Creating value in times of low commodity prices Statoil gas seminar, 18 February 2016, London Jens Økland, EVP, Marketing, Midstream & Processing (MMP) Classification: Internal 2012-10-24 Our industry is in a challenging situation • Low oil and gas prices Commodity prices 140 120 Climate 100 80 • High costs 60 USD/boe 40 20 0 • Oil and gas in a 2013 2014 2015 2016 Oil Gas (NBP) decarbonising world Costs 2 Sources: Platts, Heren, IHS Statoil’s mid- and downstream business is adding value • With low commodity prices, the relative MMP1) - adjusted earnings2) importance of our mid- and downstream activity increases 25 20 • Through Asset Backed Trading, the value of our products can be increased 15 10 Billion NOK • MMP earnings in 2015 exceeds NOK 20 5 billion and accounts for nearly 30% of Statoil’s adjusted earnings 0 2012 2013 2014 2015 MMP 1) Marketing, Midstream & Processing (MMP). Before 2015: Marketing, Processing and Renewables (MPR) 2) Before tax 3 Source: Statoil Asset Backed Trading – an extensive toolbox for value creation • Our most successful trading activities imply Adjusted earnings 1) MMP - 2015 use of physical infrastructure or contractual assets − Storages − Refineries − Terminals − Shipping − Rail − Capacity bookings • Active use of assets add flexibility and optionality to our portfolio and increase our Natural gas Europe Natural gas US competitiveness Liquids Other 1) Before tax 4 Source: Statoil Resetting costs in MMP Continue efforts to become more competitive A sustained culture of continuous improvement Respond to complexity with simplicity 5 Opportunities in European gas markets • Europe has a large and growing supply gap • Norwegian gas is well placed as a cost-efficient supply source for the long term • Due to its cleanness and versatility, gas will remain a key part of European energy supply Outlook for EU demand and indigenous supply Outlook for Norwegian gas production 600 500 400 Norway Import needs 300 Indigenous EC reference 200 EC 2030 policies 100 IEA WEO 2015 0 2012 2020 2025 2030 6 Sources: IEA, European Commission, Norwegian Petroleum Directorate 7 European gas market outlook Statoil gas seminar, 18 February 2016, London Olav Kolbeinstveit, Vice President, Statoil Market Analysis Classification: Internal 2012-10-24 European gas price drivers – more than oil Price fall less severe than for oil Brent and global gas prices USD/MMBtu Key European gas market drivers 25 . Demand Forward prices* • Competing fuels 20 • Temperature 15 FW market1) . Supply 10 • Flexible long-term contracts • LNG supply 5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Japan - Korea Spot LNG NBP spot (UK) Henry Hub (US) Brent 1) Forward prices as of 15 February 2016, NYMEX Henry Hub Forward 12 February 2016 9 2) Sources: Platts, ICE, NYMEX, Statoil ASA Growing global LNG liquefaction capacity The LNG market is cyclical LNG production capacity BCM US LNG exports: 600 . Limited volumes in 2016 500 . Significant volumes contracted by portfolio players 400 . Tolling contracts 300 200 Current LNG price level does not 100 justify new investments 0 2010 2015 2020 Existing capacity Australia US Others 10 Source: IHS CERA, Pira, Statoil ASA US LNG currently on the margin in Europe US LNG will flow according to price signals – or at all? Short-run marginal cost ranges for US LNG supply to Asia and Europe Asia North America Europe USD/MMBtu USD/MMBtu USD/MMBtu 5.3** 4.5** 1.7 - 3 1 - 1.5 4.8 - 6.1 4.1 - 4.6 0.4 2.7* JKM Shipping HH Shipping/Regas NBP * NYMEX Henry Hub Forward curve for Calendar 2017 12 February 2016 11 ** ICE NBP Forward curve for Calendar 2017 15 February 2016 and Platts JKM spot Source: NYMEX, ICE, Platts, Pira, Statoil ASA US LNG most expensive source to Europe Financial Times 3 February 2016 12 EU28 gas consumption has bottomed out Gas to power is expected to recover EU 28 gas demand per sector . Historic drop in consumption BCM mainly related to gas to power 600 500 . No growth expected in the 400 buildings sector 300 . Stable demand in the industry 200 sector 100 0 2005 2010 2014 2015 2016E Buildings Industry Others Electricity/CHP/Heat Plants 13 Sources: European TSO’s, ENTSOG, Eurostat, IEA, CCGTs1) in the UK competitive with coal plants Carbon tax drives gas to power recovery UK Coal switching range and gas-to-power consumption . Gas to power demand is price sensitive p/th mcm/d 100 100 90 90 80 FW 80 . market2) Growing political willingness to 70 70 curb use of coal 60 60 50 50 40 40 30 30 20 20 10 10 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Coal Switching Range (LHS) Gas-to-power consumption (RHS) NBP (LHS) 1) Combined Cycle Gas Turbine (CCGT) 2) Forward prices as of 15 February 2016 14 Sources: ICIS Heren, ICE, Statoil ASA EU 28 natural gas imports increasing Record low indigenous production in 2015 Indigenous production EU 28 EU 28 gas imports BCM BCM 250 400 90% 200 300 80% 150 200 70% 100 100 60% 50 0 0 50% 2005 2010 2014 2015 2016E 2005 2010 2014 2015 2016E LNG North Africa Russia Norway Imports in % of consumption 15 Sources: European TSO’s, Eurostat, IEA, PIRA Dutch gas production capped Seasonal flexibility hit Groningen production 60 . Groningen BCM • Production cap 27 bcm 40 • Was key source of flexibility 20 0 2005 2010 2014 2015 2016E . Flexible Norwegian gas 8 Seasonal output important BCM/month 6 Min-Max 5Y 4 5Y Average 2 2015 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 16 Source: NAM, Dutch Energy ministry Concluding remarks . Challenging period – risks to the upside . LNG connecting regional markets . Increasing import needs to Europe 17 18 Capturing business opportunities Statoil gas seminar, 18 February 2016, London Tor Martin Anfinnsen, Senior Vice President, Marketing and Trading Classification: Internal 2012-10-24 A major gas player with Europe as gravity point NCS NCS Melkøya LNG • Largest gas producer on NCS1) • Pipeline gas to North West Europe • Melkøya LNG facility USA • Shale gas production in Marcellus • Deliveries of gas to Toronto and US shale gas New York City Statoil offices with natural gas business activities 20 1) Norwegian continental shelf (NCS) Statoil’s gas is well positioned in Europe Access to an integrated and flexible Large gas resource potential Proximity to markets pipeline infrastructure on the NCS Polarled Pipeline LNG Åsgard transport Ormen Lange 1450 Nyhamna Norway 400 – 1200 Tampen Link Troll km Russia 3 1922 6000 – 7000km Kollsnes bn Sm Vesterled Kårstø Sleipner Draupner St Fergus Europipe II Ekofisk Europipe I Norpipe Langeled Easington Zeepipe Emden/ 625 Franpipe Dornum Caspian Zeebrugge Dunkerque Reserves * Algeria Region Contingent resources in fields/discoveries ~3000 km ~4000 km Undiscovered * Statoil share of NCS reserves ~34% 21 Source: Norwegian Petroleum Directorate (NPD) resource account as of 31.12.2014 Our marketing strategy • Developments in gas market give new Statoil’s contract portfolio has changed sales channels and opportunities Oil indexed − Transformation away from oil-indexing Gas indexed − Unbundling of the value chain and third Other party access 2010 2014 − Development of liquid hubs European gas prices are converging 70 • Long-term contracts are still important, 60 50 but take on a modernised form DE 40 IT 30 UK EUR/MWh 20 NL 10 0 2011 2012 2013 2014 2015 2016 22 Source: ICIS Heren Capturing value at the trading desk Capitalise on NCS Manage risk in Monetise total portfolio equity gas position contract portfolio through trading Optimising production in Keep volume commitments and Execute optimisation strategies time, volume and geography safeguard cash flow and trade around total portfolio 23 Seising upstream opportunities on the NCS Aasta Hansteen Providing services to NCS peers Polarled • Gas modulation, transport and back-up services • Dispatching services • Blending services to meet quality specs • Fuel and injection gas 24 Taking opportunities in a global LNG market • Highly flexible LNG portfolio creating new business opportunities • The LNG protfolio is made up predominantly of equtiy volumes combined with third party volumes • The global LNG market provides trading opportunities for our LNG portfolio 25 Gas meets UK’s energy needs • Coal phase out and falling indigenous production is creating an energy gap • Gas is key to a stable energy solution Coal phase out gives energy gap in UK Growing UK import need 100% Generation gap 120 80% Coal 100 Imports 60% 80 ? Other 60 40% Gas bcm 40 20% Renewables 20 Nuclear 0% 0 2013/2014 Late 2020s 2000 2005 2010 2015 2020 2025 2030 Net gas production Net gas demand 26 Concluding remarks . Despite current market prices, our outlook for gas in Europe remains positive . Statoil’s gas activity has an extensive toolbox of value-creating options . Coal phase out in the UK is giving new opportunities for gas 27 28 Longer-term gas market perspectives Statoil gas seminar, 18 February 2016, London Eirik Wærness, Senior Vice President and Chief Economist Classification: Internal 2012-10-24 Long-term Energy Perspectives Short-term volatility – long-term trends, across different scenarios Commodity prices (real Dec 2015, indexed Feb 1997=100) 800 Brent HH 600 NBP Reform, 2.8% Coal 2012 Renewal, 2.9% 400 Rivalry, 2% 200 0 1997 2002 2007 2012 30 Source: Thomson Reuters Datastream It takes decades to change the global fuel mix New renewables set for rapid growth, robust gas demand across scenarios World fuel mix 1972 - 2040 100 % . Economic growth and structure . Energy efficiency improvements 80 % New renewables . Demography, urbanisation Biomass & waste 60 % Hydro . Energy and climate policies Nuclear . 40 % Geopolitics, energy security Gas . Fuel costs, availability, prices Oil 20 % Solid fuels . Technological evolution, costs 0 % . Consumer preferences 1972 2012 Reform Renewal Rivalry 2040 31 Source: IEA (history), Statoil (projections) Paris COP21 – a breakthrough? Achieving the targets entails a significant role for natural gas .