IPG: Profile• Publicly traded company

on the Kuwaiti Stock Exchange: [Ticker Symbol – IPG]

• Market capitalization in excess of US$400 Million.

• For year 2004, after tax net profit US$29 Million.

• For year 2004, equity of

US$132 Million.

• For year 2004, sales in excess of $1.3 billion.

Overview of Project Development in the Downstream Oil Industry

Prepared for Africa Oil & Gas Trade & Finance 2005

NOT AN OFFICIAL UNCTAD RECORD

IPG is here today because…

Africa presents an enormous potential in downstream logistics asset development to service existing as well as growing needs.

“Asset development” is defined as

Greenfield or acquisitions combined

with technological upgrades of aging

infrastructure.

Today’s Objective

Share the experiences of the Independent Petroleum Group (IPG) s.a.k., an Independent oil company, in the development of its downstream logistics projects, with the hope that it raises issues that you might consider in the development of your own projects, with your partners.

Today’s Topics

• Who is IPG, anyway?– Background on IPG– Oil Storage Project in Mozambique: Inpetro SARL

• Project Development– Prospecting Insights– Setting Up the Deal– Rights, Liabilities & Obligations– Funding Challenges– Innovation of Small and medium sized operators in Project

Development

Who is IPG, Anyway?

• An Independent oil company, headquartered in Kuwait.

• Established in 1976 to provide a competitive service in the supply of crude oil and petroleum products to niche markets.

• Over its 29 year history, succeeded in becoming an international oil company with commercial activities targeting Africa and Asia.

• In 2004, more than 175,000 barrels a day.

IPG: Profile

• Diversification into downstream oil logistics in the mid 1990s.

• International maritime logistics operating out of the Arabian Gulf.

• Storage terminals and related infrastructure in Africa and Asia.

• Combined capex of projects in development in excess of US$600 Million.

• Works closely with its strategic partner, Emirates National Oil Company (ENOC).

Petroleum Value Chain

Petroleum Value Chain

State of the art petroleum storage terminal

• Inpetro SARL

• Joint Venture – Petróleos de Moçambique, S.A.R.L. (“Petromoc”)– National Oil Company of Zimbabwe (Pvt) Ltd (“Noczim”)– Independent Petroleum Group s.a.k. (“IPG”)

Inpetro SARL

• 9 tanks with aggregate capacity of 95,000 cubic meters

• Aviation Fuel, Petrol and Diesel

• Linked to Petromoc infrastructure, as well as to CPMZ pipeline

Petroleum Value ChainInpetro SARL

Inpetro SARLWhy the Port of Beira?

• Beira Corridor, an important gateway (import/export).

• Malawi, Zimbabwe, Zambia and other countries in the region.

• The Port’s infrastructure is developed, and linked to road, rail, tanker and pipeline.

Highlighting Broad Issues related to Project Development

Mr. Anthony “Tony” Bridgens

Member of the Fiscal Board of Inpetro SARL

Manager Business Development, Trade & Finance, IPG

Prospecting Insights

• Large potential in Africa– Additional services for growing markets– Technology upgrade

• Small and medium projects servicing niche markets – Unique technical design– Innovative business modeling – To achieve economic viability

• Appropriate solutions needed for unique propositions in small and medium size projects– Large operators have a preference for “off the shelf” solutions– Smaller and medium sized operators have a greater appetite

for risk– Can mobilize more quickly and find appropriate solutions

• Finding the right promoter is key element – Strong balance sheet, good liquidity

Setting Up The Deal

• The right partners are a key factor for success– Local expertise – Technical excellence– Resource rich

• Quality of partners must be undoubted– Long term players– Have to contribute more than

money– Strategic fit

• Data is essential – Goes to the heart of the

feasibility of the project– Assists in risk mitigation and

the type of structure– Data should be freely available

• Strategic alignment– All strategic issues should

be put on the table– Compromise found where

conflict of interest exists• Clear objectives captured

in an appropriate agreement– Provides stakeholders and

third parties comfort

Rights, Liabilities & Obligations

• Investors need to be reassured their rights are protected.– Land tenure– Dividend distribution– Capital repatriation– Etc.– Investment centers need to

provide level of comfort

• Environmental concerns– Assistance with legislation– Explanation of liabilities and

obligations

• Other regulatory issues– Laws specific to the industry

• Other Investor obligations not directly related to the project– For example, social

obligations– Employment creation – Related infrastructure

upgrades– Other Investor obligations not

directly related to the project

• The more information provided upfront, the less pre-operating cost– Lessens the need to invest in

expensive professionals

Funding Challenges

• Private Equity– Prepared for significant

“hurt money” to establish credentials for a project

– Limited availability• Private Equity Funds

– Large availability but limited by strict qualification criteria

– Need to achieve economies of scale restricts Private Equity Funds from entrance in small and medium sized projects

• Multilateral and bilateral funders– Enthusiastic with access to

massive resources, but strict qualification criteria

– Bureaucratic processes are lengthy

• Commercial Financial Institutions– Probably the biggest

underwriters of projects in the downstream sector

– Responsive with good financial backup service

– Regional institutions have capital limitations

– Western Institutions are more risk averse as they have numerous international opportunities

Innovation of the Small and Medium Project Developers

• Small and medium operators in downstream sector have a role to play in Africa.

• They are innovators to their approach to solving project issues.

• They are adept at offering appropriate solutions, as opposed to “off the shelf” solutions

• Small and medium project developers are light on their feet, with an ability to mobilize quickly

• Capital can be a constraint, but there are some medium operators in their sector that have the ability to overcome this constraint, such as IPG.