Malaysia Full Profile

November 2010
Downstream Monitoring Service-Asia (DMS-A)
MALAYSIA
Market Profile
Malaysia | Page 2 Market Profile
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Table of Contents
Summary of Conclusions ...................................................................... 4 Malaysia quickly returns to growth ................................................. 4 Downstream Regulatory Environment ................................................... 6 Refining ................................................................................................. 9 Product Supply & Demand .................................................................. 16 Product Distribution ............................................................................. 23 Marketing............................................................................................. 26 Competitive Environment .................................................................... 28 Prices & Margins ................................................................................. 31 Annex .................................................................................................. 34 Market Context ............................................................................. 34 Abbreviations ............................................................................... 36
Summary of Conclusions
Malaysia quickly returns to growth
Economic roadmap to spur investments in logistics
Malaysias downstream oil sector is poised to enter a renewed period of growth, spearheaded by product distribution and storage projects aimed at developing the country as a key player in Southeast Asias oil trading market, complementing Singapores role as the incumbent regional trading hub. The government, through the recently unveiled Economic Transformation Program (ETP) has identified the creation of a regional storage and trading infrastructure as one of the entry point projects for the oil, gas & energy sector. The landmark investment in the streaming of additional storage capacities is the proposed Pengerang deepwater terminal in the southern state of Johor, estimated to cost RM 4.8 bn (US$ 1.5 bn) and with a total crude and oil product storage capacity of 5 million cu.m. Vopak is partnering with local player, Dialog, in a JV which will control 90% of the special purpose vehicle responsible for the development of the project, while the Johor state government will hold the remaining 10%. Apart from foreign operators such as Vopak and Trafigura, there are also new players which have emerged as key investors in Malaysias oil product and logistics segment. This includes MISC, a subsidiary of PETRONAS, which recently acquired a 50% stake in Vitol Tank Terminals International (VTTI) for US$ 839 mn, giving the company direct participation in the terminal being developed at Tanjung Bin, Johor by VTTIs unit, ATT Tanjung Bin. This facility is set to open in 2012 with the capacity of 841,000 cu.m. In addition, a local company, KIC Oil & Gas is building a terminal on a reclaimed island off Tanjung Bin with total crude and product capacity of 1 million cu.m and slated for completion in August 2011.
Refining projects in the pipeline

Throughout 2009 and into early 2010, several private sector-led grassroots refinery projects have been announced in Malaysia which sought to leverage on the countrys domestic growth, export opportunities as well as government incentives. With domestic crude distillation capacity of 546.3 mb/d as of end-2009, fairly well-balanced against product demand, the proposed facilities are likely to be export-oriented units. Although most of these projects have yet to make material progress as of now, there is also the likelihood that some additional refining capacity will be added in the near term. For instance, the relocation of Gulf Petroleums proposed plant from the state of Perak to the Port Dickson area, adjacent to Shell and ExxonMobils facilities appears to demonstrate the companys determination to build a refinery in Malaysia. Meanwhile, PETRONAS also seems to be gearing up to augment their domestic supply capacities especially at their Melaka refining complex which houses the Melaka I and II refineries with combined refining capacity of 228 mb/d. The NOC has reportedly completed debottlenecking at the Melaka II plant (JV between PETRONAS and ConocoPhilips) which increased crude distillation capacity as well as the installation of a hydrocracking unit in 3Q10.
Local press indicate that PETRONAS is also looking into expanding the 100 mb/d Melaka I refinery, with the feasibility study set to be complete by 1Q11. Furthermore, the companys petrochemicals unit PETRONAS Chemicals Group has disclosed that PETRONAS is also considering the development of a grassroots integrated refinery and petrochemicals complex in Peninsular Malaysia, although no additional details on this proposal have been divulged.
Fuel retail segment going strong

The outlook for the domestic fuel retail sector remains positive, underpinned by continued vehicle fleet growth as well as stable margins for motor fuels under Malaysias Automatic Pricing Mechanism (APM), which regulates gasoline and diesel pump prices. Another key factor in the vibrancy of the retail market is the aggressive network expansion strategy undertaken by PETRONAS Dagangan Berhad (PDB), the domestic marketing arm of PETRONAS. This has resulted in PDB overtaking Shell as the biggest retailer in terms of network size by end-2009 although the company still trails the IOC in motor fuel sales. PDBs ambition to overtake Shell as market leader, anchored by retail growth, will likely sustain the impetus for network expansion for the industry as a whole as other players also seek to expand and capture increasing demand growth in the market.
Downstream Regulatory Environment

Following the Petroleum Development Act in 1974 which created PETRONAS as Malaysias NOC, amendments in 1975 and 1981 vested regulatory functions in the domestic downstream industry to the Ministry of Trade and Industry (MITI) and the Ministry of Domestic Trade and Consumer Affairs. PETRONAS, which exercises regulatory powers in the upstream sector, is also mandated to generate added value to the countrys oil and gas resources and has expanded into the R & M segment from the 1980s onwards. IOCs continue to maintain refining and marketing assets in Malaysia while there is a likelihood of new, private entrants to the countrys refining landscape if recent proposed grassroots projects go through. In addition, the oil products storage sector has been highlighted as a growth sector under the governments Economic Transformation Program (ETP). Retail prices of motor fuels remain regulated by the government through the Automatic Pricing Mechanism (APM), although steps have been taken in July 2010 to reduce fuel subsidy spending. The prices of RON 95 gasoline and retail diesel were hiked while RON 97 gasoline is no longer subsidized, with prices determined through a managed float. Euro 2M fuel specifications were implemented in September 2009, with sulfur content in both gasoline and diesel set at 500 ppm. The government plans to adopt Euro 4M standards by 2011 although fuller details have yet to be disclosed. Meanwhile, the deadline for the mandatory 5% biodiesel program has been pushed back to June 2011 from January 2010 and will initially cover the central regions of Peninsular Malaysia.
Overview
The defining legislation for Malaysias oil & gas industry is the Petroleum Development Act (PDA) 1974, which created PETRONAS as the NOC and vested the company with sole ownership and control over all oil and gas resources in Malaysia. The PDA also provides PETRONAS with the right to process and market oil products. However, the NOC does not play a regulatory role in the downstream sector, unlike the upstream segment where regulation of domestic E&P is administered by PETRONASs Petroleum Management Unit. Following amendments to the PDA in 1975 and 1981, regulatory functions in the downstream sector are exercised by the Ministry of International Trade and Industry (MITI) with respect to licenses for the manufacturing of refined oil products while the Ministry of Domestic Trade and Consumer Affairs is responsible for issuing licenses for the distribution and marketing of oil products. The 1974 PDA and subsequent amendments did not nationalize foreign oil companies, which allowed IOCs such as ExxonMobil and Shell to retain majority ownership of their refining assets in Malaysia. At the same time, PETRONAS was also tasked with generating added value to the countrys oil & gas resources. To this end, the NOCs domestic marketing subsidiary, PETRONAS Dagangan (PDB) was incorporated in 1982 and commenced retail operations in the same year. This was followed by streaming of PETRONASs first refinery at Kertih in 1983. The downstream sector, inclusive of the petrochemicals industry, is a significant contributor to Malaysias economic activity. According to the government, the oil & gas industry accounted for 13.1% of the countrys Gross Domestic Product (GDP) in 2009 or RM 68.3 bn (US$ 19.3 bn), of which the downstream industrys share stood at RM 28.8 bn (US$ 8.2 bn). Since early 2009,
several grassroots refinery projects have been announced, riding on robust domestic demand, export opportunities as well as government incentives, although none of these proposals have made much progress as of now. On the other hand, the government, under the recently launched Economic Transformation Program (ETP), highlighted oil products logistics and storage segment as a growth area within the oil & gas sector. It is envisioned that Malaysia could emerge as a regional oil product storage hub, alongside Singapore as the city-state has limited land available for future investments. Local companies such as MISC, a subsidiary of PETRONAS and the Dialog Group have already embarked on developing product terminals, particularly in the southern state of Johor, in partnership with foreign operators including Vitol and Vopak.
Pricing
The retail prices of gasoline, diesel and LPG in Malaysia are controlled by the Ministry of Domestic Trade and Consumer Affairs via an Automatic Pricing Mechanism (APM). The APM was established to provide stable margins for oil companies and stable prices for consumers. It is comprised of fixed elements such as operating expenses, dealers commission and company profit, including variable costs. Thus when product costs rise the APM calculates how much of the increase should be subsidized by the government in order to comply with the fixed retail price. The government kept gasoline and diesel retail prices unchanged throughout 2009, incurring spending on fuel subsidies that amounted to RM 5.3 bn (US$ 1.5 bn). Of this, the direct subsidy on gasoline came to RM 3.4 bn (US$ 962 mn) while for diesel, the cost was RM 1.9 bn (US$ 538 mn). In a move to reduce subsidy spending, on 16 July 2010 the government increased the price of subsidized RON 95 gasoline from RM 1.80/liter (US$ 0.55/liter) to RM 1.85/liter (US$ 0.56/liter) and stopped subsidizing the premium RON 97 gasoline. The price of RON 97 is currently determined through a managed float according to the APM. On the same day, the price of retail diesel was hiked from RM 1.70/liter (US$ 0.52/liter) to RM 1.75/liter (US$ 0.53/liter) while the price of LPG increased to RM 1.85/kg (US$ 0.56/kg) from RM 1.75/kg (US$ 0.53/kg). The government does not regulate the price of HFO, jet fuel and non-retail diesel as well as the product prices for industrial uses.
Fuel specifications
Malaysia implemented the Euro 2M fuel standards for gasoline and diesel in September 2009, with the sulfur limit in both reduced to 500 ppm. At the same time, RON 92 was phased out and replaced with RON 95 as the standard unleaded gasoline. PETRONAS was the first retailer to introduce RON 95 gasoline by making the fuel available at two service stations in May 2009 and also became the first to market Euro 2M-compliant diesel in late August through their Dynamic Diesel product. According to MITIs Review of the National Automotive Policy in October 2009, the government has set the target of adopting Euro 4M specifications for gasoline and diesel by 2011 and has mandated the Ministry of Natural Resources and Environment to set up the roadmap, although no
additional details have been disclosed thus far. Reports indicate that under Euro 4M, the sulfur limit for both will be set at 50 ppm, while the benzene content in gasoline will be reduced from 5% of volume to 1%. Most recently, Shell announced that they will be installing a gasoil desulfurization unit at their 109 mb/d Port Dickson refinery although the completion date was not disclosed. Meanwhile, rollout of the mandatory B5 biodiesel (5% palm methyl ester) at service stations has been delayed to June 2011 from the earlier implementation date of January 2010. The biodiesel will be supplied initially to consumers in the central region of Peninsular Malaysia before being made available nationwide, although no timeframe has been set for the second stage. According to local press, the major retailers have each been allocated RM 1 mn (US$ 304,305) to support capital expenditure for upgrading their terminals and depots to handle B5 biodiesel, including at the Klang Valley Distribution Terminal jointly owned by PETRONAS, Shell, and ExxonMobil. Since February 2009, PETRONAS has supplied B5 biodiesel to government agencies located in the central region, namely the Ministry of Defence and the Kuala Lumpur City Hall (DBKL) amounting to 4,000 diesel-powered vehicles. The total volume of B5 biodiesel demand in 2009 amounted to 5.49 million liters.
Refining
Refinery Inputs
In 2009 Malaysias five active refineries had a total crude processing capacity of 546.3 mb/d and utilized a mix of domestic and imported crude and other feedstocks. Domestic crude continued to account for some 70% of overall processing in 2009 and remains the primary feedstock for PETRONASs Kertih and Melaka I refineries. The three other refineries, including PETRONASs JV Melaka II facility, rely on imported crudes in addition to domestic grades. The 128 mb/d Melaka II refinery, co-owned by PETRONAS and ConocoPhilips, processes primarily medium, high sulfur crudes imported from the Middle East although is set to process the first batch of Russias ESPO crude in June or July 2010. Shells 109 mb/d Port Dickson refinery processed primarily imported crudes from Asian, Australian and African sources which accounted for 56% of overall crude supply. Light domestic crude was the other significant source of feedstock at 38% of total crude processing in 2009.
'000 tonnes
Total Crude Processing
Crude Exports by Destination - 2009 South Korea 3.9% Thailand 12.3% Singapore 7.7%
30,000 25,000 20,000 15,000 10,000 5,000 0 2005 2006 2007 2008 2009E Total Crude Processed Of Which Local
Others 48.9%
Australia 13.9%
India 13.2%
'000 tonnes
Total Crude Production
Crude Imports & Exports

'000 tonnes
37,000 36,000 35,000 34,000 33,000 32,000 31,000 30,000 2005 2006 2007 2008 2009E
20,000 15,000 10,000 5,000 0

20 09 E 20 05 20 06 20 08 20 07
Imports
Exports
Crude/Feedstock Imports and Exports Malaysia

Change mt/y Imports Exports Net imports
Source: PFC Energy from national sources
2002 7,083 18,100 -11,017
2003 7,921 18,747 -10,826
2004 7,953 19,245 -11,292
2005 8,031 18,994 -10,963
2006 8,048 17,262 -9,214
2007 9,453 16,962 -7,509
2008 9,457 16,970 -7,513
2009 9,295 16,690 -7,395
09/08 -1.7% -1.7% n/a
Crude Balance Malaysia

Change mt/y Total supply Domestic Production Net imports Transfers/backflows Use Refinery input Stocks/statist. diff. ** 2002 23,821 34,838 -11,017 23,821 22,870 951 2003 26,200 37,026 -10,826 26,200 25,344 856 2004 26,749 38,041 -11,292 26,749 25,334 1,415 2005 25,164 36,127 -10,963 25,164 24,339 825 2006 25,172 34,386 -9,214 25,172 24,909 263 2007 26,458 33,967 -7,509 26,458 26,571 -113 2008 26,469 33,982 -7,513 26,469 26,776 -307 2009 25,299 32,694 -7,395 25,299 25,088 211 09/08 -4.4% -3.8% n/a n/a -4.4% -6.3% n/a
* Includes net imports of NGLs and other refinery input. Source: PFC Energy from national sources and others
** Includes direct uses of crude and NGLs.
Ports with Oil Terminals, Bunkering 2009

Port Ownership/Operator Berths 3 General Cargo Wharves 2 Container Terminals Bintulu 1 Dry Bulk Cargo Wharf, 3 LNG Jetties 1 Petroleum Jetty 1 LPG Jetty Kemaman Esso Production Malaysia Inc. (EPMI) Petronas Penapisan Sdn. Bhd. (PPSB) 11 berths + 1 LPG Export Terminal 2 crude terminals 1 berth 12 berths 15 berths Biawak Oil Jetty (2 berths) Kuching Petronas, Shell, Esso Senari Terminal (5 berths), Pending Terminal (5 berths) 2 wharves + 4 jetties Shell 1 jetty 2 berths 1 jetty Sarawak Shell Berhad 3 wharves 6 berths Lay-up facilities available for 20 VLCCsized vessels in the Johor River Anchorage. Container Terminal, Liquid Bulk Terminal (4 berths) handles oil products, chemicals and LPG, with supporting terminal tank farm (517,451 t). Vegetable Oil Jetties (4 berths) handle palm oil and soft oils, with supporting tank farm (462,500 t). Break Bulk Terminal, Dry Bulk Terminal, Multi-Purpose Terminal. 11 berths + 1 pier Shell Refining Co. Port Dickson 1 jetty with storage capacity: HFO (1000 t), diesel (1400 t), gasoline (700 t), kerosene (600 t). 1 jetty with storage capacity: white oil (33,000 t), black oil (43,000 t), crude (100,000 t) 1 SBM, crude discharging rate of 4,500 t/h 18,000 Ban Hoe Leong Marine Suppliers Sdn. Bhd., BP Malaysia Sdn. Bhd., Dickson Marine Company Sdn. Bhd., GEM Resources Sdn. Bhd., Petronas 150,000 6,000 25,000 10,000 125,000 Cheang Fong Marine & Supplies Max Vessel Dimensions (DWT) 25,000 55,000 65,000 30,000 51,000 150,000 250,000 85,000 16,000 40,000 NK Management & Supplies, Shell Timur Sdn. Bhd. Ban Hoe Leong Marine Suppliers Sdn. Bhd. Cheang Fong Marine & Supplies, Petronas KIC Oil and Gas, NK Management & Supplies, Shell Malaysia Ltd. Shell Malaysia Ltd. Terrathree Sdn. Bhd. (available at East Wharf and delivered by truck or wharf pipeline) Bunkering
Kertih
Kota Kinabalu Kuantan
Labuan Lahat Datu Malacca Miri
Pasir Gudang
104,000
Ban Hoe Leong Marine Suppliers Sdn. Bhd., Maska Dagang Sdn. Bhd.
Penang
Sin Soon Hock Sdn. Bhd.
Esso Standard Malaysia Shell Refining Co. / Esso Standard Malaysia
19,500 100,000
Source: PFC Energy from Lloyds
Ports with Oil Terminals, Bunkering 2009

Port Ownership/Operator Berths Max Vessel Dimensions (DWT)
Continued
Bunkering
Northport (Malaysia) Bhd.
Port Klang
Northport & Southpoint: Container Terminal (12 berths), Break Bulk Terminal (8 berths), Dry Bulk (3 berths), Liquid Bulk (4 berths handling chemicals, oil products and crude) 9 Container Berths, Liquid Bulk Terminal (4 main jetties + 1 bunkering jetty), Dry Bulk Terminal (4 berths + 1 cement jetty), Break Bulk Terminal (5 berths). 1 Oil Tanker berth + 3 berths + 1 jetty + 1 sub jetty 6,000
Ban Hoe Leong Marine Suppliers Sdn. Bhd., BP Malaysia Sdn. Bhd., GEM Resources Sdn. Bhd., Petronas, R.T. Technologies
Westports Malaysia Sdn. Bhd.
1.3 million barrel bunker storage facility in Westport
Pulau Langkawi
Sandakan
1 oil jetty + 5 berths 1 oil terminal + 1 new container terminal under construction (2 berths) 1 wharf 7 berths
30,000
NK Management & Supplies, Shell Malaysia Ltd., Thien Sheng Packing and Forwarding Sdn. Bhd.
Sapangar Bay Terminal
30,000 Huo Heng Oil, Cheang Fong Marine & Supplies, Shell Malaysia Ltd. Ban Hoe Leong Marine Suppliers Sdn. Bhd.,BP Malaysia Sdn. Bhd., GEM Resources Sdn. Bhd., Petronas
Sibu
8,000 120,000 5,000 300,000
Sungai Udang
1 Bulk Cargo Jetty 1 SBM L-shaped twin berth (outer and inner berths) handling petrochemicals/liquid bulk 8 berths + reclamation of additional 6 berths in Phase 2 (construction will be in stages) Tanjong Batu Oil Jetty 6 berths
Tanjung Langsat
30,000
Tanjung Pelepas
BP Malaysia Sdn. Bhd., ExxonMobil Marine Fuels, GEM Resources Sdn. Bhd., Maska Dagang Sdn. Bhd. 30,000 16,000 Dieseline can be obtained from the oil jetty via pipelines
Tawau
Source: PFC Energy from Lloyds
Malaysia Refining Infrastructure
Refinery Capacity & Indicators

Malaysia had a total crude processing capacity of 546.3 mb/d as of end-2009, unchanged year-on-year, with refining capacity roughly balanced with demand. However, an additional capacity of 47 mb/d is slated to come online in 2010 following the scheduled completion of the debottlenecking exercise at the 128 mb/d Melaka II refinery, bringing total capacity to 175 mb/d. The streaming of the additional capacity is expected to reduce the persistent deficit of gasoline which has required imports from Singapore, and could potentially allow for additional exports. Future investments will likely be focused on fuel quality upgrades with the Malaysian government backing the implentation of Euro IV specifications for motor fuels in 2011. While capacity expansion at existing facilities seems limited, a number of grassroots refinery projects are being planned by private sector entities. The announced investments appear to be driven by the prospects of continued strong domestic demand growth and integrated export opportunities, as many of the potential investors have existing foreign distribution networks for refined products. In addition to growing market demand, new investments are supported by the countrys strategic geographic position as well as government incentives to promote domestic regional development. One of the first two grassroots projects is the 350 mb/d Merapoh refinery in the northern state of Kedah, spearheaded by privately-owned Merapoh Resources Corporation which claims to have secured agreements for financing, crude supply and product offtake with the likes of Saudi Aramco and CNPC. However, progress on what would be Malaysias biggest refinery appears to have stalled with no recent indication that the project is still going forward. The second grassroots refinery is being proposed by Gulf Petroleum in the Port Dickson area, adjacent to Shell and ExxonMobils facilities, and will be part of an integrated refining complex with crude distillation capacity ranging between 100 mb/d to 150 mb/d. The company had originally planned to locate the integrated complex in the northern state of Perak but the change in site location appears to indicate that Gulf Petroleum is determined to back a facility in Malaysia. However, as with the Merapoh refinery there has been little visible progress on the project.
mb/d
Capacity and Utilization Rate

100% 98% 96% 94% 92% 90% 88%
600 550 500 450 400 350 300
20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 E
Crude distillation capacity Utilization rate
2009 Refining Capacities Malaysia

Conversion capacities Crude distilllation capacity Name/Location - Company National Total Kertih - Petronas Melaka II - Petronas Melaka I - Petronas Port Dickson - Esso Malaysia Port Dickson - Shell Refining Co B h d Source: PFC Energy Petronas 100.00% ConocoPhillips 47.00%, Petronas 53.00% Petronas 100.00% ExxonMobil 65.00%, Others 35.00% Others 49.00%, Shell 51.00% * Excludes Lubricants Hydrocracking Ownership (mb/d) 546.3 123.3 128.0 100.0 86.0 109.0 Vacuum distillation (mb/d) 76.0 68.0 8.0 FCC (mb/d) 39.0 39.0 HCK* (mb/d) Resid HCK (mb/d) 36.0 36.0 VB (mb/d) TCK (mb/d) Coking (mb/d) 24.0 24.0 -
2009 Refining Capacities Malaysia

Polymerizati Isomerizatio Oxygenate on n (mb/d) (mb/d) 10.8 10.8 (mb/d) -
Reforming Name/Location - Company National Total Kertih - Petronas Melaka II - Petronas Melaka I - Petronas Port Dickson - Esso Malaysia Berhard Port Dickson - Shell Refining Co Berhad Source: PFC Energy (mb/d) 86.4 27.5 23.5 19.5 15.9
MD Desulf (mb/d) 98.5 58.5 19.0 11.0 10.0
Alkylation (mb/d) -
Lubes (mb/d) -
Asphalt (mb/d) 8.2 4.0 4.2
2009 Refining Complexity Indicators Malaysia

Nelson Complexity Total Name/Location - Company National Total Kertih - Petronas Melaka II - Petronas Melaka I - Petronas Port Dickson - Esso Malaysia Berhard Port Dickson - Shell Refining Co Berhad Source: PFC Energy (index) 4.6 1.0 9.6 3.2 3.3 4.9 Conversion Capacities Gasoline Production Gasoil Conversion Thermal FCC/HCK as Reforming APIM as % desulf as % Conversion ratio, in FCC Process as of CDU % of CDU as % of CDU of CDU equivalent % of CDU (index) 2.5 1.0 5.3 1.0 1.0 3.4 (%) 28.4% 90.9% 35.8% (%) 7.1% 35.8% (%) 4.4% 18.8% (%) 15.8% 21.5% 23.5% 22.7% 14.6% (%) 2.0% 8.4% (%) 18.0% 45.7% 19.0% 12.8% 9.2%
Product Supply & Demand

Product Supply
Net refining production in Malaysia decreased 5.9% year-on-year in 2009, the first decline in refining output since 2005. Domestic production fell in tandem with lower crude intake, which decreased by 6% over the same period. The primary driver for lower product yields was plant shutdowns to facilitate debottlenecking throughout 2009, particularly at PETRONASs Melaka refining complex. Declines in production were most evident in naphtha and kerosene production which decreased by 15.3% and 13.6% respectively. The only exception to the decline was gasoil, which is also the single biggest component of the countrys refining output, recording a production increase of 1.9% in 2009. Despite Malaysia being a net gasoil importer and with demand down by 1.1 the country had a 1.2% increase in gasoil export volumes over 2008 accounting for much of the increased production volumes. Despite lower refining output in 2009, Malaysia remains a net product exporter although the country runs a persistent deficit in gasoline and gasoil. The dependence on light and middle distillate imports could narrow in the near term following the reported installation of a hydrocracking unit at PETRONASs JV Melaka II refinery in 3Q10 which also expanded the plants crude distillation capacity. The NOCs plan to expand their other Melaka facility together with a number of grassroots private sector-led projects in the pipeline could also bring in additional supply to the domestic market as well as increase future export volumes.
mt/y
Oil Products Production
Oil Products Production - 2009

LPG 4.4% Gasoline 18.5%
30,000 25,000 20,000 15,000 10,000 5,000 0 2002

LPG
Kerosene/ Jet f uel 11.7%
Other products 19.4% Gasoil 38.3%
2003
2004
2005
2006
Gasoil
2007
HFO
2008
2009
HFO 7.8%
Gasoline
Kerosene/Jet fuel
Other products
Refining Processing & Production Malaysia

Change mt/y Refinery intake of which crude Net production * LPG Naphtha Kerosene Gasoline Gasoil HFO Other products Product yield (% wgt) ** LPG Naphtha Kerosene Gasoline Gasoil HFO Other products Refinery losses/fuel 3.92% 4.34% 13.05% 19.50% 36.73% 10.20% 6.25% 6.01% 3.68% 4.89% 13.22% 18.09% 35.76% 6.96% 6.49% 10.92% 3.54% 4.53% 12.96% 18.65% 37.94% 7.16% 6.01% 9.22% 3.38% 4.17% 12.63% 17.44% 37.64% 7.30% 5.52% 11.92% 4.49% 6.21% 13.95% 18.50% 35.14% 7.76% 8.24% 5.72% 4.62% 7.12% 12.69% 19.89% 34.00% 7.49% 9.44% 4.76% 4.51% 8.78% 12.64% 18.92% 34.97% 7.45% 11.64% 1.10% 4.34% 7.94% 11.65% 18.33% 38.03% 7.72% 11.30% 0.69% -0.17% -0.84% -0.99% -0.59% 3.06% 0.27% -0.34% -0.41% 2002 22,870 14,838 21,495 897 993 2,984 4,460 8,401 2,332 1,428 2003 25,344 17,127 22,576 932 1,241 3,350 4,584 9,062 1,763 1,644 2004 25,334 16,810 22,999 897 1,148 3,284 4,724 9,611 1,813 1,522 2005 24,339 18,216 21,438 822 1,014 3,074 4,245 9,161 1,777 1,345 2006 24,909 16,797 23,484 1,118 1,548 3,475 4,607 8,752 1,933 2,051 2007 26,571 17,320 25,307 1,228 1,892 3,372 5,285 9,033 1,990 2,507 2008 26,776 18,638 26,482 1,208 2,350 3,384 5,066 9,364 1,994 3,116 2009 25,088 17,520 24,916 1,088 1,992 2,924 4,599 9,541 1,936 2,835 09/08 -6.3% -6.0% -5.9% -9.9% -15.3% -13.6% -9.2% 1.9% -2.9% -9.0%
* Excluding refinery fuels & losses. **Based on total production, including refinery fuels & losses. Source: PFC Energy from IEA and local sources
Product Demand
Malaysias oil product demand decreased 0.2% year-on-year in 2009, marking a second consecutive year of declining consumption. Demand was impacted by the economic downturn, as the exportoriented domestic economy shrank by 3.6% over the same period. Declining industrial and manufacturing activity was the main driver in decreasing gasoil and HFO consumption, which decreased by 1.1% and 0.7% year-on-year respectively. Gasoil remains the single largest component of the countrys oil product demand, accounting for 37.2% of overall consumption in 2009 and consumption could increase in the near term on the back of the improving economy in the first three quarters of 2010. Meanwhile, gasoline consumption remained strong in 2009, increasing by 1.4% year-on-year, supported by stable pump prices and strong passenger car sales, with new registrations breaching the half-amillion mark for the second year in a row. The demand outlook for gasoline is likely to stay strong on resilient private consumption, although fuel sales could be crimped by gradual withdrawal of subsidies by the government. The price of standard RON 95 gasoline increased in mid-July 2010, together with the ceasing of subsidies for premium RON 97 grade gasoline, with prices now determined through a managed float according to the Automatic Pricing Mechanism (APM).
mt/y
Demand Breakdown by Product
Demand Breakdown - 2009

LPG 5.9% Gasoline 36.8%
30,000 25,000 20,000 15,000 10,000 5,000 0 2002

LPG
Other products 3.7% HFO 8.0%
Jet Fuel 8.5% Gasoil 37.2%
2003
2004
2005
2006
Gasoil
2007
HFO
2008
2009
Gasoline
Jet Fuel
Other products
Oil Product Demand Malaysia

Change mt/y LPG Gasoline Leaded Unleaded Naphtha/petchem feedstocks Jet fuel Other kerosene Gasoil Diesel Other gasoil (1) HFO Lubricants Bitumen Other products Total demand Int'l marine bunkers All products Gasoline Diesel
Source: PFC Energy from national sources
Structure 2009 5.9% 36.8% 36.8% 1.6% 8.5% 0.3% 37.2% 21.4% 15.7% 8.0% 1.0% 0.6% 0.3% 100.0%
2002 1,542 6,948 6,948 280 1,785 92 8,689 4,680 4,009 2,953 212 83 64 22,648 90 943.27 289.38 194.92
2003 1,437 7,360 7,360 282 1,852 93 9,050 5,019 4,031 1,545 217 89 51 21,976 73 877.29 293.81 200.36
2004 1,542 7,839 7,839 270 2,056 86 9,657 5,439 4,218 1,737 224 92 51 23,554 88 920.80 306.45 212.63
2005 1,510 8,211 8,211 197 2,010 81 8,672 5,076 3,596 1,953 231 96 51 23,011 84 880.64 314.24 194.26
2006 1,520 7,517 7,517 288 2,152 79 8,541 5,046 3,495 1,901 235 106 55 22,394 90 840.62 282.17 189.41
2007 1,474 8,600 8,600 398 2,155 76 9,512 4,859 4,653 2,202 238 129 67 24,851 70 914.65 316.53 178.84
2008 1,475 8,842 8,842 387 2,112 75 9,167 5,283 3,884 1,963 239 127 65 24,452 66 881.79 318.86 190.52
2009 1,427 8,966 8,966 393 2,077 66 9,067 5,225 3,841 1,948 241 136 70 24,392 83 861.60 316.70 184.57
09/08 -3.3% 1.4% n/a 1.4% 1.7% -1.7% -11.8% -1.1% -1.1% -1.1% -0.7% 1.0% 7.3% 7.0% -0.2% 25.8% -2.3% -0.7% -3.1%
Consumption (Thousand tons per year per 1,000 capita)
GDP vs. Oil Product Demand

12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 2002 2003 2004 2005 2006 2007 2008 2009
Total demand Total retail fuels GDP (US$ billions)
Retail Fuels Demand Growth

250 200 150 100 50 0 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% 2002 2003 2004 2005 2006 2007 2008 2009
Gasoline
Diesel
Vehicle Fleet Information Malaysia

Change 2002 Vehicles in circulation (1,000) Passenger cars Diesel cars Gasoline cars Light and heavy trucks Buses Motorcycles Other Key indicators Passenger cars per 100 inhabitants New passenger car registrations (1,000) of which diesel cars Diesel cars as % of passenger car fleet Replacement rate in years *
* Total passenger cars divided by new registrations Source: PFC Energy from National sources
2003 12,819 5,500 660 4,840 740 53 6,165 361 21.95 301 n/a 12.0% 18.27
2004 13,765 5,987 718 5,269 772 55 6,572 378 23.41 338 n/a 12.0% 17.70
2005 14,816 6,552 786 5,766 805 57 7,008 393 25.08 366 n/a 12.0% 17.91
2006 15,791 7,024 843 6,181 837 60 7,458 412 26.37 382 n/a 12.0% 18.41
2007 16,814 7,504 901 6,604 871 62 7,943 433 27.62 474 n/a 12.0% 15.82
2008 17,972 8,057 967 7,090 909 64 8,487 454 29.06 535 n/a 12.0% 15.05
2009 19,017 8,602 1,032 7,570 936 67 8,940 472 30.38 520 n/a 12.0% 16.54
09/08 5.8% 6.8% 6.8% 6.8% 3.0% 4.0% 5.3% 3.9% 4.6% -2.8% n/a n/a 9.9%
12,022 5,069 608 4,461 713 51 5,843 346 21.11 320 n/a 12.0% 15.83
LPG Demand
12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 2002 2003 2004 2005 2006 2007 2008 2009 20% 15% 10% 5% 0% -5% -10% 2002 2003
Gasoline Demand
2004
2005
2006
2007
2008
2009
Jet Fuel Demand

12% 10% 8% 6% 4% 2% 0% -2% -4% 2002 2003 2004 2005 2006 2007 2008 2009 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 2002 2003
Diesel Demand
2004
2005
2006
2007
2008
2009
Other Gasoil Demand

40% 30% 20% 10% 0% -10% -20% 2002 2003 2004 2005 2006 2007 2008 2009 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% 2002 2003
HFO Demand
2004
2005
2006
2007
2008
2009
Product Supply/Demand Balance

Malaysia, a net product exporter, experienced a 6.6% year-on-year increase in volumes in 2009 spurred by robust increases in HFO and LPG volumes on weakening domestic consumption. Gasoil exports also improved slightly, growing by 1.2% although the country is a net importer of gasoil. This deficit could narrow in the near term on increased supply of middle distillates due to the installation of additional conversion units as well as the planned expansion of domestic refining capacity. Meanwhile, total oil product import volumes decreased slightly by 1.8% year-on-year in 2009, primarily on the incremental reduction in gasoline imports. Gasoline is the single largest imported product based on volume, accounting for 42.2% of overall product imports, but import volumes declined by 1.9% on lukewarm demand growth which increased by 1.4% in 2009. Stagnant consumption has narrowed Malaysias gasoline supply deficit, although total import volumes still amounted to more than 3.6 million tons in 2009. Gasoil imports plunged sharply, falling by 26% year-on-year in 2009 due to shrinking domestic demand coupled with higher production.
mt/y
Oil Products Net Imports
Oil Products Imports - 2009

Gasoline 42.2%
6,000 4,000 2,000 0 -2,000 -4,000 -6,000 -8,000 2002

LPG
LPG 3.8% Other products 8.5%
Kerosene /Jet f uel 3.5% HFO 24.3% Gasoil 17.8%
2003
2004
2005
2006
Gasoil
2007
HFO
2008
2009
Gasoline
Kerosene/Jet fuel
Other products
Oil Product Imports and Exports Malaysia

Change mt/y Total product imports LPG Gasoline Jet fuel Gasoil HFO Other Total product exports LPG Gasoline Jet fuel Gasoil HFO Other 2002 7,220 329 2,514 128 1,457 2,326 466 8,158 1,345 13 1,491 1,439 1,627 2,243 2003 7,116 664 2,521 95 1,530 1,604 702 9,012 762 44 1,554 1,995 1,728 2,929 2004 8,980 280 3,517 49 1,868 2,399 867 8,912 257 531 1,133 1,850 2,531 2,610 2005 7,961 479 3,778 235 1,296 1,742 431 8,435 1,786 83 1,389 1,718 1,216 2,243 2006 7,734 308 3,331 246 1,274 2,227 348 9,535 1,591 371 1,420 1,163 2,198 2,792 2007 8,452 320 3,821 250 1,457 1,923 681 9,780 2,085 376 1,377 873 1,341 3,728 2008 8,725 302 3,680 277 2,055 1,703 708 10,120 1,966 362 1,496 1,231 1,188 3,877 2009 8,565 329 3,611 296 1,521 2,078 730 10,790 2,141 355 1,605 1,246 1,449 3,994 09/08 -1.8% 8.9% -1.9% 6.9% -26.0% 22.0% 3.1% 6.6% 8.9% -1.9% 7.3% 1.2% 22.0% 3.0% Structure 2009 100.0% 3.8% 42.2% 3.5% 17.8% 24.3% 8.5% 100.0% 19.8% 3.3% 14.9% 11.5% 13.4% 37.0%
Source: PFC Energy from IEA and national sources
Oil Product Balance Malaysia

Change mt/y Total supply Refinery gross prod. Net imports LPG Gasoline Jet fuel Gasoil HFO Other Use Inland market Int'l marine bunkers Refinery fuels Transfers/backflows Stocks/statist. diff.
Source: PFC Energy from IEA and national sources
2002 21,863 22,801 -938 -1,016 2,501 -1,363 18 699 -1,777 21,863 22,648 90 1,375 -2,250
2003 23,372 25,268 -1,896 -98 2,477 -1,459 -465 -124 -2,227 23,372 21,976 73 2,768 -1,445
2004 25,326 25,258 68 23 2,986 -1,084 18 -132 -1,743 25,326 23,159 88 2,335 -256
2005 23,792 24,266 -474 -1,307 3,695 -1,154 -422 526 -1,812 23,792 23,011 84 2,901 -2,204
2006 23,033 24,834 -1,801 -1,283 2,960 -1,174 111 29 -2,444 23,033 22,394 90 1,425 -876
2007 25,163 26,491 -1,328 -1,765 3,445 -1,127 584 582 -3,047 25,163 24,851 70 1,264 -1,022
2008 25,301 26,696 -1,395 -1,664 3,318 -1,219 824 515 -3,169 25,301 24,452 66 294 489
2009 22,787 25,013 -2,226 -1,812 3,256 -1,309 274 629 -3,264 22,787 24,392 83 172 -1,860
09/08 -9.9% -6.3% n/a n/a -1.9% n/a -66.7% 22.1% n/a -9.9% -0.2% 25.8% -41.4% n/a n/a
Product Distribution
A majority of oil products are transported within Malaysia via road and coastal tankers, as pipeline infrastructure remains limited with only one multi-product pipeline in operation. The 130 km long pipeline transports gasoline, diesel, and jet fuel from PETRONASs Melaka refining complex and the two refineries in Port Dickson operated by Shell and ExxonMobil respectively, and terminates at the Klang Valley Distribution Terminal, located south of the capital Kuala Lumpur. There is also a spur to the Kuala Lumpur International Airport for moving jet fuel. Both the multi-product pipeline and KVDT are jointly owned by PETRONASs domestic arm, PETRONAS Dagangan (40%), Shell (40%), and ExxonMobil (20%). The two biggest retailers in terms of volume, PETRONAS Dagangan (PDB) and Shell operate the majority of product terminals and depots in the country. Both companies have made additional investments to upgrade and improve their distribution capacities to meet increasing product demand. For instance, in August 2010 Shell announced that they have struck an agreement with Westports for the sublease of a 25 acre terminal at Port Klang. With a tenure of 14 years, the company will initially store gasoline and diesel at this facility. Meanwhile, PDB controls a network of 16 terminals and depots, inclusive of their joint ownership of KVDT, with the most recent addition being the Lumut terminal which was commissioned in January 2009 to supply products to the central and northern regions of Peninsular Malaysia. Furthermore, in April 2009 the company completed the expansion of both the Kuantan and Pasir Gudang terminals in order to augment distribution capacities in the southern and eastern regions of the peninsular. PDB and Shell also each have a 20% stake in ASSAR Chemical Dua, a JV company that is developing the Central Oil Distribution Terminal in the east Malaysian state of Sarawak. PDB will be the operator of this facility with a total storage capacity of 420,000 cu.m, set to be completed by October 2010. Non-retail players have also been active in Malaysias oil products logistics and storage segment, particularly in the southern state of Johor in partnership with foreign operators, taking advantage of the limited availability of land in Singapore which remains the regional oil product trading and storage hub. The government has recognized Malaysias potential in this sector, identifying storage and trading as a growth area for oil & gas under the newly launched Economic Transformation Program (ETP). The most recent capacity addition in Johor came in April 2010 as both Phase 1 and 2 of the Langsat Terminal (One) facility were streamed with a combined capacity of 400,000 cu.m, primarily storing naphtha, middle distillates and HFO. The terminal is a JV with 80% of the company held by Centralised Terminals while PUMA, a wholly-owned subsidiary of Trafigura, owns the remaining 20%. Reports indicate that Trafigura has already leased the entire capacity of the terminal for a period of seven years. MISC, a subsidiary of PETRONAS, has an indirect interest in Langsat Terminal (One) as the company owns 45% of Centralised Terminals while 55% is controlled by local company, Dialog. MISC has stepped up their participation in oil product logistics by acquiring 50% of Vitol Tank Terminals International (VTTI) for US$ 839 mn, a transaction completed in September 2010. Within Malaysia, this gives MISC direct interest in the terminal at Tanjung Bin, Johor being developed by VTTIs subsidiary, ATT Tanjung Bin (ATB). With a capacity of 841,000 cu.m, this facility is set to begin operations in 2012. Another significant storage investment is being undertaken by local company, KIC Oil & Gas through their Asia Petroleum Hub project. The company is developing a terminal with a capacity of 1 million cu.m located on a reclaimed island off Tanjung Bin in Johor. Construction work began in July 2007 and the project was set for completion in 2009 but this has been delayed until August 2011 due to additional work needed to stabilize the site. It was reported that stabilization activities has increased the cost of the project to RM 2 bn (US$ 608 mn) from the initial estimate of RM 1.7 bn (US$ 517 mn). The biggest planned facility to date is the Pengerang Terminal in Johor with a storage capacity of 5 million cu.m including crude, oil products and petrochemicals. Set to be the first deepwater terminal in Southeast Asia, this project will be developed by a special purpose vehicle (SPV) with 90% controlled by a JV between DIALOG and Vopak while the Johor state government will hold the remaining 10%.
According to DIALOG, in October 2010 the company was given exclusive rights by the Johor state government to undertake the venture at Pengerang. The project remains at an early stage as the detailed feasibility study and environmental impact assessment is still being conducted.
Malaysia Gasoline Flow Diagram - thousand barrels per day

Gasoline Domestic Sales 208.8 mb/d Gasoline Production 107.6 mb/d
Gasoline Retail Sales 203.98 mb/d
Gasoline Total Supply 220.13 mb/d Gasoline Imports 115.24 mb/d
Gasoline Wholesale Sales 4.82 mb/d
Gasoline Stock Adjustment + 2.71 mb/d
Gasoline Exports 11.33 mb/d
Malaysia Gasoil Total Flow Diagram - thousand barrels per day
Gasoil Total Domestic Sales 184.9 mb/d Gasoil Total Production 194.58 mb/d Gasoil Total Total Supply 224.67 mb/d Gasoil Total Imports 48.52 mb/d
Diesel Retail Sales 106.56 mb/d Gasoil Total Wholesale Sales 78.34 mb/d
Gasoil Total Stock Adjustment + 18.43 mb/d
Gasoil Total Exports 39.77 mb/d
Malaysia Logistical Infrastructure
Marketing
Network & Indicators
The combination of expanding vehicle fleet, and stable retail margins for motor fuels under Malaysias regulated Automatic Pricing Mechanism (APM) mean that retail network expansion continues to be on the upward trend, in line with the slight increase in motor fuels demand in 2009. The overall network reached 3,139 service stations as of end-2009, up 2.9% year-on-year compared to 3,051 sites in 2008. Retail growth is also supported by the aggressive network expansion strategy pursued by PETRONAS Dagangan, the domestic marketing arm of Malaysias NOC, PETRONAS as they seek to augment market leadership in the all-products segment by becoming the leading fuel retailer by sales volumes. Although PETRONAS Dagangan (PDB) continues to trail Shell in motor fuels market share in 2009, the company has moved ahead of the IOC for the first time in terms of network size. The outlook for the retail segment remains positive, as fuel retailers are likely to intensify network expansion buoyed by the prospect of economic growth and vehicle fleet expansion. In addition, PDB is not showing any signs of slowing down as the company has increased capital expenditure in their FY2011 period (1 April 2010 to 31 March 2011) to RM500 mn (US$ 152 mn), compared to RM 371 mn (US$ 106.8 mn) in FY2010, with the bulk of the investments allocated for retail expansion. This is likely to spur other players to augment their respective retail segments in order to keep pace with PDB, albeit at lower levels compared to the companys aim of developing 30 new sites annually. Although Shell, still the leading motor fuels retailer with 36.5% market share, has not announced any major retail investment plans, the company is making incremental additions especially in East Malaysia which remains relatively untapped compared to Peninsular Malaysia. Meanwhile the smallest retailer BHPetrol is planning to open between 15-20 service stations per year until 2013-2014 as the company aims to have a network of 400 retail outlets by then, compared to 325 sites as of end-2009. The ambition of ExxonMobil is more modest, as the IOC is only looking to add between five to ten new outlets per year with the company concentrating on their rebranding program.
Retail Network & Throughputs

3,200 3,100 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300
m cu.m/y/site
m cu.m/y
Motor Fuel Retail Sales
5.40 5.30 5.20 5.10 5.00 4.90 4.80 4.70 4.60 4.50 4.40 4.30 2002 2003 2004 2005 2006 2007 2008 2009
Service Stations Average Annual Throughput
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2002 2003 2004 2005 2006 2007 2008 2009
Retail Diesel Sales Retail Gasoline Sales
Retail Indicators Malaysia

Change m cu.m/y Total number of service stations Service stations per 1,000 vehicles Service stations per 1,000 sq. km Motor fuel retail sales (m cu.m/y) Gasoline as % of total gasoline demand Diesel as % of total diesel demand Average annual throughputs per site (m cu.m/y) Gasoline only Diesel only Gasoline & diesel Source: PFC Energy 3.71 1.31 5.03 3.86 1.39 5.25 3.94 1.26 5.20 3.47 1.22 4.69 3.90 1.00 4.90 3.89 1.19 5.08 3.84 1.14 4.98 -1.4% -3.9% -2.0% 2003 2,677 0.21 8.12 13,453 9,935 99.9% 3,518 58.8% 2004 2,740 0.20 8.31 14,388 10,579 99.9% 3,808 58.7% 2005 2,811 0.19 8.53 14,615 11,073 99.8% 3,543 58.5% 2006 2,919 0.18 8.85 13,689 10,134 99.8% 3,555 59.1% 2007 2,961 0.18 8.98 14,513 11,553 99.4% 2,960 51.1% 2008 3,051 0.17 9.25 15,506 11,876 99.4% 3,630 57.6% 2009 3,139 0.17 9.52 15,633 12,042 99.4% 3,591 57.6% 09/08 2.9% -2.8% 2.9% 0.8% 1.4% 0.0% -1.1% 0.0%
Competitive Environment
Malaysias fuel retail market is dominated by two main players, Shell and PETRONAS Dagangan (PDB) with a combined network and motor fuels market share of 58.3% and 71.5% respectively in 2009. Two other IOCs, ExxonMobil and Chevron also have a significant retail presence although ExxonMobil had undertaken rationalization of their assets, specifically from 2004 to 2007. Since then, the IOCs have embarked on limited network expansion as well as adjustments to their branding and non-fuel strategies. The smallest retailer, Boustead Petroleum (BHPetrol) is looking to make further gains in the domestic retail market by investing in network expansion, although the company still remains concentrated in Peninsular Malaysia. While retail growth is a key feature in all of the oil companies strategies, non-fuel services are also equally vital and continue to attract investments. This is particularly relevant considering pricing constraints embedded within the Automatic Pricing Mechanism (APM), although this does provide stable margins for fuel retailers. At the same time, non-fuel offerings will provide a platform for higher site returns if and when motor fuels pricing is fully deregulated in Malaysia. The government had stopped subsidizing RON 97 gasoline in mid-July 2010 as a measure to cut spending on fuel subsidies, with the price of the premium grade now determined through a managed float based on the APM. PDB, which overtook Shell as the biggest retailer in 2009, is also recording improvements in their nonfuel business alongside investing in network expansion. The company reported that the average daily revenue from their Mesra branded c-stores has increased by 10.9% on a CAGR basis over the last five years, bolstered by what is likely the highest coverage of c-stores in the industry at 65%. The c-store segment is also a key element in Chevrons strategy to gain market share as the IOC has widened their portfolio of brands, adding Xpress Point to the existing range of Star Mart and Mart brands at Caltex service stations. Developed by one of their local branded marketers, the introduction of Xpress Point is meant to provide Chevrons dealers with more choice in terms of adopting the appropriate c-store offering for their sites. On the other hand, ExxonMobil is replacing their Tiger Mart and Mobil Mart branded c-stores with On the Run. This rebranding is taking place in tandem with the companys decision to streamline their Malaysian retail operations under the Esso brand. This involves renaming all existing Mobil sites, a process that began in April 2008 in the southern state of Johor and has been extended to the Klang Valley in 2009. The company plans to complete this process by 2012.
Retail Networks and Throughputs by Company Malaysia
Number of service stations as of 31 Dec Shell Petronas ExxonMobil Boustead Petroleum Chevron Source: PFC Energy 2007 874 832 570 285 400 n/a 2008 904 892 530 305 420 n/a 2009 910 919 560 325 425 n/a Change 09/08 0.7% 3.0% 5.7% 6.6% 1.2% n/a % of total network 29.0% 29.3% 17.8% 10.4% 13.5% average t'puts 6.27 5.96 3.38 4.01 2.96 0.00 as % of nat'l avg 125.8% 119.6% 67.9% 80.6% 59.4% Site Effectiveness 1.26 1.20 0.68 0.81 0.59 0.00
Average Annual T'put per Site for Top 4 - 2009

m cu.m/y/site
7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
Network Breakdown for Top 4 - 2009

Shell 29.0%
Motor Fuels Market Share for Top 4 - 2009

Shell 36.5%
Other 13.5%
Other 8.0% Petronas 29.3% Boustead Petroleum 8.3% ExxonMobil 12.1% Petronas 35.0%
Boustead Petroleum 10.4%
ExxonMobil 17.8%
Gasoline Market Share for Top 4 - 2009

Shell 37.0%
Diesel Market Share for Top 4 - 2009

Shell 34.9%
Other 7.8% Boustead Petroleum 8.0% ExxonMobil 12.4% Petronas 34.8%
Other 8.9% Boustead Petroleum 9.7% ExxonMobil 11.0%
Petronas 35.6%
Detailed by company coverage is now provided in a supplementary DMS-A publication, Major Retail Operators
Prices & Margins

Retail gasoline and diesel pump prices were unchanged throughout 2009, following a series of price adjustments in the previous year which saw two price hikes in mid-2008 on rising crude prices. However, the government began reducing controlled prices in August 2008 as crude prices retreated. Meanwhile, RON 92 gasoline was phased out in September 2009 and replaced by RON 95 as the standard unleaded gasoline which was set at RM 1.80/liter (US$ 0.51/liter). In a move to reduce spending on fuel subsidies, in mid-July 2010 the government increased RON 95 gasoline price to RM 1.85/liter (US$ 0.56/liter). In addition, the retail price of diesel was also hiked to RM 1.75/liter (US$ 0.53/liter) from RM 1.70/liter (US$ 0.52/liter). Furthermore the government stopped subsidizing the premium RON 97 gasoline with the price now determined through a managed float according to the Automatic Pricing Mechanism (APM).
Regular Gasoline Malaysia

RM per liter
2005 1.45 0.12 0.05 1.53
2006 1.67 0.20 0.00 1.87
2007 1.77 0.15 0.00 1.92
2008 2.11 0.15 0.05 2.21
2009 1.50 0.30 0.00 1.80
Ex-refinery price Gross distribution margin Subsidy Full-tax price

in %
Ex-refinery price Gross distribution margin Tax
95.1% 8.1% -3.2%
89.4% 10.6% 0.0%
92.2% 7.8% 0.0%
95.4% 7.0% -2.4%
83.3% 16.5% 0.2%
Source: PFC Energy's Global Retail Service
Automotive Diesel Malaysia

RM per liter
2005 1.61 0.06 0.58 1.09
2006 1.84 0.07 0.37 1.53
2007 1.95 0.07 0.44 1.58
2008 2.53 0.08 0.60 2.01
2009 1.61 0.09 0.00 1.70
Ex-refinery price Gross distribution margin Subsidy Full-tax price

in %
Ex-refinery price Gross distribution margin Tax
147.5% 5.3% -52.8%
120.1% 4.3% -24.4%
123.6% 4.3% -27.9%
125.6% 4.0% -29.6%
94.5% 5.4% 0.1%
Source: PFC Energy's Global Retail Service
Regular Gasoline
2009 2008 2007 2006 2005 -0.2
RM/liter
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0 Subsidy
2.2
2.4
Ex-refinery price
Gross distribution margin
Automotive Diesel
2009
2008
2007
2006
2005 (1.0)
RM/liter
(0.5)
0.0 Ex-refinery price
0.5
1.0
1.5
2.0
2.5 Subsidy
3.0
Gross distribution margin
Detailed monthly data on prices and margins for this market is now available as part of PFC Energys Global Retail Service (GRS). This service provides ongoing comparative analysis of the price deregulation process, as well as up-to-date monitoring of end-consumer prices and distribution margins. The GRS also analyzes the full fuel retail value chain, portraying the margin situation (fuel, non-oil), costs, capital expenditure, and profitability. For further information, please refer to the client site of the Global Retail Service or contact erigolet@pfcenergy.com
Annex
Market Context
Real GDP Growth & GDP per Capita
8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 2002 2003 2004 2005 2006 2007 2008 2009 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 4% 4% 3% 3% 2% 2% 1% 1% 0% 2002 2003 2004 2005 2006 2007 2008 2009
Unemployment rate (left-hand axis) Consumer inflation (right-hand axis)
Unemployment & Inflation

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Real GDP growth
GDP per capita (US$)
Key Economic Indicators Malaysia

Change 2002 Geography and Demography Area (1,000 sq.km) Population (1,000) Density (inhabitants per sq.km) Economy Total GDP (US$ bn) * GDP per capita (US$) * Real GDP growth Consumer inflation Unemployment rate Trade balance (current US$ bn) Exchange rate (Local Currency per US$) Annual average Year-end
* Using IMF Current Prices Source: PFC Energy from IMF, OECD and national sources
2003 330 25,050 76.0 110.2 4,399 5.8% 1.2% 3.6% 25.7 3.80 3.79
2004 330 25,580 77.6 124.8 4,877 6.8% 1.4% 3.5% 27.5 3.80 3.80
2005 330 26,130 79.2 138.0 5,282 5.3% 3.1% 3.5% 33.2 3.79 3.79
2006 330 26,640 80.8 157.0 5,895 5.8% 3.6% 3.4% 30.5 3.68 3.53
2007 330 27,170 82.4 186.1 6,850 6.2% 2.0% 3.0% 37.1 3.45 3.32
2008 330 27,730 84.1 221.6 7,992 4.6% 5.4% 3.3% 51.1 3.34 3.49
2009 330 28,310 85.9 207.4 7,324 -3.6% 0.6% 3.7% 40.1 3.50 3.40
09/08 0.0% 2.1% 2.1% -6.4% -8.3% n/a -88.9% 11.1%
330 24,010 72.8 100.8 4,200 5.4% 1.8% 3.4% 19.0 3.80 3.80
4.8% -2.5%
1,000
New Passenger Car Registrations

14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2002 2003 2004 2005 2006 2007 2008 2009 35 30 25 20 15 10 5 0 2002
Passenger Car Equipment Rate

45.5% 45.0% 44.5% 44.0% 43.5% 43.0% 42.5% 42.0% 41.5% 41.0% 40.5% 2003 2004 2005 2006 2007 2008 2009
Pas senger cars per 100 inhabitants Pas senger cars as % of total fleet
600 500 400 300 200 100 0
New passenger car registrations
Diesel cars as % of total
Primary Energy Production & Demand

Demand
mmto e
Primary Energy Production & Demand

50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2002 2003 2004 2005 2006 2007 2008 2009
Total production Total demand Oil product demand as % of total demand
120 100
80 60
Production
40 20 0 0 20
Oil Gas
40
Solid fuels & other
60
80
100
mmtoe Electricity (nuclear & hydro)
Primary Energy Indicators Malaysia

Change mmtoe Total primary energy production Oil Gas Solid fuels & other Electricity (nuclear & hydro) Total primary energy demand Oil products Gas Solid fuels & other Electricity (nuclear and hydro) Ratios Energy consumption per capita (toe) Energy intensity (toe/US$ m of GDP) Oil product demand as % of total demand Oil production as % of oil demand Total production as % of total demand 2.15 511.1 44.1% 151.7% 154.3% 2.07 471.4 42.4% 161.5% 160.9% 2.04 418.8 44.5% 157.0% 165.6% 2.18 412.9 40.5% 148.9% 159.7% 2.29 388.9 36.8% 149.0% 151.6% 2.33 339.7 39.4% 137.2% 149.5% 2.26 283.3 40.7% 135.3% 152.8% 2.11 287.6 42.5% 131.0% 154.9% -6.9% 1.5% 4.3% -3.2% 1.4% 2002 79.5 34.5 43.5 0.2 1.3 51.5 22.7 24.0 3.6 1.2 2003 83.6 35.6 46.6 0.1 1.3 51.9 22.0 24.4 4.2 1.3 2004 86.5 36.5 48.5 0.2 1.3 52.2 23.2 22.0 5.7 1.3 2005 91.0 34.4 55.0 0.4 1.2 57.0 23.1 26.4 6.3 1.2 2006 92.6 33.5 57.0 0.5 1.6 61.1 22.5 29.7 7.3 1.6 2007 94.5 34.2 58.1 0.6 1.7 63.2 24.9 29.7 7.1 1.5 2008 95.9 34.6 58.5 0.6 2.2 62.8 25.6 30.2 5.0 2.0 2009 92.4 33.2 56.4 0.6 2.2 59.6 25.3 28.3 4.0 2.0 09/08 -3.6% -4.0% -3.6% n/a n/a -5.0% -0.9% -6.3% -20.0% n/a Structure 2009 100.0% 35.9% 61.0% 0.6% 2.4% 100.0% 42.5% 47.5% 6.7% 3.4%
Source: PFC Energy from local sources, IEA, and BP Statistical Review
Abbreviations
b/d bcf boe cu.m JV l mmboe Mt Mtoe na ns PFC PSC POS sq. ft mboe mb/d mgal mgal/mo barrels per day billion cubic feet barrels of oil equivalent cubic meter joint venture liter million barrels of oil equivalent million tons million tons of oil equivalent not available or not applicable non significant Petroleum Finance Company Production Sharing Contract point of sale (i.e. filling station) square feet thousand barrels of oil equivalent per day thousand barrels per day thousand gallons thousand gallons per month

Malaysia Full Profile

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Malaysia Full Profile

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November 2010

Downstream Monitoring Service-Asia (DMS-A)

Malaysia | Page 2 Market Profile

Malaysia | Page 3 Market Profile

Malaysia | Page 4 Market Profile

Refining projects in the pipeline

Malaysia | Page 5 Market Profile

Fuel retail segment going strong

Malaysia | Page 6 Market Profile

Downstream Regulatory Environment

Malaysia | Page 7 Market Profile

Malaysia | Page 8 Market Profile

Malaysia | Page 9 Market Profile

Total Crude Processing

Total Crude Production

Crude Imports & Exports

20,000 15,000 10,000 5,000 0

Malaysia | Page 10 Market Profile

Crude/Feedstock Imports and Exports Malaysia

2002 7,083 18,100 -11,017

2003 7,921 18,747 -10,826

2004 7,953 19,245 -11,292

2005 8,031 18,994 -10,963

2006 8,048 17,262 -9,214

2007 9,453 16,962 -7,509

2008 9,457 16,970 -7,513

2009 9,295 16,690 -7,395

09/08 -1.7% -1.7% n/a

Crude Balance Malaysia

** Includes direct uses of crude and NGLs.

Malaysia | Page 11 Market Profile

Ports with Oil Terminals, Bunkering 2009

Kota Kinabalu Kuantan

Labuan Lahat Datu Malacca Miri

Sin Soon Hock Sdn. Bhd.

Esso Standard Malaysia Shell Refining Co. / Esso Standard Malaysia

Source: PFC Energy from Lloyds

Malaysia | Page 12 Market Profile

Ports with Oil Terminals, Bunkering 2009

Northport (Malaysia) Bhd.

Westports Malaysia Sdn. Bhd.

1.3 million barrel bunker storage facility in Westport

Sapangar Bay Terminal

8,000 120,000 5,000 300,000

Malaysia | Page 13 Market Profile

Malaysia Refining Infrastructure

Malaysia | Page 14 Market Profile

Refinery Capacity & Indicators

Capacity and Utilization Rate

600 550 500 450 400 350 300

Malaysia | Page 15 Market Profile

2009 Refining Capacities Malaysia

2009 Refining Capacities Malaysia

MD Desulf (mb/d) 98.5 58.5 19.0 11.0 10.0

Asphalt (mb/d) 8.2 4.0 4.2

2009 Refining Complexity Indicators Malaysia

Malaysia | Page 16 Market Profile

Product Supply & Demand

Oil Products Production

Oil Products Production - 2009

30,000 25,000 20,000 15,000 10,000 5,000 0 2002

Kerosene/ Jet f uel 11.7%

Other products 19.4% Gasoil 38.3%