1. NATURAL GAS – EFFICIENT INSTRUMENT FOR TRANSITION TO LOW CARBON ECONOMY Svetoslav Ivanov Deputy Executive Director Overgas Inc. AD Sofia, 07.05.2012

2. Natural Gas CARES for the World Global production will increase over the next 20 years, with growing supplies from both conventional and unconventional resources. The natural gas sector has the best safety record in the industry. Natural gas is clean. Natural gas produces less nitrogen oxide than coal, and more than 50% less CO 2. Gas produces no sulphur and no solid waste. Natural gas promotes sustainabl e transport. Natural gas vehicles can improve air quality and energy efficiency in large cities. Natural gas is abundant. Natural gas is safe. Natural gas is available now. Natural gas is flexible. Gas can serve as a flexible partner in power generation for intermittent energy sources like wind and solar, facilitating the phase-in of renewables. Natural gas is the affordable choice. Modern gas- fired plants have a capital cost that is half that of coal, one-third the cost of nuclear and one-fifth the cost of onshore wind. Natural gas does not require subsidies. Unlike heavily subsidized renewable technologies, natural gas use allows countries to affordably reduce their emissions. Natural gas is efficient. Modern gas- fired power plants are 40% more efficient than coal plants. Natural gas saves time. Gas-fired plants require less construction time than nuclear or coal plants. A ffordable R eliable E fficient Gas is readily available from a variety of sources, both pipeline and LNG. The environmental benefits of gas can be realized immediately. Natural gas is a clean, affordable, reliable, efficient, and secure energy source. It has a vital role to play in a sustainable energy future. C lean S ecure

3. 3 Source: MMD 350 (100%) 850 (230%) 1,200 (340%) Lignite-fired power Hard coal-fired power Gas-fired CCGT Emission of CO 2 (in kg CO 2 /MWh) Gas: Cleanest Fossil Fuel Lowest emission of CO2

4. 4 Gas: The Cleanest Fossil Fuel Also lower on SO X and NO X Global warming effect of NO X is considerably higher than that of CO 2 (up to 300 times for 100 years (source ICBE)) Kg/MWh Source: DOE 2010 (NETL) Mercury emission from coal: 4.3 10 kg/MWh -6

5. Particulate emissions from heating systems mg/kWh * Emissions based on use of briquettes and lignite from the Rhineland-area in Germany ** Emissions based on use of briquettes LUWB Landesanstalt für Umwelt, Messungen und Naturschutz Baden-Württemberg; Average emission factors for small and medium combustion installations without exhaust gas after treatment. Status: 2006, BGW; Source: www.asue.de 5

6. 6 Source: MMD 2 5 1 4 3 Capital costs of options may vary considerably in absolute terms, but very little in relative terms Indicative, cost levels million $/MW Natural Gas is Affordable Gas-fired power generation Lowest capital costs per MW installed On a per kW basis, natural gas is very competitive relative to other fuels.

7. 7 Gas-fired power: Efficient Plus shortest time for permitting etc years Source: ETP, IEA 2010 Short construction time reduces risks demand uncertainty.

8. 8 Natural Gas and Electricity Transmission Lower cost of energy transmission of gas vs electricity Gas pipelines offer more energy transportation capacity Lower visual impact from transport of gas vs electricity Easier and more economic to store gas than electricity Source: IGU: ”Natural Gas Unlocking the Low-Carbon Future”, September 2010 The drawing shows an example of 40 TWh of electricity produced from 6 Bcm/yr of natural gas carried in the pipeline. The foot-print is very different and illustrates the benefit of gas transmission over electricity tramsmission (Source: Statkraft 1988).

9. 9 Basis: equivalent of 50 million m 3 /day of natural gas (1 large pipeline 48” or 56”) (diesel) Source: EDI Energy Transportation daily equivalents

10. 10 Conventional Reserves: plenty and more to come Global proven gas reserves have more than doubled since 1980, reaching 190 trillion cubic metres at the beginning of 2010 Source: IEA 2011 Growing proven reserves

11. When You Need Electricity You Can’t Flick a Switch and Turn on the Sun and Wind 1.Variability creates complex grid balancing and supply security issues 2.Gas-fired generation can play a key role in maintaining grid stability and supply security 11

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13. Source: MMD Based on 2,500 hrs of onshore wind and 3,000 hrs of complementary supply from gas or coal CO 2 Emissions in kg/Mwh without CCS with CCS The example illustrates that wind combined with gas reduces CO 2 emission. Wind combined with coal back-up produces more CO 2 than a gas plant on its own Natural Gas: A suitable option for complementing wind 13

14. Natural gas consumption per capita in the EU countries

15. Natural gas in the energy consumption structure 22% Natural gas in the EU EEC structure 25% Natural gas in EU PEC structure

16. DEMAND IN THE LAST 10 YEARS

17. Forecast for natural gas demand in the coming years

18. PREREQUISITES FOR NATURAL GAS DEMAND GROWTH Rapid development of distribution due to the maintenance of natural gas competitive edge; Rapid expansion of transport alternative technology – CNG; Plan for development of transmission grid =>new territories for natural gas distribution; New power generating capacities of natural gas; New areas of natural gas use.

19. TIME FOR GAS-GAS COMPETITION Under the directive the market is free: since 2004 for big industrial consumers; since 01.07.2007 for all. “De jure” the market is free in Bulgaria: since 2004 for big industrial consumers; since 01.07.2007 for all. “De facto” the market has never been liberalised in Bulgaria.

20. Alternative sources for natural gas supply to Bulgaria Interconnector Bulgaria– Romania (IBR) Interconnector Bulgaria – Serbia I nterconnector Bulgaria – Greece (IGB) CNG, supply by tankers across the Black Sea Interconnector Bulgaria – Тurkey (ITB) Up to 1 bcm/y Up to 1,5 bcm/y Up to 2 bcm/y. Up to 5 bcm/y Up to 1 bcm/y

21. LIBERALISATION PREREQUISITES ARE AVAILABLE TODAY AS WELL Demand about 2.8 tо 3 bcm/y against a supply of about 3.5 bcm/y - i.е. the supply exceeds the demand by between 17 % and 25 %; At least four traders with ensured gas; Willingness and readiness expressed by large end users to join the free trade.

22. THANK YOU FOR THE ATTENTION! www.overgas.bg svetoslav_ivanov@overgas.bg