16/7/212 Natural Gas in Latin America: Business Opportunities Evandro Correa Nacul Executive Director Pacific Region LATINVE&P 212 Repsol, Pacific R.U. Agenda 1. Overview 2. Supply & Demand in the region: 1. Bolivia 2. Argentina 3. Brazil 4. Chile 5. Peru 3. Activity & Projects in the region 4. Repsol s Activities 5. Challenges for the upcoming years 2 1
16/7/212 Overview: Global gas demand Steady increase in consumption. Non OECD countries take the lead. Natural Gas plays a key role in the current and forecasted energy matrix. 9 8 7 6 5 4 3 2 1 World energy consumption ( quadrillion BTU) Non-OECD OECD 199 2 28 215 22 225 23 235 25 2 15 1 5 World energy consumption by fuel (quadrillion BTU) Liquids Natural gas Coal Nuclear Renewables 199 2 21 22 23 Source: EIA, International Energy Outlook 211 3 Overview: Gas Reserves, Production & Consumption 25.9% 26.7% 2.3% 8.6%16.8% 7.4% 5.6% 6.% 23.9% 18.4% 13.1% 5.3% 4.5% 14.4% 11.5% 7.9% 6.5%3.3% 15.4% 17.9% 8.7% Reserves Production Consumption 4.% 5.% 4.7% Worldwide reserves: 6,69 Tcf (59 years). 4% of reserves, 5% of production and 5% of consumption are located in Latin America Source: BP Statistical Review of World Energy June 211 4 4 2
16/7/212 Overview: Supply & Demand in Latin America Supply CAGR = 2.4% between 25 and 21. Demand CAGR = 3.3% for the same period and a forecasted 4.4% for the upcoming years. Source: IHS CERA. 5 1P Reserves & Key Facts Peru Increasing E&P activity in the last decade. Transport capacity will be a bottleneck for production until 215. LNG plant allows surplus exportation. Peru Reserves: 12.5 Tcf Production: 1.1 Bcf/d Consumers Gas Reserves Gas Pipelines (Mm3/d) Bolivia Important producing fields. Limited exploration activity in the last years. Strategic geographic location near markets like Brazil, Argentina & Chile. Argentina Significant but mature producing fields. Increasing demand. Ongoing projects to boost transport capacity from Bolivia. Two existing regasification units. Brazil Important exploratory activity. Increasing demand. Ongoing projects to increase production. Two existing floating regasification and storage units FRSU. Chile Limited reserves. Dependency on imported LNG. Bolivia Reserves: 9.9 Tcf Production: 1.6 Bcf/d Chile Reservas: 3. Tcf Production:.2 Bcf/d 11 Brazil Reserves: 14.7 Tcf Production: 1.4 Bcf/d Argentina Reserves: 12.2 Tcf Production: 3.9 Bcf/d Source: BP Statistical Review 211 / Internal information 6 3
16/7/212 Bolivia 8. 7. 6. Supply & Demand (Mm3/d) 5. 4. 3. 2. 1. - Source: Internal information 29 21 211 212 213 214 215 216 217 218 219 22 221 222 223 224 225 226 227 228 229 23 Demand: Bolivia Demand: Brazil Demand: Argentina Supply Bolivian natural gas production increased significantly in the past ten years as a result of exploratory efforts carried out by private companies. Now a days Bolivia plays a key role in the southern cone gas market, even though transportation investments in order to increase exports to Argentina are still under development. Its significant producing fields like San Alberto, San Antonio and Margarita allowed the closing of Gas Sales Agreements with Brazil (3 Mm3/d) and Argentina (28 Mm3/d). New developments are needed in the midterm. 7 Bolivia ability to deliver 3, 25, Combined Demand / Sources of natural gas in the southern cone (Mm3/d) Source: Internal information M m3/d 2, 15, 1, GNL GSA Bolivia Producción In 28 Bolivia represented the 91% of the total gas imported by Brazil, Chile and Argentina, for 214 this ratio is expected to drop down to 52%. 5,, 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Bolivian gas share in the southern cone is declining in the midterm. The Country needs new projects to come on-stream in order to take advantage of its geographical location. Oil and gas discoveries from new projects since the new 25 hydrocarbon law was enacted were virtually inexistent. Political issues cause difficulties to export gas to Chile. 8 4
16/7/212 Argentina Supply & Demand (Mm3/d) Demand Supply Source: CERA. Argentina used to be a natural gas exporter, now a days it covers its deficit with gas from Bolivia and regasification units. Mature fields and diminished investments due to price restrictions were the main causes for the decline in production. The current transport capacity for Bolivian gas is 15 Mm3/d. Ongoing investments should increase this capacity to a maximum of 28 Mm3/d in 221. Two regasification units are currently working (Bahía Blanca Gas Port = 3 Mtpa & Escobar LNG = 3.8 Mtpa) and a new one has been announced (GNL Puerto Cuatreros). 9 Argentina shale gas YPF and Apache started drilling shale wells in Neuquén Basin Exxon acquired 4 exploration blocks with shale potential President Cristina Kirchner announced new gas prices for unconventional gas Total acquired interests in 4 Neuquén blocks in partnership with YPF with shale potential Gas y Petroleo Neuquén to conduct the third bidding round in second half 211 Source: IHS CERA. Could shale gas help Argentina diminish its gap between supply & demand? Recoverable resources in the Neuquen Basin range from 75 to 235 TCF Recoverable resources in the Austral Basin range from 16 to 51 TCF 1 5
16/7/212 Brazil Mm3/día 12 Supply & Demand (Mm3/d) 12 1 1 8 8 6 6 4 4 2 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Source: CERA Residential Uso Residencial CNG GNC Industries Industrias Generation Generación Domestic Producción Gas Production Brasil Importación (GSA Imports Bolivia) (GSA) Importación Imports (LNG) LNG The increase in oil prices triggered the boost of natural gas share in the energy matrix, gas consumption is expected to grow from 53 Mm3/d in 29 to 113 Mm3/d in 214. Production is also expected to increase from 28 Mm3/d in 29 to 69 Mm3/d in 214 due to ongoing projects like Marlim, Manatí, Mexilhão, Peroá-Cangoá, Camarumpin, Roncador, Uruguá-Tambaú and recent discoveries like Campos, Santos, Tupí, Iará, Carioca & Guará, among others. These main concerns are the complexity and the investments required for those projects. 11 Brazil - imports LNG Units: Pecem: 1.9 Mtpa. Guanabara: 3.9 Mtpa. 2 announced terminals: Sao Francisco & Tergas LNG. LNG imports are expected to increase from 3 Mm3/d in 29 to 14 Mm3/d in 214. Guanabara GNL Pecem GNL Bolivian gas: Gas Supply Agreement for 3 Mm3/d. Expires in 219 but it is expected to be extended. Sources: Wood Mackenzie, E&P News database. 12 6
16/7/212 Chile Mm3/día 25 2 Supply & Demand (Mm3/d) Demand Importación GNL 25 2 Source: CERA 15 Generación Restrictions Restricciones to a Argentinian la Exportación Gas Argentina Supply 15 1 Industria 1 5 Importación Argentina Producción Supply 5 Residencial 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Chile is a natural gas importer. After the gas crisis in Argentina, the country increased LNG imports and partially switched its energy matrix to fuel oil. Two regasification units are currently working (Quintero = 1.5 Mtpa & Mejillones = 2.5 Mtpa). Political issues cause difficulties to import gas from Bolivia. 13 Peru 1.6 Mscfd 1,8 1,6 Supply & Demand (Mscf/d) Source: Internal information 1,8 1,6 1,4 1,4 1,2 1,2 1. Mscfd 1, 1, 8 8 6 6 4 4 2 2 Mscfd 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 242 244 Exports Local Markets Firm Demand (w/o extended contracts) Transport capacity Peru has become a net exporter of gas thanks to its LNG plant. Camisea is the main producing field. The Ucayali Basin is considered to be under-explored and there are several high potential projects in Block 57, 58 & 76. Kinteroni, the southern field of block 57, should have its first gas in Q4-212. Transport capacity at TGP is the current bottleneck for the system (1,15 Mscfd), the increased capacity should be available in 215 (1,54 Mscfd). The Kuntur pipeline project (Gasoducto Andino del Sur) should help develop internal consumption in the south. The country has been able to attract private companies its current reserves replacement ratio exceeds 2%. 14 7
16/7/212 Activity: Exploration awards Blocks awarded in Latin America 4 35 3 25 2 15 1 5 2 21 22 23 24 25 26 27 28 29 21 Number of blocks awarded Source: Wood Mackenzie PathFinder Brazil Argentina Peru Bolivia Chile Source: Wood Mackenzie 15 Activity: Exploration wells Number of exploration wells completed in Latin America 2 18 16 14 12 1 8 6 4 2 2 21 22 23 24 25 26 27 Number of exploration wells completed 28 29 21 Brazil Argentina Peru Bolivia Source: Wood Mackenzie PathFinder Source: Wood Mackenzie 16 8
16/7/212 Activity: Reserves Reserves discovered (2P) in Latin America 2, 18, Reserves discovered (p+p) 16, 14, 12, 1, 8, 6, 4, 2, 2 21 22 23 24 25 26 27 28 29 21 Brazil Chile Argentina Bolivia Peru Source: Wood Mackenzie PathFinder Source: Wood Mackenzie 17 Projects: Repsol s Global Positioning Alaska Norway Russia Canada US Mid-Continent Deepwater GoM North Africa Kurdistan Indonesia West Africa Deepwater Brazil Producing and growth projects Exploration Producing assets Key growth projects Contingent resources Prospective resources 18 9
16/7/212 Projects: Repsol s Strategic Plan Brazil Africa & Europe Mid-continent Reggane Lubina-Montanazo Sapinhoa (Guara) Carioca (USA) (Algeria) (Spain) 1 2 3 4 5 6 7 3 Kboed WI: 15% FID: 21 FO: 213 1.2bn Margarita-Huacaya (Bolivia) 12 Kboed WI: 37.5% FID: 21 FG: 212.3bn 8 15 Kboed WI: 15% FID: 212 FO: 216.8bn Kinteroni (Peru) 4 Kboed WI: 53.8% FID: 29 FG: 212.7bn North Latam 9 USA 4 Kboed (1) net production (1) - FO: 212 2.3bn Carabobo (Venezuela) 37 Kboed WI: 11% - FO: 213.7bn 212-216 48 Kboed WI: 29.25% FID: 29 FG: 216.4bn Cardon IV (Venezuela) 1 53 Kboed (2) WI: 32.5% FID: 211 FG: 214.5bn 5 Kboed WI: 1-75% FID: 29 FO: 212.2bn Russia AROG (Russia) 5 Kboed WI: 49% - FO: 212.4bn Post 216 Next wave of growth Exploration Contingent resources Alaska C-33 (Seat, Gavea, Pao de Açucar) Presalt Albacora Sierra Leone Buckskin Malombe Iguaçu Piracuca-Panoramix-Vampira NC2 Prospective resources GoM Beaufort Sea Louisiana East Canada Campos, Santos & Espiritu Santo Colombia RC11, RC12 & Tayrona Guyana Jaguar I Angola and Namibia Spain and Portugal Norway offshore Ireland Dunquin Peru: 19Mapi, Mashira & Sagari... Key growth projects increasing Repsol net production: more than 2 Kboed in 216 Note: all production figures indicate gross plateau production; WI = Repsol Working Interest; FID = Final Investment Decision; FO: First Oil; FG: First Gas; 19 Net capex 212-216, excluding G&G and G&A.1. Average Repsol net production post royalties 2. Phase I gross production Challenges: Country Bolivia Challenges Develop new projects in the mid-term by reactivating exploratory investments Increase transport capacity to Argentina Solve political issues that complicate gas exports to Chile Recover political stability and economic attractiveness Argentina Solve the domestic gas price distortion Offset the declining production of its mature fields Increase import capacity Develop the unconventional gas potential Attract new private investments Develop the high potential projects and discoveries made in the last years Brazil Balance the growing demand with its own production and imports Source: Wood Mackenzie 2 1
16/7/212 Challenges: Country Chile Challenges Increase its production Optimize its energy matrix Solve political issues that complicate gas imports from Bolivia and Peru Balance its growing demand by using its regasification units Peru Increase the transport capacity along with the growing demand Solve the permits problems Maintain the political and economic stability that has boosted the E&P activity in the last decade Develop the high potential of the Ucayali basin Source: Wood Mackenzie 21 22 11