Shaping oil and gas for a competitive future Ashley Sherman, Senior Research Analyst September 2017

Building a competitive advantage on strong foundations Over the last 40 years, Wood Mackenzie has evolved naturally along the energy value chain to capture all the key components affecting global markets. Our integrated approach allows us to spot trends and forecast future dynamics before anyone else

Wood Mackenzie’s ‘carbon-constrained scenario’ Long-term demand growth for hydrocarbons is not assured World primary energy demand (scenario), 2000-35 World energy demand change (scenario), 2015-35 Hydrocarbons dominate, but… Oil demand flat Gas growth at expense of coal Renewables growth is global *Other Solid Fuels (OSF) includes biofuels and waste.

Even in base case, 17 million b/d required to fill ‘supply gap’ to 2025 By 2025, liquids supply required from projects that break even at >US$70/barrel Supply gap to 2025 New supply required to fill the gap OPEC Capacity Growth Supply gap

Future oil and gas project delivery – leaner and quicker Caspian pre-FID* projects can fit the global trend Wood Mackenzie global upstream project tracker: pre-FID benchmarking Reserve size: 500 mmboe Caspian region: pre-FID project * Pre-FID = pre Final Investment Decision. Discount date: January 2017. Discount rate: 15%. Valuations run using Wood Mackenzie’s base price assumption.

Can Kazakh oil and gas meet the challenge? Affordable / Competitive Reliable Sustainable improvement Cost savings at major projects Commercialise other offshore discoveries Maintain high efficiency Incentivise and prioritise exploration Stable investment has economic and social multipliers Licence extensions

Key takeaways Affordable: Cost optimisation must ‘stick’ Reliable: Current investment phases will set benchmark Sustainable: Carbon footprint of oil and gas operations

Ashley Sherman Senior Research Analyst – Russia & Caspian Upstream Research Biography Ashley joined Wood Mackenzie in 2012 and works as the Senior Research Analyst in the Caspian Upstream Research Team, focused on Kazakhstan, Azerbaijan and Central Asia. He was previously an Analyst in the Oil & Gas team at an emerging markets- focused investment bank. He provided valuation support for debt and equity financing for E&P companies in Central Asia and Africa. In 2012, he completed an MSc in International Public Policy at University College London, with his dissertation focused on unconventional gas development in China. In 2010, Ashley graduated from Oxford University with a degree in Russian and French. ashley.sherman@woodmac.com +44 (0)131 243 4377

Disclaimer Strictly Private & Confidential This report has been prepared for the XI KAZENERGY Eurasian Forum by Wood Mackenzie Limited. The report is intended solely for the benefit of attendees and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission. The information upon which this report is based has either been supplied to us by clients or comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.