Refiners' Digest

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01 March 2016

Global

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Oil & Gas Refining & Marketing

Refiners' Digest COMMENT

The jury is out ■ Refining margins are currently soft, wherever you look from Singapore

to Russia to Europe and the US. All regions are running behind our estimates for 1Q16. NWE stands at $6.1/bbl vs our $7.1/bbl for 1Q16, Asia is at $10.2/bbl QTD vs our $12.3/bbl, and in the US, PADD I is at $8.5/bbl vs our $9.5/bbl, and PADD III on average continues to be slightly below our forecast. Our view has not changed, however: 'sunnier' times are ahead as we head into the summer months and as long as OPEC pumps, not cuts.

■ Movers and shakers last week. In Europe, margins are low and down w/w – uptick in crude, continued weakness in diesel and fuel oil cracks weighed. On middle distillates, inventories were pushed higher when low water levels on the Rhine River disrupted barge shipments in late 2015. Water levels have risen in recent months, allowing normal barge traffic to resume, but reduced distillate heating oil demand due to mild winter (and high runs) kept ARA inventory at elevated levels (leading to volumes held offshore). In Russia, the story looks the toughest (see our new charts) – both simple and teapot refining margins are in negative territory, which should lead to further run cuts and decent crude exports. In Asia, margins remain largely stable at weak levels w/w. Better light distillates, including naphtha encouragingly, were the positives, but offset by increasing prices for Dubai and weaker fuel oil. In the US, PADD III margins ticked up over the week, led by a recovery in the gasoline crack (transition to summer spec). First draw in number of months helped, but gains in PADD I were more subdued as the transition to summer grade gasoline has not kicked in yet. Overall, US gasoline demand is fine as far as recent data is concerned, which is a relief. Overall, however, it is interesting that in an environment where throughput is being cut, crude oil markets have not deteriorated; if anything, they have recovered. Yes, there have been a number of outages (eg KRI, Nigerian exports etc), but whether crude markets (absent any OPEC action) can withstand the pressure from weakening refinery runs in the near-term remains to be seen.

■ What about China? Interestingly, diesel and gasoline exports in January fell m/m (see charts inside), and are at lower levels than much of 2H15. Without data on refinery runs and inventory draws (data will be released for Jan and Feb combined later this month to smooth out the CNY effect), the jury is out on whether the reduced exports represent an improvement in demand. If history is any guide, throughput tends to be lower at the start of the year. But history does not take into account changes to behaviour at teapot refineries (higher runs due to higher crude import licenses), in addition to NDRC's intervention earlier this year, which allows refiners to enjoy higher margins theoretically encouraging higher refinery runs. The government stopped lowering product prices when oil is below $40/bbl since the start of the year, which helps, even though much of the excess profit is placed in a fund that aims to improve energy security/fuel quality. If so, it does at least hint at higher domestic consumption, and alleviate pressure from already battered global diesel market. The jury is out; data will be out end-March.

■ Asian Chemical Prices. Solid momentum remains across the board with seasonal demand emerging post CNY amid sub-par inventory prior to turnaround season. Interestingly, BD spread saw a spike (16% w/w) to US$622/mt whereas ethylene rebounded 7% w/w to US$662/mt. We view recent pricing/margin rally as more of a function of supply issues, which will likely be sustained in 2Q. As such, we see better chance of late-cycle rally for a few 'bad' products in the context of imminent supply drought (e.g. BD).

Research Analysts

Thomas Adolff

44 20 7888 9114

[email protected]

Kenneth Whee

852 2101 7319

[email protected]

Ilkin Karimli

44 20 7883 0303

[email protected]

Horace Tse

852 2101 7379

[email protected]

Justin Teo

44 20 7888 9484

[email protected]

Yaroslav Rumyantsev

44 20 7883 1722

[email protected]

01 March 2016

Refiners' Digest 2

Table of contents Regional refining margins 3 Asian Olefin, vinyl and styrenics chain 4 Asian PET chain 5 Refining margins summary 6 Commodity monitor – Crude runs 7 Commodity monitor – Outages/Maintenance 8 Commodity monitor – Global crude differentials 9 Commodity monitor – Saudi Official Selling Prices 10 Commodity monitor – Iraqi OSPs 11 Commodity monitor – NWE product/crude spreads 12 Commodity monitor – US refining margins 13 Commodity monitor – USGC and USEC spreads 14 Commodity monitor – Asian refining margins 15 Commodity monitor – Chinese product demand data 16 Commodity monitor – Chinese net import/export data 17 Commodity monitor – South Korean refinery data 18 Commodity monitor – Japanese refinery data 19 Commodity monitor – Russian refining margins 20 De-constructed: Russian refining margins 21 Commodity monitor – Russian crude/product output 22 Commodity monitor – Saudi Arabia refinery data 23 Commodity monitor – Indian refinery data 24 Commodity monitor – Brazilian product margins 25 Commodity monitor – Brazil refinery data 26 Commodity monitor – Mexico refinery data 27 Regional OECD End-of-Month Industry (oil) stocks 28 US inventory and demand data 29 OECD and European inventory data 30 CS versus Valero's view on net capacity additions 31 Global refining closures since 2009 33 NEW WORLD ORDER – Global product flows and regional product balances 34 OLD WORLD – Global product flows and regional product balances 35 Global refiners’ valuation summary 36 Appendix 37 Downstream: Refining 101 38 Let's take it step by step 42

01 March 2016

Refiners' Digest 3

Regional refining margins

Figure 1: CS Indicator NWE refining margins ($/bbl) Figure 2: MED Complex vs Simple refining margins ($/bbl)

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Source: Platts, Credit Suisse Research Source: Hellenic Petroleum, Credit Suisse Research

Figure 3: US East Coast 6-3-2-1 ($/bbl) (Brent based) Figure 4: USGC 3-2-1 ($/bbl) (LLS based)

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Figure 5: 6-2-3-1 Singapore Refining margins ($/bbl) Figure 6: Russian export margins to NWE ($/bbl)

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Source: Platts, Credit Suisse Research Source: Argus, Credit Suisse Research

01 March 2016

Refiners' Digest 4

Asian Olefin, vinyl and styrenics chain

Figure 7: Butadiene margin Figure 8: PE margin

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Ethylene-Naphtha PE-Ethylene Quarterly Average

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Source: Thomson Reuters Source: Thomson Reuters

Figure 9: PP margin Figure 10: PVC margin

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PVC-Naphtha-Chlorine Quarterly Average

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Figure 11: EDC margin Figure 12: SM margin

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Figure 13: PS margin Figure 14: ABS margin

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01 March 2016

Refiners' Digest 5

Asian PET chain

Figure 15: PET margin Figure 16: PSF margins

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Figure 17: POY margin Figure 18: MEG-Ethylene margin

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Figure 19: PTA-PX margin Figure 20: PX-Naphtha margin

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01 March 2016

Refiners' Digest 6

Refining margins summary Figure 21: Quarterly crude price, product crack and refining margin calculations ($/bbl)

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Last Last Prior Last 1Q16 1Q16

TD 4 wks 2 wks 2 wks 1 wk q/q (%) ($/bbl) y/y (%) ($/bbl)

Crude oil prices ($/bbl)

WTI 97.6 72.9 48.6 57.7 46.6 41.9 31.0 30.2 30.7 29.7 31.5 -26% -11.0 -36% -17.7

Brent 102.2 75.8 53.92 62.1 50.1 43.3 31.9 33.1 33.6 32.6 34.1 -26% -11.4 -41% -22.0

Brent/Urals spread -1.8 -1.6 -1.72 -1.5 -1.5 -2.7 -2.8 -2.7 -2.6 -2.7 -2.6 -3% -0.1 -61% -1.1

Refining margins ($/bbl)

NWE Indicator margin 6.8 6.6 8.6 9.3 10.2 7.0 6.1 4.6 4.3 4.9 4.0 -13% -0.9 -29% -2.5

PADD I 10.2 11.5 12.2 12.6 12.4 8.8 8.5 7.1 6.4 7.7 5.4 -4% -0.3 -31% -3.7

PADD II 17.4 14.4 16.3 20.9 24.2 14.2 7.8 7.6 11.1 4.1 11.9 -45% -6.4 -52% -8.5

PADD III (WTI) 18.4 9.8 17.7 22.6 20.9 10.8 10.5 10.2 10.1 10.3 10.8 -2% -0.2 -41% -7.2

PADD IV 30.5 24.5 23.1 32.7 37.7 23.4 17.6 15.9 16.9 14.9 18.2 -25% -5.8 -24% -5.5

PADD V 16.8 13.7 21.5 29.0 23.2 21.6 17.0 11.6 8.9 14.4 16.2 -22% -4.7 -21% -4.6

US weighted average 17.5 12.1 17.8 22.8 21.7 13.7 11.2 9.8 9.9 9.7 10.9 -18% -2.5 -37% -6.6

Asia (Singapore) 9.7 11.0 12.4 12.5 10.4 11.5 10.2 8.4 9.1 7.8 9.0 -11% -1.3 -18% -2.2

Product cracks (NWE)

Gasoline 13.7 9.8 11.4 17.5 21.0 11.6 12.5 8.8 7.8 9.8 7.8 7% 0.9 9% 1.0

Heating oil 12.6 13.0 13.1 12.5 12.2 8.6 5.3 5.1 5.3 5.0 4.7 -39% -3.4 -60% -7.8

Diesel 16.8 18.1 17.6 16.6 15.9 12.5 8.0 7.9 8.4 7.5 7.9 -36% -4.5 -54% -9.6

LSFO (1%) -11.5 -12.0 -9.3 -10.3 -11.9 -12.8 -11.4 -11.7 -12.1 -11.3 -12.4 11% 1.4 -22% -2.1

HSFO (3.5%) -16.7 -15.9 -13.7 -14.0 -14.8 -17.5 -14.9 -14.6 -14.9 -14.2 -15.1 15% 2.6 -9% -1.2

Naphtha -4.7 -8.7 -2.4 -2.9 -2.8 2.0 1.7 -1.1 -1.3 -1.0 -1.0 -15% -0.3 169% 4.1

Jet 17.9 20.0 18.4 14.9 14.2 12.7 9.5 9.3 9.3 9.3 8.9 -25% -3.2 -48% -8.9

Source: Platts, Credit Suisse research; Note: CS Indicator margin – Crude slate (Brent/Urals at 35/65); Product slate: Gasoline (26%), Naphtha

(7%), Gasoil (10%), ULSD (30%), Jet (7%), LSFO (8%), HSFO (12%) and assumes a 6% C&L loss.

Figure 22: Regional refining margin forecasts ($/bbl)

1Q15 2Q15 3Q15 4Q15 2015 1Q16E 2Q16E 3Q16E 4Q16E 2016E

CS NWE Indicator margin $8.7 $9.3 $10.2 $7.0 $8.8 $7.1 $8.4 $8.9 $5.5 $7.5

Asia (Singapore) 6-2-3-1 $12.4 $12.5 $10.4 $11.5 $11.7 $12.3 $12.4 $10.3 $10.8 $10.9

US East Coast (PADD I) 6-3-2-1 (Brent) $12.3 $12.6 $12.4 $8.8 $11.5 $9.5 $12.5 $12.5 $9.5 $11.5

US Midwest (PADD II) 3-2-1 (WTI) $16.3 $20.9 $24.3 $14.2 $18.9 $10.3 $16.3 $15.5 $12.5 $13.6

US Gulf Coast (PADD III) 3-2-1 (WTI) $17.7 $22.6 $20.8 $10.8 $18.0 $11.3 $14.3 $13.0 $8.0 $11.6

US Gulf Coast (PADD III) 3-2-1 (LLS) $13.4 $17.5 $17.5 $9.2 $14.4 $9.8 $13.3 $12.0 $6.5 $10.4

US West Coast (PADD V) 5-3-1-1 (ANS) $21.6 $29.1 $23.2 $21.5 $23.9 $20.0 $25.0 $20.0 $16.3 $20.3

Source: Platts, Credit Suisse estimates

Figure 23: Full year crude price, European product crack and margin realisations ($/bbl)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

5 yr avg

10 yr avg

Crude oil prices ($/bbl)

Brent 28.83 38.26 54.49 65.41 72.70 97.60 61.81 79.71 111.04 111.85 108.84 99.28 53.54 96.91 83.30

Brent/Urals spread -1.62 -4.14 -4.15 -4.18 -3.31 -2.83 -0.63 -1.40 -1.80 -1.66 -1.18 -1.72 -1.85 -1.64 -2.25

Refining margins ($/bbl)

CS NWE Indicator Margin 4.91 8.12 8.80 7.12 7.78 8.55 3.66 5.14 4.74 7.17 4.44 5.31 8.81 6.09 6.50

Product cracks (NWE)

Gasoline 6.40 9.30 8.80 8.35 10.26 1.83 6.84 7.89 6.80 11.38 8.67 10.38 15.25 10.49 8.77

Heating oil 5.34 8.61 13.26 12.36 12.73 23.81 6.85 9.17 12.61 14.08 12.80 12.30 11.94 12.75 12.90

Diesel 8.65 14.07 19.07 17.24 18.23 30.71 10.95 14.39 18.43 20.23 18.05 16.60 15.89 17.84 18.16

LSFO (1%) -2.75 -12.98 -15.03 -19.49 -18.66 -14.92 -5.58 -7.29 -10.37 -6.20 -12.14 -11.39 -11.01 -10.22 -12.01

HSFO (3.5%) -7.64 -16.66 -20.95 -22.45 -21.83 -28.02 -9.07 -12.06 -17.29 -15.12 -18.09 -18.71 -14.74 -16.79 -18.03

Naphtha 1.14 3.11 -2.14 -3.12 1.85 -10.24 -3.14 -0.91 -7.59 -8.43 -9.05 -6.53 -1.79 -6.68 -4.65

Jet 7.27 12.71 18.03 17.97 18.50 31.06 10.57 13.05 18.84 19.46 17.85 17.30 15.14 17.72 17.98

Source: Platts, Credit Suisse estimates; Note: CS Indicator margin assumes a 6% C&L loss, whereas other margins are unadjusted for C&L

01 March 2016

Refiners' Digest 7

Commodity monitor – Crude runs

Figure 24: Global crude runs (mbd) Figure 25: OECD crude runs (mbd)

Source: IEA, Credit Suisse Research Source: IEA, Credit Suisse Research

Figure 26: US refinery runs (mbd) Figure 27: Original EU 16 refinery runs (kbd)

Source: DOE, Credit Suisse Research Source: Euroil, Credit Suisse Research

Figure 28: Chinese refinery runs (kbd) Figure 29: Russian refinery runs (kbd)

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

Jan

Feb

Mar

ch

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2011 2012 2013 2014 2015

4,000

4,500

5,000

5,500

6,000

6,500

Jan

Feb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

Dec

2011 2012 2013 2014 2015 2016

Source: CEI, Credit Suisse Research Source: Federal State Statistics Service (up to end 2012), The

Ministry of Energy (from 2013) Credit Suisse Research

01 March 2016

Refiners' Digest 8

Commodity monitor – Outages/Maintenance

Figure 30: Global reported CDU outages (mbd) Figure 31: World ex-US, ex-FSU & ex-NWE reported CDU

outages (mbd)

Source: Bloomberg, Credit Suisse Research Source: Bloomberg, Credit Suisse Research

Figure 32: Total US CDU maintenance forecast (kbd) Figure 33: NWE reported CDU outages (kbd)

Source: EIA, Credit Suisse Research Source: Bloomberg, Credit Suisse Research

Figure 34: FSU reported CDU outages (kbd) Figure 35: China reported CDU outages (kbd)

Source: Bloomberg, Credit Suisse Research Source: Bloomberg, NBS, Credit Suisse Research

01 March 2016

Refiners' Digest 9

Commodity monitor – Global crude differentials

Figure 36: WTI-Brent differentials ($/bbl) Figure 37: WTI-LLS differentials ($/bbl)

-$30

-$25

-$20

-$15

-$10

-$5

$0

$5

$10

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016 2016 forecasts

-$30

-$25

-$20

-$15

-$10

-$5

$0

$5

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

Figure 38: LLS-Brent differentials ($/bbl) Figure 39: LLS-Mars differentials ($/bbl)

-$15

-$10

-$5

$0

$5

$10

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

-$2

$0

$2

$4

$6

$8

$10

$12

Janu

ary

Febr

uary

Mar

ch

April

May

June July

Sept

embe

r

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

Figure 40: LLS-Maya differentials ($/bbl) Figure 41: Urals-Brent differentials ($/bbl)

-$5

$0

$5

$10

$15

$20

$25

$30

Janu

ary

Febr

uary

Mar

ch

April

May

June

July

Sept

embe

r

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

-$6

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

Janu

ary

Febr

uary

Mar

ch

April

May

June July

Sept

embe

r

Oct

ober

Nove

mbe

r

Dece

mbe

r2015 2016 2016 forecasts

Figure 42: Bonny Light-Brent differentials ($/bbl) Figure 43: Brent-Dubai differentials ($/bbl)

-$3

-$2

-$1

$0

$1

$2

$3

$4

$5

$6

$7

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

-$5.0

-$3.0

-$1.0

$1.0

$3.0

$5.0

$7.0

$9.0

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

Source for Figures 36-43: Platts Source for Figures 36-43: Platts

01 March 2016

Refiners' Digest 10

Commodity monitor – Saudi Official Selling Prices

Figure 44: Saudi OSPs to Asia ($/bbl) Figure 45: OSP to Asia: Extra Light to Heavy spread

-$8.0

-$6.0

-$4.0

-$2.0

$0.0

$2.0

$4.0

$6.0

$8.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

Extra Light Light Medium Heavy

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

Figure 46: Saudi OSPs to the US ($/bbl) Figure 47: OSP to the US: Extra Light to Heavy spread

-$3.0

-$2.0

-$1.0

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16


$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

Jan-

16

Mar

-16

Figure 48: Saudi OSPs to the Med ($/bbl) Figure 49: OSP to the Med: Extra Light to Heavy spread

-$10.0

-$8.0

-$6.0

-$4.0

-$2.0

$0.0

$2.0

$4.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16


$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

Jan-

16

Mar

-16

Figure 50: Saudi OSPs to Europe ($/bbl) Figure 51: OSP to Europe: Extra Light to Heavy spread

-$10.0

-$8.0

-$6.0

-$4.0

-$2.0

$0.0

$2.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16


$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

Source: the BLOOMBERG PROFESSIONAL™ service Source: the BLOOMBERG PROFESSIONAL™ service

01 March 2016

Refiners' Digest 11

Commodity monitor – Iraqi OSPs

Figure 52: Iraqi OSPs to Asia ($/bbl) Figure 53: OSP to Asia: Light to Heavy spread

-$10.0

-$8.0

-$6.0

-$4.0

-$2.0

$0.0

$2.0

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-1

6

Basrah Heavy Basrah Light

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-1

6


Figure 54: Iraqi OSPs to the US ($/bbl) Figure 55: OSP to the US: Light to Heavy spread

-$7.0

-$6.0

-$5.0

-$4.0

-$3.0

-$2.0

-$1.0

$0.0

$1.0

$2.0

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-1

6


$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-1

6


Figure 56: Iraqi OSPs to Europe ($/bbl) Figure 57: OSP to Europe: Light to Heavy spread

-$12.0

-$10.0

-$8.0

-$6.0

-$4.0

-$2.0

$0.0

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-1

6


$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-1

5

Ma

y-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-1

6


01 March 2016

Refiners' Digest 12

Commodity monitor – NWE product/crude spreads

Figure 58: Original EU 16 refinery runs (mbd) Figure 59: NWE gasoline cracks ($/bbl)

-$10

-$5

$0

$5

$10

$15

$20

$25

$30

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016 2016 forecasts

Source: Euroil, Credit Suisse Research Source: Platts, the BLOOMBERG PROFESSIONAL™ service

Figure 60: NWE naphtha cracks ($/bbl) Figure 61: NWE Reforming spread ($/t)

-$20

-$15

-$10

-$5

$0

$5

$10

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016 2016 forecasts

-$50

$0

$50

$100

$150

$200

$250

$300

Janu

ary

Fe

bru

ary

Marc

h

Ap

ril

May

June

July

Se

pte

mb

er

Oct

ober

No

vem

ber

De

cem

ber

2015 2016

Source: Platts, the BLOOMBERG PROFESSIONAL™ service Source: Platts, the BLOOMBERG PROFESSIONAL™ service

Figure 62: NWE 10ppm diesel cracks ($/bbl) Figure 63: NWE 1.0% fuel oil cracks ($/bbl)

$0

$5

$10

$15

$20

$25

$30

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016 2016 forecasts

-$25

-$20

-$15

-$10

-$5

$0

$5

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016 2016 forecasts


01 March 2016

Refiners' Digest 13

Commodity monitor – US refining margins

Figure 64: Total US throughput (mbd) Figure 65: USGC 3-2-1 ($/bbl) (WTI based)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Janu

ary

Fe

bru

ary

Marc

h

Ap

ril

May

June

July

Se

pte

mb

er

Oct

ober

No

vem

ber

De

cem

ber

2015 2016 2016 forecasts

Source: DOE, Credit Suisse Research Source: Platts, the BLOOMBERG PROFESSIONAL™ service

Figure 66: USGC 3-2-1 ($/bbl) (MAYA based) Figure 67: US Mid-Continent 3-2-1 ($/bbl) (WTI based)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

$0

$10

$20

$30

$40

$50

$60Ja

nuar

y

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016 2016 forecasts


Figure 68: US East Coast 6-3-2-1 ($/bbl) (Brent based) Figure 69: US West Coast 5-3-1-1 ($/bbl) (ANS based)

$0

$5

$10

$15

$20

$25

$30

Janu

ary

Fe

bru

ary

Mar

ch

Ap

ril

May

June

July

Se

ptem

ber

Oct

obe

r

No

vem

ber

De

cem

ber

2015 2016 2016 forecasts

$0

$10

$20

$30

$40

$50

$60

$70

Janu

ary

Fe

bru

ary

Mar

ch

Ap

ril

May

June

July

Se

ptem

ber

Oct

obe

r

No

vem

ber

De

cem

ber

2015 2016 2016 forecasts


01 March 2016

Refiners' Digest 14

Commodity monitor – USGC and USEC spreads

Figure 70: USGC gasoline cracks ($/bbl) (LLS based) Figure 71: USGC distillate cracks ($/bbl) (LLS based)

-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

$30

$35

$40

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

$0

$5

$10

$15

$20

$25

$30

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016


Figure 72: USGC gasoline cracks ($/bbl) (WTI based) Figure 73: USGC distillate cracks ($/bbl) (WTI based)

-$10

$0

$10

$20

$30

$40

$50

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016


Figure 74: USEC gasoline cracks ($/bbl) (Brent based) Figure 75: USEC distillate cracks ($/bbl) (Brent based)

-$10

-$5

$0

$5

$10

$15

$20

$25

$30

$35

$40

Janu

ary

Fe

bru

ary

Mar

ch

Ap

ril

May

June

July

Se

ptem

ber

Oct

obe

r

No

vem

ber

De

cem

ber

2015 2016

$0

$5

$10

$15

$20

$25

$30

$35

$40

Janu

ary

Fe

bru

ary

Mar

ch

Ap

ril

May

June

July

Se

ptem

ber

Oct

obe

r

No

vem

ber

De

cem

ber

2015 2016


01 March 2016

Refiners' Digest 15

Commodity monitor – Asian refining margins

Figure 76: Japan crude runs, mbd Figure 77: Chinese refinery runs (kbd)

2000

2200

2400

2600

2800

3000

3200

3400

3600

3800

4000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Range 2010-2014 2014 2015 Avg 2010-2014

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

Jan

Feb

Mar

ch

Apr

il

May

June

July

Aug

Sep

t

Oct

Nov Dec

2011 2012 2013 2014 2015

Source: JODI, Credit Suisse Research Source: CEI, Credit Suisse Research

Figure 78: 6-2-3-1 Singapore Dubai based margins ($/bbl) Figure 79: Singapore gasoline cracks ($/bbl)

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Janu

ary

Fe

bru

ary

Marc

h

Ap

ril

May

June

July

Se

pte

mb

er

Oct

ober

No

vem

ber

De

cem

ber

2015 2016 2016 forecasts

$0

$5

$10

$15

$20

$25

$30

$35

$40

Janu

ary

Fe

bru

ary

Marc

h

Ap

ril

May

June

July

Se

pte

mb

er

Oct

ober

No

vem

ber

De

cem

ber

2015 2016


Figure 80: Singapore diesel crack ($/bbl) Figure 81: Singapore fuel oil (FO) crack ($/bbl)

$0

$5

$10

$15

$20

$25

$30

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016

-$25

-$20

-$15

-$10

-$5

$0

$5

Janu

ary

Feb

ruar

y

Mar

ch

Apr

il

May

June

July

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

2015 2016


01 March 2016

Refiners' Digest 16

Commodity monitor – Chinese product demand data

Figure 82: Oil products demand, 3MMA y/y growth (mbd) Figure 83: Oil products demand, y/y (%)

-0.6

-0.3

0.0

0.3

0.6

0.9

1.2

1.5

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Total Oil Products

(MBD)

-10

-5

0

5

10

15


Total Oil Products

(%)

Source: CEIC, Credit Suisse Asia Oil & Gas Source: CEIC, Credit Suisse Asia Oil & Gas

Figure 84: Gasoline demand, 3MMA y/y growth (mbd) Figure 85: Gasoline demand, y/y (%)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40


Gasoline

(MBD)

-5

0

5

10

15

20


Gasoline

(%)


Figure 86: Diesel demand, 3MMA y/y growth (mbd) Figure 87: Diesel demand, y/y (%)

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5


Diesel

(MBD)

-15

-10

-5

0

5

10

15

20


Diesel

(%)


01 March 2016

Refiners' Digest 17

Commodity monitor – Chinese net import/export data

Figure 88: Net total oil products import/(export), kbd Figure 89: Net gasoline import/(export), kbd

-300-200-100

0100200300400500600700

Jan

Feb

Marc

h

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2012 2013 2014 2015 2016

-300

-250

-200

-150

-100

-50

0

Jan

Feb

Marc

h

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2012 2013 2014 2015 2016

Source: CEIC, Credit Suisse Research Source: CEIC, Credit Suisse Research

Figure 90: Net diesel import/(export), kbd Figure 91: Net jet/kero import/(export), kbd

-300

-250

-200

-150

-100

-50

0

50

Jan

Feb

Marc

h

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2012 2013 2014 2015 2016

-350

-300

-250

-200

-150

-100

-50

0

50

Jan

Feb

Marc

h

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2012 2013 2014 2015 2016


Figure 92: Net Naphtha import/(export), kbd Figure 93: Net fuel oil import/(export), kbd

0

50

100

150

200

250

300

Jan

Feb

Marc

h

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2012 2013 2014 2015 2016

-200

-100

0

100

200

300

400

500

Jan

Feb

Marc

h

April

May

June

July

Aug

Sept

Oct

Nov

Dec

2012 2013 2014 2015 2016


01 March 2016

Refiners' Digest 18

Commodity monitor – South Korean refinery data

Figure 94: South Korean refinery runs (kbd) Figure 95: Oil Products Net Exports (kbd)

2000

2200

2400

2600

2800

3000

3200


Range 2010-2014 2014 2015 Avg 2010-2014

-200

-100

0

100

200

300

400

500

600

700


Range 2010-2014 2014

2015 Avg 2010-2014

Source: JODI, Credit Suisse Research Source: JODI, Credit Suisse Research

Figure 96: Gasoline output (kbd) Figure 97: Fuel Oil output (kbd)

0

100

200

300

400

500

600


Range 2010-2014 2014 2015 2010

0

50

100

150

200

250

300

350

400

450


Range 2010-2014 2014 2015 Avg 2010-2014


Figure 98: Gas/Diesel output (kbd) Figure 99: Gas oil/ Diesel net exports (kbd)

600

700

800

900

1000

1100

1200


Range 2010-2014 2014 2015 Avg 2010-2014

200

250

300

350

400

450

500

550

600


2015 2014 2013 2012


01 March 2016

Refiners' Digest 19

Commodity monitor – Japanese refinery data

Figure 100: Japanese refinery runs (kbd) Figure 101: Oil Products Net Exports (kbd)

2000

2200

2400

2600

2800

3000

3200

3400

3600

3800

4000


Range 2010-2014 2014 2015 Avg 2010-2014

0

50

100

150

200

250

300


Range 2010-2014 2014

2015 Avg 2010-2014



700

750

800

850

900

950

1000

1050

1100

1150

1200


Range 2010-2014 2014 2015 2010

0

100

200

300

400

500

600


Range 2010-2014 2014 2015 Avg 2010-2014



600

700

800

900

1000

1100

1200


Range 2010-2014 2014 2015 Avg 2010-2014

0

50

100

150

200

250

300


2015 2014 2013 2012


01 March 2016

Refiners' Digest 20

Commodity monitor – Russian refining margins

Refining margins in Russia have come under pressure in 2015. This is due to the

implementation of the so-called tax manoeuvre, which came into force on 1st Jan 2015.

One of the parameters of the tax change was the reduction in export duties, designed to

stimulate upstream economics. Given domestic oil prices are calculated on a netback

basis (i.e. oil prices net of export duties), a reduction in export duties leads to higher

domestic oil prices i.e. higher feedstock costs.

For 2016, we expect margins in Russia to remain largely in line with 2015 levels. The two

main factors impacting margins in 2015 were the tax manoeuvre, which increased the

burden on the downstream segment, and RUB weakness. As per the government’s tax

amendments late last year, a planned cut in oil export duty will be delayed by at least one

year, which should remove the pressure on margins compared to 2015. In this

environment, we do not expect a significant recovery in throughputs either and expect the

companies to demonstrate a similar flexibility on throughputs as they did last year.

Figure 106: Russian refining margins to NWE ($/bbl) Figure 107: Complex Russian margins to NWE ($/bbl)

-10

-5

0

5

10

15

20

25

30

Medium/Complex NWE Simple NWE Teapot NWE

-10

-5

0

5

10

15

20

25

30

Gasoil Gasoline Naphtha VGO Fuel oil Loss Total

Source: Argus, Credit Suisse estimates Source: Argus, Credit Suisse estimates

Figure 108: Simple Russian margins to NWE ($/bbl) Figure 109: Teapot Russian margins to NWE ($/bbl)

-10

-5

0

5

10

15

20


-10

-5

0

5

10

15

20



01 March 2016

Refiners' Digest 21

De-constructed: Russian refining margins

Figure 110: 'Complex' Russian margins to NWE ($/bbls) Figure 111: 'Complex' Russian margins to Med ($/bbls)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec

2016 2015 2014 2013 2012

0.00

5.00

10.00

15.00

20.00

25.00

30.00


2016 2015 2014 2013 2012


Figure 112: 'Simple' Russian margins to NWE ($/bbls) Figure 113: 'Simple' Russian margins to Med ($/bbls)

-5

0

5

10

15

20


2016 2015 2014 2013 2012

-5.00

0.00

5.00

10.00

15.00

20.00


2016 2015 2014 2013 2012


Figure 114: 'Teapot' Russian margins to NWE ($/bbls) Figure 115: 'Teapot' Russian margins to Med ($/bbls)

-5.00

0.00

5.00

10.00

15.00

20.00


2016 2015 2014 2013 2012

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00


2016 2015 2014 2013 2012


01 March 2016

Refiners' Digest 22

Commodity monitor – Russian crude/product output

Figure 116: Production of crude and condensate, kbd Figure 117: Crude export, kbd

10,100

10,200

10,300

10,400

10,500

10,600

10,700

10,800

10,900


2013 2014 2015 2016

3,500

3,700

3,900

4,100

4,300

4,500

4,700

4,900

5,100

5,300

5,500


2013 2014 2015 2016

Source: The Ministry of Energy Source: The Ministry of Energy

Figure 118: Crude delivered to refineries, kbd Figure 119: Refinery throughput, kbd

4,500

4,700

4,900

5,100

5,300

5,500

5,700

5,900

6,100

6,300

6,500


2013 2014 2015 2016

4,500

4,700

4,900

5,100

5,300

5,500

5,700

5,900

6,100

6,300

6,500


2013 2014 2015 2016


Figure 120: Gasoline output, kbd Figure 121: Diesel output, kbd

700

750

800

850

900

950

1,000


2013 2014 2015 2016

1,200

1,300

1,400

1,500

1,600

1,700

1,800


2013 2014 2015 2016


Figure 122: Fuel oil output, kbd Figure 123: Jet output, kbd

1,000

1,100

1,200

1,300

1,400

1,500

1,600


2013 2014 2015 2016

100

120

140

160

180

200

220

240

260

280

300


2013 2014 2015 2016


01 March 2016

Refiners' Digest 23

Commodity monitor – Saudi Arabia refinery data

Figure 124: Saudi Arabian refinery runs (kbd) Figure 125: Oil Products Net Exports (kbd)

0

500

1000

1500

2000

2500

3000


Range 2010-2014 2014 2015 Avg 2010-2014

-200

-100

0

100

200

300

400

500

600

700

800


Range 2010-2014 2014 2015 Avg 2010-2014



0

100

200

300

400

500

600

700


Range 2010-2014 2014 2015 Avg 2010-2014

0

100

200

300

400

500

600


Range 2010-2014 2014 2015 Avg 2010-2014


Figure 128: Gas/Diesel output (kbd) Figure 129: Gas Oil / Diesel net export (kbd)

0

200

400

600

800

1000

1200

1400


Range 2010-2014 2014 2015 Avg 2010-2014

-300

-200

-100

0

100

200

300

400


2015 2014 2013 2012


01 March 2016

Refiners' Digest 24

Commodity monitor – Indian refinery data

Figure 130: Indian refinery runs (kbd) Figure 131: Oil Products Net Exports (kbd)

0

1000

2000

3000

4000

5000

6000


Range 2010-2014 2014 2015 Avg 2010-2014

-200

0

200

400

600

800

1000

1200

1400

1600


Range 2010-2014 2014

2015 Avg 2010-2014



200

300

400

500

600

700

800

900

1000

1100


Range 2010-2014 2014 2015 2010

0

50

100

150

200

250

300

350

400


Range 2010-2014 2014 2015 Avg 2010-2014



500

700

900

1100

1300

1500

1700

1900

2100

2300


Range 2010-2014 2014 2015 Avg 2010-2014

0

100

200

300

400

500

600

700

800


2015 2014 2013 2012


01 March 2016

Refiners' Digest 25

Commodity monitor – Brazilian product margins

Theoretically, the Brazilian Downstream market is an attractive one: the country is long oil,

short oil products, product demand has been strong over the past ten years (less so now),

and the largest demand centres are located close to the large oil reservoirs. In practice,

the pricing policy of key oil products has been very opaque, making refining a loss making

business for most of the past five years in Brazil. PBR has mentioned a commitment to

price its products in line with international prices in the long run, but at the same time not

passing through international volatility to the domestic consumer. Gasoline and diesel in

Brazil are priced in R$/liter, and there is no known formula for when and by how much

adjustments should be made to follow international prices. PBR's Downstream division

buys oil from its E&P division at market prices, but because Downstream prices are

opaque, PBR's Downstream profitability has varied significantly. Over 2011-14, this

division was loss making; it sold gasoline and diesel at or below prices it paid for crude.

Figure 136: Brazil: Domestic vs international prices (R$/liter)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

60%

70%

Jan

10

Jul 1

0

Jan

11

Jul 1

1

Jan

12

Jul 1

2

Jan

13

Jul 1

3

Jan

14

Jul 1

4

Jan

15

Jul 1

5

Jan

16

Gasoline Diesel

Average 20% domestic discount from 2011-14

Source: MME, Credit Suisse Research

Figure 137: Brazilian vs GoM gasoline prices (R$/liter) Figure 138: Brazilian vs GoM diesel prices (R$/liter)

0.0

0.5

1.0

1.5

2.0

2.5

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oct-

10

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oct-

11

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-

13

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-

14

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-

15

Ja

n-1

6

Domestic gasoline (R$/liter) US GoM gasoline (R$/liter)

0.0

0.5

1.0

1.5

2.0

2.5

Jan-1

0

Apr-

10

Jul-1

0

Oct-

10

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Jul-1

3

Oct-

13

Jan-1

4

Apr-

14

Jul-1

4

Oct-

14

Jan-1

5

Apr-

15

Jul-1

5

Oct-

15

Jan-1

6

Domestic diesel (R$/liter) US GoM diesel (R$/liter)

Source: MME, the BLOOMBERG PROFESSIONAL™ service Source: MME, the BLOOMBERG PROFESSIONAL™ service

01 March 2016

Refiners' Digest 26

Commodity monitor – Brazil refinery data

Figure 139: Brazilian refinery runs (kbd) Figure 140: Oil Products Net Import (kbd)

1500

1700

1900

2100

2300

2500

2700


Range 2010-2014 2014 2015 Avg 2010-2014

0

100

200

300

400

500

600

700

800


Range 2010-2014 2014

2015 Avg 2010-2014



200

250

300

350

400

450

500

550

600

650


Range 2010-2014 2014 2015 2010

0

50

100

150

200

250

300

350


Range 2010-2014 2014 2015 Avg 2010-2014


Figure 143: Gas/Diesel output (kbd) Figure 144: Gas oil/ Diesel net imports (kbd)

500

550

600

650

700

750

800

850

900

950

1000


Range 2010-2014 2014 2015 Avg 2010-2014

0

50

100

150

200

250

300


2015 2014 2013 2012


01 March 2016

Refiners' Digest 27

Commodity monitor – Mexico refinery data

Figure 145: Mexican refinery runs (kbd) Figure 146: Oil Products Net Import (kbd)

800

900

1000

1100

1200

1300

1400


Range 2010-2014 2014 2015 Avg 2010-2014

0

100

200

300

400

500

600

700

800

900


Range 2010-2014 2014

2015 Avg 2010-2014



200

250

300

350

400

450

500


Range 2010-2014 2014 2015 2010

0

50

100

150

200

250

300

350

400


Range 2010-2014 2014 2015 Avg 2010-2014


Figure 149: Gas/Diesel output (kbd) Figure 150: Gas oil/ Diesel net imports (kbd)

250

300

350

400

450

500


Range 2010-2014 2014 2015 Avg 2010-2014

0

50

100

150

200

250


2015 2014 2013 2012


01 March 2016

Refiners' Digest 28

Regional OECD End-of-Month Industry (oil) stocks

Figure 151: OECD Total Oil fwd demand cover (days) Figure 152: OECD Total Oil stocks (mb)

Figure 153: Americas Total Oil fwd demand cover (days) Figure 154: Americas Total Oil stocks (mb)

Figure 155: Europe Total Oil fwd demand cover (days) Figure 156: Europe Total Oil stocks (mb)

Figure 157: Asia Oceania Total Oil fwd dem cover (days) Figure 158: Asia Oceania Total Oil stocks (mb)

Source for Figures 153-160: IEA Source for Figures 153-160: IEA

01 March 2016

Refiners' Digest 29

US inventory and demand data

Figure 159: US crude inventories (mbbls) Figure 160: US crude days of forward cover

Source: EIA, Credit Suisse Research Source: EIA, Credit Suisse Research

Figure 161: US gasoline inventories (mbbls) Figure 162: US middle distillate inventories (mbbls)


Figure 163: US finished gasoline demand (mbd) Figure 164: US middle distillate demand (mbd)


01 March 2016

Refiners' Digest 30

OECD and European inventory data

Figure 165: OECD crude inventories (mbbls) Figure 166: Original EU 16 crude inventories (mbbls)

Source: IEA, Credit Suisse Research Source: Euroil, Credit Suisse Research

Figure 167: OECD gasoline inventories (mbbls) Figure 168: OECD middle distillate inventories (mbbls)

Source: IEA, Credit Suisse Research Source: IEA, Credit Suisse Research

Figure 169: Original EU 16 gasoline inventories (mbbls) Figure 170: Original EU 16 MD inventories (mbbls)

Source: Euroil, Credit Suisse Research Source: Euroil, Credit Suisse Research

01 March 2016

Refiners' Digest 31

CS versus Valero's view on net capacity additions

Figure 171: Net global distillation capacity additions (kbd)

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,5002

01

3

20

14

20

15

E

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

MidEastClosure/Capacity cut

North AmericaClosure/Capacity cut

OECD APACClosure/Capacity cut

EuropeClosure/Capacity cut

ChinaClosure/Capacity cut

AfricaRefinery

North AfricaRefinery

FSURefinery

LatamRefinery

MidEastCondensate Splitter

MidEastRefinery

Asia ex ChinaCondensate Splitter

Asia ex ChinaRefinery

ChinaRefinery

OECD APACRefinery

OECD APACCondensate Splitter

EuropeRefinery

North AmericaCondensate Splitter

North AmericaRefinery

Net capacity addition

Source: Company data, Credit Suisse estimates

Figure 172: Valero's estimates for net global distillation capacity additions (mbd)

Source: Valero

01 March 2016

Refiners' Digest 32

Figure 173: Net global distillation capacity additions (kbd) Global refinery net additions in 2015 (excluding creeps)

Country Company Refinery Capacity (bpd) Year Quarter

US North America MDU North Dakota Refinery 20,000 2015 Q1

US North America DK Tyler Refinery 15,000 2015 Q1

US North America KMI Galena Park (ph 1) Condensate Splitter 50,000 2015 Q1

Saudi Arabia MidEast Saudi Aramco/Sinopec Yanbu (ph 2) Refinery 200,000 2015 Q2

U.A.E. MidEast Abu Dhabi Nat. Oil Co Ruwais (phase 2) Refinery 200,000 2015 Q2

US North America MPC Catlettsburg Condensate Splitter 35,000 2015 Q2

US North America 3 Tribes Ward County Refinery 20,000 2015 Mid-2015

Australia OECD APAC BP Bulwer Island Closure/Capacity cut -102,000 2015 May-15

Switzerland Europe Tamoil Collombey Closure/Capacity cut -72,000 2015 Mid-2015

Russia FSU LukOil Volgrograd Refinery 65,000 2015 Mid-2015

US North America KMI Galena Park (ph 1) Condensate Splitter 50,000 2015 Q2/Q3

Pakistan Asia ex China Byco Petroleum Karachi Refinery 120,000 2015 Q3

Algeria North Africa Sonatrach Tiaret Refinery 100,000 2015 Q3/Q4

US North America Buckeye Texas Partners/Traf Corpus Christi Condensate Splitter 50,000 2015 Q3/Q4

China China Sinopec Jiangxi Refinery 100,000 2015 Q4

China China CNOOC Zhejiang Refinery 140,000 2015 Q4

China China Sinopec Hebei expansion Refinery 30,000 2015 Q4

Colombia Latam Ecopetrol Reficar expansion Refinery 85,000 2015 Q4

US North America VLO McKee Refinery 27,000 2015 Q4

US North America VLO Corpus Christi Refinery 70,000 2015 Q4

Suriname Latam Staatsolie Tout Lui Faut Refinery 8,000 2015 Q4

Taiwan OECD APAC CPC Kaohsiung Refinery -220,000 2015 Q4

Japan (CS estimate) OECD APAC TonenGen METI Phase II related Closure/Capacity cut -81,000 2015 Q4

Japan (CS estimate) OECD APAC Idemitsu Kosan METI Phase II related Closure/Capacity cut -55,000 2015 Q4

Japan (CS estimate) OECD APAC Cosmo Oil METI Phase II related Closure/Capacity cut -52,000 2015 Q4

Japan OECD APAC PBR Okinawa Closure/Capacity cut -100,000 2015 Q4

Total in 2015 703,000

Global refinery net additions in 2016 (excluding creeps)


US North America CLMT Great Falls Refinery 15,000 2016 Q1

US North America Castleton Corpus Christi Condensate Splitter 100,000 2016 Q1

India Asia ex China IOC Paradip Refinery 300,000 2016 Q1

China China CNOOC Taizhou Refinery 60,000 2016 Q2

US North America VLO Houston Refinery 90,000 2016 Q2

US North America CHSCP McPherson Refinery 15,000 2016 1H

US North America MPC Robinson Refinery 30,000 2016 1H

Qatar MidEast QP Ras Laffan II Condensate Splitter 146,000 2016 Q2/Q3

Peru Latam Petroperu Talara Refinery 33,000 2016 2016

Algeria North Africa Naftec Arzew Refinery 25,000 2016 2016

US North America TARGA Houston Condensate Splitter 35,000 2016 2016

South Korea OECD APAC Hyundai Lotte Seosan Condensate Splitter 110,000 2016 Q3

India Asia ex China BPCL Kochi expansion Refinery 112,000 2016 Q3

Mongolia Asia ex China Mogol Sekiyu Darkhan-Uul Refinery 44,000 2016 Q3/Q4

Japan (CS estimate) OECD APAC JX METI Phase II related Closure/Capacity cut -141,000 2016 Q3/Q4

Japan (CS estimate) OECD APAC Showa Shell METI Phase II related Closure/Capacity cut -37,000 2016 Q3/Q4

Japan (CS estimate) OECD APAC Fuji Oil METI Phase II related Closure/Capacity cut -14,000 2016 Q3/Q4

Japan (CS estimate) OECD APAC Taiyo Oil METI Phase II related Closure/Capacity cut -14,000 2016 Q3/Q4

US North America MMP Corpus Christi Condensate Splitter 50,000 2016 2H16

US North America MMLP Corpus Christi Condensate Splitter 75,000 2016 2H16

China China CNOOC Huizhou Refinery 200,000 2016 2H16

France Europe Total La Mede Closure/Capacity cut -153,000 2015 2H16

UK Europe Total Lindsey Closure/Capacity cut -100,000 2016 2H16

Russia FSU Gazprom Neft Omsk Refinery 24,000 2016 2H16

US North America WNR El Paso Refinery 25,000 2016 Q4

US North America PSX Freeport Condensate Splitter 100,000 2016 Q4

China China Shandong govt imposed Teapot refineries Closure/Capacity cut -80,000 2016 Q4

Total in 2016 1,050,000



Iran MidEast NIOC PGS Phase I Condensate Splitter 120,000 2017 Q1

China China CNPC/Aramco Yunnan Refinery 260,000 2017 Q1/Q2

Kuwait MidEast KNPC Shuaiba Closure/Capacity cut -200,000 2017 Q2

Canada North America North West Redwater Partnership Edmonton Refinery 50,000 2017 Q3

Oman MidEast Sohar Bitumen Refinery Sohar Refinery 60,000 2017 Q3

China China PetroChina Huabei Refinery 100,000 2017 Q3

China China CNOOC/Zhonghai Guangdong Refinery 70,000 2017 2017

Venezuela Latam PDVSA Santa Ines Refinery 40,000 2017 2017

Venezuela Latam PDVSA Puerto de la Cruz Refinery 30,000 2017 2017

Saudi Arabia MidEast Saudi Aramco/Sumitomo Rabigh II Refinery 50,000 2017 2017

Algeria Africa Sonatrach Skikda Refinery 100,000 2017 2017

Sudan Africa Ventec Thangrial Refinery 10,000 2017 2017

China China Sinopec/KPC Zhanjiang Refinery 300,000 2017 Q4


Total in 2017 910,000



Iran MidEast NIOC PGS Phase II Condensate Splitter 120,000 2018 Q1

China China CNPC/PDVSA Jieyang Refinery 400,000 2018 Q3

India Asia ex China IOCL Koyali Refinery 86,000 2018 Q3

Turkey Europe Socar Star (Izmir) Refinery 214,000 2018 Q4

Brazil Latam PBR Abreu e Lima (ph 2) Refinery 115,000 2018 Q4


Total in 2018 855,000



Iran MidEast NIOC PGS Phase III Condensate Splitter 120,000 2019 Q1

Vietnam Asia ex China PetroVietnam Nghi Son Refinery 200,000 2019 Q1

China China CNOOC Shandong Refinery 70,000 2019 Q1

Timor Leste Asia ex China PTT/Timor Gap TL cond splitter Condensate Splitter 40,000 2019 Q2

Russia FSU Tatneft Taneco Ph 2 Refinery 120,000 2019 Q2

Mongolia Asia ex China Mongol Sekiyu Corp Darkhan-Uul Refinery 40,000 2019 Q3

China China PetroChina Gansu Refinery 60,000 2019 Q3

India Asia ex China MRPL Karnataka Refinery 60,000 2019 Q4

Angola Africa Sonangol Lobito Ph 1 Refinery 120,000 2019 Q4

Total in 2019 830,000



Bahrain MidEast BAPCO Sitra Refinery 93,000 2020 Q1

Iran MidEast NIOC SIRAF 1 Condensate Splitter 60,000 2020 Q1

Iran MidEast NIOC SIRAF 2 Condensate Splitter 60,000 2020 Q1

Yemen MidEast Yemen-Hunt Marib expansion Refinery 15,000 2020 Q2

China China Sinopec Henan Refinery 160,000 2020 Q3

Malaysia Asia ex China Petronas RAPID Refinery 300,000 2020 Q4

China China PetroChina/Rosneft Tianjin Refinery 320,000 2020 Q4

Australia OECD APAC Vitol Geelong Closure/Capacity cut -105,000 2020 Q4

Australia (CS estimate) OECD APAC Caltex Lytton Closure/Capacity cut -109,000 2020 Q4

Total in 2020 794,000 Source: Company data, Credit Suisse estimates

01 March 2016

Refiners' Digest 33

Global refining closures since 2009 Figure 174: Announced refinery closures

Announced Region Country Company Capacity Complexity Status

Quiangquao Asia China PetroChina 50 Shutdown completed in June 2009

Negishi Asia Japan JX Holdings 70 9.1 Cutting capacity of 70kbd out of 340kbd by October 2010

Oita Asia Japan JX Holdings 24 6.6 Cutting 24kbd out of 160kbd by May 2010 (from March 2011)

Kashima Asia Japan JX Holdings 21 6.4 Cutting 21kbd out of 210kbd by May 2010 (from March 2011)

Mizushima Asia Japan JX Holdings 110 13.7 Cutting 110kbd out of 455kbd.

Toyama Asia Japan JX Holdings 60 1.8 Closed in 2009

Various Asia Japan Cosmo Oil 80 8.6 Completed in Feb 2010; net capacity cut

Kawasaki Asia Japan Showa Shell 120 7.2 Completed in Sept 2011

Sodegaura Asia Japan Fuji Oil 52 8.2 Permanent closure of crude unit 1 in Nov 2010 (from 192kbd)

Sakaide Asia Japan Cosmo 140 6.5 To be closed in July 2013

Tokuyama Asia Japan Idemitsu Kosan 120 6.9 Permanently closed by March 2014

Muroran Asia Japan JX Holdings 180 Permanently closed by March 2014

Kawasaki Asia Japan TonenGen 67 To close one CDU by March 2014

Wakayama Asia Japan TonenGen 38 To close one CDU by March 2014

Chiba Asia Japan TonenGen 23 To reduce capacity of the refinery in 2014

Clyde Asia Australia Shell 85 7.7 To be converted by Sept 2012 (prior target mid 2013)

Kurnell Asia Australia Caltex 125 6.2 Announced for closure in July 2012

Bulwer Island Asia Australia BP 102 7.2 Announced for closure in April 2014; to be closed by mid-'15

Kaohsiung Asia Taiwan CPC 220 5.8 Announced for closure; we assumed late 2015 to be closed

Okinawa Asia Japan PBR 100 2.6 Announced for closure in March 2015; needed upgrade

Eagle Point NA US SUN 145 8.4 Permanently shut down and dismantled in late 2009

Bloomfield NA US Western Ref 17 6.3 Shut down as part of refinery restructuring

Montreal E NA Canada Shell 130 9.4 Operated as terminal since last 2010

Yorktown NA US Western Ref 70 8.4 Shut down - Now operated as a terminal

Bakersfield NA US Flying J 68 8.8 Alon to reopen secondary units only

Tulsa NA US Holly Corp 40 Merger of 2 refineries - Reduced capacity

St Croix NA Virg Islands Hovensa 150 9.4 Capacity reduction to 350kbd by 1Q11

Marcus H. NA US Sun 175 8.2 Idled in Dec 2011

St Croix NA Virg Islands Hovensa 350 9.4 Idling by mid Feb 2012

Aruba NA Aruba Valero 235 8.0 Announced to be closed in March/April 2012

North Pole NA Alaska Flint Hills 135 Closing 1 CDU in 2Q12

Dartmouth NA Canada Imperial Oil 88 7.4 Failure to find a buyer. To be converted into terminal in 2H13

North Pole NA Alaska Flint Hills 85 Closing 2nd

CDU in 2Q14

Gonfreville EMEA France Total 80 7.8 Cutting capacity by 80kbd from 339kbd

Teesside EMEA UK Petroplus 117 2.1 Announced in 2009, and converted in 2010

Dunkirk EMEA France Total 137 6.7 Long-term shutdown since Sept 09. Converted in 1H10.

Harburg EMEA Germany Shell 107 9.6 Initially planned for early 2012; now delayed to 1Q13

Reichstett EMEA France Petroplus 85 5.3 Petroplus looking to convert in 1Q/2Q11

Cremona EMEA Italy Tamoil 94 7.6 To be converted by end 2011

Wilhelmshav EMEA Germany COP 260 5.2 We treat this as an inoperable refinery despite the sale

Arpechim EMEA Romania Petrom 70 7.3 Converting to terminal in 2Q11

Berre EMEA France Lyondell 105 6.7 Mothballed from Jan 2012 for two years; likely idled after

Lisichansk EMEA Ukraine TNK-BP 175 8.3 TNK-BP announced permanent closure

Rome EMEA Italy Total/ERG 89 7.3 ERG announced closure by 3Q12

Coryton EMEA UK Petroplus 220 12.0 Failed to find buyer. Proceed to close starting June 2012

Fawley EMEA UK XOM 80 10.1 Decommissioning 1 CDU of the 330kbd complex in Sept ‘12

Petit Cour. EMEA France Petroplus 154 7.6 Failed to find buyer.

Pardubice EMEA Czech Rep Unipetrol 20 3.9 Ended crude processing in 2012

Venice EMEA Italy ENI 107 6.8 Converted into biodiesel plant

Mantova EMEA Italy IES (MOL) 52 8.4 Converting into terminal in early 2014

Stanlow EMEA UK Essar 101 8.2 Capacity cut to 195kbd (previous run rate of 220kbd)

Milford Haven EMEA UK Murco 106 10.3 Deal with Klesch fell apart; site converted into terminal

Lindsey EMEA UK Total 100 8.1 Closing one CDU in by the end of16

La Mede EMEA France Total 153 8.7 Converting into biodiesel / ref operations to end by end 2016

Collombey EMEA Swiss Tamoil 72 6.9 Closing after failed to find a buyer by end March 2015

Shuaiba EMEA Kuwait KNPC 205 7.4 To be closed in April 2017 (source Argus)

Total 6162 ~7.7

Source: OGJ, Argus, Credit Suisse estimates, Company data

0

1 M

arc

h 2

01

6

Re

fine

rs' D

ige

st

34

NEW WORLD ORDER – Global product flows and regional product balances

Figure 175: NEW WORLD ORDER – product flows and balances (kbd)

Source: Credit Suisse Research

0

1 M

arc

h 2

01

6

Re

fine

rs' D

ige

st

35

OLD WORLD – Global product flows and regional product balances

Figure 176: OLD WORLD – product flows and balances (kbd)


0

1 M

arc

h 2

01

6

Re

fine

rs' D

ige

st

36

Global refiners’ valuation summary

Figure 177: Global refiners' valuation multiples

Global Refiners: Summary Valuations EPS Metrics Dividends and Buybacks

Price YTD Target Mkt Cap EV EV

Company Ticker Reco Analyst FX perfomance

29-Feb USD terms Price $Mn Mn $Mn 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 16E 17E 16E 17E 18E 16E 17E 18E

US REFINERS

Alon USA ALJ V N Edward Westlake $ $ 9.9 -33.6% $ 19.0 700 1,081 1,081 0.69 0.96 14.3 10.3 - (47%) 39% 0.4 0.4 68% 142% 6.5% 6.5% 6.5% 6.5%

Delek US Holdings DK O Edward Westlake $ $ 15.8 -35.7% $ 37.0 984 1,420 1,420 1.55 1.57 10.2 10.1 - (19%) 1% 1.4 1.5 8% 5% 4.0% 4.2% 4.0% 4.2%

HollyFrontier Corp HFC N Edward Westlake $ $ 33.8 -15.2% $ 60.0 5,831 7,270 7,270 4.85 4.45 7.0 7.6 - 0% (8%) 3.4 4.0 42% 12% 4.0% 4.1% 16.0% 16.1%

Marathon Petroleum Corp. MPC O Edward Westlake $ $ 34.3 -33.9% $ 58.0 18,126 18,354 18,354 4.64 5.26 7.4 6.5 - (21%) 13% 4.4 4.7 6% 12% 3.8% 4.0% 3.8% 4.0%

PBF Energy PBF O Edward Westlake $ $ 30.2 -18.0% $ 44.0 3,102 3,837 3,837 5.93 6.11 5.1 4.9 - 40% 3% 4.2 4.5 40% 35% 4.1% 4.2% 4.1% 7.4%

Phillips 66 PSX.N N Edward Westlake $ $ 79.4 -2.9% $ 95.0 41,875 47,742 47,742 7.54 8.66 10.5 9.2 - (2%) 15% 6.5 7.3 17% 18% 2.6% 2.7% 8.6% 8.8%

Tesoro Corp. TSO O Edward Westlake $ $ 80.7 -23.4% $ 125.0 9,672 12,704 12,704 8.80 7.36 9.2 11.0 - (23%) (16%) 8.8 8.1 0% (9%) 2.6% 2.7% 2.6% 2.7%

Valero Energy VLO O Edward Westlake $ $ 60.1 -15.0% $ 85.0 28,261 31,511 31,511 8.84 7.81 6.8 7.7 - (3%) (12%) 7.2 7.6 22% 3% 4.1% 4.3% 4.1% 4.3%

Western Refining WNR O Edward Westlake $ $ 26.7 -25.1% $ 52.0 2,433 2,783 2,783 2.83 2.74 9.4 9.7 - (44%) (3%) 2.9 2.6 (4%) 5% 5.7% 5.7% 5.7% 5.7%

8.6 8.3 - (7%) 3% 0% 17% 11% 3.4% 3.5% 0.0% 6.3% 6.5% 0.0%

EURO REFINERS

Tupras TUPRS.IS O Onur Muminoglu TRY TRY 75.9 7.2% TRY 85.4 6,419 11,144 5,915 8.99 8.52 7.52 8.4 8.9 10.1 27% (5%) (12%) 9 9 (5%) (7%) 6.5% 6.7% 6.7% 6.5% 6.7% 6.7%

8.4 8.9 10.1 27% (5%) (12%) (5%) (7%) 6.5% 6.7% 6.7% 6.5% 6.7% 6.7%

ASIAN REFINERS

Bharat BPCL.BO O Badrinath Srinivasan Rs. Rs. 769.8 -16.5% Rs. 1130.0 8,155 765,590 11,314 79.98 9.6 - - 7% 93.8 104.9 (15%) - 3.5% 3.5%

Caltex Australia CTX.AX O Mark Samter A$ A$ 36.5 -5.2% A$ 40.0 6,942 10,230 7,297 2.32 2.22 2.32 15.5 16.2 15.5 (0%) (4%) 4% 2.4 2.4 (2%) (7%) 3.2% 3.1% 3.2% 3.2% 3.1% 3.2%

Formosa Petroleum 6505.TW O Jeremy Chen T$ T$ 84.4 5.7% T$ 90.0 24,809 892,485 26,960 4.74 4.81 18.2 17.9 - (5%) 2% 4 4 8% 10% 4.0% 3.8% 4.0% 3.8%

Hindustan Petroleum HPCL.BO O Badrinath Srinivasan Rs. Rs. 688.2 -21.5% Rs. 1080.0 3,414 551,272 8,218 100.35 108.17 6.9 6.4 - 28% 8% 102 114 (1%) (5%) 8.3% 8.9% 8.3% 8.9%

Indian Oil Corp IOC.BO O Badrinath Srinivasan Rs. Rs. 367.3 -17.6% Rs. 495.0 13,063 1,516,265 22,507 48.86 7.5 - - 36% 52 58 (7%) - 4.6% 4.6%

Reliance Industries RELI.BO N David Hewitt Rs. Rs. 966.6 -7.6% Rs. 1050.0 45,872 4,335,476 63,861 58.07 64.30 16.6 15.0 - (32%) 11% 93 106 (38%) (39%) 1.2% 1.3% 1.2% 1.3%

SK Innovation 096770.KS O Kenneth Whee W W 145000 5.9% W 170000 10,880 19,757,987 16,315 14,718 14,755 9.9 9.8 - 67% 0% 15,031 16,455 (2%) (10%) 2.2% 2.2% 2.2% 2.2%

S-Oil 010950.KS O Kenneth Whee W W 79000 -5.6% W 102000 7,218 10,784,592 8,821 7,197 8,226 11.0 9.6 - 28% 14% 7,674 7,900 (6%) 4% 3.8% 5.1% 3.8% 5.1%

ThaiOil TOP.BK O Paworamon (Poom) SuvarnatemeeBt Bt 64 -2.7% Bt 75 3,640 150,757 4,229 7.17 6.77 7.09 8.9 9.4 9.0 20% (6%) 5% 7 7 (2%) (9%) 5.1% 4.8% 5.0% 5.1% 4.8% 5.0%

14.1 11.9 1.1 0% 5% 0% (15%) (14%) 2.9% 2.3% 0.3% 2.9% 2.3% 0.3%

Consensus EPS Credit Suisse

vs consensus

Vo

lati

le EPS P/E EPS Growth Total YieldDividend Yield

Capex and Free Cashflow Cash Flow and EBIDAX

TP

Company FX Upside /

16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E 15E 16E 17E (Downside)

US REFINERS

Alon USA $ (152) (90) 72 163 - (35%) 126% (100%) 10% 23% 3.2 2.8 3.8 3.6 - 35.1% 35.3% 28.0% 93%

Delek US Holdings $ (124) (133) 88 86 - 518% (3%) (100%) 9% 9% 4.8 4.6 4.5 4.6 - 26.3% 24.4% 20.0% 134%

HollyFrontier Corp $ (500) (500) 648 533 - 111% (18%) (100%) 11% 10% 5.2 5.4 5.4 5.6 - 12.8% 16.9% 22.4% 77%

Marathon Petroleum Corp. $ (3,699) (3,472) 1,069 1,231 - (60%) 15% (100%) 6% 7% 3.8 3.7 3.6 3.3 - 45.5% 38.9% 34.4% 69%

PBF Energy $ (1,158) (605) (277) 289 - 52% 204% (100%) (9%) 9% 3.5 3.4 3.7 3.7 - 29.9% 33.8% 29.3% 46%

Phillips 66 $ (3,612) (4,350) 673 508 - 151% (25%) (100%) 2% 1% 9.6 8.0 8.7 8.0 - 19.4% 21.8% 23.2% 20%

Tesoro Corp. $ (1,760) (1,992) 261 (64) - (74%) (124%) 100% 3% (1%) 5.0 5.2 5.3 5.6 - 37.4% 29.7% 27.1% 55%

Valero Energy $ (1,950) (1,950) 2,709 1,162 - (21%) (57%) (100%) 10% 4% 5.3 7.2 4.8 5.3 - 13.4% 12.4% 16.2% 41%

Western Refining $ (175) (150) 20 31 - (96%) 56% (100%) 1% 1% 2.1 1.9 na 12.7 13.4 - 20.5% 19.7% 18.4% 95%

45% (25%) (83%) 5% 4% 0% 6.5 6.4 - 6.3 6.2 - 23.8% 23.0% 23.6%

EURO REFINERS

Tupras TRY (823) (773) (848) 1,809 2,103 2,051 1124% 16% (2%) 10% 11% 11% 9.6 8.5 8.2 5.3 5.9 6.9 45.4% 46.2% 44.6% 13%

1124% 16% (2%) 10% 11% 11% 9.6 8.5 8.2 5.3 5.9 6.9 45.4% 46.2% 44.6%

ASIAN REFINERS

Bharat Rs. (88,619) 30,476 - - 146% (100%) (12%) 5% 4.7 8.2 - - 45.2% 40.2% - 47%

Caltex Australia A$ (405) (245) (230) 415 599 640 (48%) 44% 7% 4% 6% 7% 14.9 11.7 11.4 11.9 12.1 12.0 13.5% 22.4% 15.1% 11%

Formosa Petroleum T$ (5,041) (5,166) 55,922 52,366 (38%) (6%) 7% 6% 13.5 14.3 14.7 14.8 - 20.8% 15.5% 10.4% 4%

Hindustan Petroleum Rs. (51,707) (118,277) 12,338 (59,293) - 1119% (581%) 100% (1%) 5% (25%) 3.6 4.0 8.3 8.3 - 66.9% 64.9% 67.5% 57%

Indian Oil Corp Rs. (238,438) (20,038) - - 90% 100% (22%) (2%) 4.1 7.3 - - 45.6% 45.1% - 35%

Reliance Industries Rs. (514,839) (396,891) (135,142) (12,268) - 70% 91% 100% (15%) (4%) (0%) 8.2 8.1 12.5 10.0 - 34% 36% 36% 9%

SK Innovation W (2,000,000) (2,000,000) 1,107,616 272,904 (46%) (75%) 8% 2% 4.3 5.9 8.1 7.6 - 29% 26% 25% 17%

S-Oil W (1,200,000) (1,000,000) 564,842 196,614 (28%) (65%) 6% 2% 5.0 7.4 8.4 8.2 - 26% 22% 22% 29%

ThaiOil Bt (3,530) (864) (864) 12,482 15,459 20,330 (25%) 24% 32% 10% 12% 16% 7.6 7.8 5.9 6.1 6.3 5.9 20% 13% 6% 18%

59% 13% 41% (6%) 1% (0%) 8.3 7.8 0.8 11.1 8.9 0.8 31.8% 31.0% 21.7%

Netdebt /(Net Debt+Equity)Free Cash FlowCapex FCF Growth FCF Yield EV/EBIDAXP/CF

Source: Company data, Credit Suisse estimates, Thomson Datastream

01 March 2016

Refiners' Digest 37

Appendix

01 March 2016

Refiners' Digest 38

Downstream: Refining 101

Figure 178: Downstream Overview

Source: Credit Suisse US Oil and Gas Research, DOE

How refiners make money

Oil refining is the industrial process of turning crude into useful products; i.e., without

refineries, crude oil is an unusable commodity outside of power generation. Refiners differ

significantly from each other in terms of what they specialise in producing (yield), their

ability to process difficult or heavy crude (complexity), and the size of the refinery. The size

of the refinery will allow a company to benefit from economies of scale, while a higher

complexity refinery stands to gain from a higher yield of light products (premium to Brent)

and the ability to process heavier and more sour crude (at a discount to Brent/WTI).

Margins by region can differ depending on the product supply/demand dynamics in the

area as well as availability and price of the region’s price setting marginal crude oil.

Figure 179: Refinery margin calculation

Revenue from

products (depends

on product slate)

minusFeedstock costs

(depends on crude

quality)

minus

Refinery related

costs (opex,

transport,

complexity)

equalsRefinery net margin


Regardless of the differences between refineries, every refinery earns its return the same

way; it buys crude, incurs some costs from processing it and then sells the products

yielded from processing the crude. After all costs are deducted, a refinery is left with the

refinery margin. In cases where the cost of the crude and processing is larger as was

evident during 2009 and the first half of 2010, the refining margin is negative. A prudent

refiner then would lower the processing rate to reduce the production of the loss-making

products (yield optimisation). This typically means that the refinery reduces the processing

rate to limit the output of fuel oil, a product that trades at a discount to crude and is often

used as feedstock for complex refineries or in bunkering/power generation. In other cases,

a refinery may try to optimise yields by refining a lighter slate of crude, which yields a

higher portion of light products; however, this is at a cost of a higher feedstock burden.

01 March 2016

Refiners' Digest 39

Figure 180: Refining Margins Drive Refinery Value Figure 181: Nelson Complexity Index

Source: Credit Suisse US Oil and Gas Research Source: Credit Suisse US Oil and Gas Research

Figure 182: Crude Oil Characteristics Figure 183: Crude Oil Basics

Source: VLO Source: VLO

Figure 184: Why not make every Refinery complex? Figure 185: MED Complex vs Simple ref margins ($/bbl)

-$10

-$5

$0

$5

$10

$15

$20

$25

Sep

20

06

Mar

20

07

Sep

20

07

Mar

20

08

Sep

20

08

Mar

20

09

Sep

20

09

Mar

20

10

Sep

20

10

Mar

20

11

Sep

20

11

Mar

20

12

Sep

20

12

Mar

20

13

Sep

20

13

Mar

20

14

Sep

20

14

Mar

20

15

Sep

20

15

Hydrocracking Hydroskimming

Source: Credit Suisse US Oil and Gas Research Source: Hellenic Petroleum, Credit Suisse Research

01 March 2016

Refiners' Digest 40

Complex vs Simple refineries. The conversion margin represents the difference between

a cash margin from a simple refinery and one from a refinery with more sophisticated

conversion capabilities. The difference between a complex and simple refinery is the

ability to optimise the stream of crude processed. A complex refiner can take advantage of

the discounts of the medium/heavy sour crude. The Jamnagar refinery in India and

numerous US Gulf Coast refineries are some examples of highly complex refineries where

processing the heavy and difficult crude leaves them less exposed in a weak refining

margin environment.

Figure 186: What's in a barrel of Crude Oil? Figure 187: Basic Refining Concepts

Source: VLO Source: VLO

■ Simple refinery: involves atmospheric distillation, plus some common secondary

processes (usually reforming and hydro-treating to raise the quality of the product

output to current commercial/environmental standards). These simple processes

produce large volumes of residual fuel oil, especially from heavier grades of crude oil.

■ Complex refinery: produces a greater quantity of light products (eg gasoline) by using

the heavy gas oils and gases from some processes as feedstock for others, such as

cracking and alkylation. A highly complex plant adds more technological sophistication,

eating up more of the low value, heavy products through residue destruction

technologies such as coking. Some highly complex refineries are also integrated with

petchem or lubricant plants to further enhance the value of the final products.

Figure 188: Refinery Yield (%) – Europe and Med Figure 189: Refinery Yield (%) – USGC and Asia

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Eu

rop

e_

Bre

nt_

HS

Eu

rop

e_

Ura

ls_

HS

Eu

rop

e_

Bre

nt_

FCC

+ V

B

Eu

rop

e_

Ura

ls_

FCC

+ V

B

Me

d_

Es

Sid

er_

HS

Me

d_

Ura

ls_

HS

Me

d_

Es

Sid

er_

HC

+ V

B

Me

d_

Ura

ls_

HC

+ V

B

LSFO

HSFO

Diesel

Kerosene

Naphtha

Gasoline

LPG

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sin

gap

ore

_D

ub

ai _

HS

Sin

gap

ore

_T

apis

_H

S

Sin

gap

ore

_D

ub

ai _

HC

/FC

C +

VB

Sin

gap

ore

_T

apis

_H

C/F

CC

+ V

B

USG

C_

50

/50

HLS

/LLS

_FC

C

USG

C_

Mar

s_FC

C

USG

C_

ASC

I_FC

C

USG

C_

50

/50

HLS

/LLS

_FC

C +

Co

kin

g

USG

C_

50

/50

Mar

s/M

aya_

FCC

+C

oki

ng

USG

C_

ASC

I_FC

C +

Co

kin

g

LSFO

HSFO

Diesel

Kerosene

Naphtha

Gasoline

LPG

Source: IEA; Note: HS = Hydro-skimming; FCC = Fluid Catalytic

Cracker, VB = Visbreaker, HC = Hydrocracking

Source: IEA; Note: HS = Hydro-skimming; FCC = Fluid Catalytic

Cracker, VB = Visbreaker, HC = Hydrocracking

01 March 2016

Refiners' Digest 41

Refinery complexity varies around the world, due primarily to regional differences in oil

product demand. Most simple refineries are located in developing countries and the former

Soviet Union, where demand for light products is inferior and where significant volumes of

residual fuel are still used for PowerGen. This, however, is changing as economies mature

and product specifications are tightened (and therefore the output of residual fuel oil

declines). The additional processes needed to make the increased amount of light

products also cost more, both in terms of capital and opex. The most complex refineries

are in the US, where gasoline’s share of oil consumption is high. Western Europe’s

refineries are less sophisticated than their American counterparts and have their product

output weighed more heavily towards gas oil.

Gravity is typically measured in terms of a scale set by the American Petroleum Institute

(API) in which higher values designate lighter grades, while sulphur content is usually

measured as the % by weight of sulphur occurring in crude oil. Higher values indicate

more sulphur. These scales are used to classify crude oil as light (>34 degree API),

medium (22-34 degree API) and heavy (<22 degree API), and as sweet (<0.5% sulphur),

medium sour (0.5-1.5% sulphur) and sour (>1.5% sulphur).

Sweet grades are frequently further divided into high or low pour point grades, where pour

point is the lowest temperature at which the grade flows readily, and into naphthenic or

paraffinic grades. Naphthenic crude oil has a high proportion of naphthenes in its naphtha

fractions, making it suitable for gasoline manufacturing, whereas paraffinic crude oil is

more suitable as a petrochemical feedstock.

Fuel cost: a critical variable. A refiners’ principal use of crude is as a processing

feedstock. Thus, the higher the oil price, the bigger the burden from a working capital

perspective, but also from a profitability perspective. The latter is the case as the refining

business is energy-intensive. The cost of fuelling a refinery is 5-12% of the total cost of the

refinery (subject to complexity) in Europe; often this is called Consumption and Losses

(C&L). The higher the complexity of a refinery, the higher the energy costs given the

numerous units, while other factors such as the layout of the refinery also have an impact.

What is the source of power? Typically, refining units consume steam, fuel gas, boiler

feed, gas oil, nitrogen, water and cooling water. The source of power will vary from refinery

to refinery. In some cases refineries get power from the grid while in others they are self-

generated. Self-generation is possible as a refinery utilises the light ends (methane,

ethane) that arise from refining in a gas generator or heating furnace. The advantage is a

refiner is insulated from power shortages on the grid, while self-generating is also utilising

an otherwise wasted energy source from refining, if not connected to the pipeline network.

01 March 2016

Refiners' Digest 42

Let's take it step by step

Figure 190: Breaking Down a Barrel of Crude

Source: Credit Suisse US Oil and Gas Research, DOE

Figure 191: A Closer Look at Separation and Cuts

Source: Credit Suisse US Oil and Gas Research, VLO

01 March 2016

Refiners' Digest 43

Figure 192: From Fractions to Final Products

Source: Credit Suisse US Oil and Gas Research

Figure 193: Advanced Upgrading Unit: Fluid Catalytic Cracker (FCC) – Gasoline Oriented


01 March 2016

Refiners' Digest 44

Figure 194: Advanced Upgrading Unit: Hydrocracker – Diesel oriented


Figure 195: Advanced Upgrading Unit: Delayed Coker


01 March 2016

Refiners' Digest 45

Figure 196: Product Finishing Units: Reformer & Desulfurizer


Figure 197: Product Finishing Units: Alkylation Unit


01 March 2016

Refiners' Digest 46

Figure 198: Making Finished Gasoline


Figure 199: Making Finished Diesel


01 March 2016

Refiners' Digest 47

Figure 200: Examples of the Uses for the Products created from Crude


01 March 2016

Refiners' Digest 48

Companies Mentioned (Price as of 29-Feb-2016)

Alon USA Energy, Inc. (ALJ.N, $9.86) BP (BP.L, 351.45p) Bharat Petroleum (BPCL.BO, Rs769.8) CVR Energy (CVI.N, $23.65) Caltex Australia (CTX.AX, A$36.54) Chevron Corp. (CVX.N, $83.44) ConocoPhillips (COP.N, $33.83) Delek US Holdings, Inc. (DK.N, $15.82) Dow Chemical Company (DOW.N, $48.61) DuPont de Nemours and Co. (DD.N, $60.87) ENI (ENI.MI, €12.95) EOG Resources (EOG.N, $64.74) ExxonMobil Corporation (XOM.N, $80.15) Formosa Petrochemical (6505.TW, NT$84.4) Formosa Plastics (1301.TW, NT$79.0) Galp Energia (GALP.LS, €10.11) Hindustan Petroleum (HPCL.BO, Rs688.15) Holly Frontier Corp. (HFC.N, $33.82) Indian Oil Corp Limited (IOC.BO, Rs367.25) LUKoil (LKOH.MM, Rbl2686.0) MOL (MOLB.BU, Ft13910.0) Marathon (MPC.N, $34.25) Nan Ya Plastics (1303.TW, NT$63.8) Neste (NES1V.HE, €28.91) OMV (OMVV.VI, €24.18) PKN Orlen (PKN.WA, zł63.92) PetroChina (0857.HK, HK$4.99) Petrobras (PBR.N, $3.6) Phillips 66 (PSX.N, $79.39) Reliance Industries Limited (RELI.BO, Rs966.55) Repsol (REP.MC, €9.52) Rosneft (ROSNq.L, $3.77) Royal Dutch Shell plc (RDSa.L, 1647.5p) S-Oil Corp (010950.KS, W79,000) SK Innovation (096770.KS, W145,000) Saras (SRS.MI, €1.485) Sinopec Shanghai Petrochemical Company Limited (0338.HK, HK$3.3) Tesoro Corp. (TSO.N, $80.68) Thai Oil (TOP.BK, Bt63.5) Total (TOTF.PA, €41.38) Tupras (TUPRS.IS, TL75.9) Valero Energy Corporation (VLO.N, $60.08) Western Refining Inc. (WNR.N, $26.67)

Disclosure Appendix

Important Global Disclosures

Thomas Adolff, Justin Teo, Ilkin Karimli, Kenneth Whee and Horace Tse each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

01 March 2016

Refiners' Digest 49

3-Year Price and Rating History for S-Oil Corp (010950.KS)

010950.KS Closing Price Target Price

Date (W) (W) Rating

30-Apr-13 88,500 116,000 O

04-Oct-13 76,300 100,000 *

27-Jan-14 68,600 90,000

11-Mar-14 65,100 80,000

24-Apr-14 60,900 76,000

24-Jul-14 55,000 77,000

20-Aug-14 47,350 60,000

06-Oct-14 41,050 57,000

27-Oct-14 42,100 54,000

27-Jan-15 58,200 66,000

02-Feb-15 60,200 70,000

23-Apr-15 78,100 98,000

23-Jul-15 59,600 100,000

14-Oct-15 66,600 93,000

14-Dec-15 72,500 103,000

28-Jan-16 76,300 102,000

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

3-Year Price and Rating History for SK Innovation (096770.KS)

096770.KS Closing Price Target Price

Date (W) (W) Rating

29-Apr-13 146,000 206,000 O

04-Oct-13 144,000 170,000 *

04-Feb-14 126,000 165,000

28-Apr-14 120,000 150,000

25-Jul-14 104,000 140,000

21-Aug-14 93,900 130,000

06-Oct-14 77,800 120,000

04-May-15 119,000 144,000

24-Jul-15 97,700 141,000

14-Oct-15 109,000 139,000

26-Oct-15 115,000 156,000

14-Dec-15 122,000 165,000

04-Feb-16 145,000 170,000

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total retu rn of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underpe rform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.

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Refiners' Digest 50

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover mul tiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 59% (37% banking clients)

Neutral/Hold* 29% (24% banking clients)

Underperform/Sell* 11% (45% banking clients)

Restricted 1%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

See the Companies Mentioned section for full company names

The subject company (CVX.N, RDSa.L, OMVV.VI, WNR.N, CVI.N, VLO.N, BP.L, TOTF.PA, TOP.BK, PSX.N, TUPRS.IS, COP.N, 0857.HK, TSO.N, XOM.N, CTX.AX, GALP.LS, 096770.KS, 010950.KS, RELI.BO, ENI.MI, ROSNq.L, EOG.N, DOW.N, DD.N, PBR.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (RDSa.L, VLO.N, BP.L, TOTF.PA, PSX.N, COP.N, 0857.HK, XOM.N, ENI.MI, DD.N) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (XOM.N) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (RDSa.L, VLO.N, PSX.N, COP.N, 0857.HK, XOM.N, DD.N) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (RDSa.L, VLO.N, BP.L, TOTF.PA, PSX.N, COP.N, 0857.HK, XOM.N, ENI.MI, DD.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (CVX.N, RDSa.L, OMVV.VI, WNR.N, CVI.N, VLO.N, BP.L, TOTF.PA, TOP.BK, PSX.N, IOC.BO, ALJ.N, TUPRS.IS, COP.N, 6505.TW, 0857.HK, TSO.N, XOM.N, CTX.AX, GALP.LS, 096770.KS, 010950.KS, RELI.BO, ENI.MI, ROSNq.L, EOG.N, 1301.TW, 1303.TW, DOW.N, DD.N, PBR.N) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (XOM.N) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (CVX.N, MPC.N, WNR.N, CVI.N, VLO.N, PSX.N, COP.N, HFC.N, TSO.N, XOM.N, EOG.N, DOW.N, DD.N).

Please visit https://credit-suisse.com/in/researchdisclosure for additional disclosures mandated vide Securities And Exchange Board of India (Research Analysts) Regulations, 2014

Credit Suisse may have interest in (BPCL.BO, IOC.BO, HPCL.BO, RELI.BO)

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (0857.HK, TSO.N, CTX.AX).

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Refiners' Digest 51

Credit Suisse has a material conflict of interest with the subject company (VLO.N) . Credit Suisse Securities (USA) LLC is acting as financial advisor to Valero Energy Corp. on their announced decision to pursue separation of their retail business.

Credit Suisse has a material conflict of interest with the subject company (0857.HK) . Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved this report and/or any of the statements made herein.

Credit Suisse has a material conflict of interest with the subject company (XOM.N) . Kofi Adjepong-Boateng, a Senior Advisor of Credit Suisse, is a Senior Advisor to Exxon Mobile (XOM).

Credit Suisse has a material conflict of interest with the subject company (ENI.MI) . Credit Suisse is acting as exclusive financial advisor to Eni S.p.A. in relation to the announced sale of a 12.5% stake in Saipem to Fondo Strategico Italiano S.p.A. (FSI).

Credit Suisse has a material conflict of interest with the subject company (ROSNq.L) . Economic sanctions imposed by the United States and European Union prohibit transacting or dealing in new equity of Rosneft issued on or after the date when the Company became the target of such sanctions. This report should not be construed as an inducement to transact in any such sanctioned securities.

Credit Suisse has a material conflict of interest with the subject company (PBR.N) . Andre Natal was formerly employed by Petroleo Brasileiro SA. within the past 12 months and received compensation from the company during that period. A household member of the research analyst Andre Natal is employed by Petroleo Brasileiro SA.

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

The following disclosed European company/ies have estimates that comply with IFRS: (RDSa.L, OMVV.VI, BP.L, DK.N, REP.MC, TUPRS.IS, LKOH.MM, XOM.N, ENI.MI).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (RDSa.L, WNR.N, CVI.N, VLO.N, BP.L, TOTF.PA, PSX.N, COP.N, 0857.HK, XOM.N, EOG.N, DD.N, PBR.N) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

For Thai listed companies mentioned in this report, the independent 2014 Corporate Governance Report survey results published by the Thai Institute of Directors Association are being disclosed pursuant to the policy of the Office of the Securities and Exchange Commission: Thai Oil (Excellent)

Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse (Hong Kong) Limited .............................................................................................................................. Kenneth Whee ; Horace Tse

Credit Suisse International ................................................................................... Thomas Adolff ; Justin Teo ; Ilkin Karimli ; Yaroslav Rumyantsev

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

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Refiners' Digest 52

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. 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Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse International, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 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U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. 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Refiners' Digest 53

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

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