CREATING A CONSORTIUM FOR GAS TRANSIT Masalkova Anastasia, PhD student Moscow, 28 september 2013

Slide 2 GERMANY FRANCE TURKEY BRITAIN UKRAINE POLAND HUNGARY RUMANIA BULGARIA SWEDEN DENMARK NEITHERLANDS NORWAY Gas import requirements - bcmShale gas resources - bcm Significant gas reserves in the EU is concentra ted in the Netherlan ds, France and Poland SOURCE: Annual report, Ernst & Young, Shale gas in Europe: revolution or evolution? 2012.

Slide 3 PROBLEMSPROSPECTS Environment al and social factors Demand for gas The availability of infrastructure and capacity gas-oil services Mode of taxation and regulation Mining-geological conditions and the availability of resources Energy security Economic growth (government revenue from taxation) Creation of new jobs in the private sector

Estimates of technically recoverable shale gas resources in Europe Slide 4 5,3 Annual consumption of 14 billion cubic meters. m, of which only 5 billion cubic meters produced in Poland itself, the reserves of shale gas on such a scale can fully support the needs of Poland's gas for several centuries to come SOURCE: Golden Rules for a Golden Age of Gas. World Energy Outlook. Special Report on Unconventional Gas. OECD/IEA, 2012.

EVOLUTIONREVOLUTION Geological features and the amount of resources The disappointing results of the drilling Discovered reserves are not cost- effective for development Low flow rate per well for the continuation of production Advances in the early stages of exploration Proven reserves amount is higher than expected level The rapid increase in production Environmental and social factors Restriction / prohibition of hydraulic fracturing the results of the study of ecological effects Increased public pressure on the government to stop development of the fields to determine the possible consequences Studies show about the safety of hydraulic fracturing on human health and environment Society's desire to lower prices energy Taxation and regulation The possibility of a pan-European about regulation of shale gas The inclusion of shale gas in the European legislation governing the quality of motor fuel and greenhouse gas gases Stimulation of individual countries operators of shale gas Expedited permitting process to develop State support for R & D in shale gas Demand for gas The slowdown due to measures designed to facilitate the development of low-carbon economy The weakening of the European economy Increasing demand for natural gas for the purpose of its Frequency power generation The role of gas as a source of intermediate energy for the transition to a low-carbon based economy Opportunities in the field infrastructure and commercial services Deficiency of essential equipment and qualified personnel Lack of funds for investment in new gas infrastructure facilities Fast adaptation of commercial segment services to the needs of the shale gas sector Cost reduction under the influence of technology Slide 5

Slide 6

Source: Compiled on the basis of BP Statistical Review of World Energy import pipeline from Algeria demand for gas in the EU house production imports from Russia imports from Norway pipeline imports in the form of LNG Bcm Source: based on IEA report 2012 Scenario production of shale gas in the EU by 2035 maximum medium minimum maximum Slide 7 Bcm

Companies in the consortium retain their economic and legal independence; The goal of the consortium is to join efforts for the implementation of specific investment projects, the implementation of sciences - and capital projects; Parties to the consortium agreement can serve a variety of subjects of investment activity, regardless of the extent of their participation in the project (investors, public authorities, suppliers, contractors, architects, insurance companies, consulting firms and other participants). Slide 8

Strong points: The presence of significant resources SG in Europe. EU - the second largest gas market in the world (the demand for gas in 2011 amounted to billion cubic meters) - according to the BP Statistical Review. The presence of gas pipeline infrastructure in the EU. Weak points: SG is currently characterized by low-impact, it is necessary to drill more wells at a closer distance than conventional gas production. All of this is expensive. Shale gas resources in the EU are characterized by a low degree of scrutiny and thus low reliability. Capabilities: Possible measures of the state to support and stimulate the development of the SG (tax breaks and other incentives). The presence of unconventional gas resources in import- dependent Europe is having a positive impact on the image of natural gas, and thereby contribute to the strengthening of the role of gas in the energy balance of the EU. Country completely dependent on natural gas imports have added impetus to the development of unconventional gas production Bluster: A possible refusal of states to measures to support and stimulate the development of the SG (no tax breaks and other incentives). The protests of the local population in some European countries against the use of hydraulic fracturing. The legislative ban on the use of hydraulic fracturing (in France, Bulgaria). SHALE GAS Slide 9

THANK YOU FOR ATTENTION Slide 10