Pre U.S. Crude Boom (~2007/2008)

Pre U.S. Crude Boom (~2007/2008) Export regulations irrelevant. Refinery Utilization 90 80 70 60 50 40 30 20 10 0 U.S. Production Canadian Imports Saudi Imports Other Light & Medium WB Imports Heavy Waterborne Imports Declining U.S. crude production made up for by increasing imports exceed 10 MM BPD Light & Medium waterborne imports make up almost 60% of total imports. U.S. refinery utilization holds in the mid 80% range. 2

Today U.S. production rises over 60% from 2008. Refinery Utilization 90 80 70 60 50 40 30 20 10 0 U.S. Production Canadian Imports Saudi Imports Other Light & Medium WB Imports Heavy Waterborne Imports Canadian imports grow over 35% as oil sands production increases. Increasing production squeezes out waterborne light imports total light/medium waterborne imports down to 2.7 MM BPD U.S. refinery utilization rises to near 90%. 3

Day of Reckoning when North American production exceeds refining capacity. Max Sustainable Refinery Utilization ~92% Future U.S. production continues to grow Refinery Utilization 90 80 70 60 50 40 30 20 10 0 Export restrictions incentivize increased refinery utilization U.S. Production Canadian Imports Saudi Imports Other Light & Medium WB Imports Heavy Waterborne Imports Canadian imports continue to grow but can t reach tidewater Waterborne imports decline to structural minimum levels (Latin heavy/saudi/other) U.S. refinery utilization maxes out; with exports restricted there is no where else for new production to go 4

Factors Influencing Day of Reckoning When Export Restrictions Strand Domestic Crude Actual Level of Production Growth Estimates vary widely from 2 MMBPD to 6 MMBPD over the next ten years Ability to Expand Exports to Canada 2013 Light/Medium Waterborne (non-u.s.) Imports into Canada > 500 MBPD 2013 Light/Medium Imports into U.S. from Canada = 1.0 MMBPD Dependent on build-out of Canadian pipelines to Tidewater Ability to Access West Coast Markets This would also influence economics for exporting ANS California Low Carbon Fuel Standard (LCFS) /other regulations will also impact access Ability of U.S. Refining System to Displace Lt. Sour/Medium Crudes Very dependent on Saudi willingness to decrease imports Level of U.S. Processing Additions TM&C estimate is currently at about 500 MBPD over next 3 years How Current Export Restrictions are Applied Day of Reckoning Could be as early as 2015/16 or after 2020+ 5

Dispositions for Excess U.S. Production Mid-Range Scenario Most Saudi Imports Displaced 5000 4500 4000 Thousand BPD 3500 3000 2500 2000 Foreign Lt/Med Imports to E. Canada Lt/Med Imports from Canada Foreign Med. Imports Foreign Lt. Imports Raymond James* EIA AEO 2014* 1500 1000 *Incremental crude production in excess of refinery/splitter additions 500 0 2014 2015 2016 2017 2018 6

Dispositions for Excess U.S. Production Saudi Lt. Sour/Medium Imports Remain at Current Levels 5000 4500 4000 Thousand BPD 3500 3000 2500 2000 Foreign Lt/Med Imports to E. Canada Lt/Med Imports from Canada Foreign Med. Imports Foreign Lt. Imports Raymond James* EIA AEO 2014* 1500 1000 *Incremental crude production in excess of refinery/splitter additions 500 0 2014 2015 2016 2017 2018 7

Impacts of Export Restrictions Requires crude production growth to be processed domestically Makes the entire U.S. an effectively stranded location (similar to Cushing) and creates price discounts will impact production levels Spur increased refinery utilization and new investment Investment delayed due to regulatory uncertainty Increase refined product exports; where is the limit? Price discount trajectory/levels Discounts blow out when all nonstructural light/medium waterborne imports displaced key is Saudi reaction Ultimately discounts decline to levels based on marginal industry investment type 8

U.S. Gasoline Import/Export Balance 1,500 Canada Mexico Europe Latin America Asia / Other 1,000 28% 500 41% 37% MBPD 0 62% 75% 48% 35% Exports Imports -500-1,000 2013 2022 Crude 2022 Exports Crude 2022 Crude Allowed 2022 Crude Exports Exports Allowed Exports Restricted Restricted 9

LLS-WTI Experience $30 $25 $20 Sale of 30 MMBBL from U.S. SPR Seaway acquisition announced Inventories build in Cushing Stranded with booming production massive and volatile discount 2011-2013 $25 $ Per Barrel $20 $15 $10 $15 Arab Spring sparks crude price rises, LLS outpaces WTI Seaway reversal, 150kbd Cushing to Houston $10 J-11 M-11 S-11 J-12 M-12 S-12 J-13 At parity through 2006 Seaway expansion, 150->400 MBPD Market recognizes disconnect 2007 to 2010 Investment results in quality and transportation adjusted parity $5 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -$5 10

Domestic-to-International Discount Brent (Dated) LLS (St James) Forecast 15 10 5 Increasing volatility during transition LLS transitions to discount as light crude imports disappear Eventually discount declines to level based on investment economics 0 J-10 O-10 J-11 A-12 J-13 O-13 (5) 15 Large Cone of Uncertainty - substantial volatility $ Per Barrel 10 5 0 At import parity through 2010? (5) (10) 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Actual Forecast - Exports Restricted? 11

Industry Responses Increase Refinery Utilization PADDs I, III, and V can absorb additional 400 MBPD of light crude Incentivized by large domestic to international crude discounts PADD V would need improved logistics to access tight oils Will delay/reduce required new processing investment Refinery Investment Two timeframes: Current to 2018 and 2018 and beyond Current to 2018 investment required regardless of export policy Both refiners and midstream players will participate Heavy-to-Light Refinery Conversions limited Will cause significant increases U.S. product exports 12

Industry Investments Current to 2018 Made to provide industry the ability to run very light crudes and condensates delays Day of Reckoning Most being done within refinery gates Focused on Eagle Ford; also some Utica Refinery specific Pre-flash towers, new atmospheric units; also condensate splitters and condensate hydroskimmers by midstream players Total level of required investments exceed $2 billion Does not include opportunistic investments to take advantage of regional proximity to advantaged crudes 13

Industry Investments 2018+ Made to convert crude to exportable products Various types condensate splitters/expansions, diesel HDS additions, Eagle Ford and WTI hydroskimmers Midstream segment likely to sponsor many of the projects Economics highly sensitive to naphtha and atmospheric tower bottoms (ATB) prices/ability to find export homes USGC WTI Hydroskimmer will be price-setter 14

Final Thoughts U.S. Prod. Growth Will Surpass Domestic Refining Capacity Day of Reckoning influenced by a variety of factors could be anywhere from 2015/16 to 2020+ - Saudi strategy on exports to U.S. critical Continued Strict Export Restrictions will Lead to Stranded Crude Domestic prices discounted; situation similar to WTI/LLS experience Large Cone of Uncertainty - Duration and depth of discount hard to predict; very volatile Industry Responds with Investment in Crude-to-Product Facilities Investment delayed by policy uncertainty Ultimate discount reduced to level based on USGC diesel hydroskimmer economics ability to find homes for increased product exports key Gasoline Price Impacts With U.S. becoming large net exporter, domestic prices tied to world prices Short-term impacts hard to predict; influenced by logistics/other policies 15

Presenter John R. Auers, P.E. Executive Vice President Univ. of Nebraska Chem. Engr. Univ. of Houston MBA Formerly with Exxon Industry studies/analysis, forecasting, modeling Leads Outlook team Contact Info jauers@turnermason.com Office 214-223-8887 16

Extra Slides

Foreign Producer U.S. Capacity Company Location Foreign Entity Capacity Percent CITGO Lemont, IL PDVSA 159 100 CITGO Lake Charles, LA PDVSA 440 100 CITGO Corpus Christi, TX PDVSA 157 100 Motiva Port Arthur, TX Saudi Aramco 600 50 Motiva Convent, LA Saudi Aramco 227 50 Motiva Norco, LA Saudi Aramco 220 50 Pasadena Ref. Pasadena, TX Petrobras 117 100 Shell Deer Park Deer Park, TX PEMEX 327 50 Chalmette Ref. Chalmette, LA PDVSA 189 50 Total 2,436 1,660* *Foreign ownership weighted capacity 18

Refinery Expansions Required Crude Expansions Operator Location MBPD* Startup Flint Hills Corpus Christi, TX 30 Late 2014 Valero Houston, TX 90 2Q 2015 Valero Corpus Christi, TX 70 3Q 2015 Marathon Canton, OH 10 2014 Marathon Catlettsburg, KY 35 2015 Opportunistic Crude Expansions Operator Location MBPD Startup Dakota Prairie Refining/Calumet Dickinson, ND 20 2014-2015 Valero McKee, TX 25 2015 HollyFrontier Woods Cross, UT 14 2015 Calumet Great Falls, MT 10 2015 Tesoro Salt Lake City, UT 4 2015 *Project will allow refinery to run higher volumes of very light crude and condensate from regional tight oil production. Estimated total expansion of crude capacity is not necessarily equal to capacity of new condensate splitter or preflash tower and is TM&C's estimate. 19

Condensate Splitters Under Construction Operator Location MBPD Startup Kinder Morgan, Phase 1 50 1Q 2014 Houston, TX Kinder Morgan, Phase 2 50 2Q 2015 Trafigura Corpus Christi, TX 50 4Q 2014 Proposed Operator Location MBPD Startup Magellan Midstream Corpus Christi, TX TBD TBD Martin Midstream Corpus Christi, TX Up to 100 1-2Q 2016 Targa Resources TBD TBD TBD Castleton Commodities Corpus Christi, TX TBD TBD 20