1. U.S., Saudi, Russia, China as Major Energy Players in Low Oil Price Environment DFS Energy Consultant Ltd. Chen Weidong 21---April---2016 Moscow

2. U.S., Saudi, Russia, China are contribute to current low oil price situation: Benefits & Challenges All these Four Countries are big producers and consumers: low oil price benefits the consumers, but put pressure on producers Mbbl/dProductionConsumptionImport U.S.11644190357409 Saudi1150631858321 Russia1083831967642 China4246110566810 Big Four: U.S./China/Russia/Saudi Arabia mmbbl/dpercentage of the world 2014 “big four” production3823442.60% 2014 “big four” consumption3647239.60% 2014, China & U.S.’s total import volumes are same as Russia & Saudi Arabia’s total export volumes; accordingly, the overall reduction of import cost roughly same as the export loss 2

3. U.S. & China are changing the world oil supply and demand structure entering the 21 st century “Shale Revolution” in U.S. boosts unconventional oil and gas production to the world supply side China’s booming economy driven the development of a huge demanding market for oil and gas U.S. is turning its role from an importer to an exporter China is succeeding the role of No.1 oil & gas importer and becoming the No.1 investment outflow country U.S. became the focused oil & gas investment market for Chinese investors 3

4. Five big impacts of U.S. “Shale Revolution” 1. Booming the Production: U.S. return as the biggest producer in the world 2. “Tight Oil” greatly expand the technical recoverable oil & gas resources lead to a re-recognition to the value of unconventional resources. 3. Thousands of mid- & small- producers in U.S. comprised the main body of unconventional resources development, huge amount of financial capital flows into these producers supported the businesses 4. Today, the oil price decided as known as “benchmark oil pricing” Mechanism has to reform into a “marginal income-driven oil pricing” Mechanism under the pressure of low oil price. U.S. becomes the new “swing producer” 5. The booming effects of shale gas production decoupled the natural gas and oil prices in U.S., the exporting of LNG from U.S. will accelerate the progress in identifying natural gas as an independent commodity worldwide 4

5. China becoming the biggest oil & gas importer and resource investor will shock the industry China provide the biggest demand market to producers of the world China is chasing the investment opportunities globally on one hand, the resource countries may searching China’s capital on the other hand --- Each takes what their own needs Chinese oil industrial development stepping into the 4 th stage, reshaping itself in structure & size, as well as Refocus on the main target in future Energy structure transit, carbon emission reduction and improving the efficiency create big potentials for the cooperation of technology and market practices 5

6. U.S. and China both are contributors of current low oil price situation: Benefits & Challenges Since 2015, there are 45 oil companies in U.S. declared bankruptcy protection Since July 2014, rig counts reduced nearly 70%, employee lay off 10%, there are more companies will seeking bankruptcy protection 6

7. U.S. and China both are contributors to current low oil price situation: Benefits & Challenges Daqing as the largest oil field in China has loss 800 million U.S. dollar in the first two months of 2016; Shengli oil field closed 4 small fields for the first time attempts to stop production in 50 years The production breakeven point in China is 48 $/bbl which is higher than the oil price below 40 $/bbl, the cost challenge is absorbing Chinese oil industry’s accumulative profits. Over 100 billion dollars overseas resources assets are facing devaluation US and China are the two biggest oil industry countries in the world, over 70% rigs over the world are located in. there are the biggest Oil Equipment Manufacture capabilities and Most Educated Human Resources. 7

8. Energy Geopolitical Situation is Under a Grand Transition: Being the Major Players We have to consider each part’s role, strategy and practice Technology innovations drive grand energy transition: such as UK stimulate the coal; U.S. boost the oil and gas era; Who will take a leading role in the diversifing energy era? In 21 st century, “production center shifted to the west, the consumption center shifted to the east”: U.S. produce more, plays the leading role since WWII. Russia and Saudi are in its peak productions as well. China consume more oil and gas; China will play an ever important role in the global grand energy transition, which the factors will include the pace, volume, market and investment Cooperation between Countries (4 levels): Trading/capital/technology & information/Human Resources low volume trade flow between U.S. and China in Energy; improvements in other three levels China with Russia and Mideast countries energy cooperation is the very reverse model Energy Cooperation between Countries Trade Volume Technology Sharing Human Resources Flow Mutual Investments 8

9. US, China, Russia & Saudi Forming the Most Important Energy & Geopolitical Quadrangle This Quadrangle Are Combined by Several Triangles Up Triangle: US, Russia and China Low Triangle: US, Saudi and China Left Triangle: Russia, US and Saudi Right Triangle: Russia, China and Saudi There are Different opportunities and Challenges in different Triangle But All Triangles are linked each others US China Russia Saudi 9

10. New Thought, New Concept and New Pattern LNG trading will stimulate the energy trade volume between U.S. and China: the old “non energy trading” pattern will be changed; need to find more mutual benefits fitting both economic level and political level “Low Carbon Belief” has become the distinguished characteristic in forthcoming grand energy transition as a new concept today: the officially declared emission reduction action cooperation between China and U.S. A modified global energy governance structure is necessary to cope with the transition friction: IEA, OPEC have to find a new pattern to rebalance the powers; China and U.S. may take important roles to participant in building a newly established governance structure Gas will become more important in energy transition: Mideast and east European market facing uncertainties and unstable environment; China and U.S. should consider more on how to improve the cooperation from a global perspective, or say the energy governance system. 10

11. Thanks! 11