Transcript 2012-08-30 Building a natural gas businessx

Tanzania Oil and Gas
Opportunities and Challenges
Mark Stearnes
03 October 2012
Legal notice
Certain statements included in this presentation contain forward-looking information 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 are within BG Group plc’s control or can be predicted by BG Group plc.
Although BG Group plc 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.
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Agenda
1
BG Group
2
Offshore East Africa – upstream overview
3
Tanzania – success so far
4
Doing business in Tanzania (and wider East Africa)
3
BG Group – Who we are
• Market leader:
– FTSE top ten company
– Market capitalisation
– Circa $70bn
– Production approximately
70% gas; 30% oil
• Global gas major:
– Over 6 000 employees;
65% outside UK
BG Group Global Gas Major
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Global portfolio
Countries of current operation
Norway
UK
Kazakhstan
Italy
Areas of PA
USA
India
Tunisia
China
Thailand
Trinidad &
Tobago
Egypt
Kenya
Tanzania
Bolivia
Chile
Singapore
Brazil
Uruguay
Australia
Madagascar
BG Group countries
BG Group is active in more than 20 countries across five continents
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Who we are
Demerger and development
1986
1997
BG Plc
1999
2000
2002
2005
BG Group Plc
Lattice
British Gas
www.bg-group.com
National Grid
Transco
National Grid
www.nationalgrid.com
Centrica
www.centrica.com
A proven record of performance
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How we do it
Working sustainably
Responsible conduct
Integrity
Governance
Strategy/investment
Environmentally responsible
Environmental impacts
Climate change
Biodiversity
The way we conduct business
Responsible to our people
HSSE, Recruitment
Training, development
Equality & diversity
Responsible to society
Human rights
Community relations
Capacity building
Investment
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Agenda
1
BG Group & Global LNG
2
Offshore East Africa – upstream overview
3
Tanzania – success so far
4
Doing business in Tanzania (and wider East Africa)
8
Oil and Gas East Africa
• Large Frontier plays
Kenya – Tullow:
onshore oil
discovery
Tanzania – BG:
6, Statoil: 2
BG gas
deepwater
discoveries
Mozambique –
Anadarko & Eni
discoveries
– Sizeable blocks
– Deep to ultra deep water
– Several recent discoveries
• Material resource potential
– Multiple play types
– Multi-TCF gas potential
• Stable/ progressive governments
• Favourably located for LNG
markets
– India and Asian Pacific
An exciting exploration “hot-spot”
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Agenda
1
BG Group & Global LNG
2
Offshore East Africa – upstream overview
3
Tanzania – success so far
4
Doing business in Tanzania (and wider East Africa)
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Tanzania – Deepwater activity
• Incumbents
Block 12
Block 11
– Smaller Africa focussed
Block 10
independents
Block 9
Block 8
• Majors renewed interest
Block 7
• Some companies still targeting oil
Block 6
• Two producing gas fields with
sufficient reserves for domestic
demand
Block 5
Block
4
Block
3
Two producing
fields: Songo
Songo &
Mnazi Bay
Block 2
E.
Pande
Block 1
Block 2
• 4th offshore deepwater licensing
round planned in 4Q 2012
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Success in first deepwater wells
• Farm-in June 2010, 60% of Blocks 1, 3 & 4
• BG Operatorship – 1st July 2011
• Six successful wells
– Gas discoveries
– Still in exploration phase
• Appraisal program in Q3 / Q4 2012
• Also acquired substantial siesmic;5140 sq km
3D followed by 2,500 sq km 3D seismic in
Block 1; evaluation ongoing
• In-country presence in Dar es Salaam and
Mtwara – high quality national staff
• LNG Implementation Agreement and PSA gas
terms already in place
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Sharing the Operations Supply Base
in Mtwara
• BG Operates the Mtwara
Supply base on behalf of other
offshore Operators (Petrobras,
Statoil, Ophir)
– Upgrade commenced in 4Q 2011 to
enable multiple drilling operations
with improvements to benefit
existing port users (cashew nut
farmers)
– Tanzanian Ports Authority plans to
develop free trade port and export
corridor
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Agenda
1
BG Group & Global LNG
2
Offshore East Africa – upstream overview
3
Tanzania – success so far
4
Challenges
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Capacity building initiatives
• BG scholarship scheme with the British Council and
Nelson Mandela African Institute for Science and
Technology
• Support for G&G studies at the University of Dar Es
Salaam and University of Dodoma
• Pilot project for long term industry vocational training
with VSO and VETA
• Mtwara road safety programme in partnership with
National Institute of Transport
• School support program in Mtwara
• Marine Conservation and livelihoods project in
partnership with Mnazi-Bay Ruvuma Estuary Marine
Park
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Operational challenges – remote location
• Operational challenges
– Lack of infrastructure and local service
industries
– Deep water drilling
– Environmentally sensitive
– Capacity and skills development
– Piracy
• Joint initiatives for:
– Sharing port facilities in Mtwara
– Mutual Assistance between IOCs/ use of best
technology
– Incident response (e.g. oil spill)
– Cooperation with Tanzanian navy
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Business Environment Challenges
• Capacity and capability within Government and Parastatals
• Stability of contractual environment
• Levels of education and training within general population
• Direct experience of Oil and Gas
• Robustness of business systems and processes
• HSSE
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LNG will require huge investment
Upstream
Liquefaction
Shipping
Regasification
c. 35-45% of
investment
c. 35-40% of
investment
c. 20-25% of
investment
c. 8% of
investment
• 2 - 6 sq. mile site
• $50 - 100 million
per exploration
well (deepwater)
• 3,500
construction
personnel
• $8 - 20 billion
upstream
development cost
• $5 - 16 billion
downstream
development cost
• $300+ million
cost per vessel
• $5 million
voyage cost (fuel,
port, charter, boiloff) to India
• 1 LNG tank can
store two Boeing
777’s
• $600+ million
investment
• c.120 cargo
loadings per year
Figures are highly variable depending on project scope and scale
Markets
• $90 - 350 billion
gross sales
revenue over
project life
LNG versus oil – illustrative cash flow
Based on a generic greenfield LNG project
LNG Expansion
Billion ($)
Oil
LNG
Time from discovery
of reserves
LNG development = longer lead times but significant long term benefits
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LNG could deliver unprecedented benefits
Historic Foreign Direct Investment (FDI)
1,000
• Positive impact on FDI, export
earnings and government
revenues
900
700
• Enabling legislation needed to
maximise benefits
600
• Key challenges:
– Long lead time
500
– Political / institutional capacity
400
– Petroleum sector reforms
300
– Domestic energy expectations
200
– Macroeconomic impacts
100
– Exchange rate appreciation;
“Resource Curse”
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
US$ million
800
Source: IMF, International Financial Statistics
Tanzania has had no experience of such large projects
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Thank you