Teamwork Partnership Refinery Modernisation 11th UNCTAD Africa Oil, Gas Trade & Finance Conference Nairobi, 23 rd - 25 th May 2007 NOT AN OFFICIAL UNCTAD RECORD

2 Overview Global refining markets have witnessed a dramatic turnaround in the last 3-4 years Where is the demand? Which products? What type of refineries will be needed? Where does Africa fit in the global picture? What does this mean for East Africa’s KPRL Mombasa refinery?

3 Increased refinery utilisation Refining capacity is effectively full in the major world markets

4 Refined product demand growth Light product demand is growing faster than residual fuels

5 Light product demand growth US Other AmericasEurope & CISAfrica & Middle EastAsia Distillates will account for much of the global product demand growth

6 Light and heavy product prices High fuel oil yield can make refineries uneconomic

7 Tighter product specs Product specs in Africa are expected to follow suit

8 Historic refining margins Refining margins are cyclical, improving strongly in recent years

9 What does this mean for refiners? Investments in new capacity 50 mmtpa of new capacity in India and the Middle East by 2010 Proposed capacity expansion at Tema Oil Refinery, Ghana Investments in new conversion capacity to improve light product yield Petrotrin $800 mn upgrade to improve gasoline yields, Trinidad Possible addition of a thermal gasoil unit at KPRL Investments to meet of new environmental requirements Sasol, Sapref, Enref and Natref refineries (new 2006 product specs), South Africa Mongstad (lower emissions), Norway

10 Key issues for African refiners Major factors affecting refinery profitability Size and operating efficiency Conversion capability Domestic market demand Other factors Product pricing formula Port facilities and tankage Local crude supply Imports from large high complexity refineries

11 Size and operating efficiency African refineries (outside of RSA) are small or have low efficiency 6 5 5

12 Conversion capability African refineries generally have low conversion capability

13 Domestic market demand Strong local market important for profitability Freight $30-50/t Import Parity – Med + $30-50/t Export Parity – Med - $30-50/t

14 Other factors Product pricing formula Often based on Platts quotations but not always consistently applied by Governments Port facilities and tankage Restriction on ship size and increased demurrage Has cost implications for crude supply and export product pricing Local crude supply May not be a major economic factor Refineries in Cote d’Ivoire and Congo refine Nigerian crude Imports from large high complexity refineries Competitive pricing of imported products

15 Possible African refinery projects Port Harcourt Refinery Company, Nigeria (210,000 bbl/d) Partial privatisation and rehabilitation Tema refinery, Ghana (100,000 bbl/d, expansion) Partial privatisation and capacity expansion Sonaref, Lobito Angola (200,000 bbl/d, greenfield) New export refinery to process Angolan heavy acid crude oil New refinery, Tanzania (200,000 bbl/d, greenfield) Proposed refinery plus pipelines to Kigoma and Mwanza Kenya Petroleum Refineries Limited (upgrade) Possible addition of TGU to reduce fuel oil yield and enhance utilisation Strong competition from India and the Middle East

16 East African petroleum market Kenya and Tanzania are the largest markets in East Africa Currently demand in Kenya is satisfied by the KPRL refinery and imports at Mombasa. Distribution through KPC pipeline KPRL is looking at upgrading Contracts for the upgrading and extension of the KPC pipeline have been awarded Demand in Tanzania is satisfied through product imports into Dar es Salaam Zambian demand is satisfied from pipeline crude imports to the Ndola refinery Malawi has signed a MOU for a products pipeline from the Mozambican port of Beira Total regional demand (excl Zimbabwe) is approximately 130,000 bbls/day Mombasa market Dar es Salaam market Competing market Other market KPRL Existing refinery T Terminal T KPRL T

17 Kenya Petroleum Refineries Limited KPRL has a number of issues which currently hamper its profitability Current lack of residue upgrading –Limited local fuel oil market limits capacity utilisation –Configuration restricts crude choice to light crude New product specifications –Dakar Declaration –Limited capacity to produce unleaded gasoline –Unable to produce low-sulphur diesel without investment Unreliable electrical power supply from grid The proposed upgrade would address these issues and enhance profitability

18 Proposed refinery configuration

19 Kenya Petroleum Refineries Limited Standard Chartered was appointed as financial advisers to KPRL in September 2005 Bank soundings indicated a willingness of the financial markets to provide a portion of the required funding subject to the necessary equity being found

20 Contact details Rob Tims Director, Oil & Gas Corporate Finance Standard Chartered Bank New London Bridge House 25 London Bridge Street London SE1 9TB Tel: Fax: