Commercial Aspects of Gas Development in Southern Africa 21 May 2014

Paul Eardley-Taylor

Oil & Gas: Southern Africa

+27117217829; +27716037136

paul.eardley-taylor@standardbank.co.za

1 Contents

Section Page

1. Introduction to Standard Bank 2

2. Market Introduction 5

3. South Africa 11

4. Mozambique 21

5. Regional Snapshot 28

6. What lies ahead? 30

Private and confidential

Section 1:

Introduction to Standard Bank

3

On the ground presence in 20 African countries

Natural partner in Africa

152 years of experience in Africa

Largest bank in Africa

– Over 42,000 employees in Africa

– Over 1,200 bank branches and 8,600 ATMs

Growth on the continent is a key strategic focus area

Market Capitalisation – ZAR 231 billion (19 May 2014)

Presence across the region and in key markets :

– IBTC Chartered Bank, Nigeria

– CFC Bank, Kenya

– Angola

– Mozambique

– Recently opened in South Sudan

Angola (20.1 million)

Botswana (2.1 million)

Côte d’Ivoire (19.8 million)

Mozambique (23.5 million)

Ghana (25.2 million)

Kenya (43.0 million)

Lesotho (1.9 million)

Malawi (16.3 million)

Mauritius (1.3 million)

Nigeria (170.1 million)

South Africa (52.2 million)

Swaziland (1.4 million)

Tanzania (43.6 million)

Uganda (35.9 million)

Zambia (14.3 million)

Zimbabwe (12.6 million)

Presence in 20

African countries

Unrivalled

knowledge of sub-

Saharan Africa

through on-the-

ground presence

Strong product

teams in

Johannesburg,

Lagos, Nairobi and

London

Key points Most comprehensive network in Sub-Saharan Africa

Namibia (2.1 million)

South Sudan (10.6 million)

(Population) Source: CIA World Factbook

Ghana

Nigeria

South

Sudan

Kenya D.R.C

Angola

Namibia

South

Africa Lesotho

Swaziland

Mauritius Botswana

Zambia

Zimbabwe

Mozambique

Malawi

Tanzania

Uganda

Standard Bank

Stanbic Bank

Stanbic IBTC Bank

CFC Stanbic Bank

Ethiopia

Côte d’Ivoire

DRC (73.6 million)

Ethiopia (91.7 million)

4 O&G Credential - Seplat Petroleum: US$535m IPO on NSE and LSE

Seplat closed its US$500m (N82.5bn equivalent) IPO on 14 April 2014 listing

shares on both the Nigeria Stock Exchange (“NSE”) and London Stock

Exchange (“LSE”). The transaction is notable for many reasons:

– first Nigerian company to have its ordinary shares dual listed on both

the LSE and the NSE

– largest ever IPO in Nigeria

– largest IPO in Sub Sahara Africa (ex SA) since 2008

– largest African Oil & Gas IPO since 2011

Standard Bank/Stanbic IBTC worked with regulators in Nigeria and London to

harmonise listing requirements to ensure a dual-primary IPO including:

– first Nigerian company to obtain UKLA approval to list Shares on the

Main Board of the London Stock Exchange

– first ever equity bookbuild process in Nigeria

– first IPO in Nigeria to settle in T+3 days

Standard Bank/Stanbic IBTC managed an extensive marketing campaign for

the Company, including:

– attending Standard Bank investor conferences since 2010

– extensive pilot fishing early in the IPO process to c. 50 investors

– award winning research analyst, Lionel Therond, publishing a 95 pg

research report sent to c. 1,000 investors globally

– investor education to over 100 investors in 10 days by 2 analysts

– Seplat management conducted a two week IPO roadshow in Nigeria,

UK, Europe, U.S., South Africa and Asia, meeting over 130 investors

The IPO included a global bookbuilding exercise whereby demand from

Nigeria built quickly with sizeable orders from key Pension and Insurance

funds. International and HNW investors showed strong demand such that

the books were covered going into the final week of the roadshow: Standard

Bank delivered early orders to ensure this successful “covered” messaging

The IPO book of demand closed oversubscribed with 310 investors, pricing

at 210p or NGN 576 per share, representing a premium valuation to peers

Standard Bank’s understanding of the Niger Delta and Pioneer Tax status,

which Seplat obtained in Feb-14, meant we were able to generate significant

orders from key international funds at a superior valuation

Standard Bank acted as Stabilisation Agent and Settlement Agent and was

integral to the successful listing debut, where shares traded up 6% in early

LSE trading and 5% “limit-up” on the first day trading on NSE

Term sheet Transaction highlights

Issuer overview Seplat Petroleum Development Company Plc

Listing Nigeria Stock Exchange and London Stock Exchange

Transaction type Initial Public Offering

Standard Bank role Joint Global Co-ordinator, Bookrunner and Joint Lead

Issuing House

Issue size US$500m or NGN 82.5bn (pre over-allotment option)

US$535m or NGN88.3bn (incl. over-allotment option)

Offer price NGN 576 (NGN535-700) / LSE: 210p (195-255p)

Shares offered 143,284,130 primary shares

Over-allotment option 10,336,183 primary shares

NSE / LSE split 52% (NSE) / 48% (LSE)

Pre-Money Valuation US$1.3bn to US$1.7bn

Market cap post money US$1.9bn (pre over-allotment option)

IPO % Market cap 28.7%

Demand overview

39%

4%

38%

2% 2%

15%

Standard Bank BNPRenCap CitiRBC Co-leads

48%

26%

13% 8%

4% 1%

Nigeria UKU.S. South AfricaEurope RoW

Demand by bank Demand by geography

Seplat Petroleum Development

Company Plc

April 2014

US$500m / NGN82.5bn

Dual listing on the Nigeria and

London Stock Exchanges

Joint Global Co-ordinator, Joint

Bookrunner and Joint Issuing House

(1) Excluding a Seplat managed order, Standard

Bank generated 39% of demand for the IPO, more

than any other bank

(1)

Insert front cover of

prospectus

Private and confidential

Section 2:

Market Introduction

6 African Oil & Gas: Snapshot

Oil & Gas

activities in Africa

dominated by

Nigeria, Angola,

Egypt, Algeria

and Libya

Development of

Oil & Gas

projects

challenging due

to lack of

infrastructure

Increased exploration

activities across East &

West Africa has

delivered new reserves

New frontier exploration

in deep/ultra deep

offshore, and potentially

also shale/CBM

Oil & Gas projects financed

by Oil Majors using their

corporate balance sheets

Development of infrastructure

projects catalyst for exploration

and development of O&G

projects

Financing available from

industry players, banks,

investment funds, capital

markets

World oil production 1999

(72.4mn bbl/d)

World oil reserves

(1.3 tn bbl)

North America S. & Cent. America Europe & Eurasia Middle East Africa Asia Pacific

O&G production

Key points Before 2000 Today

World oil production

(86.2mn bbl/d)

World oil reserves

(1.66tn bbl)

O&G

development

projects

20%

9%

19% 31%

11%

10% 107

98

70

686

85 40

Source: BP Statistical Review 2013

18%

9%

20% 33%

11%

10% 220

328

141 808

130 42

7 African Oil & Gas: More Upstream IOCs….

Traditionally, IOC operations (O&G Exploration and

Production activity) have been centred in Angola,

Equatorial Guinea, Gabon and Nigeria

More recently, Africa’s increasing upstream discoveries

have led to the IOCs and leading Independents entering

the following markets:

– Ghana, Kenya, Mozambique, Namibia, South

Africa, South Sudan, Tanzania, Uganda

– We show the attached upstream presence across

Standard Bank’s network and focus markets

Due to this change, Africa’s number and scale of touch

points with the IOCs has materially increased

According to Wood Mackenzie (2014), IOCs are learning

that ‘’Exploring is Easy. Producing is hard”

Key points Summary

Production < 100 kbbleq/d

Production > 100 kbbleq/d

Production > 1m bbleq/d

Appraisal Wells

Exploration Wells

Across the SB

network, IOC

activities are

broadening from the

Gulf of Guinea into

other markets

8 Africa Oil & Gas: IOC Upstream E&P

Key points Summary

IOC’s expected to

have largest capex

spend to 2020

Total, Tullow, Eni

and Anadarko top

drillers in 2013

Total to have largest

production by IOC in

Africa by 2020

Eni, Shell, Tullow,

Anadarko and Galp

Energia are

expected to grow

current production

the most to 2020 0

100

200

300

400

500

600

700

800

Kb

bl/d

ay 2013

2020

0

5

10

15

20

25

30

35

Nu

mb

er

of

dri

lled

wells

Company Type US$bn %

Majors 189 48%

NOC 130 33%

Large Cap 33 8%

Mid Cap 11 3%

Independent 15 4%

Small Cap 16 4%

Total 394 100%

Top Drillers: Exploration and Appraisal Wells Drilled in 2013.

Current and Expected Production by IOC.

Source: Wood Mackenzie

Capex Spend to 2020 by Oil Co. Type.

9 African Oil & Gas: Unprecedented growth

Accompanying the sustained growth in the

upstream segment requires similar expansion in

downstream infrastructure: Refineries, terminals,

LNG, pipelines

Infrastructure particularly important for where new

production is landlocked

Many new infrastructure projects have already

been approved

International and domestic demand putting

pressure on Africa to increase production level and

to expand infrastructure network

Oil (m bbl/d) Gas (bcm)

Production Consumption

West African

Transform Margin

Pre-salt

play

East

African

gas

Indigenisation

Rift

Valley

Existing refinery

Existing LNG

Planned refinery

Planned LNG

Key points

Source: BP Statistical Review 2013

The sustained

growth in the

upstream segment

requires similar

expansion in

downstream

infrastructure:

Refineries,

Terminals,

LNG;

Pipelines; and

Power

7.9

9.4

2.6

3.5

2002 2012

138

216

70

123

2002 2012

Overview

10 African Oil & Gas: Changing Downstream Market

In the last decade, the African downstream market has

changed. Traditional Super Majors – Exxon, Chevron,

Shell, BP – have exited the market (except in South

Africa). Despite Africa’s growth, downstream returns on

capital are less than upstream and management time is

high. Only Total has remained

The exiting IOCs have been replaced by incoming

Traders who are developing integrated trading and

downstream businesses. The leading contenders are

Trafigura / Puma Energy and Vitol / Vivo Energy.

Glencore are moving into Africa O&G, recently picking

up businesses in Chad and Zimbabwe

Downstream is a business where scale increasingly

matters. Within Standard Bank’s network and focus

markets, most of the adjacent countries have at least

two of the four highlighted companies and certain

countries four or five.

An extension of downstream is the developing storage

sector, with multiple countries exploring import / storage

projects (instead of new refineries)

Within a decade, BP,

Chevron, Exxon

Mobil and Shell have

largely exited

African downstream

(except in South

Africa). Only Total

has remained of the

Super Majors

Key points Summary

They have been

replaced by the

widespread entry of

Puma Energy and

Vivo Energy, with

Glencore closely

considering its

position

Present

Private and confidential

Section 3:

South Africa

12 South Africa - Driving the Oil & Gas Discussion

CTL/GTL

Sasolburg/Secunda 1950s-1990s

PetroSA (Mossel Bay) 1992

Refineries

Enref (Durban) 1954

Chevref (Cape Town); 1966

Sapref (Durban); 1963

Natref (Sasolburg) and 1971

Pipelines

DJP 1965

ROMPCO 2004

Lilly Pipeline 1994

Key points Rear View Mirror The Road Ahead

Offshore North/West/East Capes, KZN

Shale Gas Karoo Basin

CBM Mpumalanga, Limpopo

LNG Imports Mossel Bay ? Saldanha? Coega?

Pipelines NMPP, Offshore/Shale Lines

Renewables Ethanol/Biodiesel

Clean Fuels Refinery Upgrades

Project Mthombo ??

South Africa Oil &

Gas has only

recently attracted

investor interest,

since 2009-2010

We expect SA’s

future O&G sector to

look different from

the present

Each of Offshore, Shale Gas and LNG imports are options for South Africa,

with different pros and cons applying to each source

13 Upstream – Offshore Potential

1

Cairn India and

PetroSA signed a farm-

in agreement for crude

oil and natural gas

exploration in the

offshore Block 1

2A

Ibhubesi Gas Field

Sunbird acquired

76% of production

licence; PetroSA

holds 24%

5/6

7

Anadarko and PetroSA

recently signed an

agreement for

Exploration Rights over

blocks 5/6 and 7

9 11B/12B

Project Ikhwezi: PetroSA started

drilling at the F-O Field in 2013 with first

gas expected 3Q 2014

In June 2012, Total submitted an application

for exploration rights South of block 9.

Canadian Natural

Resources completed

conversion of their licence in

blocks 11B/12B and Total

have farmed-in. Drilling is

targeted: a

– Q2/14 & Q4/14-Q2/15

ExxonMobil recently acquired

a 75% participating interest in

Impact’s Tugela South

Exploration Right

ExxonMobil have submitted an

application for exploration rights

South-East of Sasol Petroleum

International’s offshore block on

the East Coast

Increasing Offshore activity but SA is still pre-exploration (generally) Key points

There is increasing

investor interest and

activity regarding

offshore South

African acreage…

...We list the recent

events, with existing

offshore investors

also including Shell

and BHP Billiton...

Offshore investors

are targeting oil as

well as natural gas 7

Shell plan to

drill 1-2

exploration

wells in

2014-2015

14 Upstream - Falkland Islands Parallel

The Falklands islands are situated East of South

America and comprise of approximately 340 islands.

In 1998 six wells were drilled in the North Falkland

Basin, oil was found but this was not commercially

viable.

In 2010, Rockhopper (the only company to have found

commercially viable oil) started drilling exploration well

on the Sea Lion prospect and discovered oil. Of the 10

wells which were drilled 7 proved successful.

In June 2012, Rockhopper entered into a conditional

farm out agreement with Premier Oil plc whereby

Premier acquired 60% of the interest in the North

Falkland Basin.

Rockhopper is planning a minimum of 3 exploration

and appraisal wells on its North Falkland Basin.

First oil production anticipated for the third quarter of

2017 with output of over 30,000 b/d expected to be

achieved during 2019.

Together with Premier Oil, Rockhopper is looking at

exploration opportunities in RSA as it targets a

geological province that is a continuation of the

Cretaceous rifted Eastern margin play of the opening of

the South Atlantic.

CNR/Total, Anadarko and Shell South Africa have each

applied for exploration rights to start drilling in deep

offshore waters.

Total farmed into CNR’s al Resources have applied for

a block in the Outeniqua Basin (South Coast), they

believe there could be significant oil in this region. Total

plans to drill 1 well in 2014.

Anadarko holds an interest in some of the Orange

Basin Blocks, they have confirmed that there are

similarities between the Falkland plate elements and

the South African offshore zone.

Shell South Africa Upstream obtained an exploration

right for one of the Orange Basin blocks. Shell is

proposing to drill one or two wells in their blocks in

2014/2015.

South African Offshore Falkland Islands Key points

Falkland Island:

Wind – 30.0m/s

Surface Current–

1.4m/s

Water Depth – 450m

South Africa

Offshore

Wind – 45.0m/s

Surface Current–

3.0m/s

Water Depth –

<4000m

15 Upstream - Shale Gas Potential

Key points

Sungu Sungu Gas

has applied for two

TCPs for the

highlighted areas

(combined

100,000km2)

Shell has applied for

Exploration Rights for

their Western, Central

and Eastern Precincts

(each block 30,000km2)

Falcon Oil & Gas has applied for an

Exploration Right for their 30,000km2

block. Chevron will jointly co-operate in

exploration for an initial 5 year period

Bundu Gas has applied

for an Exploration Right for

a 4,600km2 block

Sasol / Statoil /

Chesapeake were

awarded a TCP for

the yellow highlighted

area, but

subsequently

withdrew the

application

A

B

C

D

E

A:

Sungu Sungu Gas

verbally advises its

TCP applications

have been accepted

B, C & D:

Each Party has

applied for

Exploration Rights,

including

submission of an

EMP (following

granting of a TCP)

E:

Sasol / Statoil /

Chesapeake were

awarded a TCP, but

let it lapse by not

applying for

Exploration Rights

Overview

In addition, Cairn

India has applied for

a TCP in the Eastern

Cape (by Port

Elizabeth) and Rhino

Resources Ltd in

Kwazulu-Natal

(inland from Durban)

16 Upstream - Shale Gas Potential (Continued)

Introduction Key points

Shale gas has become a very important driver in meeting the energy requirements of the United States and a strategic player in

driving US economic growth in recent years

The US EIA estimates SA Shale ‘’dry’’ gas potential to be around 390Tcf (2013) which needs to be reduced for economically

recoverable amounts (e.g. Assumptions - Econometrix Report 25-50 Tcf; Wood Mackenzie 128 Tcf; report SA Government

Report 30Tcf; PASA 40 Tcf which will only be known post the drilling of exploration and appraisal wells but at these levels are

transformational. Mossell Bay was built on around 1 Tcf, Sasol’s Mozambique Gas Imports around 3 Tcf P90

Shale Gas is presently an issue under debate in South Africa, from both a political and an environmental standpoint. The SA

Cabinet announced the end of the exploration moratorium on 7th September 2012 . Subsequently, Minister Shabangu clarified

seismic work can start immediately but hydraulic fracturing would only take place once mining regulations had been amended

(which should take 6-12 months from September 2012). Not yet finalised

The technological process used in prospecting and extracting shale gas is asserted by some to cause damage to the eco-

structure and water table. Note though these concerns have been addressed in the US where shale gas exploration and

production has been successfully carried out in multiple locations (e.g. Conway Country, Arkansas, alone has had 1 000 wells

drilled since 2004).

We envisaged a significant educational programme to be put in place – addressing concerns of local environmental parties’

concerns. Exploration will likely commence thereafter, probably 2015. If initial exploration activities are successful shale gas will

likely play a significant role in future iterations of the IRP (IRP2013 update) and the first gas-fired power plant could be online by

[2018] (gas engines), with CCGT IPPs, GTL and a domestic gas likely to follow afterwards (2020?). Shale gas will then

permanently change SA’s energy balance

Multiple companies have shown interest in shale gas including Shell (3 Exploration Licence applications); Bundu (1 EL

application); Falcon Oil & Gas, together with Chevron (1 EL application) are the front runners. BEE partners for the above

companies, and other International Shale Gas players, will no doubt also follow creating further opportunities. Note that each of

the above applicants will have to hand back acreage in time

A potential catalyst

to unlock value for

the country, and to

promote economic

growth

Shale gas is

currently under

debate in SA from a

political and

environmental

standpoint

Shale gas is starting

to play a significant

role in the IRP

Update 2013

17

Upstream - The Shale Gale

Key points Overview

1 billion cubic feet of

daily natural gas

production could

replace 150,000

barrels a day of

refined petroleum

Shale gas and tight oil reside in fine-grained sedimentary rock formations known as shale. Hydraulic fracturing (“fracking”)

was invented in 1947 but on its own was only mildly successful in unlocking shale. From 2002, the process was

combined with ‘’horizontal (or lateral) drilling’’ in which a well is drilled vertically into the shale formation before extending

horizontally (for up to 3-4kms) through the shale layer increasing the length of the layer from which gas or oil can be

extracted, with fracking used to extract the product.

In 2013 the US had an estimated minimum recoverable shale gas of 665 Tcf and tight oil of 58 bn bbl.

The US shale gas production has grown by 51% p.a. since 2007 leading to falling gas prices. In 2013 the average price of

gas in the US was $3 per Mcf, $12 in Europe and $18 in Japan. To take advantage of the price difference producers are

looking at exporting LNG from the US (continued overleaf).

By 2020 Shale gas and

tight oil could

contribute $380bn and

$690bn per year to US

GDP.

Mckinsey Global Institute, July 2013

International Energy Agency, World Outlook 2013

Shale gas brought

about the opportunity

to change North

American EIUGs from

high-cost producers

to "incredibly

competitive

18

The amended MPRDA has been passed by parliament in March 2014 and will be sent to President for signing. We expect the

President to look at any of the issued raised by stakeholders but have not been fully accommodated in the amendments. The

MPRDA is unsigned as at today

In a statement, cabinet describes the MPRDA as giving effect to section 24 of the Constitution “by ensuring that the nation’s

minerals are developed in an orderly manner while promoting justifiable social and economic development”. The MPRDA

was previously amended in 2008

The Petroleum Exploration and Production (“PEP”) provisions have been relatively uncontroversial since 2002, potentially

due to the relative lack of SA’s resources developed since then. However, significant ongoing interest in shale gas, offshore

gas and – to a lesser extent – CBM mean it is vital to ensure the amended MPRDA is appropriate for O&G development.

Key Points to be addressed, amongst others:

– The abolition of the Petroleum Agency of South Africa – “Designated Agency”;

– Requirement to partially relinquish rights when renewing rights or applying for next stage rights;

– Beneficiation requirements determined by the Minister of Mineral Resources, impacting massively on the route to market

and the attractiveness of upstream;

– Potential discrepancies between the objectives of different Government Ministries (e.g. DMR v DoE) ;

– Requested 20% free carried Interest for the State during the production phase, including linkage to royalties/tax.

– Amended Broad-Based Black Economic Empowerment Requirements (increased from 9% to 26% by applying the Mining

Charter)

– The most recent amendment is the floated Production Sharing Agreement concept

Noting SA’s developmental objectives outlined in the National Development Plan, we envisage that its in SA’s interest to

encourage these investors to explore SA’s geology as a priority to determine whether SA has significant hydrocarbon

potential.

Standard Bank has provided commercial comments on the Amendment Bill and assisted multiple clients in their response

Upstream - The MPRDA

Draft Mineral and Petroleum Resource Development Act Amendment Bill, 2012 Key points

In its current form, the amended MPRDA could have a material impact on the development of the industry. We expect clarity

over time, partially through regulations, due to the clear economic advantages of promoting a growing SA O&G sector

A change to SA’s

‘’Upstream Law’’

has been mooted at

a key moment – just

before many parties

start exploration

19 Midstream/Downstream - Wonderfuel Gas

Gas to Power (GTP)

– IRP 2013 (‘’Big Gas Scenario”). In time, we expect 15 GW+

GTP

– Shale Gas tariffs probably R 1.00 kWh

Gas to Industry (GTI)

– Pipelines to Coega (?) and one along West Coast to

Saldanha/CPT (?).

– Conversion of DJP to Gas and connection to Karoo (?)

– Reduced energy costs for SA manufacturing, per US model

Conversion to liquid fuels (GTL) (if oil not found ?)

– Mossel Bay/Sasolburg GTL expansions and / or Karoo?

Transportation Options (GTT) (if oil not found ?)

– Compressed Natural Gas (CNG)

– National filling stations network and repowering of truck and

bus fleets, leading to balance of payments savings

Gas to Communities (GTC)

– Huge benefits for rural/poor communities

If oil is found, there is a massive potential economic impact

– Standard Bank research note (2013)

Potential Applications Key points

CNG?

Generation of

electricity

Conversion to liquid

fuels?

Industrial benefits

Before offshore/shale develops, the front runners are Ibhubesi Gas Field (offshore gas into Eskom’s Ankerlig) and

Gourikwa LNG import (LNG into Eskom’s Gourikwa and Mossell Bay)

Cheap gas from Mozambique may be less likely post Mozambique’s price discovery since 2010

20

South Africa faces multiple scenarios (SBSA illustration) Key points

Durban

Midstream/Downstream – Multiple Infrastructure Options

?

?

?

Kudu IPP?

Ibhubesi IPP?

Non-Shale Prospects

CBM potential being evaluated in the Region

– Botswana estimates a reported 60Tcf of potential

– Zimbabwean potential est. 40Tcf

– SA est. approx. 15-40Tcf

Port Elizabeth

Shale Gas Potential

Repower OCGT

Repower new OCGT

Offshore O&G (?)

Existing Gas Pipeline

New Gas Source

New CCGT IPP (?)

New Gas Pipeline (?)

Gas to liquids (GTL)

?

Mossel Bay GTL Gourikwa

Ankerlig

New TX Lines (?) Richards

Bay

Secunda

GTL

?

?

? ?

ExxonMobil/ Impact

CNR/Total

Anadarko

Shell

Cairn

India Eskom’s fleet

Pipeline to

Area 1/4?

SA Gas

Infrastructure

Requirements:

– LNG Import

Terminals

– OCGT plants (fuel

switching/CCGTC

CGT)

– New CCGT

plants/pipelines

Sunbird

DJP converted to

Natural Gas (???)

Karoo – Kroonstad

750km Potential

Pipeline (???)

Private and confidential

Mozambique

Section 4

22 Unprecedented Reserve Growth

Key points

ENH is the Government of Mozambique’s mechanism for state

participation in Oil & Gas developments on/offshore in

Mozambique.

In upstream concessionary agreements, by arrangement, ENH

receives a free equity carry on the exploration phase, and the

opportunity to participate in the production phase.

Accordingly, ENH now has the below reserves:

– 15% in Area 1 (15 Tcf gas in place); and

– 10% in Area 4 (8.5-8.7 Tcf gas in place)

As a result, ENH has 23.5 – 23.7 Tcf of gas in place, with further

upside potential as exploration companies continue to explore

the offshore Mozambican blocks and firm up discoveries

Both Anadarko and Eni are currently looking to develop a LNG

export facility in order to monetise their reserves

– The plant will initially be based on two trains, with

potential to ramp up to multiple trains

– ENI are discussing floating LNG schemes to supplement

land-based plant

– Per Anadarko, LNG will be sold under term contracts with

an expected delivery window from

► 2018 (Train 1)

► 2020 (Train 2)

Mozambique Gas Discoveries ENH Participation

The Anadarko and Eni led consortia have made material

offshore discoveries in Areas 1 and 4 of the Rovuma Basin -

which are likely to mean that Mozambique will become a major

natural gas producer

– Anadarko’s discoveries to date total an estimated 40-70

Tcf of recoverable gas, with gas in place of around 100

Tcf (Anadarko, Nov 12, Jul13)

– Eni records gas in place of 85 -87 Tcf (ENI, Aug 13)

Current gas in place estimates sit at 185- 187 Tcf (based on Eni

and Anadarko announcements)

– Reserve Certification achieved for Prosperidade (for initial

two LNG trains)

It is estimated that this potential places Mozambique in the top 9

of global gas reserve rankings and in the top 5 for non-

associated gas

July 2013 - Tullow Oil found non-commercial gas (on a

standalone basis) at the Cachalote-1 exploration well in Area 2

August 2013- Anadarko announce agreement to sell a 10

percent interest in Mozambique’s Offshore Area 1 for

$2.64billion to ONGC Corporation Limited.

Source: BP Statistical Review 2013; ENI;

Anadarko; Standard Bank

Between the

Anadarko and Eni –

led consortia’s

discoveries,

Mozambique now

has 185 – 187 Tcf of

GIP

It is estimated that

this potential places

Mozambique in the

top 10 of global gas

reserve rankings

and in the top 5 for

non-associated gas

23 Afungi LNG Park

Conceptual 10-Train Layout Key points

Liquefaction Trains

The adjacent schematic

depicts the initial

conceptual 10-train

layout for the Afungi

LNG Park

The initial FEED for the

LNG plant will include

the design of the first 4

trains – 5MMTPA each

Total park concept to

include up to 10 trains –

50 MMTPA in total

Initial construction phase

to include the first 2

trains

Source: Anadarko

24 LNG is the key first step

Export market is the key to attract funding to develop gas resources Key points

Securing LNG sales contracts are key to unlocking the future of Mozambique, without it nothing will happen.

In turn, the timing of LNG first gas production is critical for potential offtakers

LNG Sales

Contracts

Upstream and

LNG

Development

Funding

Airport Expansion

Port Construction

Rail Network Expansion

Road Improvement

Fertilizer Plant

Ammonia Plant

LNG Revenue

Tax Revenue

Gas-fired Power Plant

Petrochemical Plant

GTL

Methanol plant

Enhanced Agricultural Output

Accelerate Infrastructure

Accelerate Industrialisation

and

Increased Access to Electricity

Enhanced Social Investment

Enhanced Industrial Output

As with other global

markets, developing

an LNG export plant

is expected to

unlock

Mozambique’s

economic future

25 Case Study: Oman LNG (Oman)

The Growth Catalyst Key points

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

US

D

USD mn USD per capita

Oman LNG, in Qalhat near Sur in Oman, was the country’s first LNG infrastructure development and was the catalyst

for future development. The construction was launched in November 1996, and the plant was commissioned in

September 2000.

The LNG plant is supplied through a 360km pipeline from the central Oman gas field complex and consists two 3.3

MTPA liquefaction trains – at a total construction cost of USD 2bn

Since Oman LNG closed in November 1996:

– Oman has closed over 20 large gas-derived projects since Oman LNG

– These additional projects have added immense value to the Oman GDP and to local economic growth.

► Over 18 years, GDP has increased by CAGR 9.6% (1995-2013*)

► The catalyst to unlock the value for the country, and to promote economic growth, was the initial Oman LNG

project

The Omani LNG example sets the scene for the future possible Mozambican situation and it is indicative of the

possibility for Mozambique. Subsequent investment and ancillary infrastructure and much needed economic growth

would follow

Oman has closed

over 20 large gas-

derived projects

since Oman LNG

The catalyst to

unlock the value for

the country, and to

promote economic

growth, was the

initial Oman LNG

project

The Oman LNG

example sets the

scene for the future

possible

Mozambican

situation and it is

indicative of the

possibility for

Mozambique

*Using EIU historical and forecast data

26

2012 – 2016

– New LNG supply capacity is expected from Australia and Papua New Guinea (Angola now online)

– Lead US regas conversions will come online (e.g. Sabine Pass)

2018 onwards

– Main East African competition are more US Regas conversions and Canada.

LNG Market Summary

Key points

BG Group expect global LNG demand to increase @ 4.8% CAGR to 2025 (driven by Asia) meaning

a 150 MTPA supply gap. US Regas conversions are expected to supply some but not all demand,

leaving an opportunity for Mozambique LNG

Market Opportunity

What Supply will meet growing demand? Supply Commentary

Source: BG Group, Multiple

New LNG supply

capacity is expected

from Australia,

Papua New Guinea

and US regas

conversions (fuelled

by shale gas), with

Canadian exports

also being a

possibility

Multiple North American LNG export projects are

under development (fuelled by shale gas):

– 1 approved and under construction (FERC,

Sep13); 13 sites proposed to FERC (FERC,

Sep13)

– An additional 17 US/Canada sites have been

identified (FERC, Sep 13)

There are mixed market views on the impact of

North America. Some market participants note a

reduction of demand in the 2018-2019 period.

Others, e.g. BG Group, believe that most of the US

Regas Conversions will never be completed for

various reasons – e.g. local opposition; developer

expertise; offtake market (e.g. future price increases

in Henry Hub may make landed LNG less

competitive in Asia and hit economics).

27

1. Agreements with Government

Need for a "Project Agreement" or ‘’Concession Agreement’’ that reflects use of gas in LNG (not just E&P) and all

infrastructure needs in the context of changes to the Petroleum Law and the development of a Gas Master Plan

Significant assistance required from the Government on licenses, permits etc, as well as investor protection

mechanisms (e.g. offshore bank accounts)

2. Trains and LNG Operator

Final decision on two (2) or four (4) trains from inception or stepped execution plan from 2 to 4 trains

Potential need to add an experienced LNG operator to the Area 1 and 4 shareholder groups

3. ENH Capitalisation

Required in order for their participation in the development and production stages of the concession

– ENH would require approx USD 3 - 6 bn by 2014 to retain existing 10% - 15% participation in Areas 1 / 4 and

fund its pro-rata share of completion support (underpinning the LNG financing)

ENH looking to increase their participation in future projects to [40%]

– Once able to do so, ENH would look to develop blocks independently and / or act as Operator

4. Funding Requirements

Estimated capex costs of USD 16-20bn inclusive of Financing Costs (Sources: Anadarko, Standard Bank)

USD 12-14bn debt and USD 6-8bn equity is a huge obligation post the global financial crisis in any market

– Raising the necessary liquidity is likely the biggest challenge in a B+ (S&P) / B (Fitch) market

– Introduction of Basel III for commercial Banks and country risk inexperience for most

Key Strategic Decisions

Key points

In December 2013,

the Anadarko and

ENI led consortia

reached a Heads of

Agreement –

Establishing

foundational

principles for the

coordinated

development of

common natural gas

reservoirs in Areas 1

and 4

Funding challenges

are significant in the

current global

environment

The next 12-18 months will determine the next 10-20 years

Private and confidential

Regional Snapshot

Section 5

29 Regional Snapshot

Key points Namibia Botswana

• Exploration wells for CBM- if successful appraisal wells

may then lead to GTT (Gas to Transport) projects and

supply to power stations. Query flow rates

• Exploration licence issued for shale gas in the Kalahari

Karoo Basin

• Downstream, retail chain and depot growth

• Puma, Vivo, Engen etc

Zimbabwe

• Exploration of offshore Oil & Gas wells

• 5 dry wells up to now albeit evidence of

hydrocarbon structure

• Offshore natural gas

• Kudu Gas Project remains under development

• Downstream, retail chain and depot growth:

• Puma, Vivo, Engen etc

• LPG Storage facility under consideration

• Potential CBM (Discovery)

• Midstream – NOIC pipeline (fed by CPMZ)

• Downstream, retail chain and depot growth:

• Puma M&A market entry

• Vivo market entry

• Glencore M&A market entry

Optimism for the

Southern African

region

O&G businesses are

being built up in SA

and Mozambique

with the need to

replicate this

strategy in other

parts of Africa.

Private and confidential

What lies ahead?

Section 6:

31 Is Past Performance a Future Guide?

Key points Papua New Guinea LNG North Sea Oil

• 1943 - First well discovery under Schoonebeek (Netherlands)

• 1959 - Discovery of Groningen Gas Field (Netherlands)

• 1964 - Continental Shelf Act 1964 is legislated in the UK:

issuing licences for hydrocarbons production

• 1965 - Discovery of Viking Gas Field (UK)

• 1970 - Discovery of Forties Oil Field (UK)

• 1971 - Discovery of Brent oilfield (Scotland) Frigg gas field

• 1975 - Oil production from Ardmore and Forties oil fields

11 years of development from the issuing of UK

licences to the production phase

South Africa

• 2009 - Bulk of licences issued (CNR older)

• 2014 - Total/CNR to drill their first deep offshore well

• 2014/2015 - MPRDA finalization

• 2022? Offshore O&G production

5 years of development and exploration phase close to

starting. Deeper water and more challenging weather

• 1987 - Hides Gas field discovery

• 1998 - Oil and Gas Act of 1998 is legislated, 5 different

licences for oil and gas activities can be issued under the Act

• 1998 - Initiating of a project to construct a pipeline to transport

the gas to Australia

• 2006 - Discovery of Elk gas field

• 2007 - Suspension of pipeline to Australia

• 2007 - LNG project planning begins

• 2008 - Discovery of Antelope gas field

• 2009 - Financial Close of LNG/pipeline/ Field

• 2014 - LNG Operations commence

27 years of since the discovery of gas to final operation of

LNG but only 7 years from concept switch

Mozambique LNG

• 2005 - Anadarko apply for licence

• 2006 - Anadarko commence plans for the building of the

LNG/ pipeline/ field expected

• 2010 - First discovery of Gas- Orca-1 well

• 2015? Financial close of LNG/ pipeline/ Field expected

• 2018? Operation of First train expected

The North Sea

offshore Oil

development are

compared to those

of South Africa to

date

PNG LNG moved

fast once the sales

concept changed.

Mozambique LNG

under development

4 years from first exploration discovery and LNG plant

development progressing

32 What Lies ahead?

1. South African Offshore Oil & Gas:

• Total and CNR are expected to spud first well from June 2014 (150- 200km south of Mossel Bay).

• Finalization of the MPRDA - resolution of the fiscal terms, free carry percentage, BEE compulsory participation,

state buy-in option and beneficiation.

2. Shale Gas:

• Exploration Licence Award, detailed drilling regulations and interaction with Gas Utilisation Master Plan

(“GUMP”).

1. Clean Fuels:

• Decisions regarding Go/ No Go; Which Euro; cost recovery mechanism, timing.

2. Services and local content strategy

3. Latest turn of energy policy documents:

• GUMP, IEP, IRP

1. Mozambique LNG:

• Agreement of commercial terms for first two trains

• Raising of debt and equity (Africa’s largest ever Project)

1. Namibia offshore

• Will Repsol’s well be the first successful one? North Sea oil needed multiple wells….

Key points Key Issues for the next 12 months

1

2

3

4

5

6

The next 12 months

should lead to the

progression of many

issues

7

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