1. 1 Oil and Gas Industries Delivered on Behalf of: Bill Pyke Hilbre Consulting Limited, November 2010 Copyright and all intellectual property rights retained by presenter Marketing the Products

2. 2 Crude Oil Exploration & Production Refining Product Distribution & Sales Crude market Products market Source: Purvin & Gertz Global Petroleum Market Outlook The oil industry has three key business segments…

3. 3 Outline Distribution Fuel Retailers Aviation Fuel Bunker Fuel The Natural Gas Market

4. 4 Refinery to Retail Refinery Trading Heating Oil Service Stations Company Owned Dealer Owned Depots Road, Rail Pipeline, Barge Manufacturer Distributor Depots Road, Rail Consuming Market

5. 5 Distribution to Markets

6. 6 Southern UK Products Pipeline Networks Source: UKPIA, 2007

7. 7 The Product Trend Global demand expanding for the light products:- gasoline, middle distillates-diesel, gasoil, jet kero. Reduced demand for fuel oils, bunker fuels Complex refineries are required to process the increasing volume of sour crudes Tough environmental standards - low sulphur etc. Refining costs rising

8. 8 Motor Fuel Demand in EU-27 1990-2005 Diesel now dominates the European Road Fuel Market Source: Eurostat, 2007

9. 9 Fuel Marketing Source: Petroleum Review, Fuel marketing Survey, March 2010

10. 10 Several types of retail market players IOCs/NOCs Examples Shell, BP, Total, Esso generally integrated further up the supply chain Supermarkets Examples Tesco, Sainsbury, Asda Business model designed to increase footfall, trade-off between overall margin and fuel margin Independents Examples GB Oils, Dragon, NWF Individual dealers who have long-term supply arrangements with fuel marketers (often including branding)

11. 11 Source: Petroleum Review, Fuel Marketing Survey, March 2010

12. 12 Pressure on fuel margins is forcing retailers to look to non-fuel sources of income Percentage of non-fuel margin Source: Wood Mackenzie

13. 13 UK Jet Fuel Pipeline Networks Source: British Pipelines Agency

14. 14 Aviation Fuels Aviation Fuel: A category of fuel that includes aviation gasoline and jet fuel. Aviation Gasoline: Piston engines Aviation Kerosene: Jet engines

15. 15 Residual Fuel Oil and Bunker Fuel Used in power stations and for marine fuel Marine Fuel oil also referred to as bunker fuel Often contain impurities, but can be used in marine engines Close to the density of water (often in the range 0.991- 1.000) Recent environmental regulations has enforced desulphurisation to prevent atmospheric pollution from sulphur oxide emissions

16. 16 Natural Gas

17. 17 Global Natural Gas Utilisation Natural Gas Feedstock Burner Tip Power Generation Markets Commercial Residential Industrial Petrochemicals Agrochemicals

18. 18 UK Gas Supply Before Deregulation in 1989 British Gas Corporation Distribution system Residential Market Industrial market British Gas Corporation (Monopoly Purchaser) UKCS Gasfield Producer Pre- 1989 BGC Monopoly Gas Supply Scenario Commercial market

19. 19 Purchasers &Traders Large range of Players The 2010 UK Gas Market Long, Short-Term and Spot Trades UKCS Gasfield Producers Mainland European Market Bacton-Zeebrugge Interconnector Electricity Generation Commercial Market Industrial Market Residential Market Norway BBL Langeled Vesterled Ireland Irish Interconnector LNG Grain UKCS LNG Dragon LNG South Hook

20. 20 Key Areas of Gas Liberalisation-Unbundling of Businesses The unbundling of the transport and trading sectors in Britain following the privatisation of British Gas Corporation in 1986 ensured market freedom The Pipeline Infrastructure (the national transmission system) in the UK is owned and run by National Grid The upstream gas reserves were divided with the newly– formed BG and Centrica BGC BG Group National Grid (Transco) Centrica British Gas

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22. 22 European Gas Hubs NBP Zeebrugge Baumgarten TTF PSV PEGS N&E PEG SW CDG EGT

23. 23 UK Sources of Gas, Winters 2005-6, 2006-7 and 2007-8 Source: Oil and Gas UK, Economic Report, 2009

24. 24 Interconnectors UK-Continental Europe

25. 25 Market players National Grid: High pressure large gas lines Key Sellers/Distributors British Gas (Centrica) E.on RWE (NPower) Scottish and Southern (SS&E) Scottish Power Regulator: Ofgem