Competitive Bidding 2010

Outline of Talk Introduction Gas Bid round 2009/2010 Oil Framework for Presentation Gas Bid round 2009/2010 Areas Offered and Terms Oil Immediate to Short Term Long term – Areas Offered and Terms

Government’s of Trinidad and Tobago’s Focus Sustainable development of the energy industry Provision of a competitive framework for investment Provision of gas for expansion of downstream industries Rebalance oil and gas production Enabling greater participation of nationals and national enterprises provision of incentives for investment

Gas Reserves and Resources (tcf) 1.1. 2007 1.1. 2008 1.1.2009 PROVED 17.05 16.997 15.374 POSSIBLE 6.23 7.883 8.451 PROBABLE 7.76 5.888 6.286 Total 31.04 30.768 30. 011 EXPL. RESOURCES: 37.09 31.25 29.64 A largely Static Picture

Change the Static Picture – How? Challenge for gas- Build up probable and possible reserves base to feed into proven Gas, because of its nature, has no value unless a market exists for it Companies will not explore for gas unless a market is available The entire value chain is interwoven Upstream E&P Midstream transmission - pipeline, ?LNG Downstream – Primary Refining Downstream – Manufacturing Provision of a market

Projected Production Statistics 2017 Projected with Train X GAS PROCESSING 1% METHANOL MANUFACTURE 10% REFINERY AMMONIA AND UREA MANUFACTURE SMALL CONSUMERS Down Stream Ammonia 4% New Metals and Plastics 7% Down Stream Methanol 4% LNG 'Train X' 13% Atlantic (LNG) 39% POWER GENERATION 7% Total 6042 MMscfd Train X is still considered a viable option but there has to be considerable quantities of new gas discovered to move forward with this project.

Gas Round

Shallow and Average Water Round Acreage Offered Blocks Offered NCMA 2 NCMA 4 NCMA 3 NCMA 5 4(b) North Marine 5(d)

Shallow Water Block Descriptions (1) North Marine Block -280 sq km Located in very shallow water Close to infrastructure This block has the potential to be both oil and gas bearing Block NCMA 2 - 1,019 sq km. This block deservedly attracted three bids in the 2006 round and has identified potential over 1tcf of gas Block NCMA 3 - 1,019 sq km. Several anomalies have been identified, although the block poses more of an exploitation challenge

Shallow Water Block Descriptions (2) Block NCMA 4 - 1779 sq km. This block has at least 300bcf of identified resources the recent 2D speculative survey has identified some upside potential. NCMA 5 - 2,311 sq km This area lies north of the Angostura Field and holds promise for both oil and gas accumulations in Oligocene reservoirs.

Average Water Depth Block Descriptions Block 4(b) - 750 sq km One well on the eastern edge of the block (Las Cuevas 1) encountered hydrocarbons. Several structures mapped - >2tcf of gas in shallow structures and the possibility of more at depth  Block 5(d) - 684 sq km Two wells in this block - El Nino-1 confirmed the presence of an active hydrocarbon system encountering gas-condensate sands, Sandpiper – gas bearing sands.

Timing Competitive Bid Order was signed by the Minister on 31st 2010 March Will be published and gazetted to have legal effect Bids are to be submitted by the first Wednesday four months after publication of the CBO Announcement of awardees six months after publication of CBO

Contained in Competitive Bidding Order Terms and Conditions Contained in Competitive Bidding Order

Pre-bid Qualification Fee US$ 50,000 for Blocks NCMA 3, NCMA 4 and NCMA 5 which shall entitle the bidder to bid on any or all of these blocks US$40,000 to bid on Block NCMA 2, US$40,000 to bid on Block 4(b), US$40,000 to bid Block 5(d) US$40,000 to bid on North Marine Block

NCMA 2, 3, 4 and 5 and North Marine Block TERM OF CONTRACT 1st Phase - seismic option – 2years 1st Phase - seismic and exploration drilling seismic and 1 well – 3years seismic and 2wells – 4 years seismic and 3 wells – 5 years 2nd Phase - exploration drilling 3rd Phase - exploration drilling Drilling of exploration wells is a requirement in the second and third phases Bid Order will contain more information

MINIMUM WORK PROGRAMME WORK UNITS (US$1MN equivalent to one work unit) Geophysical SEISMIC 3D Seismic ____________ Other Geophysical ____________ Geological Studies Drilling: Wells Depth _____________ SIGNATURE BONUS US$ _____________

PSC Commercial Terms Shallow and Average Water Depth Conventional styled (non taxable) PSCs, for Shallow(400m), Average (400 -1000m) with the following features: GORTT’s Share of Profit Petroleum are in lieu of taxes with exception of the payment of Withholding Taxes and Stamp Duty Ring-fenced – There will be no consolidation Profit Shares are biddable, matrices are open with no constraints to bidding (Production is incremental) Financial Obligations are fixed in the Contract Cost Recovery Limit is fixed at 50%, 55% for shallow and average respectively Fair Market Value as defined in Petroleum Taxes Act is utilised for the pricing of gas

Natural Gas A B C D Crude Oil Cost Recovery: 50% Shallow Water: Profit Petroleum Share Matrices Natural Gas Price MMCFD A B C D < $3.00 $3.00 -$4.50 $4.50 - $6.00 > $6.00 % < 60 X 60 - 150 150 - 300 300 - 450 > 450 Crude Oil Price MBOPD A B C D < $40.00 $40.00 -$55.00 $55.00 -$70.00 > $70.00 % < 6 X 6 - 20 20 - 50 50 - 75 > 75 20% Carried participation X represents the Governments Share of Profit Petroleum which is biddable Windfall Feature: BR + 70%*[(P – US$70.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price Windfall Feature: BR + 70%*[(P – US$6.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price Cost Recovery: 50%

Average Water: Profit Petroleum Share Matrices Natural Gas Price MMCFD A B C D < $4.00 $4.00 -$5.50 $5.50 - $7.00 > $7.00 % < 60 X 60 - 150 150 - 300 300 - 450 > 450 Crude Oil Price MBOPD A B C D < $40.00 $40.00 -$60.00 $60.00 -$80.00 > $80.00 % < 10 X 10- 25 25- 50 50 - 75 > 75 X represents the Governments Share of Profit Petroleum which is biddable No Carried Participation Windfall Feature: BR + 70%*[(P – US$80.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price Windfall Feature: BR + 70%*[(P – US$7.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price Cost Recovery: 55%

Evaluation Process

Bid Evaluation Two Biddable items Bid not totally self assessable Work Programme self assessable Pts per ft for wells drilled included in the Bid Order Government Share is biddable but not self assessable Internal benchmark will be set

2010 Deep Water

Deep Water Blocks 39 blocks in water depths 1,000 – 3,500 metres No decision has yet been made on the number of blocks to be offered Blocks in the TTDAA can now be nominated Prequalification criteria has been published Operators must be prequalified The document also asks for information on non-operators

Blocks available for Nomination Deep Water Blocks Blocks available for Nomination

Nomination Process The Map indicates the blocks from which nominations are to be made (hatched area) Companies will be required to submit a letter to the Minister naming the block nominated All nominations will be treated as confidential commercial Nomination is free Nominations close May 7th, 2010 Final determination of blocks will be made by MEEI

Location of Leads Analysed (6) Depth Structure Maps Showing Lead Locations Lead NW Lead NE Lead 010 Lead 020 Lead 040 Lead 030

Reserves Analysis for Leads Identified Uncertainty Analysis (for each lead) Estimate Reserves Size Distribution Multi-zone Monte Carlo Simulation Reservoir Size, Thickness, & Recovery Factors (Ps) Chance of finding HC’s in at least one zone Risked & Unrisked Reserves Hydrocarbon Type – Oil, Gas, GOR, Cond Yield

Reserves Identified

Deep Water Exploration Commercial Terms Conventional styled (non taxable) PSCs, with the following features: GORTT’s Share of Profit Petroleum are inlieu of taxes with exception of the payment of Withholding Taxes and Stamp Duty Ring-fenced – There will be no consolidation Profit Shares are biddable, matrices will be open with no constraints to bidding (Production is incremental) Financial Obligations are fixed in the Contract Cost Recovery Limit fixed at 60% No carried Participation Fair Market Value as defined in Petroleum Taxes Act is utilised for the pricing of gas

Deep Water: Profit Share Matrices Crude Oil Price MBOPD A B C D < $50.00 $50.00 -$75.00 $75.00 -$100.00 > $100.00 % < 75 X 75 - 100 100 - 150 150 – 200 > 200 Natural Gas Price MMCFD A B C D < $4.00 $4.00 - $6.50 $6.50 -$9.00 > $9.00 % < 200 X 200 - 350 350 - 500 500 - 750 750 – 1,000 > 1,000 The technical terms have not yet been finalised for the deep water X represents the Governments Share of Profit Petroleum which is biddable No carried participation Windfall Feature: BR + 70%*[(P – US$100.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price Windfall Feature: BR + 70%*[(P – US$9.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price Cost Recovery: 60%

Schedule & Timing Competitive Bid Order will be finalized and published by end July, 2010 Bid offers are to be submitted by the first Wednesday four months from the date of publication of the CBO Evaluation of bids – max 2mths Announcement of successful bidders will be made six months after publication of CBO

Thank You