Presented by: Andy Varoshiotis BSc, MBA, IAFP, EIET, MSDT

Energy Technology - Strategy – Energy Financial Services

ANNUAL GENERAL MEETING 2014

Under the auspices of the Cyprus Chamber of Commerce and Industry

Cyprus Gas Monetization Options Nicosia 15H December 2014

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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SHALE GAS REVOLUTION

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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GLOBAL ENERGY TRENDS

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OIL SUPPLIERS

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A1: what is ‘natural gas’? – need to be specific – e.g. if quoting ‘Henry Hub’ gas

• traded in 10,000 MMBtu increments, quoted in MMBtu’s

• a particular quality:

– energy content (BTU’s), typically determined via in-line GC

• at a particular place:

– Henry Hub = Sabine Pass Pipe Line LLC, near Erath, LA

• at a particular time:

– spot market

– futures contracts for various months, up to 10 yrs' out

What determines the price of natural gas?

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Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015

Henry Hub Natural Gas Pricedollars per million Btu

Historical spot price

STEO forecast price

NYMEX futures price

95% NYMEX futures upper confidence interval

95% NYMEX futures lower confidence interval

Source: Short-Term Energy Outlook, December 2014.

Note: Confidence interval derived from options market information for the 5 trading days ending Dec. 4,

2014. Intervals not calculated for months with sparse trading in near-the-money options contracts.

MONETIZINGCYPRUSNATURAL GASRESOURCES

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“Building the new energy economy”

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.With demand rising at an average rate of over 2% per year for more than thirtyyears, natural gas is the fossil energy with the most dynamic growth. Given theprojected 65% rise in gas consumption between 2004 and 2030* against thebackdrop of a tightening oil market, the development of natural gas is becoming amajor challenge – and opportunity – for all oil companies.

This momentum is driven by the many advantages of natural gas. It is clean,producing no unburned particles, dust or soot in the combustion process andreleasing less greenhouse gas than the other fossil fuels. It is also efficient, notablypermitting advanced-technology power plants to attain very high efficiencies withlower energy consumption and reduced emissions to the atmosphere. For electricpower generation, the use of gas is thus projected to grow from 20% in 2004 to 23%in 2030.

GLOBAL NATURAL GAS DEMAND

Source: Total EP

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The (a) confirmation of significant quantities of hydrocarbons in Cyprus, (b) thescientific estimates of equally significant quantities in the south and southwest of theGreek island of Crete and (c) the officially declared increased cooperation betweenCyprus, Israel and Greece to jointly exploit their hydrocarbon deposits may prove tobe a tremendous opportunity not only for Cyprus, Greece and Israel but for the EU asa whole.

Moreover the resent cooperation between Cyprus – Greece - Egypt adds’ a newFrontier in the East Med Energy map and a new strategic energy corridor in Europe.

Combined sources from qualified institutions (i.e., The U.S. Geological Survey,BEICIP/FRANLAB, the Institut Français du Pétrole) and entities of science (i.e., Paper byBruneton, Konofagos and Foscolos titled “Cretan Gas Fields – A new perspective forGreece’s hydrocarbon resources”) estimate that the Levantine Basin, the Nile DeltaCone, the Eratosthenes Continental Block, the Herodotus Basin and theMediterranean Ridge, may hold more than 50 trillion cubic meters (tcm) o N. Gas.

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EAST MED DIMENSION

Source: Ministry of Energy, Commerce, Industry and Tourism.

CYPRUS EEZ EXPLORATION ACTIVITIES

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CyprusAphrodite - Block 12

“A New Milestone in Cyprus History”

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CYPRUS AS A DISTRIBUTION HUB

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CYPRUS AS EU’S ENERGY SUPPLIER?

LNG TERMINAL – MARKET OUTLOOK

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• According to the IGU World LNG Report, Qatar was by far the largest LNG exporterin 2013 (32.6% of global supply). Other major exporting countries are Malaysia, Australia

and Nigeria. In 2013 there were about 85 regasification terminals worldwide, a figure thatincludes a number of regasification vessels in South America. With 27 regasification plants,Japan has the largest number of plants of any country

Liquefaction plants

• According to available statistics, in 2013 there were approximately 30 liquefaction plantsfor LNG export in operation worldwide. Total global liquefaction capacity is set to growsignificantly in the short term, because a number of new terminals are already planned.A good example is Australia, where about 10 terminals are currently under constructionor planned. Compared with the three plants currently in operation, this can be regardedas a massive increase in supply.

Shipping

• After liquefaction, the LNG is exported overseas by LNG carrier. The total fleet presentlycomprises approximately 360 ships. Of these, around 70 are over 20 years old and thesewill probably need to be replaced over the next 10 years.

VASSILIKOS LNG - TERMINAL PROPOSAL

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EXPORTING POSSIBILITIES Modular (LNG)

Pluto LNG, Australia (Modular LNG success) Concept design, FEED and EPCm of this greenfield LNG facility in Western Australia. The Pluto LNG facility was successfully started up and loaded its first cargo in May 2012.

The project includes a single LNG production train with nameplate capacity of 4.3 million tonnes of LNG per year, gas reception facilities, a fractionation unit, an acid gas removal unit, gas treatment units, tank storage facilities, a loading berth, gas turbine power generation units and utilities.

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COMPRESSED NATURAL GAS (CNG) FOR EXPORT TO REGIONAL MARKETS

Source: SEANG

LNG CARRIERS & FSRU

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“More importers who can’t commit to costlylong term projects are looking at FSRUs”

LNG CARRIER MARKET SNAPSHOT

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• 3 New additions to the global LNGC fleet, 374 vessels in total.

• Order book for new vessels expanded to 121 units.

• Spot charter rates still weak amid vessel oversupply and limited spot cargo Opportunities, situation likely to endure in 2014.

• The upheaval in the global gas market this year is also being felt in the LNG shipping market. LNG charter rates have sunk in 2014 alongside gas prices.

• Spot charter rates have fallen from levels around 90,000 – 100,000 $/day in 2013 to around 50,000 $/day last month. 12 month term charter rates have also fallen to Around 58,000 $/day.

LNG CARRIER MARKET SNAPSHOT

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Cyprus Shipping Ranks No 3 in EU in the 10 top in the World

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EAST MED Pipeline to Europe? Geopolitical

Debate?

The priority is to build a liquefied natural gas (LNG) terminal, but a pipeline could have advantages for Europe.

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Pipeline to Turkey? Geopolitical Debate

The numbers are there. Israel's current gas reserves total 25-37 trillion cubic feet.Cyprus, still in the early exploration phase, claims it has 60 tcf. The U.S. GeologicalSurvey said in 2010 the Levant Basin, which covers Israel, Cyprus, Syria, Lebanon andthe Gaza Strip, contains an estimated 123 tcf.

The Republic of Cyprus reportedly rules out allowing a pipeline to Turkey through itsexclusive economic zone until there's been a settlement to the Cyprus Problem.

According to some analyst’s Israel's not likely to agree to a costly LNG plant onCyprus if there's no pipeline to Turkey.

Read more: http://www.upi.com/Business_News/Energy-Resources/2013/09/25/Israel-sees-Turkey-Cyprus-settlement-as-key-to-gas-exports/UPI-14461380138601/#ixzz2mUqYDxQz

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LNG BANKERING - INFRASTRUCTURE

The upcoming ECA standards are coming into force onJanuary 1, 2015 and according to the UK TransportSelect Committee, this will trigger an 87% rise in annualfuel bills for the shipping industry. LNG, seen as one ofthe most economical and environmentally viable fuels,offers the most plausible solution to this.

Vasilikos Energy Hub

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VASSILIKOS ENERGY PORT PROPOSAL

• Indications are good that substantial quantities of gas will be found to boost exports.The key question is not whether Cyprus has gas but how best to monetize it. There is theoption of regional markets but the Tamar and Leviathan partners are cornering thesevery rapidly.

• Global markets are changing rapidly and are becoming more competitive. With shale gasand an expected glut of LNG it has become a buyers’ market out there, with prices inAsia-Pacific right now around $11 per mmBTU and in Europe as low as $7 per mmBTU.

• Cyprus gas is indigenous to the EU and thus it should be able to contribute to EU’senergy security, but the price must be right both for the EU but also for Cyprus. After allCyprus is looking to gas to eventually help its economy to get out of its present troubles.

• Israel will need Cyprus to exploit its resources by employing the right size company toconstruct e.g., LNG or gas-to-liquids (GTL) plants. The size of the resources cannot allowthem to even remotely be consumed domestically; export is the only option. The Cypriotand Israel reservoirs should be unified; they are geologically contiguous anyway. Cyprus,in turn, will need the shield provided by Israel in relation to saber rattling Turkey. TheIsraeli-Cypriot marriage is made in oil and gas.

CONCLUSIONS AND KEY POINTS

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• As Noble Energy and its partners have demonstrated with Tamar and Leviathan exports,there is a thriving regional market for East Med gas. And pipelines, and CNG naturallylend themselves as an ideal means to export gas to these regional markets.

• Small scale LNG and CNG, or FCNG, are alternative options to be considered for thedevelopment of East Med gas exports.

• Egypt has two hardly used land-based LNG facilities at Damietta and Idcu due to lack ofgas. MOUs have been signed to send Tamar and Leviathan gas for liquefaction at these.

• EU gas demand has decreased and as a result prices have come down, but dependenceon Russian gas remains and may be unavoidable.

• Cyprus is well placed for companies who will come to the region to service this sector tobase their operations. Cyprus Oil & Gas Association can help such companies cutthrough red tape and expedite the process.

CONCLUSIONS AND KEY POINTS

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Ordinary Members:

Any multi-discipline Oil & Gas operator, drilling company, seismic data provider,petrochemical laboratory, importer or exporter of petrochemical products, landstorage carriers, field licensee, equipment manufacturer, by-product engineeringcompany, oil and gas consulting firm, marine engineering, oil and gas shipping, LNGbulk carriers, oil tanker operators, company that provides services to clients in the Oil,Gas and Petrochemical industry and satisfies the following conditions is eligiblefor Each applicant, as described above, shall be reviewed and approved by the Boardof Directors.

Associate Members:

Associate Membership will be opened to all service providers, engineering companiesproviding services to the Oil, Gas and Chemical Industry but not eligible to join asOrdinary Members.

Please visit www.cyoilgas.org for information and updates

THANK YOU FOR YOUR ATTENTION

Cyprus Oil & Gas AssociationMember Services & Inquiries CCCI Head officeDeligiorgis 8, & Grivas DhigenisNicosiaCyprusE-Mail Address: avaroshiotis@cyoilgas.org

Dept. of Services and TradeCyprus Chamber of Commerce and IndustryAndreas AndreouDirect Line: +357 22 889706E-Mail Address: andand@ccci.org.cy

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