GAS MARKET INTEGRATION: FOR A SUSTAINABLE GLOBAL GROWTH By: - PowerPoint PPT Presentation

GAS MARKET INTEGRATION: FOR A SUSTAINABLE GLOBAL GROWTH By: Chairman of the Management Committee, Gazprom Alexey Miller

Growth dynamics and structure of energy consumption Dynamics of world energy consumption, Structure of world energy consumption, % million TOE. 40 20000 18000 16000 29,2 30 28,8 14000 25,5 12000 10000 20 16,7 8000 6000 10 4000 6,7 2000 0 0 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Natural gas Coal Oil RES (wind, solar, tidal power, geothermal energy, biomass, hydro) Atom Gas market integration: for a sustainable global growth 2

The potential of hydrocarbon energy Forecasts of global gas demand, Forecast of gas production by 2035, billion cubic meters billion cubic meters 5000 Russia 4800 USA 4600 China 4400 Iran 4200 Qatar 4000 Cabada 3800 Algeria 3600 Australia 3400 Saudi Arabia 3200 Turkmenistan 3000 2011 2020 2030 0 100 200 300 400 500 600 700 800 900 1000 The International Energy Agency (New Policies Scenario 2011) Conventional gas Unconventional gas The International Energy Agency ( Сurrent Policies Scenario 2011) The International Energy Agency (Gas Scenario 2011) U.S. Department of Energy (Reference Case 2011) CERA (Global Redesign Scenario 2011) Energy Research Institute of Russian Academy of Sciences 2012 Gas market integration: for a sustainable global growth 3

The development of global trade in natural gas Countries outside the OECD – Europe/Eurasia OECD – Europe 400 300 300 200 OECD – North America 200 100 200 100 0 100 0 1990 2006 2010 0 0 1990 2006 2010 0 1990 2006 2010 -100 0 OECD – Pacific Region -100 -200 -100 -200 100 -300 -200 -300 -400 0 Middle East -500 1990 2006 2010 200 0 Africa 100 -100 200 0 -200 1990 2006 2010 100 0 0 -100 1990 2006 2010 0 -100 0 200 Export, billion cubic meters Import, billion cubic meters 100 -100 -200 0 Volume of international trade in gas by pipelines Volume of international trade in LNG IEA data, Petroleum Economist 4

Alternative sources of natural gas Global structure of unconventional gas Global gas production by types, resources, trillion cubic meters billion cubic meters 20% 5000 200-225 380-550 4000 16% Shale gas Gas of low-permeable reservoirs 12% 3000 2000 8% 380-420 1000 4% Coal-bed gas 0 0% 2008 2015 2020 2025 2030 2035 Conventional gas Low-permeability gas reservoirs Coal-bed gas Shale gas Share of unconventional (right axis) Expert assessment by Gazprom VNIIGAZ Gas market integration: for a sustainable global growth 5

International gas trade from 2010 to 2011 Dynamics of international gas trade, World exports by regions of the world, billion cubic meters billion cubic meters 1200 +4,2% 350 +10% 300 1000 -4,3% 250 800 200 +4,2% 600 150 400 -23,2% 100 200 50 0 0 Африка Европа Ближний Азия СНГ Северная Латинская 1990 1995 2000 2005 2010 2011 Восток Океания Америка Америка International gas trade By pipeline LNG 2010 2011 Gas market integration: for a sustainable global growth 6

Regional gas pricing Europe 600 400 USA 600 200 Japan 600 400 0 400 2005 2015 2025 2035 200 200 0 2005 2015 2025 2035 0 2005 2015 2025 2035 Average import gas price in Europe, USD/thousand cubic meters Spot gas price in the U.S. (Henry Hub), USD/thousand cubic meters Import gas price in Japan, USD/thousand cubic meters Perspective projects 7

Price formation in the gas market Dynamics of LNG prices in Japan, Dynamics of oil and gas prices Dynamics of oil and gas prices USD/million Btu in Europe, USD/million Btu in the U.S., USD/million Btu 25 25 20 18 20 20 16 14 15 15 12 10 10 10 8 6 5 5 4 2 0 0 0 03.2010 09.2010 03.2011 09.2011 03.2012 03.2010 09.2010 03.2011 09.2011 03.2010 09.2010 03.2011 09.2011 03.2012 Japanese Crude Cocktail Russian gas at the border of Germany Henry Hub LNG (Japan) WTI Russian gas at the border of France Russian gas at the border of Hungary Russian gas at the border of Italy Brent Gas market integration: for a sustainable global growth 8

Price formation in the gas market Hotelling rent Dynamics of price integration of the world gas market 120 Price (USD/barrels, USD/thousand cubic meters) 100 Limitation of production Price, based on capacities replacement cost (the cost Supply curve 80 of consumption (cost of delivery) of alternative energy resources) 60 40 Hotelling rent Demand curve 20 Ricardo rent Price, based on the costs (Cost +) of production and delivery 0 Production volume 1861 1871 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011 (million barrels/day, million cubic meters/year) Gas market integration: for a sustainable global growth 9

Development of Gazprom's resource base billion cubic meters billion cubic meters 800 400 323,0 700 300 600 500 200 157,2 133,2 400 94,9 90,3 100 69,4 47,2 300 32,2 0 200 2020 2030 2020 2030 2020 2030 2020 2030 100 0 Commissioning of the Yamal Peninsula fields and the shelf 2010 2020 2030 Existing projects Expected production, billion cubic meters/year New fields Nadym Pur Taz District 2015 2030 Yamal 116 310-360 (land+shelf) Stockman Eastern Siberia and the Far East Gas market integration: for a sustainable global growth 10

Gazprom's transportation projects South Stream and Blue Stream gas Nord Stream gas pipeline pipelines Capacity: 55 billion cubic meters/year Capacity: 63 billion cubic meters/year (South Stream) Gas balance in Europe, Europe's inter-regional gas trade, billion cubic meters billion cubic meters 800 Imports from the Middle East 700 600 Imports from Africa 600 500 Imports from the CIS 500 400 400 Imports from Latin America 300 300 Imports from North America LNG import 200 200 Gas import through Gas production in other EU countries 100 100 pipelines Gas production in Norway 0 0 2010 2015 2020 2025 2030 2035 11 2010 2035 Gas market integration: for a sustainable global growth 11

Gazprom in the LNG sector Volumes of Gazprom Group's transactions with LNG, thousand tons 2000 1500 1000 500 0 2006 2007 2008 2009 2010 Gas market integration: for a sustainable global growth 12

The strategy of relying on conventional natural gas resources Distribution of conventional and The structure of Russia's unconventional unconventional gas by regions in the world, gas resources, trillion cubic meters trillion cubic meters North America 5-20 110 CIS 120 120 Shale gas Low-permeability gas 80 80 Europe reservoirs 40 40 40 0 0 0 APR Middle East 200 and Africa 120 South America 160 80 80 50 120 40 40 Coal-bed gas 80 0 0 40 0 Conventional gas Coal-bed gas Shale gas Low-permeability gas reservoirs Coal-bed gas Shale gas Expert assessment by Gazprom VNIIGAZ Gas market integration: for a sustainable global growth 13

Gazprom's global supplies of pipeline gas and LNG Ratio of supply volumes of pipeline gas Global gas supplies, billion cubic meters and LNG, billion cubic meters 800 Russia 262,1 600 Europe 148,1 CIS and Baltic states 400 70,2 America and APR 1,93 200 0 1973 1990 2004 2005 2006 2007 22008 2009 2010 Gas through pipelines LNG Perspective routes 14

Natural gas – an environmentally and technologically optimal solution Cost of building 1 kW of electric power of Relative content of toxic components various types of power plants, thousand in exhaust gases of motor vehicles dollars. 100 Gas generation 14 90 Coal-fired TPP Fuel energy 13 80 Lignite-fired TPP 12 70 Thermal reactors 11 Nuclear 60 energy Fast neutron reactors 10 50 Onshore wind turbines 9 40 Offshore wind turbines 30 8 20 Solar photovoltaic (PV) 7 10 Concentrated thermal solar power 6 (CSP) 0 Renewable Biomass-fired CPP 5 energy Gasoline Diesel fuel Propane Natural gas Biomass-fired TPP 4 Large hydropower 3 CO NOx СН Benzopyrene Soot Small hydropower 2 Geothermal 1 0 2 4 6 8 Gas market integration: for a sustainable global growth 15

Thank you for your attention! 16