Algeria: The Saharan Promise

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Algeria The Saharan Promise

• US - Algeria Energy Forum, Washington DC
• May 14, 2007

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Agenda

• Trends in North Africa gas projects
• Future success factors
• BPs operations in Algeria

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Trends in North African Gas Projects

• Strong competition for project tenders
• Still few integrated full value chain projects
• Gas export infrastructure promoted by both
  upstream resource holders and gas marketers
• NOCs desire to extend along the entire gas value
  chain
• Infrastructure reaching capacity
• Increasingly challenging fiscal terms
• Rising global demand for gas and LNG

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Rising global demand for gas LNG
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US gas and LNG demand also on the rise

• Rise in US LNG imports will create opportunities
  for North Africa

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BUTfew major gas projects under development
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Alignment along the Gas Value Chain the key to
success
Downstream
Midstream
Upstream
Pipeline
Power
LNG
Production
Liquefaction
Regasification
Industry/Other
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Future Success Factors

• Find cost competitive gas
• Significant yet-to-find resources but
  increasingly difficult to extract
• Advantaged cost structure and access to markets
  are key to a sustainable business
• Reductions in long lead times for big gas
  projects
• Application of worldclass technology

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Application of technology
Onshore gas pipelines - high strength materials,
dense phase flow
Advanced seismic acquisition and data processing
Tight gas expertise
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Future Success Factors

• Competitive gas pricing to the power sector
  relative to coal and nuclear
• Flexible contracts
• Stable fiscal terms
• Sensitive to the environment
• Access and development of skilled workforce
• Ability to manage complex projects

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BP in Algeria Background

• Entered Algeria in 1950s. Exploration, service
  stations and lubricants
• Continued operations after independence
• Exited in late 1960s and sold its assets
• Returned to Algeria in early 1990s
• Signed two major gas deals (In Salah and In
  Amenas) in mid-1990s
• Today, largest foreign investor in Algeria over
  4bn to date
• A team of 250 BP staff and 2,000 contractors
• A long-term partner of Sonatrach

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Operations in Algeria

• Gas Two of the largest JVs
• In Salah
• In Amenas
• Oil Rhourde el Baguel JV
• 3 new exploration blocks
• LNG JV Isle of Grain (UK)
• Lubricants (BP Castrol)
• Solar
• Purchase/trading of crude oil products

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Environmental leadership

• In Salah
• One of the worlds largest Carbon Capture
  Storage projects
• A joint effort between BP, Sonatrach and Statoil
• 1 million te/yr of produced CO2 compressed
  re-injected back into the reservoir
• Impact of this project is equivalent to taking
  250,000 cars off the road every year
• Flagship project to validate CCS feasibility

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Investing in education training

• Vocational training
• Establishing five vocational centers in the
  Sahara to help Algerians develop practical work
  skills
• Enterprise development
• Providing training for young Algerian
  entrepreneurs
• Setting up and managing small businesses, with a
  focus on the environment
• Algerian Petroleum Institute
• Establishing a partnership to provide practical
  work experience and technical workshops conducted
  by BP specialists

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Conclusions

• Opportunities
• Algeria remains rich in undeveloped gas reserves
• The market for Algerias gas LNG is growing
• Algeria has long successful history in oil gas
• Sonatrach a partner of choice
• Challenges
• Undiscovered gas is increasingly difficult to
  extract
• Infrastructure is near saturation
• Rising project costs (a global trend)
• Fiscal environment

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Thank you