Where does process fit

1. Where does process fit Process Team drives the Tech team options • Understand the Placemat: Level 1 and level 2 • Fit with PwC Equiva & Koch process experiences • Fit with PwC Stars & IS-Oil - Page 2 • Help define tech architecture options • Engage the client SME’s • Develop scenarios: multiple partner - round trip

2. Technology options considered to date Technical Possibilities Range of technical possibilities discussed to date with Advisory Council. A. 3rd party builds, owns & operates (grassroots) B. Book Club designs, builds & operates (grassroots) C. To build or enhance the best of member company or industry solutions D. To build a “string of pearls”: hook together best-of-breed modules (industry/company) All the above are: Application Centric Architecture

3. Members A Blue Box Settlement Deal Technology Scheduling What industry experience does PwC bring? Current technology option is an “end state” vision Members B A1 A1 • Application (only) centric • Starts implementation thinking with Settlement • Time & cost ot implement a question • Plays primarily to members w/o good internal systems • Appears to be “Big Bank” • Combines all architectures • Early benefits for all members

4. What industry experience does PwC bring? We know your business...Your clarified “Blue Box” processes are a core competency of our US energy consulting practice, including: our development of a software product, PwC*STARS, our work at Koch and Equiva Trading and our numerous SAP IS-OIL implementations. We mapped your processes (italics) against our PwC*STARS functions in the diagram below: PwC*STARS APS Optimization Legal Contracts Rack Price Management Trading/ Agreements Movements, Logistics & Exchanges Pricing & Valuation Paper Trading Refinery Runs & Yields Taxes & Tariffs Inventory Management & Evaluation Profitability & Deal Performance Position Monitoring & Risk Management Settlement & Invoicing Rack Demand Forecast Contract Administration Accountants • Contract Authorization • Pricing Module • Settlement Module • Tax Module • Tariff Tables • Exchange Balancing/Statements Module • Exchange Reconciliation Module • Invoicing/Netting Module • Credit Authorization • Tariff Tables Traders/Marketers • Deal Capture/Catalog • Truck/Terminal Transaction Module Schedulers • Supply/Demand Forecasts • Inventory Forecasts • Scheduling Module Future-Interfaces

5. Tech Guiding Principles • Industry solution • Raise efficiency, reduce cost • Implement in reasonable time • Early benefits • Transaction engine…w/ functionality • Common processes only “The way the business is transacted in the future” Where does process fit with IT? IT Team • Has an “Architecture” - not applications challenge… • Typical architecture options” • Application & Rules Centric • Data Management & Translation Centric • Message Management Centric • Architecture insights available from other industries • IS-Oil & PwC Stars for decision rules • DTCC-NSCC for clearinghouse “netting” thinking • EDI for translation & message management

6. As-Is: Blue Box Objectives & Scope The USA petroleum industry Book Club has had an initiative underway since May, 2000 to develop an “industry solution” for mid to back office transition processing for USA refined products. The Book Club vision is to create an industry-owned and led company to build and maintain a state-of-the-art solution as shown below: Front-end deal analysis and back-end financials are not part of the solution. All the processing in the “Blue Box”, however, would be performed in a common environment that manages transactions of the six major processes among member companies. Translation Translation Market Data Capture Deal Capture Nominating Scheduling Delivery Settlement Houston Street A/P, A/R G/L RedMeteor ERP ProprietarySystems Translation InfoServices Pipelines, Partners

7. Blue Box Mkt Data Deal Capture Nominate Schedule Settle Deliver …………………... 14 New 1 2 3 Modules Databases I/O Reporting Defining “To-Be” Blue Box Architecture & Scope Needto shift our thinking - just a bit... Other Hubs Position Transporters Counter Parties ? Risk Transport4 Inv. Marine P/L Core Processes Member Company Systems

8. The Challenge & Scenarios Needed Lessons learned from other PwC e-Markets... Matt Porta: “Unlike the 200+ exchanges that I know of that primarily deal with, procurement of indirect materials, buy site or sell site options - our Book Club/Blue Box is more of a B4B “Business for Business” clearinghouse model. The only comparable :exchange” that I know of that has this same B4B flavor is Envera. ARE THERE OTHERS that you have discovered in your research, where PwC has a presence, that my team should be made aware of.” e-hubs… similar to Micron Technology (and others) working under the Rosetta.net electronics industry initiative. The e-hubs provide data communication and translation services as the first step in e-market services. PwC Contacts: Vivik Kapoor & Dennis Mathias Private exchanges… Large company initiatives (ofter closed) to get strategic supply chain efficiencies. Though closed exchanges they have done the most thinking about how to put decicsion rules (like our scheduling functions) on the exchange. One example that he knows of is CISCO, others in retail are looking at putting the Collaborative Planning & Forecasting Requirements (CPFR) with the exchange. PwC Contacts: Steve Hassleman, NY… Strategy & Process Jay Bellisimo, Phila… Technology Pantellos “on ramps” model: Jay Bellisimo & Mo Treadway I also noted to Matt htat there are additional business models cited in the literature: • CTE’s…AMR’s definition, Consortium Tradign Exchanges. • Clearinghouses - prevalent in the financial services industry. • The sophisticated EDI models from retail and automotive industries. PwC Contacts: Dennis McGinnis & Salil Menon

9. The Challenge & Scenarios Needed Offer multiple options to member firms... Blue Box Members with good systems Members • E-hub • Standards • Translation I M/F A M/F B Messaging II Data Management Common Reporting III Basic Applications Members without good systems D C Sophisticated Applications (later) • Delivers ‘Capabilities’ (standards, common codes, messaging, etc.) • Combines all architectures • Early benefits for all members • Phase I captures a prize - eliminates rework • Phase II captures a prize - gives those w/o systems an investment option • Phase III options - COIN, Stars, Tosco BUT none of these options designed for networked world • NEED staged implementation options of: • Applications • Capabilities

10. The Challenge & Scenarios Needed Process to solve what the “Blue Box” is best equipped to do… 1. What are the CSF’s - for the Blue Box? 2. What are the CSF’s - for the six major processes? 3. What CSF’s will be enhanced or delivered by the Blue Box? How to do this... Define “Round Trip” scenarios? • Multiple partner • Consider netting Then, Decide what part of the scenario is driven by: • Decision Rules • Transaction - Data management • Message management

11. BBBC Business Model Track BBBC Governance Track Even Closer Integration of Project Tracks The project plan is now more than this... “Putting it all together” Business Plan Prize Industry Survey of Benefits And is more like this... Process Enterprise Scope Document Options Research Governance Costs Scenarios Architecture Options Technology

12. PwC Experience: Clearinghouse PricewaterhouseCoopers is the preeminent firm in understanding settlement and clearance operations. PricewaterhouseCoopers was there over 25 years ago when the The Depository Trust Company (DTC) evolved from a department of the NYSE, to its present day structure as the world’s premier securities depository. We continue to be the auditors to DTCC. As each of these critical securities industry service organizations developed processes and procedures for the orderly clearance and settlement of securities market transactions, we worked closely with them to ensure that these processes work efficiently, effectively and most importantly, in well controlled manner. The Depository Trust & Clearing Corporation (DTCC) established in 1999, is a new holding company that brings together The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC). Together, they are the primary infrastructure for the post-trade processing of equities, bonds, mutual funds and insurance transactions in the U.S. The orderly functioning of the U.S. securities industry is clearly the result of industry participants coming together and forming centralized functions. The securities industry today could not efficiently and effectively function without this organization. Until securities transactions are settled and payment is made, the clearing corporation shoulders considerable risk. For market participants, however, the corporation’s guarantee assures certainty that a trade will be completed even if the counterparty fails. The Clearing Corporation mitigates risk by netting down the number of trade obligations requiring financial settlement. Of the nearly $70 trillion in transactions entering its system in 1999, the Corporation netted 97% which means more than $67 trillion in payments did not change hands. References: PwC - Robert Flaum, New York 212/596-8040 Chris Thompson, New York 212/-235-4572

13. PwC Experience: Clearinghouse • PricewaterhouseCoopers, in addition to our auditing work, has included in-depth business process and technology reviews that have helped us to understand these businesses in terms of: • Their business models (gross vs. real-time settlement, governance structures, etc.) • Their products and services • Their business processes and supporting information technologies • The legal and regulatory environments in which they operate • Their risk management issues (in terms of operations risk, settlement/credit risk, legal risk, etc.) • Their participants and suppliers (e.g., outsourcing relationships and related risks) State Street is the world's leading specialist in serving institutional investors with expertise to support the daily needs of customers, beneficiaries, and shareholders they represent. SSgA provides information services, custody, securities lending, investment management, performance and analytic measurement, cash management, and record-keeping. As the sixth largest money manager in the world, SSgA provides investment strategies and integrated solutions from 29 offices around the globe. References: PwC - Peter Drotch, Boston State Street Global Advisors 617/439-7345 Dan Connealy, Kansas City DST Systems 816/218-1864 DST provides technology solutions and services for back office functions among mutual fund and insurance companies, as well as cable television and direct broadcast satellite providers, telecommunications and utilities companies. As a leading provider of business services, DST invests extensively in technology, anticipates market trends, and consistently understands and satisfies client needs.