Markets for Azeri Crude

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SOCAR Trading All pages strictly confidential and not for public use Markets for Azeri Crude HEG Commodity Trading Major– Friday, 11 th November 2011 Ludwig Hachfeld – Project Director
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Markets for Azeri Crude. HEG Commodity Trading Major– Friday, 11 th November 2011 Ludwig Hachfeld – Project Director. Socar is the state oil company of azerbaijan. Azerbaijan – location, history and economy. Source: SOCAR. Independent republic Independence - 1991 from Soviet Union - PowerPoint PPT Presentation

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Markets for Azeri CrudeHEG Commodity Trading Major Friday, 11th November 2011Ludwig Hachfeld Project Director

SOCAR TradingAll pages strictly confidential and not for public useAll pages strictly confidential and not for public use#Socar is the state oil company of azerbaijanAzerbaijan location, history and economy1Source: SOCAR

Azerbaijan

IranTurkeyRussiaGeorgiaArmeniaTurkmenistanKazakhstan

Independent republicIndependence - 1991 from Soviet Union Territory - 86.6 thousand km2 Population - 8.7m Capital - Baku

Oil producing countryFirst industrial well - Bibiheybat 1846-1847 1890-1900 50% of world supply1994 - Contract of the Century on ACG fieldsCurrent production over 1m barrels per day

Stability and pro-business reformGovernment Presidential Republic (Ilham Aliyev)UN Transparency Public Service Award 2007 IFC Doing Business - top regulatory reformer 2009 WEF Competitiveness largest improvement ever 2010

Fast economic developmentCurrency Manat stable against USDGDP ca. US$55bn and US$10,000 PPP per capitaGDP growth 20-30% pa 2005-2007 and 5% in 2010Non-oil sector - 55% of GDP growing 7% pa

All pages strictly confidential and not for public use#Ready for further developmentAzerbaijan economic and social indicators2Sources: Statistical Office Azerbaijan, SOFAZGDP growthGDP diversificationState Oil Fund AssetsAll pages strictly confidential and not for public use#Azerbaijan upstream consortiumAzerbaijan and SOCAR legacy3Sources: SOCAR, BP*COP: Chirag Oil ProjectSince 1993, Azerbaijan and SOCAR have created a strong track record cooperating with international oil majors in upstream consortia.

Contract of the Century signed on 20 September 1994 creating the AIOC consortium for the development and production sharing of ACG

AIOC consortium investing >$15bn to develop ACG

ACG oilfields located some 120km off the coast of Azerbaijan over 430 km2 with >7bn bbl (1bn ton) in recoverable reserves and producing 850,000 bpd

BTC 1m bpd capacity crude export pipeline from Baku to Ceyhan via Tbilisi in Georgia (1,768 km), built over 2003-2005 after an investment of $4bn

SOFAZ State Oil Fund of Azerbaijan established in 1999 to manage the Republics share of PSA receipts, amounting to $18bn in total assets by mid-2010SOCAR State Oil Company of Azerbaijan Republic, incorporated in 1993 to manage all oil and gas assets and activities on the part of the Republic

NovorossiyskSupsaBakuCeyhanAIOC consortiumBTC and other pipelinesBTC (2005)Baku Supsa (1999)Baku Novorossiysk (pre-1993)Azeri QualityACG production profileCeyhanSupsaAPI36.634.8Sulphur, wt%0.150.15TAN, mg KOH/g0.310.26Vanadium, ppm< 1< 2.0 *All pages strictly confidential and not for public use#Socar handles 75-80% of azerbaijans production4Source: SOCAR *FOB Other: Supsa, Novorossiysk2010 Crude EntitlementMillion MT44515252All pages strictly confidential and not for public use#Azerbaijan: exports still increasingExport routes and volumes5Source: SOCAR

All pages strictly confidential and not for public use#Mediterranean is Azeri natural marketAzerbaijan main oil export destinations from 2008 to 20116Sources: SOCAR, BTC, press sources and SOCAR Trading estimates, BPAll pages strictly confidential and not for public use#System crudesystem barrel: now growing through consolidationSOCAR Trading system crude marketing 2008-20107Source: SOCAR TradingConsolidationCustomersMarketsM MTMMTAll pages strictly confidential and not for public use#Recent international events boost azeri pricesAzeri premium VS Es Sider OSP8Sources: SOCAR, Reuter, press sources and SOCAR Trading estimatesAll pages strictly confidential and not for public use#

socar continues to develop and expand internationallySOCAR key assets9Source: SOCARTurkey downstreamPetkim petrochemical factory 2008Refinery - under developmentUkraine downstream Retail network - 2010

Azerbaijan upstream Shah-Deniz gas 2006ACG Deepwater oil 2008Umit gas discovery 2010

Azerbaijan downstreamRetail network developmentGas distribution 2009 Refining and petrochemicals complex - under development

Georgia mid- and downstreamSupsa crude pipeline 1999Kulevi product terminal - 2008Retail station network -2008Gas distribution - 2008

SOCAR HQ - BakuBTC and other pipelinesKulevi Terminal - GeorgiaOil Refinery - BakuPetkim plant - TurkeySOCAR station - GeorgiaRomania downstream retail network - 2010

BTC pipeline - 2005

All pages strictly confidential and not for public use#

socar trading: achievements and expansionSOCAR Trading - commercial and corporate development

10Source: SOCAR TradingSOCAR TRADING, established in 2008, is achieving its three corporate objectives:Market SOCAR system barrel globally: since 2008 30% of volume and gross marginAssist strategic development: achieved in 2010 with processing and investment in oil logisticsGrowth on all three fronts continues in 2011, with increased attention for Asia-Pacific, Africa and the Americas

System crude productionKey system crude customersThird-party crudeThird-party crude under developmentProduct tradingProduct trading to under developmentSOCAR Trading officesSOCAR Trading office to be openedProcessing contractsInvestments in oil logisticsAll pages strictly confidential and not for public use#Fujairah: First tanks operational this year11

1. First 3 fuel tanks operational Q4 20112. All 6 fuel tanks complete Mid 20123. First 6 distillates tanks Mid 2012 4. Final 8 distillates tanks Early 2013PhaseConstructionTypeTanksTotal m312010-2011Main Infrastructure3 x38,000 m3114,000Fuel tanks22011-2012Fuel tanks3 x38,000 m3228,000Distillates tanks5 x22,000 m3340,0001 x6,000 m3346,00032012-2013Distillates tanks7 x39,000 m3621,0001 x20,000 m3641,000All2010-201320 Tanks641,000 m3Source: SOCAR TradingAll pages strictly confidential and not for public use#12Sources: Korea National Oil Corporation

5 M bbl storage agreement in Yeosu

Vessels handling capacityPanamax up to VLCC with min vessel PBL(parallel body length) of 105m

Qualities of crude that can be stored

API Gravity: more than or equal to 27RVP (psi): less than 9.5 (0.67kg/cm2 at 37.8 deg C)Wax Contents (wt%): less than 9Viscosity (cst): less than 22 at 20 deg CSulfur (wt%): less than 3Current Storage placesKNOC FacilitiesOpened in 1998:Underground and aboveground reserve Tank volume: 49.7 MMBYEOSUPartnership with the Korea National Oil CorporationKorean storageAll pages strictly confidential and not for public use#Ludwig Hachfeld Project DirectorSOCAR TradingRue de Villereuse 221207 Geneva, SwitzerlandTel: +41 (0) 22 562 00 00Fax: +41 (0) 22 562 00 99

All pages strictly confidential and not for public useAll pages strictly confidential and not for public use#