The State of Energy Resources and Supply in Nigeria - Challenges, Constraints and Opportunities

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

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

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

4. Our Aspiration for Oil • 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 Strategic Themes of Gas Master Plan High Value Export Regional Pipelines LNG Gas to Power Gas Based Industrialisation “… By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol.” • Deliver Gas for at least threefold increase in generation capacity by 2015 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

6. Projection of Domestic Energy Demand 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

8. Crude Oil and Condensate Production Profile • 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 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 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 • Commercial : Evolution to free market • Deregulation • Market led gas pricing • Infrastructure • Capital • Human Capacity • Industry Structure – Oil vs Oil & Gas Industry

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

14. Critical Pipeline Infrastructure

15. Western Gas Infrastructure 1n 2011, we focused on reinforcing and expanding the Western supply infrastructure 1 2 OBEN – GEREGU GAS SUPPLY TO OLORUNSHOGO • 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 6 WESTERN CPF / OBEN –KOKO PIPELINE 2 4 1 3 • Tech configuration completed by Kellogs • Ready to commence Pre-FEED ELPS A • 24”/36” x 104km; • Project progressing steadily with issues being addressed 6 3 5 4 OBIAFU-OBRIKUM-OBEN (OB3) ELPS 2 • 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

16. Capital Expenditures JV + PSC JV only Significant number of new oil and gas projects provide opportunity to rationalize for greater efficiency • 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.

17. Stimulating Demand – Gas Based Industrialization- Koko FTZ Gas Industrial Complex 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 Petrochemical Plant Fertilizer Plant Anchor Investments • 1.3MT/400KTPA PE/PP Plant • Xenel of Saudi Arabia • Largest Plant in Africa • 2*1.3MTPA Fertilizer Plant • Nagarjuna of India Critical Foundation Projects Central Processing Facility FTZ Infrastructure Port Infrastructure

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

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

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

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