Delivering sustainable results through cycles. Jens Økland, EVP, Marketing, Midstream and Processing (MMP) London, 22 February 2018

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2 Delivering sustainable results through cycles Jens Økland, EVP, Marketing, Midstream and Processing (MMP) London, 22 February 218

3 Always safe High value Low carbon Serious incident frequency USD/bbl Above USD/bbl mw bn USD 3

4 217 MMP demonstrating resilience through cycles Adj. earnings 12.6 bn USD NOI 13.8 bn USD 1) Free Cash Flow 3.1 bn USD 1) RRR 15% Record high NCS gas production Value uplift on products High regularity and margins on our refineries 1. MMP Guiding range USD 1-2bn 4

5 Gas outlook Strong demand and continued volatility W E S E E T H A T : Energy and climate policy impact on markets US seasonality and production increase LNG going to Asia Reduced indigenous EU production $/MMBtu Brent Henry Hub JKM NBP W E B E L I E V E I N : Further globalization of gas markets Electricity sector a driver for gas demand growth Continued demand growth in Asia and US Substantial investments needed to meet demand Continued market volatility and seasonality Source: S&P Global Platts, ICIS Heren

6 Statoil response Flexible contract portfolio and growth in key markets C O N T R A C T P O R T F O L I O M I D S T R E A M A N D T R A D I N G F O C U S G R O W I N G O U T S I D E E U R O P E Modernized Flexible Diversified pricing Premium markets Regional value chain focus NCS maximization US Brazil Capture global trading opportunities 6

7 Long-term energy markets Eirik Wærness, Senior Vice President and Chief Economist Classification: Internal

8 Policy uncertainty continues in energy markets The global economy is however shielded as momentum gains Policy uncertainty relatively high Macroeconomics and financial markets signs of uncertainty Politics and economics in Global economic policy uncertainty (index) Asian and Russian Financial Crises 11 Sep Gulf War II Global Financial Crisis Eurozone crises, US fiscal fights European immigration crisis Trump election, North Korea conflict Brexit referendum US equities, dollars, and risk (indexed 3 Dec 216=1, index (rhs)) S&P 5 USD index vs other currencies VIX (rhs) Key themes: Trade policy Fiscal and monetary policy Energy and climate policy Key events: Elections in Europe and the US G2 summit COP Jan-17 May-17 Sep-17 Jan-18 8 Sources: Thomson Reuters Datastream

9 Bcm Prices are up from the bottom uncertainty prevails Important: Substantial need for new investments to satisfy demand Brent price Gas prices Need for new gas to satisfy demand USD/bbl USD/MMBtu Production Demand range New supplies Decline range Planning assumptions 1 HH NBP Planning assumptions 1 9 Sources: Platts, ICE, ICIS, NYMEX 1 Planning assumptions are 216 real

10 Asia, and China, play an important role in our energy future Growing gas demand in all scenarios part of the energy transition 5 4 China energy mix Bn toe Changes in Chinese gas demand Bcm Electricity & Heat Non-Energy 3 2 Other Transport 2 1 Ref Ren Riv New RES Biomass Hydro Nuclear Gas Oil Coal Reform Renewal Rivalry Maritime Aviation LDV Others Total change 1 Source: IEA (history), Statoil (projections)

11 Twitter aside, Trump s energy agenda has three tracks E C O N O M I C P O L I T I C A L Increase US energy production in service of energy security, economic growth, and as a foreign policy tool I N T E R N A T I O N A L 11

12 EU: Improving energy efficiency, and fuel mix changes Electricity sector demand change key for gas development 2, EU Energy Mix Bn toe 1 Change in gas demand Bcm ,5 New RES Electricity & Heat 1, Biomass -1 Non-Energy,5 Hydro Nuclear Gas Other Transport Maritime Aviation Oil -25 LDV, Ref Ren Riv Coal -3 Reform Renewal Rivalry Others Total change 12 Source: IEA (history), Statoil (projections)

13 Globalizing gas flows according to price signals US LNG in the money; prices driven by other factors as well Short-run marginal cost ranges for US 218 LNG supply to Asia and Europe, and prices today and over the last 2 years Asia USD/MMBtu North America USD/MMBtu Europe USD/MMBtu ) 9.9 3) 9. 2) 6.6 2) 4. 3) ) ) JKM Shipping HH Shipping/Regas NBP 13 Source: NYMEX, ICE, Platts, Pira, Statoil ASA 1) NYMEX Henry Hub Forward curve for Calendar Feb 218 2) ICE NBP Forward curve for Calendar Feb 218, high and low trading range over the last 2 years 3) Platts JKM (Asia spot LNG, March deliveries) - 19 Feb 218, high and low trading range over the last 2 years

14 CONCLUDING REMARKS Gas is crucial in the energy transition, to reduce emissions while securing energy, and to facilitate renewables Globalizing gas increasing flows between surplus and deficit regions. Demand for LNG and new pipelines Substantial need for new investments to satisfy demand, irrespective of scenario 14

15 Global gas markets Elisabeth Aarrestad, Vice President Market Analysis

16 What happened since our 217 gas seminar? U S G A S : Coal displacement continues Cold snap breaks records $/MMBtu Brent Henry Hub JKM NBP A S I A N G A S : China absorbs LNG increase New emerging markets E U R O P E A N G A S : Gas flexible source for electricity Strengthened demand levels Increased import dependence Source: S&P Global Platts, ICIS Heren

17 US gas demand Short-term spikes, long-term growth Domestic demand Lower 48 cold snap demand Cold snap regional prices Bcm Mcm/d $/MMBtu Res'l & Com'l Ind'l 4 5 Winter Electricity LNG Exports 2-Year Average 9 Exports to Mexico Winter F des 15 des 29 des 12 jan Henry Hub (lhs) TGP Z4 (lhs) Chicago (lhs) Tetco M3 (rhs) 1 des 15 des 29 des 12 jan Gas displacing coal in electricity Industrial demand is rising Growing exports (LNG and Mexico) Records due to strong gas-to-electricity and space heating needs Surpassed vortex levels Henry Hub hit a multi-year high The NYC downstream market price reached an all-time high 17 Source: EIA, IHS, Platts Bentek, Genscape, Statoil

18 Chinese gas demand growth exceeds expectations Emission reduction targets drive gas demand Five year plan Household gas conversions Seasonal gas demand Bcm Industry Electricity & Heat Residential & Commercial Transport Other Total 2,5 2, 1,5 1, Millions of households converted to gas in 217 Bcm , , Winter 16/17 Winter 17/18E 1 Bcm increase to 22 Demand growth exceeds US LNG export growth Air quality targets 28 cities ordered to switch end-users from coal to gas 15% increase estimated for current winter Low storage capacity drives the need for flexible gas imports 18 Source: CNPC Research institute of Economics and Technology, IHS, National Bureau of Statistics, Reuters

19 European gas market drivers 19 Source: Statoil

20 European demand factors Gas flexible source for electricity and replacing coal Bcm Demand by sector Res & Com Others Economic recovery Gains from coal switching Buoyant demand Industry Electricity/Heat F217 F22 /MWh Continental coal switching Coal Switching Range TTF Gas price ( /MWh) UK carbon tax France nuclear maintenance Coal prices gas is competitive Forward market Change in electricity generation TWh Spain Italy UK Germany Coal Gas CCGT increasing more than 12 TWh Coal decreasing more than 115 TWh Largest change in the UK 2 Source: TFS/GDM, Argus, ICIS Heren, ICE, Eurostat, TSO s Forward market 13 Feb 218

21 European supply factors Imports compensating for reduced indigenous production Bcm EU production NL UK Others Further Groningen constraints Potential further reductions UKCS plateau for near term Bcm European storage 3 5-year range 2 Average jan mar mai jul sep nov Mild January has eased pressure Regional difference in stock level Risk remains for balance of winter Bcm Pipeline supply Norway Russia* North Africa Record pipeline imports Limited flexibility NCS adaptability 21 *Excluding exports to Turkey and the Baltic region Source: NAM, GSE, TSO s in Europe, Gassco, Statoil

22 Global fundamentals LNG production is increasing, but competition remains LNG changes vs 215 Global pricing Expectations vs 215 Bcm Eastern Asia NW Europe Southern Europe $/MMBtu JKM Spain 2 NBP TTF mar 17 mai 17 jul 17 sep 17 nov 17 jan 18 Bcm Reform Rivalry Renewal LNG Reduced LNG to NW Europe Attractive Southern European markets Strong Asian demand JKM driven by market tightness Southern Europe reliant on LNG Global competition for supply Global gas demand increase continue to absorb supply Europe - deficit widening, competition for global LNG 22 Source: IHS, Pira, S&P Global Platts, ICIS Heren, Statoil

23 CONCLUDING REMARKS Gas important flexible source for electricity in key regions China s gas demand growth substantially exceeds US LNG exports Europe increasingly reliant on gas import and must compete for LNG 23

24 Capturing value in volatile markets Tor Martin Anfinnsen, Senior Vice President, Marketing and Trading

25 Norwegian gas competitive and reliable Cost competitive supply Increasing volumes Committed to perform Picture: Gassco 25

26 Prices and liquidity in Europe E u r o p e a n g a s p r i c e s ( N B P ) L i q u i d i t y o f E u r o p e a n h u b s 26 Source: ICIS Heren, Statoil

27 USA: Bottlenecks still playing a role T e t c o M 3 v e r s u s T r a n s c o Z 6 N Y M a r c e l l u s a r e a s p o t t r a d i n g p o i n t s USD/MMBtu* Tetco M3 (Northeast MidAtlantic) Transco Z6 - NY Henry Hub Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Transco Z6 N-NY *The prices are capped 27 Source: Platts Bentek

28 Statoil s LNG activities S t a t o i l s c a r g o e s i n 217 Expand Atlantic LNG footprint Develop position in Asia 28

29 Growing outside Europe US Now producing ~ 1 BCM a year 6 % volume sold through longterm pipeline commitments towards Toronto, New York City and the Gulf of Mexico B R A Z I L The largest international operator in Brazil Operator and partner of two large associated gas fields To deliver 15 2% of internal gas market 29

30 Digitalisation - driver for material value creation Models and algorithms to support commercial decisions Blockchain digital platform 3

31 Focus 218 NCS M E L K Ø Y A L N G Premium markets Regional value chains Statoil offices with natural gas business activities NCS maximization U S S H A L E G A S B R A Z I L 31

32 CONCLUDING REMARKS Norwegian gas is competitive and reliable, also when urgent supply is needed US Gas bottlenecks and price variations creating trading opportunities Focus on growth in premium markets, regional value chains and NCS maximization 32

33 Closing remarks by EVP Jens Økland Global economic growth and gas to power trend is spurring gas demand growth globally Asian and especially Chinese gas demand to exceed expectations supporting European gas prices Statoil s mid- and downstream business is in good shape to deliver strong profits going forward 33

34 Investor Relations in Statoil Investor Relations Europe Peter Hutton Senior Vice President Lars Valdresbråten IR Officer Erik Gonder IR Officer ergon@statoil.com Anca Jalba IR Officer ancj@statoil.com Marius Javier Sandnes Senior Consultant mjsan@statoil.com Anne Sofie Dahle Senior Consultant asda@statoil.com Investor Relations USA & Canada Helge Hove Haldorsen Vice President hehh@statoil.com Ieva Ozola IR Officer ioz@statoil.com Page 34

35 Forward-looking statements Page 35