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NATIONAL PETROLEUM CORPORATION

ANNUAL REPORTApril 2005– March 2006

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N A T I O N A L P E T R O L E U M C O R P O R A T I O N

Front row (left to right):Mr. James Browne (General Manager), Mrs. Carol Nurse (Secretary to the Board),

Mr. Ronald Hewitt, Mrs. Martika Rocheford, Dr. William Duguid (Chairman),

Back row (left to right):Mr. David Leslie, Mr. Roger Hennis, Mr. Matthew Thornhill,

Senator Gregory Nicholls, Mr Ian Alleyne

Absent:Ms. Claire Lewis, Mr. Robert Morris

The Board of Directors

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CONTENTS

Page

Chairman’s Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Mission Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Corporate Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Board of Directors and Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Committees of the Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Principal Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Annual Report of the National Petroleum Corporation

for the Year April 1 2005 to March 31 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Financial Statements:Auditors’ Report to the Government of Barbados . . . . . . . . . . . . . . . . . . . . . . . . . 23Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Statement of Changes in Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

APPENDICES AND CHARTS

List of AppendicesI Mains Laid During 2005/2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16II Distribution of Income for the Period 1996/97 to 2005/2006 . . . . . . . . . . . . 18III Analysis of Gas Sales 1996/97 to 2005/2006. . . . . . . . . . . . . . . . . . . . . . . . . . . 19IV Summary of Operations for the Period 1996/97 to 2005/2006 . . . . . . . . . . . 20

List of ChartsNet Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Number of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Kilometres of Production, Transmission and Distribution Mains . . . . . . . . . . . . 21

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The Energy People.

National Petroleum CorporationWildey, St. MichaelP.O. Box 175, BridgetownBarbados, West IndiesTel: (246) 430 4000, Fax: (246) 426 4326Email: [email protected]

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Mission Statement

The mission of the Corporationis to provide and maintain a safe,reliable, efficient and competitive

gas service to customersand be instrumental in carrying out

Government’s energy policy toimprove the quality of life

in the community which we serve.

Corporate Values

The Corporation maintains the following core values in the performance of itsduties:

q Service: To provide the best possible service never forgetting that what is doneand the way it is done vitally affects the thousands of customers who depend on itsservice.

q Honesty: To conduct our business with honesty and integrity.

q Concern: To show concern for the welfare of our customer, fellow employees andthe general public. We will protect the environment in which we live.

q Excellence: To strive for excellence in all that we do.

q Team Work: To work together in harmony as a team, combining our best thinkingand efforts to make the Corporation the finest utility in the Nation.

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BOARD OF DIRECTORS

Dr William Duguid JP, MPChairman

Managing DirectorPine Dental Services

Mr Roger SmithDeputy ChairmanGroup AccountantSagicor Life Inc.

Mr Merton BrathwaiteDirector

Graduate TeacherParkinson Memorial School

Mr Merland BurkeDirector

Assistant Manager and Company SecretaryBarbados Agricultural Credit Trust Limited

Mr Ian AlleyneDirector

Divisional General ManagerGoddard Enterprises Limited

Mr Maurice EstwickDirector

Quantity Surveyor

Mr Ronald HewittRepresentative of Barbados National Oil Company Limited

DirectorGeneral Manager

Barbados National Oil Company Limited

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BOARD OF DIRECTORS Cont’d

Mr Robert MorrisRepresentative of the Barbados Workers’ Union

DirectorDeputy General SecretaryBarbados Workers’ Union

Senator Gregory NichollsDirector

Attorney-at-Law

Mr Matthew ThornhillDirector

Production ManagerArawak Cement Company Limited

Mr Steven WilliamsDirector

Chief Executive OfficerSunisle Communications Inc.

SECRETARY TO THE BOARDMrs Carol A Nurse

LEGAL COUNSELMr C Lindsay Bolden, CBE, QC

AUDITORSPricewaterhouseCoopersChartered Accountants

BANKERSBarbados National Bank Inc

FirstCaribbean International (Barbados) Limited

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COMMITTEES OF THE BOARD OF DIRECTORS

FINANCE COMMITTEE

Dr William Duguid - ChairmanMr Merland Burke - Director

Mr Maurice Estwick - DirectorSenator Gregory Nicholls - Director

Mr Roger Smith - DirectorMr Steven Williams - DirectorGeneral Manager - Ex Officio

ESTABLISHMENTS COMMITTEE

Dr William Duguid - ChairmanMr Merton Brathwaite - Director

Mr Merland Burke - DirectorSenator Gregory Nicholls – Director

Mr Roger Smith - DirectorGeneral Manager - Ex Officio

TECHNICAL COMMITTEE

Dr William Duguid - ChairmanMr Ronald Hewitt - Director

Mr Matthew Thornhill - DirectorMr Steven Williams - DirectorGeneral Manager - Ex Officio

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PRINCIPAL OFFICERS

Ken Hamilton LintonActing General Manager(until October 14 2005)

James Wallace BrowneGeneral Manager

(From October 15 2005)

Mrs Carol Ann NurseManager – Human Resources and Administration

Birchmore DeCourcey ScantleburyManager – Finance

Carol Randolph PadmoreManager – Technical Operations

(From October 1 2005)

Carlos Alistair CarterActing Technical Officer(From October 1 2005)

Wosley John Wayne HolderTechnical Officer/Service Installations Coordinator

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ANNUAL REPORT OF THE NATIONAL PETROLEUM CORPORATIONFOR THE YEAR APRIL 1 2005 TO MARCH 31 2006

The Board of Directors of the National Petroleum Corporation submits its twenty-fourth Annual Report together with the audited financial statements for the year endedMarch 31 2006.

.Constitution and Purpose of the CorporationThe National Petroleum Corporation is a public corporation established as successor to theNatural Gas Corporation by the National Petroleum Corporation Act Cap 280. That Actcame into effect on April 1 1981. The Corporation’s primary function is the sale of pipednatural gas for domestic, commercial and industrial use.

The purpose of the enterprise is to provide and maintain an adequate, reliable, competitive,safe and efficient gas service to customers at a reasonable cost.

The Corporation’s general functions of the production of crude oil, natural gas and liquefiedpetroleum gas, which are permitted by statute, are carried out by an associated company,the Barbados National Oil Company Limited (BNOCL). Since January 24 1996, theCorporation has held 24.5% of the equity in BNOCL while the Government of Barbadosholds 75.5%.

The Corporation was managed by a Board of Directors, which comprised eleven membersunder the chairmanship of Dr William Duguid.

The duties of Secretary to the Corporation were performed by Mrs Carol Nurse,Manager – Human Resources and Administration.

Remuneration of MembersSection 19 (2) (d) of Act, Cap 280

The remuneration paid by the Corporation to its members during the accountingyear 2005/2006 totalled $27,068 and was in accordance with the rates fixed by theGovernment.

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OperationsDuring the year 31,643 feet (9.64 km or 5.99 miles) of gas distribution main were laid. Theareas in which the mains were laid are shown in Appendix I. The Corporation installed 809new services and terminated 409 services.

To accelerate the number of domestic service connections, the Corporation continued itsprogramme of subsidised installations at the rate of $1,050 per installation.

Capital ExpenditureCapital expenditure for the year totalled $2,046,649 under the following heads

$

Land and Buildings 11,408Gas Wells, Pipelines, Production and Transmission Equipment 74Distribution Plant and Equipment 1,842,397Moveable Equipment and Furniture 192,770

Gas SupplyThe Corporation purchased 14,095,183 standard cubic metres of gas from its supplier,the Barbados National Oil Company Limited. The Corporation’s Well #19 produced 1,277standard cubic metres.

Gas ReservesAccording to information supplied by the Ministry of Energy and the Environment, thegas reserves as at March 31 2006 were estimated to be 5.906 billion standard cubic feet or167.2 million standard cubic metres.

Gas SalesThe total volume of gas sold during 2005/2006 was 11,693,879 standard cubic metresas compared with 10,852,153 standard cubic metres during 2004/2005, an increase of841,726 standard cubic metres or 7.76%.

Residential sales showed an increase of 96,351 standard cubic metres from 2,211,229standard cubic metres to 2,307,580 standard cubic metres or 4.36%. The Corporationcarried out some short extensions during the latter part of the financial year. This resulted inthe installation of residential services in the relevant areas and that would have contributedto the increases in sales.

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Commercial sales increased by 592,168 standard cubic metres from 5,026,672 standardcubic metres to 5,618,840 standard cubic metres or 11.78%. 38 commercial customerswere added and some residential customers were reclassified as commercial customers.

Total sales to special rate customers – Barbados Light and Power Company Limited(BL&P) and Queen Elizabeth Hospital (laundry boiler) – increased by 153,207 standardcubic metres from 3,614,252 standard cubic metres to 3,767,459 standard cubic metres or4.24%.

The value of sales to BL&P increased by $609,533 from $1,304,255 in 2005/2006 to$1,913,788 or approximately 46.73%. The volume increased by 236,493 standard cubicmetres from 2,959,026 standard cubic metres to 3,195,519 standard cubic metres or 7.99%.The average selling price per cubic metre was $0.60 as compared with $ 0.44 in 2004/2005,an increase of $0.16 per cubic metre or 36.36%. Given the enhancement of its monitoringcapability through the use of the Supervisory Control and Data Acquisition System, theCorporation was able to maximise the supply to BL&P.

The Queen Elizabeth Hospital recorded a decrease of 83,287 standard cubic metres in thevolume of sales from 655,227 standard cubic metres to 571,940 standard cubic metresor 12.71%. A more efficient boiler was installed during the period and this resulted in areduction in gas usage.

The price at which natural gas is purchased by the Corporation from the Barbados NationalOil Company Limited and the price at which it is sold to the Barbados Light and PowerCompany Limited were based on the fuel equivalent of imported Bunker ‘C’ fuel. The priceof the latter this year varied from 187.229 to 266.494 Bds cents per US gallon. The pricelast year varied from 143.327 cents to 184.182 cents per US gallon or 49.466 Bds cents perlitre to 70.408 Bds cents per litre, reflecting a steady, substantial monthly increase.

Income and ExpenditureThe Corporation recorded a deficit of ($2,276,098) in 2005/2006 compared to a deficit of($ 4,278,125) in 2004/2005. This improvement resulted from an increase in sales and areduction in the share of loss of the associated company, BNOCL, when compared withprevious year’s share of loss.

The Corporation’s deficit before share of net income of BNOCL and taxation decreased by$ 714,986 from a deficit of ($1,145,773) in 2005 to ($ 430,787) in the year under review.

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Operating expenses including purchase of gas, depreciation and interest charges, totalled$14,055,655. Total income from all sources excluding the share of net income of BNOCLwas $ 13,624,868.

StaffThe staff complement as at March 31 2006 was 127 as compared to 137 at March 31 2005.The decrease in the number of employees was as a result of retirements and the terminationof the contracts of short-term temporary employees.

The Corporation welcomed Mr James Browne as General Manager; he joined the staff onOctober 15 2005. Mr Browne has a background in the energy industry, having worked forseveral years as a Petroleum Engineer at BNOCL. In the manufacturing industry, he servedas Engineering Manager at Barbados Dairy Industries Limited.

RetirementsThe Board records its appreciation of the contributions of Messrs Ken Linton, ActingGeneral Manager, and Alvin Sandiford, Marketing and Sales Representative, who retiredafter 21 and 28 years of service respectively.

Staff Training and DevelopmentDuring the year under review several staff members benefited from training opportunitiesfacilitated by the Corporation. In keeping with the Corporation’s commitment to promoteemployee growth and development, employees at all levels and of all competenciesparticipated in courses and seminars including the following

Government’s Training Administration DivisionAccounting Level I Courseü .......................................................... May - June 2005

Government’s Training Administration DivisionCustomer Service Skillsü ...........................................................................June 2005

Government’s Training Administration DivisionAccounting Level II Courseü ...................................... September – November 2005

Ernst & YoungVAT from A to Zü ............................................................................... October 2005

Government’s Training Administration DivisionStress Management Courseü ............................................................ November 2005

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Insurance Corporation of Barbados LimitedPanel Discussion – Handling Crisis Situations in the Work Placeü .......March 2006

Barbados National Oil Company LimitedHealth and Safety Seminarü ...............................................................February 2006

National Productivity CouncilSeminar – Occupational Health & Safety in the Work Placeü .............March 2006

Year Under ReviewDuring this reporting year, the Corporation continued its efforts to carry out the policy ofproviding the natural gas service to as many customers as possible. However, in doing so,the Corporation’s profitability and solvency continued to be eroded because of the

High level of subsidisation1)

Steep cost of excavation and reinstatement2)

Reduced volumes of gas available3)

Rising purchase price of gas4)

MeasuresIn an effort to reverse the situation and return the Corporation to a strong financial position,the Corporation took steps to

1) Reduce operating expenses by limiting overtime and capping expenditure foradministrative and commercial supplies and expenses.

2) Prepare to apply to the Fair Trading Commission for an increase in the price ofnatural gas.

3) Continue to source capital items at the most competitive price while notcompromising quality

Christmas Party and Awards CeremonyAt the annual staff party of December 9 2005, the Corporation honoured two retireesand 36 employees – of whom 13 received long service awards in the 30, 25, 20, 15and 10 years’ categories and 11 received awards for perfect attendance. The Chairman,

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Dr William Duguid, gave the feature address and the awards were presented byMrs Anthony Wood, wife of the Minister of Energy and Public Utilities.

AppreciationThe Chairman and Directors of the Board take pleasure in expressing their appreciation tothe management and staff for their valuable contribution to the operation of the Corporationduring the year under review.

By Order of the Board

ChairmanWilliam Duguid, JP, MP

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SUMMARY OF MAINS LAID APRIL 1 2005 TO MARCH 31 2006

LOCATION SIZE OF MAIN DISTANCE

St. MichaelBarbarees Hill 3” L.P. P.E. 588’-3”Belle (R) 3” H.P. Steel 60’-9”Bush Hall Yard Gap 3” H.P. P.E. 34’-0”Carlisle House 3” L.P. P.E. 130’-6”Cheapside 3” L.P. P.E. 5’-6”Cheapside 2” L.P. P.E. 46’-0”Clapham Park 2” H.P. P.E. 537’-3”Clapham Park 1 1/4” H.P. P.E. 70’-8”Collymore Rock (R) 3” H.P. P.E. 4717’-10”Collymore Rock (R) 2” H.P. P.E. 102’-5”Collymore Rock (R) 1 1/4” H.P. P.E. 149’-8”Cowell Street 4” L.P. P.E. 10’-0”Forte George Heights 2” H.P. P.V.C. 4636’-2”Fry Oan Alley, Passage Road 2” H.P. P.E. 59’-6”Goddard Road, St. Stephens 1 1/4” H.P. P.E. 54’-6”Government Hill (R) 2” H.P. P.E. 2853’-4”Government Hill (R) 3” H.P. P.E. 217’-11”Government Hill (R) 4” H.P. P.E. 5’-5”Hincks Street 4” L.P. P.E. 197’-7”Jubilee Garden (R) 4 L.P. P.E. 199’-6”Parkinson Field 1 1/4” H.P. P.E. 375’-9”Parkinson Field 3” H.P. Steel 18’-0”Parkinson Field 3” H.P. P.E. 18’-11”Prince Alfred Street 4” L.P. P.E. 369’-9”Prince Alfred Street 2” L.P. P.E. 2’-0”Princess Alice Highway 4” L.P. P.E. 1246’-4”Spooners Hill 3” H.P. P.E. 122’-3”St. Stephens Hill 3” H.P. P.E. 324’-5”Thorne Gap, Spring Garden 3” H.P. P.V.C. 103’-6”Tudor Bridge/Spooners Hill 3” H.P. P.E. 2493’-6”Tudor Bridge/Spooners Hill 2” H.P. P.E. 23’-9”Tudor Bridge/Spooners Hill 1” 1/4 H.P. P.E. 93’-2”Two Mile Hill 3” H.P. P.E. 164’-0”Wavell Avenue 1 1/4” H.P. P.E. 457’-5”Welches Terrace 2” H.P. P.E. 21’-1”

APPENDIX 1

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APPENDIX 1

SUMMARY OF MAINS LAID APRIL 1 2005 TO MARCH 31 2006 (cont’d)

LOCATION SIZE OF MAIN DISTANCE

St. James1st & 2nd Street, Holetown (R) 2” H.P. P.E. 132’-0”4th Avenue Durants 1” 1/4 H.P. P.E. 178’-8”Blowers (R) 2” H.P. P.E. 868’-0”Blowers (R) 3” H.P. Steel 21’-0”Lashley Road 1” Steel 76’-6”

Christ ChurchEnterprise Tenantry Road 1 1/4” H.P. P.E. 1884’-11”Lynch Gap, Dayrells Road (R) 1 1/4” H.P. P.E. 366’-0”Powlett Place, Carters Gap 1 1/4” H.P. P.E. 143’-2”Rockley 3” H.P. P.E. 655’-11”St. Lawrence (R) 2” L.P. P.E. 97’-10”St. Lawrence (R) 4” L.P. P.E. 42’-3”St. Lawrence (R) 6” L.P. P.V.C. 2’-6”St. Lawrence Main Road (R) 4” H.P. P.E. 1786’-8”

St. PhilipCrane Hotel Acces Road 1 1/4” H.P. P.E. 548’-8”Sunbury Gap 2” H.P. P.V.C. 244’-0”Sunbury Road 3” H.P. P.V.C. 3156’-10”Sunbury Road 1 1/4” H.P. P.E. 15’-0”Sunbury Road 3” H.P. Steel 61’-8”

St. AndrewMose Bottom (R) 2” H.P. P.V.C. 6’-0”

St. ThomasBennetts (R) 2” H.P. P.E. 508’-0”Warrens (R) 2” H.P. P.E. 337’-0”

Replacement (R) 2.36 mls / 3.80 km 12474’-1”Distribution 3.63 mls / 5.84 km 19169’-1”Total Mains Laid 5.99 mls / 9.64 km 31643’-2”

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CHARTS

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designed and printed by cole’s printery limitedcorporate values the corporation maintains the...

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