Oil and Gas Value Creation and Retention in AfricaOil and Gas Value Creation and Retention in AfricaPeter NtephePeter Ntephe

Chief Executive Officer, ERHC Energy IncChief Executive Officer, ERHC Energy Inc

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Cautionary StatementCautionary Statement

Statements during this presentation may concern ERHC Energy Inc.’s future operating milestones, future drilling operations, the planned exploration and appraisal program, future prospects, future investment opportunities and financing plans, future shareholders’ meetings, response to U.S. governmental authority and related proceedings, as well as other matters that are not historical facts or information. Such statements are inherently subject to a variety of risks, assumptions and uncertainties that could cause actual results to differ materially from those anticipated, projected, expressed or implied. A discussion of the risk factors that could impact these areas and the Company’s overall business and financial performance can be found in the Company’s reports and other filings with the Securities and Exchange Commission. These factors include, among others, those relating to the Company’s ability to exploit its commercial interests in the JDZ and the exclusive territorial waters of São Tomé and Príncipe, general economic and business conditions, changes in foreign and domestic oil and gas exploration and production activity, competition, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations and various other matters, many of which are beyond the Company’s control. Given these concerns, investors and analysts should not place undue reliance on these statements. Each of the above statements speaks only as of the date of hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any of the above statements is based.

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Theme of ConferenceTheme of Conference

• Natural Resources Development: Value Creation and Retention

• How do we retain the value created by the development of Africa’s natural resources? To develop [Africa’s] resources in a sustainable manner, countries need sound pro-development domestic policies. Good regulation is not the only precondition. It is also necessary to build beneficial relationships with the various stakeholders in the natural resource extraction process– http://www.unctad.org/

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Old Model: RevenuesOld Model: Revenues

• Oil and Gas Exploration and Production (E&P) : Epitome of Extractive Industries

• Old model in Africa: Extraction by foreign companies; share of revenue to African governments

• Limited local value creation/sustainability

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New Model: Local New Model: Local ContentContent

• Emerging Model in Africa: Local Content

• Local content laws in many countries (Angola, Equatorial Guinea, Gabon, Nigeria, etc):– Use of Indigenous Manpower– Use of Locally-sourced Material– Reliance on local business

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The ConstraintsThe Constraints

• Two Constraints for African Participation– Technical Expertise– Financial Capacity

• Finance is arguably the paramount constraint

• E&P is highly capital intensive

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Capital Intensive PursuitCapital Intensive Pursuit

• E&P activities are:‘...characterised by a high level of risk, a long time span before a return on investment is received, a lack of correlation between ... expenditures and the value of any resulting reserves’ – Wright and Gallun (2008:2)

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The IllustrationThe Illustration

• Nigerian Marginal Field Program– 23 marginal fields awarded in 2003– Less than a quarter taken into production

• Major complaint has been finance– Limited domestic sources– Limited access to international capital

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Accessing Accessing International CapitalInternational Capital

• Credibility challenge for African E&P players• International standards required

– Accepted corporate structures– Corporate governance and accounting– Reporting and disclosure

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New Thrust of Local New Thrust of Local Content?Content?

• Ownership of foreign companies – Through concerted action on international equity markets

• Market-based investment in foreign parents• No expropriation of local subsidiaries of foreign parents

– Complementary to other two thrusts

• Avoids ‘re-inventing the wheel’

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Case StudyCase Study

www.erhc.com

Possible precedent for African E&P players

A model not the [only] model

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Introducing ERHCIntroducing ERHC

• Incorporated in Colorado and based in Texas, USA• Publicly traded on the U.S. Over the Counter

Bulletin Board (OTCBB) – ERHE.OB• Market cap: $150 million - $500 million• Valuable oil and gas assets in the Gulf of Guinea

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ERHC in the Gulf of ERHC in the Gulf of GuineaGuinea

• Working interests in six of the nine blocks of the Joint Development Zone

• 100% of two blocks and other rights in the Sao Tome & Principe Exclusive Economic Zone

• Exploring other opportunities in the Gulf of Guinea

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Uniqueness of ERHCUniqueness of ERHC

• Market-based acquisition of control of American parent by African interests

• Reverses usual trend of ‘foreign’ investment• Equally sensitive to both Western and African policies• Subject to international corporate governance standards• Structure and governance recognized by international

capital

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ERHC Result: JDZ ERHC Result: JDZ Exploration ProgressExploration Progress

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JDZ

• Five-well drilling campaign completed in January 2010

• Over $300m expended• Interesting drilling results• Analysis of information

gathered continuing

Replicating the Replicating the ERHC ModelERHC Model

• Policy to encourage Africans to invest in foreign equity

• Sovereign Wealth Funds• Raise awareness and re-direct

elitist consumption• Critical mass of small

contributors

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ConclusionConclusion

• Value Creation and Retention: Need to move beyond mere revenue stake

• Sustainability: Local participation in extractive activity

• Challenge: Technical and financial capacity• ERHC Model: A possible solution

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