On May 24, 2013, PLG CEO Graham Brisben and President Taylor Robinson presented to industry investors and analysts via teleconference sponsored by Stifel Nicolaus Capital Markets. Graham’s presentation was entitled “Crude by Rail Update.” Taylor’s presentation was entitled “Shale Gas – Driver of Reshoring.” The presentations addressed the current crude-by-rail market in the US, as well as industry trends leading to a renewed reshoring focus for US manufacturers.

1. 1
Logistics Engineering Supply Chain
Stifel Nicolaus
Capital Markets
Conference Call
May 24, 2013 | 11:00 AM
Dial In Numbers
(888) 267-2848 (Domestic)
(973) 413-6103 (International)
Passcode: 987415

2. 2
Crude by Rail
Update
Graham Brisben
CEO
Taylor Robinson
President
Shale Gas – Driver
of Reshoring
Introduction
Stifel Nicolaus Capital Markets
Conference Call
Date: Friday, May 24, 2013
Time: 11:00 AM EST
Length: 60 minutes
Host
Michael Baudendistel, CFA,
Transportation Analyst
Dial In Numbers
(888) 267-2848 (Domestic)
(973) 413-6103 (International)
Passcode: 987415
Replay
(800) 332-6854 (Domestic)
(973) 528-0005 (International)
Passcode: 987415

3. 3
About PLG Consulting
» Boutique consulting firm with team members throughout the US
 Established in 2001
 Over 80 clients and 200 engagements
 Significant shale development practice since 2010
» Practice Areas
 Logistics
 Engineering
 Supply Chain
» Consulting services
 Strategy & optimization
 Assessments & best practice benchmarking
 Logistics assets & infrastructure development
 Supply Chain design & operationalization
 M&A/investments/private equity
» Specializing in these industry categories:
 Energy
 Bulk commodities
 Manufactured goods
 Private Equity
Partial Client List

4. 4
Shale Gas – Driver for Reshoring
A detailed analysis of shale’s direct impact to the renaissance of US manufacturing
 Real World Experience
 Strategic Perspective
 Depth of Analysis
 Hands-on Engagement
Presented by Taylor Robinson
May 24, 2013
PLGConsulting.com
Logistics Engineering Supply Chain
4

5. 5
Today’s Reshoring Discussion
What is reshoring?
The return of manufacturing that has been moved offshore to
the original manufacturing location, mainly the U.S.
Why is this relevant? What has changed/will change?
Conditions have changed over the past few years that now favor
reshoring production including quality concerns, lower energy
and raw material costs in the U.S., and rising foreign labor costs.
What are the largest cost drivers in manufacturing products?
Materials, Labor, Overhead, Transportation, and Energy.
Has it started yet?
New factory announcements in the chemical, resin, fertilizer,
and steel industries have been made in the past year. Limited
numbers of traditional manufacturing companies have moved
their operations back to the states.
When will it hit?
PLG believes that the trend will grow substantially over the next
several years for a number of reasons. Let’s discuss!
* MIT Forum for Supply Chain Innovation Survey;
340 participants completed the survey; 2013 Jan
1
2
3
4
5
15%
definitely
considering
2013 MIT Survey*
of Manufacturers
Considering Reshoring
34%
considering
5

6. 6
The Shale Development Revolution
Disruptive
Technologies
-Hydraulic Fracturing
-Horizontal Drilling
Continuous
Evolution
-Constant Change
-Rapid Change
-Difficult to predict
Marketing
Dynamics
-Supply & Demand
-Customers
-Price
-Logistics
6

7. 7
Two Technology Breakthroughs Together:
Hydraulic Fracturing & Horizontal Drilling
Great YouTube Video by Marathon on Fracking
http://www.youtube.com/watch?v=VY34PQUiwOQ
7

8. 8
US Shale Plays
Gas:
Marcellus
Haynesville
Barnett
Oil:
Bakken
Eagle Ford
Permian Basin
Most Active Plays
Utica
Eaglebine
Mississippi Lime
Emerging Plays

9. 9
Shale Oil & Gas:
High Level Supply Chain
Natural
Gas
• Proppants
• Clean water
• Chemicals
Materials
• Drilling Rigs
• OCTG (Pipe)
• Cement
Equipment
Upstream
Exploration
Production
(Well Site)
Midstream Downstream
Refining
Fuel
Gasoline Distillates
Crude
Oil
Crude/
Gas
Mixture
Chemical
Feedstocks
Process
Product
Logistics Flow
Transportation
Processing
Gathering
Jet Fuel Residuals

10. 10
Downstream Supply Chain
Consumers
Petrochemicals
Aromatics Ammonia
Many
Others
Olefins
Ethylene Propylene Butylene
Polymers
Polybutadiene Polypropylene Polyethylene
Manufacturing
Intermediates become
consumer and
industrial products
Natural
Gas Power
Generation
Industrial
Use
Consumer
Use
Petrochemical
Processing
Process
Product
Logistics Flow
Refined
Crude
Products
Chemical
Feedstocks
• Naptha
• Ethane
• Propane
• Butane
• Iso-butane
Wet
gas
Dry
gas

11. 11
Natural Gas & Petrochemical
Downstream Products
Feedstock/
Intermediary
Finished
Products
Natural Gas,
OIl
Ethane,
Naphtha, etc.
Ethylene
Miscellaneous
Vinyl Acetate
Linear
Alcohols
Ethyl
Benzene
Ethylene
Oxide
Ethylene
Dichloride
High Density
Polyethylene
Low-Density
Polyethylene
Adhesives, coatings, textile/
paper. finishing, flooring
Detergents
Styrene
Ethylene
Glycol
Vinyl Chloride
House wares, crates,
drums, food containers,
bottles.
Food packaging, film,
trash bags, diapers, toys
PVC
Antifreeze
Fibers
PET
Miscellaneous
Polystyrene
SAN
SBR
Latex
Miscellaneous
Medical gloves,
carpeting,
coatings
Tire, hose
Instrument lenses,
house wares
Insulation, cups
Siding, windows,
frames, pipe, medical
tubing
Pantyhose,
carpets, clothing
Bottles, film

12. 12
Shale Gas Is More Important
To US Industry Competitiveness Than Oil
» Natural gas is 4X cheaper than oil on a
BTU-basis
 Innovation will move more transportation fuels to
natural gas
 Natural gas is a cleaner burning fuel
» Gas drives an increasing share of the
US electricity generation capacity and
has made the US the factory energy cost
leaders
» Gas’ downstream by-products have
world class competitiveness in the US
and are the “building blocks of
manufacturing”
 Chemicals
 Resins
 Compounds
$0
$5
$10
$15
$20
$25
$30
2005 2006 2007 2008 2009 2010 2011 2012 2013
Oil vs. Gas Price on BTU Basis
WTI Crude ($/MMBTU)
Natural Gas ($/MMBTU)
Source: EIA

13. 13
Natural Gas Displacement of Coal
for Thermal Generation
» Natural gas now supplying ~30% of thermal
fuel demand (~13% share capture from coal)
» Despite recent increases in prices, natural gas
share capture expected to maintain or grow
 Environmental regulations of coal burning
 Scheduled coal unit retirements
» Will continue to adversely affecting coal
industry
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Nuclear Natural Gas Coal
GWh
2007
2012
Source: EIA
Net Generation by Source

14. 14
US Electricity Cost Competitiveness Is
Aiding Energy-Intensive Industries Now
» Shale gas boom makes electricity costs lower
for US industries
 Reduced energy costs felt throughout supply chain
 Large users are achieving even lower costs by buying natural
gas directly from wells with long term contracts
 Some processes only become economically viable with lower
costs
» Steel example -- Direct Reduction Iron (DRI)
 Shale gas strips oxygen from iron core to make high purity
pellets
 Produces higher quality steel vs. scrap steel
 DRI pellets cost ~$270/ton vs. scrap steel cost ~$390/ton
 At least five new DRI steel plants being considered in the
U.S. by: Nucor/Encana, Bluescope Steel/Cargill, Essar
Global Ltd.
– Nucor signed a 20 year supply agreement with Encana
Gas & Oil to lock in energy costs
» Reciprocal Growth and Other Industry Impacts
 Shale gas creates demand for OCTG steel pipe for wells
 Increased demand for U.S. steel creates greater demand for
U.S. gas
 Other energy-intensive industries will have great advantages
and are anticipating further expansions in the US
– Chemicals
– Glass
– Castings
Average Cost of Electricity (2012)
Three iron-ore storage domes stand near Nucor's direct-reduced iron plant in Convent,
La.www.wsj.com - Feb 1, 2013
31¢ 30¢
18¢
13¢
9¢
7¢
4¢ 3¢
0
5
10
15
20
25
30
35
¢/kWh
AAverage Cost of Electricity (2012)

15. 15
US Steel Cost Advantage
vs. China Is Widening

16. 16
US Energy Cost Advantage Is Not
a Short Term Phenomena
Over 1,000 gas wells in the Marcellus (PA) have been drilled and capped
due to gas pricing, lack of processing capacity and gas over-supply….
INSIGHT

17. 17
Low Cost Ethylene Is Key Input to Many
Downstream Gas By Products
» Gas feedstock (ethane) makes ethylene
very competitive
 Ethylene is feedstock for a broad range of chemical
products – a “building block” of manufacturing
 US is now low cost producer of ethylene – up to
60% cost advantage
 >70 cents per pound more profit per pound from
ethane production compared to naphtha
 Ethane-to-Naphtha cracker ratio in the US
– Was 70%/30%
– Likely to reach 95%/5%
» Production capacity for ethylene set to
expand in U.S. -- abundant supply
 Investment in ethylene production has already
increased by 33% domestically
 Production capacity expected to rise by up to 35%
in coming years
 Investments in the repair and expansion of existing
crackers also increasing – part of the $95B
petrochemical expansions in coming 5 years
 Ethane exports will grow fueling more demand for
gas
Relative Profit Margins for Producing Ethylene from Ethane and Naphtha

18. 18
Fertilizer Industry Reshoring Example
» Natural gas is a feedstock for ammonia production
» Cheap U.S. natural gas means billions in investment for
new domestic fertilizer plants, displacing ~11 MM m/t of
imports. Plant announcements include:
 Orascom/Iowa Fertilizer Company - Wever, IA
 CHS - Spiritwood, ND
 Ohio Valley Resources - Spencer County, IN
 Yara - Belle Plaine, SK Canada
 North Dakota Grain Growers Association - Williston Basin, ND
 CF Industries – expansions at Donaldsonville, LA and Port Neal, IA
 PotashCorp - resumption of ammonia production at Geismar, LA
 Agrium – KY or MO (anticipated)
» If new plant construction/expansions are completed,
imports of nitrogen-based fertilizers could be reduced
from ~50% to “near zero” by 2018
» Lower gas prices directly benefit American farmers
 Increased demand for corn, soybeans has driven fertilizer costs higher
 Excess natural gas supply can be utilized to produce greater volumes of
nitrogen-based fertilizer more economically

19. 19
Low Cost Gas Feedstock Provides
Tremendous Cost Advantages for Resins
» Europe and Asia are tied to naptha as a
feedstock for their downstream processing,
giving the US a large structural cost
advantage for the foreseeable future
» Plastics will continue their cannibalization of
metals and composites because of cost and
weight advantage
 Continued conversion seen in the automotive industry
 Will transition more consumer and other industrial
products
» A number of large resin facilities on the
drawing board
 New plant/expansion announcements forthcoming
 40%+ of new production will be exported
» Plastics and rubber products among the first
to be reshored
0
500
1000
1500
2000
2500
Asia US
Historical
Saudi US Recent
$/Ton
HDPE Calculated Cost
$2,018
$1,266
$692
Sources: CMAI, TopLine Analytics, and Alembic analysis, 2012
$526

20. 20
Raw Material Cost Advantage Is Key Cost
Driver to Reshoring Future
» Direct Materials normally accounts for 60-70% of
manufacturing cost of goods sold (COGS)
 Most product cost competition is won or lost here
 Shale gas giving the US an advantage for metals, plastics,
chemicals
» Labor cost is usually ~20% of COGS for US
manufacturers
 China labor cost in $ will continue to rise due to inflation and
currency appreciation
 US labor rate expected to remain stable
» Transportation & Logistics costs are in “Other”
 Asia/China has 5~10% cost disadvantage due to shipping
products on a boat for ~1 month (major cash flow disadvantage)
 Transportation costs continue to rise
» Energy cost is usually less than 5% for final
manufacturer
 However, energy costs are buried in raw material costs and
transportation and can be more substantial in energy-intensive
products

21. 21
US Is Already Among the Most Cost
Competitive Manufacturing Locations
» US competitiveness driven by continuous
productivity improvements over past 25
years
 Many US manufacturers have adopted Lean and Six
Sigma techniques
 Global competition has driven other cost cutting
innovation – Value Engineering, materials
» Experts are predicting that US will close
the overall cost gap with China over the
next several years
» Other advantages of domestic supply chain
 Reduce risk due to disaster, quality, shipping delays, IP issues
 Reduced lead time and inventory -- improved cash flow!
 Responsiveness to customer demand
 Production is closer to R&D

22. 22
Where and When Will Reshoring Occur?
Or not occur?
Where?
Southeast US for
more material-
dependent cost
products
Mexico for high labor
content products
When?
 Likely an ongoing evolutionary
process for the next 5 years
 Metals, Chemicals, Plastic
products are first movers
 Other lower labor content
products will follow like
appliances, transportation
equipment, furniture,
machinery
What products
will likely never
reshore?
 Shoes and apparel
 Fabric and textiles
 Computer and electronic
products
1 2
3

23. 23
Further US Industry Expansion
Opportunities Through Export
» LNG export grabs the headlines
 Sabine Pass, LA and Freeport, TX now permitted for
exports; more terminals in application phase
– 3.4 Bcf/day export capacity to come online by 2015
– Represents ~5% of projected US dry gas production
 20 additional terminal applications totaling 29 Bcf/day of
export capacity pending before FERC
 Expect only moderate volumes of LNG exports to be
approved vs. abundant supply potential
– Avoids exposure of natural gas to similar market
forces that have affected oil
– Useful foreign policy instrument for Executive
Branch
» Ethylene and resins have large export
opportunities to both Europe and Asia
» Steel and other metals have potential to
grow exports
» Traditional manufactured goods will
likely grow exports as production is
moved back to states
Source: Waterborne Energy Inc. Data in $US/MMBtu
Photo: Wall Street Journal

24. 24
Big Picture View on Reshoring
HeadwindsTailwinds
» China & other low cost labor
locations have substantial labor
cost advantage vs. US
» Some supply chains only exist in
Asia – electronics, apparel, etc
» China business owners will fight
hard to keep manufacturing work
» Chinese government will continue
to subsidize certain industries
» U.S. shale gas impacts on:
 Energy costs
 Raw material costs
 By product costs
» China’s rising costs
 Labor rates
 Currency valuation
 Structural ties to oil
» Other advantages of domestic
manufacturing
 Improved cash flow due to less inventory
 Reduced risk and improved
responsiveness
 Proximity to market and R&D

25. 25
Implications and Wrap Up
» Shale gas is a game-changer for many US manufacturing
industries due to impact on material costs
» US manufacturing must continuously reduce
their labor and overhead costs
» Continuous evolution….
 The Chinese will not easily give up on manufacturing US products
 New entrants in US will use new materials and technology in many
industries
 Innovate or perish
» Shale oil and gas has additive benefits to the US
economy
 Energy independence – 2020 or 2025?
 Driving large increase in exports – LNG, propane, petrochemicals,
chemicals, plastics
 Improvement in trade deficit
 Shale oil and gas supply chain will drive job growth

26. 26
Thank You!
For follow up questions and information, please contact:
Taylor Robinson, President
+1 (508) 982-1319 / trobinson@prologisticsgroup.com

27. 27
Crude by Rail Update
A detailed look at the impacts of crude by rail on the marketplace
 Real World Experience
 Depth of Analysis
 Strategic Perspective
 Hands-on Engagement
Logistics Engineering Supply Chain
Presented by Graham Brisben
May 24, 2013
PLGConsulting.com
27

28. 28
Shale Development Crude Oil Impacts
» Dramatic increases in US production due to fracking
 7.2 MM bbl/day
 Projected to grow by ~30% over next four years
 Strong play in Bakken; surging Permian and Eagle Ford development
 “Tight” oil sources driving overall North American growth
 Production forecasts frequently revised upward
Source: Morgan Stanley, February 2013
Source: Morgan Stanley, February 2013

29. 29
Driving Toward “Oil Independence?”
» Decreasing dependency on foreign crude
 Combination of US shale plus Canadian oil sands estimated to reduce
imports to <15% by 2020
 West African imports already down ~70% from 2010 levels
» However, supply isn’t enough – “independence” also
relies on lower domestic fuels consumption
 CAFE standards the primary driver
» Reducing imports means reducing waterborne crudes
 Mid-continent sources displacing imports at coasts, making rail critical
to the total crude market
 Bakken as case study for large crude by rail operations
Source: BENTEK Energy

30. 30
Bakken Oil Production and Logistics
North Dakota Crude Oil Production
First outbound unit
train shipment
December, 2009
~779,000 BPD February 2013
Source: EIA, PLG
» 2010-2011 discount of ~$8-12/bbl for Bakken
crude vs. peer WTI
 Undervalued due to logistics constraints “stranding” the oil
» Early objective of crude-by-rail was to bridge
gap until pipelines built, but has now become
the primary transport mode for Bakken crude
 ~70% rail market share
 Pipelines operating below capacity; some project
cancelations
» Significant development of crude by rail
loading terminals in 2011-2012
 Takeaway capacity now exceeds production
 Bakken vs. WTI differential near even (within ~$5)
Source: North Dakota Pipeline Authority, PLG Analysis

31. 31
Crude Oil by Rail
North Dakota Terminals
Source: North Dakota Pipeline Authority (April 2013), PLG Analysis
North Dakota Crude Oil Rail Loading Capacity (Barrels Per Day)
Rail Terminals 2013 2014* 2015* Rail Carrier
EOG Rail, Stanley, ND (Up to 90,000 BOPD) 65,000 65,000 65,000 BNSF
Inergy COLT Hub, Epping, ND (Q2 2012) 120,000 120,000 120,000 BNSF
Hess Rail, Tioga, ND (Up to 120,000 BOPD) 60,000 60,000 60,000 BNSF
Bakken Oil Express, Dickinson, ND 100,000 100,000 100,000 BNSF
Savage Services, Trenton, ND (Q2 2012 Unit Trains) 90,000 90,000 90,000 BNSF
Enbridge, Berthold, ND (Q4 2012) 80,000 80,000 80,000 BNSF
Great Northern Midstream, Fryburg, ND (Q1 2013) 60,000 60,000 60,000 BNSF
Musket, Dore, ND (Q2 2012) 60,000 60,000 60,000 BNSF
Plains, Ross, ND 65,000 65,000 65,000 BNSF
Global/Basin Transload, Zap, ND (Estimate Not Confirmed) 40,000 40,000 40,000 BNSF
Plains All American, Manitou, ND 65,000 65,000 65,000 BNSF
BNSF Total Capacity 805,000 805,000 805,000
Plains - Van Hook, New Town, ND 65,000 65,000 65,000 CP
Dakota Plains, New Town, ND 30,000 80,000 80,000 CP
Global Partners, Stampede, ND 60,000 60,000 60,000 CP
CP Total 155,000 205,000 205,000
Various Sites in Minot, Dore, Donnybrook, Gascoyne, and Stampede 30,000 30,000 30,000
Total Crude Oil Rail Loading Capacity 990,000 1,040,000 1,040,000
*Project still in the review or proposed phase Year End System Capacity

32. 32
North Dakota Class I Railroads
and Crude Oil Terminals
Map by PLG Consulting

33. 33
All Crude Handled by
Railroad Volume Growth
STCC 13111 Source: US Rail Desktop

34. 34
Bakken Area Outbound Pipelines
North Dakota Crude Oil Pipeline Capacity (Barrels Per Day)
Pipelines 2013 2014* 2015*
Butte Pipeline 160,000 160,000 160,000
Butte Loop* (Late 2014) - 110,000 110,000
Enbridge Mainline North Dakota 210,000 210,000 210,000
Enbridge Bakken Expansion Program (Q1-11/Q1-13) 145,000 145,000 145,000
Plains Bakken North (Q2 2013, Up to 75,000 BOPD) 50,000 50,000 50,000
High Prairie Pipeline* - 150,000 150,000
Enbridge Sandpiper* (Q1 2016) - - -
TransCanada Keystone XL* (2015) - - 100,000
TransCanada Bakken Marketlink * (4Q 2015) - - 100,000
Hiland Partners Double H Pipeline (Q3 2014, Up to 100,000 BOPD) 50,000 50,000
Pipeline Total 565,000 875,000 1,075,000
*Project Still in the Review or Proposed Phase Year End System Capacity
Source: North Dakota Pipeline Authority (April 2013)

35. 35
Bakken Production vs. Total Takeaway
Capacity: 2013–2015 Projection
Year ND Production
Forecast (Bpd)
Pipeline
Capacity
Rail Terminal
Capacity
Rail Carrier
Capacity
ND Refinery
Consumption
Total
Outbound &
Refinery
Capacity
Excess Logistics
Capacity
2013 850,000 565,000 990,000 1,300,000 68,000 1,623,000 773,000
2014 980,000 875,000 1,040,000 1,300,000 68,000 1,983,000 1,003,000
2015 1,150,000 1,075,000 1,040,000 1,350,000 90,000 2,205,000 1,055,000
Source: North Dakota Pipeline Authority, PLG AnalysisBpd = Barrels per Day

36. 36
Crude Oil Pipelines
Existing and Planned
Source: CAPP Report, 2012
» Current pipelines ex. Bakken
operating below capacity
» Fixed routes and long lead times are
challenged by new dynamic NA oil
market
 10 year commitments required for new build
pipeline projects
» Pegasus spill raising new concerns
about Keystone XL
 Special challenges of Dilbit
 Pegasus the only pipeline currently handling
Canadian oil sands bitumen to US Gulf
Coast
» Several natural gas pipeline
conversions planned
 Trunkline (ETP) – Patoka, IL-St. James, LA
 Freedom (KM) – Permian Basin-Southern
California
 Energy East (TransCanada) – Hardisty, AB-
St. Johns, NB

37. 37
Crude Oil by Rail vs. Pipeline
$6.50
$12.00
$10.50
$15.00
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Pipeline to
Cushing
Rail to Cushing Pipeline to Pt
Arthur
Rail to Pt
Arthur
DollarsPerBarrel
Source: PLG analysis
» Rail cost: 50-100% more expensive than
pipeline transport
» Near-term offsetting rail advantages:
 Site permitting, construction much faster
 Lower capital cost
 Scalable
 Shorter contracts (2-3 year commitments vs. 10 years for
pipeline)
 Faster transit times
 Access to coastal areas not connected via pipeline
 Origin/destination flexibility
 Primary advantage: Tool of arbitrage for trading desks
Cost Comparison: Bakken to Cushing and USGC

38. 38
Shale Development Impact on
Crude Oil Market Dynamics
» Price differentials driving trading and logistics
patterns
 Bakken and WTI trading at ~$10-$15/bbl less than Brent; Alberta
Bitumen trading at ~$30/bbl less than Brent
 E&P, midstream players willing to rapidly deploy significant
capital to enable access
– Multi-modal logistics hubs in shale plays
– New multi-modal terminals/trading hubs at destination markets (i.e.
Cushing, OK, St. James, LA, Pt. Arthur, TX, Albany, NY, Bakersfield,
CA)
– Lease and purchase of railcar fleets
– Pipeline expansions, reversals, new construction
 Refineries installing unit train receiving capability - particularly
coastal refineries previously captive to waterborne imports (i.e.
Philadelphia, PA, St. John, NB, Anacortes, WA, Ferndale, WA)
 Constantly changing trading and logistics patterns for light/sweet
mid continent crudes
– Original crude-by-rail primary destination of Cushing now being
bypassed
– Crude by rail now supplying ~20% of east coast refining demand
– 200 M/bpd or 40% of Bakken crudes via rail are being delivered to St.
James, LA
Source: Petromatrix
38

39. 39
Logistics Challenges of Light/Sweet
vs. Heavy/Sour Crudes
» Not all crudes are created equal – light/sweet vs. heavy/sour
 Brent, WTI, and US shale play crudes (Bakken, Permian, Niobrara, Permian) are light/sweet
 Heavy/sour crudes include Western Canada, Venezuela, Mexico, Alaska North Slope (ANS),
Middle East (light/sour)
 Light/sweet requires less downstream processing
 Heavy/sour has higher sulfur content
 Bakken has higher gas, jet, and distillate yield than peer crudes
» Refineries are generally configured to run certain types of crude
 Significant investments made ($48B since 2005) at select refineries to install coker units that will
allow processing of heavy/sour
 Major heavy/sour refining clusters: Corpus Christi, Houston, Chicago, southern Illinois, Ohio,
California
 US is close to saturation point on light/sweet crude at mid-continent and USGC refining areas
» The special case of the Canada Oil Sands
 Heavy/sour crude has a natural home in Midwest and US Gulf Coast (~2.8 MM bpd demand at
USGC)
 Pipeline capacity to US Midwest refining centers is at capacity
 Pipeline developments to coasts, US markets still 2+ years away, while tank car supply constrains
rail options
 Option to ship dilbit in GP oil-spec tank cars, OR undiluted bitumen in coiled, insulated cars
 Canadian bitumen trading at ~$30 discount vs. Mexican Maya
 Estimated transport cost via rail $22-30/bbl; $14-16/bbl via pipeline

40. 40
Looking Ahead:
North American Crude Oil
» The gusher of new US light/sweet shale oil production made
possible by fracking has upended the traditional oil logistics and
trading patterns
 Result: “Wrong place/wrong oil” supply displacements, i.e. Cushing overflow
 Rapid investment in new logistics infrastructure, routes, modes, and terminals
– Bakken now sufficiently developed; next immediate areas for significant investment are Utica, Oil
Sands, Permian, coastal areas and intermediate routes and facilities that support bitumen transport
in particular
» The biggest current bottleneck: Railcars
 Current order backlog runs to early 2015
 Major purchases by oil majors and midstream companies
 Extremely tight market with very high lease rates
 Current crude by rail fleet ~30,000 railcars, or 1-1.5 MM bbl/day equivalent
» A “new normal” in crude oil flows will emerge in conjunction with
continued North American oil production over the next five years
 Continued shifts of mid-continent light/sweet to coastal destinations
 New modes and infrastructure to get Canadian bitumen to USGC, with or without
Keystone XL
 Permian, Eagle Ford to meet USGC light/sweet demand; Bakken flows primarily east-
west
 Eventual government approval of crude oil exports on a limited basis, similar to LNG
 Primary risk to crude-by-rail business: WTI-Brent spread
Key
Drivers
Destination
Markets
Oil
Price
Logistics
Capital
Source: CME and Morningstar

41. 41
Looking Ahead: Crude Oil Anticipated
Production Growth and Product Flows
= Light/Sweet
= Heavy/Sour
= Pipeline
= Marine
= Rail
= Storage terminal(s)
= Refinery cluster – Light
Sweet/Intermediate
= Refinery cluster – Heavy
Sour/Intermediate
= Current b/d (000)
= Future b/d (000) additional by 2017+420
123
Bakken
+855
704
Oil Sands
+982
1,615
Eagle Ford
+1,087
352
Permian
+607
514
Source: BENTEK Energy, CAPP, Railroad Commission of Texas, PLG Consulting 41

42. 42
Thank You!
For follow up questions and information, please contact:
Graham Brisben, CEO
+1 (708) 386-0700 / gbrisben@prologisticsgroup.com