Increased Conversion to Natural Gas Vehicles in Asia

Increased Conversion to Natural Gas Vehicles in Asia Global Alternative Fuels Webinar March 17, 2016 UPSTREAM MIDSTREAM DOWNSTREAM FUEL & TRANSPORT

Overview

Overview Switching to natural gas to reduce traditional air pollution Consumption of natural gas grew at 6% annually in 2004-2014, driven by China China and Japan are the biggest consumers of natural gas in Asia The transportation sector accounted for 4% of total natural gas consumption in Asia in 2014 Compressed natural gas is the most commonly used gaseous fuel in lightduty vehicles Liquefied natural gas has started being used in medium- and heavy-duty vehicles, especially for long haul range vehicles Asia is home to five countries in the top ten countries in the world having natural gas vehicles fleets The trend to convert gasoline/diesel vehicles to run on natural gas in increasing in China and India, plateauing in Thailand and decreasing in Bangladesh and Pakistan Stratas Advisors. All rights reserved. 4

Background Increased usage of natural gas in Asia

Production and Consumption More natural gas consumed in Asia Billion cubic meters 700 600 500 400 Production and Consumption of Natural Gas in Asia Japan and China accounted for 44% of Asia s consumption in 2014 Consumption increased by 6% annually in 2004-2014 300 200 Production increased by 4% annually 100 Imports increased by 16% annually 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Production Consumption Source: BP Statistical Review 2015, February 2016 Stratas Advisors. All rights reserved. 6

Consumption by Sector The transportation sector accounted for only 4% of total natural gas consumption Consumption by Sector in 2014 13% 4% 29% 54% Power Generation Industry Transportation Household Source: Stratas Advisors, February 2016 Stratas Advisors. All rights reserved. 7

Natural Gas in the Asian Transportation Sector Promoted to reduce air pollution in major cities

Shifting to Natural Gas Vehicles Many ways to promote natural gas vehicles Economics Price Subsidies Tax reductions Fuel taxation Type of Promotions Direct consumers approach Regulatory Education Standards and guidelines New vehicles model Emissions targets Fuel efficiency targets Vehicle standards Organizational Infrastructure Usage incentives Stratas Advisors. All rights reserved. 9

Fiscal Policies for Natural Gas Vehicles Many countries offer tax reductions or tax exemptions Tax incentives for NGVs and/or CNG fuel No known NGVs program/incentives Source: Stratas Advisors, February 2016 Stratas Advisors. All rights reserved. 10

Global Country Ranking of NGVs China and Iran are neck to neck with about 4 million NGVs on the road at the end of 2015 5.0 Top Ten Countries with Largest NGVs Population Million Vehicles 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1.6% 32% 77% 1.2% 20% 4.5% 2.1% 10.56% 3.3% 45.8% China Iran Pakistan India Argentina Brazil Italy Colombia Thailand Uzbekistan Bolivia Source: Stratas Advisors, February 2016 Stratas Advisors. All rights reserved. 11

Development of NGVs in Selected Countries Policies have been set but infrastructure cost is a major hindrance

Bangladesh NGVs accounted for 23% of total light-, medium- and heavy-duty vehicles NGVs & CNG Refueling Stations Penetration of NGVs in Total Vehicles 225 610 26% Thousands Vehicles 220 215 210 205 200 195 190 2011 2013 2014 600 590 580 570 560 550 540 530 520 510 CNG Stations 24% Challenges Lack of natural gas supply, but Bangladesh not willing to import Proposal to stop NGVs promotion measures 23% 2011 2013 2014 NGV Source: Stratas Advisors, February 2016 CNG stations Aim to reduce dependency on natural gas (i.e. increase renewable energy usage) Stratas Advisors. All rights reserved. 14

China At 1.6% China has a small share of NGVs in total vehicles Million Vehicles 5 4 NGVs and CNG Refueling Stations 8,000 7,000 6,000 Stations 0.7% Penetration of NGVs in Total Vehicles 0.8% 1.0% 1.4% 1.6% 3 5,000 4,000 2010 2011 2012 2013 2014 2 1 0 2010 2011 2012 2013 2014 Natural Gas Vehicles Refueling Stations 3,000 2,000 1,000 - The Way Forward More focus on utilizing LNG in heavyduty vehicles rather than in CNG market More provinces set targets to build CNG and LNG refueling infrastructure up to 2020 Source: Stratas Advisors, February 2016 Stratas Advisors. All rights reserved. 15

India More states turn to CNG to reduce air pollution Million Vehicles 3.0 2.5 2.0 NGVs & CNG Refueling Stations 1,200 1,000 800 CNG Stations Penetration of NGVs in Total Vehicles 0.7% 0.7% 0.6% 0.7% 1.2% 1.5 600 1.0 0.5 0.0 400 200-2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 The Way Forward The National Green Tribune mandates diesel phase-out, to be replaced with CNG mainly for public transportation sector. NGV Source: Stratas Advisors, February 2016 CNG stations Non-fiscal incentives for light-duty and passenger vehicles run on CNG including exemption of odd-even day in Delhi Stratas Advisors. All rights reserved. 16

Pakistan Lack of natural gas supply has resulted in closure of CNG refueling stations NGVs & CNG Refueling Stations Penetration of NGVs in Total Vehicles Million Vehicles 3.5 3.0 2.5 3.5 3.0 Thousand Stations 80% 76% 74% 74% 77% 2.0 1.5 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 1.0 0.5 2.5 Challenges & The Way Forward Lack of natural gas supply results in closure of CNG refueling stations and shift back to gasoline-powered vehicles 0.0 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 NGV CNG Stations 2.0 Agreement with Qatar to import LNG to increase supply for industry and CNG (transportation sector). Source: Stratas Advisors, February 2016 Stratas Advisors. All rights reserved. 17

Thailand PTT ended its monopoly in CNG refueling stations, open up the market to private players Thousand Vehicles NGVs & CNG Refueling Stations 500 500 450 495 400 490 350 485 300 480 250 475 200 150 470 100 465 50 460 0 455 2011 2012 2013 2014 2015 (P) NGV CNG Stations Source: Stratas Advisors, February 2016 CNG Stations 2.5% Penetration of NGVs in Total Vehicles 2.9% 2.9% 3.0% 2.8% 2011 2012 2013 2014 2015 (P) Challenges & The Way Forward CNG price was regulated by the government PTT experienced losses PTT limits its CNG refueling stations to a max of 500 the market is now open for private players The government started de-regulating CNG prices Stratas Advisors. All rights reserved. 18

Summary

Summary Infrastructure is the major hindrance Development of natural gas vehicles is facing hindrances: High capital investments to build charging infrastructure Higher retail price of CNG vehicles compared to gasoline/diesel vehicles of the same class Gasoline and diesel will still be used but alternative transportation fuels are also developed to secure energy supply, reduce gasoline/diesel usage, reduce CO 2 emissions and improve air quality. Increase usage of LNG to reduce pollution from the heavy-duty vehicles running on long haul routes. Governments promote the use of natural gas vehicles by: Preferential tax schemes Mandate to be implemented by the State Road Transport Corporations Incentives for establishing charging infrastructure Incentives for buyers to buy NGVs Incentives in the form of easy access into the cities i.e. Delhi s government exempted NGVs from even/odd vehicles days. Stratas Advisors. All rights reserved. 20

Q & A Contact Information Lucky Nurafiatin Manager Lnurafiatin@stratasadvisors.com +65.6353.6127

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