PetroSA: Vision, Business, Performance, Budget, Challenges & Conclusion

1. Minerals and Energy Portfolio Committee Mpumelelo Tshume MD / CEO

2. The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd

3. Delivery Inform the Portfolio Committee on PetroSA’s: • Vision and strategic objectives • Business and challenges • Performance • Budget 2003/2004

4. Structure of presentation Section 1 : Vision and overview of current business Section 2 : Strategic objectives Section 3 : Business performance 2002/2003 Section 4 : Budget 2003/2004 Section 5 : Corporate Governance Section 6 : Challenges and conclusion

5. Vision and Overview of current business Section 1

6. Vision To be a leading African energy company, competing globally in an environmentally reponsible manner, to the benefit of stakeholders.

7. Overview • Merger of Soekor, Mossgas and certain activities of SFF • Business strategy informed by: • Energy White Paper (1998) • Business Plan and Corporate Governance review report sanctioned by Cabinet in May 2001 • Wholly state-owned • Separate legal entity under Companies Act • Mandated to manage all commercial assets of state in the petroleum industry

8. Overview(continued) • Managed on sound commercial business principles • Forecasted turnover for 2002/2003 financial year - R5.6 billion. • Forecasted profit after tax and before dividends for 2002/2003 financial year - R1.6 billion. • Sound balance sheet to raise financing for major capital projects • Book value of assets at end March 2003 - R12.2 billion • Employs approximately 1 200 people

9. Overview(continued) • Supply approximately 7% of total South African refined product - Mossel bay GTL plant • Oil production from Southern Cape offshore approximately 15 000 barrels per day • Chemical exports - R600 million per annum • World’s largest commercial natural gas to transportation fuels plant • Sasol licence agreement limitations • Participation in international upstream petroleum ventures

10. FA Platform • 100 km south of Mossel Bay • 220 m high • 105 m water depth • 9 direct wells, 3 satellite wells • 7 wells by remote control through EM buoy

11. Strategic Objectives Section 2

12. Corporate Strategic Thrust – Exploration and Production Division • Exploring, developing and producing gas reserves on a commercial basis to supplement feedstock to Manufacturing refinery • Intensify investment in the upstream sector of value chain by focusing on Africa • Optimising production and current operations to generate cash flow for current and future developments

13. Corporate Strategic Thrust – Manufacturing Division • Optimising production and current operations to generate cash flow for current and future developments • Evaluating alternative sources of feedstock to Manufacturing refinery • Reduce Manufacturing cost base over next 18 months to achieve a R720 million saving per year

14. Corporate Strategic Thrust – Trading, Supply and Logistics • Expanding product range into higher-value chemicals and new environmentally compliant fuels • Develop and grow international sales by growing market share in existing customer base and extending sales regions already served • Optimisation of logistics in consideration of broad strategy to supply 30% of fuel products to BEE companies • Product trading and hedging to penetrate markets for oil offtakes as well as to minimise exposure

15. Corporate Strategic Thrust – Corporate Planning and New Ventures • Extending position in value chain to wholesale and retail marketing • Commercialise and exploit gas to liquids (GTL) know-how • Develop Pipeline infrastructure along West Coast • Investigate national refinery capacity expansion • Enter LNG, Methanol, down stream petrochemicals businesses via partnerships and synergistic acquisitions

16. Corporate Strategic Thrust – Support Functions • Ensure access to world-class support services, systems and practices in pursuit of operational excellence • Ensure functional systems support empowerment of teams and individuals • Implement competency development programs to retain, develop and attract human capital

17. Corporate Strategic Thrust – Transformation Black Economic Empowerment • Achieve Employment Equity in line with Policy: 60 : 40 • Develop: • Skills and Capacity in line with commercial focus • Corporate Social Investment Strategy and Funding Plan • Policy, targets and procedures to promote affirmable procurement • Facilitate the development of suppliers • Promote Equity participation by black owned companies in our businesses • Achieve a commercially orientated culture change

18. Business Performance 2002/2003 Section 3

19. Summary of salient points

20. Business Performance 20002/2003 • Implementation of merger completed • Entered into three upstream participation agreements in Gabon, Algeria and Nigeria • Oil production better than expected from Oribi and Oryx oil fields (Oribi: produced 25 million barrels vs expected 11 billion barrels; Oryx: produced 9 million barrels vs expected 4.5 million barrels) • GTL manufacturing plant achieve 1 million hours without disabling injuries • Good progress in securing gas feedstock for GTL manufacturing plant • Ibhubesi gas fields • Block 9 gas fields • Kudu gas fields

21. Business Performance 20002/2003(continued) • Entered into numerous Memorandums of Co-Operation and Memorandums of Understanding with NOC’s, IOC,s and Governments • Refocused marketing efforts for petrochemical products internationally reaped significant monetary benefits • Commissioning of LAD/LAK 1 project, increase petrochemicals production by 70 000 tons per year. Gross revenue added of $30 million per year.

22. Business Performance 2002/2003(continued) • Initiate social development programs in Mossel Bay and Limpopo Province • Implement progressive HR policies and set R115 million aside for training and skills development over next three years • Significant progress to achieving representative demographic profile • Contract of R750 million for procurement of condensate awarded to BEE company • Financial performance from Finance outstanding.

23. Business Performance 2002/2003(continued)Staff by Race

24. Business Performance 2002/2003(continued)Top Management

25. Business Performance 2002/2003 (continued)Staff by race, gender and designated groups

26. Business Performance 2002/2003 (continued)BEE discretionary expenditure R100 Million Target (16% of Opex) for 2002-2003

27. BEE- Current and future initiatives • Projected BEE Procurement expenditure for 2003-2004 is R200m (Estimated 30%) • 25% of all staff will be female • 1% of all staff will be disabled individuals • 60% of staff will be from the designated group and 40% non-designated by 2004 (By level and division) • R6m will be spent on supplier development programme • Establishing a forum to discuss opportunities between black business, established suppliers and PetroSA

28. BEE- Current and future initiatives (continued) • R50m will be spent on CSI-targetting education, poverty alleviation, community development and enterprise development, including the registration of PetroSA Trust • 9% interest in Sable Oil field to be sold to HDSA groupings by mid year 2003 • PetroSA is funding the Vukani initiative to train 450 women intrepeneurs from 9 provinces, and 30 Process Controllers • Partnerships being established with SABS and CHIETA and other state owned organisations to promote enterprise development

29. BEE- Current and future initiatives(continued) Women And Disabled Groups PetroSA is introducing new BEE reporting parameters effective April 2003: • Black women owned enterprises, • Black disabled owned enterprises, • Black empowered enterprises, • Black enterprise 50,1% with preference for 100% black owned enterprises • To date PetroSA has spent R12m on six Black women owned enterprises, • Zero expenditure on Disabled owned enterprises.

30. Budget 2003/2004 Section 4

31. Summary 2003/4 Budget • Employment equity 60:40 • Gender equity 25% • Black economic empowerment (R mil) 200 • Sales growth 11% • Productivity improvement 13% • Return on shareholders funds 13% • Net profit before tax(R mil) 878 • Net profit after tax (R mil) 878

32. Income statement

33. Salient ratios of financial plan

34. Investments required in the future ( 2003/4) R millions • Manufacturing 367 • E & P 1 383 • Other 13 • Gross total Capex 1 762

35. Corporate Governance Section 5

36. Corporate Governance • Compliance a high priority • Compliance required to following main acts / regulations: • Public Finance Management Act • Treasury regulations • South Aftican Reserve Bank regulations • Close working relationship with regulatury bodies essential to ensure quick decision making and approval process • Opportunity to add 3.3 million barrels of oil to reserve base lost

37. Challenges and Conclusion Section 6

38. Challenges • Expand business along the industry value chain, with retail as main priority • Secure long term gas feedstock for GTL manufacturing plant • Progress GTL commercialisation projects to ensure commisioning of first full scale plant not later than 2009 • Commissioning of SABLE oil field in 2nd quarter of 2003. Will add 12 million barrels to oil reserves. Expected capital cost of $ 86 million • Successful shutdown during 2nd quarter of 2003.Expected cost of R171 million, margin impact of R220 million

39. Challenges (continued) • Migration to unleaded fuels • Create a culture and value system aligned to our commercial objectives • Skills enhancement to create required capacity • Consolidation of business architecture- systems and policies • Achievement of transformation objectives, especially BEE • Corporate Governance compliance • Meaningful contribution to NEPAD objectives

40. Conclusion The business strategy of PetroSA is based on achieving and contributing to following shareholder objectives: • Achieve a competitive commercially viable company on a sustained basis • Active along the full value chain of the petroleum, oil, gas and petrochemical sectors • Achieve transformation on a continuous basis, with focus on BEE delivery • Up skill of staff and industry capacity building

41. Thank you