Opening the Southern Gas Corridor

EU Energy Policy in Transition Brussels, 16 April 2013

Michael Hoffmann, External Affairs Director

15.04.2013 TAP's Corporate Presentation

Southern Gas Corridor Projects

Diversity and security of energy supply for Europe

• The EU’s initiative to enhance Europe’s energy security by connecting to new

sources of natural gas in the Caspian Sea

• Two pipeline projects pre-selected by Shah Deniz Consortium

• 10 bcm/a initially available from Shah Deniz will be able to supply 7 million

households in South Eastern and Western Europe

What is Involved?

3

Total investment of approx. USD 45 billion

1. Drilling of wells

2. Offshore production

3. Onshore procession Sangachal Terminal

4. SCP

5. TANAP

6. TAP

7. Expansion of Italian network (SRG)

8. Further transport to western Europe

and the Balkans

SDC Schedule

Experts doing things the right way, at the right time

1. Submission of RFP to Shah Deniz Consortium (SDC) 1 Oct 2011

2. Selection of Southern and Northern export options (Feb & June 2012 )

3. Decision Support Package to SDC – end of March 2013

4. Shah Deniz final decision on export route in June 2013

5. SDC members to take up equity option one month after selection

6. TAP to take Resolution to Construct (RTC) in Sept 2013

7. Shah Deniz Final Investment Decision (FID) in Oct 2013

8. Construction of TAP to start early 2015

9. Ready to receive first gas from Shah Deniz 2019

TAP submits final transportation bid on 28th March 2013

Shah Deniz Requirements

Commerciality

Project Deliverability

Financial Deliverability

Engineering Design

Excellent cooperation between TAP and Shah Deniz

March 2013

TAP submitted Decision Support Package (gas transportation bid) to Shah Deniz

November 2012

TAP’s shareholders conclude Shareholder Agreement with SOCAR, Total and BP

August 2012

TAP’s shareholders sign Funding and Equity Agreement with SOCAR, Total and BP with an option to take 50% equity in project

June 2012

TAP signs Cooperation Agreement with Shah Deniz Consortium

February 2012

Shah Deniz Consortium selects TAP as priority route to southern Europe

Alignment & Transparency

Operabiltiy

Scalability

Public Policy Considerations

TAP's Key Features

Alignment with EC policy objectives • Designed to expand from 10 to 20 bcm (plus) per year

• Up to 80% of physical reverse flow and potential gas storage

• Connecting directly to TANAP on the Turkish-Greek border

• Interconnection with various existing and proposed pipelines providing energy security in SE Europe

• Providing Bulgaria with a new source of gas through IGB or the Kula-Sidirokastro Interconnector

• Delivering gas and interconnecting to multiple markets in Western and Central Europe

• Bringing major foreign direct investment and employment: Greece – Euro 1.5 bln,- supporting economic

recovery in the Eurozone

6

?

?

?

TAP can connect SD/new gas to Europe

1. TAP will connect to the Italian

natural gas grid to provide firm

capacity at the Italian virtual trading

point (PSV)), from which all Italian

gas exit points can be reached

2. TAP can reach Baumgarten via

TAG pipeline to have similar

transportation capacity as other

planned pipelines, e.g.:

• 6 bcm/a reverse technical capacity

• 25 bcm/a average swap potential (2011)

3. TAP can reach Germany and

France via Transitgas pipeline

through Switzerland, e.g.:

• virtual backhaul of approx 10 bcm/a

• planned physical backhaul of 15 bcm/a

4. Baumgarten: Despite developed

pipeline infrastructure, grid extension

is necessary to reach markets of

western Germany from Baumgarten

TAP will have an option to link to

Baumgarten, and moreover, it will reach

Germany & France via Switzerland and

will have access to the Italian PSV

trading hub

TAP can deliver to the UK and more….

Grid operators Snam Rete Gas and Fluxys

signed Memorandum of Understanding in

August 2012 to develop physical reverse

flow capacities between Italy and the UK:

• Managing Director of FluxSwiss announced

that the company is ‘committed to investing

in the project to enable south-to-north

flows“

Objective: interconnect gas markets of Italy,

Switzerland, Germany, Netherlands and

Belgium

Volume: up to 15 bcm/a physical reverse flow

by 2018

This will create a new natural gas supply

route directly to the UK in the future.

TAP’s Connection to the Balkans TAP can provide Bulgaria with a new source of gas through existing and planned

infrastructure

Reverse flow on Kula/Sidirokastro

Interconnection point exporting Russian gas from Bulgaria

into Greece.

Existing capacity (Bulgaria-to-Greece direction): 4.3 bcm/y

at a minimum pressure at Sidirokastro MS of 47,74 barg.

Reverse Flow capacity: up to 4.3 bcm/y

IGB

IGB – is designed to connect Greece (Komotini) to Bulgaria

(Stara Zagora).

Planned Capacity: up to 3 bcm/y (option for capacity

increase to 5 bcm/y)

Int. BG

-Serbia* SERBIA

FYROM

*operations scheduled to start in 2015 9

Supported by Strong Partners

42.5% • Swiss energy company with

European focus

• Together with its partners, supplies

electricity to around 3 million

people

10 TAP's Corporate Presentation

42.5%

• Second largest gas supplier to

Europe

• The world’s largest deepwater

operator (8,000 km of subsea

pipelines)

• Partner and commercial operator

of the Shah Deniz consortium

15%

• Europe’s largest private utility

supplying 53 billion m³ of gas

yearly

• Own supply system comprises

11,600 km of gas pipelines

• Operates gas fired power plants

in Italy

TAP’s shareholders are the

world’s leading specialists

in the implementation of

pipeline projects having

developed over 20,000 km

of onshore and offshore

pipelines around the globe

“A” rated companies with a combined market capitalisation of over one hundred billion Euros

Massive Effort in Developing TAP

11

Front-end engineering design completed

Key Features:

• FEED completed March 2013

• Full ESIA submitted in Italy (March 2012), Albania (January 2013), full ESIA to be submitted in Greece (2Q

2013)

• Pre-qualification for steel pipe producers (January 2013)

• Frame agreements with major suppliers

Technical Excellence Mobilised:

• World class engineering expertise of Statoil and E.ON mobilized – 2 TSPs, approx. 40 subcontractors, 200

specialists working for TAP every day

• Analyzed 10,000 km of terrain in detail to identify TAP route of approx. 870 km

• Organised 150 technical field missions, offshore and onshore surveys

TAP's Corporate Presentation

Robust and creditworthy shareholders support a strong and solid business case, thus

enabling greater flexibility of financing conditions.

• Liquidity in very difficult & challenging economic climate

• No reliance on public funding to succeed

• Lower CAPEX compared to other projects in Southern Gas Corridor

• TAP initiated discussions with International Financing Institutions including EBRD & EIB as

well as various Export Credit Guarantee Agencies

• Banks signalled willingness of the market to provide financing

15.04.2013 12

Sound Financing Approach

Investment confidence

March 2013

TAP and members of the Shah Deniz Consortium

selected Société Générale Corporate & Investment

Banking to provide financial guidance to the project

during its preparatory and construction phases.

• finance strategy

• bankability review

• credible and deliverable

funding plan for TAP

TAP’s Advanced Status

Political / Agreements

• Intergovernmental Agreement (IGA) signed (February 2013), Ratifed in Albania 25th March, and

Greece 10th April

• Host Government Agreement signed and ratified with Albania (15th April 2013)

• Host Government Agreement with Greece planned to be concluded (April 2013)

• TAP and TANAP Cooperation Agreement signed (December 2012)

• TAP becomes “project of national importance” in Albania (December 2012)

• Memorandum of Understanding (MoU) between Albania, Greece, Italy signed (September 2012)

• MoUs in South Eastern Europe on interconnection with IAP (Plinacro Ltd, Croatia; BH-Gas, Bosnia;

the government of Montenegro; the government of Albania; Geoplin Plinovodi, Slovenia)

Technical

• Front-end engineering design (FEED) completed (March 2013)

• 10,000 km of terrain analyzed, world class engineering expertise of Statoil and E.ON mobilised

• Full ESIA submitted in Italy (March 2012), Albania (January 2013, approved in April), ESIA Greece

(1Q 2013)

• Pre-qualification for steel pipe producers (January 2013)

• Environmental permit received in Albania (March 2013)

Cooperation with

Shah Deniz (SOCAR,

BP, Total) /

Commercial

• Decision Support Packages submitted to Shah Deniz (28 March 2013)

• Shareholder Agreement concluded with Shah Deniz (November 2012)

• Funding and Equity Option Agreement signed with Shah Deniz (August 2012)

• Cooperation Agreement signed with Shah Deniz (June 2012)

• TAP selected as priority southern route by Shah Deniz (February 2012)

• Third Party Exemptions approved by three National Energy Regulators (4th March 2013), submitted

to European Commission

Finance

• TAP initiated discussions with International Financing Institutions including EBRD & EIB

• Financial Advisor selected (Société Générale)

• No reliance on subsidies or grants

Key Political Milestone

On 13 of February 2013 the governments of Italy, Greece and Albania signed

Intergovernmental Agreement on TAP in Athens, Greece. The IGA has now been ratified by

the Albanian and Greek Parliaments.

IGA signed in Athens by

Dimitris Avramopoulos, Greek

Foreign Minister, Edmond

Haxhinasto, the Deputy Prime

Minister and Energy Minister of

Albania, and Corrado Passera,

Italian Development Minister.

IGA solidifies a range of key commitments by

Greece, Italy and Albania to the forward

development, construction and operation of

the TAP pipeline

Conclusion - SD is just the start….

15

• Azerbaijan’s role as a stable supplier of gas

contributing to Europe’s energy security will

continue to grow in the next decades

• Production from gas fields in the Caspian

could increase Azerbaijan’s natural gas

production to c.40 bcm/a by 2030

• The giant Caspian gas and condensate field

Shah Deniz – 1.2 tcm

• SOCAR’s current exploration of the Umid

field and Babek along with Total’s

exploration of Absheron,

• Other fields including ACG Deep,

Nakhchivan, Shafag-Asiman, and Zafar-

Mashal resulting in overall proven reserves

of approximately 2.5tcm

• TANAP IGAs and HGAs signed and ratified

by Azerbaijani and Turkish parliaments

represents a clear export route to the border

with the EU

Source: Gulmira Rzayeva, Center for Strategic Studies under the President of Azerbaijan

Azerbaijan: reliable & growing supplier of gas to Europe

Thank you!

Find out more about TAP at:

www.trans-adriatic-pipeline.com

15.04.2013 16 TAP's Corporate Presentation