Natural gas market in Bulgaria

2006 and 2007

Deyan KalaydzhievDeyan KalaydzhievDeyan KalaydzhievDeyan Kalaydzhiev

Director Director Director Director ““““Strategic marketing and planningStrategic marketing and planningStrategic marketing and planningStrategic marketing and planning””””

Overgas Inc. JSC, BulgariaOvergas Inc. JSC, BulgariaOvergas Inc. JSC, BulgariaOvergas Inc. JSC, Bulgaria

Geneva, 22Geneva, 22Geneva, 22Geneva, 22----24.01.200824.01.200824.01.200824.01.2008

Total natural gas consumption of Bulgaria

• In 2006 In 2006 In 2006 In 2006 –––– 3,3 3,3 3,3 3,3 bcmbcmbcmbcm • In 2007 In 2007 In 2007 In 2007 –––– 3,4 bcm3,4 bcm3,4 bcm3,4 bcm

Total natural gas consumption in Bulgaria, bcm

2,7412,91

2,836

3,2283,327

3,5

1

1,5

2

2,5

3

3,5

4

2002 2003 2004 2005 2006 2007

Years

Volu

me

of nat

ura

l gas

, bcm

bcm

• 2006200620062006

– Import – 2,97 bcm;

– Production – 0,508 bcm.

Natural gas market structure in Bulgaria

• 2007200720072007

– Import – 3,11 bcm;

– Production – 0,291 bcm.

• Transit to Turkey, Greece and Macedonia:Transit to Turkey, Greece and Macedonia:Transit to Turkey, Greece and Macedonia:Transit to Turkey, Greece and Macedonia:

-2006 – total 15,190bcm

-2007 – total 17,190 bcm

Average Average Average Average consumption consumption consumption consumption per capita per capita per capita per capita ––––460 m460 m460 m460 m³³³³/year/year/year/year

83,4

2740

106

3145

12336

13939

Macedonia

Greece

Turkey

2006 2007

Gas distribution map of Bulgaria

Licensed territories of OVERGAS subsidiaries

Gas distribution sales in Bulgaria

Distributded volume of natural gas toDistributded volume of natural gas toDistributded volume of natural gas toDistributded volume of natural gas toTotal natural gas consumption ratioTotal natural gas consumption ratioTotal natural gas consumption ratioTotal natural gas consumption ratio

Natural gas ditribution sales in Bulgaria, million mNatural gas ditribution sales in Bulgaria, million mNatural gas ditribution sales in Bulgaria, million mNatural gas ditribution sales in Bulgaria, million m3333

3%4%

5% 6%

8%

11%

13%

0%

2%

4%

6%

8%

10%

12%

14%

2001 2002 2003 2004 2005 2006 2007

36536536536529129129129122522522522515815815815814714714714711311311311393939393

2007200720072007200620062006200620052005200520052004200420042004200320032003200320022002200220022001200120012001

0

5000

10000

15000

20000

25000

Industrial

sector

Public-

administrative

sector

Household

sector

Natural gas consumers, Overgas Inc AD

2006

2007

Gas distribution customers in Bulgaria

● Still lStill lStill lStill less than 1% of the households ess than 1% of the households ess than 1% of the households ess than 1% of the households in in in in Bulgaria Bulgaria Bulgaria Bulgaria areareareare using natural gas!?using natural gas!?using natural gas!?using natural gas!?

● Overgas Inc. JSC Overgas Inc. JSC Overgas Inc. JSC Overgas Inc. JSC holds 60%60%60%60% of all issued licences for natural gas distribution in Bulgaria;

● 70% 70% 70% 70% of the total distributed volume of natural gas in Bulgaria is distributed by subsidiaries ofOvergas Inc. JSC.Overgas Inc. JSC.Overgas Inc. JSC.Overgas Inc. JSC.

● Overgas Inc. JSCOvergas Inc. JSCOvergas Inc. JSCOvergas Inc. JSC subsidiaries have connected more than 75% of all natural gas consumers in Bulgaria;

80%80%80%80% of all investments in gas distribution sector

were made by Overgas Inc. JSCOvergas Inc. JSCOvergas Inc. JSCOvergas Inc. JSCsubsidiaries;

Natural gas market tendencies and scenarios

● According to the optimistic scenariooptimistic scenariooptimistic scenariooptimistic scenario at the end of period (2017) natural gas consumption will reach 6,5 bcm6,5 bcm6,5 bcm6,5 bcm and the volume of the distribution will increase up to 2,6 bcm2,6 bcm2,6 bcm2,6 bcm.

0

1 000

2 000

3 000

4 000

5 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Distribution Total natural gas consumption

● Natural gas consumptionconsumptionconsumptionconsumption and distributiondistributiondistributiondistribution in Bulgaria 2008 – 2017, million m3

(pessimistic scenario)

Bulgaria and the future gas projects

� Nabucco

� South Stream

Satisfying EU’s natural gas hunger

Security of supply

Social, environmentaland economicaladvantages for

the region

BULGARIA – aEuropean energy corridor

Benefits for Bulgaria

Natural gas future outlook in Bulgaria

• Projects in the field of R&DR&DR&DR&D, production of oil and gas;production of oil and gas;production of oil and gas;production of oil and gas;

• Small-size LNG plantsLNG plantsLNG plantsLNG plants;

• Developing and expanding the market of compressed natural gas (CNG)compressed natural gas (CNG)compressed natural gas (CNG)compressed natural gas (CNG).

• New underground storage facilitiesunderground storage facilitiesunderground storage facilitiesunderground storage facilities for natural gas.

OVERGAS INC. JSC – Who are we?

● More than 1 800 km1 800 km1 800 km1 800 km of gas supplying and gas distribution pipelines are built with investments over EUR 94 millionEUR 94 millionEUR 94 millionEUR 94 million.

� Overgas Inc. JSC is a joint stock company with the following shareholders:

-

-

-

● Overgas Inc. JSC is the main shareholder in 26 gas supply companies26 gas supply companies26 gas supply companies26 gas supply companies. They operate on the territory of 50 municipalities50 municipalities50 municipalities50 municipalities inhabited by more than 3 million people3 million people3 million people3 million people.

● Gasification is the fastest developing process in Bulgarian energy market.

● As of 2007 approximately 29 00029 00029 00029 000users are connected to the natural gas distribution network of Overgas Inc. JSC.

● The growth rate of the newconsumers has been sizeable and steady for the last 5 years.

● For 2008 we are expecting that the number of the consumers will reach 55556 0006 0006 0006 000.

Overgas Inc. JSCCustomers

Customers of Overgas Inc JSC

33341680

6440

13904

21179

29048

0

5000

10000

15000

20000

25000

30000

35000

2002

2003

2004

2005

2006

2007

Number of customers ,

● In the industrial sector natural gas is up to 40%40%40%40% cheapercheapercheapercheaper than the alternative - heavy oil (3,5% S);

● In the residential sector natural gas is 2,6 times cheaper2,6 times cheaper2,6 times cheaper2,6 times cheaper than the average electricity price;

● In the public-administrative sector natural gas is 3 times cheaper3 times cheaper3 times cheaper3 times cheaper than gas oil.

Benefit of using natural gas in Bulgaria

● Only in 2006in 2006in 2006in 2006 as a result of the replacement of traditional fuels with natural gas the direct emissions of greenhouse gases in the cities gasified by Overgas Inc JSC decreased by 300 000 300 000 300 000 300 000 tonstonstonstons.

● In 2006200620062006 natural gas has replaced:- 120 000 tons120 000 tons120 000 tons120 000 tons of heavy fuel oil; - over 60 000 60 000 60 000 60 000 tonstonstonstons of gas oil- 60 000 60 000 60 000 60 000 tonstonstonstons of coal

“Overgas Inc.” JSC

1407 Sofia, Bulgaria5 Philip Kutev Str.

www.overgas.bg