2009 CEO Statement

Chief Executive Officer’s StatementBusiness Review

08 Gasol plc Annual Report and Accounts 2009

StrategyLNG industry

I am pleased to report that during the year Gasolprogressed in the development of the Group’slong-term growth opportunities. Our unique anddistinctive strategy has enabled us to secure ourfirst access to gas (announced after year end), todevelop an innovative, cost efficient midstreamtechnology concept and to establish strategicalliances and joint ventures with major players inthe gas chain and national gas companies.

Themacro environment:Despite a sharp downturn in the global economy,natural gas will remain one of the world’s mostimportant commodities, central to long-termenergy needs. For a growing number of countries,the importance of gas within the broader energymix is magnified further by security concerns andclimate change. Even though we may see adecline in energy needs in the short-term, there isclear evidence that the demand for energy willcontinue to grow in the long-run, particularlydriven by developing markets.Whilst the globalLNG market remains relatively immature,accounting for the delivery of around 7% of gasvolumes worldwide, it is expected to expandrapidly once the current flattening due to theprevalent economic conditions has passed.

Overview:Shareholders will by now be familiar with ourcore strategy: a focus on monetising strandedgas assets in the Gulf of Guinea, either byaggregation, liquefaction and shipment of LNGto high-value markets worldwide, or by domesticcommercialisation projects to supply methanol,fertiliser or power plants. It is a strategy thatGasol is particularly well-placed to deliver: wecombine a deep understanding and experienceof the global gas market and the operatingenvironment in Africa, and we have developedstrong relationships with partners along thevalue chain, technology providers, and nationalgas companies and host Governments.We intendto deliver small scale gas projects, which can bequicker and cost effective. Alignment with hostnations and communities is also a key priority. Insummary, our strategy is designed to delivervalue to our shareholders over the long-term byunlocking the strategic value of stranded gas.

2008-09 has been a central and strategic year forGasol.We have made progress on the fourcornerstones of our strategy:

• Access to low cost gas: successfully negotiated(signed and announced post year end) our firstright to gas in Equatorial Guinea and madeimportant progress in negotiations to procuregas in South East Nigeria

• Continued development of a cost-effectivetechnology concept: we have conducted initialsuccessful feasibility studies on the Near ShoreProduction Solution (NSPS) which can bedeployed in our projects to monetise strandedgas assets in Gulf of Guinea

• Creating partnership along the gas valuechain: we have strengthened and expandedour relationships with upstream, technologyand downstream companies

• Strengthening our Board and Managementteam: several key members have joined ourBoard and our management team

• Raise sufficient funding to meet our shortand longer term project and corporateexpense requirements

• Acquire gas assets in the Gulf of Guinea

• Start of the Front End Engineering Design andConceptual Engineering in our projects inNigeria and Equatorial Guinea

• Sign binding project development agreementswith partners

• Explore domestic gas monetisation projectswith shorter lead times

• June 2008: Reverse Takeover of African LNG

• September 2008:MOU signed with Electricity deFrance (EDF) to jointly develop LNG project

• February 2009: Initial successful feasibility studyon bespoke midstream liquefaction solution –Near Shore Production System (NSPS™)

• March 2009: Strengthening of exclusive alliancewith Afren plc

• April 2009:Gasol in direct joint venture withSONAGAS in Equatorial Guinea

• May 2009:Access to gas in Equatorial Guinea

• May 2009:£10million equity line of credit in place

• Well-defined strategy to monetise value instranded gas

• Progress in portfolio of opportunities

• Strengthened Board andManagement Team

• Progress in negotiations to procure gasin Nigeria

• Development of strategic alliances withplayers in the gas chain

• £7 million raised fromMarch 2008 to August2009: £5 million during the period and afurther £2 million post year end

2008-2009 highlights 2009-2010 key objectives

Our unique and distinctive strategy hasenabled us to secure our first access to gas,to develop an innovative, cost efficient technologysolution and to work closely with major upstream anddownstream partners as well as national gas companies.


Niche gas assets Technology

Access to gas:Whilst for a long time, gas was seen as a hurdle inthe process of extracting oil, gas is now extremelyvaluable. In West Africa, most of the gas has beenregarded as“stranded”as the fields are either toosmall or isolated to justify development on astand-alone basis or the fields are owned bysmaller local companies which lack technicaland/or financial resources to developmonetisation projects independently. By workingdirectly with upstream partners with access tothese proven gas resources such as Afren andSONAGAS, Gasol is well positioned to secureaccess to enough gas to develop a competitiveand quick to market LNG project.Variouscommercial structures are under consideration -Gasol can either directly acquire gas with one ofits upstream partners or enter into gas purchaseagreements while its upstream partner owns/farms into the gas asset.The gas fielddevelopment is planned to be undertaken byupstream partners or gas asset owners, withGasol negotiating access to gas at a competitiveprice at the well-head. Gasol’s strategic objectiveis to minimize exposure to exploration risk.

Rapid gasmonetisation solution:Gasol has been contemplating severalmonetisation solutions for its various projectopportunities: in particular smaller scaleliquefaction technologies that would make theaggregation of stranded and marginal gas fieldseconomically viable. Gasol has continued todevelop the concept of a barge based modularNear-Shore LNG Production System (NSPS) withtechnical advice from Mustang (a leading USbased engineering company).The NSPS utilisesexisting technologies in storage, liquefactionand transfer systems and achieves a highlycompetitive cost per tonne. By virtue of itssimplicity it can be delivered and madeoperational in a relatively short time framecompared to conventional liquefactiontechnologies: Gasol expects that the commissionand construction phase will be 3-4 years afterconclusion of the front end engineering designstudy. Deploying the NSPS provides potential fora high degree of local content using localmanpower, suppliers and service providers.Delivering local content is often a high prioritywith host nations in Africa. NSPS has the addedadvantage of being scalable from 1 milliontonnes to 6 million tonnes per annum, with theprovision for an integrated gas to power solution.The simple topside and storage design of theNSPS is ideal for the benign sea conditions ofWest Africa.

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Corporate Governance

Financial Statements

Gasol is also exploring technologies (other thanLNG) to be applied for monetising stranded gas,considered too small or remote for LNGaggregation play.

The next step is to agree with our partners thetechnology deployment in our projects andproceed to the pre-front end engineering anddesign stage. Gasol’s objective is to adoptwhichever technology works best for eachproject, whether it be NSPS or floating LNG orother alternate solutions.

Being a project developer,Gasol providesmonetisationsolutions to gas assets ownersby developing projects whichprovide a route to domesticand export markets.

Chief Executive Officer’s StatementBusiness Review


TEAMGasol’s board andmanagement team are key insuccessfully executing Gasol’s business strategy.The company has brought together a teamwithsubstantial experience in the gas sector,particularlyin LNG in Africa.

StrongmanagementPartners

Strategic alliances:As a project developer, Gasol plays a crucialrole in the gas value chain: we are focusing ondeveloping projects to connect competitivelypriced gas from upstream owners to endcustomers served by downstream companiessuch as utilities, regasification terminals, tradingcompanies... or directly to local industry such aspower, methanol and fertilizer.

On the upstream, Gasol has identified severalopportunities to work in partnerships with gasasset owners. Gasol has a strategic alliance withAfren plc (the leading Africa-focused independentoil and gas company) to pool complementary skillsto develop gas assets for monetisation in Africa. Asthe exclusive mid-downstream partner of Afren,Gasol has the right of first refusal to gas supplyfrom Afren’s portfolio. In addition, Gasol has signeda joint venture agreement with SONAGAS todevelop gas monetisation projects in EquatorialGuinea after the year end. Gasol is also exploringfurther strategic tie-ups with upstream entities inareas outside the scope of its current alliances.

On the mid – downstream side, Gasol has enteredinto a cooperation agreement with Electricite deFrance to pursue opportunities in the Gulf ofGuinea. Gasol is also in negotiations with severalother strategic partners and LNG off-takers todevelop additional opportunities in the portfolio.

Experienced and focused:Gasol’s board and management teams are keyin making Gasol’s business strategy a success.The company has brought together a team withsubstantial experience of the gas sector and inparticular in LNG.There were a number ofchanges to the Board and the management teamthrough 2008. Following his appointment asPetroleum Minister of Nigeria, Dr Lukman steppeddown as strategic advisor to Gasol in December2008. Charles Osezua stepped down in June 2009to take over as the Chairman of the steeringcommittee of the Equatorial Guinea project.Rachel English resigned late 2008 to pursue otherprofessional opportunities.They leave with ourthanks and best wishes for the future. Pursuant tothe reverse takeover of African LNG in June 2008,Theo Oerlemans joined as the Non – executiveChairman and Bert Cooper as strategic advisor tothe Board.We are also pleased to welcome JeanVermeire who joined as a special advisor inDecember 2008. Mr Vermeire is currently theNon-Executive Chairman of Distrigas, a leadingBelgium-based natural gas company; previouslyJean worked in senior management assignmentsover 17 years with Chevron.

During the year under review,the managementteam has been reinforced by senior,talented andexperienced people,mostly from leading energycompanies and consultancies.


We are actively developingkey relationships andalliances with companiesalong the value chain inorder to progress ourbusiness developmentactivities.

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Project opportunities

Our portfolio:Gasol is currently working on projectopportunities in four countries (Nigeria,Equatorial Guinea, Ghana and, Ivory Coast). Ofthese, SENCO (South East Nigeria Project) andEquatorial Guinea projects are relativelyadvanced (though still early stage), with Ghanaand Ivory Coast being in the earlier opportunityscreening stage. Other gas monetisationopportunities in Cameroon, Gabon and CongoBrazzaville are under consideration.

SENCO is developing an integrated LNG anddomestic gas supply project with the objective ofmonetising gas from identified core gas fields inSouth East Nigeria. Currently negotiations areongoing with the multiple gas asset owners; onceprocured and developed by upstream partners,gas produced from these fields is planned to beaggregated and processed, before distribution toboth a near shore liquefaction facility (for LNGexport) and large-scale domestic gas consumers.The core gas fields have 2P reserves totalingapproximately 2.5Tcf, with potential to tie- innearby fields to increase gas supply to 3.5 tcf.As per current project plans, the base caseliquefaction project is likely to have a capacityof 2 million tons of LNG per annum, with acompetitive project cost and timeline due to theapplication of small scale- near shore liquefactionfacilities. Gasol’s share in this project is undernegotiation with equity partners to develop thisproject; negotiations are also ongoing withupstream partners and potential LNG off-takers.The project is expected to meet the variouscriteria set out in the Gas Master Plan announcedby the Nigerian Government, includingobligations to allocate part of the supply todomestic industry. One of the key objectives forGasol and our partners is to secure the necessaryfinancing to continue progress with this projectuntil the final investment decision.

11 Gasol plc Annual Report and Accounts 2009 Business Review



In April 2009, African Gas DevelopmentCorporation (Afgas) assigned its 50% share inSONAF, a joint venture with SONAGAS G.E., toGasol.The company is now a direct equity holderin the joint venture, which has been establishedto develop gas commercialization projects andassociated infrastructure in Equatorial Guinea,primarily to combat and monetise flared gaswith particular emphasis on Block B in the ZafiroDevelopment Area (“ZDA”). SONAF aims tocapture and commercialise gas currently beingflared in the ZDA. In June, the companyannounced rights to first associated gas fromZDA, estimated at 500- 750 bcf as per WoodMackenzie. Currently a study is being conductedto establish an accurate estimate of the gasreserves.Various project options are underevaluation, including stripping out liquids fromthe wet gas to generate additional revenuestreams. In the coming months, the joint venturewill be focusing on negotiations with gassuppliers, off-takers, infrastructure providersand technology partners with the objective toachieve an economically viable project, whichshould generate revenue from LiquifiedPetroleum Gas (LPG), LNG and Natural GasLiquid (NGL).

Chief Executive Officer’s StatementFinancial Review


Investing for the future

In order to advance our portfolio of opportunitiesover the last 13 months, we have committedfunds mainly to business development activities.Cash expenditures from operating activitiesamounted to £4.4 million (£0.5 million in 2008).The increase represents additional investments intechnology and project development,progressing the joint venture with SONAGASand, SENCO. Also, Gasol’s team has grown withimportant additions in the business developmentteam. During the year, there has also beenexpenditure on completing the reverse takeoverand integration of African LNG. Gasol willcontinue to carefully manage its costs andcash expenditure.

Financial results

The financial statements for this year reflecttwo major elements. First of all, Gasol changedits reporting year end from 28th February to31st March 2009.The financial statements aretherefore prepared for the 13 months to 31 March2009. Secondly, the financial statements reflectthe“Reverse Acquisition”accounting rulesfollowing the exercise of the 80% option toacquire African LNG in June 2008.Taking intoconsideration these elements, the Grouprecorded a loss for the 13 months to 31st March2009 of £5.05 million (2008: £0.43 million loss)or a loss per share of 0.67 p (2008: 0.09p loss).The Group had cash balances of £0.8 million(2008: £0.1 million) and no debt at 31 March 2009.Since 31 March 2009, Gasol has raised additional£2 million equity in May and August 2009.

Due to slower than anticipated progress in adifficult external environment and uncertaintiesin valuation given the early stage ofdevelopment of African LNG, Afgas Nigeria andAfgas Infrastructure Limited, provisions havebeen made against the carrying value of Gasol’sinvestment in these companies, amounting to£32.2 million for African LNG and £0.4 million forAfgas Nigeria and Afgas Infrastructure Limited.These charges affect the company accounts ofGasol only and do not impact the consolidatedresult and position of the Group.

At the heart of Gasol’sbusiness is our ability toattract partners of thehighest calibre, whetherthey be indigenouspartners, national energycompanies or majorutilities.

Whilst the economic environment and the energy/LNGsector have been challenging over the last year and theshort-term gas economics are relatively weak, the longerterm gas fundamentals are robust andGasol expects toshow further progress in the coming year.


Financing Outlook and Challenges

During February 2008 to March 2009, we haveraised £5 million equity (£4 million in May 2008and £1 million in February 2009). Since March2009, we have also raised £2 million equity fromour major shareholders: African Gas Corporationand Afren plc.The continued support from ourmajor shareholders reflects their confidence inGasol’s progress. In June 2009, we put in place a£10 million equity line of credit with GEM GlobalYield Fund.The ability to draw on the £10 millionfacility is dependent upon certain conditionsoutside of the control of the Group, includingshare price and share trading volumes. It is notviewed as likely that the full £10 million could bedrawn in one tranche given historical share pricesand volumes. Given these conditions, the Grouprequires and is continuing to seek further sourcesof funding for its short term and longer termneeds. Further details of this are set out in note 1to the financial statements. For Gasol to realise itsstrategy, significant amounts of funds will beneeded to progress our projects to finalinvestment decision stage and beyond; gasprojects, and LNG in particular, are capitalintensive; while banks would normally finance alarge portion of the investment costs post finalinvestment decision, the challenge for Gasol is tofund our share of equity in the early stages of theprojects, which include costs for acquisition of

gas, development of technology, feasibilitystudies and front end engineering design.The company is considering different financingstructures and sources, including funding fromstrategic and financial investors.The longer termsuccess of Gasol will - to a large extent - dependon our ability to mobilise the required fundingfor our projects and our corporate developmentexpenditure. Gasol is currently in the process ofraising additional funding to meet its short-termworking capital requirements.Through 2009 and2010, we expect to report how we progress infund raising activities.

Whilst the economic environment and theenergy/LNG sector has been challenging over thelast year and the short-term gas economics arerelatively weak, the longer term fundamentalswill continue to support the development ofstrategic gas and LNG projects. Under thesecircumstances, Gasol is making steady but slowerthan anticipated progress: negotiating access togas, developing a blue print of a small scale, quickto market gas monetisation solution andprogressing alliances with downstream/upstreampartners.We hope to accelerate progress in thecoming year, however much will depend on thesuccess of our fund raising efforts, both for theprojects and for corporate business developmentactivities – and the way we manage the earlystage risks normally associated with gas projects.

We have a focused strategy and a strong team -these should stand us in good stead to face thesechallenges and to deliver long term value to ourshareholders.

Soumo BoseChief Executive Officer

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VALUEWe have a focused strategy and a strong team -these would stand us in good stead to face currentchallenges and to deliver long term value toour shareholders.