 2,129 427 - - 2,788 458 - - Trade creditors and other accounts payable Chilean Pesos Dólar 13,669 - - - 15,546 - - - UF Dólar 16,912 - - - 4,880 - - - Argentinian Peso Dólar 19,775 - - - 20,911 - - - Euro Dólar 734 ------Canadian Dollar Dólar 1 ------Japanese Yen Dólar 2 ------British Pound Dólar 7 ------Other short-term accruals Chilean Pesos Dólar - (305) ------Current tax liabilities Chilean Pesos Dólar 57,444 - - - 58,549 - - - UF Dólar 1,815 - - - 2,222 - - - Argentinian Peso Dólar 3,214 - - - 3,250 - - - Current accruals for employee benefits Chilean Pesos Dólar 18,687 - - - 15,363 2,239 - - UF Dólar 4,814 10,229 - - 4,055 10,056 - - Argentinian Peso Dólar 2,679 2,678 - - 2,082 2,082 - - Other financial liabilities non-current UF Dólar - - 478,136 150,091 - - 573,046 134,566 Argentinian Peso Dólar 2,167 - - - 666 - - - Swiss Franc Dólar - - 233,009 - - - 235,280 - Liabilities, non-current Chilean Pesos Dólar - - -70 - - - 244 - Other accruals, non-current Argentinian Peso Dólar - - 1,452 - - - 1,465 - Deferred tax liabilities Argentinian Peso Dólar - - 33,191 - - - 56,112 - Non-current accruals for employee benefits Chilean Pesos Dólar - - 27,112 63,950 - - 12,623 32,761 UF Dólar ------43,118 Other non financial liabilities, non-current Argentinian Peso Dólar - - 293 - - - 417 - Total 171,940 92,697 773,123 214,041 162,294 16,154 879,187 210,445

ENAP AND SUBSIDIARIES

38. ENVIRONMENTAL INFORMATION

The following section contains a brief description of projects related to enhancement and/or investments in productive processes, verification, compliance with ordinances and laws regarding processes and industrial installations and any other that may directly or indirectly affect the environment:

ENAP Sipetrol S.A.: The resources allocated to environmental projects and initiatives in ENAP Sipetrol, for its subsidiaries in Argentina and Ecuador, relate to the constant water, soil, air quality and biotic environment monitoring systems. Another relevant aspect relates to the Environmental Management System certified in the ISO 14001 standard, as well as the monitoring and following-up of the Environmental Management Plan for the assets in Pampa del Castillo in Argentina, and MDC and PBH in Ecuador. Finally, it is important to mention the processes of elaboration of environmental impact studies for the Exploration project in the Intracampos block in Ecuador and the treatment of oil- contaminated soils in Pampa del Castillo. The amount used for environmental projects and initiatives for the year 2016 in Argentina amounted to US$ 3.9 million. In the case of Ecuador, the amount used for environmental projects and initiatives amounted to US$ 1.1 million.

ENAP Magallanes: The resources allocated to environmental projects and initiatives in ENAP Magallanes are related to ongoing operations, which is mainly considered the management and control of industrial waste, including monitoring, disposal and normalization of the related installations, as well as recovery works on environmental incidents. Another matter is related to obtaining environmental permits for the new Drilling, Hydraulic Fracturing and facility construction projects portfolio, as well as following-up with commitments to the environmental authorities. Finally, the multi-annual Environmental Liabilities project, which consists of environmental cleansing at locations in the Magallanes Region. The approximate amount of the Environmental Initiatives for ENAP Magallanes during 2016 is USD 1.7 million.

ENAP Refinerías S.A.:

Refinería Bio Bio: The focus and resources allocated to Environmental Projects and Initiatives at the Bio Bio refinery are mainly related to the execution of several commitments to the Concepcion Appeals Court (ICA) and the Superintendency of the Environment (SMA). The Projects and Initiatives related to the ICA are an odor mitigation plan whose main purpose is the management of odors that result from oil refining activity, that affect the adjoining communities. The plan includes Short (1 year), Middle (5 years) and Long-Term (10 years) Projects and Initiatives. The Action Plan presented to the SMA includes projects and initiatives that are related to improvements to the current atmospheric emissions abatement systems. The amount used for environmental projects and initiatives Bio Bio Refinery amounted to year 2016 to US $ 18.3 million.

Refinería Aconcagua: The environmental projects and initiatives for the Aconcagua refinery form part of a Long Term Work Plan and are focused on activities that identify and implement improvements regarding noise emissions, monitoring of atmospheric emissions, solid waste management and general compliance with current Environmental Certification Resolutions. The amount used for environmental projects and initiatives Aconcagua refinery amounted to year 2016 to US $ 6.5 million.

ENAP AND SUBSIDIARIES

39. LAWSUITS AND COMMERCIAL COMMITMENTS

There are several pending lawsuits and legal actions against ENAP Group derived from the nature of its operations. These lawsuits are mainly related to civil, tax and labor matters.

At the time of presenting these consolidated financial statements, no additional accounting provisions have been made additional to those shown in “Other accruals”. In the opinion of the company’s management and its legal counsel the portion not provided of these lawsuits do not represent a probable loss, in accordance with IAS 37.

Pending lawsuits that could result in a materiality exceeding ThUS$ 5,000 or having a material adverse effect, and their status at the date of these consolidated financial statements, are detailed as follows:

In Chile:

Empresa Nacional del Petróleo:

Parties: Empresa Nacional del Petróleo (“ENAP”) with PetroMagallanes Operaciones Ltda (PMO) y Greymouth Petroleum Holdings Ltd. (GPHL) Role: File No. 21706 / ASM before the Court of Arbitration of the International Chamber of Commerce (ICC). Subject matter: Breach and gross negligence in performance of contracts; Enforcement of contracts; Compensation for damages Amount: (i) ThUS $ 25,500 demand from ENAP and (ii) ThUS $ 47,000 PMO counterclaim.

Brief statement of the facts: ENAP requested the initiation of an ICC arbitration suit against PMO and GPHL of the joint operation agreement ("JOA") signed with respect to CEOP Bloque Caupolicán and ordering compliance Force of the JOA, including ENAP's right to audit, plus compensation for damages. PMO counterclaimed the payment of certain amounts under the same agreement and in case of termination, cancellation or damage of the CEOP Bloque Caupolicán, an indemnification of damages.

Current status: The arbitral tribunal is constituted, and consists of a panel composed of three arbitrators. Procedures are in discussion stage.

Enap Refinerías S.A. (Aconcagua):

Parties: Enap Refinerias S.A. with Shipbuilders of the Motor Vessel LR Mimosa and/or charterers and/or operators. Section: 17-2014 text IV (ex C-17-2014), Minister of the Appeals Court of Valparaíso Mr. Droppelmann, acting as a Unipersonal Tribunal Matter: Compensation for Losses Amount: US$ 8 million.- Brief description of the Facts: Oil spill in the Bay of Quintero by the vessel B/T Mimosa. Current State: the cause is suspended by judicial resolution while the other accumulated procedures and which are in the process of accumulation reach the same procedural action status.

Parties: Francisco Acevedo and Others with Shipowners of Motor vesses LR Mimosa and Others. Case No.: 17-2014, to which were added the cases No. 17-2014 Volume I (formerly 22-2014); Case No. 17-2014 Volume II (formerly 23-2014); Case No. 17-2014 Volume III (formerly 1-2015); Case No. 17-2014 Volume V (formerly 8-2015); Case No. 17-2014 Volume VI (formerly 9-2015). Case N°17-2014 Volume VII; Case N°17-2014 Volume VIII; Case N°17-2014 Volume IX; Case N°17-2014 Case X; Case N°17-2014 Volume XI. Minister of Valparaiso´s Court of Appeals Mr. Droppelmann, acting as Single-Member Court. Matter: Compensation for damages according to Navigation Act. 82

ENAP AND SUBSIDIARIES

Amount: US$100 million.- Brief summary of facts: Civil claim for damages governed by Article 153 of the Navigation Act, to obtain compensation for consequential damages, lost profits and moral damage allegedly suffered by fishermen and others, due to the pollution caused by the oil spill in the Quintero bay by the oil tanker Mimosa at a time when it was towed by the offshore tugboat on September 24, 2014 at the Maritime Terminal Monoboya. Current status: Currently the causes are suspended by court order while all causes are included in the same procedural status.

Labeled: Spill of Hydrocarbons of September 24, 2014 Case N/A, Maritime Prosecutor's Office of Valparaiso / Maritime Governor of Valparaiso. Matter: Oil spill into the sea. Amount: 80,000 gold pesos. Procedure: Administrative Navy, Brief summary of facts: Oil spill in the Bay of Quintero from oil tanker Mimosa. Current Status: On 6 September 2016, administrative invalidation procedure was filed, which is in the stage of notification to interested third parties. Reports were evacuated by interested third parties. By resolution 12.050 / 44 Vrs, dated October 27, 2016, received on November 4, 2016, the General Directorate of Maritime Territory and Merchant Marine rejected an application for invalidation of the resolution that imposed an administrative fine of 80,000 pesos of gold. A presentation is being prepared to the Office of the General Comptroller of the Republic against this last resolution of October 27, 2016.

Parties: Ilustre Municipalidad de Quintero with Enap Refinerías S.A. et al. Case N°: D-13-2014. Second Environmental Court of Santiago Subject matter: remedying of environmental damage Amount: Undefined. Brief record of facts: the hydrocarbons spillage in the Quintero bay caused by tanker Mimosa while being assisted by an ocean-going tug on September 24, 2014 in Maritime Terminal Monoboya ENAP resulted in environmental damage. Current status: July 22, 2016, the progress of the case was handed down. On November 30, 2016, a conciliation and trial hearing was scheduled for December 12, 2016, at 11:00 a.m., starting from the latter date the trial period.

Parties: Enap Refinerías S.A. with Linde Gas de Chile S.A. Section N°: 2129-2014. CAM Arbitral Tribunal Matter: Forced Compliance of contract with compensation for damages. Amount: US$ 70 million Brief description of the Facts: Contract for the supply of hydrogen and steam currently in effect between the parties, has been breached by Linde Gas de Chile S.A. with regards to determining the value of the nitrogen and to the amounts of steam to be delivered. Current status: August 29, 2016, a judgment was issued favorable to Enap Refinerías S.A., currently in process of notification to the defendant. The defendant Linde Gas de Chile S.A. must make the payment of the sum of USD $ 16,000,000. The defendant filed a cassation appeal in the Company was informed by the Center of Arbitration and Mediation on November 30, 2016. The names of the members of the Arbitral Tribunal of the Second Instance are pending while it is in the process of establishment.

Parties: ENAP Refinerías S.A. vs. Innergy Soluciones Energéticas S.A. Case N°: 2.215 – 2014. Santiago Arbitration and Mediation Center Subject matter: Cancellation of contract and damage compensation Amount: ThUS$ 12,000 Approximately. Brief record of facts: Enap Refinerías S.A. files a complaint against Innergy Soluciones Energéticas, in relation to non- compliance with Contracts 1 and 2 of gas supply, requesting the termination of both contracts, plus the payment of compensation for breach of contract by Innergy. Innergy in contravention brings a claim against ENAP requesting the

ENAP AND SUBSIDIARIES payment of (approx.) USD MM6 for unpaid fixed charges of both contracts plus amounts allegedly indebted by ERSA. Current status: Probate stage. The probate stage of the arbitration expires on January 31, 2017 and the testimonial hearings have been set for the end of March 2017.

Parties: Harry Andrés Jerez Díaz representing Mr. Jacobo Silva Silva and Others with PGC, owner and owner of the B / T PGC Ikaros Nassau and Enap Refinerías S.A. Role No: 7-2016. Minister of the Court of Appeals of Valparaiso Mr. Cancino, acting as Single Judge. Matter: Compensation for damages according to the Law of Navigation. Amount: ThUS$ 7,800.- Brief summary of the facts: Civil action has been taken for compensation of damages regulated by article 153 of the Law of Navigation, to obtain compensation for loss of profit and moral damages allegedly suffered by fishermen and others due to the pollution caused on May 15, 2016 from the oil spill in the bay of Quintero. This resulted from B / T Ikaros loading product in the Maritime Terminal Multicrudo. Current status: The discussion stage has ended and the parties have been called to the conciliation proceeding. The Court is making the bases of settlement which are under review by the parties. On November 30, 2016, a conciliation hearing was held, at which time the Minister of the Court of Appeals proposed a new bases of agreement and decided to continue the conciliation hearing on January 4, 2017.

Enap Refinerías S.A. (Biobío)

Parties: Mendoza Mendoza, Luis vs ENAP Refinerías S.A. et al. Case: 4-2007; Judge of the Court of Appeals of Concepcion, Ms. Juana Godoy. All compensation claims were accumulated to this cause filed and notified in time and form. The procedure followed in the referred lawsuit corresponds to a special plenary action of article 153, Navigation Law. Brief record of facts: A compensation for damages is requested based on the extra contractual liability as a consequence of a spillage that took place in San Vicente Bay. Current status: Probatory stage of the judicial process is overdue. However, a special evidentiary term is currently ongoing, with the proceedings consisting in answering interrogatories being concluded. As of this date, transactional agreements have been signed with 4,313 plaintiffs, mainly non-industrial fishers, seaweeders and shipowners, totaling around ThUS$ 7,335. Negotiations are continuing with the remaining 79 plaintiffs.

Parties: Carte vs ENAP Refinerías S.A. ENAP et al. Case: 1999-2014; 1st Civil Court of Talcahuano Subject: Claim for damages. Amount: ThUS $ 35,289.- Brief account of the facts: Neighbors to the ERSA-Hualpén plant, after processing a preliminary injunction to show documents, filed a claim for compensation for non-contractual civil damages for moral damages. Current Status: The dilatory exceptions by Enap Refinerías S.A., were received on September 9, 2016. Resolution appealed in the only devolutive effect to be counted from September 21, 2016. Appeal remains ongoing.

Commercial Commitments:

The Company has the following commercial commitments related to its operations:

GNL CHILE S.A.

On May 31, 2007, ENAP Refinerías S.A. signed a natural gas supply contract with LNG Chile S.A. This contract guarantees the LNG supply for the operation of its Aconcagua Refinery in Concón.

ENAP AND SUBSIDIARIES

This contract has a 21-year term, starting on the Early Commercial Operation Date (ECOD), allowing ERSA unrestricted access to 3.2 million cubic meters or natural regasified gas per day, as long as ERSA can secure the corresponding LNG contracts. On the same date, GNL Chile S.A. signed a contract with BG allowing ENAP Refinerías S.A. to access a maximum annual contractual quantity of LNG, equivalent to 2.2 million cubic meters of natural liquid gas per day. On June 15, 2010, the LNG Supply Contract is contract was amended to include the Truck Loading Facility, allowing ENAP Refinerías S.A. access to an additional quantity of approximately 1,165 cubic meters of liquid natural gas per day.

The supply of LNG started in August 2009. The contract obligations assumed by ENAP Refinerías S.A. under the LNG Supply Contract have been guaranteed by its parent company, Empresa Nacional del Petróleo.

In order to obtain the aforementioned daily capacity, both of regasified natural gas and LNG to be transported in tanker trucks, ENAP Refinerías S.A. acquired the commitment of the annual payment of approximately ThUS$ 70,000, as long as the Gas Sales Agreement was valid, to GNL Chile S.A. This company signed the Terminal Use Agreement with GNL Quintero S.A. on May 31, 2007. Under these conditions, the annual amount is subsequently paid by GNL Chile S.A. to GNL Quintero S.A. regarding the provision of the natural gas storage, regasification and transport to the delivery and loading point of the tanker trucks with GNL.

The above referred contract is part of a series of commercial contracts of the LNG Project, which was finally concluded in May 31, 2007. The LNG Project has as its main purpose the purchasing of liquid natural gas (LNG) from abroad, to be stored and regasified at the Regasifying Facility located in Quintero and Puchuncavi, Valparaiso Region, to be later supplied as natural gas to the south and central regions of the country.

On December 14, 2012, a new amendment to the Gas Sales Agreement was signed, caused by the signing of a new GNL supply agreement on the same date between GNL Chile S.A. and BG, its LNG supplier. This amendment allows ENAP Refinerías S.A. to have access to quantities of natural gas under new commercial conditions from January 1, 2013. These commercial conditions establish a Take or Pay clause of 29,693,766 MMBtu’s annually.

Restrictions:

ENAP - At December 31, 2016, the Company has no restrictions or covenants to comply with its creditor banks and public bonds.

ENAP Sipetrol Argentina S.A. - According to applicable Argentine legislation the company must allocate 5% of the year’s income to building a statutory reserve, which is an account forming part of the net shareholders’ equity, until such reserve is equal to 20% of the adjusted paid-in capital.

Pledges from third parties:

ENAP - On December 31, 2016 and 2015 ENAP Group has not received pledges from third parties.

ENAP AND SUBSIDIARIES

40. GUARANTEES COMMITTED WITH THIRD PARTIES

Direct Guarantees:

Creditor of the guarantee Description Type of Guarantee ThUS$

BBVA Financial Guarantee for Loan Personal guarantee on first 75,000 demand Citibank Financial Guarantee for Loan Personal guarantee on first 75,000 demand BG GLOBAL ENERGY-GNL Guarantees full compliance with the contract of sale of Liquefied Natural Gas, valid until January 31, 2017 Letter of Credit 17,818

BG GLOBAL ENERGY-GNL Guarantees full compliance with the contract of sale of Liquefied Natural Gas, valid until February 2, 2017 Letter of Credit 14,831

Secretaría de Hidrocarburos de Issuer: EOP operaciones petroleras S.A. Benificiary: Secretaría de Hidrocarburos de Ecuador. Guarantees 20% of the Stand-by Letter of Credit as 2,975 Ecuador minimum investments of Phase I of Exploration of the Service Contract for the Hydrocarbon Exploration and Exploitation counter-guarantee for the in Block 28, Ecuador, valid until May 13, 2017. issue of guarantee abroad

Ministerio de Energía Guarantees faithful performance of investment and exploration work committed to CEOP Dorado Riquelme Block. Bank guarantee in foreign 2,891 Valid until Novembre 18, 2017. currency

Ministry of Energy Guarantee faithful performanceof investment and exploration works of CEOP Dorado Riquelme Block. Valid until Bank performance bond 1,610 September 26, 2017.

UOP LLC Guarantees the lease of platinum for work at the ERSA plant, valid until January 3, 2017. Letter of Credit 1,538

BG GLOBAL ENERGY-GNL Guarantees full compliance with the contract of sale of Liquefied Natural Gas, valid until January 30, 2017. Letter of Credit 1,500

BG GLOBAL ENERGY-GNL Guarantees full compliance with the contract of sale of Liquefied Natural Gas, valid until January 30, 2018. Letter of Credit 1,500

CGE DISTRIBUCION SA. Ensure power supply tender to supply customers. Valid until July 27, 2017. Bank performance bond 1,113

PETROMAGALLANES Guarantees the payment of the AFE2015-59 additional items of the Block Caupolicán-2 '. Valid until October 19, 2017. Another guarantee issued by 648 the Bank of Chile

Ministerio de Energía Guarantees the abandonment of CEOP Cuapolican Block well. Valid until June 30, 2017. Boleta de Garantía en 643 moneda extranjera

Miscellaneous creditors Miscellaneous minor guarantees. (ENAP, ERSA and Enap Sipetrol S.A.) Miscellaneous 2,931

Banco BNP Paribas (*) Pledge on 22,199,866 shares of Productora de Diesel S.A. owned by ENAP to guarantee the repayment of credit Pledge of shares obtained to finance the project, which is valid until 2017. - Citibank (*) Pledge of 1,010,000 shares of Energía Concón S.A. shares owned by ENAP Refinerias S.A., guaranteeing the payment Pledge of shares of the loan obtained to finance the project which is valid until 2020. - (*) See note 22

ENAP AND SUBSIDIARIES

41. CONSOLIDATION SCOPE a) Below is a detail of the percentage interest held in companies that have been consolidated:

Percentage with voting Ownership percentage rights Company Country Currency 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Relationship Enap Refinerias S.A. Chile Dollars 99,98% 99,98% 99,98% 99,98% Direct subsidiary Enap Sipetrol S.A. Chile Dollars 100% 100% 100% 100% Direct subsidiary Petro Servicios Corp. S.A. Argentina Dollars 100% 100% 100% 100% Indirect subsidiary Gas de Chile S.A. Chile Chilean Pesos 100% 100% 100% 100% Direct subsidiary Petrosul S.A. Chile Dollars 100% 100% 100% 100% Indirect subsidiary Energía Concón S.A. Chile Dollars 100% 100% 100% 100% Indirect subsidiary Productora de Diesel S.A. Chile Dollars 100% 100% 100% 100% Indirect subsidiary Cía. de Hidrógeno del Bío - Bío S.A. Chile Dollars 10% 10% 10% 10% Structured Entity Petropower Energía Ltda. Chile Dollars 100% 15% 100% 15% Indirect subsidiary Enap Sipetrol Argentina S.A. Argentina Dollars 100% 100% 100% 100% Indirect subsidiary Enap Sipetrol (UK) Limited U. Kingdom Dollars - 100% 100% 100% Indirect subsidiary Sipetrol International S.A. Uruguay Dollars 100% 100% 100% 100% Indirect subsidiary EOP Operaciones Petroleras S.A. Ecuador Dollars 100% 100% 100% 100% Indirect subsidiary Petrofaro S.A. Argentina Dollars 100% - 100% - Indirect subsidiary

Note: see note 3.1 b). b) The business of consolidated companies:

Company Activity

Enap Refinerías S.A. Purchase and refining of crude oil and by-products Enap Sipetrol S.A. Exploration, production and marketing of hydrocarbons and render advisory services in Chile and abroad Petro Servicios Corp. S.A. Petroleum services Gas de Chile S.A. Import, export and operation in general of all kinds of fuels and by-products, specially natural gas in any of its phases.

Petrosul S.A. Data processing services Energía Concón S.A. Feasibility study Productora de Diesel S.A. Processing and construction services of refineries, by-products Cía. de Hidrógeno del Bío - Bío S.A. Construction and operation of an industrial plant, located in the facilities of Enap Refinerías S.A., in the district of Talcahuano and destined to the production of high quality hydrogen Petropower Energía Ltda. Construction and operation of a plant for the production of energy and steam. Enap Sipetrol Argentina S.A. Generation of Uniones Transitorias de Empresas (UTE) [similar to Joint Ventures], collaboration groups, joint venture, consortiums or other kinds of associations to explore, exploit and transport hydrocarbons Enap Sipetrol (UK) Limited Prospections, explore, develop, maintain and work with land, wells, mines and mining exploitation rights, drilling rights and concessions in areas containing oil, gas or other minerals. Sipetrol International S.A. Make and administrate investments. One or more of the activities related to the exploration, exploitation or benefits from fields containing hydrocarbons. EOP Operaciones Petroleras S.A. Surface geological studies, and drilling of exploratory well. Petrofaro S.A. Exploration and exploitation of hydrocarbons, their marketing and industrialization

ENAP AND SUBSIDIARIES c) Summary financial information on subsidiaries, including the structured entity.

December 31, 2016 Assets Liabilities Income (loss) Current Non-current Current Non-current Revenues Expenses of the year Company ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Enap Refinerías S.A. 1,206,366 2,023,779 2,374,860 191,948 4,601,938 (4,181,529) 233,421 Enap Sipetrol S.A. 222,056 754,642 161,469 205,630 386,457 (271,009) 25,544 Petro Servicios Corp. S.A. 437 1 26 - - - (88) Gas de Chile S.A. 644 4,442 36 - - - 550 Petrosul S.A. 18,310 7,410 4,932 3,212 847 - 2,033 Energía Concón S.A. 90,650 196,815 88,882 147,128 16,481 - 3,134 Productora de Diesel S.A. 27,442 11,898 18,728 1,741 1,288 - 711 Cía. de Hidrógeno del Bío - Bío S.A. 4,035 10,873 1,323 3,564 3,135 (1,210) 1,398 Petropower Energía Ltda. 37,327 61,940 5,552 17,695 - - - Enap Sipetrol Argentina S.A. 88,780 378,197 147,494 197,997 227,370 (189,692) (7,197) Sipetrol International S.A. 99,914 108,560 7,598 - 61,135 (21,671) 26,225 EOP Operaciones Petroleras S.A. 1,079 667 172 - - (1) (1,015) Petrofaro S.A. 5,445 6,398 1,107 1,506 4,155 (1,624) 1,767

December 31, 2015 Assets Liabilities Income (loss) Current Non-current Current Non-current Revenues Expenses of the year Company ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$

Enap Refinerías S.A. 1,077,908 2,011,315 2,240,014 260,096 5,727,746 (5,153,156) 245,816 Enap Sipetrol S.A. 176,956 717,592 191,090 118,529 442,283 (333,690) 9,088 Petro Servicios Corp. S.A. 931 - 67 - - - (119) Gas de Chile S.A. 590 3,686 34 - - - 422 Petrosul S.A. 11,791 11,223 1,787 5,541 1,223 - (347) Energía Concón S.A. 79,546 291,221 81,917 248,336 18,506 - 3,538 Productora de Diesel S.A. 30,228 14,535 23,032 4,718 2,093 - (445) Cía. de Hidrógeno del Bío - Bío S.A. 5,102 13,987 1,307 4,137 3,442 1,210 1,659 Enap Sipetrol Argentina S.A. 54,476 372,562 165,914 132,433 266,954 (248,563) (32,364) Enap Sipetrol (UK) Limited 1,215 - 168 - - - - Sipetrol International S.A. 83,407 103,132 11,888 - 82,593 (28,211) 48,873 EOP Operaciones Petroleras S.A. 1,020 119 137 - - - (98)

42. SUBSEQUENT EVENTS

Between January 1, 2017 and the date of issuance of these consolidated financial statements, there have been no subsequent events that could significantly affect their reasonableness.

*****

DISCLAIMER

The undersigned, members of the Board of Directors and the Chief Executive Officer of Empresa Nacional del Petróleo, in accordance with the rules established by the Superintendency of Securities and Insurance, declare that the information contained in the Annual Report and Financial Statements 2016 is true and complete.

Andrés Rebolledo Smitmans Eduardo Bitran Colodro PRESIDENTE VICEPRESIDENTE RUT N°: 8.127.608-0 RUT N°: 7.950.535-8

María Isabel González Rodríguez Bernardita Piedrabuena Keymer DIRECTORA DIRECTORA CONSOLIDATED FINANCIAL STATEMENTS RUT N°: 7.201.750-1 RUT N°: 10.173.277-0

Jorge Fierro Andrade Alejandro Jadresic Marinovic DIRECTOR DIRECTOR RUT N°: 9.925.434-3 RUT N°: 7.746.199-K

Carlos Carmona Acosta Paul Schiodtz Obilinovich DIRECTOR DIRECTOR RUT N°: 9.003.935-0 RUT N°: 7.170.719-9

Marcelo Tokman Ramos GERENTE GENERAL RUT N°: 16.654.431-9

Santiago, March 2017. ENAP ANNUAL REPORT 2016

252 /