CIS Oil&Gas CIS Oil&Gas Agoria Carbon Energy ClubAgoria Carbon Energy ClubMoscow, April 4Moscow, April 4thth, 2011, 2011

CIS Oil&Gas CIS Oil&Gas Agoria Carbon Energy ClubAgoria Carbon Energy ClubMoscow, April 4Moscow, April 4thth, 2011, 2011

Johan Vanderplaetse

VP CIS & Turkey

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BRIC Gross Domestic Product (GDP) BRIC Gross Domestic Product (GDP) Per Capita Per Capita BRIC Gross Domestic Product (GDP) BRIC Gross Domestic Product (GDP) Per Capita Per Capita

2010 GDP Per Capita $(000’s)

2000-2010 GDP Per Capita CAGR

India

China

Russia

Brazil

$15

$15

$12

$3

Russia Offers an Established Market and Steady Growth

2010-2020 GDP Per Capita $ ∆ (000’s)

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Macroeconomic Indicators RussiaMacroeconomic Indicators RussiaMacroeconomic Indicators RussiaMacroeconomic Indicators Russia

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Indicators 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GDP, % 6.4 8.2 8.5 5.2 (7.8) 4.0 4.8 4.9 5.0 5.2 5.3

Inflation (year‐end), % 13.0 10.0 9.0 14.0 8.8 8.8 8.0 6.5 6.1 5.7 5.2

Unemployment rates, % 7.2 7.2 6.1 6.3 7.9 7.6 7.2 6.8 6.2 5.8 5.5

GFI, % 10.6 18.0 20.8 10.9 (15.9) 3.5 8.1 9.1 9.6 6.9 6.0

Industrial output 5.1 6.3 6.8 0.6 (9.3) 8.2 5.7 5.9 6.2 6.6 6.0

Rouble/$ (year‐end) 28.3 27.2 25.6 24.8 30.3 30.4 28.0 28.8 29.5 29.0 28.7

Recent Economic Developments

• After a deep fall during the 2008 downturn, Russia’s economy recuperated very fast (driven by high oil prices)

• But this also shows how dependent Russia remains from natural resources

• Russia’s GDP growth at 4%, current account balance and fiscal deficit perform better then expected

• Russia maintains enviable external account dynamics, with a robust current account surplus, limited foreign debt and high reserve holdings

• US $1trn public-private investment plan over the long term will substantially modernise Russia’s transport, communications, electricity and utilities infrastructure

Investment Climate

• Lessons from 2008 crisis has accelerated the efforts by the government to diversity its economy, with Skolkovo being a pet-project for President Medvedev

• Fight against corruption continues, but stays until today mostly on paper

• Still, Russia ranked world’s 5th top priority recipient economy for FDI for 2010-2012. The scheduled accession to the WTO in 2012 will further boost the economy

• Russia plans also the set-up of a “special sovereign fund” to attract foreign capital

• The government embarks on a massive new privatization plan: 600 state-controlled companies to be sold through 2015

Investments – Power Investments – Power RUSSIA: ENERGY STRATEGY TILL 2030RUSSIA: ENERGY STRATEGY TILL 2030 Investments – Power Investments – Power RUSSIA: ENERGY STRATEGY TILL 2030RUSSIA: ENERGY STRATEGY TILL 2030

Coal26.5 GW 24%

Gas73.6 GW 52%Hydro-power &renewables81.8 GW 63%

Nuclear38.2 GW 62%

TOTAL

Power generation in 2008, Total 224.9 GW

85.5 GW – 38%

68.4 GW – 30%

47.2 GW – 21%23.8 GW – 11%

112 GW – 25%142 GW – 32%

129 GW – 29%62 GW – 14%

Power generation in 2030, Total 445 GW

126$B

233$B

529$B

TOTAL (2009-2030): 900$BTOTAL (2009-2030): 900$B

Capital expenditures in power production, $B

Capital expenditures in power supply, $B

95$B

141$B

352$B

TOTAL (2009-2030): 600$BTOTAL (2009-2030): 600$B

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IN THE PERIOD 2009-2030 RUSSIA IS PLANNED TO INVEST $1,500B IN POWER PRODUCTION AND SUPPLY

220.1 GW 49%

By 2030 power generation capacity will almost double

Source: Ministry of Industry and Trade of the Russian Federation

Investments – Oil&Gas Investments – Oil&Gas RUSSIA: ENERGY STRATEGY TILL 2030RUSSIA: ENERGY STRATEGY TILL 2030Investments – Oil&Gas Investments – Oil&Gas RUSSIA: ENERGY STRATEGY TILL 2030RUSSIA: ENERGY STRATEGY TILL 2030

Russia (oil) – $300bn, 2010-

2020

Gas: 590$B / 49% Oil: 625$B / 51%

165$B 139$B

321$B

155$B 136$B

299$B

Growth – 41.6% (2008-2030)

Growth – 31.2% (2008-2030)

7Source: Ministry of Industry and Trade of the Russian Federation

By 2030, 1,200$B is planned to be invested in Oil & Gas

By 2030, 1,200$B is planned to be invested in Oil & Gas

Investments – Oil&Gas: Global majors Investments – Oil&Gas: Global majors Investments – Oil&Gas: Global majors Investments – Oil&Gas: Global majors

Russia (oil) – $300bn, 2010-

2020

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RU: Sakhalin 2 (with Gazprom, Mitsui , Mitsubishi)

$24.5B

RU: Gazprom and Shell agree global cooperation

-

RU: Has started building a Lube blending plant $0.1B

RU: Salym field (JV): total project cost is $1B $1B

KZ: Kashagan field , Arman JV, Zhemchuzhina field , CPC. Till 2009 Shell invested more

than $3B -

RU: Oil deal with Rosneft (Barents & Black seas) -

RU: Total buys 12% of Novatek and joins the Yamal LNG project $4B

RU: Shtokman gas field (Total, Gazprom, Statoil) $15B

RU: In 2010 acquired a 49% stake in Novatek’s owned subsidiary, Terneftegas, for $44 m .

Investment plan is n/a-

KZ: Kashagan field: total project cost is $136B . Consortium. -

KZ: Khvalynskoye field: total project cost is $5B. Total SA and GDF Suez Group will

invest $1B$1B

KZ: Total acquired a 50% interest in OTG -

AZ: Shah Deniz field . Stage 2. Consortium : Total’s investment share is n/a

-

AZ: Absheron block: the cost of the first exploration work is approx $200M

$0.2B

RU: Black sea oil deal with Rosneft $1B

RU: Sakhalin 1 (SODECO, ONGC Videsh , Rosneft) $12.8B

KZ: Tengiz field: Consortium is planning to invest $15.2B from 2016

$15.2B

KZ: Kashagan field: total project cost is $136B. Consortium. -

KZ: CPC (Caspian Pipeline Consortium) . Pipeline expansion

$5.4B

AZ: Chirag field . Consortium: ExxonMobil’s investment share is n/a $6B

RU: Arctic oil deal with Rosneft (Kara sea) $1.4-2B

RU: Share-swap agreement (BP – 9.5% of Rosneft shares, Rosneft – 5% of BP’s) -

RU: TNK-BP: within 2011-2013 invests $14B $14B

RU: Sakhalin IV , V (BP-Rosneft) $5-7.6B

AZ: To date BP has invested in oil & gas projects $28B

AZ: Chirag field . Consortium: BP’s investment share is n/a $6B

RU: Black sea oil deal with Rosneft $32B

KZ: Tengiz field: Consortium is planning to invest $15.2B from 2016

$15.2B

KZ: CPC (Caspian Pipeline Consortium) . Pipeline expansion

$5.4B

AZ: Chirag field . Consortium: Chevron’s investment share is n/a $6B

Investments – Oil&Gas: Local majors Investments – Oil&Gas: Local majors Investments – Oil&Gas: Local majors Investments – Oil&Gas: Local majors

Russia (oil) – $300bn, 2010-

2020

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Gas reserves (proved, bcf)Oil reserves (proved, mb)

22,850.013,696.0

Gas production (bcm/year)Oil production (mt/year)

14.597.6

Market Capitalization $59B

Russia & CIS:

Upstream: RU (Western Siberia, Timan-Pechora, Urals and Volga), KZ (Tengiz, Karachaganak), AZ (Shakh-Deniz), UZ (Kandym, South-West Gissar)

Abroad: Upstream: Egypt (Meleiha, WEEM), Iraq (WestQurna2)

Gas reserves (proved, bcm)Oil reserves (proved, mt)

816.02,483.0

Gas production (bcm/year)Oil production (mt/year)

12.7109.0

Market Capitalization $96B

Russia & CIS:

Upstream: RU (Timan-Pechora, Kharampurskoe gas field, Western Siberia, Vankor, Eastern Siberia, Sakhalin 1,3,4,5, Southern Siberia, Artic field, Black sea), KZ (Aday and Kurmangazy blocks)

Abroad: Upstream: Algeria (245-South Block)

Gas reserves (A+B+C1, bcm)Oil reserves (A+B+C1, mt)

33,578.01,785.0

Gas production (bcm/year)Oil production (mt/year)

550.032

Market Capitalization $189B

Russia & CIS:

RU (Yamal, North stream, South stream, Shtokman, Sakhalin II, Eastern Gas Program), UZ (Dzhel gas field)

Abroad: Vietnam, India, Venezuela, Libya (Elephant oil field) , Algeria, Kyrgyzstan, Tajikistan, Iraq (Badra oil field) ,

Gas reserves (proved, bcm)Oil reserves (proved, mt)

1,144.073.0

Gas production (bcm/year)Oil production (mt/year)

37.83.6

Market Capitalization $39B

Russia & CIS: RU (Yamal-Nenets Autonomous region)

Abroad: -

Oil reserves (proved, mb) 13,069.0

Oil production (mt/year) 72.0

Market Capitalization $44B

Russia & CIS: Western Siberia, Eastern Siberia, Volga-Ural region

Abroad:Veneuela (PetroMonagas, PetroPerija, Boqueron), Vietnam (offshore gas assets: Block 08-01, NamConSon gas pipeline, Phu My 3 power plant)

Oil reserves (proved, mt) 760.0

Oil production (mt/year) 22.0

Market Capitalization (Razvedka Dobycha KazMunayGaz AO)

$10B

Russia & CIS:

44 oil and gas fields in Kazakhstan (Kashagan, Tengiz, Kumkol, Kurmangazy, Khvalynskoe)

Abroad: Romania (oil refinery), Iraq (Akkas gas field)

Customer Segmentation Customer Segmentation Customer Segmentation Customer Segmentation

● FOREIGN CONTROLLED / MANAGED:

● INTERMEDIATE:

Centralized:

Decentralized:

● LOCAL:

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“EASY”

“DIFFICULT”

Decision Making Process: Russian SpecificsDecision Making Process: Russian Specifics

Decision Making Process: WesternDecision Making Process: Western

Decision Making ProcessDecision Making Process

Drivers & Dimensions Relevant For All SegmentsDrivers & Dimensions Relevant For All SegmentsDrivers & Dimensions Relevant For All SegmentsDrivers & Dimensions Relevant For All SegmentsDRIVERS

● Price

● Quality of offering– product quality

– address “pain”

● Financing– ducroire

● Implementation

● Relations– proper

– improper

DIMENSIONS

● Bottom-up : smaller deals

● Bottom-up & Top-down: large deals

Get your political story right 11

“RANDOM 3”: you win

“RANDOM 2” : you could win

“RANDOM 1” : you loose

TYPE OF COMPETITION

- local competition

- Western competition

- Chinese competition

Business Model & go-to marketBusiness Model & go-to marketBusiness Model & go-to marketBusiness Model & go-to market

● DIRECT MODEL

For large customers, large deals or “western” companies

● INDIRECT MODEL

For smaller customer, smaller deals or “local” customers

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Multinationals tend to go direct, SME’s more indirect

● customer intimacy ● master complexities

(customs , supply chain, etc.)

● maintain margin ● high direct costs

● low entry cost ● lower customer intimacy

● “outsource complexity” ● Impact on margin

● do you bet on right horse?

CIS CIS distributors/integratorsdistributors/integratorsCIS CIS distributors/integratorsdistributors/integrators

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Name Region Type Industry Accounts ServicesGlobalstroy-Engineering, JSC, Moscow

CIS EPC Oil&Gas Lukoil, Rosneft, Salavatnefteorgsintez, Shurtansky petrochemical complex (Uzbekistan)

EPC Oil and Gas + Civil and Structural projects

Stroytransgaz, Moscow CIS, Near East, N. Africa, Europe, S E Asia, Central Asia

EPC Oil&Gas, electric power BOTAŞ, ConocoPhillips, DEPA, Dolphin Energy, GAIL, Gazprom, LUKOIL, Mosenergo, NIAEP, Reliance Ind. Ltd, Rosneft, RUSAL, Saudi Aramco, Sintez, SONATRACH, Syrian Gas Company, TNK-BP, Transneft

EPC O&G, industrial building

GIPROGAZOOCHISTKA, Moscow

CIS, E Eu, M East, S E Asia

EPC Metallurgy, Oil&Gas, Chemistry, Power

ROSNEFT, Surgutneftegas, Gasprom Neft + Industrial and HC gas purification, processes related

HMS Group (HydroMash), Moscow

CIS OEM/EPC Oil&Gas, power generation, trunk pipe transport, water utilities

Various pump and oil&gas equipment

OZNA AK, Ufa CIS OEM/EPC Oil&Gas Various Industrial equipment&solutions

RusGazEngineering, Podolsk, Mosc. Reg.

CIS EPC Oil&Gas Lukoil, Rosneft, Surgutneftegaz, NOVATEK EPC Field facilities con-struction; Chemical facilities design and constr.

Grasis, Moscow CIS OEM All Shell, Eni, Enel, ConocoPhillips, ExxonMobil, Gazprom, Rosneft, TNK-BP, Lukoil, NOVATEK, Surgutneftegaz, RITEC, Tatneft, Slavneft+

Gas production and separation

KRUG, Moscow CIS, Poland OEM/SI O&G, Heat-electric power, Municipal & civil constr. Ind.

Various Industrial automation systems and solutions

METROLOGY AND AUTOMATION, Samara

Russia, Volga SI (System Integrator)

Oil&Gas ROSNEFT, Lukoil + Automation

ARGOSY CJSC, Moscow Russia, Central D/SI Oil&Gas Various AutomationNPP "GKS", Kazan Russia, Volga,

UralSI Oil&Gas ROSNEFT, Gasprom, Gasprom Neft + Automation

IDELE INTERNATIONAL GMBH, St. Petersburg

Russia, Northwest

D (Distrib.) Oil&Gas Various Automation

Inkomsistem, Kazan Russia SI Oil&Gas Various Automation, Custody transf. skids

Nefteavtomatika, Ufa Russia SI Oil&Gas Various Automation, Custody transf. skids