Strategic HorizonsStrategic Horizons provides executive summaries of key IHS Markit analysis and outlooks from across the energy value chainIHS Markit Strategic Horizons service is specifically designed to provide executives and strategic thinkers with concise, analytical briefings from across the IHS Markit capabilities in upstream oil and gas; LNG; midstream and downstream; renewables; geopolitics; and global economics.

The service delivers approximately 140 annual briefings and longer strategic papers which present the key trends and forward-looking views of IHS Markit experts across the energy value chain.

The service synthesizes the more detailed research and data produced by other IHS Markit services into short, 3-4 page summaries including forecasts, analysis, charts and graphs.

The briefings are delivered via email attachments in pdf format for easy reading from any location on tablets, computers and mobile phones. The analysis may easily be forwarded to other colleagues within the client organization, enabling sharing of important industry outlooks.

The Strategic Horizons briefings provide timely and unique views of trends across the energy industry, grounded in the detailed analysis of our experts in each

field and geography. The executive summary approach provides a window into our research across oil, gas, renewables, geopolitics and economics in a short, digestible format designed for quick reading.

The briefings are supplemented by a quarterly webinar in which IHS Markit discusses industry trends and implications for the future.

Our clients include international and national oil companies, service sector firms, chemical companies, equipment manufacturers, technology companies, government agencies and energy ministries.

BenefitsTop executives

‒ Receive concise analysis across the energy industry which can be read from any location

Strategic planners ‒ Acquire a breadth of

understanding of the fundamentals driving different industry segmentsis

Investor relations ‒ Monitor multiple

energy-related issues which interest outside investors

Business development ‒ Understand the market

and competitive environment in which their company is operating

Offerings

Strategic Horizons provides approximately 150, 2-4 page executive briefings per year, or about three per week. The analysis is drawn from the IHS Markit expert teams within each of our energy industry segments. Recent briefings include analysis of:

Upstream oil and gas ‒ Returning investment to global deepwater

‒ North American midstream challenges

‒ Upstream developments in East Africa

‒ US oil production outlook

Oil markets, midstream and downstream ‒ Supply impact of US sanctions on Iran

‒ Declines in Venezuela crude oil production

‒ Global petrochemical developments

‒ Opportunities in Mexico downstream

‒ IMO bunker fuel transition

Power, gas and renewables ‒ Global LNG project investment and implications

‒ Renewables costs and competitiveness with other fuel sources

‒ Low-carbon investments by IOCs

‒ US gas production outlook

Energy-Wide perspectives ‒ Climate related financial risk for the oil sector

‒ G20 carbon prices and the Paris Agreement

‒ Global economic outlook and risks to energy demand growth

‒ Latin America political risk

The Strategic Horizons team reviews hundreds of IHS Markit publications from across the company in order to select and summarize the most important analysis for executive summaries. The team is led by Susan Farrell, Vice President, Energy-Wide Perspectives, a strategic planning expert with over 20 years of industry experience.

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For more information www.ihsmarkit.com

Copyright © 2018 IHS Markit. All Rights Reserved

Susan Farrell Vice PresidentT +1 202 721 0337E Susan.Farrell@ihsmarkit.comCanada)

Sandra Ortega Commercial DirectorT +1 281 752 3235E Sandra.Ortega@ihsmarkit.com

About IHS Markit

IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

Conf idential. © 2018 IHS Markit™. All rights reserv ed.

26 July 2018

Contacts Susan Farrell, Vice President, Energy-Wide Perspectives ∙ susan.farrell@ihsmarkit.com, 202 872 1199 Christopher Elsner, Senior Research Analyst, Energy-Wide Perspectives ∙ christopher.elsner@ihsmarkit.com, 646 679 3176

From IHS Markit Crude Oil Markets Aaron Brady, Vice President

The prices today for long-dated futures contracts are a notoriously bad predictor of actual future prices. However, the slope of the forward curve can actually tell us a lot about short-term supply and demand pressures. The fundamentals that have caused the front of the WTI curve to rise and Brent to flatten may reverse later this year, widening the price spread between the two benchmarks and once again improving US oil export economics.

In a tight market, with demand running ahead of supply, the front-month contract price rises relative to the longer-dated contract prices (“backwardation”) as a signal to sell oil from inventories. Conversely, when supply is running ahead of demand, the front-month contract falls relative to the rest of the curve (“contango”), which gives traders an incentive to put barrels into storage. Normally, the two main crude oil futures markets (Intercontinental Exchange [ICE] Brent and New York Mercantile Exchange [NYMEX] WTI) mirror each other in terms of the level of backwardation or contango. But over the past several weeks, they have been behaving rather differently from each other. The WTI forward curve has shifted into steep backwardation, or a downward sloping shape, with spot prices about $6/bbl higher than 12th month contract prices. Brent, on the other hand, has flattened, with the front of the curve flirting with contango.

Over the past decade, as the shale revolution has upended trade flows and turned the United States into an exporter of light, sweet crude, the NYMEX WTI light, sweet crude contract price has increasingly reflected the local supply and demand conditions of North America, while Brent has continued to reflect broader global fundamentals and remained the international benchmark. This is not to say that WTI is not influenced by international supply and demand developments—it is. But frequently, the specific logistical and supply and demand fundamentals of the United States and Canada can have outsized impacts on both the outright price of WTI and the shape of its forward curve.

This is one of those times. The unanticipated sustained downtime of the Syncrude oil sands mine in western Canada at the end of June—and subsequent news that it would be out

of commission through at least the end of July—was the key trigger pushing WTI backwardation to new heights. The Syncrude plant is a large producer of synthetic crude oil (its advertised nominal capacity is 360,000 b/d, but it has produced more), and its absence will be significant in the highly interconnected North American refining market. The outage occurred at a time when Cushing crude oil inventories were already nearing three-year lows. WTI backwardation is now at similar levels to 2014, when Cushing inventories were last at these levels

Strategic Horizons Oil Futures: Dynamic of forward curves for Brent and WTI reflect temporary market forces

Insight

Confidential. © 2018 IHS Markit™. All rights reserved.

8 August 2018

Contacts Susan Farrell, Vice President, Energy-Wide Perspectives ∙ susan.farrell@ihsmarkit.com, 202 872 1199 Christopher Elsner, Senior Research Analyst, Energy-Wide Perspectives ∙ christopher.elsner@ihsmarkit.com, 646 679 3176

IHS Markit Financial and Capital Markets Raoul LeBlanc, Vice President

The significant move by BP to purchase BHP Billiton’s US shale assets for $10.5 billion makes it the latest of the majors to make a material push into US tight oil, concentrated prominently in the Permian. ExxonMobil and Shell have spent billions buying up Permian acreage in recent years while Chevron has rediscovered its vast legacy position in the basin. France’s Total is now conspicuously notable in its absence from West Texas.

The majors piling into the Permian is changing both the nature of their portfolios as well as the dynamics of the basin’s growth in coming years. The Permian’s short-cycle production is now at the center of four of the five majors’ growth plans, which in turn will increasingly drive Permian growth. Our analysis of the majors’ plans in the Permian show the four companies alone will add more than 700,000 b/d of crude production in the Permian from 2018 to 2023.

The American supermajors are leading the charge. ExxonMobil plans to add around 250,000 b/d and Chevron around 200,000 b/d by 2023. Shell is looking to add around 150,000 b/d by 2023, bringing its total to roughly 220,000 b/d. Despite the headlines that have surrounded the BHP deal, BP has a long way to go to catch up with the lofty targets of the other majors with substantial Permian positions. The company has yet to give firm guidance on its Permian plans yet, but our initial estimates put the company on a trajectory to be producing about 80,000 b/d by 2020.

The majors will be muscling aside their smaller independent rivals and increasing their share of total Permian output as production accelerates after 2019. Based on our basin-level forecast, we expect the four majors’ share of Permian output to

be about 20% by 2023, and almost certainly higher in subsequent years. We expect total Permian output to grow by 3.2 MMb/d from 2018 to 5.7 MMb/d in 2023. The four majors alone would account for around a fifth of that total production growth.

While the Permian is at the center of the majors’ growth plans, they are also expanding in other tight oil plays. We estimate total US unconventional production from the four majors will surge from around 1 MMboe/d in 2017 to 3 MMBoe/d by 2025. ExxonMobil is the clear leader, thanks to its XTO business acquired in 2010 and the Bass family’s Permian assets bought in 2016, with total unconventional US gas and oil output on pace to top 1 MMboe/d by 2021 (of which 532,000 b/d will be liquids). Chevron’s

reliance on the Permian means that it has the oiliest shale portfolio of any of the majors. We estimate the four majors will pump around $85b into their shale businesses by 2025, accounting for between 15% and 25% of total corporate capex.

Strategic Horizons US Tight Oil: As IOCs boost US onshore position, growth will rely more on the majors

Insight

Confidential. © 2018 IHS Markit™. All rights reserved.

23 May 2018

Contacts Susan Farrell, Vice President, Energy-Wide Perspectives ∙ susan.farrell@ihsmarkit.com, 202 872 1199 Christopher Elsner, Senior Research Analyst, Energy-Wide Perspectives ∙ christopher.elsner@ihsmarkit.com, 646 679 3176

From IHS Markit Pricing and Purchasing KC Chang, Senior Economist

Cobalt and lithium are crucial elements to electric vehicle batteries. In 2017, cobalt and lithium experienced strong price gains, as evolving economic policy related to the electric vehicle (EV) industry impacted long-term demand expectations. For cobalt, after years of relative calm, prices increased more than 100%, moving from $12.20 per pound in 2016 to $34.00 per pound by the end of 2017. While lithium's price gains were less dramatic, monthly price volatility was high—carbonate prices averaged $8.22 per pound in January 2017 and finished December at $11.35 per pound. Lithium's 38% price gain in 2017 reflected new demand for rechargeable batteries. Yet rising mine supply will help prices ease over the next year.

For cobalt and lithium, battery production from the high-tech electronics industry represents a stable and significant portion of physical demand. Over the past 20 years, steady growth in portable consumer electronics such as laptop computers and

cellular phones supported a steady rise in lithium-ion rechargeable battery production. With cobalt and lithium being critical elements used to make lithium-ion battery cathodes, both metals benefited from years of steady, stable demand growth with little upward pricing pressure. A side effect of this rather benign pricing environment, however, has been little incentive to develop more supply. Given their unique properties and small global supply base, this creates a potential vulnerability as even small changes in either supply or demand to produce market imbalances that cause big price swings.

Over the last 12 months, policies in China and Europe focused on reducing carbon emissions have raised demand expectations ahead of planned supply for both metals. In particular, China began offering generous

production and consumer incentives to encourage the development and purchase of new electric vehicles (NEVs). Determined to reduce carbon emissions and become a global leader in renewable energy, the Chinese government is aggressively supporting the EV industry. The most prominent assistance is the 25% subsidy rate for EV producers, all part of a drive to increase EV sales to 2 million vehicles per year by 2019.

The sharp price gains in cobalt and lithium markets reflect the stepped increase in NEV, as well as long-term demand for lithium-ion and other renewable battery technologies. While IHS Markit is sanguine about global EV production and renewable technology adoption in the coming decades, there are economic forces that will likely restrain battery material prices over the next 12–18 months.

Insight

Strategic Horizons EV Batteries: Rising supply for cobalt and lithium the cure for higher prices