Firm

1. © 2019 Chevron Nigeria
The Future of the
Upstream Oil and
Gas Industry in
Nigeria and the
required Policy
Imperatives to
Increase Investment
• Lagos Business School (LBS) Breakfast End of year Dinner
• Oriental Hotel, Lekki Lagos, Nigeria
• December 4, 2019
• Jeff Ewing
• Chairman/Managing Director,
• Chevron Nigeria Ltd
The Future of the Upstream
Oil and Gas Industry in
Nigeria and the required
Policy Imperatives to
Increase Investment
Lagos Business School (LBS) Breakfast End of year Dinner
Oriental Hotel, Lekki Lagos, Nigeria
December 4, 2019
Jeff Ewing
Chairman/Managing Director,
Chevron Nigeria Ltd
The future of the upstream oil and gas industry in
Nigeria and the required policy imperatives to increase
investment
Lagos Business School (LBS) Breakfast end of year dinner
December 4, 2019
Jeff Ewing
Chairman/Managing Director,
Chevron Nigeria Ltd

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© 2019 Chevron Nigeria
Country
2014 Year-End Proven
Oil Reserves Billion
barrels
Country
Production
rank
Nigeria’s has the resources to compete in the global market
world’s 11th largest oil reserves and 9th largest gasreserves
48
48
98
Venezuela 298
Canada
Iran
Iraq
Saudi Arabia
Russia
Kuwait
UAE
US
Libya
267
173
158
150
103
102
11
2
4
7
8
3
9
6
1
29
Nigeria 37 12
▪ Much of
Nigeria’s
discovered gas
can only be
delivered to
market with
higher prices
and better
infrastructure
▪ Experts believe
there is much
more to find1 -
but incentive
for finding gas
is limited
▪ Nigeria has
enough
discovered
gas to support
both domestic
and export
supply
5
5
6
6
8
10
17
25
33
Nigeria
Algeria
UAE
Venezuela
US
Saudi Arabia
Turkmenistan
Qatar
Russia
Iran
2014 Year-End Proven Production
Gas Reserves Tcm rank
34 4
2
3
11
1
8
14
27
22
9
SOURCE: BP Statistical Review of World Energy 2015
1 NNPC (2014) estimates Nigeria's total discovered and yet-to-find reserves amount to ~600 tcf

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© 2019 Chevron Nigeria
oil & gas industry contributions to Nigeria
600,000
direct and indirect jobs for the
Nigerian economy generated
by the Oil & Gas industry
(2007-2018)
3.0
Mn boe/d
of Nigerian Oil & Gas
production in 2019
$425bn1
total amount contributed to the
Nigeran Government from
Oil & Gas revenues
(2007-2018)
CSR Initiatives:
▪ >50,000 scholarships
▪ Hundreds of km of roads
▪ Schools and hospitals
▪ Skills acquisition / Entrepreneurship
▪ Technical capacity building
▪ Etc.
… and various
SOURCE: OPTS analysis, Rystad

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© 2019 Chevron Nigeria
challenges that could limit Nigeria’s ability to attract new
investment and successfully take advantage of its reserves
Key Challenges
▪ Petroleum industry in Nigeria faces several challenges such as
– security/ community risks
– ineffective/inefficient regulations
– lengthy contract approval cycles, and
– increased macro-economic risks (inflation, currency)
▪ Furthermore, industry faces significant legislative uncertainty as well
as bureaucracy and over-regulation by multiple agencies
Challenging
business
environment
Description
1
▪ In addition to petroleum profits tax, company income tax, and royalties,
industry pays a plethora of other taxes, fees and levies; leading to
substantial additional financial burden
– These include but are not limited to: the Education Tax, NDDC
Levy, NCDF levy, NPA charges/dues/levies
Worsening
fiscal
environment
2

5. © 2019 Chevron
FGN receives ~91% of total JV proceeds after cost
SOURCE: OPTS IOC business plan data; Press search
FGN receives ~91% of
total JV proceeds after cost
JV proceeds at oil price of $50/Bbl and gas price of $2/MMBTU
1 Includes royalties, taxes and NNPC profit oil; NOTE: Individuals components may not match totals due to rounding effects
2 Includes VAT and duties
3 Assuming JV split of 40% IOCs and 60% NNPC; excluding VAT and duties
$7.2
$4.0
$8.3
Taxes2
$16.9
NNPC
profit
Royalties
$2.9
$3.2
$4.0
$4.8
$5.9
NNPC share
of JV Opex3
NNPC share
of JV Capex3
IOC share
of JV Opex3
IOC share of
JV Capex3
IOC profit
$2.9/boe
Total FGN revenue
~$29/bbl1
Royalties, levies, taxes & funds
Royalties
▪ Royalty based on shore type / water depth:
▪ Oil 18.5 – 20%
▪ Gas 5-7%
▪ Oil 85% and Gas 30% PPT on assessable
profit
▪ Gas related cost can be deducted from Oil
taxable income (AGFA)
▪ As investment incentive 5-15% of tangible
capex can be used as a tax deductible
(depends on shore type)
▪ 2% Education tax
▪ Additional levies and fees include:
▪ 3% of cost NDDC
▪ 1% of contracted cost NC Levy
Taxes
JV split
▪ As shareholder NNPC (55% in SPDC, 60% in
all other JVs) is obligated to fund its share of
investment and operational costs and receive
its share of liftings
All royalties, levies and taxes are interrelated and have a cumulative influence on the
total profit of IOCs and Federal Government of Nigeria
 Employee Cost
 Contract Labor
 Logistics Cost
 Materials & Supplies
 Others
Capital Projects:
 D&C
 FE & MCP
 Others

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© 2019 Chevron
post-PSC amendment:
fiscal structure allows government receive 75-80% of net revenues through
royalties, taxes and profit oil
SOURCE: Industry modeling NOTE: Individuals components may not match totals due to rounding effects
1 Cash flows under current terms for all existing projects (equal bases); undiscounted cash flows; 2020-
end of life
2 Costs include both capital and operating expenses, which is not part of either FGN take or Industry profit
3 VAT & Duties are deducted from costs and included in Taxes
Royalty Oil
▪ 10% flat for water depth >200m
▪ Price based royalties of 0-10% depending on
the oil price
Cost Oil
▪ Allocated to the contractor
▪ Allows for recovery of costs of exploration and
development of the field
Tax Oil
▪ 50% PPT on assessable profit - as investment
incentive 50% of tangible capex can be used as
a tax credit (part of disputed items)
▪ Additional levies and fees include: 2 %
Education tax, 3% of cost NDDC,1% of
contracted cost NC Levy
Profit Oil
▪ NNPC entitlement share increases with
cumulative production of asset; ranging from
20% to 60%, remainder is for IOCs
Fiscal structure of a PSC
PSC proceeds at USD 50/bbl
FGN receives 75-80% of total PSC proceeds
All royalties, levies and taxes are interrelated and have a cumulative influence on the total profit of IOCs and FGN
$ 15.0
$12.6
IOC
Profit oil
NNPC
Profit oil
Tax oil
Cost oil
Royalty oil
12.5%
$ 7.6 $ 8.4
$6.2

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© 2019 Chevron Nigeria
1.2
6.6
0.8
2.2
28.2
4.3
24.2
5.2
0.3
73.0
Nigeria has received only 3% ($2bn) of the $73bn major project
investments in Africa from 2015-2019
SOURCE: Wood Mackenzie Global Economic Model, Press Search
African major O&G projects FID-ed in 2015 or later
Country
Egypt
Ghana
Mozambique
Algeria
Angola
Senegal /
Mauritania
Nigeria
Total capex of these
projects USD bn
Equatorial
Guinea
Chad
Total fields
4
2
2
3
1
1
2
1
1
Deepwater
fields
4
2
0
0
1
0
0
0
0
Other fields
0
0
2
3
0
1
2
1
1
TOTAL
AFRICA
17 7 10
Gas Oil Oil/gas
Factors driving
low investment in
Nigeria:
1) Overall high
cost structure
2) High
government
take
3) Low rank in
ease of doing
business

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© 2019 Chevron Nigeria
17
900
500
700
19 20 23
200
21
18
300
22
2015
600
24
400
2025
16
0
100
800
-27%
PSC Amendment Bill is likely to result in at least 27% less production by
2023 due to drop in competitiveness
8
PSC Liquid production – IOC 2019 Business Plans, kbbl/d
Production viable under Current Fiscal Terms
New PSC Bill (3rd Reading)
Production without any further FIDs
SOURCE: IOC business plans 2019
The new PSC
Amendment
translates to:
- 27% oil
production
decline by 2023
- Loss of ~USD
55.5bn of
investment
compared to
Nigeria’s full
potential
- Total lost potential
FGN revenue of
10.4 bn by 2030
Oil price of $50/bbl
The legislative uncertainty around PIB
could potentially stall any new
projects/production which appear
economically viable under the PSC
Amendment bill
8

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© 2019 Chevron Nigeria
policy imperatives to increase investment in Nigeria
We believe that a holistic industry reform bill can increase competitiveness,
unlock new production and benefit both government and industry
A well-thought out holistic industry reform bill could “grow the pie” by:
Government has indicated that an industry reform discussion and bill
could begin in early 2020
▪ Timely conclusion of ongoing industry reform to guarantee
legislative clarity and certainty
▪ Agree on a set of fiscal terms that return revenue to FGN but
also safeguard Nigeria’s investment competitiveness and
attractiveness
▪ Enabling a conducive business environment, through:
– Ensuring safety of lives, security of assets and facilities
– Improving the efficiency and effectiveness of institutions
responsible for contract approval process

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© 2019 Chevron Nigeria

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© 2019 Chevron Nigeria
Uncompetitive fiscal & business environment have pushed Nigeria’s onshore
production cost to the last quartile among the top 20 producers
11
SOURCE: Wood Mackenzie GEM; Mckinsey Analysis
35
45
15
50
40
30
0
5
10
20
25
36
39
Uzbekistan
Libya
China
Iran
UAE
Venezuela
US
30 30 30 31
32 32
33
34
20
43
Nigeria
20
22
12
16
28 29
Iraq
48
Kuwait
Russia
Saudi
Arabia
Egypt
Turkmenistan
Indonesia
23
O&G Cost curve (capex + opex + government take)1 for top 20 conventional onshore producers2
USD/boe, 2017 real terms
Govt take/boe Capex/boe
Opex/boe
2030 O&G production
MMboe
1 Includes technical cost (capex, opex, and government take; 2030 cash cost for existing fields and full life cycle cost for greenfield project developments
2 production ranking on the basis of 2017 production rate
Argentina
Kazakhstan
Algeria
Canada
Oman