Nord Stream 2 Enhancing European Energy Security

Status 3 May 2017 The Pipeline Will Run Through the Baltic Sea – Along the Proven Nord Stream Route

N ORWAY FINLAND > With an overall length of 1,200 km, RUSSIA the Nord Stream 2 Pipeline will connect Europe to the largest gas Narva Bay fields in the world, in Russia > Route optimised for ESTONIA maximum efficiency and minimum impact on the environment SWEDEN > Design & implementation verified by independent certification LATVIA DENMARK

> Extensive international LITHUANIA consultation and permitting process

RUSSIA Lubmin near > Construction and design Greifswald will follow the Nord Stream model GERMANY POLAND 2 Nord Stream 2: a Commercial Initiative to Reinforce the European gas supply

> Nord Stream 2 is a new natural gas pipeline through the Baltic Sea to connect Europe to the largest gas fields in the world, supplementing existing gas transportation with up to 55 bcm/a

> Nord Stream 2 is a privately funded project to reinforce the European gas supply, backed by major European companies > EU domestic gas production has fallen in recent years and is expected to fall further within the next 20 years (-50%, about 70bcm less) while traditional suppliers from Norway (-25bcm) and Northern Africa (-30bcm) will not be able to supply Europe at today’s level anymore

> At the same time, EU gas demand remains steady so additional gas imports and capacity are required to meet European demand and safeguard supply security

> Nord Stream 2 will bring considerable benefits by: − Increasing security of supply – by connecting to the world’s biggest gas reserves − A more competitive EU gas market – by adding new capacity the market needs − Supporting sustainability goals – natural gas is a cost-efficient decarbonisation option

3 Global Gas Demand Is Set to Grow by About 50% by 2040, Increasing Competition Over Gas

World Energy Outlook 2016: Natural gas demand in New Policies Scenario [bcm]

+10,4% +18,3% Europe competes with other regions over gas 725 +103.3% resources 657 655 678

2) 941 994 1,038 1,113 Current 2020 2030 2040 Eastern Europe & Eurasia 1,433 Current2) 2020 2030 2040 1,136 +82,3% 705 832 Americas Current2) 2020 2030 2040 Global 804 Asia & Oceania 509 660 Current2) 3,502 441 +138,2% 2) 2020 3,794 Current 2020 2030 2040 +49% 131 143 +63,6% 312 Middle East 2030 4,439 208 165 164 Current2) 2020 2030 2040 198 270 2040 5,169 Africa Current2) 2020 2030 2040 Latin America

1) Demand growth leads to increased need for LNG because production and consumption locations further diverge from each other, i.e. Asian region is among the largest consumers globally, but has close to no natural gas resources itself or in proximity of a pipeline 2) Current = 2014 4 Source: IEA WEO (2016) A European Natural Gas Supply Gap Is Emerging due to Decreased Production

European gas demand mostly stable 481 bcm 472 bcm

Russia 133 bcm 120 bcm import gap 288 bcm to be filled by Russian gas and LNG 35 bcm LNG, share will be set by the market Northern Africa 41 bcm

Norway 119 bcm 10 bcm (Azeri) 8 bcm 94 bcm Drop in domestic production EU 141 bcm and lower output from other supply 72 bcm ** 2015 2035 ** Statistical difference of ~12 bcm in 2015 Sources: adapted from Prognos 2017, based on EU Reference Scenario 2016, adapted with NOP 2015, OGA (Oil and Gas Authority) production projections, February 2016, NEP Gas 2016, Norwegian Petroleum Directorate; The Oxford Institute for Energy Studies, Algerian Gas: Troubling Trends, Troubled Policies, May 2016; The Oxford Institute for Energy Studies, Azerbaijan’s gas supply squeeze and the consequences for the Southern Corridor, July 2016, BP Statistical Review of World Energy, June 2016; demand includes EU-28 and Switzerland, excludes western imports to Ukraine 5 Nord Stream 2 Increases Security of Supply

> Nord Stream 2 provides the most direct access to the world’s biggest gas reserves − Bovanenkovo alone holds more than thereof Bovanenkovo double the EU’s total proven reserves 4,900 bcm − Reserves of over 47,000 bcm connected to European consumers Ob-Taz bay gas fields Norway − Ready to export fields add 100 bcm of 1,856 bcm new supplies whenever needed

> Provides a total capacity of 55 bcm of gas, enough to power 26 million households Russia EU-28 47,768 bcm > Strategic location to supply Europe – not at 1,513 bcm risk with rising global gas competition (+25-30% demand by 2035)

> Offers an additional transport system to Europe, enhancing supply security Source: BGR 2016

6 Nord Stream 2 for a More Competitive EU Gas Market

> Gas flows freely within the EU internal market and will be traded at hubs in competition with other gas sources

> Nord Stream adds more liquidity, thereby stimulating new connections and enhancing the functioning of the integrated market – in line with EU energy strategy

> It is the most cost effective option for Europe due to: − Major long term investment in the Russian gas fields − Efficiency of offshore route, where high powered compression saves fuel gas

> Increased competition benefits the European economy

7 Nord Stream 2 Is a Competitive Transport Option

> Competitive route option for delivering Cost of Transport from the Russian border gas to hubs in North-Western Europe (Euro per 1,000 m3) and to the hub in Baumgarten 60 > Transportation tariff attractive for 55.1 shipper 50 41.8 40.7 40 > With rising import requirements, EU 33.7 30 benefits from multiple routes to bring Nord Stream gas to the EU gas market 20 Ukraine 10

Tariff rates for 1000 m3 on 100 km: 0 German-Netherlands Baumgarten Nord Stream 1: < 2 EUR border Nord Stream 2: < 2 EUR Ukraine current: ~2.26 EUR1 Ukraine new regime: ~4.30 EUR Calculations made based on open sources, incl current tariffs of TSO’s (transmission system operators) and revenue assumptions for the potential route via the Black Sea 1Source: New Europe, 'Nord Stream 2 vs Ukraine transit: costs should decide', 5 July 2016, https://www.neweurope.eu/article/nord-stream-2-vs-ukraine-transit-costs-decide/

8 High Capacity Utilisation of the Nord Stream Pipeline at ~80%

90%

80% Gas transported 70% until Apr 2017: 170.0 bcm 60%

50%

40%

30%

20%

10%

0% 2011 2012* 2013 2014 2015 2016 2017 (Nov-Dec)* (Jan-Apr)**

* Based on 27.5 bcm per year; all other yearly figures based on 55 bcm. ** Based on 167.4 mcm per day. 9 Nord Stream 2 Delivers Sustainability Benefits

Lower CO2 > Use of 55 bcm natural gas instead of coal could Emissions in Power save 14% CO2 emissions of EU power generation Generation > Ideal partner to renewables

> Better carbon footprint than LNG liquefaction chain Low-emission Gas Transport > Lower emissions from fuel gas use than onshore systems due to efficient compression to 220 bar

> Can be constructed in a fraction of the time compared to onshore systems

SustainabilityBenefits Environmentally Friendly Pipeline > Monitoring of Nord Stream shows environmental impact is minor, local and short term only

10 Gas Supports Decarbonisation Goals

> Generating electricity from gas-fired Electricity mix 2014 in EU-28 by Power sector power plants produces up to 50% less energy source* emissions CO2 than from coal-fired plants Biomass and waste > Gas-fired power stations are more Solar 6% 3% efficient than coal: 60% compared Wind 8% Coal with 25-45% 27% > Nord Stream 2 could save of the ~14% Hydro 865 77% EU’s total CO2 emissions from power 12% generation if the 55 bcm gas replaced Oil the same amount of coal 2%

Gas 216 14% 49 Nuclear 28% mtCO2

* Source: IEA, WEO 2016

11 The Project Is Well Underway

2012-13 2015 2016 2017 2018 2019 2020 >

Feasibility Study Environmental Monitoring EIA Programme Consultation Permitting and Environmental Impact Assessments

Surveys and Engineering

Procurement and Delivery, Pipe Logistics

Construction and Commissioning

Operation Significant Advancements Within Timeline Have Been Made

> Material and service contracts − All major tenders awarded: steel, logistics, pipelay − Delivery of the first pipes to concrete coating plant end of September 2016 – 30% at the stock yards by April 2017 − Concrete weight coating started in March 2017

> Permits and surveys − Espoo Report, Finnish EIA, and permit applications submitted in Sweden, Denmark and Germany; remaining ones to follow in 2017 − Over 47,000 km of surveys completed using 24 different vessels

13 Nord Stream 2 – a European Project

A multi-billion euro investment in European industry and services involving over 200 companies from 17 countries. A selection: Norway Sweden Finland 2 Logistics 3 4 1 4 Port of Hanko Koverhar Port of Mukran 6 2 Russia Port of HaminaKotka 5 3 Port of Karlshamn 2 4 2 3 3 Pipes & Materials Engineering & Surveys 1 3 5 1 EUROPIPE 1 Saipem Fano Denmark Netherlands 6 2 OMK 2 Fugro Survey UK 1 2 3 Chelpipe 3 Geo 6 9 8 1 4 PetrolValves 4 Next Germany 5 Voestalpine 5 MMT 7 1 6 MMK 6 N-Sea 7 7 Dillinger Hütte 8 Impalloy Offshore Pipelay Switzerland 5 1 9 Wasco Coatings 1 Allseas Austria 1 Environmental Studies, Quality 4 Management, Safety & inspection 1 Rambøll 5 Business Trend 4 Italy 2 IfaÖ 6 Delta Energy Services 3 DNV GL 7 Intertek 4 Svarog

1 Company Headquarter in Zug 14 Leading Energy Companies Are Strongly Committed to Implementing the Project

100% Financial Shareholder Investors

Project Developer

support the project provides up to 50 by providing up to percent of the 50 percent of the estimated project cost financing, up to 950 of 9.5 billion euros. million euros each.

15 What Financial Investors Say About Nord Stream 2

“I have always said that I believe this project is strategically relevant for Europe. It is strategically important for us too” (Interview with Energy Post - 17/02/2017) “The financial commitment of the European companies underscores the strategic importance of the Nord Stream 2 pipeline project for the European gas market” (Signing of the financing agreements-24/04/2017) Klaus Schäfer, CEO, UNIPER

“We should not politicise this economic project, which will increase security of supply. Europe needs to diversify import routes for Russian pipeline gas. Every new pipeline increases liquidity and competition in Europe’s gas market” (Quote in Handelsblatt.com article - 06/04/2017) Rainer Seele, CEO, OMV

“ENGIE is proud to support Nord Stream 2. This project will improve security of gas supply in Europe… it will also reinforce the role of gas, a low-carbon energy source, in the energy transition” (Twitter @isabelle_kocher - 24/04/2017) Isabelle Kocher, CEO, ENGIE Nord Stream 2 Is a Privately Financed and Fully Operational Project Developer

> EUR 8 billion CAPEX > EUR 9.5 billion total expenditure (including financing costs) > 70% of funds will be secured from financial markets > 30% shareholder funding > 220 employees from 20 nations, based in Zug, Switzerland – additional offices in St Petersburg and Moscow > Investments in over 10 European countries Contact

For further information, please contact:

Nord Stream 2 AG Baarerstrasse 52 6300 Zug, Switzerland

Email: [email protected] Website: www.nord-stream2.com Twitter: @nordstream2

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