Presentation_shippers meeting 2017

UTG shippers’ meeting
13 Oct 2017
Sergiy Makogon
Business Development Director
Ukrtransgaz

Content
1. Key indicators
2. Legislation and regulatory development
3. New business opportunities for international traders and shippers
4. Homework
5. Q&A session

1. Key indicators - technical parameters
Belarus
35 576 km of pipelines + 2 450 km
(ATO, Crimea)
1 392 Distribution stations
+83 (ATO, Crimea)
Hungary
70 Compressor Stations (+3 ATO)
670+35 Pumping Units
5 321 MW + 175 MW
Entry points
Exit points

1. Key indicators - transit to Europe
%
100
Supply of gas to Europe
bcm
Transit through Ukraine
80
60
98,6 104,2 84,2 86,1
62,2 67,1
82,2
90
40
20
0
2009 2010 2011 2012 2013 2014 2015
National production Russia Norway LNG Algeria Lybia
2010 2011 2012 2013 2014 2015 2016 2017
actual transit 2010-2016 forecast for 2017 *
%
100
80
60
40
20
0
Routes of supply of Russian gas
2009 2010 2011 2012 2013 2014 2015 2016
%
80
70
60
50
40
30
20
10
0
Routes of Ukrainian transit
70.4
57.0
50.2
48.4
9M 2014 9M 2015 9M 2016 9M 2017
Ukraine Yamal Nordstream Latvia Finland
Slovakia Trans-Balkan Hungary Poland Moldova
Source: ENTSOG; Operational data of PJSC “UKRTRANSGAZ”
* Estimated value, we expect from 90 to 95 bcm of transit

1. Key indicators - consumption
Natural gas consumption dynamics, 2007 - 2016
35
30
25
20
-69%
-31%
15
10
5
-41%
-48%
0
Industry Households District heating Fuel gas
Factors of consumption reduction:
- Increase of gas price
- Aggression at the East & occupation of Crimea
- Deterioration of economic environment => decrease of industry production
- Natural condition: temperature in heating season
- Regulatory factor (change in standard consumption rates for householders without heat meters)
In 2016 we saw slight increase of consumption by households and district heating companies, as well as utilization of
fuels gas due to colder winter and higher transit. The same trend is expected in 2017.
Source: Data of PJSC “UKRTRANSGAZ”

1. Key indicators - consumption
Stable structure of consumption
Budget organizations
Naftogaz’s share in industry
consumption
Fuel gas
15%
Households
District heating
19%
2017 9M
21.7 bcm
35%
30%
10%
34%
20% 2015 9M
12%
23.1 bcm 35%
20% 2016 9M
33%
21.1 bcm
Industry
21,8%
10,2%
5,5%
2015 2016 7М 2017
32%
Source: Data of PJSC “UKRTRANSGAZ”

1. Key indicators - consumption and production trends
bcm
70
100%
60
50
40
90%
80%
70%
60%
50%
30
40%
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F
Consumption Production Production share (right axis)
30%
20%
10%
0%
Source: Operational data of PJSC “UKRTRANSGAZ”; TYNDP of PJSC “UKRTRANSGAZ”
Notes: data for 2015-2019 does not include consumption on the temporarily occupied territory of Ukraine

1. Key indicators - natural gas import
PL - 2.1 bcm/y
Year
2015
2016
2017
Im
0.1
1.0
0.9
Naftogaz
41%
1.3%
0%
35
54
Russian Federation - 280.7 bcm/y
2015: 6,1
2016: 0,0
2017: 0,0
SK – 14.5 bcm/y
Year
2015
2016
2017
Im
9.7
9.1
7.9
Naftogaz
90%
90%
89%
HU – 5.4 bcm/y
Year
2015
2016
2017
Im
0.5
1.0
2.0
Naftogaz
90%
1.4%
3 %
18
2015 2016 2017
Number of importers at EU borders
Share of Naftogaz in total import from EU
90%
74%
66%
2015 2016 2017
Source: Data of PJSC “UKRTRANSGAZ”
All figures in bcm unless specified otherwise

1. Key indicators - capacity utilization in 2017
Hungary
Poland
Slovakia
mcm
mcm
mcm
18,00
16,00
17.1 4,50
4.3
4,00
45,00
40,00
42.5
14,00
3,50
35,00
12,00
3,00
30,00
10,00
2,50
25,00
8,00
2,00
20,00
6,00
1,50
15,00
4,00
1,00
10,00
2,00
0,50
5,00
-
January - September
-
January - September
-
January - September
Daily capacity
Used capacity
Source: Data of PJSC “UKRTRANSGAZ”

2. Regulatory framework
Gas Law aligned with the 3 rd Energy Package
Creation of the entry/exit system and VTP
Introduction of GTS Code (CAM, CMP codes)
Adoption of Independent Regulator Law
Daily balancing (BAL Code)
Improved interconnectivity
New interconnection points for gas flow
to Ukraine (PL, SK, HU)
Implementation of INT Code at
the existing points (PL, SK, HU, RO)
Unbundling of the TSO
DONE
DONE
DONE
DONE
IN PROGRESS
DONE
BLOCKED BY GAZPROM
IN PROGRESS

2. Unblocking IPs from Gazprom – getting ready to 2019
Poland
New IA for Single Grid
Connection Point –
consultations conducted,
ready for signing
Belarus
Russia
Slovakia
Budince – signed
Velke Kapushany
- pending
IPs blocked by GP
IPs with TPA
Hungary
IA for both
points signed
Moldova
Romania
Isaccea 1 - signed;
Tekovo - consultations conducted, TSO
finalizing results;
Isaccea 2-3 – consultations to start on
16 Oct 2017;
Isaccea (Romania) – under preparation.
Consultations conducted,
Moldavian TSO not ready to
implement new rules

3. New business opportunities for international traders
1. Open gas market for industry segment
• nearly 10 bcm/y, Naftogaz’s share now – only 5.5%
• after dissolution of PSO – open gas market for all consumers of natural gas – 33.2 bcm/y
2. Short-haul and temporary storage services
• transportation services between PL, SK, HU,
RO via Ukraine
• transportation services from border to UGS
and vise verse
• Included into draft GTS Code, submitted to
the NRA
3. Huge available storage capacity
• as for now storages are filled at 54%
(16,6 bcm/30,8 bcm)
• Customs warehouse regime already
implemented and used by 16
companies (exp Oct 2017)
1200 km
1200 km vs 200 km

3. UTG’s expectations from Network Users
• proactive and constant participation of traders – both Ukrainian and
international – in reforming of natural gas market and cooperation with the
National Regulatory Authority
• sending proposals to UTG and to the NRA regarding amendments to the
regulatory acts
• involvement into working groups under the auspices of governmental and
regulatory bodies
• participation in public consultations of the NRA and TSO (by 22 Oct 2017 have
time to submit observations to the NRA regarding amendments to the GTS Code)
• active participation in demand surveys of the TSOs, as well as active cooperation
with the TSOs and NRAs of neighboring countries (RO, MD, SK, PL).

4. Homework – aggressive plans, no time to lose
1) Implement as soon as possible daily balancing – number of new products for the market:
• IT platform for nominations and allocation
• Capacity auction platform
• Balancing platform (to purchase fuel and balancing gas for TSO; now – on open auctions)
2) Expect final award of Stockholm Arbitration. If success:
• unblocking the Interconnection Points with the EU Member States and Energy Community Contracting
Parties, which in turn will mean Third-Party Access to all IPs and will make possible implementation of
best EU business practices on all IPs (backhaul, OBA, etc.)
• may lead to shift of point of purchase of Russian gas to Eastern border of Ukraine - no more price
manipulation by Gazprom
• green light to finish unbundling
3) Unbundling – everything to be prepared for final award of Stockholm Arbitration:
• Branch-TSO already created – to be the prototype of the future TSO.
4) Monetization of subsidies – open retail market – additional 12-15 bcm market for traders.
5) In case of successful implementation of gas exchange in Ukraine – UTG may also purchase fuel and balancing
gas there.
6) Open Season on new Polish-Ukraine Interconnector – bidirectional pipeline with annual capacity of 5 bcm.

Thank you for your attention!