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17th INTERNATIONAL CONFERENCE & EXHIBITION

ON LIQUEFIED NATURAL GAS (LNG 17)

East Africa: Opportunities and Challenges

for LNG in a New Frontier Region By: Derek Hudson, BG Group

16 April 2013

17th INTERNATIONAL CONFERENCE & EXHIBITION ON LIQUEFIED NATURAL GAS (LNG 17)

Legal Notice

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No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by BG Group plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it.

Agenda

• BG Group in East Africa

• Tanzania LNG project

• Global LNG context

• Potential socio-economic impacts of a LNG project in Tanzania

• Closing thoughts

Emerging hydrocarbon province

• Relatively unexplored frontier play

• East Africa: new exploration

hotspot with recent material

discoveries

• Reliable government institutions

• Favorably positioned to access

robustly priced Asia-Pacific

LNG markets

• Likely to underpin next wave of

LNG developments

• BG Group has a strong acreage

position in East Africa

Legend:

BG Group

interests

BG Group in Tanzania

• Acquisition of 60% of Ophir’s interests

in Blocks 1, 3 & 4 in June 2010

• BG Group appointed operator in

July 2011

• Nine consecutive successful gas wells

• 13,500 km2 of seismic data acquired

• Circa US$1 billion spent on E&A to

date

• First DST commenced offshore

Tanzania in January 2013

• Further E&A in 2013/14 to enhance

resource base in support of

land-based LNG project WD: 2,000 m

TANZANIA

Mkuranga -1

Mafia Deep 1ST -1

Dar es Salaam

Pweza

Zafarani

WD: 1,000 m WD: 500 m

Chewa

Papa

Lavani

Mtwara

Kiliwani North

Songo Songo

Mzia

Jodari

Chaza

Mnazi Bay

Ziwani Ntorya

Msimbati

Block 1

Block 3

Block 4

500 km

BG Group in Kenya / Madagascar

Kenya

• BG Group operator on L10A & L10B blocks

• 10,400 km2 of acreage in water depths from 200 to 2,000 metres

• 2,630 km2 of 3D seismic acquired over two blocks

• Drilling planned for late 2013 / early 2014

Madagascar

• Non-operated block in unexplored frontier basin

• North-west coast of Madagascar

• 15,840 km2 of acreage in water depths from 200 to 3,000 metres

• Believed to be oil-prone

KENYA

TANZANIA

Mombasa

Mbawa Gas Discovery

Block L-10A

Block L-10B

WD: 1,000 m WD: 2,000 m WD: 500 m

MADAGASCAR

Majunga Offshore

Profond

500 km

Source: Wood Mackenzie

Nature of discoveries

• Discovered reservoirs not particularly

complex geologically

• Highly permeable sandstones

deposited in deep marine channel

systems

• Normally pressured, low temperature

reservoirs

• Multi-TCF discoveries in gas column

ranging from 40 to 50 metres

• Dry gas with little or no contaminants

• Challenging design of high

deliverability well in extreme

water depth

Seismic line across Jodari

TANZANIA

Block 1

Mtwara Jodari

500 km

TANZANIA

Mtwara

Export to

international

markets

Block 1

Block 3

Block 4

Block 2 DMO

LNG LNG

c. 2

00 k

m

WD: 1,000 m WD: 500 m WD: 2,000 m

Indicative plant

location

Potential LNG site locations

Tanzania LNG development

• Discoveries scattered across

four large blocks, distant from

the shore

• Water depths also limit offshore

facility design

• Subsea only solutions controlled

and monitored from the beach and

floating production unit option

considered

• FLNG option still considered while

preferred option is land-based

LNG plant

Global LNG supply / demand

• LNG demand is expected to

continue to grow, mostly in

Pacific Basin

• LNG supply growth driven by Qatar

and Australia

• However, supply / demand gap

expected to increase over the next

decade

• Where is the next Qatar or

Australia?

• Mozambique and Tanzania? Recent

discoveries have built up significant

resource base in East Africa

0

50

100

150

200

250

300

350

400

450

2000

2005

2010

2015

2020

2025

Outlook

mil

lio

n t

on

ne

s p

er

an

nu

m (

mtp

a)

LNG trade

forecast Supply /

demand

gap

c. 170

mtpa

Supply:

Existing and under

construction

Source: BG Group interpretation of Wood Mackenzie (Nov 2012)

Note: Supply adjusted by BG Group to account for chain losses

Australia

Qatar

From East Africa to markets

• Well located to supply multiple

markets on long-term basis or in

response to short-term market

fluctuation

• Equidistant from North East Asia

and North East Europe

• Extremely well located in respect to

West Coast Indian markets

• Similar distance from market

compared with Middle East

exporters

• But East Africa LNG projects

emerging at the same time as new

potential exporters: US and Canada

Distance from Tanzania to markets

UK

6,775

Spain

5,320

India

2,609

Tanzania

Japan

6,945

China

5,759

Korea

6,616

Singapore

4,057

Note: nautical miles – single leg trip

Sources of state income

• Significant economic progress in East African countries in recent years

• Fairly modest level of human development:

– Kenya 143

– Tanzania 152

– Madagascar 151

– Mozambique 184

• Development of LNG projects has potential to transform economy

• Various direct and indirect benefits of deepwater LNG projects

Out of 187

countries in

the United

Nations

Human

Development

Index

• Direct benefits:

– Foreign direct investment

– Employment

– Government take from the project

– Contribution to gross domestic product and gross national income

– Retained national income and national expenditure

• Indirect benefits:

– Induced impacts

– Multiplier effects from industry

Source: UNDP 2011

0

10,000

20,000

30,000

40,000

50,000

60,000

Year

-…

Year

-8

Year

-6

Year

-4

Year

-2

Year

0

Year

2

Year

4

Year

6

Year

8

Year

10

Year

12

Year

14

Year

16

Year

18

Year

20

Year

22

Year

24

Year

26

Year

28

Year

30

Induced Employment

Indirect Employment

Direct Employment

Employment: Multiplier effect

4 – 10 indirect jobs for every direct job

Nu

mb

er

of

em

plo

ye

es

Not fully quantified

Induced employment

Indirect employment

Direct employment

Source: Oxford Management Policy

Note: Based on a two-train LNG project in Tanzania, LNG train size yet to be decided

Gas market development

• Governments have a key role in delivering investment enabling policy and regulation

• Mutually beneficial outcome to both in-country societies and multinational investors

• Possible step-change in economic development thanks to deep water LNG projects

• Can also facilitate development of fertiliser plants and power generation that have high multiplier impacts to economy

• Enough gas for all sustainable requirements

Closing thoughts

Thank you!

• Further exploration, appraisal and testing needed to bring LNG projects in East Africa to FID

• Further exploration and well testing planned by BG Group in Tanzania

• Global gas demand believed to outstrip gas supply

• Market opportunity for well located East African gas discoveries

• Potential significant economic contribution of LNG projects to East African countries

• Upcoming drilling in offshore Kenya to further build East Africa’s importance as an emerging hydrocarbon province