Integrating sustainable development.
As a major integrated energy company, we at ConocoPhillips recognize that our responsibilities to society begin with our traditional and most important role of providing the energy that powers modern life. Our responsibilities also extend to the manner in which we conduct our operations, our adherence to the highest legal and ethical standards, our environmental performance, the practice of good corporate citizenship in the communities in which we operate, and the quality of our interactions with our stakeholders. We aim to partner with the communities in which we operate by ensuring our operations do not adversely impact community health and safety while enabling cultural and economic opportunities, aiding communities in meeting basic needs, and stimulating economic and social development. ConocoPhillips' operations, standards, engagement, and good corporate citizenship in Peru reflect the best practices of the company, and our activities in Peru are reviewed at every level and within all key functions in the company. We have outlined the corporate expectations below to provide context for the more detailed descriptions about ConocoPhillips' activities in Peru, which follow.

ConocoPhillips' stakeholder engagement activities are an integral part of our sustainable development commitments. Our major businesses have engagement strategies which vary according to the nature of the local community. In dispersed communities, we identify key stakeholders and engage with them face-to-face to ensure that our activities are understood and that we consider their feedback. In regions where there are opportunities to bring local stakeholders together, we work with multi-stakeholder groups in a similar way.

ConocoPhillips seeks first to understand local communities' social hierarchy, culture and traditions, as well as their priorities, expectations and preferences for dialogue. We engage with communities at the regional, local and individual level by meeting regularly with local leaders, community associations and regional governments to hear their views so that we can respond to the issues and concerns they care most about. For our exploration and production projects, we have publicly pledged to indigenous inhabitants in our areas of operations in Peru to obtain complete understanding and agreement of our activities with all communities prior to conducting operations.

ConocoPhillips believes business has a constructive role to play to advance respect for human rights throughout the world as do non-government organizations (NGOs) and other representative groups in civil society. ConocoPhillips conducts its business consistent with the human rights philosophy expressed in the Universal Declaration of Human Rights (UDHR), and the International Labour Organization Declaration on Fundamental Principles and Rights at Work. In addition, our corporate values, human rights position, ethics policy, health, safety and environmental policy and stakeholder engagement principles outline our expectations of our businesses in this area. We invite you to review these documents on-line at: http://www.conocophillips.com/EN/susdev/accountability/engagement/Pages/index.aspx

Exploration activities in Peru. ConocoPhillips has long been interested in the geology of Peru's Marañon Basin, where there has been production in excess of 1 billion barrels of oil. A number of large discoveries in neighboring Ecuador are in the same region as the blocks where ConocoPhillips has interests in Peru, suggesting the potential for major hydrocarbon deposits.

Despite operating challenges primarily due to the remoteness of our acreage from infrastructure, there is great resource potential in Peru. Our 2008, 2009 and 2010 exploration activity in Peru included:

• Evaluating gravity and magnetic exploration data over Blocks 123, 124 and 129;
• Acquiring more than 400 kilometers of seismic data in Block 104; and
• Drilling a well and acquiring an additional 500 kilometers of seismic data as an interest owner in Block 39.

In 2010 and 2011, we acquired an additional 600 km of seismic data in Block 123 and 300 km of seismic data in Block 129. Gravity data for 100 km in Block 123 was also gathered concurrently with the seismic data. If the seismic results are favorable, we will continue to conduct extensive environmental and social studies in preparation for future exploration activity.

Engagement with local communities. ConocoPhillips is committed to dedicating resources for engagement and consultation. There are three full time ConocoPhillips community relations staff members based in Peru who spend a majority of their time visiting with local communities. They have built strong relationships with community leaders and authorities in Peru. Our frequency of community consultation activities is commensurate with our level of activities and exceeds regulatory requirements. Additionally, a community relations representative is assigned to accompany our seismic data acquisition contractor in hiring and orientation during operations and to provide an avenue for local employees to register complaints or suggestions to ConocoPhillips for managing contractor relations.

ConocoPhillips wants to ensure that all stakeholders have a chance to be heard and to be educated on our activities. We first ask permission of the communities to meet with them, and then enter into a respectful dialogue with community members. We are aware of the importance of establishing the appropriate frequency and level of contacts with each community and have found communities very receptive to our visits. Between 2008 and mid-2011 we visited, individually and more than seven times, each of the more than 60 communities in the areas potentially influenced by our projects. In total, over 600 community meetings have been held with attendance by all the community representatives and virtually all of the community members.

We have also hosted informative and interactive workshops on different subjects, including, for example:

description of seismic activities and their impact

regulations concerning the hydrocarbon sector and International Labour Organization (ILO) 169

roles and rights of the communities in environmental monitoring in accordance with our permits and promises.

Providing project updates. All relevant groups in the blocks in which we operate, including the Indigenous Federation and community leadership, have been informed about the project activities and their concerns have been considered in project planning. ConocoPhillips, in compliance with Peruvian government expectations and regulations, enters into a written agreement, called a "convenio" with each community. The "convenio" documents the consent of the community and details the compensation agreed to for disruptions in land-use or activities caused by the seismic operations.

We cover the cost of transportation when needed, to support the communities in their review of our work. Last year, for example, we facilitated visits to operational sites by the communities' Environmental Vigilance Committees who had the opportunity to provide recommendations on environmental, safety, labor and health matters. Recommendations were incorporated into the operational activities and validated in a second visit by the committees.

Investing in People. We are committed to providing employment and other economic opportunities to the indigenous peoples who live in our areas of operation. Our field activities and seismic work between 2008 and 2010 have created more than 850 local jobs.

Our 2008 field activities and seismic work provided employment for more than 600 Peruvians, including nearly 300 members of the local indigenous communities. Additionally, during the labor recruiting and orientation process, we helped address health issues, such as malnutrition and hygiene, in both the work force and in their villages.

Social investment is another way that we invest in communities and, our sustainable development social investment plan is fully integrated into our business planning and ESIA (Environmental and Social Impact Assessment) processes in Peru. Though social investment projects are typically required in the operational phase in Peru, we view developing these projects early in the exploration phase as part of developing a mutually beneficial relationship that will serve both ConocoPhillips and local communities well over the long term.

As an example, PRISMA, a Peruvian non-governmental organization (NGO) with 22 years of experience in maternal and child health projects was approached by ConocoPhillips to help us develop a program to address the health needs of the indigenous communities of Paiche Playa, Nuevo Canaan and Pampa Hermosa. These three communities are located in the blocks in which we have been working. The program is designed to advance the day-to-day needs of individuals and the community through improved health practices, housing conditions, governance, quality of health services and food availability for subsistence. Success in these ongoing programs will be measured by key indicators developed and tracked by PRISMA.

PRISMA is also completing a health baseline study in eight communities located in the Tigre Basin (Intuto, 28 de Julio, Alfonso Ugarte, Santa Clara, Providencia, Santa Elena, Nueva Jerusalen and Belen). Phase II of this study will be focused on developing a project with the communities that addresses their specific health needs.

Although ConocoPhillips has now relinquished exploration rights in this block, we have pledged to continue to follow through with the program. In early 2011, PRISMA returned to the three communities mentioned above to assess the effectiveness of the program, which has showed positive results.  Since the beginning of the program in February 2009, the program has benefited all of the 53 families in these communities.

We are proud of this program and will continue to look for similar opportunities to partner with NGOs, government and communities.

People living in isolation. Prior to and during the ESIA baseline activity, and as part of our ongoing work, significant efforts are made to understand the potential for the existence of communities in isolation within ConocoPhillips' areas of interest. We work with various groups and obtain and study all available information. At present we rely upon the official position as stated in the Multi-Sectoral Commission Technical Report 001-ST-2009 on the Napo-Tigre-Curaray Case. The Commission found that for this case "No reasonable evidence or sound proof can be determined from this report or has been corroborated by anthropologists, linguists and studies on Peoples in Isolation, allowing us to confirm the existence of Peoples in Voluntary Isolation." This is also being ratified by local Courts in Peru. For us, the area of interest covered by the Multi-Sectoral Commission’s Report has been Block 39. Although we have reached an agreement to sell our remaining interest in Block 39, we continue to evaluate information through our own programs and credible research conducted by others.

Even with the Multi-Sectoral Commission's finding, as responsible operators, we and our operating partners have taken the precautionary step of maintaining a contingency plan that establishes protocol in the event of sightings of people, artifacts, or any other evidence possibly relating to indigenous people living in voluntary isolation or initial contact.

ConocoPhillips has in place appropriate training for operations crews which include reporting and contingency plans in the event that crews encounter any evidence of isolated peoples or have a chance encounter. As part of this plan, workforce training is conducted with employees, contractors and sub-contractors as a standard part of our operation in the Peruvian forest. Contingency plans are developed in accordance with relevant law and draw upon known best practices. Plans and training include instilling respect for any populations' choice to live in isolation, respect for their culture and awareness of the potential impact that accidental contact could have on such groups' health.

Environmental protection and biodiversity. Our philosophy in operating in Peru is to be "roadless" and to bring supplies and equipment in by boat or helicopter, utilizing minimal footprint technologies. If we proceed with future development and production, we maintain a zero-discharge policy regarding any produced water. The oil and gas industry has learned much from the early beginnings of oil production in tropical regions. ConocoPhillips continues to learn and work with communities in developing and utilizing environmentally sound practices and in implementing advanced technologies. We have addressed the observation comments, from the review process, for all of the ESIAs that we have executed in Peru. To date, all of our ESIAs undertaken in Peru have been approved.

We have also been working with local organizations to support biodiversity conservation in the Pucacuro Reserve. In the Pucacuro Reserve proposal, the community asked for support to protect their forest through their Consejo Comunal. We are providing funding to support a collaborative effort with SERNANP (Servicio Nacional de Areas Naturales Protegidas por el Estado) and the local communities to help with protection of the Pucacuro Reserve.A monitoring and control station at the mouth of the Pucacuro River has been built and forest guards have been trained to help the government to maintain oversight in the area.

In the interest of biodiversity management, ConocoPhillips requested that the original configuration of License Contract 123, as announced by PeruPetro, be changed so as to exclude all parts of the Pucacuro Reserve. PeruPetro granted ConocoPhillips' request and reconfigured the License Contract Area.

Also, through the organization Program for Conservation, Management, and Sustainable Use of Biological Diversity in the Region of Loreto (PROCREL), we have pledged to collaborate in the vision for a network of conservation areas in Loreto that reduce environmental pressure by encouraging the development of sustainable tradecraft and forms of agriculture with indigenous peoples. To this end, we have recently signed an accord with the Regional Government of Loreto (GOREL) to support such project development in the Alta Nana-Pintayacu-Chambira (ANPC) watershed where a proposed Regional Conservation Area (ACR) was established in March 2011. Our exploration licenses are contained within the Alta Nanay-Pintayacu-Chambira Regional Conservation Area.  ConocoPhillips along with several NGOs, the Institution for Investigations in the Amazonian Peru (IIAP) and GOREL, believe an important step to achieve biodiversity protection is through community involvement in sustainable development projects. On August 25, 2010, PROCREL was awarded the 2010 "Good Practices in Government" Award by Ciudades al Dia.

In addition, the Monitoring and Assessment of Biodiversity Program (formerly known as the Man and Biosphere Program) of the Smithsonian Institute has partnered to develop and implement a biodiversity action plan for Block 39. The Institute has had two teams: One to record the diversity of species found in this unstudied region, and identify areas that constitute conservation priorities and the second to investigate the direct effects of seismic exploration activities on mammals and stream-dwelling invertebrates such as aquatic insects and snails. Although we have reached an agreement to sell our remaining interest in Block 39, we will continue to watch this program with interest, and encourage you to visit http://nationalzoo.si.edu/ConservationAndScience/MAB/research/arabela/default.cfm. We anticipate future publications will be made available from the Smithsonian concerning their important recent research and findings.

We partner on projects that can achieve biodiversity protection through community involvement in a sustainable project. As an example, one of ConocoPhillips' particular environmental interests is conserving the natural habitat of migratory birds, an objective that has been among the company's charitable priorities since the 1970s. Consequently, in 2005 ConocoPhillips founded the SPIRIT of Conservation Migratory Bird Program, an outgrowth of the company's long-working relationship with the National Fish and Wildlife Foundation (NFWF). The program strives to protect, restore and improve the natural systems and habitats upon which migratory birds depend for survival, and to benefit declining bird species. Through our involvement with SPIRIT of Conservation, 1400 acres were purchased at Abra Patricia in the Peruvian Department of Amazonas as a conservation site and local people have been hired and trained as guides and guards. The program has been very successful and we will likely look for similar opportunities in the future.

While our operations in Peru are in early exploration stages, we want to foster and support exemplary ethical behavior in all aspects of our business, as we do in other places around the world where we operate. One example of how this is put into practice is in providing ethics training to all employees and direct contractors in Spanish. In 2008, within their first full year of employment, our new employees in Peru have confirmed their understanding of and compliance with the ConocoPhillips Code of Business Ethics and Conduct. ConocoPhillips' employees worldwide reconfirm their understanding and compliance of these policies annually.

Through seismic evaluation and exploration drilling, ConocoPhillips anticipates completing its evaluation of the exploration potential of the three blocks in which we have interest in Peru in the next several years. By doing so, we hope to provide employment for more than 1,000 residents of local communities and enhance their quality of life through sustainable improvements in health and education while respecting the rich environmental, social and cultural heritage of the country.