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## Note 13. Security Deposits (continued) 

## (a) Performance Bonds 

The Group has provided Agencia Nacional do Petróleo (the Brazilian Petroleum Agency) letters of credit and insurance bonds (refer Note 24) to carry out minimum work programs in relation to the Group’s exploration permits in the Santos Basin, Brazil (Santos Basin Blocks 1037, 1101, 1102, 1165 and 1166). The letters of credit are fully funded by way of payment of a security deposit, which will be released once the work programs are met. The insurance bonds have been part funded to 50% of the value of the total bonds provided to Agencia Nacional do Petróleo by establishment of an escrow account. The funds deposited in escrow are invested on term deposit and quarterly interest earned is released from escrow after the end of each quarter. The principal funds held in escrow will be released as work is undertaken to satisfy the work programs. 

## (b) Performance Guarantees 

Performance guarantees (via letters of credit) were provided to Peru Petro SA for Block Z-38 and Block 144 by the Group (refer Note 24) for second and third period work commitments (30 June 2010: for first and second period work commitments). The letters of credit are fully funded by way of payment of a security deposit, which will be released once the work commitments are met. 

## (c) Bank Guarantees 

Cash deposits are held as security against bank guarantee facilities for bank guarantees (refer Note 24) given to lessors for the Group’s compliance with its obligations in respect of operating lease rental agreements for office premises at Melbourne, Mount Martha, Peru and Brazil. 

## (d) Performance Guarantee 

In the previous financial year, a performance guarantee (via a letter of credit) was provided to a third party supplier by the Group for exploration work undertaken in Peru (refer Note 24). The letter of credit was fully funded by way of payment of a security deposit, and was released once the Group’s obligation under the contract was satisfied. 

## (e) Bond 

Cash was held in the previous financial year as a security deposit for the relinquished exploration licence EL4537. 

## (f) Financial Risk Management 

Information concerning the Group’s exposure to financial risks on security deposits is set out in Note 3. 

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