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North America

OIL AND GAS INVESTMENT OPPORTUNITIES IN NIGERIA by Mr. Tony Chukwueke Director Petroleum Resources APPEX – AAPG Conference London (20 th – 22 nd , March 2007).

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North America

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  1. OIL AND GAS INVESTMENT OPPORTUNITIES IN NIGERIA byMr. Tony ChukwuekeDirector Petroleum ResourcesAPPEX – AAPG ConferenceLondon(20th – 22nd, March 2007) Department of Petroleum Resources

  2. Global demand for oil & gas resources rose significantly in recent years driven mostly by economic growth in the West and the Emerging Economies of Asia Energy Gap as Major Imperative for Drive for New Hydrocarbon Reserves Mbopd North America Asia Pacific Europe & Eurasia South &Central America Middle East Africa Daily Regional Production Daily Regional Consumption Department of Petroleum Resources

  3. The Gulf of Guinea led by Nigeria occupies a commanding position in filling the hydrocarbon resource gap, being one of the world’s remaining most prolific hydrocarbon provinces, and is strategically positioned with respect to the markets of the EU and the Americas 100 Egypt Equ Guinea Gabon Libya Angola 50 Nigeria Algeria Sudan 0 Congo (D) Bln Boe North Africa West Africa East Africa Southern Africa Department of Petroleum Resources

  4. Nigeria is blessed with substantial oil & gas potential not only in the Niger Delta and the Offshore but also the Inland basins particularly for gas Chad Basin Sokoto Embayment Bida Basin Benue Trough BENI Benin Basin TGO GAMANA RIVER ABEOKUTA KATSINA RIER LEKKI LAGOON Anambra Basin EBUTE METTA SUMMIT INT.-OPL-205 LAGOS BENIN CITY ONITSHA NPDC-OPL-110 CROSS RIVER PAN OCEAN-OML-98 CHEVRON-OML-95 BENIN RIVER CHEVRON-OML-49 SHELL-OML-41 CAMEROUN SAPELE NIGER RIVER SHELL-OML-39 CHEVRON-OML-95 SHELL-OML-43 BIGHT OF BENIN FORCADOS RIVER OPL 240 CHEVRON-OML-90 WARRI NPDC-OML-64 BRASS OPL-208 CHEVRON-OML-91 GULF OF GUINEA CHEVRON-OML-89 ATLAS-OPL-75 CHEVRON-OML-53 SHELL-OML-16 CRESCENT OPL-234 SHELL-OML-46 SHELL-OML-27 SHELL-OML-81 EXXON-OPL-209 SHELL-OML-35 CALABAR NKONGSAMBA CHEVRON-OML-50 SHELL-OML-32 ASARIS OPL-235 SHELL-OML-28 SHELL-OML-22 CHEVRON-OML-54 PORT HARCOURT SHELL-OML-36 ELF-OML-59 SHELL-OML-13 CHEVRON-OML-51 PET PROD OPL-233 TEXACO-OML-88 SHELL-OML-73 MOBIL-OML-70 ASHLAND-OPL-98 SHELL-OML-72 SHELL-OML-72 TEXACO-OML-87 MONCRIEF-OPL-471 SANAGA RIVER SHELL-OML-71 SHELL-OML-77 SHELL-OML-74 TEXACO-OML-85 AGIPEN OPL-472 TEXACO-OML-83 SUNLINK OPL-238 ASHLAND-OPL-90 INTOIL-OPL-214 SOLGAS OPL-226 ASHLAND-OPL-225 Niger Delta ELF-OPL-223 FAMFA-OPL-216 DU PONT-OPL-220 STATOIL/BPX-OPL-217 STATOIL/BPX-OPL-218 SHELL-OPL-219 MOBIL-OPL-221 NIGERIA MONIPULO OPL-230 Department of Petroleum Resources

  5. Oil Reserves (Barrels) Gas Reserves (Tcf) Deepwater 27 Tcf Deepwater 5 Bln Niger Delta 160 Tcf Niger Delta 28 Bln Total 187 Tcf Total 33 Bln Significant discoveries have been recorded in the Niger Delta but the Deep Offshore has also become equally significant. Department of Petroleum Resources

  6. There is still ample exploration scope for oil and gas remaining in the Niger Delta, the Deepwater and Inland Basins also with substantial proven reserves uncommitted 1200 Remaining Exploration Scope Deepwater 1000 Remaining Exploration Scope Onshore Unconventional 800 600 Remaining Exploration Scope Onshore Conventional 400 200 Uncommitted Committed 0 Tcf Equiv Nigeria Remaining Exploration Potential Department of Petroleum Resources

  7. Furthermore, under the leadership of President Olusegun Obasanjo, Nigeria is evolving new strategies to bring new reserves to market • Opening up of new oil and gas assets to new investments exploration and exploitation – frontier areas in the Deep Offshore and Inland Basins, Re-invigoration of activities in the traditional areas of the Niger Delta and the deep Offshore • Pursue open and transparent Bidding Process for assets allocation. • Seek out and attract new investors to compliment traditional players. • Link investment in the downstream with upstream assets allocation. • Adopt Production Sharing Contracts as the preferred commercial instrument with slightly revised fiscal terms. • Aggressive pursuit of natural gas development including access to 3rd parties and non-traditional players as well as new fiscal terms • Pursue a credible local content programme. • Launch of fundamental and far reaching transformation of the Oil and Gas Sector Department of Petroleum Resources

  8. Nigeria’s new exploration and exploitation fiscal and commercial terms remain most competitive in the Gulf of Guinea region Equatorial Angola Gabon Nigeria Guinea Signature Bonus High High Low Medium Very Cost Recovery Generous Generous Generous Generous Royalty Medium Medium Low Low Tax Medium Medium Low Medium Work Programme Medium Medium Light Medium Commitment Comparison of OPL Fiscal Terms Department of Petroleum Resources

  9. The Niger Delta is characterized by simple rollover structures that have been the target of traditional exploration but significant prospectivity still remain especially in the deeper section. Department of Petroleum Resources

  10. The Compressional Zone in deeper water require new thinking supported by high technology to successfully delineate. SIMPLE FOLDS AND THRUST BELT IMBRICATE THRUST BELT STABLE CRATON Department of Petroleum Resources

  11. The Inland Basins are gas prone which is becoming attractive due to higher prices and opportunities for IPPs and small local oil refinery Department of Petroleum Resources

  12. At the same time, the country also embarked on fundamental Oil and Gas sector Reform aimed to provide more conducive environment for investment Ministry of Energy Revenue & Taxes (FIRS) Power Policy DOWNSTREAM UPSTREAM GAS Petroleum Products & Marketing DPR/PPPRA NNPC/Partners Independents/NGC Operating NNPC (NAPIMS) Independents DPR Refining Petrochem Pipelines Regulatory Operating Regulatory DPR Regulatory Department of Petroleum Resources

  13. In 2005 Nigeria organised its 1st successful open and transparent bid process for oil and gas assets No. of Blocks Award Performance (%) 80 100 60 75 40 50 25 20 0 0 Deep Offshore Nig Delta Onshore* Nig Delta Cont Shelf* Anambra Benue Chad Total 77 100% 100% 57% 57% 56% 44 31% 16 14 14 14 13 11 11 13% 9 8 5 4 2 * Includes Blocks Dedicated to Strategic Downstream Investment. Award Performance – a/b (%) No. of Blocks Offered (a) No. of Blocks Awarded(b) Department of Petroleum Resources

  14. This was followed in 2006 by a Mini-Round targeted especially at strategic downstream investors. Department of Petroleum Resources

  15. These Rounds brought in important new players from Korea, China and India but also from the EU (BG, Centrica). Government desires new players also from the US to compliment the traditional players (ExxonMobil, Shell, ChevTex, Total and Eni). Department of Petroleum Resources

  16. In addition to yielding substantial revenues in Signature Bonuses, linkage of downstream investment with upstream award is also yielding substantial benefits in downstream projects – Korea and China projects well underway. KADUNA IPP 1000 MW KADUNA INDUSTRIAL CITY 36” x 160km KADUNA TGS 36” x 207km ABUJA TGS Gas Feedstock (750mmScf) 36” x 196km AJAOKUTA OBEN KADUNA FERTILIZER PLANT 1 MTPA ABUJA INDUSTRIAL CITY ABUA IPP 1000 MW Department of Petroleum Resources

  17. The Rail Transportation Sector is currently a key focus of upcoming integrated projects. N Lake Chad Gusau Kano Maiduguri Biu R. Niger Zaria [6”] Kaduna 10” Gombe 6” 12” 168 km Minna Yola 8” 765 km Jos 8” 72 km R. Benue Suleja Ilorin 12” 299 km 8” 170 km Ibadan Auchi Makurdi [6”] 12” 169 km Ore Ikorodu Benin City 8” 180 km 12” 107 km LEGEND Lagos Enugu 12” Refinery and Depot [12”] 156km Warri Distribution Depot Aba Bight of Benin Booster Calabar Pipeline [12”] Port Harcourt Proposed New Railway Network Aba New Tankage Location IBADAN OPL-901 OPL-902 OPL-903 OPL-904 OPL-303 OPL-305 OPL-201 OPL-301 OPL-306 OPL-304 OPL-905 OPL-906 OPL-307 IPEC-OPL-202 SUPRA-OPL-203 SUNLINK-OPL474 ELF-OPL-447 OPL-308 OPL-302 DUBRI-OML-96 MLM OPL-454 CAVENDISH-OPL-453 PACLAN-OPL-204 SUMMIT INT.-OPL-206 SHELL-OML-7 SEAWOLF OPL-907 CONSOLIDATED-OPL-113 COTONOU OBEKPA OPL-241 SHELL-OML-1 SHELL-OML-5 QUEENS PETRO. NIG. LTD. SHELL-OML-34 OPL-135 OPL-228 SHELL-OML-4 OPL-309 YINKA JAMES PET OPL-310 OPL-311 SUNLINK SHELL-OML-40 CHEVRON-OML-49 SHELL-OML-38 SHELL-OML-38 ASHLAND-OPL-118 EXPRESS PETR OML-108 SHELL-OML-30 ATLAS-OPL-75 ELF-OML-56 DEVINE OPL-312 OPL-313 OPL-314 AGIP OPL-316 OPL 239 OPL-315 SHELL-OML-26 SHELL-OML-20 LAMONT OPL-207 SHELL-OML-15 NAOC-OML-61 MONIPULO OPL-230 SHELL-OML-42 SHELL-OML-43 SHELL-OML-45 SHELL-OML-44 AGIP OML-62 NPDC-OML-65 SHELL-OML-21 Korea CONSOLIDATED-OPL-458 ELF-OML-58 SHELL-OML-79 AGIP OML-63 SHELL-OML-17 ALLIED-OPL-210 AGIP OML-63 SHELL-OML-11 ULTRAMAR OPL-227 SHELL-OML-31 MAREENA OPL 231 AMALGAM OPL-452 AGIP OML-63 CHEVRON-OML-54 China SHELL-OML-23 ASARIS OPL-236 AGIP OPL-211 SHELL-OML-14 CHEVRON-OML-55 SHELL-OML-24 SHELL-OML-18 TEXACO-OML-84 SHELL-OML-33 SHELL-OML-29 ELF-OML-101 SHELL-OML-25 MOBIL-OML-69 AMNI OPL-237 CHEVRON-OML-52 India SHELL-OML-19 CHEVRON-OML-55 MOBIL-OML-68 NDPC OML-66 MOBIL-OML-67 MOBIL-OML-67 STATOIL/BPX-OPL-213 PEAK OPL-460 TEXACO-OML-86 SHELL-OML-74 OPL-467 IPEC-OPL-229 ELF-OML-99 (EQUATORIAL GUINEA) ORIENT-OPL-224 TIKO OPEN MOBIL-OPL-94 ELF-OML-100 NPDC-OPL-91 ELF-OML-102 Department of Petroleum Resources NOREAST-OPL-215 SANTA ISABEL UMIC OPL 242 ELF-OPL-222 OPL 246 OPL 245 OPL 243 OPL 244 OPL 247 KRIBI

  18. So also are the development of domestic gas projects including Refining, CNG, IPP, GtL and Petrochemical projects Department of Petroleum Resources

  19. Marginal field opportunities remain to support local companies in raising financing Department of Petroleum Resources

  20. Ongoing Downstream Privatisation offers unique downstream investment opportunities • Downstream Oil • Divestment of Existing Refineries (51% private) • Licences for construction of new refineries (18) • Liberalisation of Petroleum Products supply • Deregulation of Depots and Common Access to distribution infrastructure. • Refining Integrated value chain projects (full cycle) • Gas Development • Independent Power Projects • GtL and other petrochemical projects • Domestic gas distribution including CNG • Ongoing Gas Monetisation opportunities • Pipe Gas (WAGP, TSGP, Kaduna & Abeokuta Development Corridors) • GtL (EGP3, Mobile GtL) CNG, LPG/NGL • IPPs (Agip, Abuja, Kaduna etc.) • Industrial (Methanol, Aluminium, Steel, Petrochemicals) Department of Petroleum Resources

  21. However, the instability in the Niger Delta remain a serious challenge PMS PRODUCT MOVEMENT LOSS FOR JUNE - DECEMBER 2006 MM m3 2.0 8.8% (157,923) 8.8% (157,923) 1.6 1.2 PUMPED RECEIVED 0.8 2.5% (12,831) 2.9% (16,674) 2.5% (12,831) 2.9% (16,674) 0.4 1.05% (13,752) 10.5% (13,752) 0 ATLAS COVE - MOSIMI - SATELLITE MOSIMI - IBADAN IBADAN - ILORIN MOSIMI Department of Petroleum Resources

  22. But we believe that Government efforts are yielding dividends and situation will return to normal after the national elections Mr. President’s personal involvement in the Projects for Peace Initiative for the Coastal States of the Niger Delta Involvement of Niger Delta communities in oil and gas activities Development of the Delta on a commercial rather than social platform through upstream/downstream linkage Re-enforcement of the Niger Delta Development Commission (NDDC) Greater transparency in the provision and spending of the 13% revenue derivation fund Improved security surveillance targeted at criminal elements in the Delta. Department of Petroleum Resources

  23. In order to take full advantage of the global energy situation, Nigeria must maintain the strides in political and economic reforms • Stable and functional democratic institutions • Successful civilian election in 2007. • Commitment to the NEPAD initiative • Fundamental economic reform package • Adherence to the principle of EITI • Continue reform of the financial sector. • Oil and Gas Industry Reform • Committed to full deregulation of the Downstream oil and gas sector • Full implementation of the National Oil and Gas Policy. Department of Petroleum Resources

  24. Thank You Department of Petroleum Resources

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