International Trade & Supplies

1. International Trade & Supplies

2. Crude Horizon Exchange Partners Environmental Regulations Intermediate Markets Logistics Services Wholesale Market Supply Refining Wholesale Retail Crude Value What to Feed What, Where and How to Make How to Deliver What to Have What is Needed Determine Demand EXTERNAL FACTORS The Petroleum Value Chain DECISION VARIABLES

3. Intermediates /Blendstocks Product Imports/Exchanges Crude Exchanges Multiple Entry and Exit Points The Petroleum Value Chain Supply Refining Wholesale Retail

4. Demand What is required by the end customer will influence what needs to be made at refineries. Highly Interdependent The Petroleum Value Chain Supply Refining Wholesale Retail Buy / Sell Products What can be traded in the markets will also influence what needs to be made at refineries. Other Oil Companies and Spot Market

5. Highly Interdependent Crude cost also influences product Buy /Sell options and the “make” decision. The Petroleum Value Chain Supply Refining Wholesale Retail Other Oil Companies and Spot Market

6. Integrated Value Chain Elements The Petroleum Value Chain Supply Refining Wholesale Retail • International Pricing • Forecasting • Ship Chartering • Crude Analyses • Refinery Operations • Blending • Planning & Scheduling • Domestic Pricing • Customer Relationship • Logistics

7. Supply and Refinery Functions OMC Supply Chain: • Crude Selection and Procurement • Refinery Planning and Scheduling • Product sourcing at terminals for primary distribution, including imports. • Exports of refinery surplus. • Import of products in short supply. • Objective is to maximize the corporate margin by improving refinery margin.

8. OMC Supply Chain: Primary Distribution Functions Operations & Distribution • Product Demand Forecasting • Inventory Management • Movement planning from terminals to depots. Objective is to optimize cost of placement of product.

9. OMC Supply Chain: Secondary Distribution Functions Operations & Distribution Aviation SBU: Responsible for meeting its customer needs through airport storages. LPG SBU: Responsible for movement of bulk LPG from terminals to bottling plants, and of packed cylinders to the distributor network. Lubes SBU: Industrial & Consumer SBU: Coordinates with customers for bulk demand of products. Execution of the order is the responsibility of O&D. O&D: Timely placement of all other productsat the retail / direct consumer network. Objective is individual optimization of the placement costs.

10. OMC Supply Chain: Supply Refining Wholesale Retail OVERALL OPTIMUM Optimum 1: Gross Refinery Margin (GRM) Optimum 2: Primary Distribution Costs Optimum 3: Secondary Distribution Costs Corporate Margin = + +

11. International Trade International Trade & Supplies

12. Term vs. Spot • Term Contracts: With NOCs at OSP after approval from Board (earlier years MOP&NG). • Spot Purchases: Through limited tenders to international vendors. Approval of purchases by Empowered Standing Committee: • C&MD • Director – Finance • Director – Refineries • AS&FA, MOP&NG or his nominee • JS-R, MOP&NG or his nominee

13. OIL

14. SOME DEFINITIONS • Sweet - Low Sulphur (<0.2pct) • Sour - High Sulphur (>0.75pct) • Light - Lighter than 35 API (0.85 grav) • Heavy - Heavier than 30 API (0.875 grav) • Condensate - Very Light. By - product of LNG production ( above 47 API ) • Bid Buy • Offer Sell • Crack Spread Product vs Crude price differential

15. Proved oil reserves

16. Distribution of proved oil reserves

17. Oil production by area

18. Oil reserves-to-production (R/P) ratios

19. Oil consumption by area

20. Oil consumption per capita

21. Oil product consumption - by region

22. Oil product consumption - by region

23. Chart of crude oil prices since 1861

24. Rotterdam product prices and Gulf Coast product prices

25. Chart of OECD total commercial oil stocks

26. Chart of refinery utilisation

27. Chart of regional refining margins

28. Major oil trade movements

29. THE PLAYERS • National Oil Companies • Producers - Adnoc, NIOC, Petronas, PDVSA etc. • Consumers – IOC, PTT, CPC - Taiwan, etc. • Majors/Independent Refiners • BP, ExxonMobil, Tesoro, NipponMitsubishi Oil etc. • Trading Houses/Wallstreeters/Shoshas • Vitol, Phibro, J.Aron, Itochu, Mitsui, etc. • Brokers • Amerex, PVM, Spectron, TulletsTokyo, etc. • Shoshas - General Trading Houses that belong to large industrial and financial conglomerates

30. OIL PRICES • Government Official Selling Price (OSP) • Eg, Arab Heavy Formula, Adnoc price, Indonesian Crude Price (ICP), Petronas OSP, • Proactive Formula • Eg, June 06 Arab Med formula is (Oman and Dubai)/2 minus 2.80 - Retroactive Formula or fixed price • Eg, April 06 Murban price is dubai + 3.13 • Premium/Discount versus Marker grades

31. MARKER GRADES “A Marker Grade is a reference crude oil price that other grades will trade at a differential to.” Features - Liquid/Many Cargoes - Widespread Ownership - Support Paper Markets - Transparent Prices - Operating Considerations - Geographical Locality

32. MAIN MARKER GRADES Grade Reporter Asia Dubai - Platts, RIM, Argus Tapis - Platts, RIM, Argus Europe Brent - Platts / ICE Urals Platts Africa Bonny Light Platts USA WTI - Platts/NYMEX

33. Determining what you need to buy or sell and when requires view of world supply/demand balance Information is Key! Eg of influencing factors:- weather e.g. Hurricane in US Gulf Coast production disruptions e.g.Maintenance/ Refinery shutdown political disruptions Refinery requirements Market Rumours CRUDE OIL TRADING

35. PRICE FEATURES • Contango - • Prompt oil is priced at a discount to oil delivered in the future. • Is a feature of low price/ weak market • Encourages Stock Builds

36. PRICE FEATURES • Backwardation - • Prompt oil is priced at a premium to oil delivered in the future. • Is a feature of high price/ strong market • Encourages Stock Draws

37. TRADING OF PHYSICAL CARGOES • Buy/Sell 4-8 weeks before loading • Coordination between refinery planners/operators/traders critical

38. TRADING OF PHYSICAL CARGOES WET TRADING • Typical parameters to agree during a purchase/sale • Grade • Quantity • Price – Marker or OSP plus/minus a premium or discount • Pricing period and media used • Delivery period • Delivery terms – FOB, CIF, CNF, ex-Ship, etc • Payment terms – Credit • Inspection fees • Governing general terms and conditions

39. DERIVATIVES [PAPER] TRADING • Manage physical oil price risk • Protects refining margin • Protects revenue • Reduce cash flow fluctuation • Budget predictability • Provide price stability to retail end-users/customers • Manage oil stocks price exposure OIL PRICE RISK MANAGEMENT

40. Supplies & Shipping

41. Supplies & Shipping: • To coordinate with MR/VR and Oil Marketing Companies (OMCs) to ensure: • Evacuation of MR/VR through coastal vessels and pipelines. • Ensure product availability at all terminals as per the requirements of SBUs. • Arrange for ship chartering through Transchart / Contract of Affreightment (COA) with SCI.

42. Sizes of Oil Tankers 10,000 – 24,999 dwt – General Purpose tanker 25,000 – 44,999 dwt – Medium Range tanker 45,000 – 79,999 dwt – LR1 (Large Range 1) 80,000 – 159,999 dwt – LR2 (Large Range 2) 160,000 - 319,999 dwt - VLCC (Very Large Crude Carrier) 320,000 - 549,999 dwt - ULCC (Ultra Large Crude Carrier)

43. Thanks!