OIL AND GAS INVESTMENT OPPORTUNITIES IN NIGERIA by

OIL AND GAS INVESTMENT OPPORTUNITIES IN NIGERIA by Mr. Tony Chukwueke Director Petroleum Resources APPEX – AAPG Conference London (20 th – 22 nd, March 2007) Department of Petroleum Resources 1

Global demand for oil & gas resources rose significantly in recent years driven mostly by economic growth in the West and the Emerging Economies of Asia Energy Gap as Major Imperative for Drive for New Hydrocarbon Reserves Mbopd North America Asia Pacific Europe & Eurasia South &Central America Middle East Africa Daily Regional Production Daily Regional Consumption Department of Petroleum Resources 2

The Gulf of Guinea led by Nigeria occupies a commanding position in filling the hydrocarbon resource gap, being one of the world’s remaining most prolific hydrocarbon provinces, and is strategically positioned with respect to the markets of the EU and the Americas 100 Egypt Bln Boe Equ Guinea 50 0 Libya Gabon Angola Algeria Nigeria Sudan Congo (D) North Africa West Africa East Africa Department of Petroleum Resources Southern Africa 3

Nigeria is blessed with substantial oil & gas potential not only in the Niger Delta and the Offshore but also the Inland basins particularly for gas Chad Basin Sokoto Embayment BENI Benue Trough Benin Basin GAMANA RIVER ABEOKUTA KATSINA RIER SUM MIT INT. OPL 205 LEKKI LAGOON EBUTE METTA LAG OS Anambra Basin BENIN CITY NPD COPL -110 CHEV RONOML 49 P N C D - WARRI 64 ATL ASOPL -75 SH L EL - M O L- SHE LLOML -16 CHEV RON -OML -53 CAMEROUN CRES CENT OPL 234 27 SH L EL - M O L- 35 H C R EV N O - SH L EL - M O L- 46 SH ELL OM L 81 EXX ONOPL 209 SH L EL - M O L- CHE VRO NOML -89 BRA SS OPL -208 O L M - GULF OF GUINEA S OS CR ER RIV SHE LLOML -39 SAPELE S O AD RC FO ER RIV CHEV RON -OML -90 O P L 2 4 0 ONITSH A PAN OCE ANSHE OML LL- -98 OML -41 NIN BE ER RIV SH LL E O -4 ML 3 CHEV RONOML 95 NIG RIV ER ER CHE VRO NOML -95 BIGHT OF BENIN CHE VRO NOML -91 O M L- 32 50 SH L EL - M O L- CHEV RON -OML -54 SHE LLOML -28 ASA RIS OPL -235 SHE LLOML -22 CALABAR NKO NGS AMB A PORT HARCOURT 36 EL FO M 59 3 SHE LLOML -72 SHE LLOML -77 TEXA COOML -83 SOL GAS OPL -226 AGI PEN OPL SUN -472 LINK OPL -238 SHE LLOML -74 ASHL ANDOPL 225 E CH O VR N- L OM 1 -5 SHE LLOML -73 SHE LLOML -13 MOBIL-OML-70 ASHL ANDOPL 98 SHE LLOML -72 SHE LLOML -71 SANAGA RIVER ASHL AND -OPL -90 - STATOI L/BPXOPL 217 STATOI L/BPXOPL 218 SHEL LOPL 219 DU PON TOPL -220 22 FAM FAOPL -216 3 O PL EL F INT OILOPL -214 Niger Delta 23 MON CRIE FOPLTEX 471 ACO OML -85 PR D O P O L- TEXA COOML -87 PE T L- TEX ACO OML -88 M N O U IP O LO -2 PL 30 TGO Bida Basin MOB ILOPL -221 NIGERIA Department of Petroleum Resources 4

Significant discoveries have been recorded in the Niger Delta but the Deep Offshore has also become equally significant. Oil Reserves (Barrels) Gas Reserves (Tcf) Deepwater 27 Tcf Deepwater 5 Bln Niger Delta 28 Bln Niger Delta 160 Tcf Total 33 Bln Total 187 Tcf Department of Petroleum Resources 5

There is still ample exploration scope for oil and gas remaining in the Niger Delta, the Deepwater and Inland Basins also with substantial proven reserves uncommitted Tcf Equiv 1200 1000 800 600 400 200 0 Nigeria Remaining Exploration Potential Remaining Exploration Scope Deepwater Remaining Exploration Scope Onshore Unconventional Remaining Exploration Scope Onshore Conventional Uncommitted Committed Department of Petroleum Resources 6

Furthermore, under the leadership of President Olusegun Obasanjo, Nigeria is evolving new strategies to bring new reserves to market · Opening up of new oil and gas assets to new investments exploration and exploitation – frontier areas in the Deep Offshore and Inland Basins, Reinvigoration of activities in the traditional areas of the Niger Delta and the deep Offshore · Pursue open and transparent Bidding Process for assets allocation. · Seek out and attract new investors to compliment traditional players. · Link investment in the downstream with upstream assets allocation. · Adopt Production Sharing Contracts as the preferred commercial instrument with slightly revised fiscal terms. · Aggressive pursuit of natural gas development including access to 3 rd parties and non-traditional players as well as new fiscal terms · Pursue a credible local content programme. · Launch of fundamental and far reaching transformation of the Oil and Gas Sector Department of Petroleum Resources 7

Nigeria’s new exploration and exploitation fiscal and commercial terms remain most competitive in the Gulf of Guinea region Comparison of OPL Fiscal Terms Angola Equatorial Guinea Gabon Nigeria Signature Bonus High Low Medium Cost Recovery Very Generous Royalty Medium Low Tax Medium Low Medium Work Programme Commitment Medium Light Department of Petroleum Resources Generous Medium 8

The Niger Delta is characterized by simple rollover structures that have been the target of traditional exploration but significant prospectivity still remain especially in the deeper section. Department of Petroleum Resources 9

The Compressional Zone in deeper water require new thinking supported by high technology to successfully delineate. SIMPLE FOLDS AND THRUST BELT IMBRICATE THRUST BELT Department of Petroleum Resources STABLE CRATON 10

The Inland Basins are gas prone which is becoming attractive due to higher prices and opportunities for IPPs and small local oil refinery Department of Petroleum Resources 11

At the same time, the country also embarked on fundamental Oil and Gas sector Reform aimed to provide more conducive environment for investment Ministry of Energy Revenue & Taxes (FIRS) Power UPSTREAM NNPC (NAPIMS) Independents Operating DPR Regulatory Policy DOWNSTREAM Petroleum Products & Marketing Refining Petrochem Pipelines DPR/PPPRA GAS NNPC/Partners Independents/NGC Operating Regulatory Department of Petroleum Resources DPR Regulatory 12

In 2005 Nigeria organised its 1 st successful open and transparent bid process for oil and gas assets No. of Blocks 80 Award Performance (%) 100 77 100% 60 75 40 57% 56% 44 57% 50 25 20 31% 0 16 9 Anambra 5 13% Benue 14 14 13 Chad 14 11 11 Deep 8 Nig Delta Onshore* Cont Shelf* Offshore 0 Total 4 2 * Includes Blocks Dedicated to Strategic Downstream Investment. No. of Blocks Offered (a) No. of Blocks Awarded(b) Department of Petroleum Resources Award Performance – a/b (%) 13

This was followed in 2006 by a Mini-Round targeted especially at strategic downstream investors. Department of Petroleum Resources 14

These Rounds brought in important new players from Korea, China and India but also from the EU (BG, Centrica). Government desires new players also from the US to compliment the traditional players (Exxon. Mobil, Shell, Chev. Tex, Total and Eni). Department of Petroleum Resources 15

In addition to yielding substantial revenues in Signature Bonuses, linkage of downstream investment with upstream award is also yielding substantial benefits in downstream projects – Korea and China projects well underway. KADUNA IPP 1000 MW KADUNA INDUSTRIAL CITY 0 km 36” 6 km 9 1 x U JA TG K A D TG UN S A S UT EN OB OK A AJ A Gas Feedstock (750 mm. Scf) x 36” m 207 k 6 A 6” x 1 B 3 ABUJA INDUSTRIAL CITY ABUA IPP 1000 MW Department of Petroleum Resources KADUNA FERTILIZER PLANT 1 MTPA 16

The Rail Transportation Sector is currently a key focus of upcoming integrated projects . N Lake Chad Gusau Ni ge r Kaduna Minna [6”] Ibadan 10” 12” 168 km 8” 72 km 6” 12” 299 km Makurdi OPL-305 OPL-306 OPL-304 SUNLI NKOPL 47 4 OPL-307 SUPR AOPL 203 IPEC-OPL-202 OPL-308 MLM OPL-454 COTONOU OPL-310 JAMES PET OPL-312 DEVINE OPL-313 SHE LLOML -34 SHELL-OML-1 SHEL LOML -40 OPL-311 SUNLINK OPL-314 OPL-315 OPL-906 ELF-OPL-447 SUM MIT INT. OPL 206 PACL ANOPL 204 CONSOL IDATEDOPL-113 EXPRES S PETR OML 108 LEGEND Aba AGIP OPL-316 SHELL-OML-5 CHEV RON -OML -49 SHEL LOML -38 ELF-OML-56 OPL 239 SHEL LOML -26 ASHLA NDOPL 118 SHEL LOML -20 LAM ONT OPL 207 NAOC-OML-61 G IP O M L - 6 SHEL LOML -21 2 CONSO LIDATE D-OPL 458 ALLIE DOPL 210 Refinery and Depot Distribution Depot OPL-228 SHEL LOML -30 SHEL L- SHE OML LL-42 OML -44 QUEE NS PETRO. NIG. LTD. OPL-135 SHELL-OML-4 ATLA SOPL 75 SHEL L-SHEL OML L-43 OML -45 SEA WOL F SHELL-OML-7 OPL 907 A Bight of Benin SHE LLOML -79 NPDC-OML-65 Calabar A GI SHEL LOML -17 ELF-OML-58 P AGIP O OML-63 M SHEL LOML -11 [12”] Korea Port China Harcourt Aba India Department of Petroleum Resources ULTR AMAR OPL 227 63 L SHE LLOML -31 MAR EENA OPL 231 CHEV RONOML 54 SHE LLOML -23 AGIP OML-63 STATOI L/BPXOPL 213 SHE LLOML -33 TEXA COOML 86 PEAK OPL-460 SHE LLOML -29 NDPC OML-66 CHEV RONOML 55 SHE LLOML -24 SHEL LOML -25 SHEL LOML -18 SHE LLOML -19 TEXA COOML -84 CHEV RONOML 55 CHEV RONOML 52 SHEL LOML -14 ELF-OML-101 AMNI OPL-237 MOBIL-OML-69 MOBIL-OML-68 SHEL LOML -74 MOBIL-OML-67 OPL-467 IPEC-OPL-229 AMAL GAM OPL 452 ASA RIS OPL -236 AGIP OPL-211 Proposed New Railway Network OPL-904 DUBRI-OML-96 CAVE NDIS HOPL 453 OBEK PA OPL 241 OPL-309 YINKA OPL-903 OPL-902 OPL-201 OPL-302 Lagos R. OPL-901 Auchi [6”] 12” 8” 169 km Benin 180 km City 12” 107 km Enugu 12” [12”] Warri 156 km OPL-303 Yola e nu Be 8” 170 km IBADAN Ore 8” 765 km Jos Biu Gombe Suleja Ilorin Ikorodu Maiduguri Zaria SHE LLOM L- M N O 15 U IP O LO -2 PL 30 R. Kano (EQU ATOR IAL GUIN EA) ELF-OML-99 ORIE NTOPL 224 Booster Pipeline New Tankage Location TIKO OPEN NORE ASTOPL 215 NPDC-OPL-91 MOBIL-OPL-94 ELF-OML-100 ELF-OML-102 SANTA ISABEL UMIC OPL 242 ELF-OPL-222 OPL 243 OPL 244 OPL 245 OPL 246 OPL 247 KRIBI 17

So also are the development of domestic gas projects including Refining, CNG, IPP, Gt. L and Petrochemical projects Department of Petroleum Resources 18

Marginal field opportunities remain to support local companies in raising financing Department of Petroleum Resources 19

Ongoing Downstream Privatisation offers unique downstream investment opportunities · · · Downstream Oil · Divestment of Existing Refineries (51% private) · Licences for construction of new refineries (18) · Liberalisation of Petroleum Products supply · Deregulation of Depots and Common Access to distribution infrastructure. · Refining Integrated value chain projects (full cycle) Gas Development · Independent Power Projects · Gt. L and other petrochemical projects · Domestic gas distribution including CNG Ongoing Gas Monetisation opportunities · Pipe Gas (WAGP, TSGP, Kaduna & Abeokuta Development Corridors) · Gt. L (EGP 3, Mobile Gt. L) CNG, LPG/NGL · IPPs (Agip, Abuja, Kaduna etc. ) · Industrial (Methanol, Aluminium, Steel, Petrochemicals) Department of Petroleum Resources 20

However, the instability in the Niger Delta remain a serious challenge PMS PRODUCT MOVEMENT LOSS FOR JUNE - DECEMBER 2006 MM m 3 2. 0 1. 6 PUMPED RECEIVED 1. 2 0. 8 0. 4 0 ATLAS COVE MOSIMI - SATELLITE MOSIMI - IBADAN Department of Petroleum Resources IBADAN - ILORIN 21

But we believe that Government efforts are yielding dividends and situation will return to normal after the national elections • • • Mr. President’s personal involvement in the Projects for Peace Initiative for the Coastal States of the Niger Delta Involvement of Niger Delta communities in oil and gas activities Development of the Delta on a commercial rather than social platform through upstream/downstream linkage Re-enforcement of the Niger Delta Development Commission (NDDC) Greater transparency in the provision and spending of the 13% revenue derivation fund Improved security surveillance targeted at criminal elements in the Delta. Department of Petroleum Resources 22

In order to take full advantage of the global energy situation, Nigeria must maintain the strides in political and economic reforms · Stable and functional democratic institutions · Successful civilian election in 2007. · Commitment to the NEPAD initiative · Fundamental economic reform package · Adherence to the principle of EITI · Continue reform of the financial sector. · Oil and Gas Industry Reform · Committed to full deregulation of the Downstream oil and gas sector · Full implementation of the National Oil and Gas Policy. Department of Petroleum Resources 23

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