Opportunity for Cooperation in Energy

Sector between Russia and Japan in

Eastern Siberia and the Russian Far East

International Conference on Energy Cooperation between Russia and Japan Mitsui & Co. , Ltd. Chief Regional Representative in CIS Hiroshi Meguro

Current Global Oil Demand and Its Outlook

Oil is one of the most stable energy resources given that world primary energy demand will increase, and demand outlook for oil is expected to increase.

It will be led mainly by Asian countries such as China and India.

1024 947

North America 312 440

Central & South America

879

Europe & Eurasia

810

385 567

Middle East

171 288

Africa

2013

1415

Asia Pacific

World total 【Unit: mil tonnes】

4185 5065

2013 2035 Reference：BP Statistics

Oil Production and Export in Russia (2014）

72% and 26% of produced oil is exported to European and Asian regions respectively. Oil production from West Siberia, which produces about 60% of the oil, is in a declining

trend. It is expected to increase production in the frontier areas such as East Siberia. Russia is focusing on the development of those areas promoting development programs

of the Russian Far East and is intending to increase exports to growing Asian market.

Oil production: 10.56 mil bpd

(4.75 mil bpd is exported)

To Europe: 3.42mil bpd

Reference：U.S. Energy Information Administration, Wood Mackenzie

To Asia: 1.24 mil bpd <Main breakdown> ①ESPO pipeline： 0.81 mil bpd ②Sakhalin 1 & 2： 0.29 mil bpd

＜Oil Production Outlook＞

Existing fields

mil tonnes per year

Discovered

Undeveloped

Offshore

Far East frontier, Shale

Onshore exploration,

others

Crude supply to Asia is increased after ESPO pipeline start up. Crude supply to Asia is also increased contributing to strengthening Japan’s energy

security and diversification of oil resources. ESPO expansion may boost crude oil supply to Asia.

ESPO Pipeline Capacity and Crude Destination History

Concentrated in Asian markets such as Japan and China

Reference：Transneft

＜Current Capacity＞ ① Nakhodka（Kozmino port）： 600 thousands bpd (30miltons/year） ② China Daqing spur： 300 thousands bpd (15mil tons/year） ＜Expansion Plan＞ ※Planned to be expanded by 2019 ① Nakhodka(Kozmino port) ： 1000 thousands bpd(50mil tons/year） ② China Daqing spur： 600 thousands bpd(30mil tons/year)

Export from Nakhodka(2014)：501 thousands bpd

Export to China(2014)： 300 thousands bpd

Total： 501 thousands bpd

Total： 314 thousands bpd

Gas Field Oil Field

①External factors

Maturation of European economy, which is traditional export market for Russian oil and gas

EU’s intention to decrease dependency on Russian gas

Growing energy demand in Asia

Importance of the Development of Resources in Eastern Siberia and the Russian Far East

②Internal factors

Production decline of existing oil & gas fields mainly in West Siberia

⇒Development of frontier areas such as East Siberia is required

Diversification of energy market is required

Development of resource-rich Far East area is required.

Development of East Siberia and Far East Russia is most important issue for Russia.

Energy procurement from Far East Russia significantly contributes to Japan energy security.

Development of this area is beneficial both for Russia and Japan. Thus, Mitsui has the intention to be engaged in projects from upstream to downstream in the area.

＜Environment Recognition Surrounding Russia＞

12 cities with over 1mil population

St. Petersburg Ural mountains

Moscow

Far East Federal District

Trans-Siberian Railway

Siberian Federal District

12 cities with over 1mil population

Most part of population lives in this area

Appendix

Suppliers of Crude Oil to Japan

North America

Central & South America

Russia

Asia Pacific

World total 【Unit: mil tons】

2005

Reference：METI

188,1

Middle East

158,3 140,8

11,9 8,2 9,3

0,0 0,4 2,6

1,5 13,0 13,9

0,0 0,0 0,0

208 183 170

2010 2014

Africa

6,9 3,0 3,0

Suppliers of Crude Oil to USA (2014) 142,0

North America

109,2

Central & South America

3,1

Europe & Eurasia 91,2

Middle East

14,5

Africa

1,9

Asia Pacific

World total 【Unit: mil tons】

362

2014

Reference：U.S. Energy Information Administration