East African Operations and Gas Markets Peter Clutterbuck, CEO Orca Exploration African Independents Forum, Cape Town, October 29 th 2007
Forward looking statements and risks This presentation contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond Orca s control, including the impact of general economic conditions in the areas in which the company operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with gas operations. Therefore, Orca s actual results, performance or achievement could differ materially from those expressed, or implied by, these forward-looking estimates and, accordingly, no assurances can be given that any of the events anticipated by the forward looking estimates will -transpire or occur, or if any of them do so, what benefits, including the amounts of proceeds, that Orca will derive therefrom. This presentation should be read in conjunction with the company s unaudited financial statements for the three months ended 30 June 2007 and the audited financial statements and the related notes for the year ended 31 December 2006.
Orca corporate background Operating areas of former PanOcean Energy Current Orca operating areas Orca is TSVX listed in Toronto with market capitalisation of C$350 400 million Orca Exploration Group was formerly named EastCoast Energy EastCoast Energy was spun out from PanOcean Energy in 2004 Shareholders, Board and Management are mostly from PanOcean Energy PanOcean Energy was sold to Addax in 2006 for US $1.4 billion Orca management has operational experience in oil E&P in West Africa, onshore and offshore; and onshore / offshore gas E&P in East Africa Orca is now focussed on acquiring oil assets in East and West Africa (recently expanded into Uganda)
Experience from PanOcean businesses Courtesy of Vaalco
East African operations Uganda Exploration Area 5 in Albertine Graben Option for 50% interest with Tower Resources Dar es Salaam Downstream Distribution & Markets Own and operate gas supply for power and industry Songo Songo Gas Field Own and operate gas reserves
Uganda: Albertine Graben Rhino Camp Basin Orca and Tower / Neptune EA5 Block Rhino Camp and Nile Heritage / Tullow discoveries
Uganda Exploration Area 5: Rhino Camp Gravity interpretation Rift basin geology expected to be similar to discovery areas further south Tower Resources / Neptune Uganda operates Orca is funding 83% of seismic (2007) Orca has option to fund 83% of 2 wells (2008) Orca will then earn 50% interest Orca will operate the exploration drilling Escarpment east of Nile From Tower Resources
Tanzanian operations Operates through wholly owned subsidiary PanAfrican Energy Tanzania Vertically integrated gas company Has rights to Songo Songo reserves Operates upstream and downstream Songo Songo project Gas wells with 160 mmscfd capacity 70 mmscfd gas production 230 km pipeline $280 mm World Bank funded project Production to rise to 105 mmscfd Extra well capacity Doubling of processing capacity 5 new power stations Orca s current position The only large gas supplier in East Africa Existing gas reserves committed Gas markets likely to grow further Will explore adjacent structures
30 years from discovery to production EXP. APPRAISAL STALLED AWAITING GAS MARKETS PRE-PROJECT PROJECT PRODUCTION 1980 1990 2000 2004: first gas 1974: SS1 discovery (Cenomanian gas) 1981/2: SS5-SS9 Appraisal wells 1997: SS3, 4, 5, 7, 9 Production testing Construction 1978: SS3/4 appraisal (Neocomian gas) 2001: Songo Songo Project Financial close 2008: SS10 dev. well Songo Songo Gas to Power Project (Songas) Construction of gas processing plant, pipeline and power plant for power sales to Tanesco Reserves are owned by parastatal Tanzania Petroleum Development Corporation (TPDC) Power is generated by Songas for parastatal Tanesco for transmission and distribution Songas has rights to approximately 240 bcf of reserves ( Protected Gas, or PG ) All gas reserves in excess of this are Additional Gas, or AG, shared between TPDC and Orca
Songo-Songo gas chain Power > 60 mmscfd Songo Songo Field Wells Gas processing plant Pipeline from Songo Songo to Dar Dar distribution system OWNERSHIP/ENTITLEMENT Industrial <10mmscfd Orca TPDC OPERATORSHIP Songas Orca TPDC Future gas sales New gas markets Power/gas export Orca Songas Orca Socio-economic benefits to Tanzania Energy reliability, lowest cost fuel, environmental benefits Balance of payments, Government revenues (including TPDC) and taxes
Orca operatorship principles Specialised skills and experience in: Exploration: prospect generation, seismic, drilling Upstream: reservoir management, well operations, processing Downstream: distribution networks, commercial contracts, customer support Top quality Health, Safety and Environment standards for stakeholders Main stakeholders in Tanzania are Globeleq, Tanzania Government, and World Bank Commitment to staff development Intensive training programme (no prior oil/gas production experience in East Africa) Structured procedures, with active empowerment for delivery of targets Over 90% of our employees are Tanzanian, taking on increasing management functions Reliable, minimal cost operations without sacrificing quality Have achieved 100% uptime to major customers since 2004 startup Operated gas supply for up to 70% of Tanzania s electric power Highest standards of Corporate Governance, ethics and business practice Policy of aligned, non-confrontational relations with stakeholders
First Phase of Construction: 2001-2004 Upstream Construction Managed by Orca s Tanzania Country Manager
Reserves and resources potential SS North Accumulation: Undeveloped GIP >0.2 tcf Gas presence established by SS1 SS West Exploration Prospect Low risk Prospective resources up to 600bcf Songo Songo Main Field Developed GIP: 0.8-1.0 tcf SW SS West SW Prospect Songo Songo Field SS1 NE 250 msec 1km
Seismic: 2005 (Marine), 2007 (Transition Zone)
Seismic programme: 1000 km of new seismic Successfully identified Songo Songo West structure Eliminated smaller prospects
Operations at Songo Songo Island (SSI) SS-7 SS-5 SS-9 SS-10 SS-4 SS-3
Songo Songo Island: well locations SS9 [SS10] SS4 SS-10 SS5 SS3 SS7 1 km
Well interventions to add capacity SS-9 SS-9 SS-9 1997 Well Reconstruction
New wells: extra capacity for power markets SS-10 SS-9 SS-10 Intervention completed to add 25 mmscfd New well nearing completion Drilled from onshore with 40 degree deviation offshore Songo Songo West Potential to add 50% more reserves
Complex logistics management for SS-10 Nearest oil industry services over 3000 km away Requires extra capability to be generated in country
Reserves growth from production data 450 400 350 300 Probable Proven Gross Additional Gas Reserves Growth BCF 250 200 150 100 50 0 2004 2005 2006
SSI Facilities expansion to 140 mmscfd Wells SS-10 SS-4 Maximum Expected Offtakes in 2008 : Protected Gas 40 mmscfd Additional Gas Industrial 8 mmscfd Additional Gas for Power 68 mmscfd 1600 psi -25ºC Production Separator Heat Exchangers JT Valves Cold separator Legend: Existing Project Expansion Project SS-9 SS-5 Test Separator Cold separator Gas to Dar SS-7 Bypass SS-3 Cold separator Production Separator Cold separator Condensate Tank Condensate Tank Condensate Tank Condensate Tank Barge to Dar markets
Downstream gas distribution CNG vehicle in Dar Ringmain Construction PRS Ringmain Two Pressure Reduction Stations (PRS) Supply to 17 industrial customers 5 mmscfd to Wazo Hill cement plant from 2009 CNG Pilot now operational Projects planned in 2008 PRS
Industrial Markets 17 Customers on line: textiles, cement, beverages, glass and others
Hydro power characterised by droughts 699 Metres above sea level 697 695 693 691 Droughts Gas supply reduced a major crisis 689 Mtera Reservoir Levels 1990-2007 687 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Mtera Kidatu
Short term generation plants connected Dowans A: 3 x GE TM 2500 60 MW, 15 mmscfd Dowans A: GE LM 6000 40 MW, 10 mmscfd Aggreko Plant 48 MW, 12 mmscfd Dowans B: GE TM 2500 20 MW, 5 mmscfd
Long term generation plants connected Tanesco Wärtsilä 100 MW, 19 mmscfd Tanesco Wärtsilä 100 MW Songas Ubungo Complex 190 MW (PG and AG) UGT-6 GE LM 6000 42 MW 9 mmscfd
Next long term generation to be tied in Existing Wärtsilä 100 MW, to be converted from Heavy Fuel Oil, 23 mmscfd Adjacent Tanesco Wärtsilä 45 MW in progress, 9 mmscfd
Longer term expansion options Potential Additional Markets Gas to Tanga and Mombasa 400 kilometre pipeline Market of 50 60 mmscfd Export of Power to Kenya Kenya has in excess of 440 MWs of generation using fuel oil (equivalent to 88 mmscfd) Demand for electricity is increasing at 150 MWs per annum (the equivalent of 30 mmscfd) Interconnector between Arusha in Tanzania and Nairobi is being progressed Transporting Gas by Pipeline or CNG Morogoro and Industrial centres Zanzibar
East Africa power pricing: sets low gas price Gas for power currently sells at $2.50 / mcf ( $15 / bbl) Low power tariff by worldwide standards, expected to rise Business General (Low voltage) Average Selling Price 30 April 2006 Source SAD ELEC 16 14 12 450kWh pm 900kWh pm 2500kWh pm 5000kWh pm c/kwh 10 8 6 4 2 0 Kenya Tanzania Uganda
Standby power costs 4 to 8 times more than grid Comparison of Cost of Power to Tanzanian Consumers Supplied by TANESCO vs. Standby Generations Standby Power - Small User Small portable generator, run on diesel Standby Power- Industrial User Large industrial generator, run on diesel TANESCO Fuel Fixed Costs Grid Power 0 10 20 30 40 50 60 70 c/kwh
Gas at $3.50/mcf: lowest cost thermal generation 18 Cost of Electricity Generation Full Life Cycle Economics including T&P Tariff Benefit HCV Basis Assumed 80% LF 16 c/kwh 14 12 10 8 6 4 Heavy Fuel Oil Coal Gas 2 0 Distillate HFO Int. Coal Local SCGT Coal Oil fired thermal Coal without FGD Coal with FGD Local Coal Coal without FGD Gas LNG Gas Hydro Low efficiency High efficiency High efficiency Gas prices for new generation must compete with coal in East Africa Hydro is lowest cost over project life, but dependent on seasonal / climate effects; and highest capex, with longest lead times, and big environmental impact
Songo Songo: an environment to be preserved
Songo Songo: community programmes The Songo Songo Island fishing communities needed to preserve a traditional way of life, whilst benefiting from the project Programmes have included Water Supply Electric Power Schooling Medical Tanzanians are taking over increasing management of the businesses
Orca Corporate aspirations Continue to build in Tanzania Satisfy our customers with reliable gas supplies Develop sustainable new markets Grow the reserves base Maintain long term relationships with all stakeholders Progress oil exploration in Uganda Albertine Graben Drill exploration wells Pursue growth through third asset Seek new African oil opportunities (West Africa focus)
Acknowledgements Orca acknowledges the dedication and cooperation of our partners: Tanzania Ministry of Energy and Minerals (MEM) Tanzania Petroleum Development Corporation (TPDC) Tanzania Electricity Supply Company (TANESCO) Tanzania Energy, Water and Utilities Regulatory Authority (EWURA) Songas Ltd / Globeleq Ltd Tower Resources plc Uganda Ministry of Energy and Minerals Development Contacts Business development: James Smith, Orca Director of Exploration - jsmith@orcaexploration.com Tanzanian operations: Pierre Raillard, Tanzania General Manager - praillard@orcaexploration.com www.orcaexploration.com