Budapest, 31st May 2012

Russian gas – European possibilities

Didier Lebout, Head of Strategy,

Gazprom Marketing and Trading France

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Gas in Europe: an eco-friendly solution for decades ahead

Natural gas: the best solution for environmentally safe and economically efficient generation in the decades ahead.

Much lower costs to achieve European emission reduction goals towards 2050, according to a study commissioned by the European Gas Advocacy Forum:

Through RES: up to $ 1.5 trillion (out of which $820 billion to be paid from the budget of the European states)Through “gas scenario”: 500 billion dollars less by 2030, and 850 billion less by 2050 than the full RES scenario.

Other advantages:

Gas is available, its reserves are predictable Supply routes are growing. Gas power production is also flexible: it can provide a “base load”, cover peak loads, or act as a back-up for downfalls in RES power production.

Budapest, 31st May 2012

European imports

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The gas market in the early 21st century should be discussed in an increasingly global scale. One key principle: It is the principle of long-term contracts with oil products index and the “take-or-pay” conditions that our parent company and the entire Gazprom Group in foreign markets base their activity upon.

Gas market development: becoming more global

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Spot-markets are volatile - no guarantee of supplyEarly days economic crisis: prices in the spot markets of continental Europe

(over-contracted volumes dumped in the spot market, forcing the price down there)After the European customers had a chance to adjust their contracts, the excessive volumes on spot disappeared and spot prices went up

Volatile spot markets– an adequate pricing reference? Spot markets in continental Europe: not yet mature, liquid and deep enough to provide a reliable price signal Gazprom Group: not against spot peg, but its share is limited by own economic limits of spot markets.

Oil-pegged pricing: predictable and protected against the abuse of any market player

Oil-peg versus spot

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Conclusion: a hybrid pricing model in Europe’s gas market1. Long-term contracts and oil-indexation: leading role, secured supplies2. Spot-market: balancing role, arbitrage for companies at the margin Closely interconnected, healthy balance between its two components

Long-term contracts: a fundamental role

For gas consumers For gas producersSecured gas supplies Predictable prices thanks to the oil indexation Flexibility and services

Possibility to plan investments : production and transportation of gas is only reasonable under long-term contracts with off-take obligations (no one would construct a costly pipeline without a firm belief that it will be filled with gas)

Long-term contracts: mutual obligations – mutual guarantees

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Policy: equal treatment is essential

In Europe, equal treatment and equal opportunities for all projects and all technologies are essential to enable genuine competition.

Long-term plans – the nuclear phase-out and renewable energy What will be able to replace the generating capacity being phased out? What solution would be best if we decide to reduce nuclear power generation?

A number of imperfections in the current regulatory framework: ‘merit order’ for access to electricity grid intended to stimulate renewable sources but… nips in the bud all incentives for investing in other areas of generation

Budapest, 31st May 2012

GM&T Ltd : a quick presentation

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Our landmarks:• Company created in mid-2006• First sale to the end user: end of 2006• 2007-2008: direct sales to very large end users-monosite• 2009-2010 : expanding to medium –size end customer market and multi-site large clients• 2009-2010: First smart meter installed• 2011: development of the sales to small and medium clients• The total of about 1 bcm delivered in 2010

French sales organization is integrated inside GM&T Energy team (Manchester) active in England, Ireland, Belgium, Netherlands, Germany.

In France, GM&T also has other activities • Gazprom representative functions in France and admin support functions;• To manage the EU REACH program for GAZPROM & SIBU (Registration of chemicals products

exported to EU)• To develop through BST synergies between all BU’s of GM&T and all others entities of the

Gazprom group.

Gazprom Marketing and Trading France The French example

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August 2000: liberalization of the market for sites consuming more than 237 GWh/y (± 20% of the market is open – roughly 600 sites)

August 2003: liberalization of the market for sites consuming more than 83 GWh/y (± 37% of the market is open – roughly 1200 sites added to the liberalized market) July 2004 : liberalization for the professional clients (± 70% of the market is open – roughly 640 000 sites added to the liberalized market)

July 2007: liberalization of the domestic market (11 millions sites) = total liberalization of the market

Dynamic of Gas market liberalization in France - 1

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Dynamic of Gas market liberalization in France - 2

French gas market structure overview and GM&T position in 2011

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(2,700 sites)

B2S( 71,000 sites)

B2i+

B1(707,000 sites)

(10,193,000 sites)

15 Bcm / year

13 Bcm / year

INDUSTRIES

PROFESSIONALS

RESIDENTIALS

(1,200 sites)

( 71,000 sites)

(707,000 sites)

18 Bcm / year

FRANCE

Market share: approx. 6%

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Thank you for your attention!

Budapest, 31st May 2012