And what does consumption growth look like in 2035?: but Coal is King !!!

Energy use in real terms and future projects (always wrong)

The present perception if it concerns Natural Gas

Global level Market GrowthMethane leakagesFlaring (tight oil/shale gas)Its fossil

European level Deemed MarketIts fossil; its should be ….Has a political dimensionIts expensive (coal is king)

National Level (Dutch an example?)Its fossilPolitical and unreliableRenewable has priorityDutch disease

Energy is politics and for Europe the Natural Gas Sector is hit hard

The way from Policy to NetWorkCode !

Policy/Roaming

PA &Regulation

NCLaw

Madrid ForumCEERAcerCommissionIndividualsComplains

Concrete LobbyConsultationsDrafting optionsFrom EU to National levelNRA influence

Down the drain:LegislationNetWorkCodes

An example, from SoS guidelines, just by limited consultation to a new set of SoS regulation.

Source: ecowin, Bloomberg, ING calculations

40

50

60

70

80

90

100

11031

/12/2

013

14

/01/2

014

28

/01/2

014

11

/02/2

014

25

/02/2

014

11

/03/2

014

25

/03/2

014

08

/04/2

014

22

/04/2

014

06

/05/2

014

20

/05/2

014

03

/06/2

014

17

/06/2

014

01

/07/2

014

15

/07/2

014

29

/07/2

014

12

/08/2

014

26

/08/2

014

09

/09/2

014

23

/09/2

014

07

/10/2

014

21

/10/2

014

04

/11/2

014

18

/11/2

014

02

/12/2

014

16

/12/2

014

30

/12/2

014

Oil, Brent, 31/12/13=100

Rouble to USD, 31/12/13=100

Some are hit hard and the key is: where is the bottom

Matching point6US/Mmbtu

Self sufficient is one of the key words: USA an example SHALE

Shale gas potential in Europe

The aim of the EU energy policy: dependency should go down!

And natural gas lost competitiveness in (residual) power generation at European level: coal is King !!!!

Sources: Bloomberg, The Intercontinental exchange

0

5

10

15

20

25

30

35€/MWh

gas coal switching range TTF monthly index API#2

Coal is presently cheap: EU is using coal for PowerKing is Coal, also in Europe.

In global competition: Europe is expensive overallGlobal industrial players, energy intensive!; move away.

From EU to US

Last couple of years the sector lost 50 Bcm/y within the power sector

Installed capacity Electricity production

20301993 2010 20301993 2010

283 GW

158 GW

101 GW

Braunkohle: 15

Steinkohle: 22

Erdgas: 40

Andere Konventionelle : 4Speicher: 19

Biomasse, andere EE: 20

Wind – offshore: 27

Wind – onshore: 66

PV: 71

20

25

24

66

11

27

18

Wind – onshore: 138

PV: 59

Biomasse;

andere EE: 92

Speicher: 31Andere Konventionelle: 13

Erdgas: 7

Steinkohle: 36

Braunkohle: 93

Wind – offshore: 103

Erdgas

527 TWh

Braunkohle

Steinkohle

Kernenergie

572 TWh615 TWh

Steinkohle

Braunkohle

Kernenergie

Erdgas

Szenario für konstanten Nettostromverbrauch zur weitgehenden Erreichung der Klimaschutzziele

Quelle: BCG-Trendstudie 2030+, Szenario "Zielerreichung Klimaschutz"

17

German capacity coverage and future energy needs

Average monthly Month-ahead prices

Law of one price: if market is liquid: but no ‘room’ for transmission

Same slope: PSVWarsawMoscow ?

Physical volume on European Hubs

Physical gas deliveries on hubs increased to over 80% of gas demand in physical markets:

the more spot: middle-man in trouble; margins evaporate.

Source: IEAContinent: Austria,

Belgium, France,

Germany, Italy,

Netherlands

The relevant liquid market will be step by step larger: to the East and South: MENAMore network is needed including interconnections and new HUB’s: regulated businessSouth Corridor is the interconnector towards the EAST: Ankara HUB (Iran, Kurdistan, etc)To the MENA region: an EU priority and establishing a MENA Hub: Algiers or Tripoli

When it comes to gas: Expansive infrastructure

EU will not be a real LNG player: short term/balancing

Reason for this: simple, a matter of cost structure.

EER

In conclusion

Be prudent as industry in Europe: no methane leakage and flaring (past!); enough technical solution to be prudent.

Be transparent, CO2 footprint and EITI ruling

Be aware: politics are active in the line of SoS, at least in EUthe general issues could easily be redirected in legal setting and forwarded NC (like SoS was a guideline and than a Directive: sudden!!!!)

Europe is part of the rest: money is global and LNG is getting more than before global, but is EU global competitive?

Scenario’s have been supporting, more than before it are all black swans dealing with the changes of the sector.

Communicate over figures and facts, be careful with framing and be aware of present volatile European polity making.