oro nero corporation- lardistan repaired)

8/9/2019 Oro Nero Corporation- Lardistan Repaired)

1/30

Oro Nero Corporation 2009 Page 0

BID PROPOSAL FOR THE CONSTRUCTION OF

THE SOUTH-CENTRAL PIPELINE LINKING THE

GAS FIELDS OF LARDISTAN TO ROTLANDA.

SUBMITTED BY

ORONERO PIPELINES (OroNero)

A subsidiary of Oro Nero Corporation

U2005/3070211-220

APRIL 2009


2/30


Contents

COMPANY PROFILE ................................ ................................ ................................ ............................ 3

BIDDER - ORO NERO CORPORATION ................................ ................................ ................................ .. 3

EXPERIENCE ................................ ................................ ................................ ................................ ... 4

BALANCE SHEET ................................ ................................ ................ Error! Bookmark not defined.

TECHNICAL DESCRIPTION. ................................ ................................ ................................ .............. 5

PHYSICAL CHARACTERISTICS ................................ ................................ ................................ .......... 5

EFFICIENCY LEVEL ................................ ................................ ................................ .......................... 6

ROUTE DESCRIPTION AND LOCATION................................ ................................ ............................. 6

TECHNOLOGY ................................ ................................ ................................ ................................ 7

CONSTRUCTION PLAN ................................ ................................ ................................ ........................ 9

SCHEDULE ................................ ................................ ................................ ................................ .... 10

MILESTONES ................................ ................................ ................................ ................................ 11

BACKGROUND AND REFERENCES FOR SUBCONTRACTORS ................ Error! Bookmark not defined.

CONTRACT SUMMARIES FOR SUBCONTRACTED ACTIVITIES................................ ......................... 12

ENVIRONMENTAL IMPACT ASSESSMENT................................ ................................ ...................... 12

OPERATIONS, MAINTENANCE AND QUALITY ASSURANCE PROCEDURE................................ ............ 14

ECONOMIC ANALYSIS ................................ ................................ ................................ ...................... 16

ESTIMATED COSTS ................................ ................................ ................................ ....................... 17

CONSTRUCTION ................................ ................................ ............ Error! Bookmark not defined.

GAS SUPPLY AND DEMAND ................................ ................................ ................................ ...... 18

FINANCE ................................ ................................ ................................ ................................ .. 18

OPERATIONS ................................ ................................ ................. Error! Bookmark not defined.

ESTIMATED REVENUES ................................ ................................ ................................ ................. 18

RATES ................................ ................................ ................................ ................................ .......... 18

SUMMARIES OF PRO FORMA CONTRACTS WITH SUPPLIERS, SERVICE PROVIDERS AND CUSTOMERS

................................ ................................ ................................ ................................ .................... 19

NO:1 ................................ ................................ ................................ ................................ ................ 19

GAS TRANSPORTATION CONTRACT ................................ ................................ ................................ .. 19

BETWEEN ................................ ................................ ................................ ................................ ........ 19

LARDISTAN GAS COMPANY ................................ ................................ ................................ .............. 19

AND ................................ ................................ ................................ ................................ ................. 19

ORO NERO PIPELINES LIMITED ................................ ................................ ................................ ......... 19

DATED: 10TH FEBRUARY, 2008. ................................ ................................ ................................ ....... 19

ARTICLE 1 SCOPE OF CONTRACT................................ ................................ ................................ .... 20

ARTICLE 2 RATE SCHEDULES AND GENERAL TERMS AND CONDITIONS ................................ .......... 20


3/30


ARTICLE 3 TERM ................................ ................................ ................................ ............................ 20

ARTICLE 4 CORRESPONDENCES ................................ ................................ ................................ ..... 21

ARTICLE 5 BANKRUPTCY OF LARDISTAN GAS COMPANY ................................ ................................ 21

ARTICLE 6 LAW OF CONTRACT ................................ ................................ ................................ ...... 21

SUPPLY ARRANGEMENTS ................................ ................................ ................................ ................. 22

GAS SUPPLY SOURCES ................................ ................................ ................................ .................. 22

UPSTREAM TRANSPORTATION AND STORAGE ARRANGEMENTS................................ .................. 22

BACKGROUND DESCRIPTION, REFERENCES AND CREDIT RATINGS ON ALL POTENTIAL SUPPLIERS/

SERVICE PROVIDERS ................................ ................................ ................................ ..................... 23

FINANCIAL ARRANGEMENTS ................................ ................................ ................................ ............ 24

SUMMARY OF COMMITMENT LETTERS ................................ ............. Error! Bookmark not defined.

PROOF OF FINANCIERS CREDIT-WORTHINESS ................................ .. Error! Bookmark not defined.

CORPORATE AUTHORIZATIONS ................................ ......................... Error! Bookmark not defined.

RISK MANAGEMENT ................................ ................................ ................................ ........................ 24

CONSTRUCTION RISK ................................ ................................ ................................ ................... 24

PRICE RISK ................................ ................................ ................................ ................................ ... 24

OPERATIONS RISK ................................ ................................ ................................ ........................ 24

POLITICAL RISK................................ ................................ ................................ ............................. 24

REGULATORY RISK ................................ ................................ ................................ ....................... 25

LEGAL RISK ................................ ................................ ................................ ................................ ... 25

ENVIRONMENTAL RISK................................ ................................ ................................ ................. 26

LEGAL & REGULATORY ................................ ................................ ................................ ..................... 26

APPLICABLE LAWS AND REGULATIONS ................................ ................................ ......................... 26

PERMITS REQUIRED WITH ESTIMATED TIMELINE ................................ ................................ ......... 26

SUMMARY OF COMPLIANCE PLANS ................................ ................................ ............................. 27

SUMMARY OF CONTRACTUAL AGREEMENTS ................................ ................................ ............... 27

SMART DEVELOPMENT ................................ ................................ ................................ .................... 27

PROJECTIONS OF ANTICIPATED ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACT................... 28

LOCAL CONTENT & HUMAN RESOURCE DEVELOPMENT ................................ ........................... 28

HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION ................................ ............................. 28

ANALYSIS OF PROJECTS ANTICIPATED CONTRIBUTION ................................ ................................ 29

PROGRESS REPORTING SCHEDULE ................................ ................................ ............................... 29


4/30


BIDDER - ORO NERO CORPORATION

COMPANYPROFILE

Oro Nero Pipelines is a subsidiary of the popular Integrated Energy Conglomerate, Oro Nero

Corporation (Oro Nero). Oro Nero Pipelines was incorporated 15 years ago under the laws and

statutes ofA

ngoria to enable it focus on its core business which is getting Oil and Natural gas fromthe producers to the end users.

Figure 1 Structure for Oro Nero Corporation

The Parent company holds 75% of the stock in Oro Nero Pipelines and Oro Nero Corporation

is also listed in various stock exchanges worldwide including the New York Stock Exchange (NYSE)

under the symbol, ORO. The remaining 25% equity is publicly held. Oro Nero Pipelines is listed

under the symbol, ORP.

Oro Nero Pipelines has consistently given positive Returns on Investments to shareholders

for the past 12 years, with earnings showing a cumulative average year on year growth of 21.3%

over the period.

Oro Nero Pipelines formerly existed as Angorian Pipe Co., a moribund state enterprise which

was sold during the privatization program of theAngorian Government in 1993. Oro Nerocorporation successfully bid for and purchased 75% equity in the company and completely

revamped it, turning it into what it is today.

The Board of Oro Nero comprises ten members; four (4) of whom (inclusive of the Chairman

of the Board) are Non-Executive Directors, while six (6) are Executive Directors. The Directors are

listed in the Directors report. The Companys Board is made up of a crop of seasoned professionals

who have excelled in their various professions including oil and gas and law andpossess the

requisite integrity, skills and experience to bring independent judgment to bear on Board

deliberations.

In line with best practice, the Company in June 2008 appointed Mr. VictorAlete and Mr.

Rapt Ejike as Independent Directors based on theAngorian criteria on the appointment of

independent Directors and the core values enshrined in the Companys Code of CorporateGovernance. Both Directors do not have any significant shareholding interest or any specialbusiness

relationship with the Company.

The Executive Directors of the company along with their Ranks are as follows:

1 Mr. Peter A. Banigo CEO, Oro Nero Corporation

2 Mr Amadi Ambrose MD, Oro Nero Pipelines

ORO NEROCORPORATION

ORO NEROPIPELINES

ORO NEROMARKETING

ORO NEROEXPLORATION

ORO NERO

PETROCHEMICALSORO NERO

REFINERY

ORO NERO

POWER SUPPLY


5/30


3 Ms Akrasi Esther Exective Director, Quality Control

4 Mr Victor Alete Non- Executive Director

5 Mr Awara Iwah Executive Director, Finance

6 Mr Alozie Chigozirim Executive Director, Risk Management

7 Mr Omoni Ejike Rapt Non-Executive Director

8 Ms Favour Amadi Executive Director

9 Mr Amore Femi Deputy Managing Director, ORP

10 Mr Chinedu Executive Director

EXPERIENCE

Oro Nero pipelines Inc, a division of the Oro Nero Corporation has been into the business of

construction, maintenance and operation of oil and gas pipelines for over 15 years. Oro NeroPipelines is committed to linking all oil and gas pipelines to their markets for effective exploitation.

Our International certificates and permits, as well as a substantial body of project-specific

technical analysis place Oro Nero in the best position to develop the South-Central Gas Pipeline.

In addition, our expertise and project management skills, as well as multi-jurisdictional

regulatory experience provide unparalleled access to major markets worldwide and ensure the

timely construction of a technologically sophisticated and environmentally sound transportation

system, and mitigate the risk of delays.

The company, which has the vision of being the number one reference when quality

pipelines are mentioned, has satisfactorily completed so many projects spanning the globe which are

mentioned below:

1.) 1994-1997. The 600 mile, 48, Angorian South North pipeline. This cost a total of $750million

2.) 1995-1997. The 365 km, 48, 56 pipeline linking Calabar and Ajaokuta, both in Nigeria.3.) 1997-1999 The 800 mile, 42, Oil pipeline linking WestAfrican Gas Markets to Nigerian

Suppiles. This cost $1.3bilion.

4.) 1999-2001. The 1,442 mile, 52" Alaska Gas Pipeline in the Mackenzie valley.This was constructed at the cost of $2.8billion within schedule

5.) 2000-2001 The 375 mile, 32" south-west gas pipeline linking the gas fields in Nigeria's NigerDelta to Lagos. $500million

6.) 2000-2003 The 2615 mile 42" linking Libya to the UK. This cost 5$5 billion7.) 2002-2005. The 4000 mile, variable Diameter, North American Gas Supply Network. This

Cost a total of $12 billion.

8.) 2003-2006, The2600 mile, 28 Ukraine Georgia Supply System. This cost $3.2 billion.9.) 2005-2007, The 1200 mile, 36 mixed product line linking Russia to the FSU. $1.8 billion10.)2006-2008 The 1592 mile, 42 pipeline linking South Africa to Angola. $2billion


6/30


11.)2007-? The 1635 mile, 35 Iran China oil line. Estimated at $2.6 billionAs can be seen above the company has vast experience in pipeline construction and works

within schedule, regardless of the terrain encountered.

TECHNICALDESCRIPTION.

Oro Nero has prepared a natural gas pipeline development plan to facilitate the

commercialization of the Lardistan south basin natural gas reserves.

Oro Nero proposes to construct a 960-mile natural gas pipeline from Lardistan to major

cities in Rotlanda. For planning and design purposes, Oro Nero is analyzing a 36-inch diameter (NPS

36), high-pressure (2,500 psia) pipeline that has an initial design capacity of 750 MMcfd and can be

expanded very efficiently to approximately 800 MMcfd by adding incremental compressor units.

The pipeline when constructed would have the following major technical features:

y Tubes of high grade (X80) corrosion resistant steel with inner and outer smooth polymercoating produced during the manufacturing process

y Cathodic protection of the linear part of the offshore section (with anodes placed duringconstruction and operational during service life)

y Tunnelling would be employed for construction in mountain ridgesy Concrete coating of the pipes would be carried out at coastal sectionsy Compressor stations

PHYSICAL CHARACTERISTICSTotal Pipeline length: 960 MILES

Length on land: 768 MILESLength in Water: 192 MILES

Type: Longitudinal SAW

Initial Throughput: 750 MMCF

Expansion Potential to: 800MMCF

Operating Pressure: 2500psia

Initial Compressor Stations: TWO (2)

Heater Stations: ONE (1)

Meter Stations: TWO (2)

Pipe Steel Grade: X80 (GRADE 550) CARBON STEEL

Pipeline Diameter: 36

Pipe Wall Thickness: 1.45


7/30


EFFICIENCYLEVEL

The South Central pipeline would operate at an efficiency level of 99.9%with all measures

taken to minimise and eliminate downtime.

ROUTEDESCRIPTIONANDLOCATION

Figure 2 Pipeline Route Location and Description.

The pipeline will receive pipeline quality gas1

at Lardistans South Basins where it will

proceed southward along the described ROW till it gets to the river where it will cross

before it gets to Rotlan City.

Oro Neros proposed pipeline route is the certificated ANGTSroute that has been

sanctioned by both the Lardistani Senate and Rotlan Parliament.

There would be camps for workers (temporary) built along the ROW and also,two

compressor stations and a Gas Treatment Plant would also be constructed.

The pipeline route consists of Hilly Terrain, Highways, Mountains, a River,

Ecologically Sensitive Forests and Built Up areas which can all increase cost of

construction.

1Pipeline quality gas is obtained by removing most of the heavy hydrocarbons, moisture, CO2 and otherimpurities from the natural gas stream.


8/30


TECHNOLOGY

For so many years now, Oro Nero has led and participated in numerous technical

and economic studies and proposals for pipeline projectsworldwide. In the process, Oro

Nero has analyzed, in considerable detail, large-diameter pipeline design and construction.

Armed with almost half a century of experience operatinglarge-diameter, high-

pressure natural gas pipelines, compressor stations andmeasurement stations in regions

where winter temperatures can drop below -40F, Oro Nero has the expertise to develop

the Lardistan pipeline.

Oro Nero has continuously improved upon its cold climate expertise byincorporating

learning into the operating procedures of existing facilities and into thedesign criteria for

new projects. Oro Neros active research program has focused onmaterial, strain-based

design and structural reliability; fracture behaviour and control; frost heave and thaw

settlement in permafrost and discontinuous permafrost areas;trenching techniques;

horizontal drilling methods; buoyancy control and advancedsoftware development.

The application of many of these technological advancements has increased

efficiencies, safety and environmental protection while decreasing costs. A sample of

technological advancementswhich we would employ:

High-strength pipe materials

X80 (Grade 550) Oro Nero first installed X80 pipe on its system in 1994. Since that

time, Oro Nero has installed approximately 3000 miles of large-diameter X80, including

projects dealing with discontinuous permafrost in Northwestern Alaska. The use of X80

continues to lower pipeline material and construction costs by reducing pipeline weight and

reducing construction impacts on the right-of-way.

Fracture control plans Such plans are now an integral element of anyregulatory

application in support of new projects. Oro Nero has developed fracture control plans for

pipelines. Oro Nero engineers have applied and upgraded their knowledge and experience

to control the propagation of longitudinal fractures, and to understand the gas

decompression behaviour that is a key aspect of this phenomenon. These approaches have

been validated through some full-scale fracture tests.

Frost heave and thaw settlement Frost heave and thaw settlement are uniquewinter

pipeline design challenges. Numerous transitions to and from permafrostand the related

frost heave and thaw settlement can induce excessive stress andstrain on the pipe.

Lardistans discontinuous permafrost, especially in the mountainous regions, Oro

Nero the experience it needs to design pipelines for Lardistan.

Strain-based design This concept specifies the pipe material characteristics

required to meet expected strain loads. Oro Nero is a leader in the development and

application of strain-based design methodologies. We have anin-depth understanding of

material and structural behavior, an extensiveoperations database, and advanced analytical

models to support design innovations

Mechanized welding Mechanized welding will be essential for mainline welding of

any pipeline project. Automated and higher productivitywelding, with minimumintervention by the welder, will be a distinct advantage in harsh conditions and short

construction seasons. Oro Nero and BP Exploration are developing a new, fully automated

pipeline welding system. Advanced mechanized welding has been accompanied by the

introduction of mechanized ultrasonic inspection. Oro Nero has led the industry in the

application of this technology. Advanced welding design, processes and inspection ensure

the structural integrity of the field weld.

Advanced monitoring, control and communication systems Oro Nero operates

one of the largest and most sophisticated gas pipeline systems in theworld. We use leading-


9/30


edge software to operate our SCADA system, employing avariety of telecom options to

communicate with our remote sites, which allows usto choose the right telecom solution

based on site requirements and cost. Our systems are highly available (99.9 percent), fully

redundant with a remote hot standby contingency site. By applying new technology,Oro

Nero has gone from 14 control centres with a supervisory gas control centre down to a

single gas control centre.


10/30


S/N ITEM REMARKS

PRELIMINARIES

1 Economic Analysis of

demand and Supply for the

Natural Gas

1 Month

2 Pipeline Route Selection 1 Month

3 Pipeline Design 2 Months Determination of pipe and

components and technical

specifications

4 Environmental Impact

Assessment

1 Month

5 Public Consultation 1 Month

6 Land Acquisition &

Requisition

3 Months 10m wide along ROW,

acquisition, 15m wide on one

side, requisition(for working

period).

For scraper station and Valve

station separate block lands

of required size have to be

acquisition

7 Obtaining of permits 2 Months Easement rights,

Environmental permits

7 Compensation 1 Month

Preparation ofAccess

Roads, Camps, Movement

of equipment to staging

sites

3 Months

CONSTRUCTION STAGE

1 Survey and Staking 1 Month

2 Front End Grading ! Month

3 ROW Topsoil stripping 1 week


11/30


4 Pipe Hauling & Stringing 1 Month

5 Field Bending of Pipe 2 Weeks

6 Line Up & Initial Welding 3 Weeks

7 NDT of welding joints 3 Weeks Dye Penetrant, Radiographic,

etc

7 Trenching 2 Months Use of Wheel ditcher &

Backhoe

8 Holiday Testing

8 Inspection and Repair of

Coating

3 Weeks

9 Lowering of Pipe into Trench 2 Months

10 Laying of riverbed portion 6 Weeks The S-lay Method would be used and a

robotic trenching machine

Installation of valves and other

fittings

1 Month

11 Padding, Backfill& Rough Grade 6 Weeks

POST-CONSTRUCTION STAGE

1 Testing 3 months

hydrostatic testing 2 weeks Pressure at 1.5 times design pressure, Give

notification to residents.

Drying of Pipeline 2 weeks Use dry air to push foam pigs to collect

water

Purging 2 weeks Removal ofAir

2 Final Tie-In 1 month

3 Top-soil Replacement 3 months

4 Final Cleanup & Full Restoration 5 months

Commissioning 1 week First Gas transmitted


12/30


SCHEDULE

Several crews known as "spreads" will build the pipeline in sections. The plan

assumes that the pipeline will be separated into five construction sections for each

year of construction. The spreads will construct sections ranging in length from 150

to 200 miles.

The peak field workforce is estimated to be between 6,500 and 7,000 people

for the pipelines construction.

A sample of the engineering, field data and technical information compiled to

date for the Lardi portion of the South Central Pipeline includes the following: Field Test Programs

Frost heave Fairbanks frost heave test site Chilled pipe test sites Differential heave test sections Heat pipe test site Soil uplift resistance program Surface disturbance test sites Full scale pipe burst and bend tests

Field Data Gathering Programs

- Geotechnical field program- Bore hole drilling programs for pipeline centreline, mineral material sites, and

compressor station and other sites

- Mapping programs- Geophysical studies, including soil resistivity, slope stabilization

reconnaissance, fault studies, pipeline centreline studies, and seismic

refraction

- Laboratory testing programs


13/30


- Geotechnical databases- River and stream surveys, including stream entry studies and disturbance of

stream and wetland crossings

Technical Information

- Technical reports based on integration of data and engineering- Designcriteria manuals for all components of the pipeline, compressor and meter

stations, operations control centre and supervisory control systems, andtelecommunications, for example:

o Frost Heave Design Criteria and Methodologyo Geotechnical/GeothermalAnalysiso River, Stream, and Wetlands Crossings

Technical and environmental plans, pursuant to Stipulation 1.6.1 of the Federal

Grant of Right-of-Way

Pipeline alignment sheets, as revised

Mineral Material Acquisition Plan

Authorization to Proceed (ATP) Application Plan

Notice to Proceed (NTP)A

pplication Planning

CONTRACTSUMMARIES FORSUBCONTRACTEDACTIVITIES

Rotlanda Steel Coy: Supply of X80 Carbon Grade steel Pipes and fittings

Environment Watch International: Environmental Impact Assessment (EIA)

Julius Berger International- Access roads, surveys, trenching

WeldNet International- Welding, Coating and Bending

Magnifico Inspection Coy: Inspection & Testing

Lardi Earthworks: Supply of Gravel, etc

Lardi Gardens: Restoration & Clean Up

ENVIRONMENTALIMPACTASSESSMENT

The Environmental Impact Assessment (EIA) for the South Central Gas project

would be carried out by an Independent third party agency, the Environmental

Watch International (EWI).

The EIA which would be provided on request, contains information on

y The reason for the choice of the pipeline route chosen compared withalternatives,

y Risk analysis for gas leakage, which would show the consequences of any gasleakages both on land and water to humans, wildlife and property.


14/30


15/30


OPERATIONS, MAINTENANCEAND QUALITYASSURANCEPROCEDURE

The South Central gas pipeline, due to the nature of material it carries, Natural

Gas, would be maintained in the strictest manner and to the highest of quality

standards. The pipeline would run for 24 hours, 365 days every year.

The pipeline would, like all our previous projects, be fitted with the

SCADA (Supervisory Control & data acquisition system) which any leakage or

vandalism problems can be handled immediately minimising impact on theenvironment.

The pipeline, in addition to automated checks by the devices stationed

along its length, would also be manually inspected physically by staff from the quality

control unit of the company once every three months and all leaks detected would

be fixed within 24 hours.

The quality control unit is adequately funded for this purpose. Prompt

response to all defects found is necessary to prevent loss of sales, customer

inconvenience and service disruption.

Major repairs may be carried out once in a while on the pipeline due to

internal defects, leaks or in order to install large connections. Traditionally,considerable amounts of Gas are lost during pipeline repair which is why our

company, to reduce/ eliminate the occurrence of these, uses the most modern

methods in maintenance such as Hot Taps and Composite Wraps while Pipeline

pump downs are carried out for major repairs to recover vented gas.

All trenches dug in the course of maintenance and repair are

immediately covered up and restored after the curing time for all repair has elapsed.

Oro Nero conducts its business so that it meets or exceeds all applicable laws

and regulations and minimizes risk to our employees, the public and the

environment. It is these principles that guide Oro Nero during all phases of project

development, including engineering design, field studies, construction, operation andmaintenance, and eventually decommissioning.

Oro Nero is committed to maintaining its position as an industry leader in

health, safety and environmental (HS&E) practices, to maintaining a safe and healthy

workplace and to protecting environmental quality. We believe excellence in HS&E

practices is vital to the well-being of all people everywhere and essential to all

aspects of our global business.

It is Oro Neros intention to design, construct and operate the pipeline to meet or

exceed all applicable safety standards, building on half a century of experience in

cold weather pipeline design and construction.

The following factors would be addressed in the design of the pipeline material,

strain-based design and reliability-based design;

Fracture behaviour and fracture control;

Frost heave and thaw settlement in permafrost areas; and

Advanced design software development.

Construction and environmental focus areas would include:

Trenching techniques in permafrost areas;

Horizontal directional drilling techniques in permafrost areas; and

Buoyancy control in permafrost areas.


16/30


Ultimately, the goal of the project is to provide safe and reliable delivery of

natural gas to customers without adverse effect on employees, contractors, the

public, or the environment. Managing the integrity of a gas pipeline system is the key

to accomplishing this goal. Operational excellence is achieved by implementing a

comprehensive system of integrity management that includes, among others, the

following items:

Operating procedures Oro Neros operation and maintenance activities aregoverned by over 650 individual procedures that promote safety, environmental

protection and efficiency in the operation of the pipeline. These procedures are

known as Oro Nero Operating Procedures (OOPs). OOPs are developed and revised

in conjunction with our pipeline and plant maintenance plans, safety and

environmental protection programs, and in response to legislated requirements in all

applicable regulatory jurisdictions in which we operate. OOPs are maintained

electronically and are accessible at all locations across the organization. Electronic

links with our state-of-the-art computerized maintenance management system

allows for efficient access to the OOPs for field technicians at the same time as they

are reviewing and issuing maintenance work orders.Results and findings from the execution of maintenance tasks are captured

and trigger reviews and updates to the TOPs, thus facilitating continuous

improvement. Finally, a change-management program ensures that legislative

amendments that may impact the OOPs are communicated, analyzed and

incorporated into the OOPs when appropriate, and that staff receive timely

notifications when OOPs are revised.

Advanced monitoring, control and communication systems Oro Nero operates

one of the largest and most sophisticated gas pipeline systems in the world. We use

leading-edge software to operate our SCADA system, employing a variety of telecom

options to communicate with our remote sites, which allows us to choose the right

telecom solution based on site requirements and cost. By applying new technology,

Oro Nero has gone from 14 control centres with a supervisory gas control centre

down to a single gas control centre. Pipeline integrity and maintenance Oro Nero

uses an industry-leading integrity management program to ensure pipeline integrity

and the safety of employees and people who live near the pipeline system. The

program uses advanced inspection and mitigation technologies applied within a

comprehensive risk-based methodology. Risk assessment is used to identify potential

integrity threats for initiation of inspection or mitigation activities. Results from the

inspections for known or suspected integrity threats are then fed back into an

information database to plan future programs. Our integrity management programs

have led to a reduction in costs such that, on a volume-distance basis, our operationscosts are less than half the industry average.

Compression operation and maintenance Oro Nero is the lowest-cost operator of

gas compression facilities worldwide. Our compression maintenance costs (capital

and expense) are approximately one-third of average industry costs. We continue to

look for improvements that will lower costs and improve the efficiency of our

compressor fleet.


17/30


Geographic information systems Oro Nero leads Angorias gas transmission

industry in the integration of facility and environmental data to achieve operational

efficiencies and support sophisticated maintenance planning.

In fact, Oro Nero received the 2001 Excellence Award from the Geospatial

Information Technology Association; Oro Nero was recognized for exceptional design

and application of GIS technology, the first in the industry to receive such an award.

HS&E Management System Oro Neros integrated HS&E Management systemcaptures, organizes, and documents the companys commitment and expectations

for effectively managing HS&E responsibilities and risks. There are two major aspects

of the system: the framework and the continuous improvement cycle. It is modelled

after ISO 14001, an international standard for environmental management systems.

Our approach is risk-based, the same as our pipeline integrity program. By

considering the likelihood, frequency and consequence of events, we are able to

place our first priorities on those areas which show the greatest exposure. Our

record in safety is among the best in our industry. Oro Nero Pipelines, in all its years

of doing business, has never had any serious incident reported on any of its pipelines.

This is as a result of the company sticking to quality standards set by variousregulatory and professional bodies such as the ASTME (Angorian Society of

Mechanical Engineers), World Materials Foundation (WMF),

ECONOMIC ANALYSIS

The South Central Gas pipeline project would be a very financially viable

project as there is a wide market for the Goods in question and also, there is a global

trend of a shift towards the use of clean fuels for industrial and domestic use as a

result of the climate change phenomenon.

Our company, over the years, with our vast experience, has developed an

economical, cost effective means of constructing and managing gas pipelines and this

project, would be the recipient of years of expertise in pipeline management.

Our company conducted an economic evaluation of the project, which is

attached with this proposal. From the evaluation, it can be seen that with the

available pipeline parameters and the lowest possible tarrif rate of $1.30, the project

yields a Net Present Value (NPV) of approximately $991 and an IRR of 13%. This

shows a very profitable venture even with leap year revenues ignored andcontingencies included.


18/30


ESTIMATEDCOSTS

The South Central Gas pipeline project is estimated to cost a total of

$1,700,000,000 (One Billion, seven Hundred Million Dollars only) of which 25% would

be spent in the first year, 50% in the second year and 25% in the third year.

This figure includes the value of the financing which would be obtained in

respect of the pipeline.

The construction phase of the pipeline project would take the shortest time and the

largest chunk of the budget in our projections (50%).

Extension in the time estimated for construction would unnecessarily inflate

the cost of the pipeline which is why our company employs the segmenting method

where work goes on simultaneously at different points. From experience, this has

been seen to reduce time, and hence cost factors by a factor of as much as 5.

The break down for the construction cost of the pipeline is as follows (prices in$MM).

Cost in $MM Percentage of Total

Material Costs 273 16%

Labour 1025 60%

Miscellaneous 342 20%

ROW and Damages 69 4%

TOTAL 1709 100%

The pipeline would be constructed at an average cost of $1.3MM per mile

onshore and $2.5MM/mile offshore for its total length of 960 miles and with 80% of

its length onshore.

Operating costs have been estimated to stabilize at a maximum of

$26,000,000(Twenty Six Million Dollars) annually, with fixed cost per year at

$16,000,000 and a variable operating cost per MMMcf of $0.02.

In calculating the costs for the pipeline, an O & M contingency of 20% was

added to the calculated value yearly to make up for contingencies in O&M costs that

may be associated with lack of skilled labour, poor infrastructure, bureaucratic

changes and the like that commonly delay projects and increase costs.


19/30


GASSUPPLYANDDEMAND

The financial projections for the South Central pipeline, have all been made,

based on assumptions that a fixed amount of gas at a fixed tariff rate would pass

through the pipeline on a daily basis, uninterrupted, for 30 years, for this reason, we

have to ensure that the pipeline always has enough gas for supply to end users and

also, that there are users that need the amount of gas available for use immediately

(since gas cannot be stored for long periods).

Oro Nero pipelines has entered into long term gas shipping contracts with

existing upstream gas production companies for about 600 MMcfd of gas deliverable

by 2012 and also, other contracts have been signed with companies which won in

the just concluded Lardistani Licensing round for the unexplored basins in the

southern area of Lardistan which would be deliverable in 2014 hence completing the

supply requirements of 750 MMcfd.

FINANCE

The South Central Pipeline would be financed by a consortium of investor-

lenders who would provide a total of 25% or $406,559,999 of the project sum at an

interest rate of 12% to be amortized over 10 years. The financiers include

Internacionale Credit Suisse, HSBC,FCMB.

The pipeline would also be insured by the International insurance group AIG in

order to mitigate against losses and to pay workmen compensation.

ESTIMATEDREVENUES

Revenues for the pipeline in question would be obtained from tariffs on the amount of

Natural gas which passes through the Gas pipeline. Currently, the tariffs are estimated at $1.3 per

Mcf of Gas based on the average estimated throughput of 700MMcfd of gas, the yearly revenues are

estimated as follows:

700 000MMcf * $1.3 * 365 days = $332,150,000

This is a low estimate since the pipeline is estimated to stabilize production at 750 MMcf per

day and also, leap-year revenues have been ignored to allow for any unforeseen breaks in

production. This is the gross revenue from the pipeline before various costs would be taken into

consideration.

RATESThe tariff rates for the South Central gas pipeline are estimated at about $1.3 per Mcf of

Gas. This tariff is acceptable by both the Lardistani & Rotlan Governments and is the base on which

the financial estimates for the project have been based. The breakdown of the tariff is as follows:

US$/Mcf %

Operating cost 0.10 7.69


20/30


Maintenance Reserve 0.10 7.69

Miscellaneous 1.10 84.61

TOTAL 1.30 100

SUMMARIES OF PRO FORMA CONTRACTS WITH SUPPLIERS,SERVICE

PROVIDERSAND CUSTOMERS

NO:1

GASTRANSPORTATION CONTRACT

BETWEEN

LARDISTAN GAS COMPANY

AND

ORO NERO PIPELINESLIMITED

DATED: 10TH FEBRUARY, 2009.

This contract is made as of the 10th day of February, 2008 by and between the ORO

NERO PIPELINES LIMITED and LARDISTAN GAS COMPANY, a Lardistani company, pursuant

to the following recitals and representations: Whereas, Oro Nero Pipelines Limited hasreceived and accepted a certificate of public convenience and necessity issued by the

Federal Energy Regulatory Commission, authorizing Oro Nero Pipelines Limited to manage,

construct and operate a pipeline gas transmission. Whereas Oro Nero Pipelines Limited has

entered into gas transportation agreement with the Lardistan Gas Company herein called

Gas supplier(s), for the transportation of up to 120MMcf of natural gas per day; whereas

Oro Nero Pipelines Limited and Lardistan Gas Company now desire to establish the terms


21/30


and conditions under which Lardistan Gas Company render services to Oro Nero Pipelines

Limited by entering into this Gas transportation contract.

Now therefore, in consideration of the mutual convenants and agreement herein

assumed, Oro Nero Pipelines Limited and the Lardistan Gas Company agree as follows:

ARTICLE 1 SCOPE OF CONTRACT

1. On the commencement date and each day thereafter, Lardistan Gas Company shallcause the input quality for each receipt point hereunder, not to exceed the

maximum input. Quantity for each receipt point, to be delivered to Oro Nero

Pipelines Limited at the receipt point(s).

2. On the commencement date, Lardistan Gas Company shall make the equivalentquantity corresponding to the input quantity, not to exceed themaximum

equivalent quantity for each delivery on behalf of Oro Nero Pipelines Limited on a

firm basis.

3. Lardistan Gas Company shall be solely responsible for securing faithful performanceby gas supplier(s) in all matters which may affect Oro Nero Pipelines Limiteds

performance hereunder, and Limited shall not be liable hereunder to Lardistan Gas

Company as a result of the failure of Gas supplier(s) to so perform

ARTICLE 2 RATESCHEDULESAND GENERALTERMSAND

CONDITIONS

This contract and all terms and provisions contained herein are subject to the provisions of

Rate Schedule FTS and the general terms and conditions of Oro Nero Pipelines LimitedsFERC gas tariff and as such, may be revised and superseded from time to time, which Rate

Schedule FTS and general terms and conditions are by this reference made a part thereof.

ARTICLE 3 TERM

1. This contract shall be effective as of the date first therein above written; providedhowever, that Lardistan Gas Company shall be under no obligation to receive or

deliver any quantities of natural gas and Oro Nero Pipelines Limited shall be under

no obligation for any payment(s) hereunder prior to the commencement date.

2. This contract shall be enforced and shall continue to be effective until a date which isat least one month from the commencement date, pursuant to any effective

provisions for termination of this contract by Lardistan Gas Company as stated in

Rate Schedule FTS or the general terms and conditions for transportation service,

provided however that if the FERC authorizes Lardistan Gas Company to abandon

service to Oro Nero Pipelines Limited on an earlier date. This contract shall terminate

as of such earlier date.


22/30


ARTICLE 4 CORRESPONDENCES

All correspondences to Oro Nero Pipelines Limited shall be addressed to:

The Manager

Power Operations

Oro Nero Pipelines Limited

P. O. Box 860

ANGORIA, AN 62157.

Correspondences to Lardistan Gas Company shall be addressed to:

The Manager

Gas Transportation Operations

Lardistan Gas Company

P. O. Box 1460

Republic of Lardistan.

Either party may change its address under this article by a written notice to the other party.

ARTICLE 5 BANKRUPTCY OF LARDISTAN GAS COMPANY

Subject to the requirements of section 7 of the National Gas Act, Lardistan shall not

be required to render or continue to render sales on behalf of any Oro Nero Pipelines

Limited that has applied for bankruptcy under the bankruptcy code or on behalf of any

lardistan gas company which, at Oro Nero Pipelines Limiteds request , fails within a fifteen

(15) day period to desmonstrate and maintain credit worthiness, provided however, that

Lardistan Gas Company shall render or continue to render transportation service for any

such Oro Nero Pipelines Limited which prepays for such service or which, upon fifteen (15)

day notice by Oro Nero Pipelines Limited, furnishes good and sufficient security bond or

other good and sufficient security as Lardistan Gas Company in its reasonable discretion

deems acceptable of a continuing nature and in an amount equal to the costof performing

the transportation service request for a two month (2) period.

ARTICLE 6 LAW OF CONTRACT

The interpretation and performance of this contract shall be in accordance with and

controlled by the laws of LARDISTAN and applicable federal law and regulation IN WITNESS

THEREOF, the parties here to have caused this contract to be duly executed in several

counterparts by their proper officers duly authorized, as of the date first herein above

written.


23/30


ATTEST: ORO NERO PIPELINES LIMITED

-------------------------------------------------------------------

By Mr Ambrose .O. Amadi (PERSONNEL DIRECTOR )

ATTEST: LARDISTAN GAS COMPANY

-------------------------------------------------

By Ms Akrasi Esther (DIRECTOR GENERAL )

SUPPLYARRANGEMENTS

GASSUPPLYSOURCES

Oro Nero has reviewed publicly-available reserve estimates and has determined that

there is sufficient supply within the region to support this project proposal. These reserve

estimates, show that proven natural gas reserves on state lands in Lardistan total

approximately 29.7 Tcf, the vast majority of which is located in the south of Lardistan whichare yet to be exploited fully.

With estimated production of 700MMcf/day this reserves would last an estimated

116 years. However, the life of the project would no doubt be extended because this

reserve figure does not include reserves on other Lardistan South Slopes. With respect to

undiscovered fields, the Minerals Management Service indicated in a January 2001 study,

that undiscovered, technically recoverable, conventional natural gas resources in Lardistan

could be as high as 100 Tcf of gas.

UPSTREAM TRANSPORTATIONANDSTORAGEARRANGEMENTS

The natural gas obtained from the suppliers would come from different sources to the South

Central Gas Line. This would bring up a transportation problem for the project. Oro Nero pipelineswould undertake to invest in

1. A Gas Gathering pipeline Network to collect the gas from sources of production to link to themain trunk line for onward delivery to Rotlanda.

2. A central gas treatment plant to remove impurities and refine the gas to pipeline quality gasbefore it gets to the trunk line.

Sometimes, gas might need to be stored for a variety of purposes such as


24/30


y Balancing the flow in the pipeline system to maintain operational integrity to ensurepipe pressures are kept within design parameters.

y Maintain volume delivered and withdrawn from the pipeline systemy Levelling production in times of fluctuating demand such as winter, summer

demand.

y Insuring against unforeseen accidentsTherefore, the company would also build an Underground facility to protect against these

situations and would also utilize line-packing in storage of the gas.

BACKGROUNDDESCRIPTION,REFERENCESAND CREDITRATINGS ONALL

POTENTIALSUPPLIERS/SERVICEPROVIDERS


25/30


FINANCIALARRANGEMENTS

Oro Nero pipelines has concluded arrangements with several banks to provide the loansum

of approximately $400MM as soon as the proposal has been approved Letters from these banks are

all attached. The Loan would be repaid over a ten year period beginning from when production

starts, hence, payments can easily be made from earnings from the pipeline

Figure 3 Financiers and their contributions

The partner banks and their contributions are shown in the chart.

RISK MANAGEMENT

CONSTRUCTION RISK

During construction of the pipeline, some issues might come up such as natural disasters,delay in supply of materials, system failure due to substandard material, and so on. The company

observes the highest codes of quality in existence and also has already put in contingency plans in

place for any of the imaginable scenarios.

PRICERISK

In the day to day operation of the pipeline, there is interaction of demand and supply forces

which can lead to volatility in prices of Natural Gas. This Risk has been taken care of as contracts for

transportation of the Gas have been signed with both parties agreeing to a tariff rate for 30 years.

OPERATIONSRISK

Problems such as shortfalls in through put and so on, which might be experienced during therunning phase of the gas pipeline have all been taken care of. The pipelines are all linked to an

underground storage system for emergency and other purposes and also, Natural gas loss during

maintenance procedures is highly minimized through the advanced techniques we employ in

maintenance of our pipelines.

POLITICALRISK

Lardistan: The current political party in power, the hope for people party is made up of a

younger generation of politicians whose priorities have been to clean up corruption and open up the

33%

20%

21%

26%

Loan

HSBC

FCMB

BA

GTB


26/30


economy. Since 1989, there have been four freely contested democratic elections with no

disruptions.

There have not been any serious internal conflicts for religious, ethnic or political reasons since the

1987 coup and any which have occurred have been non-violent.

There does not seem to be solid evidence of militarys intent to take control of government and it is

believed that this would continue to be the case in the nearest future.

Rotlanda: Rotlanda has a well-functioning multiparty democracy. The political system is one of the

most stable in the region with over 50 years of democracy since its independence fromAngoria.

2004 is presidential election year in Rotlanda and due to the increase in unemployment and

percentage of population living below poverty level, there ahas been a mild upsurge of crime and

social unrest in the country.

Opposition parties, indigenous groups and international NGO's oppose this pipeline for a variety of

reasons ranging from un-sustainability, potential adverse environmental impacts and violation of the

property rights of indigenous groups Risk Mitigation

Rotlanda: The completion of the pipeline to Rotlanda would be the beginning of a new era in

industrialisation as industries would be attracted to set up in the country with availability of a cheap

and steady gas supply, environmentally, the company has an enviable record of constructing in line

with environmental best practices so we would ensure that there is minimum environmental impact

on the proposed pipeline route.

For the Indigenous groups, since they claim the lands as ancestral, the company would give them

access to areas and also assign them the responsibility of protecting the parts of the pipeline whichcrosses their area. Projects which are also of utmost importance to each community would be

awarded for each in the vicinity of the pipeline.

For the political parties, it is believed that the ruling NRP would keep power in the upcoming

elections and if not, the opposition parties would see the viability of the proposed project as it

would create jobs, increase the countrys GDP hence reviving the failing economy of Rotlanda

REGULATORYRISK

There is a risk of regulatory bodies from either country changing rules and regulations on

pipeline operation and also a risk of price caps being fixed on tariffs which may hurt revenue

projections on the pipeline. This risk, though minimal, has to be taken as one of the risks of businessand in the worst case scenario, the pipeline, being as hugely profitable as it is now, would still

recover costs of construction and operation and would also yield some returnsto investors.

LEGALRISK

There


27/30


ENVIRONMENTALRISK

The South Central pipeline would pass through areas recognized as havens for rare species

and would also run a risk of harming its immediate environment in the event of gas venting and so

on, the company Oro Nero pipelines, from the date of construction to de-commissioning, works

closely with environmental consultants to ensure that the existence of the pipeline has minimum

impact on the flora and fauna of its immediate environment. In the construction phase, before

construction, samples and photographs are taken of plants which exists on the ROW and when thepipes have been buried, an attempt is made to replant everything as they where to avoid natural

imbalance.

LEGAL & REGULATORY

APPLICABLELAWSANDREGULATIONS

1. Investors, Lardistan citizens, legal entities (consortium) which are engaged in theconstruction of natural gas turbine plant will and are using their own borrowed or

attracted fund. There will be adequate protection of foreign and Lardi investment

participation in the oil/gas resources of Lardistan and the protection of legal

interests of persons engaged in oil and gas operations in Lardistan.

2. The terms and conditions for tenders or auctions shall be defined by the agency andregistered at the Ministry of Justice of Lardistan one month prior to the

announcement of auction.

3.

Comprehensive Environmental Response, compensation and liabilityA

ct. Theenvironment must be protected and compensation paid where applicable.

4. Clean Air Act: This Act is designed to protect and enhance the nations air resourcesso as to promote the public health, welfare, and productive capacity of the populace.

5. Article1.22 under general provisions of the Petroleum Industry Reform Law of Lardistan,Force Majeure Acts of God, strikes, sabotages and other industrial disturbance, civil

unrest, war, blockade,earthquakes, avalanches, epidemics, flood and similar events, which

are out of reasonable control of Parties andwhich are impossible to eliminate by Parties.

Force Major does not include deterioration of Investors financialcondition provided that it

is not connected to the above listed events. In such cases advantages under ForceMajorconditions does not apply to the amount payable by Parties underAgreement.

PERMITSREQUIRED WITH ESTIMATEDTIMELINEThe regulations most generally applied for the construction of pipelines arethe ANSI

codes B31.4 and B31.8. These both refer to API 1104 for specificwelding requirements.Another well known code is BS 8010 which refers to BS 4515 for welding aspects

There is also likely to be a range of local requirements covering land purchase, rightsof way, easements, conservation, etc.


28/30


Certificates / Permits

Permits held by ORO NERO include the following:

FERC Conditional Certificate of Public Convenience and Necessity

(1 FERC 61,248 (1977)), issued: December 16, 2007

Clean Water Act Section 404 Wetland Permits

- Rotlanda River Permit (File No. Rotlan River 120), originally issued: January 4, 2004(effective date)

Two Clean Water Act Section 401 Certifications (issued in conjunction with the

Section 404 Wetland Permits)

SUMMARY OF COMPLIANCEPLANS

Oro Nero Pipelines Limited shall be committed to contracts terms and conditions

within the duration of the contract. In line with Oro Nero Pipelines LTDS compliance

plans, a periodic review of terms and agreement shall be displayed for examination and

execution.

SUMMARY OF CONTRACTUALAGREEMENTS

y We shall construct a pipeline for the transportation of Natural gas andoperate it for a period of 30 years

y We shall develop a pipeline system capable of delivering a steady throughputof 750 MMcf/ day expandable to 800 MMcf per day

y We shall ensure at least 25% engineering procurement to be of Lardi origin.

SMARTDEVELOPMENTOro Nero pipelines, from years of operating various pipeline systems scattered around the

globe has come to realise that there is no feasible long term development without the input,

Participation and support of the stake holders or community. The company is globally admired as a

development partner, touching lives and making improvements to conditions on ground in any part

of the world where we operate.

Oro Nero is guided by the vision of being the energy company most admired for her

partnership and performance. In the pursuit of this vision, the company has been pivotal in

promoting the ideas and programmes that foster sustainable development in facets of her

operational terrains. We do this through a corporate responsibility programme targeted at

improving the quality of life by contributing to schemes that stimulate socio-economic

growth. In the same vein, Lardistan stands to benefit considerably from the project in two

broad-based areas. These are the provision of basic infrastructure and business and human

capital development.

INFRASTRUCTURE PROGRAMMES.y Upgrading of existing infrastructure.


29/30


y Road construction.y Provision of portable water.y Provision of health care delivery system(buildings and equiping of

medical doctors and nurses quaters as well as a number of cottage

clinics) that will address critical medical issues.

y Communities, most of whom have completed land claims will benefitfrom increased property and resource revenue.

BUSINESS AND HUMAN CAPITAL DEVELOPMENT.y Youth empowerment through training( carpentry, heavy equipment

operators, labourer occupational groups ), trades, transportion and

other areas where skills are in abundance.

y Making the community a stakeholder in the operations of the sectorby minimization of community related disruption of operations.

y Encouragment of indigenous contractors.y Provision or micro credit.y Employment of skilled and unskilled labour.y Award of scholarships (primary, secondary and tertiary ).

PROJECTIONS OFANTICIPATEDECONOMIC,ENVIRONMENTALANDSOCIAL

IMPACT

LOCAL CONTENT& HUMAN RESOURCEDEVELOPMENT

In cognisance of the local content laws of Lardistan which stipulate that 25% of materials

used in construction of the pipeline must be of Lardi origin, Our Company has decided to go the

extra mile by ensuring that 30% of the workforce & materials initially increasing to 75% by the end of

the life of the pipeline are all of Lardi & Rotlan origin.

This increase would be as a result of our intensive human resource optimization and

technology transfer program which we carry out in all communities were we operate. The

scholarships we award are given to bright students who, on undertaking to work with us, are sent on

an intensive program at any station in our vast network to learn the basics and also advanced

techniques which we employ in managing projects..

HEALTH,SAFETYANDENVIRONMENTALPROTECTION

Oro Nero has a very strict record of compliance to HSE requirements and regulations at

every operating location. The company recognizes that protecting its workers is a very simple yet

effective way of increasing productivity. We ensure that all workers and visitors, once on site, put on


30/30

their complete personal protective equipment (PPE) and also, our workers are sent on trainings,

seminars and workshops on HSE in order to increase compliance.

ANALYSIS OF PROJECTSANTICIPATED CONTRIBUTION

The South Central pipeline project would be of immense benefit to both nations and alsoall

communities along its ROW. The pipeline would touch various aspects such as:

1. Increase in the GDP of both countries: The existence of the pipeline would result in animmense increase in the GDP of both countries, Lardistan would benefit as the nation would

have a further means of monetizing its gas resources hence an additional revenue stream,

also, and the country would benefit from taxes paid by the company. In Rotlanda, the

availability of a cheap source of fuel for power, industries and businesses would reduce the

cost of production, increasing the level of productivity & hence, increasing the GDP of the

country.

2. Employment: The South Central pipeline would greatly reduce the unemployment level ofboth countries with our plan to train & employ 70% of staff locally in the long term. The

pipeline estimates to directly employ 6000 -7000 people in the construction phase & provide

indirect employment to over 50, 000 people in the construction phase alone. This would

have a positive impact on the unemployment rate in both countries.

3. Infrastructural development:As part of the companys social responsibility program, thecompany would build and maintain projects which are of utmost importance to communities

along its right of way. These can be schools, water projects, primary health-centres and so

on.

PROGRESSREPORTING SCHEDULE

oro nero corporation- lardistan repaired)

Documents