Standard Bank Group Limited · JSE:SBK
Standard Bank — Technical Presentation (March 2019)
45 slides from Standard Bank's technical presentation, Mar 19, 2019
Slide 1: Rovuma LNG Macroeconomic Study
Macroeconomic Study Rovuma LNG Standard Bank 19 March 2019
Slide 2: Table of contents
1. Project & Market Introduction 2. Introduction to Macroeconomic Study 3. High Capex & Reinvestment Scenario Table of contents 4. Low Capex & Reinvestment Scenario 5. Study Results and Conclusions 6. Policy Options
Slide 3: Section 1: Project & Market Introduction
Section 1 Project & Market Introduction 3
Slide 4: Standard Bank Economic Study
STANDARD BANK ECONOMIC STUDY Standard Bank has prepared an independent Macroeconomic Study upon Rovuma LNG. We have previously analysed Mozambique LNG (2014) and Afungi GTL & Power (2018) We envisage Rovuma LNG will take a Final Investment Decision (‘’FID’’) in mid-2019 and reach Financial Close in
Slide 5: Project & Project Parties
PROJECT & PROJECT PARTIES Party Licence Interest Role ENI 25% Operator - Offshore Exxon Mobil 25% Operator - Liquifaction & Related Operations CNPC 20% Galp 10% Kogas 10% ENH 10% Value Chain Mamba straddling (12 Tcf) Affiliated Buyers Non-Straddling (5.7 Tcf) and / or Third Parties Domgas (1.4 Tcf),
Slide 6: Offshore Facilities Layout
OFFSHORE FACILITIES LAYOUT Please find adjacent the Offshore Facilities Layout, divided between the Straddling Resources from Mamba (Grey) and the Non- Straddling Resources from 385E (Green) 6
Slide 7: Afungi Site Layout
AFUNGI SITE LAYOUT Please find adjacent Phase 1 of Mozambique LNG and Rovuma LNG. The scale of the Afungi site is apparent 7
Slide 8: Full Field Development
FULL FIELD DEVELOPMENT Please find adjacent an indicative layout of the Afungi Site, arising from a Full Field Development (presented by Area 4). The site includes multiple LNG and industrial facilities As shown above, a Full Field Development can lead to a truly world class Afungi site 8
Slide 9: LNG Demand Comparison
LNG DEMAND COMPARISON Eleven independent LNG demand forecasts outlined from 2020-2040: Forecast LNG Demand (MTPA) CAGR CAGR 1) 2016&2017: Actual International 800 3.8% 3.16% Gas Union – 2018 Edition 2) 2018A: Shell LNG Outlook 2019 518-685 CAGR 607-658 P (Feb’19) 700 CAGR 3.39% 3) BAML: P (July’17)
Slide 10: LNG Is the Bedrock of Future Growth
LNG IS THE BEDROCK OF FUTURE GROWTH Power IPP Domgas SSLNG Trucks D LNG C MTO A Containers Fertiliser Condensate LPG B Marine Bunkering GTL 10
Slide 11: Section 2: Introduction to Macroeconomic Study
Section 2 Introduction to Macroeconomic Study 11
Slide 12: Snapshot of Assumptions
SNAPSHOT OF ASSUMPTIONS On average, equates to Brent of approximately Source: Poten Lenders Base Case Brent price deck deflated by the projected U.S. Inflation rate as projected by the IMF for 2018-2022, USD 66 per barrel (Constant 2018 prices). thereafter (2023-2049) inflation rate of 2.2% is assum
Slide 13: Schematic Potential National Employment (No Reinvestment)
SCHEMATIC POTENTIAL NATIONAL EMPLOYMENT (NO REINVESTMENT) Project/On-Site: 20.5k construction; 1.3k Ops; 2.1k avg Economy-Wide: 93k-104k Supply Chain: 5.3k-3.9k arise from Phase 1 arise from Phase 1 Future Rovuma LNG Phases 2019 2024 (Numbers: High Capex v Low Capex scenario) 2049 2059 Future Phases
Slide 14: External Debt & ENH Funding
EXTERNAL DEBT & ENH FUNDING 1 2 3 Standard Bank assumed that The Project provides a means Standard Bank calculated 64% (High Capex) or 67% to service USD 14.1bn of Project benefits net of the (Low Capex) of the Project’s sovereign external debt. repayment of 54% of the net income is reinvested into
Slide 15: External Debt & ENH Funding
EXTERNAL DEBT & ENH FUNDING 4 5 6 Standard Bank assumes the Once this is done, Standard A future debate will be whether next priority is to repay ENH’s Bank assumes the GOM will GOM should set up a Sovereign borrowing from its partners to prioritise social expenditure Wealth Fund (‘’SWF’’) to fund i
Slide 16: Schematic Potential National Employment (With Reinvestment)
SCHEMATIC POTENTIAL NATIONAL EMPLOYMENT (WITH REINVESTMENT) Economy-Wide: 165k-201k arise from Phase 1 Project/On-Site: 20.5k construction; 1.3k Ops; 2.1k avg Supply Chain: 90k-119k arise from Phase 1 Future Rovuma LNG Phases (Numbers: High Capex v Low Capex scenario) 2019 2024 2049 2059 Future Phas
Slide 17: Section 3: High Capex & Reinvestment Scenario
Section 3 High Capex & Reinvestment Scenario 17
Slide 18: Financial CBA
FINANCIAL CBA Discount Project Area 4 After tax GOM USDm rate pre- Tax (excluding ENH) (including ENH) Net Present Value (NPV) 8% 25,748 1,290 18,395 Benefit Cost Ratio (BCR) 2.20x 1.04x 8.00x Internal Rate of Return (IRR)% 19% 9% 36%
Slide 19: Project Components GDP Impact
PROJECT COMPONENTS GDP IMPACT, USDM Operational cash flows are the initial material contribution with the role of savings (reinvested cash flows) becoming increasingly important over time.
Slide 20: Results of Main Components
RESULTS OF MAIN COMPONENTS, USDM Employment Phases GDP GNP Capital (Numbers) Operational 9,530 24,413 98,284 Construction 116 2,057 2,431 Savings/ Investment Impact 5,743 8,420 156,871 (Reinvestment) * Numbers = annual average real Total 15,388 9,900 34,890 257,586
Slide 21: Combined Macroeconomic Impacts
COMBINED MACROECONOMIC IMPACTS, USDM On-Site Supply Chain Economy Wide Total Impact Impact Impact Impact Impact on Gross Domestic Product (GDP) 6,195 3,363 5,831 15,388 Impact on Gross National Product (GNP) 9,900 Impact on capital formation 24,363 2,107 8,420 34,890 Impact on employment [national j
Slide 22: Nationwide Employment Impact
NATIONWIDE EMPLOYMENT IMPACT (NUMBERS) Employment Impact Level of Skill Percentage share of Various Linkage Impacts 55,802 Direct Skilled employment impact 25% 100,750 Semi-skilled impact Induced impact Indirect 64% impact 101,035 11% Unskilled impact Household Income, USD Million Low income 957 It
Slide 23: Additional Potential Social Infrastructure
ADDITIONAL POTENTIAL SOCIAL INFRASTRUCTURE Additional Additional hospital Additional Additional educators beds serviced doctors low-cost houses 17 671 3 905 851 3 155 Note: The funding of these infrastructures are calculated after 54% of outstanding external debt and ENH funding (to invest in all LN
Slide 24: Rovuma Basin Impact of 1 Year Delay
ROVUMA BASIN IMPACT OF 1 YEAR DELAY Rovuma Mozambique Combined Rovuma LNG Prosperidade Combined Total LNG LNG Phase 1 Phase 2 LNG Phase 2 Combined (extrapolated) Delay (extrapolated) Delay Delay Impact on GDP -422 -358 -779 -464 -394 -857 -1,637 Impact on GNP -239` -202 -441 -262 -223 -485 -926 Dire
Slide 25: Section 4: Low Capex & Reinvestment Scenario
Section 4 Low Capex & Reinvestment Scenario 25
Slide 26: Financial CBA
FINANCIAL CBA USDm Discount Project Area 4 After tax GOM rate pre- Tax (excluding ENH) (including ENH) Net Present Value (NPV) 8% 34,794 5,971 23,973 Benefit Cost Ratio (BCR) 3.10x 1.21x 12.00x Internal Rate of Return (IRR)% 24% 12% 44% 26
Slide 27: Project Components GDP Impact
PROJECT COMPONENTS GDP IMPACT, USDM Operational cash flows are the initial material contribution with the role of savings (reinvested cash flows) becoming increasingly important over time. 27
Slide 28: Results of Main Components
RESULTS OF MAIN COMPONENTS, USDM Employment Phases GDP GNP Capital (Numbers) Operational 10,234 19,913 87,501 Construction 1,195 2,521 34,203 Savings/ Investment Impact 7,120 10,253 201,346 (Reinvestment) * Numbers = annual average real Total 18,549 14,197 32,687 323,050 28
Slide 29: Combined Macroeconomic Impacts
COMBINED MACROECONOMIC IMPACTS, USDM On-Site Supply Chain Economy-Wide Total Impact Impact Impact Impact Impact on GDP 6,970 4,458 7,120 18,549 Impact on GNP 14,197 Impact on capital formation 19,845 2,589 10,253 32,687 Impact on employment [national job opportunities] 2,088 119,615 201,346 323,050
Slide 30: Nationwide Employment Impact
NATIONWIDE EMPLOYMENT IMPACT (NUMBERS) Employment Impact Level of Skill Percentage share of Various Linkage Impacts 70,363 Direct Skilled employment impact 27% 126,662 Semi-skilled impact Induced impact Indirect 62% impact 126,025 11% Unskilled impact Household Income, USD Million Low income 1,179 I
Slide 31: Additional Potential Social Infrastructure
ADDITIONAL POTENTIAL SOCIAL INFRASTRUCTURE Additional Additional hospital Additional Additional educators beds serviced doctors low-cost houses 21 303 4 708 1 026 3 804 Note: The funding of these infrastructures are calculated after 54% of outstanding external debt and ENH funding (to invest in all
Slide 32: Rovuma Basin Impact of 1 Year Delay
ROVUMA BASIN IMPACT OF 1 YEAR DELAY Rovuma Mozambique Combined Rovuma LNG Prosperidade Combined Total LNG LNG Phase 1 Phase 2 LNG Phase 2 Combined (extrapolated) Delay (extrapolated) Delay Delay Impact on GDP -559 -474 -1033 -615 -522 -1136 -2,169 Impact on GNP -342` -290 -632 -376 -319 -696 -2138 D
Slide 33: Section 5: Study Results and Conclusions
Section 5 Study Results and Conclusions 33
Slide 34: Key Messages – High Capex & Reinvestment Scenario
KEY MESSAGES – HIGH CAPEX & REINVESTMENT SCENARIO Key Project benefits include: USD 4bn fiscal contribution GNP increase of 257,586 to GOM p.a. * (average real) USD National employment 10bn p.a. opportunities * (average real) Capital formation USD 35bn GDP increase of * (average real) USD Major incr
Slide 35: Key Messages – Low Capex & Reinvestment Scenario
KEY MESSAGES – LOW CAPEX & REINVESTMENT SCENARIO Key Project benefits include: USD 5bn fiscal contribution GNP increase of 323,050 to GOM p.a. * (average real) USD National employment 14bn p.a. opportunities * (average real) Capital formation USD 33bn GDP increase of * (average real) USD Major incre
Slide 36: GDP Growth Impact
GDP GROWTH IMPACT 4,0% The Project can raise national projected real GDP growth from 4% to 4.8% - 5.4% p.a. We note Mozambique LNG will be executed in parallel and c. 60% of GDP benefits go to non-O&G sectors 36
Slide 37: Macroeconomic Study Comparisons
MACROECONOMIC STUDY COMPARISONS Rovuma LNG (2019) Rovuma LNG (2019) Mozambique LNG USD (unless stated) High Capex Scenario Low Capex Scenario (2014) 67.16 67.16 Oil price (Brent bbl) 98.97 9.81 10.61 Gas price (mcf) 12.30 14 14 Mozambique GDP (bn) 15 15.2 15.2 Capacity (MTPA) 10 2,158 1,769 Capex pe
Slide 38: Key Messages and Benefits
KEY MESSAGES AND BENEFITS The Rovuma LNG study The Project will kick start Northern The only Cabo Delgado parallel assumes a FID in mid-2019 Industrialisation, with the we can think of is Guangdong development of a ‘’Qatari Province, China. LNG/industrial model’’ in Cabo 1978 GDP - USD 11 bn Delgado
Slide 39: Key Opportunities and Challenges
KEY OPPORTUNITIES AND CHALLENGES In 2017, China changed its energy policy to promote coal to gas switching. Standard Bank considers Mozambique can become to China for LNG, as Australia is for minerals and New Zealand food. Multiple mega-trains promptly developed allows the maximum amount of LNG sold
Slide 40: Key Opportunities and Challenges
KEY OPPORTUNITIES AND CHALLENGES Under the Decree Law, the GOM retains all approval rights relating to imports, customs clearances, licences and permits etc. Standard Bank notes a delayed First Gas has a major Standard Bank suggests, until the Project’s First Gas, negative economic impact upon Mozam
Slide 41: Section 6: Policy Options
Section 6 Policy Options 41
Slide 42: Policy Options (1/3)
POLICY OPTIONS (1/3) Facilitate Use LNG revenues Develop economic onshore FIDs ASAP to pay down master plan Underpins Northern Industrialisation external debt Non-O&G sectors crucial (supporting supply/value chain) and Increases macroeconomic (59% - 62% of national benefit) middle-income status flex
Slide 43: Policy Options (2/3)
POLICY OPTIONS (2/3) Solve Domgas Fiscal and structure and Revenue design Management e.g. Fertiliser crucial, if Increase capacity to integrated into wider ensure spending of future agricultural value chain fiscal proceeds on Mozambique Execution beneficial projects SWF? Speed DSF likely more Can LN
Slide 44: Policy Options (3/3)
POLICY OPTIONS (3/3) Local Content Use future trains as a LC escalator Ancillary Cabo Delgado Projects Vision Progress Condensate, SSLNG Develop provincial master plan to and LNG Bunkering reflect, complement and service the LNG developments 44
Slide 45: Thank You
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