Gas Infrastructure and Climate

Change Challenge

19th November 2019 Rastislav Ňukovič, CEO

Central European Energy Conference

2019 (CEEC XIII)

Agenda

2

1) Market Development

2) Eustream’s Projects

3) Climate Change

European Natural Gas Sourcing (Flows)

3

23%

20%

7%

3%

36%

Other

(UGS / diff.)

Notes:

Year 2019 is EUS internal FC, data are presented in bcm with GCV 10.48 @ 200 Celsius

Europe includes: EU28, CH, BA, MK, MO, RS, TR, UA

156 155 149 136 125

106 107 119 116 108

51 51 61 65 113

31 40 39 39 27

172 184

199 207 205

530 551

582 578 596

-

100

200

300

400

500

600

700

'15 '16 '17 '18 '19

Natural Gas Sourcing

Russia

Middle East

North Africa

LNG

Norway

Indigenous Prod.

21%18%

4%

3%

34%172 184 199 207 205

-

30

60

90

120

150

180

210

'15 '16 '17 '18 '19

Russia

14 14 16 15 18

-

30

60

90

120

150

180

210

'15 '16 '17 '18 '19

Middle East

31 40 39 39 27

-

30

60

90

120

150

180

210

'15 '16 '17 '18 '19

North Africa

51 51 61 65 113

-

30

60

90

120

150

180

210

'15 '16 '17 '18 '19

LNG 11%

106 107 119 116 108

-

30

60

90

120

150

180

210

'15 '16 '17 '18 '19

Norway

156 155 149 136 125

-

30

60

90

120

150

180

210

'15 '16 '17 '18 '19

Indigenous Prod.

19%

LNG Increase as Result of New Global Liquefaction Capacities and Price Spreads Between Regions

4

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

50,0

1-J

an

-15

1-M

ar-

15

1-M

ay-1

5

1-J

ul-

15

1-S

ep

-15

1-N

ov-1

5

1-J

an

-16

1-M

ar-

16

1-M

ay-1

6

1-J

ul-

16

1-S

ep

-16

1-N

ov-1

6

1-J

an

-17

1-M

ar-

17

1-M

ay-1

7

1-J

ul-

17

1-S

ep

-17

1-N

ov-1

7

1-J

an

-18

1-M

ar-

18

1-M

ay-1

8

1-J

ul-

18

1-S

ep

-18

1-N

ov-1

8

1-J

an

-19

1-M

ar-

19

1-M

ay-1

9

1-J

ul-

19

1-S

ep

-19

1-N

ov-1

9

EU

R/M

Wh

Prices

TTF 1M JKM EUR HH EUR Brent EUR Coal EUR

-7

0

91

9

3

95

1

05

12

8

12

8

33

1

19

26

2

7

6

6

6 13

29

98

26

7

-

-

-

-

22

-

20

40

60

80

100

120

140

160

180

N. A

me

rica

Afr

ica

Asia

& O

ce

an

ia

Mid

dle

Ea

st

Au

str

alia

C. &

S. A

me

rica

Eu

rop

e (

incl. N

O)

CIS

bcm

Global Liquefaction Capacities

2014

2019 (YTD)

FID 2019-2024

LNG Increase as Result of New Global Liquefaction Capacities and Price Spreads Between Regions

5

-

2,0

4,0

6,0

8,0

10,0

12,0

-

2,0

4,0

6,0

8,0

10,0

12,0

Jan

.15

Ap

r.15

Jul.15

Oct.

15

Jan

.16

Ap

r.16

Jul.16

Oct.

16

Jan

.17

Ap

r.17

Jul.17

Oct.

17

Jan

.18

Ap

r.18

Jul.18

Oct.

18

Jan

.19

Ap

r.19

Jul.19

Oct.

19

EU

R/M

Wh

bcm

LNG Deliveries to Europe

LNG TOTAL JKM-TTF spread avg. TTF-JKM freight avg. 80%

-

20,0

40,0

60,0

80,0

100,0

120,0

1-J

an

15-J

an

29-J

an

12-F

eb

26-F

eb

11-M

ar

25-M

ar

8-A

pr

22-A

pr

6-M

ay

20-M

ay

3-J

un

17-J

un

1-J

ul

15-J

ul

29-J

ul

12-A

ug

26-A

ug

9-S

ep

23-S

ep

7-O

ct

21-O

ct

4-N

ov

18-N

ov

2-D

ec

16-D

ec

30-D

ec

bcm

Aggregated Flow

2,015 2,016 2,017 2,018 2,019

European Storages are at their Historical Maximum

6

-

20,0

40,0

60,0

80,0

100,0

120,0

1-J

an

8-J

an

15-J

an

22-J

an

29-J

an

5-F

eb

12-F

eb

19-F

eb

26-F

eb

4-M

ar

11-M

ar

18-M

ar

25-M

ar

1-A

pr

8-A

pr

15-A

pr

22-A

pr

29-A

pr

6-M

ay

13-M

ay

20-M

ay

27-M

ay

3-J

un

10-J

un

17-J

un

24-J

un

1-J

ul

8-J

ul

15-J

ul

22-J

ul

29-J

ul

5-A

ug

12-A

ug

19-A

ug

26-A

ug

2-S

ep

9-S

ep

16-S

ep

23-S

ep

30-S

ep

7-O

ct

14-O

ct

21-O

ct

28-O

ct

4-N

ov

11-N

ov

18-N

ov

25-N

ov

2-D

ec

9-D

ec

16-D

ec

23-D

ec

30-D

ec

bcm

Europe UGS

Tech Cap 2,015 2,016 2,017 2,018 2,019 2,020

Agenda

7

1) Market Development

2) Eustream’s Projects

3) Climate Change

Poland – Slovakia Interconnection

8

SNINA

CS1 Veľké Kapušany (SK) – Strachocina (PL)

Length 164 km (103 km at SK side)

Diameter DN 1,000 mm

Compression power 32 MW

(modification of existing 25MW

electro-turbines at SK side)

Flow Bi-directional

Technical capacity 4.7 bcm (to SK), 5.7 bcm (to PL)

Preparatory works finished at all 103-km route

sections

Ca. 20 kilometers of welded pipeline up to date

Bordering metering station under construction

Poland – Slovakia Interconnection

9

CS05 – Lakšárska Nová Ves

10

Core Technology• 2xGE 23MW + tandem compressors;

• Relocation and upgrade of two units from CS04 to CS05

• Expected technical capacity after completion at the level

of 151 mcm/d (55.1 bcm/y)

Current Main Milestones• Installation completed in 5/2019

• 72h trial operation completed in 11/2019

• End of 11/2019 guaranteed parameters test expected

• 1/1/2020 commercial launch expected

BRU(SK)A - New Capacity Booking

from the Black Sea

DOMINO Gas Field

Located: continental shelf of the

Black Sea

Discovered: 2012

Developed: Petrom and ExxonMobil

COD: 2020

Proven Reserves: ca. 41 – 83 bcm

BRU(SK)A

Veľké ZlievceBaumgarten

Budapešť

Csanádpalota

Corbu

Mosonmagyaróvár

Offshore gas field

- DOMINO

BRU(SK)ACapacity: 4.4 bcm/y

Length: 550 km (RO section)

Diameter: DN800

Mode: one-directional flow

COD: 2022

Physical Flows & Bookings at Exit Veľké Zlievce

12

-

1

2

3

4

5

-

2

4

6

8

10

12

14

bcm

/y

mcm

/d

exVZ Booking 2019/2020

-

1

2

3

4

5

6

-

2

4

6

8

10

12

14

EU

R/M

Wh

mcm

/d

exVZ Booking vs. Real Flow 2019

yearly quarterly monthly

daily estimated Flows (Allocation)

Technical Capacity aux

EASTRING PIPELINE - CONNECTING MARKETS

Capacity: 20 bcm/y (first stage) up to 40 bcm/y (optionalfinal stage)

Length: 1,208 kmSK 17 kmHU 283 kmRO 646 kmBG 262 km

Diameter: DN1400Mode: bi-directional flowCAPEX estimated: 2,600 mEURCo-financed by the Connecting Europe

Facility of the European Union

Agenda

14

1) Market Development

2) Eustream’s Projects

3) Climate Change

Climate Change – The Challenge and Facts

15

• In the last 800ths years the CO2 concentration has fluctuated between 180 – 300 ppm; since 1950 increased up to 400ppm

• CO2 is annually generated in great quantities of ca. 750 Gt; Vast Majority (95%) of CO2 is generated by natural processes Out of the 5%, which is generated by humans only around 10% is generated in the EU (c. 4.5 Gt averall GHG)

• EU‘s ambitions alone have effect on 10% CO2 generated by humans resp. c. 0.5% of the total CO2 production on Earth

• Climate change is a global phenomenon (the effects occur irrespective of the location of CO2 emissions)

• To achieve the relevant goal of maximum +1.5 degrees Celsius below pre-industrial levels, European contribution alone is almost negligible and global measures are required

Climate Change – European Results

16

• However, while EU is not meeting the energy demand targets, it has already substantially reduced its CO2 emissions and is on track to achieve the 2020 targets

• Unfortunately, the contribution to climate is unobservable as rest of the world has increased in CO2 emissions exceeding the EU’s savings multiple times: e.g. in 2018 EU has saved c. -70mn tones and the rest of the world has increased its emissions by +718 mt

The Results, The Ambition and The Consequencies

17

• As the reduction has been substantially focused on the Power Sector, the Power Price has increased radically in countries such as Germany above 300 EUR/MWh. USA average price at the moment is at 121 EUR/MWh

• The share of household’s expenditure on energy is already reaching over one quarter of income in certain countries

• EU while still not clearly defining how to meet the 2030 targets, is now on its way to 2050

• It has taken the lead in reducing the CO2 emissions by setting a target which requires to reduce by 40% against the 1990‘s levels by 2030 and sets the ambition for 80%—95% reduction by 2050

• EU’s strategy is based on the document ‘’Clean Planet for All’’

• Europe, in its study outlines several decarbonization Pathways utilizing a range of technologies, which are presently not employed at all or in very low scale

• The study indicates that these measures may lead to a cost of c. 1,400 bnEUR (11% GDP) to c. 2,500 bnEUR all in real terms of 2013, thus nominal terms may be almost two times as much by 2050

• We firmly believe that the continuation of the current ambitions (under the absence of a wider due analysis) shall lead to substantial negative consequences for the EU

• The fact that Europe will burden itself with the excessive costs of the announced ambitions shall jeopardize its competitive position on the global market (most notably in a scenario where other major economies are not following the decarbonization path or follow much more loose targets)

• At the same time more optimal solutions using efficient deployment of technologies (in or outside of the EU) are being ignored along the way (still with EU remaining as the leader of cleantech!)

….All this to reach a saving which will be quite likely offset by growth of CO2 of a single country in a few years…

The Proposal

18

We believe that before a decision on 2050 is made in Europe a relevant dialogue and due analysis is required and at least the following examined:

• EU should (under international cooperation) create a full list of available measures to reduce CO2 using the existing available technology

• This list should cover not only the EU land but also countries abroad (i.e. China, India, Africa etc.)

• The measures should be organized as per their efficiency (i.e. the amount of EUR spent vs. CO2 reduction achieved). It is certain that 1 EUR spent in replacing a very old coal power plant abroad (or preventing a construction of such) shall deliver much greater result than deployment of heavily subsidized pilot technologies in EU in large scale.

• Simultaneously, Europe would continue to protect its position as the cleantech leader remain in possession of the relevant know-how which could be deployed around the world.

• Europe is able to meet its 2030 emission targets using currently available technology without excess economic burden on EU citizens.

• The time period until 2030 may be efficiently used in deploying new technology pilot projects without embarking on to large-scale subsidization schemes with questionable feasibility as well as economic outcome.

• Deployment of R&D projects or further analysis of renewable gases utilization in reasonable and responsible scope

• Regular re-assessing of targets based on R&D results, on the back economic implications and available technologies

ENTSOG Roadmap for Gas Grids

Gas Infrastructure and Climate

Change Challenge

19th November 2019 Rastislav Ňukovič, CEO

Central European Energy Conference

2019 (CEEC XIII)