Update on Namibia Oil and Gas Exploration Sector

1. National Petroleum Corporation of Namibia An Update on the Namibia Oil and Gas Exploration Sector Robert Mwanachilenga Engineering Manager WWW.NAMCOR.COM.NA

2. Introduction License Activity Exploration History Namibian Basins and Data Coverage Fiscal and Legal Terms Summary Presentation Content

3. Introduction

4. Country Information • Government type: Republic • Capital: Windhoek • Independence: 21 March 1990 • Population: 2.1 million (2007 est.) • Area: 825 418 km2 • Coastline: 1 572 km • GDP : US $15 billion (2009) • Corporate income tax rate: 35%, Value added Tax (VAT) 15%

5. Petroleum Regulatory Structure Ministry of Mines and Energy Admin and Finance Mines Energy Directorate Diamond Affairs Geological Survey Office of the Petroleum Commissioner National Petroleum Corporation of Namibia (NAMCOR) Upstream Downstream

6. License activityHistoric post-independence 1990 - 2009

7. Exploration History • Underexplored – A Lot of Opportunity!!! • Onshore • First Well Drilled in 1928 (Berseba, Nama Basin) • Two Further Wells drilled in the Nama Basin by Artnell (1963) and Elf (1971) • ST-1 Drilled in Owambo Basin by Etosha Petroleum in 1959 • Three Further Wells Drilled in the Owambo Basin by Etosha Petroleum • OPIC Gets Etosha Petroleum Concessions and Drills OPO-1 in the 1990’s • Offshore: • Kudu 9A-1 Drilled in 1973 – Discovery Well for Kudu Gas Field • 7 Further Wells Drilled in Kudu Gas Field • Exploration Waned Until the First Licensing Round in 1991-1992 • Five Operators Were Awarded Licenses • NAMCOR Acquires Aeromagnetic Data For Offshore Namibia in 1998

8. Namibian basins

9. Data – Geology

10. Data – Seismic Coverage

11. Data - Wells Total 16, 8 in the Kudu field

12. Current Licenses Current Licensees - 11 Operators - 10 Exploration and 1 Production - 5 New Applications Under Review

13. Legal • The Petroleum (Exploration and Production) Act of 1991 and amendments, • The Petroleum (Taxation) Act of 1991, and amendments • The Petroleum (Regulations) Act of 1991 • 4. The Petroleum Agreement – between the Government and Operator

14. Fiscal • The three Main Components of the Namibian Fiscal Package are: • Royalty • Rate 5% of Market Value of Oil & Gas Produced. Paid Quarterly, can be deferred, remitted or refunded in Special Cases upon application to the Minister • Petroleum Income Tax (PIT) • Rate 35% of Taxable Income • The Additional Petroleum Tax (APT) • Incremental 3-tiered Tax Based on project IRR. • First additional tax rate is determined by a formula in the Act. • 2nd and 3rd Tax Rates are negotiable.

15. Fiscal Fees/charges - License Application Fees (N$ 3,000 to N$ 30,000), - Annual License Area Rental Charges, (N$ 60/km2 to N$ 1,500/km2 for Production Licenses). - Annual training sums – biddable and negotiable. 1 USD ≈ N$ 7.00

16. Fiscal - Decommissioning Trust Fund (as of 1998 Petroleum Laws Amendment Act) payment into escrow account from date when ½ estimated reserves are produced. - Possible bank guarantee - PA: Standard Petroleum Agreement model: - modern accounting procedure; - detailed valuation based on fair market pricing principles etc.

17. Fiscal • - Nosignature, discovery or production bonuses • Most items needed for petroleum operations can be imported duty free (Fuel is not duty free, but rebates are available upon application) • Non-resident shareholders tax - oil companies exempted

18. - Encouraging Fiscal and Legal Regime - Definite Increase in Exploration Activity - Focus on Onshore Basins - New Data Acquisition Campaigns Planned for 2010 - 11 - Very Low Well-Basin Density - Namibia Still Very Much Underexplored!! SUMMARY

19. Thank You !