Expanding Saudi Arabia’s Industrialization & Energy Services

1. Expanding Saudi Arabia’s Industrialization & Energy Services Dr. Abdulaziz S. Al-Jarbou Chairman, TAQA Saudi Energy Forum 18-20 November 2006

2. Introduction Cluster Phase One Phase Two Phase Three Overview • Introduction • Cluster Development • Phase One: Contribution to Local Content Through Organic Growth • Phase Two: Geographic Expansion • Phase Three: Industrial Complex & Partnership for Marine Services 2

3. Introduction Cluster Phase One Phase Two Phase Three Formative Stages & Ownership • TAQA means “ENERGY” in Arabic • Endorsed by the Ministry of Petroleum & Mineral Resources • Established by Royal Decree in March 2003 • Saudi Closed Joint Stock Company • Paid-up Share Capital: SR 2,000 million ($534M) • 45% owned by the Saudi Government • 55% owned by Saudi Joint Stock companies, private companies and industrial investors • 12 Saudi Joint Stock companies • 19 privately owned industrial investors 3

4. Introduction Cluster Phase One Phase Two Phase Three Vision Our vision is to be a leading manufacturer of high quality products and a provider of best-in-class services to the industrial and energy sectors Mission Our mission is to establish industries and services, create value for our shareholders, develop strategic alliances, transfer technology and create employment opportunities while holding paramount our commitment to quality, safety, social responsibility and environmental preservation 4

5. Introduction Cluster Phase One Phase Two Phase Three Strategic Objectives To support demand drivers in their anticipated mega- projects by providing services and industrial components To localize industry and transfer technologies To attract foreign investment and equity partners To increase local content and add value To create employment opportunities 1 2 3 4 5 5

6. Introduction Cluster Phase One Phase Two Phase Three Engineering Operations Support Training Logistics, R&D Assembly Finishing Regional Product Development Installation Repair Field Delivery Raw Materials Manufacturing Maintenance Diversifying the Local Industrial Base • As a vehicle to add local content, we are developing industrial and services clusters in the energy and energy-related sectors • We will integrate backward and forward across the value chain when it makes economic and strategic sense VALUE CHAIN Industrial Services 6

7. Introduction Cluster Phase One Phase Two Phase Three Diversifying the Local Industrial Base • As a vehicle to add local content, we are developing industrial and services clusters in the energy and energy-related sectors • We will integrate backward and forward across the value chain when it makes economic and strategic sense VALUE CHAIN Engineering Operations Support Training Logistics, R&D Assembly Finishing Regional Product Development Installation Repair Field Delivery Raw Materials Manufacturing Maintenance Industrial Services 6

8. Introduction Cluster Phase One Phase Two Phase Three Diversifying the Local Industrial Base • As a vehicle to add local content, we are developing industrial and services clusters in the energy and energy-related sectors • We will integrate backward and forward across the value chain when it makes economic and strategic sense VALUE CHAIN Engineering Operations Support Training Logistics, R&D Assembly Finishing Regional Product Development Installation Repair Field Services Raw Materials Manufacturing Maintenance Industrial Services 6

9. Introduction Cluster Phase One Phase Two Phase Three Diversifying the Local Industrial Base • As a vehicle to add local content, we are developing industrial and services clusters in the energy and energy-related sectors • We will integrate backward and forward across the value chain when it makes economic and strategic sense VALUE CHAIN Engineering Operations Support Training Logistics, R&D Assembly Finishing Regional Product Development Installation Repair Field Services Raw Materials Manufacturing Maintenance Industrial Services 6

10. Introduction Cluster Phase One Phase Two Phase Three Diversifying the Local Industrial Base • As a vehicle to add local content, we are developing industrial and services clusters in the energy and energy-related sectors • We will integrate backward and forward across the value chain when it makes economic and strategic sense VALUE CHAIN Engineering Operations Support Training Logistics, R&D Assembly Finishing Regional Product Development Installation Repair Field Services Raw Materials Manufacturing Maintenance Industrial Services 6

11. Introduction Cluster Phase One Phase Two Phase Three The Macro Picture: Development of Clusters in Support of Energy Sectors Energy and Energy–Related Sectors SERVICES INDUSTRIALIZATION Business Unit Business Unit Electricity Industrial Automation Exploration Petrochem Seamless Pipes Marine Services Oil & Gas Water Offshore Fabrication Drilling Offshore Facilities Business Unit Mining 7

12. Introduction Cluster Phase One Phase Two Phase Three • Global Market Penetration • Backward and Forward • Integration • MENA Market Expansion • Backward and Forward • Integration Steps for Expanding the Industrial Base Long-Term Short-Term Mid-Term Capture immediate manufacturing and service opportunities locally Continue development of industries and services in 5 sectors Export of finished products on worldwide level • Organic Growth • Building Cluster Foundation 8

13. Introduction Cluster Phase One Phase Two Phase Three Saudi Arabia - Energy Some of the Successful Service-based and industrial-based Clusters World-wide 9

14. Introduction Cluster Phase One Phase Two Phase Three 25 21 Rigs 20 15 8 Rigs 10 5 0 2004 2006 Contribution to Local Content Through Organic Growth Arabian Drilling Company • Established in 1964 • 51% owned by TAQA • 49% owned by Schlumberger of France • In less than 3 years of TAQA’s involvement, total rig count increased from 8 to 21 10

15. Introduction Cluster Phase One Phase Two Phase Three Contribution to Local Content Through Organic Growth Arabian Geophysical & Surveying • Established in 1966 • 51% owned by TAQA, • 49% owned by Compagnie Générale de Géophysique (CGG) of France • Crew number increased from three to four. Currently has three3-D crews and one2-D crew. 11

16. Introduction Cluster Phase One Phase Two Phase Three ARGAS ADC 1991 1814 1654 No. of Employees No. of Employees 657 2002 2006 2002 2006 Saudi Non-Saudi Manpower & Saudization 12

17. Introduction Cluster Phase One Phase Two Phase Three Geographic Expansion in the Middle East CGG ARDISEIS • TAQA expanded its strategic partnership with CGG in the Middle East by acquiring 49% of CGG ARDISEIS, a newly formed CGG subsidiary headquarted in Dubai, where CGG holds 51%. • The activities will cover the Middle East market and will range from Land & Shallow Water Seismic Data Acquisition Services to 3-D seismic imaging. • The activities will be exclusively conducted through ARGAS, TAQA’s subsidiary in Dammam. 13

18. Introduction Cluster Phase One Phase Two Phase Three Expanding the Oil & Gas Cluster: New Seamless Pipe Plant Jubail Energy Services Co. (JESCO) • A new manufacturing complex to produce 400,000 metric tons of seamless pipes per year • Localized industry and transfer of technology to support Saudi Aramco and other Oil & Gas producers in their strategic expansions • Plant will be located in Jubail (1) • Commissioning and start up is expected in 4th Quarter of 2008 • Approximately 500 jobs will be created 14

19. Introduction Cluster Phase One Phase Two Phase Three Newly Formed Subsidiary TAQA - Al Rushaid for Marine Works Co. Ltd. • A newly formed 50 / 50 partnership between TAQA and Al-Rushaid Investment Company • The new venture’s activities include maintenance, operation, repair and assembly of oil & gas related marine equipment and components 15

20. Introduction Cluster Phase One Phase Two Phase Three In Summary • The investment case for Saudi Arabia’s Energy sector is compelling, driven by strong fundamentals and a favorable investment environment • Many opportunities are being considered in the kingdom and are suitable for future strategic partners • With a strong support from major demand drivers, TAQA offers a win-win relationship and an equity position forour partners with an eye on a long term investment horizon • Favorable timing to build a platform for growth in the Middle East’s energy hub 16

21. Introduction Cluster Phase One Phase Two Phase Three Conclusion: The Way Forward • Meeting challenges to invest locally and to increase local content will require: • To accelerate the development of industrial sites • To expand local sources of raw material • To consider incentives to manufacturers and service providers proportionate with increases in their local content in terms of: • Saudization levels • Components manufactured locally 17

22. Thank you