Eas ast Afri frica: : Opportunities an and d Chal allenges - - PowerPoint PPT Presentation

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17th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17)

Eas ast Afri frica: : Opportunities an and d Chal allenges fo for LNG in in a a New ew Fron rontier Reg egio ion

By: Derek Hudson, BG Group 16 April 2013 17 17th

th INT

INTERNATIONAL CO CONFERENCE & EXH XHIBITION ON ON LI LIQUEFIED NA NATURAL GAS GAS (LN (LNG 17 17)

Legal Notice

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• 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

• Reliable government institutions
• 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

Legend:

BG Group interests

BG Group in Tanzania

• Acquisition of 60% of Ophir’s interests

in Blocks 1, 3 & 4 in June 2010

• BG Group appointed operator in

July 2011

• Nine consecutive successful gas wells
• 13,500 km2 of seismic data acquired
• Circa US$1 billion spent on E&A to

date

• First DST commenced offshore

Tanzania in January 2013

• Further E&A in 2013/14 to enhance

resource base in support of land-based LNG project

WD: 2,000 m

TANZANIA

Mkuranga -1 Mafia Deep 1ST -1

Dar es Salaam

Pweza Zafarani

WD: 1,000 m WD: 500 m

Chewa Papa Lavani

Mtwara

Kiliwani North Songo Songo Mzia Jodari Chaza Mnazi Bay Ziwani Ntorya Msimbati

Block 1 Block 3 Block 4

500 km

BG Group in Kenya / Madagascar

Kenya

• BG Group operator on L10A & L10B blocks
• 10,400 km2 of acreage in water depths

from 200 to 2,000 metres

• 2,630 km2 of 3D seismic acquired over

two blocks

• Drilling planned for late 2013 / early 2014

Madagascar

• Non-operated block in unexplored frontier

basin

• North-west coast of Madagascar
• 15,840 km2 of acreage in water depths

from 200 to 3,000 metres

• Believed to be oil-prone

KENYA

TANZANIA

Mombasa

Mbawa Gas Discovery

Block L-10A Block L-10B

WD: 1,000 m WD: 2,000 m WD: 500 m

MADAGASCAR

Majunga Offshore Profond

500 km

Source: Wood Mackenzie

Nature of discoveries

• 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

• Dry gas with little or no contaminants
• Challenging design of high

deliverability well in extreme water depth

Seismic line across Jodari

TANZANIA Block 1

Mtwara

Jodari

500 km

TANZANIA

Mtwara

Export to international markets

Block 1 Block 3 Block 4 Block 2

DMO LNG LNG

• c. 200 km

WD: 1,000 m WD: 500 m WD: 2,000 m

Indicative plant location

Potential LNG site locations

Tanzania LNG development

• Discoveries scattered across

four large blocks, distant from the shore

• Water depths also limit offshore

facility design

• Subsea only solutions controlled

and monitored from the beach and floating production unit option considered

• FLNG option still considered while

preferred option is land-based LNG plant

Global LNG supply / demand

• LNG demand is expected to

continue to grow, mostly in Pacific Basin

• LNG supply growth driven by Qatar

and Australia

• However, supply / demand gap

expected to increase over the next decade

• Where is the next Qatar or

Australia?

• Mozambique and Tanzania? Recent

discoveries have built up significant resource base in East Africa

50 100 150 200 250 300 350 400 450 2000 2005 2010 2015 2020 2025

Outlook

million tonnes per annum (mtpa)

LNG trade forecast

Supply / demand gap

• c. 170

mtpa

Supply: Existing and under construction

Source: BG Group interpretation of Wood Mackenzie (Nov 2012) Note: Supply adjusted by BG Group to account for chain losses

Australia Qatar

From East Africa 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

and North East Europe

• Extremely well located in respect to

West Coast Indian markets

• Similar distance from market

compared with Middle East exporters

• But East Africa LNG projects

emerging at the same time as new potential exporters: US and Canada

Distance from Tanzania to markets

UK 6,775 Spain 5,320 India 2,609 Tanzania Japan 6,945 China 5,759 Korea 6,616 Singapore 4,057 Note: nautical miles – single leg trip

Sources of state income

• Significant economic progress in

East African countries in recent years

• Fairly modest level of human

development:

– Kenya

143

– Tanzania

152

– Madagascar

151

– Mozambique 184

• Development of LNG projects has

potential to transform economy

• Various direct and indirect benefits
• f deepwater LNG projects

Out of 187 countries in the United Nations Human Development Index

• Direct benefits:

– Foreign direct investment – Employment – Government take from the project – Contribution to gross domestic product and gross national income – Retained national income and national expenditure

• Indirect benefits:

– Induced impacts – Multiplier effects from industry

Source: UNDP 2011

10,000 20,000 30,000 40,000 50,000 60,000 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

Induced Employment Indirect Employment Direct Employment

Employment: Multiplier effect

4 – 10 indirect jobs for every direct job

Number of employees

Not fully quantified

Induced employment Indirect employment Direct employment

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

Thank you!

• 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
• utstrip 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 importance as an emerging hydrocarbon province