nzog in indonesia dr chris mckeown gm se asia. new zealand oil & gas limited has prepared this...
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NZOG in IndonesiaDr Chris McKeown
GM SE Asia
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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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4NZOG in Indonesia
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%
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Some history
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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
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Why do we like Indonesia?
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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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13NZOG in Indonesia
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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14NZOG in Indonesia
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
16 June 2015
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18NZOG in Indonesia
Infrastructure enables commercialisation
16 June 2015
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19NZOG in Indonesia
Gas is not a second prize
16 June 2015
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20NZOG in Indonesia
Gas export market exists: LNG
Lampung LNG FSRU
16 June 2015
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21NZOG in Indonesia
Indonesian permit activity high
Access to opportunities, regular permit changes and deal flow
16 June 2015
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22
Although global deal flow down in 2015….
16 June 2015 NZOG in Indonesia
Num
ber
of
blo
cks
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2316 June 2015 NZOG in Indonesia
…Indonesia dominates the deal scene (although less than 2014)N
umbe
r of
blo
cks
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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
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Sounds easy, but…does it all work?
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but…does it all work?
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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
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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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51NZOG in Indonesia