GAS EXPORT AND ENHANCING RELIABILITY OF GAS SUPPLY TO EUROPE ALEXANDER MEDVEDEV Deputy Chairman of Management Committee, Gazprom Press Conference, June 6, 2017
GAS SALES BY GAZPROM GROUP Volume and average price* data of Gazprom Group gas Volume and average price* data of Gazprom Group gas beyond former Soviet Union (FSU)** in FSU 250 250 228.3 200 200 RUB/1,000 m 3 RUB/1,000 m 3 184.4 174.3 159.4 150 150 bln m 3 bln m 3 148.3 148.1 156.6 151.0 100 11,259 11,970 12,138 13,487 15,057 100 11,763 81.7 9,414 50 9,167 50 56.7 70.2 66.1 10,263 11,911 59.4 48.1 8,509 9,490 40.3 33.2 6,411 7,039 8,500 10,116 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 Net revenue* from gas sales beyond FSU Net revenue* from gas sales in FSU 3000 3000 2,777 2,686 2500 2500 2,116 2,150 1,764 1,807 2000 2000 RUB bln RUB bln 1,396 1,358 1500 1500 1000 1000 695 627 494 505 486 480 363 340 500 500 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 * Inclusive of (excise tax and) customs duties ** Gas supplies, including LNG and auctioned gas, to foreign countries, except for FSU, under contracts of Gazprom Export and other Gazprom companies 2
GAZPROM GROUP’S GAS SALES BEYOND FSU (UNDER CONTRACTS OF GAZPROM EXPORT AND GAZPROM SCHWEIZ) bln m 3 • Total sales in 2016 amounted Germany, 49.8 to 179.3 bln m 3 • Increase of 19.9 billion m 3 (+12.5%) from Poland, 11.1 previous year • Major gas France, 11.5 buyers in 2016 were Germany, Turkey, 24.8 Turkey, and UK Italy 17.9 Italy, 24.7 3
GAZPROM GROUP’S GAS SALES TO FSU IN 2016 bln m 3 Gazprom’s gas sales in FSU totaled 33.2 bln m 3 * in 2016 Moldova, 3.0 Belarus, 18.3 Kazakhstan, 4.7 * According to consolidated financial statements of Gazprom prepared under IFRS 4
PIVOTAL ROLE OF GAZPROM GROUP’S GAS IN EUROPEAN MARKET Gazprom Group’s * share in European gas imports** Gazprom Group’s * share in European gas consumption 900 26% 27% 25% 23% 27% 26% 30% 30% 31% 33% 500 56% 58% 55% 50% 55% 56% 64% 66% 66% 66% 800 400 700 598 602 583 551 564 542 542 540 600 507 485 280 273 274 273 271 257 255 300 248 240 500 225 400 200 300 200 100 100 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Import needs, bln m3 Gas consumption, bln m3 Gas sales by Gazprom Group*, bln m3 Gas sales by Gazprom Group*, bln m3 Gazprom Group's share* Gazprom Group's* share Gas supplies to Europe by major gas exporters and producers Short- term forecasts for gas consumption from world’s in 2016, bln m 3 leading companies (consumption in 2012 = 100%) 105 200 179.3 150 124.0 100 100.0 99.9 99.7 100 % 51.2 46.4 45.5 95 50 24.0 93.5 9.8 8.0 Actual 2012-16 CERA (Oct. 2016) 0 90 89.6 CERA (March 2017) PIRA (Sept. 2016) Gazprom Norway Algeria UK Netherlands Qatar Nigeria Iran Group* PIRA (March 2017) IEA (May 2015) 85 IEA (May 2016) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 * Gas sales to European countries beyond FSU under contracts of Gazprom Export and GAZPROM Schweiz ** Difference between consumption and indigenous production 5
LOW COMMERCIAL ATTRACTIVENESS OF U.S. LNG SUPPLIES TO EUROPE Estimated price range* for U.S. LNG supplies in Europe versus forward prices** in European gas market In current environment, forward contract prices at European trading platforms do not cover full cost of future U.S. LNG supplies linked to Henry Hub prices * Based on Henry Hub forward prices, P = HH * 115% + X, where X – costs (liquefaction, shipments, regasification) ** NBP forward prices *** Historical data: Russian gas prices, including delivery, at German border (according to World Bank), projected data: based on current forward prices of Brent and TTF Sources: Bloomberg, Cheniere Energy, WoodMackenzie, World Bank 6
FORECASTED GROWTH IN GAS-FIRED POWER GENERATION Baseline scenario* 2030 Energy Strategy scenario** Power industry 4000 shows highest 4000 TWh TWh growth rates in gas 3500 3500 consumption across 714 698 513 682 511 666 508 650 505 26.4% 634 503 Europe. Even EC’s 500 618 497 602 33.3% 495 Oil 586 492 489 570 3000 487 554 484 537 481 3000 521 478 476 505 473 489 473 most radical 438 438 Gas ecology-oriented 2500 2500 Coal scenario, with 2000 40.1% highest subsidies 2000 Wind 33.6% for RES, envisages Solar and tidal 1500 1500 increased gas use energy, etc. Biomass for power 1000 1000 generation. Hydro According to 500 500 Nuclear baseline scenario, 0 by 2025 gas-fired 0 2014 2016 2018 2020 2022 2024 2026 2028 2030 2014 2016 2018 2020 2022 2024 2026 2028 2030 power generation in EU will grow by * 21% increase in energy efficiency by 2030, 33% reduction of greenhouse gas emissions by 2030 versus 1990, 24.4% share of one-third versus RES in primary energy consumption by 2030. 2015. ** 27% increase in energy efficiency by 2030, 40% reduction of greenhouse gas emissions by 2030 versus 1990, 27% share of RES in primary energy consumption by 2030. Source: European Commission, ENTSO-E 7
USE OF NATURAL GAS AS VEHICLE FUEL IN LONG TERM Between 2013 and 2016: • Number of Gazprom Group’s gas filling stations in Europe increased from 23 to 69 • In 2016, Gazprom Group entered Serbia’s NGV market, with retail services offered at two stations • Gazprom’s supplies of CNG and LNG to its own and third-party gas filling stations grew from 4.8 to 14.6 mln m 3 • In collaboration with local companies, Gazprom NGV Europe (part of Gazprom Group) implements Europe’s first projects for introducing LNG as vehicle fuel in public bus transportation in Poland: 11 buses in Olsztyn and 35 buses in Warsaw Gazprom’s sales of gas as vehicle fuel through its Prospects for gas demand increase in transportation own and third-party stations, mln m 3 /year sector: 16 14 • Heavy-duty truck can consume up to 200 – 300 kg of 12 Serbia LNG daily 10 Czech Republic • Transportation company with 20 – 40 trucks consumes 8 Poland several mln m 3 of gas per year 6 Europe’s demand for natural gas as vehicle fuel can • 4 Germany reach up to 27 billion m 3 by 2025 * 2 0 2013 2014 2015 2016 * ACER (Agency for the Cooperation of Energy Regulators) forecast. 8
UNDERGROUND GAS STORAGE: ENSURING STABLE, RELIABLE AND FLEXIBLE SUPPLIES 2016: development of Europe’s underground gas storage network During 2016/2017 withdrawal season, Gazprom operated 5 bln m 3 of storage capacities in Europe. Rehden Bergermeer Katharina Damborice Maximum daily deliverability of UGS facilities in Haidach Western Europe was 83.3 mln m 3 during 2016/2017 withdrawal season. Banatski Dvor Katharina and Damborice UGS projects are in progress: • Katharina UGS facility has 6 operational caverns with total working capacity of 315 mln m 3 and maximum daily deliverability of 23.2 mln m 3 . On April 1, 2017, UGS surface facilities were brought onstream. • On July 1, 2016, Damborice UGS facility with design working capacity of 456 million m 3 was put into operation in Czech Republic. At present, Gazprom has access to 156 mln m 3 of Damborice’s storage capacity, with maximum daily deliverability standing at 3.7 mln m 3 . 9
NORD STREAM 2 • Nord Stream 2 project envisages construction of gas pipeline across Baltic Sea with entry point in Kingisepp District of Leningrad Region and exit point near Greifswald in Germany • Length of gas pipeline: around 1,200 km • Annual capacity: 55 bln m 3 of gas • In addition to higher reliability of supplies, Nord Stream 2 project is consistent with EU objectives for energy security and harmful emissions reduction • Nord Stream 2 AG project company was set up to deliver project • Nord Stream 2 AG signed financing agreements with ENGIE, OMV, Royal Dutch Shell, Uniper, and Wintershall for Nord Stream 2 gas pipeline project 10
TURKSTREAM • TurkStream is project for transit-free export gas pipeline stretching across Black Sea from Russia to Turkey and further to Turkey's border with neighboring countries • First string (15.75 bln m 3 in capacity) of gas pipeline is intended for Turkish consumers, while second string (with same capacity) will deliver gas to EU countries • On October 10, 2016, Russian and Turkish Governments signed Agreement on TurkStream project South Stream Transport B.V., wholly-owned subsidiary • of Gazprom, is responsible for construction of gas pipeline’s offshore section • On May 7, 2017, pipe-laying of TurkStream gas pipeline started near Russian coast (Audacia vessel owned by Allseas) • Pioneering Spirit, world’s largest pipe -laying vessel, has arrived in port of Anapa to build TurkStream pipeline in deep- water area of Black Sea • TurkStream is expected to come onstream before late 2019 11
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