The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project The Challenges of the Gassi Touil Integrated Project Algiers, April 04, 2006 NOT AN OFFICIAL UNCTAD RECORD

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project  First Integrated Project (Exploration, Development, Production, Liquefaction & Commercialization of Gas) in Algeria  Launched initially by Sonatrach in 2002  Scope increased by Sonatrach in 2004 as initial reserves were perceived as insufficient to pay for development & risks  Very tight schedule (start-up end of 2009), with penalties if dates not met  Awarded to Repsol YPF and Gas Natural in December 2004  Effective Date May 2nd, 2005

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Repsol YPF’s Assets in Algeria

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Contract Areas

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Partners: Association: Repsol YPF (60% Operator) + Gas Natural (40%) Upstream: Sonatrach (35%) + Repsol YPF / Gas Natural (65%) Transport: Sonatrach (100%) LNG Plant: Sonatrach (20%) + Repsol YPF / Gas Natural (80%) Commercialization: Sonatrach (51%) + Repsol YPF / Gas Natural (49%) Contract: Production Sharing: 30 years ( ) Production: Start Up: End of 2009 Sales 100% (plateau): 4 MTA LNG + Associated Liquids Gassi Touil – Rhourde Nouss QH LNG Integrated Project Contract & Expected Production Data

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition  One of the 10 most Large & Complex E&P Projects in the World. Initial CAPEX (100%) estimate 3 B$  The present extremely Tight Oil & Gas Market makes it very difficult to control Schedules and Costs, and to find the adequate Resources  Expect to have a peak of some 5 - 6,000 Persons (mainly Algerians) working during the Construction Phase  Some Direct Employees once on Production, plus a similar number in indirects  Cooperation among the partners, particularly with Sonatrach, and with qualified service companies, is critical to success Gassi Touil – Rhourde Nouss QH LNG Integrated Project Main Challenges

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition  Very Aggressive Exploration Campaign, with a cost of 105 MM$ (Contractual 35 MM$) in 5 years  The largest 3D Seismic Campaign ever launched in Algeria (3,500 km 2 )  A total of at least 19 Identified Accumulations in a surface of 3000 km 2 to be Explored / Appraised or Developed  Up to Three Different Reservoirs per Accumulation. The most important one being the Hamra Quarzites, never economically produced before  Production of Hamra Quartzites advanced to 2009 (Contract 2012) to obtain real drilling and production data as soon as possible Gassi Touil – Rhourde Nouss QH LNG Integrated Project Main Challenges

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition  85 existing wells to be inspected, tested, secured, possible workovers, etc. Some will be abandoned, others as producers  Additionally, some 40 – 50 new wells will be drilled for production start up  Hamra Quartzite drilling (estimate 100 days per well) and fracturing extremely challenging. HQ productivity critical to the success of the project.  Up to 7 Drilling and Workover Rigs working simultaneously  Gas Treatment Facilities (22 – 23 MMNm 3 /d) at three locations, including Separation and Injection of CO 2 and some 600 km of in-field flowlines and pipelines  A 4 Million Tons per Year LNG Plant to be located at Arzew. Possible second LNG Train to be decided by 2008 Gassi Touil – Rhourde Nouss QH LNG Integrated Project Main Challenges

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Reservoirs

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Main Progress Milestones

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Exploration – Map & Works Minimum Phase I (5 Years) 3 Exploration Wells 500 km 2D Seismic 150 km 2 3D Seismic 1 Long Production Test 1 Hydraulic Fracture 35 MM$ Planned Phase I (5 Years) 8 Exploration Wells 1430 km 2D Seismic 260 km 2 3D Seismic 1 Long Production Test 1 Hydraulic Fracture > 105 MM$

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project The largest seismic campaign ever in Algeria

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Full scale reservoir characterization as a key tool to drill new opportunities and predict reservoir behavior Matrix Permebility 0.1 mD

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Advanced Well Design, Planning & Architecture High-tech to optimize productivity from the Ordovician fractured reservoirs

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Depleted fields rejuvenation Existing wells surveillance campaign

16 RESERVOIR: HQ – 5016 m - P RES = psi s.g. equiv. - Static BHT = 158°C - CO 2 < 11%, N 2 <1% BRIDES WELLS TO ORDOVICIAN CP 30’’ or +/- 9 m 26” drilling, WBM 1.05 s.g. 425 m : 18 5/8” Csg, 87.5#, K55, BTC 16” drilling, OBM 1.25 s.g 2350 m : 13 3/8” Csg, 68#, N80, BTC cement to surface : Light Cement or DV 12 ¼’’ drilling, OBM 2.10 s.g : 9 5/8” Csg, 53.5#, special drift, P110,Tenaris Blue Cement to surface : ~2500 m, in Lias Anhydritique 8 ½” drilling, OBM 1.30 to 1.50 s.g. (Possibility of ‘’Flow Drilling’’) 4470 m 4670 m : 7” liner, 32#, P110, Tenaris Blue ~ 2250 m, +/-250 m above 9 5/8” DV 6” drilling, OBM 1.45 s.g m : 4 ½” liner, 13.5#, P110, Tenaris Blue WH 15 K Compact opt DV BRD 4, 5, 6 24” WBM 1.05 – /8”: (Sénonien Lagunaire Anhydrites & Dolomites) 17 1/2” OBM 1.10 – /8”: (Top Lias: Lias argilo-dolomitique) 12 ¼” OBM 2.10 – /8”: (Base Lias: Lias argileux) 8 3/8” - 8 1/2” OBM 1.24 – ”: (Top Ordov.: DMK) 6” OBM ½”: (Grès d’El Atchane) DV Hz B

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project CO2 Injection CO2 Injection Project – Defined Workflow

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Upstream Facilities Present Market Environment very difficult: Large increases in equipment and materials prices, Much longer delivery times, Most quality contractors are saturated To accelerate engineering, FEED done mostly in-house Preliminary Open Book Estimate Contract signed with major international contractor, expect to sign EPC in October 2006 First Gas Planned September 2009

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Upstream Facilities  The integration of a large number of gas fields of different characteristics (high pressure vs depleted, wet vs dry, high CO 2 vs sweet) present significant challenges for an efficient, long term development  To optimize this very complex network, large scale integrated simulations, from the reservoir to the facilities, have been developed.  This allows the Project Team to select the optimum development scenarios (e.g. compression) and to update them easily

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project LNG Facilities  The Market Situation is even more difficult than in Upstream Facilities, as only a very small number of contractors are qualified to design & build LNG Plants  The number of LNG projects under development has increased dramatically, giving the international contractors a very large leverage  This is causing significant costs increases in many projects around the world

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project LNG Facilities

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Layout of LNG Facilities at Arzew

The Challenges of the GT Project – UNCTAD – 10th Africa Oil & Gas, Trade & Finance Conference & Exhibition Gassi Touil – Rhourde Nouss QH LNG Integrated Project Conclusions  Very Complex and Demanding Project, in very Difficult Market Circumstances  Very Tight Schedule, but presently On Target  Productivity of the Hamra Quartzite is the cornerstone of the project  The Project will use Cutting-Edge Technology in several areas to overcome the technical / economical challenges  Close collaboration among the partners, in particular with Sonatrach, is key to the success of the project