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22nd World LP Gas Forum in Rio « Energising the future »

22nd World LP Gas Forum in Rio « Energising the future ». « Financial Crises in 2008: Impacts on the LP Gas Business ». Ernst Brandstaetter General Manager SHV Gas Supply & Risk Management, Paris. World LPGAS Forum: 7th – 9th October 2009 1. SHV Business Structure.

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22nd World LP Gas Forum in Rio « Energising the future »

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  1. 22nd World LP Gas Forum in Rio « Energising the future » « Financial Crises in 2008: Impacts on the LP Gas Business » Ernst Brandstaetter General Manager SHV Gas Supply & Risk Management, Paris World LPGAS Forum: 7th – 9th October 2009 1

  2. SHV Business Structure SHV Mammoet (Heavy lifting And transport) Makro (Food & Non Food Consumer Articles) Dyas (E&P of Oil & Gas) NPM Capital (Private Equity) TCEC (Renewable Energy) ERIKS (mechanical engineering components) SHV Gas (LPG) World LPGAS Forum: 7th – 9th October 2009 3

  3. China Philippines SHV Gas : Presence in the World Asia Pakistan North America Europe Africa India South America Brasil Australia World LPGAS Forum: 7th – 9th October 2009 4

  4. Content Reflection Prediction Reality Consequences World LPGAS Forum: 7th – 9th October 2009 2

  5. INTERESTING STATEMENTS… I do not anticipate any serious problems among the large internationally active banks. 28 February 2008 Ben Bernanke, Chairman of the board of governors of the United States Federal Reserve I do believe that the Economy is growing. 15 July 2008 In today’s regulatory environment it is virtually impossible to violate rules. World LPGAS Forum: 7th – 9th October 2009 5

  6. REFLECTION: Long Term Crude Development 11 September 2001 World LPGAS Forum: 7th – 9th October 2009 6

  7. REALITY: C3 CIF ARA & FEI « We project healthy growth in global GDP (+4.9%) and oil demand (+1.4 mb/d or 1.7%) in 2008. Demand growth will be led by China and the Middle East. » Société Générale,19 November 2007 March: Falling Russian oil supply – fist y/y declines for over 10 years July: Iran-Us relation turn of the worse April: Iran-US relations deteriorate «The possibility of $150- $200 per barrel seems increasingly likely over the next six-24 months (…) » Goldman Sachs, official report 5 May 2008. January: Disruption in Nigeria and North Sea June: Rising Chinese, ME and Indian demand World LPGAS Forum: 7th – 9th October 2009 7

  8. October: Evidence of further US oil demand deterioration and slowdown in China. REALITY: C3 CIF ARA & FEI August: Fannie & Freddi Mac collaps/ financial troubles. MARKET CRASH November: Drastic reduction to GDP forecast September: Lehman Brothers Collapse. World LPGAS Forum: 7th – 9th October 2009 8

  9. Immediate consequences on the Derivative Markets • Trading counterparts disappeared or refocussed approach • Number of derivative desks cut • Trading markets close to stand still • Q4 MTM exposure reached record highs. Financing of risk is creating cash flow problem • Price volatility becomes exceptional • Stock markets influence commodities • Unhedged storage positions cause record losses “ A large number of senior London-based equities traders at Morgan Stanley are leaving the firm, or facing redeployment, as the bank presses forward with its plans to cut a further 10% of staff in the institutional securities division.” Renée Schultes, December 2008 «  Volatility increased to a point we had never seen except in a period of war I’m grateful to all the client who, despite all this turbulence, continued to deal with us. » Marc Mourre, Morgan Stanley – February 2009 World LPGAS Forum: 7th – 9th October 2009 9

  10. Immediate consequences on the Physical Markets • Financial turmoil reduces demand (industrial/commercial/domestic segment) • Petchem buyers decrease presence on the market • Triple A rated customers turn to prepayment customers • Long markets and collapsed crude prices delay/even stop new productions • Shipping markets crash to record lows “During the past two quarters, we have seen dramatic softening in demand for our products and unprecedented volatility in raw materials costs.” Volker Trautz, LyondellBasel’s Chief Executive BASF has announced plans to axe 3700 jobs and left the future of 23 production sites in doubt following its acquisition of Swiss firm Ciba in April this year. July 2009 LyondellBasel is owned by New York- based industrial group Access Industries, but the filing in the Southern district of NY in Manhattan applies to Lyondell Chemical Co., its U.S. arm. The court filing lists assets of $27.1 billion and liabilities of $19.3 billion. ConocoPhillips, lays off 4 % of its GLOBAL workforce and scales back capital spending this year to $12.5bn, from $15.3bn in 2008. Morgan Stanley LUKOIL said it would cut its planned capital expenditure in 2009 to $9.7 billion, from an earlier forecast of $11.2 billion, due to unfavorable market conditions. Morgan Stanley World LPGAS Forum: 7th – 9th October 2009 10

  11. Immediate consequences on the Physical Markets 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter January February March April May June July August September October November December World LPGAS Forum: 7th – 9th October 2009 11

  12. Immediate consequences on the Physical Markets • Financial turmoil reduces demand (industrial/commercial/domestic segment) • Petchem buyers decrease presence on the market • Triple A rated customers turn to prepayment customers • Long markets and collapsed crude prices delay/even stop new productions • Shipping markets crashed to record lows and will not recover soon • FOB posted price contracts create massive losses World LPGAS Forum: 7th – 9th October 2009 12

  13. C3 CP & C3 FEI $/Mt – October 2008 Shipping Total loss = 240 $/tons $ 10.500.000 per cargo Loss CP FEI World LPGAS Forum: 7th – 9th October 2009 13

  14. GOODNEWS!! Producers start to connect with the final customers cutting intermediaries Shipping costs are at record low levels Product prices return to the level of year 2002 World LPGAS Forum: 7th – 9th October 2009 14

  15. Prices return to the level of year 2002 World LPGAS Forum: 7th – 9th October 2009 15

  16. Alzheimer Syndrom in Commodities Trading BRENT Y08 Yield Basis Jan 08 BRENT Y09 Yield Basis Jan 09 World LPGAS Forum: 7th – 9th October 2009 16

  17. World LPGAS Forum: 7th – 9th October 2009 17

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