CNOOC Natural Gas Business

CNOOC Natural Gas Business CNOOC 2 October 2014

1. CNOOC Gas & Power Overview 2. Chinese Gas Market Overview 3. Chinese Economic & Gas Market Update 4. Chinese Gas Market Outlook 5. Summary

CNOOC Overview Founded in year 1982 China's largest offshore oil and gas producer Ranked 79 in 2014 Fortune Global 500 (first listed in 2007) Ranked Class A in 9 consecutive years in SASAC stateowned enterprises performance appraisal SIX BUSINESS SECTORS Exploration & Production Oil Field Service Gas & Power Refining &Chemical Fertilizer Renewable Energy Finance 3

CNOOC Gas Industrial Value Chain Oversea gas production &liquefaction LNG Transport LNG receiving terminal Natural Gas Pipeline Distributed energy vessel filling CNG Truck Offshore gas International Market CBM power generation Industrial users Town gas Oversea gas production &liquefaction 4 LNG Transport LNG storage center LNG receiving terminal local distributor Capital-intensive & technology-intensive complete industrial chain vehicle filling

Steady Development of CNOOC Natural Gas Business LNG Natural Gas SNG CBM Shale Gas From year 2006 to 2013,respectively imported LNG 0.745, 2.98, 3.21, 5.80, 9.34, 10.85,10.79,13.01 million tons In year 2013, offshore gas production was 10.7 bcm. Offshore Gas 5

Resource Pool & Market Group Offshore gas Domestic Onshore Gas Imported LNG Power Generation Town Gas Filling Industrial/Chemical 6

Domestic Resource Offshore gas CBM Resource SNG LNG produced by small liquefaction plant 7

International Resource Europe Total & other 21 companies Middle East & Indian QG & other 8 companies Northeast Asian TEPCO & other 17 companies America Chevron & other 8 companies Africa NNPC & other 3 companies Southeast Asian & Australia Petronas & other 7 companies CNOOC gas & power group has established intensive cooperation relationship with more than 64 major global LNG market participants and contracted long term LNG resource by now is up to 25.7 million tons/year. 8

CNOOC Major Market Areas Heilongjiang Jilin Northeast Region Heilongjiang, Jilin, Liaoning Xinjiang Liaoning Inner Mongolia Beijing Gansu Shanxi Hebei Ningxia Shandong Shanxi Qinghai Henan Jiangsu Tibet 湖北 Hubei Zhejiang Chongqing Hunan Jiangxi Guizhou Southwestern Region (Sichuan,Chongqing,Yun nan,guizhou,guangxi) Shanghai Anhui Sichuan Northern Region (Beijing,Tianjin,Hebei, Shandong) Tianjin Fujian Taiwan Yunnan Guangxi Eastern Region (Jiangsu,Zhejiang, Anhui,Shanghai) Southeastern Region (Jiangxi,Fujian, Taiwan) Guangdong Macao Hong Kong Hainan Central Region (Shanxi,Henan,Hubei Hunan) Southern Region (Guangdong,Hongkong, Macao,Hainan)

Infrastructure-LNG Receiving Terminals Dapeng LNG Fujian LNG Shanghai LNG Zhejiang LNG Tianjin FSRU Zhuhai LNG Hainan LNG Yuedong LNG Shenzhen LNG Jiangsu LNG Yuexi LNG Zhangzhou LNG 10

Infrastructure- Pipeline and Others Northern Electricity Center Tianjin LNG Storage Center To Korea Power Plant In-operation: 6 Total Installed Capacity:8480MW Pipeline Commissioned & Under Construction: 3698 km Southern Electricity Center Zhejiang LNG Storage Center To Taiwan To Japan Filling Station Commissioned: 171 Under Construction: 70 Zhuhai LNG Storage Center 11 Hainan LNG Storage Center

1. CNOOC Gas & Power Overview 2. Chinese Gas Market Overview 3. Chinese Economic & Gas Marker Update 4. Chinese Gas Market Outlook 5. Summary

Chinese Energy Consumption 4000 Million Tons of Standard Coal 3500 3000 2500 2000 1500 1000 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Non-fossil Energy Nature Gas Oil Coal In 2013, the primary energy consumption of China was 3.75 billion tons of standard coal, increased by 3.7% over last year. Gas consumption was about 169.2 bcm, increased by 13% over last year, accounting for 5.9% of the total primary energy consumption.

Chinese Natural Gas Consumption 180 bcm 169.2 160 147.1 140 131.3 120 107.6 100 80 70.5 81.3 89.5 60 40 29.2 33.9 39.7 46.8 56.1 20 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Chinese natural gas consumption average annual growth was 17.3% between 2002 to 2013. In year 2013, Chinese nature gas consumption is 169.2 billion cm with 30% dependence on imported nature gas.

Chinese Natural Gas Consumption Structure 2013 Natural Gas Consumption Structure Chemical 13% Power Generation 18% Residential 41% Characteristics of Chinese natural gas market Seasonal fluctuation of demand Requiring ensured supply security Fierce competition Industrial 28%

Gas Sources Gas from Russia 68bcm/y Gas from Central Asia 85bcm/y Proportion of each gas source in year 2013 哈尔滨 Tarim Basin 营口 Ordos Basin 鄂尔多斯 Imported pipeline gas 16% Domestic Gas 70% 天津 端氏CBM 安阳 潍坊 日照 博爱 商丘 郑州 徐州 Domestic Onshore Gas 沈阳 Imported LNG 14% 盐城 Estimated proportion of each gas source in year 2020 上海 CNPC Pipeline Sinopec Pipeline CNOOC Pipeline Sichuan Basin 鄂州 温州 福州 厦门 广州 深圳 珠海 Gas from Myanmar 12bcm/y 海口 Imported LNG 18% Imported Pipeline gas 19% Domestic Gas 63%

Chinese LNG Import Million Tons 25 20 15 10 5 0 5.07 3.85 1.366 13.01 9.48 10.85 10.79 5.79 3.17 3.36 0.75 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Imported by CNOOC Imported by Others China imported 18.08 million tons of LNG in 2013, while 72% of which was imported by CNOOC

Policy-Pricing &Taxation Domestic Price is regulated by the government The Town-gate price ceilings of domestic and imported pipeline gas are regulated by the government Although LNG price is not regulated, the price still be affected by the town gate price. LNG import VAT is proportionally refunded

1. CNOOC Gas & Power Overview 2. Chinese Gas Market Overview 3. Chinese Economic & Gas Market Update 4. Chinese Gas Market Outlook 5. Summary

China s Recent Economic Situation GDP Growth Rate Export Growth Rate 15% 14% 13% 12% 11% 10% 9% 8% 7% 14.2% 12.7% 10.0% 11.3% 10.4% 10.1% 9.6% 9.2% 8.4% 9.1% 9.2% 8.3% 7.8% 7.7% 7.4% 20% 10% 0% -10% 14.6% 9.2% 12.7% 10.6% 5.1% 5.6% 4.3% 1.0% -3.1% -0.3% -6.6% 0.9% 7.2% 7.0% 14.5% -20% -18.1% 16% 12% Electricity Consumption Growth Rate Economic growth slowed down, representing a GDP growth of 7.4% in the first half year 14.1% 14.4% 13.2% 12.1% Export situation is still not optimistic, representing a decrease of 1.2% in the first half year 8% 7.2% 7.5% 5.6% 5.9% 4% 5.3% 0% 2006 2008 2010 2012 2014Jan-June Electricity demand is not strong, representing a slight growth of 5.3% in the first half year Severe environmental pollution problems come along with the economic development

China s Recent Gas Market Natural Gas Price Reform Main Point Since September 1, 2014, for existing gas for non-residential use, the city-gate price ceiling increases Rmb 0.4 /m³ In 2015, the goal is to achieve that the price of existing gas equals that of incremental gas Impact on the Market Lead more rational consumption of the gas and promote the industry upgrading. The demand growth slows down. However, the prices of natural gas and electricity generated by gas do not fully reflect their peak-shaving and environmental value.

Gas Market Situation January-June 2014, gas consumption is 88.7 bcm, increased by 8.9%, less than 13% in last year. Competition in the domestic gas market is driven by: Steady progress in domestic onshore natural gas exploration and development Rapid progress in offshore gas exploration More pipeline gas import Mid-Asia 30% Myanmar 25% Coastal LNG terminals move into operation 20% 15% Unconventional gas made breakthroughs 10% 5% 0% Chinese Nature Gas Consumption Growth Rate Due to user s lower affordability of gas price, some coal to gas users changed back to coal

1. CNOOC Gas & Power Overview 2. Chinese Gas Market Overview 3. Chinese Economic & Gas Market Update 4. Chinese Gas Market Outlook 5. Sumarry

Outlook of Chinese Gas Demand 500 bcm 430 360 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Expected by 2015, China s nature gas demand will reach 230 bcm, accounting for 7.5% of the total primary energy. By 2020, consumption will increase to 360-430 bcm, accounting for 10-12% of the total primary energy.

Outlook of Chinese Gas Demand Gas by Source in year 2020 Gas by Usage in year 2020 Imported LNG 18% Imported pipeline gas 19% Domestic Offshore gas 6% Domestic onshore gas 57% Power Plant 27% Chemical 9% Industrial 26% Residential &Commercial 38%

1. CNOOC Gas & Power Overview 2. Chinese Gas Market Overview 3. Chinese Economic & Gas Update 4. Chinese Gas Market Outlook 5. Summary

Summary In short term, the growth of gas demand in China is slowing down. In long term, there is broad space for the further development of Chinese gas market. As the demand cannot be satisfied by domestic resources, gas import is imperative for Chinese gas market. The competition among diversified gas sources is becoming fierce, mainly in price and security of supply. Though LNG is an important part of imported gas, it should keep competitive in price and supply flexibility.

Summary All along, CNOOC maintains a leading position in Chinese LNG market. We are willing to establish long-term and stable cooperative relationships with worldwide LNG participants. We would like to develop diversified cooperation to achieve win-win situation in terms of upstream exploration and development, resource purchase and sales, liquefaction facilities etc.

Thank You