Transcript Motiva Enterprises LLC Port Arthur Expansion Project Team “C” Jacob Munoz Aaron Hebert Joseph Nasser Outline Motiva Overview Expansion Highlights Insurance Programs – Contractor Wrap-Up – Contractor’s Equipment Floater – Builders Risk –

Motiva Enterprises LLC
Port Arthur Expansion
Project
Team “C”
Jacob Munoz
Aaron Hebert
Joseph Nasser
Outline
Motiva Overview
Expansion Highlights
Insurance Programs
– Contractor Wrap-Up
– Contractor’s Equipment Floater
– Builders Risk
– Marine Cargo
Motiva Overview
Formed in 1998
Dual ownership between Shell and Saudi Aramco
Number of Employees: Approximately 2,900
Revenues: $31.1 billion (YE 2006); (~85M a day)
Terminals: 42
Motiva owned stations: 1,128
Wholesale owned stations: 7,011
Crude Throughput Capacity (Daily): 745,000 BPD
Crude Actual Avg. Daily Throughput: 704,000 BPD
(Average ~95% of max capacity)
Motiva Operations
Commercial Fuels
Distribution
Retail
Refining
– Convent Refinery- 235,000 BPD
– Norco Refinery 220,000 BPD
– Port Arthur Refinery 285,000 BPD
Refinery Expansion Highlights
325,000 barrels/day
capacity
Lower emissions
Increase US Supply
4,500 construction
jobs and at least 300
new full-time jobs
Cost
– $7,000,000,000
Cautionary Statement
The following presentation includes forward-looking and backward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe
harbors created thereby. You can identify our forward-looking statements by words such as “anticipates,” “expects,” “intends,” “plans,”
“projects,” “believes,” “estimates,” and similar expressions. Forward-looking statements relating to Team C observations on Motiva are
based on our research and knowledge from Dr. Dan Jones’ class. It includes generalized information about the petroleum industry in
general on the date the presentations are given. These statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to
future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or
forecast in such forward-looking statements.
Factors that could cause actual results or events to differ materially include, but are not limited to, crude oil and natural gas prices; refining and
marketing margins; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and
future oil and gas development projects due to operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering
data relating to underground accumulations of oil and gas; unsuccessful exploratory drilling activities; lack of exploration success;
potential disruption or unexpected technical difficulties in developing new products and manufacturing processes; potential failure of new
products to achieve acceptance in the market; unexpected cost increases or technical difficulties in constructing or modifying company
manufacturing or refining facilities; unexpected difficulties in manufacturing, transporting or refining synthetic crude oil; international
monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations;
potential liability resulting from pending or future litigation; general domestic and international economic and political conditions, as well as
changes in tax and other laws applicable to Team C. Other factors that could cause actual results to differ materially from those
described in the forward-looking statements include other economic, business, competitive and/or regulatory factors affecting Team C
generally as set forth in the class syllabus. Team C is under no obligation (and expressly disclaims any such obligation) to update or alter
its forward-looking statements, whether as a result of new information, future events or otherwise.
Cautionary Note to U.S. Investors – The U.S. Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC,
to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically
and legally producible under existing economic and operating conditions. We use certain terms in this presentation such as “oil/gas
resources,” “Syncrude,” and/or “Society of Petroleum Engineers (SPE) proved reserves” that the SEC’s guidelines strictly prohibit us from
including in filings with the SEC. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10-K for the year
ended December 31, 2004.
This presentation includes certain non-GAAP financial measures, as indicated. Such non-GAAP measures are intended to supplement, not
substitute for, comparable GAAP measures. Investors are urged to consider closely the GAAP reconciliation tables provided in the
presentation Appendix.
Motiva – Port Arthur
Port Arthur Refinery (PAR)
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Built in 1903 as Texaco’s first refinery
Capacity of 285k BBOPD
900 employees with payroll of $150,000,000
Port Arthur and Port Neches terminals serve 700
vessels per annum
Historic asides
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Wood storage tanks and pipes
WWII Fuel for Cash program
Donkey transportation
Admin building shaped like a “T”
Contractor Wrap-Up Program
Traditional insurance – project owners,
contractors and subs purchase insurance
independently.
Wrap-up insurance – project owner covers
all parties – owner, contruction manager,
general contractor, and subs
Popular on large construction projects
– Cost savings
Contractor Wrap-Up Program
Advantages
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Savings from buying insurance “in bulk”
Eliminating duplication in coverage
Handling claims more efficiently
Reducing potential litigation
Enhancing workplace safety
Save up to 50% vs. traditional insurance
Save up to 1 to 3% of project’s construction cost
– Cost savings realized from centralized safety
programs.
Contractor Wrap-Up Program
Disadvantages
– Requires project owners to invest more time
and resources in admin
Project owners must hire additional personnel or
pay to contract out mgmt of wrap-up insurance.
– Large premiums at beginning of project
Contractor Wrap-Up Program
Barriers
– State systems for workers’ compensation can prevent
wrap-up insurance in some states by reducing cost
savings.
North Dakota, Ohio, Washington, West Virginia, Wyoming
– Project must be large or have high labor costs to
make wrap-up insurance financially viable.
– Reduces contractor’s profits from insurance rebates.
– ¾ of Total Ins. Cost on construction is for workers’
comp. Removing it from owner’s control eliminates
the cost savings of wrap-up insurance.
Contractor Wrap-Up Program
Wrap-up insurance can provide:
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Workers’ comp
General liability
Architects’ and engineers’ professional liability
Builders’ risk
Excess liability
Pollution liability
Specialized insurance
Longshoremen’s and harborworkers’ insurance
Railroad protective liability insurance
Wrap-up insurance does not provide:
– Automobile liability
– Insurance on contractors’ tools and equipment
Contractor Wrap-Up Program
Two types of wrap-up insurance
– Guaranteed Cost Plan
Simplest form of plan
Premiums remain constant regardless of claims paid out.
Common for small to medium-sized businesses
– Loss-sensitive Plan
Premiums dependent on policyholder’s claims paid or
“losses”
Returns a refund for low losses
Charges additional premium for high losses
Dollars in millions
Project Name and
Location
Blue Water
Bridge, Michigan
Total
project
cost
Insurance Costs
Traditional
Wrap-up
Insurance
savings
$97.2
$10
$7.1
$2.9
$10,800
$1,030
$765
$265
I-15,
Salt Lake City, Utah
$1,600
$52.2
$22.3
$29.9
CTA Green Line
Rehabilitation
Chicago, Illinois
$408.7
$32.5
$21.0
$11.5
Hudson-Bergen Light Rail
(Initial segment)
$992
$20
$11
$9
Tri-Met, Westside Light Rail
Portland, Oregon
$952
$27.1
$17.2
$9.9
Boston Central
Artery Tunnel,
Massachusetts
Transportation Infrastructure, Advantages and Disadvantages of Wrap-Up Insurance for Large Construction Projects, U.S. General Accounting Office, June 1999,
http://www.gao.gov/archive/1999/rc99155.pdf
Contractors’ Equipment Floater
Common insurance on special equipment for construction projects
that is not permanently tied to one location
Types of equipment covered
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Loaders
Dozers
Cranes
Excavators
Concrete Pumpers
Backhoes
Asphalt Machinery
Drill Rigs
Well Servicing Equipment
Forklifts
Misc. Tools & Equipment
Equipment has tendency to walk off during the night
Construction Builders/All Risk
Insurance
BUILDER'S RISK: Insurance against loss to
buildings or structures in the course of
construction.
ALL RISK: Insurance against loss or damage
to property arising from any accidental cause,
except such as may be specifically excluded
Options
Estimated Maximum Loss of $750M
Leverage Motiva’s existing property coverage
with Oil Insurance Limited
– Disadvantages:
Only 1 OIL limit of $250 million for combined operational and
CAR event
Requires commitment to OIL for life of project – reduces
flexibility
Stand-alone CAR program
– Advantages
More coverage
Use of captives
Decision
Standalone Coverage
• Limits:
$750 million, except $250 million in respect of
windstorm and flood;
$10 million for existing property.
• Deductible:
$10 million any one occurrence;
Project Insurance Programs
Construction All Risk - Markets
Market
• Swiss Re (Lead)
• Noble (Shell Captive)
• Stellar (Saudi Aramco Captive)
• Liberty
• Zurich
• AIG
• Starr Tech
• Arch
• Navigators
• SCOR
• Lancashire
• O'Farrell
• Catlin
Total
Line Size
20.00%
20.00%
20.00%
10.00%
7.50%
5.00%
4.00%
2.50%
1.00%
4.00%
2.00%
2.00%
2.00%
100.00%
Marine Cargo Insurance...
Who needs that??
Marine Cargo Insurance
Summary
The world’s integrated Global Economy demands movement of
goods across borders to fuel economic growth and stability.
As Emerging Markets in Latin America, Europe, Asia, Africa, and
the rest of the world begin to demand more goods from across
the globe the volume of international cargo shipments increase.
Although physical damage on transit claims may not be a
common problem. Importers or exporters must keep in mind that
over 50 voyages a year encounter heavy weather where shipping
containers are lost overboard.
Most risks are difficult for the owner of the goods to manage
directly. This is because the shipment will be given into the care,
custody and control of third parties who will limit their liability for
loss or damage to those goods
Marine Cargo Insurance Cont.
Marine Cargo Insurance is different then other liability and property
coverage. The scope is international, and broad. Also, extension of
coverage is industry specific and broader then other lines of insurance.
– Marine insurance clauses are not filed, nor regulated by state laws.
Also insurance can be offered for one shipment or multiple
shipments.
The premium cost of covering the cargo is based on individual
experience, shipment volume, mode of transit, and value shipped. The
underwriter determines what premium will be required to meet the
anticipated losses and expenses on account.
– The premium can also be impacted as the shipper includes
additional coverage; such as processing in a foreign country, how
damage to cargo could affect future cash flows of a firm, exhibition
coverage at sales conventions in foreign countries overseas, and
temporary storage overseas.
Risks
Theft, pillage or hijack
Mistakes in
transportation...
– I.E. dropping, rough or
inappropriate handling
Accident to the carrying
conveyance...
– I.E. vessel sinking,
aircraft crashing or
vehicle fire, road traffic
accident or overturning
Exposure to rain or salt
water
Exposure to unusual
variations in temperature
Example of a Motiva Insurance
Package
• Coverage:
Physical Loss of or Damage occurring during transit from suppliers'
premises anywhere in the World until safe unloading at the Project
Site;
Loss or impairment of Operating Margin triggered by a covered
property loss.
• Term: October 15 07 to June 01 10;
• Limits:
$70 million any one vessel, conveyance and/or location;
indemnification up to $480 million, capped at $50 million per month,
for a 24 month indemnity period.
• Deductible:
Property damage - $100,000 each and every loss;
DSU - 45 days in the aggregate.
The Port of Houston
Port of Houston Summary
Port of Houston is the port of the fourth-largest city in the United States.
The port is a 25-mile-long complex of diversified public and private facilities
located a few hours’ sailing time from the Gulf of Mexico.
It is the busiest port in the United States in terms of foreign tonnage,
second-busiest in the United States in terms of overall tonnage, and tenth
busiest in the world.
Made up of the Houston Ship Channel and Galveston Bay. It is made up of
the port authority, and the 150-plus private industrial companies along the
ship channel. Many oil companies have built refineries on the channel
where they are protected from the Gulf of Mexico.
Port of Houston Quick Facts
(2006)
6th largest in the world
1st in US in foreign tonnage
2nd in total tonnage
Home of the world’s 2nd largest petrochemical
complex
More then 200 million tons of cargo moved through
the port.
Leads the nation in environmental protection. It is
the first US port to be certified as ISO14001.
Supports 785,000+ jobs in Texas