Kurdistan Investor Trip - Oil Search · Reported ~70,000 bbl/d via truck ... exports from Kurdistan resume via Federal system (Ceyhan) 6) May 2011. Federal Ministry of Finance confirms

Oil Search Limited ARBN 055 079 868

March 2014

Kurdistan Investor Field Trip

Kurdistan Region Overview

Kurdistan Region Location

EGYPT

IRAN

TURKEY

SYRIA

IRAQ

JORDAN

TURKENISTAN

SAUDI ARABIA

U.A.E.

Caspian Sea

Persian Gulf Red

Sea

Mediterranean Sea

Erbil Office Sulimaniyah Office

KURDISTAN REGION OF IRAQ

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Kurdistan Region Overview » A semi-autonomous Region within Iraq and operates under dual Iraq (Federal) law and Kurdistan Region (KR) laws

» Policy and major decisions determined by Regional Council for Oil & Gas Affairs – Prime Minister, Deputy PM, Ministers for Finance, Planning & Natural Resources

» KR population approx. 4.6 million with ~ 70% of workforce employed by the Government

» 3 major cities dominate – Erbil (~ 1million), Sulaymaniyah (~500000) & Dohuk (~300000). Many small centres and villages

» KR covers approximately 40,000 square kilometres (excluding disputed territories)

» Significant development over the last 10 years - infrastructure, real estate, education and essential services

» Many Kurds are returning from Europe, North America and UK to participate in the opportunities presented

» Industry base centred on petroleum, cement works, oil refineries, property development & small business (retail). A small manufacturing base

» Reliance on imports for fruit, vegetables and processed foods. Self sufficient in other aspects

» Mostly a cash based economy with little take up of banking system – financial system is undeveloped

» Extensive wireless based communications network with little fibre optic and no copper wire infrastructure

» Mix of Sunni and Shia Muslims. Also Arabs, Turkmen & Assyrians

» Strong tribal affiliations in addition to ethnic & religious identities

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Iraq & Kurdistan History » Ancient area with a traces of early settled existence 23rd Century BC. Has been part of Mesopotamia, Roman occupation,

and Ottoman control

» Iraq established in 1920 under British rule after defeat of the Ottoman Empire. Kurdish ethnic homeland divided between Iraq, Iran, Syria & Turkey under Treaty of Lausanne (1923)

» From 1923 Kurds sought recognition and independence (led by Shayk Mahmud Barzani). Successive nationalist movements resulted in autonomy being granted in 1970 under a peace accord with Iraq which collapsed 5 years later, with physical conflict ongoing until the overthrow of Saddam Hussein in 2003

» 2005 pivotal year; Iraq National elections & Jalal Talabani elected as President. Constitution adopted recognizing Kurdistan as a provincial region within Iraq (retroactive to 1992) and requiring Kurdish representation on the Presidential Council

» 2007 Kurdistan Oil & Gas Law enacted and PSCs signed. Draft 2007 Iraq O&G Law not enacted

» Census to be held by 2008 to determine boundaries – not undertaken. Boundary line remains an open issue

» Constrained by reliance on GOI - KR exports are minor; funding comes from an allocation from the GOI budget based on proportional population which is set at 17%. Allocations from Bagdad in 2013 were $11b & for 2014 are projected to be ~$12.5b

» Key issues between Iraq (GOI) and Kurdistan (KRG):

» Boundary of the Region – entitlement to Kirkuk & related fields (‘disputed territories’)

» Right to & control over management of the oil & gas resource and right to independently export (and receive revenue)

» Share of Federal Budget funding

» Compensation for Saddam’s Anfals – claim for US$450B submitted to Baghdad in 2013

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» Iraq constitution: negotiated & approved by referendum in 2005, establishing Iraq as a single federal democratic State including the KR & sharing certain powers with the Regions

» Kurdistan Government: Parliamentary system with 111 elected members of which 11 seats are reserved for non-Kurdish minority communities of the KR. Elections held every four years

» Power share: The two ruling parties (KDP & PUK) have operated under a 50/50 power sharing agreement since the formation of KRG in 1992. Contested the 2005 and 2009 elections as a coalition

» Change in political landscape: Gorran Party established in 2007 (breakaway from the PUK) has changed the political map of the region. Gorran polled second to KDP in the 2013 election, PUK 3rd

» New KRG government (post Sept 2013): Yet to be formed, expected to comprise of representatives from the 3 parties with KDP retaining the majority

» Iraqi parliament: (Council of Representatives – COR) consists of 275 members. United Iraq Alliance (UIA – 85 seats) is the largest bloc. Prime Minister Maliki’s Islamic Dawa Party is part of this bloc

– Kurds are allocated 59 seats in COR and are largely grouped in the Democratic Patriotic Alliance (DPAK – 53 members) which acts as a unified voting bloc. Independent or non-affiliated Kurds hold the other 6 seats

– COR elections (due in April 2014) dominate the relationship and negotiations between KRG and Iraq

» KR Laws: Independent Judicial system like Iraq. New Federal laws not applicable in KR unless endorsed through KR legislation

Government

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KR Area is Close to Fully Contracted - Prospective acreage, - resource estimate of 40 billion barrels oil and 60 Tcf gas (USGS, 2010) - Most of the available blocks have been taken up – 28 IOCs in the Region

Block Operator A Taza Oil Search B Garmian WesternZagros C Topkhana / Kurdamir Talisman D Ain Sifni Hunt E Akre-Bijeel MOL (Kalegran)

F Al Qush / Bashiqa / Pirmam /

Betwata / Qara-Hanjeer / Arbat East

ExxonMobil

G Atrush TAQA H Bazian / South Sangaw KNOC I Ber Behr / Chia Surkh / Miran Genel J Dohuk / Tawke / Irbil DNO K Sindi/Amedi Perenco L Sarsang HKN Energy M Central Dohuk Murphy N Sulivani Petroquest O Sheikh Adi / Shaikan Gulf Keystone P Dinarta / Shakrok Hess Q Rovi / Qara Dagh / Sarta Chevron R Barda Rash Afren S Hawler Oryx T Khurmala Kurdistan NOC U Harir / Safeen Marathon V Bina Bawi OMV W Taq Taq – Kewa Chirmila TTOPCO X Qala Dze / Piramagrum Repsol Y Khalakan Gas Plus Z Chemchemal / Kor Mor Pearl Pet aa Baranan TOTAL bb Shakal / Halabjah Gazprom

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aa bb

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Expl/Dev/Prodn Block

Taza Block

Open Block

Oil Field

Gas Field

Gas/Condensate Field

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Ongoing Development of Energy Infrastructure to Serve the Progression of Discoveries

» Current Exports to Turkey Reported ~70,000 bbl/d via truck

» Oil pipelines Kirkuk – Ceyhan: 2012 exports of 400,000 mmbbl/d versus 1.6mmbbl/d capacity Tawke – Fish Khabur: 100,000 bbls/d Taq Taq – Khurmala: 20”. Capacity ~150,000 bbl/d. Khurmala – Fish Khabur: 24” - 36”, Capacity ~300,000 bbl/d

» Gas pipelines Kor Mor – Chemchemal – Erbil power plants, 174km, 350mmscf/d Shaikan Field to Dohuk power plant: 50km (under construction)

» Planned oil & gas pipeline – South Oil & gas pipeline extension to the Garmian Block planned by KRG*

» Refineries & Power Stations 3 Refineries: (~150kbbl/d capacity). Planned expansions set to double capacity over 5 years 4 major Power Plants (2200MW). Planned additions set to double installed capacity over 5 years

*As published in “The Oil & Gas Year 2013, Kurdistan Region of Iraq”

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Miran

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Fish Khabur

Khurmala

Kurdamir

Garmian

IRAN

TURKEY

Chemchemal Power Plant 100% Gas

Erbil Power Plant 50-75% Gas

Balance Diesel

Dohuk Power Plant 100% Diesel

New Khurmala Power Plant 125mmscf/d

Initially Distillates

IRAQ Dev/Prodn Block

Taza Block

Exploration/Open Block

Oil Field

Gas Field


Oil Pipeline

Gas Pipeline Proposed Oil Pipeline

Power Plant

Refinery

Taq Taq Oil Field

Tawke Oil Field

Kirkuk Oil Field

Kor Mor Liquids & Gas Field

Taza PSC

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Export Infrastructure & Export Routes Oil: » KRG 40” oil pipeline connecting Taq Taq field to

Fish Kabur on Iraq-Turkey border completed late 2013. 1mmbbl/d capability (export point Ceyhan)

» Approx. 1mmbbl of crude oil export injected into new pipeline since January 2014 (in storage)

» KRG building closer ties to Turkey, providing long term alternative export route (Turkey-Kurdistan Energy Accord signed March 2013)

» Significant step towards achieving sustainable exports from region and unlocking value from oil fields

» Turkey cautiously supports KRG export plan but would like Baghdad endorsement

» Current production capacity 400kbbl/d » Route to south & north via Turkey (Ceyhan)

remains an option subject to agreement with GOI

» Domestic refinery demand remains an open market

Gas: » Turkey export, domestic power generation,

cement, ammonia/fertilizer options

Proposed pipeline

Fish Khabur - Turkey: - 40” 500,000 bbl/d - 46” 1 mmbbl/d

Fish Khabur

Khurmala

Kurdamir

Khurmala - Dohuk: - 36” 300,000 bbl/d

Taq Taq - Khurmala: - 20” 150-200k bbl/d

IRAN

TURKEY

IRAQ

Garmian

Dev/Prodn Block

Taza Block

Exploration/Open Block

Oil Field

Gas Field


Oil Pipeline Proposed Oil Pipeline

Taq Taq Field

Tawke Field

Kirkuk Field

Kor Mor Field

Taza PSC

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Oil Export Projections

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2013 2012 2011 2010 2009 2008

Iraq and KRG (est.) Historical Production and Exports (EIA)

Iraq Production Iraq Exports KRG Production KRG Exports

» KRG projection for KRI (December 2013 Minister Ashti Hawrami) - Production target of 1 mmbbl/d by 2015, 2 mmbbl/d by 2020

» Iraq projections of 5 mmbbl/d by 2018 & 6 mmbbl/d by 2020 and to be a leader of OPEC production

» 53 rigs in the KRI as at late 2013 with more on order & for delivery in 2014

» Many discoveries since 2007 with 11 fields declared commercial

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Operator Block Field Declaration dateDNO International Erbil Bastora Jun-11DNO International Erbil Benenan Jun-11Afren

Rash Barda Rash Jul-11

Gulf Keystone Shaikan Shaikan Aug-12DNO International Dohuk Summail Oct-12OMV Bina Bawi Bina Bawi Mar-13Genel Energy Miran Miran Aug-13Kalegran (MOL) Akri Bijeel Bijeel Oct-13Hunt Oil Ain Sifni Simrit Nov-13WesternZagros Garmian Sarqala Dec-13Oryx Petroleum Hawler Demir Dagh Feb-14

11 Declarations of Commerciality

1) Oct 2005 Iraqi constitution adopted

2) Feb 2007 Draft federal petroleum law

3) Jun 2007 Agreement on initial revenue sharing – 17% of net oil revenues from all regions in Iraq go to Kurdistan

4) Aug 2007 KRG petroleum law approved by KRG Parliament

5) Feb 2011 Iraqi Prime Minister announces Kurdistan PSCs will be respected. Oil exports from Kurdistan resume via Federal system (Ceyhan)

6) May 2011 Federal Ministry of Finance confirms release of the first oil export payment to KRG contractor (approx. 50% of net revenues)

7) June & Sep 2011 Kurdistan producers receive first 2 payments for oil exports from the Federal Ministry of Finance

8) Apr 2012 KRG cease oil export in April due to dispute with the Federal Government

9) Aug 2012 KRG resumes oil exports to progress reconciliation with Federal Government over the oil and gas law

10) Sep 2012 Agreement signed with KRG and Federal Government to increase Kurdistan Region’s oil exports and ~$500m payment received from Baghdad

11) Dec 2012 KRG cease oil exports due to ongoing dispute with the Federal Government

12) Jan & Feb 2013 KRG approves trucked oil exports from Taq Taq field to Turkey. KRG (Ministry of Natural Resources) announces intention to build its own export pipeline to Turkey

13) March 2013 Agreements signed with Turkish government for gas supply from KRI. Turkey indicates it will facilitate direct oil and gas exports

14) Nov 2013 Construction completed on the Khurmala – Fish Khabur oil Pipeline

15) Jan 2014 Oil export shipments commence in KRG pipeline

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Significant Events in Development of Kurdistan Region Oil Potential

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http://www.hess.com/

Cost Recovery Up to 40% of Net Available Oil

Reasonable Fiscal Terms Summary of Taza PSC terms

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Total Oil Produced 100 bbls

Net Available Oil

Royalty Oil 10% of Total Crude Oil

10 bbls 90 bbls

36 bbls

Profit Oil Sharing based on R-factor(1) sliding range of 30% - 12%(2)

54 bbls

KRG Contractor Group

38 bbls

70% 30%

16 bbls

3 bbls 10 bbls 3 bbls

OSH 60%

TOTAL 20%

KRG 20%

OSH 75%

TOTAL 25%

27 bbls 9 bbls

Entitlement

PSC Governance: » Management Committee (2 MNR reps & 2

OSH reps) for all ‘operational’ matters

» Certain approvals require KRG (Minister) approval (e.g. Appraisal & Development plans)

Same structure for gas with a different (higher) R-Factor share to Contractor (40% – 20%)

0%

5%

10%

15%

20%

25%

30%

35%

40%

Tawke Garmian Kurdamir Taq Taq Taza Kurdamir Tawke* Barda Rash Atrush Taq Taq* Shaikan

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30%

0%

30% 40%

Contractor profit oil allocation % (post capacity building payment %)

30% 20%

3%

20%

3%

20%

capacity building payment %

0%

New terms introduced in early 2011

Reasonable Fiscal Terms First mover advantage in Kurdistan


March 2014


Kurdistan Regional Geology / Exploration

Kurdistan Geology Background

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Reproduced from Petroceltic Presentation

Location and Regional Setting » Located on the NE collisional

margin of the Arabian Plate » Structuration is a result of the

collision of Arabia/N Africa with Eurasia

» Comprises Low fold Zone in SW to High Fold and Thrust Zone in N and NE

» Geological setting and petroleum systems are contiguous with adjacent Iran

» Iraq lies in one of the world’s most prolific hydrocarbon provinces with numerous super-giant fields, including Kirkuk (20bln bbls)

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Kurdistan

Location and Regional Structural Map » Iraq lies on the northern part of the

Arabian Platform - a long-lived, gently subsiding, southern continental margin of the Tethys Ocean

» The plate motions from the Cretaceous to Tertiary closed the Tethys Ocean, resulting in the collision of the northern edge of the Arabian plate with the Eurasian plate

» As the Arabian Platform collided with the Iranian block, structural shortening of the Arabian Platform resulted, forming the Zagros Fold Belt and the Zagros foreland basin

» Continued convergence through the later Tertiary produced southward folding and thrusting and produced the anticlines that characterise the Zagros Fold and Thrust Belt.

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Taza

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» Taza area located on Arabian Plate positioned in Tethys ocean until Miocene collision

» Marine carbonate reservoirs, high TOC source, regional seals

Kurdistan Taza Area

Zagros Evolution – Plate Tectonics

Homke, 2007

Taza Area Regional Structure and Objectives

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SW NE

Taza Trend

Prospective section is younger and deeper moving from High Fold Zone (Cretaceous,

Jurassic and Triassic objectives) to Miocene and Oligocene primary objectives in Taza area

Source: Western Zagros presentation

Southern Kurdistan Licensing Oil and Gas Fields

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Taza

Source: WoodMackenzie

Kurdistan Region of Iraq Zagros Fold Belt Stratigraphy-Taza Area

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Taza-1 Oil bearing Oligo-Miocene reservoirs – proven in Low Fold Zone – fractured carbonates plus dual porosity system

Taza-2 planned TD in Shiranish Formation, major reservoir at Kirkuk and Taq Taq

S

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Main Sealing Units

Main Reservoir Units

Main Source Rocks

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Example reservoir distribution: Jeribe Formation

» Jeribe Fm is widespread and its open fracture system will contribute to sustained flow

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Source: Oil Search 2013

Kurdistan Region Iraq – Early Movers Pre 2005

» The first two licences in Kurdistan were awarded in the early 2000’s - Taq Taq to Addax and Tawke to DNO

» Most of the area was vacant with much earlier discoveries at Kor Mor, Chem Chemal and Chia Surkh lying dormant

» OSL involved early on in a number of blocks, but divested due to lack of materiality, retaining Taza due to upside potential

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Source: TOGY 2009 Yearbook

Kurdistan Contracted Acreage - 2013

»Since 2007, licencing activity has increased significantly. By the end of 2011 most of the territory administered by the KRG had been licenced.

» More than 50 blocks have been awarded.

»The blocks have generally been awarded on a negotiated basis.

»Almost all of the PSCs are published on the KRG’s Ministry website.

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Taza

Kurdistan Drilling Success » Exploration and Development in Kurdistan is steadily increasing. » Approximately 55 exploration wells drilled since 2003 » More than 40 drilling rigs are currently active in the country » High overall success rate (60%) confirms highly prospective region.

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» Major oil discoveries: • Shaikan (GKP) • Tawke (DNO) • Barda Rash (Afren) • Atrush (Aspect) • Kurdamir (WZ) • Taza (Oil Search)

» Large gas discoveries:

• Miran West (Genel) • Topkana (Talisman)

Zagros Basin Creaming Curves

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» The initial discovery well, Naft Khaneh-1, was drilled in 1920.

» 126 exploration wells have been drilled since 1920 resulting in the discovery of 68bn boe.

» The largest field, Kirkuk, discovered in 1927.

» There is significant remaining potential.

» A number of key wells will be drilled during 2014.

Kurkuk

Shaikan Shaikan


March 2014


Taza Appraisal Programme

Taza PSC » PSC Effective Date 1 November 2009; Exploration Period of 5 years

» Very encouraging results at Taza 1 (2013):

– Positive test light oil, flow rates 1,100 bopd from Euphrates / Upper Kirkuk

– Continuous shows over a c. 250m interval from top Jeribe

» Currently in Second Sub Period of the Exploration Period, to 31 October 2014

» Obligations in current Sub Period are 1 exploration well to be drilled to the Cretaceous and optional seismic

» Following Taza 1 discovery, our activity levels in country have increased significantly

» Multi-disciplinary appraisal team formed

» Appraisal data gathering with further wells, flow testing and 3D seismic during 2014, in order to prepare for a decision on commerciality

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Taza 2 Update

Taza 2 update

» Taza 2 is the commitment exploration well of the Second Sub-period » Located 10km NNW of Taza-1 » To be completed by 31 October 2014 » Taza 2 objectives:

– Complete Taza PSC Second-Sub Period Commitment – Penetrate Cretaceous Shiranish Objective – Gain appraisal information on the Jeribe/Dhiban , Euphrates and Kirkuk

formations away from Taza-1 • Facies distribution • Fracture distribution • Pressure profile and communication • Fluid variations

– Test deeper reservoirs – Jaddala, Aliije, Shiranish in a near crestal position on the Taza structure

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Taza 2 Location

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-

K42 - 10 - 06 K42 - 10 - 04 K42 - 10 - 02

L.Bakhtiari

U.Fars

L.Fars

Saliferous

Jeribe

Shiranish

Jurassic

Qamchuqa

Euphrates

NE SW Taza 2

Taza-2 Predicted Stratigraphy

» 200m of Shiranish planned

» Depth as of 12 March 2014 is 2611m at 13.5/8” casing point

» Following the setting of the 13.5/8” casing, plan is to drill ahead in 12.1/4” hole to just above the Jeribe Formation, expected at c. 3200m MD.

» A further casing string is planned to be set at this depth before drilling ahead into the first reservoir objectives

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Further wells - Taza 3, 4

Taza 3 and 4 Locations

» Approximate Top Reservoir Depth Structure

» Taza 3 – southeast well for structural, reservoir and fluid constraint near plunge

» Taza 4 – Forelimb (western) well for structural, fluid, and reservoir constraint, also fracture characterisation and distribution

Taza 4 Potential Location

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Taza 3 Location

Location of Taza 3

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Location Window for Taza 4

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Taza 4 Target Box


Taza 3D Seismic

Euphrates ML Depth Map » Key contracts awarded and preparatory work has started

» Mobilisation of equipment and personnel to field initiated at end-February

» Camp construction ongoing » ERW survey initiated » Seismic acquisition expected to

begin this month

» 2D long-offset dip line to be acquired through potential Taza 4 location

– Acquire before 3D survey – Wide Azimuth processing to

image deep structure and steeper dips

– Use for 3D parameter testing

Taza 3D Seismic Survey

3D Survey Area

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Taza 3D - Status

» ERW clearance mobilising into field

» Start-up meeting held with AOFS on Jan 29 in Erbil

» AOFS mobilising camp

» AOFS currently organising Security, arranging local hiring committee and preparing HSES documents (Seismic Risk Plan, ERP, Bridging Documents, etc.)

» AOFS surveyors in field checking Control Stations from 2010 survey to ensure that 3D survey is to a common datum.

» Community engagement ongoing re duration and nature of work and local hiring opportunities

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Taza Early Development Potential

» Investigating the potential to bring in a 5,000 bopd facility for a long term test period on one of the existing or new Taza wells.

» EWT / EPF has a number of strategically important objectives. Specifically to demonstrate:

– Sustainable production rates with a safe, clean and reliable operation

– Quality data to further evaluate the well and reservoir – pressures, fluids, performance

– Decision support for the EWT facility expansion to EPF with 10,000 bopd capacity as first phase of development

– Longer term investigation of the presence of H2S / CO2 which were observed in the Taza 1 well tests

Example 10,000 bopd EPF in Kurdistan

Taza Extended Well Test / Early Production Facility

Shaikan 1 EPF

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Development Concept Select Study » Oil Search is conducting a prequalification process to identify and engage a Concept

Select partner to carry out option selection studies for Taza Development and to ensure the field is developed as efficiently as possible

» We are in the process of identifying, screening, and selecting a group of specialist contracting organisations capable of performing these concept selection option studies who have prior MENA experience in similar reservoirs

» Currently there are 5 contracting organisations completing a prequalification / EOI submission process

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March 2014


Community Affairs

Taza Block Demographics » Approx. 1400 residents on site across 27 villages. 11 former (destroyed) villages uninhabited » Many former residents & family descendants have migrated to nearby towns » Subsistence lifestyle relying on seasonal agriculture & herding » Limited infrastructure which varies between villages » Predominantly Kurdish » 10 villages with schools

CA/CSR Activity » Dedicated Community Affairs team currently of 8 local staff and two expats » Working closely with local authorities on labour hire & work opportunities » Openly available to the community and enjoy a very good relationship » Community Development projects directed at high impact areas

– schools

– water and electricity supply

– road upgrade projects

– general community projects

Focus Areas

» People Capacity Building (Training & Competency) – Organization requirements to identify roles and plan for

Kurdish citizens – Education & skills development (University – College)

» Local content – The Taza activities to date have created business and work

opportunities for 352 people from the local area. This will be magnified by the 3-D seismic program

– New local business activities to service Taza operations

» Community Programs – Block & regional opportunities and potential sharing with

adjacent PSC Operators – New agriculture opportunities & improve current techniques – Revegetation

Oil Search Limited ARBN 055 079 868 46

Disclaimer While every effort is made to provide accurate and complete information, Oil Search Limited does not warrant that the information in this presentation is free from errors or omissions or is suitable for its intended use. Subject to any terms implied by law which cannot be excluded, Oil Search Limited accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this presentation. All information in this presentation is subject to change without notice. This presentation also contains forward-looking statements which are subject to particular risks associated with the oil and gas industry. Oil Search Limited believes there are reasonable grounds for the expectations on which the statements are based. However actual outcomes could differ materially due to a range of factors including oil and gas prices, demand for oil, currency fluctuations, drilling results, field performance, the timing of well work-overs and field development, reserves depletion, progress on gas commercialisation and fiscal and other government issues and approvals.