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

Press Conference of June 22, 2010

Gas Export and Enhancing Reliability of Gas Supply to Europe

1

Gas Marketing beyond FSU in 2009: Supply Volume

• Gazpro

rom m delivere red 140.65 billion cubic 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.

• The largest

st gas purchasers asers are: 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

Gas Export and Enhancing Reliability of Gas Supply to Europe

In 2009 140.65 billion cubic meters were supplied beyond FSU West Europe Central Europe

2

• 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.

Gas sales by Gazprom beyond FSU, billion cubic meters

Gas Export and Enhancing Reliability of Gas Supply to Europe

Gas Marketing beyond FSU in 2009: 5-Year Trend

Estimated

3

Gas Marketing beyond FSU: Demand Recovery

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 recovery very to the pre-crisis risis level by 2012.

Gas Export and Enhancing Reliability of Gas Supply to Europe

Gas supply in January-May, billion cubic meters West Europe Central Europe Total

* preliminary estimates

4

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.

Gas Export and Enhancing Reliability of Gas Supply to Europe

5

Outlook for Natural Gas Demand Growth

• 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

• pe will decreas

ease. e.

• By 2030 the demand

d for additional

• nally imported

ed gas will be some 210 billion

• n cubic meters

versus us the present ent-day day level.

Gas Export and Enhancing Reliability of Gas Supply to Europe7

Gas production and consumption in Europe

Scenarios and forecasts for 2020–2030

Scenarios for gas demand recovery in Europe

(2008 consumption = 100%)

Difference between consumption and domestic production: 400 billion cubic meters in 2020 465 billion cubic meters in 2030 Pursuant to most of forecasts, gas demand recovery is expected in 2011–2012

6

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
• verall 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.

Gas Export and Enhancing Reliability of Gas Supply to Europe

7

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.

Gas Export and Enhancing Reliability of Gas Supply to Europe

8

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

• n 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

• n cubic meters.
• The inter-gov

gover ernment nment agreements ments were signed ned with all the project t participants pants whose territori

• ries

es will be crossed ed by the onshor

• re

e pipeli eline ne route. Appropr

• priat

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.

Gas Export and Enhancing Reliability of Gas Supply to Europe

9

Spot Market

• In 2010 the gap between

en the spot market ket prices s and the contractu actual al prices s in Continental tal Europe will remain.

• We expect

t the prices s to equal out by 2012.

• 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.

Market liquidity index churn ratio is a relation between “paper” trading and physical supply. This parameter is five times higher in the liquid UK market than the one at the trading floors in Continental Europe.

Gas Export and Enhancing Reliability of Gas Supply to Europe

10

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 СО2 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 СО2 emissi sion

• ns

s reduction tion.

• We stand for fair competition

tition of the energy sources s where the directio tion of the power generati ration

• n industry

try developmen

• pment

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.

• We are sure that natura

ral l gas is the fuel of choice in the 21st

st century.

• ry. Gas will play a

decisive sive role in developing ping the power generati ation

• n industry

try and the entire e economy my both in Europe e and around the Globe. e.

Gas Export and Enhancing Reliability of Gas Supply to Europe

Thank You for Your Attention!

Gas Export and Enhancing Reliability of Gas Supply to Europe