HISTORY OF OIL AND GAS ALL OVER THE WORLD

Petroleum is a naturally occurring liquid found in rock formations. It consists of a complex

mixture of hydrocarbons of various molecular weights, plus other organic compounds. It is

generally accepted that oil is formed mostly from the carbon rich remains of ancient plankton

after exposure to heat and pressure in the Earth's crust over hundreds of millions of years. Over

time, the decayed residue was covered by layers of mud and silt, sinking further down into the

Earth’s crust and preserved there between hot and pressured layers, gradually transforming into

oil reservoirs.

History

The following are key events in the recent history of oil:

1951 Nationalization of the Iranian oil industry

1959 Formation of OPEC

1972 Nationalization of the Iraqi oil industry

1973 First oil price shock caused by Arab boycott of oil supplies to USA because of Arab

Israeli war; price rises from US$ 2.50 to US$ 10 per bbl "

1975 Nationalization of the Kuwaiti oil industry "

1979 Nationalization of the Saudi Arabian oil industry "

1979 Second oil price shock cause by fall of the Shah of Iran; price rises from US$ 12 to

US$ 30 per bbl "

1991 Third oil shock caused by Iraqi invasion of Kuwait; price rises from US$ 15 to US$

35 "

1999 Agreement between Saudi Arabia, Mexico and Venezuela

2003 Iraqi war; price rises from US$ 30 to US$ 70

Introduction of the Sector

Exploration for hydrocarbons (oil, gas, and condensate) is commonly acknowledged to have

begun with the discovery at Oil Creek, Pennsylvania, by "Colonel" Edwin Drake in 1859.

However, this was only the start of the modern global era of technology-driven advances in

exploration. Traditionally, oil exploration was conducted by recognizing seeps of hydrocarbons

at the surface.

The population of the world continues to grow, as does the average standard of living, increasing

demand for food, water and energy and placing increasing pressure on the environment. The

population of the world doubled from 3.2 billion in 1962 to 6.4 billion in 2005 and is forecast to

grow to 9.2 billion in 2050.

Supplies of oil, gas, coal and uranium are forecast to peak as reserves are depleted. At the same

time, fear of climate change is putting pressure on the energy sector to move away from carbon

burning to nuclear, solar and other environmentally friendly energy sources.

Oil accounts for between 34% and 37% of the world's primary energy. Components of crude oil

are feedstocks to the chemicals, plastics and fertilizer industries.

Crude oil is extracted from the earth and refined to create a range of gas (liquified petroleum gas

- LPG), liquid (gasoline, diesel, jet aviation fuel, paraffin, etc.) and solid (bitumen) petroleum

products. The most sought after crudes are those that are "light" (i.e. contain a high proportion of

short chain molecules) and "sweet" (i.e. low sulphur content) as they are easier and cheaper to

refine.

Exploration and Development

In June 2007, OPEC announced plans to invest US$ 130 billion in expanded production between

then and 2012. Excluding Iraq, production is forecast to increase from 35.7 million bpd to 39.7

million bpd in 2010. Between 2013 and 2020 OPEC plans to spend a further US$ 500 billion

provided biofuels doesn't change economics. Saudi Arabia alone is investing US$ 50 billion to

increase crude production capacity from 10.5 million barrels a day in 2007 to 12 million bpd in

2009 and 15 million bpd after 2025.

A Harrison Lovegrove study of 200 non state-owned oil and gas companies found 2005

development costs rose 30% to US$ 159 billion, yet only yielded a 2% increase in proved

reserves and a 1% increase in production. Part of the reason is that countries rich in oil are

increasingly excluding foreign companies from participation. A later study showed spending by

228 oil and gas companies increased 45% in 2006 to US$ 400 billion but again only increased

reserves by 2%.

A March 2007 report by Harrison Lovegrove estimated that state owned oil and gas companies

invested US$ 75 billion in oil and gas asset acquisitions in 2006, 33% of the total of US$ 166

billion. Average 2006 prices paid were US$ 12.86 per barrel of proved oil / gas reserves, an

increase of 34% on 2005.

Only three major fields have been discovered worldwide since 1969 and none since 1976. A

study by Simmons found that since 1980, only three fields out of all of the new discoveries are

producing over 200,000 barrels a day. In the 1990's, over 420 fields were discovered, but only 11

have production that exceeds 100,000 barrels per day.

The largest fields discovered in the past decade or so are:

Field Country Date Reserves (boe

billion)

Carioca Brazil 2007 33?

Kashagan Kazakhstan 2000 14.6

Tupi Brazil 2006 4.0

Niban Saudi Arabia 1999 4.0

Azadegan Iran 1998 3.5

Yadavaran China 2000 3.0

Shah Deniz Azerbaijan 1999 2.1

Dolginskoye Russia 1999 1.9

North

Samburgskoye

Russia 1998 1.8

Nanpu China 2005 1.3

Dalia Angola 1997 0.9

To put this in perspective, note that the world consumes 29 billion barrels of oil per year.

Oil Trading

On average, 52 mbpd of oil were moved internationally in 2006. The USA, Europe and Japan

were responsible for more than 60% of world oil imports, while the Middle East, Africa and

former Soviet Union accounted for more than 65% of world oil exports.

The crude oil spot price averaged $US 72 per barrel in 2007, more than triple the average price

in 2002. Towards the end of 2007, the price of crude oil breached US$ 100 per barrel and, in

May 2008, US$ 120 per barrel.

Consumption

World demand for oil reached 85.7 mbpd in 2007, 1% up on the 84.9 mbpd in 2006. The major

oil consuming nations were, in order, the USA, China, Japan, Russia, Germany, India, South

Korea, Canada, Brazil and Saudi Arabia. Although US consumption has remained static over the

past four years, China increased its petroleum consumption by 5.5 percent in 2007. China and

India accounted for some 70% of the increase in oil demand during 2006 and 2007, with oil

producing countries responsible for much of the balance.

Between 1996 and 2006, USA domestic production reduced from 45% to 33% of demand. Net

imports were larger than the combined production of Saudi Arabia and Kuwait. The US

government launched its 20 in 10 initiative to reduce gasoline demand by 20% in 10 years,

through improve engine emission standards and the use of ethanol.

The IEA forecasts that oil demand will increase by 10 mbpd to 94.8 mbpd in 2015. Demand for

OPEC oil is forecast to increase from current 31 mbpd to 38.8 mbpd in 2015. It is not clear that

the additional demand is going to be met through a combination of new sources of conventional

oil, gas to liquids, unconventional oil and biofuels.

Introduction to supply chain management:

A supply chain is a network of facilities and distribution options that performs the

functions of procurement of materials, transformation of these materials into intermediate and

finished products, and the distribution of these finished products to customers. Supply chains

exist in both service and manufacturing organizations, although the complexity of the chain may

vary greatly from industry to industry and firm to firm.

History of Oil and Gas in Pakistan

In 1986, the Government of Pakistan introduced new Pakistan Petroleum (Exploration and

Production) Rules clearly defining the rights, obligations and authorities which were aimed at

streamlining and accelerating the hydrocarbon exploration and production in Pakistan.

Subsequently a number of independent foreign oil companies entered into joint venture

agreements with Government of Pakistan and OGDCL including crescent Petroleum, Canada

Northwest, Anglo Suisse, Lasmo Oil and Ranger oil Ltd. None of them, however, were

successful except Lasmo Oil which discovered gas at Kandanwari in their Tajjal Block. Later

Amoco, Petro-Canada and Phillips were also granted Exploration Licences in Kohat – Bannu and

Lower Indus Basin. POL acquired petroleum concession rights over Khushalgarh Block with

OGDC in northern Potwar and Kohat region. POL also entered into Joint Venture agreements

with OGDCL, Petro Canada and Occidental for exploration in various blocks including offshore

region. Oxy discovered oil at Bhangali and Pindori during 1989-90 in their Soan Concession.

Pindori-1 during recompelation  blow out and the well had to be abandoned. OGDC discovered

heavy crude at Chak Naurang, retested old Qazian Structure and found oil at Missa  Kaswal-1.

During early nineties  OGDC also made several oil discoveries in Missan Concession just to the

north of UTP’s Badin Block. Oil was also discovered by OGDC in Potwar at Sadkal near

Fatehjang, Rajian and Kal near Chakwal. During the same period AMOCO drilled number of dry

holes in Kohat region and closed their operations second time in Pakistan.

INTRODUCTION OF PAKISTAN STATE OIL

Pakistan State Oil (PSO) is the oil market leader in Pakistan enjoying over 79% share of Black

Oil market and 58% share of White Oil market.

The history of Pakistan State Oil starts from mid-70s when the Government of Pakistan

amalgamated three OMCs: Esso Eastern, Pakistan National Oil (PNO) and Dawood Petroleum as

part of its reorganization plan. It is considered as one of the most successful mergers in the

history of Pakistan. The main objective of the Nationalization of POL Giant was backed by the

facilitation of the sensitive national issue of providing fuel to Defense forces. Because, during

the war of 1971, the nation suffered from the problem that no fuel company was interested to

provide fuel to the Armed forces at that and the sensitivity of the nation was in very crucial

condition. The than Federal government decided to nationalize three petroleum companies along

with management control.

The company is the only public sector entity in Pakistan that has been competing

effectively with three multinationals companies which are supported technically by their parent

organization.

Pakistan State Oil Company Ltd; is the largest oil marketing company (OMC) of

Pakistan. It is engaged in the Storage, Import, Distribution and Marketing of Petroleum Products,

Petrochemicals, Aviation & Bunker Fuels, LPG and CNG Dominates the Country’s Fuel and

Energy Need.

Since its inception in 1976 the company has been meeting more than 70% of the

country’s fuel needs. PSO’s 3805 outlets all across the country markets more than 12 million

tons of fuel products annually. This network is supported by PSO’s 28 storage facilities with a

capacity of more than 800,000 tons. PSO took a major step in improving its distribution facilities

by acquiring 12% equity in the 800km long Karachi-Mehmoodkot White Oil Pipeline.

As part of PSOCLs policy of providing better customer service, it has embarked upon its

New Vision of retail development program. Equipped with the most modern facilities like

electronic dispensing units, auto car wash, convenience stores, internet facilities and business

centers. These state of the art designed stations provide greater customer confidence and a

friendlier environment. As a manifestation of PSOCL’s greater customer focus a PSO 24hr

Customer Service has been launched where customers can lodge their queries and suggestions

about various PSO products and services.

Alongside its retail network, PSO is playing an equally important role in the industrial

sector. From the locomotives of Pakistan Railways to the giant turbines of Power Projects, all are

fuelled by PSO. Being fully alive to its responsibilities towards the agriculture sector PSO’s 700

strong agency network helps keep the farm machinery running. Further, its kerosene sales are a

major source of energy for the rural and lacking gas facilities.

Pakistan State Oil Company Limited remains equally strong in Aviation and Bunker

Sales. PSO has been constantly upgrading its facilities to serve a wide range of commercial

aircrafts. Through a chain of eight Aviation Service Stations scattered all across the country PSO

fuels the aircrafts of many local and international airlines. Acquisition of new Lahore Terminal

Complex at the Allama Iqbal International Airport has enabled PSO to serve the busiest corridor

of East/West bound flights benefiting the airlines in shape of time saving and lesser fuel burn off.

While it’s bunkering facilities at all the major ports of country fill up the ocean liners of many

nationalities facilitating the nation’s international trade. In its endeavor to provide quality

lubricants, PSO has started the agency trade and distribution system of the Lubricants all across

the Pakistan. More cordial relationship with its dealers is one of the important objectives of

PSO’s New Vision Program. To give them a sense of participation PSO has instituted “TOP

DEALER AWARDS” and “MILLION LITER AWARDS” whereby efforts of the high

performing dealers are recognized.

Emergence of Health Safety & Environment (HSE) as the corner stone of PSO’s corporate

governance testifies to its commitment to environmental protection.

Introduction of Caltex

History

Caltex is an Australian company with a long history. Our roots go back to 1900 when Texaco

products were first marketed in Australia and the Caltex name has been in Australia for almost

70 years.

The all-Australian Ampol was listed on the Australian Securities Exchange in the late 1940s.

Each of Caltex and Ampol built refineries, Caltex in Sydney in 1956 and Ampol in Brisbane in

1965, and they competed fiercely in the service station arena and oil product marketing

generally. As the industry started to rationalize, Ampol acquired Total, and Caltex acquired

Golden Fleece – two smaller oil companies.

Caltex and Ampol merged in 1995 and the Caltex brand has now largely replaced the Ampol

brand.

Caltex only operates in Australia, with around 4,000 employees working across the country, and

while our major shareholder is the US based Chevron, Caltex is listed on the Australian

Securities Exchange and operates independently of Chevron, with all decisions made in Australia

by its management and Board. This distinguishes Caltex from other refiner-marketers in

Australia.

PULL/PUSH VIEW OF PROCESS OF SUPPLY CHAIN

Push/Pull View of PSO in Products for Institutions

Supplier, Procurement, manufacturer and Consumer

In this, PSO totally focus on push view because PSO produce products firstly and then distribute

its POL products to its customers. In some cases PSO produce customized products while

serving army, WAPDA and PIA.

ACHIEVING THE STRATEGIC FIT

Making a strategic fit requires integration among the activities. For that purpose the organization

has to create a consensus among the competitive and supply chain strategy.

IN CASE OF Pakistan State Oil

1. Competitive strategy of PSO

PSO’s focuses on the stable prices for high quality of products.

2. Supply chain strategy of PSO

PSO is the pioneer of Oil marketing companies in Pakistan and it is totally vertically integrated

firm either the backward integrated of the forward integrated firm means it has its own supplier

to supply the raw material and it has its own distributors and contract carriage fleet to provide

products to the end consumers. The PSO is aligning the both strategies by focusing on their own

resources. Making one stage more responsive allows the other stage to focus on being more

efficient. The PSO’s supply chain assigns different roles to its different stages; the company has

to decide either to transfer the responsiveness to the supplier stage, manufacture stage or to the

distributor stage.

In case of products for institutions PSO focus to be more efficient manufacturer and

distributor and it take supplier more responsive because there is demand totally certain in

this type of products, because institutions ordered for the products to PSO immediately

and they need more responsive supply of POL products. In case of products for

individual consumers PSO focus to be more responsive manufacturer and distributor and

it take supplier more efficient because there is demand totally uncertain in this type of

products, because customer can order at any time and PSO have to fulfill their order at

that time, so it make more responsive distributors but manufacturer hold inventory more

than the distributors, so distributor is responsive too but less than the manufacturer i.e in

case of lubricants the distributor is totally concerned with the customer dealing.

PSO focus on the Intercompany Interfunctional Scope: The Maximize Supply Chain

Surplus View, because it is totally vertically integrated firm having its own supplier and

distributors. So it makes the overall supply chain strategy for supplier, manufacturer and

distributor.

IN CASE OF Caltex

1. Competitive strategy of Caltex

Caltex focuses on the differentiation strategy, it means provide products of superior quality as

compare to its competitors.

2. Supply chain strategy of Caltex

Caltex is also dealing in the Oil marketing industry in Pakistan and it is not totally vertically

integrated firm because it mostly focus on to provide products to the consumer through their own

distributors as well as other retailers and wholesalers because the lubricants of Caltex are well

renowned across the world, so they don’t need to market the lubricants. The Caltex is aligning

the both competitive and supply chain strategy.

Caltex just deals in the products for individual consumer and targets the middle class as well as

the upper class. So

It focus to be more responsive manufacturer and distributor and it take supplier more

efficient because there is demand totally uncertain in this type of products, because in

summer the demand of lubricants as well as oil increase manifold due to the heat of

engines and electricity shortfall.

Caltex also focuses on the Intercompany Interfunctional Scope: The Maximize Supply

Chain Surplus View, because it has its own supplier and distributors. So it makes the

overall supply chain strategy for supplier, manufacturer and distributor.

FRAMEWORK FOR STRUCTURING DRIVERS

Supply chain network can be a competitive edge for the company as compare to its competitors

if it coordinates well and work efficiently and responsively, but is there is less coordination

between this network and this can be the cause of the failure of the company. PSO manages its

supply chain network more efficiently and it has competitive edge of better coordination of this

network over its competitors like Menu.

Goal of a supply chain strategy is to strike the balance between responsiveness and efficiency

that fits with the competitive strategy. To reach this goal company must structure the right

combination of the Three Logistical and Three Cross Functional Drivers discussed.

Competitive Strategy

Supply Chain Strategy

Efficiency Responsiveness

Facilities Inventory Transportation

Information

Supply chain structure

Cross Functional Drivers

Sourcing Pricing

Logistical Drivers

PSO’s competitive strategy is to be a High Quality Product at a Reasonable Cost for a wide

variety of mass consumption goods. This strategy dictates that the ideal supply chain will

emphasize efficiency but also maintain an adequate level of responsiveness in terms of product

availability.

PSO uses three logistics and three cross functional drivers efficiently to achieve supply chain

performance align with its competitive strategy.

Logistical Drivers

1. INVENTORY DRIVER:

PSO maintains efficient supply chain by keeping high levels of inventory as well as the

responsive because of the inventory/units provide as the demand forecasted.

PSO’s inventory of product for Institutions:

PSO’s products for the institutions (Railway, PIA, Army, IPP’s etc.) while focusing on these

PSO’s focus of efficiency because it provides products as the order is received so more inventory

in required to store. In order to meet customers demand immediately PSO has to maintain high

inventory as it has 0.8 million tons oil storage depots all over Pakistan. Inventory of products for

Individual Consumer:

PSO’s products for individual consumer, while focusing on these PSO’s focus of responsiveness

because it provide all type of products with their DCs to meet the customer’s order. And PSO

produce product for individual consumer by anticipation of demand. That’s why it has to keep

every type of product in its DCs and responsiveness automatically with increases.

2. TRANSPORTATION DRIVER:

PSO runs its own contract carriage fleets to keep responsiveness high. This increase

transportation cost, but the benefits in terms of reduced inventory and improved product

availability justify this cost in PSO’s case. Because as the electronic order received from its

warehouses truck leave for delivery of products to the warehouses because all the 3805 pumps

are linked with pump controller interface (PCI) so inventory of oil and lubes is observed at head

office.

3. FACILITY DRIVER:

PSO uses centrally located DCs within its network of stores to decrease the number of facilities

and increase efficiency at each DC. PSO builds its own stores only where the demand is

sufficient to justify having several of them supported by a DC. All over the Pakistan PSO have

28 storage depots in just big cities like Islamabad, Rawalpindi, Faisalabad, Lahore, Multan,

Karachi, Sahiwal etc.

Cross Functional Drivers

1. INFORMATION DRIVER:

PSO is a leader in this use of the information driver to improve responsiveness and decrease

inventory investment. PSO demanded information across the supply chain to suppliers who

manufacture only what is being demanded. It uses Electronic Data Interchange ERP software in the

computers of DCs and in the PCs of warehouses and in the PCs of manufacturing sites. As the

inventory reaches the minimum level at DC automatically mail sent to nearly storage depot, and if

the inventory reaches the minimum level at storage depot automatically mail sent to manufacturing

site, and tank lorry leave for the providing the inventory to depots.

2. SOURCES DRIVER:

PSO increases the efficiency and responsiveness because it has its own refineries and the pipeline

which is laid from Karachi to Mehmoodkot and furthermore PSO has its strong backup of sourcing.

so K&N’s achieve economies of scale so efficiency increases. And the availability of material at any

time increases the responsiveness.

3. PRICING DRIVER:

PSO focuses on the stable prices for high quality of products.

FRAMEWORK FOR STRUCTURING DRIVERSOf Caltex

Caltex uses three logistics and three cross functional drivers efficiently to achieve supply

chain performance align with its competitive strategy.

1. INVENTORY DRIVER:

Caltex maintains responsive supply chain by keeping high levels of inventory because of the

inventory/units provide as the demand forecasted because it provide all type of products with their

DCs to meet the customer’s order. And Caltex produce product for individual consumer by

anticipation of demand. That’s why it has to keep every type of product in its DCs and

responsiveness automatically with increases.

1. TRANSPORTATION DRIVER:

Caltex runs its own fleets to keep responsiveness high. Because Caltex is a multinational company

and have heavy infrastructure with required resources. This increase transportation cost, but

improved product. Because as the electronic order received from its warehouses truck leave for

delivery of products to the warehouses.

2. FACILITY DRIVER:

MENU uses centrally located DCs within its network of stores to decrease the number of facilities

and increase efficiency at each DC. MENU not just builds its own stores but also provide the

products of big retail stores in the big cities like metro cash & carry and makro in Lahore etc, only

where the demand is sufficient to justify having several of them supported by a DC.

Caltex’s supply chain, comprising refining, supply and distribution, again provided a foundation

for the success of the overall business. This robust, integrated system encompasses crude and

product purchasing, refining and distribution to our terminals and ultimately to our customer.

Caltex’s supply chain is safe and reliable and continually being improved in response to the

needs of our customers and to capture efficiency.

REFINING

Caltex owns two of the seven refineries in Australia and these two refineries account for almost a

third of Australia’s total refining capacity. Caltex’s Kurnell and Lytton refineries refine crude oil

into petrol, diesel, jet fuel and base oils for lubricants and many specialty products, such as liquid

petroleum gas and bitumen.

Both refineries enjoyed strong operational performance during 2009 with no significant

unplanned refinery shutdowns. Average refinery utilisation for the year was 75.3%, compared

with 73.9% in 2008, and total production of petrol, diesel and jet fuel was 10.2 billion litres,

compared with 9.8 billion litres in 2008.

The second diesel hydrotreater at Lytton refinery, successfully commissioned in July 2009

without incident, was the key growth initiative for refining and supports Caltex’s diesel growth

strategy. It is producing Australian grade 10ppm sulfur diesel.

In addition to improved reliability in 2009, refining also made significant improvements in

environmental and safety performance. The health and safety of our employees, refinery

reliability and operational excellence at all levels is paramount.

Caltex remains cognisant of the need to invest capital to address risk and reliability in refining.

During 2009, two planned turnarounds and inspections were carried out. One major planned

turnaround was undertaken at Lytton refinery. The second turnaround was conducted on the fluid

catalytic cracking unit at the Kurnell refinery. Planned turnarounds and inspections are an

essential risk mitigation tool for Caltex. Another major plant turnaround at Lytton refinery is

planned for the second quarter of 2010.

The Caltex Refiner Margin averaged US$5.95 per barrel in 2009, compared with US$10.27 per

barrel in 2008. This equates to 5.05 Australian cents per liter in 2009, compared with 7.88

Australian cents per litre in 2008. The lower Caltex Refiner Margin is a result of the higher

Australian dollar and the lower Singapore refiner margin in the second half of 2009.

SUPPLY

An effective and efficient source of supply is critical to Caltex’s success as a fuel marketer.

Caltex prides itself on its integrated supply chain from crude to customer and is committed to

being a reliable and efficient supplier across Australia.

The supply team is responsible for acquiring crude oil for the Caltex refineries and does this

through strong relationships with Chevron and other Australian and international crude

producers. The supply team has successfully developed a range of efficient shipping alternatives,

including the economical importing of West African crude oils.

Over 72 million barrels of crude were sourced by Caltex in 2009, in line with 2008.

Australia is a significant net importer of finished petroleum products with more than one in four

litres of fuel consumed in Australia currently imported. In addition to fuels produced by our own

refineries, Caltex markets are also supplied by product purchased from other Australian

refineries and international refineries, primarily those in Singapore and North Asia, although

some cargoes have been sourced from refineries as far away as Europe. This requirement for

international product is expected to grow as demand from existing and new Caltex customers

increases. The product acquired from this diverse supply chain secures supply to Caltex’s own

marketing business and provides efficient supply to other major oil companies in New South

Wales and Queensland.

DISTRIBUTION

Caltex operates 12 storage terminals across Australia. We also have access to product supply at a

further 12 terminals. From these 24 terminals at key locations around Australia, Caltex delivers

product to customers via its own truck fleet and the fleets of approved and accredited third party

contractors.

In order to efficiently and sufficiently supply across Australia as demand increases, Caltex has

been undertaking terminal upgrades. The upgrade project at Mackay was completed and the

terminal now has an additional 27 million litres of tankage capacity and additional truck loading

capability. This new infrastructure allows Caltex to improve both supply chain economics and

flexibility and strengthens the link between North Queensland and the new diesel hydrotreater at

Lytton. Other projects to strengthen the supply chain network and widen the Caltex product

range in key growth areas, including expanded truck loading facilities in Gladstone and biodiesel

and E10 distribution facilities and infrastructure for premium Vortex petrols and diesels, were

completed in a number of Caltex terminals.

During 2009, the Teekay-owned vessel, the Barrington, was replaced by theAlexander Spirit.

The 20 year old Barrington, which was built for Caltex, had been managed by Teekay since

Caltex sold the Caltex Tanker Company to Teekay in 1997. The new vessel, the Alexander

Spirit, is a larger modern vessel and will carry more product for Caltex at higher speed. This,

together with the expanded Lytton diesel production and the diesel tank at Mackay, provides

further efficiencies, reliability and capability in the supply chain along the Queensland coast in

support of our customers.

The product vessels that operate for Caltex on the Australian coast play a vital role in linking our

refineries in Sydney and Brisbane to Caltex markets around Australia, especially the North

Queensland markets, increasing our capability to efficiently service the rapid growth in the

Bowen Basin mining area.

A reorganisation of the supply and distribution business area was completed in the first half of

2009. The reorganisation was designed to put greater emphasis on increasing the capability and

efficiency of our operation while accelerating required progress on operational excellence.

Within the wider supply and distribution business area, a dedicated supply chain optimisation

team has been formed to drive future capability and efficiency improvements across the whole

supply chain to ensure that the Caltex supply chain is competitive in major markets and strategic

growth areas.

FUTURE FOCUS

As Caltex continues to enhance and build upon the strengths of its integrated supply chain,

operational excellence will remain a focus.

We have an unwavering commitment to continually provide our customers with safe, reliable

and environmentally sound product and services and our employees with a safe and secure

working environment.