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Platts African Refining Summit

18 November 2014

Olivier Lejeune, Managing Editor – Middle Distillates, Europe & Africa Oil

Will Africa get its own price benchmarks?

Enabling the markets to perform with greater

Transparency & Efficiency

Since

Platts – An introduction

Editorial and market assessments are conducted

with complete Independence & Impartiality

Platts – An introduction

Africa relies on netback pricing

4

Source:

Platts

CIF/FOB Med 1,000 ppm gasoil

FOB Med 10 ppm gasoline

CIF NWE 1,000 ppm gasoil

FOB 10 ppm gasoline barge

MOPAG 500 ppm gasoil

50-50 FOB Sing/Med gasoline

MOPAG 500 ppm gasoil

FOB Med 10 ppm gasoline

CIF NWE 10 ppm diesel

Towards African Benchmarks? Opportunities and Challenges for New Benchmarks

Platts Global Products Assessments Adapting Platts Benchmarks to Market Changes

The Role of Benchmarks Market Requirements for Benchmarks

Market requirements for benchmarks

are used as reference points in commodity trading and

to derive related commodity prices. They:

Achieve

convergence

between market

values and

published values

Display

responsible

behavior

Fully reflect market

value

Provide full

transparency

Essential Benchmark DNA

Market acceptance

Adhere to international norms of trading

Chain formation high degree of circulation

Lead to the development of a forward market

High degree of transparency

Open to industry scrutiny

Clearly defined assessment methodology

One of the world’s busiest

ports and Europe’s

refining and petrochemical

hubs with around 2.2

million barrels/day of

refining capacity

A major logistics hub –

pipelines, rivers, publically

accessible storage tanks –

it’s a deep water port

capable of discharging the

largest vessels in the world

It’s a key import and export

location open to multiple

market participants

Why is ARA so important?

– Platts benchmarks are used

to price term contracts

– Futures settlements are

often tied to Platts spot

market assessments

– Derivatives “price out”

against Platts spot price

assessments or futures

settlements

Focus, Impact and Relevance

Benchmark – The significance

A robust

How data is

analyzed to

produce a

final value

What

is being

assessed

How data

is collected –

Platts Price

Discovery

Process

Market on Close – Methodology

must define

Northwest European diesel assessments

ULSD CIF ARA Cargo

Freight Netbacks: ULSD CIF NWE (Le Havre) Cargo

ULSD CIF UK Cargo

ULSD FOB ARA Cargo

ULSD FOB NWE (Le Havre) Cargo

ULSD FOB Rotterdam Barge

CIF - Cost, Insurance & Freight Contract Basis FOB - Free-on-Board

Amsterdam Location Rotterdam (Amsterdam-Antwerp Flushing-Ghent allowed)

10-25 days forward Delivery Period 3-15/5-15 days forward

10,000-35,000 (norm. 20,000) Size 1,000-5,000 (norm. 1,000-2,000)

French quality Specification German quality

US $ Currency US $

Metric ton UOM Metric ton

7.45 Conv (to bbls) 7.45

Europe diesel deficit rising (million mt/mo)

Source: JODI

-2.0

-1.0

0.0

20

09

20

10

20

11

20

12

20

13

20

14

-0.5

-0.3

-0.1

20

09

20

10

20

11

20

12

20

13

20

14

-1.1

-0.6

-0.1

20

09

20

10

20

11

20

12

20

13

20

14

-1.0

-0.5

0.0

20

09

20

10

20

11

20

12

20

13

20

14

0.0

0.5

1.02

00

9

20

10

20

11

20

12

20

13

20

14

-1.1

-0.6

-0.1

20

09

20

10

20

11

20

12

20

13

20

14

More European refineries at risk

Source: Market

sources

Whitegate

Lindsey

Grangemouth

La Mede

Donges

Feyzin

Q8 Europoort

Stanlow

Milford

Livorno

Gela

Taranto

Falconara

Thessaloniki

Sisak

Lietuva

Fredericia

Kralupy

Petrotel

Reported bids, offers and trades

($/mt, Rotterdam 3.5%S Barges for prompt ‘Front End’ delivery, February 1 2013)

627

629

631

633

635

637

639

641

643

645

16:0

0

16:0

1

16:0

2

16:0

3

16:0

4

16:0

5

16:0

6

16:0

7

16:0

8

16:0

9

16:1

0

16:1

1

16:1

2

16:1

3

16:1

4

16:1

5

16:1

6

16:1

7

16:1

8

16:1

9

16:2

0

16:2

1

16:2

2

16:2

3

16:2

4

16:2

5

16:2

6

16:2

7

16:2

8

16:2

9

16:3

0

16:3

1

16:3

2

16:3

3

MERCURIA

ARGOS

VITOL1

VITOL2

WILJO

OW

AGEAN

CARGILL

BP

GUNVOR

CHEMOIL

TRADES

KCEL1

KCEL2

TOTSA

CARGILL

OW

BP

MERCURIA

GUNVOR

LITASCO

Market on Close process in action

Clean product flows to Lomé (2010-11)

16 Source: Platts cFlow

US refiners increasingly target Africa

19 Source: EIA

US gasoline exports on the rise

20 Source: EIA

Africa product import locations

21

Tema

Dakar

Nouadhibou

Lagos Conakry

Lomé

Luanda

Durban

Cape Town

Dar es Salaam

Beira

Mohamedia

Mombasa

Port Sudan

Jorf Lasfar

Arzew Skikda

Alexandria

La Skhirra

Source:

Platts

US flow

Hydrocracker

Africa sulfur specifications vary (1/2)

(2014)

Africa sulfur specifications vary (2/2)

(2014)

Huge disparities in retail pricing

24

Source: Platts

Note: as of 13 Nov 2014

$0.19/l $0.31/l

$1.09/l $1.36/l

$0.68/l $0.91/l

$1.51/l $1.69/l

$1.28/l $1.47/l

Gasoil ($/litre) Gasoline ($/litre)

$1.17/l $1.43/l

$0.25/l $0.36/l

$1.17/l $1.10/l

$0.89/l $1.01/l

$1.67/l

$0.69/l $0.56/l

Diesel cargo sizes moving up

26

Size January-April 2013 January-April 2014

22,000 mt 44 59

26,000 mt 9 9

30,000 mt 21 14

33,000 mt 8 19

35,000 mt 14 -

40,000 mt 7 28

Other 4 4

Total 107 (2.97 million mt) 133 (3.83 million mt)

Count of Primorsk diesel parcels by size

Source: Platts, traders

Platts to raise ARA diesel cargo sizes

SUBSCRIBER NOTE: Platts to raise cargo sizes in CIF ARA diesel assessment

London (Platts)--19Aug2014/757 am EDT/1157 GMT

Platts will extend the range of cargo sizes reflected in its CIF ARA

diesel assessment from 10,000-35,000 mt plus/minus 10% to 10,000-40,000 mt

plus/minus 10% with effect from January 2, 2015.

The announcement follows a middle distillates technical workshop hosted

by Platts on April 28 in London and a formal proposal made on May 21.

The basis of the assessment will remain 20,000 mt plus/minus 10%, but

cargoes across the entire size range of 10,000-40,000 mt plus/minus 10% will

also be considered.

The current approach of normalizing price data for different cargo sizes

back to the value of a 20,000 mt plus/minus 10% cargo will be maintained.

Platts will continue to monitor market developments to ensure the

assessment process reflects flows that become more prevalent and relevant in

the European market.

The following assessments will be affected by today's announcement: CIF

ARA diesel cargoes (AAVBG00), CIF NWE (Le Havre) diesel cargoes (AAWZC00), CIF UK diesel cargoes (AAVBH00), FOB ARA diesel cargoes (AAVBF00), FOB NWE (Le Havre) diesel cargoes (AAWZD00).

Some European ports too restrictive

Source:

Platts

Le Havre

Dunkirk

Rouen

La Pallice

Donges

Bordeaux

Lorient

Thames

Bilbao

Tees

ARA Milford

Tranmere Bremen

Hamburg

US diesel flow

Brest

Can take full MR

Cannot

0 10 20 30 40 50 60 70 80 90 100

Zawiya

Vysotsk

Ventspils

Ust Luga - Sibur

Ust Luga - Novatek

Ust Luga - Gunvor

Tuapse

Suez

Skikda splitter

Skikda refinery

Riga

Murmansk

Mongstad

Mohamadia

Milazzo

Karsto

Kaliningrad

Cartagena

Bizerte

Aspropyrgos

Arzew

Arkhangelsk

Alexandria

Agio Theodoroi

12,500 mt 20,000 mt 25,000 mt 30,000 mt 35,000 mt 40,000 mt 60,000 mt 70,000 mt 85,000 mt 90,000 mt

29

Naphtha going through similar transition

Source: Platts, shipping reports, Market Sources, CFlow

Platts to raise naphtha cargo sizes

SUBSCRIBER NOTE: Platts CIF NWE naphtha to reflect cargoes from 12,500mt to 36,000mt London (Platts)--30Oct2014/646 am EDT/1046 GMT

Platts will update its CIF NWE naphtha cargo assessment to include larger sizes alongside its existing 12,500mt delivery volume with effect from January 2, 2015. Following a comprehensive review of feedback, Platts reconsidered its initial proposal where the assessment was going to reflect the value of naphtha delivered in three larger cargo sizes. From January 2, 2015, the four cargo sizes reflected in the assessment will be 12,500mt, 24,000-28,000mt, 28,000-32,000mt and 32,000-36,000mt. The most competitive of the four cargo sizes will be reflected in the final published CIF NWE naphtha cargo assessment. By reflecting four commonly traded cargo sizes, Platts seeks to ensure that its assessment reflects a broader cross-section of Europe's evolving spot market. This change reflects the evolution of the market, as demand is increasingly supplied by larger cargoes. As trade in these cargoes has become more commonplace across the market as a whole, so trading in smaller cargoes, generally produced by local Western European refineries, has become relatively less common.

Platts launches RMK barge assessment

SUBSCRIBER NOTE: Platts to launch 500 CST Rotterdam barge assessment Aug 1 London( Platts)--1Aug2014/859 am EDT/1259 GMT

Effective August 1, 2014 Platts will launch a new assessment for 500 CST, 3.5% sulfur fuel oil barges, FOB basis Rotterdam. The new assessment will be published alongside all existing Rotterdam fuel oil barge assessments, and separately from a new 500 CST bunker fuel assessment.

The specification reflected in the new assessment will conform to ISO

8217: 2010 specifications, category ISO-F, RMK 500. Specification and assessment parameters will be detailed in Platts' Europe and Africa Refined Oil Products Methodology and Specifications Guide at the time of launch.

The assessment will reflect the value of barges at 16:30 London time, for oil loading three to 15 days forward on Monday-Tuesday, and five to 15 days forward on Wednesday-Friday. During UK public holidays this schedule and time may change and Platts will publish changes to its typical publishing schedule when the need arises. The assessment will reflect a barge size of 2,000 mt.

Platts will publish bids, offers and interest to trade RMK 500 CST barges, FOB basis Rotterdam, in front-end, middle-window and back-end loading ranges (FE, MW and BE, respectively), as in Platts' other European fuel oil barge Market on Close assessment processes.

Platts proposal to modify AG assessments

SUBSCRIBER NOTE: Platts proposes to amend Middle East methodology

Singapore (Platts)--31Jul2014/135 am EDT/535 GMT

Following a review of the volumes and nomination procedures reflected in its Middle East gasoline, naphtha, gasoil, jet fuel and fuel oil spot cargo differential assessments, Platts proposes to amend elements of these assessments from April 1, 2015.

Platts opened a review of these procedures in December 2013 and the proposals that follow are the result of industry feedback and discussion collated in that process. Platts proposes to make changes to the following spot market differentials assessments:

Assessment Volume Loading Period

Naphtha 25 kt 20-40 days

Gasoline 95 200-300 kb 20-40 days

Gasoline 95 CFR 200-300 kb 20-40 days

Jet Kero 200-300 kb 20-40 days

Gasoil 200-300 kb 20-40 days

FO 180 No change (20-40kt) 20-40 days

FO 380 No change (20-40kt) 20-40 days

From FOB Singapore to FOB Straits

Platts proposes to expand 'FOB Singapore' assessments to 'FOB Straits' July 2015 Singapore (Platts)--17Jul2014/1058 pm EDT/258 GMT

Platts requests feedback on a proposal to amend the loadpoints reflected in its FOB Singapore assessments for fuel oil, middle distillates and gasoline, with effect from July 1, 2015. For FOB Straits bids and offers, buyers and sellers would not state a specific loadpoint at the point of communication to Platts, and would proceed to nominate loading from one of the locations in Singapore and Malaysia that are already approved. For FOB Straits transactions, sellers would nominate an approved loadpoint seven days prior to loading for all products, except gasoline. Such approved loadpoints may include approved terminals in Singapore, or southern Malaysia. Additionally, Platts requests comments around the possible future inclusion of Indonesian terminals in the process.

Platts to launch new Gulf assessment

Platts to launch USGC Export ULSD cargo assessment Following a period of industry feedback that ended September 15, Platts confirms it will introduce an assessment for Ultra Low Sulfur Diesel export cargoes loading at US Gulf Coast terminals on an FOB basis, effective December 1, 2014. The Platts FOB USGC Export ULSD assessment will reflect EN590 quality diesel with a typical standard clip size of 300,000 barrels and a typical operational tolerance of plus/minus 10%.

The assessment will reflect cargoes loading seven to 21 days forward from the date of publication, subject to industry standard terminal and vessel nomination procedures. Export ULSD should be free of any biofuels. Loading locations include terminals along the US Gulf Coast from Corpus Christi, Texas, to Pascagoula, Mississippi, normalized to a Houston basis.

The Platts FOB USGC Export ULSD assessment will not include the value of Renewable Volume Obligations (RVOs), which reflect the cost of supplying RINs with fuel when mandated by the US Environmental Protection Agency as part of the Renewable Fuel Standard (RFS). RVOs are the amount of renewable fuels to be blended into transportation fuels for US domestic consumption.

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