Confidential Natural Gas and LPG Development in Africa Presentation By Omamofe Boyo Esq. Deputy Group CEO, Oando Plc 10 th African Oil & Gas Trade and.

Confidential

Natural Gas and LPG Development in Africa Presentation By

Omamofe Boyo Esq.

Deputy Group CEO,

Oando Plc

10th African Oil & Gas Trade and Finance Conference & Exhibition

April 2006

NOT AN OFFICIAL UNCTAD RECORD

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Outline

Introduction

Issues/challenges of gas utilization in Africa

Action Points

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Oando Plc (“Oando”) is an integrated energy company based in Nigeria with operations spread across West Africa

Petroleum products supply & trading

Industrial power generation & distribution

GaslinkNigeria

Industrial gas distribution Refining of

petroleum products

Oando Power

Oando Trading BermudaOando Supply & Trading

Provides support services to the upstream sector

Marketing Oando Refinery

Oando Pet.Development

Company

Oando Energy

Services

Development of marginal fields, Exploration & Production

Commercial & Retail Marketing and Distribution of petroleum products

• Oando is a private sector company listed on the Nigerian Stock Exchange (NSE) with a market capitalisation of over $450 Million (end December 2005)

• In November 2005 we concluded a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa

• Group revenues stood at N103 Billion (approx. $760 million) in 2004 and increased to N179 Billion (approx. $1.35 Billion) in 2005

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Our Participation in Gas

• Pioneered natural gas distribution in Nigeria

• 100km pipeline network

• Possesses in-house engineering, project

management & gas operations expertise

Oando Marketing

Gaslink Nigeria Limited

• Retail marketing of LPG• 9 LPG filling plants with a total capacity

of 1,170 MT• 500 retail outlets (service stations)

throughout Nigeria, Ghana and Togo

Oando Petroleum Development Co.

Oando Trading• Import of LPG into Nigeria• Trading LPG cargoes

• Exploration & Production• Gas developments from existing fields

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Gas as a Fuel of Choice

Vs Alternative Fuel or Fuel Sources like Fuel Oil, Gasoil and

Kero

Cleaner

• Environmentally friendly being with low carbon emissions

• Pollutant free

Safer

• Non-toxic in nature

• Narrow threshold for combustion

•Cost Efficient

ALL IN ALL A MORE EFFICIENT FUEL

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Outline

Introduction

Issues / challenges of gas utilization in Africa

Action Points

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NIGERIA• Reserve est.:

176.4TCF

CONGO• Reserve est.: 5.2 TCF

ALGERIA• Reserve est.: 160.4

TCF

LIBYA• Reserve est.:

52.6TCF

COTE D’IVOIRE• Reserve est.: 1.1

TCF

ANGOLA• Reserve est.: 1.7

TCF

Africa represents about 8% of Global reserves, with around 67% concentrated in

Nigeria & Algeria

Land of plenty

EGYPT• Reserve est.:

65.5TCF

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Most of the gas development projects presently initiated are export-oriented

NIGERIA LNG PROJECT• Export only: LNG

ALGERIA LNG PROJECT• Export only: LNG

MOZAMBIQUE – SOUTH AFRICA GAS PIPELINE

• Approx. 665km

WEST AFRICA GAS PIPELINE

• Approx. 1,033 km• Nigeria to Ghana (through

Togo & Benin)

KEY

Export Pipelines

MAGREB-EUROPE GAS PIPELINE

• Approx. 1,666 km• Algeria to Spain, through

MoroccoTRANS-MEDITERRANEAN GAS PIPELINE

• Approx. 1,110 km • Algeria to Italy, through Tunisia

EGYPT-JORDAN GAS PIPELINE

• Approx. 260 km

Infrastructure is limited/export oriented

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Only a fraction of the reserves are being consumed within the continent. Africa will continue to be a net exporter of

Gas.

The challenge therefore is infrastructural development which will only be driven by markets that have the critical mass

Natural Gas Consumption in Africa 1980 - 2020

0.71.1

1.41.8

22.4

2.7

3.33.7

0

0.5

1

1.5

2

2.5

3

3.5

4

1980 1985 1990 1998 1999 2005 2010 2015 2020

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Domestic demand drivers remain Power and Industrial

sectors which remain largely underdeveloped in many parts of

the continent1. Domestic Power

• Average power generation growth for emerging economies is 6% per

annum

2. Industrialization

• Cement, Fertilizer, Steel, Aluminium and transportation

6% pa

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Infrastructure is required to stimulate national and regional consumption

• The 625km West African Gas Pipeline (WAGP) is the stimulant for West Africa• Pipeline will supply natural gas from Nigeria to Ghana, Togo, and Benin

High Capex spend required on domestic infrastructure

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…As well as inter-regional ??

4,550 km gas pipeline between Nigeria (Warri) and Algeria (Hass R’Mel), via Niger Republic

Pipeline can be extended to feed other inter-land (land locked) countries

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Africa is also an LPG producer

• Total regional exports from Africa projected at 13 million tonnes in 2005, largely from the following countries:

• Nigeria ~ Expansion of Escravos, Nigerian LNG and additional processing facilities at Cawthorne Channel and Funiwa-Agbami, should add 1-2 million tonnes of LPG production to the region

• Algeria ~ LPG production West of Suez will contribute an additional 2 million tonnes

• Angola ~ Supplies from Angola will also add appreciable amounts of LPG production in the region

• Growing LPG supplies from West Africa and Algeria are now filling the Asian shortfall

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Demand is weaker than supply, hence a vibrant export market

• Regional demand of LPG projected at approximately 9 million tonnes in 2005

• Estimated demand growth rate of about 5% per year (same as 1990-1999 growth rate)

• Average per capita consumption of 4kg/capita, against world average of 17kg/capita

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Ironically, local usage is still constrained

Low purchasing power of end users

Infrastructure limitations, particularly into the hinterlands (coastal storage, distribution)

Uncertain domestic supply, particularly with epileptic production from regional refineries

Volatile prices

Prevalent usage of kerosene

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Outline

Introduction

Issues/challenges of gas utilization in Africa

Action Points

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Regional Gas Pipeline – Issues and Action

Issue Requisite Action

• Regional Pipelines i.e. WAGP, Eastern African Pipeline, Nigeria-Algeria Pipeline (proposed)

• Gas as driver for power initiatives within the continent• Encouraging industries to convert to gas usage (cement,

fertilizers, methanol etc)• Creating a pricing advantage for local consumption

• Encouraging private-public partnership based local distribution• Regional Pipelines i.e. WAGP, Eastern African Pipeline, Nigeria-Algeria Pipeline (proposed)

Improving distribution

Stimulating local and regional utilization

Infrastructure Limitation

• Infrastructure credit from development agencies

• Commercial projects that subsidize local infrastructure development (fertilizer etc)

• Power as a driver for development

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LPG Challenge

Issues Requisite Action

• Grants to cushion the requisite conversion costs (from biomass to LPG)

• Fiscal policies to drastically reduce cost of equipment i.e. cylinders, burners etc

Low purchasing power of end users and small number of users

• Incentivise local supplies from existing export oriented gas

projects

• Incentivise investment in secondary distribution (bottling

plants & road transportation

• Pursue adequate long term funding and practical assistance

for LPG infrastructural development

Government participation to encourage domestic use and investment

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Thank You

www.oandoplc.com