17 17 th th INT INTERNATIONAL CO CONFERENCE & EXH XHIBITION ON ON 17 th INTERNATIONAL CONFERENCE & EXHIBITION LI LIQUEFIED NA NATURAL GAS GAS (LN (LNG 17 17) ON LIQUEFIED NATURAL GAS (LNG 17) Eas ast Afri frica: : Opportunities an and d Chal allenges <Title of Presentation> <Title of Presentation> fo for LNG in in a a New ew Fron rontier Reg egio ion By: <Author Name>, <Organization> By: <Author Name>, <Organization> By: Derek Hudson, BG Group <Date> <Date> 16 April 2013
Legal Notice The following presentation contains forward- looking statements concerning BG Group plc’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group plc operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which can be controlled or predicted. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from the guidance given in this presentation for a number of reasons. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the “Principal risks and uncertainties” included in the BG Group plc Annual Report & Accounts 2011. Nothing in this presentation should be construed as a profit forecast and no part of this presentation constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group plc undertakes no obligation to update any forward-looking statements. No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by BG Group plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it.
Agenda • BG Group in East Africa • Tanzania LNG project • Global LNG context • Potential socio-economic impacts of a LNG project in Tanzania • Closing thoughts
Emerging hydrocarbon province • Relatively unexplored frontier play • East Africa: new exploration hotspot with recent material discoveries Legend: • Reliable government institutions BG Group interests • Favorably positioned to access robustly priced Asia-Pacific LNG markets • Likely to underpin next wave of LNG developments • BG Group has a strong acreage position in East Africa
BG Group in Tanzania Dar es Salaam 500 km • Acquisition of 60% of Ophir’s interests Mkuranga -1 in Blocks 1, 3 & 4 in June 2010 • BG Group appointed operator in July 2011 Mafia Deep 1ST -1 • Nine consecutive successful gas wells Block 4 Chewa • 13,500 km 2 of seismic data acquired Songo Songo Pweza Kiliwani North Block 3 Papa • Circa US$1 billion spent on E&A to date Zafarani • First DST commenced offshore Lavani Tanzania in January 2013 Mzia • Further E&A in 2013/14 to enhance Jodari Chaza Block 1 resource base in support of Mtwara Mnazi Bay Msimbati TANZANIA land-based LNG project Ziwani Ntorya WD: 500 m WD: 1,000 m WD: 2,000 m
BG Group in Kenya / Madagascar WD: 500 m WD: 1,000 m WD: 2,000 m Kenya KENYA Mbawa Gas Discovery • BG Group operator on L10A & L10B blocks Mombasa • 10,400 km 2 of acreage in water depths from 200 to 2,000 metres Block L-10A • 2,630 km 2 of 3D seismic acquired over Block L-10B two blocks TANZANIA • Drilling planned for late 2013 / early 2014 Madagascar 500 km • Non-operated block in unexplored frontier basin • North-west coast of Madagascar Majunga Offshore • 15,840 km2 of acreage in water depths Profond from 200 to 3,000 metres • Believed to be oil-prone MADAGASCAR Source: Wood Mackenzie
Nature of discoveries Seismic line across Jodari • Discovered reservoirs not particularly complex geologically • Highly permeable sandstones deposited in deep marine channel systems • Normally pressured, low temperature reservoirs • Multi-TCF discoveries in gas column ranging from 40 to 50 metres 500 km Block 1 • Dry gas with little or no contaminants • Challenging design of high Jodari deliverability well in extreme Mtwara water depth TANZANIA
Tanzania LNG development • Discoveries scattered across Export to international four large blocks, distant from markets the shore Block 4 • Water depths also limit offshore c. 200 km facility design Block 3 • Subsea only solutions controlled and monitored from the beach and floating production unit option Block 2 DMO considered LNG LNG • FLNG option still considered while Indicative plant preferred option is land-based location LNG plant Block 1 Mtwara TANZANIA WD: 500 m WD: 1,000 m WD: 2,000 m Potential LNG site locations
Global LNG supply / demand Outlook • LNG demand is expected to continue to grow, mostly in 450 Pacific Basin 400 LNG trade • LNG supply growth driven by Qatar million tonnes per annum (mtpa) forecast Supply / 350 c. 170 demand mtpa and Australia gap Supply: 300 Existing and under • However, supply / demand gap 250 construction Australia expected to increase over the next 200 decade Qatar 150 • Where is the next Qatar or 100 Australia? 50 • Mozambique and Tanzania? Recent discoveries have built up significant 0 2000 2005 2010 2015 2020 2025 resource base in East Africa Source: BG Group interpretation of Wood Mackenzie (Nov 2012) Note: Supply adjusted by BG Group to account for chain losses
From East Africa to markets Distance from Tanzania to markets • Well located to supply multiple markets on long-term basis or in response to short-term market fluctuation • Equidistant from North East Asia UK and North East Europe 6,775 Korea • Extremely well located in respect to Spain 6,616 5,320 West Coast Indian markets China Japan 5,759 6,945 • Similar distance from market India 2,609 compared with Middle East exporters Singapore Tanzania 4,057 • But East Africa LNG projects emerging at the same time as new potential exporters: US and Canada Note: nautical miles – single leg trip
Sources of state income • Significant economic progress in • Direct benefits: East African countries in recent – Foreign direct investment years – Employment • Fairly modest level of human – Government take from the development: project Out of 187 – Kenya 143 countries in – Contribution to gross the United – Tanzania 152 domestic product and gross Nations national income – Madagascar Human 151 Development – Retained national income – Mozambique 184 Index and national expenditure • Development of LNG projects has • Indirect benefits: potential to transform economy – Induced impacts • Various direct and indirect benefits – Multiplier effects from of deepwater LNG projects industry Source: UNDP 2011
Employment: Multiplier effect 4 – 10 indirect jobs for every direct job 60,000 Induced Employment Induced employment Indirect employment 50,000 Indirect Employment Number of employees Direct employment Direct Employment 40,000 30,000 Not fully quantified 20,000 10,000 0 Year - … Year -8 Year -6 Year -4 Year -2 Year 0 Year 2 Year 4 Year 6 Year 8 Year 10 Year 12 Year 14 Year 16 Year 18 Year 20 Year 22 Year 24 Year 26 Year 28 Year 30 Source: Oxford Management Policy Note: Based on a two-train LNG project in Tanzania, LNG train size yet to be decided
Gas market development • Governments have a key role in delivering investment enabling policy and regulation • Mutually beneficial outcome to both in-country societies and multinational investors • Possible step-change in economic development thanks to deep water LNG projects • Can also facilitate development of fertiliser plants and power generation that have high multiplier impacts to economy • Enough gas for all sustainable requirements
Closing thoughts • Further exploration, appraisal and testing needed to bring LNG projects in East Africa to FID • Further exploration and well testing planned by BG Group in Tanzania • Global gas demand believed to outstrip gas supply • Market opportunity for well located East African gas discoveries • Potential significant economic contribution of LNG projects to East African countries • Upcoming drilling in offshore Kenya to further build East Africa’s Thank you! importance as an emerging hydrocarbon province
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