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DIRECTOR'S REPORT ON ACTIVITIES

During 2010 the Africa Region focused on enabling and implementing its longer term exploration program. Key wells were drilled in the Tinah, North Kairouan and Ivory Coast Blocks leading to two gas discoveries which will need to be further appraised to determine ultimate commerciality. KUFPEC entered into lease extensions (subsequent exploration periods) in the Tinah and West Sitra Blocks. Finally, significant effort was made to ensure and extend the KUFPEC's interest in the Congo Marine Block IX, the Sudan Block B, and the Ivory Coast Blocks CI-24 and CI-102. The Africa Region implemented the drilling of KUFPEC's first operated well in several years, the North Kairouan Block BBJ-1 well; and finalized arrangements to test the deep potential beneath the SLK field during 2011 by drilling the KUFPEC operated SLK-13 Deep well. The average production achieved within the Africa Region during 2010 was 6,020 boepd net KUFPEC as compared to the average production achieved during 2009 of 4375 boepd net KUFPEC. Arrangements are under way to place the Prince discovery in the Ras Kanayes Block on production during first-half 2011.


EGYPT	Western Desert: Onshore West Sitra (KUFPEC: 25%) Production continued from the Shell operated West Sitra development lease during 2010 with a net average rate of 34 boepd. KUFPEC's Board approved entering the 3rd exploration period (10th May 2010- 9th May 2012) with a commitment to drill one exploration well scheduled to be drilled in the second quarter of 2011. The forward program into 2012 will be determined by the results of the 2011 well. Ras Kanayes (KUFPEC: 36.36%) Production continued from the Apache operated Ras Kanayes Concession in the Western Desert during 2010 with a net average of 127 boepd. The Prince discovery (Prince-1 well) will be tied-in to production during the first half of 2011. This well was production tested in 2009 with a combined total production rate in excess of 40 mmscfpd natural gas and 1,600 bcpd from 2 reservoirs. The RK-8 exploration well was spudded on 29th November 2010 and is currently drilling, the RK-9 well, an appraisal well to the producing RK-2 well will be spudded in February 2011. The Ras Kanayes joint venture plans to propose an aggressive forward work program to the regulatory authority as part of its application to extend the lease in September 2011. Nile Delta: Offshore North Bardawil (KUFPEC: 36%) IEOC (Operator) completed the First Phase Development by bringing the Assad and Zaraf discoveries on-stream during August 2009. The net production from the field averaged 3,259 boepd during 2010. The initial development of the area being complete; no major activities for this field are planned for 2011. Additional offsetting development potential will be evaluated during 2011/2012. Tinah (KUFPEC: 36%) The Tinah Block is currently in the Third Exploration Period (8 June 2010 - 7 June 2012) with a work commitment to drill two exploration wells. The decision to enter the third and final exploration period was made in order to ensure complete evaluation of the exploration potential, particularly the deeper targets. Drilling on the Block has yielded two marginal natural gas discoveries (the Nardine-1 well and the Seridia-1 well) both of which require further appraisal to determine commerciality. West Mediterranean Block -1 (KUFPEC: 10%) The joint venture's efforts during 2010 focused on the potential development of the El King discovery in cooperation with other joint ventures. The joint partners continue to work together to develop a viable ongoing development strategy for the Block. Gulf of Suez - Offshore Geisum & Tawila West (KUFPEC: 40%) The operating company PetroGulf Misr evaluated the 2008-2009 drilling campaign and conducted various reservoir studies during 2010 to enhance the ongoing exploration and exploitation practice within the Block. An ongoing well workover campaign was continued to counter production challenges including the high natural decline rates of the producing reservoirs and controlling the produced water cut. An aggressive development and exploration drilling program was defined in 2010, implementation is planned to start early 2011. The net oil production from the block averaged 1,689 boepd during 2010.
SUDAN	Block B (KUFPEC: 27.5%) KUFPEC has been present in Sudan in the Total operated Block B for more than two decades. The joint venture's efforts during 2010 were focused on finalizing the Block B consortium by completing the assignment of a 10% participating interest share to Nilepet (representing the South Sudan interests). Significant delays occurred due to the referendum on separation between South and North scheduled for 2011.
TUNISIA	North Kairouan (KUFPEC: 50%) The KUFPEC operated North Kairouan Permit was granted to KUFPEC in 1984. Several renewals of the initial exploration period were granted by the authorities. The current exploration period is the First Extension of the Fourth Renewal (11 July 2008 - 10 July 2011). Its associated work commitment to acquire 450 kilometers of 2D seismic and drill one well (the BBJ-1 well) were fulfilled in 2010. Regrettably, the BBJ-1 well was Plugged and Abandoned in October 2010 after encountering an unexpected salt diaper. The joint venture is evaluating the remaining potential within the Block and will make a decision on applying for an extension first half 2011. Sidi El Kilani (KUFPEC: 22.5%) The field provides a high quality 39 API crude oil and continued to perform stably during 2010 with net oil production averaging 234 boepd during 2010. A technical evaluation study performed in 2010 defined new drilling potential targeting both shallow (development) and deep (exploration) targets that will be tested during 2011.
IVORY COAST	Block CI 24 (KUFPEC: 33.75%), Block CI-102 (KUFPEC: 27%) Both Blocks are exploration concessions. Block CI 24 is in its Final Exploration Period. The Virgo-1 exploration well was Plugged and Abandoned after it was spudded on 24th July 2010 and declared as a gas discovery on 15th October 2010 and consequently a six month extension was granted to request an Evaluation Area. If the Evaluation Area is requested by the joint venture and granted by the regulatory authority, the joint venture will have 4 years to evaluate the discovery and declare commerciality. The first 12-month extension of the 1st Exploration Period for Block CI 102 expired in 10th December 2010. The Joint Venture Partners have requested a second 12-month extension for further geological evaluation of the Block in view of the Virgo-1 well gas discovery. The joint venture is waiting for the Government's response which has been delayed due to the ongoing political instability in the Ivory Coast.
MAURITANIA	PSC A (KUFPEC: 13.084%), PSC B (KUFPEC: 11.630%) and Chinguetti EEA (KUFPEC: 10.234%) The Chinguetti Exclusive Exploitation authorization contains the Chinguetti Oil Field wherein net oil production averaged 678 boepd during 2010, and the Tevet Oil Discovery. The Joint Venture continued its efforts during 2010 to optimize field production and thus prolong field life. These efforts were successful, possibly extending the field life for several more years. Options for the future decommissioning of the field are being evaluated. PSC A covers the shallow water area of Blocks 3, 4 and 5; and contains the bulk of the Banda Gas (with oil rim) Discovery. PSC B covers the deep water area of Blocks 4 and 5 and contains the Tiof, Tevet Deep, and Lebeidna Oil Discoveries. Development studies on the Banda Gas Discovery were completed and submitted to the Government 1st July 2010. Commercial and fiscal challenges remain to be overcome before commerciality can be declared. The PSC A and PSC B licenses expired on 31st July and 20th July 2009 respectively. The Joint Venture Partners are attempting to negotiate an extension to the current exploration period of each PSC to continue their rights to the existing discoveries and the remaining exploration potential. The Mauritanian Government has granted provisional extensions under the current PSC terms until the conclusion of the ongoing negotiations.
CONGO	Marine Block IX (KUFPEC: 27%) The Marine Block IX is located in the offshore Congo a proven petroleum province close to existing developed oil fields. It has an area of 1044 km2 in water depths ranging between 400m and 1500m. The first exploration well drilled by the joint venture, the Frida-1 well, was Plugged and Abandoned. Premier (Operator) subsequently withdrew from the Block and its 35% participation interest was provisionally distributed prorate between KUFPEC and Ophir. In October 2010 KUFPEC's Board approved increasing KUFPEC's participating interest on a pro-rata basis; and Ophir replacing Premier as Operator. Discussions to finalize operatorship and participating interests were ongoing with the Congolese regulatory authorities end-2010. Concurrently, the regulatory authorities approved a 12-month extension to the 1st Exploration Phase (from 5th October 2010 to 4th October 2011). The Joint Venture Partners requested the extension to allow time to negotiate with the regulatory authorities to amend the existing fiscal terms to ensure the commerciality of the prospect inventory.