Antonio Brufau Niubó

Letter from the

We are committed
to an energy transition towards a
low emission future, in which natural gas will play an
essential role
We generate most of the energy that humans need to move around every day

Dear Shareholders,

It is a pleasure to address you to review matters of special relevance to Repsol and the future of the energy sector.

2016 was a particularly difficult year for our sector due to the low crude and gas prices, with cumulative falls of 56% (Brent) and 53% (Henry Hub) over the last two years.

Despite the difficult scenario, our company was able to achieve the highest net profits of the last four years thanks to the resilience of our businesses and the proven flexibility of our company as a whole.

In 2017 we continued to make progress in the fulfillment of our 2016-2020 Strategic Plan by capitalizing on our strengths and working to become a more flexible and innovative company, capable of addressing the major challenge posed by society: to responsibly and sustainably meet the growing demand for energy.

At Repsol we believe that access to energy is a universal right. Everyone is entitled to economic and sustainable energy sources. Therefore, our obligation is to guarantee a safe and competitive supply while preserving the environment and ensuring a better planet for future generations.

We actively share society's concern for the effect that human activity is having on the climate. We want to actively participate in the solution to the climate change problem. At Repsol we are firmly committed to achieving the objective of limiting the increase in global average temperature of the planet to two degrees, as agreed after the Paris Agreement (COP21).

We have been striving for years to ensure that our operations and facilities are increasingly energy efficient, which has allowed us to reduce our CO2 emissions by 4.3 million metric tons between 2006 and 2016. Another line of work we are pursuing is carbon capture, use, and storage (CCUS), using cutting-edge technology to substantially reduce greenhouse gas emissions from fossil fuels.

Additionally, together with nine other international companies from the sector, we form part of the Oil & Gas Initiative (OGCI) for collaboration in the sphere of climate action and sharing of best practices and technology solutions. In late 2016 the OGCI created a fund that will invest 1 billion dollars over a 10-year period to develop and accelerate the commercial deployment of low-emission technologies.

At Repsol we are committed to an energy transition towards a low-emission future in which oil will continue to be key to mobility and to the industry as natural gas also plays an essential role, since the associated CO2 emissions represent approximately half of carbon emissions. We believe that natural gas will play a key and immediate role in the reduction of greenhouse gas emissions, mainly in electricity generation.

In this regard, our company is well positioned with respect to its competitors, since our sales of oil products continued to grow in 2016, totaling 48,048 thousand metric tons, and we have a portfolio of gas production assets that currently accounts for 65% of our production and 75% of our reserves.

As you can see, our company strives every day to be profitable for our shareholders and useful to society. Not only do we actively fight against climate change, but we have also spend decades manufacturing materials that directly improve our quality of life.

Repsol is constantly present in people's daily lives: the surgical instruments in an operating room, the insulating foam installed in our homes, the clothes we wear, and the plastic used in greenhouses are just some examples of the products we manufacture using the raw materials obtained from oil and gas processing.

We also aim to facilitate mobility. We generate most of the energy that humans need to move around every day. Not only do we produce increasingly efficient fuels, but we’ve also spent years promoting projects to supply energy to different types of vehicles, such as those that run on AutoGas or electricity, that are alternatives aimed at achieving a sustainable mobility future.

We make all of this possible by driving improvements and developing innovative projects, which is one of the distinguishing features of our company. In order to fulfill our commitment to innovation, we have formed partnerships with various actors in society and are committed to the collaborative economy as a work model. Our goal is to use natural resources responsibly and develop even more energy efficient and environmentally friendly technologies.

At Repsol we are firmly convinced that this way of understanding our activity will build a solid foundation for our company's future and contribute to social and economic development and the generation of wealth and well-being of millions of people around the world.

Everyone who forms part of Repsol works towards this objective every day. This is our project for the future. We are making it a reality thanks to the talent and enthusiasm of our team of professionals and, naturally, with your support.

Thank you very much for continuing to place your trust in us.

Chairman signature

Antonio Brufau Niubó