Confidential Natural Gas and LPG Development in Africa Presentation By Omamofe Boyo Esq. Deputy Group CEO, Oando Plc 10 th African Oil & Gas Trade and Finance Conference & Exhibition April 2006 NOT AN OFFICIAL UNCTAD RECORD

2 Oando Outline  Introduction  Issues/challenges of gas utilization in Africa  Action Points

3 Oando Oando Plc (“Oando”) is an integrated energy company based in Nigeria with operations spread across West Africa Petroleum products supply & trading Industrial power generation & distribution Gaslink Nigeria Industrial gas distribution Refining of petroleum products Oando Power Oando Trading Bermuda Oando Supply & Trading Provides support services to the upstream sector Marketing Oando Refinery Oando Pet. Development Company Oando Energy Services Development of marginal fields, Exploration & Production Commercial & Retail Marketing and Distribution of petroleum products Oando is a private sector company listed on the Nigerian Stock Exchange (NSE) with a market capitalisation of over $450 Million (end December 2005) In November 2005 we concluded a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa Group revenues stood at N103 Billion (approx. $760 million) in 2004 and increased to N179 Billion (approx. $1.35 Billion) in 2005

4 Oando Our Participation in Gas Pioneered natural gas distribution in Nigeria 100km pipeline network Possesses in-house engineering, project management & gas operations expertise Oando Marketing Gaslink Nigeria Limited Retail marketing of LPG 9 LPG filling plants with a total capacity of 1,170 MT 500 retail outlets (service stations) throughout Nigeria, Ghana and Togo Oando Petroleum Development Co. Oando Trading Import of LPG into Nigeria Trading LPG cargoes Exploration & Production Gas developments from existing fields

5 Oando Gas as a Fuel of Choice Vs Alternative Fuel or Fuel Sources like Fuel Oil, Gasoil and Kero Cleaner Environmentally friendly being with low carbon emissions Pollutant free Safer Non-toxic in nature Narrow threshold for combustion Cost Efficient ALL IN ALL A MORE EFFICIENT FUEL

6 Oando Outline  Introduction  Issues / challenges of gas utilization in Africa  Action Points

7 Oando NIGERIA Reserve est.: 176.4TCF CONGO Reserve est.: 5.2 TCF ALGERIA Reserve est.: TCF LIBYA Reserve est.: 52.6TCF COTE D’IVOIRE Reserve est.: 1.1 TCF ANGOLA Reserve est.: 1.7 TCF Africa represents about 8% of Global reserves, with around 67% concentrated in Nigeria & Algeria Land of plenty EGYPT Reserve est.: 65.5TCF

8 Oando Most of the gas development projects presently initiated are export-oriented NIGERIA LNG PROJECT Export only: LNG ALGERIA LNG PROJECT Export only: LNG MOZAMBIQUE – SOUTH AFRICA GAS PIPELINE Approx. 665km WEST AFRICA GAS PIPELINE Approx. 1,033 km Nigeria to Ghana (through Togo & Benin) KEY Export Pipelines MAGREB-EUROPE GAS PIPELINE Approx. 1,666 km Algeria to Spain, through Morocco TRANS-MEDITERRANEAN GAS PIPELINE Approx. 1,110 km Algeria to Italy, through Tunisia EGYPT-JORDAN GAS PIPELINE Approx. 260 km Infrastructure is limited/export oriented

9 Oando Only a fraction of the reserves are being consumed within the continent. Africa will continue to be a net exporter of Gas. The challenge therefore is infrastructural development which will only be driven by markets that have the critical mass

10 Oando Domestic demand drivers remain Power and Industrial sectors which remain largely underdeveloped in many parts of the continent 1.Domestic Power Average power generation growth for emerging economies is 6% per annum 2.Industrialization Cement, Fertilizer, Steel, Aluminium and transportation 6% pa

11 Oando Infrastructure is required to stimulate national and regional consumption The 625km West African Gas Pipeline (WAGP) is the stimulant for West Africa Pipeline will supply natural gas from Nigeria to Ghana, Togo, and Benin High Capex spend required on domestic infrastructure

12 Oando …As well as inter-regional ??  4,550 km gas pipeline between Nigeria (Warri) and Algeria (Hass R’Mel), via Niger Republic  Pipeline can be extended to feed other inter-land (land locked) countries

13 Oando Africa is also an LPG producer Total regional exports from Africa projected at 13 million tonnes in 2005, largely from the following countries: Nigeria ~ Expansion of Escravos, Nigerian LNG and additional processing facilities at Cawthorne Channel and Funiwa-Agbami, should add 1-2 million tonnes of LPG production to the region Algeria ~ LPG production West of Suez will contribute an additional 2 million tonnes Angola ~ Supplies from Angola will also add appreciable amounts of LPG production in the region Growing LPG supplies from West Africa and Algeria are now filling the Asian shortfall

14 Oando Demand is weaker than supply, hence a vibrant export market Regional demand of LPG projected at approximately 9 million tonnes in 2005 Estimated demand growth rate of about 5% per year (same as growth rate) Average per capita consumption of 4kg/capita, against world average of 17kg/capita

15 Oando Ironically, local usage is still constrained  Low purchasing power of end users  Infrastructure limitations, particularly into the hinterlands (coastal storage, distribution)  Uncertain domestic supply, particularly with epileptic production from regional refineries  Volatile prices  Prevalent usage of kerosene

16 Oando Outline  Introduction  Issues/challenges of gas utilization in Africa  Action Points

17 Oando Regional Gas Pipeline – Issues and Action Issue Requisite Action Regional Pipelines i.e. WAGP, Eastern African Pipeline, Nigeria-Algeria Pipeline (proposed) Gas as driver for power initiatives within the continent Encouraging industries to convert to gas usage (cement, fertilizers, methanol etc) Creating a pricing advantage for local consumption Encouraging private-public partnership based local distribution Regional Pipelines i.e. WAGP, Eastern African Pipeline, Nigeria-Algeria Pipeline (proposed) Improving distribution Stimulating local and regional utilization Infrastructure Limitation Infrastructure credit from development agencies Commercial projects that subsidize local infrastructure development (fertilizer etc) Power as a driver for development

18 Oando LPG Challenge Issues Requisite Action Grants to cushion the requisite conversion costs (from biomass to LPG) Fiscal policies to drastically reduce cost of equipment i.e. cylinders, burners etc Low purchasing power of end users and small number of users Incentivise local supplies from existing export oriented gas projects Incentivise investment in secondary distribution (bottling plants & road transportation Pursue adequate long term funding and practical assistance for LPG infrastructural development Government participation to encourage domestic use and investment

19 Oando Thank You