Corral Petroleum Holdings AB (publ) Business Update ... - Preem

CompetitionOur supply and refining segment competes primarily with ST1 Refinery AB, which owns and operates the onlyother competing oil refinery in Sweden and, to a lesser degree, with Neste Oil Corporation and AB Svenska Statoil. OutsideSweden, we compete with the refineries in northwestern Europe that can serve our target markets, primarily Scandinavia, theUnited Kingdom and Germany. The principal competitive factors affecting our refining operations are the price andavailability of crude oil and other feedstock, refinery efficiency, the refined product mix and product distribution andtransportation costs. Our marketing segment competes primarily with AB Svenska Statoil, OK-Q8 AB, ST1 Energy AB andST1 Sverige AB. The principal competitive factors affecting our marketing segment are market volume, station throughput,product price, locations of service stations and brand identification.In Sweden, we had the leading market share in 2008 in terms of sales volume of diesel, heating oil and fuel oil withapproximately 30% of diesel sales, 39% of heating oil sales and 52% of fuel oil sales, according to the Swedish StatisticalCentral Bureau. In 2009, we also had the leading marketing share in Sweden in terms of volume of diesel, heating oil andfuel oil with approximately 33% of diesel sales, 50% of heating oil sales and 48% of fuel oil sales, according to the SwedishStatistical Bureau. In 2010, we also had the leading marketing share in Sweden in terms of volume of diesel, heating oil andfuel oil with approximately 35% of diesel sales, 49% of heating oil sales and 52% of fuel oil sales, according to the SwedishStatistical Bureau. In addition, our marketing segment’s share of the Swedish retail gasoline market in terms of sales volumewas approximately 12% in 2010, based on data from the Swedish Statistical Central Bureau. This ranked fourth, behind OK-Q8 AB, with approximately 29% market share, AB Svenska Statoil, with approximately 25% market share, and Conoco JetNordic AB, with approximately 13% market share, based on data from the Swedish Statistical Central Bureau.Regulatory and Environmental MattersWe are subject to both Swedish and EU regulation on the production, storage, transportation and sale of petroleumproducts. Sweden was one of the first European countries to introduce strict environmental legislation, which required theSwedish petroleum industry to upgrade existing infrastructure earlier than other European refiners. Sweden has among thestrictest environmental specifications in the EU. Current EU regulations allow a maximum sulphur content of 10 parts permillion for gasoline and diesel, effective January 1, 2009, and an aromatic content in gasoline of 35%, effective January 1,2005.In 2006, we commissioned the hydrocracker unit at Preemraff Lysekil, which has enhanced Preemraff Lysekil’sstrong market position and enabled Preemraff Lysekil to produce more virtually sulphur-free (10 parts per million) diesel, aproduct for which there is increasing demand in Europe.After the hydrocracker unit became operational, we decreased our production of heating oil, a lower margin product,and increased our production of diesel, a higher-margin product. This has substantially improved our overall refiningmargins. Although we have made the necessary investments to meet current EU specifications, our intention is to makeadditional investments to further upgrade our refineries. We have also modified the mild hydrocracker unit at theGothenburg refinery in order to allow processing of bio-based feedstock for production of green diesel.Intellectual PropertyPreem holds the word and combined word and device trade mark registrations for Preem and the Preem bear logo inthe EU and Norway. Preem also holds other Swedish trade mark registrations including “Renofin,” “Minima.,” “Micro,”“OK Micro,” “OK Micropris,” “Optima,” “ProMil,” “SP Svenska Petroleum,” “Björnkoll,” “Preem Active Cleaning PowerDiesel,” “Preem ACP Diesel,” “ACP,” “EO2 DUO LS” and a three dimensional trademark portraying a Preem filling station.Preem, directly or indirectly through its subsidiaries, also holds the following domain names: “preem,”“preempetroleum,” “bjornkoll,” “renofin,” “preemgas,” “preemraff,” “bjornen,” “wwwpreem,” “preemfinans” and“svenskaoljegrossister.” The above-mentioned domain names are all held the in the top domains “.se,” “.com,” “.eu,” “.nu,”“.org,” “.biz,” “.info” and “.net.”EmployeesWe employed an average of approximately 1,300 persons in 2010, 1,400 persons in 2009 and 1,400 persons in 2008.Substantially all of our employees are represented by trade unions under collective bargaining agreements. We believe thatour relations with our employees are good. We have not been involved in any material labor disputes or experienced anydisruptions in production as a result of union activities of our employees in the last five years.Organizational structurePreem is wholly owned by Corral Petroleum Holdings. Corral Petroleum Holdings is wholly owned by Moroncha46