Tanzania gas project - From discovery to gas sales.pdf

Tanzania gas project From discovery to gas sales

2An emerging gas sectorMajor gas discoveries have been made offshore Tanzania and the country emerges as a potential large gas producer in East Africa. In Block 2, Statoil together with partner ExxonMobil has discovered 21Tcf of gas. If sanctioned, an LNG development could offer significant long term benefits to Tanzania mainly through domestic gas, government revenues, employment and local content.

Statoil in TanzaniaStatoil has been in Tanzania since 2007 when it signed a Production Sharing Agreement (PSA) for Block 2 with Tanzania Petroleum Development Corporation (TPDC). Statoil Tanzania is the operator with 65% working interest while ExxonMobil is partner in the license with a 35% working interest. TPDC has the right to participate with a 10% working interest in the licence if commercial volumes are proven. Statoil Tanzanias main office is in Dar es Salaam, with a liaison office and an offshore support base in Mtwara.

Block 2 map with discovery areas

3Successful drilling operations offshore TanzaniaSince the start of the drilling campaign in Block 2 in 2011, Statoil and co-venturer ExxonMobil have achieved extraordinary results offshore Tanzania.

A drilling campaign comprising of 12 exploration and appraisal wells drilled over less than three years has resulted in seven discoveries with more than 21 tcf of gas (in place volumes). The wells were drilled in water depths of approximately 2,400 2,600 meters in a frontier area where no wells had been drilled prior to 2010. One of Statoils high impact discoveries, in Tanzania, Piri-1, was the second largest gas discovery in the world in 2014.

The gas discoveries hold the potential to lay the foundation for a major LNG project in Tanzania.

Following the successful exploration campaign, the Block 2 licence is now approaching a more mature stage. If the project is sanctioned for development, extraction of the gas resources will be done through a subsea development. This will comprise reservoir extraction through subsea wells, a subsea production system, pipelines to an onshore LNG plant, LNG exports to international gas markets as well as gas transmission to the domestic market.

The project will be technically challenging and demanding, but with significant deep water and subsea experience, Statoil and partner ExxonMobil are well prepared for taking on the challenges and developing the project in a safe and efficient manner.

The Tanzania Domestic Gas Statoil will supply up to 10% of the gas produced for use in the domestic market (DSO) in gaseous state. This could potentially double Tanzanias current domestic gas supply. Domestic use of gas should be sustainable and provide a stable long term offtake of the gas. Further, the domestic gas price should be market-based and create value for all stakeholders. Statoil will work closely with TPDC and MEM to deliver gas into the domestic market.

What is gas and what can it be used for?The natural gas discovered in Block 2 is mainly methane. Methane can be used for purposes such as domestic appliances, electricity production, and in industries such as fertilizer, cement and petrochemicals. It can also be used as fuel for vehicles and vessels.

Is methane dangerous?Methane is a natural gas. It is normally not toxic. However, if ignited, it can cause explosions. Statoil has high Health, Safety and Environmental (HSE) standards and a sharp focus on preventing gas leaks. During our operations we have equipment in place to prevent and detect leaks.

4What is Liquefied Natural Gas (LNG)?LNG is natural gas that has been converted to liquid form by cooling it down to minus 163 degrees Celsius for ease of storage and transportation. Through liquefaction the volume is reduced by a factor of 615 compared to natural gas in gaseous state. Methane usually accounts for about 85-95% of LNG. LNG is odourless, colourless, non-corrosive and non-toxic. LNG offers a unique solution for transporting natural gas across long distances.

The foundation for monetizing the deep water gas discoveries in Tanzania is an LNG export project. The global LNG market provides scale and access to established international markets required for developing large deep water gas discoveries such as Block 2. Tanzanias strategic location between markets in Asia, Europe and South America increases the optimisation potential and ability to profit from relative market price differences.

LNG transportation

Joint LNG project in Tanzania The Government of Tanzania has requested the partners in Block 1 & 4 and Block 2 to cooperate in the development of a joint onshore LNG facility. Such facility will receive gas from all blocks to capture synergies and associated cost savings. As a response, an integrated project team with representatives from all the licence holders of Block 1, 2 and 4 has been established with the purpose of developing a common onshore LNG facility. The offshore developments remain as independent projects operated by Statoil and BG respectively.

The capital intensive joint LNG export facility will require a dedicated commercial and fiscal arrangement implemented through specific legislation, as it brings together several blocks and investors into one project. This is common practice for LNG projects in many countries.

These terms and conditions should be captured in a Host Government Agreement (HGA) between the government of Tanzania, TPDC and the International Oil Companies (IOCs) and need to be in place before the next phase of the project can be initiated, the Front End Engineering and Design (FEED).

5Extensive work needed to proceed The LNG Project is still at an early stage. Significant work needs to be done to clarify if a commercial development is possible. No final investment decision (FID) is yet taken. To bring gas from deep-water off the coast to shore is challenging and costly. This can only be done based on a robust business case and extensive planning to develop cost effective onshore and offshore solutions. This is a comprehensive task and it will take years before all the technical work is finalized, necessary regulatory framework is agreed and implemented and until the first gas is eventually produced.

A typical illustrative schedule of the stages of an LNG project.

If sanctioned an LNG development would provide significant benefits for Tanzania The development would be the first of its kind in Tanzania, and would be by far the largest investment project to date in the country. The project could transform the Tanzanian economy as it will offer significant long term benefits to Tanzania mainly through domestic gas, government revenues (direct income and taxes), employment and local content as well as contribution to GDP and favourable trade balance.

By end of 2014 the partners in Block 2 have spent over 1,8 billion on its operations in Tanzania. Around 600 Tanzanians have been employed directly and indirectly through various suppliers and vendors.

Statoil has taken a proactive approach to local content in Tanzania, and has already created a significant footprint. More than 75% of current spend is with Tanzanian registered suppliers. This represents over 1200 MUSD in the period between 2010 and 2014.

Going forward the Tanzania gas project also represents opportunities for a wide range of Tanzanian suppliers. Statoil is working on several initiatives to support the development of the local supply industry to ensure an optimal level of local participation.

To prepare for the potential development of the LNG project Statoil invests in education and training particularly within science disciplines. Statoil works hand in hand with local organisations to develop long term capacity building plans to ensure adequate supply of skilled and competent labour.

Exploration & appraisal Production and marketing

Subsurface & project

development

Execution andproduction start-up

2-5 years 2-6 years 4-6 years 10-30+FID

6Statoil is committed to Making decisions based on the way they affect our interests and the interests of the societies in which we operate

Respecting human rights and labour standards

Ensuring transparency and anti-corruption

Contributing to local content by developing skills and opportunities in the societies in which we operate

Graduates from Statoil scholarship program

7Heroes of TomorrowIn pursuit of enhancing local content in Tanzania, Statoil launched the Heroes of Tomorrow programme, a business plan competition aiming at encouraging entrepreneurial spirit among the youth in Mtwara. Statoil believes that due to the oil and gas activities that are taking place in Mtwara business opportunities are emerging that could drive individual as well as community success.

Five finalists of the 2014 Heroes of Tomorrow Business Competition

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About us Statoil is an international energy company with operations in 36 countries. Building on more than 40 years of experience from oil and gas production on the Norwegian continental shelf, we are committed to accommodating the worlds energy needs in a responsible manner, applying technology and creating innovative business solutions. We are headquartered in Stavanger, Norway with approximately 23,000 employees worldwide, and are listed on the New York and Oslo stock exchanges.

Discoverer Americas

If you have any queries about Statoil activities in Tanzania, please contact: Statoil Tanzania Office Office address: Statoil Tanzania AS P.O. Box 713, Dar Es Salaam Visitor address: Plot 1403 Bains Singh Avenue Masaki, Dar Es Salaam Telephone: +255 22 2923402 / + 255 684 226203

Statoil Mtwara Liaison office Visitors address: Msemo Road Telephone: +255 685 742845 / + 255 689 103380 For more information about Statoil, please visit: www.statoil.com