One Pipeline, Two Pipelines or no Pipeline…What is the answer ?

ICC Conference, Karachi 17-18 February 2002Paul SamsonVice President, BHPBilliton

Outline

• Pakistan • Supply/Demand• Options to fill the gap

•Iran to Pakistan Pipeline• India

•Supply/Demand• Options to fill the gap

• Iran to Pakistan and India Pipeline• Conclusions

Pakistan: Supply & Demand

2000 2005 2010 2015

6000

4000

2000

BCFD

PAKISTAN

Existing

Developing

Most Likely Demand

Pakistan needs to add 1 Tcf/year just to replace the decline…

Pakistan – Options to fill the gap

Increase the pace of exploration and development

0

5

10

15

20

25

30

35

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Exp

lora

tio

n W

ells

00.511.522.533.544.55

TC

F D

isco

vere

d

Average discovery since 1991 0.75Tcf/year

GAS DISCOVERIES vs PRODUCTION

0

5

10

15

20

25

30

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

TC

F

Cum Gas Discovered TCF Cum Gas Produced TCF

Pakistan – Options to fill the gap

… if gas potential and investment are present

New Petroleum

Policy

Revised Petroleum

Policy

FORECAST

Pakistan – The cost of not filling the gap @US$20/bbl

• or import gas from Turkmenistan, Iran, Qatar…

22%

18%8%

7%14%

75%

4%8%

13%

ODSGST

DOMESTIC GAS H S F O

Foreign Exchange

Foreign Exchange

67% more67% more

ProducerTake

F&DCost

Royalty GoPEquity

Tax

12%

18%

GST T&D Importedfuel

Freight&Margin

Fuel OilFuel Oil

33% more33% more

The Iran to Pakistan Pipeline Project

20°N

60°E 80°E

32”

IRANPAKISTAN

CHINA

NEPAL

UAE

SAUDI ARABIAOMAN

INDIA

QATAR

Bombay

Hyderabad

Tehran

Karachi

Delhi

Lahore

AssaluyahSouthPars

HBJ

1115km

$1.25b

Length 1875 kmTotal Cost $1.9b

Arabian Sea

0 500 km

760km

$0.65b

• 0.5 to 1.5BCFD over 20 years

• High CV gas

• 32” Assaluyeh to AC1-X

• Class 900 , x80

• MAOP 2220psig

32”

India’s options to fill the gap

6000

4000

2000

BCFD

2000 2005 2010 2015

Existing Production

New Developments

Most Likely Demand

• Use domestic coal • Explore for more gas• Import fuel oil• Import LNG• Import pipeline gas from Bangladesh, Qatar, Iran

The Iran to India Project

20°N

60°E 80°E

36” 36”

IRANPAKISTAN

CHINA

NEPAL

UAE

SAUDI ARABIAOMAN

INDIA

QATAR

Bombay

Hyderabad

Tehran

Karachi

Delhi

Lahore

AssaluyahSouthPars

HBJ

1115km

$1.5b

Length 2775 kmTotal Cost $3.8b

Arabian Sea

0 500 km

760km

$1.1b900km

$1.2

36”

• 1.0 to 2.0BCFD

over 20 years

• 36” Assaluyeh to

Delhi

The Iran to Pakistan to India Project

20°N

60°E 80°E

44” 4

4”

1-2 36”

IRANPAKISTAN

CHINA

NEPAL

UAE

SAUDI ARABIAOMAN

INDIA

QATAR

Bombay

Hyderabad

Tehran

Karachi

Delhi

Lahore

AssaluyahSouthPars

HBJ

1115km

$1.86b

Length 2775 kmTotal Cost $4.16b

Arabian Sea

0 500 km

760km

$1.20b900km$1.10b

• Throughput:

1.5 to 3.5BCFD

3.8% pa growth

• Class 900 , x80

• MAOP 2220psig

• 44” to Indian border

• 36”from border

The Value Proposition to Pakistan

Delivered to ACX1 @ $18/bbl oil price

Ira

n P

aki

sta

n &

Ind

ia P

ipe

line

Ira

n P

aki

sta

n

Pip

elin

e

Imp

ort

ed

HS

FO

Ga

s @

Po

licy

Pri

ce

FX Component

Excludes anyExcludes anytransit feestransit fees to to

PakistanPakistan

The Value Proposition to India

Indifference point with

imported coal for 1200MW

baseload power

generation based on

US$30/tonne coal price

Indifference point with

imported coal for 1200MW

baseload power

generation based on

US$30/tonne coal price

Current gas

Market Prices

Current gas

Market Prices

LN

G

Pip

e B

an

gla

des

h

GA

IL R

eta

il

Delivered to Delhi @ $18/bbl oil price

Pip

e Ir

an

What needs to happen?

• Explicit Government(s) support• Establish regulatory framework• Integrated participation of key sponsors from source to market• Update feasibility study• Enter into sales agreement with potential customers• Set up sponsors leading to consortium• Arrange financing• Execute • First gas to Pakistan: 36 months from financial closure

The Benefits

Pakistan:– Affordable, unlimited supply– Internationally benchmarked compensation for transit– Abundant energy for uninhibited economic growth

India:– Affordable, unlimited supply – Economic growth– Diversity of supply

Iran: – Diversification from oil revenue– Long term foreign exchange earnings

Regional Stability ???

Conclusions

• One pipeline is better than two and much better than none…

• Project fundamentals are strong

• Provides long term affordable energy supply

• Political hurdles can be overcome – economic incentives

• There are a few visionary companies believing in the project

Role of BHPBilliton

• BHPBilliton - world’s leading diversified resources company

• Discovered and developed Zamzama gas field

• Has been promoting gas exports from Iran since 1993

• Completed feasibility study from Iran to Pakistan in 1998

• BHPB mandated by NIOC to lead the study and execution