Challenges for the European Gas Market

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Challenges for theEuropean Gas Market

Vienna, March 8, 2013

Michael WoltranSenior Vice PresidentGas Logistics

2 |Vienna Forum on European Energy Law – March 8, 2013

Oil & gas import dependencyMajor global gas flows, 2010/2035 (bcm)

Ongoing Changes in the Energy Landscape

Changing supply pattern

Globalization of gas trade / LNG to link global energy market

Divergent regional import dependency

139 390

2010 2035

0 27

0 41

94 16886 252

62 29

25 107 Source: IEA World Energy Outlook 2012


European Gas Market – Economic Challenges I

0

100

200

300

400

500

600

700

201520102005 20252020

SOURCE: OMV market update 2012, based on public and proprietary data

Forecast

EU 27+Turkey, bcm Technical supply capacity

Widening gap too large

to manage by ToP

flexibility

High uncertainty in forecastOMV expected demand forecast range Full demand forecast range Range for contracted supply volumes incl. ind. prod.

Demand – supply gap

Widening demand– supply capacity gap since 2008

End of this decadedemand – supply pattern to change

Uncertain developments lead to broad range in demand forecast

Need to meet demand


UK

SEE

9297

211206 3529

5938

Turkey

NWE

CEE

7477

Italy

Gas demand by submarket

bcma Stagnating demand

Growing demand

4839

Nabucco West TANAP South Caucasus Pipeline

Ø 2009-111 2020

Slow demand growth (~1.8% p.a.²)

Regional differences (Turkey: Fastest growing market (~3.6% p.a.²))

Profitability of market-based energy business under pressure

Increasing import dependency on gas

European Gas Market – Economic Challenges II

1 Average 2009-11 taking for actual figures to eliminate yearly weather fluctuations 2 CAGR 2011-2020

SOURCE: OMV market update 2012/2030 based on Eurogas, Cera, local regulators and OMV analysis


European Gas Market – Political Challenges

Energy challenges calling for feasible solutions for the European gas market

Challenging regulatory framework for natural gas in Europe

Restrictive energy policies

Natural gas squeezed from policy environment (e.g. high subsidies for renewables, low carbon price)


European Gas Demand Scenario until 2035

Gas - most important energy fuel until 2035 in Europe

EU 27+Turkey primary energy demandmn t p.a.

Coal

Nuclear

Renewables

Gas

2035

1,859

31%

25%

10%

12%

22%

2020

1,825

27%

29%

16%

12%

16%

2010

1,822

26%

33%

17%

13%

11%

Oil

Source: IEA World Energy Outlook 2012, BP Statistical Review, IHS CERA, OMV analysis


The European Gas Market – How to Look Like

Liberalized, but not overregulated market Decarbonisation targets to meet the real market environment

Gas infrastructure development shaped by EU needs and SoS, diversification andgeostrategic goals

Increasing regional integration between European energy markets

Stronger correlationamong Gas Hubs

Variety of suppliers, supply sources and contractual terms

European gas markets

Long-term supply patterns to adapt to new market reality

Adopted contracts containing intelligent price concepts

LTCs to remain backbone for secured supply?!

Gas promotion to increase the gas demand

Supply / Demand

Infrastructure

Competitive Gas Market

Regulatory Framework


Natural Gas, the Energy Source of the Future(?)!

Supporting decarbonization of European economy Natural gas in combination with increased share of Renewable Energy Sources Lowest CO2 emissions

Further development of technologies and innovation Further enhancement of markets (liquidity, flexibility, integration) A wise and strategic energy turnaround offers new possibilities and markets for

natural gas: High potential of natural gas in the market Diverse fields of application (thermal / power / transportation market)

Any pragmatic roadmap for a sustainable future has to involve a larger role for gas and to strengthen awareness of natural gas as green energy in policy, public and

among our customers

Increased share of natural gas in the energy mix

Current situation

Vision


OMV as Integrated Gas and Power Player

Strategy: Integrated Gas


Reasonable Thoughts for the Gas World Current radical changes on the global energy market

In combination with increasing import dependency on gas in Europe

Lead to a challenging role for natural gas as a perfect supplement to

renewable energy in the future energy mix.

Thus we need a fully functioning European gas market

With supportive political and regulatory framework and

Efficient market conditions

Progress in geostrategic projects (Nabucco) and logistical integration

New markets to be opened up for natural gas

Competitive pricing

What we have to concentrate on now is the promotion of gas as the best

solution to meet future energy demand!


Michael WoltranSenior Vice President

OMV Gas & Power GmbH

Trabrennstrasse 6-81020 Vienna/Austria

www.omv.com

Challenges for the European Gas Market

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