Energy Scenarios 2025NationalofficeofEnergyScenariosandProjectAssessmentUndersecretariat ofEnergyScenariosandProjectAssessmentSecretariatofStrategicEnergyPlanning

December 2016

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About this presentation

The outcomes of the analysis shown in these slides, which are associated to four scenarios deriving from the combination ofdifferent demand, investment, price and productivity assumptions, do not intend to be predictive, but they are projections ofwhat it may occur according to the combination of such assumptions.

Duetothedynamicnatureofanenergysectorwhichisundergoingaregulatory,economicandinstitutionalnormalizationprocess,suchscenariosaredynamic.Forthisreason,theoutcomesofthescenariosmightchangesignificantlyinsubsequenteditions,inlinewiththeevolutionofthenationalandinternationalenergyreality,withthedevelopmentofthedifferenteconomicsectorsandwithchangingboundaryconditions– forexamplethechangesinthedynamicofinternationalprices,theevolutionofclimatechangeagreementsortheoccurrenceofeventsoftechnologicalorpoliticaldisruption-,whichwouldleadtotheinclusionortheadjustmentoftheusedassumptions.

Additionally,itshouldbehighlightedthattheMinistryofEnergyandMiningdoesnotassigndifferentprobabilitiesofoccurrencetothemodeledscenarios,instead,itimpartiallypresentstheoutcomesfortheanalysisofthepopulation.

ThisispartofthebeginningofasharedvisionbuildingprocessoftheArgentinesocietyinordertobuildasustainableenergyfuture.Byvirtueofthisministry,theNationalExecutivePowerpromotesthecreationofspacesfordialogue,aswellasagreatertransparencybymakingmoreandbetterinformationavailable,andalso,clearlycontributestostrengthentheabilitiesoftheStatetosuitablyreflect,initsfutureeditions,scenariosthatshowgoal-relatedoutcomes.

Outlook 2025- Charts index

• International context

• Definition of cases and assumed basis

• Demand forecasting and supply alternatives

• Outcomes of the supply/demand balance

• Economic and environmental impact

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Definition of cases and assumed basis

Methodology

MINISTRY OF TREASURY AND PUBLIC FINANCES

MESSAGE

OSCAR – MARGO MODEL

POLICIES

TECHNOLOGIES

INTERNATIONAL AND REGIONAL ENERGY

SCENARIOS

ENVIRONMENT

LEAP - DEMAND

ECONOMETRIC MODELS

ENERGY INFORMATION SYSTEM

ENERGY BALANCES

ENVIRONMENTAL

ECONOMIC AND FINANCIAL

ENERGYSCENARIOS

SOCIO-ECONOMIC SCENARIOS

DEMAND SCENARIOS

SUPPLY SCENARIOS

INTERACTION-ADJUSTMENTS

REFINERY MODEL

HYDROCARBONSPRODUCTIONMODELS

LEAP

TIMES - MARKAL

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Scenarios set-up

• Two demand scenarios which include the impact of energy efficiency and energy saving• Two scenarios of hydrocarbons supply which are defined according to prices, investment levels and

improvements in productivity and in efficiency• If combined, 4 scenarios may be obtained.

Trend Scenario Efficient Scenario

Base Scenario

Scenario + Investment

High demand+

Low production of hydrocarbons

High demand+

High production of hydrocarbons

Efficient demand+

Low production of hydrocarbons

Efficient demand+

High production of hydrocarbons

2 Demand Scenarios

2 SupplyScenarios

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Demand growth with less energy intensity• Higher growh in developing countries, including China, India and Latin America• Impact of the incorporation of electric vehicles and other technoogies

Paris Agreement on climate change will generate important changes in energy policies• 2/3 of the greenhouse gas emissions are produced by the energy sector• Commitment to reduce emissions to limit global warming to 2°C

New technologies allow for the reduction of fossil fuel consumption and for the generationof clean electricity

• Competitiveness of non-traditional renewable sources

Uncertainty in oil and natural gas markets• Lower growth in oil demand and reduced price vs previous scenarios• Global market for natural gas at a stable and lower price

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The international context marked by major changes

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International context

Region GDP(% y.y.) Pop. (% y.y.)2014-2020 2014-2025

OECD 2.00% 0.5%Non-OECD 4.60% 1.2%Asia (non-OECD) 6.10% 0.8%Latin America 0.80% 0.9%

World 3.50% 1.0%Source: International Energy Agency - World Energy Outlook 2015

29,0%

31,1%

21,4%

4,8% 2,4%

10,1% 1,2%

26,5%

29,3%

22,1%

6,0% 2,7%

10,6% 2,9%

2013 2025

Source: International Energy Agency - World Energy Outlook 2015

• The economic growth continuesto be the main driver of energydemand. The population growsfrom 7.1 trillion to almost 8 trillionpeople.

• Within the scenario of new policies of the IEA, there is a coaland oil downturn, and an increaseof natural gas, nuclear and renewables.

Socio-economic scenario assumption

Natural gas penetration2015: 62 % of households.2025: 68 % of households.

2,4%

-1,4%

3,6% 3,5% 3,5% 3,5% 3,3% 3,3% 3,4% 3,4% 3,4%

-2,0%

-1,0%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

GDP Annual variationPopulation 2025: 47.5 MM

Growth 2015 – 2025: 2.9 % y.y.Motor vehicles on the road2015: 240 vehicles per 1,000 people. 2025: 305 vehicles per 1,000 people. 2040: 400 vehicles per 1,000 people.

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Price scenariosUS Energy Information Administration (EIA) Short Term Energy Outlook, July 2016 & Annual Energy Outlook 2016.

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Basis for the calculation of energy efficiency saving

Measures for electric power (15% saving)• Efficient appliances• Switching light bulbs in the residential sector• Setting of air conditioners to around 25 °• Street and public lighting• Efficient engines• Energy management systems• Energy diagnosios• Co-generation• Variable speed drives

Measures for natural gas (2.3% saving)• Heat pumps• Boilers and water heaters• Furnaces

Measures in transport - gasoil (10.6% saving)

• Efficient road transport

Demand forecasting and production alternatives

33.300

34.100

27.500

163

192

132

Energy final consumption

MMm3TWh

3,8 % a.a.

2,1% a.a.

2,2 % a.a.

1,9% a.a.

-

200.000

400.000

600.000

800.000

1.000.000

1.200.000

-

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

MM

$04

ktep

Tendencial Eficiente PBI MM$04

Saving= 15% Saving = 2,3%

2025 Trend

2025 Efficient

2015

2025 Trend

2025 Efficnet

2015

+2,6 % a.a.

+2,6 % a.a.

+2,9 % a.a.

+2 % a.a.

+2,6 % a.a.

12NOTE: Natural gas demand does not include RTP CERRI (1.390 MMm3 en 2015) or the consumption in power plants (14.916 MMm3 en 2015).

Energy Demand: Electric power

Chart 1TWh

% y.y. Demand

2015-2025 2015 2025

Residential 5,7% 55,1 95,6

Lower (<10kW) 3,3% 18,1 25,2Intermediate(10 y 300kW)

3,1% 19,8 27,0

Higher (>300kW) 1,3% 39,0 44,2

Total 3,8% 132,0 192,0

-

100.000

200.000

300.000

400.000

500.000

600.000

-

20

40

60

80

100

120

140

160

180

200

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Mill

ones

$93

TWh

Residencial Menores(<10kW) Intermedios(10y300kW)

Mayores(>300kW) PBI (MM$93)

Actual Estimated

• Prices gradually align with the productioncosts. The social tariff is kept throughoutthe whole period .

• A better access and serviceimprovements contributes to the growthof demand .

• Energy saving and energy efficiency are reflected in a reduction in the alternativescenario.

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Energy supply: power generation

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

200.000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

GW

h

Trend Base

Térmica Nuclear Hidro Renovable

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

200.000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

GW

h

+Efficient Investment

Térmica Nuclear Hidro Renovable

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• Hydroelectric, nuclear and renewablepower generation meets the growingdemand of electricity.

• Decrease in the share of thermal power(64 % in 2015).

• Observance of the Renewable Energy

Act.

• Reduction in the use of liquid fuels forgeneration due to a greater availabilityof natural gas.

Installed capacity increase

New total installed capacity to 2025 (GW )

11,3

2,9

0,8

9,2

0 2 4 6 8 10 12 14

9,4

2,9

0,8

4,1

0 2 4 6 8 10 12 14

Trend Efficient

Measuring energy efficiency reduces power capacity demand by 7 GW.

For 2025, between 9.4 and 11.3 of additional installed capacity from unconventional renewablesources will be required in order to comply with the law 27.191.

24,2 GW 17,2 GW

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Energy Demand: Natural Gas

Chart 2109 m3

%y.y. Demand

2015-2025 2015 2025

Residential 2,2% 11,3 14,0Commercial andPublic

1,9% 1,8 2,2

Industry 2,2% 11,5 14,4

CNG 1,9% 2,9 3,6

Total (*) 2,3% 27,5 34,1

* NOTE: Natural gas demand does not include RTP CERRI or the consumption in power plants. .

-

100.000

200.000

300.000

400.000

500.000

600.000

-

5

10

15

20

25

30

35

40

45

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Mill

ones

$93

109

m3

Residencial Comercial y Público Industria GNC PBI (MM$93)

Actual Estimated

• Gradual price increase to users isreflected in a lower intensity

• New users are connected to theGNEA and there is an expansion of distribution grids

• Energy saving and energy efficiencyare reflected by means of a reductionin the efficient scenario .

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Natural gas production Scenarios

-

20

40

60

80

100

120

140

160

180

200

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

MM

m3 /

d

Base Scenario

Convencional No Convencional

14,9% a.a.

-

20

40

60

80

100

120

140

160

180

200

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

MM

m3 /

d

Scenario +Investment

Convencional No Convencional

185 MMm3/d

140 MMm3/d1,8% y.y. 4,6% y.y.

-3,7% a.a. -2,8% a.a.

19,8% a.a.

1.300

1.75035.000 MMUSD accumulated to 2025 55.000 MMUSD accumulated to 2025

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Investments related to the development of unconventionalnatural gas

Energy Demand: Oil derivatives

Chart 3% y.y. Demand

2015-2025 2015 2025Aerokerosene(MMm3)

3,3% 1,7 2,3

Naphtha (MMm3) 3,3% 8,5 11,9

Gasoil (MMm3) 2,1% 13,3 16,4

LPG (MMtn) -0,1% 1,8 1,8

Kerosene (Mm3) -12,7% 21,6 5,6

Fueloil (MMtn) 2,1% 1,2 1,5

NOTE: Consumption of naphtha and gasoil includes blended biofuels. 12 % bioethanol and 10 % biodiesel for the whole period.

-

100.000

200.000

300.000

400.000

500.000

600.000

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Mill

ones

$93

MM

m3

Aerokerosene (m3) Gasoil (m3) Nafta (m3) PBI (MM$93)

Actual Estimated

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• Prices of fuels are aligned with crudeoil prices

• Efficiency improvement in the numberof motror vehicles on the road bymeans of the incorporation of technology .

• It is promoted the use of biofuels to replace imports, but with technicallimitations.

Energy Supply: oil production

-

100

200

300

400

500

600

700

800

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

kbbl

/d

Base Scenario

Convencional No Convencional

-

100

200

300

400

500

600

700

800

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

kbbl

/d

Scenario +Investment

Convencional No Convencional

452 kbbl/d

559 kbbl/d

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-2,1% y.y.

-1,6% y.y. 0,5% y.y.

-2,1% y.y.

19,3% a.a.

10.000 MMUSD accumulated to 2025 40.000 MMUSD accumulated to 2025

Investments related to the development of unconventional gas

Results of the supply/demand balance

Total internal energy supply

Total internal energy supply : Primary energy internal supply plus the effect of the secondary energy’ trade balance. 21

The growth of reneawable energies diversifies the energy mix, despite the prevalence of hydrocarbons

52%

28%

1%

6% 5% 9%

51%

29%

1%

5% 5% 10%

52%

35%

1%

5%

3%

4%

86,6 MMtep 107,9 MMtep 103,4 MMtep

Trend Base 2025Base Year2015

+Efficient Investment2025

Electric power generation

• All the scenarios reach 20 % of electricity geneartion from unconventional renewableenergies.

• The share of thermal generation is reduced, however, it continues to be significant.

31%

20%

11%

38%

26%

20%

9%

45%

29%

2% 5%

64%

135 TWh 168 TWh197 TWh

22

Base Year 2015 Trend 2025 Efficient 2025

Electricity generation from natural gas and liquids in power plants

• The increase in the availability of natural gas gradually displaces the liquid fuels consumption, and it further increases in winter.

• The scenario showing greater availability of natural gas and energy efficiency intensifies the trend towards 2020.

• During the summer and towards the end of the season there are natural gas exportable amounts. 23

94%

2% 2% 1%

73%

12% 13%

2%

98%

Trend Base 2025Base Year2015

+ Efficient investment2025

Gas Natural

Gasoil

Fueloil

Carbón Mineral

86 TWh 89 TWh 64 TWh

Energy: Primary internal supply vs total internal supply

-25.000

-5.000

15.000

35.000

55.000

75.000

95.000

115.000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

ktep

Trend Base

IMPO EXPO Oferta Interna Primaria Oferta Interna Total

-25.000

-5.000

15.000

35.000

55.000

75.000

95.000

115.000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

ktep

+Structural Investment

IMPO EXPO Oferta Interna Primaria Oferta Interna Total

In 2023 an energy surplus is achieved in the scenario of strong investments and of energy saving and efficiency and efficient demand.

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Economic and environmental impact

Trade Balance(% GDP)

Trade deficit strongly depends on the hydrocarbons production scenario and it has an impact on energy efficiency policies.

+ Inversión Eficiente-0,2%

-0,9%

Base Tendencial-1,1%

-1,5%

-1,0%

-0,5%

0,0%

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

%PBI

26

198 186

209

170 175 180 185 190 195 200 205 210 215

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

MM

tnCO

2eq

+Inversión Eficiente Base Tendencial

153 127

158

110

120

130

140

150

160

170

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

MM

tnCO

2eq

Eficiente Tendencial

28

48 37

20

25

30

35

40

45

50

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

MM

tnCO

2eq

+Inversión Eficiente Base Tendencial

14 12

18

10

12

14

16

18

20

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

MM

tnCO

2eq

Base + Inversión

Año Base

Año Base

Año Base

Año Base

Emissions

Total

Central

Demand

Fugitive

The diversification of the energy mix and the lower consumption of liquids generate a strong reduction of emissions in the power plants.

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Summary- Conclusions

• For a 2.9 % y.y. GDP growth, if the productive investment was promoted and energy efficiencymeasures were implemented, the final energy demand would only increase 2.0 % y.y.

• The scenario with high investment and improvement of productivity shows that theproduction of natural gas would increase 57 % in that period. In this scenario:• There are still imports from Bolivia and LNG is required for winter peaks.• Seasonal exportable amounts are generated from the last five-year term.

• Crude oil production is recovered only in a high investment scenario with unconventionalproduction of about 150 kbbl/d.

• In order to meet the electricity demand, it is necessary to install between 24 and 17 GW ofadditional generation capacity. Half of that additional capacity will be renewable capacity.

• Energy saving and energy efficient policies will allow for a 5.7 % reduction in the final energyconsumption in 2025. There will be a greater impact on the electricity demand, where theenergy saving will reach 15 %.

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