TRANSPORTATION AND STORAGE RELATED … · frequently called upon to analyze the costs associated...

Baker & O'Brien consultants have considerable experience in the transportation,storage, and distribution of energy raw materials and finished products. We arefrequently called upon to analyze the costs associated with truck, rail, pipeline, and/ormarine transportation of crude oil, petroleum products, and chemical feedstocks. Weundertake feasibility studies associated with pipelines and petroleum storage facilities.We investigate the source and implications of leaks, fires, explosions, and otheroperating incidents that periodically occur during the operation of such facilities. Ourconsultants have provided evidence and expert testimony regarding propermaintenance and safe operating practices for all types of transportation systems.

PRIMARY CONTACTS

RELATED SERVICESAccident/Incident InvestigationAsset ValuationsDue Diligence and Advisor toLenders and InvestorsEngineering, Procurement, andConstruction (EPC)Markets and StrategyMerger and Acquisition SupportProperty Damage and BusinessInterruption Insurance ClaimsTechnology Assessment

Robert L. BeckConsultantHouston

Kevin H. BuntenConsultantLondon

Amy L. KaltConsultant, Manager of Analytical ServicesHouston

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TRANSPORTATION AND STORAGE

RELATED EXPERIENCEBankruptcy ReorganizationDeveloped, in conjunction with senior management, reorganization plans for various operating segments of a major trading andtransport company. The resulting business plan formed the foundation of the company's successful reorganization and emergencefrom bankruptcy. Bitumen Valuation StudyDeveloped a methodology using a marker crude oil to value bitumen at the production site. Methodology addressed differences inqualities (sulfur, acid number) and refining yields. Transportation costs from the valuation hub to the production site weredeveloped. Blending methodologies were evaluated to develop bitumen blends for comparison to the marker crude oil. Black Oil StorageProvided an assessment of terminal facilities in the Long Beach and Los Angeles areas. Assessed historical and projected crudeoil supply and demand for California. California Crude Oil StudyDeveloped a detailed California crude oil supply, demand, and transportation balance (by refinery) for a mid-size independentCalifornia crude oil producer. Results were used in client's annual report for shareholders and security analysts. Chemical Pipeline Market StudyOn behalf of an acquisitive client, researched, identified, and characterized chemical pipeline operations in the U.S. to form adatabase of prospective business opportunities. The engagement included contacting each prospective target to ascertain aninitial level of interest in pursuing commercial arrangements with the client. The study identified several attractive prospects andprovided an overall measure of the market dimensions. Company Reorganization StudyFollowing the bankruptcy of a major Singapore-based shipyard, with significant oil interests throughout Southeast Asia, workedwith the company's lenders to restructure and reorganize the company's asset base. Made visits to all major company sites andprepared report outlining current status. Recommended the disposition of non-core assets and the reorganization of core assetsinto a smaller and less highly leveraged entity. Following acceptance of most of recommendations by creditors' committee,company was able to successfully emerge from bankruptcy protection. Condensate Feedstock Contract DisputeAssisted in a claim between: (1) a European refiner and ultimate condensate supplier, and (2) an intermediary company,concerning allegations that the intermediary company was prevented from obtaining condensate supplies for sale to the refiner. Studied the potential availability and quality of condensates in the producing region and elsewhere. Identified potentially suitablecondensates for the refinery. Based on forecasts of oil and petroleum product prices, prepared an estimate of potential economicdamages. Described how term feedstock contracts for condensate are typically concluded. Testified at an arbitration in London.

Charles G. KempVice President, Dallas Office ManagerDallas



damages. Described how term feedstock contracts for condensate are typically concluded. Testified at an arbitration in London. Construction Dispute - Gas PlantProvided expert reports and testimony regarding project management issues, alleged defects, and liquidated damages forinternational arbitration between owner and contractor. The project involved an offshore platform, an undersea pipeline, anonshore pipeline, an onshore cryogenic gas processing plant, and a sales gas pipeline. Contamination at Bulk Petroleum Storage FacilityEvaluated the potential long-term contamination at a bulk storage facility resulting from the sediment contained in incominghydrocarbons. Crude Oil Gathering System EvaluationOn behalf of an independent U.S. refiner, conducted an in-depth study of its crude oil gathering and transportation system. Ourstudy included reviews of physical assets and crude oil purchase and transportation agreements, and evaluation of the economicsof retention versus disposition. Our results and conclusions were used by the client in its asset rationalization plans. Crude Oil Import Terminal FeasibilityExamined the feasibility of a deep water import terminal to meet the domestic refining industry's needs for imported crude oil asWest Coast crude production declines. The analysis included a review of the history of imported crude oil for West Coast refineries,the current outlook for domestic production declines, crude oil import trends, shipping logistics, refinery capabilities, and futureopportunities for moving crude oils to refining facilities east of the Rocky Mountains. Crude Oil Market StudiesPrepared several detailed assessments of West Coast crude oil markets for an independent California producer. Studies includedpreparation of detailed regional balances, identification of target refineries for client's crude oil, and estimation of its value relativeto imported and domestic alternatives. Results were presented to client's executive management and at its banker and securityanalyst conferences. Crude Oil Marketing and Trading ReorganizationConducted review of crude oil marketing and trading practices of major international oil company operating in Europe. Preparedanalysis of the organization, key practices, and operating systems. Recommended changes in structure and practices to increaseeffectiveness, efficiency, and profitability. Crude Oil Marketing StrategyPrepared a marketing strategy for new production in Russia's Sakhalin Island region. The study analyzed potential markets for newproduction of crude oil, transportation options and costs, and contracting strategies. Crude Oil Marketing StudyAssisted the U.S. General Accounting Office in evaluating the potential for marketing of Naval Reserve crude (Elk Hills) in marketseast of the Rockies. Work included evaluation of breakeven refining values, assessment of yield and contaminant penalties, andanalysis of the potential for supplying this crude to the Gulf Coast market. Crude Oil Marketing StudyProvided support to a major Canadian crude oil pipeline transporter in the customization of the PRISM model, Baker & O'Brien'sproprietary refining industry analysis tool, the company had licensed from Baker & O'Brien. Support included addition of crude oilsof specific interest to the client. Crude Oil Pipeline AcquisitionOn behalf of an international pipeline company, prepared an assessment of the acquisition of a fifty percent ownership in apipeline system that transports crude oil from Canada into the U.S. Study included crude oil supply/demand projections for the



markets served. Crude Oil Quality DisputeActed as expert witness in a dispute between a major oil company and a small crude oil supplier that allegedly delivered"dumbbell" crude into the oil company's common carrier pipeline system. Prepared a report covering standard industry pipelinepractices, crude oil quality acceptance, crude oil trading, and refining values of various crude oils. Calculated damages incurred asa result of the poor quality crude oil delivered and the impact on refiners receiving crude from the pipeline. Crude Oil Sludge AccumulationFollowing a claim concerning sludge accumulation in crude oil storage tanks over a twenty-year period, advised as to the creationof sludge in crude oil tanks, its accumulation, the ways to prevent or control it, and the conventional ways of dealing with it. Crude Oil Supply EvaluationOn behalf of a major pipeline and terminal company, prepared a detailed assessment of future crude oil supply and demandbalances for the U.S. West Coast, with an emphasis on California. The assessment was used by the client as a key part of itsjustification for a new crude oil import terminal, capable of handling VLCCs (Very Large Crude Carriers), to be constructed in thePort of Los Angeles. Results were presented to community and state government groups. Crude Oil Terminal and Pipeline StudyAssisted in the site selection study for a new crude oil terminal and a pipeline connecting the terminal to an existing refinery. Ethanol Terminal Blending Facility EvaluationOn behalf of a private equity firm, reviewed a site development plan for a coastal ethanol receiving terminal and associatedgasoline blending facility. Evaluated the market competition for terminalling services within the local area. Fischer Tropsch (FT) Market StudyConducted a market study for intermediate and finished products resulting from FT synthesis of a gas source in West Africa. Thestudy assessed the best markets and projected netback prices for FT diesel, jet, and naphtha, as well as a review of themarketability of intermediate (unfinished) FT products. Litigation - Fuels Terminal Operations AssessmentPerformed expert advice on fuels terminal operations that focused on the practices and procedures with an emphasis on the fillingof product tanks. Gas Measurement DisputePerformed a preliminary audit of natural gas measurement discrepancies between an unregulated gathering system and aninterstate pipeline. Identified periods that meters were out of service and utilized system balance to estimate deliveries. Gas Pipeline Rupture DisputePerformed an independent assessment of the costs incurred, including the lost natural gas inventory, on a ruptured interstate gastransmission line for which the owner requested a multi-million dollar damage reimbursement. A report was prepared for mediationwhich resulted in a negotiated settlement. Gas to Liquids EvaluationOn behalf of a major oil and gas producer, prepared a conceptual design for a Fischer-Tropsch based gas-to-liquids unit using lowvalue associated gas to produce LPG, gasoline, and zero sulfur diesel. Developed estimates of charge and yield, capital andoperating costs, and project development and capital spending schedules. Gas Well Production DisputeReviewed gas well production (meter readings) and pipeline pressure history to determine if gas was delivered into gatheringsystem when the system was not being monitored and the local injection compressor was not operating.



Gasoline Blending ComplianceProvided analysis for a refiner that does not produce finished gasoline on the prospects for producing gasoline that meets all APIand ASTM requirements. Analyzed the options available to the refinery for blending reformate fractions and whether aromatics orbenzene would likely be the constraining specification as it relates to the "anti-dumping" rule. Evaluated potential early compliancewith the EPA's mobile source air toxics (MSAT2) program. Gasoline Spill LitigationAssisted in a dispute between a retail marketer and contractor concerning allegations that contractor's work contributed to agasoline spill from a retail gas station that contaminated the well water of 130 homes. Assisted in discovery, evaluated themechanical integrity of equipment, examined unique theories of causation, inspected site, and attended destructive testingprocedures. Grassroots Refinery Feasibility StudyConducted a feasibility study for a grassroots refinery project that included assessment of potential crude oil supplies, variousrefinery configurations, and a detailed analysis of target markets and product distribution logistics. The study also included anintegrated coke gasification complex to supply hydrogen, power, and steam to the refinery. Capital cost estimates were preparedand project economics were developed for a range of scenarios. Heliport Pipeline LeakPrepared expert rejoinder report on leakage from fuel storage, pipeline, and loading system located at a heliport and marine dock. Import Terminal StudyOn behalf of four major oil companies, provided a screening study focused on the Port of Long Beach and Port of Los Angeles todetermine the future adequacy of the overall port infrastructure and facilities. Independent EngineerRetained as the Independent Engineer for the "grassroots" Tangguh LNG Liquefaction Project in Indonesia. Prepared the technicaldue diligence for the US$3 billion facility on behalf of a financial consortium. Insurance ArbitrationInvestigated the circumstances surrounding an oil spill at a Gulf Coast refinery following a hurricane. Work focused on whether therefiner acted as a "prudent operator" before and after the hurricane and whether the owner was entitled to a claim for damagesbased on an insurance policy's pollution exclusion clause. Prepared a written report for submission into evidence in aninternational arbitration. Interstate Pipeline Inspection PracticesProvided expert testimony on inspection and maintenance practices for interstate petroleum products pipelines. Issues includedreasonable depth of additional overfill and width of maintenance right-of-way. Jet Fuel Contamination DisputeFollowing product quality issues in major interstate product pipeline movements, reviewed product injection practices and analysesat pipeline injection point. Evaluated analyses at various points along the pipeline to assess possibility of quality degradation. Litigation - MTBEAssisted in defense of oil companies charged with supplying gasoline containing the additive MTBE, which was alleged to havecontaminated water supplies. Baker & O'Brien was involved in reviewing and analyzing refinery supply, pipeline distribution, andretail marketing of gasoline in the area subject to the dispute. Litigation - MTBEPrepared expert testimony on the issue that MTBE use in reformulated gasoline (RFG) was the result of a federal mandate to use



oxygenates in RFG. The legal result was to consolidate several state MTBE cases into federal court. Several other studiesperformed, including the ability to use other oxygenates and the costs of ethanol logistics. Long-term Outlook - Global Refining and Light/Sweet CrudeCompleted a study that examined longer-term developments of the worldwide refining industry and strategies for maximizing thesales value of light, sweet crude grades. The study identified and evaluated a long-term pricing strategy for light/sweet crude oil asa response to expected changes in crude oil quality, environmental legislation and mandates, and regional growth trends inpetroleum demand. LPG Pipeline ContaminationEvaluated pipeline contamination and potential sources of contaminants from various sources. LPG Pipeline SpecificationsEvaluated pipeline tariffs, product specifications, connection agreements, and liquefied petroleum gas sales agreements, includingthe determination of fractionator feedstock and product economics, for the export of liquefied petroleum gas to northern Mexicofrom fractionation facilities in West Texas. Lube Oil Market StudyOn behalf of a major oil company, prepared a forecast of the worldwide supply/demand balance for paraffinic lube oil base stocksto support the development of a new high technology manufacturing facility to be located in Saudi Arabia. Project was a jointventure between the company and the Saudi Arabian government. Output from the project was intended to serve the high growthareas of the Middle East and Far East. Manufacturing Facility and Plant EvaluationPerformed an on-site assessment of a pipe manufacturing facility to determine operational viability. Key assessments made onmechanical integrity and reliability of the process equipment, technical understanding and organizational strength of facilitypersonnel, and related operational issues. Marine Cargo ContaminationInvestigated causes for contamination of a cargo of gasoline delivered by ship to Ecuador. Work included review of contractrequirements, gasoline blending practices, surveyor procedures, and issues related to laboratory testing of gasoline. Market Analysis and Term Supply Contracting - Synthetic Crude OilAssisted a Venezuelan joint venture company in developing a marketing strategy for a new synthetic crude oil. The assignmentincluded an evaluation of the potential market for the new production, modeling of refinery values for the new production, detailedassessments of potential supply agreements, and assistance in term contract negotiations. Modular Refinery Conceptual StudyPerformed a conceptual analysis of a small, skid-mounted refinery operating in the Middle East to serve local markets. Assessedthe likely configuration and capital costs and yields, given an assumed crude slate. Multi-Refinery SynergiesAnalyzed the synergies and economic advantages of companies that operate multiple refineries on the U.S. Gulf Coast. Analysisincluded advantages in crude acquisition; turnaround and routine maintenance; feedstock and product transportation; efficientprocessing of intermediate streams; and optimal capital investment. Natural Gas Pipeline and Processing Plant Due DiligenceAssisted an electric utility in its merger with a gas transmission and distribution company. Inspected pipeline and processingfacilities and reviewed natural gas and natural gas liquids supply and marketing issues. Conducted operations review and ananalysis of staffing levels.



Natural Gas Royalty LitigationEvaluated the design and historical capital costs of a natural gas pipeline system in western Oklahoma. Reviewed system materialbalances and operator's natural gas measurement practices. New Petroleum Products TerminalOn behalf of a major international construction company, prepared a preliminary feasibility study on a new petroleum productsimport terminal to serve the local market . Study included facility layout and size estimates for docks and storage tanks. Valuation of Pipelines and Gas PlantServed as independent engineer on behalf of a major bank to value and certify completion of a project to build offshore pipelinesand an onshore gas processing plant for gathering and processing of deepwater Gulf of Mexico oil and gas production. Thevaluation was prepared for the lender in support of $200 million of structured finance. Sulfuric Acid Storage IncidentRetained to assist in the investigation of a fatality incident at a sulfuric acid processing and storage facility. Reviewed equipmentdesign, inspection and repair history, operating procedures, training of personnel, and industry practices. Assisted legal team withon-site investigation and interaction with local, state, and federal agencies. Reviewed conclusions by root cause analysis forconsistency and factual support. Salt Water Disposal Tank ExplosionInvestigated the cause and origin of a storage tank explosion at an oil and gas salt water disposal facility in Colorado. Conductedsite investigation and facility/equipment inspections, evaluated system design and operation, and conducted witness interviews.Determined cause of explosion and worked with company management to evaluate existing policies and procedures for potentialareas of improvement. Refinery Product Distribution OutlookOn behalf of a large, publicly-traded master limited partnership engaged in the transportation, storage, terminalling, and marketingof petroleum, we assessed the five-year outlook for refinery production, liquid storage capacity, and major pipeline flows on theUSGC. Supply/Demand ForecastConstructed PRISM refinery models of all of the Australian refineries for use by a client for its strategic planning efforts. Supply and DistributionAssisted in a dispute concerning the effects of Hurricanes Katrina and Rita on jet fuel prices for the Gulf Coast market. Thesequence of events and impacts on individual suppliers were developed, as well as an allocation of outages and price differentialsattributable to each hurricane. Our analysis of pricing activity also considered estimates of normalized versus event-based pricemovements in the overall market. Subsea Pipeline RuptureAssisted attorneys in investigating the circumstances surrounding a rupture of a subsea crude oil pipeline caused by a vesseldragging an anchor. This assignment included a review of the impact on crude oil gathering system and receiving terminaloperations, the owner's emergency response, subsea pipeline repair costs, and a determination of the maximum insurable loss. Refinery Business InterruptionPrepared detailed analyses of property damage, business interruption, and demurrage claims resulting from a vessel allision with arefinery dock. Underground Storage Tanks ClaimAssisted in a dispute concerning an allegation that Underground Storage Tanks (USTs) at a retail outlet had released gasoline



vapors, resulting in contamination of groundwater with MTBE. Assignment included review of procedures for delivery of gasolinefrom tankers to UST, review of equipment and fittings used in UST, review of hydrogeological data regarding groundwater andcontamination plumes, review of the design of vapor recovery systems, and calculations of vapor composition and amountsreleased. Prepared report to document findings and testified in deposition. Review of Facilities Safety IssuesAssisted in technical review of safety related issues at crude oil production and gathering facilities. RFS Infrastructure StudyPrepared a report for the American Petroleum Institute (API) that analyzed the potential logistics and infrastructure bottlenecks ona year-by-year basis to 2012 that could result from the industry trying to meet the Renewable Fuel Standard from the EnergyIndependence and Security Act of 2007. Refinery Competitiveness StudyAnalyzed the relative competitiveness of a group of refineries in a specific region. The study included an analysis of the localsupply and demand balance, and a forecast of product movements into and out of the region. Using our proprietary PRISM system, modeled each refinery in its current configuration and in its expected configurations eight years in the future. Profitmargins were calculated for each refinery under three different product price scenarios. Refinery Product Delivered Cost DataAssisted a client with the historical analysis of refined product supply patterns and costs in the U.S., with a particular emphasis ondelivered cost of supply for transportation fuels. Provided five years of delivered product volume and cost data (by calendarquarter), for all major gasoline and distillate grades, for 85 U.S. markets, as produced and transported from over 130 fuelsrefineries. Transmix and Biodiesel Processor ValuationDeveloped a business valuation for an entity engaged in transmix processing, biodiesel production, and ethanol terminaling. Theengagement entailed analysis of historical, current, and projected cash flows from operations to generate an income-based valuefor the enterprise. The work included updates to valuations of operations previously assessed by Baker & O'Brien, as well asanalysis of new facilities. Pipeline Contamination DisputeAssisted in a claim involving an alleged y-grade/NGL pipeline contamination from a gas processing facility. Examined thefollowing key areas to evaluate the claim: pipeline hydraulics, laboratory records, chronology of pipeline sample data,reasonableness of claimed expenses, gas processing facility operation, and records. Pipeline Quality Bank DisputeAssisted in a dispute involving crude oil quality bank payments demanded by a pipeline consortium transporting a company's oilthrough Central Asia. Studied the quality bank calculation procedure in order to demonstrate if the methodology described in thetariff had been properly applied. Provided examples of methodologies used in other quality banks. Prepared quality bankcalculations based on application of the methodology. Testified at an arbitration in London. U.S. Midcontinent Crude ValuationEvaluated crude oil refining values and logistics for several targeted refineries in the U.S. midcontinent area. Evaluated expectedprice parity points for domestic crude oils versus competing grades delivered to the refineries via pipeline. Tank Truck Explosion InvestigationInvestigated the potential causes and sources of ignition for an explosion that destroyed a road tanker, used to haul raw naturalgas liquids from a gas treating plant, that was in a repair shop for the replacement of a pressure relief valve.



Product Supply Contract ReviewFollowing the notice of cancellation of a product supply agreement based on crude processing, to be replaced with an agreementwhere refined product prices were to be supplied based on adjustments to posted prices, evaluated the economics of the proposedsupply contract compared with the existing crude processing agreement. Determined the required level of discount to OPIS pricesto match product cost under the existing crude processing arrangement. Pipeline Contractual DisputeAssisted in a claim between a major U.S. energy provider and project promoters concerning claims that the energy providerdefrauded project promoters when it proceeded with the construction of an international natural gas pipeline. Submitted reportoutlining the differences between energy provider's project and the promoters' project. Products Terminal Feasibility StudyPrepared feasibility study and cost estimate to modernize and increase throughput capacity of a petroleum products terminal onthe Black Sea. Petroleum Products Terminal ExpansionOn behalf of a worldwide independent storage group, undertook a marketing study to support the expansion of an existingpetroleum products and chemical storage terminal. Study addressed the potential growth in Southeast Asian products trade, thedemand outlook for independent storage, and likely future terminal rates. Expansion proceeded to successful completion based onstudy results. Replacement Cost DeterminationProvided a comprehensive estimate of replacement costs for oil and gas producing facilities, offshore production and drillingplatforms, gathering systems, storage facilities, and processing plants. These costs were used as a basis for establishingappropriate levels of insurance coverage for a major petroleum corporation. Pipeline DivestitureUndertook a comprehensive market analysis and competitive assessment of a major refined products pipeline system and formedvarious strategic options for asset disposition. The conclusions developed from the engagement supported the client's subsequentdecision to divest certain asset segments. Refining Market ForecastInvestigated business interruption claims from fuels refineries, lube refineries, cement plants, fuels distributors, and chemicalsmanufacturers due to the closure of marine access following the release of oil into the waters surrounding the plants. MTBE LitigationPrepared declaration of gasoline distribution issues in northern California, including rebuttal of other experts' analyses of gasolinedistribution. Propane Storage AssessmentPrepared an analysis of an underground propane storage system to determine causes of leakage and potential corrective actions. Petrochemical Terminal FireReviewed testimony, expert reports, and forensic evidence and attended depositions to determine cause and origin of terminal fire. Prepared report addressing electrostatic discharge theory, petrochemical handling procedures, employee training, andmanagement issues. MTBE LitigationSupported joint defendants in litigation involving alleged MTBE contamination in groundwater. Analyzed gasoline supply issues tocentral Illinois over the period 1980 to 2006.



Terminal Facility Due DiligenceConducted financial and operational due diligence on behalf of lenders for a large regional petroleum terminal facility withassociated transmix processing and commercial waste treatment operations. Tasks included inspection of facilities, assessment ofcompetitive market position, evaluation of financial performance, and estimation of potential market value for the facilities. Tennessee Gasoline and Ethanol BlendingProvided an expert report and expert testimony on the production and distribution of ethanol and gasoline, particularly brandedgasoline, in the state of Tennessee. Provided a refiner perspective of the impact of the Renewable Fuel Standard on gasolineblending, distribution, and marketing operations. Pipeline Pigging AccidentReviewed injury accident that occurred while pigging a gathering pipeline to remove formation water produced with natural gas.Provided an expert report regarding applicable industry standards regarding operation of vacuum truck for disposal of formation, aswell as observations regarding the contractual responsibilities of the tank truck operator and the production operator. MTBE LitigationProvided expert report that evaluated and discussed the issues concerning why MTBE was chosen over ethanol to the federaloxygenate requirements in the early 1990s. Also included was a discussion of how gasoline was supplied to the local region inCalifornia over the 1990s and early 2000s. Bitumen Diluent StudyDeveloped a market study regarding diluent to be used by Canadian Oil Sands bitumen producers. This included projected supplyand demand balances, logistics requirements, and impact from unconventional natural production. Project Development DisputePrepared an expert report and delivered a deposition and testimony at jury trial in a dispute involving a project development claim.The dispute focused on the value and likelihood of successful completion for two projects in the early stages of development: anatural gas salt dome storage facility and a petroleum products terminal. NGL Pipeline Due DiligenceReviewed data presented by a potential NGL pipeline seller on behalf of a potential buyer. The review focused on mechanicalintegrity and other safety issues. Gas Gathering and Treating Due DiligencePerformed due diligence of West Texas natural gas gathering and treating system. Reviewed contracts and facilities, assessedcompetition, developed economic model, and estimated market value of assets. Gas Treating Facility Explosion InvestigationInvestigated cause of system overpressure and shutdown of downstream pipelines which led to flange gasket failure and fire. Reviewed system design, construction, and overpressure protection at wellheads located upstream to determine cause of failure. Gasoline and Diesel Terminal Due DiligencePerformed technical due diligence for terminal assets on behalf of financial firm. Visited the facilities and reviewed relevantdocumentation to advise the client on issues concerning the operability, safety, and physical conditions of the facilities andpotential future maintenance and capital costs. Refinery and Pipeline Systems ValuationProvided values of a refinery, crude oil gathering, and products marketing system to be recorded as fair values for purchase priceallocation purposes.



Refinery Cash Margin studyProvide a comparison of cash refining margins for PADDs 1 through 4 versus expected cash refining margins when inland crude oiltransport bottlenecks to the USGC have been relieved. Condensate Gathering System Due DiligenceAssisted client with engineering due diligence on a Texas condensate gathering system focusing on pipeline mechanical integrityissues. Horizontal Drilling Property DamageReviewed damage to private property (farmland) allegedly caused during the installation of an underground pipeline. A portion ofthe pipeline was installed using the technique of horizontal directional drilling (HDD). Monterey Shale Oil StudyOn behalf of a California refiner, reviewed the potential for production of Monterey shale crude oil in the San Joaquin Valley andthe accessibility of this crude to the client's refining system. Natural Gas Gathering Fee DisputeReviewed natural gas contracts to opine on whether addition of a gas gathering fee was consistent with typical commercialexperience on intrastate pipelines. Market Study for Crude Oil Rail Unloading TerminalProvided an update to a previous report on U.S. light crude oil supply/demand and implications for a new crude oil unloadingterminal in a large refining center on the USGC. Supplemented the report with an analysis of heavy crude oil rail transportopportunities. Crude Oil Pipeline System Due DiligenceSupplemented the client's team performing due diligence as part of a potential transaction regarding a crude oil gathering andmainline pipeline system. Our focus was on the engineering aspects of new facilities and facilities under construction. Weprovided an opinion on whether the new facilities, and the facilities under construction, appeared to be designed to applicableindustry specifications. Reorganization of Crude Oil Trading BusinessAnalyzed crude trading business for potential reorganization. Reorganization of Crude Oil Trading BusinessAnalyzed crude trading business for potential reorganization. Shipyard Insurance Claim AnalysisAssessed a business interruption claim filed by a shipyard that resulted from a third-party incident. Based upon our analysis of theclaimant's business operations and performance, claim estimates were developed that formed the basis for settlementnegotiations. Terminal Facility ValuationReviewed the operating results and management projections for a terminal and transmix processing facility to develop anincome-based valuation for the business enterprise. This engagement was one of a series of valuations prepared by Baker &O'Brien to support the financing requirements for this business since its inception. Terminal OperationsProvided litigation support assistance and expert opinion for case involving historic Standard of Care issues with petroleum productterminals. Trans-Alaskan Pipeline (TAPS) Quality Bank



Provided expert testimony before extended hearings of both the Federal Energy Regulatory Commission (2004) and the AlaskanPublic Utilities Commission (2007) with respect to the methodology used to value various Alaskan crude oil streams enteringTAPS. Issues included how to calculate the refining values of such crude oils in U.S. West Coast refineries and how changes inthe indicated market values of crude oils should be handled from a retrospective basis. Wholesale Trade PracticesAssisted a South American national oil company in reviewing trade practices for the wholesale marketing of petroleum products.Advised the client on wholesale price formation and marketing practices in free markets. Project ManagementExecuted several mid-to-large pipeline and facility projects in multiple international locations, overcoming challenging cultural andlanguage differences. Performed feasibility studies, detailed design, procurement, construction, inspection, hydrotesting, riskassessments, and pipeline integrity. Independent Planning Consultant In the early 1990s, a major oil company agreed to purchase a former Soviet block country’s refining and marketing assets.Additionally, there was an agreement to build a state-of-the-art grassroots refinery. Until the streaming of the grassroots refinerylater in the decade, the oil company operated the existing refining assets on behalf of the national office of privatization. The role ofthe independent consultant was to ensure that the operation was not “optimized” at the expense of the country’s taxpayers.Participated in the preparation of monthly operating plans with the operating company and presentations to the national office ofprivatization over a two-year period. Performance Improvement Initiatives in Worldwide RefineriesHelped design and direct a consulting project to identify the most successful profit improvement initiatives at top performingworldwide refineries. Audited and examined company culture, energy usage, refinery losses, personnel training, safety practices,environmental controls, process operations, technical services, administration, planning and economics, capital investments,maintenance, and reliability factors. Identified and documented those initiatives, which proved most successful, including theirduration, need, and value added. Assignments were in the U.S., U.K., Romania, Korea, and West Africa. Terminal and Pipeline Studies Managed several competitive assessments of major crude oil and refined products logistics systems, including pipelinetransportation and inland and coastal storage terminals. Pipeline Operating DisputeAssisted in a dispute between an owner and an operator of a recently-constructed crude oil pipeline. Prepared an expert reportconcerning: (1) the facilities that should have been provided as part of the capital project to construct the pipeline; (2) theequipment necessary to operate and maintain the pipeline; and (3) whether defects found during the early operating period werethe result of improper equipment design specifications and construction, or improper operation and maintenance. Testified atarbitration in London. Marine Accident InvestigationInvestigated causes for contamination of a cargo of residual fuel aboard a barge that exploded and sank. Product Terminal and Transmix Processing ValuationPhysical asset appraisal and business valuation of a refined product terminal and transmix processing facility. Estimated thereplacement cost and deferred replacement value of the physical assets to provide a depreciation basis for taxes. Valued thebusiness enterprise using a discounted cash flow approach based on an analysis and projection of transmix processing andproduct terminal activities.



Wholesale Supply Contract DisputeReviewed supply contract dispute and claims that customer was overcharged for product delivered to customer's retail locations.Completed an analysis of refinery gate prices, regional wholesale pricing, and transportation charges for deliveries to each locationto determine if overall charges to customer were consistent with transportation logistics and contractual obligations. Product Pipeline and Terminal ValuationPrepared a valuation of a pipeline and related terminal associated with client's refinery. The valuation was used by the client foraccounting and tax allocation purposes. Alberta Bitumen Valuation StudyEvaluated various approaches to valuing Canadian Oil Sands bitumen blends (DilBit). Approaches for valuation at a Hardisty,Alberta basis included: differential to a marker crude oil, refinery return on investment, parity to Mexican Maya and otherapproaches, including statistical regression. Evaluated approaches and potential marker crude oils and provided recommendationsto client. MTBE Contamination LitigationSupported several oil company clients in defense of claims that the inclusion of MTBE in gasolines supplied to the State of NewHampshire caused contamination of water wells in the state. Provided information on the supply of MTBE-blended gasolines to theState and assessed availability of other oxygenates (primarily ethanol) to meet EPA requirements for oxygenated fuels. Testified attrial. Isobutanol Value in GasolinePrepared initial screening study to assess the potential benefits and issues associated with marketing isobutanol as agasoline-blend component within the U.S. Provided isobutanol gasoline blend valuations versus ethanol/alkylate for a list of targetrefineries. Fuel Contamination InvestigationInvestigated an occurrence of contaminated diesel fuel at a mine facility, as well as the claimed property damage and businessinterruption claims. Assessed the root cause of the fuel contamination and prepared a presentation of our findings. Dock Collision Business Interruption ClaimAssisted in a dispute concerning a refinery business interruption claim and lawsuit after a marine vessel allision with a refinerydock. Analyzed need for extraordinary refined product marine and pipeline movements, as well as trading activity and demurrageclaims. Pipeline Pigging Incident InvestigationFollowing a plant incident caused by the ingress of water, we investigated upstream pipeline activities and operating records todetermine the root cause of the incident. Terminal Hurricane Damage Repair and ClaimAssisted in a dispute concerning a rebuild estimate for a terminal damaged by a hurricane. Gasoline Supply Contract DisputeRepresented a major refiner in a dispute related to lack of performance alleged by a large local service station chain. Reviewed thecontract terms and provided testimony via deposition. Refinery Construction Dispute and ArbitrationFollowing previous arbitrations regarding liability for change orders and delays associated with a refinery expansion/upgrade,Baker & O'Brien was engaged to estimate the "quantum" amounts associated with over 400 individual claims that had beenaddressed by the arbitration tribunal and its technical advisor. We testified regarding our estimates at a final arbitration hearing.



Ethanol Class Action LitigationAssisted a major Florida fuel marketer in Florida in defense against class action claims that ethanol-blended fuels had resulted indamaged boat engines, fuel tanks, and other marine/recreational equipment. Reviewed terminal blending and quality controlpractices, the actual quality and formulation of gasolines delivered to Florida consumers, and state specifications controlling thequality of such gasolines. Hydrogen Pipeline Construction Cost DisputeAssisted client in a dispute concerning settlement costs in regards to a canceled construction contract for a hydrogen pipeline. North Carolina Gasoline and Ethanol Blending AnalysisProvided an expert report on the production and distribution of ethanol and gasoline, particularly branded gasoline, in the state ofNorth Carolina. Provided a refiner's perspective of the impact of the Renewable Fuel Standard on gasoline blending, distributionand marketing operations, considering the options, alternatives and risks of selling gasoline without ethanol. Refinery Demurrage Claims Reviewed ship demurrage claims regarding refinery force majeure issues. Developed report on issues including residual fluidcatalytic cracking (RFCC) operations and prudent operating procedures. Refinery Business Interruption - Marine SpillConducted an assessment of business interruption damages stemming from downtime caused by an oil spill which disruptedmarine traffic at several adjacent manufacturing facilities. Crude Oil Terminal StudyAssisted client in identifying new crude oil business opportunities for a large off-shore oil terminal that it had recently acquired.Analyzed regional crude oil supply and demand patterns and expected trends, and considered other opportunities such as crudeoil blending. Shale Oil Market StudyDeveloped target markets, estimated values for upgraded shale oil in various U.S. refineries, and expected price netbacks to theproject site. Developed crude oil supply and demand balances to determine which crude oils would be displaced and the expectedpricing impacts. Terminal Acquisition Due Diligence SupportConducted a review of fuel oil and asphalt terminal assets in support of a potential acquisition. Provided input andrecommendations as to the overall quality of the assets, including a review of previous expenditures and maintenance records. Process Plant Fire Protection ReviewReviewed fire protection recommendations by other firms and assisted client in understanding API and NFPA standards that aregenerally applicable in the process industry. Undersea Pipeline Damage Repair CostsAssisted client by providing opinion on reasonableness of claimed repair costs to an undersea pipeline damaged by a ships'sanchor. Product Pipeline Terminal ValuationPrepared a terminal valuation based on a discounted cash flow analysis of transmix and terminal businesses and an appraisal ofthe physical assets. Crude Oil Rail Transport StudyProvided an assessment of refinery crude oil processing capability and crude oil pipeline receipt options to enable client to assesscrude-by-rail options that might be available to U.S. refiners.



Natural Gas Midstream Due DiligenceConducted due diligence on gas gathering assets in East Texas for a prospective purchaser. Inspected facilities, reviewed pipelineand facility construction records, confirmed regulatory status, evaluated pipeline integrity management program, and assessedprocess safety. Crude Oil Market StudyProvided a forecast of North American crude oil production through 2030 by quality and by major producing region. Evaluated theextent to which the North American refining industry could accommodate a lighter crude oil slate. Identified expected change incrude flow patterns and imports. PRISM Data ExtractsProvided PRISM data extracts for several refineries located near the Utica shale formation. PADD 4 Products Supply/Demand StudyForecasted PADD 4 refined products supply and demand through 2020 considering potential refinery expansions, refiningeconomics, logistics and product consumption trends. Outlined the potential implications of changing supply/demand patterns onPADD 4 refined product prices. High TAN Crude Oil Refinery StudyIdentified U.S. Gulf Coast refineries processing high TAN crude oil. Estimated capital cost to convert heavy sour crude refineriescurrently processing low TAN crude oil to high TAN refineries. Considered a Canadian bitumen/diluent blended crude oil as thebasis. Calculated the metallurgy and light ends processing costs associated with refinery conversion to high TAN crude oil. Crude Oil Pipeline Due DiligenceProvided technical, commercial, and market due diligence for acquisition of pipeline transportation rights in Latin America. Carriedout a technical review of the oil pipeline and pump station facilities. Reviewed the tariff setting mechanism and analyzed key inputs.Developed a tariff model and ran sensitivity scenarios to predict future pipeline tariffs. Carried out regional market study tocompare alternate transportation modes (pipeline versus truck) and reviewed forecasts for crude oil production and transportation. Port of Houston Power DisruptionReviewed the power outage caused by a contractor at a Port of Houston container facility, to assess the Contractor's potentialexposure to claims from the Port Authority. Crude Oil Pipeline System Due DiligenceOn behalf of an investment group, provided technical and operational due diligence of an interstate (FERC regulated) crude oilpipeline system. Our focus included the review of asset integrity, design, system capacity, and operating costs of an existing assetand the design, project execution plan, schedule, cost estimate, and projected operating costs of a proposed pipeline. Residual Fuel Oil ValuationProvided an assessment of the quantity, quality, and value of fuel oil recovered during demolition of storage tanks at a power plant. Black Wax Crude Oil Market StudyReviewed qualities of Utah Black Wax crude oil versus other sweet crude oils to determine key criteria which would lead a refinerto process to Utah Black Wax crude oil. Used criteria to screen existing U.S. refineries for their ability/incentive to process the UtahBlack Wax crude oil. Crude Oil Terminal StudySurveyed existing crude oil storage costs on the U.S. Gulf Coast. Evaluated current and future crude oil storage capacity on theU.S. Gulf Coast, and developed an outlook for near-term crude oil storage costs. Provided input to client's greenfield crude oilterminal project.



Ethanol Blending LawsuitWorking on behalf of a petroleum industry trade organization, in defense of major gasoline branded companies, provided analysisand opinions related to the potential impact on brand quality from allowing ethanol splash-blending by third parties. Provided experttestimony at trial. Water Treatment/Injection Contract DisputeEngaged to provide expert witness assistance with technical issues regarding water treatment facilities. Reviewed project,maintenance and operational costs and schedules, in addition to the performance of the facilities. Testified in an ICC arbitrationhearing in New York conducted in Spanish/English. Pipeline Quality Bank DisputeReviewed claims by a crude oil refiner to adjust the valuation of the residuum cut in the TAPS Quality Bank. Reviewed the residualfuel markets and the delayed coking capacities and operations for several West Coast refiners. Provided written and oraltestimony before a FERC Administrative Law Judge. Crude Oil Storage StudySupported various feasibility studies related to development of a crude oil storage project on the U.S. Gulf Coast. Activitiesincluded a survey of Houston and Port Arthur-area crude oil storage costs, an assessment of medium term lease rates, and anevaluation of days of crude oil storage, both historically and projected, given the changing crude oil flow dynamics from the EagleFord and Permian regions. Logistics services company assessmentProvided an independent financial and commercial assessment of a logistics services company that our client was consideringpurchasing. Condensate Splitter Due DiligenceConducted asset due diligence activities: inspected facility under construction; provided market incentives, operating costs, riskoverview, and staffing recommendations for successful acquisition of condensate splitter and associated logistics. Asphalt Refinery Due DiligencePerformed due diligence on behalf of a financial institution for funding the startup of an idle asphalt refinery. Advised client ontechnical issues related to running black/yellow (Uinta) wax crude in the asphalt refinery. Work included evaluation of the conditionof the process units and infrastructure, assays of feedstocks, analysis of yields, and evaluation of process bottlenecks. LNG Capital Cost ReviewOn behalf of potential offtakers and equity investors of one train, Baker & O’Brien performed a follow-up review of the updatedOpen Book Estimate (OBE) of a two-train liquefaction project, including common use of certain existing regasification facilities. Environmental Impact Support - Rail Terminal and RefineryPrepared an expert report on behalf of a local government agency, as part of an environmental impact process, to address the keytechnical changes resulting from a project to construct a crude oil rail terminal and modify an existing refinery to allow it to processincreased amounts of light domestic crude oil. Refined Products Terminal StudyTo support a client's due diligence efforts for a potential petroleum products terminal acquisition, undertook a market study toevaluate the current refined products supply and demand balance on the U.S. Gulf Coast. Key market drivers were identifiedwhich could impact future market growth. Permian Basin Market ReviewAnalyzed Permian Basin crude oil production, production forecasts, infrastructure projects, and price differentials for a midstream



company. Provided input for annual investor presentation. Gasoline Supply AnalysisPrepared several regional maps showing sources of gasoline supply to various states including refineries, pipelines andwaterborne routes. Condensate/Diluent AnalysisDeveloped a diluent supply and demand balance to determine if U.S. lease condensate is being blended into Canadian bitumen forimport into the U.S. Evaluated multiple approaches to identify any potential U.S. lease condensate being blended into Canadianbitumen. Asphalt Refinery DisputeProvided analyses on locating an asphalt refinery on a property and expert witness deposition testimony involving the constructionof an asphalt refinery. Crude Oil Flow Projections for Pipeline AcquisitionEvaluated the current regional supply and demand balance for crude oil and developed medium-term forecasts, given expectationsfor area refinery expansions and crude oil production changes. Developed projections for crude oil transportation volumes in anexisting crude oil trunkline that was considered for acquisition. Gas Plant Acquisition DisputeAfter concluding a transaction, the acquiring party claimed that the facilities were not sufficient to conduct business due todeficiencies related to design, construction, safety, and failure to meet environmental regulations. Visited the plant to interview keypersonnel, viewed the physical facilities, and reviewed relevant operational, safety, and engineering design information. Ourfindings and opinions were presented in an expert report which was submitted into evidence. Terminal Due DiligenceProvided technical due diligence support for a large terminal acquisition opportunity involving approximately 50 terminals, 700tanks, and 30MMbbls of storage. Condensate Splitter Due DiligenceConducted asset due diligence activities: (1) inspected facility under construction; (2) provided market incentives; (3) operatingcosts; (4) risk overview; and (5) staffing recommendations for successful acquisition of condensate splitter and associated logistics. Condensate Splitter Market StudyDeveloped market study and economics for a "grassroots" Eagle Ford condensate splitter located in Corpus Christi. Evaluatedalternate locations and presented to CEO and management. Oil Disposition StudyDeveloped economics of crude disposition alternatives for producer's growing production of light tight oil. Alternatives includedlocal and distant refining values with appropriate logistics costs. GTL Commercialization StudyPerformed due diligence on a new GTL process to evaluate possible routes to commercialization. The work program included thefollowing steps: (1) verification of mass balance; (2) comparison of laboratory and pilot plant yields; (3) evaluation of alternativetechnologies; (4) assessment of scale-up issues; (5) review of preliminary commercial design; (6) estimate of capital costs; and (7)the development of an economic model that included sensitivity analyses for capital costs, yields and prices. Barge Loading Incident InvestigationInvestigated a marine over pressure and rupture incident which occurred while loading a barge with light stabilized hydrocarbons. Pipeline Contractor Business Interruption Claims



Reviewed business interruption claims made by welding contractors related to a pipeline incident that resulted in damage to thecontractors' equipment. Prepared a report documenting our findings of the business loss claims. Gasoline Supply MapPrepared a regional map showing sources of gasoline supply to a specific state, including refineries, pipelines, and waterborneroutes. Analyzed gasoline supply logistics from terminals within, or near, the subject state. Crude Oil Supply Contract DisputeProvided an expert report for a crude oil supplier who lost its contract to a refiner. Provided a valuation versus alternative crudeoils as to the value of the cancelled crude oil supply contract. Dispute settled prior to trial. Refinery Business Interruption ClaimOn behalf of an insurer, calculated the business interruption expense for a Gulf Coast refinery associated with a delay in receivingcrude oil via ship. Reviewed calculations provided by the refinery and opined on associated business interruption impactsassociated with the delay in receiving crude oil shipments. Provided an expert report, which enabled a settlement in the dispute. Crude Oil Storage SupportSurveyed industry sources to develop an estimate of the current crude oil storage costs in the Texas Gulf Coast area. Developedan estimate of the current crude oil storage capacity and petroleum refinery capacity in the Houston area. Pacific Northwest Market StudyPrepared a market study of the Pacific Northwest U.S., which included the refined products supply and demand balance andlogistics systems. The emphasis of the study was on current and future jet fuel supply and demand in the region. Evaluated jetfuel logistic systems for Pacific Northwest. LPG TerminalLenders' Engineer review for development of an LPG terminal consisting of LPG tankage, gasoil tankage, loading facilities, andassociated pipelines and equipment. The facilities were planned to accommodate annual throughput volumes of 1,150,000 tons ofLPG and 940,000 tons of gasoil, with minimum guaranteed volumes of 700,000 tons of LPG and 600,000 tons of gasoil withplanned future facilities for increased throughput volumes, bunkering operations, and third-party storage. Refinery Design ReviewGrassroots refinery was to be a modular-fabrication with an on-site assembly on a greenfield site in North East Africa. Due to thecharacteristics of the crude oil (heavy, waxy and high naphthenic acid content), process design included Visbreaker-typetechnology. An evaluation was made of the process design and the project economics. Gas Pipeline DisputeAs a member of the three person dispute resolution board for a gas pipeline construction project, reviewed, evaluated, anddetermined liability for project claims brought before the board. Refined Products Pipeline Market StudyDeveloped a supply and demand forecast by market area for a major refined products pipeline from the Gulf Coast to the Midwest. Project involved analyzing historical supply trends and demand by market area and forecasting expected pipeline flows undervarious refinery utilization scenarios. Pipeline Specifications DisputeA new pipeline owner was seeking to impose tighter diesel specifications on a pipeline. Provided an expert report and testimonyregarding common carrier pipeline diesel product specifications in a regulatory hearing. The dispute was ultimately settled prior tothe hearing. Pipeline Operating Practices



A lawsuit was filed against a major U.S. pipeline company stating that its operating practices during maintenance at a gasgathering line resulted in a fire and the injury of two contract workers who were the plaintiffs. We were asked to opine on the causeof the fire. The matter was settled out of court prior to reports being issued or testimony being presented. Crude Oil Quality Bank StudyRecommended a crude oil quality bank methodology for the different types of crude oil to be stored in a new USGC crude oilstorage facility. Reviewed other existing quality banks and developed recommendations and methodology for managing a crude oilquality bank. Transmix Facility Due DiligenceCompleted technical, financial, and operational due diligence analysis on behalf of lenders for an existing transmix processingfacility and associated terminal. Tasks included inspection of facilities, assessment of competitive market position, and anevaluation of a new hydrotreater project for ULSD production. Canadian Refinery Competitiveness StudyEvaluated the competitive position of several Canadian refineries located in Eastern Canada and Ontario. Evaluated refineryconfigurations, crude oil slate and product yield, and profitability versus a group of regional competitor refineries. Presented thecrude oil and product logistics systems for each of the Canadian refineries being studied. Terminal Due DiligencePerformed a technical due diligence of a Gulf Coast refinery tank farm and associated transfer pipelines for a prospective investor. Reviewed inspection and maintenance records of the assets during a site visit. Reviewed numerous operating performancedocuments from a data room. Prepared a technical due diligence report outlining our findings. St James Louisiana Crude Supply StudyAnalyzed crude supply sources and pipeline flows for the Southern Louisiana refining market in conjunction with a potentialpipeline acquisition. Forecasted crude supply availability by grade in the St. James trading hub and analyzed impact of new crudeoil pipelines in the market. California Terminal Due DiligenceAssisted midstream buyer with valuation of a large Northern California petroleum terminal. Delivered market study presentation tocompany management to assist in due diligence and valuation using market metrics. Permian Basin Crude Oil Supply and LogisticsProvided supporting material related to Permian Basin crude oil production growth and logistic infrastructure for a pipeline owner'sannual investor presentation. LNG Due DiligenceProvided technical support to the sponsor of a multi-train liquefaction project. The scope of work included: preparation of atechnical due diligence report; in-depth review of the Open Book Estimate (OBE), schedule, and project execution plan;assessment of the EPC contractor’s capabilities and experience; high-level review of geotechnical issues; assistance in thedevelopment of an Operating and Maintenance (O&M) plan; input into the formation of sponsor’s project management team; andinput into the development of owner’s costs, including appropriate levels of cost and schedule contingency. Provided support to thesponsor with EPC contract negotiations.



TRANSPORTATION AND STORAGE RELATED … · frequently called upon to analyze the costs associated...

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Transcript of TRANSPORTATION AND STORAGE RELATED … · frequently called upon to analyze the costs associated...