ASSESSMENT OF GAS PRODUCTION INDUSTRY IMPACT ON THE UKRAINIAN ECONOMY 2021 2 The oil & gas industry is fundamental for the functioning of the entire economy of Ukraine Domestic output CAPEX* UAH 34 bln 5.5% contribution* UAH 151 bln 2% of total in of total in OPEX* UAH 72 bln 1% Ukraine* GDP contribution* UAH 97 bln 2.4% Ukraine* Jobs** 47thousand 0.3% Fiscal contribution*** UAH 86 bln 9% 81% of the oil & gas extraction industry’s output is consumed by other industries Output of Oil & Gas industry, 2019 Energy Oil Food Gas Transport Metallurgy and heat supply refinery production extraction UAH 81% 34% 18% 16% 7% 6% 6% 4% 3% 7% Intermediate 151 consumption Chemical Other Other bln production production industries ~45% of Ukrainian output Sources: *SSSU; **Naftogaz Group; Association of Gas Producers of Ukraine; ***Project ‘Rating. Business in numbers’ 3 UAH 1 invested in natural gas production yields long-term effects on Domestic output GDP Fiscal revenue of products and services 2.86 UAH 1.19 UAH 5.72 UAH Corporate income tax, UAH UAH 0.48 UAH Investment: 1.00 royalties: Direct effects: 1.39 UAH Additional product generated by Final UAH Excise tax and VAT: 0.27 the Development strategy consumption: 0.72 UAH UAH Indirect effects: 3.14 Social contribution: 0.19 Increase in intermediate UAH Net export: 0.62 UAH consumption and fixed asset Dividends*: 0.17 investment in Ukraine * If the projects are implemented by Naftogaz Group and 50% of net UAH income is paid as dividends to the budget Induced effects: Public UAH 1.19 spending: 0.51 UAH Increase in final private and Personal income tax: 0.08 public consumption The investment impact given on the slide are calculated for the new well, starting with the drilling project. For more details please refer to the "Methodology" section 4 The Ukrainian economy is highly dependent on energy imports. Due to an unparalleled dependence on imports of oil & gas… The oil & gas industry is second only to retail and wholesale trade in terms of use of its products for intermediate consumption. At the same time, the oil & gas industry’s products are imported the most among top-10 industries Intermediate Import as % of final Contribution to 2019 consumption as % of the demand for Ukrainian GDP industry’s output industry’s product* 13 Oil & gas industry 2,4% 81% 37% 13,4 1 Retail and wholesale 99% 0.4% trade % 2 Agriculture 9,3% 42% 6% 3 Food production 8,0% 5% 10% 4 Real estate operations 7,0% 40% 2% 5 Transport & warehousing 6,9% 57% 16% Government bodies; 6,7% 10% 3% 6 defence 7 Education 4,4% 3% 0.2% 8 Power & utilities 3,4% 76% 1% 9 Construction 3,3% 45% 0.3% Programming and 3,2% 53% 9% 10 consulting 5 …though Ukraine has the potential to fully substitution gas imports in the case of implementation of new gas production projects Natural gas reserves (on balance, extractable) Gross gas production, 2019 as at 1 Jan 2020 2% 3% 5% Naftogaz 9% 6% 3% Naftogaz DTEK 8% UNB 778 Private companies ~21 bcm bcm Burisma Smart Energy Undistributed reserves 78% 86% Other 780 bcm of potential gas reserves are readily accessible for extraction. This ensures up to 25 years of extraction at the target rate of 30 bcm / year Sources:SSSU; State balance of mineral resources in Ukraine, 2020; Naftogaz Group; Association of Gas Producers of Ukraine 6 CONSERVATIVE SCENARIO: 2021-2030 production only at the fields discovered earlier and actively developed Operational inputs Effects Cumulatively over 2021 to 2030, the conservative effects are the sum of the effects of the newly Trade gas production balanced economy per each year and base values* Base* yoy 2030 2021 – 2030 Cumulative 2021 – 2030 149 bcm GDP UAH UAH UAH 2021 2030 3,561 bln -1.9% 3,493 bln (383) bln bcm bcm 18.6 11.5 Base* yoy 2030 2021 – 2030 Domestic UAH UAH UAH output OPEX 7,454 bln -1.4% 7,350 bln (616) bln UAH Base* yoy 2030 2021 – 2030 Cumulative 2021 – 2030 167 bln Fiscal UAH UAH UAH revenue 1,303 bln -2.4% 1,273 bln (106) bln CAPEX Government revenue continually shrinks when compared with the base level starting from the fourth year that the Baseline scenario unfolds (i.e. 2024) Cumulative 2021 – 2030 UAH 159 bln Base* yoy 2030 2021 – 2030 thous. thous. thous. Yearly average in 2021 – 2030 Jobs 15,719 -1.1% 15,552 (167) compared to x 0.8 yearly average in 2015 – 2019 2021 – 2030 2021 – 2030 Cumulative 2021 – 2030, UAH Expenditures on Total cases net of import 136 bln social activities not defined of benefit not defined * Base values are accepted at the level of 2018, as of the most recent year for which Input-Output table is available as per Ukrstat. Please refer to Methodology for the details. DEVELOPMENT SCENARIO: 7 2021-2030 implementation of the new large-scale gas production projects by Naftogaz Group and the private companies Operational inputs Effects Cumulatively over 2021 – 2030, the effects of the Development scenario are the sum of the effects of Trade gas production the newly balanced economy per each year and base values* Base* yoy 2030 2021 – 2030 Cumulative 2021 – 2030 217 bcm GDP UAH UAH UAH 2021 2030 3,561 bln +2.9% 3,663 bln 441 bln bcm bcm 18.6 30 Base* yoy 2030 2021 – 2030 Domestic UAH UAH UAH output OPEX 7,454 bln +2.1% 7,611 bln 791 bln UAH Base* yoy 2030 2021 – 2030 Cumulative 2021 – 2030 248 bln Fiscal UAH UAH UAH revenue 1,303 bln +3.7% 1,352 bln 241 bln CAPEX Government revenue consistently surpasses the base level from the very first year that the Development strategy unfolds, or 2021 Cumulative 2021 – 2030 UAH 769 bln Base* yoy 2030 2021 – 2030 thous. thous. thous. Yearly average in 2021 – 2030 Jobs 15,719 +1.7% 15,991 273 compared to x 4.1 yearly average in 2015 – 2019 2021 – 2030 2021 – 2030 Cumulative 2021 – 2030, UAH Expenditures on UAH Total cases mln net of import 657 bln social activities 2.0 bln of benefit 22.6 * Base values are accepted at the level of 2018, as of the most recent year for which Input-Output table is available as per Ukrstat. Please refer to Methodology for the details. 8 Net effect of the Development Scenario in 2021-2030 offsets a negative effect of the Conservative scenario and leads to economic growth GDP GDP Total effect Indirect UAH multiple effect: 330 bln Direct UAH UAH Induced UAH effect 345 bln x 2.4 825 bln effect: 150 bln Domestic output Output Total effect Indirect UAH multiple effect: 734 bln Direct UAH UAH Induced UAH effect: 366 bln x 3.8 1.4 trillion effect: 306 bln Fiscal revenue Fiscal Total effect Indirect UAH multiple effect: 57 bln Direct UAH UAH Induced UAH effect: 155 bln x 2.2 347 bln effect: 136 bln Jobs created Employment Total effect Indirect thous. multiple effect: 239 Direct thous. thous. Induced thous. effect: 22 x 20.2 440 effect: 179 Numbers may not add up due to rounding. More detailed information on the calculation of indicators - in the section Methodology 9 Net effect of the Development Scenario in 2021-2030 offsets a negative effect of the Conservative scenario and leads to economic growth Increase in domestic output, UAH billion 257 261 227 203 Direct effects 148 112 85 Indirect and induced effects 56 20 38 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Jobs created when compared to 2018, thousand jobs 411 446 440 371 Direct effects 273 212 160 Indirect and induced effects 83 111 40 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Increase in government revenue, UAH billion 74 80 49 57 Direct effects 34 17 23 2 4 8 Indirect and induced effects 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Note: See Methodology section, which describes the approach deployed explaining the approximate effect per annum 10 Potential impact of the Development Scenario on the Ukrainian social sphere in 2021-2030 Direct effect of Forecast investment in social UAH cases of projects on local benefit and infrastructure projects 2.0 bln 22.6 mln residents* Population Forecast investment Forecast benefit (Focus regions) UAH • Medicines cases Health facilities 468 mln • Modern equipment 7.0 mln • Protective clothing projects UAH • Playgrounds cases Education 468 mln • School equipment 0.5 mln • Preschool educational buildings mln Naftogaz 12.5 people UAH • Roads cases Infrastructure 624 mln • Strategic buildings 10.5 mln • Gas pipelines UAH • Medical facilities cases Other • Strategic buildings 4.5 mln Private Private 433 mln projects Companies' Companies' • Schools and kindergartens Development scenario of Ukrainian gas production 2021-2030. Key projects 12 Strategic initiatives for the development of the new fields: Naftogaz Group (1/4) 1 PSA Gross natural gas production, bcm 3 Cumulative bcm 2 production 9.4 • First round of PSA agreements won by Naftogaz 0,7 1 0,4 • Field development under PSA (~3,000 m2 of new acreage in ‘oil & gas - - 0,1 regions’ near the largest UGV fields; production to start in 3 to 4 years) 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 • EUR: ~50 bcm Cumulative UAH CAPEX, UAH bln OPEX 6.7 bln region structure 12,3 9,6 9,4 9,3 Lviv Kharkiv 7,8 7,6 5,4 Focus oblasts 15% 65% 2,3 3,7 0,0 Cumulative UAH CAPEX 67.5 bln Other oblasts 20% 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: (1) Naftogaz data Source: (1) Naftogaz data (2) EIU 2 Tight gas Gross natural gas production, bcm Cumulative bcm 4 production* 13.4 • Sviatohirsk field and continued development of Naftogaz’s tight gas 3 2 0,7 potential 1 0,0 0,1 0,1 0,4 • EUR: ~43 bcm 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Cumulative UAH OPEX 7.5 bln region structure CAPEX, UAH bln 14,4 11,8 12,7 12,4 Poltava Kharkiv 9,8 4,9 6,2 3,2 3,7 Focus oblasts 11% 89% 2,0 Cumulative UAH