MR. SPEAKER, MR. SPEAKER

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1 MINISTERIAL STATEMENT ISSUED BY HON. KENNETH KONGA, MP MINISTER OF ENERGY AND WATER DEVELOPMENT ON BP'S DECISION TO SALE ITS SHARES IN BP (Z) LIMITED TO BE MADE IN PARLIAMENT ON THURSDAY 18 TH MARCH, 2010, IT IS ALWAYS INDEED AN HONOUR AND PRIVILEGE TO BE ALLOWED TO ADDRESS THIS AUGUST HOUSE ON THE DEVELOPMENTS IN THE COUNTRY'S ENERGY SECTOR. MY STATEMENT IN PARTICULAR TODAY IS AIMED AT PROVIDING A BRIEF TO THE NATION THROUGH THIS HOUSE ON BP AFRICA'S INTENDED SALE OF ITS SHARES IN BP (Z) LIMITED. THIS IS IN LIGHT OF THE VARIOUS CONCERNS THAT HAVE BEEN RAISED BY KEY STAKEHOLDERS ON THE POTENTIAL NEGATIVE IMPACTS OF THIS DEVELOPMENT. FROM THE ONSET, I WISH TO INFORM THE NATION THROUGH THIS HOUSE THAT THE DECISION BY BP AFRICA TO DISPOSE OF ITS SHARES IN BP (Z) LIMITED IS PURELY A BUSINESS ONE AND IS BASED ON THE DUE DILIGENCE THE COMPANY HAS UNDERTAKEN REGARDING ITS OPERATIONS IN ZAMBIA. THE NATION MAY WISH TO NOTE THAT THIS DECISION HAS NOT ONLY AFFECTED BP OPERATIONS IN ZAMBIA BUT ALSO OTHER SOUTHERN AFRICAN COUNTRIES SUCH AS BOTSWANA, MALAWI, NAMIBIA AND TANZANIA. AS GOVERNMENT, WE ARE AWARE THAT BP (Z) LIMITED IS AN IMPORTANT AND CRITICAL PLAYER IN THE ZAMBIAN PETROLEUM SUB-SECTOR AND ANY DECISION THE COMPANY MAKES REGARDING ITS OPERATIONS IN THE COUNTRY HAS TO BE CLOSELY MONITORED TO AVOID POTENTIAL NEGATIVE IMPACTS ON THE INDUSTRY. IT IS IN THIS REAGRD THAT GOVERNMENT ENGAGED BP MANAGEMENT IN ORDER TO OBTAIN AN IN-DEPTH UNDERSTANDING OF THE REASONS FOR THE PULL-OUT AND 1

2 TO ENSURE THAT THE TRANSITION PROCESS IS DONE SMOOTHLY WITHOUT ANY ADVERSE EFFECTS. MR. SPEKEAR DURING A MEETING HELD AT THE MINISTRY OF ENERGY AND WATER DEVELOPMENT BETWEEN THE GOVERNMENT AND REPRESENTATIVES OF BP AFRICA LIMITED, THE FORMER INFORMED THE LATTER THAT BP PLC HAD RECENTLY CONDUCTED A GLOBAL PORTFOLIO REVIEW OF ITS ASSETS AND MARKETING POSITIONS ACROSS THE WORLD. THE PURPOSE OF THE REVIEW WAS TO IDENTIFY THOSE DOWNSTREAM OPERATIONS WHICH NATURALLY LEND THEMSELVES TO GREATER SYNERGIES WITH BP'S SUPPLY PORTFOLIO. BP AFRICA'S ASSETS HAD FORMED PART OF THIS GLOBAL REVIEW. THE REVIEW CONCLUDED THAT A NUMBER OF SOUTHERN AFRICAN MARKETS LACK THE INTRINSIC SYNERGIES WITH BP AFRICA'S PORTFOLIO THAT CERTAIN OTHER MARKETS HAVE. AS A RESULT OF THIS REVIEW, BP PLC HAS TAKEN A DECISION TO MARKET ITS SHAREHOLDING OF 75% + 1 SHARE IN BP ZAMBIA LIMITED. IT IS IMPORTANT TO NOTE THAT THE SOUTHERN AFRICAN REGION GENERALLY, AND ZAMBIA IN PARTICULAR, HAVE NOT BEEN SINGLED OUT IN THIS PORTIFOLIO REVIEW. BP PLC RECENTLY MADE A SIGNIFICANT DOWNSTREAM DISPOSAL IN GREECE AND IT IS IN THE PROCESS OF MAKING A SIGNIFICANT DOWNSTREAM DISPOSAL IN FRANCE. 2

3 CONSIDERING WHAT HAS BEEN HAPPENING IN THE OIL INDUSTRY GLOBALLY IN THE LAST FEW YEARS, THE DECISION BY BP PLC IS LONG EXPECTED. OTHER MAJOR OIL COMPANIES SUCH AS CHEVRON AND SHELL ARE HEADING THE SAME DIRECTION, ALTHOUGH AT DIFFERENT PACES, DEPENDING ON THEIR PORTFOLIOS IN THE VARIOUS WORLD GEOGRAPHIC LOCATIONS. ALL OF THEM, WITH NO EXCEPTIONS HAVE SUFFERED SIGNIFICANT DECLINES IN THEIR DOWNSTREAM MARKETS ESPECIALLY THOSE LOCATED IN AFRICA, EUROPE AND SOUTH AMERICA. IN THE LAST FEW YEARS THE CONTRIBUTION OF THE DOWNSTREAM BUSINESS TO THE OVERALL COMPANY EARNINGS OF THESE BIG OIL COMPANIES HAS DECLINED FROM AN AVERAGE OF 10% TO LESS THAN 2%, WITH THE REST OF THE PROFITS COMING FROM THE UPSTREAM BUSINESSES I.E. CRUDE AND GAS OIL EXPLORATION AND EXTRACTION. SHELL ANNOUNCED THAT IT WAS DOWN SIZING BY AS MUCH AS 15% MOSTLY IN THE DOWNSTREAM BUSINESS. CHEVRON IN THE LAST YEARS HAS SOLD OFF ITS DOWNSTREAM BUSINESS ASSETS IN WESTERN EUROPE, SOUTH AMERICA, INDIA, WEST AFRICA AND EAST AFRICA. HOWEVER, WITHOUT EXCEPTIONS AMONG THESE MAJORS, ALL OF THEM HAVE REMAINED IN THE NIGER DELTA REGION IN THE UPSTREAM BUSINESS, DESPITE SO MANY ATTACKS ON THEIR INSTALLATIONS AS WELL AS KIDNAPPINGS AMONG THEIR MEMBERS OF STAFF. IT WILL BE RECALLED THAT A FEW YEARS AGO, MOBIL EXITED 12 AFRICAN COUNTRIES INCLUDING ZAMBIA WHERE IT SOLD ITS ASSETS TO A FRENCH COMPANY TOTAL. MUCH EARLIER AGIP HAD SOLD THEIR ASSETS TO MOBIL. 3

4 THIS IS THE SAME ROUTE MOST OF THESE MAJOR OIL COMPANIES ARE TAKING. FOR THEM, IT MAKES MORE BUSINESS SENSE TO CONCENTRATE THEIR INVESTMENTS IN UPSTREAM BUSINESS WHICH CONTRIBUTE OVER 95% OF THEIR EARNINGS, RATHER THAN FOCUS ON THE LESS PROFITABLE DOWNSTREAM BUSINESSESS, WITH POTENTIAL FOR LIABILITY ON ENVIRONMENT AND SAFETY ISSUES. BP AFRICA HAS MADE A PURELY BUSINESS DECISION TO SELL ITS MARKETING BUSINESSES IN BOTSWANA, MALAWI, NAMIBIA, TANZANIA AND ZAMBIA. THIS NOT WITHSTANDING, THERE ALREADY EXISTING ADEQUATE LAWS AND REGULATIONS IN PLACE IN THE COUNTRY THAT OIL MARKETING COMPANIES MUST FOLLOW WHEN UNDERTAKING SUCH TRANSACTIONS. GOVERNMENT WILL ENSURE THAT THESE REQUIREMENTS ARE MET TO THE FULL. I THEREFORE WISH TO LAY TO REST THE FEARS THAT MAY BE IN THE MINDS OF THE ZAMBIAN PUBLIC REGARDING THIS MATTER. SENIOR EXECUTIVES FROM BP AFRICA HAVE FURTHER ASSURED THE MINISTRY OF ENERGY AND WATER DEVELOPMENT THAT THEY WILL WORK CLOSELY WITH THE GOVERNMENT TO ENSURE A SMOOTH AND SEAMLESS TRANSITION. ALTHOUGH BP (Z) LIMITED HOLDS A SIGNIFICANT MARKET SHARE, THE ZAMBIAN PETROLEUM SUB-SECTOR IS CURRENTLY SERVED BY NOT LESS THAN TWENTY (20) OIL MARKETING COMPANIES. THIS IS TESTIMONY OF THE ROBUSTNESS AND CAPACITY OF THE SUB-SECTOR TO ATTRACT NEW PLAYERS INTO THE SECTOR. GOVERNMENT IS CONVINCED THAT THIS PROCESS WILL CULMINATE IN A MORE COMPETITIVE PETROLEUM SUB-SECTOR IN ZAMBIA. 4

5 BP AFRICA'S EXIT FROM THE ZAMBIAN MARKET MUST BE SEEN AS AN EMPOWERMENT OPPORTUNITY BY THOSE ZAMBIANS WISHING TO INVEST IN THE SECTOR. WHEN ONE LOOKS AT THE TOP MANAGEMENT COMPOSITION OF THE ZAMBIA OPERATIONS IN BP, CHEVRON AND TOTAL, ONE NOTICES THAT THE ZAMBIANS THAT ARE MANAGING THESE OPERATIONS HAVE BEEN PRODUCING GOOD RESULTS FOR A NUMBER OF YEARS. GOVERNEMENT IS EXPECTING THAT THE LOCAL MANAGEMENT TEAM AT BP ZAMBIA WILL TEAM UP WITH OTHER LOCAL PARTNERS AND PUT UP A COMPETITIVE BID TO BUY SOME OF THE SHARES AND ASSETS OF BP ZAMBIA. IT IS THE INTENTION OF GOVERNMENT TO SUPPORT LOCAL INVESTORS THROUGH INSTITUTIONS SUCH AS THE ERB, ZAMBIA COMPETION COMMISSION, CEC AND THE ZDA AND EMPOWER THOSE ZAMBIANS WITH CAPACITY TO BUY SOME OF THE SHARES AND ASSETS BEING DISPOSED OF AND ENSURE THAT SOME OWNERSHIP OF THE SOLD COMPANY REMAINS WITH ZAMBIANS. THROUGH THIS AUGUST HOUSE, I ALSO WISH TO ASSURE THE PUBLIC THAT GOVERNMENT VIEWS THIS AS A BUSINESS AND STRATEGIC DEVELOPMENT BY ONE INDUSTRY PLAYER. I FURTHER WISH TO REITERATE THAT GOVERNMENT THROUGH THE MINISTRY OF ENERGY AND WATER DEVELOPMENT STANDS READY AND COMMITTED TO WORK WITH BP FOR A SMOOTH TRANSITION. I THANK YOU 5