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Team “C” Jacob Munoz Aaron Hebert Joseph Nasser

Motiva Enterprises LLC Port Arthur Expansion Project. Team “C” Jacob Munoz Aaron Hebert Joseph Nasser. Outline. Motiva Overview Expansion Highlights Insurance Programs Contractor Wrap-Up Contractor’s Equipment Floater Builders Risk Marine Cargo. Motiva Overview. Formed in 1998

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Team “C” Jacob Munoz Aaron Hebert Joseph Nasser

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  1. Motiva Enterprises LLCPort Arthur Expansion Project Team “C” Jacob Munoz Aaron Hebert Joseph Nasser

  2. Outline • Motiva Overview • Expansion Highlights • Insurance Programs • Contractor Wrap-Up • Contractor’s Equipment Floater • Builders Risk • Marine Cargo

  3. Motiva Overview • Formed in 1998 • Dual ownership between Shell and Saudi Aramco • Number of Employees: Approximately 2,900 • Revenues: $31.1 billion (YE 2006); (~85M a day) • Terminals: 42 • Motiva owned stations: 1,128 • Wholesale owned stations: 7,011 • Crude Throughput Capacity (Daily): 745,000 BPD • Crude Actual Avg. Daily Throughput: 704,000 BPD (Average ~95% of max capacity)

  4. Motiva Operations • Commercial Fuels • Distribution • Retail • Refining • Convent Refinery- 235,000 BPD • Norco Refinery 220,000 BPD • Port Arthur Refinery 285,000 BPD

  5. Refinery Expansion Highlights • 325,000 barrels/day capacity • Lower emissions • Increase US Supply • 4,500 construction jobs and at least 300 new full-time jobs • Cost • $7,000,000,000

  6. Cautionary Statement The following presentation includes forward-looking and backward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. You can identify our forward-looking statements by words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions. Forward-looking statements relating to Team C observations on Motiva are based on our research and knowledge from Dr. Dan Jones’ class. It includes generalized information about the petroleum industry in general on the date the presentations are given. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially include, but are not limited to, crude oil and natural gas prices; refining and marketing margins; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects due to operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas; unsuccessful exploratory drilling activities; lack of exploration success; potential disruption or unexpected technical difficulties in developing new products and manufacturing processes; potential failure of new products to achieve acceptance in the market; unexpected cost increases or technical difficulties in constructing or modifying company manufacturing or refining facilities; unexpected difficulties in manufacturing, transporting or refining synthetic crude oil; international monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations; potential liability resulting from pending or future litigation; general domestic and international economic and political conditions, as well as changes in tax and other laws applicable to Team C. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include other economic, business, competitive and/or regulatory factors affecting Team C generally as set forth in the class syllabus. Team C is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Cautionary Note to U.S. Investors – The U.S. Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation such as “oil/gas resources,” “Syncrude,” and/or “Society of Petroleum Engineers (SPE) proved reserves” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10-K for the year ended December 31, 2004. This presentation includes certain non-GAAP financial measures, as indicated. Such non-GAAP measures are intended to supplement, not substitute for, comparable GAAP measures. Investors are urged to consider closely the GAAP reconciliation tables provided in the presentation Appendix.

  7. Motiva – Port Arthur • Port Arthur Refinery (PAR) • Built in 1903 as Texaco’s first refinery • Capacity of 285k BBOPD • 900 employees with payroll of $150,000,000 • Port Arthur and Port Neches terminals serve 700 vessels per annum • Historic asides • Wood storage tanks and pipes • WWII Fuel for Cash program • Donkey transportation • Admin building shaped like a “T”

  8. Contractor Wrap-Up Program • Traditional insurance – project owners, contractors and subs purchase insurance independently. • Wrap-up insurance – project owner covers all parties – owner, contruction manager, general contractor, and subs • Popular on large construction projects • Cost savings

  9. Contractor Wrap-Up Program • Advantages • Savings from buying insurance “in bulk” • Eliminating duplication in coverage • Handling claims more efficiently • Reducing potential litigation • Enhancing workplace safety • Save up to 50% vs. traditional insurance • Save up to 1 to 3% of project’s construction cost • Cost savings realized from centralized safety programs.

  10. Contractor Wrap-Up Program • Disadvantages • Requires project owners to invest more time and resources in admin • Project owners must hire additional personnel or pay to contract out mgmt of wrap-up insurance. • Large premiums at beginning of project

  11. Contractor Wrap-Up Program • Barriers • State systems for workers’ compensation can prevent wrap-up insurance in some states by reducing cost savings. • North Dakota, Ohio, Washington, West Virginia, Wyoming • Project must be large or have high labor costs to make wrap-up insurance financially viable. • Reduces contractor’s profits from insurance rebates. • ¾ of Total Ins. Cost on construction is for workers’ comp. Removing it from owner’s control eliminates the cost savings of wrap-up insurance.

  12. Contractor Wrap-Up Program • Wrap-up insurance can provide: • Workers’ comp • General liability • Architects’ and engineers’ professional liability • Builders’ risk • Excess liability • Pollution liability • Specialized insurance • Longshoremen’s and harborworkers’ insurance • Railroad protective liability insurance • Wrap-up insurance does not provide: • Automobile liability • Insurance on contractors’ tools and equipment

  13. Contractor Wrap-Up Program • Two types of wrap-up insurance • Guaranteed Cost Plan • Simplest form of plan • Premiums remain constant regardless of claims paid out. • Common for small to medium-sized businesses • Loss-sensitive Plan • Premiums dependent on policyholder’s claims paid or “losses” • Returns a refund for low losses • Charges additional premium for high losses

  14. Contractors’ Equipment Floater • Common insurance on special equipment for construction projects that is not permanently tied to one location • Types of equipment covered • Loaders • Dozers • Cranes • Excavators • Concrete Pumpers • Backhoes • Asphalt Machinery • Drill Rigs • Well Servicing Equipment • Forklifts • Misc. Tools & Equipment • Equipment has tendency to walk off during the night

  15. Construction Builders/All RiskInsurance • BUILDER'S RISK:  Insurance against loss to buildings or structures in the course of construction. • ALL RISK: Insurance against loss or damage to property arising from any accidental cause, except such as may be specifically excluded

  16. Options • Estimated Maximum Loss of $750M • Leverage Motiva’s existing property coverage with Oil Insurance Limited • Disadvantages: • Only 1 OIL limit of $250 million for combined operational and CAR event • Requires commitment to OIL for life of project – reduces flexibility • Stand-alone CAR program • Advantages • More coverage • Use of captives

  17. Decision • Standalone Coverage • Limits: • $750 million, except $250 million in respect of windstorm and flood; • $10 million for existing property. • Deductible: • $10 million any one occurrence;

  18. Project Insurance ProgramsConstruction All Risk - Markets Market Line Size • Swiss Re (Lead) 20.00% • Noble (Shell Captive) 20.00% • Stellar (Saudi Aramco Captive) 20.00% • Liberty 10.00% • Zurich 7.50% • AIG 5.00% • Starr Tech 4.00% • Arch 2.50% • Navigators 1.00% • SCOR 4.00% • Lancashire 2.00% • O'Farrell 2.00% • Catlin 2.00% • Total 100.00%

  19. Marine Cargo Insurance...Who needs that??

  20. Marine Cargo Insurance Summary The world’s integrated Global Economy demands movement of goods across borders to fuel economic growth and stability. As Emerging Markets in Latin America, Europe, Asia, Africa, and the rest of the world begin to demand more goods from across the globe the volume of international cargo shipments increase. Although physical damage on transit claims may not be a common problem. Importers or exporters must keep in mind that over 50 voyages a year encounter heavy weather where shipping containers are lost overboard. Most risks are difficult for the owner of the goods to manage directly. This is because the shipment will be given into the care, custody and control of third parties who will limit their liability for loss or damage to those goods

  21. Marine Cargo Insurance Cont. • Marine Cargo Insurance is different then other liability and property coverage. The scope is international, and broad. Also, extension of coverage is industry specific and broader then other lines of insurance. • Marine insurance clauses are not filed, nor regulated by state laws. Also insurance can be offered for one shipment or multiple shipments. • The premium cost of covering the cargo is based on individual experience, shipment volume, mode of transit, and value shipped. The underwriter determines what premium will be required to meet the anticipated losses and expenses on account. • The premium can also be impacted as the shipper includes additional coverage; such as processing in a foreign country, how damage to cargo could affect future cash flows of a firm, exhibition coverage at sales conventions in foreign countries overseas, and temporary storage overseas.

  22. Risks • Theft, pillage or hijack • Mistakes in transportation... • I.E. dropping, rough or inappropriate handling • Accident to the carrying conveyance... • I.E. vessel sinking, aircraft crashing or vehicle fire, road traffic accident or overturning • Exposure to rain or salt water • Exposure to unusual variations in temperature

  23. Example of a Motiva Insurance Package • Coverage: • Physical Loss of or Damage occurring during transit from suppliers' premises anywhere in the World until safe unloading at the Project Site; • Loss or impairment of Operating Margin triggered by a covered property loss. • Term: October 15 07 to June 01 10; • Limits: • $70 million any one vessel, conveyance and/or location; • indemnification up to $480 million, capped at $50 million per month, for a 24 month indemnity period. • Deductible: • Property damage - $100,000 each and every loss; • DSU - 45 days in the aggregate.

  24. The Port of Houston

  25. Port of Houston Summary Port of Houston is the port of the fourth-largest city in the United States. The port is a 25-mile-long complex of diversified public and private facilities located a few hours’ sailing time from the Gulf of Mexico. It is the busiest port in the United States in terms of foreign tonnage, second-busiest in the United States in terms of overall tonnage, and tenth busiest in the world. Made up of the Houston Ship Channel and Galveston Bay. It is made up of the port authority, and the 150-plus private industrial companies along the ship channel. Many oil companies have built refineries on the channel where they are protected from the Gulf of Mexico.

  26. Port of Houston Quick Facts (2006) 6th largest in the world 1st in US in foreign tonnage 2nd in total tonnage Home of the world’s 2nd largest petrochemical complex More then 200 million tons of cargo moved through the port. Leads the nation in environmental protection. It is the first US port to be certified as ISO14001. Supports 785,000+ jobs in Texas

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