International Markets for Crude, Refined Products And

London Houston Singapore Moscow Dubai New York Calgary International Markets for Santiago Rio de Janeiro Beijing Shanghai Crude, Refined Products and LPG Tokyo Sydney Astana IPAA’s Annual Meeting – Napa, FL Kiev Cape Town Kristine Klavers Riga San Francisco 9 November 2017 Washington

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Population and energy demand growth

Supply will diversify

Demand will diversify and shift

Environmental pressure will continue

Trade flows will change

Shale oil and gas boom – New technologies

Geopolitical events

Energy Population growth vs annual growth rate 1950-2050 Rank by consumption Country Population population kgoe per 1000 billion pc Population Annual Growth Rate (pc) capita 12 2.5 1 China 1,379,302,771 2.2 2 India 1,281,935,911 0.6 3 United States 326,625,791 7.0 2.0 9 4 Indonesia 260,580,739 0.9 5 Brazil 207,353,391 1.5 1.5 6 Pakistan 204,924,861 0.5 6 7 Nigeria 190,632,261 0.8 1.0 8 Bangladesh 157,826,578 0.2 9 Russia 142,257,519 4.9 3 0.5 10 Japan 126,451,398 3.5 11 Mexico 124,574,795 1.5

0 0.0 19 Germany 80,594,017 3.8 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: U.S. Census Bureau, International Data Base. 22 United Kingdom 64,769,452 2.8 Source: World Bank

2010-2015 2015-2020 Russia and central Asia 3.7% 3.4% Western Europe 2.5% 3.6% Southeast Asia 5.8% 7.1% North America 3.9% 4.0% Middle East 4.5% 5.2% China 9.7% 8.3% India 8.5% 9.9%

Source: IMF, Argus Consulting

Review of market fundamentals for:

 Crude  Refined products  LPG

Technology: Shale & Offshore US is a growing oil exporter 2015 Oil peak demand? Geopolitical events Wildcards • Demand diversity • Environmental pressure: o Cleaner fuels o Fracking regulations, activities

$/bl 140

120

100

0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

World Oil Demand, Supply and Cumulative Oversupply

9.0 1,400

1,200 8.8 1,000

8.6 800

8.4 600 Million bbls Million 400

Billion bbl/quarter Billion 8.2 200

8.0 0 Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4 - Q1 - Q2 - 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017

Global oil demand (left axis) July, 2017 Update Global oil supply (left axis) Data Source: IEA Calculations by Argus Cumulative oversupply since Q1, 2014 (right axis)

mn b/d 39

25 2011 2016 2021 2026

1200

1000

800

600

400

200

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012 2013 2014 2015 2016 2017 — EIA monthly and weekly data

US crude exports

mn b/d Canada Asia-Pacific Europe Other Prelim total

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17

Source: EIA and US Customs data

Source: Argus China Petroleum

1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 Bakken 200,000

Jan-15 Jan-07 Jan-09 Jan-11 Jan-13 Jan-17

Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17

May-08 May-10 May-12 May-14 May-16

2,000,000 3,000,000

2,500,000 1,500,000

2,000,000 1,000,000 1,500,000 500,000 Eagle Ford

1,000,000 -

500,000 Permian

Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17

Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17

May-08 May-12 May-14 May-16 - May-10 Source: EIA Drilling Productivity

Report, Sept 2017

Jul-10 Jul-17

Jan-07 Jan-14

Jun-13

Oct-15 Oct-08

Apr-12

Feb-11

Sep-11

Dec-09 Dec-16

Mar-08 Mar-15

Aug-07 Aug-14

Nov-12

May-09 May-16

wells/rigs 500 450 400 350 300 250 200 150 100 50 0

Permian drilled Permian wells completed

Forecast US crude output growth (Jun '17 - Dec '18, in '000 b/d) 600 515 500

400 344

300

200

100 31 17 0 0 Permian Federal offshore Eagle Ford Bakken Other

Canadian Oil Imports to US versus US Oil Production and Mexican and Venezuelan Imports 10,000 000 bpd 8,000 US Oil Production Canadian Crude Imports 6,000 Mexican Oil Imports Venezuelan Oil Imports 4,000

2,000

0 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17

Futures open interest (combined Nymex and Ice contracts) bn bl WTI Brent 3.0

2.5

2.0

1.5

1.0

0.5

0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Supply/production Demand Environmental pressure • Sulfur regulations • Biofuels/CO2 • Café – Corporate Average Fuels Replacements

• Alterative fuels

• Battery

Europe & Eurasia 30 China 30 15 15 0 0 North America 2000 Now 30 2000 Now Middle East India 15 30 30 0 15 2000 Now 15 0 0 2000 Now 2000 Now Asia & Pacific* 30 South America 30

15 30 Africa 15

0 15 0 2000 Now 2000 Now 0 2000 Now

* less China & India

Copyright © 2017 Argus Media group. All rights reserved. 25 US gasoline demand US - Yearly Domestic Gasoline Component Demand and US Refinery Oil-Derived Gasoline Production 10,000 9,500 ’000 bpd 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 2000 2002 2004 2006 2008 2010 2012 2014 2016

Ethanol Imports US-produced oil derived gasoline for domestic use Total gasoline (oil-derived) production 2017 data through June -Data from EIA. Calculations by Argus.

US- Yearly Domestic Distillate Demand and US Refinery Oil-Derived Distillate Production 5,000 ’000 bpd 4,500

4,000

3,500

3,000

2,500

2,000 2000 2002 2004 2006 2008 2010 2012 2014 2016

Biodiesel Imports

US-produced distillate for domestic use Total distillate (oil-derived) production

2017 data through June -Data from EIA. Calculations by Argus.

197 3,000 Jet fuel & other kero. 185 304 Resid fuel oil 181 162 173 288 2,500 137 326 Pet. coke 103 362 364 620 388 574 424 2,000 Gasoline & blendstocks 538 524 541 Distillate 503 405 756 499 761 1,500 618 415 506 550 355 449 507 526 1,000 391 330 377 336 210 1330 366 189 1176 1190 1007 1134 1101 500 854 144 528 587 656 268 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

FSU Europe

North America Northeast Asia Indian China Middle East & Africa Subcontinent

Southeast Asia

Trade Flow South America

Structural Surplus

FSU Europe

North America Northeast Asia Indian China Subcontinent Middle East & Africa

Southeast Asia

Trade Flow South America

Structural Surplus

◦ Domestic demand and exports demand • High level of uncertainty going forward

◦ US refined products demand growth rates

◦ MARPOL VI & the Light-Heavy spread

◦ RFS (RINs) and Cafe regulations (and octane requirements)

◦ Export growth outlook

◦ Oil prices

◦ Effects of Alberta distillate surplus

◦ G/D demand ratio shifts

◦ Border taxes

Global market ~300mn t/yr…. Expected 360mn t/yr by 2027

US production has grown 25% since 2010

US produces 25% of global production, at 67mn t/yr+

China and Saudi Arabia produce close to 10% each

US consumes about 20% of global production

China is the next largest consumer and the fastest growing market

US became exporter in 2012

US largest global exporter; almost double to over 50mn t/yr by 2027

Consumption growth will depend on the energy and petrochemical markets, prices of competing feedstock like naphtha and ethane, and also subsidy regimes in Asia

Global overcapacity expected until 2020

Methane (C1H4)

Dry gas or “natural gas”

Ethane (C2H6)

Propane (C H ) Natural 3 8 Butane (C H ) LPG NGLs gases 4 10 Isobutane (C4H10)

Pentanes (C5H12) Naphtha Heavier fractions Natural gasoline Condensate

Non-hydrocarbon gases such as: CO2, H2O, H2S, N2, etc. — International Energy Agency

mn t

0 2010 2011 2012 2013 2014 2015 2016 2017

Gas Processing Refining

'000t 2016 2017 2018 75,000

50,000

25,000

0 US Europe Middle East Asia-Pacific Russia and Central Asia

— Argus

mn t 60

0 2012 2017 2022 2027

mn t Africa Asia Pacific Europe 350 Latin America Middle East North America 300 Russia and Central Asia

250

200 Growth area

150

100

0 2010 2011 2012 2013 2014 2015 2016

mn t Residential Agricultural Industrial Commercial 350 Transport Refinery fuel Petrochemical Other non-energy Consumption 300

250

200 Growth areas

150

100

0 2010 2011 2012 2013 2014 2015 2016 — Argus Consulting Notes: 2016 data is provisional

250 238 239

200

150

100

0 2010 2011 2012 2013 2014 2015 2016 — Argus Consulting Notes: 2016 data is provisional

• Production growth will continue to come from US, but other regions will also increase. • Demand growth will be concentrated in Asia, in both the petrochemical and energy markets. • Structural supply will outstrip demand globally – the world will be long LPG until 2025. • The additional length in LPG must find a home, and will price lower relative to other oil products as a result. • Despite a significant divergence in the net position of each region, the global surplus will prevent sustained arbitrages emergence. • Trade flows will follow seasonal/temporary patterns. • Post 2025 should see a rebalancing, which might effect LPG pricing.

 Continued growth in demand, of all products  Shift in demand centers and trade flows  Peak demand  China  MARPOL  Petrochemicals

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