off the blocks editor s note Sasol Synfuels International e-newsletter Christopher Kabosha September edition 2009

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1 September edition 2009 Sasol Synfuels International e-newsletter off the blocks editor s note Dear Colleagues, You will recall from our previous quarterly reflections publication that we mentioned the signing ceremony of the Heads of Agreement between the three joint venture partners to UGTL: Sasol, UNG of Uzbekistan and Petronas of Malaysia for the development of a gas-to-liquids facility in Uzbekistan. This issue focuses on Uzbekistan and the advancement that has taken place in SSI towards furthering the opportunity to beneficiate Uzbekistan s gas reserves. SSI s GTL global footprint continues to step-forward first Oryx, then EGTL and now potentially Uzbekistan. It should make us all feel proud of our company! In keeping with our philosophy adopted for our e-newsletter, we put our people first. Martin Waterhouse, the team lead for Sasol in Uzbekistan (no stranger to pursuing GTL opportunities for Sasol), is featured prominently in this issue. Martin responds to our question providing insight into the project direction his impressions on Uzbekistan and a summary on his career. We have also included perspectives from two of our team members, Gugu Mpungose and Elfranco van Loggerenberg, both frequent visitors to the Uzbek capital, Tashkent. Culturally Uzbekistan is a rich tapestry of religion and culture. Revival of the spiritual and cultural heritage In ancient times, the Silk Road (or Silk Routes) was an extensive 4000 mile network of trade routes across the Asian continent connecting East, South, and Western Asia with the Mediterranean world, as well as North and Northeast Africa and Europe. In recent years, the Silk Road is again being used by ships and railways. of Uzbekistan has been one of the most important goals since the independence of Uzbekistan. There are various museums of note to be found in Uzbekistan-Aksaray in Shahrisabz, Kalyan Mosque in Bukhara, Ahmad, the Yassaviy Mausoleum in Turkestan, Bibi Hanim Mosque, Ulugbek s Medrese and the Observatory in Samarqand. So, if you re ever in this neck of the woods be sure to submerge and indulge yourself in this rich citadel of Islamic culture. For those of you who are keen followers of geo-politics, Uzbekistan is a doublelandlocked country. It is centrally located in what was formerly the Union of Soviet Socialist Republics, USSR, now known collectively as the Commonwealth of Independent States, or as others refer to the region Central Asia Neighbours include Kazakhstan, Afghanistan, Kyrgyzstan, Azerbaijan, Turkmenistan and Tajikistan. Enjoy the read and as always we appreciate your comments. By the way, the next issue will be a scorcher! You will not want to miss it. Christopher Kabosha

2 off the blocks page 2 ssi on the move uzbekistan Pat and Lean visited Tashkent to meet the President and senior ministers of the government of Uzbekistan on the occasion of the signing of the Heads of Agreement for the GTL project and the Memorandum of Understanding for upstream cooperation in the oil and gas industry. During a packed schedule, and between meetings, Mr. Majitov the deputy chairman of Uzbekneftegas organised short sightseeing opportunities around Tashkent for Pat and Lean to get an insight into the long history and rich cultural background of Uzbekistan. Signing ceremony of the Heads of Agreement in Tashkent. Pat signing with the minister responsible for the energy sector and the CEO of Petronas. Khast Imam Square with the Barakan Madrassa in the background. Pat and the Mufti talking about the oldest Koran in the world which he had just been admiring. Accompanying them is Mr. Majitov (extreme left). Entrance of the main mosque on Khast Imam Square, Tashkent. The Sasol team admiring the impressive architecture under the guidance of the Mufti. The JV team met in South Africa on 12 August 2009

3 off the blocks page 3 profile: the man at the helm Martin Waterhouse: Uzbekistan Background I joined Sasol seven years ago on the Iran GTL project. I spent a lot of time in Tehran at that time. I graduated in 1976 in Geology and after a year in the Royal Air Force l started working in the oil industry. My 22 year career before Sasol was split between Schlumberger and ARCO, both big international organisations. I met my wife at University, though she didn t like me at the time rowdy Rugby players! We were married in Abu Dhabi and have a son and two daughters, who are working or at university. We went everywhere as a family, living in Kuwait, Dubai, Kuala Lumpur, Abu Dhabi, Oman, Saudi, Norway, USA and the UK. Our middle daughter is the true gypsy, having been in 10 schools by the time she graduated from high school. We have been in Qatar for a year and a half now, and are making plans with the rest of the team to move up to Tashkent. I am probably the worst linguist ever, and Russian looks like Everest to me. So that will have to join the list of hurdles! Q. What is Sasol s project status in Uzbekistan? A. We really got started on the project last summer when we had the first joint meeting with the other two partners, Petronas of Malaysia and Uzbekneftegas, the Uzbek national oil and gas company, in Tashkent. Over the last twelve months we have met many times in Tashkent, Kuala Lumpur and Johannesburg. Since all the parties were interested in proceeding without delay, the group soon got started on the pre-feasibility study which saw joint teams forming to get the work done. All the functional groups in SSI were involved, including people from Sasol Limited for topics such as project finance, and Sasol Petroleum for gas supply. Once the pre-feasibility study had been successful completed in December the partners had to concentrate on a number of commercial issues. The negotiations were completed to a point in April when Pat Davies and Lean Strauss came to Tashkent to sign a Heads of Agreement for the GTL project and a Memorandum of Understanding for upstream cooperation on other projects unrelated to the GTL. After further negotiations the three-way Joint Venture Agreement (JVA) was signed in July by Lean Strauss in Tashkent. This paved the way to start assigning and seconding people into the new joint venture organisation. The top six positions were shared between the three parties, and this executive management team is now formed and is busy organising the project. The individual shareholders are still working in the negotiation team to agree the so-called conditions precedent to allow the JVA to become effective. Q. How long will it take to build a GTL facility in Uzbekistan? A. This is a heavily worked project at the moment! The pre-feasibility phase was the fastest we have ever achieved at SSI and the partners have agreed to try to shrink the schedule as much as possible. We have to stay prudent though and face the commercial reality of getting all the right assurances in-place and following the right governance to ensure we arrive at the Final Investment Decision (FID) (Gate 4 in BD&I), fully equipped to make a confident decision. The fact that we are project financing the venture means that all the needs and assurances for the banks have to be addressed. Q. What conditions are necessary to make the project work? A. The technical aspects of the project are considered to be very do-able with the main challenge being the logistics of transporting our largest equipment, the reactors. Since Uzbekistan is doubly landlocked the transport route is complicated. This is receiving a lot of attention at the moment. The commercial conditions are the subject of ongoing negotiations and very good progress continues to be made. The key aspects of the deal will be enshrined in decrees and agreements with the Uzbek government. Overall though, the key factor that makes this all work is the compelling business need of the country itself. They have a lot of gas with a need for the diesel and kerosene that we will produce. Q. What are the obstacles to the progression of the project? A. The obstacles are more like hurdles! I say that because obstacles you can go around, but we need to face all the hurdles full on. We want a project that will go on for more than 25 years. You don t get that by dodging issues or putting things aside for later. Now is the time when we create the value to Sasol in the project. You can t do much later on to significantly change the economics of the business. I guess the real exception is de-bottlenecking once operations have been running a while, which allows you to get more from the same plant without spending more. Getting back to the hurdles... these are mainly all those commercial assurances that we need to preserve in the documents. The risk evaluation we have done has highlighted the big issues which we are now making plans to overcome. No going round the hurdles, otherwise you are disqualified!

4 off the blocks page 4 profile: the man at the helm: Martin Waterhouse (continued) Q. Would this be the biggest South African investment in Uzbekistan ever? A. This will be the biggest ever project in Uzbekistan and therefore, also the biggest investment by South Africa. This has the full support and encouragement of the Uzbek government which has enabled the project to move quickly through the initial stages. There are other very big projects coming forward in Uzbekistan, like a gas pipeline to China and a joint venture with General Motors. This has been helpful, in that we are all talking to the government about our respective projects wanting the same assurances and arrangements. Q. First impressions of Uzbekistan? A. By definition you can t have more than one first impression! However, every time I travel there I see something that is more impressive or catches my eye or I understand certain aspects better. It all get s over written with every visit. Stretching the grey cells back to the first arrival, I think the first impression was the wide open and clean streets... and thinking I had better learn Russian in a hurry. On leaving for the first time, I thought I had better learn some good toasts for the work dinners, and a few good jokes that translate well into Russian! some personal views on uzbekistan Elfranco van Loggerenberg Elfranco says: Uzbekistan is mainly a cash society, which has its advantages in the financial crisis the world is currently experiencing, but it does have its disadvantages. With the largest denominated note being 1,000 Soums (worth about 70 US cents) and an average meal for a group of four costing about 200,000 Soums, everybody is walking around with piles of cash. Some of our colleague s even resorted to carrying their cash in the complimentary toiletry bags received on the airplane. Quite unexpectedly, Pieter and I had the opportunity to watch the Springboks vs Australia in an Irish Pub in heart of Tashkent, the capital of Uzbekistan. We vowed to put a Springbok jersey up on the wall in this pub. There were mostly English supporters and two South African supporters. The international school in Tashkent has about 400 children, indicating that the expatriate community is very small, mainly consisting of diplomatic staff. There are beautiful big parks with huge green trees and statues of popular figures of the past. During independence day on 1 September the whole of Tashkent was a flurry of activity preparing for the celebrations. All the roads were being repaired, a new government building was being completed and the flags were being hoisted. Until recently it was believed that Tashkent was about years old. That was until new archaeological discoveries were made, which dated back about years. So every shop and building is displaying posters advertising this fact that, for now, Tashkent is years old. The climate in summer is very hot, approximately 40ºC, but it is a dry heat with no humidity. Gugu says: Food. The fruits and veggies are all organic, thus always fresh and very healthy. There are not a lot of large supermarkets like Pick n Pay where you can buy them from. Traffic. The drivers travel at very high speeds and staying in your lane is a recommendation not a rule. Shops are very expensive and have limited variety. Gugu Mpungose The streets and cities are very clean; you do not see any litter around.

5 off the blocks page 5 uzbekistan culture and custom Central Asia offers a rich cultural experience for visitors, with over 140 nationalities and ancient traditions that are still practiced in daily life. People of the region are proud of their longstanding tradition of hospitality, and locals readily forgive any cultural transgression by a visitor. Meeting and greeting Generally Russians devote much time and energy to relationships and friendships. A professional relationship without personal contact is generally alien. Men always shake hands with other men, and even if you are not introduced to everyone, a simple handshake substitutes for a formal introduction. Men also shake hands with women if the woman extends her hand first. Close friends or family members of the same sex often greet each other with more affection, with kissing being the most common greeting. The silent bow is a simple gesture with great meaning in Central Asian culture. Often accompanying a handshake, men place their left hand over their hearts and offer a slight, almost indiscernible bow as a gesture of deep respect. When not shaking hands, the right hand is placed on the chest. You often encounter the silent bow when someone is offering thanks, saying goodbye or showing respect to an elder. upcoming celebrations Hospitality Creating bonds and forging friendships through culinary occasions is still the essence of Central Asian hospitality. Banquets often set the stage for negotiations and business events are often transformed from business only to building lasting friendships. Drinking alcohol is a big part of social life and is even imbibed during business lunches. Drinking vodka is considered favourably but it is acceptable to drink another beverage, alcoholic or otherwise. For toasts you should down the first shot of vodka, when everyone is watching you, and then you may sip from the glass during subsequent toasts. Set your glass down on the table to be refilled do not raise it to meet the bottle. There are over one thousand dishes in Uzbek cuisine prepared with the glorious fruits and vegetables grown under the tender oriental sun. There are even 100 varieties of Uzbek plov, Uzbekistan s national dish, prepared in a different way in every region. Like the culture, Uzbek cuisine cannot be adequately described it has to be experienced. eid ul-fitr! Diwali (or Deepavali) Diwali is popularly known as the festival of lights but spiritually it means the awareness of the inner light. The date of this festival depends on the lunar calendar and this year it is celebrated on 17 October. This five day religious celebration of the victory of good over evil is observed by Hindus throughout the world. In India and Nepal it has become a national festival. Customs for celebrating Diwali vary from place to place and country to country. Firework displays are the hallmark of this special event. Homes are decorated with lamps and candles, new clothes are worn, gifts are exchanged and sweets distributed. Source: Wikipedia Ramadan In the Islamic calendar the ninth month Ramadan is observed as the month of fasting when Muslims seek spiritual cleansing and enlightenment. They ask for forgiveness from past sins and aim through good deeds to link themselves with God. Each day, for 29 or 30 days (depending on the lunar calendar), Muslims refrain from eating, drinking, smoking or indulging in anything excessive or ill-natured from dawn until sunset. Ramadan ends with The Festival of Breaking the Fast Eid ul-fitr. Special foods are prepared, gifts are bought for family and friends and the poor and needy are given assistance. Source: Wikipedia