GAZPROM IN EASTERN RUSSIA, ENTRY INTO ASIA-PACIFIC MARKETS Moscow, June 16, 2015
Development of Resources and Production Capacities in Eastern Russia 2
Future Development of Eastern Gas Program Power of Siberia 3
Gazprom Group’s Gas Business Growth in Asia-Pacific Gazprom Group’s priority in Asia-Pacific is to increase its share in this market by ramping up LNG supplies and developing pipeline gas exports Key Asia-Pacific markets’ demand for LNG and pipeline Natural gas supply routes from Russia gas imports* western eastern route route Sakhalin II Sakhalin II Vladivostok LNG 3 rd process train South Korea Japan China Ratio between prices of LNG supplies to Asia and oil & gas indexation in different external scenarios** Taiwan 18 existing LNG projects prospective LNG projects 16 USD / mln BTU existing import terminals Thailand 14 Philippines prospective import terminals Vietnam existing LNG supplies 12 prospective LNG supplies 10 existing contracts for pipeline gas supplies prospective contracts for pipeline gas supplies 8 Malaysia 6 При цене на нефть от 90 до 110 долл. При цене на нефть от 60 до 80 долл. Singapore Indonesia Oil prices vary from USD 60 to 80 Oil prices vary from USD 90 to 110 США / баррель США / баррель per bbl per bbl * Source: consensus forecasts of Wood Mackenzie, IHS Energy, IEA, CEDIGAZ, SIA Energy, CNPC, Chinese Ministry of Land and Resources, Indonesian Agency for Assessment and Application of Technology ** Analysis takes into account two price scenarios for Henry Hub index based on NERA forecasts (USD 3 / mln BTU and USD 5 / Price range of LNG (DES Asia) linked to Henry Hub index mln BTU), as well as various levels of costs for liquefaction process based on expert assessment of various prices in contracts Price range of LNG (DES Asia) linked to oil concluded in 2014. It is assumed that prices of LNG supplies to Asia-Pacific (DES) are oil-based at level of 14.85% Brent 4
Natural Gas Supplies to China Natural gas supplies to China will help Gazprom diversify natural gas exports and facilitate gas transmission network expansion in Eastern Russia western Western route Eastern route eastern route route Russia May 8, 2015 Gazprom and CNPC May 21, 2014 Gazprom and CNPC signed Heads of Agreement for pipeline signed Purchase and Sale Agreement gas supply from Russia to China via for natural gas supply from Russia to western route. China via eastern route. Mongolia Estimated supply volumes – 30 bln m 3 , Supply volumes – 38 bln m 3 , timeframe – 30 years timeframe – 30 years Beijing Forecast gas supply in Chinese market* 2014 2030 China Gas pipeline LNG supplies supplies from 10% Central Asia LNG supplies 10% 15% Shanghai Gas pipeline Pipeline gas supplies from supplies from Myanmar Central Asia India 2% Gas 15% production Gas pipeline Gas production in China Pipeline gas supplies from in China 68% supplies from Russia 67% Myanmar 11% 2% Main export routes of Russian natural gas to China * Source: Chinese General Administration of Customs; consensus forecasts of Chinese National Development and Reform Commission, Energy Information Administration under US Department of Energy, forecasts of IHS Energy, CEDIGAZ, SIA Energy and CNPC 5
Gazprom Group’s LNG Supplies to Asia-Pacific Markets Asia-Pacific is Gazprom Group’s major LNG sales market. Up to 60% of total LNG volume from Group’s subsidiaries were supplied to Asia-Pacific in 2014. Gazprom Group’s projects in Asia-Pacific Gazprom Group’s LNG plants and supply routes in 2005-2014 6 Japan Sakhalin II South Korea Nigeria; 16% LNG plant in operation Egypt; 8% 10 mln t 5 4 Spain, Belgium, Netherlands Vladivostok LNG FOB supplies and other LNG re-exporters; bln m 3 China Argentina 10 mln t Design phase 3 10% Russia; 44% India Other DES (expected) Taiwan UAE; 5% 2 Malasya Sakhalin II Thailand Trinidad & Tobago; 4% UK 3 rd process train 1 Design phase Qatar; 3% 5 mln t 0 (expected) Others; 8% Oman; 3% Gazprom Group’s LNG Portfolio Growth in 2014 52 LNG cargos supplied Contract with Yamal Trade Contracts with TEPCO and RWE Contract with GAIL Expanding LNG fleet Basic Terms and Conditions Two newly built & hi-tech LNG Mid-term deals signed to Long-term contract to 30 cargos out of them – signed to supply liquefied supply LNG to TEPCO annually supply 2.5 mln t of tankers – Velikiy Novgorod supplied to Asia-Pacific. natural gas in amount of 2.9 and Pskov – added to and RWE from Gazprom LNG to GAIL (India) came mln t during 20 years from Group’s portfolio. into effect. Group’s LNG fleet. Number of cargos supplied Yamal LNG project. in 2014 more than doubled Sales and Purchase compared to 2013. Agreement signed on January 22, 2015. 6
Critical State Support Measures for Projects of Eastern Gas Program Tax incentives: • Provision of equitable tax treatment for offshore projects in northern and southern parts of Sea of Okhotsk, • Severance tax and export customs duty incentives for oil produced from oil rims of Far East and Eastern Siberia fields, • Property tax exemption for onshore process facilities and hydrocarbons shipping terminals used by offshore field development projects. 7
Price Formation Process Gazprom believes that gas prices for newly gasified Russian regions, including Russia’s East, should be set with due account of: • level of return on investments channeled into local gas sector and projected load of gas pipelines; • cost of fuel substituted by gas in substitution point within gasified area; • confirmed solvent gas demand of end consumers; • possibilities for funding or other measures of state support to consumers and regions; • singling out export-oriented production segments into separate category of consumers, with possibility to set negotiable gas prices fro them (due to considerable gap between domestic gas prices and prices for gas and gas- based products in Asia-Pacific). 8
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