Technological and HSE related best practice in the Hungarian HC industry

Managing Director

of Eurasian E&P

MOL E&P Division

Technological and HSE related best practice in the Hungarian HC industry

●

●

… that

came

true.Once there was a VISION…

●

WelcomeBienvenueWillkommen

BenvenutoBienvenida

Witaj

Tervetuloa

Welkom

Üdvözöllek

Chapter I.

Agenda

MOL Group

MOL Group -

so powerful what you can’t imagine…

Financial highlights

-

outstanding growth in the last 5 years

Operationalhighlights

►

Market presence in more than 40 countries

►

More than 75 years upstream operational background

►

Leader in core downstream markets of Hungary, Slovakia and

in Croatia

►

Growing international business and strong ties to Western-Europe, Russia, Africa and the Middle-East

►

State of the art assets serving one of the high growth downstream regions

►

Management with outstanding track record of operational efficiency

MOL Group is a leading European integrated energy company

EBITDA*

by segment

USD mn

-5000

50010001500200025003000

2005 2010

E&P DS G&P C&O

*EBITDA excluding special items.

CAPEX by segment

USD mn

0500

100015002000250030003500

2005 2006 2007 2008 2009 2010E&P DS G&P C&O

Integrated portfolio based on 3 pillars

DOWNSTREAMUPSTREAM GAS & POWER

► 619 MMboe SPE 2P reserves► 144 Mboe/day production► Production in 7, exploration in 12 countries

► Over 70-year experience in CEE► Over 20-year international presence► Well-positioned player in the Middle East► Outstanding exploration drilling success► One of the lowest lifting cost in Europe

E&P R&M Petchem Gas Storage & Power

►

1.9 bcm UGS capacity

Gas Transmission

Crude to plastic integrationUnbundlingGas value chain

Electricity supply

►

5,560 km pipeline in Hungary

EBITDA (2010 %)

Previous pipeline developmentsUGS

Potential development

►

International transit

►

Good geographical position

►

EUR-base return on storage

►

Good geographical position

► CEZ partnership

►

High regulatory risk

►

Currently not a growth driver

►

Monitoring to develop diversified portfolio

RefineryRefineryPetchem unitPetchem unit

►

5 refineries, 470 thbpd►

21.6 Mtpa

sales ►

1,600+ filling stations

►

Top assets with high net cash margin

►

Strong landlocked market position

► 2 petchem plants ►

880 kt ethylene, 1.2Mt polymer cap.

►

The largest integrated olefin and polymer player in CEE

►

Efficiency improvements and synergy through joint optimization of assets

►

Focus on Rijeka refinery upgrade►

Above average growth in sales

EBITDA (2010 %)

EBITDA (2010 %)

►

Field development driven growth in the short term

►

Long term growth based on existing exploration portfolio

Chapter II.

Agenda

MOL Group

MOL Exploration & Production Division

MOL E&P -

upstream means more than this for us…

Highlights of Exploration & Production

Strengths

►

Leading European low cost onshore producer

* ►

One of the lowest lifting cost among European Upstream

players

*►

Outstanding exploration success rate ►

Proven

track record of successful project execution

ranging

geological surveys to large scale

production at major projects

* IHS Herold Database

Net income per unit*

peers avg.

USD/boe

peers avg.

Unit Lifting costs*USD/boe

►

Focus on high return development projects►

Exploration with international focus is targeting reasonable

resource base►

Minimizing natural decline in the CEE region►

Maintaining production level in CIS ►

Key regions: Syria, Hungary, Kurdistan, Croatia and Russia

Goals

Production activities in 7 countries

Croatia, Croatia, HungaryHungary

Reserves: 366.6

MMboe

Production: 85,100

boepd

Hayan

Block

Reserves:

45.7

MMboe Production:

7,900

boepd

CroatiaCroatia

Reserves:

56.8

MMboe

Production:

22,700 boepd

ZMBReserves: 38.5

MMboe

Production: 12,000 boepd BaituganReserves: 61.9

MMboe

Production: 4,600 boepd Matjushkinskiy

Block

Reserves: 29.4

MMboe

Production: 3,000 boepd

Tal Block

Reserves:

11.9 MMboe Production:

4,700

boepd

CEE onshoreCEE onshore SyriaSyria

Other InternationalOther International

CEECEE

offshoreoffshore PakistanPakistan

EgyptEgypt

Ras

Qattara, West Abu Gharadig, North Bahariya, Sidi

Rahman

AngolaAngola

3/05 Block, 3/85 Block,

3/91 Block

Total reserves: 8.0 MMboe

Total production: 3,500 boepd

Note: SPE 2P reserves. Reserves and production of non-consolidated projects are not highlighted.

RussiaRussia

Production breakdown by countries and products, 2010 Reserves breakdown by countries and products, 2010

3%

37%

5%

14%

38%

3%

Hungary CroatiaRussia SyriaPakistan Other

56%

10%

34%

Oil Gas Condensate

1%2%

41%

21%

7%

28%

Hungary CroatiaRussia SyriaPakistan Other

49%

8%

43%

Oil Gas Condensate

Production: 144 MboepdReserves: 619 MMboe

Exploration activities in 12

countries

KazakhstanKazakhstan

PakistanPakistan

RussiaRussia

Federovskoye Block

Tal, Margala

& Margala

North, Karak Blocks

CEE onshore, offshore, CEE onshore, offshore, unconventionalunconventional

Other InternationalOther International

Cameroon, Angola, Cameroon, Angola, Oman, India, SyriaOman, India, Syria

Kurdistan Region of IraqKurdistan Region of Iraq

Akri-Bijeel, Shaikan

Blocks

Hungary, Croatia, Hungary, Croatia, Romania Romania Recoverable resource potential*: 145 MMboe

Matjushkinskiy, Surgut-7, Baitex

BlocksHungary, Croatia, RomaniaHungary, Croatia, Romania

*Working Interest (un-risked)

Estimated recoverable resource potential*

490

725

120

50

65

200

MMboe

USD

mn Exploration CAPEXExploration CAPEX

0

50

100

150

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Hungary International

0

10

20

30

40

50

CEE InternationalTotal drillings Successful drilling

70%

48%

No. of wells

Average: USD 90 mn

Increasing exploration activity with new focus areas Outstanding exploration success rate (2006-2010)

Bajánsenye-Õriszentpéter-D

Tóalmás-D

Nagykáta

GombaNagykörû

Szank-ÉNYSzank-ÉKSzank-DKTázlár

Kiskunhalas-ÉK-É

Öttömös-K

Szank-NyCsólyospálos-KKömpöc-D

Kiskunhalas-DKiskunhalas-ÉK

Jánoshalma-ÚjBorota

Kiskunmajsa-DRuzsa-É

Dány

Demjén

Szeghalom Mezõsas-Ny

MartfûDévaványa

Méhkerék

Földes-K

Hosszúpályi

Kismarja-NyFegyvernek

Kisújszállás-Ny

Endrõd-É

Endrõd

Nagylengyel

Sávoly

Sávoly-D-K

Tótkomlós-D

BattonyaBattonya-K

MezõhegyesMezõhegyes-Ny

Csanádapáca

AlgyõÜllés

Szeged-Móraváros

Szolnok, 2007.június 22.

30 40 50 km0 10 20

A MOL Nyrt. jelentõsebb termelõ mezõi

MOL Nyrt.Kutatás-Termelés Divízió

Átnézeti térkép

Olajtermelõ mezõ

Színkulcs:

Gáztermelõ mezõ

Készült: a DTA-200 2.0 jelzésû digitális térképmû felhasználásával

Olaj- és gáztermelõ mezõ

BudafaMezõcsokonya-Ny

Barcs-Ny

Görgeteg-Babócsa

Ortaháza

Ölbõ CO2

PusztaföldvárKaszaper-NagybánhegyesDél-Békés

Termelési volumen:

Földgáz: 1,5 milliárd m felett, 3 olaj: 500 e tonna felett

Földgáz: 0,5-1,5 milliárd m között, 3 olaj: 100-500 e tonna között

Földgáz: 0,5 milliárd m alatt, 3 olaj: 100 e tonna alatt

The domestic ‘playground’

Gas fieldOil fieldOil and gas

field

AlgyAlgyőő

fieldfield

As a dominant area, in 2009 Algyő

provided 40% of total domestic oil and gas production

Palaeogene area Hosszúpályi-South gas field

Since the exploration in 1999, Palaeogene area oil and gas-condensate fields have been playing a significant role and in 2009 provided 19% of domestic oil

Several newly discovered fields with remarkable potential, providing 10% of domestic gas production in 2009

MOL

Zala ege rszeg

Pusztae derics

Csurgó

Kom árom

Budapest

Városföld

Szank

Zsa na

Adony

Algyő

Kardoskút

Tiszaújvá ros

Hajd úszobo szló

Fényeslitke

Gyõr

Compr essor sta tion

Pump sta ti on

Refine ry

H ydrocarbon field

U nder ground Gas Stor

Gas line

Crude oil l ine

Maros1

Main production areas

Distribution of operating technologies

Exploration licencesin Hungary

Chapter III.

Agenda

MOL Group

MOL Exploration & Production Division

MOL Group SD Strategy and HSE MS

The lesson was learned…

75 blowouts in Hungary since 1937 (last one in 2000)

Continuous organic growth with a focus on sustainability

►

SD Strategy is integrated part of the Group Strategy►

In 2006-2010 there were 7 SD initiatives defined►

In 2011 there was an update process:–

6 new SD focus areas were defined at Group-level with 20 related topics–

More harmonised with organisational responsibilities–

E&P, R&M, Petchem and Retail has prepared business division level objectives and targets

MOL Group Sustainable Development Strategy

„Achieve and maintain an internationally acknowledged leader position (top 20%) in sustainability performance.”

MOL Score 2007 (%) MOL Score 2008 (%) MOL Score 2009 (%)Total Score 65 68 75

Economic 73 68 79Environmental 64 68 73Social 56 69 72

►

Track the performance of the global sustainability leaders (top 10% of the 2,500 largest companies in the DJ Global Indexes are selected as components of

DJSI World)►

MOL participates in the assessment since 2006

Dow Jones Sustainability Index

Climate Change

Health &Safety

Communities

Human Capital

Economic Sustainability

Ethics and ComplianceCorporate Governance and Management TransparencyRisk Management

Customers

Economic Sustainability

Environment

WaterWasteEmissionsBiodiversity

Environment

Health & SafetyPeople Health and SafetyOperational integrity

CommunitiesCommunity RelationshipsSocial InvestmentsHuman Rights

Climate ChangeFuture product portfolioEnergy efficiencyRenewable energy

Human CapitalTalent Attraction and RetentionHuman Capital DevelopmentLabour Practices

6 elements are the base of the sustainability

●

Reducing risk, protecting people and promoting efficiency

We are committed tocontributing to Sustainable Development by protecting Health, Safety and the Environment and the social impact of our activities as an integrated part of

day-to-day business. achieving a generative HSE culture to prevent incidents of every

type and reducing our environmental footprint whilst maximising positive impact on society in general.

MOL Group HSE and Social Impact Policy

Goals and implemented actions

HEALTH•

Execute Workplace Health Promotion Program

SAFETY•

MOL Group HSE Management System •

Contractor Safety Program •

Incident Investigation System (IRIS)•

COMPASS (Comprehensive Risk Assessment)•

Implementing defensive driving culture

ENVIRONMENT•

Decrease amount of known environmental provision-based liabilities •

Development of standardised waste management practice •

Achieve integrated water management (with focusing on protection

of freshwater resources)•

Optimize greenhouse gas emissions and support the increase of renewable energy utilisation

HSE Management System -

having all regulations in one system

1.

HSE Leadership and Accountability

2.

HSE Risk and Change Management

3.

HSE Training and Competences

4.

HSE Planning and Targets

5.

Contractor and Supplier HSE

6.

HSE Design and Construction

7.

Safe Operation

8.

Health Prevention and Promotion

9.

Environmental Stewardship

10.

HSE Legal Requirements and Documentation

11.

Product Stewardship

12.

HSE Communication and Consultation

13.

HSE Incident Reporting and Investigation

14.

Emergency Preparedness and Response

15.

HSE Operation Assessment and Improvement

Chapter IV.

Agenda

MOL Group

MOL Exploration & Production Division

E&P SD Strategy and HSE

MOL Group SD Strategy and HSE MS

We believe that there’s a total different way of approach…

Upstream is not a „green”

industry

but we have opportunity to minimise our footprint

Climate Change

Decrease electric consumption used for lighting by 25%- modernization of electric systemsDecrease CO2 emissions by 20%- carry on energy racionlisation projects - Füzesgyarmat - 2011- Hajdúszoboszló - 2011- Szank - 2012- Algyő - 2013

●

Environment

Decreasing fresh water intake by 20%- changing steam boilers to water ones- Algyő 2011, Szank 2012Minimizing fluids disposal- on site treating of tank cleaning fluidsDecreasing air emissionsTaking care of wildlife close to ouractivities- working out biodiversity studies

Health & Safety

Improving HSE culture goals- management HSE awareness trainings- comprehensive HSE trainings for - employeesManaging all HSE risks (including stress)Fully implement Process Safety Management (PSM)Require maximum HSE standards from contractors

Communities

Enhance the Community Engagement Program for providing a friendly environment for smooth operation of the company in the areaEstablish stakeholder engagement policy at our operationsIn case of new operations, identify local social demands, initiate actions

Human Capital

Utilizing Human Resources Providing equal ranking of employees Continuous feedback from employeesAssessing professional competencies, providing tailor made trainings - PetroSkillsApplying local staff

Economic Sustainability

Economic Sustainability

Improving reserve life index and reserve replacement rateFull implementation of HSE Management System on Upstream level

Upstream HSE –

local initiatives and best practises

Main activities

HSE forums within all Hungarian productionInvestigating all incidents and near misses, improving near miss reportingRegular HSE inspections with unified checklistsUnifying HSE audits in Hungary, managing Behaviour Audits (focusing on human aspects)Successful IMS audit without non-conformance

Participating in associations (OMBKE, SPE, OGP - 2009)

Environment protection Provision Based Environmental Liabilities - recovering pollutions from the past

RBER - Risk based approach to manage the pollution (assess, measure, intervene, monitor)ENRAC - Energy Rationalization (6 fields)

Operated HSE reporting systems

•

Integrated HSE Information System (HSE INFO)•

Integrated HSE weekly reporting•

Integrated HSE incident reporting and investigation

Utilizing primary and secondary energy sources

Projects

Project description

Future prospect

Overview / Concept

Low calorific

gas

Utilize MOL’s existing resources

for power generation purposes

Increased domestic gas production

lower power import dependency

Small size

gas resources

with high inert content (low calorific value)

Pilot project in progress

Geothermal energy CEGE Co.

Use MOL’s upstream experience

in exploring geothermal opportunities for power generation

CEGE

to be the first and leading player on the (power generation) CEE geothermal market

Significant thermal water potential

ExplorationStatus

Biogas

Power and heat generation

by burning biogas in gas engines

Increase green electricity

portfolio

Biogas production by utilizing the by-

products of bio fuel production

Feasibility

Energy efficiency

Energy efficiency improvements of current production processes

Reduce

the energy costs

of MOL Group

Further developments in energy efficiency is an iterative

process

Audit ongoing

Waste heat recovery

Utilizing the waste heat of productive processes

Identify heat points to install power generation units

External electricity need of MOL Group could be reduced

Pilot project in progress

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Thank you for your attention!