1. What make a market attractive? The case of the European Union gas market Yves Lebas – Managing Director Cepsa Gas Comercializadora Madrid 22 – 23 November 2007

2. Sustainable demand growth Towards an integrated and competitive market Adequate valorisation European Union Gas Market: main features Europeans Gas Directives 330 bcm 700 bcm Bp statistical review $/mmbtu X 2 Cepsa Gas Comercializadora

3. 15% 35% 45% 60% 70% Expected by 70´ies 80´ies 90´ies 2006 2020 Globally, Europe needs more investments to face growing imports infrastructures Cepsa Gas Comercializadora A growing dependency to the external supplies

4. Exporters Importers 80% of total gas imports concentrated in 4 countries Nearly or 100% depended from one supplier Different market situations Different market situations could imply different approaches to face the challenge Future big importer Bcm Cepsa Gas Comercializadora

5. Different players and ….. different objectives European Commission - Single market - Competitiveness Suppliers - Guaranty of outlets - Valorisation Governments - Security - Efficiency - Environment Incumbents - Market share protection - Margin - Diversification New entrants - Access to the gas - Access to the market - Market share offensive Cepsa Gas Comercializadora A great challenge: how to conciliate different points of view?

6. An imperative: develop gas import infrastructures Source : Total From 2004 to 2015 a dramatic increase of gas imports all around the world Europe: more than 200 Bcm of new gas imports infrastructures (120 for LNG) Asia: around 120 Bcm of new gas imports infrastructures (100 for LNG) America: 120 Bcm of new LNG imports infrastructures Cepsa Gas Comercializadora

7. Centrally situated, a real advantage for Europe Supply capacities (2010 – 2020) CIS 185 - 220 Norway 100 - 120 Central Asia 15 - 40 Middle east 25 - 60 Algeria 85 – 115 Egypt 15 - 25 Libya 15 - 35 Western Africa 15 - 25 T & Tobago 5 - 10 Source : IEA/OME Cepsa Gas Comercializadora Europe is a potential and accessible destination for worldwide major NG and LNG producers

8. Natural gas flows are in a reorganisation process More globalisation through LNG Buyers looks to increase supply diversification Sellers are seeking diversification and putting projects in competition With regard to the capitalistic and rigidity of the logistic, natural gas industry will still be a long term business and for the future … Cepsa Gas Comercializadora The actual situation of European gas market

9. The European Union gas market even if it is well situated, with regard to the world gas reserves repartition, need to stay attractive in order to mobilise new resources With regard to the gas demand growth expected, the competition from traditional and new consuming gas areas, Any regulation need to be equilibrated, send the right signal to the market and provide long term visibility Cepsa Gas Comercializadora

10. The offer and demand competition On the demand side: competing for supply competing for quantities growing gas demand from traditional areas (US & Asia) emergence of new gas markets (China, India, …) competing for the better price On the offer side: competing for markets looking for the better rate of return looking for stability è Common interest: ➣ security o n flux ➣ sustainability on revenues ➣ trust and continuity in regulation and legal rules  Common obligation: ➣ invest in logistics Cepsa Gas Comercializadora

11. The unbundling debate How to conciliate different dilemmas? “ I need firm commitment before to invest in infrastructures ” “ I can close the deal only if the capacity is available ” “ long term contracts are inherent to a highly capitalistic activity” “ competition is the basis for correct information and better prices” … Who’s first? Is the unbundling the only way to solve these dilemmas?  be more pragmatic than theoretical Cepsa Gas Comercializadora