Oil & Gas projects the transformation of East Africa

John Wood March 2015

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j.wood@teramargroup.com www.teramargroup.com

mailto:j.wood@teramargroup.com

Safety Moment

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Narok Sep 2013

41 killed (4 children)

33 injured

Brought total killed on

roads in Kenya to

2,200

Estimated 3,000 road

deaths in 2013

Oil Price History and Forecasts

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XX

For two decades it averaged $28

Projected to return to $94 in 2018

Why Has The Oil Price Dropped

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What Does It Mean For Operators ?

Slow down spend on exploration. It has happened for

decades that exploration only happens when Oil is at a

premium. During these times exploration is over invested in

and scaled back in lean times to a minimum.

Increase development speed of lower cost to market projects.

Decommission high cost fields quicker.

Investment will go to Gas projects.

Will take long term view as market will recover.

Focus on getting leaner and meaner, retained jobs will go and

more work will go to subcontractors and consultants.

Will slowly become fat again as price increases and

exploration ramps up.

As Simple as supply and demand too much Oil not enough demand.

Opposite of Gas where Demand outstrips supply.

This has arisen for two prime reasons

- Arrival and Licencing to export US Shale Oil

- OPEC members trying to force the Shale producers out of business

and to reduce the number of new projects as the break even point is

substantially higher. They are willing to take the short term pain for the

long term gain in reduced supply.

Location Project To Market Costs in $pb

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Gas Converted to Oil pb for comparison

Supply By Product

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East African Oil & Gas Is Nothing New

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East Africa was zoned as an agricultural area rather than an oil producer by colonial governments

Even after hydrocarbon potential was discovered, the area has been treated as frontier until recent developments

Uganda

Waki 1938

Tanzania

Songo Songo 1974

Mozambique

Pande 1961

Temane 1967

Kenya

Pate 1973

Loperot 1992

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What We Know

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Uganda

3.5B barrels

Kenya

Over 1B barrels resources

Seven(7) discoveries. Evaluation in progress

Tanzania

~ 40 Tcf

Mozambique

~ 150 Tcf

Export contract with Thailand

Anadarko, ENI, Galp Energia, Inpex, Kogas, Bharat Petroleum, Maurel & Prom, Mitsui, CNPC, Oil India, Petronas, PTTEP, Stat Oil, Energi Mega Persada, Total, Tullow, Videocon, ENH

Kenya

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46 Exploration Blocks. At least 40 licensed Over 26 International Oil Companies Exploring for Hydrocarbons At least twelve (12) new blocks for licensing round in 2015/16 Wells

Total drilled 44 Currently drilling 4

Discoveries 7+1+1? Planned 24 months drilling activity

Onshore >40 Offshore >2

Rigs Offshore 1 Onshore 5

Afren, Africa Oil, Anadarko, A-Z Pretroleum, BG, Camac, CNOOC, EDGO Group, ENI, ERHC Energy, Imara Energy, NOCK, Ophir, Pacific Seaboard, PTTEP, Rift Energy Corp, Simba Energy, Sunbird Energy, Swiss Oil Co, Taipan Resources, Total, Tullow, Vangold

Uganda

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Albertine Graben region has estimated 13 blocks which may be up for licensing in 2014 Three (3) delineated development areas

CNOOC development plan approved for the Kingfisher Complex + anticipated spend is $4B over the next 4 years

Tullow Uganda and Total Still awaiting some approvals

MoU signed by the Government and Contractors early 2014, progress has been made but still very slow

$15 billion investment

CNOOC TULLOW TOTAL

Tanzania

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Fourth licensing round Seven (7) deep sea blocks

One (1) lake block

Natural gas discoveries 3 blocks BG and Ophir 15 Tcf

2 blocks Statoil and Exxon Mobil 17 Tcf

Other notes

532 km long Mnazi Bay to Dar es Salaam gas pipeline under construction

Gas fired power plants to follow

Afren, Aminex, Beach Energy, BG Group, Bounty Oil & Gas, ExxonMobil, Heritage Oil, Jacka Resources, Maurel & Prom, Ndovu Resources, Nor Energy, Ophir Energy, Orca, Pan African Energy, Petrobras, Petroquest, Rukwa, Shell, Swala Energy, Total Signet Petroleum, Petroquest

Mozambique

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Major Natural Gas Discoveries since 2010 circa 150 Tcf of resources discovered.

If everyting that has been descovered is proven commercially viable Mozambique will rank 4th in the world.

LNG Export contract under discussion

Development by 2018?

First phase development to cost $13 to $16 billion

Anadarko, ENI, Galp Energia, Inpex, Kogas, Bharat Petroleum, Maurel & Prom, Mitsui, CNPC, Oil India, Petronas, PTTEP, Stat Oil, Energi Mega Persada, Total, Tullow, Videocon, ENH

New Infrastructure Development 2016/20

with prices

O&M, Upgrade and Monitoring Activity

2016/20 with prices

Local Content

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Fuel

Emergency Services

Waste Management

Security

Medical

Crane Hire

Personnel

Transport

Freight Forwarding

Custom

Clearance

Facilities

Management

IT Services

Telecoms

Hotel/Accom.

Office

Supplies

HR

Unskilled

Labour

Training General Trades

Catering

Communications

Camps/Accom.

FPSO/Wellhead

Tangibles

Rig

Hire Feed

Seismic

Services Well

Services

Environmental Services

Int. Freight Services

Site Prep.

Field Construction

Specialist Trades

Inspections

Infield

Transport

Spare

Parts

Infield

Services

Civil

Mechanical

Electricals

Mud/

Cuttings

Construction

Materials

INDIRECT SERVICES Mostly available and well serviced Not very specialized but requires some expertise Need to improve standards Some investment required ($)

DIRECT SERVICES More specialized Stringent compliance to safety and operational standards Requires significant investment ($$) Not widely available in KE

SPECIALIST SERVICES Highly specialized Strictest standards for operations and safety Critical services (mistakes ground operations and increase losses exponential) Heavy investment in service provision + R&D ($$$) Not available in KE

Project Cost Split Land Based LNG

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Storage, 5% Subsea

Infrastructure, 5%

Marine Facilities /

Services, 6%

Onshore Site Prep & Civil Works, 11%

Offshore Facilities,

12%

Wells & Drilling, 12%

Pipeline, 12%

LNG Plant (Train), 37%

Project Cost Split Floating LNG

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Onshore Supply Base 2%

Wells & Drilling 11% Subsea

Infrastructure 14%

FLNG Structure & Hull 21%

FLNG Topsides 52%

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23%

18%

16%

16%

9%

7%

4% 4%

3% Countries average % of a typical Australian project

Australia

Korea

Japan

Others

France

America

Norway

Italy

UKFloating offshore production is not a new concept, FPSO (Floating Platform , Storage & Offloading) has been around for decades. The key change is the focus switches from the initial infrastructure construction cost to asset management of the asset.

Expression of Interest Issued

Questions

Return of EOI Documentation

EOI Qualification Documents Issued

Overview Info

Ownership Financial Point of

Difference Track Record

Capacity Capability Location

Interest Expressed

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Pre Qualification

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HSE Technical Quality

Financial Track Record

Capacity Capability

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Interest Expressed

TO STAGE 2

TO STAGE 3

STAGE 2 STAGE 3 STAGE 1

Existing relationship from another country

Technical

Route Map

PRE FEED

FEED CONSTRUCTION FEASIBILITY F I D OPERATION

12 24 MONTHS

6 12 MONTH

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12 18 MONTHS

24 72 MONTHS

20 YEARS +

TENDER WINDOW

3 - 9 MONTHS

CONTRACTING WINDOW

TENDER

DOCUMENTS

TENDER

DOCUMENTS

MULTI LEVEL PRE QUALIFICATION

T1

T2

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T4

T1

T2

T3

T4

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Criticality Matrix Concept

Criticality Level 2

Criticality Level 7

Criticality Level 6

Criticality Level 5

Criticality Level 4

Criticality Level 3

Criticality Level 1

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MATURE SUPPLIER

SUPPLIER DEVELOPING TRACK

RECORD

NEW ENTRY SUPPLIER

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Commitment Do We Need or Want O&G ?

Whatever happens keep positive & have belief in your strategy You need to lead the desire & passion to make it happen

all be plain sailing but d give up!!

everything today we need to take small steps

towards the future we desire!!!

Questions ?

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