assessment of the upstream sector in the oil and gas...

August 1, 2011

The Customer Driven Retailer

Grounded in Insights, Fueled by Data and Analytics

CEO – Ebrahim Takolia February 2014

Assessment of the Upstream Sector in the Oil and Gas Industry

1. What has been the experience of the oil and gas industry?

2. SAOGA’s strategy on localisation, BBBEE and skills development?

3. How does SAOGA see the future of the oil and gas industry?

August 1, 2011

The Customer Driven Retailer

Grounded in Insights, Fueled by Data and Analytics

CEO – Ebrahim Takolia February 2014

Serving the interests of industry and members in the upstream and midstream oil & gas sectors

Membership | Advocacy | Knowledge | Linking & Networking

History

A non-profit organisation that acts in

the interests of industry and

members in the Upstream and

Midstream sectors of the Oil & Gas

value chains

Ebrahim Takolia, CEO © 2014 South African Oil & Gas Alliance 3

http://www.saoga.org.za/about-us/overview-saoga

We now have a national

and regional strategy

focused on the

development of the oil

& gas industry!






Governance and Implementation

Board of Directors

CEO

Employees

Ports Cluster

Leadership Team

Governance Task

Team

Major Project

Leadership Team

Marketing

Leadership Team

EXCO

Mission

Vision

Strategy

ARC HRC

Implementation

Setting and

Implementing

Reviewing,

Advising and

Approving

We implement on our mandate

through project leadership teams

Local Content

Task Team


Did South Africa have an upstream and midstream Oil & Gas sector?

Not really

Oil & Gas in South Africa – The Past


Upstream • Industry was primarily based on

passing trade

• Focused on rig and ship repair

• PetroSA – Mossgas and work

related to this project

Midstream • Activity limited to PetroSA for new

work

• Maintenance of Refineries

Industry & SAOGA – Past Focus Areas

Since the formation of SAOGA, the organisation has achieved the following:

• The proactive networking and linking of Oil & Gas professionals and the industry in Sub-Saharan Africa

• Raised the profile for Oil & Gas in South Africa and Sub-Saharan Africa for more than ten years

• Marketing of South Africa's Oil & Gas sector potential and the capabilities of the local industry at global

conferences and exhibitions

• Advanced the interests of the industry and members through lobbying and advocacy

• Promoted the development of a robust ship / rig repair industry and associated port infrastructure

• Advanced the interests of the ship / rig repair industry by co-ordinating industry efforts

• Worked with relevant stakeholders to gear up South African ports to service the oil and gas industry

• Cape Town - A Berth, Berth 502, the repair Quay and Sturrock Dry Dock

• Saldanha Bay – Quay 204

• Linked the private and public sector by working with both governments and industry to develop and

create a sustainable oil and gas industry

• In South Africa, Oil & Gas is now part of the Industrial Policy Action Plan as a result of work undertaken by

SAOGA

• Awareness of the Oil & Gas industry and its potential for development in Sub-Saharan African countries

• Providing comment on legislation that will facilitate the development of a robust Oil & Gas industry

• Assessment and changes to legislation affecting business issues

• Value Added Taxation and Customs (Goods imported or cleared from a customs and excise warehouse for

the exploration for petroleum or production of petroleum)

• Taxation

• Visa Issues

7 Ebrahim Takolia, CEO © 2014 South African Oil & Gas Alliance

Industry & SAOGA – Future Focus Areas

Based on the recent developments in the Oil & Gas sector in Africa, the organisation has geared

itself up to meet the requirements of the significantly expanding industry in Sub-Saharan Africa:

• To continue to proactively networking and link Oil & Gas professionals and the industry in Sub-Saharan

Africa

• To continue to raise the profile for Oil & Gas in South Africa and Sub-Saharan Africa

• Marketing of South Africa's and Sub-Saharan Africa's Oil & Gas sector potential and the capabilities of the

local industry at global conferences and exhibitions

• Advance the interests of the industry and members through lobbying and advocacy

• Promote the development of a robust ship / rig repair industry and associated port infrastructure • Advanced the interests of the ship / rig repair industry by co-ordinating industry efforts

• Establish a closer relationship with relevant port authorities

• Link the private and public sector by working with both governments and industry to develop and create a

sustainable oil and gas industry • In South Africa, update the Oil & Gas section of the Industrial Policy Action Plan

• Develop a Research Agenda for work that needs to be undertaken in the Oil & Gas sector relevant to the

governments, industry and members

• Continue to raise awareness of the Oil & Gas industry and its potential for development in Sub-Saharan African

countries

• Comment on legislation that will facilitate the development of a robust Oil & Gas industry

• Assessment and comment on legislation affecting business issues • Value Added Taxation and Customs (Schedule 4 of the Customs Act specific to the Oil & Gas industry -

exemption from VAT and Security)

• Corporate Taxation

• Visa Issues

• Developing a regional market for gas 8 Ebrahim Takolia, CEO © 2014 South African Oil & Gas Alliance

Industry & SAOGA – Future Focus Areas

Based on the recent developments in the Oil & Gas sector in Africa, the organisation has geared

itself up to meet the requirements of the significantly expanding industry in Sub-Saharan Africa:

• Advance the development of the local industry:

• Local content

• Broad Base Black Economic Empowerment

• Skills development


SAOGA’s strategy on localisation, BBBEE and skills development

Practical and achievable recognising the constraints related to funding, capacity and skills

Lets look at the Oil & Gas Value Chain


Aspect

Localisation

BBBEE

Skills Development

Limited Potential Medium Potential High Potential

Offshore Exploration

requires >R20 billion

Shale Gas Exploration

requires >R10 billion Refinery and Primary

Distribution

R10 – >R100 billion

Refinery and Primary

Distribution

R10 – R30 billion

Cash Flow High Risk – No Certainty Medium Risk due to high capital

outlays and environmental issues

Cash flows can be monetized with

offtake agreements

KEY

RISK

Localisation, BBBEE & skills development


Technology R&D

Procurement

Local manufacture / supply The Midstream and Downstream natural gas value chains

represent significant opportunities for :

Local manufacture /supply:

The manufacture / supply of products and services

Procurement:

Importation and local assembly of goods under license from

established manufacturers

Technology R&D:

Technology R&D to develop competitive advantage

Full importation of equipment

A lack of skills / knowledge that prevents local procurement

Skills development

Skills development and transfer

Full importation

Skills development

SAOGA’s Focus – Supplier Development


What does SAOGA already do?

Membership | Advocacy | Knowledge | Linking & Networking

SAOGA’s Focus – Supplier Development


What will SAOGA do for supplier development?

• Local Content Task Team

• SAOGA is setting up this forum for Oil & Gas

• Act as a forum to co-ordinate various activities from industry players

• DTI

• UNIDO

• Provincial Economic Development Departments

• Industry players in Oil & Gas

• Work with the forum to identify areas of high potential for local

economic development

• SAOGA Oil & Gas Academy

• Link various players and activities in the Oil & Gas

value chain

• Collaborate with international bodies on skills

development and capacity building

Looking to the Future of Oil & Gas

West, now East and South Africa?

Oil & Gas Developments in South Africa

• 20 Companies

• 30 Licences

• Offshore exploration activity announcements

Source: PASA

• Exceptional

amount of activity

and a healthy

spread of operators

• Total 73 TCP and

ER issued

South Africa Onshore

• Shale Gas

• Coal Bed Methane

Oil & Gas Developments in South Africa

Source: PASA

Oil & Gas Developments in Africa A

fric

a O

il &

Gas R

eserv

es

Source: ey.com

1980

2010

OIL

1980

GAS


Oil & Gas Developments in Africa

19

Sub-Saharan Africa – Natural Gas Reserves

Sub-Saharan Africa

map depicting the

relative size of

Africa

~27 million square

kilometres

Sub-

Saharan

Africa

Sub-Saharan Africa currently accounts for a relatively small percentage of world

production and reserves for oil and gas. As at January 2014, Sub-Saharan Africa's

share of world oil production and oil reserves was 6.52% and 4.26% respectively, and

the share of gas production and reserves was 3.19% and 3.28% respectively.

However, these production and reserve numbers are expected to grow significantly as

the vast continent remains one of the last exploration frontiers for oil and gas, as

evidenced by the exploration activity by upstream exploration companies and

significant oil and gas discoveries in the region.

Production /

Reserves

Share of

World

Oil Production (barrel per day) 5 709 471 6.52%

Proven Oil Reserves

(million barrels) 63 118 4.26%

Gas Production

(cubic metres per year) 107 024 000 000 3.19%

Proven Gas Reserves

(cubic metres) 6 143 337 168 800 3.28%

Ebrahim Takolia, CEO © 2014 South African Oil & Gas Alliance

Sector Overview – SSA Major Projects

• Refineries

• Clean fuel technology upgrades of crude & GTL

refineries

• Mthombo Refinery, port of COEGA - (Feasibility

Studies being conducted for crude oil refinery

and import terminal)?

• Terminals

• Oil – Oiltanking MOGS Saldanha Crude storage &

blending terminal

• Oil/Gas – New Fuels/LPG Terminal in Richard’s

Bay – Vopak

• Gas – LNG Import Terminal to feed PetroSA

• LPG Import Terminal – Sunrise Energy

• Fuel Depot – Port of Nqura

• LNG Liquefaction – Palma Bay, Mozambique


Sector Overview – SA Major Projects

Activity Year 14 15 16 17 18 19 20 21 22 23

SA Offshore

SA Onshore

Africa Onshore & Offshore

Refineries

Terminals

Mozambique – Palma Bay, LNG

Planning | Local Participation | Infrastructure | Skills


Sector Overview – Industry Spinoffs

• Many large corporations have set

up or are considering setting up

offices in South Africa

• Foreign direct investments have

been made into South Africa with

the acquisition of local industry

players

• New companies have entered the

Oil & Gas value chain


Future Scenarios

Africa Oil & Gas – current vs proposed future activity


• Refineries: Sub-Saharan Africa is under-invested in refining capacity relative to the rest of the world.

• Offshore exploration: additional activity in East Africa.

• Local Africa demand: economic development in Africa will spur demand for natural gas.

23

Future Scenarios

Africa Oil & Gas – proposed future activity


Sub-Saharan Africa - the

next 20 years

Over the next 20 years

Sub-Saharan Africa will

see significant changes in

the upstream and

midstream sectors of the

oil and gas value chain.

Included in this section is

an examination of current

Oil & Gas activity and an

assessment of proposed

future Oil & Gas activity

over the next 20 years.

24

Connect with us! www.saoga.org.za

25

DISCLAIMER


Disclaimer

The material in this presentation has been prepared by The South African Oil & Gas Alliance (SAOGA) and is based on information

available at the date of this presentation.

This information is given in summary form and does not purport to be complete. Information in this presentation, including forecast

information, should not be considered as advice or a recommendation.

Before acting on any information you should consider the appropriateness of the and the risk of adverse or unanticipated market,

financial or political developments.

This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations

with respect to oil and gas industry businesses and operations, market conditions, results of operation and financial condition,

capital adequacy, specific provisions and risk management practices.

Readers are cautioned not to place undue reliance on these forward looking statements. SAOGA does not undertake any

obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after

the date hereof to reflect the occurrence of unanticipated events.

While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative

manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside SAOGA’s control.

Past performance is not a reliable indication of future performance.

Ebrahim Takolia

Chief Executive Officer

Studio 604 | 6th Floor | 4 Loop Street | Cape Town 8001

T +27 21 425 8840 | C +27 82 304 3133 | F +27 86 218 0845

[email protected] | www.saoga.org.za

mailto:[email protected]

http://www.saoga.org.za/

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