1. How to Partner With the European Bank for Reconstruction and Development In the Russian Oil and Gas Industry Exploration, Production, Processing in Russia 19 November 2013 10:00 session 2 International Investment Forum Eric Rasmussen Director, Natural Resources

2. November 2013© European Bank for Reconstruction and Development 20132 Agenda What is the EBRD? Russias Potential and Challenges for Oil and Gas Investors Private CEOs views and expectations How can EBRD help?

3. A network of over 40 offices in 35 countries More than half our bankers based in the region St. Petersburg RO Moscow RO Yekaterinburg RO Vladivostok RO Rostov RO Samara RO Krasnoyarsk RO EBRD in Russia 7 offices 120 Professionals

4. November 2013© European Bank for Reconstruction and Development 20134 EBRD offers a comprehensive product portfolio to address the investment challenges in Russia Direct EBRD financing Loans Non or limited recourse to sponsors Hard / local currency Medium / long term Floating / fixed rates New equity Privatizations Underwriting Quasi-equity Portage Indirect EBRD financing Guarantees to Confirming Banks for trade finance instruments (i.e. L/Cs, payment guarantees etc.) of local issuing Bank covering the payment risk Short-term financing of local Issuing Banks providing exporters/importers with liquidity for pre-export and post import and local trade finance purposes Guarantees Specific risk guarantees Commodity-backed instruments Equity

5. November 2013© European Bank for Reconstruction and Development 20135 Promote market efficiency by investing mainly in the private sector Mobilise foreign direct investment Support municipal services to improve peoples lives Encourage environmentally sound and sustainable development More than 4,000 projects since 1991 1/4 of all new business in Russia Largest equity fund program in the EBRD countries of operation EBRDs historical investments of EUR 82 billion. About 28% in Russia.

6. November 2013© European Bank for Reconstruction and Development 20136 EBRD has mobilised EUR 7 billion funding for oil and gas projects in Russia with EUR 1.6 billion of own funds Pipelines, Storage & Gasoline Stations OFS / Remediation RussiaCentral AsiaCentral & SE Europe Ukraine & Caucasus Refineries Oil & Gas Extraction / APG utilisation

7. November 2013© European Bank for Reconstruction and Development 20137 Putin inaugurated as President Subsoil Law introduced Yukos collapse Gazprom allows Third Party Access Production Sharing Law introduced BP + TNK merger Rosneft completes TNK-BP takeover Roseneft & Exxon alliance Russias oil and gas industry was dramatically transformed and modernised in the past decade Russian - Ukrainian gas disputes

8. November 2013© European Bank for Reconstruction and Development 20138 Uncertainty Low oil prices Putin promises to double GDP within a decade Russia crisis GDP per capita returns to the levels of 1990 Asia demand Export boom High oil prices Exploration boom USSR Russia … and Russia and its oil and gas markets still offer lots of potential… Banking crisis Asia crisis

9. November 2013© European Bank for Reconstruction and Development 20139 …however Russias high potential for conventional oil and gas is located in places with little infrastructure… Uvat oil project in the Tyumen region Lukoil's Imilor and Istochnoye fields in the Khanty Mansiysk Autonomous Region Surgutneftegazs severo-Rogozhnikovskoye field The Novoportovskoye oil and gas condensate field in the Yamal-Nenets Autonomous Region Caspian Sea - Yuri Korchagin field, Pechora Sea: Gazprom's Prirazlomnoye field The government has introduced preferential taxes for East Siberian projects. Vankor field Verkhnechonsk oilfield Suzunskoye and Tagulskoye fields Lodochnoye field

10. November 2013© European Bank for Reconstruction and Development 201310.. and also the high potential for unconventional oil and gas is located in places with little infrastructure. Tight oil and shale gas formations (EIA, May 2013)

11. November 2013© European Bank for Reconstruction and Development 201311 Russias oil and gas industry needs up to $1 trillion investments over the next 15 years for modernization and development

12. November 2013© European Bank for Reconstruction and Development 201312 A SWOT of Russias oil and gas industry suggest a reset of international partnerships could boost FDI and enhance exports… SWOT Strengths One of the world's largest proven reserves of oil (93.1bn bbl) and gas (45.3 tcm) Huge output with 10.5 mn bpd of oil and 657bcm of gas World's third largest refiner after the US and China. Opportunities Reset partnerships with EU and Asia Potential to expand refining capacity to 6 million b/d by 2017 Underexplored East Siberia and offshore fields Tax & permit reform can double LNG by 2020 Bazhenov may hold 75 bn barrels of shale oil Weaknesses Limited FDI from international oil companies (IOC) is holding back innovation and modernization needed to explore difficult reserves Gas export infrastructure need upgrade Gas sales depend on EU Threats US$280 billion investment needed to keep current oil output until 2020 Oil output will drop 20% without tax & permit reform Proven oil reserves are expected to fall Without proactive planning new shale gas will significantly replace Russian gas in Europe and Asia.

13. November 2013© European Bank for Reconstruction and Development 201313 YEAR 2012 2013 STATE REGULATION PARTICIPATION BY STATE COMPANIES CEOs welcome the new energy tax reform, but need non- protectionist reform to open access to potential opportunities. Source: Deloitte 2013 Russian Oil & Gas Outlook Survey

14. November 2013© European Bank for Reconstruction and Development 201314 The Russian oil and gas industry also needs a high pace of innovation and that requires more private sector engagement. Oil Production - Market Structure 2013 (%) Refining - Market Shares 2013 (%) Gas Production - Market Structure 2013 (%) Oil Storage - Market Shares 2013 (%) Sources:BMI, OG Analysis 2013 Rosneft Lukoil Surgutneftegas Gazprom Neft Others Gazprom Novatek Lukoil Rosneft Others Rosneft OJSC Lukoil Gazprom Neft JSC Bashneft OAO Lukoil Alliance Oil Co. Gunvor Rosneft Caspian Pipeline Consortium

15. November 2013© European Bank for Reconstruction and Development 201315 FDI is eyeing the Russian oil and gas potential, but there are still substantial investment barriers and risks to form new alliances….. Exploration Access EHS Production Transport Refining Favored local players Lack of infrastructure local service capacity Gvt take

16. … so how can the EBRD help? Supporting Russian companies in cross-border investments in EBRDs countries of operation Working with big companies to support smaller local content providers Process/resource efficiency: increase refining value added, reduce energy consumption and emissions with better processing and greener products. Supporting private players with a regional development impact. Companies pursuing corporate governance enhancement programmes (especially for early stage and 2nd tier companies, pre-IPO financing, environmental clean-up as well support for Joint Ventures). November 2013© European Bank for Reconstruction and Development 201316

17. November 2013© European Bank for Reconstruction and Development 201317 How does EBRD partner with oil and gas companies depending on circumstances? Russian Government Strategic Interest Complexity of Asset Development EBRD supports FDI partners service providers Incentivised FDI Domestic players NOC NOC alliance with FDI HIGH LOW EBRD supports FDI service providers local content development EBRD supports service providers energy efficiency environment, safety EBRD supports private players service providers efficiency, environment, safety corporate governance

18. November 2013© European Bank for Reconstruction and Development 201318 We all need more international alliances to meet the global energy demand, which may double by 2050…. 3 times more energy must come from renewable sources 1.2 billion additional vehicles will be on the roads 300 million people will exit poverty and demand more energy …. while CO2 emissions must be reduced by 75% of todays level to avoid climate meltdown 9.5 billion people will live on the planet with 75% in cities (2.5 billion more than today)

19. November 2013© European Bank for Reconstruction and Development 201319 How to obtain EBRD financing Financing requirements How to obtain finance? Ensure appropriate returns by carefully assessing the risks: Disclosed owners and corporate structure Management team and strategy Business plan and project costs IFRS audits Environmental, social, health and safety - action plan Need to develop local content? Ensure appropriate returns by carefully assessing the risks: Disclosed owners and corporate structure Management team and strategy Business plan and project costs IFRS audits Environmental, social, health and safety - action plan Need to develop local content? Provide EBRD with an overview of proposed investment Commitment to cooperation clarify role of EBRD mandate to initiate transaction mutual understanding of corporate integrity issues Project / business plan, market analysis, financial analysis, risk assessment Exit strategy Provide EBRD with an overview of proposed investment Commitment to cooperation clarify role of EBRD mandate to initiate transaction mutual understanding of corporate integrity issues Project / business plan, market analysis, financial analysis, risk assessment Exit strategy www.ebrd.com

20. Contact Eric Rasmussen Director Natural Resources t: + 44 20 7338 8615 e: RasmussE@ebrd.com RasmussE@ebrd.com EBRD, One Exchange Square London, EC2A 2JN United Kingdom www.ebrd.com Aida Sitdikova Director Energy, Russia and Central Asia t: + 44 7 8025 106 44 e: Sitdikoa@ebrd.comSitdikoa@ebrd.com November 2013© European Bank for Reconstruction and Development 201320