THE E&P BUSINESS OF EDISON GROUP THE E&P BUSINESS OF EDISON GROUP EDISON AND THE E&P BUSINESS 3 ITALY AND THE MEDITERRANEAN BASIN 8 EGYPT, AN INTEGRATED BUSINESS MODEL 16 AREA OF INTEREST: NORTHERN EUROPE 22 NORTHERN AFRICA AND THE MIDDLE EAST 26 SUSTAINABILITY 28 EDISON AND THE E&P BUSINESS Edison SpA was founded in 1884 in Milan and is one of continental Europe’s oldest energy companies. Today, Edison is an active player in the supply, production and sales of electric power and hydrocarbon natural gas and crude oil. Nowadays, Edison, part of the EDF group, is the second largest integrated energy company in the Italian market. It also operates abroad in more than 10 countries with a staff of over 3,000 people. The two main areas of business are electricity and the exploration and production of hydrocarbons. The Upstream Division is responsible for Edison activities in oil and natural gas exploration, development and production. Exploration and Production (E&P) plays a key role in the Group’s strategy of integration across the gas value chain. Hydrocarbons will continue to be society’s most important energy source for many years. Exploration is pivotal to have access to acreage for discovering oil and gas. The exploration function is responsible for renewing the resource base through exploration and appraisal, while the reservoir development function is responsible for the stewardship of our resources over the life of each field. The E&P strategy is to have a balanced portfolio in the areas in which we operate, working safely and reliably while maintaining a focus on capital discipline and project delivery to maximize value for our shareholders. E&P has grown from being an Italian operator to becoming an established international player through Edison International SpA and local companies. Edison’s main hydrocarbon activities are in the Mediterranean Basin in two main core areas represented by Italy and Egypt. There are also operations in other areas of interest, which are in Northern Europe, Northern Africa, Middle East. Mediterranean Basin and East Med are Edison – at the end of 2016 – holds interests in 110 licenses, of which the core areas of the it operates 38, with a portfolio of assets in Italy, Egypt, Croatia, Group’s exploration and Greece, Israel, Algeria, Middle East, the UK and Falklands, Norway production business. and Denmark. E&P specifically Geographically, the Mediterranean Basin in Southern Europe aims to continue the and Northern Africa is the main area of the Group’s exploration development of new and production business. The E&P business aims to continue the projects in North Africa development of its projects in the East Med while consolidating its and in the East Med, position in current areas of production. Edison produced 14.5MM while maintaining its BOE of hydrocarbon in 2016 with natural gas representing 78% of position in areas of the total production. current production 2 3 E&P ACTIVITIES 2016 HIGHLIGHTS E&P RESERVE 2016 69% of E&P reserves is natural gas 31 % OIL EDISON 263 MMBoe HAS PRODUCTION Hydrocarbons Reserves (2P) COMING FROM 4 COUNTRIES: 110 ITALY, CROATIA, EGYPT AND THE UNITED KINGDOM. Production and exploration licenses 69 % 34 44 2 2 7 15 % % % % % % GAS EGYPT ITALY CROATIA UK ALGERIA NORWAY 39 EDISON E&P HOLDS KBoe/day 47 EXPLORATION LICENSES, Hydrocarbons Daily Production 19 OF WHICH ARE OPERATED; 63 14,3 PRODUCTION LICENSES, MMBoe/year 19 OF WHICH ARE OPERATED. Hydrocarbons Annual Production E&P PRODUCTION 2016 Natural gas represents 78% of total production 22 % OIL 78 % 53 32 6 9 % % % % EGYPT ITALY CROATIA UK GAS 4 5 OUR CORE REGIONS Kilometers 0 62,5 125 250 375 500 MEDITERRANEAN BASIN NORWAY Italy, Croatia, Egypt, Greece AREA OF INTEREST Norway and Denmark, United Kingdom and Falkland Islands, Northern Africa, Middle East UK DENMARK UK FALKLAND C O C E AN ISLANDS CROATIA T I N A L T A H T U ITALY O S GREECE ITALY IRAN ISRAEL kilometers 0 62,5 125 259 375 500 ME DI 0 62,5 125 259 375 500kilometers TERRANEAN B A S I N ALGERIA PRODUCTION EXPLORATION STUDY PHASE EGYPT MAIN AREAS OF PRODUCTION EGYPT AREAS OF INTEREST IN NORTHERN EUROPE, NORTHERN AFRICA, MIDDLE EAST 6 7 THE HISTORICAL PRESENCE IN ITALY VEGA FIELD m 0 SINCE THE FIFTIES, Since the early 1950s, Edison has constantly played a leading role in Existing FSO 2 the Italian energy sector with discoveries of major importance: the EDISON HAS 225 m gas field at Cellino in 1958, Portocannone in 1963, the discovery of OPERATED WITH the Vega oilfield in the Sicilian channel in 1981 and the takeover of A CONSTANT Rospo and Sarago oilfields in the Adriatic Sea in 1998. N COMMITMENT IN I The Italian activities are managed by the Milan office in cooperation PRODUCTION S THE ACTIVITIES VEGA A with two regional operations offices: the Pescara district, which A OF EXPLORATION manages activities in the Adriatic offshore and Northern Italy, and DILUENT AND PRODUCTION, the Siracusa district, which manages the Sicilian channel operations. B In Italy, Edison is active in the exploration and production of natural ALWAYS TAKING A gas and crude oil with 49 concessions and 11 exploration permits. VEGA A LEADING ROLE IN THE N Most of Edison’s gas production in Italy comes from the two large gas DECK COUNTRY’S ENERGY fields of Daria and Clara (both operated by Eni). The oil production m Weight 7200T A 4 Width 35M INDUSTRY comes from the operated offshore fields of Vega – located in Sicily 2 1 – and Rospo Mare – located in the Adriatic Sea – and the non- Length 60M E Height 40M operated onshore field of Tresauro in Sicily (Enimed). In 2016, Edison N produced 12,624 KBoe/day in Italy. S L L JACKET E A W 8 Legs Major investments have recently been put in place to replace the Weight 12000T R two FSO (Floating Storage Offloading) vessels where the oil is stored Width 50M in order to apply the best practices in the industry and comply with Length 70M R the latest environmental regulations. In the coming years, Edison Height 140M E will complete an investment plan in Italy to optimize and maximize oil production and develop new gas resources. T I D ITALIAN FIELD PRODUCTION E Manned 24/7 surveillance and monitoring M Vega The Vega field is located in the Sicilian Channel, 20 km south of Pozzallo (RG), Italy. In production since 1987, the field is operated D by Edison with a 60% working interest (Eni is the partner with 40%). The Vega platform is the largest in Italy and was developed with 24 N wells and located in 124 meters of water depth. It is designed to Santa Maria a Mare A process 60,000 barrels of oil per day and is supported by a floating This oil field was discovered in 1974 and started operation in storage and offloading tanker (Leonis) with a capacity of 110,000 September 1975. It is located between the towns of Porto Sant’Elpidio tons to temporarily store production. The crude oil is transported and Porto San Giorgio. It’s an offshore field with an extension to the Y from the Leonis to refineries by tanker shuttles. adjacent shore Sarago Mare. L The field was discovered in 1979 and currently has two producing A Rospo Mare wells. This oil field is located in the north of the B.C7.LF concession The Rospo Mare offshore field is located in the Adriatic Sea, about area, about 4 km off the coast between the towns of Porto Civitanova T 20 km off the Abruzzo coast (Italy), in 80 meters of water depth. and Porto Sant’Elpidio in central Italy, at 13 m of water depth. I 8 9 Portocannone N The Portocannone field was discovered in 1963 with a well and was I subsequently developed by drilling 28 additional wells. Production S started in June 1966 with two wells; 25 additional wells were A added in the following years. The last well was drilled and put into production in 1992. B Fauzia N The field is located in the Adriatic Sea, 40 km offshore from Pesaro, in an intensely developed area. Fauzia is an unmanned platform, A in 70 meters of water depth, with 2 wells and 15 km of sealine connections to existing facilities. The platform was commissioned in E September 2014. N Clara North West / Clara South East A The field is located in the Adriatic Sea, 48 km offshore from Ancona. Clara North West is a new unmanned platform in 77 meters of water R depth, with 4 wells and the 13 km of sealine connections to existing R facilities. The first gas was extracted in 2016. Clara South East is under development with a new unmanned platform in 78 meters E of water depth. Two wells are being drilled and 4.1 km of sealine T connections to existing facilities are being installed. I D E M D N A Accettura This gas field is located in the Matera district in southern Italy. The Y field was discovered in 1967. Production started in 1973 with 4 wells. A fifth one was added in 1975. The gas produced is collected L by a dedicated flow line network, which delivers the gas to the A Edison treatment plant in Garaguso where the gas is compressed T and measured. I San Giorgio Mare The field is located offshore in the Adriatic Sea, about 10 km off the town of Porto San Giorgio in central Italy, at a 20 m water depth. The field was discovered in 1968, and production started in 1973. In Italy, Edison is active Santo Stefano Mare in the exploration This field is adjacent to the Adriatic coastline. The field was and production of discovered in 1967. Production – which started in 1969 – currently hydrocarbons with 49 takes place through 7 wells located on 5 platforms. Only one well production licenses and 11 is currently active. Three different sea lines connect the platforms to exploration licenses the mainland facility which collects all the methane that is extracted. 10 11 IZABELA 50% 38,28% Edina Eni IZABELA 50% ROSPO 61,72% Zagreb Edison Edison Milan CROATIA N 49% 40% SI Eni Edison A 60 CLARA CLARA 51% VEGA % B Edison Eni ITALY A D N R I T A Y TI R C SE A R A H Pescara E E N I A N N S E A A Edison Operator R PRODUCTION LICENCES ROSPO EXPLORATION LICENCES R E T Edison Partner A GREECE E PRODUCTION LICENCES I S EXPLORATION LICENCES D N A I RELINQUISHED E N HEADQUARTERS O I M M D E D I T M N E R Siracusa E R D A A I N T E E Y A R R N L A VEGA N S E A E A N kilometers A SEA T 0 15 30 60 90 120 150 I 12 13 N I S A B N A E N A R R E T I D E GREECE CROATIA M Edison has the offshore exploration license of Patraikos Gulf (West) The asset based in Croatia is operated by Edina (Edison International in Greece in an area of the Eastern Ionian Sea between the Greek D 50%, INA 50%) and consists of two gas fields, Izabela and Irena, mainland and the islands of Kefallinia and Ithaki. It was awarded located in the northern part of the Adriatic Sea, about 50 km NW N on October 3, 2014 and the exploration rights are held by Hellenic of Pula, in water depth of around 37 m. The Izabela and Irena fields Petroleum West Patraikos Exploration & Production of Hydrocarbons were discovered in 2004 and 2006 respectively. The development A SA (50%, Operator) and Edison International SpA (50%). plan was made for the Izabela field, which was completed in 2010. The main activities included in the approved work program are 3D Two platforms have been installed, Izabela South and North, and Y seismic acquisition and processing (800 km2); 2D seismic acquisition 5 wells have been drilled and put on stream. Gas production is and processing (300 km); 2D legacy seismic reprocessing (1500 km); L exported via purposefully built and existing infrastructure both to and G&G studies. The proceptivity is mainly linked to structural or Italy and Croatia. Production started in July 2014 with a flow rate of A combined (structural/stratigraphic) plays. The Mesozoic to Paleogene approximately 2,300 BOED. T carbonates are supposed to be the most promising reservoirs and the main source rocks are envisaged to be of Jurassic and Cretaceous age. I 14 15 EGYPT, AN INTEGRATED BUSINESS MODEL EDISON HAS HAD Edison has been present in Egypt since the mid-1990s, actively participating in the oil and gas exploration and production sector A SIGNIFICANT through its affiliate, Edison International. Following a successful BUSINESS exploration campaign in joint venture with BG, Edison became one DEVELOPMENT of the major gas players in the country with the development of the IN EGYPT SINCE first LNG train of Idku in 2001. 1995. NOW EDISON In 2002, Edison decided to reduce its exposure in Egypt and sold HAS 3 OPERATED to Petronas its integrated E&P and LNG activity. In 2009, Edison re- PRODUCTION BLOCKS, consolidated its position in the gas sector by acquiring the Abu Qir concession and added additional new exploration licenses investing 6 EXPLORATIONS to date (since 2009) close to $3B. LICENSES AND The current portfolio includes 9 concessions, of which 6 are operated A DEVELOPING by Edison, deploying almost 1000 people directly and through its joint PROJECT OF A ventures. Edison owns 3 production leases and 6 exploration licenses distributed in all the proven petroleum provinces in Egypt (i.e. Nile COMBINED-CYCLE Delta, East Mediterranean offshore, Western Desert and Gulf of Suez). POWER PLANT, WHICH With 3 operated exploration blocks in East Mediterranean, Edison has WILL BE THE FIRST consolidated its dominant position in this new exploration area with a world-class gas potential confirmed by the recently announced giant MERCHANT POWER gas discovery of Zohr (30TCF) in Egypt and the other field previously PLANT IN EGYPT discovered in adjacent areas in Israel and Cyprus waters (Tamar, 10 TCF; Leviathan, 22 TCF; Aphrodite 4.5 TCF). Seismic activities on these blocks have been completed with the aim to evaluate the potential and plan future drilling activities. Edison’s knowledge and position in the area is also sustained by the participation and operatorship of one exploration block in Israeli waters. It is worth mentioning that in 2000 Edison, in joint venture with Bechtel, participated in the development of the first gas-fired IPP of Egypt (Sidi Krir 2x340 MW BOOT), which was then sold in 2002. Today, Edison is working with a local partner to develop a 200MW combined cycle power plant in vicinity to its Abu Qir onshore receiving gas terminal. This plant is leveraging Edison’s expertise as well as the ongoing liberalization of Egypt’s electricity and gas sectors. Once completed, this will be the first merchant power plant in Egypt. T PRODUCTION OF HYDROCARBONS P Edison holds a 100% operated participating interest in the Abu Qir Y concession in the Nile Delta offshore. It also has a 20% participating G interest in the Rosetta offshore production license. Edison also operates with a 60% working interest in the West Wadi El Rayan E concession. 16 17