1 Commercial Opportunities in Nigerian Oil and Gas Sector Engnr. Funsho Kupolukun Group Managing Director Nigeria National Petroleum Corporation Gulf of Guinea Breakfast Session OTC 2007, Houston May 2, 2007

2 n Global Oil and the Gulf of Guinea n Overview of Nigerian Oil and Gas Industry n The Growth Agenda n Emerging Commercial Opportunities n Key Enablers and Interventions n Concluding Remarks CONTENT

3 In both oil and gas, there has been a band shift in prices occasioned by supply tightness and growing demand. Secure supplies is therefore a major agenda issue for the global oil and gas industry as well as governments alike GLOBAL OIL AND THE GULF OF GUINEA Price Shifts

4 Whilst OPEC remains the primary point of call for global capacity additions, the Gulf of Guinea countries, particularly Nigeria and Angola, are evolving as geo-strategically important suppliers to the global market, particularly to the USA GLOBAL OIL AND THE GULF OF GUINEA Growing Importance of Gulf of Guinea

5 Deepwater Comparative Reserves The Gulf of Guineas growing importance is supported by a high level of prospectivity. Almost 40% (14 bn bbls) of global deepwater discoveries have come from this region. About half of this is from Nigeria. Recent discoveries have brought the region to the forefront of deepwater technologies Deepwater Discoveries GLOBAL OIL AND THE GULF OF GUINEA Gulf of Guinea Prospectivity

6 From this robust base, a significant contribution is expected from this region to global capacity. An estimated 7mmb/d or 9% of worlds total daily production is expected to come from this region in Relative to the world average of 3%, production capacity growth in Africa (specifically Gulf of Guinea) is forecast to be highest at about 7% annually THE GULF OF GUINEA Projected West African Crude Oil Output World Average 3%

7 n Global Oil and the Gulf of Guinea n Overview of Nigerian Oil and Gas Industry n The Growth Agenda n Emerging Commercial Opportunities n Key Enablers and Interventions n Concluding Remarks CONTENT

8 Nigeria is a key component of the Gulf of Guinea. It represents 70% of total Gulf of Guinea reserves and is the anchor country for the region in terms of supply THE NIGERIAN OIL AND GAS INDUSTRY Nigeria In the Gulf of Guinea Reserves Production

9 Nigerias aspirations for its oil and gas industry are anchored on 2 key elements – capacity growth and economic integration of the industry with the macro-economy. The nation aspires to grow GDP at a 10% rate. The strategic thrust is therefore that of alignment between global and domestic objectives. Core Sector Aspirations Grow Crude oil reserves to 40bn barrels by 2010 Production capacity to 4.5mmb/d by 2010 Gas revenues to match crude oil revenues Domestic gas market and address environmental issues Maximize sector value to the Nigerian economy Improve Nigerian capacity and content in industry Enhance multiplier effect on economy Transit oil to an integrated oil and gas economy Recent Presidential Mandate … Attain a GDP growth rate of 10% THE NIGERIAN OIL AND GAS INDUSTRY National Aspiration for Oil and Gas

10 To deliver the aspirations, between , the industry has refocused strategically on 7 key areas vital to coping with the rapidly evolving global and local industry landscape. These 7 areas have anchored industry operational focus and the achievements to date 1.Crude Oil Capacity Growth Aggressive exploration and development to arrest production decline and grow capacity to 4mmb/d by Enable / Sustain Linkage of Industry to Economic Growth Aggressive development of the National Content Agenda to facilitate manufacturing and industrial capacity growth The Renewable Energy Initiative to stimulate agriculture sector growth The Marginal Fields Initiative to stimulate local participation 3.Stimulating Gas Sector Growth Aggressive growth of export sector to leverage evolving opportunities in global growth in gas Stimulate domestic sector gas growth to underpin economic growth THE NIGERIAN OIL AND GAS INDUSTRY 7 Industry Focus Areas

11 4.Stimulate Downstream Product Availability and Growth Refinery performance improvement Retail outlet growth Private sector participation in product marketing 5.Develop Sustainable Financing Solutions for the Industry Activity 6.Developing Legal and Fiscal Environment to Support Sector Aspirations 7.Develop Organisational Capacity in NNPC to Manage and Exploit Evolving Industry Challenges and Opportunities Respectively THE NIGERIAN OIL AND GAS INDUSTRY 7 Industry Focus Areas

12 Reserves have continued to grow steadily in Nigeria. Over 7bn bbls have been discovered in the deepwater acreages bringing the total national crude oil reserves to about 35bn bbls from about 22bn bbls pre Significant scope for reserves growth still exists THE NIGERIAN OIL AND GAS INDUSTRY Performance Update - Reserves Growth 59% increase

13 Similarly, production capacity has grown steadily to an installed capacity of about 3mmb/d in More recently in 2005/2006, an additional 790mmboed was added to the nations supply capacity. In essence despite major disruptions to production, the industry has been able to sustain production at within quota limits in view of the robust and diverse supply base THE NIGERIAN OIL AND GAS INDUSTRY Performance Update – Production Capacity Growth

% Flared Gas flares have reduced significantly to about 32% by end Significant growth in domestic and export gas utilisation will end flares by Steady drop in % gas flared 14 THE NIGERIAN OIL AND GAS INDUSTRY Performance Update - Gas Sector

15 T12 started 10/99 T45 FID 03/02 T3 started 12/02 T6 FID 07/04 T4 started 07/05T4 started 07/05 T5 started 12/05T5 started 12/05 T6 RFSU 2008 ~$1.5 bn 3 rd Party financed USD 569million dividend Over 500 cargoes delivered Total Investment - $11.4 bn ($bn)T1&2T3T4&5T6 Plant Ships L N G BGT NLNG 22 Mtpa LNG, 3.5 Mtpa NGLs 24 dedicated LNG tankers Highlights NLNG was commissioned in 1999 with 2 Trains at startup. It has since expanded rapidly to 5 trains by 2005 and the 6 th is planned for commissioning in To date, the NLNG project has delivered over $3.6bn in revenues to Nigeria, part of which has been reinvested for further growth. THE NIGERIAN OIL AND GAS INDUSTRY Performance Update - Gas Sector

16 n Global Oil and the Gulf of Guinea n Overview of Nigerian Oil and Gas Industry n The Growth Agenda n Emerging Commercial Opportunities n Key Enablers and Interventions n Concluding Remarks CONTENT

17 To deliver the GDP aspiration as well as contribute to global economy growth, Nigeria needs to grow capacity significantly. The sector has assembled and is progressing a robust portfolio of projects planned to grow capacity to about 4mmb/d by The portfolio comprises a mix of deepwater and conventional terrain projects THE GROWTH AGENDA Crude Oil Capacity - Future Capacity Growth

18 THE GROWTH AGENDA Overview of Key Projects – Conventional Terrain Over 2.0mmb/d additional capacity is planned from the shallow offshore concessions between

19 Over 1.0mmb/d of additional capacity is anticipated from about 7 major deepwater projects. THE GROWTH AGENDA Overview of Key Projects – Deepwater Terrain

20 In gas, there is a major transformation in forecast utilisation for both the domestic and export sector. Domestic demand will grow to about 1000mmscf/d by 2006 and forecast to grow to over 10,000mmscf/d by LNG capacity has equally grown from zero to 22MTPA in 2006 and forecast to grow to 50MTPA by 2011 – second fastest growth in the world. Nigerias forecast gas growth is one of worlds most aggressive THE GROWTH AGENDA Gas Sector Growth

21 Underpinning the gas demand growth is a robust portfolio of projects. The portfolio comprises Methanol, GTL, Power and Fertilizer projects THE GROWTH AGENDA Gas Sector Growth – Diverse Portfolio Opportunities

22 THE GROWTH AGENDA Major Export Projects - LNG Projects NLNG n NLNG capacity forecast 30MTPA by 2012, fastest growing LNG plant in the world n Total Investment - $11.4bn; Project has delivered over $3.6bn in revenue to date n 22MTPA LNG, 3.5 MTPA NGLs n T1-5 on production; T6 FID 07/04; n Over 500 cargoes delivered n OKLNG project will boost Nigeria LNG capacity by 22MTPA from 2011 n 22 million tonnes/year LNG Project ; 4 LNG trains of 5.5 million tonnes/yr u Trains 1 & 2 produce 100kb/d NGLs n Launch Project – trains 1 & 2 ; trains 3 & 4 to be added thereafter n FEED Commenced Feb 2006 OKLNG n Project sponsors – NNPC, NAOC, ConocoPhillips n Two LNG trains of 5MTPA capacity each n All agreements including shareholders agreement have been concluded n FEED for the plant and facilities nearing completion n FID targeted for December 2007 BRASS LNG

23 WAGP 630 km pipeline to deliver gas to Benin, Ghana and Togo by Q Initial capacity is 200 mmscf/d but will grow to 580 mmscf/d Position Nigeria to effectively capture the emerging markets of West Africa Construction commenced in 2005, commissioned April Key Projects Equatorial Guinea Gas Supply Trans-Sahara Gas Pipeline About 650mmscf/d to Equatorial Guinea and 2bcf/d thro the TSGP Strengthen regional cooperation and economic stability Anchors Nigeria as regional supply hub Other Regional Gas Pipeline Projects THE GROWTH AGENDA Major Export Projects – Other Pipeline Projects

The crude oil capacity growth has translated into major investment inflow in the industry. For instance between 2000 and 2006, FGN funding levels more than doubled from about $2.5bn to over $6bn. NB: investment includes IPP UPSTREAM PERFORMANCE Crude Oil Capacity Growth – Funding Capacity Additions 24

25 Over $60bn is anticipated to be spent through to 2008 alone and significantly more in future years. Relative to competing OPEC countries, Nigeria is experiencing one of the highest investment inflows in the industry creating opportunities THE GROWTH AGENDA Industry Investment Levels

26 n Global Oil and the Gulf of Guinea n Overview of Nigerian Oil and Gas Industry n The Growth Agenda n Emerging Commercial Opportunities n Key Enablers and Interventions n Concluding Remarks CONTENT

27 EMERGING OPPORTUNITIES Gas Pipeline Infrastructure To support the growth in gas utilisation, a major growth in gas pipeline infrastructure is planned. An infrastructure blueprint is currently being developed which will triple the gas transmission capacity in the next few years n Pipeline Capacity Growth and Extensions: n Expand existing ELPS throughput capacity n New pipeline linkages from South to North n Interconnector between East and Western grid n Connectors between domestic and export Proposed Gas Pipeline Network

28 EMERGING OPPORTUNITIES Gas Processing Plants About 3-4 gas processing plants with capability to strip NGLs is required by 2009/2010. These could be merchant plants n Central Processing Facilities n About 3-4 gas processing plants are required to support growth n Plants will be able to strip NGLs n Plants may be tolling / merchant plants or owned by the equity owners of the gas n The CPFs need to be in place by 2009/2010 when gas demand peaks

29 EMERGING OPPORTUNITIES Other Gas Support Services In addition, there will be numerous opportunities in the support services for gas to cope with the massive growth in gas delivery systems n Metering, monitoring and Control Systems n Pipeline integrity systems n Gas specification management systems n Other maintenance and support systems

30 EMERGING OPPORTUNITIES ENGINEERING & FABRICATION With over $85bn spend in the next 5 years and Policy requirements to domicile Engineering Design and over 50% of fabrication works in country, international EPC companies, Investors & engineering companies are welcome to set up in Nigeria

31 EMERGING OPPORTUNITIES CONSTRUCTION & INSTALLATION Pipe-lay & Crane Barges Inspection services & project Mgt support Marine construction equipment & support bases Pipe Spooling facilities Support clusters & skilled Maintenance crew Over 4000 km of med/ large dia pipeline to be installed Installation of jackets, decks, platforms, etc(1250k MT) Integration, hook-up & commissioning of all future FPSOs & Platforms Identified gaps KEY INDICATORS FOR INVESTMENT OPPORTUNITIES The Nigerian Content Policy is strongly linked to the cabotage act which requires Nigerian Flagging of vessels operating in Nigerian waters. Coupled with the spike in work load, opportunities abound for new entrants to buy into this emerging segment. MC Dermott Lay barge

32 EMERGING OPPORTUNITIES SHIPPING & MARINE SERVICES The Nigerian Oil and Gas industry is open to investors who are keen to partner with Nigerian companies in the provision of Tankers and coastal vessels to service the operations. This will offer additional opportunity in the areas of Ship Management expertise and training of seafarers

33 n Global Oil and the Gulf of Guinea n Overview of Nigerian Oil and Gas Industry n The Growth Agenda n Emerging Commercial Opportunities n Key Enablers and Interventions n Concluding Remarks CONTENT

34 ENABLING INITIATIVES Targeted Incentives for Investors Effort is ongoing to secure a targeted set of incentives for would-be investors who need to install major capacity in Nigeria. The incentives include some guaranteed work to justify investment

35 Key Incentives Free trade zones will provide significant incentives for oil and gas investors by lowering investment barriers and enhancing project profitability 4 Free Trade Zones n Calabar n Lekki n Olokola n Onne n No corporate income tax n No customs & excise duty on imports n Centralised approval process for permits – one stop shop n Excise duty on exports only ENABLING INITIATIVES Free Trade Zones

36 Despite investment by successive governments and corporations, the level of success of many of the past initiatives have been largely low and unsustained ENABLING INITIATIVES Niger Delta Interventions

37 n Global Oil and the Gulf of Guinea n Overview of Nigerian Oil and Gas Industry n Emerging Commercial Opportunities n Key Enablers and Interventions n Concluding Remarks CONTENT

38 CONCLUDING REMARKS The opportunities are immense at over $60bn and the landscape is being prepared for willing investors to participate. Please join us. Rapid Capacity Growth Huge Opportunities A New Dawn The Nigerian Oil and Gas industry is set for a second phase of growth.