Mr Jeremy Smith: Mozambique LNG project economics competitive with similar

19 November 2014

Sector: Oil & Gas

Expert Speak

Mozambique LNG project economics competitive with similar

new projects, including that in US

FID to take 6 months after approval of Decree Law; expect reserve update in

annual results

We hosted a conference call with the US-based Anadarko Petroleum to get an operational

update and outlook on its JV E&P blocks with BPCL, ONGC and OINL. Key takeaways:



2/3rd volume of the first two LNG trains (10mmt) in Mozambique is fully subscribed.



Production to start in ~4 years from FID, which in turn will be finalized within 6 months of

passage of Decree Law that is currently under negotiation.



Mozambique LNG economics comparable to new LNG projects.

Mr Jeremy Smith,

Director,

Investor Relations,

Anadarko Petroleum

Corporation

Anadarko Petroleum

Corporation (Mkt Cap:

USD48b) is among the

world's largest

independent E&P

company with 2.8bboe of

proven reserves by end-

2013. It is a JV partner

and Operator of the key

E&P blocks in

Mozambique and Brazil

held by BPCL, ONGC and

Oil India.

Mozambique Decree Law negotiations on; production in 4 years post FID

Mozambique's parliament passed an enabling legislation in Aug 2014 empowering

the Mozambique government and E&P operators to negotiate the Decree Law.



The Decree Law is critical to establish legal, governmental and contractual support

for the LNG project. Currently, the Decree Law draft/negotiations are with the Ministry

of Energy, then will go to the council of ministers and finally to the Parliament for

ratification. The language of the Decree Law is expected to be finalized by Dec 2014

and parliament's approval after that.



Early passage of the Law is also Mozambique government's objective, given the huge

economic benefits.



Anadarko expects to achieve FID (Final Investment Decision) within six months from

the Decree Law's approval and expects ~4 years development period, implying the

first gas by 2019.



2/3rd of initial 2 trains subscribed, project competitive to new LNG facilities

While the full scale Mozambique project will be of >50mmt with 10 trains, initial

development will be with two trains of 10mmt.



It has signed non-binding 20-year agreements with Asian buyers for 2/3rd (7mmt) of

the initial train capacity and is targeting to get Japanese buyers on board for the

remaining capacity. Asian buyers find the location convenient and Mozambique gives

them an opportunity to diversify their sourcing.



The LNG pricing discussions are based on liquid equivalent pricing, and in terms of

economics, Anadarko indicated that the production cost will be similar to other

projects in the world, including the US.



Expect further reserve update in 2014 Anadarko annual results

Current work program is focused on covering maximum acreage and establishing a

resource base to delineate the acreage before the exploration period ends in Jan

2015.



Anadarko has established 70+tcf of recoverable gas resources and expects further

reserve update from the appraisal at Orca (and later Tubarao Tigre next year) when

Anadarko announces its 2014 annual results.



Harshad Borawake

(HarshadBorawake@MotilalOswal.com); Tel: +91 22 3982 5432

Investors are advised to refer through disclosures made at the end of the Research Report.

Expert Speak

Development update: Mozambique a priority over Wahoo



Gross exploration spend in Mozambique by Anadarko till date stands at ~USD3b

and development capex is estimated at USD13-16b.

Cost savings will accrue due to (a) high well deliverability of 2.5-5.5mmscmd and

necessitating only 6 wells per train, (b) lower process equipment and operating

costs due to dry gas and low sulphur and liquid content and (c) flexibility to use

some of the existing wells.

JV partners have (a) 70,000 acres of land approved for LNG facilities, (b)

environmental impact assessment, including all public consultations are complete

and approved, (c) are progressing well on engineering and construction planning

for early works like marine facilities, airstrip, construction camps and

infrastructure improvement.

Critical issues include (a) expedition of customs processes to bring in long lead

equipment into the country, (b) bringing in thousands of workers due to lack of

ready local talent and (c) ability to contract in other than Mozambique currency.

On Wahoo (the discovery in Campos basin in Brazil), Anadarko indicated that it is

currently conducting the pre-feed and feed studies to evaluate multiple

development options. However, management's focus is more on the Mozambique

development.

Valuation and view

Key events to watch are (1) approval of an acceptable Decree Law, (2) signing of

gas sales agreement with price decision and (3) FID.



We currently value ONGC and Oil India's stake at purchase price (~USD5b for 20%

stake) and value BPCL's 10% stake in Mozambique at INR211/sh based on 60tcf

(average of indicative reserve range of 50-70 tcf) valued at USD4/boe.



We value BPCL's 12.5% stake in Anadarko operated (only Campos - Wahoo, assumed

gross reserves of 200mmboe) block at INR12/sh.



Exhibit 1: Earnings and valuation summary

19 November 2014

Expert Speak

Exhibit 2: Area 1 (operated by Anadarko) and Area 4 (Operated by ENI) blocks in Rovuma Basin,

established resources ~200tcf of natural gas resources with further upside potential

Source: EIA, ENI, Anadarko, MOSL

Exhibit 3: Mozambique, led by Anadarko and ENI LNG projects, to emerge as a largest LNG

supplier country

Source: Anadarko, MOSL

19 November 2014

Expert Speak

Exhibit 4: Mozambique to emerge as one of the largest proven natural gas reserve holder

*Mozambique reserve size is estimated

Source: BP Statistical Review 2014, MOSL

Exhibit 5: Mozambique is uniquely located with access to all the key customers

Mozam-

bique

Source: Oxford Energy, MOSL

Exhibit 6: Anadarko LNG project to benefit from quality reserve and proximity to Asia

Source: Anadarko, MOSL

19 November 2014

Expert Speak

Mozambique Government press release to authorize government to negotiate

Decree Law (translated version)

Published on Friday, August 15, 2014 13:15

The National Assembly approved on Thursday, 14/08/14, the Project Authorization Act

regard to the Special Legislative Projects Scheme relating to Natural Gas Liquefaction Areas

1 and 4 of the Rovuma Basin. It is a device that will enable the Government to approve a

Decree establishing a special legal regime for contractual projects of the Rovuma Basin,

introducing changes or exemptions and conclude contractual agreements.

This Draft Law aims to facilitate the design, construction, installation, ownership, financing,

operation, maintenance, use of wells, facilities and related equipment, whether on land or

at sea, for the production, including but not limited to units of LNG, multipurpose pier,

wharf unloading of materials, basic construction of the surface equipment, installation

and modifications for maritime operations, including without limitation the optimization

of capacity and their expansions necessary for production, processing, liquefaction, storage,

transportation and delivery of gas natural deposits of oil in Areas 1 and / or 4 of the

Rovuma Basin and the sale of it.

Concessionaires of concession contracts for research and production of Areas 1 and 4;

entities specific subject, directly or indirectly established by the concessionaire (s), according

to point a) for the purposes of any project of the Rovuma Basin; people who enter into

contracts with the dealership (s), in accordance with subparagraph a), or with the specific

purpose entities referred to in point b) for the purposes of any project of the Rovuma Basin;

and subcontractors and any other persons directly involved in any of the Rovuma Basin

Project, are the people who, in accordance with Article 2 of this Draft Law, "the terms and

conditions of the special legal and contractual arrangements apply established by Decree

law, including contractual agreements related to one of the Rovuma Basin Project to be

specified in Decree-Law. "

According to the reasoning of the Council of Ministers, under the grant of exploration and

production of oil (hereinafter "CCPP" contracts, approved by Decree No. 67/2006 and No.

68/2006, both of 26 December, awarded in 2006 for areas located in the Rovuma Basin,

research work that resulted in discovery of large quantities of natural gas in Areas 1 and 4,

which are operators and representatives of utilities, Anadarko Mozambique Area 1 Lda

and Eni SpA Eat Africa were conducted , respectively.

"The volume of natural gas reserves available in discovered deposits is estimated at about

200 trillion cubic feet (200 tef in English acronym). About the discovered reserves are located

in oil deposits that are covered by both areas 1 and 4, designated "Common Oil Deposits",

Facilities / Property / Mamba ", explains the reasoning of the Council of Ministers, adding

that" other deposits are fully understood within each area of the concession contract. "

Also according to that reasoning, "taking into account the size of the investment to be

made, about 50 billion dollars a horizon of 10 years, there is an urgent need for the

development of these projects be approved by a Decree establishing the legal, regulatory,

contractual and fiscal regime to be agreed and set incentives, as well as the necessary

safeguards for investors and financiers in force during the life of the enterprise ".

Source: www.parlamento.mz

19 November 2014

Expert Speak

Exhibit 7: Indian companies (BPCL, OINL and ONGC) have the largest share in Mozambique Area

1 block in Rovuma

Source: Company, MOSL

Exhibit 8: Mozambique Area 1 block in Rovuma basin has reported 13 discoveries (values in metre) ...

Discovery/

Appraisal

Windjammer

Barquentine

Lagosta

Tubarao

Barquentine-2 (Appraisal)

Camarao

Barquentine-3 (Appraisal)

Lagosta-2 (Appraisal)

Lagosta - 3 (Appraisal)

Barquentine-4 (Appraisal)

Golfinho

Atum

Orca

RESERVE UPGRADE

Date

Mar-10

Oct-10

Nov-10

Feb-11

Aug-11

Oct-11

Nov-11

Jan-12

Feb-12

Apr-12

May-12

Jun-12

Apr-13

Mar-14

May-14

Oil/Gas

Gas

Pay

Zone

365

126

168

202

237

176

160

Water

Depth

1,465

1,576

1,539

900

1,650

1,441

1,575

1,467

1,404

1,650

1,027

1,000

1,061

Depth

4,250

5,115

4,221

3,337

2,450

2,409

2,509

2,868

4,180

4,537

3,860

4,996

Comments

No resource number available yet

Recoverable reserves - 3-4 tcf (indicative)

Recoverable reserves - 6 tcf

Recoverable reserves - 10 tcf

Recoverable resource range - 15-30tcf

Recoverable resource range - 17-30+tcf

Prosperiade - 17-30 tcf, Other - 7-20+tcf

Prosperiade - 17-30 tcf, Other - 10-30+tcf

Prosperiade - 17-30 tcf, Golfinho-Atum -15-35+tcf

Upgraded reserves from 30-65+tcf to 45-70+tcf

Upgraded reserves from 45-70+tcf to 50-70+tcf

Source: Company, MOSL

Exhibit 9: …leading to significant recoverable reserve addition (tcf)

Source: Company, MOSL

19 November 2014

Expert Speak

Exhibit 10: Anadarko work program targeting new areas as well as reserve accretion through appraisals

Source: Anadarko, MOSL

19 November 2014

Disclosures

This research report has been prepared by MOSt to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies). This report is for personal information

of the select recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal

Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your general information and should not be reproduced or

redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on

any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this

material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original

capital may occur.

MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a significant

percentage of the companies covered by our Research Department Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that MOSt and/

or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may

participate in the solicitation of such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering,

applying and interpreting market information. Our research professionals are paid in part based on the profitability of MOSt which include earnings from investment banking and other business. MOSt generally prohibits its analysts,

persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt generally prohibits its analysts and

persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market

commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with

the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest . MOSt and its affiliated company(ies),

their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and

earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict

of interests with respect to any recommendation and other related information and opinions.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from,

any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free

and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources

believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service,

and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we would

endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or

its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this

report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability,

fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents.

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this

document. This should, however, not be treated as endorsement of the views expressed in the report.

Disclosure of Interest Statement

Analyst ownership of the stock

Companies where there is interest

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly

related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive

compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which

would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.

For U.K.

This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005

(referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to which this document relates is only available

to investment professionals and will be engaged in only with such persons.

For U.S.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not

a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the

absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document

must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in

only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities

and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International

Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore,

may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a

subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the

Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Anosh Koppikar

Kadambari Balachandran

Email:anosh.Koppikar@motilaloswal.com

Email : kadambari.balachandran@motilaloswal.com

Contact(+65)68189232

Contact: (+65) 68189233 / 65249115

Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931

Motilal Oswal Securities Ltd

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com