1. OMV Gas International Move & More. Interaction between Transit & Storage/ Investment into Gas Infrastructure in SEE Bratislava, September 29 th 2006 Martin Schwarzbichler

2. 2 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Interaction between Transit and Storage/ Investment in Gas Infrastructure in SEE  Interaction between Transit and Storage Is this the right time? Step-by-step approach?  Investments into gas infrastructure as pre-requisite  Conclusion

3. 3 | OMV Gas International, M. Schwarzbichler, September 29, 2006 time / development step Offering arbitrage possibilities for traders / suppliers Offering parking possibilities for traders / suppliers Keeping a minimum stock of storage gas on voluntary basis ? gas on voluntary basis ? Covering the seasonal swing Satisfying the peak demands Interaction between Transit and Storage in SEE: Strategic mix of storage products but before considering all that, something else is needed… Infrastructure

4. 4 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Gas imports to EU-25 Source: European Commission, Competition DG, Energy Sector Inquiry/Draft Preliminary Report; BP Statistical Review 2005; Study A.T. Kearney, „Russland am Gashahn“, January 2006; 2006

5. 5 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Forecast of Gas Supply Europe Source: OME 2006 in billion m³ 502 816 1) 1) EU 25, Balkan states and Switzerland (653 Imports) (291 Imports)

6. 6 | OMV Gas International, M. Schwarzbichler, September 29, 2006 New projects / Investment needs Source: IEA, World Energy Investment Outlook 2003, OECD Europe IEA Total: 635 bn. US$

7. 7 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Increasing gas demand and decreasing gas production: Corridors through SEE are linking new gas sources with the EU Source: IEA - World Energy Outlook 2004; Cedigaz (Feb 2004) Eurogas Zeebrugge Montoir Fos Barcelona Arzew Kapsala Krk Nabucco  Investments in SEE gas infrastructure create win-win situation for EU-25/SEE EU-25/SEE need new import lines Domestic production Netto Imports Natural Gas Transport LNG Terminal Pipeline LNG-Route Pipeline planned LNG-Route planned

8. 8 | OMV Gas International, M. Schwarzbichler, September 29, 2006 OMV Develops Along the EU Growth Belt Mature Markets East- European Growth Belt  Austria is third largest investor in CEE.  Expand from mature into growing markets  Increase the lead to other regional competitors  Further boost profitability potential  Continued growth Source: Vienna Institute for International Economic Studies; 2004 OMV, 2006

9. 9 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Projects/growth opportunities from OMV´s perspective Nabucco Gas Pipeline  Opening a new gas supply corridor for Europe from Middle East and Caspian regions  Raising transit profiles of participating project countries  Contribution to security of supply for partner countries and for Europe as a whole  Strengthening the turntable position of Austrian pipeline grid and the Hub Baumgarten within the European network Adria LNG  Potential supply regions: (North) Africa and Middle East  Potential markets: Adriatic region (Croatia, Italy, …) and Western and Central Europe Source: GIE, OMV Gas International, September 2006  Storages along Nabucco Pipeline  Technical feasibility study for new storage at Baumgarten / Austria CEGH  Trading possibilities  Currently 21 active traders Storage projects

10. 10 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Share of natural gas in primary energy resources / Storage Working Gas Capacity Source: CEER, October 2005 OMV, September 2006 Specifics of SEE  Natural gas has to be price- competitive towards other fuels.  Additonal volumes ensure competitivity of natural gas compared to alternative fuels.  Cross border capacities have to be developed in SEE area.  Pipeline systems are developed to serve mainly industrial and transit purposes.  UGS are planned to be built in most countries. 12,5 3,2 2.1 0,9 2.7 0.5 0,4 10 % - 20 % 20 % - > 2.1…. Storage Working Gas Capacity [ in bcm ] Storage working Gas as % of annual consumption

11. 11 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Gas Infrastructure Projects: Risk Allocation – a balancing exercise Source: Norton Rose, Presentation at Fourth Asia Gas Partnership Summit on February 20th, 2006 Construction risk Operational risk Force majeure risk Exchange rate risk Cash flow risk Default risk Market risk Technology risk Political risk Environmental risk Counterparty credit risk

12. 12 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Suggestions with specific focus on SEE  Regulatory/legal framework  Acquis communautaire represents an appropriate legal framework; any legal framework should not go beyond  Regulatory co-operation: only the regulatory authorities territorially involved should participate in investment related conditions  Energy Community Treaty as common legal basis  Investment attraction  Providing stable and predictable tariffs and tariff structures  Stable and predictable regulatory framework that takes into account individual cases  Remuneration reflecting risks specific to gas infrastructure investments in SEE  Development of infrastructure in discretion of investors / operators  Commercial conditions  Long term capacity contracts enable the feasibility of projects, contribute to security of supply  Short term contracts should only be offered where demanded by the market and economically feasible

13. 13 | OMV Gas International, M. Schwarzbichler, September 29, 2006 South East Europe process: Energy Community Treaty Observer Participants Contracting Parties; TK not signed yet Parties of Energy Community Treaty: Steps to and within the Treaty  Developing the SEE electricity market  2002: Athens MoU on Electricity Market  2003: Athens MoU on Gas Market  2005: Energy Community Treaty (10/2005 signed, 07/2006 ratified)  As soon as possible: Reaching the objectives of the Energy Community Treaty; Guidelines for New Gas Infrastructure Investment

14. 14 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Conclusions  Before considering transit & storage issues the infrastructure has to be built.  EU-25/SEE is getting more dependent on imports, investments of new gas infrastructure are needed. Various large scale infrastructure projects are in feasibility and/or development phases (with respective lead times to realisation).  Specifics of SEE have to be taken into account for the legal/regulatory framework.  Investments in SEE gas infrastructure create win-win situation for EU- 25/SEE.  A stable and predictable legal and regulatory framework will be necessary in order to provide a sound investment climate.  The industry is ready to invest into infrastructure projects as long as promising economic results can be reached. A cooperation between representatives from policy and from industry will be a key element in this respect.

15. 15 | OMV Gas International, M. Schwarzbichler, September 29, 2006 Thank you for your attention! OMV Gas International GmbH International Pipeline Projects Martin Schwarzbichler martin.schwarzbichler@omv.com