Arrow International â Major Growth in Action
Arrow International – Major Growth in Action Shaun Scott – CEO (Australia), Arrow Energy
1
Vision
To repeat the success and scale of the Australian business in multiple countries
Results of Strategy Implementation Strategy Set in Early 2007: 1.
Arrow International - Strategy
Results to Date:
Select Countries with high growth, high supply/demand imbalance and substantial CSG Resources
1.
Active in India, China, Vietnam and Indonesia – all meeting the strategy requirements
2.
Partner with major, established Corporations or Government entities.
2.
GAIL, Tata, PetroChina, Pertamina, Medco and PetroVietnam are partners.
3.
Identify tenements with large areas and large potential resources, close to market
3.
All tenements acquired to date have significant resources and market proximity
4.
Gain as big a footprint as possible to conduct systematic exploration then focusing on best areas for early development
4.
Title to seven tenements to date and up to 10 more under negotiation including mine-degassing “quick-wins” and blocks close to market
5.
Be the operator initially but consider plans to hand over operatorship to local partner post development
5.
Operator in all blocks with title and with that intent for all blocks under negotiation
3
The Global CBM Company – Key Milestones •
2006 –
•
2007 –
•
•
•
Awarded 3 Blocks in India
Signed HOA with PetroChina
2008 –
Signed PSC with PetroVietnam
–
Commence drilling in India and Vietnam
–
June 2008 - Shell acquires 10% of Arrow international and 50% farm-in option to future projects for $US75m
2009 –
Farm-in to Sangatta West PSC in Indonesia
–
Commence drilling at Binchang in China
–
Secure 50% farm-in to Far East Energy Qinnan block plus 11% Corporate equity.
Today –
Rapidly growing asset portfolio
–
A$70m of cash and a further A$38m forthcoming
–
Separate board established with Shell representation & staff of 50 and offices in 5 countries
Approximately 80 TCF of gas resource on current Arrow opportunity set
4
International Business Plan - Production Target of 50 PJ p.a.* Arrow net by 2015 PJ 60 55 50 45 40 35 30 25 20 15 10 5 0
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
* Assumes Shell takes 50% interest in all projects & excludes new countries
5
International Business Plan - Cash Flow Target A$150m p.a.* Arrow net by 2015
US$'m $150 $130 $110 $90 $70 $50 $30 $10 -$10
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
-$30 -$50 -$70 -$90 -$110
* Assumes Shell takes 50% interest in all projects & excludes new countries
6
Arrow Projects in China Estimated CBM Resources:
Gas in Place / PJ’s
Total China
1,300,000
Xinjiang Autonomous Region
400,000
Shanxi & Shaanxi Provinces
480,000
Dajing PSC
5,500
Qinnan PSC
12,500
Binchang Mining Area
2,500
South Junggar Mining Area
500
Total Arrow China Projects
21,000 7
China Gas Supply & Demand •
12000
8000
•
1. Domestic production – will always get priority 2. Offshore production – priority but more expensive and getting costlier as fields get deeper 3. Pipeline imports – strategic, large volume, long term contracts – will also get priority 4. LNG – imported, limited supply, higher prices
6000
4000
Power Generation Industrial & Other Total Supply - Base Case
2010 2015 2020 2025 2030
2008
2006
2004
0
2002
2000
2000
bcf per annum
10000
City Gas High Line Forecast Total Supply - High Line
Even under the High Line Forecast, gas likely to only contribute around 7.5% of total energy supply, cf. ~15% for Japan and Korea currently Gas supply options
•
CBM fits nicely between 3 & 4. Freedom to grow by backing out LNG but can also take share from pipeline imports 8
Gas Pricing in Shanxi and Xinjiang Typical netbacks to a CBM producer in Shanxi
Outlet
Retail price
Retail costs
Compression costs
Compress & Transmission
Netback to wellhead Yuan/cu. m US$/GJ
City gas
2.1
0.2
1.1*
5.2
City gas (coal gas)
1.6
0.2
1.4
6.6
0.2
1
4.7
1.2-1.4
0.2
1.0-1.2
4.7-5.7
2.9
0.2
2.7
12.8
Transport fuel Industry Industry (replace FO)
2.2**
0.8
0.2
* Lower figure assumes competing with natural gas. **Could be double this and still compete with LPG. Sellers are under pricing CNG, perhaps as an incentive to convert.
Typical netbacks to a CBM producer in Xinjiang
Outlet
Retail price
City gas
2.2
Transport fuel
4.8
Industry
1.7-2.2
Retail costs 0.8
Compression costs 0.2
Compress & Transmission
Netback to wellhead Yuan/cu. m US$/GJ
0.2
2.0
9.5
0.2
3.6
17.0
0.2
1.7-2.2
8.0-10.4 9
Dajing PSC with PetroChina Xinjiang Province Project Description: – Block Size 4000 km2; Sub-bituminous coal, thick seams up to 70m; Limited CBM data available; GIP >5TCF. Status: – PSC to be signed in near future Way Forward: – Commence 14 well exploration program in June 2009 Key Issues: – Limited CBM exploration data with exploration risk 10
Qinnan PSC “farm-in” with FEEC Shanxi Province Project Description: – Farm-in and operatorship of FEEC’s Qinnan PSC – Highly Prospective block 2,312km2, Thick seams 57m, high gas content 1018m3/t, depths 400-800m, GIP above 1000m depth = 5TCF;. Status: – Farm in agreement signed March 2009 Way Forward: – Commence 11 well exploration program in June 2009 Key Issues: – Complete exploration and pilot testing to certify 11 reserves
Indonesia –Arrow Target Areas & Resources Estimated CBM Resources:
Gas in Place / PJ’s
Total Indonesia
450,000
Sumatra
240,000
Kalimantan
210,000
Medco South Sumatra PSC Ephindo Sangatta West PSC
4,000 500
Pertamina Tanjung-1 PSC
26,000
Transasia S.Kalimantan area
15,000
Total Arrow Indonesia Projects
45,500 12
Indonesia gas consumption
Demand growth is mainly located in Java although S.Sumatra and E Kalimantan markets are developing
13
Indonesia potential gas supply 5,000 4,500 4,000
bbtud
3,500 3,000 2,500 2,000 1,500 1,000 500 0 2000
2002
2004
2006
2008
Java Contracted/Committed East/Central Java Uncontracted Bontang LNG East Java YTF South Sumatra CBM YTF Tangguh LNG Source: Wood Mackenzie
2010
2012
2014
2016
2018
2020
West Java Uncontracted South Sumatra Uncontracted South Sumatra Conventional YTF West Java YTF Java Sea YTF Abadi LNG
By 2020, Indonesia needs to find ~2,000 bbtud (2 BCFD) of gas to meet its expectations
14
Gas pricing range in Indonesia
15
Sangatta West PSC - Ephindo Project Description: • • •
50/50 operatorship venture with Ephindo, Arrow will effectively be technical operator of PSC Close to Bontang LNG
Status: • •
Farm in signed February 2008 Negotiating JOA with Pertamina
Way Forward •
Planning for first year exploration program on Eastern area of PSC. Drilling in 2009
Key Issues • •
Potential for gas to Bontang LNG Plant Seeking other blocks in area to grow position 16
South Sumatra PSC - Medco Project Description: • 50/50 joint venture with Medco, • Block has good gas prospects • Close to South Sumatra pipeline
Status: • HoA finalized Feb 2008 • Commencing Joint technical study for government
Way Forward • During Joint Study, will concurrently negotiate JOA with Medco • After completion of Joint Study, will begin negotiations with Migas on PSC terms
Key Issues • Some potential overlapping coal concessions in the area, but regulations favour Medco’s oil and gas PSC 17
India – CBM Resources Estimated CBM Resources:
Gas in Place / PJ’s
Total India
300,000
DGH Estimates on CBM III:
Raj Mahal
5500
Mand Raigarth
4200
Tatapani Ramkola
1900
Total Arrow India Projects
11,600
18
Regulatory Framework • CBM Bidding Rounds / Federal Government • Bid on guaranteed (2 Year) initial Phase I work program (eg 8 coreholes + 5 Test wells) with Phase II Indicative Development Program • Bid includes offer of share of production to government as proportion of annual production/ tranches • Royalty 10% • Tax holiday • State Governments issue necessary Licences • Local governments issue certain permits • Land matters 19
India – Resource & Markets •
Resources – – –
•
Extensive coal deposits, primarily high ash, thick seams variable gas contents Huge in-place coal reserves -> multiple TCF of CBM in place
Markets – – – – –
Energy poor country High demand requirement Gas Price US$4-12 Sometimes remote / on-site CNG or Power generation opportunities Rapidly developing pipeline network 20
CBM III Licences - Progress ⃟ RM TR
• RM block
⃟
• 4 wells drilled
MR
• Thick coals, low gas content, permeability in range 10-30 mD
⃟
• TR block • 7 wells drilled to date • Net coal 0-44m, with low to medium gas content • Forest in centre of block Block
Arrow
GAIL
EIG AB
Tata
RM
35
35
15
15
TR
35
35
15
15
MR
40
45
15
0
• MR block • 2 wells drilled to date, 3rd in progress • Very thick coal up to 65m 21
New Business – ONGC MOU & CBM-IV
Arrow Blocks
• MOU signed on 15th Jan ‘09 between Arrow and ONGC for 5 CBM blocks – total acreage 900 km2
CBM IV Blocks ONGC Blocks
• 10 CBM blocks will be open for bidding in CBM Round-IV in June-July, 09
22
Vietnam •
Vietnam has around 7 TCF of proven natural gas reserves as of January 2007 (OGJ, as reported by the EIA)
•
Most gas production is in the south and goes directly to power and industrial use
•
There is no significant gas pipeline infrastructure in the north of Vietnam.
•
CBM may be the solution to meet northern demand
23
Arrow PSC - Block MVHN-01KT
•
Estimated coal resources in the Red River / Hanoi Basin of over 70 Billion tonnes to 900m depth
•
Arrow has CBM rights over an area of 2,601 km2 .
•
15-30m thick Miocene age coal-bearing sequence above the conventional gas target.
•
The post-rift sediments include the coal measures, within the Late Miocene age Tien Hung Formation.
24
Block MVHN-01KT Work Plan Exploration Phase • • •
G & G Data Review Drilling of eight exploration wells – currently drilling #3 Preliminary gas marketing study
Coal sample from a Miocene seam within the PSC
Appraisal Phase • • • •
G & G Study Drilling of ten appraisal wells Reserve Evaluation Feasibility Study
25
Arrow International – Forward Plan • Double the number of tenements with firm title to 12 during 2009 • Certify first reserves 2010 • Commence production 2011 • Build cash flow and production to current Arrow Australian business level by FY2013 • Perform screening study of European opportunities during 2009 • Create the World’s first Global CBM Company 26
Arrow Energy International Major Growth in Action
27
Disclaimer & Important Notice The information in this presentation: is not an offer or recommendation to purchase or subscribe for securities in Arrow Energy Limited or to retain any securities currently being held does not take into account the potential and current individual investment objectives or the financial situation of investors was prepared with due care and attention and is current at the date of the presentation This presentation contains forward looking statements that are subject to risk factors associated with the gas and energy industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a range of variables which could cause actual results or trends to differ materially, including but not limited to: price and currency fluctuations, geotechnical factors, drilling and production results, development progress, operating results, reserve estimates, legislative, fiscal and regulatory developments, economic and financial markets conditions in various countries, approvals and cost estimates. All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated. * The reserves estimates used in this statement and throughout this presentation were compiled by Mr. John Hattner of Netherland, Sewell & Associated, Inc., Dallas, and Mr. Gregory Hueni of MHA Petroleum Consultants, Inc., Colorado, and are consistent with the definitions of proved, probable, and possible hydrocarbon reserves that appear in the Australian Stock Exchange (ASX) Listing Rules. Mr. Hattner and Mr Hueni are qualified in accordance with the requirements of ASX listing rule 5.11 and consent to the use of the reserve figures in the form and context in which they appear in this announcement. 28
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1
Vision
To repeat the success and scale of the Australian business in multiple countries
Results of Strategy Implementation Strategy Set in Early 2007: 1.
Arrow International - Strategy
Results to Date:
Select Countries with high growth, high supply/demand imbalance and substantial CSG Resources
1.
Active in India, China, Vietnam and Indonesia – all meeting the strategy requirements
2.
Partner with major, established Corporations or Government entities.
2.
GAIL, Tata, PetroChina, Pertamina, Medco and PetroVietnam are partners.
3.
Identify tenements with large areas and large potential resources, close to market
3.
All tenements acquired to date have significant resources and market proximity
4.
Gain as big a footprint as possible to conduct systematic exploration then focusing on best areas for early development
4.
Title to seven tenements to date and up to 10 more under negotiation including mine-degassing “quick-wins” and blocks close to market
5.
Be the operator initially but consider plans to hand over operatorship to local partner post development
5.
Operator in all blocks with title and with that intent for all blocks under negotiation
3
The Global CBM Company – Key Milestones •
2006 –
•
2007 –
•
•
•
Awarded 3 Blocks in India
Signed HOA with PetroChina
2008 –
Signed PSC with PetroVietnam
–
Commence drilling in India and Vietnam
–
June 2008 - Shell acquires 10% of Arrow international and 50% farm-in option to future projects for $US75m
2009 –
Farm-in to Sangatta West PSC in Indonesia
–
Commence drilling at Binchang in China
–
Secure 50% farm-in to Far East Energy Qinnan block plus 11% Corporate equity.
Today –
Rapidly growing asset portfolio
–
A$70m of cash and a further A$38m forthcoming
–
Separate board established with Shell representation & staff of 50 and offices in 5 countries
Approximately 80 TCF of gas resource on current Arrow opportunity set
4
International Business Plan - Production Target of 50 PJ p.a.* Arrow net by 2015 PJ 60 55 50 45 40 35 30 25 20 15 10 5 0
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
* Assumes Shell takes 50% interest in all projects & excludes new countries
5
International Business Plan - Cash Flow Target A$150m p.a.* Arrow net by 2015
US$'m $150 $130 $110 $90 $70 $50 $30 $10 -$10
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
-$30 -$50 -$70 -$90 -$110
* Assumes Shell takes 50% interest in all projects & excludes new countries
6
Arrow Projects in China Estimated CBM Resources:
Gas in Place / PJ’s
Total China
1,300,000
Xinjiang Autonomous Region
400,000
Shanxi & Shaanxi Provinces
480,000
Dajing PSC
5,500
Qinnan PSC
12,500
Binchang Mining Area
2,500
South Junggar Mining Area
500
Total Arrow China Projects
21,000 7
China Gas Supply & Demand •
12000
8000
•
1. Domestic production – will always get priority 2. Offshore production – priority but more expensive and getting costlier as fields get deeper 3. Pipeline imports – strategic, large volume, long term contracts – will also get priority 4. LNG – imported, limited supply, higher prices
6000
4000
Power Generation Industrial & Other Total Supply - Base Case
2010 2015 2020 2025 2030
2008
2006
2004
0
2002
2000
2000
bcf per annum
10000
City Gas High Line Forecast Total Supply - High Line
Even under the High Line Forecast, gas likely to only contribute around 7.5% of total energy supply, cf. ~15% for Japan and Korea currently Gas supply options
•
CBM fits nicely between 3 & 4. Freedom to grow by backing out LNG but can also take share from pipeline imports 8
Gas Pricing in Shanxi and Xinjiang Typical netbacks to a CBM producer in Shanxi
Outlet
Retail price
Retail costs
Compression costs
Compress & Transmission
Netback to wellhead Yuan/cu. m US$/GJ
City gas
2.1
0.2
1.1*
5.2
City gas (coal gas)
1.6
0.2
1.4
6.6
0.2
1
4.7
1.2-1.4
0.2
1.0-1.2
4.7-5.7
2.9
0.2
2.7
12.8
Transport fuel Industry Industry (replace FO)
2.2**
0.8
0.2
* Lower figure assumes competing with natural gas. **Could be double this and still compete with LPG. Sellers are under pricing CNG, perhaps as an incentive to convert.
Typical netbacks to a CBM producer in Xinjiang
Outlet
Retail price
City gas
2.2
Transport fuel
4.8
Industry
1.7-2.2
Retail costs 0.8
Compression costs 0.2
Compress & Transmission
Netback to wellhead Yuan/cu. m US$/GJ
0.2
2.0
9.5
0.2
3.6
17.0
0.2
1.7-2.2
8.0-10.4 9
Dajing PSC with PetroChina Xinjiang Province Project Description: – Block Size 4000 km2; Sub-bituminous coal, thick seams up to 70m; Limited CBM data available; GIP >5TCF. Status: – PSC to be signed in near future Way Forward: – Commence 14 well exploration program in June 2009 Key Issues: – Limited CBM exploration data with exploration risk 10
Qinnan PSC “farm-in” with FEEC Shanxi Province Project Description: – Farm-in and operatorship of FEEC’s Qinnan PSC – Highly Prospective block 2,312km2, Thick seams 57m, high gas content 1018m3/t, depths 400-800m, GIP above 1000m depth = 5TCF;. Status: – Farm in agreement signed March 2009 Way Forward: – Commence 11 well exploration program in June 2009 Key Issues: – Complete exploration and pilot testing to certify 11 reserves
Indonesia –Arrow Target Areas & Resources Estimated CBM Resources:
Gas in Place / PJ’s
Total Indonesia
450,000
Sumatra
240,000
Kalimantan
210,000
Medco South Sumatra PSC Ephindo Sangatta West PSC
4,000 500
Pertamina Tanjung-1 PSC
26,000
Transasia S.Kalimantan area
15,000
Total Arrow Indonesia Projects
45,500 12
Indonesia gas consumption
Demand growth is mainly located in Java although S.Sumatra and E Kalimantan markets are developing
13
Indonesia potential gas supply 5,000 4,500 4,000
bbtud
3,500 3,000 2,500 2,000 1,500 1,000 500 0 2000
2002
2004
2006
2008
Java Contracted/Committed East/Central Java Uncontracted Bontang LNG East Java YTF South Sumatra CBM YTF Tangguh LNG Source: Wood Mackenzie
2010
2012
2014
2016
2018
2020
West Java Uncontracted South Sumatra Uncontracted South Sumatra Conventional YTF West Java YTF Java Sea YTF Abadi LNG
By 2020, Indonesia needs to find ~2,000 bbtud (2 BCFD) of gas to meet its expectations
14
Gas pricing range in Indonesia
15
Sangatta West PSC - Ephindo Project Description: • • •
50/50 operatorship venture with Ephindo, Arrow will effectively be technical operator of PSC Close to Bontang LNG
Status: • •
Farm in signed February 2008 Negotiating JOA with Pertamina
Way Forward •
Planning for first year exploration program on Eastern area of PSC. Drilling in 2009
Key Issues • •
Potential for gas to Bontang LNG Plant Seeking other blocks in area to grow position 16
South Sumatra PSC - Medco Project Description: • 50/50 joint venture with Medco, • Block has good gas prospects • Close to South Sumatra pipeline
Status: • HoA finalized Feb 2008 • Commencing Joint technical study for government
Way Forward • During Joint Study, will concurrently negotiate JOA with Medco • After completion of Joint Study, will begin negotiations with Migas on PSC terms
Key Issues • Some potential overlapping coal concessions in the area, but regulations favour Medco’s oil and gas PSC 17
India – CBM Resources Estimated CBM Resources:
Gas in Place / PJ’s
Total India
300,000
DGH Estimates on CBM III:
Raj Mahal
5500
Mand Raigarth
4200
Tatapani Ramkola
1900
Total Arrow India Projects
11,600
18
Regulatory Framework • CBM Bidding Rounds / Federal Government • Bid on guaranteed (2 Year) initial Phase I work program (eg 8 coreholes + 5 Test wells) with Phase II Indicative Development Program • Bid includes offer of share of production to government as proportion of annual production/ tranches • Royalty 10% • Tax holiday • State Governments issue necessary Licences • Local governments issue certain permits • Land matters 19
India – Resource & Markets •
Resources – – –
•
Extensive coal deposits, primarily high ash, thick seams variable gas contents Huge in-place coal reserves -> multiple TCF of CBM in place
Markets – – – – –
Energy poor country High demand requirement Gas Price US$4-12 Sometimes remote / on-site CNG or Power generation opportunities Rapidly developing pipeline network 20
CBM III Licences - Progress ⃟ RM TR
• RM block
⃟
• 4 wells drilled
MR
• Thick coals, low gas content, permeability in range 10-30 mD
⃟
• TR block • 7 wells drilled to date • Net coal 0-44m, with low to medium gas content • Forest in centre of block Block
Arrow
GAIL
EIG AB
Tata
RM
35
35
15
15
TR
35
35
15
15
MR
40
45
15
0
• MR block • 2 wells drilled to date, 3rd in progress • Very thick coal up to 65m 21
New Business – ONGC MOU & CBM-IV
Arrow Blocks
• MOU signed on 15th Jan ‘09 between Arrow and ONGC for 5 CBM blocks – total acreage 900 km2
CBM IV Blocks ONGC Blocks
• 10 CBM blocks will be open for bidding in CBM Round-IV in June-July, 09
22
Vietnam •
Vietnam has around 7 TCF of proven natural gas reserves as of January 2007 (OGJ, as reported by the EIA)
•
Most gas production is in the south and goes directly to power and industrial use
•
There is no significant gas pipeline infrastructure in the north of Vietnam.
•
CBM may be the solution to meet northern demand
23
Arrow PSC - Block MVHN-01KT
•
Estimated coal resources in the Red River / Hanoi Basin of over 70 Billion tonnes to 900m depth
•
Arrow has CBM rights over an area of 2,601 km2 .
•
15-30m thick Miocene age coal-bearing sequence above the conventional gas target.
•
The post-rift sediments include the coal measures, within the Late Miocene age Tien Hung Formation.
24
Block MVHN-01KT Work Plan Exploration Phase • • •
G & G Data Review Drilling of eight exploration wells – currently drilling #3 Preliminary gas marketing study
Coal sample from a Miocene seam within the PSC
Appraisal Phase • • • •
G & G Study Drilling of ten appraisal wells Reserve Evaluation Feasibility Study
25
Arrow International – Forward Plan • Double the number of tenements with firm title to 12 during 2009 • Certify first reserves 2010 • Commence production 2011 • Build cash flow and production to current Arrow Australian business level by FY2013 • Perform screening study of European opportunities during 2009 • Create the World’s first Global CBM Company 26
Arrow Energy International Major Growth in Action
27
Disclaimer & Important Notice The information in this presentation: is not an offer or recommendation to purchase or subscribe for securities in Arrow Energy Limited or to retain any securities currently being held does not take into account the potential and current individual investment objectives or the financial situation of investors was prepared with due care and attention and is current at the date of the presentation This presentation contains forward looking statements that are subject to risk factors associated with the gas and energy industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a range of variables which could cause actual results or trends to differ materially, including but not limited to: price and currency fluctuations, geotechnical factors, drilling and production results, development progress, operating results, reserve estimates, legislative, fiscal and regulatory developments, economic and financial markets conditions in various countries, approvals and cost estimates. All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated. * The reserves estimates used in this statement and throughout this presentation were compiled by Mr. John Hattner of Netherland, Sewell & Associated, Inc., Dallas, and Mr. Gregory Hueni of MHA Petroleum Consultants, Inc., Colorado, and are consistent with the definitions of proved, probable, and possible hydrocarbon reserves that appear in the Australian Stock Exchange (ASX) Listing Rules. Mr. Hattner and Mr Hueni are qualified in accordance with the requirements of ASX listing rule 5.11 and consent to the use of the reserve figures in the form and context in which they appear in this announcement. 28
go further
