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Market Reporting

ConsultingEvents

Argus Delivered Bunkers InitiativeThe Singapore perspective

Sammy SixMarine Fuels Pricing AnalystTokyo Bunker Forum22 Nov 2018

Agenda

2

2 Position of Singapore in the global bunker market

3 IMO 2020: impact on marine fuel demand and trade flows

4 Quality, availability and compatibility issues

5 Singapore as an LNG bunkering hub

6 Argus Delivered Bunkers Initiative

1 About Argus

7 How to price 0.5% MFO?

Argus - one of the largest and fastest growing commodity PRA and information providers

Early Stage Indexation Breakthrough Commercialisation and Expansion2 3 4

Today: 2nd largest PRA

160+ publications

23,000+ price assessments

Over 3,5004 core clients

Further 3,000 Metal Prices

clients

Approaching 900

employees

21 offices in trading hubs

Note: selected illustrative data. 1: Liquid Petroleum Gas. 2: All Publishers Index.3: Argus Sour Crude Index.5: As of FY 2015. Includes editorial and business development. 6: Revenues based on the audited accounts .

Founded in 1970

1970: EuropOil Prices newsletter

Foundation1

M&ANew market entryInnovation Indexation and Benchmark

1984: Crude and European Products

1985: Asia Pacific Products

1986: US Products 1993: LPG1

1995: Gas 1998: Asphalt

2000: Launch of Argus Online

1984 - 2000 2010 - 20152000 - 20101970 - 1984 Today

0.4 1.2 2.2 5.3 6.4

9.9 11.1 15.4

23.5

41.9

56.1

72.0

90.7

107.8

124.4

1984 1988 1992 1998 2000 2002 2004 2006 2008 2010 2011 2012 2013 2014 2015Houston, Singapore (1985), Moscow

(1994)Houston, Singapore (1985), Moscow

(1994)Washington (2000), Tokyo (2005), Dubai (2009

)Washington (2000), Tokyo (2005), Dubai (2009

) NY (2011), Calgary (2012), Rio (2013)Selected officesopened:

Entry into Fertilizers (2011), Petrochemicals (2012) and Metals (2014) markets

2013: Russian Federal Tax Service

2014: Crude on ASCI Ecuador

2015: Argus Open Markets

2015: Argus Spot Ticker

TABrewerConsulting

Revenue, £m6

2013: Argus Direct

2003: Joint launch of API2 coal with IHS McCloskey

2003: European gasoline

2005: US Crude

2008: Biofuels Europe

2010: Saudi, Kuwaiti and Iraqi crude indexation to ASCI3

2000: Coal, Transportation, Emissions

2001: Petroleum Coke 2005: LNG 2008: Bioenergy, Jet Fuel 2009: Biomass 2010: Base Oil

1979: The Argus Telex

2016GA invests in Argus –

valuing business at over $1 billion

Our leadership & strength in core high value markets is a measure of our success…US Crude – Market Leader

USGC Products – Market Leader

Fertilisers – Market Leader

Global LPG – Market Leader

European Gasoline – Market Leader

Euro Biofuels – Market Leader

CIS – Crude and products market leader

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Bio Mass – Market Leader

Singapore’s location and infrastructure are key

5

Source: EIA

• Singapore lays in the mouth of the Strait of Malacca, the world’s second busiest oil trade chokepoint after Hormuz

• Connects Indian Ocean with Pacific Ocean, shortest vessel route between West/Mideast and Asia-Pacific

• World-class port infrastructure• Still, deep waters and no piracy• Stable and transparent government• Multitude of suppliers, competitive

pricing• 4mn t sales per month, 125 bunker

operations per day

Singapore Bunker Sales

6

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Annual bunker sales per port (t)

Source: variousYear: latest data available

• Left: Singapore accounts for 25% of the global bunker market, est. at 200 million tonnes• Right: Around 90% of Singapore marine fuel sales are high-sulfur 3.5% fuel oil

Source: Singapore MPA

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Monthly MFO sales by quality (000 t)

HSFO 380cst HSFO 500cst (LS)MGO Others

IMO 2020 will change the composition of the global bunker pool

7

0

50

100

150

200

Bunker Demand Scrubber Non-Compliance Compliant fuel MGO

Bunker Fuel Substitute (million T)

Source: Argus Consulting

LSFO

MGO

Hybrids

Trade Flow Shift: West-East fuel oil arb to largely disappear

0

50

Supply Demand

mt

0

50

Supply Demand

mt

0

50

Supply Demand

mt0

50

Supply Demand

mt

0

50

Supply Demand

mt

0

50

Supply Demand

mt

0

50

Supply Demand

mt

0

20

40

60

80

Supply Demand

mt

Trade Flow

Bunkering Hub

0

Supply (2016)

Demand (2016)

Key import sources SG• Russia• Mideast Gulf• US• Brazil

Source: Argus Consulting

Changes in blending components may result in alternative global trade flow pattern…

Trade Flow

Bunkering Hub

0

100

200

300

Supply Demand

mt

0

100

200

300

Supply Demand

mt

0

100

200

300

Supply Demand

mt0

100

200

300

Supply Demand

mt

0

100

200

300

Supply Demand

mt

0

100

200

300

Supply Demand

mt

0

100

200

300

Supply Demand

mt

0

100

200

300

Supply Demand

mt

0

Supply (2016)

Demand (2016)

Asia will become balanced in gasoil, and supply will largely remain in the region• China• Korea• India Source: Argus Consulting

Argus Marine Fuels Outlook

10

• Quarterly analytical report ahead of IMO 2020

• Contains price forecasts & news and analysis

• Covers Asia, Europe and Americas

• Scrubber database

• Next issue to be released 9 Jan 2019

MFO bunker sales dipped throughout the year…

11

Sales declining over the summer because of high prices, contamination fears and FO cargo tightness…

2.5

3

3.5

4

4.5

5

FO arbitrage inflow (mn t)

Arbitrage inflows from the west of Suez fell from 3Q onwards, usually 4-4.5 mn t

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

MFO sales Singapore (1000 t)

2017 2018

Delivered premiums over HS 380cst cargo price through the roof

12

0

5

10

15

20

25

30

35

40

16 Nov 2017 16 Jan 2018 16 Mar 2018 16 May 2018 16 Jul 2018 16 Sep 2018 16 Nov 2018

HS 380cst delivered bunker premium ($/t)

• Dislocation between delivered and cargo…• Different quantities (500-3kt vs 20kt) and laycans (4-12 days vs 15-30 days)• Different market dynamics (delivered local, cargo depending on regional arbitrage)

Quality, availability and compatibility issues

13

• Due to introduction of MFM in 2017, no longer quantity or ”cappuccino” disputes • Quality issues still prevalent though: “bad bunkers” contamination crisis 2018• Reinforces question marks come 2020 regarding:

- Quality of blends- Availability of compliant fuels- Compatibility

• Only a couple of majors have announced fuels and availability, full specs by end-2018?• Fuels will be sold against existing ISO:8217 specs, maybe update from ISO in 2019?• Expectation: owners will opt for existing low-sulfur gasoil bunkers during first months,

then change to cheaper blends• High quality blend components reserved for 0.5%... HSFO quality to suffer even more?• Competition for Singapore expected mainly from Ningbo-Zhoushan

Singapore as an LNG bunkering hub

14

LNG bunker barge by FueLNG (JV Shell/Keppel). Operational by

end-2020

• Singapore has ambition to become future Asian LNG trading hub • LNG as compliant marine fuel: clean (no NOx/SOx and less CO2), viable and scalable • LNG bunkering: need for LNG bunker vessels, now still truck-to-ship (MPA subsidies)• Port Focus Group: solve chicken-and-egg problem and coordinate global infrastructure• 9/10 largest bunkering ports already offer LNG

Vancouver

RotterdamAntwerpZeebrugge

MarseilleYokohamaUlsan

Ningbo-Zhoushan

Singapore

Argus Delivered Bunker Initiative: why Singapore? and why now?

15

Argus Delivered Bunker Initiative: A three-phased approach

16

1 2 3Build robust assessments Obtain indexation Launch derivatives

• IMO 2020: industry needs to change benchmarks

• Need for fair and accurate deliveredbenchmarks instead of premiums to cargo

• MFMs: sharp pricing

• LSFO 0.5%S for now based on 7:1 ratio

• Allows for hedging

• Clear need for exchange cleared swaps settling on Argus assessments

• Creation of eco-system

0

5

10

15

20

25

Jun Jul Aug Sep Oct Nov

Reported daily bunker deals (Avg)

380cst LSMGO

0

10

20

30

40

11-Jun-18 11-Jul-18 10-Aug-18 9-Sep-18 9-Oct-18 8-Nov-18

Total companies submitting (cumulative)

Assessment based on Volume Weighted Averaging of deals

17

Deals must be received by 7pm Singapore time to be included

18

Deals are preferred by email to singaporebunkers@argusmedia.combut can be submitted by any reasonable means including phone, skype, ICE chat, text, WhatsApp etc.

Deal information is treated as strictly confidential. Only the quantity of deals and the assessed price are published.

Comparison of Argus and Platts assessment process for Singapore bunkers

19

‘Market On Close’ methodology.

From Bunkerwire report on website:“For Singapore delivered 380 CST bunker fuel,

a bid stood at $450/mt against offers at $466/mt during the Platts Singapore MOC

assessment process. Out in the market, offers were mostly between $462-$465/mt.”

$461.50

No transaction data, wide price range, based on survey, data does not explain assessment.

Volume Weighted Averaging of transactions that meet the standard specifications of laycan and quantity reported by 7pm Singapore time.

Seven (7) 380cst deals reported that day, totaling 5,640t.

In October 2018 an average of Thirteen (13) 380cst deals per day were reported.

$464.40

Precise assessment, based on actual transactions, high quality

data inputs, mathematical process.

Assessment Method

Example:3rd August

Assessed value

Argus Platts

IMO2020 compliant assessment ‘LSFO 0.5%S’ – launched by Argus October 1st

20

Now, for the first time, there is a 0.5%S assessment with a name and specifications

that can be referenced and hedged in contracts that extend beyond Jan 2020.

Prior to aligning with the ‘standard’ methodology shown here when deals

become available, the assessment will be based on a 7:1 blending ratio of LSMGO

0.1%S and HSFO 380cst.

No market consensus on pricing levels of 0.5%S bunkers…

21

HSFO 3.5%

LSMGO 0.1%

Price indications from majors likely below market value because test cargoes

Argus 7:1 ratio(placeholder)

$150/t range

Argus in pole position to assess the bunker markets come 2020!

22

02468

1012141618

Daily assessment contributors

380cst total contributors LSMGO total contributors

24

8

• Once physical 0.5% bunker market develops, we’ll hear about prices first• The Argus Delivered Bunker price in Singapore is by far the most robust and qualitative

assessment in the market, accurately reflecting value in the world’s largest bunker hub!

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Total quantity reported (t)

HALF of total spot market

Participants by type

Suppliers Owners

34%66%

Thank you for your attention!

Sammy Six

sammy.six@argusmedia.com singaporebunkers@argusmedia.com