And what does consumption growth look like in 2035?: but Coal is King!!!

And what does consumption growth look like in 2035?: but Coal is King!!!

Energy use in real terms and future projects (always wrong)

The present perception if it concerns Natural Gas Global level Market Growth Methane leakages Flaring (tight oil/shale gas) Its fossil European level Deemed Market Its fossil; its should be. Has a political dimension Its expensive (coal is king) National Level (Dutch an example?) Its fossil Political and unreliable Renewable has priority Dutch disease

Energy is politics and for Europe the Natural Gas Sector is hit hard

The way from Policy to NetWorkCode! Policy/Roaming Madrid Forum CEER Acer Commission Individuals Complains PA & Regulation Concrete Lobby Consultations Drafting options From EU to National level NRA influence NC Law Down the drain: Legislation NetWorkCodes An example, from SoS guidelines, just by limited consultation to a new set of SoS regulation.

110 100 90 80 70 60 50 40 31/12/2013 14/01/2014 28/01/2014 11/02/2014 25/02/2014 11/03/2014 25/03/2014 08/04/2014 22/04/2014 06/05/2014 20/05/2014 03/06/2014 17/06/2014 01/07/2014 15/07/2014 29/07/2014 12/08/2014 26/08/2014 09/09/2014 23/09/2014 07/10/2014 21/10/2014 04/11/2014 18/11/2014 02/12/2014 16/12/2014 30/12/2014 Some are hit hard and the key is: where is the bottom Oil, Brent, 31/12/13=100 Rouble to USD, 31/12/13=100 Source: ecowin, Bloomberg, ING calculations

Matching point 6US/Mmbtu

Self sufficient is one of the key words: USA an example SHALE

Shale gas potential in Europe

The aim of the EU energy policy: dependency should go down!

And natural gas lost competitiveness in (residual) power generation at European level: coal is King!!!! /MWh 35 gas coal switching range TTF monthly index API#2 30 25 20 15 10 5 0 Sources: Bloomberg, The Intercontinental exchange Coal is presently cheap: EU is using coal for Power King is Coal, also in Europe.

In global competition: Europe is expensive overall Global industrial players, energy intensive!; move away. From EU to US

Last couple of years the sector lost 50 Bcm/y within the power sector

German capacity coverage and future energy needs Installed capacity Electricity production Szenario für konstanten Nettostromverbrauch zur weitgehenden Erreichung der Klimaschutzziele 283 GW PV: 71 527 TWh 615 TWh 572 TWh PV: 59 Erdgas Wind onshore: 138 101 GW Erdgas Steinkohle Braunkohle Kernenergie 158 GW 18 27 11 6 6 24 25 20 Wind onshore: 66 Wind offshore: 27 Biomasse, andere EE: 20 Speicher: 19 Andere Konventionelle: 4 Erdgas: 40 Steinkohle: 22 Braunkohle: 15 Steinkohle Braunkohle Kernenergie Andere Konventionelle: 13 Erdgas: 7 Wind offshore: 103 Biomasse; andere EE: 92 Speicher: 31 Steinkohle: 36 Braunkohle: 93 1993 2010 2030 1993 2010 2030 Quelle: BCG-Trendstudie 2030+, Szenario "Zielerreichung Klimaschutz" 17

Average monthly Month-ahead prices Same slope: PSV Warsaw Moscow? Law of one price: if market is liquid: but no room for transmission

Physical volume on European Hubs Source: IEA Continent: Austria, Belgium,France, Germany, Italy, Netherlands Physical gas deliveries on hubs increased to over 80% of gas demand in physical markets: the more spot: middle-man in trouble; margins evaporate.

The relevant liquid market will be step by step larger: to the East and South: MENA More network is needed including interconnections and new HUB s: regulated business South Corridor is the interconnector towards the EAST: Ankara HUB (Iran, Kurdistan, etc) To the MENA region: an EU priority and establishing a MENA Hub: Algiers or Tripoli

When it comes to gas: Expansive infrastructure

EU will not be a real LNG player: short term/balancing

Reason for this: simple, a matter of cost structure.

EER

In conclusion Be prudent as industry in Europe: no methane leakage and flaring (past!); enough technical solution to be prudent. Be transparent, CO2 footprint and EITI ruling Be aware: politics are active in the line of SoS, at least in EU the general issues could easily be redirected in legal setting and forwarded NC (like SoS was a guideline and than a Directive: sudden!!!!) Europe is part of the rest: money is global and LNG is getting more than before global, but is EU global competitive? Scenario s have been supporting, more than before it are all black swans dealing with the changes of the sector. Communicate over figures and facts, be careful with framing and be aware of present volatile European polity making.