Affordable, reliable and sustainable energy sources Astana September 7th, 2017 Pedro Miras Role of oil in the future energy mix. Challenges and certainties Chairman of the Committee of Programmes (CPC) of the WPC Vice President Programme of the Executive Committee of the WPC Chairman of Corporation of Strategic Reserves of Petroleum Products (CORES)

Cores is the Spanish Central Stockholding Entity What is Cores? Cores is the Spanish Central Stockholding Entity Cores is the Central Stockholding Entity responsible for maintaining and controlling strategic reserves in Spain Cores contributes to ensuring the security of supply for petroleum products, LPG and natural gas in the event of a supply crisis Cores is the leading statistics and official information source in the hydrocarbon sector in Spain

Global oil demand will increase by 13-50% over the next 25 years Role of oil in the future energy mix. Challenges and certainties Global oil demand will increase by 13-50% over the next 25 years Primary energy consumption in 2016 and forecasts for 2035-2040 Units: Mtoe +49% +50% +30% +36% +13% 450 2016 2035 2040 NPS: New Policies Scenario; CPS: Current Policies Scenario; 450 Scenario: assumes a set of policies that bring about a trajectory of greenhouse- gas (GHG) emissions from the energy sector Source: BP Statistical Review 2016. World Energy Outlook 2016. Bp Energy Outlook 2017. World Oil Outlook 2016 (OPEC)

Oil will remain equally important in the coming years Role of oil in the future energy mix. Challenges and certainties Oil will remain equally important in the coming years Global primary energy consumption Oil Natural gas Coal Nuclear Hydropower Renewable 450 2016 2035 2040 NPS: New Policies Scenario; CPS: Current Policies Scenario; 450 Scenario: assumes a set of policies that bring about a trajectory of greenhouse- gas (GHG) emissions from the energy sector Source: BP Statistical Review 2016. World Energy Outlook 2016. Bp Energy Outlook 2017. World Oil Outlook 2016 (OPEC)

Role of oil in the future energy mix. Challenges and certainties Demand will vary based on the economy, environmental policies and energy efficiency Global oil demand forecast under several scenarios Unit: MBbl/day OPEC IEA-NPS IEA-CPS IEA-450 BP NPS: New Policies Scenario; CPS: Current Policies Scenario; 450 Scenario: assumes a set of policies that bring about a trajectory of greenhouse- gas (GHG) emissions from the energy sector Source: World Energy Outlook 2016. World Oil Outlook 2016 (OPEC). Bp Energy Outlook 2017

Demand from non-OECD countries will account for 2/3 of the total Role of oil in the future energy mix. Challenges and certainties Demand from non-OECD countries will account for 2/3 of the total OECD vs. non-OECD oil demand in 2016 and forecast for 2040 Unit: 2016 2040 450 450 Non-OECD OECD NPS: New Policies Scenario; CPS: Current Policies Scenario; 450 Scenario Source: BP Statistical Review 2016. World Energy Outlook 2016. World Oil Outlook 2016 (OPEC)

¿? The future of oil is exposed to many uncertainties Role of oil in the future energy mix. Challenges and certainties The future of oil is exposed to many uncertainties Peak demand 1 New competitive dynamics in the industry 6 Mobility models 2 ¿? Digital and new technologies 5 Environmental regulation 3 Consumption mix 4

Expected slowdown in demand, uncertainty about maximum Role of oil in the future energy mix. Challenges and certainties Expected slowdown in demand, uncertainty about maximum Peak demand 1 Growth in oil demand is expected to slow down over the next decade: Greater efficiency Electrical vehicles Replacement of fuels Oil demand could hit a high in 2024 if... 10% +0.25% Penetration of electrical vehicles (2030) Greater efficiency gains -0.5% $+5 Lower growths in GDP Higher oil prices Source: The Future of Refining – Goldman Sachs, 24 July 2017

Different mobility models could change consumption patterns Role of oil in the future energy mix. Challenges and certainties Different mobility models could change consumption patterns Mobility models 2 Promotion of low emission technologies Euro 6 vehicles and ZERO Eco 100% fleet Electrical vehicles Alternative fuels Promotion of railway transport Local initiatives ie Europe: Zero emission areas Shared mobility and digitalisation

An example of environmental regulation: Restrictions on marine fuels Role of oil in the future energy mix. Challenges and certainties An example of environmental regulation: Restrictions on marine fuels Environmental regulation 3 By 2020, sulphur in marine fuels will be limited to 0.5% Many consequences in the oil sector Increased demand for sweet crude oils Increased investment in refining: secondary & desulfurization units Redefining marine consumption mix: gasoil vs ULSFO vs LSFO vs HSFO Shipbuilders: installation of scrubbers and fleet renewals Maximum content of S Anex VI, MARPOL Source: International Maritime Organization (IMO) ECA zones, existing and possible Source: International Maritime Organization (IMO)

An example of the change in consumption mix: non-refined products Role of oil in the future energy mix. Challenges and certainties An example of the change in consumption mix: non-refined products Consumption mix 4 13% of oil demand is for non-refined products Higher growth in demand for non-refined products Breakdown of oil demand in 2005 and 2015 NGL: natural gas liquids; CTL: coal to liquids; GTL: gas to liquids Source: IEA Oil product demand changes 2010-2015. Compound annual growth rates Source: IEA

Digital and new technologies Role of oil in the future energy mix. Challenges and certainties New technologies and digitalisation as the driving force for a change in the sector Digital and new technologies 5 Improved productivity Digital revolution 1. Improved maintenance 2. Operation improvement 3. Optimised supervision 4. Security 5. Reinforcement Optimised driving Reduction in consumption Cyber security Drones to replace road transport

New business models will shape the competitive panorama Role of oil in the future energy mix. Challenges and certainties New business models will shape the competitive panorama New industry competitive dynamics 6 What will compete with oil? Who will my competitors be? Oil companies, energy companies, startups...Google How are we going to compete? Through price, service, advertising, good social responsibility practices...using social media...

Are there other uncertainties affecting the future of oil? Role of oil in the future energy mix. Challenges and certainties Are there other uncertainties affecting the future of oil? Economic uncertainties Collaborative economies, delocalised 24/7 financial markets, new currencies (bitcoins)? Changes in leadership models Energy and corporate governance, real regulator? Redefining workforce Demographics, externalisation, talent management and robotics A new role for consumers Empowerment, influencers

Conclusions Oil will remain equally important in the coming years Role of oil in the future energy mix. Challenges and certainties Conclusions Oil will remain equally important in the coming years Fossil fuels will play a role in the transition to a sustainable energy system Many uncertainties might determine the future Peak demand Mobility models Environmental regulation Consumption mix Digital and new technologies New competitive dynamics in the industry