European Security of Supply vs. African Energy Requirements: Could energy partnerships change the international gas business?

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European Security of Supply vs. African Energy
Requirements Could energy partnerships change
the international gas business?
NOT AN OFFICIAL UNCTAD RECORD

• Daniel Muthmann
• Vice President LNG Supply Liquefaction
• E.ON Ruhrgas AG
• 12th African Oil, Gas Trade Minerals Trade and
  Finance Conference and Exhibition, Malabo, 3-7
  November 2008

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Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together? - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

3
Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together? - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

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E.ON is the Worlds Largest Privately Owned
Utility WithStrong Positions Along European Gas
Power Value Chains

• E.ON key figures 2007
• Customers approx. 30 million
• Power sales 470,8 billion kWh
• Gen. Capacity gt 60,000 MW
• Gas sales 105 bcm/a
• Gas storage cap. 12.2 bcm
• Sales 68.7 billion
• Employees 87,815
• Market capital. 74 bn (Oct. 08)
• Credit Rating A (SP)
• EBITDA (adj.) 12,4 billion

E.ON market position
US-Midwest
Leading
Significant
Minor
Not consolidated
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E.ON Ruhrgas is the Gas Competence Centre within
the E.ON groupresponsible for sourcing gas
internationally

• E.ON Ruhrgas AG
• Gas supply (incl. LNG)
• Gas sales
• Gas storage
• Network operation
• Technical development,advice and services

Upstream Participation in gas production
including Operatorships
Project companies for gas transmissionand
storage, total working gas volume 12,2 bcm
Transport Marketing of
transmission capacities/operation
of 11.500 km pipeline network
Mid-/Downstream Shareholdings in
international energy companies
German gas merchant
companies
Downstream Shareholdings in local and regional
gas companies and municipal utilities in
Germany and Italy
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Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

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A significant supply gap in Europe (EU30) is
emerging due to demand growth declining
production
580-625

• mtoe

555-575
future projects
32
advanced projects
24
472
other non-EU imports
11
9
Algeria
8
10
26
30
Russia
28
18
15
Norway
14
35
22
18
domestic production
2007
2015
2020
11
16
17
LNG share in supplies
Remark Malta and Cyprus are notsupplied with
natural gas
provisional data for 2007 ) of which Nigeria
4, Egypt 1, Qatar 1 (2007) Basis for imports
Contracted volumes and prospective contract
prolongationsfor Norway extensive utilisation of
import capacities is assumed
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Challenges and Opportunities of a Major European
Utility Accessing LNG supply sources and
seeking growth
Security of Supply via LNG
Growth outside Europe

• Backward integration along value chain into LNG
  Upstream
• Renewables/CDM/JI
• Possibly power gas business in new regions

Russia
Netherlands
26
17

61 bcm
Germany
18
Norway
UK
10
25
3
Denmark
Many Current Supply Sources with limited
future potential
Predominantly Long-Term SPA Source E.ON
Ruhrgas, consolidated sale of ER 2007
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Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together? - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

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Africa has substantial proven gas reserves and if
one adjusts for geographical and strategic
considerations

• Proved reserves at end 2006 (trillion cubic
  meters)

Source BP Statistical Review of World Energy 2007
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Africas pole position in securing European
physical supply market share becomes obvious

• Proved reserves at end 2006 (trillion cubic
  meters)

Source BP Statistical Review of World Energy 2007
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However, there are domestic challenges and
strategic ambitions equally important that need
to be addressed

• Provide enough affordable energy to meet the
  national development targets
• Strategic energy goals in the NEPAD Initiative
• Regional power pools and grid connections
• Use of African Energy sources for regional
  development
• Gas pipelines
• Securing future energy sources for future African
  populace
• End gas flaring

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Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together? - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

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There is a natural fit of strategic ambitions
between NOCs and European utilities in the field
of energyopening a vast number of
opportunities

• NOCs have
• Access to reserves
• Experience from existing projects
• NOCs seek
• Forward integration/market access capturing more
  value
• Development of domestic energy infrastructure and
  markets
• Know How Technology
• Funding

• Utilities have
• Premium market access and experience
• Capabilities along power gas value chains
  (incl. renewables)
• Financial Strength
• Utilities seek
• LNG access to keep lights on and houses warm
• Growth through backward integration into LNG
  Upstream and new markets

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Elements for a potential Energy Partnership with
E.ON (examples)
LNG EP
Financing
Local Energy
Training Dev.
Local Content

• Farm in/Explor.
• LNG Project
• Marketing JV
• Downstream Access
• Assets Swaps

• Guarantee instruments
• Financing NOC share

• Gas Gathering Pipelines
• ConsultingLocal JV (gas/power)
• Renewables/ CDM

• Corporate University
• Special purpose training
• Employee Exchange

• Local content and sponsorship
• Scholarships for school children and university
  students

Energy Partnership
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E.ON s competitive edge A proven track record
of mutually beneficial long-term partnerships
going beyond gas

• With Russian Suppliers since 1970, with Norwegian
  Suppliers since 1973
• Joint storage/pipeline companies
• JI-Programme (CO2-Reduction)
• Technical/Managerial Education
• Education/Scholarships
• Art exhibitions
• Hon. Consulates
• We understand what partnership means Give and
  Take

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Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together? - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

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The time is now! A unique window of opportunity
is opening up

• Energy Partnerships high on political agenda
  internationally
• G8 Summit 2007
• EU focus
• Energy needs, prices, and climate change
• Example Nigerian-German Energy Partnership
• Economic growth in Africa picks up momentum
• Domestic energy supply
• Significant investment requirement
• Training development transfer of know-how
  requirements
• Structural reforms taking place allowing for the
  energy business to change
• NOCs with new ambitions and tasks
• Frameworks combining LNG export and domestic

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Will it be easy? No, there are key requirements
for successful energy partnering

1. Dedication
2. Ability to listen
3. Willingness to act
4. Strong Relationships
5. Political Support
6. Time

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Contents

1. E.ON Ruhrgas Company Introduction
2. European Energy Challenges General and Major
   Utilities Perspective
3. Africas Opportunities in a Global Gas Market vs.
   Domestic Requirements
4. How to bring it together - Partnership
   Opportunities
5. Is this the right time? Will it be easy?
6. Influence on international gas business A
   personal outlook

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In 2008 we are at the dawn of a new phase in the
international gas business The age of energy
partnerships has begun
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For us, partnering with Equatorial Guinea and
Sonagas is an honour. It paves our way for other
energy partnerships in Africa
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Vielen DankThank youMerci BeaucoupMuchas
Gracias

• 12th African Oil, Gas Trade Minerals Trade and
  Finance Conference Malabo, 3-7 November 2008

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Back-up
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Example Structural Investments with CDM

• The Clean Development Mechanism (CDM) under the
  Kyoto Protocol allows industrialized countries
  with a greenhouse gas reduction commitment
  (so-called Annex 1 countries) to invest in
  emission-reducing projects in developing
  countries and to obtain CO2 credits accordingly
• E.ON is Europes biggest power supplier and
  therefore one of Europes biggest CO2-emitters as
  well
• E.ON chooses to reduce CO2-emissions of its own
  power plants and also make use of the opportunity
  to reduce CO2-emissions in less developed
  countries.

We all have only one climate. It doesnt matter
where emissions are reduced as long as it happens!
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Example (cont.) Reaping a double dividend
through CDM

• E.ON
• E.ON obtains CO2-credit by the avoided carbon
  emissions
• CO2-credit can be used in the European Emission
  Trading System to which E.ON is a party
• Positive impact on the E.ON image

• Host Country
• Pioneers clean local energy production
• Meets growing local energy demand needed for
  sustained economic development
• Accesses E.ONs distinctive know how in
  constructing / operating power plants and grids
• Takes advantage of E.ONs financial strength and
  top credit rating

LNG supply CO2-credit
Reliable export income Clean local energy
Double Dividend