Reliability of Gas Supply to Europe Press Conference of June 22, - PowerPoint PPT Presentation

Gas Export and Enhancing Reliability of Gas Supply to Europe Press Conference of June 22, 2010

Gas Marketing beyond FSU in 2009: Supply Volume In 2009 140.65 billion cubic meters were Gazpro rom m delivere red 140.65 billion cubic • supplied beyond FSU meters ers of natura ral l gas beyond the former r Soviet et Union (FSU). ). Gazprom’s foreign currency proceeds • from m gas sales totale led USD 42.5 billion. n. Today y the gas price is equal to some • USD 302 per 1,000 cubic meters. rs. West Europe The largest st gas purchasers asers are: • Central Europe Germa many y – 31.36 billion cubic meters, s, Turkey key – 19.98 billion cubic meters, rs, Italy ly – 19.0 billion n cubic meters. s. 67.7 billion cubic meters were supplied to FSU in 2009 1 Gas Export and Enhancing Reliability of Gas Supply to Europe

Gas Marketing beyond FSU in 2009: 5-Year Trend Gas sales by Gazprom beyond FSU, billion cubic meters The overall ll drop in demand • feature tured d in 2009 correspo sponds ds to the general al trend of the Europe pean n gas industry. try. Since the beginnin ing of this • year natural al gas supplies ies to the European ean market et have started rted to gradually ally recove ver. r. Estimated 2 Gas Export and Enhancing Reliability of Gas Supply to Europe

Gas Marketing beyond FSU: Demand Recovery Gas supply in January-May, billion cubic meters In the first st five months s of 2010 the supplies es showed d a 13 billion cubic c meter r increase se. Gas export rt and foreign ign currency ency procee eeds s are expecte cted d to exceed 145 billion n cubic meters s and USD 45 billion, , respectively, ctively, by the year end. We foresee see a complete ete demand West Central Total recovery very to the pre-crisis risis level Europe Europe by 2012. * preliminary estimates 3 Gas Export and Enhancing Reliability of Gas Supply to Europe

Contract Amendments • We take into account the crisis environment and demonstrate flexibility in relation to our partners. Such flexibility is envisaged by the long-term contracts. • The amendments to the contracts are not made in a one-way street manner. • We offer a package of terms and conditions stimulating our purchasers to offtake gas in excess of the minimum specified quantity. The basic marketing principles remain intact . These are: long-term contracts, gas price • pegging to the oil basket, the take-or-pay principle. • The long-term contractual system is a guarantee of investment. The gas that will be conveyed via Nord Stream was contracted several years ago. • The Continental Europe spot market can currently give adequate signals neither for pricing nor for long-term investment decisions. • The price balance and the pre-crisis demand will recover in a number of years. 4 Gas Export and Enhancing Reliability of Gas Supply to Europe

Outlook for Natural Gas Demand Growth Gas production and consumption in Europe Scenarios for gas demand recovery in Europe Scenarios and forecasts for 2020 – 2030 (2008 consumption = 100%) Pursuant to most of forecasts, gas demand recovery is expected in 2011 – 2012 Difference between consumption and domestic production: 400 billion cubic meters in 2020 465 billion cubic meters in 2030 • We have compiled ed a consensus ensus forecas ast t for the coming ng 20 years based d on the forecas asts ts made e by competent etent analytical center ers during g the recent t 12 months. • The demand for the “blue fuel” will increase while the indigenous gas production in Europe ope will decreas ease. e. • By 2030 the demand d for additional onally imported ed gas will be some 210 billion on cubic meters versus us the present ent-day day level. 5 Gas Export and Enhancing Reliability of Gas Supply to Europe7

Non-Conventional Energy In 2009 the USA significantly increased non-conventional gas production, which led to a short- term oversupply on the market. • In the long run, shale gas will increase the share of gas in the US energy mix thus raising the overall gas demand in the USA. • Gazprom Group welcomes an increasingly significant role of gas in the energy balance. This creates additional opportunities for production and sales growth. • The current pricing environment allows shale gas producers to cover operating expenses only, thus creating objective reasons for an increase in the gas price. • Potential shale gas production in Europe may turn out to be less profitable due to a higher population density and specific geological features, as well as a different landowning system as compared to the one in the USA. 6 Gas Export and Enhancing Reliability of Gas Supply to Europe

New Projects: Nord Stream • The celebrations dedicated to the construction startup were held on April 9, 2010. • During 2009 we received permits for the pipeline construction from all the countries whose territorial waters will be crossed by the pipeline route. • Gas supply will start in the fourth quarter of 2011. Project partners: The Agreement on the entry of into the project was signed on June 19, 2010 . 7 Gas Export and Enhancing Reliability of Gas Supply to Europe

New Projects: South Stream • A c comprehens rehensive e feasibi bility ty study for the project ect will be finalized ed early in 2011. . Construc uction on will be launched hed in 2013 after design gn work is accompl mplished. hed. • We are planni ning ng to start gas suppl ply in 2015. • The projected ted throughput ghput capaci acity ty will be up to 63 billion on cubic meters. • The inter-gov gover ernment nment agreements ments were signed ned with all the project t participants pants whose territori ories es will be crossed ed by the onshor ore e pipeli eline ne route. Appropr opriat ate e joint ventur ures es were set up in Serbia, a, Hungary ry and Greece. • The Memorandum ndum was signed ned between en Gazprom and EDF for the French company’s entry into the project. t. 8 Gas Export and Enhancing Reliability of Gas Supply to Europe

Spot Market • In 2010 the gap between en the spot Market liquidity index churn ratio is market ket prices s and the contractu actual al a relation between “paper” trading prices s in Continental tal Europe will remain. and physical supply. This parameter is five times higher in • We expect t the prices s to equal out by 2012. the liquid UK market than the one at the trading floors in Continental Europe. • The spot market et has never been self-susta sustaine ned but played a balancing ing role in the markets ts of Contin inenta ntal l Europe. e. • An insigni nifi fican cant t number r of sellers s and buyers, s, as well as a small sales volume e do not make the market t liquid and deep enough, h, they do not allow for adequatel tely y assessi ssing the supply to demand relation ion and for giving price signals. s. • None of our partners ners suggest st giving up a syste tem m of long-term term contra ract cts s in favor of spot t trading ng only. 9 Gas Export and Enhancing Reliability of Gas Supply to Europe

Renewable Energy • We share the aspiratio ation of the European ean Union to mitiga gati ting ng the adverse se environmen ronmental tal impact. t. Natural al gas is the most environme nmenta ntall lly-frie friend ndly y fossil l fuel, , which h can signifi fican cantly tly contri ribu bute te to achieving ving this goal. • Just a 1 per cent growth th of the natural l gas share in the EU ecological ical mix will result lt in a 3 per cent decline of СО 2 emissio ions. s. • Switching ching every second coal-fire fired d power plant to CCGT units s will allow by 2020 solving half of the task set by the EU regarding СО 2 emissi sion ons s reduction tion. • We stand for fair competition tition of the energy sources s where the directio tion of the power generati ration on industry try developmen opment t is determi rmine ned by the economic ic viabili lity ty and the environmen ronmental tal effici cien ency. cy. Significan ficant t subsidizing dizing of renewabl ble energy disrupts pts the conditions itions for inter-fue fuel competitio tition. n. st century. • We are sure that natura ral l gas is the fuel of choice in the 21 st ry. Gas will play a decisive sive role in developing ping the power generati ation on industry try and the entire e economy my both in Europe e and around the Globe. e. 10 Gas Export and Enhancing Reliability of Gas Supply to Europe

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