Petcoke Prices – Do They Relate to Anything? Ben Ziesmer McCloskey Group Petcoke Conference — 2008 Houston, TX June 10 & 11

Petcoke Conference—2008 Houston, Texas June 10 & 11 Petroleum Coke Prices ($/MT fob Vessel, load port)

Petcoke Conference—2008 Houston, Texas June 10 & 11 Fuel Prices – Mediterranean Market

Petcoke Conference—2008 Houston, Texas June 10 & 11 Fuel Prices – Mediterranean Market

Petcoke Conference—2008 Houston, Texas June 10 & 11 USGC/Caribbean Market Petcoke vs. South African Steam Coal $/MMBtu CIF Mediterranean

Petcoke Conference—2008 Houston, Texas June 10 & 11 Petcoke Pricing – A New Paradigm? Cement industry – from secondary fuel to preferred fuel  Many kilns use 100% petcoke  Ash in fuel becomes part of clinker  Supply certainty important  Coal supplier dependability concerns Power industry – still secondary fuel  Must be lower cost on $/MMBtu basis

Petcoke Conference—2008 Houston, Texas June 10 & 11 Fuel Prices – Asia

Petcoke Conference—2008 Houston, Texas June 10 & 11 USWC Petroleum Coke vs. Australian Thermal (Steam) Coal $/MMBtu CIF Japan (USWC)

Petcoke Conference—2008 Houston, Texas June 10 & 11 Australian & South African Steam Coal

Petcoke Conference—2008 Houston, Texas June 10 & 11 USGC & USWC Petroleum Coke $/MMBtu CIF Mediterranean (USGC/Caribbean) or CIF Japan (USWC)

Petcoke Conference—2008 Houston, Texas June 10 & 11 Illinois Basin vs. South Africa Steam Coal

Petcoke Conference—2008 Houston, Texas June 10 & 11 Illinois Basin vs. South Africa Steam Coal

Petcoke Conference—2008 Houston, Texas June 10 & 11 Utah vs. Australian Steam Coal

Petcoke Conference—2008 Houston, Texas June 10 & 11 Petroleum Coke EUA Penalty vs. Burning Natural Gas

Petcoke Conference—2008 Houston, Texas June 10 & 11 Indifference Price of Petcoke vs. Natural Gas including EUA Cost

Petcoke Conference—2008 Houston, Texas June 10 & 11 U.S. Climate Change Legislation – Lieberman-Warner Oil refineries – Have to acquire CO 2 credits based on carbon in crude  Assumes all carbon in crude becomes CO 2  Refiners can allocate CO 2 cost among products as they see fit Coal – End user accounts for CO 2 emissions  Generating stations & industrial plants need CO 2 credits for emissions No double counting → CO 2 from burning petcoke should not count as CO 2 emissions

Petcoke Conference—2008 Houston, Texas June 10 & 11 Lieberman-Warner & Petcoke CO 2 emissions ~3 tons/ton petcoke burned How CO 2 affects petcoke value  Internal U.S. – increases value  worth premium to coal as CO 2 already counted  Exports  Developing countries – no effect  EU – should decrease value due to EUA cost WTO – Potential problem if export price is lower than domestic price

Petcoke Conference—2008 Houston, Texas June 10 & 11 Summary USGC petcoke prices are not directly correlated with South African coal prices  New pricing paradigm? Neither 2% S petcoke prices are directly correlated with Aussie steam coal prices Premium of 2% S petcoke has varied  Steel industry primarily uses coking coal  Coking coal premium over steam coal    Steel industry has been easing sulfur requirements

Petcoke Conference—2008 Houston, Texas June 10 & 11 Summary U.S. coal prices not correlated with international coal prices  When international coal very high, U.S. coal can move into Atlantic Basin export market  CAIR scrubbers changing U.S. coal market U.S. petcoke fueled project potentially exposed to international vs. domestic coal price risk CO 2 emission regulations can produce unexpected changes  EUA currently not high enough to push users from petcoke to natural gas

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