Uncertainty in Europe’s Evolving Gas Supply / Demand – the Need for New Infrastructure Andy Barrett CERA Senior Associate 23 rd October 2008 CONFIDENTIAL © 2008, All rights reserved, Cambridge Energy Research Associates, Inc., 55 Cambridge Parkway, Cambridge, Massachusetts No portion of this presentation may be reproduced, reused or otherwise distributed in any form without prior written consent.

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 1 CERA_October 2008 Terms of Use CERA content and information, including but not limited to graphs, charts, tables, figures, and data, are not to be disseminated outside of a client organization to any third party, including a client’s customers, financial institutions, consultants, or the public. Content distributed within the client organization must display CERA’s legal notices and attributions of authorship. The accompanying materials were prepared by Cambridge Energy Research Associates, Inc. (CERA), and are not to be redistributed or reused in any manner without prior written consent, with the exception of client internal distribution as described below. CERA strives to be supportive of client internal distribution of CERA content but requires that Some information supplied by CERA may be obtained from sources that CERA believes to be reliable but are in no way warranted by CERA as to accuracy or completeness. Absent a specific agreement to the contrary, CERA has no obligation to update any content or information provided to a client.

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 2 CERA_October 2008 Critical Questions Addressed via CERA’s Global Energy Scenarios ASIAN PHOENIX. How is the rise of Asia altering the global balance of power? What does it mean for geopolitics and the energy industry? BREAK POINT. How high can oil prices rise? What would it take to sustain oil above $100 per barrel for a protracted period? How would the world react? GLOBAL FISSURES. How would a world faced with a sustained slowdown in global economic growth and integration affect energy demand and long-term investment in the energy industry? Source: Cambridge Energy Research Associates

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 3 CERA_October 2008 CERA’s Global Energy Scenarios: key impacts Source: Cambridge Energy Research Associates. Economy Strong GDP growth, particularly in Asia Short term reduction in GDP (to 2015) Sustained reduction in GDP Climate Change Limited carbon reduction efforts Strong efforts to reduce carbon emissions Little or no carbon reduction efforts Energy Prices Gradual decrease in oil prices ($75 real ) Sustained high oil prices ($100 real ) Sudden drop in oil prices ($55 real ) ASIAN PHOENIX GLOBAL FISSURES BREAK POINT

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 4 CERA_October 2008 European Gas Storylines Ownership Unbundling Effective functional unbundling Effective ownership unbundling Limited – continuation of national champions Market Connections Fully linked German, Benelux and French market Progressively interlinked European markets Few additional cross-border connections Continental Prices Oil LinkedSpot Market developsOil Linked NBP Prices Short term – oil linked, Thereafter – Henry Hub Progressive convergence with continental prices Oil linked, through continental prices Electric Power Gas newbuild progressively gives way to coal. RES lose headway 30% RES penetration by CCS and Nuclear Renaissance post 2020 Delayed retirements. New coal plants dominate ASIAN PHOENIX GLOBAL FISSURES BREAK POINT

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 5 CERA_October 2008 Gas fuel of Choice or Default? EU 27 Power Generation Mix and Cumulative Capacity Additions to 2020 Power generation mixCapacity Additions

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 6 CERA_October 2008 Total Gas Demand – Europe Note: Europe includes EU27 + Norway, Switzerland, Balkan countries and Turkey 737 Bcm 519 Bcm 549 Bcm 626 Bcm 2030 Uncertainty 18% Residential & Commercial 18% Industrial 60% Power Generation

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 7 CERA_October 2008 Sectoral Demand by Region, Bcm Source: Cambridge Energy Research Associates _161008

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 8 CERA_October 2008 Indigenous Supply Decline Implies Need for New Gas Supplies Source: Cambridge Energy Research Associates

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 9 CERA_October 2008 Where Will Gas Supply Come From? New Supply Projects to Europe Source: Cambridge Energy Research Associates.

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 10 CERA_October 2008 Pipeline Projects: Complementary or Competing? PipelinePolitical Support FinancingMarketTransit issuesSupply Secured Nabucco ITGI ? Nord Stream ? South Stream ? Medgaz Galsi ?

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 11 CERA_October 2008 Regasification Facilities —Existing and Potential (2006 – 2030) Source: Cambridge Energy Research Associates _100208

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 12 CERA_October 2008 Today’s Infrastructure Financing Challenge Source: Cambridge Energy Research Associates. New gas import infrastructure through 2030 will cost € billion Projects will continue to seek high levels of debt finance / refinance Multi-party / multi-national projects need finance in place to gain sanction Simpler / scale-able projects can be triggered from balance sheets but will expect to be securitized as soon as possible Merchant market risk now ‘very difficult’ in the new financial environment Exposure may need support from sovereign backing – government aid and/or guaranteed regulated returns The evolving models for pipeline and regas finance may be imperilled Regulatory Renaissance – the answer to demand and financial uncertainty?

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 13 CERA_October 2008 Import Capacity Built versus Demand Growth Source: Cambridge Energy Research Associates _100208

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 14 CERA_October 2008 Need for Storage in Europe: Seasonal Flexibility and Power Needs CERA Scenarios Source: Cambridge Energy Research Associates

© 2008, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 15 CERA_October 2008 Storage: Changes in Seasonal Flexibility by Market Region, 2007 – 30 Source: Cambridge Energy Research Associates

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