Corporate Governance - Lundin Petroleum

GOVERNANCE STRUCTURE
The object of Lundin Petroleum's business is to explore, develop and produce oil and gas and to develop other energy resources, as laid down in its Articles of Association. The Company aims to create value for its shareholders through exploration and organic growth, while operating in an economically, socially and environmentally responsible way for the benefit of all its stakeholders. To achieve this value creation, Lundin Petroleum has, during its ten year history applied, and continues to apply, a governance structure that favours straightforward decision making processes, with easy access to relevant decision makers, while nonetheless providing the necessary checks and balances for the control of the activities, both operationally and financially.

Internal governance instruments and practices, such as the Code of Conduct and the Rules of Procedure of the Board, have existed since the creation of the Company in 2001, however the governance structure has continuously evolved following internal developments as well as changes to applicable legislation, stock exchange rules and other regulations. In particular, the introduction of a Swedish Code of Corporate Governance on 1 July 2005, and its revised versions, have led to developments in the corporate governance structure of Lundin Petroleum, e.g. the creation of a Nomination Committee, implementation of more detailed Rules of Procedure, in-depth consideration of independence requirements and improved governance routines and practices in general.

After ten years of corporate governance at Lundin Petroleum, the Company remains committed to applying good corporate governance practices that are best suited for the Company and its activities, to ensure that the Company is managed in an effective manner, in the best interests of all shareholders, for continued delivery of value creation.

The governance structure of Lundin Petroleum can be summarised in the following chart. <Governance Structure>

Lundin Petroleum adheres to principles of corporate governance found in both internal and external rules and regulations.

Main external rules & regulations affecting Lundin Petroleum’s corporate governance:

	Swedish Companies Act (SFS 2005:551)
	Swedish Annual Accounts Act (SFS 1995:1554)
	The NASDAQ OMX Stockholm Rule Book for Issuers (available on www.nasdaqomx.com)
	Swedish Code of Corporate Governance (available on www.bolagsstyrning.se)

Main internal rules & regulations affecting Lundin Petroleum’s corporate governance:

Lundin Petroleum’s Articles of Association
Lundin Petroleum's Articles of Association, which form the basis of the governance of the Company's operations, set forth the Company's name, the seat of the Board, the object of the business activities, the shares and share capital of the Company and contain rules with respect to the Shareholders' Meetings.

Lundin Petroleum’s Code of Conduct
Lundin Petroleum's Code of Conduct is a set of principles formulated by the Board to give overall guidance to employees, contractors and partners on how the Company is to conduct its activities in an economically, socially and environmentally responsible way, for the benefit of all its stakeholders, including shareholders, employees, business partners, host and home governments and local communities. The Company applies the same standards to its activities worldwide to satisfy both its commercial and ethical requirements and strives continuously to improve its performance and to act in accordance with good oilfield practice and high standards of corporate citizenship.

To mark the ten year anniversary of Lundin Petroleum, a revised Code of Conduct was approved by the Board in 2011 to confirm the Company's continued commitment to the values and principles expressed in it and to carrying out activities in an efficient and responsible way. The Code of Conduct remains an integral part of the Company's contracting procedures and any violations of the Code of Conduct will be the subject of an inquiry and appropriate remedial measures. Performance under the Code of Conduct is assessed on an annual basis by the Board.

Lundin Petroleum’s Policies, Guidelines and Procedures & Management System
While the Code of Conduct provides Lundin Petroleum's ethical framework, dedicated policies, guidelines and procedures have been developed to outline specific rules and controls applicable in the different business areas. The Company has policies, guidelines and procedures covering for example Operations, Accounting and Finance, Corporate Responsibility (CR) including Health, Safety and Environment (HSE) and Anti-Corruption, Legal, Information Systems, Human Resources and Corporate Communications. The policies, guidelines and procedures are reviewed on a continuous basis and are modified and up-dated as and when required. Some of these documents can be found on this website, whereas others are only available internally.

In addition, Lundin Petroleum has a dedicated HSE Management System (Green Book), modelled after the ISO 14001 standard, which gives guidance to management, employees and contractors regarding the Company's intentions and expectations in HSE matters. The Green Book serves to ensure that all operations meet Lundin Petroleum's legal and ethical obligations, responsibilities and commitments within the HSE field.

Lundin Petroleum’s Rules of Procedure of the Board
The Rules of Procedure of the Board contain the fundamental rules regarding the division of duties between the Board, the Committees, the Chairman of the Board and the Chief Executive Officer (CEO). The Rules of Procedure also include instructions to the CEO, instructions for the financial reporting to the Board and the terms of reference of the Board Committees and the Investment Committee. The Rules of Procedure, which are approved annually by the Board, were reviewed in the spring of 2011 as a result of the new Code of Governance that entered into force in 2010. The amended Rules of Procedure were adopted by the Board in May 2011.

NOMINATION COMMITTEE
The shareholders of the Company decide how the Nomination Committee is to be formed at each Annual General Meeting (AGM). The tasks of the Nomination Committee include making recommendations to the AGM regarding the election of the Chairman and other Board members, fees for the Chairman and the other Board members, including fees for Board Committee work, election of auditor, fees for the auditor, election of the Chairman at the AGM and principles for appointment of the Nomination Committee for the AGM of the following year. The Nomination Committee members are, regardless of how they are appointed, required to promote the interests of all shareholders of the Company.

Further to the Nomination Committee's responsibility to propose members to the Board to the AGM, the Chairman of the Board undertakes each year an evaluation of the work of the Board and presents the results and conclusions to the Nomination Committee. No remuneration is paid to the Chairman or any other member of the Nomination Committee for their work on the Nomination Committee. The names of the members of the Nomination Committee are announced and posted on the Company's website at the latest of six months before each AGM.

Nomination Committee for the 2012 AGM
In accordance with the principles resolved by the 2011 AGM, the Nomination Committee for the 2012 AGM consists of the representatives for four of the larger shareholders of the Company based on shareholdings as per 1 August 2011.

Member	Representing	Shares represented as at 1 August 2011	Shares represented as at 31 December 2011	Independent of the Company and the Group management	Independent of the Company’s major shareholders
Kerstin Stenberg	Swedbank Robur fonder	3.6 %	3.4 %	Yes	Yes
Ulrika Danielson	Andra AP-fonden	1.2 %	1.0 %	Yes	Yes
Anders Algotsson	AFA Försäkring	1.4 %	1.0 %	Yes	Yes
Ian H. Lundin	Lorito Holdings (Guernsey) Ltd., Zebra Holdings and Investment (Guernsey) Ltd. and Landor Participations Inc., also non-executive Chairman of the Board of Lundin Petroleum	32.0 %	31.0 %	Yes	No
Magnus Unger	Non-executive Board member of Lundin Petroleum who acts as the Chairman of the Nomination Committee			Yes	Yes
		Total 38.2 %	Total 36.4 %

SHAREHOLDERS' MEETINGS
The Shareholders' Meeting is the highest decision-making body of Lundin Petroleum where the shareholders exercise their voting rights and influence the operations of the Company. Shareholders may request that a specific issue be included in the agenda provided such request reaches the Board in due time. The AGM is to be held each year before the end of June at the seat of the Board in Stockholm. The notice of the AGM, which is to be given no more than six and no less than four weeks prior to the meeting, is to be announced in the Post- och Inrikes Tidningar (the Swedish Gazette) and on the Company's website. The documentation for the AGM is provided on the Company's website in Swedish and in English at the latest three weeks, however usually four weeks, before the AGM.

At the AGM, the shareholders decide on a number of key issues regarding the governance of the Company, such as election of the members of the Board and the auditor, the remuneration of the Board, management and the auditor, including approval of the Policy on Remuneration for the Executive Management, discharge of the Board members and the CEO from liability and the adoption of the annual accounts and appropriation of the Company's result. Extraordinary General Meetings are held as and when required for the operations of the Company.