Price reporting in a changing marketplace Euan Craik, CEO Americas

Outline Who is Argus? Why is Argus growing so fast? Politics & price-reporting agencies How does Argus report a market? What’s new?

Who is Argus? “The up and coming vendor” — major investment bank London Houston Washington New York Portland, OR Calgary Santiago Singapore Tokyo Beijing Sydney Dubai Moscow Kiev Astana “The up and coming vendor” — major investment bank All energy commodities, all energy markets Over 275 employees Over 60 publications Founded in 1970 US crude & products since 1986 Owned by family of founder & employees UK limited company

Energy price reporting agencies Global/universal Platts Argus Regional Opis RIM Specialist ICIS McCloskey Natural Gas Intelligence Exchanges ICE Nymex

What does Argus do? Shed light on non-transparent markets Market data vendor

What has changed? (Why has Argus grown?) Politics: A raft of issues have impacted on the business of price-reporting Sarbanes-Oxley, FERC price reporting guidelines, CFTC and FERC investigations Price-reporting agencies have changed methodologies in response Technology Easier to gather comprehensive transactional data

The challenge of regulation Post-Enron, regulatory bodies on warpath against market manipulation: CFTC: Prosecutes false reporting to index publishers FTC: Prosecutes distribution of knowingly misleading information or intentional omissions Efforts redoubled since $147 oil, financial crisis and election of Obama How to report prices in opaque markets in a way that is transparent and replicable? How to guard against manipulation?

Compliance Our clients care about compliance, about staying out of trouble, so we do too Ethics policy Enforced editorial policies Monitoring and audit controls Compliance officer Confidentiality

Methodology wars Intelligent assessments Transaction-based prices: Market-on-close All day transactions Volume-weighted average High, low, mean

Case Study: Argus crude

Volume-weighted indices Date Crude Trade Month Basis Differential Price ($/bl) Volume (b/d) (Price)*(Volume)/Total Volume 19-Oct-09 Mars November November WTI -3.80 2,000 -0.2645 -3.75 1,000 -0.1305 -0.2610 -3.70 -0.1288 3,733 -0.4807 Total Volume: 19,733 Argus Mars Differential: -3.74 November WTI Formula Basis: 79.61 Argus Mars Price: 75.87 12

How does Argus get the deals? Refiners, producers, traders submit lists of deals including price, volume, counterparty Brokers cooperate on the request of their customers. Companies cooperate because they need a total market index that is reputable and reflects actual trade Even though voluntary, Argus gets about 95% of all transactions in crude 13

How does Argus ensure the accuracy of the deals? Deals are analyzed, scrubbed, and confirmed Argus reserves the right to throw out deals if they cannot be confirmed, or seem anomalous Escalating review process Argus compliance program Written procedures and regular internal audit 14

Argus includes the entire market Argus is a total market index. All bona fide deals done on all platforms, and all done in the open market Platts window HoustonStreet Cannot game Argus by trading on one system to the exclusion of another 15

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What’s new?

Argus new developments The Argus Sour Crude Index (ASCI™) US clean products Jet fuel Canadian crude European products and biofuels API coal indices North American gas and power Biomass

Argus Sour Crude Index (ASCI™) Adoption by Saudi Aramco and Kuwait for all exports to the US. Iraq expected to follow Prompted by dislocation between inland light sweet WTI and sour crude at the US Gulf Coast ASCI has potential to be used for broad sweet/sour financial hedging in the Americas Interest in Latin America and as far away as China

ASCI vs WTI 20

US clean products East of the Rockies, refiners representing about half the market are moving all internal and external pricing onto Argus for gasoline, diesel, heating oil and jet fuel A second-tier of passive firms is consolidating the shift New wave of sales to smaller marketers and distributors Why the change? Methodology: entire day of deals done, at differentials to the Nymex settlement

Jet fuel Jet fuel is a huge market for PRAs, because no refiners operate airlines Jet fuel is globally negotiated, so change in one region affects another Leading European airlines pushing to change contracts to Argus globally US refiners continue to push US airlines to use Argus with some success Spot trade in the US is frequently transacted at Argus prices

Canadian crude Canada is the largest exporter of crude to the US Crude market indexation is in disarray with competing exchange and brokerage indices With support from key players, Argus is emerging as an indexation solution

European products and biofuels Argus has long been the benchmark for gasoline swaps in northwest Europe Adoption of Argus Eurobob (ethanol blendstock) to replace unleaded barges will broaden and deepen usage in Europe, Russia and Africa Argus the leading benchmark for biodiesel swaps in Europe

Coal API 2 (fob northwest Europe) is the benchmark for most Atlantic Basin trade API 4 (fob South Africa) is benchmark for coal moving east to Asia API 6 (for Australia) recently launched US domestic coal

North American Natural Gas & Power Argus strong in European gas & power Major gap in North American portfolio September ’09 Launched natural gas service Acquired power market service Ferc compliant in both markets Major sales and marketing offensive

What does the future hold? Filling gaps Asia-Pacific Latin America Beyond petroleum Natural gas Coal Renewables Beyond energy? Metals, agriculture, chemicals Beyond the spot market Forward curves?

Thank you for your attention Euan.craik@argusmedia.com www.argusmedia.com