1. Client Logo Naples, Florida June 14, 2006 Independent Petroleum Association of America “Mid-Year Meeting and Executive Conference” India and the Global Energy Market An Overview Presented by Juli A. MacDonald

2. 1Filename/RPS Number Road Map  India’s Energy Situation  Indian Initiatives to Address its Energy Situation  Strategic Significance of India’s Actions  Commercial Opportunities in India

3. 2 India is a nation of a billion people and gross domestic product of 720 Billion USD in 2005 that still relies on traditional fuels such as wood and waste for about 40% of its primary energy supply. India’s Energy Situation 600,000 500,000 400,000 300,000 200,000 100,000 1972197419761978 198019821984198619881990199219941996199820002002 CoalOilGasHydroComb. Renew & Waste India Total Primary Energy Supply* (Ktoe) (1972-2002) India Population (Millions) and GDP (Billions 2000 USD) (1990-2003) CAGR (Pop): 1.89% (GDP): 5.57% PopulationGDP Source: Population & GDP—EIA International Energy Annual 2003; Primary Energy Supply—IEA Energy Statistics 2004 India and the Global Energy Market

4. 3 Demand for hydrocarbons increase as the Indian economy modernizes and adds capacity. India and the Global Energy MarketIndia’s Energy Situation India Installed Electric Capacity (Million Kilowatts) 1990-2003 India Industrial Production Index (1993=100) 1993-2004 IndiaChina Korea Malaysia 16% 35% 29% 31% Share of Manufacturing in Total Economic Output 2005 India “Golden Quadrilateral” Interstate Highway (Scheduled 2007) India Vehicle Sales (Thousand Sales) 1990-2004 India Hydrocarbon Consumption (10 15 BTU) 1990-2003 Coal Oil Gas Source: Consumption & Electric Capacity—EIA International Energy Annual 2003; Vehicle Sales-Government of India Ministry of Roads and Transport; Industrial Production Indiex—India Info Online (www. indiainfoline.com) - Industrial Production Manufacturing Only

5. 4 India’s energy efficiency per dollar of GDP is below Western standards. Domestic fuel subsidies are falling but price controls limit efficiency gains at the expense of India’s state-owned refiners. India’s Energy Situation Energy Intensity per GDP (BTU / year 2000 USD) 1990-2003 2.5 Combined Loss: 51 Million USD/Day Annual Fuel Subsidies (Million Rupees) 2000-2004 Reported Loss per Liter (year 2000 USD) 2005 Note: * LPG loss reported as per cylinder, not liter. Source: Energy Intensity—International Energy Agency International Energy Outlook 2005; Fuel Subsidies—Government of India Ministry of Petroleum; Reported Loss—”Burnout: Oil Cos Lose $51m per day” Economic Times (May 18, 2006) India and the Global Energy Market

6. 5 Moderate increases in India’s domestic production of hydrocarbons have not kept pace with increased consumption. ReservesProductionConsumption India Oil Reserves and Production & Consumption (Billion Barrels and Thousand Barrels /Day)1990-2003 India Natural Gas Reserves and Production & Consumption (Trillion Cubic Feet) 1990-2004 Source: EIA International Energy Annual 2003; Reserves estimates from Oil & Gas Journal India and the Global Energy MarketIndia’s Energy Situation

7. 6 The Indian Government is pursuing a multi-pronged strategy to address its energy security concerns.  Attract foreign investment to increase domestic production  Pursue internal and external measures to become a regional supplier of refined products  Promote oil diplomacy as part of national foreign policy agenda  Reconfigure state-owned companies to pursue oil diplomacy objectives  Secure supply through investments in oil and gas projects around the world India and the Global Energy MarketIndian Initiatives to Address its Energy Situation

8. 7 India seeks to attract private investors to increase domestic production of oil and natural gas. Company Name Company Nationality # of Fields Active in # of Fields Operating Birckbeck Investment Mauritius1 Cairn EnergyUK115 ENI S.P.AItaly22 ENPRO FinanceUS22 Geoglobal Resources Canada41 Hardy E&PUK13 Jubilant Enterprises US41 MosbacherUS11 Nikko ResourcesCanada31 OAO GazpromRussia11 Energy FocusUS11 RelianceIndia3129 India inducted the New Exploration Licensing Policy (NELP) in 1999 to attract greater private investment in the exploration & production of oil and natural gas  Awarding NELP blocks to technically capable companies that offer the best terms for production sharing agreements  Allowing 100% foreign ownership and offering new tax incentives to investors  Attracting private investors to develop oil and gas resources (see Table)  Paying off for investors--Cairn Energy and Niklko Resources both reported major discoveries from early investments 48 India and the Global Energy MarketIndian Initiatives to Address its Energy Situation Source: NELP investor data compiled from India’s Directorate General of Hydrocarbon’s website: http://www.dghindia.org/index.htmhttp://www.dghindia.org/index.htm Investors in India’s Oil and Gas Sector Through NELP

9. 8 India seeks to increase competition in its domestic retail markets for refined products and to establish itself as a regional supplier of refined products. State-Owned Companies  Operate 17 of India’s 18 refineries  Will add 3,200 new retail locations in 2006. Already own 29,300 locations (94% of the market)  ONGC likely to invest in Algeria’s Sonatrach refinery  Saudi Arabia may acquire stakes in Visakh and Paradip facilities  Operate 17 of India’s 18 refineries  Will add 3,200 new retail locations in 2006. Already own 29,300 locations (94% of the market)  ONGC likely to invest in Algeria’s Sonatrach refinery  Saudi Arabia may acquire stakes in Visakh and Paradip facilities India Crude Oil Distillation Capacity (Million Barrels / Day) 1990-2006 269,700 b/d of refined product exports in 2002  Introducing competition in domestic retail market  Increasing domestic refining capacity to supply regional markets through private and state-funded investments  Pursuing interests in refining projects in Algeria, Yemen, and Saudi Arabia Indian Initiatives to Address its Energy SituationIndia and the Global Energy Market Source: Distillation Capacity—EIA Compilation of Oil & Gas Journal Reports; Reliance—Reuters News (May 2006); State-Owned—India Ministry of Petroleum and Natural Gas http://petroleum.nic.in/http://petroleum.nic.in/ Reliance Industries  Jamnagar Refinery: 680,000 b/d capacity in the process of adding 580,000 b/d new capacity.  Added 600 new domestic retail locations to existing 1,300 locations  Ras Issa Refinery (Yemen): 60,000 b/d refinery on Red Sea  Jamnagar Refinery: 680,000 b/d capacity in the process of adding 580,000 b/d new capacity.  Added 600 new domestic retail locations to existing 1,300 locations  Ras Issa Refinery (Yemen): 60,000 b/d refinery on Red Sea

10. 9 Active oil diplomacy is a central component of India’s energy security policy and an instrument of Indian national power. “Oil diplomacy is currently seen as a major tool for ensuring India’s energy security along with acquisition of equity oil & gas overseas.” Government of India Expert Committee on Integrated Energy Policy Draft Report (December 2005) India and the Global Energy MarketIndian Initiatives to Address its Energy Situation Source: OIL Videsh—The Economic Times (November 28, 2005); Oil Diplomacy—Financial Express (March 12, 2005)  National champions pursue oil diplomacy with major producers and Asian consumers –ONGC’s international subsidiary state-owned ONGC Videsh actively investing worldwide –Indian government created a new international subsidiary for the state-owned company OIL in December 2005  Energy diplomacy features MOUs/high-level agreements with major suppliers and consumers and multilateral approaches –MOUs signed with Iran, Indonesia, Myanmar, Nigeria, Saudi Arabia, Russia, and Nigeria –Energy agreement with China (December 2005) to promote cooperation in the market –Promoter of Asian grid for energy flows –Convener of multilateral fora to discuss Asian energy markets and contracts

11. 10 Indian companies are investing globally to explore and develop oil and natural gas assets. ONGC Videsh Ltd. OIL Videsh Ltd. Reliance Industries India Overseas E&P Assets 2006 India and the Global Energy MarketIndian Initiatives to Address its Energy Situation Source: Company Websites

12. 11 India’s activities conflict with United States and European interests in some regions. Asian Market Power  Vocal advocate of bundling market power of Asian consumers to increase their influence with Middle East suppliers and avoid paying premium  As Middle East importance grows as source of supply in long-term, competition for access to Middle East crude represents potential source of tension between East and West  Vocal advocate of bundling market power of Asian consumers to increase their influence with Middle East suppliers and avoid paying premium  As Middle East importance grows as source of supply in long-term, competition for access to Middle East crude represents potential source of tension between East and West India Investment in U.S. Designated “Pariah” States Cuba, Sudan, Iran, Myanmar 10 728 12 2 3 Middle East Oil Exports by Region (Million Barrels /Day) 2002 & 2030 Asia North America Europe Asia North America Europe Investments in Pariah States  Indian companies investing in states subject to U.S. sanctions  Attractive due to lack of competition from major international oil companies  India’s foreign policy interests at odds with the United States’ in some regions  Indian companies investing in states subject to U.S. sanctions  Attractive due to lack of competition from major international oil companies  India’s foreign policy interests at odds with the United States’ in some regions India and the Global Energy MarketStrategic Significance of India’s Actions Source: Investments—Company Websites; Exports by Region-- International Energy Agency, World Energy Outlook 2004.

13. 12 In contrast to China’s perceived mercantilist approach, Indian companies tend to rely on rather than distrust international markets. “To the extent that India owns that oil abroad, whether it is brought to India or sold in the international market, the value remains the same. Thus obtaining equity oil abroad should be mainly looked upon as a commercial investment decision.” Government of India Expert Committee on Integrated Energy Policy Draft Report (December 2005) Strategic Significance of India’s ActionsIndia and the Global Energy Market  India’s initiatives are market-oriented and official positions suggest comfort with the market  Actions suggest faith in contracts and current system –New futures market in Mumbai to provide instruments to hedge price risks –Oil diplomacy often contract based (e.g., in Saudi Arabia)  Approach to overseas investments based on commercial interests –Policy-makers stress bottom line and set profit requirement –Recommended target of 66% of overseas projects financed with private capital –Recommend policy of securitization of overseas assets to private investors to ensure investments are commercially sound

14. 13 India’s market-orientation presents opportunities for foreign companies in Indian market. Investors, Enhanced Oil Recovery, Offshore  India seeks bidders for its domestic industry. –Investor Road Show stopped in London, Houston, Dubai, Perth, and Calgary in early 2006.  Indian companies seek to improve average oil recovery rate of 25%.  India seeks to develop its offshore resources.  India seeks bidders for its domestic industry. –Investor Road Show stopped in London, Houston, Dubai, Perth, and Calgary in early 2006.  Indian companies seek to improve average oil recovery rate of 25%.  India seeks to develop its offshore resources. NELP VI  PFC Energy rated India a bright prospect for E&P –Creation of a new petroleum and natural gas regulatory board –Promising gas and petroleum discoveries. –Attracting interest of companies such as British Gas, Shell, and Premiere Oil  PFC Energy rated India a bright prospect for E&P –Creation of a new petroleum and natural gas regulatory board –Promising gas and petroleum discoveries. –Attracting interest of companies such as British Gas, Shell, and Premiere Oil Cairn Energy operates Rajasthan exploration discovered 380-700 million recoverable barrels in 2005. Reliance operates exploration (Niko Resources partner) of Krishna-Godavari discovered 14 trillion cubic feet natural gas in 2002 Recent Major Oil and Gas Discoveries Commercial OpportunitiesIndia and the Global Energy Market Source: Company Interest—Lloyd’s List (April 11, 2006); Discoveries—India’s Directorate General of Hydrocarbon’s website http://www.dghindia.org; Oil Recovery—Lloyd’s List (October 22, 2004); Offshore—Oil&Gas Journal (January 16, 2006) http://www.dghindia.org Oil Natural Gas

15. 14Filename/RPS Number Back-up

16. 15 Operators of NELP Issued Blocks India seeks to attract private investors to enhance domestic production of oil and natural gas. Company Name NELP Round (# of Blocks) -Sole/Consortium- Operate (#) State Partner IIIIIIIVV Birckbeck Investment 0/1N Cairn Energy1/00/20/85Y ENI S.P.A0/22Y ENPRO Finance0/22Y Geoglobal Resources 0/10/21/11Y Hardy E&P0/20/100/1Y Jubilant Enterprises0/10/20/11Y Mossbacher0/11Y Nikko Resources0/21/11N OAO Gazprom0/11Y Phoenix Overseas0/11N Reliance9/22/20/100/13/229N India inducted the New Exploration Licensing Policy (NELP) in 1999 to attract greater private investment in the exploration & production of oil and natural gas 53 48 State-Owned Companies Private Companies India and the Global Energy MarketIndian Initiatives to Address its Energy Situation Source: NELP investor data compiled from India’s Directorate General of Hydrocarbon’s website: http://www.dghindia.org/index.htmhttp://www.dghindia.org/index.htm

17. 16 Indian companies operate overseas in the exploration and development of oil and natural gas assets. Myanmar: ONGC exploration (Daewoo Operator)—4 TCF Natural Gas discovered 2004 Sakhalin 1: ONGC development (Exxon Operator)—250,000 b/d in 2006 Vietnam: ONGC exploration (British Gas Operator))—2 TCF Natural Gas discovered 2000 Iran: ONGC operates Farsi Offshore exploration— 540MMbbls estimated Syria: ONGC development (Al Farat Operator)—220,000 b/d in 2005 Qatar: ONGC operates Najwat Najem exploration Iraq: ONGC operates exploration in Block 8 Libya: ONGC exploration (TPAO Operates) NC188-89 Sudan: ONGC development (CNPC Operates)—3 MM barrels/day Ivory Coast: ONGC exploration (Sinopec Operates) Cuba: ONGC exploration (Repsol Operates) 6 Blocks Venezuela: ONGC development (PdVSA Operates) San Cristobal Yemen: Reliance development (CalValley Operates) Block 9 Oman: Reliance operates exploration Block 18 Libya: IOC & OIL operate exploration of Sirte Basin block ONGC Videsh Ltd. OIL Videsh Ltd. Reliance Industries India Overseas E&P Assets 2006 India and the Global Energy MarketIndian Initiatives to Address its Energy Situation Source: Company Websites