Investing in ’s Hydrocarbon Resources

US-Albania Investment Forum New York, September 19, 2011

Dr. Sotirios Kapotas Stream Oil & Gas Ltd Agenda

• Albanian Hydrocarbon (HC) sector • Stream investment in the Albanian HC • Use of indigenous Albanian HC resources

2 Oil & Gas Sector in Albania

• 1918: Oil first discovered in Albania • 1989: Albania net exporter of petroleum products • 2001: Albania importing ~75% of its needs • 1990s: Efforts made to attract foreign capital & technology • 1994: foreign investment law enacted to attract and protect foreign investment • Albania attracted susbtantial foreign investment in the hydrocarbon sector over last decade • 4,666 oil wells drilled to date

HYDROCARBON RESERVE POTENTIAL • Over 10 billion barrels of oil in place • Over 1 Tcf of gas in place

3 Albania Hydrocarbon Advantage

• Stable European country • NATO member, anticipates joining the EU • Government policy focused on privatization of the hydrocarbon sector – Constrained development to date – Outdated technology, extremely limited investment • Well defined, large petroleum reservoirs • High regional market demand • Excellent fiscal terms – 100% WI, 25+5yr term,100% cost recovery – Reasonable capital commitments – Local experienced workforce – Ability to export 100% of production

Current Producers:

Bankers Petroleum, Stream Oil & Gas, Albpetrol Sh.a

4 Stream Oil & Gas in Albania

• Canadian based emerging oil & gas production, development, and exploration company • Focused on the re-activation and re- development of its currently producing projects: – three on-shore heavy oil fields, -Mollaj, - and Gorisht-Kocul Delvina Base Camp staff – one onshore producing gas field, Delvina with large gas upside exploration • Operates under petroleum agreements and 25-year license agreements • Led by a technically experienced management team • Implementing modern & enhanced recovery techniques for carbonate operations office reservoirs 5 Stream Oil & Gas Operations • Defined reservoirs – 3 heavy oil fields – 1 natural gas field • Oil ~ 12 - 37 API • Gas with NGLs of ~100bbl/MMCF • Potential multiple production increase by secondary & EOR techniques • Additional Oil & Gas drilling • Gas Exploration

• Crude oil market • Power generation market

6 Investment vs Growth

$18.0 1200

$16.0 1000 $14.0

$12.0 800

$10.0

600 $MM

$8.0 bopd

$6.0 400

$4.0 200 $2.0

$0.0 0 2008 2009 2010 Q2 2011

Revenue Net Operating Income Expenditures Net Production 7 Hydrocarbon Market

. LOCAL CRUDE DEMAND - Existing refinery - Plans for new refinery

. S. EUROPE CRUDE DEMAND - Italy - Balkans

. POWER GENERATION -Thermal options

8 Electricity Sector in Albania

Albania's Electricity sector - [2008] • All production based in Hydroelectricity (2008) 37 % – Albania has been a net importer since 1998 • Electricity consumption steadily growing 63 %

– ~20% since 2002 Imported Production • “Peak load in 2008 represents 97% of installed capacity”…”it is considered of great importance the construction of new generation sources by 2009” (ERE 2008 report ) • Developments based on small Hydro Power plants with a clear pricing mechanism • Albania is extremely depended on hydropower – More capacity is needed to balance the power production in the country & to to backup hydro production during dry periods • Thermal generation seems to be the solution – Import of fossile fuels has a substantial negative impact on generation costs

9 Use of Indigenous HC Resources for Power Generation

Evolution of Electricity Import Prices Advantages: [€/MWh] 100 • Domestic production of electricity 80 – (600 MW potential – identified today) • Reduction of electricity import bill 60 – (2008 ~190 000 000 €) 40 • Backup for Hydropower 20 0 • Competitive pricing 2002 2003 2004 2005 2006 2007 2008 • Additional revenue to the Government from Oil & Gas sector – 50% tax on IOR • Production in the Southern region of Albania (eg. Delvina) • Export potential to Balkans • Use of high efficiency technology in compliance with WB environmental guidelines

10 Delvina Case

Current situation

Significant Gas Resources Very limited Gas Minimal utilization of the off take resources Stream’s Strategy 1. Invest in the development of the field 2. Invest in a Power Plant with a partner 3. Sell Electricity

Developer Albania Possibility of developing a gas field Use of domestic Hydrocarbon resources + + Sales of electricity (~150 MW) Additional Tax income from Oil&Gas production + Tax income from Electricity Production + Reduce dependence on import of energy

Win Win Situation 11 Committed to Albania

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