1. The State of Energy Resources and Supply in Nigeria - Challenges, Constraints and Opportunities April 24, 2012 Dr. David Ige Group Executive Director, Gas & Power NNPC Nigerian Association of Energy Economics Sheraton, Abuja

2. Outline  Overview of the Nigerian Oil & Gas Industry  Supply Perspective & Challenges  Investment Opportunities  Conclusion 2

3. Overview of the Nigerian Oil & Gas Industry - Huge Resource Base Abundant oil and gas reserves base. 3 Crude Oil Reserves Natural Gas Reserves

4. Our Aspiration for Oil 4  Grow crude oil reserves from 35bn bbls to 40bn bbls Refocus efforts on exploration both in existing and frontier basins  Grow production capacity from about 2mmb/d to 3mmb/d Arrest decline in mature assets through increased work-over and secondary development activity Accelerate new field development plans  Ensure better linkage of the sector’s activity with the wider economy, leveraging the National Content law

5. Our Aspiration for Natural Gas 5 G AS TO P OWER “… By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol.” G AS B ASED I NDUSTRIALISATION H IGH V ALUE E XPORT S TRATEGIC T HEMES OF G AS M ASTER P LAN Consolidate Nigeria’s position and market share in high value export markets Regional gas pipelines – consolidate national footprint and influence Deliver on President’s Gas Revolution Agenda to: Create regional hub for gas-based industries – fertilizer, petrochemical and methanol Transform gas sector to value adding sector Deliver Gas for at least threefold increase in generation capacity by 2015 LNG Regional Pipelines

6. Projection of Domestic Energy Demand 6 Socio-economic data on Nigeria point to an era of sustained energy demand growth, either for vehicular use, industrialization or for electricity generation

7. Outline  Overview of the Nigerian Oil & Gas Industry  Supply Perspective & Challenges  Investment Opportunities  Conclusion 7

8. Crude Oil and Condensate Production Profile 8 High production decline rates in PSC operations

9. Unprecedented Growth Requirement in Gas Sector Delivering the aspiration translates to an aggressive growth which is unprecedented. In reality, a brand new industry is being created from scratch at a pace which challenges the pace of gas supply development, delivery of physical infrastructure and stability of the market

10. Short Term Gas Supply to Power - West Area 10 Based on current projections, the shortfall in supply in the Western Area for 2012 is estimated at about 400mmcf/d by end year

11. Medium Term Power Sector Gas Demand/Supply Profile 11 Similarly in the medium term, will align demand with supply. The deficit in 2016 could be bridged with possible acceleration of the Odidi development slated currently for about 2018

12. Challenges of Supply 12 1.Commercial : Evolution to free market  Deregulation  Market led gas pricing 2.Infrastructure 3.Capital 4.Human Capacity 5.Industry Structure – Oil vs Oil & Gas Industry

13. Enabling Policy Thrust 13 The aspiration is supported by a set of enabling policy interventions which are already being implemented

14. Critical Pipeline Infrastructure

15. Western Gas Infrastructure 15 ELPS 2 OBIAFU-OBRIKUM-OBEN (OB3) WESTERN CPF / OBEN – KOKO PIPELINE GAS SUPPLY TO OLORUNSHOGO ELPS A OBEN – GEREGU  36” x 136km;  Project completed in 2011  Gas supply to Geregu power plant and access for gas to the North  24” x 31km;  Line Pipes procured and all lengths welded  Project to be completed by May 2012  24”/36” x 104km;  Project progressing steadily with issues being addressed  36” x 324km;  Doubling pipeline capacity to 2 bscfd to support the growing demand in the West  Construction about to commence  48” x 127km;  Contract about to be awarded; completion in 2013/2014  Tech configuration completed by Kellogs  Ready to commence Pre-FEED 1n 2011, we focused on reinforcing and expanding the Western supply infrastructure 12 3 4 5 6 1 2 6 3 4

16. Capital Expenditures 16  High finding, development, and production costs continue to be a challenge in the conventional and deepwater environments.  Capital costs will average $13.9 billion and $6.1 billion per annum in the JV and PSC operations respectively, in the 2011 to 2015 period. Significant number of new oil and gas projects provide opportunity to rationalize for greater efficiency JV + PSC JV only

17. Stimulating Demand – Gas Based Industrialization - Koko FTZ Gas Industrial Complex 17 C ENTRAL P ROCESSING F ACILITY FTZ I NFRASTRUCTURE P ORT I NFRASTRUCTURE P ETROCHEMICAL P LANT F ERTILIZER P LANT 1.3MT/400KT PA PE/PP Plant Xenel of Saudi Arabia Largest Plant in Africa Our gas based industrialisation agenda is kicking off with the Koko FTZ project in Delta State. This will be Africa’s largest gas industrial city when completed Critical Foundation Projects Anchor Investments 2*1.3MTPA Fertilizer Plant Nagarjuna of India

18. Outline  Overview of the Nigerian Oil & Gas Industry  Supply Perspective & Challenges  Investment Opportunities  Conclusion 18

19. Investment Opportunities 19 GAS PROCESSING FACILITY / GAS BASED MANUFACTURING INDUSTRIES FINANCIAL SERVICES UPSTREAM GAS DEVELOPMENT GAS TRANSMISSION PIPELINES LNG & LPG PLANTS PIPE MILLING AND FABRICATION YARDS $16 Billion Investment Opportunity 1 2 3 4 6 KOKO FTZ INFRASTRUCTURE, PORT INFRASTRUCTURE & REAL ESTATE DEVELOPMENT 5 7

20. Outline  Overview of the Nigerian Oil & Gas Industry  Supply Perspective & Challenges  Investment Opportunities  Conclusion 20

21. Conclusion 21 1.Demand growth is and will continue to be unprecedented 2.Supply will always be the challenge tempering broad demand growth 3.Next 5-8 years are critical in addressing key structural issues impacting supply 4.Good progress so far, but momentum needs to be sustained 5.Significant scope for explosive growth thereafter