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International Energy Prices and Latin America LPG Markets. Presented to XXI Congreso AIGLP Colona, Uruguay May 25, 2006

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International Energy Prices and International Energy Prices and

Latin America LPG Markets Latin America LPG Markets

L P G

Presented by: S. Craig Whitley Purvin & Gertz, Inc.

Presented to

XXI Congreso AIGLP – Colona, Uruguay

May 25, 2006

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Today’s Presentation

¾ International oil and gas supply/demand

fundamentals responsible for high crude oil, natural gas and LPG market prices

¾ Summary overview of Purvin & Gertz’ new market publication, the Latin America LPG Market Outlook

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Current State of World Oil, Gas and NGL Markets

¾ Higher-than-expected growth in petroleum demand

¾ Crude production and refining rates at record highs

¾ Production hikes in Middle East has not lowered prices

¾ Hurricanes Katrina and Rita had a devastating impact on petroleum and NGL markets.

¾ Declining oil and gas reserves in the U.S. and North Sea

¾ Mont Belvieu LPG prices are unusually high relative to other foreign markets

¾ Supply-driven LPG market – with new supplies from many new sources.

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Skyrocketing oil and gas prices make headlines daily

$19.31

$30.37

$25.93 $26.16

$31.06

$41.49

$56.59

$63.36

$70.15

0 10 20 30 40 50 60 70 80

1999 2000 2001 2002 2003 2004 2005 1Q-06 Current Spot WTI Crude Oil Pricing, US$ per Barrel

Spot WTI Crude Oil Pricing, US$ per Barrel

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Why are crude oil prices so high?

¾ Strong Global Petroleum Demand Growth Since 2003

¾ High Crude Oil Production Capacity Utilization Worldwide

¾ Slowdown in Expansion of Non- OPEC Supplies

¾ Impact of Atlantic Hurricanes on U.S.

Gulf of Mexico Crude Oil (and Gas) Production in 2005

¾ Several Geopolitical Events

ƒ Iran Nuclear Conflict

ƒ Iraqi Insurgency

ƒ Nigerian Unrest

ƒ Venezuela and Bolivia Issues

ƒ Concerns About Middle East Supply

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A “big picture” issue serves as the backdrop for these important global energy market drivers

¾ During the past 5 years worldwide oil consumption has exceeded new oil discoveries by a wide margin:

ƒ Consumed 27 billion barrels per year

ƒ Discovered 3 billion barrels per year

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REPORTED DEMAND

RESERVES 2004 2020

BBOE % MBD % MBD %

Saudi Arabia 259 23% 2 2% 2 2%

Other Mid East 437 39% 4 5% 6 6%

Canada (5 to 179) 92 8% 2 3% 3 3%

Latin America 86 8% 5 6% 6 6%

Africa 89 8% 3 3% 4 4%

Russia 60 5% 4 4% 5 4%

United States 22 2% 21 25% 25 24%

China 21 2% 6 8% 12 11%

Europe 17 2% 16 19% 16 16%

Far East 18 2% 16 20% 21 20%

Mexico 16 1% 2 2% 2 2%

Eurasia 10 1% 1 1% 1 1%

Australia 4 0% 1 1% 1 1%

Total 1,132 100% 82 100% 105 100%

Who has it? Who wants it?

62%

72%

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China Petroleum Supply and Demand

0 1 2 3 4 5 6 7 8

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Supply

Consumption

Million Barrels per Day

Net Imports

Sources: IEA and EIA

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Production from Existing

Fields

Production from New

Fields

0 20 40 60 80

1995 2000 2005

Since 1995, 33 million B/D of new crude oil production was needed to satisfy demand . . .

Global Supply Challenge

Million Barrels per Day

Demand

4% Decline

41.2 33.0

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At least 39 million B/D of new production will be needed by 2015 to satisfy future growth . . .

Global Supply Challenge

Production from Existing

Fields

Production from New

Fields

0 20 40 60 80 100

2005 2010 2015

Million Barrels per Day

Demand

4% Decline

49.3 39.3

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-0.5 0.0 0.5 1.0 1.5 2.0 2.5

2000 2001 2002 2003 2004 2005

China Other Asia

US Middle East

Europe Others

Strong demand growth in 2004/2005 surprised the market -- forcing crude prices up

Year-to-Year Change, Million B/D

Petroleum Market Overview

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Demand surge in 2003/2004 has reduced OPEC spare capacity to inadequate levels . . .

0 10 20 30 40 50

1995 2000 2005 2010

Other OPEC Venezuela Iraq Saudi Arabia

Million Barrels per Day

Capacity Production

Crude Oil Price Outlook

Pinchpoint

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Refinery Operating Rates versus Capacity

50 60 70 80 90 100

1980 1985 1990 1995 2000 2005

Asia Europe US

Percent

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Katrina made a direct hit on LA and MS

Gulf Coast refineries and offshore assets

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Rita’s forecast shutdown TX Gulf Coast

refineries from Corpus to Houston

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Although she missed her mark, Rita still struck Port Arthur/Beaumont/Lake Charles

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Double hit on USGC production and refinery

infrastructure with lasting impacts

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U.S. gas plant propane production

425,000 450,000 475,000 500,000 525,000 550,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2004 - bpd

2005 - bpd Prev 5-Yr Avg 2006 YTD

Barrels Per Day

Gas plant production has not fully recovered from impact of hurricane damage

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U.S. refinery propane production

425,000 450,000 475,000 500,000 525,000 550,000 575,000 600,000 625,000 650,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2004- bpd

Prev 5-Yr Avg 2005 - bpd 2006 - YTD

Barrels Per Day

Refinery production returning to average levels . . . .

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The Latin America LPG Market Outlook

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First Study of its Kind

¾ 421 pages long

¾ Comprehensive supply and demand analysis and

forecasts for the 41 countries in Latin America through 2020

¾ Value chain price analysis

¾ Waterborne freight rate forecasts through 2020

¾ CIF price analysis and forecasts for all LPG importing countries

¾ Netback price analysis and forecasts for all Latin LPG exporting countries, as well as major waterborne LPG suppliers around the world.

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Major Conclusions of the Study

¾ LPG demand growth in Latin America has slowed considerably since 2000

¾ LPG supply to the Latin marketplace is growing much faster than demand

¾ South America is quickly moving to becoming a net LPG exporter with new supplies from several sources

¾ Imports by Brazil and Mexico have dropped significantly

¾ Demand growth is being hurt by high prices, inter-fuel competition with natural gas and maturing markets.

¾ Venezuela’s LPG production plans are very ambitious

¾ Significant differences exists in end-user prices despite Mont Belvieu-related product costs values

¾ Improving economies should trigger new growth

opportunities for Latin LPG markets once prices drop

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0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 Ecuador

Venezuela Bolivia El Salvador Panama Colombia Argentina-Social Paraguay Dominican Republic Argentina Nicaragua Peru Mexico Brazil Guatemala Honduras Uruguay Costa Rica Chile Puerto Rico USA

End-User LPG Prices in 10 to 13 kg Bottles

Fourth Quarter 2005 US$ per Metric Tonne

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0 200 400 600 800 1000 1200 1400 1600

Bolivia Mexico Argentina-Social Peru Honduras Uruguay Guatemala Argentina Brazil Costa Rica Chile Puerto Rico United States

A Sampling of Gross Margins Between End-User Bottled Gas Prices and Ex-refinery Prices or Cost of Imports

Fourth Quarter 2005 US$ per Metric Tonne

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Latin America LPG Supplies By Country

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

1990 1995 2000 2001 2002 2003 2004 2005 2010

Other Latin America Venezuela Peru

Mexico Ecuador Colombia Chile

Brazil Argentina

Thousands of Tonnes per Year

Venezuela has big plans to expand

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Latin America LPG Demand By Country

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

1990 1995 2000 2001 2002 2003 2004 2005 2010

Other Latin America Venezuela Peru

Mexico Ecuador Colombia Chile

Brazil Argentina

Thousands of Tonnes per Year

A 26.9 Million Tonne Market

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Latin America’s Requirements for LPG Imports Have Dropped and are Expected to Drop More

-4,000 -3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

1990 1995 2000 2001 2002 2003 2004 2005 2006 2010

Thousands of Tonnes

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Latin America 2005 LPG Demand By End-Use Market

74%

5%

8% 5% 1%

7%

Residential/Com.

Industrial Engine Fuel Chemicals Refinery Other

26.9 Million Total Tonnes

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Latin America LPG Demand Growth Rates

-1.3%

6.9%7.5%

1.1%

8.2%

4.5%

4.7%

4.4%

6.6%

5.2%

-1.7%-0.6%

-2.8%

3.0%

1.5%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Annual Growth - %

Percent

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Latin LPG Market Growth – 1990’s vs. 2000’s

4.8 2.1

-0.1

-2.0 0.0 2.0 4.0 6.0

1991-2000 2001-2005

2006-2010 Forecast

Percent

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Latin LPG demand has leveled out

17.0

21.1

27.0 26.9

0 5 10 15 20 25 30

1990 1995 2000 2005

Million Tonnes

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Latin LPG Market Share by Country

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Mexico Brazil

Venezuela Caribbean Argentina Chile

Ecuador Cent. Amer.

Colombia Peru

Bolivia

Other S. Amer.

71.4% 28.6%

Percent of Total Latin LPG Market

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Residential/Commercial LPG Consumption

0 10 20 30 40 50 60 70

Mexico Ecuador Chile Venezuela Brazil Bolivia Caribbean Other South America Argentina Central America Peru Colombia

Kg/Capita 2005 Kilograms per Capita

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Per Capita Consumption has been hurt by natural gas competition in Res/Com sector

33.5

36.7

40.1

39.3

38.3

36.7 37.0

36.0

30 31 32 33 34 35 36 37 38 39 40 41

1990 1995 2000 2001 2002 2003 2004 2005 Kg/Capita Total Latin America Res/Com LPG Consumption per Capita

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All regional LPG markets except Oceania have grown more than Latin America over the past 5 years

0 10 20 30 40 50 60 70

Asia North America

Europe/CIS Latin America

Middle East

Africa Oceania

2000 2005

Regional LPG Demand, Million Tonnes Regional LPG Demand, Million Tonnes

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China LPG Supply and Demand

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

1990 1991

1992 1993

1994 1995

199 6

1997 1998

1999 2000

2001 2002

2003 2004

2005 200

6 200

7 200

8 2009

2010

Thousands of Tonnes Per Year

Total Demand Line

Domestic Supplies Imports

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Essentially, all new growth in demand has taken place in Res/Com, Chemical and Engine Fuel sectors

100.0 219.6

100.0 198.0

TOTAL

2.4 5.3

3.4 6.8

Other Uses

5.7 12.5

6.2 12.2

Refining

7.8 17.1

7.6 15.0

Engine Fuel

9.3 20.4

10.9 21.5

Industrial

23.3 51.2

21.1 41.8

Chemical

51.5 113.2

50.8 100.7

Residential/

Commercial

% MM

Tonnes

% MM

Tonnes Global LPG

Demand

2005 2000

10.9%, or 1 Japan

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Disclaimer

This report has been prepared for the sole benefit of the client. Neither the report nor any part of the report shall be provided to third parties without the written consent of PGI. Any third party in possession of the report may not rely upon its conclusions without the consent of PGI.

Possession of the report does not carry with it the right of publication.

PGI conducted this analysis and prepared this report utilizing reasonable care and skill in applying methods of analysis consistent with normal industry practice. All results are based on information available at the time of review. Changes in factors upon which the review is based could affect the results. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY.

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S. Craig Whitley

Scwhitley@purvingertz.com 1-713-236-0318

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