SOUTHERN DRUZHBA PIPELINE: FOCUSING AT ITS UNDERUTILIZED POTENTIAL TO ENHANCE REGIONAL ENERGY SECURITY AND MARKETS’ INTEGRITY Energy Community Secretariat Meeting on energy infrastructure of strategic regional significance 23.10.2017, Vienna

INTRODUCTION OBJECTIVE OF THIS PRESENTATION – TO HIGHLIGHT THE NEED FOR AND IMPORTANCE OF INCREASING AND DIVERSIFYING OIL SUPPLIES VIA SOUTHERN DRUZHBA PIPELINE TO ENHANCE SECURITY OF OIL SUPPLIES TO THE REGION, TO DIVERSIFY THE ROUTES OF SUPPLIES, TO INCREASE TRANSIT AND REVENUES FOR THE COUNTRIES OF THE REGION, TO FACILITATE INTEGRATION OF REGIONAL AND INTERREGIONAL OIL INFRASTRUCTURE AND OIL MARKETS

PRESENTATION STRUCTURE UKRTRANSNAFTA PJSC IN SOUTHERN DRUZHBA CONTEXT ASSETS, BACKGROUND, LOCATION, REGIONAL VALUE NEED FOR BETTER USE OF SOUTHERN DRUZHBA CAPACITIES DE-BOTTLENECKING ROUTES, ADDING NEW VOLUMES, PRESERVING TRADITIONAL SUPPLIES URGENTLY NEEDED CONTRIBUTION OF ENERGY COMMUNITY AND EUROPEAN COMMISSION ENHANCING OIL MIDSTREAM INTEGRITY FOR BETTER SECURITY AND COMPETETIVENESS OF OIL SUPPLIES

OIL TRANSPORTATION SYSTEM OF UKRAINE: the second largest oil trunk pipeline network in Europe Oil Trunk Pipelinеs : 4767 km Pumping Stations – 51 11 tank-farms: 1, 083 mln. m3 Throughput capacity: In 114 MTA , Out – 56,3 MTA

Transshipment Capacity 14.5 MTA (full development – up to 45 MTA) PIVDENNY OIL TERMINAL: strategic location, modern technologies, flexible operations and ambition prospects Transshipment Capacity 14.5 MTA (full development – up to 45 MTA) Deadweight of Tankers up to 150 000 t (with max draught 13,8 m) Tank Farm Capacity 200 000 m3 (foreseen full expantion – up to 600 000 m3) 5

ODESSA-BRODY-SOUTHERN DRUZHBA: THE RELIABLE, COMPETETIVE ADDITIONAL ROUTE FOR EUROPEAN CONSUMERS AND CASPIAN OIL PRODUCERS Studies of experts/market operators prove commercial and technical feasibility of the Route Suppliers and consumers are willing to use the Route to overcome the limitations of other routes The Route is ALREADY in place: utilization of EXISTING pipeline spare capacities, limited investments only The reliable transit of existing and future Urals supplies will be guaranteed Support of the EU, compliance with the EU Energy Policies, Energy Charter and other regulations Urals 2 - 5 MTA 14,5 – 40 MTA Light Crude Oil 6

EU TARGET REFINERIES ALONG THE SOUTHERN DRUZHBA NETWORK Litvinov (Czech Republic) Mozyr (Belarus) International Traders Ukrtransnafta Transpetrol, MERO, MOL, BSP* Middle East Exporters Kralupy (Czech Republic) Slovnaft (Slovak Republic) Szazhalombatta (Hungary) Schwehat (Austria) Caspian Exporters

SOUTHERN DRUZHBA ROUTE NO DAMAGE TO URALS EXPORTS TO THE REGION: LIGHT CRUDES WILL NOT REPLACE URALS BUT USE THIS ROUTE AS NEW WAY TO THE TRADITIONAL LIGHT CRUDES MARKETS 8

SOUTHERN DRUZHBA: ACHIEVED RESULTS AND ISSUES TO BE RESOLVED MoU’s on shipments via this route signed with potential suppliers and consumers Oil transportation companies of Ukraine and of Czech Republic have experience in accomplishing badging transit EC is supportive to this project which enhances security of supplies, diversifies the routes of supplies, integrates the markets Remaining relative minor technical ‘issues’ at the Slovak /Czech part of the route could be resolved with modest short-term investments Involved operators – suppliers, transit companies and consumers – could consider to share part of the mentioned additional investment burdens of the Slovak/Czech oil transportation companies 9

ENERGY COMMUNITY MISSION IN ‘NETWORKING ENERGY’ INCLUDE OIL PIPELINES Oil dimension of the Energy Community activities: Dec 2008 Ministerial Council decision: the “network energy“ mentioned in the Art. 2 of the Treaty is understood as to include the oil sector Supply, trade, processing, transmission of oil/petroleum products fall within the scope of European Community Directive 2006/67/EC incl. the related pipelines, storage, refineries and import export facilities. The decision concludes on the extension of acquis in the area of oil. The relevant new elements of the acquis in the area of oil, including the subsequent timetable for implementation, are also to be decided. 10

ECS / EC DESIRABLE ROLE IN THE PROJECT Project stakeholders believe the Energy Community /ECS have the unique positioning, tools and background for further integrating CEEC oil infrastructure markets The role of EnC/ ECS and the EC could be vital through: - providing additional TECHNICAL EXPERTISE - facilitation – if and when necessary – IFI CO-FINANCING - promoting TALKS of involved parties - mobilizing INTERGOVERNMENTAL PLATFORMS for the project facilitation and sustainability - hedging EXTERNAL NON-COMMERSIAL PRESSURES and risks - and, as a result, introducing EU acquis and further INTEGRATING THE MARKETS and ENHANCING SECURITY OF SUPPLY through competition, transparency, de-monopolization and equal access to the cross-boundary energy networks To consider setting up under the auspices of the ECS the Southern Druzhba Task Force to facilitate those objectives -

SUMMING UP INTEGRATION OF ENERGY INFRUSTRUCTURE PLAYS A VITAL ROLE IN IMPLEMENTATION OF ACQUIS BY THE EC MEMBERS AND IN ENHANCING ENERGY SECURITY IN THE EC ARIA UKRAINIAN OIL TRANSPORTATION SYSTEM AND THE SOUTHERN DRUZHBA PIPELINE PROJECT COULD REPRESENT A ADDED VALUE FOR THE INTEGRATION OF THE COMMUNITY ENERGY MARKETS THE PROJECT WILL DRASTICALLY FACILITATE IMPLEMENTATION OF ANOTHER ENERGY INFRASTRUCTURE PCI PROJECT BRATISLAVA-SCHWECHAT PIPELINE WHICH UKRAINE FULLY SUPPORTS BEING READY TO PROVIDE RELEVANT COMMITMENTS THE PROJECT SHALL USE EXISTING INFRUSTRUCTURE , IS DRIVEN BY THE MARKET AND WILL NOT ENDANGER THE RUSSIAN OIL SUPPLIES ENERGY COMMUNITY /ECS COULD USE THEIR UNIQUE POSITIONING, MISSION AND TOOLS TO FACILITATE THE PROJECT AND TO PROMOTE ENHANCED ENERGY INTEGTITY VIA OIL PIPELINE NETWORKS THE AD HOC TASK FORCE UNDER THE ECS AUSPICIES COULD HELP TO FACILITATE ACHIEVING THOSE OBJECTIVES

Thank you for your attention FOR FURTHER INFORMATION PLEASE CONTACT UKRTRANSNAFTA PJSC tel: (+38 044) 201-57-01, 201-57-76 fax: (+38 044) 201-57-78 web: www.ukrtransnafta.com e-mail: office@ukrtransnafta.com