1. Clean and Dirty Product Trades: US, Asia, and the Middle East Nancy Yamaguchi Trans-Energy Research Associates, Inc. INTERTANKOs Washington Tanker Event April 6-10, 2003

2. Objectives Inaugurate golf season with Bob, John and Oyvind Assess recent trends in clean & dirty product trade in three major markets: US, Asia, and the Middle East Explore future of product trades by creating clean/dirty product balances in key markets Assist with market session and planning

3. Good planning is a must...

4. Levels of trade in markets affected by: Level 1: Simple volumetric imbalance Level 2: Imbalance in specific products, perhaps seasonal Level 3: Imbalances caused by fuel quality standards Level 4: Trade based on geopolitics, established relationships, niche markets

5. Developments in Asia Asian Crisis 1997 caused demand slump Production capacity expanded nonetheless Many new exporters emerged, and some trades moved to short-haul Volatility remains, yet demand is recovering, and trade patterns are shifting Explore C&D trends in 4 Asian submarkets: Australasia, East Asia, Southeast Asia, South Asia

6. 1. Developments in Australasia Australia and New Zealand characterized by in- and-out trade of nearly all products Market is smallest of the 4 main AP regions: less than 1 mmb/d demand and 1 mmb/d refinery capacity Small decline in dirty trade Slight rise in clean imports forecast

7. Australasia Dirty Trade

8. Australasia Clean Trade

9. 2. Developments in East Asia Largest market: 13.7 mmb/d refinery capacity and 12.9 mmb/d of demand Essentially all countries are major product traders Major net importers are Japan and China Major net exporters are South Korea and Taiwan (excluding LPG and naphtha) Trade has fluctuated dramatically as demand, refinery capacity and throughput have changed Weak outlook for near-term growth of imports: slight decline in dirty, slight rise in clean

10. East Asia Dirty Trade

11. East Asia Clean Trade

12. 3. Developments in Southeast Asia Major market with 3.6 mmb/d of demand and 4.2 mmb/d of refinery capacity Asian Crisis 1997 caused demand slump Refinery capacity continued to come onstream Thailand emerged as an exporter Singapore cut refinery runs but remained a major entrepot Weak outlook for near-term growth in imports

13. Southeast Asia Dirty Trade

14. Southeast Asia Clean Trade

15. 4. Developments in South Asia Large market with 2.6 mmb/d of demand and 2.7 mmb/d of refinery capacity Indias refining industry has expanded enormously, and many refinery projects still are on the books Dirty trade has stagnated Clean imports fell, exports appeared Demand is growing, so expect a slight reversal of this trend

16. South Asia Dirty Trade

17. South Asia Clean Trade

18. US Product Trade Trends Despite size of Asian markets, US market remains the giant (20 mmb/d demand, 16.5 mmb/d refinery capacity) Few opportunities for refinery expansion Near-term outlook appears poor Dirty imports will grow then level off within the next decade Clean product imports will grow strongly after the middle of the decade Strict product quality may temporarily shut out potential suppliers

19. US Refineries: Fewer and Larger

20. Growth in US Clean and Dirty Imports

21. Forecast US Dirty Imports by Source

22. Forecast US Clean Imports by Source

23. Growth in Mideast Exports Goal to become product exporter and gas exporter as well as crude exporter Many plans geared toward Asian market have been rethought Volatility remains, but product export capability will grow Fuel quality improvement is emerging goal, looking to EURO and US, esp. middle distillates

24. Mideast Clean and Dirty Exports

25. Mideast Product Exports by Type

26. Conclusion Volatility in oil demand and output naturally causes volatility in trade and shipping Asian markets slumped, appear to be recovering, but imports will rise little in near-term US market flat in near-term, but expect major growth in imports beginning in the coming decade (clean growth, dirty growth then stagnation) Mideast clean exports will grow dramatically, and will include high-quality fuels destined for Europe and the US, and will require modern DH tonnage