Global Oil Markets at the Crossroads: Reducing Investments due to Uncertainty or Managing Risks?

Igor Sechin Chief Executive Officer, Rosneft

Summit of Energy Companies

2

SLIDE 2. Disclaimer

Information herein has been prepared by the Company. The presented conclusions are based on the general information collected as of the date hereof and can be amended without any additional notice. The Company relies on the information obtained from the sources which it deems credible; however, it does not guarantee its accuracy or completeness.

These materials contain statements about future events and explanations representing a forecast of such events. Any assertion in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting such statements.

This presentation does not constitute an offer to sell, or any solicitation of any offer to subscribe for or purchase any securities. It is understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information herein should not for any purpose be deemed complete, accurate or impartial. The information herein in subject to verification, final formatting and modification. The contents hereof has not been verified by the Company. Accordingly, we did not and do not give on behalf of the Company, its shareholders, directors, officers or employees or any other person, any representations or warranties, either explicitly expressed or implied, as to the accuracy, completeness or objectivity of information or opinions contained in it. None of the directors of the Company, its shareholders, officers or employees or any other persons accepts any liability for any loss of any kind that may arise from any use of this presentation or its contents or otherwise arising in connection therewith.

3

SLIDE 3. Volatility and Oil Market Price Dynamics

Source: Bloomberg

WTI price (November 2014 – August 2015, and November 2015 – June 2016)

WTI implied volatility* (November 2014 – August 2015 and November 2015 – June 2016)

Oil price dynamics in January-June 2016 mostly correspond to January-June 2015. After the decrease in 4Q 2015, oil prices recovered in 1Q-2Q 2016.

Further price dynamics, however, remains uncertain for the next few months of 2016. The future path of volatility is similarly unclear.

20

30

40

50

60

70

80

90

Nov Dec Jan Feb Mar Apr May Jun Jul Aug

$/bbl

2014-2015 2015-2016

20

30

40

50

60

70

80

90

Nov Dec Jan Feb Mar Apr May Jun Jul Aug

% 2014-2015 2015-2016

* Implied volatility is estimated based on options prices for oil futures contracts

4

SLIDE 4. Prospects for Market Rebalancing in 2H 2016

Sources: Institute for Energy and Finance estimates based on EIA data

Change in liquids oversupply in the global market in 2016 – actual and estimated

*Excluding USA

Oversupply of 0.5-0.9 mln bpd depending on the production dynamics

2,0

0,3 0,4 0,2

0,6

0,3

1, 2

0, 4

0,9 0, 7

0,4 0, 1

0,3

0,3 0,3

0,5

0,4

-0,4 -0,2 0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 2,0 2,2 2,4 2,6

OECD non- OECD

OPEC non- OPEC*

USA

2H 2015

Demand Supply 1H 2016

mln bpd

Possible production recovery in

Nigeria

Production recovery in

Canada Additional decline in

USA

OECD non- OECD

OPEC non- OPEC*

USA

Demand Supply 2H 2016

5

SLIDE 5. Energy Agencies Expect Gradual Oil Price Recovery

Sources: IEA, EIA, OPEC

Oil price forecasts to 2020, in real terms Oil price forecasts to 2040, in real terms

Base case and low oil price forecasts by IEA (WEO) and EIA (AEO and IEO) are relatively similar. OPEC (WOO) expects a slower oil price recovery.

IEO-2016 oil price forecast almost completely duplicates AEO-2015 forecast. High oil price forecast implies higher oil demand and larger upstream investment in non-OPEC countries.

* For WEO and WOO – in 2014 prices, for AEO and IEO – in 2013 prices

40

60

80

100

120

140

2013 2014 2015 2016 2017 2018 2019 2020

$/bbl

40

60

80

100

120

140

2013 2016 2019 2022 2025 2028 2031 2034 2037 2040

$/bbl

WEO 2015 NPS WEO 2015 Low AEO 2016 WOO 2015 IEO 2016 IEO 2016 Low

6

SLIDE 6. Resource Potential of the Largest Oil Producing Countries

Sources: BP Statistical Review 2016, Goldman Sachs, EIA, MNR, USGS, Zarubezhgeologia, Rosneft Oil Company

Existing differences in geology and resource base influence the role of different countries in the global markets. Reserve monetization depends on the level of industrial development, industry structure, infrastructure availability, the state of technological

and financial ecosystems and political risks.

2981

267

1742

158

150

131

102

98

49

553

29-95

187-323

20-29

35-293

103-345

367-506

117

59

10-37

122-155

Venezuela

Saudi Arabia

Canada

Iran

Iraq

Russia

Kuwait

UAE

Lybia

USA

Proved oil reserves

Potential recoverable resources

Notes: (1) including 257 bln bbl of ultra-heavy oil (2) including 170 bln bbl of bitumen (3) including 10 blb bbl of shale oil

billion barrels

7

SLIDE 7. US Production Forecasts to 2025 Significantly Differ

Sources: IEA, EIA, OPEC, BP

US crude oil production forecasts US shale oil production forecasts

2016 forecasts significantly changed future shale oil production dynamics. EIA currently expects US oil production to decrease in 2016-2017, followed by recovery to plateau at the 2015 level, and stay there in 2020-

2025, unlike last-year forecasts of growth starting from 2015.

30 40 50 60 70 80 90 100 110 120 130

8,0

8,5

9,0

9,5

10,0

10,5

11,0

11,5

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

AEO 2016 AEO 2015 Brent (right scale)

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

AEO 2016 AEO 2015 WOO 2015 BP 2016

mln bpd $/bbl (in 2015 terms) mln bpd

8

SLIDE 8. US Shale Industry – Negative FCF and Outstanding Debt

Sources: Alix Partners, J.P. Morgan

Taking into account 2010-2015 data and 2016 estimates, US shale companies attracted $830 bln from capital markets, whereby $480 bln was put to a counter-productive use and over $350 bln accumulated as debt.

According to J.P. Morgan estimates, with 2016 oil price at $55/bbl, 11% of shale market players will be exposed to bankruptcy risks, while with oil price at $25/bbl, 60%.of them will be put to risk.

Long-term debt of North American oil companies, $ bln Free cash flow of North American oil companies, $ bln

-30

-47

-79

-59

-79 -83

-102

2010 2011 2012 2013 2014 2015 2016E

Cumulative for 2010-2016 ≈ -$480 bln

194 220

275 285 312

353

2010 2011 2012 2013 2014 2015

+ $159 bln

9

SLIDE 9. US Production Forecasts to 2040 Significantly Differ

Sources: IEA, EIA, OPEC, BP

US crude oil production forecasts US shale oil production forecasts

EIA expects US crude oil production dynamics to roughly coincide with oil price dynamics in the long term. 2015 forecasts expected shale oil production to decline after a peak in 2019-2020. Current forecasts see sustainable production growth after

2018.

30

50

70

90

110

130

150

8,0

8,5

9,0

9,5

10,0

10,5

11,0

11,5

12,0

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

AEO 2016 AEO 2015 Brent (right)

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

7,0

7,5

8,0

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

AEO 2016 AEO 2015 WOO 2015 BP 2016

mln bpd $/bbl (in 2015 terms) mln bpd

10

SLIDE 10. US Elections – a Telling Example of Political Uncertainty

Sources: Institute for Energy and Finance, IER, Rhodium Group

Democratic Party Proposals ( Mrs. Hillary Clinton) Republican Party Proposals (Mr. Donald Trump)

full implementation of Clean Power Plan;

1/3 reduction in US oil consumption, increased use of biofuels;

cancellation of tax reliefs for hydrocarbon production;

140 GW new solar power generation capacity by 2020 and up to 0.5 tln solar panels installed;

30% reduction in greenhouse gas emissions by 2025 and 80% GHG reduction by 2050 vs. 2005 level;

limited coal production;

$60 bln in federal grants for clean energy projects;

direct investment from the state budget in R&D projects and clean energy infrastructure.

lifting restrictions on hydrocarbon exploration and production on federal land (28% of the US territory);

lifting government restrictions on fossil fuel production; government policy of non-interference in competition between

different fuels including renewables; lifting the ban on Keystone XL project implementation; terminating energy imports from OPEC countries as well as from

countries not friendly to the US; maintaining relatively low power and fossil fuels prices in the

domestic market; deprioritizing environmental and climate change issues in the energy

sector development.

US energy sector development models presented in the election programs of two major parties are practically opposite. According to Platts estimates, implementation of Hillary Clinton’s proposals may lead to a 0.5 mln bpd reduction in the US oil production in

the mid-term, while realization of Donald Trump’s ideas will stimulate oil production growth by the same amount.

11

SLIDE 11. Saudi Arabia – Changes in the New Environment

Sources: BP Statistical Review 2016, Rosneft estimates based on IMF, SAMA and IEA assessment

0

50

100

150

200

250

300

1980

1985

1990

1995

2000

2005

2010

2015

Saudi Arabia proved oil reserves remained unchanged since 1988 when they were revised upwards from 170 to 255 bln bbl.

Fiscal terms for oil production in Saudi Arabia are historically based on royalty (20% rate) and profit tax (85% rate). Lower taxes are expected to facilitate commercialization of the industry.

Saudi Arabia crude oil proved reserves Saudi Arabia budget

-20

-10

0

10

20

30

40

50

60

70

2000

2005

2010

2015

2020

Surplus/Deficit Revenues Expenses

% of GDP bln bbl

In 2015, Saudi Arabia’s budget deficit amounted to 16.3% of GDP and is expected to remain at the average level of 10.8% GDP in 2016-2020.

The country’s international reserves declined by $165 bln to $580.7 bln in August 2014 – April 2016.

12

SLIDE 12. Transportation and Petrochemicals Expected to Lead in Liquids Consumption

Sources: IEA, EIA, ОPEC, BP, ExxonMobil

Share of the transportation in the global liquids consumption

Share of the industry in the global liquids consumption

Most leading energy agencies and energy companies expect the transportation and the industrial sectors share in liquids consumption to grow 1-3% over the next 25 years.

IEO 2016 WEO 2015 WOO 2015 BP 2016 ExxonMobil 2016

52%

54%

56%

58%

60%

2015 2020 2025 2030 2035 2040 20%

25%

30%

35%

40%

2015 2020 2025 2030 2035 2040

13

SLIDE 13. Russia – Sustainable Position in the International Oil Trade

Sources: Central Bank of Russia, Federal Customs Service of Russia

Russian share in the international oil trade Russian oil export

37 37 38 37 27 30 28 29 24 23

211 221 205 211 224 214 212 208 199 222

0

20

40

60

80

100

120

0

50

100

150

200

250

300

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

mln tons

CIS Other countries Avg. export price (right scale)

248 254 240 248 247 242 240 235 221 242

1 685 1 730 1 730 1 644 1 629 1 653 1 688 1 643 1 683 1 735

12,8 12,8 12,2 13,1 13,2 12,8 12,4 12,5

11,6 12,2

0

2

4

6

8

10

12

14

16

18

20

0

500

1 000

1 500

2 000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

mln tons

Russia Others Share of Russia (right)

% $/bbl

Russian oil exports are resilient in different price environments and are set to grow in 2016. Russian market share of the international oil trade remains steady at 12-13%.

14

SLIDE 14. Russia Has Great Resource Potential, and Russian Oil Projects Are Cost Efficient Even In Low Oil Price Environment

Sources: Goldman Sachs, BP Statistical Review 2016, EIA, IEA, USGS, Zarubezhgeologia, Rosneft Oil Company

According to Goldman Sachs, Russian oil projects generate positive free cash flow even at $10/bbl and $12/bbl of EBITDA at $30/bbl According to Wood Mackenzie, 80% of Russian oil projects will remain cost efficient even if the oil price is $20/bbl.

Russia has great resource potential Finding and development costs (excl. transport and royalty) for the largest oil projects

2981

267

1742

158

150

131

102

98

49

553

29-95

187-323

20-29

35-293

103-345

367-506

117

59

10-37

122-155

Venezuela

Saudi Arabia

Canada

Iran

Iraq

Russia

Kuwait

UAE

Lybia

USA

Proved oil reserves

Potential recoverable resources

Notes: (1) including 257 bln bbl of ultra-heavy oil (2) including 170 bln bbl of bitumen (3) including 10 blb bbl of shale oil

bln bbl

0

5

10

15

20

25

30

35

0 5 10 15 20

$/bbl

Cumulative peak production, mln bbl/d

Development costs CAPEX Total F&D

Russia

15

SLIDE 15. Russian Oil Production Has Developed in a Favorable Scenario, However, Below Its Full Potential

Sources: Institute for Energy and Finance based companies’, Ministry of Energy of Russia data

Russian oil and gas condensate production scenarios to 2035

Scenarios Key industry assumptions

Low scenario Delays in tax reform and in application of key new technologies

Base scenario Energy Strategy-2035 Scenario

Favorable scenario

Timely introduction of incentivizing fiscal system

Industry potential

Additional demand for Russian oil, large-scale development of Arctic

offshore resources

430

480

530

580

630

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

mln tons

Low scenario Base scenario

Favorable scenario Industry potential

16

SLIDE 16. Two Major Sources of Russian Oil Development – Brownfield Production and Unconventional Reserves

Sources: Ministry of Natural Resources of Russia, Federal Tax Service of Russia, Institute for Energy and Finance

Structure of Russian hard-to-recover reserves, 2015 (according to Russian ABC1+C2 classification)

Russian brownfield production dynamics

According to Goldman Sachs estimates, Russian unconventional reserves are the largest in the world and exceed the US reserves by 1/3. The future of Russian oil production is linked to enhanced oil recovery at brownfields which increase their contribution to the overall Russian

production

3%

38%

31%

26%

5% 3%

3%

47%

38%

4% Abalak

Bazhen

Domanic

Khadum

Tuymen

Low permeability reservoirs

High viscosity oil

19 13 13 13 13 13

26 30 31 30 30 30

24 20 14 10 7 7

17 19 21 23 24 24

12 20 25 34 36 36

0

20

40

60

80

100

120

2014 2015 2016E 2017F 2018F 2019F

mln tons

>1.0

0.96-1.0

0.91-0.95

0.86-0.90

0.80-0.85

Depletion factor

ABC1 Reserves

С2 Reserves

17

SLIDE 17. Offshore Development – a Powerful Driver for the Russian Economy

Pobeda 455 mln toe

Source: Rosneft

Kara Sea – the extension of West-Siberian oil and gas province Acreage – c. 300 th sq km More than 30 prospective structures Resources – 87 bln boe or 12 bln toe

Norwegian oil sector of the North sea – 170 th sq km

The main oil and gas area in the Gulf of Mexico – 180 th sq km

North Sea

Kara Sea