A View of the European Energy Markets

A view of the European Energy Markets
Colette Lewiner

Paris - March 5, 2012

| Energy, Utilities & Chemicals Global Sector

A view of the European energy markets

 Recent events are impacting the energy markets

 They are changing the electricity and gas short- and longer-term security of supply

 Present and future energy mix is evolving

 Focus on the French Oil & Gas industry

 Conclusions


2


• Middle East events
• Fukushima accident
• Economic downturn




 Conclusions


3

Global demand for oil has increased in 2011

 World oil demand increased in 2011 by 0.88 million
barrels per day (mbpd), i.e. +1.01% (to 87.82 mbpd)
compared with 2010 (86.94 mbpd) World oil demand outlook
 According to the latest OPEC projections, worldwide oil mbpd mbpd
consumption is expected to increase by 1.07% in 120.0 120.0

2012 (to 88.76 mbdp)
100.0 110.0 Other transition economies
Russia
„000 b/d Quarterly world oil demand growth „000 b/d OPEC
80.0 100.0 China
Southeast Asia
South Asia
60.0 90.0
Middle East & Africa
Latin America
OECD Pacific
40.0 80.0
Western Europe
North America
World (right axis)
20.0 70.0

0.0 60.0
2010 2015 2020 2025 2030 2035
Source: OPEC Monthly Oil Market Report – February 2011 Source: World Oil Outlook 2011, OPEC

Primary factors driving demand are economic growth and increased
requirements in the developing world
Libya, Yemen, Syria, Egypt and Iran… political situation may place global
production and transportation at risk

4

The rising political tensions in Iran are particularly worrying
for global oil supply
Iran‟s oil exports (Jan to June 2011)
 After China, the EU is the largest importer of Iranian
oil (about 20%)
 In response to the failure of the negotiations on Iran’s
nuclear program, the US and Europe decided sanctions
against Iran, who threatened to close the Strait of Hormuz:
• Strengthening of the US military presence in the Gulf
• Oil embargo from the EU (decided in January 2012 and
due to start in July) which should hit 450,000 to 550,000
barrels a day of Iranian oil exports
 But Iran banned crude oil supply to France and the UK
right away
 In addition, Japan, South Korea, Taiwan and India could
reduce their purchases (up to 250,000 bl/d). In total,
between 25% and 35% of Iran‟s oil exports could be
impacted

Source: Financial Times
Average daily oil flow
through the Strait of
Hormuz (2011) 14 crude oil tankers
This situation is benefitting notably
Russia and keeps oil prices high.

Source: Financial Times
Almost 17 million barrels
Traders estimate that if the situation
deteriorates, oil prices could rise
35% 20% towards $150/bl or beyond
of all seaborne of oil traded
traded oil worldwide


5

Refineries closures are putting pressure on oil price volatility

 The refinery industry in developed countries Global refining capacity
(mainly the US and Europe) is facing an
unprecedented crisis:
• Since the 2008-2009 financial crisis, 2.6 mbd of
refining capacities have disappeared in
developed countries
• An additional cut of 1 mbd* in 2012 is expected
• In the US, refineries currently run at 86% of their
capacity vs. 93% in 2001
• Since mid 2008, nine refineries have closed in
Europe
• Refinery margin have been mostly negative in
2011
 On the contrary, due to their strong economic
growth, emerging countries are developing their
refinery capacities
• Between 2008 and 20011, 36 new refinery
facilities were commissioned in India, China,
Middle East and Brazil
• 25 new other refineries are expected to be built US fuel suppliers could be forced to import
by 2015 gasoline from Europe due to the US
refineries‟ closure while Europe may need
 Petroplus (a pure refinery player) bankruptcy to buy diesel from the US, increasing
is highlighting refineries difficulties transportation costs
*Merril Lynch estimation


6

Oil prices are still driving many other energy prices

 Oil prices forecasts uncertainty is increased by  In euros, the crude oil spot price is at its highest
speculation: each barrel traded on the physical  There is currently a $20 spread between WTI and
market is traded 35 times on the financial markets Brent, a the consequence of a localized logistic
 There is some consumption/price elasticity phenomenon at Cushing, Oklahoma, where WTI is
 High present oil prices are linked to tensions in priced
Middle East and Iran
Oil prices Crude oil spot – Brent in US dollars and in Euros Crude oil spot – Brent vs. WTI
130

120
Brent

110

100

WTI 90

80

70
March 2011 July 2011 Nov 2011 Feb 2012
Source: Focus Gaz, February 17, 2012 Source: Ycharts
Source: France inflation

High oil prices impact economic growth (EU‟s oil import costs up 44% in 2011
compared to 2010) and trade exchanges balance

7

Fukushima accident first safety lessons learned

The accident First safety lessons learned

 Exceptional circumstances: 9.0-magnitude undersea  Need to design plant infrastructures for really exceptional
earthquake off the coast of Japan on March 11, 2011 earthquakes and tsunamis
triggering a tsunami that travelled up to 10 km inland.  Simultaneous Natural Catastrophes have to be taken
 Fukushima nuclear plant: 6 boiling water reactors into account
(BWR) maintained by TEPCO have been hit by the  Spent fuel storage and management policy to be
earthquake and tsunami: rethought
• Reactors 4, 5 and 6 were shut down prior to the earthquake  Emergency measures to be revisited
for maintenance.
• Remaining reactors shut down automatically after the  Cooling systems redundancy to be re-assessed
earthquake. Grid electricity supply for cooling purposes  Radiological permanent control on the site and around
collapsed and then the tsunami flooded the plant, knocking  Crisis management and crisis communication to be re-
out emergency generators.
designed
• 20 km radius evacuation around the plant from March 12
 Nuclear bodies and governance
 Highest rating (level 7) on the International Nuclear
Event Scale. Second level 7 rating in history, following
Chernobyl

In December 2011, the Japanese Prime Minister, Yoshihiko Noda, confirmed that the four
Fukushima Daiichi nuclear units of Tokyo Electric Power Company have been brought to a
condition “equivalent to „cold shutdown‟”


8

Nuclear new build:
the vast majority in Asia, Russia and Middle East
 Worldwide, 434 reactors are in operation, 61 under construction and 495 planned or proposed
(February 2012, World Nuclear Association)
Overview of existing nuclear plants and project capacities (as of February 2012)
 The final number of planned or proposed reactors
is difficult to assess. However, two points are clear: 0 50,000 100,000 150,000 200,000 250,000
MWe
• The proportion of new, safer “Generation 3 reactor” China
builds will increase USA
Russia
• The new projects will also be impacted by economic India
factors (low gas prices) Japan
France
 It is worthwhile mentioning that: South Korea
• TVA in the US has decided to complete Bellefonte 1 United Kingdom
reactor, that the Nuclear Regulatory Commission has Ukraine
Canada
certified the design of Westinghouse Electric Co.'s UAE Operable
AP1000 reactor and that Southern Company is Saudi Arabia Under construction
building 2 new nuclear plants in Vogtle, Georgia Germany
South Africa Planned
• Argentina inaugurated its third nuclear power plant, Vietnam Proposed
Atucha II Turkey
• Finland announced a new build, the first Sweden
Spain
announcement of a new site anywhere in the world Finland
since the Fukushima accident Czech Republic
• Russian Rosenergoatom has received a license for Brazil
Switzerland
building the Kaliningrad plant
Source: World Nuclear Association
• No.1 nuclear unit in Zhejiang Sanmen (China) has *IEA: International Energy Agency
restarted the infrastructure construction project **World Energy Outlook 2011

The vast majority of new constructions and existing plants in operation should continue with
some delays and more safety focus. In addition, lifetime extension of Spanish and French
reactors has been authorized
The IEA** forecasts that nuclear output will rise by more than 70% over the period to 2035

9

The safety inspections launched on existing plants should
lead to additional investments
Distribution of reactors under operations by age (EU-27)
20
18

Source: World Nuclear Association
 Safety tests aim to assess:
• Plants’ resistance to simultaneous and exceptional catastrophes

Number of units
15
(flooding and earthquakes) 11 11
10 10 10
• On site emergency preparedness and information 10 9
7
• Radiation protection of people and the environment 5 5 5
5 4
• And in Japan, change of governance around nuclear safety questions 3 3 3 3 3 3
2 2 2
1 1 1 1 1 1 1 1 1 1
 For all 14 EU nuclearized Member States, national nuclear
0
regulators have released their “stress tests” reports 4 9 11 13 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 42 44
• No country will be required to take any of its plants off line Reactors' age (in years)
• France: ASN (French Safety Authorities) stated in December 2011 that no plants needed to be immediately shut down, but that steps should be
taken as "soon as possible" to improve safety at the 58 reactors (investments estimated between €10 to 15 billion)
• UK: “No fundamental weaknesses in design and resilience at UK nuclear power plants“ according to the Office for Nuclear Regulation
• Spain: according to the Nuclear Safety Council (CSN), all reactors would be able to withstand earthquakes and floods
 Outside Europe, nuclear stress tests are also on-going:
• China: 34 reactors passed the safety checks of which 26 were being built. A new China National Plan for Nuclear Safety is being formulated, and
approval for new projects should follow its adoption, at a pace of three or four per year, which represents slower growth than before.
• US: inspections carried out at all 104 operating nuclear reactors. The nuclear regulator (NRC) stated that “every plant has the capability to effectively
cool down reactor cores and spent fuel pools following extreme events”
• Japan: stress tests consistent with IAEA standards. For the first 2 examined units (Ohi 3 & 4), the nuclear regulator (NISA) stated that the Utility
(Kansai Electric Power) has taken sufficient measures to prevent a similar accident to the one at the Fukushima Daiichi plant. Still, 52 reactors out of
54 are stopped
 Additional CAPEX and OPEX will push nuclear electricity costs up. Nevertheless, nuclear energy stays competitive.

Provided reactors are run safely, the consequences of the Fukushima accident should be less
important than viewed just after the accident

10

There is some elasticity between the economic situation and
the energy consumption
EU electricity and gas consumption
Evolution of electricity and gas consumption (M/M-12) non-weather-adjusted
(non-weather-adjusted)
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
-6.1% +7.0% -8-9%

5,336 5,010 5,363 1%
4,880 0%
+4.1% -2.7%
-4.7% 0% -4%
3,265 -2% -1% -2%
-3% -3% -2% -2%
3,294 3,136 3,177 -4% -4%
-6% -5%
-8% -7%
-10% -10%
-12% -12%
Electricity -14%
-16%
Gas
Electricity Gas
-22%
2008 2009 2010 2011
Source: SG Energy Pulse – Capgemini analysis, EEMO13
Source: ENTSO-E, BP – Capgemini analysis, EEMO13

 In 2009, electricity and gas consumption dropped in Europe (-4.7% and -6.1% respectively) due to the crisis, in 2010,
they increased again (+4.1% and +7.0%) thanks to the economic recovery and colder than average winter
temperatures. Wholesale electricity and gas prices followed the same trend.
 In 2011, European electricity and gas consumption decreased respectively by 2.7%* and 8-9%**, mainly due to a
mild weather. In France, electricity consumption decreased by 6.8% (weather-adjusted: +0.8%) and gas
consumption by 13.4% (weather-adjusted: -1.9%).
A second economic slowdown would impact negatively the energy consumption and prices
* Société Générale Energy Pulss (Focus group representing 63% of European electricity consumption)
**Cedigaz provisional figure


11



• Electricity
• Gas



 Conclusions


12

Peak loads are increasing year-on-year threatening security of
supply on cold days
160,000 9.1% Peak load, generation capacity and electricity mix (2010)
&

140,000 Peak load 2012: Total installed capacity for Europe in 2010: 882,712 MW
101,700 MW (+3.7% compared to 2009)
3.6%
&
120,000
Total generation capacity and peak load [MW]

2.1% CO2 emitting generation capacity
4.7% & 3.9% Non-CO2 emitting generation capacity
100,000 & & Peak load 2010
Total generation capacity evolution 2010 vs. 2009 (notified if below or above +/-3%: +3.4%)
Peak load evolution 2010 vs. 2009 (notified if below or above +/-3%: +3.4%)
9.5%

Source: ENTSO-E – Capgemini analysis, EEMO13
& 1.5%
80,000 &

2.6%
8.8% &
60,000 &
0.1% Peak load 2012:
& 25,844 MW
-0.1%
40,000 2.2%
( 0.1%
&
6.2% & 0.1%
3.2% 9.3%
& & 1.6%
& & 1.0% 5.8% 0.3% 9.3% 6.8%
& -1.4%
3.6% &
6.6%
20,000 & &1.7%
& ( & & 0.2% 10.3%
-0.6% 4.8% 0.1%
& & 1.1% 2.0% 2.6% & &0.3%
&1.1% 2.1% 10.2% 9.3%
( & & &
1.0%
& 1.1% 4.1%
& & & & &5.1%-23.6% 7.9%
1.8% 3.0%
& & & -0.4% -1.3% 1.9%
4.9% 1.5%
6.8%
& ( & & & (
( & & &
0
DE FR IT ES UK SE PL NO NL AT BE CH FI CZ PT RO DK GR BG HU IE SK LT SI LV EE LU

Nine countries registered an all-time high peak loads in 2010 due to cold temperatures.
During the cold wave early 2012, France and Poland recorded all time record electricity
demands and Germany has activated its reserve coal power plants

13

France recorded a new peak load on February 8, 2012 due to
the cold spell
Generation mix on February 8, 2012 at 19:00
 The French peak load reached 101,700 MW at 19:00
Gas
• Nuclear plants‟ availability largely contributed: 59,165 MW (55 reactors Oil-fired + Coal
out of the 58 were in operation) 3%
peak 5%
• France imported 7,845 MW from all its neighboring countries
capacities
• On EPEX Spot, day-ahead electricity prices jumped to €1,938/MWh
5%
• RTE activated it EcoWatt demand response program in Brittany and PACA
regions which resulted in a consumption reduction of respectively 2% and 3% Imports Nuclear
• EnergyPool curtailed 20 MW of industrial consumption which have been 8% 58%
used for Brittany region
 In 2011, net new generation capacities have been added: Others
• 850 MW of CCGT Hydro
6% 13%
• 1,250 MW of renewable energies
• 450 MW of fossil-fired plant have been decommissioned Wind
 In the meantime, tariff-related demand response capacities have Source: RTE
2%
decreased from 6,000 MW in 2004 to 2,000 MW in 2011

A holistic approach to manage the peak load needs to be implemented. It should encompass:
• Generation capacities
• Demand response: tariffs or other types of demand response programs
• Incentives to build peak generation capacities
• Grids reinforcement
• Incentives for energy savings


14

New pipelines and LNG terminals are increasing gas security
of supply
Pipeline projects
Map of pipelines and LNG
Projects of new pipelines
BALTIC & terminals projects (2010) (planned or under
 Nord Stream delivers NORTH SEA construction)
108.7
Russian gas since November NO FI
Built segments of
pipelines under
SE construction
2011 (27.5 bcm/year 33.1
RUSSIA Interconnection projects
capacity, to double by the ATLANTIC EE
GALSI
financially supported by
the European Energy
end of 2012) 123.3
IE DK
LV Recovery Plan (EERP)
LT
 South Stream (63 bcm/year, 65.9 UK
Interconnector projects – NORTH-
EAST EUROPE
LNG terminals
BBL Nord Stream Existing
to be finalized in 2015) NL
PL
Capacity 2 x 27.5 bcm
End 2011 Under construction
BE DE To be commissioned
• March 2011: EDF and LU
and 2012 and/or included within
Mandatory Planning
CZ
Wintershall (BASF subsidiary) FR SK Under study or proposed
acquired 15% stake each. Eni CH AT HU
Nominal annual capacity
SI
has 20% and Gazprom 50%. RO by receiving zone
(in bcm)
 Nabucco (31 bcm/year PT
ES BG
Existing Forecast
IT by 2015
expected capacity by 2018) TAP
• Budget of €7.9 billion to GALSI GR
WEST. MED Medgaz TGI
potentially rise to €15 billion 87.9 ALGERIA

 Trans Adriatic Pipeline 56.2
EAST. MED
Interconnector projects - SOUTH-EAST EUROPE
Interconnector projects – 62.3
(TAP), supported by Statoil AFRICA-EUROPE
21.3
Nabucco
South
Stream
White
Stream
TGI TAP
South-East
Europe
GALSI Capacity (bcm) 26-31 63 32 12 10+10 10
 TGI, supported by Edison Capacity (bcm)
To be commissioned
8
2015
LIBYA To be commissioned 2017
End
2015
2016 2017 2017 n.a.

and DEPA Source: GIE gle, IEA WEO 2011 – Gas, Capgemini analysis, EEMO13

 South-East Europe (10 bcm/year), Multiple southern pipelines routes are in competition. Their
supported by BP future will depend on gas substitution to nuclear generation,
unconventional gas development pace and economy

15

Unconventional gas is changing the picture

 Unconventional gas accounts for 4% of the world total of proven gas reserves and for 12% of global production in
2010 (to increase to 30% by 2040*).
 The US account for 3/4 of global unconventional output, increasing production 4 fold since 1990 (420 bcm in 2010).

Global unconventional natural gas resources (tcm)
 The latest US Energy Information
Administration report shows significantly larger
NO: 2,324
SE: 1,148 unconventional gas resources in Europe
PL: 5,236
• France: resources estimated at 5,000 bcm
(around 100 years of consumption). They are
FR: 5,040 equally situated in two basins (North and South-
East)
• Germany: resources amount to 20 times less and
British resources to 9 times less
• Only Poland would have equivalent resources
to France
 It would be regrettable if the present French
decision to cancel exploration permits
prevents shale gas exploration

FR: 5,040 Largest technically recoverable
shale gas resources (bcm) * ExxonMobil Energy Outlook, December 2011
Source: EIA

Shale gas changes the gas perspective:
• It increases the total gas resources to 250 years of consumption
• It is widely distributed
• It is cheap ($3/Mbtu in the US)
• It allows to repatriate gas consuming industries as chemicals and to fight against deindustrialization

16




• Gas
• Renewables
• Electricity costs


 Conclusions


17

The Fukushima accident has triggered a debate on the
present and future energy mix
2010 and 2025 electricity mix (as of June 2011)
 There is a debate on nuclear phase- 100%
out. Before asking ourselves if it is
feasible, one needs to ask if it is 90%
desirable. An immediate nuclear
phase-out is challenging. 80%

 A long-term phase-out is possible but
needs to be assessed against the 70%
Solar + Biomass
following criteria: Wind

• Sustained development: global 60% Hydro
Other f ossil
warming / greenhouse gas emissions
Gas
decrease 50%
Lignite + Coal
• Security of supply Nuclear
40%
• Electricity generation costs
2010 mix: lef t-
• Social acceptance 30%
hand side bar

 The IEA* has examined a Low Nuclear 2025 mix: right-
hand side bar

Scenario (no new nuclear plant is built 20%
in OECD countries, non-OECD
countries build only half of the projected 10%
nuclear plants and the operating
lifespan of existing nuclear plants is 0%
BE BG CH CZ DE ES FI FR UK HU IT LT NL PL RO SE SI SK
limited to 45 years) which
Source: ENTSO-E – Capgemini analysis and estimations, EEMO13
consequences would be to:
• Put additional upward pressure on energy prices Nuclear energy should slightly decrease its
• Raise additional concerns about energy security worldwide share while gas and renewables should
• Make it harder and more expensive to combat increase theirs, leading to electricity costs increase
climate change:
* AIE: Agence Internationale de l‟énergie , WEO 2011


18

Power plant’s consumption is the main cause for gas demand
growth
World primary natural gas demand by sector and scenario
 In the new IEA GAS* scenario:
• Gas share of primary energy consumption
reaches 25% in 2035 (more than coal, slightly
less than oil)
• CO2 emissions are not compliant with
climate change objectives and lead to a high
+3.5°C temperature increase instead of an
acceptable +2°C

CO2 emissions in the GAS relative to the New Policies, 2035

Source: World Energy Outlook 2011: Golden Age of Gas Report

On the longer term, increased gas
consumption for flexible electricity
generation will require more flexibility in
storage and pipeline management

Source: World Energy Outlook 2011: Golden Age of Gas Report

* GAS: Golden Age of Gas, IEA WEO 2011


19

Gas is not a global market.
Very different regional pricing systems
Gas spot prices Gas prices evolution
50 100
In €/MWh ($4.4/MBtu=€10.6 /MWh)
DE - Import price NL - TTF
BE - Zeebrugge UK - NBP
40 DE - NCG FR - PEG Nord 80 Long-term contracts price
Brent month ahead Spot price
Gas prices [€/MWh]

30 60

Brent price [€/bl]
20 40

10 20

0 0
Europe versus US gas prices

Source: Gas Exchanges web sites, SG Commodities Research, BMWI – Capgemini analysis, EEMO13

 US spot prices could go up on the mid-term triggered by the new EPA
(Environment Protection Agency) regulation on air pollution (Cross State Air
Pollution Rule) that could lead to 20% of US coal-fired plants phase-out and their
replacement by gas
 Beginning of 2012, Gazprom has agreed to reduce by 10% the price of its
long-term contracts to Europe

US spot gas prices are 1/3 of long-term European
gas prices. For how long?
Source: Focus Gaz January 2012


20

Renewable energies have continued their development

 As of May 2011, 10% of the Growth rate of renewable energy sources
110%
generation plants under 2008

Solar PV Top 3 countries ranked by:
construction are from renewable

Source: Eur’Observer barometers – Capgemini analysis, EEMO13
100% Capacity Growth (abs.) Growth (%) Capacity installed* Growth** (absolute)
energy sources (vs. 7% in 2009) DE DE SK
1. DE 1. SK
 In 2010, wind power provided the 90%
2005
IT CZ FR
2. ES 2. FR
CZ FR SI
largest output (147 TWh) but had a 3. IT 3. SI
declining growth due to onshore 80% 2010
* Volume for wind, small hydro, geothermal and solar PV
favorable sites saturation and local in MW and for biogas and biomass in TWh
** Relative growth additionally displayed for solar PV and
negative reactions 70% wind

 Many governments have or are
Growth (%) 60%
launching large offshore wind 2007 2009

programs 50%
• September 2010: 300 MW offshore 2006

wind farm inaugurated in the UK 40% Wind
Capacity Growth (abs.) Growth (%)
• In July 2011, France launched a DE ES RO
30%
tender for 3,000 MW ES DE BG
• North Sea: 400 MW (Germany) and 2005
IT FR PL
20% 2006
325 MW (Belgium) under 2007 2008 2009
2010
construction + Biomass
10% 2009

• Nuclear phase out in Germany should DE PL
boost wind power FI SE
0%
70 SE 80 NL 90
 In 2010, solar PV power had the 0 10 20 30 40 50 60 100 110 120 130 140 150

fastest growth (+80%) Electricity production (TWh)

 Fluctuating governmental policies A stable governmental policy is key for renewables
on solar subsidies are damageable development as they still need governmental subsidies.
(Germany, Spain, France, Italy, …). The eurozone sovereign debt issues should lead to a
Several solar companies went bust decrease of those subsidies
and China is dominating the market

21

Status on the 2020 EU objectives

110 EU-27 GHG emissions

Source: BP statistical report 2011, European Environment Agency, Eur’Observer – Capgemini analysis, EEMO13
 The 2009 economic crisis and its consumption reduction
Historical evolution of GHG emissions

EU-27 GHG emissions [base year=100]
had a positive effect on EU greenhouse gases (GHG) 105 Path to reach 2020 target
2020 target f or EU-27

emissions that dropped by 7.1%
100
 In 2010, with the economic recovery, GHG emissions
increased by 2.4% (+3.8% for the ETS sectors). For 95
2011, experts project a slight increase of the CO2
emissions for the ETS sector (+2.6%*) 90

 In its March 2011 Energy Efficiency plan, the EU
estimated that with current measures only half of the 85

objective would be attained and developed a new draft -20%
80
Directive in June 2011 focusing on: 1990 1995 2000 2005 2010 2015 2020

• Triggering better energy efficiency of public buildings 1,850 EU-27 primary energy consumption
• Demand response programs through smart meters roll out

EU-27 Primary energy consumption [Mtoe]
1,800
• White Certificates mechanisms
• Better usage of cogeneration especially for district heating 1,750

• In 2013, the EU will re-assess the situation 1,700

-9%
1,650
An economic slowdown would push CO2
emissions and energy consumption 1,600
down but would negatively impact Historical evolution of primary energy consumption

renewable‟s share in the final 1,550 Path to reach 2020 target
2020 target f or EU-27
Projection with current measures in place
consumption 1,500
(as per the March 2011 EU Energy Ef f iciency Plan)

-20%
*Deutsche Bank Forecast 1,450
1990 1995 2000 2005 2010 2015 2020


22

Extensive analysis have been carried out on the nuclear
generation costs and energy mix scenarios in France
€/MWh Nuclear generation costs in France
80 75
 A working group, Energies 2050, set up by the Decommissioning Radioactive waste
70 management
French Minister of Industry, Energy and the Digital Lifetime
60 extension 0.5
Economy examined four energy scenarios: 2011-25 2.5
4.95
1. Lifespan extension of existing reactors 50 55
43
2. Quicker adoption of 3rd generation nuclear reactors 40
3. Progressive reduction of nuclear energy in the mix 35
30 57.5
4. a. Nuclear phase out (more fossil fuel energy) 49.5 49.5 54.45 56.95
4. b. Nuclear phase out (more RES) 20 39 42
 The final price to end-customers is a combination of: 10
• Energy generation: 40% 0
Champsaur ARENH 2010 Full cost Historical New
• Transportation and distribution: 33% nuclear nuclear
• Taxes: 27% French Court of Auditors 2030 2030

Energies 2050
Source: Les coûts de la filière nucléaire, January 2012 and Energies 2050, February 2012 – Capgemini analysis

Assumptions on electricity generation costs by 2030 (€/MWh w/o taxes)
1 Lifespan extension of existing nuclear reactors
2 Quicker adoption of 3rd generation nuclear reactors
Energies 2050 commission
3 Progressive reduction of nuclear energy in the mix recommends extending nuclear
4a Nuclear phase out (more fossil fuel energy) reactors lifespan
4b Nuclear phase out (more RES)

Source: Energies 2050, February 2012 – Capgemini analysis 50 60 70 80 90 100 110

23






 Conclusions


24

France produces only a fraction of its oil and gas
consumption
Oil production by company as of Oil and gas fields in France
 In addition to Total, foreign players are January 2011
Oil
operating on the oil and gas E&P Natural gas
French market:
• Vermilion (Canadian-based company)
already the first E&P operator in France,
has increased its market share (reaching
75% of the French oil production) thanks
to the purchase of a large part of Total’s
assets in November 2011
 French oil and natural gas production
covers respectively only 1% and 2% of Source: UFIP
the country‟s needs (annual oil
production of 896,000 t and natural gas
production of 745 mcm, however:
• Recent discovery made by Tullow, Total, Shell and Northpet off the French Final energy consumption in France (2010)
Guiana coast could multiply by 5 the current oil production
• Shale gas reserves could be of 5,000 bcm, i.e. 100 years of consumption. The
figure is still theoretical since the government repealed all shale gas permits for
Oil
exploration in October 2011
Natural gas
Coal
Providing hydraulic fracturing prohibition law is revisited, Electricity (81% from
nuclear energy)
allowing shale gas exploration and production and the Other
discovery off the French Guiana materializes, France could
improve its energy security
Source: UFIP


25

The French refinery industry is facing an unprecedented crisis
with negative refining margins
 The five operators (Total, Esso, Petroplus, Petrochina-Ineos and Final oil products consumption in France (2010)
LyondellBasell) have a total refining capacity of 81.8 Mt/year, in line
Gasoline
with the demand (82 Mt/year) but unbalanced (France produces mainly Jet fuel
gasoline but consumes mainly diesel fuel) Diesel fuel
• In 2010, France imported 18 Mt of diesel fuel (i.e. half of its consumption) and Heating fuel
Heavy fuel
exported 5 Mt of gasoline (i.e. 39% of its production)
Naphtha
• France implemented the most favorable fiscal policy to diesel fuel in Europe,
resulting in 2010 in 73% of registration of diesel vehicles (vs. 50% in Europe) Source: UFIP

 Overcapacity in refinery due to energy efficiency improvements, oil European oil products demand in 2030 vs.
products substitution and industrial activity decrease has worsened refinery production in 2007
since 2009 in Europe and in France
• Refined products are sometimes sold at a price close to the crude oil price LPG
on the Rotterdam market Naphtha
Gasoline
• In Europe, refining margins dropped by 60% since 2009
• In France, the refining margin stood at €14/t in 2011 vs. fixed and variable Jet fuel
costs between €20 and €25/t
• The US is a traditional importer of European gasoline but the demand is
expected to decrease by 2020 and US refineries turned again competitive due to
the rapid shale gas development
Diesel fuel /
 Shell has agreed to help Petroplus French refinery of Petite Couronne Heating fuel
to restart activity for six months
Lubricants and

Source: UFIP
Since 2009, the French refining industry lost over €2 billion. specialties
Heavy fuel
It is estimated that over €8 billion are needed to transform
the European refinery facilities to produce more diesel European
production in 2007
European demand
in 2030


26






 Conclusions


27

Conclusions

 Recent events are putting Energy questions in the spot light
« Energy Orb » (PG&E) gives visual
• BP accident in Gulf of Mexico highlighting the deepwater production indications to clients involved in energy
difficulties and strengthening regulations demand management programs
• Nuclear Fukushima plant accident slowing down the nuclear
« renaissance »
• Middle East and Arab countries political instability threatening oil and
gas supply
 In the short-term: the energy consumption (post 2009 economic
crisis) growth could be stalled by EU country’s recession
 In the long-term, we can expect:
• Higher energy prices
• Decreased security of supply
• More greenhouse gases emissions
• Increased need for investments
 In all cases, customers in developed countries should change
their behavior and increase their energy savings focus

Governments and Regulators have a key role to play:
• To make the needed investments happen
• To implement a sound energy and CO2 savings policy

28

About Capgemini

With around 120,000 people in 40 countries, Capgemini is one of the world's foremost providers of
consulting, technology and outsourcing services. The Group reported 2011 global revenues of EUR 9.7
billion. Together with its clients, Capgemini creates and delivers business and technology solutions that fit
their needs and drive the results they want.
A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative
Business ExperienceTM, and draws on Rightshore ®, its worldwide delivery model.

With EUR 670 million revenue in 2011 and 8,400 dedicated consultants engaged in Utilities projects
across Europe, North & South America and Asia Pacific, Capgemini's Global Utilities Sector serves the
business consulting and information technology needs of many of the world’s largest players of this
industry.

More information is available at www.capgemini.com/energy.

Rightshore® is a trademark belonging to Capgemini

Rightshore® is a trademark belonging to Capgemini
29

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