nzog in indonesia dr chris mckeown gm se asia. new zealand oil & gas limited has prepared this...

NZOG in IndonesiaDr Chris McKeown

GM SE Asia

New Zealand Oil & Gas Limited has prepared this presentation to provide information about certain of the company’s projects.

This presentation contains interpretations and forward looking statements that are subject to risk factors associated with the oil and gas industry.

It is believed that the expectations reflected in the presentation are reasonable but may be affected by a variety of variables and changes in underlying assumptions which could cause actual results to differ substantially from the statements made. This includes but is not limited to: production fluctuations, commodity price fluctuations, variations to drilling, well testing and production results, reserve estimates, loss of market, industry competition, environmental risk, physical risks, legislation, loss of mineral lease tenure, fiscal and regulatory developments, economic and financial market conditions, project delay or advancement, approvals and cost estimates.

The company accepts no responsibility or liability for the public's subsequent use or misuse of the information provided. The Company and its Directors, agents, officers or employees do not make any representation or warranty, express or implied, as to endorsement of the accuracy or completeness of any information, statement representations or forecasts contained in this presentation and they do not accept any liability for any statement made in, or omitted from, this presentation.

The information presented here does not, in any way, constitute investment advice. It is of a general nature and includes forecasts and estimates based on current knowledge. It is possible that changes in circumstances after the date of publication may impact on the accuracy of the information.

New Zealand Oil & Gas Limited strongly advises you to seek independent professional advice before making any investment decisions.

Disclaimer

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Background

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NZOG snapshot

Corporate• ASX and NZX Listed E&P company• Market cap ~NZ$ 202 million * • Cash ~NZ$ 43 million*• Annual revenues ~NZ$ 100 million

Production• 15% of Kupe gas & oil field, offshore Taranaki• 27.5 % of Tui area oil fields, offshore Taranaki• Total 2P reserves of ~9.8 mmboe **

Strategy• Enduring New Zealand explorer• Balanced portfolio• Multiple pathways to growth

* As at 31 March 2015

** As at 31 December 2015

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Early Seismic Evaluation Drilling Appraisal Development Production

TUI

KUPE

KISARAN

KAHERU

WARU

MATUKU

CLIPPER

GALLEON

BOHOROK PSC

TOROA

VULCAN

PALMERAH

KISARAN PSCMNK KISARAN PSC

BalancedPortfolio

27.5%

15%

22.5%

35%

100%

12.5%

Key: Taranaki | Canterbury-Great South | Indonesia

50%

100%

45%

30%

30%

26%

11.25%

25%

Some history

Evolution of NZOG strategy

1985 to 2007 • Small explorer• Onshore focus

First production 2007-2009• Leadership change• Revenue increase• Options exercised

NZ drilling poor • Sporadic • Lots of dry holes• Common risks

Search for portfolio depth• Regional reviews• Country reviews• New Ventures

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Whetting the appetite

2009 - 2011 Scouts• Indonesia perception• Poor economics• Corrupt / too hard• Don’t understand rules

Initial EU/NA focus• Romania study group• Tunisia exploration

2010 opportunity brought to us• Months of analysis• Opportunity stacked up • Out-bid on asset

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Getting our feet wet…

Bukit Energy established by "Scout"• Seasoned ex-pats & locals • Access to opportunities• Funding constrained• Connected GM

Bukit opens local office late 2011• Joint bid on "Bohorok“ JSA• Joint investment in Kisaran• Bohorok PSC awarded

And we’re off!

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NZOG in Indonesia now

Kisaran• Successful drilling: oil discovery• POD approved• Aiming for production early 2016

Bohorok• Acquired 2D seismic• Plan for drilling early 2016

Palmerah Baru• Planning on 2D/3D seismic in 2016• Well not likely before 2017

Unconventionals (MNK)• Recently awarded unconventional

PSCs and JSA

Why do we like Indonesia?

Why do we like Indonesia

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NZOG initially interested in Sumatra because• Low cost environment• Highly prospective• Low drilling risk• Continuous discoveries• Prolific oil and gas basins onshore and offshore

Access to opportunities• Deal flow• Regular permit changes• Infrastructure and equipment

Access to market• Highly populated energy hungry region• Huge future growth potential• Supply demand gap, huge emphasis on oil & gas sector for economic growth

Social changes favourable• Economy strong• Emerging democratic government • Graft clamp down

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Jakarta

Singapore

North Sumatra Basin (5,500MMboe)

Central Sumatra Basin (15,500MMboe)

South Sumatra Basin (8,000MMboe)

Bontang

Hugely prospective and productive

Sumatra’s ultimately recoverable volume of discovered oil and gas is around 15 times that of ALL of New Zealands

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Indonesian population provides market

16 June 2015

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Supply demand gap will increase

Access to market• Highly populated energy hungry region• Huge future growth potential16 June 2015

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Oil imports will impact economy

• Government incentivised to encourage exploration, oil and gas investment and production (better fiscal terms)

16 June 2015

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Huge growth potential

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Infrastructure enables commercialisation

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Gas is not a second prize

16 June 2015

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Gas export market exists: LNG

Lampung LNG FSRU

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Indonesian permit activity high

Access to opportunities, regular permit changes and deal flow

16 June 2015

22

Although global deal flow down in 2015….

16 June 2015 NZOG in Indonesia

Num

ber

of

blo

cks

2316 June 2015 NZOG in Indonesia

…Indonesia dominates the deal scene (although less than 2014)N

umbe

r of

blo

cks

How does it all work?

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Entry Points

JSA – Joint Study Agreement• Need to know an area is likely to be open for bidding• 6 month, low cost University study on an area• Key point is that it establishes ROFR over future PSC

PSC – Production Sharing Contract• Long term government contract• Bid through regular block offerings• Direct bidding process at conclusion of JSA• Farm-in through Government owned oil company (Pertamina) or bid winner

KSO – Cooperation Operation Fields • Sub-contract under Pertamina• Appraisal of existing or abandoned discoveries• Contribution of technical expertise to development

Sounds easy, but…does it all work?

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but…does it all work?

Process, Government & culture

Local aspects and content key• Need connections to know what is happening• Need to keep constant dialogue• Bureaucracy around PSC/intra government relationships tortuous

Understand the processes• Apparent corruption: more about trying to remove road blocks/time

issues• Multiple land usage a major issue• Right of Way problems can cause major slow downs

Understand the regulatory environment• Government, legislation and regulations changes frequent• Significant overlap of regulatory jurisdiction(s)

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Government, legislature and regulatory body changes frequent and cause delays

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Significant overlap of regulatory jurisdiction(s)

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Lessons learned

What have we learned?

Joint Venture with local representation essential• Western technical specialists• Well connected senior staff• Do your homework

Choose your friends wisely• Bukit good example• Relationship based upon trust• Social license crucial

Ensure you are “plugged-in”• Well connected (information)• Make the processes work

Communication is key• Keep the romance alive, give it the attention it deserves• Be patient, but don't take your eye of the ball

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Down town Jakarta from 14th floor, Sultan Hotel

…let’s get down to business here

What have we learned?

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Hmmm, complications…

• A recent study showed that 60 percent of the time spent in the Jakarta road network is delayed time.

• The number of registered vehicles in Jakarta is nearing 9.5 million, including about 2 million cars and 6.6 million motorcycles.

• Each day around 1,000 new motorcycles and 300 new cars are registered in Jakarta.

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Bus-only lane

The little guys make easier progress

The little guys get squeezed

The big guys survive to old ageOpen roadway = toll road

Features of Jakarta traffic (metaphor for oil business in Indonesia)

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