ASPHALT SUPPLY IN A VOLATILE OIL WORLD

Bill HaverlandBill HaverlandConocoPhillips ConocoPhillips

Baxter BurnsBaxter BurnsErgonErgon

CRUDE OIL SUPPLY

A WORLD LOOKA WORLD LOOK

Crude Oil Supply (2006)World Crude Oil ProductionWorld Crude Oil ProductionMillions of Barrels Per DayMillions of Barrels Per Day

World Proven Crude Oil World Proven Crude Oil ReservesReserves

Billions of BarrelsBillions of Barrels

W. Europe

US/Canada

Asia/PacificAfrica

Middle East

FSU/E. Europe

Latin America

11.3

6.310.6

8.49.8

FSU/E. Europe

W. Europe15 Latin

America

US/Canada

Asia/Pacific

Africa

Middle East

743

201

11679

10236

Asia/Pacific

Africa

26.0

12.6

Middle EastTotal: 85MMB/D Total: 1,292 BB

Crude Oil Demand

Demand has risen by 7 MMBD (9%) since 2002.Demand has risen by 7 MMBD (9%) since 2002.Demand at 85 MMBD or 98% of world daily Demand at 85 MMBD or 98% of world daily delivery capacity.delivery capacity.Vulnerable to supply disruptions caused by Vulnerable to supply disruptions caused by storms, accidents, breakdowns, political unrest.storms, accidents, breakdowns, political unrest.65% of proven reserves within national oil 65% of proven reserves within national oil companies and 16% held by Russia.companies and 16% held by Russia.Traditional companies have full access to 7% of Traditional companies have full access to 7% of reserves and 12% through partners (if allowed).reserves and 12% through partners (if allowed).

CRUDE OIL PRICING

WTI Price by Year

0

10

20

30

40

50

60

70

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007YTD

WTI Price by Quarter

01020304050607080

1Q 20

01

1Q 20

02

1Q 20

03

1Q 20

04

1Q 20

05

1Q 20

06

1Q 20

07

REFINING CAPACITY

U. S. Refining Capacity

14

14.5

15

15.5

16

16.5

17

17.5

18

18.5

1980 1995 2000 2006

more than 30less than 30Crude Dist Cap

Last New U. S. Refinery Built in 1976Source: Oil & Gas Journal

319

175 158 131

U. S. Asphalt Refining Capacity

72

98

60

42

1980 1995 2000 2006400

450

500

550

600

650

700

750

800

# RefineriesAsphalt Capacity

Production Range: 600 B/D to 60,000 B/DSource: Oil & Gas Journal

U. S. Refining Coking Capacity

50

585681

120138

46

48

50

52

54

56

58

60

1995 2000 20060

20

40

60

80

100

120

140# Refineries w/CokersCoke Production, MT/D

U.S. Coker Construction Projects2005 - 2011

Planning, Engineering, or Construction Planning, Engineering, or Construction PhasePhase

Total Refineries: 360 MB per dayTotal Refineries: 360 MB per dayAsphalt Refineries: 197 MB per dayAsphalt Refineries: 197 MB per day

* * Source: Argus Asphalt ReportSource: Argus Asphalt Report

Refinery Yield (% of Crude Intake)

0%10%20%30%40%50%60%70%80%90%

100%110%120%

TOPPINGRFY

SIMPLERFY

CCU RFY COKERRFY

OTHERMOGASJETLT NAPHHVY NAPHGAS OILNO.2NO6 or AsphaltCOKE

PRODUCTS SUPPLY/DEMAND

Supply Source for U. S. Demand

02468

101214161820

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06

MM

B/D

Domestic Crude Production Imported Crude Imported Products

Historical Asphalt Supply/DemandMillions Tons - Liquid

0

10

20

30

40

50

60

1980 1995 2000 2003 2005 2006

SupplyDemand

Source: Oil & Gas Journal

Crude Oil SourcesCrude Oil Sources

Crude Oil ImportsInto USA from the Top Six CountriesAs of June 2007 (1000 Barrels Per Day)

573573IraqIraq66893893NigeriaNigeria55

1,1351,135VenezuelaVenezuela441,3921,392MexicoMexico331,5011,501Saudi ArabiaSaudi Arabia221,8741,874CanadaCanada11

Canada’s Historical Crude Supply Volumes To The USA Have Been Doubling Every Decade Since 1988

4,6004,6002020 Estimate2020 Estimate3,0003,0002015 Estimate2015 Estimate2,4002,4002011 Estimate2011 Estimate2,1002,1002007 Estimate2007 Estimate1,8741,8742007 Current as of June2007 Current as of June1,2661,26619981998

68168119881988

CANADIAN EXPORTS - 2007-2020

Important Points:

1. Canada is expected to complete 2007 with over 2,000,000 bbls per day export to the USA.

2. By 2020 Canada expects to be exporting on a moderate growth estimate 4,600,000 bbls per day to the USA over a 100% increase.

3. Approximately half (2,300,000) of this daily amount will be “DILBIT”that is heavy asphaltic crude cut with a diluent. (25% natural gas diluent and 75% heavy asphaltic oil.)

4. The remaining half (2,300,000) will be “SYNBIT” which is made up of 50% synthetic crude from the Athabasca Tar Sands Upgraders and 50% heavy asphaltic oil.

CANADIAN EXPORTS - 2007-2020

Summary:

• The most important point is that over the next decade , the USA’s number one crude oil supplier (Canada) will be increasing the volume of good asphaltic crude to the USA by 100%

• While the main target market for this heavy Canadian crude is refined cokers for the refiner capable of making asphalt there should be ample availability of a suitable high quality asphaltic crude.

• The majority of refiners of old had to make asphalt. Today’s refinery can make a choice.

• Simply put, asphalt has got to compete with the rest of the barrel or light products.

PRODUCTS PRICING

COKER ECONOMICS

Prices by Quarter

2030405060708090

100110

1Q 20

001Q

2001

1Q 20

021Q

2003

1Q 20

041Q

2005

1Q 20

061Q

2007

WTIGasoline

Prices by Quarter

0102030405060708090

100

1Q '0

0

1Q '0

1

1Q '0

2

1Q '0

3

1Q '0

4

1Q '0

5

1Q '0

6

1Q '0

7

WTIGasolineAsphalt

Asphalt vs Coker Feed Value

0102030405060708090

Jan-02

May

-02Sep

-02Ja

n-03M

ay-03

Sep-03

Jan-04

May

-04Sep

-04Ja

n-05M

ay-05

Sep-05

Jan-06

May

-06Sep

-06Ja

n-07M

ay-07

Sep-07

WTIP&P MC Avggulf coast coker value

Current Coking Economics

Gasoline/Diesel PricingGasoline/Diesel Pricing

Aug., 07 Price: $95.00/BBLAug., 07 Price: $95.00/BBLLess Distribution: 6.00/BBLLess Distribution: 6.00/BBL

Net to Refinery: $89.00/BBLNet to Refinery: $89.00/BBL

Kansas City Asphalt PricingKansas City Asphalt Pricing

Aug 07:Aug 07: $54.50/BBL*$54.50/BBL*($40/Ton): $7.15/BBL($40/Ton): $7.15/BBL

$47.35/BBL$47.35/BBL

Lost Value: Lost Value: $41.65/BBL$41.65/BBL

** Source Source –– Poten & PartnersPoten & Partners

Current Coking Economics

30,000 BBLS/Day Asphalt Production30,000 BBLS/Day Asphalt ProductionX 70%X 70% Gasoil ProductionGasoil Production

21,000 BBLS Gasoil for Gasoline/Diesel21,000 BBLS Gasoil for Gasoline/DieselX $41.65X $41.65/BBL Gasoline/Diesel diff. To Asphalt/BBL Gasoline/Diesel diff. To Asphalt

$874,650 per day added margin$874,650 per day added margin

$1 Billion / $874,650 = 1,143 days (3.1 years payoff) $1 Billion / $874,650 = 1,143 days (3.1 years payoff)

FUTURE OF THE INDUSTRY

FUTURE FOR U. S. ASPHALT

More heavy crude being produced and run

Asphalt will have to trend faster with crude oil prices and be competitive with light products – continued volatility

Transportation – cost rising and supply at maximum (marine/rail)

A continued push towards new products for pavement preservation due to limited dollars

Warm mix asphalt

Increase technical know how to deal with different asphalts or coker bottoms to produce pg grade materials

Recycling

QUESTIONS