CERI Commodity Report Crude Oil

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1 CERI Commodity Report Crude Oil April 2015 Crude Oil by Tanker off the West Coast of Canada Allan Fogwill The consensus from global and regional reporting agencies is that demand for crude oil will continue to increase worldwide and fossil fuels will make up a shrinking, but nonetheless, significant share of primary energy demand in the foreseeable future. However, regions where demand for crude will grow the most are not, in general, the supply regions of crude. In particular, in North America (US, Canada and Mexico) substantial incremental growth of crude supply, beyond the needs of domestic use, will mean an increase in crude or crude product exports. Crude oil tankers provide the means of connecting supply basins with demand regions. Much of the concern related to oil consumption is related to climate change, and second to that is transportation of crude and/or refined products, with the possibility of an accident at sea or land. Despite the fact that the oil industry has a good safety record, accidents do happen. In addition, when they do, the public does not forget easily, nor should they. With forecasted incremental production growth of crude oil, it is feasible to think that the growth in production will lead to an increase in the number and frequency of oil tankers in ports in North America. The increasing number of shipments from an increasing number of terminals spurs concerns about the potential for an accidental spill or release of oil on land or water. Safety has always been a leading public concern. The Exxon Valdez oil spill and, more recently, BP s massive and highly publicized Gulf of Mexico accident are remembered by the public. Both accidents have occurred in the United States. In Canada each year, 80 million tonnes of oil are shipped off Canada s east and west coasts. 1 On any given day, there are 180 vessels (ships known as SOLAS vessels, or those over 500 CERI Commodity Report Crude Oil Editor-in-Chief: Dinara Millington (dmillington@ceri.ca) About CERI The Canadian Energy Research Institute is an independent, not-for-profit research establishment created through a partnership of industry, academia, and government in Our mission is to provide relevant, independent, objective economic research in energy and related environmental issues. We strive to build bridges between scholarship and policy, combining the insights of scientific research, economic analysis, and practical experience. For more information about CERI, please visit our website at tonnes gross tonnage that operate internationally) operating within Canada s Exclusive Economic Zone (200 nautical miles from shore). The Government of Canada aims to prevent spills through regulatory oversight, inspections, and enforcement measures. This article discusses oil tankers in more depth, potential transportation of crude off the BC coast of Canada and the safety record of the available tanker fleet. Oil Tankers There are two types of oil tankers: crude tankers and product tankers. The former moves large quantities of unrefined crude oil to refineries while the latter transports refined products and/or other petrochemicals from refineries to market for consumption. This article will focus on the crude tankers only, given the fact that crude tankers will be the most likely of the two utilized off the coast of British Columbia. Oil tankers are divided into subclasses: Product Tanker/ Seawaymax, Panamax, Aframax, Suezmax, Very Large Crude Carrier (VLCC) and Ultra Large Crude Carrier (ULCC). Table 1 illustrates the average dimension of each subclass of vessel, as well as other tanker statistics: Table 1: Oil Tanker Characteristics Class Length (m) Beam (m) Draft (m) Typical Min DWT Typical Max DWT Capacity Mbbl No. of Ships (2010) Panamax ,000 80, Aframax , , Suezmax , ,000 1, VLCC , ,000 2, ULCC , ,000 4, Source: Jaime Rodrigo de Larrucea 2 Panamax vessels are generally known as product tankers, often carrying refined petroleum products. Panamax, as the name suggests, refers to ships that are able to travel through the Panama Canal. An expansion of this canal is underway, target date is April 2016; 3 however, the new canal dimensions will not be able to fit vessels categorized as VLCCs and ULCCs. Aframax tankers are based on the Average Freight Rate Assessment (AFRA) tanker rate system. Aframax tankers are generally used in the North Sea, Black Sea, the Caribbean Sea, the China Sea and the Relevant Independent Objective

2 Page 2 Mediterranean. Suezmax refers to the category of vessels able to pass through Egypt s Suez Canal. Once regarded as supertankers, this distinction is now reserved for the much larger VLCC and ULCC vessels. While large, they are still smaller than the VLCC. The VLCC is able to transport the most in comparison to Panamax, Aframax, and Suezmax. The capacity of a VLCC is approximately 2,000,000 barrels. The latest generation of supertanker is the ULCC and has a capacity of up to 4,000,000 barrels. It is interesting to note that because of their sheer size, they are usually not permitted to enter a port fully loaded. There are only 11 ULCCs worldwide. This is most likely because they may be deemed too risky, not because of the construction and engineering but due to the intrinsic risk that if something were to go wrong it could be very costly for the organization. In addition, very few ports can accommodate these enormous ships. Safety Regulations At the heart of international maritime law is the International Maritime Organization (IMO). Its mandate is to promote safe, secure, environmentally sound, efficient and sustainable shipping through cooperation. The IMO is responsible for the safety and security of shipping, and is mandated with the prevention of marine pollution by ship. For example, IMO regulates the sulphur content of bunker fuel used in marine shipping. In October 2008 the IMO adopted amendments to Annex VI of the MARPOL Convention which, among others, strengthened the requirements on the permitted sulphur limits in ships fuel. Two sets of emission and fuel quality requirements are defined by Annex VI: (1) global requirements, and (2) more stringent requirements applicable to ships in Sulphur Emission Control Areas (SECA). On the global level, the sulphur cap was reduced initially to 3.50% (from 4.50%), effective January 1, 2012; the cap will be progressively reduced to 0.50%, effective January 1, 2020 (or in 2025 at the latest), subject to a feasibility review to be completed no later than Annex VI introduces much more stringent requirements for ships operated in SECA. As of July 1, 2010, the maximum sulphur limit has been reduced to 1.00%, (from 1.50%), while from January 1, 2015, sulphur content in ships fuel must be below 0.1%. Figure 1: Sulphur Fuel Content Source: ImplicationsofnewRegulationFINAL.pdf As a Member State of the International Maritime Organization (IMO), Canada endorses and enforces Conventions such as International Convention for the Prevention of Pollution from Ships (MARPOL), International Convention for the Safety of Life at Sea (SOLAS) and International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). The Canadian Federal Government passed the Canada Shipping Act, 2001, replacing the old Canada Shipping Act. Transport Canada (TC), Fisheries and Oceans Canada (DFO) and Environment Canada (EC) are major players in enforcing shipping laws and regulations. Ships must be built, maintained and operated within a strict set of regulations. For example, single-hulled tankers are no longer allowed to operate within Canadian waters as of this year and all oil terminals have required vessels to be double-hulled as of In Canada, liabilities associated with oil spills are based on the polluter pay principle. Owners are liable up to a maximum of $145 million in damages. This is based on the International Convention on Civil Liability for Oil Pollution Damage. If the damages or clean-up is greater than the $145 million, Canada can access the Ship Source Oil Pollution Fund which was established in the 1970s. All oil cargo vessels sailing in Canadian waters contribute to the fund, which is currently able to provide upwards of $400 million in incremental costs. In addition, Canada can access similar international funds. In combination, all funds available would cover oil spill compensation of $1.36 billion. 4 While funds have been established for oil spill clean-ups, the risk of these spills has been decreasing over time. According to the International Tanker Owners Pollution Federation Limited, there were 24.5 spills on average in the 1970s, of approximately 94 Mbbls each. In the period, this average dropped to 1.8 spills per year of about 21 Mbbls. This decrease occurred with roughly the

3 Page 3 same amount of tanker traffic in the two periods. Therefore, the size and frequency of oil spills has significantly decreased. The only major oil spill in the last 20 years on Canada s West Coast occurred in 2006, when the BC ferry Queen of the North sank with 240 tonnes of oil on board. (In comparison, the Exxon Valdez spilled approximately 40,000 tonnes of oil in 1989.) In 1988, Vancouver Island was affected by a spill from the Nestucca, an oil barge that lost approximately 87 tonnes of oil, most of which drifted onto the west coast of the island. 5 The risk of a spill remains. In addition, given the higher expected tanker traffic along BC s coast, the local risk of a spill would increase. These risks can be mitigated with best-in-class spill response programs and adherence to Transport Canada and the IMO s safety and operating regulations. Tanker Traffic on the BC Coast On British Columbia s west coast, there are about 1,500 tanker movements per year. This is approximately half of the oil tanker traffic on Canada s east coast. Figure 2 shows current and proposed coastal tanker traffic from major ports north of Seattle, Washington, and their approximate routes. It is important to note that currently, the largest ports in British Columbia are Port Metro Vancouver, followed by Prince Rupert and Kitimat. Currently the largest oil tankers able to dock are Aframax. These are at Kinder Morgan s Westridge Terminal. There is a voluntary Tanker Exclusion Zone 6 off the BC coast that applies to loaded oil tankers servicing the Trans- Alaska Pipeline System between Valdez, Alaska, and Puget Sound, Washington. This zone does not apply to tankers travelling to or from BC ports. Figure 2: Current and Proposed Coastal Tanker Traffic The new Enbridge Northern Gateway marine terminal in Kitimat will be designed to load one VLCC and one Suezmax tanker. Enbridge predicts annual traffic of approximately 220 tankers, not necessarily all will be loaded. In the Port of Vancouver, the Westridge marine terminal operated by Kinder Morgan will expand from 60 tankers per year to 408. These would all be Aframax tankers. The terminal is expanding the docking berths to three from one. The increased tanker traffic represents about 14% of the ship traffic in the Port. Endnotes 1 Transport Canada. menu-4100.htm 2 de Larrucea, Jaime Rodrigo, Oil Tankers Safety: Legal Aspects, bitstream/2117/6129/1/oil%20tankers%20safety.pdf 3 article.php/ Transport Canada. menu-4100.htm 5 Ibid. 6 Transport Canada. menu-4100.htm#f. Voluntary Tanker Exclusion Zone - In 1985, a voluntary Tanker Exclusion Zone was created along the British Columbia coast. This zone applies to loaded oil tankers servicing the Trans-Alaska Pipeline System between Valdez, Alaska, and Puget Sound, Washington. The Tanker Exclusion Zone extends from the shores of British Columbia westward. The zone was determined by calculating the worst case scenario using the drift rate of a disabled laden tanker and the time required for a suitable assist tug to arrive on scene. This exclusion zone was established through joint discussions of the Canadian Coast Guard and the United States Coast Guard with the American Institute of Merchant Shipping before the National Oil Spill Preparedness and Response Regime was developed. More than 300 tankers transit annually along the BC coast while respecting the Tanker Exclusion Zone (only laden tankers must stay west of the zone; tankers in ballast may transit within the zone). It is important to note that the Tanker Exclusion Zone does not apply to tankers travelling to or from Canadian ports. There is a federal moratorium on oil and natural gas exploration and development. There is no moratorium on tanker operation in Canada s western waters. Oil tankers have been moving safely and regularly along Canada s West Coast for many years. Source: Enbridge website

4 Page 4 US$/bbl WTI Spot - WTI Edmonton Crude - Brent Prices Light Price Differentials Differential WTI Brent US$/bbl US$/bbl WTI - Edmonton Light Price Differentials Differential WTI Edmonton Light May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Spot Prices WTI Brent Cdn.Light* H.Hardisty Year-to-Date Quarter-to-Date SOURCE: EIA. May 22, SOURCE: EIA. W US$/bbl 120 WTI - Hardisty Heavy Price Differentials N US$/bbl 70 NYMEX WTI Crude Forward Curve 4 contract months Differential WTI Hardisty Heavy Mar Apr May Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 SOURCE: NRCan, EIA. SOURCE: EIA, CERI.

5 SOURCE: EIA, CERI. SOURCE: NRCan. Page 5 NYMEX Petroleum Products CDN/US$ Exchange Rate US$/gal 3.25 CDN/US$ RBOB Gasoline Heating Oil May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 NYMEX Prices Unleaded Gasoline Heating Oil Year-to-Date Quarter-to-Date May 22, Oil Demand Global in Selected Oil Demand Countries U US Products Demand April April 2015 Y-on-Y change MMbpd % % 30% % 51.0% 25% 20% 15% % 10% % 49.5% 49.0% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 5% 0% -5% -10% Total Gasoline Jet Fuel Distillate Residual Propane Other Total OECD Total Non-OECD non-oecd Demand share SOURCE: IEA Oil Market Report. SOURCE: EIA Weekly Petroleum Status Report. Relevant Independent Objective

6 SOURCE: IEA Oil Market Report, CERI. SOURCE: IEA Oil Market Report. SOURCE: IEA Oil Market Report. SOURCE: IEA Oil Market Report. Page 6 MMbpd Mbpd 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Global Oil Supply 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 non-opec Supply OPEC Supply non-opec Share of Global Supply Canadian Oil Production by product 4Q14 1Q15 2Q15 3Q15 4Q15 AB L/M/H AB Bitumen SK Other NGLs Synthetic 61.5% 61.0% 60.5% 60.0% 59.5% 59.0% 58.5% 58.0% 57.5% 57.0% Mbpd 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Mbpd 3,000 2,500 2,000 1,500 1, US Oil Production by region 4Q14 1Q15 2Q15 3Q15 4Q15 Alaska California Texas Federal GOM Other Lower 48 NGLs Other OECD Commercial Stocks by region Mar-12 Mar-13 Mar-14 Mar-15 OECD North America OECD Europe OECD Pacific

7 Page 7 MMb US Commercial Stocks March 27 - April 24, 2015 M-on-M Change Crude Gasoline Distillate Products Total MMb Canadian Stocks on Land 4Q13 1Q14 2Q14 3Q14 4Q14 SOURCE: EIA Weekly Petroleum Status Report. SOURCE: IEA Oil Market Report. Relevant Independent Objective

8 Page 8 World Supply and Demand Balance (MMbpd) Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 World Demand OECD non-oecd World Supply Non-OPEC OPEC NGLs OPEC Crude Supply - Demand OECD Stocks (MMbbls) Days Cover OPEC Crude Oil Production (MMbpd) Sustainable Production Over (+)/Under (-) Target Capacity Feb-15 Mar-15 Apr-15 Feb-15 Mar-15 Apr-15 Saudi Arabia Iran UAE Kuwait Qatar Nigeria Libya Algeria Ecuador OPEC Iraq Total OPEC WTI Price Projections ($US/barrel) Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 High Price Case Reference Case Low Price Case

9 Page 9 Data Appendix Relevant Independent Objective

10 Page 10 A1: Historic Light Sweet Crude Futures Prices ($US per barrel) NYMEX Light Sweet Crude Last 3 Day Avg. When 12-Month Spread Close Average Near Mo. Strip Avg. (1-2 Mo.) Q Q Q Q Q Yr-on-Yr Chg % -47.7% -43.5% -12.2% May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Yr-on-Yr Chg % -46.1% -49.3% -44.8% A2: Historic Crude Product Futures Prices ( US per gallon) NYMEX Unleaded Gasoline NYMEX Heating Oil Last 3 Day Avg. When 12-Month Spread Last 3 Day Avg. When 12-Month Spread Close Average Near Mo. Strip Avg. (1-2 Mo.) Close Average Near Mo. Strip Avg. (1-2 Mo.) Q Q Q Q Q Yr-on-Yr Chg % -44.7% -43.8% -40.4% -38.3% -39.7% -38.3% -38.4% May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Yr-on-Yr Chg % -33.4% -37.0% -36.6% -32.7% -34.1% -37.7% -36.0% Notes (Tables A1 and A2): Prices are listed by contract month. Close: final contract close on the last day of trading. Last 3 Day Average Close: simple average contract close on last three days of trading. Average When Near Month: simple average closing price on trading days when contract was near month. 12-Month Strip Average: simple average of daily near 12-month contract closing prices in a given contract month. Spread: difference between one-month and two-month forward prices in a given period. Source: New York Mercantile Exchange (NYMEX).

11 Page 11 A3: World Crude Oil Contract Prices (FOB, $US per barrel) Saudi U.A.E. Oman U.K. Norway Russia Venez. Kuwait Ecuador Mexico Nigeria Indon. Arab Lgt Dubai Oman Brent Ekofisk Urals 1 T.J. Light Blend Oriente Isthmus Bonny Lgt Minas Q Q Q Q Q Yr-on-Yr Chg % -50.2% -49.5% -50.1% -49.7% -50.1% -53.0% -53.4% -52.8% -49.4% -50.5% -53.0% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg % -44.1% -43.8% -44.7% -44.1% -44.2% -47.3% -45.7% -44.3% -41.7% -45.0% -47.3% Notes: 1. Urals is Delivered price at Mediterranean. Contract prices are based on prices at the end of each month. Source: OPEC Monthly Oil Market Report. A4: North American Posted Crude Prices (FOB, $US per barrel) United States Canada ANS 1 Lost Hills Kern R. WTI WTS GCS Okla. Sw. Kans. Sw. Mich. So. Wyo. Sw. CDN Sweet 2 HH Q Q Q Q Q Yr-on-Yr Chg % -50.8% -58.1% -52.3% -55.1% -55.9% -52.3% -50.3% -57.0% -53.8% -39.7% -48.5% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg % -41.9% -47.9% -44.6% -47.0% -47.7% -44.6% -45.1% -48.6% -45.8% -39.1% -43.0% Notes: 1. ANS is Delivered price on US West Coast. 2. Edmonton Light Sweet prices are discontinued as of May 1, 2014 and replaced by the Canadian Light Crude blend which is traded daily on the Net Energy Index. 3. Hardisty Heavy. Posted prices are based on price at the end of each month. Sources: Oil & Gas Journal; Natural Resources Canada. Relevant Independent Objective

12 Page 12 A5: Crude Oil Quality Differentials (FOB, $US per barrel) Light vs. Heavy Sweet vs. Sour Arab Lt Arab Hv Diff. Isthmus Maya Diff. CDN Sweet 2 HH 2 Diff. GCS WTS Diff Q Q Q Q Q Yr-on-Yr Chg % -54.1% -49.4% -50.3% -46.2% -54.0% -55.9% -55.1% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg % -46.5% -41.7% -43.0% -45.8% -49.3% -47.7% -47.0% Notes: 1. Edmonton Light Sweet prices are discontinued as of May 1, 2014 and replaced by the Canadian Light Crude blend which is traded daily on the Net Energy Index. 2. Hardisty Heavy. Based on contract prices at the end of each month. Sources: OPEC Monthly Oil Market Report: Oil & Gas Journal; Natural Resources Canada. A6: Crude Oil Spot Prices and Differentials (FOB, $US per barrel) Spot Prices Differentials WTI Brent Dubai Urals Basket 1 WTI-Brent WTI-Dubai WTI-Urals WTI-Basket Q Q Q Q Q Yr-on-Yr Chg % -50.1% -50.5% -50.7% -52.0% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg % -44.4% -44.3% -44.5% -45.0% Notes: 1. OPEC-Reference Basket is average price of seven crude streams: Algeria Saharan Blend, Dubai Fateh, Indonesia Minas, Mexico Isthmus, Nigeria Bonny Light, Saudi Arabia Light and Venezuela Tia Juana Light. Source: OPEC Monthly Oil Market Report.

13 Page 13 A7: World Petroleum Product Spot Prices ($US per barrel) US Gulf Coast, Pipeline Rotterdam, Barges Singapore, Cargoes Gasoline 1 No. 6 3% 2 Jet/Ker. Gasoline 1 Gasoil Resid. 3 Gasoline 1 Gasoil Resid Q Q Q Q Q Yr-on-Yr Chg % -50.4% -44.5% -43.3% -43.5% -53.5% -43.6% -44.3% -49.1% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg % -46.5% -41.1% -37.3% -39.3% -46.9% -37.7% -41.1% -42.8% Notes: 1. Regular unleaded gasoline. 2. Waterborne 3. High Sulfur ( %) Residual Fuel Oil. Spot prices are based on average daily prices over a specific timeframe. Source: IEA Oil Market Report. A8: Product Spot Prices in Selected American Cities ( US per gallon) NY Harbor US Gulf Los Angeles Gasoline 1 No. 2 H.O. Distill. Gasoline 1 Jet Fuel Distill. Gasoline 1 Distill Q Q Q Q Q Yr-on-Yr Chg % -43.3% -40.8% -42.8% -44.3% -42.5% -37.3% -40.8% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg % -40.4% -37.7% -38.1% -41.1% -39.4% -32.0% -39.6% Notes: 1. Reformulated regular unleaded gasoline. Spot prices are based on average daily prices over a specific timeframe. Source: EIA Weekly Petroleum Status Report. Relevant Independent Objective

14 Page 14 B1: World Petroleum Supply and Demand Balance (million barrels per day) OECD Non-OECD OPEC World N. A. Europe Asia-Pac Total 1 Asia Non-Asia FSU Total 1 P. Gulf Non-Gulf Total 2 Total 3 Demand Q Q Q Q Q Q Q Q Q Supply Q Q Q Q Q Q Q Q Q Balance Q Q Q Q Q Q Q Q Q Notes: 1. Totals for OECD and non-oecd supply include net refining gains; specific regions/groupings within each do not. 2. OPEC demand is an estimate based on historical annual data. 3. Balance for World equals global stockbuilds (+) and stockdraws (-) for crude oil and petroleum products and miscellaneous gains and losses. Regional surpluses (+) and deficits (-) are balanced through net-imports and stock changes in the short-term, and net-imports in the longer term. Supply includes crude oil, condensates, NGLs, oil from non-conventional sources and processing gains. Demand is for petroleum products. Source: IEA Oil Market Report.

15 Page 15 B2: World Petroleum Production (million barrels per day) OECD Non-OECD OPEC World N. A. Europe Asia-Pac Total Asia Non-Asia FSU Total P. Gulf Non-Gulf Total Total Q Q Q Q Q Yr-on-Yr Chg. 8.7% -2.3% -2.0% 6.7% 3.2% 4.0% 0.4% 2.1% 2.2% -2.2% 1.9% 3.2% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg. 5.5% 0.6% 6.3% 4.8% 2.1% 2.3% 0.9% 1.6% 4.9% -0.4% 4.2% 3.5% R/P Ratio Notes: 1. Production includes crude oil, condensates and NGLs. 2. Reserve-Production ratio is based on latest month production and British Petroleum reserve estimates. Sources: IEA Oil Market Report and BP Statistical Review of World Energy. B3: OECD Commercial Petroleum Stocks (million barrels) North America Europe Asia-Pacific OECD Crude Product Total Crude Product Total Crude Product Total Crude Product 1 Total , ,413 2, , ,337 2, , ,020 1,400 2,712 1Q , ,003 1,292 2,582 2Q , ,012 1,332 2,652 3Q , ,415 2,720 4Q , ,020 1,400 2,712 1Q , ,110 1,370 2,767 Yr-on-Yr Chg. 20.9% 8.7% 13.2% 2.8% 5.9% 4.1% -6.5% -3.9% -6.1% 10.7% 6.1% 7.1% Mar , ,003 1,292 2,582 Apr , ,000 1,306 2,598 May , ,018 1,341 2,662 Jun , ,012 1,332 2,652 Jul , ,362 2,665 Aug , ,410 2,709 Sep , ,415 2,720 Oct , ,011 1,368 2,703 Nov , ,397 2,707 Dec , ,020 1,400 2,712 Jan , ,034 1,408 2,735 Feb , ,071 1,370 2,729 Mar , ,110 1,370 2,767 Yr-on-Yr Chg. 20.9% 8.7% 13.2% 2.8% 5.9% 4.1% -6.5% -3.9% -6.1% 10.7% 6.1% 7.1% Notes: 1. Product includes only finished petroleum products. 2. Total stocks include NGLs, refinery feedstocks, additives/oxygenates and other hydrocarbons. All stocks are closing levels for respective reporting period. Source: IEA Oil Market Report. Relevant Independent Objective

16 Page 16 B4: OPEC Crude Oil Production and Targets (million barrels per day) Persian Gulf Non-Persian Gulf OPEC-11 OPEC-11 Arabia Iran UAE Kuwait Qatar Venez. Nigeria Libya Algeria Angola Ecuador Total 1 Target Iraq Q Q Q Q Q Yr-on-Yr Chg. 1.5% 0.4% 4.0% 0.4% -6.9% -2.4% -6.2% 0.0% 3.7% 12.7% 0.0% 1.1% 6.1% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg. 4.6% 1.8% 5.6% -0.4% -1.4% -0.8% -6.2% 136.4% -0.9% 3.1% 0.0% 3.1% 14.5% Quotas Over/Under % -13.8% 27.9% 26.1% -5.5% 22.6% 7.8% -64.6% -7.5% 10.5% 27.9% -8.6% Notes: 1. Does not include NGLs; OPEC production targets apply to crude oil only. 2. Iraq does not have an official OPEC target. 3. OPEC-10 production targets. 4. As of latest month. Source: IEA Oil Market Report. B5: OECD Refinery Activity Crude Input (MMbpd) - Utilization (percent) - Refining Margins ($US/barrel) North America Europe Asia-Pacific OECD Input Util. Margin 1 Input Util. Margin 2 Input Util. Margin 3 Input Util Q Q Q Q Q Yr-on-Yr Chg. 0.8% % 7.4% 465.7% 2.4% % 3.1% Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Yr-on-Yr Chg. 2.3% 409.5% 7.6% 479% 0.1% % 3.5% Notes: 1. Based on dated Brent being processed in average US Gulf cracking refinery. 2. Based on dated Brent in average Rotterdam cracking refinery. 3. Based on spot Dubai in average Singapore hydroskimming refinery. Source: IEA Oil Market Report.

17 Page 17 C1: US Petroleum Supply and Demand Balance (million barrels per day) United States 1 East Mid-West Supply Demand Net-Imp. Stk. Chg. Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. 13.4% 1.0% -13.2% 70.2% 4.3% 14.0% 0.8% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 11.9% 2.1% -18.0% 28.0% 4.0% 15.5% 5.2% % of Total % 100.0% 2.3% 30.9% 24.7% 26.2% South-Central North-West West Supply Demand Balance Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. 14.0% -1.8% 13.0% 0.7% 0.9% 0.8% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 11.3% -5.5% 21.5% 11.3% -2.2% 4.8% % of Total % 24.7% 7.5% 3.8% 9.5% 14.5% Notes: 1. Does not balance because of unaccounted for crude oil. Regional surpluses (+) and deficits (-) are balanced through net-imports/transfers and stock changes in the short-term, and net-imports/transfers in the longer term. 2. As of most recent month. Supply includes crude oil, condensates, NGLs, oil from nonconventional sources and processing gains. Demand is for petroleum products. Source: EIA Petroleum Supply Monthly. Relevant Independent Objective

18 Page 18 C2: US Petroleum Demand by Product (million barrels per day) Finished Petroleum Products NGLs Petroleum Gasoline Jet Fuel Distil. Resid. Total 1 Total Total Q Q Q Q Q Yr-on-Yr Chg. 3.5% 4.5% 2.9% 5.6% 3.8% -4.4% 1.0% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. -0.6% 5.0% 8.4% -4.8% 1.8% 8.4% 2.1% Notes: 1. Total includes other finished petroleum products. 2. Total petroleum demand includes refinery feedstocks, additives/oxygenates and other hydrocarbons. Source: EIA Petroleum Supply Monthly. C3: US Petroleum Stocks (million barrels) Petroleum Stocks 1 Crude Oil Finished Products East Mid-West S-Cent N-West West U.S. Total 2 Gasoline Jet Fuel Distil. Resid. Total , ,807 1, , ,760 1, , ,856 1, Q , ,760 1, Q , ,753 1, Q , ,814 1, Q , ,835 1, Q , ,856 1, Yr-on-Yr Chg. 4.4% 7.4% 5.7% 7.2% 1.0% 5.5% 2.9% -22.9% 0.9% 6.9% -10.6% -1.5% Feb , ,743 1, Mar , ,753 1, Apr , ,780 1, May , ,809 1, Jun , ,814 1, Jul , ,818 1, Aug , ,822 1, Sep , ,835 1, Oct , ,830 1, Nov , ,842 1, Dec , ,856 1, Jan , ,874 1, Feb , ,878 1, Yr-on-Yr Chg. 12.1% 16.9% 5.9% 7.0% 2.3% 7.7% 6.5% -18.9% 0.9% 9.1% 0.0% 1.7% Notes: 1. Petroleum stocks include crude oil, finished products, NGLs, refinery feedstocks, additives/oxygenates and other hydrocarbons. 2. Includes Strategic Petroleum Reserves. 3. Total includes other finished petroleum products. All stocks are closing levels for respective reporting period. Source: EIA Petroleum Supply Monthly.

19 Page 19 C4: US Petroleum Net Imports by Source (million barrels per day) Region of Origin OPEC Canada Mexico Lat. Am. Europe Africa M.E. Total 1 Venez. S. Arabia Nigeria Total 2 P. Gulf Q Q Q Q Q Yr-on-Yr Chg. 6.5% -43.3% -8.3% -68.6% -17.2% -32.1% -13.2% -11.8% -40.4% -53.7% -23.2% -32.1% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 17.4% -67.4% -22.3% % -19.1% -33.1% -18.0% -8.1% -35.3% % -22.1% -34.3% % of Total % 2.0% 11.3% -2.2% 2.4% 31.1% 100.0% 15.7% 20.7% -0.2% 56.1% 31.2% Notes: 1. Total includes net-imports from Russia and Asia-Pacific region. 2. Total OPEC includes the other eight cartel members. 3. As of latest month. Source EIA Petroleum Supply Monthly. C5: US Regional Crude Oil Production (million barrels per day) PAD District U.S. Major Producers East Mid-West S-Cent N-West West Total Alaska Calif. 1 Louis. Texas G. of Mex Q Q Q Q Q Yr-on-Yr Chg. 24.3% 20.4% 16.9% 17.3% -0.1% 15.2% -2.8% 2.1% -5.0% 20.1% 14.2% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 36.1% 26.7% 17.9% 29.0% -2.6% 17.3% -4.8% -0.6% -6.8% 20.8% 13.7% R/P Ratio Notes: 1. California includes Federal Offshore crude oil production. 2. Gulf of Mexico includes Federal Offshore production adjacent to Texas and Louisiana. 3. Crude oil Reserve-Production ratio as of latest production month. Crude oil production does not include NGLs. Source: EIA Petroleum Supply Monthly. Relevant Independent Objective

20 Page 20 C6: US Refinery Activity Crude Input (MMbpd) - Utilization (percent) East Mid-West South-Central North-West West U.S. Input Util. Input Util. Input Util. Input Util. Input Util. Input Util Q Q Q Q Q Yr-on-Yr Chg. 1.0% -3.3% -0.2% 0.1% -6.6% -1.9% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Yr-on-Yr Chg. 28.2% 8.6% 16.1% 26.9% 13.7% 15.1% % of Total 1 7.1% 21.5% 51.5% 3.6% 16.3% 100.0% Notes: 1) As of most recent month. Source: EIA Petroleum Supply Monthly. C7: US Refinery Margins ($US per barrel) NY Harbor Chicago US Gulf Los Angeles (East Coast Comp.) (WTI) (WTS) (ANS) Q Q Q Q Q Yr-on-Yr Chg. 92.0% -5.8% 20.3% 148.7% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Yr-on-Yr Chg. 65.2% -11.7% -15.6% 2.3% Note: Based on specific crude being processed in average cracking refinery in a given area. As of February 2010, NY Harbor Arab Med. is now East Coast Composite. Source: Oil and Gas Journal.

21 Page 21 D1: Canada Petroleum Supply and Demand Balances (million barrels per day) Canada East West Supply Demand Net-Exp Stk. Chg. Supply Demand Balance Supply Demand Balance Q Q Q Q Q Yr-on-Yr Chg. 7.5% -14.2% 19.6% -20.5% -10.2% 10.1% -20.4% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 10.6% -16.6% 35.9% -2.7% -10.6% 11.5% -25.1% % of Total % 100.0% 5.9% 63.0% 94.1% 37.0% Notes: 1. As of most recent month. See notes for Table C1 for additional comments. Source: Statistics Canada s Energy Statistics Handbook. D2: Canada Demand by Product (million barrels per day) Finished Products NGLs Petrol. Gasoline Distil. Resid. Total 1 Total Total Q Q Q Q Q Yr-on-Yr Chg. 0.6% 5.8% 16.5% 3.1% 0.0% 2.3% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 6.8% 1.4% -94.1% 2.9% 0.0% 2.2% Notes: 1. Total includes other finished petroleum products. 2. Total petroleum demand includes refinery feedstocks, additives/oxygenates and other hydrocarbons. Source: Statistics Canada s Energy Statistics Handbook. D3: Canada Petroleum Stocks (million barrels) Finished Products Crude Oil Petrol. Gasoline Distil. Resid. Total 1 Total Total Q Q Q Q Q Yr-on-Yr Chg. 3.0% -21.5% -19.4% -4.1% -0.1% -1.5% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. -3.6% 0.2% 22.7% 1.0% 5.1% 3.7% Notes: 1. Total includes other finished petroleum products. 2. Total petroleum stocks include NGLs, refinery feedstocks, additives/ oxygenates and other hydrocarbons. All stocks are closing levels. Source: Statistics Canada s Energy Statistics Handbook. Relevant Independent Objective

22 Page 22 D4: Canada Crude Oil Production (million barrels per day) Major Producers Canada Petroleum Type Alta. Sask. B.C. N.W.T. Atlantic Total 1 Light SCO Heavy Bitumen NGLs Q Q Q Q Q Yr-on-Yr Chg. 9.6% 20.8% 21.4% -4.9% -22.2% 6.4% 3.9% -0.2% 1.7% 21.0% 24.9% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 14.7% 6.0% 23.6% -3.2% 1.2% 11.8% 3.8% 3.9% 1.7% 30.0% 29.1% Note: Total includes small amounts of production from Manitoba and Ontario. Source: Statistics Canada s Energy Statistics Handbook. D5: Canada Petroleum Imports by Source (thousand barrels per day) Non-OPEC OPEC Imports Mexico U.S. U.K. Norway Total 1 Algeria Nigeria S. Arabia Venez. Total 2 P. Gulf Total Q Q Q Q Q Yr-on-Yr Chg -8.3% >100% % -77.0% 4.0% -68.2% -9.3% 0.0% 0.0% -60.3% % -14.6% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yr-on-Yr Chg. 22.3% 0.0% % 0.0% -13.3% 8.8% % 0.0% 0.0% -48.7% 0.0% -20.4% % of Total 3 7.0% 0.0% 0.0% 0.0% 87.1% 12.9% 0.0% 0.0% 0.0% 12.9% 0.0% 100.0% Notes: 1. Includes all non-opec production. 2. Includes production by the other seven OPEC members. 3. As of most recent month. Sources: Statistics Canada s Energy Statistics Handbook.

23 Page 23 E1: World Drilling Activity (active oil and gas rigs) OECD Non-OECD OPEC World N. A. Europe Asia-Pac Total Asia Non-Asia Total 1 P. Gulf Non-Gulf Total Total , , , , , , , , ,573 1Q , , ,626 2Q , , ,399 3Q , , ,636 4Q , , ,632 1Q , , ,950 Yr-on-Yr Chg % -6.3% -22.9% -25.4% -7.1% -0.4% -3.0% 3.9% -13.9% -3.1% -18.7% Apr-14 2, , ,388 May-14 2, , ,372 Jun-14 2, , ,437 Jul-14 2, , ,608 Aug-14 2, , ,642 Sep-14 2, , ,659 Oct-14 2, , ,657 Nov-14 2, , ,670 Dec-14 2, , ,570 Jan-15 2, , ,309 Feb-15 1, , ,986 Mar-15 1, , ,555 Apr-15 1, , ,268 Yr-on-Yr Chg % -26.5% -28.6% -45.3% -7.1% -10.6% -9.3% 0.3% -15.8% -5.6% -33.1% % of Total % 4.3% 0.9% 55.1% 9.2% 14.9% 24.0% 14.1% 6.8% 20.9% 100.0% Notes: 1. Does not include active rigs in the Former Soviet Union and onshore rigs in China. 2. As of latest month. Source: Baker Hughes, Inc. E2: North American Drilling Activity (active oil and gas rigs) United States Canada North America 1 East Mid-West S-Cent N-West West Total Land 2 Offshore Total Oil Gas Total , ,919 1, , , , ,761 1, , , , ,861 1, , ,238 1Q , ,780 1, , ,291 2Q , ,852 1, , ,054 3Q , ,903 1, , ,288 4Q , ,911 1, , ,317 1Q ,380 1, , ,688 Yr-on-Yr Chg % -17.2% -23.5% -28.4% -45.6% -22.5% -22.9% -11.2% -39.6% -28.1% -16.4% -26.3% Apr , ,835 1, , ,039 May , ,859 1, , ,022 Jun , ,861 1, , ,101 Jul , ,876 1, , ,226 Aug , ,904 1, , ,303 Sep , ,930 1, , ,336 Oct , ,925 1, , ,349 Nov , ,925 1, , ,346 Dec , ,882 1, , ,257 Jan ,683 1, , ,051 Feb ,348 1, , ,711 Mar ,109 1, , ,304 Apr #REF! 90 1, ,066 Yr-on-Yr Chg % -42.9% -49.9% -51.6% -47.8% -46.8% -47.1% #REF! -55.8% -38.6% -97.5% -47.7% % of Total 3 6.8% 23.6% 52.3% 6.7% 2.5% 91.6% 88.4% #REF! 8.4% 99.2% 0.8% 100.0% Notes: 1. Excluding Mexico. 2. Includes drilling on inland waterways. 3. As of latest month. Source: Baker Hughes, Inc. Relevant Independent Objective

24 Page 24 Geographical Specifications 1. The World: OECD is comprised of countries from three regions: North America (Canada, Mexico, US); Europe (Austria, Belgium, Czech Republ ic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, UK); and Asia-Pacific (Australia, Japan, New Zealand, South Korea). OPEC is comprised of Persian Gulf (Iran, Iraq, Kuwait, Qatar, Saudi Arabia, United Arab Emirates) and non-persian Gulf countries (Algeria, Indonesia, Libya, Nigeria, Venezuela). Non-OECD is comprised of countries from three regions: Former Soviet Union (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kirghizstan, Moldova, Russia, Crude Oil Qualities Producing API Country or Gravity Region F) Sulfur Content (%) BBLs/Metric Tonne Crude Stream Tapis Blend Malaysia Ekofisk Blend Norway WTI Texas GCS Gulf of Mexico Oklahoma Sweet Oklahoma Kansas Sweet Kansas Wyoming Sweet Wyoming ELS Alberta Brent Blend United kingdom Bonny Light Nigeria Oman Blend Oman Arabian Light Saudi Arabia Minas Indonesia Isthmus Mexico Michigan Sour Michigan WTS Texas Urals Russia Tia Juana Light Venezuela Dubai U.A.E Lost Hills California Cano Limon Colombia Arabian Heavy Saudi Arabia ANS Alaska Oriente Ecuador Hardisty Heavy Alberta Maya Mexico Kern River California Tajikistan, Turkmenistan, Ukraine, Uzbekistan); Asia (including non-oecd Oceania); and non-asia (Africa, Middle East, Latin America, and non- OECD Europe). 2. United States: East (PADD I) New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont); Central Atlantic (Delaware, Maryland, New Jersey, New York, Pennsylvania, and the District of Columbia) and Lower Atlantic (Florida, Georgia, North Carolina, South Carolina, Virginia, and West Virginia). Mid -West (PADD II) Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, and Wisconsin. South-Central (PADD III) Alabama, Arkansas, Louisiana, Mississippi, New Mexico and Texas. North-West (PADD IV) Colorado, Idaho, Montana, Idaho, Montana, Wyoming. West (PADD V) Alaska, Arizona, California, Hawaii, Nevada, Oregon, Washington. 3. Canada: East is comprised of Ontario, Manitoba, Quebec and the Maritime provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island). West is comprised of Alberta, British Columbia, Saskatchewan and the northern territories (NorthWest Territories, Nunavuut, and Yukon). Additional Notes 1. Petroleum and oil refer to crude oil and natural gas liquids (NGLs), whereas crude oil refers to its namesake and field condensates. Condensates derived from natural gas processing plants are classified as NGLs. 2. The spot price is for immediate delivery of crude oil or refined products at a specific location. Spot transactions are generally on a cargo by cargo basis. In contrast, a futures price is for delivery of a specified quantity of a commodity at a specified time and place in the future. 3. Crude oil sold Free-On-Board (FOB) is made available to the buyer at the loading port at a particular time, with transportation and insurance the responsibility of the buyer. Crude oil sold Cost-Insurance-Freight (CIF) is priced at a major destination point, with the seller responsible for the transportation and insurance to that point. A Delivered transaction is similar to a CIF transaction, except the buyer in the former pays based on the quantity and quality ascertained at the unloading port, whereas in a CIF transaction, the buyer accepts the quantity and quality as determined at the loading port. 4. Processing gain is the volume of which refinery output is greater than crude oil inputs. The difference is due to the processing of crude oil products, which in total have a lower specific gravity than crude oil. 5. Unaccounted for crude oil reconciles the difference between crude input to refineries and the sum of domestic production, net imports/exports, stock changes and documented losses (in the U.S.). 6. Totals may not equal the sum of their parts in the statistical tables due to rounding. For more information, please contact Dinara Millington at dmillington@ceri.ca. Canadian Energy Research Institute 150, Street NW Calgary, AB T2L 2A6