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Tanzania Oil and Gas Opportunities and Challenges

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Presentation on theme: "Tanzania Oil and Gas Opportunities and Challenges"— Presentation transcript:

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

2 Legal notice Certain statements included in this presentation contain forward-looking information concerning BG Group plc’s 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 plc’s 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.

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

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

5 Countries of current operation
Global portfolio Countries of current operation BG Group countries Trinidad & Tobago Egypt Kazakhstan UK India Uruguay Bolivia Brazil USA Italy Tunisia Thailand Singapore Areas of PA Norway China Madagascar Chile Australia Tanzania Kenya BG Group is active in more than 20 countries across five continents 5 5

6 Demerger and development
Who we are Demerger and development 1986 1997 1999 2000 2002 2005 BG Plc BG Group Plc British Gas Lattice National Grid Transco National Grid BG Group is renowned within the industry for its performance in finding and commercialising gas and for project delivery. Our strategy of focusing on connecting gas to high value markets has helped to transform our cost base and increase revenues for our shareholders. This slide shows the history of the company since it was privatised in 1997 and the former British Gas utility split into two companies, BG Plc which became BG Group, and Centrica. Centrica A proven record of performance 6

7 Working sustainably Responsible conduct Responsible to our people
How we do it Working sustainably Responsible conduct Integrity Governance Strategy/investment Responsible to our people HSSE, Recruitment Training, development Equality & diversity Responsible to society Human rights Community relations Capacity building Investment Environmentally responsible Environmental impacts Climate change Biodiversity Responsible conduct We have an established governance framework: Matches highest standards, robust assurance; Integrated with the business Business Principles are the fundamental element in the governance framework: Owned, agreed and reviewed annually by the Board; Underpinned by Group Policies. Board Sustainability Committee works to ensure that sustainability at the centre of BG Group’s business – also support EITI Responsible to our people Our objective is to avoid harm and provide healthy working conditions 14 Point Assurance Tool revised to aid assurance and drive behavioural improvement Health risk assessments completed for all assets Worldwide talent pool: International management; Diverse workforce; Opportunity for all Developing employees: High quality training; Postings across Assets and Head Office Responsibilities to society Impacts: Social impact assessment; Human rights: Voluntary Principles on Security and Human Rights Social investment: Assets produce 5-year Community Involvement Plans linking business and community needs Environmentally responsible 96% of BG operated assets achieved ISO 14001: 2004 standards in 2009; On target to achieve an ongoing reduction in our annual GHG emissions of 1 million tonnes by 2012. The way we conduct business 7

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

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 Kenya – Tullow: onshore oil discovery Tanzania – BG: 6, Statoil: 2 deepwater gas discoveries BG Mozambique – Anadarko & Eni discoveries An exciting exploration “hot-spot”

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

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 4th offshore deepwater licensing round planned in 4Q 2012 Block 12 Block 11 Block 10 Block 9 Block 8 Block 7 Block 6 Block 5 Block 4 Block 3 Two producing fields: Songo Songo & Mnazi Bay Block 2 Block 2 E. Pande Block 1

12 Success in first deepwater wells
Farm-in June 2010, 60% of Blocks 1, 3 & 4 BG Operatorship – 1st July 2011 Six successful wells Gas discoveries Still in exploration phase Appraisal program in Q3 / Q4 2012 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 Tanzania – Significant Progress in Just 12 Months TANZANIA MOZAMBIQUE BG will spend $374m Gross or $199m over the $175m MWO amount. Moving away from 60/40 funding on that $199m means will spend $50m more net ($318m vs. $268m) or 25% of $199m. Activity BG Net Gross G&G seismic acquisition & processing 39 46 2010 Actuals 13 15 Pweza 38 45 Chewa 57 67 Chaza 109 128 Mobilisation + non well costs for 1st campaign 61 72 MWO COST 318 374 LLIs for 2nd campaign 14 16 Well drilling costs (Dec 2011) 9 10 Mobilisation + non well costs for 2nd campaign 62 73 Well drilling costs (Q1 2012) 87 102 489 575

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

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

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 Several social investment initiatives have been launched both in Mtwara as well as Dar es Salaam.

16 Operational challenges – remote location
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

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

18 LNG will require huge investment
Upstream Liquefaction Shipping Regasification Markets c % of investment c % of investment c % of investment c. 8% of investment $ million per exploration well (deepwater) $ billion upstream development cost 2 - 6 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 1 LNG tank can store two Boeing 777’s $600+ million investment $ billion gross sales revenue over project life Figures are highly variable depending on project scope and scale

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

20 LNG could deliver unprecedented benefits
Historic Foreign Direct Investment (FDI) 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” An LNG project in Tanzania would be transformational for the economy and the country Proposed sector legislation / policies such as Gas policy, Gas Master Plan and Gas Act needs to be enabling and must encourage investments. Source: IMF, International Financial Statistics Tanzania has had no experience of such large projects

21 Thank you

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