Petroleum eCommerce Exchange “Magnet”

1. Petroleum eCommerce Exchange “Magnet” DRAFT Summary of PwC’s Vision for the Exchange May 10, 2000

2. Contents • General Overview of Today’s Exchanges • PwC’s Value Proposition • Benefits • Proposed Next Steps 2

3. There are several exchange models Different exchange models are evolving for different product / service categories. General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Exchange Models Buyers Big Three Market Maker/ Intermediary Sellers Community of Mutual Interest (Buyer Led) Distributor (Seller Led) Integrated Supply Chain Model Type Eco-System Dynamic Market Example Auto Exchange e.conomy e-steel Grainger.com HitechMatrix.com Characteristics Groups of buyers with common needs/interests align to gain leverage (can be with or without anchor tenant) Community forms around common exchange of buyers and sellers (no dominant party necessarily) All auto suppliers to are linked with OEMs and, where applicable, each other Distributors group sellers to focus on a common group of buyers Neutral party builds “platform” for eBusiness within a vertical market (e.g. high technology) Magnet falls within the “Community of Mutual Interest” model 3

4. Today, exchanges are forming around vertical industries or horizontal communities based on a clear, sustainable value proposition eMarkets General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Target Buyers Target Suppliers VAC Examples Unique Value Proposition GM Trade Exchange ENVERA myAIRCRAFT.com GMA eCPG e-Citi Buyers Suppliers Vertical Communities • Resolve industry specific supply-chain inefficiencies VALUE ADDED COMMUNITY Buyers Suppliers AmEx-Exchange e.conomy Buyers Suppliers Horizontal Communities • Cut across industries and automate functional processes such as MRO or Logistics KEY BENEFITS • Provide a central platform for transaction automation, demand aggregation, improved market liquidity, extended market reach • Optimize a network of businesses vs. an individual business • Introduce new market and process efficiencies to an industry supply chain • Provide end-to-end procurement solutions According to Bear Stearns: • Over 200 VACs have already been created by Internet-based businesses • $438 billion of the $1.7 trillion anticipated in B2B online transactions will occur through VACs PO Issued The eMarket must create enough value to create a win-win-win for suppliers, buyers and the eMarket model 4

5. Exchanges will create value for its members through a combination of five value levers Value Levers General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps MarketEfficiency PurchasePower Process Efficiency/Outsourcing / ASP Aggregated Content/ Community ERP Integration • Industry best practices • Knowledge Management • Benchmarking studies • Monitoring/control reports • Discussion forums • Product information and reviews • FAQs • Industry collaboration • Newsletters • Network effect • Electronic product searches/catalogs • Electronic order taking and management • Electronic requisition and approval (workflow) • Auto replenishment • Electronic bill presentment/payment • Improved information access • Better spend control • Reduced transaction costs • Online market making mechanisms to match buyers and suppliers • eCatalogue • Auctions • Exchange • Access to broader range of suppliers and buyers • Improved information access • Aggregate buyers into buying consortiums • Volume pricing • Better information for supplier negotiations • Supplier consolidation • Spending and control reports • Disintermediation • Improved visibility across market supply chains • Reduced lead time • Reduced inventory levels • Improved logistics management Increasing Value/Complexity 5

6. The value of marketplace ownership is derived from its underlying value proposition General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Illustrative Revenue Options Revenue Source Sample Revenue Ranges Advertising • $7-45 per 1,000 impressions. Volume of impressions range from 250K to 750K Subscription/ Access Fees • $10-1000s per month Transaction • Transaction fees range from 0.1 to 20% and typically are based on a percentage of cost savings. Some sites charge a minimum monthly usage fee Licensing • $100 to $2.5M Sales Revenue • Margin on product Data Collection • Can be part of subscription • $100-5,000 for market reports Value Added Services • % of amount (shipping service etc) or hourly rate Hosting • Storefront hosting in a prominent B2B site ranges from$500-1,000 per year 6 Source: Forrester Research, PwC analysis

7. The ownership value of exchanges can be substantial General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Exchange Ownership Value Company Market Cap1 P/E IPO Date Auto Exchange $40-50B N/A TBD (estimate) Free Markets $6.7B N/A Nov 99 espeed $4.4B N/A Nov 99 SCIquest $1.7B N/A Nov 99 Vertical Net $8.9B N/A Apr 99 Ventro $5.3B N/A Jul 99 1 As of March 13, 2000 7

8. Strategically, the race is on for early market share General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps The Importance of Speed to Market and Scale Level of eMarket Adoption Customer Lock-In Competitor Lock-Out Number of eMarket Competitors eMarket Development Stage Entry Expansion Dominate Consolidation Source: Forrester Research, Goldman Sachs, Bear Stearns, PwC analysis First to market, first to scale 8

9. Summary General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps • Many Exchange models are in existence • Exchanges must use the five value levers to create value to its members • Each exchange must develop a unique value proposition to customers to survive • Value propositions must include multiple sources of revenue • Based on market caps of past IPOs, the prize can be great but … • speed to market is essential 9

10. PwC’s Value Proposition PwC’s value proposition is intended to increase the Exchange’s revenue opportunity and BP Amoco’s revenue potential for their equity investments in the PwC BPO Centre, Magnet Exchange, and Petrocore. Our value proposition is summarized below: General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps • PwC to build the business model for the Exchange • Simultaneously, PwC BPO Centre to provide immediate hosting environment and operational support for the Magnet Exchange and maximize speed-to-market • PwC to build value-added service offerings using existing resources to increase time-to-market and realize a greater revenue stream faster • PwC BPO Centre to provide operational support for value-added services 10

11. PwC has the experience needed to develop a business model for the Exchange to ensure success General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps PwC is helping many exchanges today 11

12. The Magnet Exchange can outsource operations to PwC’s BPO Centre, which is equipped to begin immediately Better operations, lower cost – at eSpeed! General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Exchange CoreOperations (Account & Relationship Management, Strategy, R&D, Customer Strategic and Alliance Partners Parent Company Field Sales Providers Outsource Customer ERP Marketing & PR Administration (Staff Support Services) Providers Customer Intel Hosting Environment 24x7 Global Customer Support Customer Procurement Solution Maket- place Deve- lopment Web UI (to be devel- oped) Providers • Capacity Planning • Connection Svcs • Daily Operations • DBA • etc. Operational Support Existing PwC’s BPO Centre capabilities will increase Magnet’s speed-to-market. 12

13. PwC has immediate capability to build value-added services to increase revenue for the Magnet Exchange General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Exchange CoreOperations (Account & Relationship Management, Strategy, R&D, Customer Strategic and Alliance Partners Parent Company Field Sales Providers Outsource Customer ERP Marketing & PR Administration (Staff Support Services) Value-Add BPO Solutions Providers Customer Intel Hosting Environment 24x7 Global Customer Support Customer Procurement Solution Maket- place Deve- lopment Web UI (to be devel- oped) Maket- place Inte- gration Providers • Capacity Planning • Connection Svcs • Daily Operations • DBA • etc. Operational Support 13

14. New products and varying service levels can be offered to suppliers and customers General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps • Products and services can include: • Marketplace integration - integration toolkits (e.g., adapters) offered to suppliers and new customers at unit-cost to enable immediate access to the Exchange • Basic process support - process and operational transactional support (e.g., faxing POs to companies without adequate system support, etc.) • Business Process Outsourcing (BPO) - providing clearinghouse capabilities, netting between partners, contract management, logistics planning/handling, etc.) • Industry Collaboration - using PwC’s existing portal solution Petrocore, the exchange can immediately offer data collaboration services between partners, with information such as geo-geotechnical data, CDEX, JIBE, and AFE generation • Benchmarking - PwC has conducted many oil and gas benchmarking studies, yielding state-of-the-art best practices and enabling a quick hit approach to this value-add service to those participants desiring this service • Revenue for the Exchange will increase based on the value proposition of the products and services 14

15. OA, then Invoice Returned PO Issued Basic exchange offerings (initial) General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Service Companies & Suppliers MagnetExchange Customers Most exchanges begin with basic procurement functions utilizing a shared catalogue. 15

16. OA, then Invoice Returned AR, Payment Logistics Consolidated Statement PO Issued Example of additional BPO services (level 1) General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Service Companies & Suppliers Bank MagnetExchange Shipping Customers BPO Centre staff can offer Clearinghouse logistics services to customers at additional cost and increased Exchange revenue. 16

17. Consolidated Statement BPO can offer outsourcing services for contract management General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Service Companies & Suppliers Bank MagnetExchange Shipping Customers Services that require laborious attention may be chosen first, such as cementing and wireline fishing, logging, etc.. Customers could use PwC’s BPO Centre to outsource management of specific contracts. 17

18. Petrocore Consolidated Statement PwC’s product - Petrocore - can be used to share information to be used to ensure contract performancecby the BPO Centre. . Customers can focus manage on core- competencies and shift daily operations to the BPO Centre, who are incented to improve performance of outsourced daily operations Petrocoretm can be used by the BPO Centre to gather information needed to manage contract performance General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Service Companies & Suppliers Bank MagnetExchange Shipping Customers 18

19. Exploration Service Providers Procurement Develop products Opportunity Management External / Internal Third Parties Natural Resources Portfolio Management Production Manage logistics Interest Owners, Regulatory Agencies The Exchange’s value-added service offerings can help lead companies to full outsourcing in the long-term General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps Oil and Gas Companies can better outsource non-core functions and focus on its core capabilities. 19

20. Benefits General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps • The value of PwC’s proposition will be realized by all consortium members and ultimately the customers: • Speed-to-market for initial procurement offerings through the existing PwC BPO Centre • Qualified BPO centre staff to develop and market additional clearinghouse, process and IT services - increasing revenue potential • Petrocore will increase speed-to-market for outsourcing services, such as contract management • In addition to the above, BP Amoco will realize added important benefits • Increased revenue from equity in the PwC BPO Centre • Increased revenue from equity in Petrocore • Through easier stepped transition, increased potential for additional customers moving to full outsourcing model 20

21. Proposed Next Steps General Overview of Today’s Exchanges PwC’s Value Proposition Benefits Proposed Next Steps • Define business plan for the Exchange using PwC’s experience with other exchanges • Determine specifications to run the exchange on BPO Centre and begin planning for operation • Further develop value-added service offerings 21

22. PricewaterhouseCoopers is helping a global consortium of Chemical and Petroleum Companies establish an eMarketplace. • An international group of chemical and petroleum companies agreed to pursue the creation of Envera, a global electronic-marketplace for B2B transactions and services. Envera will enable cross industry transactions and efficiencies over the Web. • "E-business is business. Our customers are demanding efficiencies and Envera's network will provide them." Unlike Websites serving mainly the spot market places, Envera is focusing on a full suite of value-added services as well as transaction systems for existing business relationships between companies.” John Hunter, CEO of Solutia Inc. • Some Strategic Partners are: PwC’s CAPABILITIES The alliances are quickly forming. 22