Nord Stream 2. Enhancing European Energy Security

Nord Stream 2 Enhancing European Energy Security Reinhard Ontyd, Chief Commercial Officer, Nord Stream 2 AG Institut für Energie- und Regulierungsrecht Berlin, 1. März 2018

What is Nord Stream 2? Project introduction

The Pipeline Will Run Through the Baltic Sea Along the Proven Nord Stream Route > With an overall length of 1,200 km, the Nord Stream 2 Pipeline will connect Europe to the largest gas fields in the world, in Russia > Route optimised for maximum efficiency and minimum impact on the environment > Design & implementation verified by independent certification > Extensive international consultation and permitting process > Construction and design will follow the Nord Stream model Nord Stream 2 AG 3

Nord Stream 2 Is a Privately Financed Project Developer > EUR 8 billion CAPEX > EUR 9.5 billion total expenditure (including financing costs) > 220 employees from 20 nations, based in Zug, Switzerland additional offices in St Petersburg and Moscow > Investments in over 10 European countries Nord Stream 2 AG 4

Why is Nord Stream 2 necessary?

A European Natural Gas Supply Gap Is Emerging due to Decreased Production European gas demand mostly 481 bcm stable 472 bcm Russia LNG Northern Africa 133 bcm 35 bcm 41 bcm 288 bcm 120 bcm import gap to be filled by Russian gas and LNG, share will be set by the market Norway EU 119 bcm 141 bcm 10 bcm 8 bcm 94 bcm 72 bcm ** 2015 2035 ** Statistical difference of ~12 bcm in 2015 (Azeri) Drop in domestic production and lower output from other supply Sources: adapted from Prognos 2017, based on EU Reference Scenario 2016, adapted with NOP 2015, OGA (Oil and Gas Authority) production projections, February 2016, NEP Gas 2016, Norwegian Petroleum Directorate; The Oxford Institute for Energy Studies, Algerian Gas: Troubling Trends, Troubled Policies, May 2016; The Oxford Institute for Energy Studies, Azerbaijan s gas supply squeeze and the consequences for the Southern Corridor, July 2016, BP Statistical Review of World Energy, June 2016; demand includes EU-28 and Switzerland, excludes western imports to Ukraine 6 Nord Stream 2 AG 6

Global Gas Demand Is Set to Grow by About 50% by 2040, Increasing Competition Over Gas World Energy Outlook 2017: Natural gas demand in New Policies Scenario [bcm] Europe competes with other regions over gas resources +10% +19% 575 583 615 636 Current 2025 2035 2040 Eurasia +101% +66% 961 1045 1109 1143 Current 2025 2035 2040 North America +63% 737 795 477 568 Current 2025 2035 2040 Middle East +134% 1331 1472 998 732 Current 2025 2035 2040 Asia Pacific 166 183 237 271 Current 2025 2035 2040 Central &South America 134 177 251 306 Current 2025 2035 2040 Africa 1) Demand growth leads to increased need for LNG because production and consumption locations further diverge from each other, i.e. Asian region is among the largest consumers globally, but has close to no natural gas resources itself or in proximity of a pipeline 2) Current = 2016 Source: IEA WEO (2017) Nord Stream 2 AG 7

Additional Import Can Only Be Supplied by Russian Pipeline Gas and/or Global LNG Natural gas import sources for the EU 28 market 1 Norway 5 Russia 4 LNG 3 Southern Corridor 2 North Africa EU 28 gas import sources EU 28 countries 1 Norway > Production and thus exports from Norway to EU will decrease 2 3 4 5 North Africa > Exports from North Africa limited by growing domestic demand Southern Corridor > No indication for substantial additional import volumes from Southern Corridor Global LNG > Significant liquefaction and regasification capacities available, volatile market Russia > The world's largest gas reserves; large volumes available for export to the EU Nord Stream 2 AG 8

World s Largest Gas Reserves in Strategic Proximity Total reserves: 196,605 North America 11,155 Europe 3,229 CIS ex. Russia 15,485 Russia 47,777 Africa 14,377 Middle East ex. Iran 45,649 Iran 33,721 Far East 17,569 CS America 7,643 Global gas reserves in bcm Source: BGR Energiestudie 2017 Nord Stream 2 AG 9

High Capacity Utilisation of the Nord Stream Pipeline at over 90% 100% 90% 80% 70% Gas transported until December 2017: 205.3 bcm 60% 50% 40% 30% 20% 10% 0% 2011 (Nov-Dec)* 2012* 2013 2014 2015 2016 2017 * Based on 27.5 bcm per year; all other yearly figures based on 55 bcm. Nord Stream 2 AG 10

Nord Stream 2 for a More Competitive EU Gas Market > Gas flows freely within the EU internal market and will be traded at hubs in competition with other gas sources > Nord Stream adds more liquidity, thereby stimulating new connections and enhancing the functioning of the integrated market in line with EU energy strategy > It is the most cost effective option for Europe due to efficiency of offshore routes and major long term investments in the Russian gas fields > Increased competition benefits the European economy - Gas market studies show: Nord Stream 2 will have a price decreasing and welfare enhancing effect in all European countries - EU wholesale gas prices will be up to 13% lower in 2020 if Nord Stream 2 is available Source: EWI: Impacts of Nord Stream 2 on EU Natural Gas Markets (2017) Nord Stream 2 AG 11

Europe s Interconnected Gas Network IRELAND UNITED KINGDOM NETHERLANDS BELGIUM FRANCE NORWAY GERMANY SWITZERLAND ITALY SWEDEN DENMARK RUSSIA AUSTRIA POLAND SLOVENIA FINLAND CZECHIA ESTONIA LATVIA LITHUANIA SLOVAKIA HUNGARY UKRAINE Existing connections Planned connections Country with LNG terminal EU internal market Pipelines from the North Sea Pipelines from Russia Pipelines from North Africa Nord Stream 2 Pipeline from the Caspian Sea European pipeline grid PORTUGAL SPAIN Nord Stream 2 AG 12 MOROCCO ALGERIA LIBYA CROATIA SERBIA BULGARIA GREECE ROMANIA AZERBAIJAN via TURKEY

EWI Report Shows All of Europe Benefits from Nord Stream 2 > Nord Stream 2 helps reduce wholesale European gas prices by enabling greater choice between imports (pipeline vs. LNG) > Europe has a price advantage from being less dependent on higher LNG prices - 2020: benefits for consumers between 7.9 bn and 24.4 bn EUR per year* - 2025: benefits for consumers between 12.9 bn and 34.8 bn EUR per year* - 2035: benefits for consumers between 9.7 bn and EUR 26.9 bn EUR per year* > Every country can benefit thanks to the interconnected market Price reductions due to Nord Stream 2 in 2020, Low Global LNG Demand. Source: EWI ER&S: Impacts of Nord Stream 2 on the EU Natural Gas Market (2017) * Depends on state of global LNG market as LNG is market price setter in Europe Nord Stream 2 AG 13

Effects of Nord Stream 2 on Jobs and Investments > Based on a contracted investment of EUR 4.5 billion (as of 2017), Nord Stream 2 will benefit the EU economy by creating: - a total output of over EUR 5 billion - over 31,000 full-time job equivalents over 5 years > Pronounced effect in countries with: - project activities (logistics, steel mills, landfalls, headquarters) - locations of major offshore industry suppliers (Netherlands, UK, Italy) UK 1,180 UK Netherlands 8,630 Switzerland 5,920 Other EU 500 Germany Sweden 1,760 Denmark 600 13,090 Germany Austria 1,840 Italy 1,030 Finland Finland 2,630 Source: Arthur D Little: Economic impact on Europe of the Nord Stream 2 project (2017) Nord Stream 2 AG 14

Nord Stream 2 Delivers Sustainability Benefits Lower CO 2 Emissions in Power Generation > Use of 55 bcm natural gas instead of coal could save 14% CO 2 emissions of EU power generation > Ideal partner to renewables Low-emission Gas Transport > Better carbon footprint than LNG liquefaction chain > Lower emissions from fuel gas use than onshore systems due to efficient compression to 220 bar Environmentally Friendly Pipeline > Can be constructed in a fraction of the time compared to onshore systems > Monitoring of Nord Stream shows environmental impact is minor, local and short term only Nord Stream 2 AG 15

Compatible with European Energy Policy > Nord Stream 2 aligns with the three main objectives of EU energy policy - Energy security: Nord Stream 2 is an additional option for importing additional gas volumes via new infrastructure - Affordability: Nord Stream 2 the most efficient access to competitive gas supplies - Sustainability: Nord Stream 2 provides a cost-effective contribution to emissions reduction by making more gas available to replace coal in power generation > Nord Stream 2 makes an important contribution to gas supply, but meets only a portion of EU demand. It is complementary to, and will operate alongside, other supply routes and sources > The relationship between Russia and the EU is balanced and interdependent the EU is Russia s largest customer for gas exports > Nord Stream 2 will be developed in full compliance with EU regulation Nord Stream 2 AG 16

Nord Stream 2 in the Political Environment USA CAATSA Nord Stream 2 EU Commission Gas Directive Denmark Bill L43 (Act on Continental Shelf) Nord Stream 2 AG 17 17

The Permitting Process Nord Stream 2 AG 18

Nord Stream 2 Route over 1,200 km Through the Baltic Sea NORWAY SWEDEN FINLAND ESTONIA RUSSIA Nord Stream 2 route crosses Exclusive Economic Zones (EEZ) and territorial waters (TW) Country EEZ [km] TW [km] Total [km] DENMARK LITHUANIA LATVIA Russia n/a 114 114 Finland 378 n/a 378 RUSSIA Sweden 512 n/a 512 GERMANY ------------ Nord Stream Pipeline - - - Nord Stream 2 Pipeline POLAND Denmark 53 86 139 Germany 31 52 83 Total 974 252 1,226 Nord Stream 2 AG 19

Legal Framework and International Consultation Process National level > National law of 5 states: Germany, Denmark, Sweden, Finland, Russia > Numerous permitting-related national provisions applicable for construction and operation Supra-national level > European Directives - Environmental legislation, e.g. EIA Directive as implemented nationally International level > Between states - UN Convention of the Law of the Sea (UNCLOS) - Espoo Convention - Helsinki Convention - International Convention for the Prevention of Pollution from Ships, MARPOL - Further multilateral treaties and conventions Party of Origin Affected Party Denmark Sweden Germany Poland Lithuania Finland Latvia Estonia Russia Ob-Taz bay gas fields > Nord Stream 2 is subject to the Espoo Convention on EIA in a Transboundary Context > Each of the countries through whose waters Nord Stream 2 passes is a Party of Origin. Countries which could be affected by transboundary environmental impacts from the project are defined as Affected Parties Nord Stream 2 AG 20

Searching for the Optimal Route > Adding to the extensive knowledge gained by Nord Stream AG, we are finalising a massive survey programme to prepare for the Nord Stream 2 route > 31 vessels have been deployed: - Surveying more than 51,000 line km - Collecting 950+ samples to confirm the geology of the seabed - Working more than 570,000 hours to find the best route for the 1,200 km pipeline - 90 terabytes of data gathered > By end of the project Nord Stream 2 will have spent around EUR 100 million on survey works alone Nord Stream 2 AG 21

The Legal Framework National level Supra-national level International level > National law of 5 states - Germany - Denmark - Sweden - Finland - Russia > Numerous permitting related national provisions applicable for construction and operation > European Directives - Environmental legislation, e.g. EIA Directive as implemented nationally > Between states - UN Convention of the Law of the Sea (UNCLOS) - Espoo Convention - Helsinki Convention - International Convention for the Prevention of Pollution from Ships, MARPOL - Further multilateral treaties and conventions Nord Stream 2 AG 22

Espoo Process International Consultations Until October 2017 April 2017 May 2017 June-October 2017 Submission of Espoo Report to Parties of Origin Notification of Affected Parties by Parties of Origin Publication of Espoo Report on Nord Stream 2 website in nine languages of the Baltic Sea countries and English - Non-Technical Summary - Espoo Report - Map Atlas International consultations in parallel to national EIA procedures, subject to individual national requirements Public hearings, information meetings and other means of consultation on the Espoo Report according to national legal requirements in all nine Baltic Sea countries Nord Stream 2 AG 23

Espoo Report Comprehensive Documentation for International Consultations > 10 languages (9 Baltic Sea countries and English) > 760 pages on average > Structure - Non-Technical Summary prepared for the non-specialist reader as summary of the overall approach and key findings - Espoo Report 20 chapters and 4 appendices from project justification, environmental baseline to assessment of environmental impacts, transboundary impacts and mitigation measures - Map Atlas 93 detailed maps > Available for download on project website www.nord-stream2.com/internationalconsultation-process/ Nord Stream 2 AG 24

Project Status 3/5/18 Nord Stream 2 AG 25

Leading Energy Companies Are Strongly Committed to Implementing the Project 100% Shareholder Financial Investors Project Developer provides up to 50 percent of the estimated project cost EUR 8 billion CAPEX EUR 9.5 billion total expenditure (including financing costs) support the project by providing up to 50 percent of the financing, up to 950 million euros each Nord Stream 2 AG 26

Europe s Largest Infrastructure Project > 200,000 pipes to be shipped, concrete weight coated and stored in preparation for pipeline construction > 4 storage sites in Germany, Sweden and Finland > 3 concrete weight coating plants > Over 1 million tonnes of materials needed for concrete coating mix > 500 shipments needed to transfer pipes from coating plants in Germany and Finland to interim storage yards along the middle section of the pipeline route > About 100 suppliers and service providers involved in the large-scale logistics operation > 100,000 pipes to be readily coated and available at relevant logistics hubs by the time construction begins in Q2/2018 Nord Stream 2 AG 27

Nord Stream 2 a European Project Already, EUR 4.7 billion in investments have been committed in European industry and services involving over 670 companies from 25 countries. A selection: Logistics 1 Port of Mukran 2 Port of HaminaKotka 3 Port of Karlshamn Pipes & Materials 1 EUROPIPE 2 OMK 3 Chelpipe 4 PetrolValves 5 Voestalpine 6 MMK 7 Dillinger Hütte 8 Impalloy 9 Wasco Coatings 4 Port of Hanko Koverhar 5 Company Headquarter in Zug Engineering & Surveys 1 Saipem Fano 2 Fugro Survey 3 Geo 4 Next 5 MMT 6 N-Sea Offshore Pipelay 1 Allseas 2 Saipem 3 Boskalis / van Oord Environmental Studies, Quality Management, Safety & inspection 1 2 3 Rambøll IfaÖ DNV GL 5 6 7 Business Trend Delta Energy Services Intertek 4 Svarog 2 UK 8 Norway 6 Sweden 1 Denmark Netherlands 1 1 6 2 9 3 Germany 7 1 Switzerland 5 7 3 3 2 5 1 4 3 5 Austria 4 Italy Finland 4 2 Russia 2 4 3 5 6 Nord Stream 2 AG 28

Development on Schedule 2012-13 Feasibility Study 2015 2016 2017 2018 2019 2020 > EIA Programme Consultation Permitting and Environmental Impact Assessments Environmental Monitoring Surveys and Engineering Procurement and Delivery, Pipe Logistics Construction and Commissioning Operation Nord Stream 2 AG 29

Status of Project Development > Material and service contracts - All major tenders awarded: steel, logistics, pipelay - Pipe deliveries well on track: 1,800 km (74%) of line pipe delivered (January 2018) - Concrete weight coating ongoing at three locations, approx. 31% already coated (January 2018) - Transshipment started to Hanko (FIN) and Karlshamn (SWE) > Permits and surveys - National process ongoing and hearings already held in all countries, Espoo hearings concluded - Over 51,000 line km of surveys completed using 31 different vessels - National construction permits expected in time for planned start of construction in Q2 2018 Nord Stream 2 AG 30

Summary

Summary > Nord Stream 2 is a new natural gas pipeline through the Baltic Sea to connect Europe to the largest gas fields in the world, supplementing existing gas transportation with up to 55 bcm/a > Nord Stream 2 is a privately funded project to reinforce the European gas supply, backed by major European companies > EU domestic gas production has fallen in recent years and is expected to fall further within the next 20 years (-50%, about 70 bcm less) while traditional suppliers from Norway (-25 bcm) and Northern Africa (-30 bcm) will not be able to supply Europe at today s level anymore > At the same time, EU gas demand remains steady so additional gas imports and capacity are required to meet European demand and safeguard supply security > Nord Stream 2 will bring considerable benefits by: - Increasing security of supply by connecting to the world s biggest gas reserves - A more competitive EU gas market by adding new capacity the market needs - Supporting sustainability goals natural gas is a cost-efficient decarbonisation option Nord Stream 2 AG 32

Contact > For further information, please contact: Nord Stream 2 AG Baarerstrasse 52 6300 Zug, Switzerland Email: info@nord-stream2.com Website: www.nord-stream2.com Twitter: @nordstream2 Nord Stream 2 AG 33