oil and gas africa 2005 the petroleum oil and gas corporation of south africa (pty) ltd reg. no....

Oil and Gas Africa 2005 The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd Reg. No. 1970/008130/07

Presentation to the Presentation to the Portfolio Committee for Portfolio Committee for

Minerals and EnergyMinerals and Energy

The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd Reg. No. 1970/008130/07

Cape Town, 18, October 2006

Mr Sipho Mkhize Mr Sipho Mkhize President & CEOPresident & CEO

PetroSAPetroSA


Outline

• Overview PetroSA• Corporate Objectives• Feedstock Update• LTFT Technology Update• Security of Supply• Global Safety Record• HIV Aids• BEE• Imvume• Challenges• Financial Results


About PetroSA

• South African national oil company, 100% government owned

• Operate the world’s largest and one of the only three GTL plants worldwide

• Accumulated unique GTL experience for the past 14 years and operating know-how, which it is in the process of commercialising

• GTL commercialisation has been an activity within PetroSA since 2001 and has since become one of the strategic priorities for the company.

• Operates the strategic crude storage tanks in Saldhana

• Oil/Gas producer in SA and Nigeria (OML114/Abana field)

• Is active across the value chain (in both upstream and downstream)

• An international player with African focus


“We will deliver sustainable growth through maximisation of cash flow from PetroSA’s assets with our people, delivering

operational excellence underpinned by world class SHEQ practises in partnership with our customers and local

communities.”

Mission of PetroSA Operations Division

Find a Balance between1. Efficiency and commercial drive of IOC 2. Mindset of NOC - deliver more than profit!


PetroSA’ Experiences: GTL supports macroeconomic development

• Employment : direct and indirect• Training and Development of Skills in Process Industry• Supplier Development: Services, Maintenance, Materials• Support of Transformation: Black Economic Empowerment• Opportunities for Small & Medium Enterprise Development• Tax revenues other than Royalties for raw materials• Improves security of supply – direct through GTL products or via swaps with external

markets with different specs• Opens access to local Downstream Market: Trading, Marketing• Anchor inland customer for development of Gas Infrastructure and Inland Market:

Commercial, Gas to Electricity, Private Households, Chemicals• Input in Government to Government negotiations in developing countries: support of

regional development

GTL Technology offers more than just export of raw materials


Overview

• PetroSA has had a successful year in many aspects of its business. A solid growth platform for the future has been laid following the successful restructuring of the organization.

• The business is now buoyant, our people are feeling upbeat and confident, and the circumstances of our industry all contribute to a positive outlook.


Outline



Corporate Objectives

• Implement South Coast Gas project by 2008

• Secure feedstock for the Mossel Bay plant beyond 2012.

• Replace non-feedstock production and build reserves to maintain a non-feedstock production rate of more than 30 000 barrels of oil equivalent per day, with a reserve life of at least 8.5 years by 2010

• GTL Refinery to achieve a sustainable break-even target by 2010 that will ensure a long term affordable feedstock supply.

• Complete development phase II of LTFT GTL by October 2007 and develop opportunities to commercialize technology.

• Meet new fuel specifications, as per legislation, in the future.

• Commercially manage Government strategic stocks and associated tankage.

• Enter the downstream marketing of liquid fuels.


Outline



Feedstock Update

• Secure feedstock for the Mossel Bay plant beyond 2008 and invest in related infrastructure

• Successfully implement the South Coast Gas Project by May 2007

• Recommend a long term feedstock alternative


Feedstock Update - Cont

• Continue/accelerate exploration activities in South Coast• Continue to pursue strategic participating interest in upstream gas

producing assets offshore West and East Coast of Southern Africa.• Lead the development of gas infrastructure on the West Coast.• Engage key stakeholders to secure support for the pipeline project.• Obtain approval for a single gas buyer business model from the Energy

Regulator to underpin the financial viability of pipeline. • Investigate and develop alternative options – contingency

Underground coal gasification CNG Coal bed methane Imported LNG

• Develop worst case scenario options:• Conversion to crude refining, Mossel Bay, Saldanha, Coega. • Abandonment


Optimistic/preferred• 2007 – 2011: Gas from FA/EM and South Coast Gas Project• 2011 – 2015: Other South Coast Gas• 2012 onwards: Piped West Coast Gas &/or CNG from Mozambique

Fall back option (insufficient South Coast gas)• 2009 – 2012: Gas for 2-train operation from FA/EM and SCG

Project • 2015 onwards: Piped West Coast Gas, or CNG from Mozambique

and/or Namibia, and/or West Coast• Importation of LNG – Coega or Saldanha

Pessimistic • Abandonment, or crude conversion 2011 (for latter – decision

required latest mid 2008)




• PetroSA aspires to drive gas commercialisation in Southern Africa, preferably with other NOC’s, to ensure: Maximum mutual benefit Regional cooperation and development Focus on downstream beneficiation of indigenous gas

• Efforts concentrated on Namibia, South Africa and Mozambique.

• PetroSA to lead the development of gas utilisation infrastructure – Gas Transmission Pipeline, CNG, or LNG.

• PetroSA engaging Key Stakeholders to secure support



• PetroSA is to develop additional fields in the South Coast Gas development known as the Bredasdorp Basin.

• The project is fully in execution phase and is on track for first gas intake in May 2007.


Outline



LTFT Technology Update

• The Low Temperature Fischer-Tropsch (LTFT) Semi Commercial plant in Mossel Bay was designed and constructed through an agreement with Statoil, the Norwegian State-Owned national oil company.

• A technology company, GTL.F1 AG has been established, with an additional engineering partner, Lurgi, to house and further develop and market the LTFT and integrated reforming technology, MegaSyn.

• The objective is to operate the plant at conditions as close as possible to the expected commercial conditions, with a view of conducting a catalyst life test, a limited process variable study as well as a tracer study.

• There is a marked change to the progress being made in the global GTL business. The main players, Sasol, Shell and Exxon Mobil, are all developing large GTL projects.


LTFT Technology Update -Cont

A JV Project

with Statoil

Major Components

• $60+ million investment

• EPC Contractor Technip Italy S.p.a.

• Ready for commissioning March 2004

• Catalyst supply Johnson Matthey Catalysts

• Technology concept proved end 2005

• Slurry Bubble Column Reactor

• Cobalt catalyst

• Proprietary filter

• Compressor, Membrane unit

• Instrumentation and data capture

LTFT Semi- Commercial Plant



•The Algerian Government has invited PetroSA to bid on a 34000 b/d integrated GTL project (Tinrhert).

•Sep. 2005, PetroSA submitted a technical proposal in a consortium with Statoil and BHP Billiton.

•A commercial bid is scheduled for submission in Sep. 2006 along with competitors, Sasol, Chevron and Shell.



Target• 900 million barrels of oil equivalent

• PetroSA share 135 mil barrels eq (15% share)

• Aligned with PetroSA reserve target

• Supply PetroSA European markets

• Commercialise GTL technology

• Deploy new LTFT technology

• Demonstration underway in South Africa

Competitive

Bid

Technology

• Only 3 qualified bidders

• GTL experience: largest worldwide

• Partners: Statoil and BHP Billiton

Capex

Commit.


Outline



Security of Supply

• West / East coast gas pipeline

• Coega storage and loading facilities

• Participation in a CTL / Refinery study

• Exploration and driling operations in RSA coastal waters

• LNG receiving terminal

Total Capital Expenditure for these projects in the next 5 year at R15 billion


Proposed Gas Transmission Pipeline

Touwsrivier

222 km

Saldanha

Cape Town Port Elizabeth Mossel Bay

Bit terfontein

Hopefield

Swellendam George Joubertina Oudtshoorn

Coega Worcester

Calvinia

Beaufort West

Uitenhage

Oranjemund NAMIBIA

SOUTH AFRICA

KEY

541 km

163 km

290 km

445 km

125 km

LANGKLOOF

OVERBERG

CAPE TOWN

BREEDE RIVER

WEST COAST 2

WEST COAST 1


Producer 1

Producer 2Producer 2



LNG & CNGLNG & CNG

Onshore Wholesal

e Gas Trader

Onshore Wholesal

e Gas Trader

Local Distribution Co.Local Distribution Co.

Major Industries

Major Industries

EskomEskom

GTLplant GTL

plant

Gas FlowGas Flow

Transmission pipeline

Gas Sales & Purchase

Agreements

Gas Sales & Purchase

Agreements

Transportation Agreement

Proposed Aggregator Model


Outline



Global Safety Record

• PetroSA has undertaken an international benchmarking exercise which shows all our operations are easily within the bracket for world best practice

• The GTL refinery in fact exceeds the benchmark.

• Among other highlights was the achievement in December 2005 of a total 6.45 million hours without a disabling injury at the GTL refinery.

• The company’s quality certifications with the International Standards Organisation (ISO 9001/2000 and ISO 14001) were not only retained, but extended to cover additional areas that met the certification requirements.


Outline



HIV and Aids

• A case study on the remarkable HIV and AIDS programme rolled out in PetroSA was conducted.

• Key success areas within a six-month period were:

• 79.4% of employees had attended awareness session

• 64% had undergone voluntary testing.

• The programme has already had a positive impact on the local community in Mossel Bay, which has requested PetroSA’s help with a similar community-wide initiative.


Outline



BEE

• To pursue economic growth through the seven (7) elements of BBBEE Employment equity (70:30) Skills development (5% of payroll) Preferential procurement (40%) Management & control (89%) Supplier Development Programme - Enterprise Development: Established five

companies (5) & spent about R 10 Million towards the development Corporate Social Investment - Residual: (over the three year period spent

R50.1 Million


BEE

Supplier development

• PetroSA piloted a successful Supplier Development Programme over two years

• South African Supplier Development Agency was launched in September 2005.


BEE

Skills transfer and development

• Two graduate students were sponsored for international MSc programmes in Reservoir Engineering to address the shortage of skills in that area.

• Ten other students have commenced petroleum studies abroad with sponsorship from PetroSA.

• PetroSA welcome the Department of Trade and Industry’s (DTI) National Initiative for Partnership Programme (NIPP), in terms of which, foreign companies doing business in South Africa are obliged to provide reciprocal benefits in respect of training.

• PetroSA has made huge advances at its Centre of Excellence in Mossel Bay. This Centre serves as an industry model and will make a significant contribution to the planning and smooth execution of the statutory maintenance shutdown of the GTL refinery scheduled for October 2006.


Outline



Imvume Transaction

• Two public-interest investigations were conducted• R18 million condensate transaction with Imvume

Management. • The standing committee on public accounts (SCOPA)

recommendations were:

- Risk assessment procedures be strengthened

- Regular report-backs be made to SCOPA.

- PetroSA’s risk management function has been established as a separate function within the Office of the CEO.


Imvume Transaction - Cont

• A court settlement agreement was signed with Imvume in August 2005

• Since then good progress has been made in the collection of the advance payment made to Imvume during early 2004.

• At 31 March 2006, repayments of R9.5 million had been received in terms of the settlement agreement.

• Interest raised on the outstanding amount is R4 million, resulting in the total outstanding debt at 31 March 2006 being R12.5 million.

• Since May 2006, Imvume has defaulted on the settlement agreement.

• In August 2006, our lawyers were instructed to execute the settlement, by attaching assets.


Outline



Challenges

• Slow decision process

• Foreign investment approvals

• Conversion to new order rights uncertain

• Upstream fiscal uncertainty

• Shortage of technical and operational skills


Outline



Financial Results 2005/6

• With this year’s performance, further progress has been made within a positive global market context for GTL technology and products over the coming decade. Aggressive commercialisation of GTL know-how and the development of value-added products should bring PetroSA into the mainstream of global demand and diversify the income stream. The national growth outlook is good, with the economic fundamentals firmly in place.

• We expect to make further advances in all areas of our business, including a successful refinery maintenance shutdown, possible E&P acquisitions in Namibia and Mozambique, and successful commissioning of the South Coast Gas project. I look forward to reporting back to stakeholders next year.


The graphic below shows the relationship between the rand/dollarexchange rate, the crude oil price and profitability of the company.

Permanent workforce demographic profile

31 March 2006


Performance Review

2006 2005 ChangeR’m R’m %

Income StatementTurnover 7 509 6 446 17Operating profit 2 312 1 715 35Net profit 2 765 1 737 59Balance SheetTotal assets 15 595 13 213 18Total debt 310 427 (27) Net asset value 11 494 9 234 24 Cash generated 3 406 4 078 (16)


Revenue Variance

2006 2005 Change

R’m R’m R’m

Turnover 7 509 6 446 1 063

Average ZAR / USD R6.38 R6.28 2%

Average crude oil price $58bbl $42bbl 28%

Analysis R’m

Price variance 2 410

Volume variance (1 500)

Exchange variance 153

1 063


Ration Analysis

2006 2005

% %

Gross Margin 40.9 39.1

Cost to revenue ratio 72.6 76.3

Return on assets 17.7 13.1

Gearing 2.6 4.3

Liquidity Current ratio excl. cash 1.55 : 1 1.97 : 1


Thank You

oil and gas africa 2005 the petroleum oil and gas corporation of south africa (pty) ltd reg. no....

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