SOCAR Trading

All pages strictly confidential and not for public use

Markets for Azeri CrudeHEG Commodity Trading Major– Friday, 11 th November 2011

Ludwig Hachfeld – Project Director

All pages strictly confidential and not for public use

2

2

SOCAR IS THE STATE OIL COMPANY OF AZERBAIJANAzerbaijan – location, history and economy

Source: SOCAR

Azerbaijan

IranTurkey

Russia

Georgia

Armenia

Turkmenistan

Kazakhstan

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

Oil producing country First industrial well - Bibiheybat 1846-1847 1890-1900 – 50% of world supply 1994 - Contract of the Century on ACG fields Current production – over 1m barrels per day

Stability and pro-business reform Government – 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 development Currency – Manat stable against USD GDP – ca. US$55bn and US$10,000 PPP per capita GDP growth – 20-30% pa 2005-2007 and 5% in 2010 Non-oil sector - 55% of GDP growing 7% pa

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3

READY FOR FURTHER DEVELOPMENTAzerbaijan economic and social indicators

Sources: Statistical Office Azerbaijan, SOFAZ

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 40735

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

491.5 692.2 815.6 964.0 1,394.3 1,454.5 2,475.4

11,219.2

14,900.0

22,766.8

30,357.0

USD

bn

2005 2006 2007 2008 2009 2010 2011

0%

10%

20%

30%

40%

50%

60%

70%

26%

35%

25%

11% 9%5% 3%

Azerbaijan GDP growthOil sectorNon-oil sectors

GDP growth GDP diversification

State Oil Fund Assets

2007 2010

36% 44%

57% 49%

Non-oil Sector Oil SectorNet taxes on products and imports

All pages strictly confidential and not for public use

4

AZERBAIJAN UPSTREAM CONSORTIUMAzerbaijan and SOCAR legacy

4

Sources: SOCAR, BP

*COP: Chirag Oil Project

Since 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 Republic’s share of PSA receipts, amounting to $18bn in total assets by mid-2010

SOCAR – State Oil Company of Azerbaijan Republic, incorporated in 1993 to manage all oil and gas assets and activities on the part of the Republic

NovorossiyskSupsa Baku

Ceyhan

BP (operator) 34%

SOCAR 10%

Chevron 10%Inpex 10%

Statoil 9%

ExxonMobil 8%

TPAO 7%

Devon 6%

Itochu 4% Delta Hess 2%

AIOC consortium BTC and other pipelines

BTC (2005)

Baku Supsa (1999)

Baku Novorossiysk (pre-1993)

Azeri Quality ACG production profile

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0 COP GUNESHLI DW AZERI CHIRAGCeyhan Supsa

API 36.6 34.8

Sulphur, wt% 0.15 0.15

TAN, mg KOH/g 0.31 0.26

Vanadium, ppm < 1 < 2.0

*

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5

SOCAR HANDLES 75-80% OF AZERBAIJAN’S PRODUCTION

Source: SOCAR *FOB Other: Supsa, Novorossiysk

Production AIOC partner exports SOCAR Refineries SOCAR exports

Non-ACG11

ACG40.63141

13

6.2206

CIF-CFR21

FOB Ceyhan7.030266328

FOB other*5

Mill

ion

MT

SOCARTrading from Ceyhan

33

2010 Crude Entitlement

Mill

ion

MT

2008 2009 20100

10

20

30

40

50

60

1219 21

10

1112

14

1413

8

7 6

Azeri barrel consolidation

SOCAR Trading - System Barrel Azeri SOCAR MO Other exporters

Refining domestic

44

51 52 52

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6

1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0 Crude exports - CeyhanCrude exports - SupsaCrude exports - NovorossyiskRefining - product exportsRefining - domestic consumptionProduction

Mill

ion

bpd

AZERBAIJAN: EXPORTS STILL INCREASINGExport routes and volumes

Source: SOCAR

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7

MEDITERRANEAN IS AZERI NATURAL MARKETAzerbaijan main oil export destinations from 2008 to 2011

Sources: SOCAR, BTC, press sources and SOCAR Trading estimates, BP

2008 2009 2010 2011

49% 54%64% 64%

13% 7%

6%9%

26%20%

12%8%

12%19% 17% 12%

1% 4%

AfricaAsiaAmericasNW EuropeMed

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8

System crude

SYSTEM BARREL: NOW GROWING THROUGH CONSOLIDATION

SOCAR Trading – system crude marketing 2008-2010

Source: SOCAR Trading

Consolidation

Customers

Markets

2008 2009 2010

6.2 10.213.2

1.6 1.31.3

3.33.8

2.4

1.53.6 3.6

0.1

Africa

Asia

Americas

NW Europe

Med

MM

T

Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 20110

5

10

15

20

25 System barrel Azeri Third party Azeri BTC programme Turkmen

M B

bls

/ Mon

th

14.8

19.3

Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 20110

2

4

6

8

10

12

14

16

11.110.0 9.8

12.410.1

11.8 12.4 11.6

14.2 13.311.7

9.010.9

M B

bls

/ Mon

th

M M

TM

MT

2008 2009 2010

7.2 10.6 10.6

3.9 5.0 6.7

1.4 3.3 3.5

NOC

Major

Refineries

All pages strictly confidential and not for public use

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RECENT INTERNATIONAL EVENTS BOOST AZERI PRICESAzeri premium VS Es Sider OSP

Sources: SOCAR, Reuter, press sources and SOCAR Trading estimates

01 January 2008 01 July 2008 01 January 2009 01 July 2009 01 January 2010 01 July 2010 01 January 2011 01 July 2011-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

All pages strictly confidential and not for public use

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SOCAR CONTINUES TO DEVELOP AND EXPAND INTERNATIONALLYSOCAR – key assets

10

Source: SOCAR

Turkey downstream Petkim petrochemical factory – 2008 Refinery - under development

Ukraine downstream Retail network - 2010

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

Azerbaijan downstream Retail network development Gas distribution – 2009 Refining and petrochemicals

complex - under development

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

SOCAR HQ - Baku BTC and other pipelines

Kulevi Terminal - Georgia Oil Refinery - Baku

Petkim plant - Turkey SOCAR station - Georgia

Romania downstream retail network - 2010

BTC pipeline - 2005

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SOCAR TRADING: ACHIEVEMENTS AND EXPANSIONSOCAR Trading - commercial and corporate development

Source: SOCAR Trading

SOCAR TRADING, established in 2008, is achieving its three corporate objectives: Market SOCAR system barrel globally: since 2008 <50% volume is sold in Med basin Develop third party trading: since 2009 >30% of volume and gross margin Assist 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 production

Key system crude customers

Third-party crude

Third-party crude under development

Product trading

Product trading to under development

SOCAR Trading offices

SOCAR Trading office to be opened

Processing contracts

Investments in oil logistics

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12

FUJAIRAH: FIRST TANKS OPERATIONAL THIS YEAR

12

1. First 3 fuel tanks operational – Q4 2011

2. All 6 fuel tanks complete– Mid 2012

3. First 6 distillates tanks – Mid 2012

4. Final 8 distillates tanks – Early 2013

Phase Construction Type Tanks Total m3

1 2010-2011Main Infrastructure

3 x 38,000 m3 114,000Fuel tanks

2 2011-2012

Fuel tanks 3 x 38,000 m3 228,000

Distillates tanks5 x 22,000 m3 340,000

1 x 6,000 m3 346,000

3 2012-2013 Distillates tanks7 x 39,000 m3 621,000

1 x 20,000 m3 641,000

All 2010-2013 20 Tanks 641,000 m3

Source: SOCAR Trading

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Sources: Korea National Oil Corporation

5 M bbl storage agreement in Yeosu

Vessels handling capacity Panamax 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 27 RVP (psi): less than 9.5 (0.67kg/cm2 at 37.8 deg C) Wax Contents (wt%): less than 9 Viscosity (cst): less than 22 at 20 deg C Sulfur (wt%): less than 3

Current Storage places KNOC Facilities

Opened in 1998:Underground and aboveground reserve Tank volume: 49.7 MMB

YEOSU

Partnership with the Korea National Oil Corporation

KOREAN STORAGE

SOCAR TradingRue de Villereuse 22

1207 Geneva, SwitzerlandTel: +41 (0) 22 562 00 00Fax: +41 (0) 22 562 00 99

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Ludwig Hachfeld – Project Director