1. VP Center of Excellence & Business Services, Chevron
Introduction to LEAP (Leadership for Energy Automated Processing) The Role of Leadership in Driving Automation & Standardization in our industry
Gary Spengler
VP Center of Excellence & Business Services, Chevron
and
LEAP Co-Chair
Welcome participants.
Good afternoon, my name is Gary Spengler. I’m VP for Chevron’s Downstream Center of Excellence and Business Services and Co-Chair for LEAP – Leadership for Energy Automated Processing.
Today I plan to give you an overview of what LEAP is about and how business leadership has a key role in driving automation and standardization in our business.
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November 16, 2011
© LEAP 2011

2. Leadership Drives Automation
LAGGARDS
Data integrity and management is critical to our business – within the oil, energy, independent trading and banking industries.
We know that there are parts of our industry that are lagging behind.
Specifically, we’re talking about the commercial piece across the front, mid and back office.
So where do we want to be?
Do we want to be leaders using space age technology or laggards using a stone age chisel?
How do we get there?
There are many industries already paving the leadership path ahead…..
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Other industries are leading the way
– where do we want to be?
© LEAP 2011

3. Leadership Drives Automation (cont)
Major IT Milestones in FedEx History
1978: Fred Smith, who founded FedEx in 1971, declares: "The information about a package is as important as the package itself.“
FedEx Ground's hubs sort 3.5 million packages a day without human intervention, helping the courier win market share.
1979: FedEx launches a centralized computer system designed to track packages, routes, weather, vehicles and employees.
1980: Implements a dispatch system that allows customers to electronically request pickups.
These supply chain driven companies are leaders in their industry. Many started 1, 2, 3 decades ago.
Even the gas industry is way ahead of the game, whereby the industry evolved from 20-year contracts to annual pricing terms, to monthly, then daily and even hourly (electric utilities)
They have mastered automation…. Where do we want to be?
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1984: Introduces a PC-based shipping system.
1986: Introduces a handheld bar-code scanner.
Source: ComputerWorld.com
© LEAP 2011

4. What’s Holding Back Our Industry?
1. Leadership
2. Partnership
3. Focus
4. Commitment
Leadership - drives change – FedEx is a perfect example of leadership driving from the top
Partnership - we’re all doing this in our own houses. But when we’re working together - for example contract matching – we need to work in partnership. Agreeing on language etc
Focus - we need to prioritize (I’ll shortly talk about LEAPs prioritized 6 key initiatives).
To make this happen we need Commitment from everyone in our industry
LEAP provides the leadership, the forum to work in partnership, and the focus .
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LEAP is the enabler to do this.
© LEAP 2011

5. LEAP Leadership for Energy Automated Processing
LEAP was formed in 2006 with the mission to: Promote efficient and reliable transaction processing within the energy trading industry by means of automation and standardization.
Our founders are a group of oil majors, banks and independent traders.
Benefits of automation:
 Accuracy & Timeliness  Managed Risk
 Consistency  Regulatory Credibility
 Efficiency
For those of you who are not very familiar with LEAP – Leadership for Energy Automated Processing…. Here’s some background:
LEAP was formed in 2006 with the mission to:
Promote efficient and reliable transaction processing within the energy trading industry by means of automation and standardization.
Accuracy & Timeliness – minimize operational incidents
Consistency – reduce operational risk
Efficiency – scale up the business while containing operating costs
Managed Risk – manage counterparty, operational and market risk
Regulatory credibility – provide real commitment to industry best practices
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Better Access to Customers, Capital and Profitability!

6. The LEAP Board of Directors
Co-Chair:
Gary Spengler
Chevron, US
James Murdoch
Shell, UK
Treasurer:
David Porter
Glencore
Secretary:
Karen Mikkelborg Nexen
Jim Brush
Goldman Sachs
Cesar Covarrubias
PMI
Gordon Fraser
Morgan Stanley
Tom Lullo BP
Kevin Masucci
Hess
Carolien Ruiter
Mercuria
Jone Slutas
Statoil
Mary Dortenzio
(as D. Porter designee when required)
Joann Bonanno
(as G. Spengler nominee when required)
Patty Giedris
Shell, US
(as J. Murdoch nominee when required)
LEAP is made up of folks from the oil majors, banks, and independent trading houses.
Chevron and Shell currently Co-Chair the LEAP Board of Directors, with James Murdoch, from Shell UK being the other Co-Chair.
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7. Members of the Executive Committee
Co-Chair James Murdoch Shell, UK
Tone Vaila Statoil
Co-Chair Gary Spengler Chevron, US
Karen Mikkleborg Nexen, Calgary AB
Cesar Covarrubias PMI
LEAP EC
Blandine Lewine Glencore, US
David Porter Glencore, US
In addition to the LEAP Board of Directors, we also have an Executive Committee, again with a good cross section from industry representation.
We also have good presence in both the US and the UK. Our intent is to influence business on a global basis.
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David Knipe BP, UK
John Herd Glencore, UK

8. LEAP Accomplishments – A Brief History
ISDA adopts v2, creating U.S. Crude Oil and Refined Petroleum Products Annex
Pipeline Contracts Master 1.0
LEAP Master 2.1
Canadian Addendum 2.3b
LEAP Settlements White Paper draft
LEAP DELIVERY
JAN-06 |
JAN-07 |
JAN-08 |
JAN-09 |
JAN-10 |
JAN-11 |
Annex C
Marine Annex 1.0
First physical oil match on ICE eConfirm
ICE eConfirm for Physical Crude Oil in Canada
LEAP Master 2.0 adds US crude
Canadian Addendum 2.2
Over the past 6 years LEAP has accomplished some significant milestones in the area of automation and standardization.
For those of you who may have attended the previous ISDA session, you’ll be interested to hear that LEAP has very good coordination with ISDA.
ISDA has leveraged LEAP’s crude Master as the starting point for their physical oil annex. We continue to share as we progress, such as Canadian annex.
Master agreements provide the ability to incorporate numerous contracts ( ) under one electronic agreement. This has the key benefit of mitigating potential risk, and improving efficiencies across front-mid-and back office.
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Navarik contributes electronic Inspection Data standard

9. LEAP’s 2011 Key Initiatives

10. The LEAP 2011 Initiatives LEAP Prime Initiatives
NW European Barge Contract
(Annex)
NA Rail / Truck Contract
(Annex)
Pipeline Bookouts
LEAP Prime Initiatives
eDocs (Electronic Cargo Docs)
RINs GT&C’s
Secondary Initiatives
Contract Matching Redesign
Inspection Data Standardization
Dodd Frank: Issues and Impact
Automated OTC Margin Matching
Settlement Matching
Some of you may be aware of LEAP’s key initiatives for 2011 shown under the Prime Initiatives.
Objectives
US Pipeline Bookouts – objective is to automate the current manual processs for US refined products pipelines
RINS – Renewable Identification Number – There is a need for a clear interpretation and standardization of RINS trading And, given current annual renewable fuels volume is mandated to increase approx. 180% by 2022, developing a set of balanced General Terms & Conditions (GT&Cs) will greatly benefit all companies involved.
Broker Matching – Broker Confirms are often the primary vehicle for trade verification so trade details need to be timely & accurate
eDocs – electronic cargo documentation – industry adoption of electronic documents to replace existing manual, multi-copy, and paper-based process
N.A Rail/Truck Contract annex
NW European Barge Contract annex - Both these annexes were added to the priority list following the last LEAP General Meeting, held in London in Sept. The objective of both is to publish a Trade Annex based on the LEAP Master Agreement.
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Broker Matching

11. Other Potential LEAP Initiatives
Possible Future Development
Settlement Matching
Automated OTC Margin Matching
Dodd Frank Implications & Impacts
In addition to the primary and secondary initiatives, we have several other potential future developments, which will be driven by industry needs identified by the LEAP board members.
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Inspection Standards
Contract Matching Redesign

12. Levels of Involvement:
How To Get Involvement
Levels of Involvement:
Several levels are available
Take a test run as a non-LEAP member
Join LEAP as a Full Member (fee is prorated) - Actively participate, vote in the Work Groups, assign a representative to the LEAP Board, become a member of the Executive Committee decision process
As a non-member: You are invited to observe the Work Group process, but not actively participate in the meeting dialog or direction 
As a LEAP member:
The option of Board membership is available (a commitment of 2 hours a month) 
Active participation in a Work Group (Initiative)
A commitment of resources is expected to staff your Work Group
The pay-back is direct influence in the direction of the Initiative and Work Group effort
Participation
LEAP is looking for new members from the oil, banking and independent trading communities.
There are different levels of participation.
8K – Full membership (seat on Board, participate on all committees, guide direction of org, etc.)
12K – Regular membership (1 committee); note no seat on Board
6k – svc providers
The conference organizers will be sending out this deck afterwards and the copy you’ll receive contains additional information on the initiatives LEAP is working on.
QUESTIONS
Next Steps
Identify areas of interest (initiatives) that best suit your org
Make a participation commitment
© LEAP 2011

13. Where to find out more about LEAP http://energyleap.org/
QUESTIONS
Where to find out more about LEAP
© LEAP 2011

14. Appendix
© LEAP 2011

15. Recent / Current Activity
US Pipeline Bookouts
Objectives
Automate the current manual process for US refined product pipelines
Create a standard communication process
Leverage Transport4, the de facto standard transaction hub for 12 US pipelines since 1997
Benefits
Automatically identify trades that can be offset against one another
Find more complex bookouts & minimize product shipped (save $)
A clear method for communicating changes to the book or conversions to physical delivery
Creation of an audit trail maintained by a disinterested third-part (T4)
Applicable to other petroleum types (crude, NGL) and markets (cargo, non-US), assuming user participation is gained
Recent / Current Activity
Development activity: parameters are well understood, production level software would be ready in 11 months;
Require critical mass of users, operational consensus, funding and compliance with Dodd Frank
LEAP’s Goal
To save companies money by minimizing product shipped by pipeline via an automated solution
Provide an audit trail where none exists today

16. Recent / Current Activity
RINs (‘Renewable Identification Number’ – as applies to Renewable Fuel Standard Program )
Objectives
There is a need for clear interpretation and standardization of RINs trading
the need for a set of balanced GT&Cs that at a minimum, address indemnifications, clarification of RFS2 standards and compliance, risk protections
Benefits
Current annual renewable fuels volume is 13 Billion gallons and is mandated to increase to 36B Gals by 2022, developing a set of balanced GT&C’s now will greatly benefit all companies involved.
Recent / Current Activity
Annual Renewable Volume Obligation (RVO) is set yearly by the EPA for each RFS participant organization
RIN’s are used to verify each party has met its annual RVO
BP and Morgan Stanley are key participants of this Initiative .
LEAP’s Goal
To develop a set of balanced GT&Cs that will address RIN’s.
Involvement to include Non-LEAP members

17. Recent / Current Activity
Broker Matching
Objectives
Broker Confirms are often the primary vehicle for trade verification
Match broker trade details timely and accurately
Matching Canadian activity - currently being done on derivatives, US physical products and crudes.
Benefits
Minimize human error; prompt detection of trade discrepancies; improve accuracy
Improve Process Efficiency: Average 5 mins to process a trade, ~10% contain discrepancies
Spend work time resolving discrepancies rather than checking correct trades
Recent / Current Activity
Brokers (US and European) have been signing up at rate of 1 per month
LEAP’s Goal
Progress this Initiative, we are seeking additional participation and development

18. eDocs (Electronic Cargo Documentation )
Objectives
Industry Adoption of electronic documents to replace existing manual, multi-copy, and paper based process
Reduce lost time in document generation, transport, tracking, validation, and (ultimately) invoicing
Benefits
Overall document accuracy, speed in cargo ownership transition and validation
Reduced demurrage, reduced need for LOI’s, allows for timely invoicing, trade transparency (regulatory interest here)
Reduces incurred working capital costs when indemnities are required
Recent / Current Activity
Support of several large integrated Oil Companies already exists
Pilot activity is already underway.
LEAP’s Goal
LEAP’s goal is to accelerate, expand, and automate the process
Progress this Initiative: We are seeking adoption of standardized electronic documentation across the industry (oil companies, ship owners)

19. NA Rail / Truck Contract - Annex
Objectives
Publish a Trade Annex based on the LEAP Master Agreement
Work with vendors to implement electronic matching, and to encourage voluntary adoption within the Industry of these agreements
Benefits
Reduction of manual effort, errors, and a savings of time & costs
Allows the capture of economies of scale
Recent / Current Activity
V2.1 Pipeline Master published
V2.3a Canadian Addendum published
V1.0 US Marine Annex published
NWE ARA Barge contract Master drafted and reviewed
User Guide published
LEAP’s Goal
Gain better understanding of the roadblocks to adoption
Leverage the knowledge gained in past NA contract work
Progress adoption and the use of electronic contract matching

20. NW European Barge Contract - Annex
Objectives
Publish a Trade Annex based on the LEAP Master Agreement
Work with vendors to implement electronic matching, and to encourage voluntary adoption within the Industry of this agreement
Benefits
Standardization of terms
Reduction of manual effort, errors, and a savings of time & costs
Allows the capture of economies of scale
Recent / Current Activity
V2.1 Pipeline Master published
V2.3a Canadian Addendum published
V1.0 US Marine Annex published
User Guide published
LEAP’s Goal
Gain better understanding of the roadblocks to adoption
Develop common wording acceptable to all
Progress adoption and the use of electronic contract matching