TOWARDS IDEALS OF EURASIAN INTEGRATION

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1 TOWARDS IDEALS OF EURASIAN INTEGRATION I.I. Sechin CEO Rosneft October 217

2 Disclaimer Information, contained in this presentation, was prepared by the Company. Inferences contained herein are based on general information available at the moment of materials preparation and may be changed without prior notice. The Company fully relies on information obtained from sources, which it believes reliable. However, the Company does not guarantee either its accuracy or completeness. These materials contain assumptions on future events and clarifications, which represent a forecast of such events. Any representations in these materials, unless being statements of historical facts, are forward-looking assumptions, associated with known and unknown risks, uncertainties and other factors, for which reason our actual results, conclusions and achievements may differ significantly from any future results, inferences or achievements reflected in or asserted by forward-looking assumptions. We do not assume any liability for due updating of any forward-looking assumptions contained herein, so that they would reflect actual results, changes in assumptions or changes in factors that influenced such representations. This presentation is not an offer to sell or buy or subscribe for any securities. It is understood that neither provision of this report/presentation may serve a basis for any contract or obligation of any nature. Information, contained in this presentation, may not be deemed for any purposes as complete, precise or impartial. Information of this presentation shall be subject to verification, finalization and amendment. The content of this presentation was not verified by the Company. Therefore, we never provided and will not provide any explicit or implicit assurances or guarantees on behalf of the Company, its shareholders, directors, officers, employees or any other persons in terms of accuracy, completeness or impartiality of information or opinions contained herein. No director of the Company or its shareholder, officer, employee or any other person does not assume any responsibility for any losses on any kind, which may be incurred as a result of any use of this presentation or the content hereof, or otherwise in connection herewith. 2

3 Changing Needs of Global Economy Oil global Consumption Forecast, mmbpd liquids Global primary energy consumption structure WEO 216 EIA 217 OPEC 216 BP % 1% 8% 6% 4% 2% % 3% 4% 4% 4% 8% 4% 7% 6% 6% 28% 28% 27% 27% 5% 25% 24% 25% 26% 29% 25% 33% 32% 35% 31% 3% WEO 216 EIA OPEC 216 BP 217 Renew. Hydro Атом Coal Gas Oil Global oil demand will continuously grow in mid-term and long-term perspective. Yearly growth in the next 1 years will be 77 kbpd on average. The share of liquid hydrocarbons will remain around 3% of global primary energy consumption. Source: EIA, IEA, OPEC, BP 3

4 Financial Players Dominance in Crude Oil Pricing NYMEX and ICE crude oil futures open positions Money managers WTI/Brent/Prod futures net positions млн баррелей Mln. barrels Brent WTI Refined Нефтепродуты products 15 1 млн баррелей Mln. barrels Короткие Short positions позиции Длинные Long positions позиции Нетто-позиция Net positions Source: СFTC, ICE 4

5 The Fundamental Driver Behind the Increasing Consumption Growing Population and Life Quality Global population growth , billion people 9. 8,5 8. 7,4 7. 6, ,4 4. Global urbanization growth and decreasing share of slums 6% 3% Urban population share Slums share F Share of SUVs in total car sales in China 6% 3% F Source: World Bank, UN Habitat, UMTRI, Bloomberg; WIND, Barclays 5

6 Crude Oil and Refined Products Stocks Dynamics Commercial stocks of oil and refined products in OECD countries, mln. barrels млн барр. МЭА IEA EIA ОПЕК Запасы на момент Соглашения Stocks before OPEC deal Текущие запасы Current stocks Average Средний уровень stocks level запасов в гг OPEC млн барр mln. barrels Changes in commercial stocks of crude oil in OECD countries, mln. barrels cumulative since млн барр. Европа Europe Сев. North Америка America АТР Asia - Pacific Source: EIA, IEA, OPEC 6

7 Short-Term Priorities of Financial Markets Have a Severe Impact on Oil Majors Long-Term Investments Brent price Majors capital expenditures* 14 $/bbl 18 $ Billion % CAPEX % of operation Cash Flow * ExxonMobil, Shell, BP, Chevron, Total Source: Companies data 7

8 Since 21, the Largest US Shale Oil Companies Had a Negative Free Cash Flow in 28 Quarters Out of 29 Free cash flow for top-5 US shale oil companies, $/boe Source: Wood MacKenzie 8

9 Rosneft Leadership in Reserves, Production and Efficiency Hydrocarbon reserves 1 bn boe Hydrocarbon production 2 Lifting costs 3 MMboed $/boe 137 5,7 2,5 Liquids Gas Note: (1) Rosneft AB1C1+В2C2 reserves under Russian classification as of 1 January 217 (incl. Bashneft), data for other companies is taken from Wood Mackenzie reserve estimates including commercial and subcommercial reserves; (2) PetroChina for 1Q 217, Lukoil preliminary data for 1H 217; other companies data for 1H 217 (3) Rosneft, BP and Petrobras for 1H 217, other companies data for

10 The Sustainability of the Russian Oil Industry Costs by type of resource Breakeven price, $./barrel Saudi Arabia Onshore non-opec Onshore OPEC Tight oil / shale oil Shelf Deepwater shelf Average Iran Russia OPEC IRAQ USA (conv.) Non-OPEC Production of liquids, mmbpd OPEC Non-OPEC США North Europe (shelf) USA Others USA NGL Canada Sands A lot of new projects of Heavy oil, Canadian Oil Sands, as well as projects in mature basins on the shelf of West Africa, North Sea and Gulf of Mexico are not economically feasible for oil price below $5/barrel. Projects worth more than $8 billion with production of more than 12 MMbpd will not be approved at prices below $5 per barrel Source: IEA, Wood Mackenzie, IHS Markit, assessments of analysts 1

11 Demand Growth for Petrochemicals will Outpace the Growth of the Global Economy Demand Million tons GDP Demand growth for petrochemicals and world GDP growth rates Petrochemical products (final products) World GDP Trillion USD in 21 prices Demand for petrochemical products, million tons/y Paraxylene Propylene Benzene Ethylene % Multiplier to GDP 2х 1.5х 1.1х Source: McKinsey & Co 11

12 Natural Gas a Promising Area for Growth in the Energy Sector Natural Gas Global Demand, billion toe/y Rosneft Strategic Goals: Gas Production, billion m 3 \/y 2,9 3,1 3,5 3,8 4,1 4,3 +5% % F Source: IHS, BP Energy Outlook 235, Rosneft 12

13 Greater Eurasia Key Player on the Global Energy Market Greater Eurasia Countries of Large Eurasia Other countries Socio-Economic Indicators 32% 69% 24% 76% 31% 69% 5,1 16,1 82,9 2,3 5,2 37,4 Population, billion Energy Indicators Export of goods and services, billion $ GDP parity, Trillion $ 31% 69% 37% 63% 31% 69% 37% 63% 9,2 2,2 17,1 6,6 1,3 36, 4,1 7,7 Primary energy consumption, billion toe Natural gas Consumption, Trillion m 3 Electricity generation, thousand TWh Liquids consumption, MMbpd By «Greater Eurasia» we refer to countries that are on the territory of the Eurasian continent. Large Eurasia includes 91 countries (excluding micro-states) Greater Eurasia represents two-thirds of the world based on the main socio-economic indicators Source : IMF, UN, EIA, BP data 13

14 Greater Eurasia is a Balanced Region in Terms of Energy Resources Regions of energy consumption Financial and Trade centers Europe Caspian Regions of energy production Russia and Arctics Greater Eurasia energy demand / production ratio, % 14% Oil 12% Gas Collectively Greater Eurasia is a perfectly balanced region in energy resources for the long-term Middle East Asia-Pacific Greater Eurasia energy reserves / demand, years Existing financial centers will provide financial services to growing energy flows Oil 48 Large Eurasia consists of two regions of energy consumption and three regions of energy production in between Gas 68 Source: BP Statistical Review of World Energy

15 Geography of Greater Eurasia Provides Opportunities to Create a Unified Economic Landscape Russia Construction of alternative logistics routes is required for the development of Eurasian integration and trade: Europe Caspian Middle East Asia Pacific The New Silk Road will connect China and Europe through Central Asia and the Middle East in the near future The Northern Sea Route will connect Europe and Asia directly in the long term High-speed trade routes by land need to be developed Sea route Europe-Suez-Asia The Northern Sea Route Trans-Siberian Route The New Silk Road Source: Rosneft 15

Rosneft Shareholder Capital is an Example of the Effective Eurasian Integration Region of energy consumption Financial and trading centers Region of energy production Investments into Rosneft

16 Rosneft Shareholder Capital is an Example of the Effective Eurasian Integration Region of energy consumption Financial and trading centers Region of energy production Investments into Rosneft shareholder capital Free float Rosneft shareholders* 1,75% 19,75% Russia and Arctic 4,7% Europe 5,% 14,2% Middle East Asia Pacific Eurasian integration implies involvement of energy consumers into energy production through investments into shareholder capital of producers Being shareholders of energy producers, consumers participate wisely in energy distribution by balancing their interests with producers goal of continued business development * After the deal between Glencore/QIA consortium and CEFC announced on 8 Sep 217 is closed 16

17 Eurasia Integration Projects E&P Refining Germany Vankor Udmurtneft Taas-Yuryakh Tianjin China Sakhalin-1 SODECO Japan Cooperation and integration between companies and regions should not become a zero-sum game All participants of the integration can create value for themselves while pursuing their interests: Zohr Egypt Vadinar India Access to resources Financing Technologies Offshore gas Vietman Markets Human capital Tuban Indonesia Source: Rosneft 17

18 Total Amount of Rosneft s Cooperation with the World s Leading Companies Exceeds $.5 trillion Rosneft partnerships and deals with the world s leading companies Strategic Agreements >$11 bn + >$4 bn (trade flows, swap operations and prepayments) Source: Rosneft 18

19 Key Conclusions Greater Eurasia is a huge economic and energy space that has all the prerequisites for cooperation and economic integration. Eurasian gravity is stronger than any external influences. The movement towards united Eurasia is organic and natural. In the energy sector of Greater Eurasia mutual investments, the exchange of assets and technologies have already reached a large scale, despite such factors as sanctions pressure. Rosneft is one of the largest participants and drivers of such processes. Desynchronization of the investment cycle in the oil and gas industry with global economic dynamics creates prerequisites for a future oil shortage and price volatility increase. The strategy of the responsible hydrocarbon producer should account for both risks and uncertainties of the current state of the world oil market and the long-term outlook of the global economic development. 19

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January Christof Rühl, Group Chief Economist

January Christof Rühl, Group Chief Economist January 213 Christof Rühl, Group Chief Economist Contents Introduction Global energy trends Outlook 23: Fuel by fuel Implications Energy Outlook 23 BP 213 Introduction Global energy trends Outlook 23: