Contents of presentation report

1. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

2. Background 1 Following the Auto-Oil programme the EU recently recommended maximum sulphur contents for gasoline and diesel to apply from 2000 Product Maximum sulphur contents of proposed EU fuel package Swedish maxima Finnish maxima(Reformulated) Gasoline 200 ppm 100 ppm 100ppm Diesel 350 ppm MK I 10 ppm MK II 50 ppm 50ppm • The recommended sulphur levels were above those which are currently in force in Sweden and Finland

3. Background 1 The costs to refiners for sulphur removal developed by Arthur D. Little for Auto-Oil were based on previous studies adjusted to a 1995/6 cost basis Key Previous Studies Title Integrated approach for sulphur and sulphur dioxide limits in the European refining industry Modifying European gasoline composition to meet enhanced environmental standards and its impact on EC refineries Date 1992 1993 Client(s) Governments of Holland, France, Spain, Italy and GermanyEuropean Commission Government of Germany • The cost curves developed relied on extensive interpolation and extrapolation of previous work. No new detailed refinery analysis was undertaken

4. Background 1 The costs for sulphur removal for EU12 developed by Arthur D. Little for the Auto-Oil program were as follows in 1995/6 costs Gasoline Sulphur Removal Diesel Sulphur Removal Sulphur (1)ReductionStep Capital InvestmentMillion ECU Net Present (3)CostMillion ECU Sulphur (1)ReductionStep Capital InvestmentMillion ECU Net Present (3)CostMillion ECU 200ppm to 150ppm 875 1320 350 to 200 4560 6980 200ppm to100ppm 1750 2630 350 to 100 9230 15380 200ppm to30ppm 3340 5240 350 to 50 11570 19580 (1) Cost curves were originally developed from a base gasoline sulphur level of 300ppm. The results shown have been interpolated from the original analysis(2) Cost curves were originally developed from a base diesel sulphur level of 450ppm. The results shown have been interpolated from the original analysis(3) All future cash costs (investment and operating costs) were discounted back to 1996 at 7% per annum

5. Background 1 The Swedish and Finnish Governments wish to know how recent developments might influence the costs of sulphur removal . . . Three Factors Could Effect Costs • What developments have occurred in process plant and catalysts? Technology for Desulphurisation Crude Oil Diet for EU Refineries • What impact would be made by recent North Sea production developments? General Oil Industry Trends • Would refiners have to invest in associated technologies for other reasons? . . . and commissioned Arthur D. Little to undertake a detailed refinery analysis of EU15

6. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

7. Scope of Refinery Work 2 The scope of our refinery work was to update our cost curves for sulphur removal Scope of Analysis Examine costs of removing sulphur from gasoline and diesel in stepwise approach from Auto-Oilrecommended levels Revisit previous analysis (which was EU 12) for EU 15 Compare new cost curves for EU 15 with old cost curves for EU 12 Gasoline from 200 ppm Perform refinery analysis Assess significance of updated analysis Comment on key sensitivities Diesel from 350 ppm Technology improvements Crude oil diet changes Changes in industry demand trends

8. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

9. Methodology for Refining Costs 3 Simulation of complete industry systems requires a compromise approach • Study of each individual EU refinery for a variety of scenarios would involve a massive work effort and take much longer elapsed time to complete • Study of the EC refining industry as a single system would result in over-optimisation and under-assessment of financial and other implications • A compromise was adopted for our previous studies which was generally considered acceptable • Three regions simulated • Typical refinerines simulated • We have adopted the same methodology, to enable meaningful comparisons to be made Results aggregated to represent EU system

10. Methodology for Refining Costs 3 EU refining industry has been dividied into three regional groupings Northwest Europe (Old) Belgium, Netherlands, Luxembourg, Germany and Denmark 34 Refineries Northwest Europe (New) Additionally includes Sweden, Finland and Austria 42 Refineries Atlantic Zone United Kingdom, Ireland, France (Atlantic), Portugal and Spain (Atlantic) 30 Refineries Mediterranean Zone Italy, Greece, France (Mediterranean) and Spain (Mediterranean) 32 Refineries

11. Methodology for Refining Costs 3 Six typical European refining configurations have been evaluated to emphasise the differences faced by individual refineries Predominantly SourCrude Oil Refineries Predominantly SweetCrude Oil Refineries • • Hydroskimming • Fluid catalytic cracking • Hydrocracking • Fluid catalytic crackingand hydrocracking • • Hydroskimming • Fluid catalytic cracking North Sea Crude Oilfeedstocks have been adjusted toreflect recentshifts in typical qualities in both regionaland individual refinery analysis

12. Methodology Revisited 3 Refinery industry simulation has followed two parallel paths Regional Group Evaluation Typical Refinery Evaluation • Demand on refineries developed for each group • Refinery capacity data reviewed with industry – still discussing minor points • Reflects industry changes in demand barrel • Results aggregated • Solutions will be over optimised • Six typical EU refinery configurations used for similar analysis reflecting wide range of feedstock sulphur content • Actual refinery population assigned to typical refinery types and feedstock sulphur content. (Details of refinery assessments are given in the appendix) • Results aggregated • Solutions will be under optimised Final results based on a blend of the two approaches

13. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

14. Summary of the Results and Comparisons with Earlier Work 4 The new cost curves indicate lower costs for sulphur removal than the previous studies Old and New Costs on a 1996 Cost Basis Net Present Cost Million Ecu Net Present Cost Million Ecu Gasoline Diesel • Both the old and new cost curves have been developed on the same basis as used in auto-oil • Assumes costs incurred from 1996 onwards • All capital and operating costs are included and a fifteen year cashflow is discounted back to 1996 at 7% per annum 30 Sulphur ppm Sulphur ppm Sulphur ppm 30 100 150 50 100 200 Capital Investment Million Ecu Old 3340 1750 875 Old 11570 9230 4560 New 2940 1310 615 New 5990 3520 820

15. Summary of the Results and Comparisons with Earlier Work 4 We have compared the current estimates of the unit costs to remove sulphur with those used in Auto/Oil

16. Summary of the Results and Comparisons with Earlier Work 4 There are three major reasons why our assessments of costs to remove sulphur are lower Technology Improvements We have reduced our estimates of capital costs for the construction of middle distillate desulphurisation units. This reduces the capital costs required for removing sulphur from diesel Crude Oil Diet Availabilities of sweet (low sulphur) crude oils are now higher than previous expectations because north sea production (predominantly low sulphur crude oil) is higher. This reduces the amount of sulphur to be removed particularly for diesel components Industry demand trends indicate a greater proportion of Jet fuel and diesel and a lesser proportion of gasoline than previous expectations. This implies that the industry would need to invest in significant new hydrocracking capacity. This increases the availability of sulphur free diesel components and reduces the cost of lowering diesel sulphur levels Industry Trends

17. Summary of the Results and Comparisons with Earlier Work 4 Major improvements have been made in distillate desulphurisation technology Capital costsfor all other refineryprocesses have beenmaintained at levelsused in previous studies(Adjusted to 1997 basis) Capital Cost Assumptions (1) (1997 $) Old Basis $ Million New Basis $ Million Distillate Desulphurisation (HDS) 30,000 Barrels/day 10,000 Barrels/day 82 40 53 26 Sulphur removal 97% Aromatics reduction 10% Distillate Desulphurisation and Dearomatisation (HDS-HDA) 30,000 Barrels/day 10,000 Barrels/day 177 87 102 50 Sulphur removal 99.9% Aromatics reduction 66% This technology improvement reduces the capital costs required to meet lower diesel sulphur levels (1) Include ISBL and all supporting offsites and utilities. Excludes financing charges

18. North Sea Crude Oil Production – Million Barrels/Day Average Sulphur Content of Crude Oil Processed wt% Summary of the Results and Comparisons with Earlier Work 4 North Sea crude oil production has exceeded previous expectations Reduces base sulphur levelsparticularly in diesel “If recent North Sea production performances are repeated we may notsee a decline in North Sea availabilities until post 2005”

19. Summary of the Results and Comparisons with Earlier Work 4 New capital investments required in hydrocracking to meet jet and diesel demand will also provide additional sulphur free diesel components • Previous studies built on EU 12 demand expectations for 2000 • This study built on EU 15 demand expectations for 2005 to be consistent with any Auto-Oil 2 proposals Implications Previous EU 12 Demand For Year 2000 Current EU 15Demand For Year 2005 The reduction in the proportion ofgasoline and the significant increasein jet/kerosene/diesel indicate that theindustry requires significantly morehydrocracking and a little less catalyticcracking. This industry basis shift helps to reduce thecost of lowering sulphur levels particularly in diesel. The base case has more sulphur free distillates produced from new hydrocracking capacity MillionTonnes % MillionTonnes % Gasoline 120.6 21.0 125.7 20.0 Jet/Kerosene/Diesel 143.3 25.0 184.5 29.4 Total Demand 574.3 100.0 628.1 100.0

20. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

21. Diesel Sulphur Reductions 5 The base case for 2005 will have made significant contributions to aid diesel sulphur reduction Key Base Case Parameters • • Product demand barrel – requires more hydrocracking • Low sulphur crude oil slate from high levels of N. Sea production • Auto-Oil 2000 product quality requirements already built-in Major New Refining Investments in Base Case 2005 Region Process Types Hydrocracking DistillateDesulphurisation BenzeneReduction N.W. Europe Yes Yes Yes Atlantic Yes Yes Yes Mediterranean Yes Yes No

22. Diesel Sulphur Reductions Regional Results 5 Base case advantages and regional optimisation allow low cost initial reductions of sulphur levels New CapitalInvestment$/Million (1997) Unit Costs$/TonneDiesel 8.1 6.9 5 3 AverageCosts Regional Range inCosts 4.2 2 3.0 2.2 0.3 0.2 1.0 0.1 Sulphur Level p.p.m Base Case MainlyDesulphurisation More DesulphurisationPlus Radical Shift inConversion Mode Close Catalytic Crackers Build New Hydrocrackers

23. Diesel Sulphur Reductions Typical Refinery Results 5 Individual refinery constraints result in much higher cost solutions Unit Costs$/TonneDiesel New CapitalInvestment$/Million (1997) 5 3 Range ofTypical RefineryCosts AverageCosts 55.0 26.2 5.1 2 In general we found it very difficult to meet 50ppm in the sour refineries without reprocessing of components. Levels close to 70ppm were the best achieved. The results shown for 50ppm are based on 50ppm for sweet refineries and 70ppm for sour.Sour refiners account for between30% and 40% of the population 48.3 20.5 3.2 10.2 5.0 0.0 Sulphur Level p.p.m. Base Case MainlyDesulphurisation More DesulphurisationPlus Radical Shift inConversion Mode

24. 60% Regional Results Weighting 40% Typical Diesel Sulphur Reductions Aggregated Results 5 We have weighted the regional and typical results to represent our best judgement for EU 15 refiners New CapitalInvestment$/Million Unit Costs$/TonneDiesel 14.6 3 AverageCosts A wide range of unit costs for individual refiners have been used in assessing the average costs Sour typical refineries could not meet 50ppm without reprocessing of components 9.6 2.1 Sulphur Level p.p.m.

25. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

26. Gasoline Sulphur Reductions Regional Results 6 Sulphur removal to 100ppm can be achieved at low cost Unit Costs$/TonneGasoline New CapitalInvestment$/Million 5 3 5.4 Range ofRegional Costs AverageCosts 3.3 2.4 Base Case Sulphur Levels ppm Atlantic 180 Mediterranean 110 N.W. Europe 200 0.2 1.1 0.1 0.6 0.1 0.1 Sulphur Level p.p.m. 30 Base Case Combination ofFCC Feed andFCC Gasoline Desulphurisationplus replacement of lost octane Sufficient Flexibilityin Existing Processes

27. Unit Costs$/TonneGasoline 5 3 Range ofCosts forTypical Refinery AverageCosts Gasoline Sulphur Reductions Typical Refinery Results 6 Similarly typical refinery costs are much higher for gasoline New CapitalInvestment$/Million 14.5 8.7 0.0 Major source of gasoline sulphur originates in FCC gasoline. Typical refineries without FCC are already at sulphur levels below 30ppm 9.0 4.6 0.0 7.8 2.4 0.0 Sulphur Level 30 Base Case Only Refineries with FCC Require Investment but they constitute the majority. Combination of FCC Feed and FCC Gasoline Desulphurisation plus replacement of lost octane

28. 60% Regional Results Weighting 40% Typical Gasoline Sulphur Reductions Aggregated Results 6 Aggregate gasoline costs were estimated for EU 15 refiners in a similar manner to that of diesel costs New CapitalInvestment$/Million Unit Costs$/TonneGasoline 3 AverageCosts 6.6 A wide range of unit costs for individual refiners have been used in assessing average costs Refineries without FCC units are already at levels below 30ppm 4.5 1.2 Sulphur Level 30

29. Contents of presentation report 1 Background 2 Scope of Refinery Work 3 Methodology for Refining Costs 4 Summary of Results and Comparisons with Earlier Work 5 Diesel Sulphur Reductions 6 Gasoline Sulphur Reductions 7 Sensitivities 8 Appendices

30. Sensitivities 7 Based on additional analyses and interpolation we identified the following sensitivities Level ofoil prices • Gasoline sulphur levels down to 30ppm are achievable • Sour refiners may not be able to produce diesel below 70ppm without reprocessing (and therefore additional desulphurisation capacity and capital investment) Results are fairly insensitive to the level of oil prices. The major portion of the costs are capital investment related Although we have assessed aggregated costs for all EU refineries the variation by individual refinery is significant. The worst placed refiner could face costs up to four times the average and the best placed face costs as low as one quarter of the average Range of costs toindividual refiners Synergies by reducing both gasoline and diesel sulphur sulphur At the very low sulphur levels there are synergies if the sulphur level of both products are reduced simultaneously which would reduce total costs by around 15% If North Sea crude oil availability declines to previous expectations the costs will increase by around 20%. If North Sea crude oil availability is the same in 2000 and 2005 the costs will be lower by around 15% Availability of low sulphur crude oils Technical Thresholds

31. Sulphur in Transport Fuels Re-Analysis of the Costs to Reduce EU Sulphur Levels in Gasoline and Diesel Final Report February 12, 1997 Swedish and Finnish Governments Arthur D. Little Limited Berkeley Square House Berkeley Square London W1X 6EY Telephone 0171-409 2277 Telefax 0171-491 8983