A Pathway for Mozambique: From Reserves to Production to Prosperity Presentation by Sara Menker, Founder and CEO of Gro Ventures 27 February 2013 Confidential

Mozambique’s Natural Gas: The Facts Offshore drilling began in 2009 and Anadarko announced a small discovery early 2010 2010 – 2011, 7 out of 9 wells that were drilled discovered significant amounts of gas 2012: one-third of global oil and gas discovery volumes were in Mozambique 61% of discovered volumes were in Sub-Saharan Africa.

2012: The Year Mozambique Became a Natural Gas Superpower The Natural Resource Curse and Challenges for Mozambique Ten Largest Discoveries of 2012 Reframing the dialogue around natural resources in sub Saharan Africa: Mozambique is not being challenged with a curse, but is being presented with an opportunity Capturing this opportunity requires Mozambique to implement specific policies and initiatives Source: WoodMackenzie

Mozambique’s Natural Gas: The Facts Area 1 Estimates Reserves: 50 TCF $28bn= Amount that will be spent over the next 30 years producing a portion area 1 gas that is sufficient for a 2-train LNG Project (11.1 TCF) $18.5bn= Cost of a 2-train LNG Project $17bn= The government’s profit share the 20 year production period $16bn= Income tax revenue

Mozambique’s Natural Gas: The Facts Area 4 Estimates Reserves: 42 TCF $28bn = Amount that will be spent over the next 30 years producing a portion area 4 gas that is sufficient for a 2-train LNG Project (11.1 TCF) $18.5bn= Cost of a 2- train LNG Project $18.5bn= The governments profit share during the 20 year production period $16bn= Income tax revenue

Natural Resources as Opportunities, Not Curses Data from the World Bank, Graph powered by Google

Capturing Opportunities The only way for Mozambique to succeed in capturing natural resource opportunities is if the Mozambican government initiates sound policy reforms while strengthening its institutions

Institutional and Regulatory Reform Regulatory framework must be consistent and finalized Fiscal policy stabilized Policy stabilization and regulation will lower risk premiums Contracts must be legally enforceable and financially sound

Commercialization Further commercializing ENH, INP and their subsidiaries ENH has 10% ownership in Area 1 and 15% ownership in Area 4 Carried through exploration phase Further commercialization essential to access the funding required to participate in development  

Service Providers to the Coal and Gas Industries Cost competitiveness is essential to LNG. East Africa’s infrastructure is consistently lacking and the local service sector is non-existent Important to increase the number of national and international service providers Nigeria: > 400 oilfield service companies. It is the only sub Saharan country with a substantial home-grown industry

Emphasis on Local Content Inclusion of provisions requiring operators to be socially responsible, use local content and employ Mozambicans The kkey is to act immediately with regards to education. The opportunity costs of waiting are high Short-term costs: longer project lead times, higher costs and lower project values Long-term benefits: strengthened infrastructure and heightened competitiveness

Emphasis on Local Content Qualitative Summary of Local Content Approaches in sub Saharan Africa Source: Wood Mackenzie

Downstream Opportunities Maximizing resource value: Multi-use infrastructure important: especially railroads, which should be operated independently and not by resource extractors Gas monetization options: Liquefied Natural Gas (LNG), Gas to Liquids, Pipelines, Power Plants, Fertilizer Plants, Chemicals, etc.

Diversify Funders Large infrastructural projects need to be funded by diverse actors, beyond traditional developmental financial institutions (DFIs) DFIs alone cannot meet the funding requirements of ENH, let alone all infrastructure projects.

Revenue Management Ensuring new revenue is managed efficiently and transparently, and invested in a responsible way with a focus on: Education Agriculture Infrastructure Banking and financial services Telecommunications Creation of a sovereign wealth fund

Mozambique’s Natural Gas: The Facts Area 1 and Area 4 The calculated costs and revenues were assuming only two 2-train projects. Area 1 alone has sufficient gas for 4 as does Area 4 The reserve figures are still growing for both fields Area 1 Estimates Reserves: 50 TCF $28bn= Amount that will be spent over the next 30 years producing a portion area 1 gas that is sufficient for a 2-train LNG Project (11.1 TCF) $18.5bn= The cost of a 2-train LNG Project $17bn= The government’s profit share the 20 year production period $16bn= Income tax revenue Area 4 Estimates Reserves: 42 TCF $28bn = Amount that will be spent over the next 30 years producing a portion area 4 gas that is sufficient for a 2-train LNG Project (11.1 TCF) $18.5bn= The cost of a 2- train LNG Project $18.5bn= The government’s profit share during the 20 year production period $16bn= Income tax revenue

Summary Natural gas in Mozambique becomes an opportunity, not a curse, through: Institutional and Regulatory Reform Commercialization Emphasizing Local Content Increasing number and capabilities of service providers Capturing Downstream Opportunities Diversified funders Effective Revenue Management