1. Toward the resilient petroleum industry 24 November 2015 Sinya Okuda Petroleum Association of Japan

2. Petroleum is indispensable “energy” and “resources” to life  Petroleum is indispensable energy, in all sectors, such as transport, household, commercial and industrial, including in an emergency.  At the same time, petroleum is essential "resource" in people's lives, such as raw material (plastic, lubricating, etc.). Petroleum Demand in Japan (FY 2014) Gasoline 29% Jet 3% Kerosene 9% Gas oil 18% Fuel oil 17% Naphtha 24% Lubricant 1% 542 Mil. KL (COE*) Oil 40% LPG 3% Coal 24% Nuclear 0.4% Natural Gas 24% Renewable 8% Primary Energy Supply in Japan (FY 2013) Energy Resource 1 Source : Ministry of Economy, Trade & Industry, Japan * Crude Oil Equivalent Source : Ministry of Economy, Trade & Industry, Japan 184 Mil. KL

3. Characteristics of energy supply (Japan and Indonesia) Oil 35% LPG 2% Coal 26% Renewable 26% Other 0.2% Natural Gas 15% Japan Indonesia 542 Mil. KL (COE*) Oil 40% LPG 3% Coal 24% Nuclear 0.4% Natural Gas 24% Renewable 8% 254 Mil. KL (COE*) Primary Energy Supply (2013) Refinery Number Refinery Capacity *End of August 2015 Crude Oil Self-sufficiency ratio** 2013 (Thousand B/D) Production824 Import324 Export322 Supply (Domestic)826 23 (Places) 3,917 (Thousand B/D) FY 2014 (Thousand B/D) Production11 Import3363 Export- Supply (Domestic)3392 0.3% Excluding changes in stocks *2013 10 (Places) 1,157 (Thousand B/D) 100% Source : Ministry of Economy, Trade & Industry (Japan) Ministry of Energy and Mineral Resources (Indonesia) * Crude Oil Equivalent ** Self-sufficiency ratio = Production / Supply(Domestic) 2

4. Petroleum supply system in Japan  In most cases, refineries are located close to the major cities.  As most of petroleum products are delivered to consumers in the following way. (a) Refinery - tank trucks - consumers (b) Refinery - coastal tankers - oil terminals - tank trucks - consumers  Pipelines for petroleum products supply are not laying with the exception of a few. Major city Refinery 23 : 3.9 million B/D Main oil terminal Refinery Tank trucks Oil terminal Coastal tanker Consumer (gas station) Oil supply chain in Japan (August 2015) Tokyo 8 Refineries (1.6 million B/D) 3

5. Collapse of the seawall Shipping facilities for tank trucks Gas station Access road to the refinery Able to ship Suspended shipment Partial shipment Tohoku Area Kanto Area  Petroleum-related facilities and social infrastructures (such as road and harbor) were seriously damaged.  In some areas, stable supply of petroleum products became difficult temporarily. Impact of the Great East Japan Earthquake Damages of petroleum-related facilitiesOperating situation aftermath of the quake 4 Focal Area

6.  Immediately after the disruption of electricity and city gas, petroleum industry received many supply requests as the “distributed energy”.  Infrastructures (road,port, etc.) and petroleum companies were suffered severe damage, but we made a maximum effort to the petroleum supply. Response to the Great East Japan Earthquake Operating Situation of Refineries and Oil Terminals Fuel (Oil) 29% General supplies 71% Evacuation centers Hospitals 25% Ambulance Firefighting Police 20% Dealer 29% Logistics Telecom company etc. 26% Source : Ministry of Economy, Trade & Industry, Japan Emergency requests from the disaster area Shipment by the drum Joint Operation room (The corresponding to the fuel supply request) Interoperate of oil terminal 5

7. Damage and affairs in petroleum industry (c) Build a cooperative relationship among companies against emergency. (b) Strengthening of distribution network considering emergency. (d) Joint exercise of government, petroleum companies and other relevant organizations. (a) Enhance the resilience of refineries and shipping facilities, in order to keep minimum supply of products in an emergency. The lessons of the Great East Japan Earthquake Lessons of the Great East Japan Earthquake 1. Loss of power for the receiving and the shipping pump. 2. Damage to the information and communication facilities. 3. Many fuel supply requests by the drums (almost no needs in normal times ). 4. Extraordinary joint operation of oil terminal. 5. Supply shortage for consumers by the destruction of tank trucks and service stations. 6. Took time to get the traffic permit of tank trucks. 7. It was difficult to access to refineries and oil terminals. （ Deposition of sediment to the channel, etc.) 6

8. Reinforcement of emergency response capability on refinery and oil terminal Construction or expansion of pipeline and pump Development of Emergency set High-pressure gas plant Product tank Shipping facilities Refining plant Seawall (public or private) Piled jetty Anti-seismic reinforcement Prevent liquefaction Pipeline Seismic strength evaluation of brace (spherical tank) Adaptation of the latest standards for important facilities (earthquake-resistance) Installation of automatic shutdown system Emergency power Emergency communication tool Facility of drum shipment Emergency set scheduled to be completed in FY 2015 ⇒ Total about 750 million US$ (90 billion yen)* of initiatives in seven years (1) Anti-seismic reinforcement, prevent liquefaction, safety shutdown of refinery and oil terminal. (2) Strengthening the function of receiving and shipping for products (Emergency set*, Gas Station corresponding to the disaster, etc.) Prevent liquefaction Installation of emergency cut-off valve The measures for enhance of resilience in refineries and oil terminals * Emergency power, Emergency communication tool, Facility of drum shipment 7 * Based on government budget

9. (1) Planning and drill of "The Oil Supply Coordination Plan in Disaster". (2) Constant review and improvement of “BCP*" including affiliated companies". (3) Information sharing about the fuel supply of the important facilities (e.g. hospital) with local government. (4) Assign "the designated public institution" to petroleum companies. * BCP ： Business Continuity Plan Designated in this April Coordinated response in petroleum industry Local government of devastated area Joint Operations Room (in Petroleum Association of Japan) 1. Information collection room (Information about supply capacity and stock) 2. Emergency request correspondence room (matching of supply and demand) ３． Joint oil terminal WG *as necessary (schedule adjustment) Content of Plan (Outline) (1) Contact person (2) Detail of shared information (3) Tank capacity (4) Cooperation method of transport Periodic training Training of Joint operations room The simulated refueling in important facilities National government ( Headquarters for Emergency Disaster Control) Fuel supply for devastated area Fuel supply request Fuel supply request Fuel supply system based on “the Oil supply Coordination Plan in Disaster” 8

10. (1) list of affiliated gas station complete with disaster response capability (2) Check the damage (3) Support system for the business continuity and early resumption  Japanese petroleum companies formulated the “BCP(*) including affiliated companies” and are going to constantly review, to supply minimal petroleum for maintaining the social function at the time of a Huge Nankai Trough Earthquakes and a Tokyo Inland Earthquakes. (*) BCP : Business Continuity Plan Refinery Delivery Gas station (affiliate company) Gas station (affiliate company) Main contents of “BCP including affiliate company” (1) Safety shutdown of plant (2) Anti-seismic reinforcement and prevent liquefaction for receiving and shipping (3) Continuation of sales operation (4) Procedure for quick restoration (1) Alternate vehicle procurement plan at the time of tanker disaster. (2) Preparation of qualified driver (3) Procurement of drums and it’s delivery method Preconditions and target Preconditions and target (1) Earthquake based on government scenario (maximum intensity 6 upper on the Japanese scale), grid power supply stop up to one month (2) Maintain the minimal petroleum supply from refinery on the affected area. ⇒ Securing a supply about 1/2 from the normal times shipping volume (gasoline, kerosene, gas oil, fuel oil A) (3) It covers the entire supply network (refinery - transportation - gas station affiliated company) Development of “BCP including affiliate companies” 9

11. Participants (approximation) 1 Lecture meeting about Tsunami Disaster Prevention (*1) 100 2 Drills assuming the imposition of “the Oil supply Coordination Plan in Disaster” 300 3 Operation check of the emergency power, the facility of drum shipment, etc.. 1700 4 Tabletop exercise about oil spill incidents 80 5Disaster drill on each petroleum companies 5,500 6Training for Earthquake Early Warning 3,000 Total Over 10,000 Petroleum Association of Japan and member companies implemented the following programs for this year‘s “Tsunami Disaster Prevention Day“ (5 th November). *1 Co-hosted with Japan Petrochemical Industry Association. The training of “Tsunami Disaster Prevention Day” 10

12.  The oil stockpile is equivalent to about 200 days or more of domestic demands, in combined with the government and the private.  The government revised the concept of the law after the Great East Japan Earthquake. (1) Increase of government product stockpiles (2) Addition of release requirements : the shortage of the supply in the disaster (3) Obligated to formulate "The Oil Supply Coordination Plan in Disaster" Oil Stockpiling in Japan Trends of Oil Stockpiling in Japan (end of March each year) Private Stockpiles Government Stockpiles Government Stockpiles was started in 1978 9,043 (168) 9,080 (163) 8,953 (150) 8,278 (142) 7,095 (126) 6,981 (100) 6,197 (89) 4,604 (71) 3,979 (56) 8,590 (185) 8,343 (197) 8,075 (193) 8,302 (199) 8,406 (193) 8,147 (199) Government Product Stockpiles was started in 2009 (90)(85)(76)(54)(35) (10) (78) (74)(88)(92)(90) (80)(83) (84)(79)(84) (110)(102)(113)(114)(115) (82) (7) the oil storage project with oil producing countries (117) 10,000KL, (day) * Totals may not match due to rounding Source : Ministry of Economy, Trade & Industry, Japan 11

13. Key issue for the resilience in petroleum industry people's safety and security Energy Security Economic Efficiency Environment  Japanese energy policy designated “3E” as the Basic viewpoint.  Toward the achievement of "3E", Japanese petroleum industry have addressed many challenge, and will continue to promote various initiatives. The enhance of “resilience” and emergency response capability Structure improvement of refineries and industrial complex. Promote the effective use of oil. Improvement of refinery energy efficiency Implementation of Action Plan for GHG Japanese petroleum industry will continue to engage "the enhance of resilience“ and "the strengthening competitiveness“. 12