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operating in cote d’ivoire UK - Cote d'Ivoire Trade & Investment Forum London 30 October 2013

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  1. operating in cote d’ivoireUK - Cote d'Ivoire Trade & Investment ForumLondon30 October 2013

  2. OVERVIEW OF RIALTO IN COTE D’IVOIRE • Key shareholders include a number of UK and Australian institutions plus the International Finance Corporation (part of the World Bank group) • Entered Cote d’Ivoire via acquisition of majority interest in existing operator in 2010 • More than US$ 150 mln spent to-date on activities including 3D seismic survey and drilling of two new wells (plus one sidetrack) • Around US$ 13 mln spent to 30 June 2013 on “true” local content, eg local staff, contracts, social fees etc • Local operating company Rialto CdI Limited 100% Ivorian - 10 employees / contractors

  3. COTE D’IVOIRE Block CI-202 Overview Proven basin with five discovered, undeveloped oil and gas fields Gazelle (1977) Addax (1977) Impala (1978) Bubale (1981) Hippo (2000) • Proven basin (15 wells drilled all of which have encountered hydrocarbons), but geologically complex • April 2013: Vitol Farm-In for 65% of Rialto Cote d’Ivoire Belier Belier (1974) 20 mmbbls Ibex (1985) ~77 bcf Virgo (2010) Gas Discovery Eland ~100 bcf Kudu (1984) ~200 bcf Gazelle EEA is located within Block CI-202: 25 year production licence granted for Gazelle pursuant to the Block CI-202 * Upon completion, Vitol will hold 65% of Rialto Cote d’Ivoire ** Excluding Gazelle EEA, for which Rialto’s working interest is 74%

  4. OUTLINE PLAN FOR DEVELOPMENT OF GAZELLE • Low cost, minimum facilities: • 3 production wells planned (plus one contingent) targeting around 40 bcf P90 / 85 bcf P50; • Conductor supported offshore facility; • Multiphase pipeline to beach (ca. 8 km); • Minimum processing • Schedule and Costs: • 14 to 18 months from Final Investment Decision to first gas; • Ca. $140 – 150 mln total capex to First Gas • First step in area development plan

  5. Regional DEVELOPMENT Concept Mature Gas Market and Onshore Infrastructure • Cote d’Ivoire has a mature power generation network and exports electricity from gas fired power stations • Major new energy-intensive mining projects planned • Current gas supply deficit and increasing demand predicted Regional Infrastructure Concept • Existing discoveries on Block CI-202, e.g.: • Gazelle • Hippo/Bubale • Stranded discoveries in neighbouring blocks • Additional exploration targets in CI-202 and neighbouring blocks

  6. Significant projected demand for naturAL GAS

  7. SO IS THERE POLITICAL RISK IN COTE D’IVOIRE? • Conventional political risk insurance tends to cover the following matters: • Political violence, such as revolution, insurrection, civil unrest, terrorism or war; • Governmental expropriation or confiscation of assets; • Governmental frustration or repudiation of contracts; • Business Interruption; and • Inconvertibility of foreign currency or the inability to repatriate funds. • Generally in Cote d’Ivoire (and indeed the continent as a whole), whilst there have been examples of civil unrest, occurrences of other forms of political risk which affect the oil industry have been rare • In fact, the UK is far more “politically risky” from an investment standpoint given the periodic revisions to economic terms!!

  8. OUR EXPERIENCES – GOVERNMENT RELATIONS • Constructive engagement with Ministry of Energy (Directorate Hydrocarbons – DGH) and State Oil Company (Petroci) • Relatively high degree of competence given industry history in Cote d’Ivoire • Key aim is to create good relations at all levels: • Local staff key – they are the “front office” for your company on the ground, not your chaperones for when you visit from abroad. Good, motivated Ivorian staff available • Understand the political and governmental environment and constraints in which Govt. department/ state partner works • Engage constructively with other O&G operators • A Company needs to build confidence which is best done by outperforming on commitments

  9. OUR EXPERIENCES – LEGAL, FISCAL AND FINANCIAL • Some ambiguity of interpretation in PSC, e.g. cost oil / gas allocation • Some disagreement regarding approach to negotiating new PSC for CI-202 – shallow water, marginal discoveries as opposed to deepwater exploration. “It’s in the model PSC” not always appropriate justification. • Good availability of local legal and fiscal expertise: • French speaking legal support with relevant experience a must • Recent DGH and Petroci financial audits conducted co-operatively, some disagreement on recoverability of certain costs

  10. OUR EXPERIENCES – ENVIRONMENTAL MANAGEMENT • Communications could be improved with Environmental Regulator (ANDE) • Lack of direct relationship with operators, as all must be via locally approved ESIA companies • Lack of updates or changes to environmental laws communicated directly to operators preparing ESIAs. • Extensive list of local companies (provided by ANDE) with average experience of preparing ESIAs to international standards • Emergency Response: • Local security company and medivacavailable • Lack of Emergency Response equipment (stockpile) available in-country to tackle any major incident if it occurs. Operators must source internationally, which is very costly.

  11. OUR EXPERIENCES - INFRASTRUCTURE • Abidjan airport better than Heathrow • Easy entry into country (3 month visa, also “urgent” Visa On Arrival capability) • Roads, hotels and offices in Abidjan are good standard • Communications: • Internet to international countries not great. Infrastructure within country not established to allow high speed connection (ie. fibre optic). For consistent, stable connection to international office, satellite is the most viable option but very expensive • Service companies, supply bases: • Some availability of international companies, but limited competition • With regards to local companies: • There is a general lack of awareness to approved & certified companies. • Only a limited number have experience of E&P, so they can be more expensive than sourcing a company from abroad

  12. OUR EXPERIENCES – SOCIAL, EQUIPMENT AND TRAINING EXPENDITURE • Each PSC contains “Social, Equipment and Training” expenditure obligations • Ongoing discussions with DGH regarding allocation of funds, particularly social – clear preference of oil companies to fund activities (1) directly rather than pay to Government and (2) in area of operations • To-date, Rialto has constructed two schools in its area of activities, but we could have done and do more – proposed restoration works to local orphanage and provision of medical equipment to local hospital not yet approved, so funds remain unspent.

  13. SUMMARY • Cote d’Ivoire remains under-exploited but future looks bright • The relevant authorities understand the Energy Industry and consequently relations are largely constructive and focused on results • There are and will continue to be daily frustrations, but we at Rialto are excited by the opportunities and are proud to be active operators in the region