SONATRACH PERSPECTIVES ON ASIAN LNG MARKETS 65% of global gas demand growth by 2030 is expected to come from Asia, with traditional demand centers remaining stagnant Global gas demand by region to 2030 CAGR Bcm 2017-30, % Main drivers ▪ Asia (especially China) 4,500 remains the main driver of demand growth: adding 4,000 1.2% p.a. 6.7% 400 bcm of additional China 3.1% demand between 2017 and 2030 3,500 India 1.2% ▪ Africa will grow at 2.3% ROA1 p.a. between 2017 3,000 and 2030: bringing 0.8% in approximately Middle East 40 bcm of additional 2,500 -1.5% Japan demand 0.3% ▪ 0.5% and 0.8% demand Europe3 2,000 growth in the US and the 2.3% Middle East respectively Africa 0.8% translates into substantial 1,500 Latin America volume additions (around Russia 0.1% 50 bcm each) Europe and Russia to 1,000 ▪ remain stagnant, adding US 0.5% altogether around 25 bcm of 500 demand between 2017 and 2030 ROW2 0 1.3% 201718 19 20 21 22 23 24 25 26 27 28 29 2030 1 Rest of Asia 2 Rest of World 3 Continental Europe incl. Ukraine SOURCE: Sonatrach Analysis, Energy Insights by McKinsey 1 European gas demand expected to stabilize around 460 bcm in 2020 and to remain flat through 2030 SpainFrance Germany Rest of Europe Turkey Italy United Kingdom EU 28+31 natural gas consumption by CAGR country, bcm 2016-30, % Main drivers ▪ Demand decline driven mainly by power and industry sectors -1.2 affected by renewable energy’s increasing competitiveness and -0.5% p.a. hence growing capacity 490 Fast demand growth in buildings and industry sectors 464 461 457 1.2 ▪ 28 due to increasing gas penetration as well as growing 42 23 24 24 46 urbanization, population and overall economic progress 43 48 50 ▪ Growth in residential and transportation sectors, where cleaner gas 34 41 37 -1.2 65 will push out traditional fuels, will be offset from 2025 onwards 62 57 50 by improving overall energy efficiency 81 ▪ Gas to power demand expected to decline due to growing 85 89 97 -1.8 competition from renewables, mainly solar energy 77 72 62 58 Move away from nuclear power and coal-fired generation will 1.3 ▪ further stimulate use of cleaner fuels, including natural gas 154 142 141 143 serving also as a backup for volatile renewables ▪ New nuclear power generation capacity and renewables expansion -2.0 2016 2020 2025 2030 to decrease gas to power demand ▪ Decline in accessible gas resources to constrain development of NB: ca 20 BCM extra demand in power gas intensive industries in 2016 due to a) cold winter, b) coal Energy efficiency and renewables additions combined with price floor UK and c) high coal prices -0.5 ▪ uncompetitiveness of industry due to high feedstock costs and declining gas-to-power demand will limit underlying demand growth 1 EU28 + Norway, Switzerland, Turkey SOURCE: Sonatrach analysis, BP Statistical Review of World Energy 2017, Energy Insights, Rystad Energy, Press search 2 Sonatrach is uniquely positioned - STRENGTHS WEAKNESSES ▪ Close proximity to attractive markets in Europe via pipeline and LNG enabling low cost for marketed gas ▪ Strong commercial capabilities in negotiating long-term contracts (SPA) ▪ High LNG spare capacity (6 Bcm) with the ability to quickly ramp up production ▪ Great flexibility in the calorific value of the gas with ability to modulate supplies ▪ Flexible shipping capacity through varying ship sizes allowing to serve both large and small buyers OPPORTUNITIES ▪ Expiring contracts create opportunities for commercial portfolio restructuring (e.g. expiration of Italian LT contracts in 2019, 37 bcm of contracts) ▪ Explore new markets such as Asia LNG (currently representing only 5% of Sonatrach's volumes while ~70% of the Global LNG production goes to Asia) ▪ Development of multimodal trading and short term opportunities can change the current market landscape ▪ Expand gas available for exports via unconventional resources, domestic demand management 3 Sonatrach’s reserves to production ratio is in line with peers at approximately 34 years of production R/P ratio for selected companies1, Years Qatar Petroleum 193 Saudi Aramco 69 . Sonatrach’s R/P ratio is Gazprom 46 comparable with most peers Shell 38 . Qatar Petroleum, Saudi Aramco, and Gazprom Total 37 have the highest R/P ratios in the market Eni 37 Qatar and Saudi have relatively Chevron 36 large resource bases ExxonMobil 34 Gazprom has the highest Sonatrach 34 resource base, as well as the highest OOC (Oman) 33 production amongst peers Kuwait Petroleum Corp (KPC) 30 Abu Dhabi NOC 22 1 Balance calculated based on 2017 production and reserves levels SOURCE: Rystad Ucube 4 Sonatrach has the fourth largest liquefaction capacity with high spare capacity (~6bcm) LNG terminal utilization rates LNG terminal capacity %, 2017 Bcm, 2017 85% Egypt 15% 7 Algeria 72% 231 . Should the LNG market Angola 74% 7 become more attractive, Trinidad & Tobago 75% 21 Sonatrach has the ability to Oman 79% 15 ramp up the two modular liquefaction terminals 29 Indonesia 89% (GL1Z, GL2Z) within two Malaysia 89% 41 days for additional LNG Peru 93% 6 exports. Australia 95% 83 Brunei 95% 10 UAE 95% 8 Nigeria 96% 30 Norway 98% 6 US 104% 19 Qatar 104% 106 Russia 105% 15 Equatorial Guinea 113% 5 Papua New Guinea 119% 9 NB: utilizations over 100% are occurring from plants operating above nameplate capacity 1 Based of "realised" capacity of 3 trains each for GL1Z, GL2Z Source: Sonatrach Analysis, McKinsey energy Insights 5 New VLGC OUGARTA and TESSALA suit more long distance deliveries. Sonatrach’s Shipping Capacity, Cm OUGARTA 171,800 TESSALA 171,800 75,000 75,000 138,000 145,000 684,000 126,000 125,000 Post 2017 2017 6 Sonatrach’s Exports progressed by 8,8% per year. Sonatrach’s natural Gas exports since 1967, Bcm CAGR 1967-2017, % 64 60 . 1964: First cargo sent to the terminal 8,8 % p.a. 54 of Canvey Island (UK) from la Camel. 41 +6,2% 34 +21,2%* 12 1 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 Natural Gas LNG (*): 1979-2017 7 New entrants ‘Africa and Asia’ are becoming sustainable clients of Sonatrach CAGR Sonatrach’s gas exports by region : 2000 - 2017, Bcm 2000-17, % 3,1% p.a. 63 61 62 58 60 60 59 57 56 54 52 54 54 52 5%** 47 43 32 +2% +13% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 AFRICA EUROPE AMERICA ASIA (*): Including LNG (**): 2003-17 8 LNG expedition to Asia multiplied by 10 in 12 years Sonatrach’s LNG exports to Asia: 2003-2017, Thousand cm 4,628 4,419 3,321 3,309 2,674 . 25 millions cm of LNG exported to Asia, since 2003. ▪ Sonatrach has supported the Japanese market after the Fukushima incident. 1,401 1,009 813 781 678 382 383 382 127 129 2003 2005 2007 2009 2011 2013 2015 2017 KOREA JAPAN CHINA INDIA TAIWAN UNITED ARAB EMIRATES MALAISIA JORDAN KUWAIT SINGAPORE THAILANDE 9 Sonatrach sales to Asia can counter balance the weak demand of the European market during summer. Sonatrach’s LNG exports to Europe on monthly basis, January February March April May June July August September October November December 2015 2016 2017 (*): Including LNG (**): 2003-17 10 Future Current challenges Target markets The way forward • Free quantities of gas from EUROPE • Decrease in the duration of the expiry of LTC. LTC. • Huge competitive pressure • Spare piped gas capacity. (REN, other competitors, • Increase in the share of short Northern and eastern term trading (less than 2 • Spare LNG capacity projects). years), either in Europe or in Asia. • Varying size LNG shipping • But a high option value for capacity the short term trading. • More innovation and sophistication in our ASIA marketing / trading scheme. • Huge growth potential, possibilities to index to oil • But, remote markets.