Slide 1: ASX announcement cover: presentation to Eastern Australasian Basins Symposium
Origin energy To Company Announcements Office Facsimite 1300 300 021 Company Australian Stock Exchange Limited Date 20 September 2004 From Bill Hundy Pages 25 Subject PRESENTATION Please find attached a copy of a presentation entitled “Does Vertical Value in Australian Gas Exploration and Production
Slide 2: Does Vertical Integration Create Value in Australian Gas Exploration and Production
Does Vertical Integration Create Value in Australian Gas Exploration and Production Eastern Australasian Basins: Symposiu 2 couples __ September 2004
Slide 3: Explorers in Australia have overwhelmingly found gas
While the initial focus of petroleum exploration in Australia has been on finding oil, explorers have overwhelmingly found gas...... Estimated recoverable hydrocarbon resources discovered to 1 January 2003* 240,000 40,000 E) Condensate & LPG @ Natural Gas M Crude Oil 180,000 + 420,000 Petajoules equ
Slide 4: Australia's gas inventory discourages further exploration without commercialisation strategies
Australia’s gas inventory discourages further exploration without strategies to commercialise the gas, yet even so more gas continues to be added Proved and Probable Reserves (TCF) 175 150 125 100 75 50 25 Australia’s major gas reserves* Developed Resources - years from discovery to development TTT
Slide 5: Commercialising gas depends on access to markets
Commercialising gas is dependent on access to markets ........ Gas Pipeline Gas Pipetine under development Markets (PJ/a) Approximate remaining 2P gas reserves (PJ} ....but most of Australia’s gas reserves are in remote locations Page 4 Origin. Hobart
Slide 6: Remote resource base increasingly reliant on LNG demand
Commercialising this remote resource base will increasingly rely on demand from LNG markets........ PJ per annum aad i=! ay o 4,000 3,500 3,000 ABARE 2004 Australian forecast natural gas supply and use {including exports} Year ending June 30 MResidential Electricity Generation H Export Related Other
Slide 7: Origin's financial objectives and business strategies since the mid 90s
Against this backdrop, Origin began developing financial objectives and business strategies to respond to changes in the energy industry in the mid 90’s.... « Financial Objective ~ Steady and predictable cashflows - EPS growth of 10-15% pa on average « Business Strategy ~ Positioned in the competiti
Slide 8: Strategy changed the focus of Origin's exploration
The implementation of this strategy in the mid 1990’s changed the focus of Origin’s exploration « Exploration became increasingly gas focussed, with rationalisation of higher risk oil effort * Exploration was targeted where gas would be easy to market, rather than necessarily easy to find « Efforts
Slide 9: Origin went looking for markets and increased retail and generation positions
Concurrently Origin went looking for markets to place the gas and considerably increased its retail and generation positions 2,500 25 2P Reserves (PJe) Retail customers 2,000 | UP 118% EBITDA by Segment (A$, millions) 20. {miltions) 600 1,500 500 + 1s 1,000 400 + 1.0 508 306 5 O85 200 4 Jun Jun Jun
Slide 10: Significant share of domestic markets as producer and aggregator
By pursuing these strategies Origin has been able to secure a significant share of domestic markets as a producer and aggregator Origin Energy Estimated share of eastern Australian Exploration and Production Gas Contracts {by buyer) retail gas market 2001/02 1200 i Contracted to 3rd party MContracte
Slide 11: Base demand growth in eastern Australia largely captured by recontracting
Looking forward, the base demand and modest projected growth in eastern Australia in the coming decade has largely been captured by recontracting......... Estimate of new gas supply agreements signed since January 2001 « Since early 2001 Origin estimates that over 5,500 PJ of gas has been recontract
Slide 12: Greatest domestic growth area for gas is power generation
Potentially the greatest domestic growth area for gas is power generation......... 250 Estimated merit order of thermal plant - eastern Australia + Developers e of new Z 200" capacity % & Capital Costs must be 3 competitive : © Fixed Costs on both & be 21004) wsenc average and 3 short-run E | : marg
Slide 13: Little requirement for base-load plant for some time
Although there is little apparent requirement for base-load plant for some time....... Comparison of LRMC for new generation - . coal vs combined cycle gas turbine « Assuming 90% base load run 48 time, gas prices of around $2.10 per GJ will make gas competitive against brown coal, S46 or $2.20 per G
Slide 14: Integrated players will drive next round of generation investment
It is most likely that integrated players will drive the next round of investment in generation......... $150 Tariffs in the retail electricity — oe Conitrket are relatively stable with $125 #----------------------------- customers billed quarterly and prices reset over periods of $100 |------------
Slide 15: Ladbroke Grove: first example of integration benefits
Ladbroke Grove provided the first real example of integration benefits............ « Ladbroke Grove was discovered in the SA Otway Basin in 1989 with minor gas reserves and a high CO, content * 3D seismic in 1995 identified updip potential - but the high CO, rendered it uneconomic « While the gas ha
Slide 16: Yolla field development required a marketing solution
Development of the Yolla field in Bass Strait required a marketing solution to help maximise liquids yield and keep costs low . Under a base-load, interruptible Yolla was discovered in 1985, with marginal gas volumes (400-500 BCF OGIP) but high liquids content (70-80 bbls/mmscf) Efforts to sign gas
Slide 17: Offshore Otway Basin: positioned early ahead of deregulation
In the offshore Otway Basin, Origin positioned early ahead of market deregulation in Victoria....... * Thylacine & Geographe fields discovered in mid 2001 + $1.1 bn staged development approved in early May 04. Woodside Petroleum Limited will be the operator « 2P gas reserves of over 880 PJ gross plu
Slide 18: Perth Basin: niche gas position and first commercial oil since 1966
in the Perth Basin, Origin sought to extend its niche gas market position but suffered a temporary setback........ : * Origin has been involved in the Perth i Basin since acquiring an interest in, and developing, the Beharra Springs gas field in the early 1990’s * Origin farmed into the adjacent L1
Slide 19: Expanding Queensland supply by diversifying into coal seam gas
Origin also recognised the potential to expand its existing Queensland gas supply by diversifying into coal seam gas ® Kitometres. 190 Page 1 in the late 1990’s coal seam gas was established as a viable energy source in the USA, but in Australia companies were struggling with the technical challenge
Slide 20: Unique issues in development and production of CSG
The development and production of CSG poses some unique issues...... Customer Requirements « Certainty of supply e Reliability of supply Deliverability - MDQ e e Volume - ACQ e Competitive Price Production issues « Customers were uncomfortable with the “unconventional” and “untested” nature of CSG «
Slide 21: Origin has addressed CSG issues for customers
Origin has systematically addressed these issues such that CSG and natural gas are indistinguishable to customers ...... Customer Requirements Origin realities * Certainty of supply * Strong balance sheet, existing cash flow, proven physical & contractual supply e Reliability of supply « Proven reco
Slide 22: New Zealand: entered exploration in the late 1990s
in New Zealand, Origin entered exploration in the late 1 Page 21 990’s in anticipation that gas markets were shortening..... e Origin entered New Zealand in the late 1990’s after studying supply-demand dynamics and determining gas was likely to become short e Early positions in the East Coast Basin
Slide 23: Contact Energy, like Origin, is an integrated energy producer and retailer
Contact Energy, like Origin, is an integrated energy producer and retailer......... Otahuhu & gas turbine 17MW Company Gverview 3*4 largest company on NZ Stock Exchange 100,000+ NZ Shareholders Retail and generation coverage across NZ Otahuhu & combined cycle gas turbine 380MW 27% of generation capa
Slide 24: Integration across the energy industry has provided significant benefits
For Origin, integration across the energy industry has provided significant benefits............ « The key exploration challenge within Australia has been to turn the likely discovery of gas into an opportunity rather than a problem « Astrategy based on access to markets is required to make this a r
Slide 25: meena
meena This presentation:centains:the views and opinions Of Origin Ene analysis, trends and forecasts of energy use and related acti areas external sources of information have been used and a Although all care has been taken in the preparation of this ¢ responsibility for inferences drawn from.this d