Agenda

1. Market Outlook and Price Assessments in ChinaDave ErnsbergerEditorial Director, AsiaPlattsQingdao, ChinaJuly 24, 2004

2. Agenda • Introduction to Platts: present and future • Platts assessment methodology • Platts in China • Physical and Futures Markets – different and often co-dependent • The prospects for an integrated market in China • Q&A

3. Platts: Part of McGraw-Hill Companies • McGraw-Hill has more than 280 offices in 40 countries • Sales in 2003 were $4.8-billion • Platts’ sister companies include: • Standard & Poor’s • BusinessWeek • McGraw-Hill Education • Many others Our strategy: build comprehensive information businesses for both general and industry specific audiences.

4. Our mission • Platts is the world’s most trusted and valued source of global energy information and intelligence. • Our goal at Platts is to work with our clients and the industry to enable global energy markets to function with efficiency, transparency and integrity.

5. Our profile • Platts is the world’s largest energy information provider. • Platts provides decision-critical, expert information to the petroleum, electricity, natural gas, coal, petrochemicals, metals, nuclear and shipping industries. • Platts’ provides uniquebenchmark pricing opinions, real-time news, market and industry analysis, energy consulting, analytical databases, and geospatial tools. • Platts’ customersare traders, marketers, planners, analysts, managers, engineers, consultants, lawyers and governments. • Platts informationmust be bought directly from Platts, or via our licensed third party distributors, to guarantee reliability, and to ensure that the information is in fact from Platts.

6. Unique methodology, unique benchmarks • From 14 offices worldwide, Platts covers the oil, natural gas, electricity, nuclear power, coal, petrochemical and metals markets. • Platts unique, expert assessments are trusted and used as benchmarks in the world’s commodities markets • Every day, more than $10-billion of trading activity and term contract sales is based on Platts' price assessments. • Platts is the world leader in publishing oil assessments • Specialist in oil market information since 1923 • Impartial and independent

7. Unique methodology, unique benchmarks • We have built a unique methodology and price assessment process for the Asian oil markets using many decades of experience and development • The assessment process is open, transparent and subject to public scrutiny • All of our assessments are proprietary • As result of this unique methodology and process, our assessments are trusted, widely-used and valued by the Asian oil markets

8. Platts: price assessment process • Assessments represent our expert opinion • An editorial process developed by Platts to uncover market value of energy commodities • All information is tested in the Platts “window”—in Asia, this is Page 190 • We use an interactive process where the market itself is the testing ground • We use real-time technology to interact with market • All bids/offer must be available to market at large • Transactions must be made at arms length • Values are based on ‘market-on-close’ principle • Assessments always reflect transactable values

9. Platts: price assessment process (ctnd) • Assessment process is open and transparent • Assessments are inclusive of backwardation or contango – prevents double counting of differentials • Deals are subject to several tests, including “golden standards” of repeatability and incrementability • Key to any price assessment process is transparency and a reliable methodology • Our methodologies are open to public scrutiny and comment, and can be viewed at www.platts.com

10. Platts: price assessment process

11. Platts in China • Platts has been marketing its services in China for more than 20 years • Provides a broad range of energy, petrochemical and metals information products and services • Platts benchmarks are widely used for price benchmarking in China oil, petrochemicals, metals markets • Our customers in China include integrated oil companies, petrochemicals companies, traders, regulators and government departments

12. Platts China Initiative • Launched Huangpu, Shanghai and Qingdao fuel oil assessments this year • Started publishing the Chinese-language “China Fuel Oil Report” on July 5 • Preparing expansion of Platts services to China’s LPG, petrochemicals, electricity, natural gas, coal, and LNG markets to serve needs as they arise

13. Platts China Initiative • Platts expanded commitment to China by establishing Guangzhou representative office in June • Our new representative office enables us to provide liaison and product introduction services • Our plans call for Beijing, Shanghai representative offices over next 12 months

14. Platts China Initiative • Platts organizes training courses in risk management in China • Educates at seminars held by our partners and other third parties • Holds regular petrochemicals and fuel oil market seminars in major cities • Studying interest in other value-added Platts services in China • Geospatial services • Consulting

15. South China fuel oil assessments Ship-to-ship Huangpu 180CST 3.5% sulfur黄埔燃料油过驳价 (至3。5% 含硫 180 CST)FOB Huangpu 180CST 3.5% sulfur黄埔燃料油提库价 (至3。5% 含硫 180 CST)C+F Huangpu 180CST 3.5% sulfur黄埔燃料油到货价 (至3。5% 含硫 180 CST)C+F Huangpu 180CST 2.5% sulfur (MSFO)黄埔直流燃料油到货价 (至2。5% 含硫 180 CST)

16. East China fuel oil assessments FOB Shanghai 180CST 3.5% sulfurC+F Shanghai 180CST 3.5% sulfur FOB Shanghai 180CST 1.5% sulfurC+F Shanghai 180CST 1.5% sulfur FOB Qingdao 180CST 1.5% sulfurC+F Qingdao 180CST 1.5% sulfur

17. Platts: Chinese assessment window • Launched July 12 • Information in Chinese and English • Same methodology applied as in Singapore and Page 190 • Open access for participants in physical market

18. Platts market reporters Real-time publication of bids, offers and deals Instant feedback Decision support Price transparency Price discovery – interactive process Market activity

19. Solid benchmarks = Clear price signals • FOB Huangpu fell below import cost—and even FOB Singapore—for periods in May • China markets sent clear signal in May that port was congested, bonded storage full to bursting • Supply corrected itself, premiums were re-established in early June • Without clear price signals, market could have become critically oversupplied for longer

20. China: needs efficient markets • Efficient markets allow countries to manage economic growth • Expert assessments send clear price signals about where new supplies are most needed • Allow for better planning and targeted infrastructure development • Efficient markets are created in trading centers where liquidity, transparency, stability, and rule of law are reasonably guaranteed • Platts’ role is to help energy markets around the world function with greater efficiency, transparency and integrity

21. China: demand growing on all fronts • Infrastructure under increasing stress from high oil demand growth • Overtook Japan as world’s second biggest oil user in 2003 • Oil demand rose by more than 900,000b/d in Q1 2004 to 6.14-mil b/d; up 18% year-on-year • Electricity demand rose 16.4% in Q1 2004, almost all grids in China experienced shortages • Peak supply-demand gap stretching to 30,000MW in 2004 • Government taking measures to slow down economic growth in 2004; moved to slow down borrowing in late April

22. China: needs physical and futures trade • Physical and Futures markets are different, but usually co-dependent • Taken together, physical and financial markets are used around the world to properly manage price risk • Used together, they help balance supply and demand in the short and long term • To use both markets most efficiently, traders need to minimize the basis risk between the two (delivery timing, location of delivery, quality specifications)

23. Physical Markets • Essential for moving commodities from producers to consumers – the primordial marketplace • Trading is relatively unregulated • Usually not traded on an exchange • Trades typically settled by actual delivery of products seller to buyer • Sellers, buyers assume a certain amount of credit risk • Give financial markets a solid (and non-circular) reference point for settlement

24. Futures Markets • Allow buyers and sellers to hedge price risk • Provide a venue for financial institutions (banks, funds) • Usually traded on an exchange • Exchanges often assume credit risk by taking each side of every trade done • Exchanges often highly regulated to provide certainty of rules, protection for investors and high degree of standardization • Trades typically settled with exchange in cash • Settlement often relies on a benchmark (or basket of benchmarks) from the physical markets

25. Physical & Futures: codependent • Efficient commodities markets have coexisting, and codependent physical and futures trading • Platts and established exchanges work together around the world to provide unified hedging and settlement systems • Transparent physical markets influence futures prices • Transparent futures markets influence physical prices • Together, both markets minimize price “distortions” by providing reliable and immediate signals of changes in market conditions • Together, both markets are critical to maintaining a supply/demand balance

26. Prospects for an integrated China market • Prospects are very good, depend mostly on supportive measures from Beijing • China’s physical fuel oil markets have thrived since regulations were relaxed in January • Platts launched proprietary physical benchmarks for Huangpu in March • Launched proprietary benchmarks for Shanghai and Qingdao in July • Development work on an exchange-traded futures market picking up speed

27. Only Authorized Platts Distributors in Asia ComStock Reuters Moneyline Telerate Bloomberg FAME OilSpace GlobalView

28. questions?Dave ErnsbergerEditorial Director, AsiaPlatts(65) 6530 6571dave_ernsberger@platts.com