North Africa Mediterranean Opportunities in the gas market

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1 North Africa Mediterranean Opportunities in the gas market 20 th World Energy Congress Rome 2007 Joint presentation Sonatrach Enel Rome, November 2007

2 Agenda 1. Company profiles 2. Mediterranean gas market and future development 3. Potential constrains 4. NOCs and utilities role 1

3 SONATRACH- Highlights of the year 2005 Results 2005/2004 Revenues at bn + 44% EBITDA at bn + 48% Net result at 5.75 bn + 69% Net debt at 0.52 bn - 69% Headcount: people + 1% 2

4 Sonatrach s assets Strategic position Large hydrocarbons reserves Sizable networks (more than Km pipelines) Solid financial situation Excellent and durable relationships with foreign partners 3

5 Algeria: strategic geographic location 3000 km 2000 km African, Arab and Mediterranean crossroad 1000 km Close to main Mediterranean markets (Spain, France, Italy, Greece, Turkey, Lebanon ) 4

6 Sonatrach s targets GAS EXPORT TARGETS: 85 bcm from 2010 and 100 bcm from 2025 by Developing gas reserves in Algeria and entering international upstream Putting in place new schemes of integrated development Reinforcing pipeline export capacity Securing the access to LNG markets Entering the gas downstream and being present in each phase of the gas value chain (transportation, storage, power generation, etc. ). 5

7 ENEL - Highlights of the year 2005 Results 2005/2004 Revenues at 34 bn +9.8% EBITDA at 7.7 bn +10.6% Net result at 4 bn +48.0% Net debt at 12.3 bn - 49,8% Headcount: people (1) -5,1% Excellent performance on key indicators 6 (1) Excluding 2005 acquisition in Romania (Electrica Banat and Electrica Dobrogea: people)

8 Enel in the Italian electricity sector GENERATION 42,047 MW 26,837 MW Thermal 14,318 MW Hydroelectric 642 MW Geothermal 250 MW Wind and other renewable DISTRIBUTION 82% of the total electricity distributed in Italy SUPPLY nearly 30 million customers. Data as of December 31 st

9 International assets Spain Viesgo: MW coal, oil, hydro: more than customers Enel Uniòn Fenosa Renovables 445 MW (80% Enel) Escatron CCGT realization started 800 MW Enel North America 410 MW Hydro, wind and other renewable in US (and Canada) Enel Latin America More than 200 MW hydro, geo and wind in central America and Chile Entered in Panama with Fortuna acquisition (300 MW, 30% of country production) El Salvador [Geo]: 12,5% (growing) participation in LAGEO PT ES UK FR NL BE CH DK DE IT NO SE PL LT FI CK SK AT HU SI HR RO BA YU BG MK AL (1) GR France 1000 MW contracted with EdF Participation in Flamanville nuclear EPR project (1600MW) Trading activity on Powernext OTC and large account direct sales Acquired Erelis (500MW wind projects pipeline) EE LV BY UA MO TR RU 66% of Slovenské Elektrárne MW (deal closed on April ) Romania 51% distribution company Banat & Dobrogea 1,4 mn customers for total 7.7 TWh distributed Won bid for Muntenia Sud (1,1 mn customers) Russia Operation of the NW Power Plant, 450 MW (recently doubled to 900MW) CCGT in S. Petersburg JV RusEnergoSbyt, trader Slovakia Bulgaria 73% di Maritsa East III Power Holding BV company that owns the lignite power plant of Maritsa East III 840 MW 8

10 Agenda 1. Company profiles 2. Mediterranean gas market and future development 3. Potential constrains 4. NOCs and utilities role 9

Mediterranean gas market overview bcm 165 159 Consumption Import 95 75 129 116 CAGR 5,7% 7,8% Other 62% Algeria 32% Egypt 3% Libya 3% 1995 2000 2005 Reserves: : 8.

11 Mediterranean gas market overview bcm Consumption Import CAGR 5,7% 7,8% Other 62% Algeria 32% Egypt 3% Libya 3% Reserves: : bcm Production Consumption CAGR 7,5% 7,5% Other 21% Spain 24% France 14% Greece 1% Italy 40% Sources: BP; CERA; Italian Ministry of Industry; estimates

12 Mediterranean gas market outlook bcm CAGR 2,7% 2,8% Power generation demand Other uses demand 2,6% e 2015e CAGR 137 6,1% Production Consumption ,1% e 2015e 11 Sources: BP; CERA; Italian Ministry of Industry; IEA World Energy Outlook 2005; estimates

13 Mediterranean import-export infrastructures bcm/y Existing gas pipelines Existing LNG liquefation plants Existing LNG regassification plants Projected gas pipelines Projected LNG liquefation plants Projected LNG regassification plants Import existing under construction planned total Export LNG pipe existing under construction planned total 12 Sources: CERA; Petroleum Economist; others

14 Algerian export capacity bcm/y Existing gas pipelines Existing LNG terminals Spain Italy Projected gas pipelines Projected LNG terminals Medgaz (8) Morocco Spain Arzew LNG (23) Gassi Touil LNG (5) Skikda LNG (3) Revamping (6,5) Galsi (8) Tunisia Italy Pedro Duran Farell (11,5) Transmed (26) Expansion (6,5) LNG pipe existing under construction planned & speculative total 13

15 Italian import capacity bcm/y Netherlands and Norway Transitgas (17) Russia TAG (26 bcm) Expansion (6,5) Trieste LNG (8) Existing gas pipelines Existing LNG terminals Projected gas pipelines Projected LNG terminals Panigaglia LNG (3,5) Monfalcone LNG (8) Livorno LNG (3) Rovigo LNG (8) Rosignano LNG (8) Brindisi LNG (8) Igi (10) LNG pipe Greece Gioia Tauro LNG (8) Taranto LNG (8) Algeria Galsi (8) Transmed (26) Expansion (6,5) Priolo LNG (8) Nuove Energie LNG (8) Algeria Libya Greenstream (8) existing under construction planned & speculative total 14

16 Central & Eastern Europe natural gas demand Demand (bcm) 158 PT ES FR NL BE e 2015e Power generation Other uses 175 UK 201 CH DK DE IT NO CK AT SI HR BA CAGR SE 2,5% 2,9% 2,3% PL SK HU LT FI RO YU BG MK AL (1) GR EE LV BY UA MO TR RU Netherlands 15% Import bcm Other 11% Norway 21% Russia 53% 15 Source: BP; CERA; estimates

17 Agenda 1. Company profiles 2. The Mediterranean gas market and future development 3. Potential constrains 4. NOCs and utilities role 16

Traditional structure of the gas sector in Europe Player Key features Mostly vertically integrated incumbents: importer(/ producer) and transporter Main constrains Unfavorable and not transparent

18 Traditional structure of the gas sector in Europe Player Key features Mostly vertically integrated incumbents: importer(/ producer) and transporter Main constrains Unfavorable and not transparent access terms for gas transport and storage Infrastructure Contracts Developed and controlled by the vertically integrated incumbents Long term ToP Gas pricing formulas indexed on oil products Lack of flexibility (long term commitment) Exposure to oil price volatility 17

19 Deregulation policies and new infrastructure development Main guidelines Unbundling of the vertically integrated incumbents Harmonization and improvement of grid access rules Transparency Non-discriminatory TPA Efficiency However, new complex and expensive projects generally require... TPA exemption Long term firm commitment 18

20 Gas pricing schemes Coal price Crude oil Other Fixed Electricity price Heavy fuel oil UK 7,0% 14,6% Western Europe 4,6% 5,2% 2,6% 30,0% 0,6% Eastern Europe 0,7% 2,1% 0,8% 48,1% Light fuel oil and gasoil 16,2% General inflation 16,5% 50,1% Gas price 40,1% 47,2% 2,0% 4,9% 1,1% 19 Source: Sector Inquiry on the gas and electricity markets, European Commission, DG Competition, Feb. 2006

21 Security of supply High oil (and gas) price Geopolitical instability Demand from fast growing economies Implication Utilities fuel diversification strategy Government policies Fuel mix restriction Taxation Import caps Possible solution Diversification of supply Build security margins Back-ups/ recoveries in case of crisis Additional flexibility 20

22 Agenda 1. Company profiles 2. The Mediterranean gas market and future development 3. Potential constrains 4. NOCs and utilities role 21

23 Gas players evolving role NOCs going to market Regassification terminal participation Pipeline development Marketing & trading Utilities going upand midstream LNG plants participation Natural gas fields development COOPERATION NOT COMPETITION! 22

24 Cooperative approach Benefits NOCs Utilities Final markets access Support in the development of the domestic market Gas & electricity distribution Power generation National system and grid Security of gas supply Long term competitiveness Mutually beneficial partnership based on complementary competences 23

GALSI: a new opportunity in the Mediterranean area Capacity Start-up Capex estimate Total length Partners Benefits Enel Sonatrach 8 bmc/year 2H 2009 2 bn USD 910 km from Algeria to Tuscany

25 GALSI: a new opportunity in the Mediterranean area Capacity Start-up Capex estimate Total length Partners Benefits Enel Sonatrach 8 bmc/year 2H bn USD 910 km from Algeria to Tuscany Sonatrach (36%), Edison (18%), Enel (13.5%), Wintershall (13,5%), Hera (9%), Sfirs (5%), Progemisa (5%) Direct supply with own import infrastructure Direct access to the Italian and European market 24

MEDGAZ Capacity Start-up Capex estimate Total length Partners 8 bmc/year 1H 2009 1,2 bn USD 210 km

26 MEDGAZ Capacity Start-up Capex estimate Total length Partners 8 bmc/year 1H ,2 bn USD 210 km (offshore distance) from Algeria to Spain Sonatrach (36%), Cepsa (20%), Iberdrola (20%), GdF (12%), Endesa (12%) 25

27 Conclusion NOCs + Utilities A balanced partnership offers a unique opportunity for an effective development of the markets both in Europe and in North Africa 26

ERMInE Database. Presentation by Nils Flatabø SINTEF Energy Research. ERMInE Workshop 2 - Northern Europe Oslo, 1. November 2006

ERMInE Database. Presentation by Nils Flatabø SINTEF Energy Research. ERMInE Workshop 2 - Northern Europe Oslo, 1. November 2006 ERMInE Database Presentation by Nils Flatabø SINTEF Energy Research ERMInE Workshop 2 - Northern Europe Oslo, 1. November 26 Overview Content of the Ermine Database Electronic Questionnaire RTD&D Data