Energy Security and Trends in Latin America October 18, 2007 CONFIDENTIAL © 2007, All rights reserved, Cambridge Energy Research Associates, Inc., 55 Cambridge Parkway, Cambridge, Massachusetts No portion of this presentation may be reproduced, reused or otherwise distributed in any form without prior written consent.

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 1 Terms of Use ● CERA content and information, including but not limited to graphs, charts, tables, figures, and data, are not to be disseminated outside of a client organization to any third party, including a client’s customers, financial institutions, consultants, or the public. ● Content distributed within the client organization must display CERA’s legal notices and attributions of authorship. The accompanying materials were prepared by Cambridge Energy Research Associates, Inc. (CERA), and are not to be redistributed or reused in any manner without prior written consent, with the exception of client internal distribution as described below. CERA strives to be supportive of client internal distribution of CERA content but requires that Some information supplied by CERA may be obtained from sources that CERA believes to be reliable but are in no way warranted by CERA as to accuracy or completeness. Absent a specific agreement to the contrary, CERA has no obligation to update any content or information provided to a client.

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 2 Energy Security and Trends in Latin America ● What is energy security and how it has traditionally been approached? ● What are the new trends affecting energy security? ● How does energy security present itself in Latin America and how relevant is it? ● What are the key trends and impacts of energy security in Latin America, and in the Southern Cone in particular?

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 3 Energy Security – Global Context Regions’ share of global oil demand and productive capacity Source: Cambridge Energy Research Associates. Percentage Share of Demand Share of Supply

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 4 Energy Security – Global Context High Concentration of Productive Capacity Source: Cambridge Energy Research Associates. 12% 13% 8% 4% 6% 14% 9% Asia Pacific Africa Northwest Europe United States Canada Latin America Eurasia 33% Middle East Marine transportation routes possible chokepoints

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 5 Energy Security – Global Context WTI price and linkage to OPEC spare capacity Source: Cambridge Energy Research Associates. *Estimated. WTI price US$/Barrel Oil Embargo Producers fighting for market shares Low spare capacity as OPEC compensates for loss production from Iraq, Venezuela, Nigeria and US golf CERA Base Case CERA High Price Case

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 6 Traditional Measures to Manage Energy Security ● Energy Security System (1973) —IEA, monitoring, storage, energy conservation, collaboration in case of disruption ● Diversification of Supply —Source of supply and type of supply (nuclear, ethanol, renewable energy…) ● Security Margins —Spare capacity, storage, strategic reserves, stockpile of equipment… ● Energy Integration ● Energy Conservation

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 7 Energy Security Changing Trends : Mounting Pressures Concentration of Productive Capacity to 2012—“O-15” Source: Cambridge Energy Research Associates. Non OPEC OPEC “O-15” Share of Global Capacity 30% 40% 50% 60% 70% Non OPEC OPEC

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 8 Energy Security Changing Trends : Growing Preoccupation with Natural Gas EU30- Gross Inland Consumption Source: Cambridge Energy Research Associates. *Estimated. Percentage In 2006, 44% of Europe’s gas demand was imported (28% via pipelines, 16% via LNG), an increase from 33% in 2000 By 2008, the share of import is expected to rise to 48% In 2006, 44% of Europe’s gas demand was imported (28% via pipelines, 16% via LNG), an increase from 33% in 2000 By 2008, the share of import is expected to rise to 48%

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 9 Energy Security Changing Trends : Growing Role of Asia Oil and Natural Gas Demand Growth Source: Cambridge Energy Research Associates. *Estimated. Demand Growth (Percentage) OilNatural Gas

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 10 Energy Security in Latin America Abundance of Reserves Share of natural gas proven reserves in Latin America Share of oil proven reserves in Latin America 68% 59% 9% 13% 10% 9% 8% Argentina Brazil Bolivia VENEZUELA Mexico Trinidad & Tobago

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 11 Energy Security in Latin America: Difficulties to Transform Underground Wealth in Reality Oil production in Latin America Source: Cambridge Energy Research Associates. *Estimated. Thousands Barrels per Day Mexico Venezuela Other Latin American Producers Brazil

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 12 Energy Security in Latin America: Difficulties to Transform Underground Wealth in Reality Bolivia’s Commitments and projected deliverability MMcm per day Bolivia Deliverability (CERA Base Case) Brazil GSA Other export to Arg./Bra. Domestic Demand Source: Cambridge Energy Research Associates. *Estimated. Argentina GSA Mutun project Bolivia’s Commitments

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 13 Energy Security in Latin America: Difficulties to Transform Underground Wealth in Reality Argentina’s Gas production reaching its limit? Source: Cambridge Energy Research Associates. Gas Production MMcm per day

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 14 May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Energy Security in Latin America: Failures of Regional Integration Argentine gas exports cuts to Chile as a percentage of normal requirements Source: CNE.

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 15 Energy Security in Latin America: Difficulties to Transform Underground Wealth in Reality Southern Cone intra-regional natural gas imports Source: Cambridge Energy Research Associates. *Estimated. Million Cubic feet per Day

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 16 Importing LNG Terminals Announced Existing Under Construction/Contracted Exporting LNG Terminals Pecem, Brazil 7 MMcm per day (2009) Baia de Guanabara, Brazil 14 MMcm per day (2008) South of Brazil Quintero, Chile 6–10 MMcm per day (2009) Mejillones, Chile Peru LNG (2010) 4.2 million tons per year Uruguay Argentina Energy Security in Latin America: LNG to Replace Regional Flows? Main LNG project in South America Source: Cambridge Energy Research Associates.

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 17 Energy Security in Latin America: Growing Pressures in the Coming Years Gas supply growth in the Southern Cone Source: Cambridge Energy Research Associates. *Estimated. Gas Supply Growth (2000=100) Brazil Argentina Chile

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 18 Energy Security in Southern Cone: Uneven Use of Traditional Measures to Manage Energy Security ● Diversification of Suppliers ● Energy Diversification ● Security Margins ● Energy Integration ● Energy Conservation ● Integrated Information ArgentinaBrazilChile

© 2007, Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 19 Energy Security and Trends in Latin America Key TakeAways ● Regional disparities are likely to maintain energy security concerns high in the coming years ● Energy security concerns could also become a source of opportunity for resource rich countries —As large consuming nations try to secure access to resources and generate a new inflow of capital for the E&P sector ● Energy security through diversification and growing interdependence with global markets will come at a price —Price volatility, higher prices than today, higher sensitivity to global surges of energy security concerns ● Diversification to non-hydrocarbon based energy will increase considerably ● Efficient energy security mechanism will have to encompass more than just energy and suppliers’ diversification —Integrated information system, energy conservation, reserve margins and storage…

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