JKX Oil & Gas plc Annual Report 201159At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-136LPG Poltava- case studyWhy LPG? Liquefi ed petroleum gas (LPG) is a fl ammable mixture of hydrocarbon gases used as a fuel in vehicles and heating appliances. When specifi cally used as a vehicle fuel it is often referred to as autogas. It is much cheaper to buy than either petrol or diesel. Far less tax is added to the pump price because it creates less pollution. European governments encourage the use of LPG to help meet environmental targets.LPG market in Ukraine, 2006-2011 (thousand tonnes)Production Import Export ConsumptionSources: Oil market/Nfterynok, January 20125887797367248211,05870038150866311187663262770861327142271206905011338001,0001,200600400200060708091011

60The projectOilfield projects are always a challenge, particularly in areas ofthe world with limitedinfrastructure and experience in completing such projects. The PPC LPG Project from concept to first production was completedwith an excellent safety and environmental record, on budget,ahead of schedule, exceeded its goals for national training and content and has been able to produce as planned.On the first major project that PPCcompleted in 1997 we engaged a Ukraine design institute and it became obvious that if PPC were toactually make any progress weneeded to be in control of engineering and constructionactivities.PPC were awarded Ukraine licenses for engineering and construction activities in 1998/9 which have been vital to the speedat which we can complete projectsat the PPC Production Site. The licences mean we are self-sufficient and avoid the necessity ofutilising Ukraine institutes orcontractors and therefore cancontrol schedules and costs. What worked wellBy most project standards,milestones were met in a veryshort time. Such speed indevelopment can be attributed to the following fundamentals:.Ukraine licenses (1998/9) toperform most engineering andconstruction activities.highly motivated team made upmostly of Ukrainian nationals.project team was led by PPC in-house staff with minimum involvement from contractors. experienced Project Leaders were used who regularly work in Ukraine. PPC management's foresightand willingness to place a high priority on the project . atmosphere of trust amongst the project team and project management to deliver. stakeholders were aligned. the project was self-financedthrough PPC's operating cash flow. ample feed gas supply was already available on site from existing wells. we had significant prior experience of highly technical projects in the oil and gas industry.LPG consumption in Ukraine, 2010 and 2011 LPG Poltava- case study continued20102011Liquefi ed Petroleum Gas (LPG)production commenced at our Poltava plant on 4 July 2011 and the fi rst commercial cargoes were dispatched on 5 July. Dr Paul Davies, JKX's Chief Executive said, "The facilities came in on schedule and on budget and we achieved pay-back on the incremental investment in approximately six months. The added value of this product stream has enhanced the economic performance of our Ukraine operation and effectively increased gas realisations by approximately 10%."1% Petrochemistry22% Petrochemistry9% Cylinders7% Cylinders1% Heating1% Heating89% Autogas70% Autogas