Fuel and Refining TrendsPresentation at Louisiana State University

Fred StiersGeneral Manager, Lake Charles Refinery

October 22, 2004

World Energy Demand OutlookWorld Energy Demand Outlook

0

2000

4000

6000

8000

10000

12000

14000

16000

1971 2000 2010 2020 2030

Hydro & OtherRenewables

Nuclear

Natural Gas

Oil

Coal

Million Tons of Oil Equivalent

Source: International Energy Agency,“World Energy Outlook”

U.S. Price Threshold for ChangeU.S. Price Threshold for ChangeSurvey by CNW Marketing ResearchSurvey by CNW Marketing Research

0

5

10

15

20

25

30

35

40

1.75 2.25 2.75 3.25 3.75

Eventually Immediately

Percent

Survey measures the percent of new car owners who would buy a new, more fuel-efficient car immediately or eventually based on the price of gasoline.

Survey of 3,981 car owners nationwide, assuming price remains for 6 months

Gasoline Price ($ per Gallon)

U.S. Consumer Spending on Energy as U.S. Consumer Spending on Energy as a Percentage of Disposable Incomea Percentage of Disposable Income

3.7%

4.2%

4.7%

5.2%

5.7%

6.2%

6.7%

7.2%

7.7%

8.2%

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

Source: U.S. Department of Commerce, Bureau of Economic Analysis

Auto TrendsAuto Trends

MSRP: $20,510Hybrid System Mfg. Cost:

$2500-350055 mpg avg city/highway

45 mpg actual?

Hybrid ElectricHybrid ElectricToyota PrirusToyota Prirus

M.T. Car of the YearM.T. Car of the Year

VW Passat diesel(return after 8 years)

NOX concerns for U.S.

Diesel CarDiesel Car European Automakers European Automakers

Ramping UpRamping Up

Fuel Cell VehiclesFuel Cell VehiclesMany Challenges to Many Challenges to

OvercomeOvercome

•Safety•Inadequate nat gas as H2 source•Cost too high by a factor of 10

U.S. Refining CapacityU.S. Refining Capacity

150

175

200

225

250

275

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

14

16

18

20

22

Number of RefineriesNumber of Refineries

Distillation Capacity

Number of Refineries

Capacity/DemandCapacity/Demand(million barrels per day)(million barrels per day)

Demand

Source: U.S. DOE, API, P&G

0

200

400

600

800

1,000

1,200

1,400U

.S.

We

ek

ly G

as

oli

ne

Im

po

rts

, M

bb

l/d

ay Imports represent approximately Imports represent approximately

10% of today’s U.S. gasoline 10% of today’s U.S. gasoline demand!demand!

Source data: U.S. EIA

520

845

U.S. Refinery Capacity UtilizationU.S. Refinery Capacity Utilization

Gross input to refineries / operable capacity

Source: U.S. Department of Energy

Pe

rce

nt

Uti

liza

tio

nP

erc

en

t U

tiliz

ati

on

HistoryHistory Forecast (DOE)Forecast (DOE)

90%

60

65

70

75

80

85

90

95

100

1980 1985 1990 1995 2000 2005 2010 2015 2020

U.S. Refining TrendsU.S. Refining Trends• Capital money for US refining has been spent to

meet changing fuel specification rather than build additional capacity (estimated $20 Billion)• LSG and ULSD

• the 2% RFG oxygen mandate

• Local/regional boutique fuels

U.S. Gasoline RequirementsU.S. Gasoline Requirements

U.S. RefiningTrendsU.S. RefiningTrends• Capital money for US refining has been spent to

meet changing fuel specification rather than build additional capacity (estimated $20 Billion)• LSG and ULSD• the 2% RFG oxygen mandate

• Local/regional boutique fuels

• Public demand continues to increase; however, so does “not in my backyard” resistance to refinery and infrastructure expansions• Permitting difficulties

• Litigation from upsets and environmental issues

Locations of U.S. Refineries 2004Locations of U.S. Refineries 2004

U.S. Refining ConcernsU.S. Refining Concerns• Capital money for US refining has been spent to

meet changing fuel specification rather than build additional capacity (estimated $20 Billion)• LSG and ULSD• the 2% RFG oxygen mandate

• Local/regional boutique fuels

• Public demand continues to increase; however, so does “not in my backyard” resistance to refinery and infrastructure expansions• Permitting difficulties

• Litigation from upsets and environmental issues

• Investment in refining capacity post Clean Fuels will require a sustained trend of strong return on capital employed.

Thanks for the opportunity !