1. LAGOS OIL CLUB, NOVEMBER 21, 2011 Challenges of Nigerian Independents: Beyond 2011 Austin Avuru Managing Director/CEO SEPLAT Petroleum Development Company Limited

2. KEY DISCUSSION FOCUS 1.THE NO-GROWTH HISTORY OF NIGERIAN INDEPENDENTS. 2.THE EMERGING NEW SHAPE OF INDUSTRY FOOTPRINT 3.IMPLICATIONS FOR NIGERIAN INDEPENDENTS 2

3.  THE 20-YEAR HISTORY OF NIGERIAN INDEPENDENT  Dubri Oil (since 1987) is Nigeria’s oldest Independent Producer.  But the Landmark Takeoff of the Indigenous program occurred during 1990/1991.  Between 1990 and 2007, some 52 Indigenous Companies have been licensed to Operate Leases in the Niger Delta and Anambra Basin.  In 2004, 24 Nigerian companies were licensed to operate 24 Marginal Fields.  Independents’ Operated Production peaked at about 100kbd in 2005. Conoil and Moni Pulo accounted for 70% of this peak production. 3

4.  THE 20-YEAR HISTORY OF NIGERIAN INDEPENDENT  Seven Marginal Field Operators currently produce about 22,000 bopd. Two of them account for 60% of this figure.  On the average, Independent production over the 20 years from 1990 to 2010 has stayed below 80kbd, often oscillating between 40kbd and 100kbd.  Average life cycle from First Oil to Peak Production to Rapid Decline is less than 10years for Independents.  Apart from Conoil, most Independents Operations are single block/single field developments with little or no prospects for sustainable growth in reserves and production. 4

5.  CURRENT INDUSTRY FOOTPRINT DeepWater, the tuff of Deep Pocket Multinationals -Shell -ExxonMobil -Chevron -Total In the Traditional Onshore/Shallow Water, five early comers sit on some 88% of the Reserves and Production -Shell - ExxonMobil - Chevron - Total - Agip 5

6.  CURRENT INDUSTRY ….. (cont’d) 6 Shell Chevron Mobil Total Agip OML 04 OML 41OML 38

7.  THE EMERGING SHAPE OF INDUSTRY FOOTPRINT  On January 29, 2010, SEPLAT pioneered a Commercial, operated Asset acquisition transaction with the Shell Joint Venture.  Five more transactions have followed this, and are at different stages of rancorous closure. 7

8. NPDC/SEPLAT JOINT VENTURE  THE EMERGING SHAPE OF ….. (cont’d) 8

9. OML 42OML 34 OML 30 OML 26 OML 40 NPDC/SEPLAT NEW ACQUISITIONS 9

10.  IS THIS A GAME CHANGER??  But over 52 Nigerian Companies have been awarded blocks in the past 20 years without any growth in Indigenous Production??  Could the prospects now look more promising??  In the immediate horizon are six possible Independents poised to seize the moment. SEPLAT OANDO FIRST HYDROCARBON CONOIL NIGER DELTA NECONDO 10

11.  These fore-runners can quickly build up Operational and Financial Capacity and set the pace for a few others to join.  A lot, however, depends on the disposition of NNPC/NPDC  THE KEY GAME CHANGER HERE IS THE ABILITY OF THIS NEW GENERATION OF INDEPENDENTS TO BUILD OPERATIONAL CAPACITY AND RAISE SUBSTANTIAL FUNDS TO FINANCE THEIR GROWTH. 11

12.  IMPLICATIONS  Production from Nigerian Independents could top 250kbd by 2015.  Annual spend by Independents could top $1.5billion by 2014.  These activities will precipitate a full-blown Exploration/Appraisal Development Campaign focusing on: - Deeper Plays -By-passed Plays -Small Fields Development 12

13.  IMPLICATIONS (cont’d)  The result will be Accelerated growth of Nigerian Independents Renewed Onshore Exploration, Appraisal and Development Campaigns Accelerated Gas Development Production/Reserve Growth 13  Some 60% of Domestic Gas supply in the West will come from these new locals.  The Western Franchise of the Gas Master Plan will be hinged on them.

14.  KEY CHALLENGES  Funding  Operatorship/ Capacity / Competencies  Security  Community Management  JV Management - Partnership 14

15.  CONCLUSION  There is a window of opportunity now to build a new crop of medium-sized Independents in Nigeria.  The combination of some PIB (Lease Administration) provisions and Voluntary Asset rationalisation by the Majors will fuel this opportunity.  The Unfolding scenario could see the dominance of Independents in the Onshore Niger Delta. 15

16. THANK YOU 16