“High Impact OGEInvestment Projects under the ETP”

Oil, Gas & Energy

0

Investment Projects under the ETP”

3rd Energy Forum12th July 2011

Muhammad Hudhaifa AhmadSenior Manager, NKEA Oil, Gas & Energy

PEMANDU

Gross domestic product

RM million, percent

Oil, Gas and Energy have always played a central role

in the Malaysian economy

84 78 81

100% =

All except Oil,

Gas and Energy

679,687740,907356,401 All

1

Key sector drivers

� Oil & gas production/ prices

� Complementary growth of downstream value added

SOURCE: Annual National Accounts, 2000-9, Department of Statistics, Malaysia

22 1916 Oil, Gas and Energy1

Gas and Energy

200920082000

1 Includes Crude petroleum and Natural Gas production and Refined petroleum products

However, it has been a challenge to sustain the

production since 1990

Malaysian Oil production 1974-2009kbd

CAGR

500

600

700

800 -0.8%-0.7%7.8%21%

2

8078761974 02200019989694929088868482 20080604

SOURCE: PETRONAS

0

100

200

300

400

500

3 areas for OGE to continue to power the Malaysian

economy

kboe

Oil & gas production will decline……hence three areas of focus for the Lab

GROW

1,500

2,000

SUSTAIN

Counter decline - maintain

oil & gas production

3

GROW

Maximize value from

downstream and services

DIVERSIFY

Move decisively towards

sustainable energy

SOURCE: PETRONAS, OGE NKEA Lab

0

500

1,000

2010 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2025

Growth via 3-pronged approach…

2018

10 million tonnes

regional oil storage 2017

#1 oil field services

hub in Asia - Regional

HQ of MNCs, new

regional champions

20205 GW Hydro, up to

1.25GW Solar, 2 GW

Nuclear power (2021)

Leading oil & gas producer in SE Asia

stable production at 550-600 thousand barrels per day

GROW

DIVERSIFY

SUSTAIN

9.Reduce energy bill

through energy

efficiency

Build alternative

energy capabilities

4.Unlock latent gas

demand through

LNG import

Grow in downstream

Continue domestic Oil & Gas production

4

regional oil storage

and trading hub2017

2014

Reduce energy bill by

5% through energy

efficiency best

practices

2013

First LNG imports

into Malaysia to

substitute expensive

fuel and create new

industries

2010Oil, Gas and Energy

central to Malaysia

economy (20% of

GDP)

1.Enhanced oil

recovery

2.Develop small

fields

3.Increase

exploration

activities

Make Malaysia # 1 Asian hub for oil field services

efficiency

10.Build up solar

power capacity

11.Ensure best

practice nuclear

deployment

12.Drive industrial

growth in Sarawak

with big hydro

LNG import

5.Create a regional

oil storage and

trading hub

Gas production

6.Increase presence

of major OFSE MNCs

7.Create regional

fabrication champions

8.Encourage JV with

world-class companies

Source: OGE Lab

+ 7 Business Opportunities

ETP in Oil, Gas & Energy

6 Progress Updates6 Progress Updates

11 Oil & Gas Initiatives

Exploration and

ProductionService Industry Tax Incentives

Petroleum

Storage

5 Energy Initiatives

SAVE ProgramRenewable

Energy ParkNuclear Power Bakun Big Hydro

ETP announcement on 30 Nov 2010 1 - 3

6

ETP announcement on 11 Jan 2011 1 - 3

7

Shell Malaysia will invest RM5.1 billion into projects to upgrade, expand or build their facilities in upstream, midstream and downstream across Malaysia. These projects include the expansion of the Shell MDS wax plant in Bintulu, a new diesel processing unit at the Shell Refinery in Port Dickson, and the Gumusut deepwater development offshore Sabah.

InvestmentRM5.1 billion

GNI ContributionRM2.9 billion (at plateau production level)

Potential Jobs1,650 over the construction period

1 - 3 ETP announcement on 8 Mar 2011

Petroliam Nasional Bhd (PETRONAS) has awarded a risk service contract for its Berantai field to Petrofac Energy Developments Sdn. Bhd., Kencana Energy Sdn Bhd and Sapura Energy Ventures Sdn Bhd.

Petrofac will lead the project, in which it has a 50 per cent equity stake. Kencana and Sapura each take a 25 per cent stake. The partners expect to invest around RM2.56 billion in the development and hope to produce the first gas by December 2011.

In the initial stage of development, the partners will install a wellhead platform and drill 18 wells. A second platform will then be installed and the two platforms connected to a floating production, storage and offloading (FPSO) vessel. The first phase wells will be completed during 2012. Shuttle tankers will offload oil while gas will be exported by a subsea pipeline.

8

Shuttle tankers will offload oil while gas will be exported by a subsea pipeline.

Investment:RM2.56 billion

THAILAND

Kertih

Kuantan

Kangar

Ipoh

Kuala Lumpur

Seremban

Segamat O.C.

K. Sg. Baru

Gurun

Alor Setar

Butterworth

N

JDA gas

Raw Gas Supply

PETRONAS Regasification terminal

Unlocking latent gas demand4

9

LNG Regasification Facilities:

� The facilities is designed to receive, store and vaporize LNG with a maximum capacity of 3.8 million tonnes per annum (MTPA) (up to 530 MMSCFD).

� JRU will regasify the LNG (into its gaseous form).

� The natural gas will be transported to demand centres through the existing PGU network.

� Estimate completion third quarter 2012.

SINGAPORE

Melaka

Johor Bahru

Segamat O.C.

ETP announcement on 11 Jan 2011 5

10

Dialog Group Berhad is leading a consortium comprising of the State Government of Johor and Vopak to develop an Independent Deepwater Petroleum Terminal Project at Pengerang, Johor with a total petroleum storage capacity of about 5 million cubic meters.

Investment RM5 billion

Potential Jobs (by 2020)5,000 throughout construction and operation

Pulau Daat Petroleum Integrated Project5

Zhuhai Winbase has teamed up through a joint venture with RG Gas & Chemical (M)

Sdn Bhd to develop Labuan oil storage terminal in Pulau Daat.

This hub will provide land-based logistics and support services such as tank farms, oil

terminals, container yards, fabrication yards as well as complementing marine support

logistics in Labuan. The first phase of the project, with an investment of RM500 million,

would involve the building of a storage tank terminal, with a capacity of 300,000 cubic

metres. The remaining three phases would include building a 1.5 million cu m storage

tank terminal, engineering fabrication yards like jacket platforms and other facilities,

11

tank terminal, engineering fabrication yards like jacket platforms and other facilities,

including water storage facilities.

Investment:

RM1 billion over 3 years

GNI Impact:

RM360 million from Phase 1 operations

Potential Jobs:

1000 over construction period

Make Malaysia #1 Asian hub for Oil Field Services 6-8

ILLUSTRATIVE

Houston

StavangerAberdeen

2020 GNI impact:

RM14.4Billion

2020 Totalnew jobs:

40,000

12SOURCE: OGE NKEA Lab

▪ Attract major international OFSE companies to bring a sizeable share of their global operations to Malaysia

▪ Build regional champions

– Rationalize fabricators

– JVs with world class players

What it takes to make it happen

To achieve this goal, Lab has recommended the

establishment of Malaysia Petroleum Resource

Corporation (MPRC)

Attract MNCs¹ to bring a sizeable share of their global operations to Malaysia

▪ Rationalise fabricators to maximise efficiency, making best use of yard space and win large international contracts

▪ Enhance engineering, procurement and installation capabilities and capacity through strategic partnerships/JVs

2

3

Set-up a body whose responsibility it is to

▪ Create an attractive and sustainable environment for MNCs in the OFSE industry

▪ Promote the Malaysian OFSE industry and companies to overseas companies

1

Build regional champions

6-8

13SOURCE: OGE NKEA Lab

1 Multi National Companies

through strategic partnerships/JVsand companies to overseas companies and investors

▪ Create a holistic plan to develop, link and support existing and planned clusters of O&G activity

▪ Make recommendations on how to restructure domestic industry to create a more competitive environment and position it for future growth

ETP announcement on 25 Nov 2010 6-8

14

ETP announcement on 30 Nov 2010

Tanjong Agas Supply Base & Marine Services Sdn Bhd (TASBMS) is the

Concessionaire and Project Company to develop the Tanjong Agas Oil & Gas and

Logistics Industrial Park on land measuring 4,260 acres in Tanjung Agas, Pekan,

Pahang Darul Makmur.

The Tanjong Agas Industrial Park will accommodate the operations and activities

within the oil & gas and maritime industries such as shipyards, fabrication yards,

supply/logistics bases, a crude oil & petroleum storage terminal and a LNG/gas

receiving and storage terminal. It will introduce support services and facilities such

as port & marine services, a centralized Integrated Utility Waste Management Plant,

6-8

15

as port & marine services, a centralized Integrated Utility Waste Management Plant,

an Oil & Gas College, 5-Star Mariners’ Centre and Business Park.

GNI

RM30 billion over the next 10 years

Potential Jobs

30,000 over 5 years

Total Investment including Foreign Direct Investment (FDI)

RM3 billion between 2011 and 2012

TG AGAS BUILDERS SDN BHD

Proposed Crude Oil & Petroleum Storage Terminal Project

16

TANJONG AGAS SUPPLY BASE & MARINE SERVICES SDN BHD

(730891-D)

ETP announcement on 13 June 2011

Sustainability Achieved Via Energy

Efficiency (SAVE) Program is Entry Point

Project (EPP) 9 under OGE aiming to

improve energy efficiency in the country.

At present, Malaysians are averaging 34%

more energy intensive than its Asian peers.

Through SAVE Rebate Program,

government is expecting increase usage of

5 Star energy efficient appliances that will

generate 127.3GWh of energy utilization.

9

Rebate Eligibility

Refrigerator (RM200/unit)Quantity: 100,000 units

• Only Malaysian households that consume an average of 200-400kWh of electricity per month in Peninsular Malaysia

• All Malaysian domestic users registered with SESB or SESCO in Sabah, Labuan and Sarawak

• Models with capacity up to 400

Eligibility

17

generate 127.3GWh of energy utilization.

This same amount of savings can generate

enough electricity supply to 425,000 homes

on annual basis.

GNI

RM5.1 billion by 2020

Potential Energy Savings

127.3GWh

• Models with capacity up to 400 litres only

Air-conditioner (RM100/unit)Quantity: 65,000 units

• Models capacity up to 2.5 horsepower only

• All Malaysian households in Peninsular Malaysia, Sabah and Sarawak

Chiller (RM200/RT)Quantity: 72,000 RT

• Registered private entities in Malaysia

• Chiller for air conditioning systems in commercial buildings for comfort cooling only

ETP announcement on 8 March 2011

Cypark Resources Berhad (CRB) will spearhead an initiative to build a Renewable

Energy Park (RE Park) on 26 hectares of remediated landfill in Pajam, Nilai, Negeri

Sembilan. The proposed RE Park involves the integration of three potential

resources available at the landfills i.e. solar, landfill gas (biogas), and waste (biocell)

into a scalable renewable energy project capable of generating up to 10 megawatts

of power in Pajam landfill alone.

The proposed sustainable economic transformation of non-sanitary landfills into RE

Park is in line with the Government’s Economic Transformation Program (EPP 10)

and will be carried out through the private investment initiative of CRB.

10

18

and will be carried out through the private investment initiative of CRB.

GNI

RM12.16 million

Total Investment

RM94.29 million

ETP announcement on 11 January 2011

Government is studying the possibility of deploying nuclear energy to meet future

demand and diversify the energy mix for Peninsular Malaysia. To spearhead the

initiative, the Malaysia Nuclear Power Corporation (MNPC) has been formed to

lead the planning based on the current development timeline of 11 to 12 years, from

pre-project to commissioning. Dr Mohd Zamzam bin Jaafar has been appointed the

Chief Executive Officer of this newly established entity.

11

19

PM announcement on 1 June 2011

Bakun Hydroelectric PPA, signed between Sarawak Hidro Sdn Bhd - owned by the

federal Finance Ministry - and state-owned Sarawak Energy Berhad, sets the base

tariff at 6.25 sen per kilowatt-hour (kWh) with an annual tariff hike of 1.5 percent.

The rate is attractive for investors to pump in funds into Malaysia, particularly in the

Sarawak Corridor of Renewable Energy (Score) project.

GNI

RM5.4 billion by 2020

12

20

Total Investment including Foreign Direct Investment (FDI)

RM23 billion by 2020

SOURCE: OGE NKEA Lab

Thank You

21

Executive Summary

▪Major contributor to the Malaysian economy

▪Decline of domestic oil and gas production

▪

22

▪ 3 areas of focus

• SUSTAIN

• GROW

• DIVERSIFY

▪ Target: additional RM76.8 Bln to GNI and 52,000 new jobs by 2020

ETP Progress Announcement

Schlumberger invested RM300 million in

setting up their Eastern Hemisphere

Global Financial Services Hub in

Bandar Utama

The Economic Council

endorsed new tax

incentives to be

incorporated in Petroleum

Income Tax Act (PITA) to

incentive production and

exploration

Tanjong Agas is

investing RM3 billion to

Petronas has recently

made a major oil and gas

23

investing RM3 billion to

develop the Tanjong

Agas Oil & Gas and

Logistics Industrial Park

in Pekan, Pahang

ExxonMobil is investing over RM10

billion to rejuvenate mature facilities

and undertake enhanced oil

recovery

Shell Malaysia will invest

RM5.1 billion into projects to

upgrade, expand or build

their facilities in upstream,

midstream and downstream

across Malaysia.

made a major oil and gas

discovery after

commencing drilling

works offshore Sarawak.

ETP Progress Announcement

Dialog Group Berhad is

leading a consortium to

develop an Independent

Deepwater Petroleum

Terminal Project at

Pengerang, Johor

Petronas has awarded a risk

service contract for its

Berantai field to Petrofac

Muhibbah Engineering (M) Bhd, in a consortium with Perunding Ranhill Worley Sdn Bhd, have

MPRC will facilitate cross-border

investments and assist Malaysian oil and

gas companies through the identification

of suitable markets and opportunities

abroad.

Malaysia Petroleum Resources Corp

24

Berantai field to Petrofac

Energy Developments Sdn.

Bhd., Kencana Energy Sdn

Bhd and Sapura Energy

Ventures Sdn Bhd.

Ranhill Worley Sdn Bhd, have been awarded a RM1.07bil contract by Petronas Gas Bhd to construct a liquefied natural gas (LNG) import terminal off the coast of Malacca

RG Gas & Chemical (M) Sdn Bhd has received approval from the Labuan Corporation of FT Labuan to convert Pulau Daat into an industrial zone for an integrated oil and gas hub.

Even with an increase in exploration activity, total

resource addition is shrinking

Historic number of wells drilled# wells/ 5 years

Oil & Gas resource additionMMboe/ 5 years

1,050

1,200

1,380

1,580140

120

78

25SOURCE: PETRONAS

680780

250

04-0899-0394-9889-9384-8879-831974-78

62

45

25

78

40

04-0899-0394-9889-9384-8879-831974-78

ETP announcement on 8 Mar 2011 1 - 3

Petroliam Nasional Bhd (Petronas) has recently made a major oil and

gas (O&G) discovery after commencing drilling works at NC3 and Spaoh-1

wells in Blocks SK316 and SK306 respectively, offshore Sarawak.

The successful drilling of the NC3 wildcat well in March 2010 and a

subsequent appraisal well indicated a significant discovery for the national

oil company in Block SK316 with early estimates at 2.6 trillion standard

cubic feet (tscf) of net gas in place.

26

The Spaoh-1 well located in Block SK306, shows similar promise. It was

drilled in December 2010 and found both oil and gas. Petronas pointed out

that preliminary evaluation indicated about 100 million stock tank barrels

(mmstb) of oil and 0.2 tscf of gas in place respectively. Currently, the well is

being prepared for production testing.

Unlocking latent gas demand

MMSCFD

Make up for depleting gas

production

Make-up GNI

New industries develop on

back of natural gas supply

RM8 Bn GNI impact3Industries

switching from diesel

RM1.92 Bn

A

B

270

700260

2020 Total new jobs:

~27,0003

4

27SOURCE: OGE NKEA Lab

1 Actual size will be determined by PETRONAS in the design phase (by Oct 2010)

2 Not including “multiplier” effect of ~RM 8 Billion coming from new industries that will develop on the back of new gas supply (EPP 4)

3 Not included in OGE GNI target, since ‘multiplier” effect on other industries

7 MTPA1 LNG regasification and receiving

facility

RM0.64 Bn GNI impact

Make-up GNI impact

RM1.92 Bn GNI impact

C

2020 GNI impact:

RM2.562

Billion

▪ There is a demand to build storage capacity for the region

▪ Facility would complement Singapore, which currently is the only major independent

Opportunity

Malaysia

(Million m3

capacity planned)

South Johor and Tg Agascan complement Singapore to form an oil co-hub with 10 Million m3 if all the potential

2020 Total new jobs:

800

Tanjung Agas (3)

Regional oil storage hub5

28

the only major independent terminal and storage facility in South East Asia

▪ Potential for an oil trading business, future development of downstream industry including refinery and oil based petrochemical complex, and LNG regasterminal

Singapore

Pengerang(5)Singapore

� Independent Storage Capacity 10 Million m3

� Limited land for new major storage investments

SOURCE: OGE NKEA Lab

TanjungBin (1.4)

TanjungLangsat (0.6)

Million m if all the potential projects comes online

2020 GNI impact:

USD0.5 Billion1

1 Pilot project terminal GNI only, excludes derived GNI from petrochemical or other developments

Malaysian Petroleum Resources Corporation (“MPRC”)

MPRC Organisational StructureMandate of MPRC

▪ Make recommendations on policy

▪ Make recommendations on business regulations and tax regime

▪ Prepare and share blueprints

▪ Build Oil and Gas Service company database

▪ Promote the Malaysian Oil and

Board of Directors

Minister

29

▪ Promote the Malaysian Oil and Gas Services industry and companies abroad

▪ Use financial incentives to support selected domestic companies applying for foreign contracts

▪ Support Oil and Gas Services companies (domestic and foreign) to set up in Malaysia

▪ Interact with other parties to ensure industry requirements are met e.g., talent, R&D etc.

CEO

Consultan + Services

Manufactu + Fabrication

Marine + Installation

Corporate + Spec Proj

SOURCE: OGE NKEA Lab

GNI impact

Energy reduction potential 1700

ktoe

Transport efficiency

~USD0.4

Building insulation

4 5Leading by

example1

~USD1.0

Co-gene-ration

3

~USD0.4 ~USD1.0

1,700GWh4,300GWh 2,300GWh

9 Energy efficiency

New appliances

2

~USD1.6

7,300GWh

30

▪ Government to lead by example: Energy efficient practices across

ministries and departments

▪ Funding to incentivise adoption of energy efficient appliances or vehicles

▪ Reduction of energy subsidies to push consumers to save energy

▪ Regulatory changes to support and promote energy efficiency initiatives

What it takes to make it happen

GNI impact

Widespread usage

of energy efficient

vehicles with newer

Internal Combustion

Engine (ICE) or

hybrid engines

2020 GNI impact:

RM14.08 Billion

~USD0.4

Billion

Improve building

insulation to reduce

energy used in

cooling

Encourage adoption

of energy

efficient practices

(e.g. increase air-

conditioning by 1°C)

~USD1.0

Billion

Incentivise industrial

users and utilities to

adopt co-generation

for optimised energy

use

~USD0.4

Billion

~USD1.0

Billion

SOURCE: OGE NKEA Lab

Encourage usage

of high efficiency

appliances

(5-star refrigerators, air-

conditioners or lamps)

~USD1.6

Billion

Solar capacity build-up

Full cost1 of solar generation vs gas

Levelised cost of energy, USD/kWh

Additional benefits from implementing

solar…

0.4

0.5

0.6

0.7

Fulfil “Green” Agenda

Enhance energy independence

Increase energy

NA

NA

GNI USD Bn

Combined Cycle Gas Turbine

Solar - Central generation

Solar - Distributed generation

10

31SOURCE: OGE NKEA Lab

1 Full cost, including CAPEX (LCE)

2 Assumptions for CCGT gas power generation: WACC 7.6%, CAPEX USD1000/KWe, plant efficiency 53%, gas price USD/mmbtu 8 in 2010 to 9.8 by 2020, O&M cost

of 5USD/MwH load factor 85%

3 Assumptions for centrally generated solar: WACC 7.6% CAPEX 2812USD/Kw falilng at 10% until 2016, then by 8%, 6%, 4% and 3% from 2017 to 2020, O&M 1% of

CAPEX, lifetime: 20 years, hours utilization 1,300/year

4 Assumptions for centrally generated solar: WACC 7.6% CAPEX 3,750USD/Kw falilng at 10% until 2016, then by 8%, 6%, 4% and 3% from 2017 to 2020 O&M 2% of

CAPEX, lifetime: 20 years, hours utilization 1,300/year

5 GNI impact taken into account in the Electronics and Electrical NKEA Lab

0

0.1

0.2

0.3

2010 2012 2014 2016 2018 2020

Increase energy security

Increase employment

Catalyse local manufacturing and FDI

NA

0.1

~6.95

Nuclear

If developed, nuclear would be cost competitive but it takes 10-11 years to build

This requires for the government to start today with the preparatory phase

Int’l governance

▪ Sign/ratify relevant treaties & conventions

Public education

▪ Promote public acceptance

5144

211919

Gas NuclearCoal Gas Solar

Comparative cost of energy & CO2 emission indicatorLevelised cost of energy, RM sen/kWh

11

32

Regulatory context

▪ Put in place detailed regulations

Plant Site Acquisition

▪ Acquire approval for plant sites

▪ Obtain public support in locality

Gas

CCGT

NuclearCoal Gas

OCGT

Solar

(centrally

generated)

SOURCE: OGE lab; TNB data; IAEA data

Assumptions: General: WACC 7.6%, 1USD = RM3.2

Coal: CAPEX USD1530/kWe, plant efficiency 46%, coal cost 5 USD/mmbtu, O&M cost of 6.16USD/MWh, load factor 85%

Gas CCGT: CAPEX USD1000/KWe, plant efficiency 53%, gas price 8 USD/mmbtu, O&M cost of 5USD/MWh load factor 85%

Gas OCGT: CAPEX USD700/KWe, plant efficiency 30%, gas price 8 USD/mmbtu, O&M cost of 5USD/MWh load factor 15%

Solar centrally generated : CAPEX 2812USD/Kw O&M 1% of CAPEX, lifetime: 20 years, hours utilization 1,300/year

30 60 13444

Pre-project activities

Vendor procurement

Construction &

commissioning

Fastest timeline supported by all stakeholdersMonths

2020 Total new jobs:

2,600

12 Big hydro powers industrial growth in Sarawak

Existing dam

Planned dam

Growth NodesNew additional

transmission to build

Existing transmission

Extensions to build

ILLUSTRATIVE

Sabah

Limbang

Tudan

Brunei200MW

Sabah200MW

Samalaju

Lawas (100MW)

Lawas

Limbang

33SOURCE: OGE NKEA Lab

2020 GNI impact:

RM5.76 Billion

Kapit

Similajau

Bunut

(944MW)

Baram (1212MW)

Limbang (245MW)

Tg.Kidurong

Mukah

Sarikei

Tg.ManisG.Maling

Batang.Ai (108MW)

Sejingkat

Biawak

Kpg.Pueh

Bakun (2400MW)

Murum

Samalaju

EngkililiWestKalimantan

100MW

Mukah

Services Hub, R&D

and Human Capital

Samalaju

Heavy and Energy

Intensive Industries

Baram

Oil Palm, Food

Production,Timber

and Tourism

Tunoh

Oil Palm,Food

Production,Timber and

Tourism

Tanjung Manis

Halal Park, Ship

Building and Resource-

based industries

Matang

2020 employment:

600 jobs