Overview of the South African Gas Sector and

Overview of the South African Gas Sector and the role of Petro. SA Presented to the Parliamentary Portfolio Committee on Energy 09 September 2014 The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07

Our Key messages in relation to Gas Sector 1 • Petro. SA is well positioned to be the gas aggregator and the agent of the State to take on the challenge of growing the gas sector in South Africa. 2 • We have accumulative experience in the gas industry across the entire value chain including access to proprietary GTL technology. 3 • Our projects are of national significance (beyond Mossel Bay) and are fully aligned to that of the National Development Plan (NDP). The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07

CEF alignment 1 The CEF Group mandate is to invest in and develop gas and gas infrastructure in a manner which is commercial and can attract investment. 2 Petro. SA is the implementing agent under CEF. 3 Integration of i. Gas into Petro. SA will complement existing capabilities to be able to strenghten the value proposition of Petro. SA in the gas sector The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07

Our Mandate Operate as a commercial entity and create value for the shareholder • Pay tax and dividends Advance national objectives in the petroleum industry • Spearhead industry transformation Complement & promote Government policy & strategic thrust Advance energy goals and objectives as set out in various policy instruments , E. g. Energy White Paper (1998), Energy Security Master Plan ( 2007), Medium Term Strategic Framework (2009 -2014), National Development Plan The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 4

Petro. SA has been a pioneer in integrated GTL business and gas field developments in South Africa • Established in 2002, Petro. SA owns one of the world’s largest GTL refinery. • Multiple years of experience in developing and operating gas infrastructure. • Business spans petroleum value chain • Produces diesel, gasoline, kerosene and specialty products • Has produced ~70 MMbbl crude oil & 1 Tcf of natural gas to date. • Has upstream presence in South Africa, Equatorial Guinea and Ghana. Petro. SA owns proprietary GTL technology The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 5

Historical Interventions to Sustain the GTL Refinery in the face of declining reserves We have years of experience in developing and operating complex gas infrastructure. EM Field & Satellites 2000 FA Satellites 1997 Project Ikhwezi (tight gas) FA Field 1992 South Coast Gas 2007 The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07

The need for Gas in South Africa: • South African government recognizes the need for gas (NDP 2030/Draft IEP/IRP); • Diversify current energy mix AND reduce carbon footprint. Gas-to-Liquids (GTL): • Declining feedstock; • Sustain the Mossel Bay economy • Growth opportunity to move into production of specialty chemicals; and • Establishes markets for upstream / shale gas. Power: Current Energy Mix: • 2013/14, Eskom spent R 10. 5 -billion on diesel to operate its two OCGT’s in the Western Cape. Gas currently accounts for only 2. 8% in terms of primary energy source! • • • This was R 8. 1 -billion above the R 2. 5 -billion set aside by Ner. SA in its price determination. It is envisaged that 14% of electricity Source: Department of Energy, 2013 • Gas is a cleaner, ‘cheaper’ & more efficient source of energy; • will be generated from gas by 2030. Western Cape imports ~2050 MW to meet its daily demand. The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 7

Current gas supply sources are limited and under-developed Resource Reserves Markets Status/Future Projects Block 9 (South Coast – RSA) ~0. 4 Tcf Mossel Bay GTL Refinery • • • Pande/Temane (Mozambique) ~3 Tcf Mozambique and Sasol’s Sasolburg and Secunda petrochemical plants, industrial customers and via Petronet pipeline to Kwazulu Natal • Expansion of the current ROMPCO pipeline • Future expansion possible Kudu (Namibia) ~0. 8 Tcf Namibia and/or Western Cape Namibia power station Export to Western Cape Ibhubhesi (West Coast – RSA) ~0. 5 Tcf Western Cape Partnership: Petro. SA (24%) & Sunbird Energy (76%) Production Right in place Coal Bed Methane (CBM) To be proven Botswana/RSA powergeneration Too early in the development cycle Shale Gas To be proven • • RSA power-generation GTL and other Too early in the development cycle LNG Worldwide supply • • RSA power-generation GTL and other • • & Huge gas reserves >120 tcf in Rovuma Basin, North of Mozambique Current production Project Ikhwezi Additional prospects Infrastructure to be developed Petro. SA LNG Project Note: Only ‘reserves’ are quoted in this table. The table does not include prospective or contingent resources, either offshore or onshore Investment and appropriate work programs to re-risk prospective resources and mature contingent resources into reserves categories are required The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 8

We are embarking on various initiatives to grow the role of Gas in the energy mix 1 Sustaining the GTL refinery through development of additional feedstock 2 Importation of LNG, and associated pipelines to increase the usage of natural gas in RSA, for both power generation, GTL and industrial customers 3 Continued offshore exploration and commercialisation of offshore gas 4 Participate in the exploration and development of onshore gas (e. g. shale) 5 Achieve energy security through becoming the leading supplier of gas for the benefit of RSA. Target discovered gas/acquire gas in neighbouring Mozambique/Tanzania The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07

We are evaluating various security of supply options for South Africa West Africa & Rest of the World East Africa Gas West Coast gas Shale Gas ~390 Tcf? • LNG importation project in progress LNG Western Cape Eastern Cape • Atlantis/Cape Town OCGT • Saldanha Bay IDZ • Industrial Users Mossel Bay • GTL Refinery • Gourikwa OCGT • Mthombo Refinery • Coega IDZ • East London IDZ South Coast Gas/Oil ~150 TCF gas finds • Plans are afoot to convert power plants: OCGTs to CCGTs • US IEA has estimated that SA may hold 390 Tcf of shale gas reserves • Project Mthombo entails building a new crude refinery for SA The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 10

Petro. SA’s LNG importation project will unlock the growth potential for gas in South Africa Proposed LNG terminal to comprise the following: • Offshore Infrastructure (jetty, trestle, cryogenic pipelines) • Onshore Infrastructure (storage tanks, regasification equipment, auxiliaries) • • Associative Pipeline Infrastructure • Various locations are being evaluated. Will create opportunities to supply Independent Power Producers (IPPs) The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 11

We are actively positioning ourselves for Shale Gas development • The company is actively positioning itself: § Established a dedicated Unconventionals Unit; The currently limited seismic and well data results in geological uncertainty! § Contributing to the shaping of a suitable Regulatory Framework; § Developing in-house capabilities; § Pursuing strategic partnerships for research and technology development (incl. Tertiary Institutions, Service Oil Companies); and § Sustaining and growing gas infrastructure and markets. Shale Gas acreage • We have past experience in shale gas drilling through Soekor! The current regulatory uncertainty has resulted in a delay in the development of unconventional resources. The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 12

Our initiatives are in full support of the objectives of the Do. E and the NDP Addressed by Petro. SA plans Amongst other initiatives, the NDP states… Short term: v Develop offshore gas. v Do exploratory drilling for economically recoverable shale gas reserves. v Promote investment in LNG landing infrastructure. v Introduce cleaner fuels. Medium term: v LNG infrastructure will be in place to power first CCGT’s. The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 13

Required mechanisms to grow gas market • Policy: An enabling Policy, Legislative and Regulatory Framework (certainty and clarity) § e. g. MPRDA should empower Petro. SA as the NOC , Gas Utilization Master Plan ( GUMP -framework for the gas development) alignment with the Power Sector & Petro. SA’s own plans • Infrastructure: investment to unlock current constraints. § LNG diversifies supply and serves as a catalyst for indigenous gas development § Expand Gas pipelines to connect supply and demand • Markets: Guaranteed and sustainable gas off-takers. § Erect Independent Power Producers (IPPs) in optimal locations • Funding: Financial support for projects The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 14

Concluding Remarks • Gas IS our business and gas is the future – it is imperative for SA to grow its gas market, and Petro. SA is well positioned to lead in this space • Petro. SA has accumulative experience in the gas industry across the entire value chain including access to proprietary GTL technology • Petro. SA continues to cooperate with Eskom to provide a joint solution to change the energy mix in the country. • Shale gas is a game-changer for SA - Petro. SA is the most capable agent to supply the growing gas market in South Africa The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07

End Thank you for your attention The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 16

Back up slide The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 17

Liquid Fuel Supply Sustaining the GTL Refinery Petro. SA’s plans going forward in terms of SA’s gas and liquid fuel supply Asset Development Programme Continued Exploration Mthombo Refinery Mozambique GTL The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd Reg. No. 1970/008130/07 18