Upstream petroleum activities in South Africa Good day, ladies and gentleman. My name is John Decker, and I am a geologist with the Petroleum Agency of South Africa. In my presentation today, I would like to give an overview of the current activities taking place in South Africa’s upstream petroleum industry. It is a very exciting time for our country, with significant interest in both our offshore conventional and onshore unconventional energy resources, and indeed, we are of the opinion that our energy future for the next half a century will be mapped out within the next 5 to 10 years. Dr John E. Decker Petroleum Agency SA AAPG ICE - October 2011, Milan

Petroleum Agency SA Promotion and Regulation of oil and gas exploration and production in South Africa Archiving all data Under Department of Mineral Resources headed by Hon. Minister Susan Shabangu By way of introduction, I would like to begin by explaining the role of Petroleum Agency SA. The Agency is the state-owned entity that is responsible for promoting and regulating oil and gas exploration and production in South Africa, as well as for archiving all related data. As such, we report to the Department of Mineral Resources, headed by the Honourable Minister Susan Shabangu and naturally we also have close ties to the Department of Energy.

Mandate – Mineral and Petroleum Resources Development Act (2002) OUR VISION A viable, sustainable and responsible upstream industry in South Africa. OUR MISSION To promote, facilitate and regulate exploration and sustainable development of oil and gas in South Africa. The role of the Agency is mandated by the Mineral and Petroleum Resources Development Act of 2002. Through this act, we are instructed to develop, facilitate and regulate the growth of the upstream industry in South Africa. As such, the Agency’s vision is to have a viable, sustainable and responsible upstream industry in our country.

Recent activity Rights conversions New production rights New explorers offshore Unconventionals onshore Upcoming exploration In the last few years the Agency has finalised a number of right conversions from old to new order legislation. We have granted new production rights, and attracted new explorers to our offshore acreage. A highlight of this has been that two large, seismic acquisition programmes have recently been conducted off our west and east coasts, respectively. In addition to this, we have seen unprecedented international and local interest in our unconventional hydrocarbon resources onshore.

Current licenses and applications I would now like to take you around South Africa and discuss current activities on a local scale. Offshore activity is focused on our Jurassic- to Cretaceous-aged extensional basins along our west, south and east coasts, with current production occurring off our south coast. Onshore exploration activities are focused on the potential of the Carboniferous- to Jurassic-aged Main Karoo Basin and subsidiary Karoo basins, principally for coalbed methane, shale gas and biogenic gas. Please note that current licences are shown in dark green, and licences under applications are shown in pale green.

Orange Basin – West Coast Block 1 – PetroSA Exploration Right Late 2008 Approx. 21000km2 1500km2 3D seismic acquired Potential for gas – Kudu equivalent, Ibhubesi equivalent plus other untested plays Orange Basin – West Coast PetroSA So we’ll start with the Orange Basin in the offshore west coast region. In the northern sector of the Basin, South Africa’s state-owned oil company, PetroSA, has just completed the initial stage of their exploration right. They have acquired a 1500 km2 3D seismic survey and have now completed processing and interpretation. We expect them to start drilling within the next 2 years. It is the Agency’s opinion that the area may have large potential resources of gas, of the same size and stratigraphic level as both the Kudu gas field to the north and the Ibhubesi gas field to the south, as well as some new untested plays. As such, we look forward to the continuation of PetroSA’s exploration activities in Block 1.

Orange Basin – West Coast Blocks 2B and 2A Thombo Petroleum – A-J oil discovery Forest Exploration International – Ibhubesi Gas Field Thombo Petroleum Forest Exploration Moving southwards down the west coast, we have also granted an exploration right to Thombo Petroleum of the UK, following the completion of their Technical Cooperation Permit study. They will be investigating the potential highlighted by the AJ-1 oil discovery, beginning with seismic acquisition. To the west, in Block 2A, Forest Exploration International and its joint venture partners have recently acquired a third 3D volume over the Ibhubesi gas play. At the Agency, we consider that the Ibhbusi play may extend northwards across the block, and that the extended play has multi-Tcf potential. Forest are also in a phase of gas market development planning, and so they are hoping to bring Ibhubesi into production in the near future, and thus bring natural gas from South Africa’s west coast into the national energy mix through an independent power production project. If successful, this will be a very important milestone in South Africa’s upstream industry, as it will change the general perception of the contribution that natural gas has to offer as a viable long-term energy source for South Africa.

Orange Basin – West Coast Other upcoming operations Shallow and deep water – BHP Billiton Mid-Basin – Sungu Sungu Deep water – Shell Southern basin – PetroSA Orange Basin – West Coast Sungu Sungu BHP Billiton Shell Exploration Elsewhere on the West Coast, we have exploration rights awarded to BHP Billiton for the shallow and deep water areas, and to Sungu Sungu Exploration for the mid-basin region. We also have exploration rights under application for the deep water Orange Basin and the southern Orange Basin, which we have received from Shell Exploration international and PetroSA, respectively. PetroSA

South Coast New Age CNR PetroSA Block 11B/12B - CNR Exploration Right conversion Deep water exploration Acquired 2D seismic in previous exploration period Identified exploration targets Resume exploration program South Coast New Age CNR Moving to the South Africa’s south coast, there has been ongoing interest in exploring the various southern offshore rift basins. We have had exploration right applications from Impact Africa, Bayfield Energy and New Age. This has also been ongoing exploration being done by Canadian Natural Resources and PetroSA . CNR have finished a 2D seismic survey in their area, and we anticipate that they will be drilling a well within the next three years. PetroSA’s exploration efforts within their block have focused on the appraisal of the F-O gas field… PetroSA

South Coast F-O field Block 9 - PetroSA Exploration Right Block 9 Ongoing exploration Development of F-O gas Field F-O field …and if we zoom in on this block, we can see that they have applied for a Production Right in the area. If approved, this gas field will then hopefully complement PetroSA’s ongoing oil and gas production in the Bredasdorp Basin, which at the moment is principally from the Oribi, Oryx, Sable and F-A fields. (~1500 bbl/day, 45 million bbl to date)

East Coast Sasol Recent interest Silver Wave – 2D seismic survey Sasol – TCP deepwater Impact Africa – TCP app I’m also pleased to say that we have recently had great interest in our East Coast, which has been neglected by explorers for some time. Silver Wave are leading with way with their exploration program, and have so far completed half of their 2D seismic survey work. Sasol has recently been awarded a technical cooperation permit for a large area, including deepwater regions, and we have also received a TCP application from Impact Africa closer to the coast. So in summary, we are pleased that a large proportion of our offshore acreage in South Africa is currently either under licence or under application, to 14 operators spread over 16 concessions and 7 applications. These operators include major IOCS, our NOC, and other international and local companies. Sasol

SA onshore Karoo Basin Main Karoo Basin and associated sub-basins Coalbed methane, biogenic gas and shale gas 58 concessions & 65 applications When we move to the onshore areas, we see an historically unprecedented degree of activity and a healthy spread of operators, with some 58 concessions and some 65 applications. Onshore hydrocarbon exploration in South Africa is still in its infancy, but is focused on the vast onshore Karoo Basin and associated sub-basins. The Karoo was explored in the 1960s and 1970s by the NOC of the time, Soekor, but due to a perceived poor potential for large conventional oil plays, exploration was abandoned. The new wave of exploration in the Karoo is driven by interest in unconventionals, principally coalbed methane and shale gas.

Coalbed methane Anglo Tuli Soutpansberg Ellisras Springbok Flats Ellisras/Waterberg: ~1 Tcf Springbok Flats: ~ 5 Tcf Tuli & Soutpanspansberg sub-basins Northern coalfields Ellisras Coalbed methane exploration has concentrated on the coal-bearing sequences of the northern Main Karoo Basin and the northern sub-basins.  Exploration in the Waterberg coalfields of the Ellisras Basin is at the most advanced stage, with Anglo Operations having drilled over 70 wells and conducted production tests. Our own evaluation of the CBM resource potential in these sub-basins is ongoing, but we estimate something on the order of 1 Tcf of gas in place in the Ellisras Basin, with perhaps up to 5 times as much gas present in the Springbok Flats. Springbok Flats

Biogenic gas Anglo Evander Virginia Main Karoo Basin Molopo Energy Exploration in Evander Recent application for a production right in Virginia area Biogenic gas from underlying Archean basement Anglo Evander Virginia There is of course also CBM exploration activity associated with the coals of the Witbank and Newcastle coalfields further south of these sub-basins. However, the most exciting development in this area of late has been a recent application by Molopo Energy for a gas production right in the Virginia area. If granted, this will be South Africa’s first onshore gas production right. Molopo is also exploring for gas in the Evander area. What also makes these developments exciting is that the source of the gas is not believed to be coalbed methane, as originally thought, but in fact biogenic gas that is being produced by microbes in the underlying Archean Witwatersrand basement. So while this gas has long been flared as a mining hazard in South Africa’s gold mines, it may in fact prove to become a renewable hydrocarbon energy source for South Africa in years to come. Main Karoo Basin

Sasol, Chesapeake, Statoil Shale gas Play fairway in southern part of basin ~101-102 Tcf (EIA: 485 Tcf) Moratorium on issuing of concessions until February 2012 Sungu Sungu Sasol, Chesapeake, Statoil Last but not least, exploration activities in the central and southern Main Karoo Basin are focused on evaluating the basin’s shale gas potential. There have been some technical cooperation permits issued recently to investigate shale gas potential, and TCPs are currently held by a Sasol, Chesapeake and Statoil consortium, and by Sungu Sungu. The greatest interest, however, is in the south-western part of the basin, where we have received exploration right applications from Shell, Falcon and Bundu Gas. We believe the potential shale gas resource in South Africa’s Karoo Basin to be quite significant. The US Energy Information Administration has deterministically estimated a risked technically recoverable resource of 485 Tcf. Our own work shows that given the available data, the size of the resource is highly uncertain, but is likely to be on the order of at least tens of Tcf. However, the South African government has declared a moritorium this year on the processing of any new and existing applications for shale gas, in order to investigate the environmental considerations that are associated with hydraulic fracturing. Currently, this moratorium has been extended until February 2012. Shell Shell Shell Bundu Falcon

Summary South Africa has attracted a wide diversity of international and local exploration companies over the past few years. Acreage under license or under application: opportunities for partnerships. A number of new surveys have been conducted offshore in previously underexplored areas. Unprecedented interest in the onshore unconventional resource potential. So in summary, we are pleased to report that South Africa has attracted a wide diversity of international and local exploration companies over the past few years. This has resulted in a lot of acreage in South Africa presently being either under licence or under application, and so various opportunities for partnerships with operators exist. A number of new surveys have been conducted offshore in previously underexplored areas, and we are optimistic that this may lead to some significant developments in the next few years. There has also been great interest in the onshore unconventional potential of South Africa, and we anticipate that these new energy resources may allow for a diversification of South Africa’s energy production in the near future.

Finally, I would just like to invite anyone who is interested in learning more about current upstream activities in South Africa to come visit our promotional booth. We have a variety of promotional and technical material on hand, and our technical team will be available to answer any questions that you might have. Thank you for your attention.