european security of supply vs. african energy requirements: could energy partnerships change the...

European Security of Supply vs. African Energy Requirements: Could energy partnerships change the international gas business?

Daniel MuthmannVice President LNG Supply & LiquefactionE.ON Ruhrgas AG

12th African Oil, Gas Trade & Minerals Trade and Finance Conference and Exhibition, Malabo, 3-7 November 2008

NOT AN OFFICIAL UNCTAD RECORD

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major Utilities’

Perspective3. Africa‘s Opportunities in a Global Gas Market vs. Domestic

Requirements4. How to bring it together? - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal outlook

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major Utilities’

Perspective3. Africa‘s Opportunities in a Global Gas Market vs. Domestic

Requirements4. How to bring it together? - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal outlook

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Leading Significant Minor

US-Midwest

E.ON key figures 2007

Customers approx. 30 million

Power sales 470,8 billion kWh

Gen. Capacity > 60,000 MW

Gas sales 105 bcm/a*

Gas storage cap. 12.2 bcm

Sales 68.7 billion €

Employees 87,815

Market capital. € 74 bn (Oct. 08)

Credit Rating A (S&P)

EBITDA (adj.) 12,4 billion €

E.ON is the World’s Largest Privately Owned Utility WithStrong Positions Along European Gas & Power Value Chains

E.ON market position

* Not consolidated

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E.ON Ruhrgas AG

Gas supply (incl. LNG)

Gas sales

Gas storage

Network operation

Technical development,advice and services

UpstreamParticipation

ingas

production including

Operatorships

DownstreamShareholdings in

local and regional gas companies and municipal utilities

in Germany and Italy

Transport Marketing of transmission capacities/operation of 11.500 km pipeline network

Project companiesfor gas transmissionand storage, total

working gas volume12,2 bcm

Mid-/DownstreamShareholdings in international energy companies & German gas merchant companies

E.ON Ruhrgas is the Gas Competence Centre within the E.ON group…responsible for sourcing gas internationally

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major

Utilities’ Perspective3. Africa‘s Opportunities in a Global Gas Market vs. Domestic

Requirements4. How to bring it together - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal outlook

S2308_30oe

mtoe

11% 16% 17%

A significant supply gap in Europe (EU30) is emerging due to demand growth & declining production

2007 2015 2020

24%

15%

30%

9%

22%

32%

14%

28%

8%

18%

10%

26%

18%

35%

11%472

580-625555-575

LNG share in supplies

other non-EU imports*

Algeria

Russia

Norway

domestic production

future projects

advanced projects

Remark:Malta and Cyprus are notsupplied with natural gasprovisional data for 2007

*) of which: Nigeria 4%, Egypt 1%, Qatar 1% (2007)Basis for imports: Contracted volumes and prospective contract prolongationsfor Norway extensive utilisation of import capacities is assumed

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Challenges and Opportunities of a Major European Utility: Accessing LNG supply sources and seeking growth

UK10 %

Denmark3 %

Netherlands17 %

Germany18 %

Norway25 %

Russia26 %

61 bcm**

* Predominantly Long-Term SPA** Source: E.ON Ruhrgas, consolidated sale of ER 2007

Many Current Supply Sources*

with limited future

potential…

+

Security of Supply via LNG

Growth outside Europe

Backward integration along value chain into LNG & Upstream

Renewables/CDM/JI

Possibly power & gas business in new regions

[…]

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major Utilities’

Perspective3. Africa‘s Opportunities in a Global Gas Market vs.

Domestic Requirements4. How to bring it together? - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal outlook

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6,88 7,9814,18 14,82

64,1373,47

S.& Cent.America

North America Africa Asia Pacific Europe&Eurasia Middle East

Africa has substantial proven gas reserves and if one adjusts for geographical and strategic considerations… Proved reserves at end 2006 (trillion cubic

meters)

Source: BP Statistical Review of World Energy 2007

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…Africa’s pole position in securing European physical supply market share becomes obvious Proved reserves at end 2006 (trillion cubic

meters)

Source: BP Statistical Review of World Energy 2007

6,88

14,1816,48

32,21

S.& Cent.America

North America Africa Asia Pacific Europe&Eurasiaw/o RussianFederation

Middle Eastw/o Iran, UAE,

Saudi

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However, there are domestic challenges and strategic ambitions equally important that need to be addressed… Provide enough “affordable” energy to

meet the national development targets

Strategic energy goals in the NEPAD Initiative

Regional power pools and grid connections

Use of African Energy sources for regional development

Gas pipelines

Securing future energy sources for future African populace

End gas flaring

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major Utilities’

Perspective3. Africa‘s Opportunities in a Global Gas Market vs. Domestic

Requirements4. How to bring it together? - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal outlook

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There is a natural fit of strategic ambitions between NOCs and European utilities in the field of energy…

…opening a vast number of opportunities

Utilities have: Premium market access and experienceCapabilities along power & gas value chains (incl. renewables)Financial Strength

Utilities seek:LNG access to „keep lights on and houses warm“Growth through backward integration into LNG & Upstream and new markets

NOCs have: Access to reservesExperience from existing projects

NOCs seek:Forward integration/market access capturing more valueDevelopment of domestic energy infrastructure and marketsKnow How & TechnologyFunding

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Elements for a potential Energy Partnership with E.ON (examples)…

„Energy Partnership“

Farm in/Explor.

LNG ProjectMarketing JV Downstream Access

Assets Swaps

LNG & E&P FinancingGuarantee instruments

Financing NOC share

Local EnergyGas Gathering & Pipelines

Consulting&Local JV (gas/power)

Renewables/ CDM

Training & Dev.Corporate University

Special purpose training

Employee Exchange

Local ContentLocal content and sponsorship

Scholarships for school children and university students

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E.ON‘ s competitive edge: A proven track record of mutually beneficial long-term partnerships going beyond gas

With Russian Suppliers since 1970, with Norwegian Suppliers since 1973 Joint storage/pipeline companies JI-Programme (CO2-Reduction) Technical/Managerial Education Education/Scholarships Art exhibitions Hon. Consulates

We understand what “partnership” means: “Give and Take”

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major Utilities’

Perspective3. Africa‘s Opportunities in a Global Gas Market vs. Domestic

Requirements4. How to bring it together? - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal outlook

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The time is now! A unique window of opportunity is opening up… 1. Energy Partnerships high on political agenda

internationally G8 Summit 2007 EU focus Energy needs, prices, and climate change Example: Nigerian-German Energy Partnership

2. Economic growth in Africa picks up momentum Domestic energy supply Significant investment requirement Training & development + transfer of know-how requirements

3. Structural reforms taking place allowing for the energy business to change NOCs with new ambitions and tasks Frameworks combining LNG export and domestic

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Will it be easy? No, there are key requirements for successful energy partnering…

1.Dedication

2.Ability to listen

3.Willingness to act

4.Strong Relationships

5.Political Support

6.Time

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Contents

1. E.ON Ruhrgas Company Introduction2. European Energy Challenges: General and Major Utilities’

Perspective3. Africa‘s Opportunities in a Global Gas Market vs. Domestic

Requirements4. How to bring it together - Partnership Opportunities5. Is this the right time? Will it be easy?6. Influence on international gas business – A personal

outlook

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In 2008 we are at the dawn of a new phase in the international gas business: The age of energy partnerships has begun

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For us, partnering with Equatorial Guinea and Sonagas is an honour. It paves our way for other energy partnerships in Africa

Vielen DankThank youMerci BeaucoupMuchas Gracias

12th African Oil, Gas Trade & Minerals Trade and Finance Conference Malabo, 3-7 November 2008

Back-up

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Example: Structural Investments with CDM

The Clean Development Mechanism (CDM) under the Kyoto Protocol allows industrialized countries with a greenhouse gas reduction commitment (so-called Annex 1 countries) to invest in emission-reducing projects in developing countries and to obtain CO2 credits accordingly

E.ON is Europe´s biggest power supplier and therefore one of Europe´s biggest CO2-emitters as well

E.ON chooses to reduce CO2-emissions of its own power plants and also make use of the opportunity to reduce CO2-

emissions in less developed countries.

We all have only one climate. It doesn‘t matter where emissions are reduced as long as it happens!

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Example (cont.): Reaping a double dividend through CDM E.ON

E.ON obtains CO2-credit by the avoided carbon emissions

CO2-credit can be used in

the European Emission Trading System to which E.ON is a party

Positive impact on the E.ON image

Host Country Pioneers clean local energy

production Meets growing local energy

demand needed for sustained economic development

Accesses E.ON´s distinctive know how in constructing / operating power plants and grids

Takes advantage of E.ON´s financial strength and top credit rating LNG supply +

CO2-creditReliable export income +

Clean local energyDouble

Dividend