ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR ROMANIAN GAS SECTOR OVERVIEW

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR ABOUT NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR - ANRGN ANRGN was established in the year 2000 (on the basis of Government Ordinance no. 41/2000, approved by Law no. 791/2001), is:ANRGN was established in the year 2000 (on the basis of Government Ordinance no. 41/2000, approved by Law no. 791/2001), is: Romanian legal person public institution under coordination of Prime Minister entirely financed from extra budget funds certified according to ISO 9001:2000 standard by AFAQ ASCERT INTERNATIONAL MissionMission >to elaborate, apply and monitor, at national level, the regulatory system necessary for developing activities in natural gas sector on the following terms: »safety and efficiency »competition and transparency »consumers and environment protection Main prerogativesMain prerogatives >to issue, suspend and withdraw authorizations and licenses >to issue the methodologies for regulated prices and tariffs and to approve the prices for captive end-users, as well as the tariffs for storage, transmission and distribution >to approve technical norms regarding construction and operation of facilities in natural gas sector >to issue commercial regulations regarding the internal market for natural gas, solving the disputes and preventing the abuse of dominant position 2

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR NATURAL GAS - SHORT HISTORY 1909 – discovery of the first natural gas fields in Romania, in Transylvanian Basin, at Sarmasel 1914 – the first pipeline (length 50 km, diameter 10 inches) dedicated exclusively to natural gas transmission, linking Sarmasel and Turda – the first company for exploration, drilling, transmission and distribution of natural gas 1947 – the first gas transmission pipeline (length 250 km) from Manesti to Bucharest 1960 – discovery of some large gas fields in Transylvania which supply more than 60% from the total amount of national primary energy 1974 – first transit of natural gas in Romania and in the Balkans 1979 – first imports of natural gas from Soviet Union 1979 – first modern underground storage of natural gas in Urziceni 1986 – the maximum internal production of natural gas – 36.3 billion cubic meters 1999 – Interconnection with the Ukrainean gas transmission system 3

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR THE SHARE OF NATURAL GAS (%) IN THE BALANCE OF ENERGY RESOURCES IN ROMANIA 0% 20% 40% 60% 80% 100% NATURAL GAS CRUDE OIL % COAL HYDRO+NUCLEAR 42,4 35,0 17,0 5,6 41,0 37,0 14,0 8,0 40,0 29,6 14,5 15,7 37,0 32,6 15,2 4

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR LICENSED OPERATORS - evolution from the year 2000 up to present - 5

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR MARKET RELATIONSHIPS ELIGIBLE CONSUMERS (102) DISTRIBUTION COMPANIES (24) PRODUCERS (4) FOREIGN SUPPLIERS (2) CAPTIVE CONSUMERS WHOLESALE SUPPLIERS (43) RETAIL MARKET WHOLESALE MARKET 6

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR NUMBER OF THE ELIGIBLE CONSUMMERS Total opening of the market DEVELOPMENT OF NATURAL GAS INTERNAL MARKET OPENING DEGREE

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR NOTE: 25% from total internal consumption is rezidential consumption 8

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR METHODOLOGY FOR APPROVING THE PRICES AND SETTING THE REGULATED TARIFFS Past methodology for setting regulated prices and tariffs in natural gas sector was cost-plus type. Final price resulted from adding transmission, storage and distribution tariffs, as well as the selling component to average weighed price for purchasing natural gas, using the formula: P final = P average weighted purchasing price + T transmission + T storage + T distribution + C commercial In December 2003 new methodologies for setting regulated tariffs and prices were issued by ANRGN: revenue cap type for underground storage and for transmission activities and price-cap type for distribution and regulated supply During 2004 and first quarter of 2005, ANRGN and the licensed operators implemented these new methodologies, so that in April 1 th 2005 the new prices will became effective. REGULATED PRICES FOR END CAPTIVE CONSUMERS Three prices for end users CONSUMMERS DIRECTLY CONNECTED TO NATIONAL TRANSMISSION SYSTEM – industrial consumers USD/1,000 c.m. CONSUMMERS CONNECTED TO DISTRIBUTION SYSTEMS - residential consumers USD/1,000 c.m. - industrial consumers USD/1,000 c.m. 9 * the used rate exchange is 30,400 ROL/USD

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR DAILY/SEASONAL NATURAL GAS SALES IN ROMANIA FOR THE PERIOD OCTOBER 1, MARCH 31,

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR 1

ROMANIA DEVELOPMENT OF UNDEGROUND STORAGE CAPACITIES IN THE PERIOD B.C.M. PARTICIPATION IN ANNUAL CONSUMPTION CAPACITY OF UGS % PARTICIPATION IN ANNUAL GAS CONSUMPTION CAPACITY OF UGS, B.C.M. 1212

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR FUTURE EVOLUTION OF ROMANIAN GAS MARKET SNP PETROM S.A., one of the two great natural gas internal producers, was privatized in the first semester of OMV bought a 33.34% share package of PETROM and, in December 2004, its participation reached 51% as a result of increased equity. The market share of other producers, entirely private owned, holders of oil agreements, will increase to 3% (in the year 2007), respectively, up to 10% in the year 2015; The same privatization method was used for the two major natural gas distribution companies. Thus, Gas de France has bought a 30% share package of S.C. DISTRIGAZ SUD S.A. Bucharest and Ruhrgas has bought a 30% share package of S.C. DISTRIGAZ NORD S.A. Targu Mures. The cumulated market share of these two distribution companies will decrease to about 90% up to the year 2007, in the same time with licensing of new private distribution operators; The wellhead gas price will increase gradually, reaching import parity in the year 2007, the year Romania joins EU; The diversification of import sources will be looked for, the alternatives at the main external sources (Russian Federation) being the European Union, Caspian Sea zone and Middle East. 1313

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR MAP OF NATIONAL TRANSMISSION SYSTEM OF ROMANIA 1414

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR NATURAL GAS TRANSIT ON THE ROMANIAN TERRITORY 1515

ROMANIA NATIONAL REGULATORY AUTHORITY IN NATURAL GAS SECTOR TRANSIT OF NATURAL GAS FROM CASPIAN AND MIDDLE EAST REGIONS TO EUROPE 1616 PROJECT DESIGNED TO OPEN A NEW GAS TRANSMISSION CORRIDOR FROM CASPIAN / MIDDLE EST REGIONS VIA ROMANIA TO EUROPE Initiators/partners: OMV (Austria), MOL (Hungary), TRANSGAZ (ROMANIA), BULGARGAZ (Bulgaria), BOTAS (Turkey). Total length: 3,400 km, of which 500 km on Romanian territory. Transit capacity: 30 bcm/year; Estimated cost = 4.4 billion Euro : included in TEN (TRANS EUROPEAN NETWORK) Program of European Union. NABUCCO GAS PIPELINE