GAZPROM IN EASTERN RUSSIA, ENTRY INTO ASIA-PACIFIC MARKETS Moscow, June 18, 2014
EASTERN GAS PROGRAM 2 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Vladivostok LNG construction project Process house Administrative area LNG storage yard Natural gasoline storage yard Narva Bay Tsaplichnaya Lagoon Auxiliary power plant site Shipping terminal Perevoznaya Bay 3 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Critical State Actions to Support Projects Covered by Eastern Gas Program Tax incentives: Fixing 0% severance tax rate for natural gas produced from Far East and Eastern Siberia fields as part of Eastern Gas Program implementation since 01.01.2015 for no less than 40 years; Corporate property tax incentives (up to 0%) with regard to property used within Eastern Gas Program implementation, including main pipelines, power lines and auxiliaries, as well as gas production, treatment and chemical facilities, helium and LNG plants; Fixing 1.3% severance tax rate for natural gas produced from Sea of Okhotsk southern region; Fixing 10% severance tax rate for gas condensate produced from Sea of Okhotsk southern region. 4 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Critical State Actions to Support Projects Covered by Eastern Gas Program Tax and customs incentives: Severance tax and export customs duty incentives for oil produced from oil rims of Far East and Eastern Siberia fields; Property tax exemption for onshore process facilities and hydrocarbons shipping terminals used by offshore field development projects; Corporate income tax relief within rate paid to federal budget for 10 years for gas treatment and chemical plants, helium and LNG plants located in Far East and Eastern Siberia; Incentives to corporate profit tax paid to Russian constituent entities budgets as lower rate (up to 0%) for first five years, up to 10% for next five years and to 13.5% for complete pay-off period for entities investing into new facilities related to gas treatment, gas chemistry, helium and LNG production in Far East and Eastern Siberia. 5 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Critical State Actions to Support Projects Covered by Eastern Gas Program External infrastructure development: Due financing of Vilyui highway construction by 2016 end and restoration of М-58 Amur and М-60 Ussuri motor roads; Attribution of construction of joint rail and motor bridge across Amur river in Jewish Autonomous Region by 2019 to state-run Program Far East and Baikal Region social and economic development and special federal Program Far East and Baikal Region social and economic development up to 2018 to ensure gas treatment and gas chemical products supplies to China; Attribution of restoration and extension of A-189 motor road within Ussuriysk-Slavyanka section to state-run Program Far East and Baikal Region social and economic development and special federal Program Far East and Baikal Region social and economic development up to 2018 to ensure procurement of LNG plant construction within Vladivostok LNG project implementation in Perevoznaya Bay (Lomonosov Peninsula, Khasan District, Primorye Territory); 6 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Critical State Actions to Support Projects Covered by Eastern Gas Program External infrastructure development: Incentives for establishing national carrier fleet for liquid helium haulage (tank trucks); R&D activities to design railway tanks for liquid helium haulage; Incentives for developing national innovative helium-consuming manufactures; Incentives for developing Far East shipyards producing marine vessels of various classes, including LNG ones, as well as offshore oil and gas production equipment, offshore platforms and subsea production systems; Financial support to executives of Russian constituent entities within Far Eastern Federal District areas to ensure due meeting their obligations on consumers fitting for gas intake within regional gas supply programs. 7 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Critical State Actions to Support Projects Covered by Eastern Gas Program Additional activities: maintaining single channel for Russian natural gas export supplies through pipelines; developing single gas balance for Sakhalin projects by Gazprom, covering domestic and external supplies, including obtaining gas from Sakhalin I phase 2 by Gazprom as per market conditions; developing helium export tool supposing elimination of competitiveness while selling helium externally by Russian producers through entitling Gazprom as special authorized entity. 8 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Fluctuation and Structure of Global Natural Gas Demand tcm: North America 3% 12% 19% 26% 15% 20% 5% 4% 25% 3.6 4.6 14% 22% 13% 5% Central and South America Europe (OECD) Eurasia (beyond OECD) Middle East 17% Africa Asia and Oceania 2013 2030 (outlook) 9 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Import Capabilities of Asia-Pacific Natural Gas Markets Supplies through western route Supplies through eastern route Sakhalin II LNG and pipeline gas import demand at major Asia-Pacific markets* Китай Япония Южная Корея Тайвань Индия Новые рынки Азии China Japan Taiwan India New Asian markets South Korea Vladivostok LNG 600 Urumchi Beijing 500 53 Shanghai Fujian Guangdong 400 300 200 7 18 18 55 21 36 19 55 115 59 24 62 118 100 120 216 0 52 106 2030 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Import terminals existing prospective In-house LNG projects existing prospective Natural gas supply routes from Russia existing (LNG) prospective (pipeline gas) prospective (LNG) Asia-Pacific markets will show long-term increase of natural gas import LNG portfolio expansion and pipeline export development are of Gazprom Group s top priority Source: consensus forecasts of Wood Mackenzie, IHS CERA, PFC, IEA, MOTIE, Mitsui, Mitsubishi, Chinese Ministry of Land and Resources, Japanese Institute of Energy Economics 10 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Gazprom Group s Natural Gas Supplies to China Supplies from Central Asia Supplies through western route Urumchi Beijing Supplies through eastern route Harbin Changchun Shenyang On May 21, 2014 Gazprom and CNPC entered into Gas Purchase Agreement stipulating gas supplies through eastern route Supplies duration: Annual volume: Supplies commencement: 30 years 38 bcm to plateau 2018-2020 (depending on construction completion) Signing Agreement on pipeline gas supplies to China allowed Gazprom Group to enter new market Supplies from Myanmar Shanghai Guangzhou Gazprom Group s pipeline gas supplies will not directly compete with LNG in Chinese market due to consumption peculiarity: - pipeline gas supplies through eastern route will be the basic source of consumption at China s Northeastern areas - LNG supplies are intended for seaside regions and act as a balance LNG import terminals existing prospective LNG supplies Pipeline gas import routes existing routes prospective routes for supplies from Russia Gazprom and CNPC intend to proceed with project on natural gas supplies through western route 11 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets
Gazprom Group s LNG Supplies to Asia-Pacific Markets Gazprom Group s sources of LNG supplies in 2011-2013 New LNG projects of Gazprom Group in Asia-Pacific 4% 4% 4% 18% 7% Россия Нигерия Египет 42% США Австралия Испания 21% Другие Vladivostok LNG Output: 2 lines x 5 mln t annually (with possible extension) 1 line commissioning: late 2018 2 line commissioning: 2020 Current status: 2013 pre-feed activities completed 2014 FEED activities in progress Gas sources: Sakhalin gas production center (1 & 2 lines) Irkutsk and Yakutsk gas production centers (in case of plant extension) Destinations of Gazprom Group s LNG supplies in 2011-2013 Sakhalin II extension 2% 5% 4% Asia-Pacific region 89% 27% 20% 19% 16% 6% 1% Ближий Восток Южная Америка Европа Япония Корея Китай Индия Тайвань Таиланд Project status: Output: Gas sources: Operator: Pre-investigation activities completed 5 mln t annually Gas from Sakhalin gas production center Sakhalin Energy Investment Company Gazprom 50% plus 1 share Shell 27.5% less 1 share Mitsui 12.5% Mitsubishi 10% Expanding commercial activities and implementing in-house projects are of Gazprom Group s top priority with regard to LNG 12 Gazprom in Eastern Russia, Entry into Asia-Pacific Markets