10h15 - Ammar Tahir, Petrobas Base Oil Melaka

WHERE IS MALAYSIA?BRASIL

Capital City: Kuala LumpurPopulation: 26 million (August 2009)Climate: TropicalAverage Annual Temperature: 26.7 O Celsius

PETRONAS Company ProfileNational oil & gas company of Malaysia– Fully integrated:-• E&P• Marketing and distribution• Oil Refining• Shipping• Gas• Properties• Petrochemicals– Crude oil and natural gas production is 1.77million BOE per day• Listed in the Fortune Global 500 with the following2009 rankings:– No. 80 by Revenue : US$ 77 billion– No. 20 by Return on Revenues : 20%– No. 25 by Return on Assets : 14%5• Breakdown of revenue source by percentage(FY2008/09)– Overseas Operations : 37%– Exports : 40%– Domestic : 23%

PETRONAS GROUP III BASE OILPRODUCTION CAPACITYMG3 = MELAKA GROUP III• Capacity : 6,500 barrels/day (300,000 mt/year)• Divided intoETRO 4 30 - 50%ETRO 6 25 - 45%M500 10 – 30%• ETRO base oil comes with top-tier formulation supportmeeting API SM, ILSAC GF-4, ACEA and various OEMspecifications.6

MELAKA GROUP III BASE OIL PLANT = MG3

P ETRONAS8

Why is Petronas in South America?• Petronas acquired FL Selenia in December2007 for €1 billion• The acquisition automatically included FLSelenia Italy, SUNOCO (Belgium), FL Iberia(Spain), FL Brasil & FL Argentina.• SeleniaPetronas Lubricants International• Long term presence and commitment

IN EUROPEPetronas Marketing Netherlands (R’dam)Antwerp StoragePLI BELGIUMPLI ITALYGenoa StoragePLI SPAINNapoli Storage

VOPAK STORAGE TERMINAL IN LINKEROEVER,ANTWERP

VOPAK STORAGE TERMINAL IN LINKEROEVER, ANTWERP

STOLT TERMINAL IN SANTOS

CONSISTENCY IN ETRO SUPPLYBACK-UP

BASE OIL DEMAND

DRIVERS FOR BASE OIL & LUBRICANTSThe EconomyBase Oil CapacityImbalancesBase OilEconomicsCapacity ChangesChangingSpecificationsProduct DemandCrude Oil &ProductEconomics

GROUP III DEMAND DRIVERSD + E + Fecon= DEFECONEmissionsEnvironmentalconcernsLower fuelconsumption= savings $$$FuelEconomyDemandDrivers forGroup IIIDurabilityLonger oilchangeinterval

CHANGE IN SPECIFICATIONS

165 base oil refineries with total capacity of 47 million mt per year47 million metric tons per year of base oil capacitySource : L & G19

Majority of the base oil refineries in Asiaand Europe are producing Group I baseoils5%7%98.1%1.2%0.4%4%87%1% 17%34%8%48%16%52%24%Group IGroup IIGroup IIINaphthenicSource : L & G20

WHO ARE THE CURRENT GROUP III MAJOR MERCHANTPRODUCERS?250 Kmt/yearSK CORP1,200 Kmt/yearPETRO CANADA100 Kmt/year300 Kmt/year460 Kmt/year21GS CALTEX200 Kmt/year

GLOBAL GROUP 3 BASE OIL SUPPLIERS 2011-2012Finland250 kmt/yearCanada100 kmt/yearMiddle east2,000 – 2,200 kmt/yearKorea1,500 kmt/yearSEA650 kmt/yearNEW22

MAJOR NEW CAPACITIES• SHELL PEARL GTL [QATAR]1.2 Million Metric Tons/Year• BAPCO/NESTE [BAHRAIN]400,000 Metric Tons/Year• TAKREER/NESTE [UAE]500,000 Metric Tons/YearUNDERCONSTRUCTIONCONFIRMED2011UNDERREVIEW

WHERE WILL THE SURPLUS GO?

WORLD GROUP III BASE OIL SUMMARY• Total World Capacity of GIII from 2011-2012 at4.5 million metric tons/year• “Actual” supply estimated at 3.6 to 4 millionmetric tons per year• Major Supply source from Asia & Middle East

WHERE ARE THE DEMAND FOR GROUP III?In ‘000 metric tons per year7005001,3501070010026

GLOBAL LUBRICANT DEMANDTotal Lubricants Demand (‘000 metric tons per year)Lubricant Demand to followeconomic growthEast Of Suez will represent50% of global lube consumptionby 2020North America & Europe tocontinue to declineExpected after 2020 , enginetechnology & fuel efficiencyimprovements will slow thegrowth of demand for finishedlubricants globallySource: Purvin & Gertz Inc

Global Lube Demand by Regional ShareTotal Lube Demand in 2009 estimated at 38.2 million metric tonsRest Of theWorld12%7% 13%North & South America33%Asia Pacific35%Source: Kline

DEMAND FOR GROUP III INCREASINGBASE OIL DEMAND BY API GROUP (‘000 METRIC TONS PER YEAR)Group I to retainglobal dominance atleast until 2015-2020Group II and IIIdemand to increasedue to global needs toimprove fuel efficiency,control emissions andprolonged drainintervalsSource: Purvin & Gertz Inc

GROUP I PRODUCTION IN THE WEST WILL FALLSHARPLYSource: Purvin & Gertz Inc

BASE OIL CAPACITY GROWING FASTER THAN DEMANDBASE OIL CAPACITY VERSUS ACTUAL PRODUCTION (‘000 METRIC TONS PER YEAR)60,00055,00050,00045,00040,00035,00030,00025,0001995 2,000 2005 20102015

STAY AT GROUP I OR SWITCH TOGROUP III???The switch will be aneconomic decision (both byproducers and lube blenders)

In 2008, SAE 10W-40 represents 30% out of the totalEuropean Passenger Car Motor Oils (PCMO) consumption5% 20%Group I45%30%Source : Lubrizol33

Mixing two Group I base oils to lower treat Group III willprovide the balance between cost and performance100% 4cStgrade100% 6cStgradeGrade mix4cSt: 51%6cSt: 49%Grade mix4cSt: 51%10cSt: 49%20% Group III 4 cSt + Group I (SN150 +SN600)Example10W-40PCMOConstant DI/VM34

The addition of Group III 4 cSt (ETRO 4) will increase theability of Group I SN150 meeting 10W-40 blendingwindow100% 4cStgrade100% 6cStgradeGrade mix4cSt: 51%6cSt: 49%35Example10W-40PCMOConstant DI/VM

GROUP I + GROUP IIIIs the answer???

OUTLOOK

IMPACT OF ECONOMIC CRISISWeaker demand(but improving)Overcapacity(not over supply!)Weaker margins for Group IGroup III Centremoving EastHydroprocessingCapacity continueexpandingEurope & USAexpected torationalise itsGroup I capacitiesLONGER TERM

Advances in Engine TechnologySource: ACEA

Advances in Lube TechnologySource: Lubrizol

Consumer demands better oilSource: Lubrizol

Emissions LegislationSource: ACEA

Global Lube Demand ImprovingECONOMIC CRISIS

WORLD ECONOMY IS RECOVERING

ECONOMIC GROWTH HOT SPOTS 2010

VIVA SOUTH AMERICA!!Real GDP growth(Annual % change)2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Argentina 8.8 9 9.2 8.5 8.7 6.8 -2.5 1.5 2.5 3Brazil 1.1 5.7 3.2 4 5.7 5.1 -0.7 3.5 3.5 3.5Chile 4 6 5.6 4.6 4.7 3.2 -1.7 4 4.5 5.2Ecuador 3.6 8 6 3.9 2.5 6.5 -1 1.5 1.8 2.5Peru 4 5 6.8 7.7 8.9 9.8 1.5 5.8 5.5 5.5Uruguay 2.3 4.6 6.8 4.6 7.6 8.9 0.6 3.5 3.6 3.8China 10 10.1 10.4 11.6 13 9 8.5 9 9.7 9.8Malaysia 5.8 6.8 5.3 5.8 6.2 4.6 -3.6 2.5 4 5.5Source: IMF

CONCLUSIONS• The World is moving towards higher qualitybase stocks (Group II & III)• Trend headed by advancedeconomies, followed by emerging economies• Advances in engine technology andformulation improvements demand for higherquality lubricants & better basestocks.• Group III consumption growth is a slow butdefinite eventuality.

The future is nowThe future is

MUITO OBRIGADO