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Tanzania Oil and Gas Opportunities and Challenges 03 October 2012 Mark Stearnes.

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Presentation on theme: "Tanzania Oil and Gas Opportunities and Challenges 03 October 2012 Mark Stearnes."— Presentation transcript:

1 Tanzania Oil and Gas Opportunities and Challenges 03 October 2012 Mark Stearnes

2 Legal notice Certain statements included in this presentation contain forward-looking information concerning BG Group plcs strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group plc operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within BG Group plcs control or can be predicted by BG Group plc. Although BG Group plc believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from the guidance given in this presentation for a number of reasons. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the Principal risks and uncertainties included in the BG Group plc Annual Report & Accounts Nothing in this presentation should be construed as a profit forecast and no part of this presentation constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group plc undertakes no obligation to update any forward-looking statements. No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by BG Group plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it. 2

3 Agenda 3 1 Offshore East Africa – upstream overview 2 Tanzania – success so far 3 Doing business in Tanzania (and wider East Africa) 4 BG Group

4 BG Group – Who we are Market leader: – FTSE top ten company – Market capitalisation –Circa $70bn – Production approximately 70% gas; 30% oil Global gas major: – Over employees; 65% outside UK 4 BG Group Global Gas Major

5 5 Countries of current operation BG Group is active in more than 20 countries across five continents Global portfolio

6 Demerger and development British Gas BG PlcBG Group Plc Lattice National Grid Transco National Grid Centrica Who we are A proven record of performance 6

7 Responsible conduct Integrity Governance Strategy/investment Responsible to our people HSSE, Recruitment Training, development Equality & diversity Environmentally responsible Environmental impacts Climate change Biodiversity Responsible to society Human rights Community relations Capacity building Investment The way we conduct business Working sustainably How we do it 7

8 Agenda 8 1 Offshore East Africa – upstream overview 2 Tanzania – success so far 3 Doing business in Tanzania (and wider East Africa) 4 BG Group & Global LNG

9 Oil and Gas East Africa Large Frontier plays – Sizeable blocks – Deep to ultra deep water – Several recent discoveries Material resource potential – Multiple play types – Multi-TCF gas potential Stable/ progressive governments Favourably located for LNG markets – India and Asian Pacific 9 An exciting exploration hot-spot BG Mozambique – Anadarko & Eni discoveries Kenya – Tullow: onshore oil discovery Tanzania – BG: 6, Statoil: 2 deepwater gas discoveries

10 Agenda 10 1 Offshore East Africa – upstream overview 2 Tanzania – success so far 3 Doing business in Tanzania (and wider East Africa) 4 BG Group & Global LNG

11 Tanzania – Deepwater activity Incumbents – Smaller Africa focussed independents Majors renewed interest Some companies still targeting oil Two producing gas fields with sufficient reserves for domestic demand 4 th offshore deepwater licensing round planned in 4Q Two producing fields: Songo Songo & Mnazi Bay Block 12 Block 11 Block 10 Block 9 Block 8 Block 7 Block 6 Block 5 Block 4 Block 3 Block 1 Block 2 E. Pande

12 Success in first deepwater wells Farm-in June 2010, 60% of Blocks 1, 3 & 4 BG Operatorship – 1 st July 2011 Six successful wells – Gas discoveries – Still in exploration phase Appraisal program in Q3 / Q Also acquired substantial siesmic;5140 sq km 3D followed by 2,500 sq km 3D seismic in Block 1; evaluation ongoing In-country presence in Dar es Salaam and Mtwara – high quality national staff LNG Implementation Agreement and PSA gas terms already in place 12 TANZANIA MOZAMBIQUE

13 Sharing the Operations Supply Base in Mtwara BG Operates the Mtwara Supply base on behalf of other offshore Operators (Petrobras, Statoil, Ophir) –Upgrade commenced in 4Q 2011 to enable multiple drilling operations with improvements to benefit existing port users (cashew nut farmers) –Tanzanian Ports Authority plans to develop free trade port and export corridor 13

14 Agenda 14 1 Offshore East Africa – upstream overview 2 Tanzania – success so far 3 Challenges 4 BG Group & Global LNG

15 Capacity building initiatives BG scholarship scheme with the British Council and Nelson Mandela African Institute for Science and Technology Support for G&G studies at the University of Dar Es Salaam and University of Dodoma Pilot project for long term industry vocational training with VSO and VETA Mtwara road safety programme in partnership with National Institute of Transport School support program in Mtwara Marine Conservation and livelihoods project in partnership with Mnazi-Bay Ruvuma Estuary Marine Park 15

16 Operational challenges – Lack of infrastructure and local service industries – Deep water drilling – Environmentally sensitive – Capacity and skills development – Piracy Joint initiatives for: – Sharing port facilities in Mtwara – Mutual Assistance between IOCs/ use of best technology – Incident response (e.g. oil spill) – Cooperation with Tanzanian navy 16 Operational challenges – remote location

17 Business Environment Challenges Capacity and capability within Government and Parastatals Stability of contractual environment Levels of education and training within general population Direct experience of Oil and Gas Robustness of business systems and processes HSSE 17

18 LNG will require huge investment Upstream c % of investment LiquefactionShippingRegasificationMarkets c % of investment c % of investment c. 8% of investment $ million per exploration well (deepwater) $ billion upstream development cost sq. mile site 3,500 construction personnel $ billion downstream development cost $300+ million cost per vessel $5 million voyage cost (fuel, port, charter, boil- off) to India c.120 cargo loadings per year $ billion gross sales revenue over project life Figures are highly variable depending on project scope and scale 1 LNG tank can store two Boeing 777s $600+ million investment

19 LNG versus oil – illustrative cash flow 19 LNG development = longer lead times but significant long term benefits LNG Oil LNG Expansion Time from discovery of reserves Billion ($) Based on a generic greenfield LNG project

20 LNG could deliver unprecedented benefits Positive impact on FDI, export earnings and government revenues Enabling legislation needed to maximise benefits Key challenges: – Long lead time – Political / institutional capacity – Petroleum sector reforms – Domestic energy expectations – Macroeconomic impacts – Exchange rate appreciation; Resource Curse 20 Source: IMF, International Financial Statistics Tanzania has had no experience of such large projects Historic Foreign Direct Investment (FDI)

21 Thank you

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