Nomura Oil Outlook

ASIA
NOMURA INTERNATIONAL (HK) LIMITED
Asia Oil & Gas/Chemicals

Oil at peak; Petrochems offer
more LT upside
Cheng Khoo
+852
852 2252 6180
cheng.khoo@nomura.com
May
y 2011
Any authors named on this report are research analysts unless otherwise indicated.
See the important disclosures and analyst certifications on pages 200 to 208.
ASIA
Oil and
d Gas
G Team
T
Name Email Address Telephone Coverage
Cheng Khoo cheng.khoo@nomura.com +852 2252 6180 Team Head
Michael Lo michael.lo@nomura.com +852 2252 6225 Global Oil Market
Xavier Grunauer xavier.grunauer@nomura.com +61 2 8062 8416 Australia
Gordon Wai gordon.wai@nomura.com +852 2252 6176 China
Anil Sharma anil.sharma.1@nomura.com +91 22 4037 4338 India
Cindy Park cindy.park@nomura.com +822 3783 2324 Korea
Yong Liang Por yongliang.por@nomura.com +852 2252 6220 Taiwan, Thailand

© Nomura International (Hong Kong) Limited 2
ASIA
Contents
I. Crude oil fundamentals 9
II. Asian refining fundamentals 50
III
III. Asian petrochemical fundamentals 63
IV. China 80
V. China fertiliser 123
VI. India 132
VII. Korea 153
VIII Malaysia
VIII. 168
IX. Taiwan 173
X. Thailand 185

ASIA
Structure of oil and petrochemical industry

Oil & natural
t l gas
Oil refining
LPG Gasoline Naphtha Kerosene Diesel Fuel oil
Naphtha cracking
Olefin plant Aromatics plant
Ethylene Propylene Mixed C4 Butylene Benzene Toluene Xylene
Synthetic Synthetic
Plastics industry Others
rubber industry fibre industry

ASIA
A i oil
Asian il and
d petrochemicals
t h i l universe
i Price Potential 52 - Week Net Profit^ Dividend Yield (%)
Reporting Upside Mkt Cap.
Company Name Bloomberg Currency 29-Apr Target Price (%) Rating (US$ bn) High Low 2009 2010 2011E 2012E 2009 2010 2011E 2012E
Exploration & Production
Petrochina 857 HK Rmb HK$ 11.16 HK$ 13.50 21% Buy 322.4 12.3 8.0 103,387 139,992 176,214 184,403 2.7% 3.7% 4.6% 4.8%
CNOOC 883 HK Rmb HK$ 19.16 HK$ 23.00 20% Buyy 110.2 20.9 11.6 29,486 54,410 70,482 71,116 4.1% 3.2% 3.2% 3.3%
Woodside WPL AU USD A$ 46.80 A$ 56.40 21% Buy 40.6 48.2 40.6 1,462 1,577 1,808 3,150 1.3% 2.5% 2.5% 2.5%
PTT E&P PTTEP TB Bt Bt 185 Bt 202 9% Neutral 20.6 196.5 138.0 22,154 41,739 44,092 53,799 2.1% 3.3% 3.1% 3.8%
Origin ORG AU A$ A$ 16.35 A$ 18.80 15% Buy 19.0 17.2 13.7 6,941 612 705 945 3.7% 3.1% 3.1% 3.1%
Cairn India CAIR IN Rs Rs 349 Rs 405 16% Buy 15.0 367.4 271.8 11 61 104 118 0.0% 0.0% 1.4% 1.4%
Santos STO AU A$ A$ 15.12 A$ 16.10 6% Neutral 14.5 16.5 11.8 434 500 429 564 2.3% 2.0% 2.0% 2.0%
Oil Search OSH AU USD A$ 7.05 A$ 7.70 9% Neutral 10.2 7.6 5.3 134 186 175 183 0.6% 0.7% 0.7% 0.7%
Kunlun Energy 135 HK HK$ HK$ 13.76 HK$ 17.00 24% Buy 8.8 14.4 9.6 1,234 2,426 5,868 6,757 0.5% 1.0% 1.7% 2.0%
AWE AWE AU A$ A$ 1.56 A$ 1.70 9% Neutral 0.9 2.4 1.5 89 (29) 10 66 0.0% 0.0% 0.0% 0.0%
E t
Eastern Star
St Gas
G ESG AU A$ A$ 0
0.76
76 A$ 0
0.92
92 21% B
Buy 08
0.8 09
0.9 06
0.6 (3) (7) (5) 2 0 0%
0.0% 0 0%
0.0% 0 0%
0.0% 0 0%
0.0%
Average 1.6% 1.8% 2.0% 2.1%
Oil Services
COSL 2883 HK Rmb HK$ 15.36 HK$ 10.30 -33% Reduce 12.1 18.0 8.4 3,135 4,128 4,421 4,957 2.1% 1.4% 1.5% 1.7%
Natural Gas Transmission
GAIL GAIL IN Rs Rs 476 Rs 600 26% Buy 13.6 527.3 419.5 31 37 44 49 1.6% 1.8% 2.2% 2.4%
Gujarat State Petronet GUJS IN Rs Rs 98.35 Rs 135 37% Buy 1.3 125.1 88.7 4 5 6 6 1.0% 1.5% 1.5% 1.5%
Average 1.3% 1.7% 1.9% 2.0%
LNG and City Gas Distribution
Petronet LNG PLNG IN Rs Rs 132.10 Rs 180 36% Buy 2.2 138.3 77.1 4 6 8 9 1.3% 1.5% 1.5% 1.5%
Gujarat gas GGAS IN Rs Rs 364.60 Rs 415 14% Neutral 1.1 419.8 271.1 2 3 3 3 2.2% 3.3% 2.7% 2.7%
Indraprastha Gas IGL IN Rs Rs 321.20 Rs 450 40% Buy 1.0 361.7 219.6 2 3 3 4 1.4% 1.4% 1.4% 1.4%
Average 1.6% 2.1% 1.9% 1.9%
Refining & Marketing
Sinopec 386 HK Rmb HK$ 7.82 HK$ 9.00 15% Buy 110.0 8.8 5.8 63,147 71,800 81,153 93,005 3.4% 3.1% 3.5% 4.0%
Reliance Ind RIL IN Rs Rs 981.95 Rs 1,200 22% Buy 72.7 1,112.0 895.7 159 202 259 292 0.7% 0.8% 0.8% 0.8%
PTT PTT TB Bt Bt 375 Bt 440 17% Buy 35.8 384.0 233.0 59,548 83,087 97,499 113,836 4.0% 4.4% 3.9% 4.6%
Formosa Petrochemical 6505 TT NT$ NT$ 100.50 NT$ 110.00 9% Neutral 33.4 100.5 71.3 39,192 40,923 59,369 61,731 5.1% 4.8% 5.7% 6.1%
Indian Oil Corporation IOCL IN Rs Rs 340.0 Rs 365 7% Neutral 18.7 448.2 293.3 107 60 86 88 3.8% 2.1% 3.0% 3.0%
SK Innovation 096770 KS Won W 232,000 W 330,000 42% Buy 20.0 222,500 78,200 677 1,206 2,526 2,698 0.9% 0.9% 0.9% 0.9%
S-Oil 010950 KS Won W 159,500 W 200,000 25% Buy 16.8 167,000 49,150 217 677 1,873 2,034 0.6% 1.5% 3.4% 3.7%
Shanghai Petrochem 338 HK Rmb HK$ 3.76 HK$ 4.50 20% Buy 8.3 4.9 2.7 1,591 2,772 2,375 3,081 1.2% 3.6% 2.5% 3.3%
GS Holdings 078930 KS Won W 89,500 W 115,000 28% Buy 7.8 103,000 32,800 496 801 1,041 1,051 1.1% 1.4% 1.7% 1.7%
Bharat Petroleum BPCL IN Rs Rs 627.2 Rs 620 -1% Neutral 5.1 802.0 514.9 16 12 19 18 2.2% 1.2% 1.5% 1.5%
Thai Oil TOP TB Bt Bt 84.50 Bt 85.00 1% Neutral 5.8 86.8 40.5 12,062 8,999 15,434 16,088 7.1% 4.0% 3.9% 4.0%
PTT Aromatics & Refining PTTAR TB Bt Bt 41.25
41 25 Bt 50.00
50 00 21% Buy 41
4.1 43 0
43.0 22 1
22.1 9 162
9,162 6 343
6,343 13 051
13,051 16 180
16,180 7 0%
7.0% 3 1%
3.1% 4 5%
4.5% 5 6%
5.6%
Hindustan Petroleum HPCL IN Rs Rs 372.0 Rs 380 2% Neutral 2.8 546.2 309.0 13 6 7 8 3.2% 1.4% 1.5% 1.8%
Average 3.1% 2.5% 2.8% 3.2%
Upstream/Integrated Chemical
Formosa Chemical & Fibre 1326 TT NT$ NT$ 115.50 NT$ 134.00 16% Buy 25.0 117.0 63.0 29,440 47,275 59,701 58,248 8.6% 9.7% 9.0% 8.8%
Petronas Chemicals PCHEM MK RM RM 7.23 RM 8.40 16% Buy 19.5 7.53 5.05 NA 2,195 3,001 3,839 NA 0.0% 2.7% 3.5%
PTT Chemical PTTCH TB Bt Bt 160 Bt 200 25% Buy 8.1 166.5 88.8 6,802 10,290 20,495 24,770 3.7% 2.3% 3.9% 4.7%
Honam Petrochemical 011170 KS Won W 378,000 W 480,000 27% Buy 11.2 445,000 116,500 797 784 1,100 1,223 0.4% 0.5% 0.5% 0.5%
Averageg 4.2% 3.1% 4.0% 4.4%
Midstream Chemical
LG Chem 051910 KS Won W 530,000 W 700,000 32% Buy 32.8 567,000 262,000 1,572 2,200 2,751 3,084 0.7% 0.8% 0.8% 0.8%
Nanya Plastics 1303 TT NT$ NT$ 87.8 NT$ 105.0 20% Buy 24.1 88.4 49.6 16,404 40,974 52,154 62,093 4.2% 7.4% 7.3% 8.7%
Formosa Plastics 1301 TT NT$ NT$ 117.00 NT$ 136.00 16% Buy 22.9 119.0 67.9 27,533 45,547 60,569 64,984 7.0% 9.1% 8.1% 8.7%
Cheil Industries 001300 KS Won W 118,000 W 160,000 36% Buy 5.5 127,500 77,700 127 259 321 415 0.6% 0.6% 0.6% 0.6%
Hanwha Chemicals 009830 KS Won W 47,700 W 69,000 45% Buy 6.2 54,300 14,600 343 399 610 703 1.0% 1.0% 1.0% 1.0%
Average 3.2% 4.5% 4.3% 4.7%
China Fertilizer
Sinofert 297 HK Rmb HK$ 3.24 HK$ 3.00 -7% Reduce 2.9 4.7 3.0 (1,444) 536 1,018 1,306 0.0% 0.3% 0.6% 0.8%
China BlueChem 3983 HK Rmb HK$ 6.32 HK$ 7.00 11% Buy 1.4 7.1 4.3 985 1,175 1,800 2,344 1.9% 1.5% 2.2% 2.8%
Source: Company data, Nomura estimates ^ Local currency in million won and INR in billion Note: Ratings and price targets are as of the date of the most recently published report
(http://www.Nomura.com) rather than the date of this document.
ASIA
A i oil
Asian il and
d petrochemicals
t h i l universe
i EPS EPS Growth (YoY%) P/E EV/EBITDA
Reporting
Company Name Bloomberg Currency 2009 2010 2011E 2012E 2009 2010 2011E 2009 2010 2011E 2012E 2009 2010 2011E 2012E
Petrochina 857 HK Rmb 0.56 0.76 0.96 1.01 35% 26% 5% 12.7 10.5 10.2 9.8 5.6 5.1 5.3 5.2
CNOOC 883 HK Rmb 0 66
0.66 1 22
1.22 1 58
1.58 1 59
1.59 85% 30% 1% 25 6
25.6 13 9
13.9 10 7
10.7 10.6
10 6 61
6.1 51
5.1 57
5.7 55
5.5
Woodside WPL AU USD 1.95 2.04 2.31 3.96 8% 15% 74% 21.6 20.6 18.3 10.6 11.8 12.2 10.3 5.9
PTT E&P PTTEP TB Bt 6.70 12.62 13.33 16.21 88% 6% 22% 27.6 14.7 13.9 11.4 5.9 5.2 5.7 4.4
Origin ORG AU A$ 7.91 0.70 0.67 0.90 -91% 15% 34% 2.1 23.4 24.4 18.2 11.5 12.6 9.9 8.2
Cairn CAIR IN Rs 5.54 32.25 54.72 61.94 NM 70% 13% NM 10.8 6.4 5.6 70.1 7.8 4.0 2.9
Santos STO AU A$ 0.50 0.57 0.49 0.65 15% -14% 32% 30.5 26.5 30.8 23.4 9.0 8.3 9.1 9.2
Oil Search OSH AU USD 0.11 0.14 0.13 0.14 39% -6% 5% 58.8 44.6 47.5 45.2 20.6 25.2 22.0 23.0
Kunlun Energy 135 HK HK$ 0.27 0.49 0.82 0.95 97% 142% 15% 20.7 21.1 16.8 14.6 9.3 9.2 6.7 5.7
AWE AWE AU A$ 0.174 (0.057) 0.020 0.127 -133% NM NM 9.0 NM 78.9 12.3 1.3 7.8 6.5 2.9
Eastern Star Gas ESG AU A$ (0.003) (0.007) (0.004) 0.002 NM NM NM NM NM NM NM NM NM NM 49.5
Average 23.2 20.7 25.8 16.2 15.1 9.8 8.5 11.1
Oil Services
COSL 2883 HK Rmb 0.70 0.92 0.98 1.10 32% 7% 12% 9.5 14.7 13.8 12.3 9.1 10.1 9.4 8.5
GAIL GAIL IN Rs 24.75 29.16 35.00 38.85 18% 20% 11% 19.2 16.3 13.6 12.2 12.3 11.0 9.2 8.3
Gujarat State Petronet GUJS IN Rs 7.35 8.60 10.05 10.76 17% 17% 7% 13.4 11.4 9.8 9.1 7.0 6.7 6.2 5.7
Average 16.3 13.9 11.7 10.7 9.7 8.8 7.7 7.0
LNG and City Gas Distribution
Petronet LNG PLNG IN Rs 5.39 8.26 10.55 12.18 53% 28% 15% 24.5 16.0 12.5 10.8 14.3 10.6 9.2 8.3
Gujarat gas GGAS IN Rs 13.48 20.00 23.67 25.82 48% 18% 9% 27.0 18.2 15.4 14.1 16.7 11.2 9.4 8.4
Indraprastha Gas IGL IN Rs 15.39 18.63 22.77 26.50 21% 22% 16% 20.9 17.2 14.1 12.1 11.5 9.6 7.8 6.4
Average 24.1 17.2 14.0 12.4 14.1 10.5 8.8 7.7
Sinopec 386 HK Rmb 0.73 0.83 0.94 1.07 14% 13% 15% 7.2 7.0 7.4 6.4 4.3 4.0 4.3 3.8
Reliance Ind. RIL IN Rs 48.62 61.75 78.38 87.63 27% 28% 13% 20.2 15.9 12.5 11.2 12.1 9.2 7.9 7.4
PTT PTT TB Bt 19.43 25.22 34.53 39.91 40% 17% 17% 19.3 14.9 10.9 9.4 5.9 5.3 6.8 5.5
Formosa Petrochemical 6505 TT NT$ 4.50 3.96 6.04 6.48 4% 45% 4% 16.6 20.5 16.6 15.5 10.1 12.0 11.5 10.5
Indian Oil Corporation IOCL IN Rs 44.12 24.77 35.49 36.31 -44% 43% 2% 7.7 13.7 9.6 9.4 10.1 11.2 7.6 7.2
SK Energy 096770 KS Won 7,385 13,151 27,551 29,430 78% 109% 7% 31.4 17.6 8.4 7.9 13.2 8.7 4.6 4.0
S-Oil 010950 KS Won 1,927 6,016 16,639 18,065 212% 177% 9% 82.8 26.5 9.6 8.8 21.3 9.8 3.7 3.0
Shanghai Petrochem 338 HK Rmb 0.22 0.38 0.33 0.43 74% -14% 30% 11.1 7.3 10.0 7.7 7.0 5.3 6.6 5.6
GS Holding 078930 KS Won 5,320 8,596 11,171 11,284 61% 30% 1% 16.8 10.4 8.0 7.9 11.9 6.7 4.9 4.4
Bharat Petroleum Corp. BPCL IN Rs 44.69 32.80 53.20 50.82 -27% 62% -4% 14.0 19.1 11.8 12.3 16.3 14.2 9.7 9.7
Thai Oil TOP TB Bt 5.91 4.41 7.57 7.89 NM 72% 4% NM 19.2 11.2 10.7 4.7 7.6 6.7 6.2
PTT Aromatics & Refining PTTAR TB Bt 3 09
3.09 2 13
2.13 4 38
4.38 5 43
5.43 -31% 106% 24% 13 3
13.3 19 4
19.4 94
9.4 76
7.6 81
8.1 11 3
11.3 75
7.5 61
6.1
Hindustan Petroleum Corp. HPCL IN Rs 38.29 17.46 19.20 22.31 -54% 10% 16% 9.7 21.3 19.4 16.7 13.2 17.5 18.0 15.5
Average 20.8 16.4 11.1 10.1 10.6 9.5 7.7 6.8
Formosa Chemical & Fibre 1326 TT NT$ 5.15 8.45 10.49 10.24 61% 26% -2% 10.2 9.1 11.0 11.3 7.6 7.6 11.2 12.2
Petronas Chemicals PCHEM MK RM NA 0.30 0.39 0.48 NA 37% 28% NA 24.0 18.6 15.1 NA 12.0 10.2 8.1
PTT Chemical PTTCH TB Bt 4.55 6.79 13.52 16.34 51% 99% 21% 35.2 23.6 11.8 9.8 7.1 15.5 7.5 6.3
Honam Petrochemical 011170 KS Won 25,006 24,616 34,539 38,383 NM 40% 11% 15.1 15.4 10.9 9.8 7.4 7.1 5.2 4.2
Average 20.2 18.0 13.1 11.5 7.4 10.5 8.5 7.7
Midstream Chemical
LG Chem 051910 KS Won 23,315 32,727 40,993 46,017 40% 25% 12% 22.7 16.2 12.9 11.5 8.6 6.4 5.1 4.5
Nanya Plastics 1303 TT NT$ 2.06 5.37 6.64 7.91 150% 27% 19% 21.5 11.8 13.2 11.1 13.6 9.5 12.2 11.2
Formosa Plastics 1301 TT NT$ 4.51 7.52 9.76 10.62 65% 33% 7% 12.6 9.9 12.0 11.0 10.1 7.8 12.3 11.2
Cheil Industries 001300 KS Won 2,540 5,185 6,425 8,297 104% 24% 29% 46.5 22.8 18.4 14.2 14.3 11.8 9.5 7.3
Hanwha Chemical 009830 KS Won 2,448 2,845 4,351 5,010 NM 53% 15% 19.5 16.8 11.0 9.5 9.9 8.7 6.3 6.0
Average 25.0 15.3 13.6 11.5 12.0 9.4 10.1 8.9
China Fertilizer
Sinofert 297 HK Rmb (0.21)
(0 21) 0 08
0.08 0 14
0.14 0 19
0.19 NM 90% 28% NM 37 4
37.4 19 7
19.7 15 4
15.4 NM 37.3
37 3 16.6
16 6 13.4
13 4
China BlueChem 3983 HK Rmb 0.21 0.25 0.39 0.51 19% 53% 30% 17.2 21.8 14.3 11.0 7.4 9.8 6.2 4.8
Source: Company data, Nomura estimates Note: Ratings and price targets are as of the date of the most recently published report
ASIA
A i oil
Asian il and
d petrochemicals
t h i l universe
i P/BV Net Debt/Equity(%) ROE(%) ROCE (%)
Bloomberg 2009 2010 2011E 2012E 2009 2010 2011E 2012E 2009 2010 2011E 2012E 2009 2010 2011E 2012E
Petrochina 857 HK Rmb 1.5 1.6 1.7 1.6 17% 20% 31% 34% 12.6% 15.7% 17.8% 16.8% 10.6% 12.7% 13.7% 12.3%
CNOOC 883 HK R b
Rmb 22
2.2 26
2.6 28
2.8 24
2.4 Nett C
N Cash
h Nett C
N Cash
h Nett C
N Cash
h Nett C
N Cash
h 17 6%
17.6% 27 9%
27.9% 29 2%
29.2% 24 5%
24.5% 20 8%
20.8% 31 6%
31.6% 31 5%
31.5% 26 9%
26.9%
Woodside WPL AU USD 3.6 2.9 3.1 2.5 42.5% 35.6% 38.4% 16.5% 21.7% 15.9% 16.5% 25.8% 11.7% 10.5% 12.0% 20.0%
PTT E&P PTTEP TB Bt 2.9 2.9 3.1 2.6 9% 14% 24% 14% 16.3% 24.7% 23.7% 24.9% 11.2% 16.5% 16.3% 17.4%
Origin ORG AU A$ 1.4 1.4 1.4 1.3 NM 26.0% 31.3% 29.3% 98.6% 6.0% 6.2% 7.4% 71.3% 4.7% 4.3% 5.6%
Cairn CAIR IN Rs 2.0 1.7 1.3 1.1 7% Net Cash Net Cash Net Cash 3.2% 16.6% 23.3% 21.5% 3.2% 17.3% 26.8% 29.2%
Santos STO AU A$ 1.9 1.7 1.7 1.7 Net Cash Net Cash 4.4% 34.1% 6.2% 6.6% 5.6% 7.0% 6.6% 7.8% 5.3% 5.3%
Oil Search OSH AU USD 3.2 2.9 2.9 2.7 Net Cash Net Cash 31.6% 67.4% 0.1% 0.1% 0.1% 0.1% 8.7% 6.8% 4.6% 3.6%
Kunlun Energy 135 HK HK$ 1.9 3.2 2.3 2.0 Net Cash Net Cash 12.1% 9.0% 15.0% 15.0% 13.5% 13.9% 11.2% 15.2% 16.8% 12.2%
AWE AWE AU A$
$ 0.7 0.7 0.8 0.7 Net Cash Net Cash Net Cash Net Cash 8.1% -2.7% 1.0% 5.8% 11.9% -3.1% 1.1% 6.2%
Eastern Star Gas ESG AU A$ 3.7 4.3 2.9 2.9 Net Cash Net Cash Net Cash Net Cash -1.6% -3.8% -1.7% 0.8% -2.6% -4.5% -2.4% 1.0%
Average 2.3 2.4 2.2 2.0 18% 11% 12% 14% 15% 11% 12% 13%
Oil Services
COSL 2883 HK Rmb 1.4 2.5 2.1 1.9 125.0% 95.1% 82.6% 70.7% 15% 18% 17% 16% 8% 10% 10% 10%
GAIL GAIL IN Rs 3.6 3.1 2.7 2.4 Net Cash 5.5% 10.1% 12.6% 20% 21% 22% 21% 22% 20% 19% 18%
Gujarat State Petronet GUJS IN Rs 3.5 2.8 2.3 1.9 69.4% 57.5% 52.9% 43.2% 30% 28% 26% 23% 19% 17% 16% 15%
3.6 3.0 2.5 2.1 25% 24% 24% 22% 20% 19% 18% 17%
LNG and d Cit
City Gas
G Distribution
Di t ib ti
Petronet LNG PLNG IN Rs 4.4 3.7 3.0 2.5 97% 111% 125% 130% 19% 25% 26% 25% 12% 14% 13% 12%
Gujarat gas GGAS IN Rs 6.0 5.4 4.6 3.9 Net Cash Net Cash Net Cash Net Cash 23% 32% 33% 30% 18% 24% 25% 24%
Indraprastha Gas IGL IN Rs 5.4 4.4 3.6 2.9 Net Cash 23% 23% 12% 29% 28% 28% 26% 26% 23% 22% 21%
5.3 4.5 3.7 3.1 24% 28% 29% 27% 19% 21% 20% 19%
Sinopec 386 HK Rmb 1.2 1.2 1.2 1.1 56% 46% 41% 36% 18% 18% 18.0% 18.0% 13% 13% 13% 14%
Reliance Ind. RIL IN Rs 2.3 2.0 1.8 1.6 36% 22% 6% 1% 19% 13% 15.1% 14.8% 9% 10% 11% 11%
PTT PTT TB Bt 1.4 1.6 1.9 1.7 58% 47% 47% 39% 12% 13% 16.0% 16.4% 9% 10% 11% 12%
Formosa Petrochemical 6505 TT NT$ 3.1 3.2 3.6 3.5 66% 53% 34% 24% 20% 16% 22.5% 22.8% 12% 11% 17% 19%
Indian Oil Corporation IOCL IN Rs 1.6 1.5 1.3 1.2 91% 80% 69% 60% 22% 11% 14.5% 13.5% 2% 5% 4% 6%
SK Energy 096770 KS Won 2.7 2.0 1.7 1.4 81% 52% 32% 22% 9% 13% 21.7% 19.8% 6% 6% 11% 15%
S-Oil 010950 KS Won 4.6 4.0 2.9 2.4 49% 40% 24% 5% 6% 16% 35.3% 30.1% 7% 7% 20% 30%
Shanghai Petrochem 338 HK Rmb 1.2 1.2 1.2 1.1 53% 25% 23% 20% 11% 16% 12.4% 14.2% 8% 12% 11% 13%
GS Holding 078930 KS Won 2.0 1.7 1.4 1.2 15% 12% 2% Net Cash 13% 18% 19.5% 16.8% 7% 13% 16% 17%
Bharat Petroleum Corp. BPCL IN Rs 1.6 1.5 1.4 1.3 184% 163% 149% 135% 12% 8% 12.2% 10.6% 1% 2% 4% 0%
Thai Oil TOP TB Bt 1.1 1.4 2.1 1.9 51% 42% 20% 6% 16% 8% 18.7% 17.2% 12% 7% 15% 16%
PTT Aromatics & Refining PTTAR TB Bt 09
0.9 13
1.3 17
1.7 15
1.5 124% 95% 65% 46% 16% 10% 19 1%
19.1% 20 5%
20.5% 9% 5% 12% 14%
Hindustan Petroleum Corp. HPCL IN Rs 1.1 1.1 1.0 1.0 182% 179% 173% 165% 12% 5% 5.3% 6.0% 2% 1% 0% 1%
Average 1.9 1.8 1.8 1.6 14% 13% 18% 17% 7% 8% 11% 13%
Formosa Chemical & Fibre 1326 TT NT$ 1.3 1.6 2.3 2.2 32% 23% 21% 22% 14% 19% 21% 20% 11% 16% 18% 17%
Petronas Chemicals PCHEM MK RM NA 3.1 2.9 2.6 NA Net Cash Net Cash Net Cash NA 13% 16% 18% NA 18% 23% 27%
PTT Chemical PTTCH TB Bt 0.8 2.2 1.9 1.7 34% 28% 7% Net Cash 6% 10% 18% 19% 6% 8% 16% 18%
Honam Petrochemical 011170 KS Won 3.2 2.7 2.2 1.8 11% 28% 15% 5% 24% 19% 22% 20% 11% 16% 16% 17%
Average
g 1.8 2.4 2.3 2.1 15% 15% 19% 19% 9% 14% 18% 20%
Midstream Chemical
LG Chem 051910 KS Won 5.9 4.5 3.4 2.9 22% 9% 2% 0% 28.4% 31.7% 30.1% 27.6% 18% 24% 26% 26%
Nanya Plastics 1303 TT NT$ 1.4 1.8 2.3 2.2 34% 25% 20% 18% 5.3% 15.8% 17.9% 20.3% 6% 13% 16% 18%
Formosa Plastics 1301 TT NT$ 1.5 1.7 2.6 2.5 25% 17% 14% 14% 13.6% 18.9% 22.1% 22.8% 13% 21% 25% 26%
Cheil Industries 001300 KS Won 3.0 2.3 2.1 1.9 19% 11% 11% 7% 7.1% 11.5% 12.1% 13.9% 6% 8% 10% 11%
Hanwha Chemical 009830 KS Won 2.5 2.2 1.9 1.6 53% 52% 37% 35% 13.7% 14.1% 18.7% 18.1% 5% 9% 11% 12%
Average 2.1 2.0 2.2 2.0 9.9% 15.1% 17.7% 18.8% 7% 13% 15% 17%
China Fertilizer
Si f t
Sinofert 297 HK R b
Rmb 20
2.0 16
1.6 15
1.5 14
1.4 66% 55% 51% 46% -6%
6% 4% 8% 9% -2%
2% 4% 7% 8%
China BlueChem 3983 HK Rmb 1.7 2.4 2.2 1.9 Net Cash Net Cash Net Cash Net Cash 10% 12% 16% 18% 12% 12% 17% 20%
Source: Company data, Nomura estimates
Note: Ratings and price targets are as of the date of the most recently published report
ASIA
Share price performance relative to index Price Mkt. % change % change rel to underlying market
Company Name Bloomberg Currency 29-Apr (US$ bn) -1w -1m -3m -6m -1y -1w -1m -3m -6m -1y
Petrochina 857 HK HK$ 11.16 322.4 (6.1) (7.2) 0.0 16.6 22.6 (4.4) (6.8) 0.8 16.4 9.1
ONGC ONGC IN Rs 309 59.8 2.1 5.5 4.5 (7.0) 17.1 4.5 7.1 (1.2) (1.1) 7.5
CNOOC 883 HK HK$ 19 16
19.16 110 2
110.2 (3 6)
(3.6) (6 5)
(6.5) 78
7.8 13 5
13.5 38 4
38.4 (1 4)
(1.4) (5 1)
(5.1) 19
1.9 20 7
20.7 27 0
27.0
PTT E&P PTTEP TB Bt 185 20.6 (1.9) 0.3 10.8 3.4 21.7 (0.8) (2.4) (0.9) (5.0) (15.0)
Cairn CAIR IN Rs 349.25 15.0 0.2 (1.2) 6.1 6.5 10.9 2.6 0.2 0.3 13.2 1.8
Woodside WPL AU USD 46.80 40.6 (2.2) (1.3) 10.1 7.3 3.1 (0.3) (0.1) 10.1 4.6 1.7
Origin ORG AU A$ 16.35 19.0 0.7 (1.0) 3.1 5.6 2.7 2.7 0.1 3.1 2.8 1.4
Santos STO AU A$ 15.12 14.5 (5.3) (5.2) 8.7 19.3 9.2 (3.5) (4.1) 8.7 16.3 7.8
Oil Search OSH AU USD 7.05 10.2 (4.2) (1.1) 4.4 7.8 24.1 (2.3) (0.0) 4.4 5.0 22.5
Kunlun Energy 135 HK HK$ 13.76 8.8 (2.3) 6.8 16.6 36.5 31.3 (0.6) 7.2 17.5 36.2 16.8
AWE AWE AU A$ 1.56 0.9 (4.6) (9.0) (10.6) 3.0 (36.8) (2.7) (8.0) (10.6) 0.3 (37.7)
Oil Services
COSL 2883 HK HK$ 15.36 12.1 (8.2) (13.7) 0.8 16.7 38.9 (6.6) (13.4) 1.6 16.5 23.6
GAIL GAIL IN Rs 475.70 13.6 (0.7) 2.6 3.2 (2.2) 10.9 1.7 4.2 (2.5) 4.0 1.7
Gujarat State Petronet GUJS IN Rs 98.35 1.3 (4.1) (3.4) (3.9) (14.5) 3.2 (1.9) (2.0) (9.2) (9.1) (5.3)
y Gas Distribution
LNG and City
Petronet LNG PLNG IN Rs 132.10 2.2 (4.5) 5.5 5.6 10.5 60.9 (2.2) 7.1 (0.2) 17.5 47.6
Gujarat gas GGAS IN Rs 364.60 1.1 (2.9) (4.1) 13.6 (5.6) 26.1 (0.7) (2.7) 7.3 0.4 15.7
Indraprastha Gas IGL IN Rs 321.20 1.0 (1.3) 6.0 1.5 (2.7) 37.7 1.0 7.6 (4.0) 3.5 26.3
Eastern Star Gas ESG AU A$ 0.76 0.8 (3.2) (1.3) (5.6) (11.6) (16.9) (1.3) (0.2) (5.6) (13.9) (18.0)
Sinopec 386 HK HK$ 7.82 110.0 (2.4) 0.0 (10.6) 4.8 24.3 (0.7) 0.3 (9.9) 4.6 10.6
Reliance Ind. RIL IN Rs 982 72.7 (2.7) (5.2) 6.6 (8.6) (4.9) (0.4) (3.7) 0.8 (2.8) (12.7)
Formosa Petrochemical 6505 TT NT$ 100.50 33.4 1.3 4.5 6.7 16.1 21.4 0.7 1.0 8.3 7.5 7.9
PTT PTT TB Bt 375.00 35.8 (1.1) 5.0 9.0 21.8 45.9 0.0 2.2 (2.5) 12.0 1.9
Indian Oil Corporation IOCL IN Rs 340 18.7 2.3 2.2 4.3 (19.6) 15.4 4.7 3.7 (1.4) (14.5) 5.9
S-Oil 010950 KS Won 159,500 16.8 1.0 4.9 48.4 116.4 182.3 2.0 1.5 40.2 89.3 124.3
SK Innovation 096770 KS Won 232,000 20.0 (8.7) 8.9 15.1 39.8 90.2 (7.7) 5.4 8.8 22.3 51.1
Shanghai Petrochem 338 HK HK$ 3.76 8.3 (0.8) 2.2 (21.8) 3.9 24.1 1.0 2.5 (21.2) 3.7 10.4
Bharat Petroleum Corp. BPCL IN Rs 627.15 5.1 1.5 3.4 5.7 (18.7) 21.1 3.9 4.9 (0.1) (13.6) 11.1
Thai Oil TOP TB Bt 84.50 5.8 (1.7) (0.6) 24.3 49.6 79.8 (0.7) (3.2) 11.1 37.5 25.5
GS HoldingS 078930 KS Won 89,500 7.8 (11.4) (5.8) 13.6 39.4 130.4 (10.4) (8.9) 7.3 22.0 83.0
Hindustan Petroleum Corp. HPCL IN Rs 372 2.8 (0.5) 5.7 8.9 (25.3) 17.9 1.8 7.3 3.0 (20.5) 8.2
PTT Aromatics & Refining PTTAR TB Bt 41.25 4.1 (1.2) 3.8 8.6 22.2 48.7 (0.1) 1.0 (2.9) 12.4 3.8
Formosa Chemical & Fibre 1326 TT NT$ 115.50 25.0 2.7 3.6 9.0 29.8 45.3 2.0 0.1 10.6 20.2 29.1
Petronas Chemicals PCHEM MK RM 7.23 19.5 (0.3) (1.9) 17.6 NA NA (1.0) (0.6) 17.3 NA NA
PTT Chemical
Ch i l PTTCH TB Bt 160 00
160.00 81
8.1 (2 7)
(2.7) 19
1.9 96
9.6 39
3.9 54 6
54.6 (1 7)
(1.7) (0 8)
(0.8) (2 0)
(2.0) (4 5)
(4.5) 79
7.9
Honam Petrochemical 011170 KS Won 378,000 11.2 (13.1) (2.5) 6.5 46.8 160.7 (12.2) (5.6) 0.6 28.4 107.1
Midstream Chemical
Nanya Plastics 1303 TT NT$ 87.80 24.1 1.7 0.9 9.1 25.1 32.6 1.1 (2.5) 10.7 15.9 17.9
Formosa Plastics 1301 TT NT$ 117.00 22.9 5.9 12.5 17.8 31.5 67.1 5.2 8.7 19.6 21.8 48.5
LG Chem 051910 KS Won 530,000 32.8 (5.2) 15.7 28.5 41.0 87.3 (4.2) 12.0 21.4 23.3 48.8
Cheil Industries 001300 KS Won 118,000 5.5 (7.1) (1.7) (0.8) 25.8 47.7 (6.1) (4.9) (6.3) 10.1 17.3
Hanwha Chemical 009830 KS Won 47 700
47,700 62
6.2 (12 2)
(12.2) 10 7
10.7 20 6
20.6 47 2
47.2 182 3
182.3 (11 2)
(11.2) 71
7.1 14 0
14.0 28 8
28.8 124 2
124.2
China Fertilizer
Sinofert 297 HK HK$ 3.24 2.9 (3.3) (3.3) (27.5) (24.8) (23.4) (1.6) (3.0) (26.9) (25.0) (31.8)
China BlueChem 3983 HK HK$ 6.32 1.4 (7.3) (2.3) (11.4) 1.4 30.0 (5.7) (2.0) (10.7) 1.2 15.7

ASIA
Crude oil fundamentals

ASIA
Oil prices
i could
ld peak
k in
i the
th near term
t
WTI & Brent prices
 Weeeexpect
pec ooil p
prices
ces to
o remain
e a volatile,
o a e, with po
potential
e a
US$/bbl US$/bbl
to spike higher in the near term. 130 130
120 120
 In addition, fundamentals will likely tighten over the 110 110
coming months on the back of both increasing 100 100
d
demand d andd reduced
d d supply.
l 90 90
80 80
 The potential increase in oil demand in Japan for 70 70
60 60
power generation during its peak power demand
50 50
season will be an added feature to this y
year’s 40 40
seasonal demand upswing as we head into the 30 30
summer driving season. 20 20
Sep-09
Nov-09
Sep-10
Nov-10
Jan-09
Jan-10
Jan-11
Jul-09
Jul-10
May-09
May-10
May-11
Mar-09
Mar-10
Mar-11
 The effect of lost Libyan crude capacity will likely have
a more profound impact on sweet crude as European Brent WTI
refiners return from maintenance season in the

coming months.
Nomura Brent crude oil price forecasts
US$/bbl 2008 2009 2010 2011E 2012E 2013E Long Term
Q1 96.52 45.14 76.61 105 105
Q2 122 08
122.08 59 35
59.35 78 63
78.63 123 113
Q3 115.91 68.37 76.70 110 113
Q4 55.89 74.98 86.93 103 110
Year Avg. 97.60 61.96 79.73 110 110 110 75
Source: Bloomberg, Nomura estimates

ASIA
Loss of Libyan crude to boost sweet crude premium

Libya sweet crude production capacity as %age
of global sweet crude production  Libyan crude capacity accounts for only 2% of world supply
7%
but represents
p 7% of g
global sweet crude capacity.
p y
 73% of Libyan oil is exported to Europe, with Italy being the
major importer.
 We believe that the spread could widen as we move into the
summer season as demand for sweet crude further
93% increases.
World major crudes by quality

Libya Production Capacity
Rest of World sweet crude production
Source: IEA, Eni, Nomura estimates
Sweet-Sour crude spread (Brent – Dubai)

12.0 (US$/bbl)
8.0
4.0
00
0.0
-4.0
No v-09
No v-10
Jan-09
Jan-10
Jan-11
ul-09
ul-10
May-09
May-10
ar-09
ar-10
ar-11
p-09
p-10
Sep
Sep
Ju
Ju
Ma
Ma
Ma
Source: Bloomberg
© Nomura International (Hong Kong) Limited
Source: Eni World Oil & Gas Review 2010 11
ASIA
Japanese oil demand to increase this summer
Potentially available capacity in thermal power  The earthquake and tsunami in Japan could cause a spike
in oil demand.
 In Japan, oil-fired power plants have always been used as
the swing supplier.
 Using fuel substituted in 2007 as a reference, we find oil
demand could increase by 171kbbl/d, or 3.9% of total
Japanese demand.
Source: FEPC, Nomura research

 Moreover, based on the increase in oil demand for power
Moreover
generation in 2010, an additional 180kbbl/d could be
needed in 3Q11 over 2Q11.
Earthquake impact on power demand Japan oil demand for electricity generation
0.8 (mmb/d)
Prior 5 Year Range
Prior 5 Year Average
2010
06
0.6 2011
+0.2mmb/d
0.4
Note: ‘Max individual alternate fuel requirement’ refers to the individual additional 0.2
requirement of each alternative source to generate the total additional power
required.‘Actual demand increase by source’ for 2011F is calculated at the same
percentage of total as 2007.
Source: FEPC, JNES, Nomura estimates
0.0
J F M A M J J A S O N D
Source: FEPC
ASIA
Seasonal demand upswing in US and Europe

North America gasoline demand vs price in 2008
(mmb/d)
 The summer driving season in the US has historically led to a
500 (cents/gallon) 11.0
significant
g rise in g
gasoline demand in the summer.
400
 Gasoline demand continues to follow its seasonal pattern,
10.6
300 +0.3mmb/d with total gasoline demand up by 0.2mmbbl/d from December
200
2010 to April this year, while at the same time, oil prices
Impact of
10 2
10.2 increased by 34% from US$91
US$91.8/bbl
8/bbl to US$123
US$123.0/bbl.
0/bbl
100 financial crisis
 Even during 2008, when oil prices crossed US$100/bbl,
0 9.8
gasoline demand increased during the first eight months of
Ap r-08
ct-08
g-08
p-08
v-08
c-08
n-08
n-08
ul-08
y-08
b-08
Mar-08
the y
year before hitting
g the financial crisis in September.
p
Nov
Dec
Feb
Aug
Sep
Jan
Jun
May
Ju
Oc
US Regular Grade Motor Gasoline retail price  In addition, we foresee a similar pickup in OECD Europe
North America Gasoline Demand demand. On a quarterly basis, 3Q demand for OECD Europe
Source: IEA, Nomura estimates is on an average 430kbbl/d higher than 2Q demand.
North America total product demand OECD Europe total product demand
30.0 (mmb/d) Prior5 Year Range 17.0 Prior5 Year Range
Prior 5 Year Average (mmb/d)
2010 2010
28.0 2011 2011
16.0
+0.4mmb/d
26.0
15.0
24.0
+0.3mmb/d 14.0
22.0
20.0 13 0
13.0
J F M A M J J A S O N D J F M A M J J A S O N D
Source: IEA, Nomura Research
Source: Nomura estimates 13
ASIA
Demand from refineries to increase in coming months

Global refinery turnaround
 Growth in refinery run rates has lagged demand growth so
far this year.
y
 Refinery turnaround this year peaked in March and some
2.0mmbbl/d of refining capacity will slowly resume operation
from April to July, with 1.0mmbbl/d coming back on line from
Europe.
Europe
 This represents approx 8% of total refinery throughput in
Europe and could further increase demand for light sweet
crude, in our opinion.
Source: IEA
European refinery turnaround Global refinery throughput

78 (mb/d)
76
74
72
70 Prior4 Year Range Prior 4 Year Average

2010 2011
IEA Forecast 2011
68
Source: IEA Source: IEA

ASIA
Demand growth to remain strong

Global oil demand
92.0
 Rising consumption, led by faster-growing non-OECD
((mmb/d)) countries,, will likelyy bring
g total 2011F oil demand to
90.0 89.7mmbbl/d, up 1.8mmbbl/d y-y, rising further to
88.0
91.3mmbbl/d in 2012F, up 1.6mmbbl/d y-y.
86.0
 China, India and the Middle East are the key demand
centers
centers.
84.0
 We estimate that total non-OECD demand growth will
82.0 amount to 1.5mmbbl/d vs. OECD demand growth of only
Q11E
Q11E
Q11E
Q12E
Q12E
Q12E
Q12E
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
013E
0.2mmbbl/d in 2011F.
2Q
3Q
4Q
1Q
2Q
3Q
4Q
20
2
3
4
2
3
4
2
3
4
2
3
4
Source: IEA, Nomura estimates
2011F global demand change 2012F global demand change

Global demand Global demand
Total non-OECD Total non-OECD
Total OECD Total OECD
Chi
China Chi
China
Other Asia Other Asia
Middle East Middle East
Latin America OECD-North America
OECD-North America Latin America
Africa Africa
FSU FSU
OECD-Europe OECD-Pacific
non-OECD Europe OECD-Europe
OECD-Pacific (mmb/d) non-OECD Europe (mmb/d)
0.0 0.5 1.0 1.5 2.0 0.0 0.5 1.0 1.5 2.0
Source: Nomura estimates.

Source: Nomura estimates 15
ASIA
April Chinese PMI dips but remains strong

China’s official PMI components
 China’s official PMI fell to 52.9 in April from 53.4 in March.
The index has remained above the expansion-contraction
p 50
mark for 26 consecutive months, suggesting that the
manufacturing sector is in a solid expansion stage.
 Although the new orders component moderated again, to 53.8
from 55
55.2
2 in March
March, it is still well above the critical 50 mark
mark.
New export orders fell slightly to 51.3 from 52.5 in March,
suggesting solid external demand will continue.
 Input
p p prices component
p fell to 66.2 from 68.3 in March,
suggesting that PPI inflation will remain at a relatively high
level over the next few months.
Source: Nomura Global Economics
PMI, new orders & finished goods inventories China exports & trade surplus
Source: Nomura Global Economics Source: Nomura Global Economics 16

ASIA
Chinese oil demand continues in upward trajectory

Chinese oil demand
12 ((mmb/d)
b/d)
10
2Q11E
3Q11E
4Q11E
1Q12E
2Q12E
3Q12E
4Q12E
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2013E
Source: IEA,, Nomura estimates.
 Total Chinese oil demand increased by 0.9mmbbl/d, 10.3% y-y during the first quarter, while diesel demand, which is
driven mainly by industrial activities
activities, increased by 0
0.4mmbbl/d,
4mmbbl/d or 13
13.8%
8% yy-y
y in 1Q11
1Q11.
 Economic activity continued to expand in the first three months of 2011 as industrial production growth accelerated
to 14.4% y-y in 1Q11 from 13.3% in 4Q10.
 We estimate that Chinese demand will increase by 0
0.6mmbbl/d
6mmbbl/d in 2011F and a further 0
0.6mmbbl/d
6mmbbl/d in 2012F on the
back of strong GDP growth of 9.8% and 9.5%, respectively (based on Nomura’s economic forecasts).
 We also estimate that diesel demand will increase by 0.3mmbbl/d in 2011, or 9.0% y-y, which accounts for nearly
half of this year’s Chinese demand growth.

ASIA
Indian oil demand remains strong

India gasoline demand  India’s GDP is expected to rise by 8.0% in 2011F and a
400 (kb/d) Prior 5 Year Range further 8.3% in 2012F, according to Nomura estimates.
g
350
2010  We believe demand for transportation fuels, driven by
2011
population growth and rising income per capita, especially in
300 urban areas, will continue to be the main driver of oil
demand g growth.
250  In addition, farming and industrial activities have contributed
to support gasoil demand so far this year.
200
 Year-to-date, India’s oil demand growth is up 3.7% y-y on
150 8.3% growth in gasoline and 5.8% growth in distillate
J F M A M J J A S O N D demand.
Source: Thomson Reuters, Nomura research  Led by India, we estimate ‘Other Asia’ will see robust oil
I di distillate
India di till t demand
d d demand growth of 00.3mmbbl/d
3mmbbl/d in each of 2011F and 2012F
2012F,
Prior 5 Year Range
up 2.4% y-y each year, respectively.
1,400 (kb/d)
2010
2011
1 200
1,200
1,000
800
600
Source: Thomson Reuters, Nomura research

ASIA
New supply peaked in 2009

Global oil supply and demand
 While demand has outpaced supply over the past year,
3.0 (mmb/d) (mmb/d) 3.0
we believe there might
g be new supply
pp y g
growth,, beyond
y
our estimates, going into 2013F as high oil prices entice
2.0 2.0
new investments into the sector.
 However, on current estimates, OPEC spare capacity will
1.0 1.0
lik l ttrend
likely d llower iin th
the coming
i ttwo years as d
demand
d
growth continues to exceed supply growth.
0.0 0.0
2005 2006 2007 2008 2009 2010 2011F 2012F 2013F  We estimate OPEC spare capacity, which reached a
peak of 6.7mmbbl/d in 2009,, to average
p g 4.8mmbbl/d in
(1.0) -1.0
2012F from 5.3mmbbl/d this year, before bottoming out in
OPEC NGL growth Total OPEC capacity growth 2013F.
Non OPEC Production Growth Global demand growth
(2.0) -2.0
Peak capacity coming online Global Supply-Demand Balance

6,000
(mmbbl/d) 2009 2010 2011F 2012F 2013F 2014F 2015F
5,000
4,000 Global Demand 85.0 87.9 89.7 91.3 92.8 93.9 95.0
Non-OPEC supply 51.7 52.8 53.7 54.2 53.9 54.0 54.4
3,000
OPEC NGL
2,000
production 4.8 5.3 5.9 6.3 6.6 6.9 7.1
1 000
1,000
OPEC crude capacity 35.0 35.2 35.5 35.8 36.7 37.8 38.1
0
2009 2010 2011 2012 2013 2014 2015 Call on OPEC
Africa Asia Production 28.5 29.8 30.1 30.9 32.4 33.0 33.5
China FSU
Latin America OECD Asia Pacific OPEC average
OECD Europe OECD North America
OPEC Non OPEC Middle East annual spare capacity 6.5 5.4 5.4 4.9 4.3 4.8 4.6
Source: International Energy Agency, Nomura estimates Source: International Energy Agency, Nomura estimates
19
ASIA
OPEC spare capacity continues to fall

OPEC capacity and production
(mmb/d) (mmb/d)
 The OPEC compliance rate declined from a peak of
37 0
37.0 70
7.0
83% iin M
March
h 2009 tto only
l 60% iin M
March
h 2011
2011.
35.0 6.0
33.0 5.0
 However, this includes lost capacity in Libya;
31.0 4.0
excluding Libya, compliance would be closer to 30%.
29 0
29.0 30
3.0
 On the contrary,
contrary Brent oil price has increased from
27.0 2.0
US$47/bbl in March 2009, when the compliance level
25.0 1.0
was at its peak, to about US$125/bbl.
23.0 0.0
1Q 11E
3Q 11E
1Q 12E
3Q 12E
1Q 13E
3Q 13E
Q04
Q04
Q05
Q05
Q06
Q06
Q07
Q07
Q08
Q08
Q09
Q09
Q10
Q10
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
OPEC Crude Production Capacity OPEC Crude Production

OPEC crude capacity excluding libya OPEC Spare Capacity
OPEC spare capacity excluding Libya
O C compliance to quota
OPEC C
Compliance
li by
b OPEC members
b
OPEC 11 Complaince Rate (lhs) (mb/d) 28.0
OPEC 11 Production
90%
27.0
70%
26.0
50%
30% 25.0
ov-09
ov-10
an-09
an-10
an-11
JJul-09
JJul-10
ay-09
ay-10
Mar-09
Mar-10
Mar-11
ep-09
ep-10
Ma
Ma
No
No
Ja
Ja
Ja
Se
Se
M
Source: International Energy Agency, Nomura estimates

© Nomura International (Hong Kong) Limited Source: IEA 20
ASIA
Iraq supply could be swing factor in 2013 & beyond

 Seven years after the overthrow of the Saddam Hussein regime, Iraq has witnessed huge interest in its oil sector
from international oil companies (IOCs).
 The government undertook two rounds of bidding in 2009-10 and has already awarded some of its most prolific
super giant fields to major IOCs.
 The two rounds promise to raise headline production to over 12.0mmbbl/d from the current 2.75mmbbl/d.
 For now, we estimate that Iraq’s production capacity can reach 3.1mmbbl/d by end-2011, 3.2mmbbl/d in 2012 and
3.4mmbbl/d in 2013 from 2.75mmbbl/d currently.
 However, we do recognize that the Iraqi government has a higher expectation of some 6.0mmbbl/d.
 In the event that Iraq can deliver production above our expectations
expectations, it could alter the fundamental picture and weigh
on oil prices.
Iraq production capacity estimates Iraq capacity additions by fields

(mmb/d)
(mmb/d) 14.0
14 Iraq Prod Capacity as per Licensing Rounds

Nomura Estimates 12.0
Najmah
12 Qayara
IEA 10.0 Badrah
10
Garraf
Halfaya
8 8.0
Majnoon
6 6.0
West Qurna - 2
Nassiriyah
4 Al Ahdab
Al-Ahdab
4.0 Zubair
2 West Qurna - 1
2.0 Rumaila
0
011F
012F
013F
014F
015F
016F
017F
018F
019F
020F
2009
2010
0.0
2
20
20
20
20
20
20
20
20
20
20
Current Capacity Round I Round II Kurdistan
Source: Bloomberg, Nomura research

Source: International Energy Agency, Nomura research
ASIA
Rig count points to intensifying investments

Global oil rig count  We believe that rig count is an early indicator of
2,500 future supply growth and serves as an indication of
i
investment
t t level
l l iin th
the oilil markets.
k t
2,000
 Over the past months, we have seen an increase in
1,500
rig counts, which we believe could be an indication
that investments are picking up in the sector.
1,000
 Our analysis suggests that there is approximately a
24-27-month lag between global rig count and its
500
peak effect on oil supply.
-  Based on our analysis, if rig counts are sustained at
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
the current level, it could push 2013 global supply up
by approximately 3.2mmbbl/d from 2010 average,
Source: International Energy Agency, Nomura research compared
p with our current estimate of 2.6mmbbl/d.
Rig count (-2years) vs global oil supply Non-OPEC rig count vs supply
78 90% (R Square)
(OPEC y = 7.0012ln(x) + 25.53
Capacity + R² = 0.8222
Non OPEC
Non-OPEC 80%
76 supply)
70%
74
60%
72
50%
40%
(Global Rig Count)
70 0 5 10 15 20 25 30 35
- 500 1,000 1,500 2,000 (Lag in months)
ASIA
Inventories could continue to fall

 While both crude and product inventories remain near their
OECD crude inventory days (comm + strategic) five-year averages, OECD inventories have shown a
60 (Days of Prior5 Year Range
d
demandd Prior 5 Year Average downward trend,, as demand rebounded in 2010,,
cover) 2010 outpacing supply growth.
2011
55
 OECD industry crude inventory currently stands at
50 979mmbbl, 0.7% higher than its five-year average but
5 6% llower th
5.6% than it
its peakk in
i AAprilil 2010
2010; while
hil product
d t
45 inventories are at 1,412mmbbl, 0.6% higher than the five-
year average but 5.8% lower than the peak in September
40 2009.
 For 2011F, we could see crude inventory drop further as
35 global demand growth continues to outpace supply growth.
 Furthermore, the backwardation nature of the oil futures
curve is skimming excess inventories
inventories.
OECD product inventory days (comm + strategic) Brent 3-month future spread
40.0 (US$/bbl) (US$/bbl)
45 (Days of Prior5 Year Range 9.0
demand Prior 5 Year Average
2010 30.0 3-year spread (LHS)
cover) 70
7.0
2011 3-month spread (RHS)
40 20.0 5.0
3.0
10.0
35 1.0
0.0
(1 0)
(1.0)
(10.0) (3.0)
30
(20.0) ep-06 (5.0)
ec-06
ep-07
ec-07
ep-08
ec-08
ep-09
ec-09
ep-10
ec-10
un-06
un-07
un-08
un-09
un-10
ar-06
ar-07
ar-08
ar-09
ar-10
ar-11
25
Ma
Ma
Ma
Ma
Ma
Ma
De
De
De
De
De
Se
Se
Se
Se
Se
Ju
Ju
Ju
Ju
Ju
ASIA
Fl ti crude
Floating d & product
d t storage
t
Global crude floating storage  No longer a profitable trade as we move into
(mmb)
100
backwardation.
80
 Total oil and product stored at sea declined from its
60
peak of 150mmbbl in November 2009 to 64mmbbl in
40 February 2011.
2011
20
 With Iran storing crude oil in tankers in May-June 2010,
- floating storage of oil and oil products went up globally.
ov-10
un-10
an-11
J ul-10
ay-10
ar-10
eb-11
ar-11
pr-10
O ct-10
ug-10
ep-10
ec-10
Ma
Ma
Ap
Ma
Fe
No
De
Ju
Ja
Au
Se
Mideast Gulf Asia Pacific Med

NW Europe US Gulf Coast West Africa
Source: Bloomberg, Gibson, Nomura research
Global product floating storage

60 (mmb)
50
40
30
20
10
-
Nov-10
Jun-10
Jan-11
Jul-10
May-10
Mar-10
Feb-11
Mar-11
Apr-10
Oct-10
Dec-10
Aug-10
Sep-10
Mideast Gulf Asia Pacific Med

NW Europe US Gulf Coast West Africa
Source: Bloomberg, Gibson, Nomura research

ASIA
Demand a mere fraction of trading volumes

 Physical demand remains a mere fraction
Physical demand vs trading volume
(mb/d)
of trading volumes of oil
oil. 1,000
1 000
Trading Vol on NYMEX
900
 Trading volume have risen exponentially 800 Trading Vol on ICE
700
since July 2005, while demand has only 600
World Demand
risen marginally.
g y 500
400
 WTI physical delivery is only about 1% of 300
the total open interest on NYMEX. 200
100
 This has led to increased volatility and 0
speculation in oil prices.
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
WTI physical delivery as % of open interest

3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
ug-08
ov-08
ug-09
ov-09
ug-10
ov-10
ay-09
ay-10
eb-09
eb-10
eb-11
Ma
Ma
Fe
Fe
Fe
Au
No
Au
No
Au
No
© Nomura International (Hong Kong) Limited Source: Bloomberg, Nomura research 25
ASIA
F d flows
Fund fl to
t negatively
ti l influence
i fl oil
il prices
i in
i the
th
medium term
QE-2 exit timeline  As QE-2 draws to an end by June 2011, liquidity could
tighten in the market, causing reduced fund flow into
commodities.
 Further monetary tightening measures in 2012F in the US
and a possible rate hike by 1Q13 could cause the US dollar
to appreciate and further reduce liquidity and the appeal of
commodities investments.
Source: Nomura economics team
 Globally, our Economics team expects benchmark policy
rates to rise from 3.08% at the end of 2010 to 3.77% by the
end of 2011 and further to 4.25% by the end of 2012.
Benchmark policy interest rate expectations Managed money net long vs WTI price
(% end of period) 2010 2011F 2012F 320,000 (contracts) (US$/bbl) 115
Global 3.08 3.77 4.25 280,000
105
United States 0.13 0.13 0.13 240,000
Euro Area 1.00 1.75 2.75 200,000 95
United Kingdom 0.50 1.00 2.00 160,000 85

Japan 0.05 0.05 0.05 120,000
75
China 5 81
5.81 6 81
6.81 7 56
7.56 80 000
80,000
India 6.25 7.75 7.75 40,000 65
Apr-10
Oct-10
Apr-11
Aug-10
Sep-10
Nov-10
Dec-10
Jan-10
Jun-10
Jan-11
Jul-10
May-10
May-11
Feb-10
Mar-10
Feb-11
Mar-11
Source: Nomura economics team
Managed money net long (lhs) WTI price (rhs)
Source: CFTC, Bloomberg, Nomura research
26
ASIA
N
New ffund
d flows
fl could
ld dry
d up
 QE-2 has led to a significant increase in Global AUM of commodity ETPs
funds inflow into the oil markets
markets. $270 (bn)
$250
 Based on our ETP fund flow analysis, $230
some US$20bn has entered the $210
commodity market since the beginning of $190
QE-2
QE-2. $170
$150
 Also, as many as 20 new ETPs have $130
been launched since the beginning of this $110
year, compared with 66 launched in $90
$70
$
2010
2010.
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Jan-09
Jan-10
Jan-11
Jul-09
Jul-10
 In our opinion
opinion, there are two main Cumulative fund flows into global commodity ETPs
reasons for the strength in fund flows:
$7.0 (bn) (bn) $80
 First, the US dollar remains weak
$70
compared with most global currencies. $5.0
$60
 Second, we believe that most funds are
$50
accumulating oil/commodities this year $3.0
on the back of geopolitical uncertainties, $40
in addition to the desire to hedge against $1.0 $30
a decline in the US dollar
dollar. $20
-$1.0
Weekly ETP Fund Inflows $10
-$3.0 Cumulative Inflow(rhs) $0
Nov--09
Nov--10
Jan--09
Jan--10
Jan--11
Jul--09
Jul--10
May--09
May--10
Mar--09
Mar--10
Mar--11
Sep--09
Sep--10
© Nomura International (Hong Kong) Limited Source: Bloomberg, Nomura research 27
ASIA
US d
dollar
ll tot strengthen
t th byb end-2012F
d 2012F
60-day rolling correlation  The correlation between the US dollar index and oil
10
1.0
Dollar Index Euro World ex-euro prices has remained strong
strong.
 The dollar has weakened notably vs most major
0.5
currencies over the past few months, causing a rise
in oil p
prices.
0.0
 Also, the correlation between the US dollar vs the
(0.5) rest of world currencies with oil price continues to
hold up well.
(1.0)  Our in-house FX team is forecasting for the US
Jun-09
Jun-10
Dollar Index to appreciate to 76.8, up 5.2% by the

Feb-10
Feb-11
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Aug-09
Dec-09
Aug-10
Dec-10 end of 2011F.

US$ Index Nomura currency forecasts

90 140
130
85
120
80 110
100
75
90
2Q11F
3Q11F
4Q11F
1Q12F
2Q12F
3Q12F
4Q12F
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
70
Occt‐10
Occt‐11
Occt‐12
pr‐10
pr‐11
pr‐12
Jan‐10
Jan‐11
Jan‐12
ul‐10
ul‐11
ul‐12
Dollar Index Euro World ex-Euro

ex Euro
Ju
Ju
Ju
Ap
Ap
Ap
Source: Bloomberg, Nomura research Source: Bloomberg, Nomura FX estimates

ASIA
OPEC tto supportt hi

higher
h oil
il prices
i
Break-even oil price of Middle East producers  With the political crisis in the MENA region
120 (US$/bbl) impacting many OPEC members,
members we have seen
101 announcements and pledges of increased
100
84
88 85 government spending on infrastructure.
80 70
65  In p
particular,, Saudi Arabia has pledged
p g to spend
p a
60 total of US$130bn in the two packages that it
40
announced on February 24 and March 18 this year.
20  We note that the majority of the additional expense
is for building 500
500,000
000 homes
homes, which could take 22-3
3
0
years. As a result, we allocate US$45bn of the
Saudi Arabia Qatar Kuwait UAE Iran Iraq
expense to 2011.
Source: Bloomberg, Nomura research  This has led to a steep rise in the break-even oil
price for the oil-dependent economy of the country
to balance its budget from our earlier estimate of
US$63/bbl to US$84/bbl.
 Such additional spending,
spending in our view
view, will lead the
OPEC countries to remain more inclined towards
maintaining higher oil prices.

ASIA
L
Long-term
t oil
il price
i tot remain
i att US$75/bbl
IHS CERA upstream cost index  Our long-term oil price is based on the supply cost of
replacing reserves for the industry, as well as
240 Upstream Capital Costs Index increasing production in line with growth in demand.
Upstream Operating Costs Index
220
 While upstream costs showed a constant rise from
200
1985 to 2008, both capital and operating costs declined
180
at the end of 2008
2008.
160
 Although all these costs have begun to recover, we
140
note that upstream costs of oil and gas drilling and
120 extraction remain well below their 2008 peak levels.
100
 We estimate a Brent price of US$75/bbl is needed to
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
earn a “mid-cycle” 10% to 12% nominal return on
Source: IHS CERA press releases, Nomura research capital.
Industry cost curve US PPI sub-indices for oil & gas industry
140 Production Cost, $/bl
(Index) Oil & Gas extraction
Coal to Liquids
500 Drilling oil & gas wells
120 Oil Shale Gas to Liquids
Deep
p Water and Ultra Support activities for oil and gas operations
deepw ater
100
Arctic 400 Oil & gas field machinery & equipment
Heavy Oil
CO2 - EOR EOR
and Bitumen
80 300
Other Conventional
60 Oil 200
40
Produced MENA 100
20
0
Resources (billion barrels)
1986
6
1988
8
1990
0
1992
2
1994
4
1996
6
1998
8
2000
0
2002
2
2004
4
2006
6
2008
8
2010
0
0
0 2000 4000 6000 8000 10000
Source: US Bureau of Labor Statistics

Source: IEA, Nomura estimates 30
ASIA
L
Long-term
t oil
il price
i tot remain
i att US$75/bbl
Break-even oil price for deepwater oil exploration
 We have also looked at some of the recent major M&A
deals in the oil and gas space over the past few years,
as we believe this is one of the best indicators to
ascertain what the industry perceives as the value of a
barrel of oil.
 We estimate that the long-term implied oil price could
be between US$70/bbl and US$80/bbl in order to give
the companies fair 10-12% returns on capital.
 In addition, we estimate that the majority of probable
new developments have a break-even oil price in the
range of US$40-US$60/bbl for a 15% IRR, although
Source: Woodmac
there are wide differences in break-even prices
Estimated Long-term oil price from M&A deals between the projects.
140 (US$/bbl)
Break-even price
120 B
Brent
t price
i
100
80
60
40
20
0
Q07
Q07
Q07
Q07
Q08
Q08
Q08
Q08
Q09
Q09
Q09
Q09
Q10
Q10
Q10
Q10
Q11
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
Source: Nomura estimates

31
ASIA
Oil price
i forecasts
f t
Nomura Brent oil price forecast
(US$/bbl) 1Q11 2Q11F 3Q11F 4Q11F 1Q12F 2Q12F 3Q12F 4Q12F 2010 2011F 2012F 2013F
Brent 105 123 110 103 105 113 113 110 80 110 110 110
OPEC spare capacity as % of world oil demand  We believe oil prices could peak in the near term
12.0% as the loss of Libyan crude capacity and
increased seasonal demand, alongside a
10.0% potential increase in Japanese demand, play
out.
8.0%
 Post the summer peak, prices could moderate
as strong fundamentals face reduced global
6.0%
liquidity which have partly driven prices higher
liquidity,
4.0%
in recent years.
 We continue to see stronger fundamentals
2.0% through to 2013F, noting the risk to the
downside.
0.0%
Apr-01
Oct-03
Apr-06
Oct-08
Nov-00
Sep-01
Dec-02
Aug-04
Nov-05
Sep-06
Dec-07
Aug-09
Nov-10
Jan-00
Jun-00
Jan-05
Jun-05
Jan-10
Jun-10
Jul-02
Jul-07
3Q11F
4Q12F
May-03
May-08
Feb-02
Mar-04
Feb-07
Mar-09
Source: International Energy Agency, Nomura estimates

ASIA
Nomura supply
supply-demand
demand balance
m m bls/d 2006 2007 2008 2009 2010 2011 2012 Change, 11 vs 10 Change, 12 vs 11Change, 13 vs 12
Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2F Q3F Q4F 2011F Q1F Q2F Q3F Q4F 2012F2013Fm m bls/d % m m bls/d % m m bls/d %
Dem and
North America 25.4 25.5 24.2 23.4 22.9 23.3 23.6 23.3 23.6 23.8 24.2 24.0 23.9 24.0 24.0 24.3 24.1 24.1 24.1 24.1 24.4 24.3 24.2 24.3 0.2 0.8 0.1 0.5 0.1 0.4
Europe 15.7 15.5 15.4 14.9 14.3 14.5 14.4 14.5 14.2 14.1 14.8 14.7 14.4 14.2 14.2 14.7 14.8 14.5 14.3 14.4 14.8 14.8 14.6 14.7 0.0 0.3 0.1 0.4 0.1 0.7
Pacific 8 5 8.4
8.5 8 4 8.0
80 8 1 7.3
8.1 7 3 7.2
7 2 8.0
8 0 7.7
77 8 2 7.3
8.2 7 3 7.6
7 6 8.0
8 0 7.8
78 8 1 7.3
8.1 7 3 7.6
7 6 8.1
8 1 7.8
78 8 2 7.5
8.2 7 5 7.7
7 7 8.1
8 1 7.9
7 9 7.9
79 00
0.0 01
0.1 01
0.1 08
0.8 00
0.0 06
0.6
OECD 49.6 49.3 47.6 46.4 44.5 45.0 45.9 45.5 46.0 45.2 46.6 46.7 46.1 46.3 45.5 46.6 47.1 46.4 46.6 46.0 46.9 47.2 46.6 46.9 0.2 0.5 0.3 0.6 0.2 0.5
FSU 4.0 4.1 4.2 4.0 3.9 4.1 4.0 4.0 4.2 4.2 4.4 4.4 4.3 4.3 4.2 4.5 4.5 4.4 4.4 4.3 4.6 4.5 4.4 4.6 0.1 1.8 0.1 2.0 0.1 2.3
Europe 0.7 0.8 0.8 0.7 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.8 0.7 0.8 0.7 0.8 0.8 0.8 0.8 0.0 2.8 0.0 4.9 0.0 5.2
China 7.2 7.6 7.7 7.5 8.5 8.7 8.8 8.4 8.9 9.4 9.2 10.0 9.4 9.9 10.0 9.8 10.4 10.0 10.4 10.6 10.4 11.1 10.6 11.1 0.6 6.8 0.6 6.0 0.5 4.8
Other Asia 9.0 9.5 9.6 10.0 10.2 9.9 10.2 10.1 10.4 10.5 10.1 10.6 10.4 10.7 10.8 10.4 10.8 10.6 10.9 11.0 10.6 11.0 10.9 11.1 0.3 2.4 0.3 2.4 0.2 1.6
Latin America 5 4 5.7
5.4 5 7 6.0
60 5 8 6.0
5.8 6 0 6.1
6 1 6.1
6 1 6.0
60 6 0 6.3
6.0 6 3 6.4
6 4 6.4
6 4 6.3
63 6 2 6.5
6.2 6 5 6.7
6 7 6.5
6 5 6.5
65 6 3 6.6
6.3 6 6 6.9
6 9 6.6
6 6 6.6
6 6 6.8
68 02
0.2 32
3.2 01
0.1 19
1.9 02
0.2 23
2.3
Middle East 6.4 6.6 7.0 6.7 7.2 7.7 7.1 7.2 7.1 7.5 8.0 7.4 7.5 7.4 7.7 8.2 7.7 7.7 7.6 7.8 8.4 7.9 7.9 8.1 0.2 3.2 0.2 2.2 0.2 2.4
Africa 2.9 3.1 3.2 3.3 3.2 3.2 3.1 3.2 3.2 3.3 3.2 3.3 3.3 3.3 3.3 3.3 3.4 3.3 3.4 3.4 3.5 3.5 3.5 3.5 0.1 2.8 0.1 3.6 0.1 1.6
Non OECD 35.7 37.3 38.6 38.0 39.7 40.4 40.0 39.5 40.5 41.8 42.1 42.7 41.8 42.5 43.2 43.5 44.0 43.3 43.8 44.4 45.0 45.6 44.7 45.9 1.5 3.6 1.4 3.2 1.2 2.7
Total dem and 85.3 86.7 86.1 84.4 84.2 85.4 85.9 85.0 86.5 87.0 88.7 89.4 87.9 88.8 88.7 90.2 91.1 89.7 90.3 90.4 91.9 92.8 91.3 92.8 1.8 2.0 1.6 1.8 1.5 1.6
% increase y-o-y 1.3 1.6 -0.6 -3.2 -2.5 -0.6 0.9 -1.3 2.4 3.4 3.9 4.1 3.5 2.6 1.9 1.6 1.8 2.0 1.8 1.9 1.9 1.8 1.8 1.6
Supply
North America 13.9 13.9 13.3 13.5 13.5 13.7 13.8 13.6 13.9 14.0 14.1 14.4 14.1 14.4 14.1 14.2 14.4 14.3 14.3 14.0 14.1 14.3 14.2 14.1 0.1 1.0 (0.1) (0.7) (0.1) (0.7)
Europe 5.3 5.0 4.8 4.9 4.5 4.3 4.5 4.6 4.5 4.2 3.8 4.2 4.2 4.3 4.1 4.0 4.2 4.1 4.1 4.0 3.9 4.0 4.0 3.8 (0.0) (0.9) (0.1) (3.2) (0.2) (5.0)
Pacific 0.6 0.6 0.6 0.7 0.6 0.7 0.6 0.7 0.6 0.6 0.6 0.6 0.6 0.5 0.6 0.6 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6 (0.0) (0.8) (0.0) (1.1) 0.0 5.0
OECD 19.8 19.5 18.7 19.1 18.6 18.7 19.0 18.8 19.1 18.9 18.5 19.2 18.9 19.2 18.8 18.8 19.2 19.0 19.0 18.6 18.6 18.9 18.8 18.5 0.1 0.6 (0.2) (1.2) (0.3) (1.4)
FSU 12.3 12.8 12.8 13.0 13.3 13.4 13.5 13.3 13.5 13.5 13.5 13.7 13.6 13.7 13.8 13.6 13.7 13.7 13.8 13.8 13.7 13.9 13.8 13.7 0.1 1.0 0.1 0.8 (0.1) (0.7)
Europe
p 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 ((0.0)) ((1.4)) ((0.0)) ((25.6)) 0.0 0.0
China 3.7 3.7 3.8 3.8 3.9 3.9 3.9 3.9 4.0 4.1 4.1 4.2 4.1 4.2 4.3 4.3 4.3 4.3 4.4 4.4 4.4 4.4 4.4 4.4 0.2 4.3 0.1 2.8 0.0 0.0
Other Asia 3.7 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.7 3.6 3.7 3.6 3.7 3.6 3.6 3.6 3.5 3.6 3.6 3.6 3.6 3.6 3.6 3.6 (0.1) (2.0) 0.0 0.4 (0.1) (1.4)
Latin America 3.6 3.6 3.7 3.8 3.9 3.9 4.0 3.9 4.0 4.1 4.1 4.1 4.1 4.2 4.4 4.5 4.5 4.4 4.5 4.6 4.6 4.6 4.6 4.7 0.3 7.7 0.2 4.2 0.1 1.6
Middle East 1.8 1.7 1.7 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.6 1.6 1.6 1.6 1.6 1.6 0.0 0.8 (0.1) (6.7) 0.0 0.0
Africa 2.5 2.6 2.7 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.7 2.7 2.7 2.7 2.7 2.7 0.0 1.4 0.1 3.1 (0.1) (1.9)
Non OECD 27.8 28.2 28.4 28.7 29.0 29.2 29.4 29.1 29.6 29.7 29.9 30.0 29.8 30.2 30.4 30.4 30.6 30.4 30.7 30.8 30.7 30.9 30.8 30.7 0.6 2.0 0.4 1.2 (0.1) (0.4)
Processing gains 21
2.1 22
2.2 22
2.2 22
2.2 22
2.2 23
2.3 23
2.3 23
2.3 23
2.3 23
2.3 23
2.3 23
2.3 23
2.3 23
2.3 23
2.3 24
2.4 24
2.4 23
2.3 24
2.4 24
2.4 24
2.4 24
2.4 24
2.4 24
2.4 00
0.0 19
1.9 01
0.1 22
2.2 00
0.0 00
0.0
Other Biofuels 0.8 1.1 1.4 1.1 1.6 1.8 1.7 1.6 1.4 2.0 2.1 1.8 1.8 1.5 1.9 2.3 2.1 1.9 2.2 2.2 2.2 2.2 2.2 2.3 0.1 7 0.3 14 0.1 5
Non OPEC 50.5 50.9 50.8 51.1 51.5 51.9 52.4 51.7 52.4 52.8 52.8 53.3 52.8 53.2 53.5 53.9 54.2 53.7 54.3 54.0 53.9 54.4 54.2 53.9 0.9 1.6 0.4 0.8 (0.3) (0.5)
OPEC 11 crude 28.8 28.2 28.8 26.3 26.1 26.2 26.4 26.2 26.7 26.7 26.9 27.0 26.8 27.1
Iraq crude 1.9 2.1 2.4 2.3 2.5 2.6 2.5 2.4 2.4 2.4 2.4 2.4 2.4 2.7
OPEC NGLs 4.3 4.3 4.4 4.7 4.7 4.9 5.0 4.8 5.1 5.2 5.4 5.5 5.3 5.7 5.7 6.0 6.0 5.9 6.1 6.2 6.3 6.4 6.3 6.6 0.6 10.7 0.4 6.8 0.3 4.8
Total supply 85 5 85.5
85.5 85 5 86.4
86 4 84 4 84.6
84.4 84 6 85.6
85 6 86.2
86 2 85.2
85 2 86 5 87.1
86.5 87 1 87.4
87 4 88.2
88 2 87.3
87 3 88 7
88.7
Call on OPEC crude* 30.6 31.5 30.9 28.7 28.0 28.6 28.6 28.5 29.0 29.0 30.5 30.6 29.8 29.8 29.5 30.3 30.9 30.1 29.9 30.2 31.7 32.0 30.9 32.4 0.3 1.1 0.8 2.7 1.5 4.7
Implied stock change - m bl 0.2 (1.2) 0.3 (0.1) 0.5 0.2 0.3 0.2 0.1 0.0 (1.3) (1.2) (0.6) (0.0)
Implied stock change - m bl 15 #### 104 (7) 43 16 24 80 5 3 (115) (113) (55) (2)
OECD stock change - m bls 94 (62) 73 58 (34) (45) (6) (28) 42 20 (50) 37 49
So urce: IEA (Internatio nal Energy A gency)/No mura estimates
o te
No te: Demand
e a d est
estimates
ates a
are
e No
o mura
u a est
estimates
ates a
and
d 201
0 1supp
supply
y est
estimates
ates a
are
e IEA est
estimates.
ates
*Call o n OP EC crude fro m Q2 2011o nwards is to tal demand minus No n OECD supply and OP EC NGLs, such that the implied sto ck change in fo recast years is zero
33
ASIA
Risks to Nomura oil price forecast

 Our oil price forecast rests, among other factors,
Nomura Brent oil price forecast on Nomura’s in-house GDP and FX estimates.
160 (US$/bbl)  We are currently factoring geopolitical conditions
140 in the MENA region to ease by end-2011F.
120
100
 Although we believe that the current energy
80
regulation proposals are loose and will not
60
impact near-term prices, any success by the US
40
regulators in strengthening their control over the
20
futures and/or OTC market may pose a threat to
0
the oil market in the medium term
term.
 Oil price might fall short of our forecast should
Oct‐08
Oct‐09
Oct‐10
Oct‐11
Oct‐12
Apr‐08
Jul‐08
Apr‐09
Jul‐09
Apr‐10
Jul‐10
Apr‐11
Jul‐11
Apr‐12
Jul‐12
Jan‐08
Jan‐09
Jan‐10
Jan‐11
Jan‐12
demand fail to meet our expectation or should
supply exceed our near-term estimates.
Source: Bloomberg
Bloomberg, Nomura estimates
 Lastly, major technological advancement leading
to cheaper and cleaner substitutes to oil may
impact our oil price forecast.

ASIA
Nomura economics estimates

Nomura FX forecasts
5-May-10 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11F 3Q11F End 2011 1Q12F 2Q12F 3Q12F End-2012
US Dollar Index DXY 74.2 81.1 86.0 78.7 79.0 75.9 76.2 75.1 76.8 75.1 75.3 75.4 75.6
Rest of World Index=2008 93.5 102.1 105.3 98.3 96.7 95.0 94.4 94.6 93.9 93.9 93.8 93.7 93.6
G10 Euro EUR 1.45 1.35 1.22 1.36 1.34 1.42 1.43 1.40 1.45 1.45 1.45 1.45 1.45
Japanese Yen US$/JPY 80.1 93.4 88.4 83.5 81.1 83.1 82.5 85.0 87.5 87.5 89.2 90.3 92.5
British Pound GBP 1.64 1.52 1.49 1.57 1.56 1.60 1.64 1.63 1.71 1.73 1.74 1.76 1.77
Swiss Franc CHF 0.87 1.05 1.08 0.98 0.94 0.92 0.93 0.98 0.97 0.99 0.99 0.98 0.98
Australian Dollar AUD 1.06 0.92 0.84 0.97 1.02 1.03 0.98 1.00 1.02 1.02 1.02 1.02 1.02
Norwegian Krone EUR/NOK 7.96 8.03 7.96 8.01 7.79 7.84 7.60 7.60 7.70 7.70 7.70 7.70 7.70
S di h K
Swedish Krona EUR/SEK 9 06
9.06 9 74
9.74 9 52
9.52 9 19
9.19 8 99
8.99 8 95
8.95 8 60
8.60 8 70
8.70 8 70
8.70 8 78
8.78 8 85
8.85 8 93
8.93 9 00
9.00
Asia Chinese Renminbi CNY 6.49 6.83 6.78 6.69 6.61 6.55 6.40 6.32 6.22 6.14 6.06 5.98 5.90
Indian Rupee INR 44.76 44.95 46.45 44.97 44.7 44.6 44.1 43.5 43.2 42.8 42.4 42.0 41.6
Korean Won KRW 1081 1131 1222 1135 1126 1097 1060 1040 1020 1005 990 975 960
LatAm Brazilian Real BRL 1.62 1.78 1.81 1.69 1.66 1.63 1.65 1.65 1.62 1.62 1.61 1.61 1.60
Mexican Peso MXN 11.73 12.33 12.94 12.60 12.34 11.90 11.90 11.70 11.50 11.35 11.20 11.05 10.90
Source: Bloomberg, Nomura FX team estimates
Nomura Real GDP growth forecasts
Real GDP (% y-y) 2010 2011F 2012F
Global 4.9 4.3 4.6
United States 2.9 2.6 2.6
Western Europe 1.7 2.1 2.3
Euro Area 1.7 2.1 2.2
g
United Kingdom 1.3 1.7 2.6
EEMEA 4.6 4.6 4.3
Asia Pacific 8.0 6.5 7.2
Japan 3.9 -0.5 3.1
Australia 2.7 3.4 4.0
China 10 3
10.3 98
9.8 95
9.5
India 8.6 8.0 8.3
South Korea 6.2 3.5 5.0
Source: Nomura Global Economics 35
ASIA
Non-OPEC supply
Non-OPEC supply coming in short, medium and long term
Source: Wood Mackenzie

ASIA
OPEC supply
OPEC supply coming in short, medium and long term
Source: Wood Mackenzie

ASIA
St
Structural
t l shift
hift in
i oil
il price
i
Brent vs spare capacity as %age of demand
Brent crude price (per bbl)
2001 2002 2003 2004 2005 2006
$160
2007 2008 2009 2010 2011
$140
$120
$100
$80
$60
$40
$20
$0
0% 2% 4% 6% 8% 10% 12%
Spare Capacity as % of Demand
Source: International Energy Agency, Bloomberg, Nomura Research
 We believe there has been a structural shift in the oil market, with oil prices significantly higher than historical
data would suggest.
 The market has readjusted itself to a higher level of oil prices.
 Oil consumption growth, particularly in the emerging economies such as China and India, has been relatively
inelastic to the oil prices.
 We believe
W b li th
thatt 2009 marked
k d another
th year off ttransition
iti ffor th
the oilil market,
k t as evidenced
id dbby the
th vertical
ti l shift
hift iin th
the
oil prices for a given OPEC spare capacity.
ASIA
WTI Brent
WTI- B t di
discountt here
h to
t stay
t
 Crude oil inventories at Cushing, Oklahoma, have
US Cushing
g inventory
y pushed down WTI crude prices. Cushing
45 (mmb) Prior 5 Year Range inventories are currently at 40.5mmbbl, 46% higher
2010
than their 5-year average. Overall crude
40
2011 inventories in the US are also near 5-year high.
35  Inventory levels at Cushing have led to temporary
30 disparities between WTI and other international
benchmarks, such as Brent, in recent years.
25
 The new Canadian pipeline is pumping more crude
20
into Cushingg than is required,
q and the landlocked
15 nature of the hub makes exports difficult.
10  We believe the WTI-Brent differential is here to
J F M A M J J A S O N D stay but will likely revert to levels that justify
S
Source: E
Energy Information
I f ti Administration,
Ad i i t ti N
Nomura research
h
transportation
p costs by
y rail/road from Cushing g to a
sea port (estimated at US$5-8/bbl).
WTI and Brent Futures curve WTI premium over Brent oil prices
115 (US$/bbl) 8.0 $/ bbl
WTI Brent
110 40
4.0
105 0.0
100 -4.0
95 -8.0
90 -12.0
85 -16.0 W TI-Brent Differential
-20.0
80
May--09
May--10
May--11
Mar--09
Mar--10
Mar--11
Sep--09
Sep--10
Jul--09
Nov--09
Jul--10
Nov--10
Jan--09
Jan--10
Jan--11
1M 7M 13M 19M 25M 31M 37M

Source: Bloomberg
ASIA
MENA crisis to further fuel oil prices?
 If Libya and Algeria were to halt oil production together, oil

OPEC spare capacity as % of oil demand price could peak above US$220/bbl and OPEC spare
OPEC spare capacity
capacity will be reduced to 2.1mmbbl/d, similar to levels
16%
14% Oil price reached
excl Libya & Algeria - seen during the Gulf War and when prices hit US$147/bbl.
Oil price?
12% $40/bbl,, up
p 130%
10%
Oil price reached
$147/bbl, up 34% y-y
 During
D i ththe seven months
th off Gulf
G lf war in
i 1990-91,
1990 91 prices
i
8% jumped 130% as OPEC spare capacity was reduced to
6%
4% 1.8mmbbl/d while demand came off briefly by 1.7%.
2%
0%  High
g crude inventories in OECD ((around 48 days y of demand
cover) reduce concerns for the very near term.
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Jan. 2011
Impact of crisis
 There is enough spare capacity in OPEC to ward off any
near-term supply disruptions. However, situation could
worsen if crisis spreads to other oil producing countries
countries.
OPEC spare capacity by country Demand sensitivity to oil price during Gulf War
4.0 ((mb/d)) 3 50
3.50
3.0
2.0
1.0
0.23 0.22 0.26 0.18 0.33 0.19
0.03 0.04 0.14 0.04 0.02
0.0
U.A.E
N igeria
Qatar
uador
Libya
Allgeria
Venezzuela
ngola
uwait
Iran
Iraq
Saudi
Arrabia
Q
Ku
An
Ecu
S
Source: IEA Source: Bloomberg, IEA, Nomura estimates

ASIA
Minimal impact from Yemen,

Yemen Bahrain and Syria
Oil production in MENA countries (2009)  Net oil exports from the three countries amounts to only
304kbbl/d, with the largest exporter being Bahrain at
142kbbl/d.
 More than three-fourths of Bahrain’s production is from an
offshore field (Abu Safah), which is a joint field (50-50
(50 50
share) between Bahrain and Saudi Arabia and is operated
by Saudi Aramco.
 Yemen is the 16th largest LNG exporter globally, with a
capacity
it tto exportt 6
6.7mmtpa
7 t off LNG,
LNG representing
ti 3-4%
3 4%
of global LNG supply.
 A possible disruption in Yemen LNG exports could tighten
Source:
Sou ce IEA,, co
company
pa y data, Nomura
o u a research
esea c tthe
e market
a et a
amid
d increasing
c eas g de
demand
a d for
o LNG G ca
cargo
go from
o
Japan. Korea could be the most at risk, as it has
Net exports from Bahrain, Syria and Yemen contracted 2 mmtpa from Yemen LNG, representing 6%
of Korean LNG demand.
 There is
Th i enough h spare capacity
it iin th
the Middl
Middle E
Eastt OPEC
countries to absorb the potential loss in capacity.
Source: IEA, Nomura research

41
ASIA
China to increase methanol gasoline blending

Impact of various factors on China gasoline Blended methanol growth as % of total gasoline
demand growth in 2010F demand growth
25% (y-y) (mn tonnes)
8.0 30%
20%
25%
6.0
15% 20%
10% 40
4.0 15%
10%
5% 2.0
5%
0% - 0%
Potential Decline due Decline due Decline due Change due Actual 2007 2008 2009 2010F 2011F 2012F
grow th in to kms driven to increased to methanol to commercial gasoline Methanol demand grow th (LHS)
gasoline per vehicle efficiency blending stocks demand Gasoline demand grow th (LHS)
demand grow th Blended methanol grow th as % of gasoline grow th (RHS)
Source: CIEC, CMAI, Thomson Reuters, Nomura estimates Source: CMAI, Nomura estimates
China retail gasoline & methanol prices

 Methanol blended in gasoline in China increased from
RMB/tonne Gasoline Methanol 1.4% in 2005 to 5.4% in 2009, and we expect methanol to
10,000
continue its displacement of gasoline in the coming years.
8 000
8,000
 Methanol costs about 1/3rd the price of regular gasoline
6,000 and, as such, makes economic sense to blend.
4,000  We estimate methanol blending will increase to about 10%
of the country
country’s
s gasoline demand by 2015F,
2015F from about
2,000 5% in 2009, growing gradually at approx 1% per annum.
0  The reduction in engine size coupled with increased
an-08
Jul-08
Oct-08
an-09
Jul-09
Oct-09
an-10
Jul-10
Oct-10
pr-08
pr-09
pr-10
efficiency due to new technological advancements is

Ja
Ap
Ja
Ap
Ja
Ap
l di to a structurall d
leading decline
li iin gasoline
li d demand,
d b
both
h iin
J
J
O
Source: CEIC, Nomura research China and across the world.

ASIA
Increasing upstream capex to benefit gas production

Global upstream development capex by country  Global upstream ‘development’ capex witnessed growth of
(US$ bn) Rest of World
Canada
Ca ada
US
China
C a
Russia
Norw
o ay
5.3% in 2010, after a significant drop of 14.0% in 2009.
500 Mexico Brazil Angola
Australia Nigeria
 Woodmac estimates global upstream development
400 spending to increase from about US$361bn in 2009 to
about US$418bn in 2013 (3.7% CAGR).
300
 Mostt off the
M th upstream
t ‘development’
‘d l t’ expenditure
dit iis b
being
i
200
targeted towards increasing gas production and building of
100 LNG infrastructure, as opposed to increasing oil output.
-
 US and Australia’s capex
p g growth will total US$55bn
$ ((2009-
2008 2009 2010F 2011F 2012F 2013F 2013), representing over 95% of global capex growth for
that period.
Source: Woodmac
Global upstream development capex OPEC upstream development capex

(y-y) Non-OPEC Oil Production (LHS) (y-y) (y-y) OPEC Oil Prod Capacity (LHS) (y-y)
Non-OPEC Gas Production (LHS) OPEC Gas Production (LHS)
12% Global Upstream Capex (RHS) 20% 20%
OPEC Upstream Capex (RHS)
15%
15% 10%
8%
5% 10% 0%
4%
5% -10%
10%
-5%
0%
0% -20%
-4% -15% -5% -30%

2009 2010F 2011F 2012F 2013F 2009 2010F 2011F 2012F 2013F
Source: Woodmac, BP, Nomura research

Source: Woodmac, OPEC, Nomura research
ASIA
Global oil decline rates to increase

Decline rate by size & type of field  Non-OPEC oilfields decline rate increased by 1.1% over
Super-giant Giant Large Total
the past decade and could accelerate going forward as we
0%
continue
i to mix
i iin fi
fields
ld with
i h a significantly
i ifi l hi
higher
h d decline
li
-2%
rate into our existing pool of oilfields.
-4%
-6%
 Decline rate for non-OPEC fields that started post year
2000 is 14.5%, compared with 11.6% for fields started in
-8%
the 1990s and only 5.9% for fields started before 1970s.
-10%
-12%  A misjudgment of just 1% in decline rate, based on IEA’s

-14%
implied decline rate of 5.1%, could result in overestimated
-16% Ohshore Offshore Shelf Deepw ater World
supply
l off some 3.0mmbbl/d
30 bbl/d b
by 2020
2020, equivalent
i l t tto about
b t2
years of average global demand growth, on our estimates.
Source: IEA
Oilfield production profile Decline rate & R/P ratio by region (2007)
Onshore < 500 mmb
2P reserves)
Reserves/Production Ratio (years)

Offshore < 500 mmb
Onshore 500mb-1.5bn bbl 0 20 40 60 80
10%
Offshore 500mb-1.5bn bbl 0%
All > 1.5bn bbl
8% Deepw ater
ual Prod / initial 2
M iddle East
Naturall Decline Rate

6% -5%
A frica Europe/Eurasia
4% A sia Latin A merica

-10%
2% OECD E
Euro pe
(Annu
0% -15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
OECD No rth
A merica OECD P acific
(Cumuilative prod / initial 2P reserves) -20%
20%
Source: IEA Source: IEA

ASIA
Iran – sanctions & delays

Iran oil and gas production capacity estimates  Recent sanctions have led to significant delays in oil
(mb/d)
Current p
prod capacity
p y (bcm/yr) &g
gas fields development
p in Iran.
Pre-sanction target (2015F)
6 500
Post-sanction target (2015F)  Recent Japanese sanctions against Iran could
5
400 potentially force oil exports to below 1.5mmbbl/d in
4
the near term from 2.0mmbbl/d currently, negatively
300 affecting global supply while helping push oil prices
3
higher.
200
2
 We reckon oil production capacity will likely decline
1
100
by 15% from 2010-15, compared with Iran’s pre-
0 0
sanction target of 35% growth.
Oil (LHS) Gas (RHS)
 Also, gas production is unlikely to go as planned,
Source: BP, Bloomberg, Nomura estimates forcing Iran to abandon all of its LNG plans.
Iran crude production capacity estimates Iran crude + NGL production capacity estimates
(mb/d) Nomura IEA Iran Government (mb/d)
6 4.7
5
4.6 0.06 0.01
4 4.52
4.5 (0.09)
3 (0.01)
44
4.4 4.39
2 (0.10)
1 4.3
0 4.2
2010F 2011F 2012F 2013F 2014F 2015F
2010F 2011F 2012F 2013F 2014F 2015F 2015
Avg
Source: International Energy Agency, Bloomberg, Nomura estimates Source: IEA, Nomura research
45
ASIA
US DOE statistics
t ti ti
US crude inventory US crude run
400 (mmb) 17 0
17.0 (mmb/d)
380
16.0
360
15.0
340
14.0
320
13.0
300
280 12 0
12.0
260
11.0
Prior 5 Year Range Prior 5 Year Average 2010 2011
US ttotal
t l product
d t demand
d d US ttotal
t l product
d t inventory
i t
23.0 (mmb/d) 810 (mmb)
22.0
760
21.0
710
20.0
660
19 0
19.0
18.0 610
17.0
560
Source: Energy Information Administration, United States
ASIA
US DOE statistics
t ti ti
US gasoline demand US diesel demand
10 0
10.0 (mmb/d) 5.0 ((mmb/d))
9.5 4.5
9.0 4.0
8.5 3.5
8.0 3.0
Prior 5 Year Range Prior 5 Year Average 2010 2011 Prior 5 Year Range Prior 5 Year Average 2010 2011
US ffuell oil
il demand
d d US jjet/kerosene
t/k demand
d d
1.6 (mmb/d) 2.0 (mmb/d)
1.8
12
1.2
1.6
0.8
1.4
0.4
1.2
0.0
1.0
Source: Energy Information Administration, United States

ASIA
OECD E
Europe statistics
t ti ti
OECD Europe crude inventory OECD Europe crude runs
580 ((mmb)) 15.0 (mmb/d)
14.0
540
13.0
12.0
500
11.0
460 10.0
Prior5 Year Range Prior 5 Year Average 2010 2011 Prior5 Year Range Prior 5 Year Average 2010 2011
OECD Europe
E total
t t l product
d t demand
d d OECD Europe
E total
t t l product
d t inventory
i t
17 (mmb/d) mmb
850
16
800
15
14 750
13
J F M A M J J A S O N D 700
Prior5 Year Range Prior 5 Year Average 2010 2011 J F M A M J J A S O N D
Prior5 Year Range Prior 5 Year Average 2010 2011
Source: International Energy Agency

ASIA
OECD E
Europe product
d t demand
d d
OECD Europe gasoline demand OECD Europe diesel demand
3.0 (mmb/d) 7.0 (mmb/d)
2.8
6.6
2.6
6.2
2.4
5.8
2.2
2.0
0 5.4
1.8
5.0
OECD Europe
E fuel
f l oil
il demand
d d OECD E
Europe jjet/kerosene
t/k demand
d d
2.0 (mmb/d) 1.5 (mmb/d)
1.8 1.4
1.6 1.3
1.4 1.2
1.2 1.1
1.0 1.0
0.8 0.9
Prior5 Year Range Prior 5 Year Average 2010 2011 Prior5 Year Range Prior 5 Year Average 2010 2011
Source: International Energy Agency
ASIA
Asian refining fundamentals

ASIA
A i refining
Asian fi i industry
i d t
Monthly Singapore margins and product spreads
M
Monthly
hl Singapore
Si refining
fi i margins
i
(US$/bbl) Complex Simple
Hurricanes
12
8 Financial crisis
4
Prolonged
dow nturn
0
-4
04 05 06 07 08 09 10 11
Oil product price spreads

(US$/bbl)
Gasoline Diesel HSFO Naphtha
50
40
30
20
10
0
-10
-20
-30
-40
04 05 06 07 08 09 10 11
Source: Thomson Reuters Database, Bloomberg

ASIA
Hi h risks
Higher i k ffrom crude
d price
i spike
ik
Relative performance of crude, GRM and stocks (1)  In 1H08, refining margins remained solid, but stock
prices declined 24% in that period
period.
Brent Sg complex Sector perf
230  In 2008, demand destruction only occurred in 2H08,
210 implying that the financial crisis was a more
190 important cause than high oil prices.
170
150
 We estimate that US$220/bbl oil prices for 2
130
quarters would lower 2011F global oil demand
110
growth to 700kb/d from our current forecast of
90 1.8mb/d.
70  With global demand growth of 700kb/d, we estimate
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08
GRM would fall to US$4.4, from our current estimate
of US$5.6.
Change in global oil demand (y
(y-y)
y) (2)
(mb/d) Potential impact of crude oil spike (3)
4
3 Positives Negatives
2 p
1. Complex refineries benefit
from improved upgrading 1. Potential demand
1
economics. destruction.
0
2. Plant closures in Europe
-1 could accelerate. 2. Potential price caps.
-2
2 3 No more capacity overhang
3.
-3 unlike 2008.
-4
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1 Source:
1. S Bl
Bloomberg,
b R
Reuters
t
2. Source: IEA
3. Nomura research
ASIA
I
Impact
t off earthquake
th k  A total of 3 refineries remain shut, totalling 554kb/d
and representing 12% of Japan’s capacity.
Potential change in Japan oil produce trade (1)
2010 2011  We expect near-term tightening of the regional

Net Net Chg in net
exports / exports / exports / % Asian % global diesel balance due to lower Japanese exports.
(kb/d) (imports) (imports) (imports) demand demand
Gasoline 20 (42) (63) 1.4 0.3
Naphtha (468) (429) 39 -1.0 -0.7  Of the 3 shut refineries, we believe only the Sendai
Jet Fuel 140 122 (18) 0.8 0.3 refinery (145kb/d) is likely to face a prolonged
Gas Oil / Kero 173 95 (78) 1.0 0.3 closure (>6 months).
Fuel Oil 87 (115) (202) 72
7.2 25
2.5
 Significant nuclear powered electricity generating

capacity is down, totalling 13,648MW, or 5% of total
Scenario analysis of 2011 refining margins (2) electricity generating capacity.
capacity
Av 2011 margins based on

length of 12% Japanese  Fuel oil demand likely to improve to replace lost
capacity disruption nuclear power – the majority of Japan
Japan’ss spare
(US$/bbl) Curr. fcst 3m 6m 9m
Gasoline 12.0 12.3 12.5 12.8
capacity is oil fired.
Jet 13.5 14.6 15.8 16.9
Diesel 13.0 14.3 15.5 16.8
Fuel oil (5 0)
(5.0) (1 0)
(1.0) (1 0)
(1.0) (1 0)
(1.0)  We estimate this could increase fuel oil demand in
Naphtha 1.5 0.6 (0.3) (1.1) Japan by 170kb/d. This is equivalent to 7.2% of
LPG (14.0) (15.0) (16.0) (17.0) Asian demand and 2.5% of global demand.
Sg complex 5.6 6.9 7.3 7.6
Sg simple 1.2 3.4 3.8 4.1
1. Source: Petroleum Association of Japan, Nomura estimates  Average 2011 refining margins could significantly
2. Source: Nomura estimates improve under these circumstances to US$6.9-
© Nomura International (Hong Kong) Limited 7.6/bbl. 53
ASIA
S t i bl higher
Sustainably hi h 2011F margins
i
Diesel margin trends (1)
(US$/b)
$
30
2009 2010 2011  Diesel margins are averaging US$10/bbl higher than
a year ago.
25
20
 The current diesel margin of US$24/bbl is the
15
highest since November 2008.
10
0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
(Week)
Diesel demand growth (y

(y-y
y change) (2)
(kb/d) Asia US EU Latam
800
 We attribute this to sharply improved global demand
600
growth.
400
200
 Diesel growth has been led by Asia, where we
0
estimate demand grew by 420kb/d or 7%.
-200
-400
-600  Only region with declining demand was EU, down
-800 1%.
2008 2009 2010
1. Source: Bloomberg
2. Source: EIA, JODI
ASIA
Ti ht i
Tightening diesel
di l balance
b l
Global diesel capacity & demand trends (1)
Diesel
Capacity (mb/d) Diesel yield (%) Capacity Demand
CDU FCC HCC CDU FCC HCC (mb/d) (mb/d)
2003 82 14 5 28 14 28 26 22
 We forecast global diesel capacity growth of 1.8%
2004 82 15 5 28 14 28 26 23 pa for 2010-2015F.
2005 85 14 5 28 14 28 27 23
2006 85 14 5 28 14 28 27 24
2007 85 14 5 28 14 28 27 24
2008 86 14 5 28 14 28 27 25  This is based on estimated diesel production yield
2009 87 15 5 28 14 28 28 24 from the OGJ’s database of global refineries.
2010F 89 15 6 28 14 28 28 25
2011F 90 15 6 28 14 28 29 25
2012F 91 15 7 28 14 28 30 26
2013F 92 16 7 28 14 28 30 26  We forecast global diesel demand growth of 2.4%
2014F 94 16 8 28 14 28 31 27
2015F 95 16 8 28 14 28 31 28 pa for 2010-15F.
Global diesel utilisation rates & margin (1)

 Growth to be driven by Asia, the Middle East and
(%) Utilisation rate ($/b) LatAm.
92 Mid. dist. margin (RHS) 30
90
25
88
 We project a gradually tightening diesel balance.
86
20
84
82 15
80  Utilisation rates to rise to 89% by 2015F.
2015F
10
78
76
5
74  We believe diesel margins of US$12-15/bbl are
72 0
achievable
achievable.
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10F11F 12F13F 14F15F
1. Source: OGJ, Nomura estimates

ASIA
St d oil
Steady il demand
d d growth
th
IEA incremental oil demand forecast (1)
(mb/d) Feb-11 Sep-09

 IEA has consistently raised its oil demand growth
3.0
2.5
forecasts.
2.0
1.5
1.0  Most recent forecast calls for +2.8mb/d and
0.5 +1.5mb/d for 2010F and 2011F, respectively.
0.0
-0.5
-1
1.0
0
-1.5
 This level
Thi l l off oilil d
demand
d growth
th iimplies
li a GDP
-2.0 elasticity of 0.4x.
2009 2010 2011 2012 2013 2014 2015
Global oil demand: GDP sensitivity (1)

(mb/d) Base case Low case
2.0
 Oil demand growth could be very sensitive to
1.5 changes in global GDP
GDP.
1.0
0.5
 IEA estimates that global GDP of 2.8% in 2011 vs
0.0 current expectations of around 4% could see
2008 2009 2010 2011
-0.5 demand growth of only 300kb/d.
-1.0
-1.5
1. Source: IEA
ASIA
Sl i capacity
Slowing it additions
dditi & closures
l
Global CDU additions (annual) (1)
(kb/d)
 New capacity growth of 1mb/d in 2011 likely to be
2,000
1,800
the lowest level of additions in the 2009-2010 period.
1,600
1,400
1,200  Many planned additions in 2011 are back-end
1,000 loaded towards 2H11, so there may not be much
800
impact in 2011.
600
400
200
0
2009 2010F 2011F 2012F 2013F 2014F
Gl b l CDU closures
Global l (2)  Pace of plant closures is accelerating
accelerating.
(kb/d)
North America Europe Asia
1,200
 In 2010, another 330kb/d of CDU capacity was idled,
1,000
while 270kb/d of idled CDU capacity was
800
permanently closed.
600
400
200  Spurred by new regulations
regulations, Japanese closures
0 could accelerate – an additional 400-500k/bd could
-200 close, in addition to earmarked closures of 535kb/d.
-400
2009 2010 2011 2012 2013 2014
1. Source: Nomura estimates  Latest casualty – Shell’s 110kb/d Harburg (Germany)

2. Includes idled, closed & targeted for closure. Source: Nomura research refinery to be closed in early 2012.
ASIA
Chi moving
China i back
b k into
i t balance
b l
China gasoline & diesel trade (1)
(kb/d) Gasoline Diesel  China’s oil product exports have slightly undermined
400
Net im ports
the market this year.
300
200
 Recent diesel shortages should translate into lower
100
exports
exports.
0  By next year, imports should lessen as we expect
(100) demand to outpace supply.
(200)
 China diesel inventories declined from February to
(300)
November 2010, but gained some ground in
(400)
Net exports December.
(500)
2006 2007 2008 2009 2010
China’s oil product demand vs supply (2)

(
(kb/d)) 2008 2009 2010F 2011F 2012F 2013F 2014F 2015F
Sinopec 240 300 344 120 190 60 200 200
Petrochina 360 80 250 100 0 800 600 0
CNOOC 0 240 0 0 0 0 200 0
Others 0 0 100 0 0 240 0 0
Total new supply 600 620 694 220 190 1 100
1,100 1 000
1,000 200
Demand growth @5% pa 346 363 381 401 421 442 464 487
Surplus/(Deficit) 254 257 313 (181) (231) 658 536 (287)
1 Source: China Customs Statistics

1.
2. Source: Nomura estimates

ASIA
I
Improving
i PX prospects
t
PX price & margin trend (1)
(US$/t) PX Naphtha Margin
 PX has been the best
best-performing
performing chemical in the
2000 past six months, with margins recently reaching a
1750 record high.
1500
1250
1000
 Production cuts, unplanned outages and strong PTA
demand drove the improvement.
750
500
250
 Start-up of S-Oil’s new plant (900ktpa) in April 2011
0 could crimp near-term margins.
06 07 08 09 10 11
Gl b l PX balance
Global b l (2)
 Improvements in PX should be more evident by
(k t)
2H11, when large new PTA capacities start up.
1500
Surplus
1000
500
 We project PX to be structurally short throughout
most of 2011-2012.
0
((500))
 Benzene margins have also improved significantly in
(1000) Deficit
1Q11 – this is being driven by rising US imports.
(1500)
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
 Earthquake in Japan has reduced regional PX

1. Source: Thomson Reuters Datastream
2. Source: CMAI, Nomura estimates
supply – Japan exports 2.5mn tpa of PX, equivalent
© Nomura International (Hong Kong) Limited to 9% of global demand. 59
ASIA
B
Base oil
il margins
i still
till strong
t
Base oil spreads (less HSFO) (1)
(US$/t) 500SN - HSFO Bitumen-HSFO  Base oil margins have improved significantly since
1,000
2Q10 and strong trends look to continue in 2011.
800
600
400  Improving trends being driven by strong demand

200
growth in China and India, plus tight supply in US
0
and Europe.
(200)
(400)  Bitumen demand down due to winter in China and

1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
flooding in Thailand.
A i base
Asian b oil
il supply
l additions
dditi (2)
(k t)
1400
1200
 We believe base oil margins could remain tight
1000
through 1H11F, before large new capacity starts up
800 in 3Q11.
600
400
200
 Margins could improve by 2012 as new capacity
additions are absorbed and there are limited start-
0
ups in the 2012-13 period.
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4

ASIA
S
Supply/demand
l /d d outlook
tl k
Global CDU additions and deletions (1)
(kb/d) 2009 2010F 2011F 2012F 2013F 2014F
Gross additions
North America 21 180 94 415 54 0
Europe 20 130 124 150 0 0
Asia 1,403 914 450 625 1,330 800
Middle East 236 20 0 144 32 474
FSU 80 130 140 60 0 0
South America 0 0 115 0 280 380
Africa 100 0 97 100 33 0
Total 1,860 1,374 1,020 1,494 1,729 1,654
Total idled/closed 946 925 (295) 0 0 0
Net additions 914 449 1,315 1,494 1,729 1,654
Demand (1,300) 2,700 1,800 1,500 1,100 1,000

Supply less Demand 2,214 (2,251) (485) (6) 629 654
Gl b l nett CDU additions

Global dditi (1) Gl b l capacity
Global it less
l demand
d d (1)
(kb/d) North America Europe Asia (kb/d)
2,000 Middle East FSU South America 2,500
Africa
2,000
1 500
1,500 1 500
1,500
1,000
1,000 500
0
500 (500)
(
(1,000)
)
0 (1,500)
(2,000)
(500) (2,500)
2009 2010F 2011F 2012F 2013F 2014F 2008 2009 2010F 2011F 2012F 2013F 2014F

ASIA
Ti ht & tighter
Tighter ti ht
Si
Singapore refining
fi i margins
i (1)
US$/bbl 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F
Gasoline 7.6 6.1 4.5 7.7 15.7 15.2 13.5 17.0 13.7 12.5 12.0 12.0 11.5 10.5
Jet 83
8.3 56
5.6 43
4.3 60
6.0 13 5
13.5 17 4
17.4 18 4
18.4 18 5
18.5 27 7
27.7 82
8.2 12 0
12.0 13 5
13.5 14 0
14.0 13 5
13.5
Diesel 6.4 4.7 3.7 5.4 11.6 14.2 15.3 16.7 25.9 7.3 11.3 13.0 14.0 13.0
Fuel oil -1.2 -1.8 -1.8 -1.0 -3.8 -6.2 -11.2 -8.3 -14.7 -7.5 -6.4 -5.0 -6.0 -6.0
Naphtha 2.2 1.3 1.1 2.5 7.0 2.2 0.8 6.2 -4.2 -1.6 0.9 1.5 1.0 0.8
LPG 1.4 -0.2 -1.8 0.2 0.0 -7.6 -14.6 -14.0 -27.2 -15.3 -14.0 -14.0 -16.0 -16.0
S
Singapore complex 3.2 2.1 1.6 3.4 6.7 6.9 5.5 7.6 6.2 3.7 4.6 5.6 5.6 5.0
Singapore simple 1.2 0.2 0.2 1.4 2.1 1.8 -0.3 1.7 0.4 0.7 0.9 1.2 1.5 1.1
S
Summary off ratings
ti and
d valuations
l ti (2)
Mark. Cap Pr target Sh price PE (x) PBV (x) EV/EBITDA (x) ROE (%) Yield (%)
Ticker Rating (US$m) (loc curr) (loc curr) 2011E 2012E 2011E 2012E 2011E 2012E 2011E 2012E 2011E 2012E
FPCC 6505 TT Neutral 33.4 110.00 100.50 16.3 15.2 3.5 3.4 11.2 10.3 22.5% 22.8% 5.7% 6.1%
SK Innovation 096770 KS Buy 20.0 330,000 232,000 8.4 7.9 1.7 1.4 4.6 4.0 21.7% 19.8% 0.9% 0.9%
S-Oil 010950 KS Buy 16.8 200,000 159,500 9.6 8.8 2.9 2.4 3.7 3.0 35.3% 30.1% 3.4% 3.7%
Thai Oil TOP TB Neutral 5.8 85.00 84.50 11.2 10.7 1.9 1.7 6.3 5.7 18.7% 17.2% 3.9% 4.0%
GS Hold. 078930 KS Buy 7.8 115,000 89,500 8.0 7.9 1.4 1.2 4.9 4.4 19.5% 16.8% 1.7% 1.7%
PTTAR PTTAR TB Buy 4.1 50.00 41.25 9.4 7.6 1.6 1.4 7.2 5.8 19.1% 20.5% 4.5% 5.6%
Average
g 10.5 9.7 2.2 1.9 6.3 5.5 22.8% 21.2% 3.3% 3.7%
1. Source: Bloomberg, Thomson Reuters, Nomura research.

2. Share prices as of 29 April 2011 close; Ratings and Price Targets are as of the date of the most recently published report (http://www.Nomura.com) rather than the date of this
document.

ASIA
Asian petrochemical fundamentals

ASIA
M
Margins
i take
t k a tumble
t bl
Asian chemical margin trends (1)
Spreads
S d Change (%)
Ch
US$/t Mar-11 -1M -2M -3M -6M -12M -1M -2M -3M -6M -12M
PTA - Naph 518 569 488 324 222 223 (9) 6 60 134 132
Benzene - Naph 200 279 203 140 184 200 (28) (1) 42 8 (0)
PX - Naph 662 757 598 475 312 283 (13) 11 39 112 134
Butadiene - Naph 1,548 1,478 1,252 1,156 1,004 1,216 5 24 34 54 27
MEG - Ethylene 444 456 404 342 186 208 (3) 10 30 138 113
AN - Propylene 1149 1083 985 960 821 1060 6 17 20 40 8
Propylene - Naph 507 522 436 425 488 532 (3) 16 19 4 (5)
Ethylene - Naph 343 406 338 310 338 471 (15) 2 11 2 (27)
PP - Naph 625 655 604 585 586 551 (5) 3 7 7 13
PVC - Ethylene 405 378 384 400 443 404 7 5 1 (9) 0
ABS - Naph 1183 1246 1210 1181 1139 1002 (5) (2) 0 4 18
Phenol - Naph 851 883 826 880 1088 621 (4) 3 (3) (22) 37
SM - Naph 422 547 536 449 448 506 (23) (21) (6) (6) (17)
LDPE - Naph 709 797 820 757 687 699 (11) (14) (6) 3 1
ECH - Prop 811 874 849 898 665 847 (7) (5) (10) 22 (4)
2-EH - Prop 444 493 484 506 468 491 (10) (8) (12) (5) (10)
HDPE - Naph 323 407 394 370 423 496 (21) (18) (13) (24) (35)
AE - Prop 1644 1769 1849 1887 1578 991 (7) (11) (13) 4 66
PSF-MEG-PTA 488 300 251 576 218 123 63 94 (15) 124 297
 Recent crude price spike has not translated into higher margins, resulting in m-m
m m margin compression.
 Despite the m-m decline, overall margins remain at strong levels on a 3-month comparison.
 AN, 2-EH & PSF managed to record rising margins, which we attribute to product tightness.
 HDPE is probably loss-making
loss making at current levels.
levels

ASIA
Hi h risks
Higher i k ffrom crude
d price
i spike
ik
Relative performance of crude, ethylene and stocks (1)
 In 1H08, ethylene margins remained solid, but stock
Brent Ethylene margin Sector perf prices
i d
declined
li d 12% iin th
thatt period.
i d
170
160  In 2008, demand destruction began from 1Q08, but
150 bounced back very strongly from 3Q09 onwards.
140
130  Sustained
S stained high oil prices for 2 q
quarters
arters could
co ld lead to
120 similar rates of demand destruction this year.
110
100  In this case, we believe the recovery could be sharp,
90 as inventories of key
ypproducts are at low levels.
80
70
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08
Change in global PE demand (y

(y-y)
y) (2) P t ti l impact
Potential i t off crude
d oil
il spike
ik (3)
(%)
15
Positives Negatives
10
1 Tight products could pass
1. 1 Potential demand
1.
5 through rising costs. destruction.
2. Competing commodities ie.
0
rubber & cotton have risen 2. Sharp margin erosion of
-5 much more. oversupplied products.
3 No more capacity overhang
3.
-10
unlike 2008.
-15
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
1 Source:
1. S Bl
Bloomberg,
b R
Reuters
t
2. Source: IEA
3. Nomura research
ASIA
S
Scenario
i analysis
l i
Sensitivity analysis of chemical margins to crude prices (1)
Current Base case

(US$/t, US$/bbl) level 95 105 115 125 135
Tight - 90% pass through
PTA - naphtha 521 380 371 361 352 342
PX - naphtha
hth 701 460 451 441 432 422
Butadiene - naphtha 1,496 1,200 1,191 1,181 1,172 1,162
ABS- naphtha 1,426 1,150 1,141 1,131 1,122 1,112
Phenol - naphtha 866 750 741 731 722 712
AN - propylene 1,130 1,200 1,230 1,263 1,297 1,330
LDPE - naphtha 751 540 531 521 512 502
MEG - ethylene 427 320 356 392 427 463
Balanced - 70% pass through

Ethylene - naphtha 401 360 332 304 275 247
Propylene - naphtha 516 400 372 344 315 287
PVC - ethylene 393 440 459 478 496 515
SM - naphtha 541 560 532 504 475 447
Benzene - naphtha 244 200 172 144 115 87
Oversupplied - 60% pass through

PP - naphtha 666 480 442 405 367 330
HDPE - naphtha 361 410 372 335 297 260
1. Source: Thomson Reuters Datastream, Nomura estimates

ASIA
I
Impact
t off earthquake
th k
Plant shutdowns in Japan (1)  A total of 4 naphtha crackers are out of action,
totalling 1.8mn
1 8mn tpa,
tpa or 23% of Japanese capacity.
capacity
Shutdown % of Japan Asian % of global
ktpa capacity capacity capacity capacity
Phenol 663 76 20 7
Butadiene 390 38 9 3  Rolling power cuts are disrupting production of
MEG 450 54 7 2 downstream chemical manufacturers.
Benzene 1163 20 5 2
Ethylene 1790 23 5 1
PX 910 24 5 3
SM 670 18 5 2  Plants have been generally unaffected, but
PP 861 25 4 1 infrastructure has been severely
y damaged.
g
PVC 905 41 4 2
VCM 800 23 3 2
Propylene 1022 15 3 1
PE 550 14 3 1
 We estimate that production should resume in 2-3
months’ time.
Chemicals most impacted by export loss (1)
2009 net % of global 6M potential % of global  Phenol, MEG, PVC, BD and PX production capacity
(k t) exports demand export loss demand in Japan have been most impacted.
Phenol 230 27
2.7 332 40
4.0
Paraxylene 2,535 8.7 455 1.6
PVC 718 2.1 453 1.3
SM 1,590 5.8 275 1.0  Products in which Japan is a significant exporter
Synthetic rubbers 487 4.1 117 1.0 could tighten further – primarily phenol, PX and PVC.
PP 371 08
0.8 431 09
0.9
Ethylene 546 0.5 895 0.7
PE 371 0.7 511 1.0
Propylene 812 1.1 335 0.5  Naphtha crack spreads have worsened, thereby
slowing the increase in naphtha prices (relative to
crude)
crude).
ASIA
Gl b l supply
Global l growth
th
Olefins (1) Benzene derivatives (1)
(%) Ethylene Propylene Butadiene (%) SM Phenol ABS

8 10
7 8
6
6
5
Av demand Av demand
4 4
3 2
2
0
1
-2
0
-1 -4
05 06 07 08 09 10F 11F 12F 05 06 07 08 09 10F 11F 12F
Propylene derivatives (1) Polyester intermediates (1)

(%) Acrylic acid AN Oxo-alcohol (%) Paraxylene PTA MEG
10 14
8 12
6 10
Av demand
4 8 Av demand
2 6
0 4
-2 2
-4 0
05 06 07 08 09 10F 11F 12F 05 06 07 08 09 10F 11F 12F

ASIA
Chi demand
China d d – the
th bi
big picture
i t
Key drivers of China chemical demand (1)
Volume 3-yr fwd
Sector Chemicals Applications (mn t) Key drivers CAGR (%)
Retail PE Packaging, bags, milk bottles 7.6 Rising share of modern vs traditional retailers 9
PP Snack wraps, caps, houseware 2.8 Rural retail network expansion 14
PET Di k b
Drinks bottles
ttl 29
2.9 St
Strong F&B growth
th trends
t d 13
Construction PVC Windows, pipes & cables 6.6 Higher housing supply to curb prices 15
PE Pipes & cables 1.3 More land auctions & enforcing anti-idle land policy 15
PP Cement sacks 39
3.9 Rmb 10tr infrastructure stimulus spending 9
Textiles Polyester Garments, carpet, furnishings 20.0 Rising retail spending 10
Appliances ABS Refrigerator panels 2.6 Subsidies for rural households 8

PP Waching machine pumps 1.1 Trade-in subsidies of 10% of new product price 8
Autos PP Bumper, body panels 0.9 Trade-in incentives raised to Rmb18k on 31 Dec 09 13
ABS Body panel, instrument panel 0.8 Subsidies of Rmb3k for fuel saving cars on 8 Jan 10 13
Agriculture PE Greenhouse, ground covering 1.2 Higher rural incomes and incentives to increase yield 9
1. Source: Nomura research

ASIA
Chi ’ 12th Five-Year

China’s Fi Y Pl
Plan
China’s 12th Five-year Plan themes (1)
Structure change Efficiency People’s Environment

process improvement well being protection
Lower unit GDP

Consumption Industry Adjusting income energy
driven growth consolidation distribution system consumption
Strategic emerging Development of Decrease pollutant

Investment return
industry Central & Western emission
improvement
development China
Upgrade on Increase medical Resources

Phase out
traditional coverage for aging conservation
outdated capacity
industry population

ASIA
P tti it together
Putting t th
China’s ethylene equivalent demand growth (1)
(k tpa) 05 06 07 08 09 10F 11F 12F

PE 10,836 11,520 12,035 11,915 15,602 16,882 18,227 19,536
MEG 3,109 3,491 4,081 3,976 4,516 5,371 5,889 6,399
PS 1,142 1,216 1,473 1,674 1,697 1,771 1,824 1,870
EDC 696 735 826 793 904 958 1,015 1,076
PVC 640 374 244 197 852 636 660 688
Total 16,423 17,336 18,658 18,554 23,571 25,617 27,615 29,569
Y-Y chg (%) 9.6 5.6 7.6 -0.6 27.0 8.7 7.8 7.1
GDP elasticity 0.9 0.5 0.6 -0.1 3.1 0.8 0.8 0.7
China’s
China s propylene equivalent demand growth (1)
(k tpa) 05 06 07 08 09 10F 11F 12F
PP 8,231 8,759 10,164 9,940 12,230 13,722 15,188 16,632
AN 2,126 2,134 2,169 1,823 2,077 2,251 2,375 2,504
Oxo-alcohols 956 954 1,137 1,139 1,207 1,243 1,268 1,293
PO 531 710 837 812 934 1,027 1,120 1,210
Others 318 325 331 338 345 351 359 366
Total 12,164 12,882 14,638 14,052 16,792 18,595 20,309 22,005
Y-Y chg (%) 6.2 5.9 13.6 -4.0 19.5 10.7 9.2 8.3
GDP elasticity 0.6 0.5 1.0 -0.4 2.2 1.0 0.9 0.9
1. Source: CEIC, Nomura estimates

ASIA
Wh China
Why Chi matters
tt
Chinese demand as % of global demand (1) Chinese imports as % of global demand (1)
(%) (%)
40
70
35
60
30
50
25
40
20
30
15
20 10
10 5
0 0
MEG
MEG
PP
PE
PE
PP
PTA
PTA
PX
Methanol
PVC
Methanol
Caustic
ABS
ABS
China imports as % of Chinese demand (1) Global ethylene demand breakdown ((2))
(%)
Middle East North
90 Africa
6% America
1%
80
Rest of 24%
70
A i
Asia
60
21%
50
40 South
30 America
20 4%
10
0 China Europe
MEG
PE
PP
PTA
SM
Methanol
ABS
21% 23%
1. Source: CEIC, Nomura estimates

2. CMAI
ASIA
US d
demand
d rebounds
b d
US ethylene demand y-y change (1) US ethylene inventory levels (2)
(k tpa) (days)
1500 10
9
1000
8
500 7
0 6
5
-500 4
-1000 3
2
1500
-1500
1
-2000 0
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
US PE exports (1) US ethylene utilisation rates (1)
(k tpa) (mn t) Capacity (%)
1500 Production
35 100
Utilisation rate (RHS)
1400
30 95
1300
1200 25
90
1100 20
1000 85
15
900
80
800 10
700 5 75
600
0 70
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
05 06 07 08 09 10F 11F 12F 13F 14F 15F

2. NPRA
ASIA
Middl East
Middle E t — a desert
d t mirage?
i ?
Middle East ethylene supply & demand (1)
 Utilisation rates in the Middle East have been falling
g
(k t) Capacity (LHS) (%)
Production (LHS)
for the past few years.
25,000 110
Utilisation rate (RHS)
105  Of the 8mn t of new ethylene capacity from 2006-09,
20,000
100 we estimate only 4.7mn t was produced (59%
15,000 95 utilisation rate).
rate)
90
 Iran’s utilisation rates have been particularly poor ,at
10,000 85
around 50% over the past two years.
80
5,000
75  We expect Iran’s
Iran s operating rate to remain weak on
0 70 structural issues. Sanctions could further reduce
90 92 94 96 98 00 02 04 06 08 future Iran’s exports.
China PE imports from Saudi + Iran (1) China PP imports from Saudi ((1))
(tonnes) Saudi Iran (tonnes) PP imports (%)
250,000 100,000 20
share of China imports (RHS)
90,000 18
200 000
200,000 80 000
80,000 16
70,000 14
150,000 60,000 12
50,000 10
100,000 40,000
, 8
30,000 6
50,000 20,000 4
10,000 2
0 0 0
Jan 09 May-09
Jan-09 May 09 Sep-09
Sep 09 Jan-10
Jan 10 May-10
May 10 Sep-10
Sep 10 J 08 Jul-08
Jan-08 J l 08 Jan-09
J 09 Jul-09
J l 09 Jan-10
J 10 Jul-10
J l 10
1. Source: CMAI
ASIA
P l
Polyester
t chain
h i – margins
i migrating
i ti upstream
t
China’s ethylene equivalent demand growth (1)
Incremental demand New capacity Surplus/(Deficit)

(k tpa) Polyester PTA PX Polyester PTA PX Polyester PTA PX
2008 ((419)) ((356)) ((239)) n/a 1,205 290 n/a 1,561 529
2009 1,589 1,351 905 2,152 1,650 2,303 563 299 1,398
2010 2,794 2,375 1,591 2,959 1,365 3,544 165 (1,010) 1,953
2011F 3,455 2,937 1,968 5,967 2,467 1,903 2,512 (470) (65)
2012F 3,697 3,143 2,106 7,507 3,503 382 3,810 361 (1,723)
2013F 3 391
3,391 2 882
2,882 1 931
1,931 5 409
5,409 5 322
5,322 2 473
2,473 2 018
2,018 2 439
2,439 541
PTA supply/demand balance (1) PX supply/demand balance (1)

(k t) (k t)
2500 1500
Surplus
Surplus
2000 1000
1500 500
1000
0
500
(500)
0
(1000) Deficit
-500
Deficit (1500)
-1000 Q10
Q10
Q10
Q10
Q11
Q11
Q11
Q11
Q12
Q12
Q12
Q12
Q13
Q13
Q13
Q13
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1. Source: PCI, Nomura estimates
ASIA
P d t positioning
Product iti i
Global supply less demand growth (2011F) (1)
(%)
2
Surplus
1
0
-1
1
-2
-3 Deficit
-4
MEG
G
PP
P
PE
E
MMA
A
PTA
A
SM
M
ol
Ethylene
e
Propylene
e
Paraxylene
e
PVC
C
Caustic
c
BPA
A
ol
Benzene
e
Butadiene
e
AN
N
ABS
S
Pheno
alcoho
Oxo-
Global supply less demand growth (2012F) ((1))
(%)
2
Surplus
1
0
-1
-2
-3
-4
Deficit
5
-5
-6
MEG
PP
PE
PTA
MMA
SM
Phenol
Ethylene
Propylene
Paraxylene
PVC
Caustic
BPA
alcohol
Butadiene
Benzene
AN
ABS
Oxo-

ASIA
All about
b t positioning
iti i
Company product gearing matrix (1)
Upstream Mid-stream Downstream Fibers Other
Oxo-alcohols
Caustic soda
Acrylic ester
Orthoxylene
Epoxy resin
Acrylonitrile
Paraxylene
Plasticizer
Propylene
Butadiene
Polyester
Methanol
Benzene
Ethylene
SBR/BR
Acetone
Styrene
Phenol
Rayon
MTBE
Nylon
MMA
MEG
EOD
Urea
ECH
PVC
BPA
ABS
PTA
PC
PE
PP
PS
(%)
FPC 7 12 13 4 4 25 10 24
FCFC 7 3 8 25 13 10 7 8 5 8 6
NYP 17 27 7 15 16 19
LGC 3 3 2 3 5 5 3 19 4 18 6 3 21 4
Honam 4 25 11 12 2 19 22 5
Hanwha 16 30 4 5 26 19
PTTC 28 18 10 42
PCG 2 7 4 13 4 13 2 8 9 4 14 9
Regional valuation comparison (1)

Mark. Cap Pr target Sh price PE (x) PBV (x) EV/EBITDA (x) ROE (%) Yield (%)
Ticker Rating (US$m) (loc curr) (loc curr) 2011E 2012E 2011E 2012E 2011E 2012E 2011E 2012E 2011E 2012E
Formosa Plastics 1301 TT Buy 22.9 136.00 117.00 11.4 10.5 2.4 2.3 11.4 10.4 22.1% 22.8% 8.1% 8.7%
Nan Ya Plastics 1303 TT Buy 24 1
24.1 105 00
105.00 87 80
87.80 12 4
12.4 10 4
10.4 22
2.2 21
2.1 11 1
11.1 10 2
10.2 17 9%
17.9% 20 3%
20.3% 7 3%
7.3% 8 7%
8.7%
LG Chem 051910 KS Buy 32.8 700,000 530,000 12.9 11.5 3.4 2.9 5.1 4.5 30.1% 27.6% 0.8% 0.8%
Formosa Chemicals 1326 TT Buy 25.0 134.00 115.50 11.4 10.5 2.1 2.1 9.9 10.8 21.3% 20.1% 9.0% 8.8%
PTT Chemical PTTCH TB Buy 8.1 200.00 160.00 11.8 9.8 1.8 1.6 7.1 6.0 18.2% 19.2% 3.9% 4.7%
Honam PC 011170 KS Buy 11.2 480,000 378,000 10.9 9.8 2.2 1.8 5.2 4.2 22.1% 20.1% 0.5% 0.5%
Hanwha Chemical 009830 KS Buy 6.2 40,000 47,700 11.0 9.5 1.9 1.6 6.3 6.0 18.7% 18.1% 1.0% 1.0%
Average 11.7 10.3 2.3 2.1 8.0 7.4 21.5% 21.2% 4.4% 4.7%
1. Merchant sales only, by revenue. Source: Company data,

2. Share prices as of 29 April 11 close. Source: Bloomberg, Nomura estimates;
Note: Ratings and Price Targets are as of the date of the most recently published report (http://www.Nomura.com) rather than the date of this document.

ASIA
P d t price
Product i forecasts
f t
Asian spot petrochemical prices
US$/tonne US$/bbl 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F
Brent 24.5 25.0 28.9 38.2 54.0 65.6 73.1 97.7 62.0 80.0 95.0 110.0 110.0
Naphtha 204 236 284 388 487 582 701 858 558 727 858 978 978
Ethylene 445 413 470 900 906 1 136
1,136 1 153
1,153 1 204
1,204 845 1 114
1,114 1 218
1,218 1 398
1,398 1 458
1,458
LDPE 615 587 677 1,106 1,118 1,227 1,434 1,598 1,142 1,421 1,398 1,638 1,738
HDPE 571 521 609 943 1,022 1,211 1,304 1,440 1,079 1,173 1,268 1,518 1,618
Propylene 405 455 563 822 943 1,100 1,093 1,229 901 1,201 1,258 1,438 1,478
PP 522 567 698 958 1,055 1,223 1,317 1,451 1,039 1,288 1,338 1,558 1,618
AN 664 634 857 1,123 1,344 1,505 1,763 1,862 1,237 2,174 2,178 2,398 2,468
Butadiene 367 560 707 954 1,220 1,352 1,068 2,132 1,003 1,913 2,058 2,228 2,378
Benzene 296 350 455 833 825 885 1,038
, 1,025
, 694 927 1,058
, 1,198
, 1,218
,
SM 494 613 699 1,048 1,133 1,192 1,279 1,327 954 1,194 1,418 1,598 1,638
PS 605 676 793 1,186 1,172 1,248 1,435 1,421 1,051 1,337 1,518 1,708 1,748
ABS 849 799 928 1,291 1,409 1,528 1,703 1,872 1,354 1,961 2,008 2,058 2,118
Ph
Phenol
l 513 568 693 1 140
1,140 1 046
1,046 1 179
1,179 1 570
1,570 1 416
1,416 858 1 586
1,586 1 608
1,608 1 758
1,758 1 578
1,578
BPA 1,028 795 963 1,365 1,571 1,414 1,748 1,698 1,276 1,918 2,008 2,133 1,998
PVC 497 544 617 882 815 814 936 1,030 777 962 1,049 1,109 1,159
MEG 441 424 656 920 862 851 1,113 975 632 880 1,051 1,179 1,235
PX 432 422 620 819 906 1,159 1,141 1,198 990 1,056 1,318 1,478 1,378
PTA 450 488 577 776 812 899 883 913 833 968 1,238 1,338 1,238
Methanol 179 155 249 270 269 345 380 400 227 297 315 330 350
Urea 136 114 166 198 253 230 345 490 269 309 330 310 320

ASIA
P d t margin
Product i forecasts
f t
Asian petrochemical product spreads
US$/tonne 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F
Ethylene-Naphtha 242 177 186 512 419 554 452 346 287 387 360 420 480
LDPE-Naphtha 412 351 393 718 631 645 733 740 584 694 540 660 760
LDPE Eth l
LDPE-Ethylene 170 174 207 206 212 91 281 394 297 307 180 240 280
HDPE-Naphtha 368 285 325 555 535 629 603 582 521 446 410 540 640
HDPE-Ethylene 126 108 139 43 116 75 151 236 234 59 50 120 160
Propylene-Naphtha
Propylene Naphtha 201 219 279 434 456 518 392 371 343 474 400 460 500
PP-Naphtha 319 331 414 570 568 641 616 593 481 561 480 580 640
PP-Propylene 117 112 135 136 112 123 224 222 138 87 80 120 140
AN-Propylene 259 179 294 301 401 405 670 633 336 973 920 960 990
Butadiene-Naphtha 164 324 423 566 733 770 367 1,274 445 1,186 1,200 1,250 1,400
Benzene-Naphtha 93 114 171 445 338 303 337 167 136 200 200 220 240
SM-Naphtha 291 377 415 660 646 610 578 469 396 467 560 620 660
PS SM
PS-SM 111 63 94 138 39 56 156 94 97 143 100 110 110
ABS-Naphtha 645 563 644 903 922 946 1,002 1,014 796 1,234 1,150 1,080 1,140
Phenol-Naphtha 310 332 409 752 559 597 869 558 300 859 750 780 600
BPA-Phenol 515 227 270 225 525 235 178 282 418 332 400 375 420
PVC-Ethylene 274 338 382 432 362 246 360 428 355 405 440 410 430
MEG-Ethylene 174 176 374 380 318 169 421 252 125 212 320 340 360
PX-Naphtha 228 186 336 431 419 577 440 340 432 329 460 500 400
PTA - Naphtha 247 252 293 388 325 317 182 55 275 241 380 360 260

ASIA
China

ASIA
Chi energy consumption

China ti
China energy consumption breakdown, 2009 China energy consumption breakdown, 2020F
(16.1bn boe) (22.9bn boe)
Renewable Renewable
energy, 6.4% Oil , 18.6% energy, 9.0%
Oil , 18
18.9%
9%
Nuclear, 0.7% Nuclear, 2.8%
Gas , 3.7%
Gas , 8.3%
Coal, 70.6% Coal, 61.0%
Oil Gas Coal Nuclear Renewable energy Oil Gas Coal Nuclear Renewable energy
Source: China Statistics, NDRC, Nomura research Source: China Statistics, NDRC, Nomura estimates

ASIA
Chi oil
China il & gas sector
t
 Under the Eleventh Five-Year Plan, the government’s

China Crude Demand & Supply (1)
plans for the energy sector include:
m tonnes Self suff rate %
600 130%
Reduce energy consumption per unit of GDP by 20%
120%
500 110% b promoting
by ti energy efficiency.
ffi i
100%
400
90%  Improve air quality by increasing natural gas and
80%
70%
renewable energy consumption and reducing
300
60% the share of coal and oil.
50%
200
40%
30%
 Reform natural gas prices and refined oil
100 20% product prices to international levels.
10%
0 0%  Build up the strategic oil reserve base.
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10E11E12E13E14E15E
Production Consumption Self Sufficiency rate
1. Source: BP, Nomura estimates

 On 29 April, 2010, the government stated in an official
document following a congress meeting held by
premier Wen Jiabao that it intends to implement the
following measures in the remainder of 2010 before
the 12th Five-Year Plan:
 Introduce and implement a new resource tax.
tax
 Increase wellhead natural gas prices.
 Revamp the oil product-pricing mechanism.

ASIA
Chi natural
China t l gas demand
d d
Natural gas production vs consumption Natural gas consumption by sector, 2008
320
300
(80.7 bcm)
280 Consumption (2009-2020F)
260 CAGR: 11% Power , 10% Town gas,
240 28%
220
Import:
200 119bcm
180
bcm
160
140
120
100
80 Production (2009-2020F)
60 CAGR: 7%
40 Chemicals,
Chemicals
20 32%
0
2009E
2010E
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Industrial, 31%
Production Consumption Town gas Industrial Chemicals Power
China Natural gas demand supply balance (bcm) Natural gas consumption by sector, 2020F
2008 2009 2010F 22015F 2020F
CAGR (%)
2005-10F 2010F-15F 2015F-20F
(290 bcm)
Domestic Power , 21%
Production Towe gas,
Petrochina 59 61 65 90 124 15 7 7 28%
Sinopec 9 10 13 20 33 15 10 11
CNOOC 7 10 9 12 14 19 4 3
Subtotal 75 81 87 122 171 16 7 7
(%)
Petrochina 78 76 75 74 73
Sinopec 12 12 15 17 20
CNOOC 10 12 11 10 8
Import
LNG
Petrochina 0 0 0 9 18 NA 16
Sinopec 0 0 0 4 4 NA 0 Chemicals,
CNOOC 5 5 5 45 55 55 4
15%
Subtotal 5 5 5 58 77 63 6
Pipeline 0 0 6 42 42 48 0
Total supply/demand 81 86 98 221 290 18 6 Industrial,
Import % of total demand 6 6 11 45 41 36%
Source: CEIC, OGP, Nomura estimates
Towe gas Industrial Chemicals Power
ASIA
Chi LNG terminal

China t i l
LNG terminal projects in China (mn tonnes per annum)
Location 2006 2007 2008 2009 2010E 2011E 2012E Status LNG source
CNOOC
Dapeng (Guangdong) 3.7 5.5 10.0 10.0 10.0 10.0 10.0 Operation North West Shelf Venture (Australia)
Putian (Fujian) 30
3.0 30
3.0 52
5.2 52
5.2 On stream in 2H09 Tangguh (Indonesia)
Shanghai 3.0 3.0 3.0 3.0 On stream in 2H09 Petronas (Malaysia)
Zhuhai (Guangdong) 3.0 3.0 On stream in 2011 Iran: Pars
Ningbo (Zhejiang) 3.0 UC Qatargas (Qatar)
CNPC
Dalian (Liaoning) 30
3.0 30
3.0 On stream in 2011 Qatargas (Qatar) and Shell (Australia)
Tangshan (Hebei) 4.0 UC na
Rudong (Jiangsu) 3.5 3.5 On stream in 2011 Qatargas (Qatar)
Sinopec
Tianjin 3.0 3.0 3.0 Initial stage
Total 3.7
3 7 5.5
5 5 10.0
10 0 16.0
16 0 19.0
19 0 30.7
30 7 37.7
37 7
Total (bcm) 5.0 7.5 13.6 21.8 25.8 41.8 51.3
Source: OGP, Nomura estimates

Note: NA: not available.

ASIA
N t
Natural
l gas price
i hike
hik
 China has announced the much-awaited natural gas price hike, with effect from 1 June, 2010. According to the
government, the reasons for increasing the wellhead natural gas price and refining the pricing mechanism are:
 to conserve natural gas to reduce wastage;
 to smooth out the price difference of natural gas vs other fuels;
 to increase the market share of natural gas in China’s energy pie, as this encourages production and
development.
development
 The domestic ex-factory (well head) natural gas prices from all onshore wells have been increased by RMB0.23cm, or
20-32.5% (depending on the base effect of the original price). Producers are allowed to price their gas up to 10%
above the guidance price published by the government.
 Gas from the West-East
West East pipeline has the largest increase of 30
30.3%,
3% while that from “other
other fields”
fields has the lowest
increase of 20%
 We think PetroChina will be the major beneficiary, as its production accounts for 82% of all domestic natural gas, or
87% of all onshore gas output. Sinopec will likely benefit from the price change and its biggest volume growth in the
g
near term is from Puguang,g, which has alreadyy been ggranted a higher
g p
price
 We don’t expect CNOOC to immediately benefit from this natural gas price hike, since it does not have any onshore
gas production and its gas prices were never controlled by the government.
(RMB/’000 cubic meter) Before After Change (%)

Fertiliser 661 868 31.3
Di t IIndustrial
Direct d ti lU Use 1 067
1,067 1 274
1,274 19 4
19.4
City Gas (Industrial Use) 1,073 1,280 19.3
Cit G
City Gas (N
(Non-Industrial
I d ti lU Use)) 713 920 29 0
29.0
Source: NDRC
ASIA
Gl b l and
Global d China
Chi natural
t l gas price
i trend
t d
Natural gas pricing breakdown for industry end-
Natural gas price trend globally
users, 2008
3.5 Rmb/cum
14.00 US$/mmbtu
12.00 3.0
10.00 2.5
Mark-up
8.00
2.0
6.00
1.5 End-user
4.00
1.0 City-Gate
2.00
0.00 0.5
2001 2002 2003 2004 2005 2006 2007 2008 2009
Japan cif European Union cif UK Heren NBP index 0.0
US Henry Hub Canada China industry Beijing Shanghai Henan Anhui Jaingsu Zhejiang
Ex-plant Pipeline tariff
China natural gas end-user price trend Estimated city

city-gate
gate price for National Gas in China by
CNY/cum source
3.5
20.0 US$/mmbtu
18.0 17.3
3.0 16 0
16.0
14.1
14.0
11.9
12.0
2.5
10.0
8.0
6.5
2.0 6.0
4.2
4.0
2.0
1.5
0.0
Jan-04
ul-04
ct-04
Jan-05
ul-05
ct-05
Jan-06
ul-06
ct-06
Jan-07
ul-07
ct-07
Jan-08
ul-08
ct-08
Jan-09
ul-09
ct-09
Jan-10
ul-10
ct-10
Jan-11
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
LNG Contract Domestic Turkmenistan Other LNG Spot

p LNG 2H08
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Oc
Oc
Oc
Oc
Oc
Oc
Oc
(NWS Australia) Production Pipeline estimated Contracts

Residential use Public Service Sector Industry
estimated
Source: BP Statistical Review 2010, CEIC, CNPC, IEA, OGP, Nomura research
ASIA
Chi iis b
China building
ildi a strategic
t t i reserve
 China s National Petroleum Reserve Centre (NPRC) was established on 18 December, 2007, to monitor the
China’s
construction of and managing the strategic reserve bases.
 The NDRC completed

p its first p
phase of strategic
g reserve construction in December 2008 over a four-year
y p
period
(around 3.5mntpa). Of the total first phase capacity 102mmbbl (14mn tonnes), Sinopec operates bases in Zhenhai
(33mm bbl), Zhoushan (31mm bbl), Huangdao (18.9mm bbl) and CNPC operates the base in Dalian (18.9mm
bbl).
 China is currently locating areas to build the second phase of national strategic oil reserves with eight bases
totaling capacity of 200mm bbl over the next three years. (Dushanzi has been specified as one of the locations.)
 According to the preliminary plan, the NDRC expects to finish construction of oil reserves bases and fill oil fully
within 15 years through three phases with a total investment of more than RMB100bn. More than RMB8bn was
invested for the first four bases.
 1st phase (2004-2008): 102mm bbl;
 2nd phase (2009-2011): 200mm bbl;
 3rd p
phase ((2011-2020):
) 480mm bbl
 In 2020, when all three phases are completed, total strategic oil reserves (around 780 mm bbl) should total 100
days of imports.

ASIA
Chi ’ crude
China’s d imports
i t
China crude demand & supply
pp y (mn
( tonnes))
YoY% YoY% YoY%
 Net crude imports grew by 17.4% y-y in 2010.
Net
2000
Production
162
Import Export
70 10
Import
60
Demand
222
Production
1.2%
Net Import
102.7%
Demand
16.9%  YTD (March), China’s total crude imports increased
2001
2002
165
170
60
69
8
7
53
62
218
232
1.6%
3.3%
-11.7%
18.1%
-2.0%
6.9%
12% y-y to 63.42mn tonnes and demand increased
2003
2004
170
175
91
123
8
5
83
117
253
292
%
0.1%
2.5%
33.4%
%
41.4%
9.0%
%
15.2%
8 7%
8.7%.
2005 181 127 8 119 300 3.5% 1.4% 2.7%
2006
2007
184
187
145
163
6
4
139
159
323
346
1.6%
1.6%
16.7%
14.8%
7.6%
7.3%
 We expect China’s total crude imports in 2011F to
2008 190 179 4 175 365 1.8% 9.9% 5.5% exceed 250mn tonnes and demand to increase at
2009 190 204 5 199 388 -0.2% 13.4% 6.3%
2010 204 239 3 236 440 7.5% 19.0% 13.4% least 5.5%.
2011E 207 261 4 257 464 1 5%
1.5% 9 0%
9.0% 5 5%
5.5%
2012E 210 286 5 281 491 1.5% 9.1% 5.7%
2013E 213 307 5 302 515 1.5% 7.6% 5.0%
mn tonnes Production Import Export Net Import Demand

2007 186.71 163.19 (3.82) 159.37 346.08
2008 190 02
190.02 178 90
178.90 (3 73)
(3.73) 175 17
175.17 365 18
365.18
2009 189.60 203.78 (5.17) 198.61 388.21 Crude oil imports by source (2010)
2010 203.83 239.30 (3.03) 236.27 440.10
Jan-11 17.82 21.80 (0.28) 21.52 39.34 Other
Feb-11 15.91 19.95 (0.08) 19.87 35.78 regions,
Mar-11
Mar 11 17 57
17.57 21 67
21.67 (0 34)
(0.34) 21 33
21.33 38 90
38.90 16%
Jan-Mar 11 51.30 63.42 (0.70) 62.72 114.02
YoY%
2007 1.6% 12.4% -38.6% 14.7% 7.3%
2008 1.8% 9.6% -2.3% 9.9% 5.5% Middle
2009 -0.2% 13.9% 38.5% 13.4% 6.3% Africa, East, 56%
2010 7 5%
7.5% 17 4%
17.4% -41.4%
41 4% 19 0%
19.0% 13 4%
13.4% 24%
Jan-11 5.6% 27.5% 115.4% 26.8% 16.2%
Feb-11 5.2% 7.8% -63.6% 8.6% 7.1%
Mar-11 3.9% 2.9% 21.4% 2.6% 3.2% Asia
Jan-Mar 11 4.9% 11.9% 11.1% 11.9% 8.7% Pacific, 4%
Middl E
Middle Eastt A i P
Asia Pacific
ifi Af i
Africa Oth regions
Other i
Source: OGP, China Custom Statistics, Nomura research

ASIA
Chi ’ oil
China’s il product
d t demand
d d
CAGR %
m tonnes
t 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 96-05
96 05 00-10E
00 10E 00 05
00-05 05-10E
05 10E 10-13E
10 13E
Gasoline 47 48 52 56 63 67 71 76 80 83.5 4.7% 7.4% 6.5% 8.2% 5.4%
Diesel 104 109 116 125 139 138 156 167 177 188.0 9.8% 8.7% 10.0% 7.4% 6.5%
Kerosene 11 10 11 12 13 15 17 20 22 24.0 7.3% 7.2% 3.8% 10.8% 11.2%
Fuel Oil 50 46 48 44 36 34 34 34 34 33.0 2.9% -1.2% 3.5% -5.8% -1.2%
Naphtha 29 30 33 35 33 41 53 57 60 63 0
63.0 5 8%
5.8% 8 3%
8.3% 4 9%
4.9% 11 8%
11.8% 5 8%
5.8%
Others 60 64 67 74 79 90 101 108 115 120.4 11.5% 8.5% 7.4% 9.7% 6.0%
Total 301 308 328 346 363 385 433 461 487 512 7.4% 7.1% 7.1% 7.1% 5.7%
YoY Growth 17.5% 2.2% 6.5% 5.5% 5.1% 6.0% 12.4% 6.5% 5.7% 5.0%
S
Source: CEIC
CEIC, OGP,
OGP Nomura
N estimates
ti t
 Diesel
ese is
s tthe
e main
a o oil p
product
oduct consumed
co su ed in China
C a owing
o g to the
t e high
g ag
agricultural
cu tu a need
eed for
o ddiesel.
ese Diesel
ese de
demand
a dggrew
e at
a CAGR of 10% from 1996 to 2005. In 2009, diesel demand suffered a 0.4% decline owing to a slowdown in industrial
production mainly in 1Q09.
 Unlike OECD countries, gasoline consumption is only half of diesel and has grown at a rate of only 5% from 1996 to
2005. However, we think that growth will accelerate over the next decade, as the number of passenger vehicles
escalates.
 Fuel oil demand has grown at a below-average rate and will likely continue to lose market share, in our view.

ASIA
Oil consumption
ti in
i various
i sectors
t
2006 2007 2008 2009 2010 2011E 2012E 2013E CAGR %

2002-
2002 2010
2010- 2002
2002-
mn tonnes Demand YoY % Demand YoY % Demand YoY % Demand YoY % Demand YoY % Demand YoY % Demand YoY % Demand YoY % 2010 2013E 2013E
Cars 42.0 10.5% 45.0 7.1% 51.8 15.0% 54.9 6.0% 58.5 6.7% 62.2 6.2% 65.6 5.6% 69.1 5.3% 9.6% 5.7% 9.4%
Motorcycle 8.8 8.8% 9.4 6.8% 10.1 7.0% 10.5 4.5% 11.0 5.0% 11.6 4.8% 12.1 4.5% 12.6 4.5% 6.0% 4.6% 6.2%
Others 1.6 -17.9% 1.5 -5.7% 1.6 7.2% 1.7 6.3% 1.8 3.0% 1.8 0.9% 1.8 -0.1% 1.8 -1.3% -1.6% -0.2% -1.3%
Gasoline demand 52.4 9.1% 55.9 6.7% 63.4 13.4% 67.1 5.8% 71.3 6.3% 75.5 5.9% 79.5 5.3% 83.5 5.0% 8.5% 5.4% 8.5%
Diesel run vehicles 44.4 11.8% 50.2 13.1% 58.3 16.0% 55.9 -4.0% 62.6 12.0% 68.9 10.0% 74.4 8.0% 80.4 8.0% 15.6% 8.7% 15.1%
A i lt l vehicles
Agricultural hi l 12 7
12.7 1 7%
1.7% 13 1
13.1 3 0%
3.0% 14 1
14.1 8 0%
8.0% 14 3
14.3 1 0%
1.0% 15 0
15.0 5 0%
5.0% 16 5
16.5 10 0%
10.0% 17 9
17.9 8 5%
8.5% 19 4
19.4 8 5%
8.5% 4 3%
4.3% 9 0%
9.0% 6 2%
6.2%
Other agricultural use 24.3 11.5% 26.5 9.0% 29.0 9.5% 29.3 1.0% 31.9 9.0% 34.8 9.0% 37.4 7.5% 40.2 7.5% 9.5% 8.0% 10.0%
Rail transportion 6.3 2.3% 6.4 1.0% 6.7 5.5% 6.8 1.0% 7.0 3.0% 7.2 3.0% 7.4 3.0% 7.6 3.0% 3.7% 3.0% 3.9%
Water transportation 5.3 0.6% 5.3 0.2% 5.3 0.5% 5.3 0.5% 5.4 1.0% 5.4 0.2% 5.4 0.5% 5.4 0.5% 2.8% 0.4% 2.4%
Fishing trawlers 5.1 -4.7% 4.8 -5.0% 4.6 -5.0% 4.3 -6.0% 4.0 -6.0% 3.9 -3.0% 3.8 -3.0% 3.7 -3.0% -5.6% -3.0% -5.4%
Diesel generator 3.9 -18.1% 3.6 -9.7% 4.3 20.0% 4.0 -5.0% 4.5 10.0% 4.9 10.0% 5.3 9.0% 5.8 9.0% 7.0% 9.3% 8.4%
Construction and others 14.3 5.6% 15.1 5.4% 16.6 10.1% 18.3 10.2% 25.4 38.3% 25.5 0.4% 25.4 -0.3% 25.5 0.4% 10.4% 0.2% 8.3%
Diesel Demand 116 2
116.2 6 6%
6.6% 124 9
124.9 7 4%
7.4% 138 8
138.8 11 2%
11.2% 138 2
138.2 -0 4%
-0.4% 155 7
155.7 12 7%
12.7% 167 0
167.0 7 2%
7.2% 177 0
177.0 6 0%
6.0% 188 0
188.0 6 2%
6.2% 9 4%
9.4% 6 5%
6.5% 9 5%
9.5%
Kerosene 11.5 9.5% 12.2 6.6% 12.8 4.6% 15.0 16.9% 17.5 16.8% 20.0 14.5% 22.0 10.0% 24.0 9.1% 9.2% 11.2% 10.7%
Fuel Oil 47.7 3.6% 43.9 -7.9% 35.9 -18.3% 33.6 -6.3% 34.2 1.6% 34.0 -0.5% 33.5 -1.5% 33.0 -1.5% -1.6% -1.2% -1.6%
Naphtha 32.6 6.9% 34.6 6.2% 33.0 -4.7% 40.9 24.0% 53.2 30.1% 57.0 7.1% 60.0 5.3% 63.0 5.0% 9.8% 5.8% 9.6%
Other Refined oils 67.2 5.8% 74.2 10.4% 79.4 7.0% 90.4 13.9% 101.2 11.9% 107.7 6.5% 115.5 7.2% 120.4 4.2% 11.1% 6.0% 10.7%
Total Oil Products 327.6 6.5% 345.7 5.5% 363 5.1% 385 6.0% 433 12.4% 461.2 6.5% 487.5 5.7% 511.9 5.0% 8.3% 5.7% 8.4%
Source: CEIC, Sinopec, Nomura estimates

ASIA
Chi ’ oil
d t demand
d d
Oil product apparent consumption (‘000 tonnes)
(m tonnes) Throughput
g p Import
p Export Net Import Demand
2007 327.4 33.8 (15.50) 18.3 345.7
2008 341.4 38.9 (17.03) 21.8 363.3
2009 373.2 37.0 (25.04) 11.9 385.1
2010 423.1 36.9 ((26.90)) 10.0 433.0
Jan-11 37.19 3.85 (2.14) 1.71 38.90
Feb-11 35.22 3.30 (1.86) 1.44 36.66
Mar-11 37.67 3.88 (2.58) 1.30 38.97
Jan-Mar 11 110.07 11.03 (6.58) 4.45 114.52
YoY%
2007 7.8% -7.1% 25.3% -23.8% 5.5%
2008 4.3% 14.9% 9.9% 19.2% 5.1%
2009 9.3% -4.9% 47.0% -45.4% 6.0%
2010 13.4% -0.2%
0.2% 7.4% -16.2%
16.2% 12.4%
Jan-11 10.3% 51.6% -20.7% -1168.8% 15.9%
Feb-11 10.4% 14.2% 16.3% 11.6% 10.4%
Mar-11 9.0% 20.5% -2.3% 124.1% 10.9%
Jan-Mar 11 9.9% 27.5% -5.2% 160.2% 12.4%
Source: CEIC, Nomura research
 According to the CEIC data, China’s oil product demand in 2010 rose 12.4% y-y from a low base.
 YTD (March), gasoline, diesel, kerosene and fuel oil apparent demand increased by 9.4% y-y, 13.8%
y-y, 15.6%
15 6% y-y and
d 23% y-y, respectively.
ti l
 The Chinese government’s extensive construction of new roads, airports and railways from the fiscal
stimulus plans helped prop up demand for asphalt/bitumen, which are classified under the “others”
category.
t

ASIA
Chi ’ oil
d t demand
d d
Gasoline apparent consumption (mn tonnes) Kerosene apparent consumption (mn tonnes)
(m tonnes) Production Import Export Net Imp/(Exp) App.
App Cons (m tonnes) Production Import Export Net Imp/(Exp) App.
App Cons
2007 60.31 0.23 (4.64) (4.42) 55.90 2007 11.48 5.24 (4.48) 0.76 12.24
2008 63.46 1.99 (2.04) (0.05) 63.41 2008 11.65 6.48 (5.33) 1.15 12.80
2009 71.97 0.04 (4.94) (4.90) 67.07 2009 14.79 6.12 (5.95) 0.18 14.96
2010 76.50 0.00 (5.17) (5.17) 71.33 2010 17.06 6.50 (6.08) 0.42 17.47
Jan-11 6.83 0.00 (0.56) (0.56) 6.28 Jan-11 1.42 0.71 (0.47) 0.24 1.66
Feb-11 6.34 0.00 (0.40) (0.40) 5.94 Feb-11 1.42 0.40 (0.30) 0.10 1.53
Mar-11 6.64 0.00 (0.47) (0.47) 6.17 Mar-11 1.47 0.46 (0.73) (0.28) 1.19
Jan-Mar 11 19.82 0.00 (1.43) (1.43) 18.39 Jan-Mar 11 4.30 1.57 (1.50) 0.07 4.37
YoY% YoY%
2007 8.0% 239.6% 32.4% 28.4% 6.7% 2007 19.9% -6.7% 20.7% -60.1% 6.6%
2008 5 2%
5.2% 775 3%
775.3% -56.2%
56 2% -98.9%
98 9% 13 4%
13.4% 2008 1.5% 23.5% 19.0% 50.2% 4.6%
2009 13.4% -97.8% 142.8% nm 5.8% 2009 26.9% -5.5% 11.5% -84.7% 16.9%
2010 6.3% -99.7% 4.6% 5.6% 6.3% 2010 15.4% 6.2% 2.3% 137.5% 16.8%
Jan-11 5.0% 44.9% -14.3% -509.5% 28.3%
Jan-11 9.8% nm -7.4% -7.4% 11.6%
Feb-11 10.7% -27.9% -29.4% -22.7% 7.6%
Feb-11 11.4% nm 91.4% 91.4% 8.3%
Mar-11 5.1% 25.4% 6.7% -14.4% 10.9%
Mar-11 5.5% nm -21.1% -21.1% 8.3%
Jan-Mar
Ja a 11 6.9%
6 9% 11.1%
% -9.5%
9 5% -127.1%
% 15.6%
5 6%
J
Jan-Mar
M 11 8 8%
8.8% -42.5%
42 5% 1 7%
1.7% 1 7%
1.7% 9 4%
9.4%
Diesel apparent consumption (mn tonnes) Fuel oil apparent consumption (mn tonnes)
(m tonnes) Production Import Export Net Imp/(Exp) App. Cons (m tonnes) Production Import Export Net Imp/(Exp) App. Cons
2007 123.89 1.62 (0.66) 0.96 124.86 2007 23.58 24.12 (3.78) 20.34 43.92
2008 133.20 6.25 (0.63) 5.62 138.82 2008 21.52 21.60 (7.25) 14.36 35.87
2009 140 9
140.9 18
1.8 (4 51)
(4.51) (2 67)
(2.67) 138 23
138.23 2009 18 23
18.23 24 00
24.00 (8 62)
(8.62) 15 38
15.38 33.61
2010 158.59 1.80 (4.67) (2.87) 155.71 2010 21.05 23.01 (9.90) 13.12 34.17
Jan-11 14.09 0.18 (0.10) 0.09 14.17 Jan-11 1.84 2.43 (0.94) 1.49 3.33
Feb-11 13.40 0.16 (0.16) (0.00) 13.39 Feb-11 1.78 2.30 (0.94) 1.36 3.14
Mar-11 13.84 0.09 (0.26) (0.17) 13.67 Mar-11 1.76 2.71 (1.00) 1.71 3.46
Jan-Mar 11 41.32 0.44 (0.52) (0.08) 41.24 Jan-Mar 11 5.38 7.44 (2.88) 4.56 9.93
YoY% YoY%
2007 6.5% 130.1% -14.9% -1462.9% 7.4% 2007 5.7% -13.7% 47.6% -19.8% -7.9%
2008 7.5% 285.1% -4.8% 484.0% 11.2% 2008 -8.7% -10.4% 91.7% -29.4% -18.3%
2009 5.8% -70.6% 617.0% -147.5% -0.4% 2009 -15.3% 11.1% 19.0% 7.1% -6.3%
2010 12.6% -2.1% 3.7% 7.6% 12.7% 2010 15.4% -4.1% 14.7% -14.7% 1.6%
Jan-11 11.1% 81.7% -79.3% -124.1% 15.1% Jan-11 10.9% 72.3% -5.7% 258.0% 60.7%
Feb-11 14.6% 67.8% -44.1% -99.9% 16.5% Feb-11
Feb 11 14.9% 26.9% 63.5% 9.8% 12.6%
Mar-11 9.5% -65.3% -44.4% -15.8% 9.9% Mar-11 -7.2% 30.3% 32.2% 29.2% 7.7%
Jan-Mar 11 11.7% -6.3% -57.5% -89.3% 13.8% Jan-Mar 11 5.4% 40.3% 23.8% 53.2% 23.0%
ASIA
Chi ’ crude
China’s d oil
il and
d oil
il product
d t inventory
i t
Crude oil inventory (mn tonnes) Gasoline and diesel inventory (mm bbl)
45 80
40 70
35 60
30
50
25
40
20
30
15
20
10
10
5
0 0
Nov-06
Nov-07
Nov-08
May-06
May-07
May-08
May-09
Dec-06
Dec-07
Dec-08
Jan-06
Feb-06
Mar-06
Apr-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Jan-07
Feb-07
Mar-07
Apr-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Jan-08
Feb-08
Mar-08
Apr-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Jan-09
Feb-09
Mar-09
Apr-09
Jun-09
Jul-09
Aug-09
ov-08
ay-08
ay-09
ec-08
an-08
eb-08
Mar-08
Apr-08
un-08
Jul-08
ug-08
ep-08
Oct-08
an-09
eb-09
Mar-09
Apr-09
un-09
Jul-09
ug-09
O
M
M
A
A
No
Ma
Ma
De
M
N
N
D
D
Ja
Fe
Ju
Au
Se
Ja
Fe
Ju
Au
F
A
S
A
S
A
S
A
J
J
O
J
J
M
M
A
CNPC & Sinopec Gasoline Inventory (mm bbls) CNPC and Sinopec Diesel Inventory (mm bbls)
Crude oil inventory (mn tonnes)
25 20%
31 6%
5%
15%
30 20
4%
3% 10%
29
2% 15
28 1% 5%
0% 10
27 0%
-1%
-2% 5
26 -5%
-3%
25 -4% 0 -10%
Apr-10
Oct-10
Feb-10
Jul-10
Feb-11
May-10
Jan-10
Jun-10
Jan-11
Aug-10
Sep-10
Nov-10
Dec-10
Mar-10
Mar-11
Aug-10
Sep-10
Nov-10
Dec-10
Apr-10
Oct-10
Feb-10
Mar-10
Jul-10
Feb-11
Mar-11
May-10
Jan-10
Jun-10
Jan-11
0
0
0
0
0
0
Crude oil inventory (LHS) Product oil inventory (LHS)
Source: OGP, Nomura research

ASIA
Chi ’ refining
China’s fi i sector
t
China refining utilisation rate %  The oil product price mechanism linking ex-refinery oil
10,000 100%
9,000 95%
product prices to international crude oil prices was
8,000 90%
implemented on 1 January, 2009.
7,000 85%
6,000 80%
 Retail g
gasoline and diesel p
prices are p
priced at ex-
5,000 75% refinery product prices plus average cost, applicable
4,000 70% taxes (17% VAT and consumption tax) and a
3,000 65% “reasonable” margin.
2,000 60%
1,000 55%
0 50%
 There is room for the Chinese government to hike oil
product prices by the end of 2Q11F at the latest due to
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Capacities (mm b/d) (LHS) Throughput (mm b/d) (LHS) Utilization rate (RHS)
potential supply shortages.
Gasoline prices — China vs Singapore Diesel prices — China vs Singapore
US$/bbl
US$/bbl
180
160
160
140
140
120
120
100 100
80 80
60 60
40 40
20 20
0 0
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
SG Diesel PRC Diesel

SG Gasoline PRC Gasoline
Source: OGP, Nomura.
Source: CEIC, Bloomberg, BP, Nomura estimates.

ASIA
D
Domestic
ti refining
fi i margins
i
PRC gasoline vs Dubai  There is a time lag between when refineries purchase
160
th crude
the d oilil and
d when
h ththe crude
d oilil iis refined.
fi d
140
120  There is a one-month lag for PetroChina, but almost a

100 two-month lag for Sinopec, which imports most of its
80
crude oil requirement from overseas.
60
40
 Refining margins peaked in June 2009.
20
0 Sinopec refining EBIT margins (US$/bbl)

(US$/bbl) Refining margins Quarterly avg.
-20 Jan-09 2.7
Feb-09 8.6
-40 Mar-09 7.3 1Q09 6.2
Apr-09 9.6
-60 May-09 7.6
Jun-09 10.4 2Q09 9.2
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Jul-09 6.1
Aug-09 0.1
Sep-09 2.6 3Q09 2.9
Spread Dubai (US$/bbl) China Gasoline Price (US$/bbl) Oct-09 (1.0)
Nov-09 2.5
Dec-09 (1.3) 4Q09 0.1
Jan-10 0.4
PRC diesel vs. Dubai Feb-10

Mar-10
Apr-10
(0.7)
3.3
4.1
1Q10 1.0
May-10 (0.7)
150 Jun-10 (5.9) 2Q10 (0.9)
Jul-10 2.8
Aug-10 3.9
Sep-10 2.4 3Q10 3.1
Oct-10 5.8
100 Nov-10 3.9
Dec-10 2.7 4Q10 4.1
Jan-11 1.1
Feb-11 0.2
50 Mar-11 (2.7) 1Q11 (0.5)
Apr-11 (3.8)
0 Gasoline and diesel price — PRC vs Singapore

China China China (ex consumption tax) China (ex consumption tax) Singapore
(RMB/tonne) (RMB/litre) (RMB/tonne) (RMB/litre) (Avg Price in May 11)
(Avg.
Retail Price
Gasoline 9,380 6.76 7,992 5.76
-50
Diesel 8,530 7.25 7,589 6.45
Ex-refinery
Gasoline 8,580 6.18 7,192 5.18
Diesel 7,730 6.57 6,789 5.77
-100 (US$/bbl) (US$/bbl)
Retail Price (ex VAT)
S ep-01
S ep-02
S ep-03
S ep-04
S ep-05
S ep-06
S ep-07
S ep-08
S ep-09
S ep-10
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
J an-01
J an-02
J an-03
J an-04
J an-05
J an-06
J an-07
J an-08
J an-09
J an-10
J an-11
Gasoline 141.9 120.9

Diesel 146.2
146 2 130.1
130 1
Ex-refinery (ex VAT)
Spread Dubai (US$/bbl) China Diesel Price (US$/bbl) Gasoline 129.8 108.8 134.1
Diesel 132.5 116.4 137.2
Gasoline (US$/Litre) 0.93 0.78 0.84
Source: Bloomberg, OGP, Nomura research Diesel (US$/litre) 0.99 0.87 0.86
Source: NDRC, Nomura research
ASIA
N
New PRC Oil Product
P d t Pricing
P i i Mechanism
M h i
 The PRC government will continue to control oil product prices and provide guidance price
for gasoline and diesel and set
 Maximum retail price
 Maximum wholesale price
 Reasonable distribution price
 Prescribed price for special customer
 Ex-refinery price of gasoline and diesel will be set according to international oil prices,
average processing cost
cost, taxes and appropriate profit margin.
margin
 Prices may be adjusted if average international oil price were to exceed a certain level (4%)
within a certain period of time (22 working days).
 Between international crude prices of US$80/bbl – US$130/bbl, the level of price adjustment
will slow, resulting in narrower profit margins for refineries.
 When international crude oil prices exceed US$130/bbl
US$130/bbl, the government may no longer
adjust product prices higher and will consider giving subsidies to refineries to compensate
for losses.

ASIA
Wh we think
Why thi k oil
il product
d t pricing
i i mechanism
h i is
i flawed
fl d
 Fixed margins cannot work in a free market
 Fixed margins can lead to overcapacity
 Being too transparent causes

ca ses inventory
in entor swings
s ings
 Can cause margin swings for the marketing sector
 Timing
g out of sync
y with refineries’ crude p
purchases
 The government has not fully adhered to the pricing mechanism

ASIA
C
Current
t oil
il product
d t price
i ini April
A il 2011
RON #90 Gasoline #0 Diesel
Max Retail Price 8,880 8,130
Min spread 300

Max. Wholesale Price 8,580 7,830
Min spread 400

Max. Distribution Price 8,480 7,730
Ex-Refinery Price 8,080 7,330
Source: Company data, National Development and Reform Commission.

ASIA
C
Consumption
ti ttax
 Removed six types of fees, such as road maintenance fee, road transportation management fee, etc.
 Raised consumption tax rate for oil products
Consumption tax rate for oil products

Gasoline
G li RMB 1.00/liter
1 00/lit or RMB1,388/t
RMB1 388/t (increased
(i d byb RMB 0.80/liter)
0 80/lit )
Diesel RMB 0.80/liter or RMB941/t (increased by RMB 0.70/liter)
Jet Fuel RMB 0.80/liter or RMB997/t (increased by RMB 0.70/liter, temporarily exempted)
RMB 0.80/liter
0 80/liter (increased b
by RMB 0.80/liter,
0 80/liter e
exempted
empted if used
sed as ra
raw material for
Naphtha ethylene or aromatics production up to end of 2010)
Fuel Oil RMB 0.80/liter or RMB812/t (increased by RMB 0.70/liter)
Source: Company data, National Development and Reform Commission.

ASIA
Chi sector
China t picks
i k - Summary
S
Stock ratings and target prices
PetroChina (857 HK) – BUY, Price Target HK$13.5 (Buy for long-term gas story)
Sinopec (386 HK) – BUY, Price Target HK$9.0 (2Q11 could underperform, but LT fundamentals
intact)
CNOOC Ltd. ((883 HK)) – BUY,, Price Target

g HK$23.0
$ (Buy
( y for gearing
g g to oil prices)
p )
COSL (2883 HK) – REDUCE, Price Target HK$10.3 (Overvalued)
Shanghai Pet (338 HK) – BUY, Price Target HK$4.5 (Gearing to petchem upcycle)
Kunlun Energy (135 HK) – BUY, Price Target HK$17.0 (Asset injection story)
Sinofert (297 HK) – REDUCE, Price Target HK$3.0 (Improving margins discounted)
China BlueChem (3983 HK) – BUY, Price Target HK$7.00 (Gaining market share)

ASIA
1Q11 results
lt recap
QoQ YoY
Ticket 1Q10 4Q10 1Q11 1Q11 1Q11
et oc a
Petrochina 857 HK
Net profit (RMB mn) 32,492 39,962 37,003 -7.4% 13.9%
EPS (RMB) 0.178 0.218 0.202
Shanghai Petrochemicals 338 HK
Net profit (RMB mn) 895 980 912 -7.0% 1.9%
EPS (RMB) 0.124 0.136 0.127
Sinopec 386 HK
Net profit (RMB mn) 16,485 15,355 20,643 34.4% 25.2%
EPS (RMB) 0.190 0.177 0.238
COSL 2883 HK
Net profit (RMB mn) 977 699 967 38.4% -1.0%
EPS (RMB) 0.217 0.155 0.215
CNOOC 883 HK
Revenue (RMB mn) 30,493 43,420 48,511 11.7% 59.1%
Source: Company data, Nomura Research.

ASIA
P t Chi (857 HK)

PetroChina HK), BUY
BUY, PT
PT: HK$13
HK$13.5
5
 Integrated oil company focuses on upstream E&P, with estimated 2011F net profit of > US$25bn and a market cap of
around US$320bn.
US$320bn It remains the largest oil and gas proxy to the China market
market.
 PetroChina (PTR) announced 1Q11 earnings of RMB37bn, up 14% y-y. Overall earnings continue to be stable despite
high volatility in crude prices and losses in the refining sector.
 PetroChina is our long-term pick due to its stable earnings growth, large reserve base, strong growth in natural gas,
strong balance sheet and cashflow, undemanding-looking valuations, high yield and low gearing.
 Future volume growth in gas should be its next trigger. We expect natural gas demand in China to grow from 90bcm in
2009 to 290bcm in 2020F.
 PetroChina will likely be the biggest beneficiary of this growth in 3 ways – 1) upstream production growth and price
appreciation; 2) pipeline distribution; and 3 downstream distribution (via Kunlun Energy, Kunlun Natural Gas and
Kunlun Gas) to end-users.
 Strategy is to stabilise domestic oil production and for overseas production to contribute 50% of oil production. It will
have strong double
double-digit
digit domestic natural gas growth
growth, we believe.
believe
 Near-term risks: 1) losses in imported gas from Turkmenistan; 2) lower-than-expected oil product prices; 3) downside
risk related to hike in resource tax; and 4) government regulatory risks.
 Upside potential: 1)) asset injections;
j 2)) windfall tax; 3)) petrochemical upcycle;
y and 4)) improved oil product mechanism
Yr to Dec Share Price Sales Net profit YoY% EPS (WA) PER BVPS P/B EV/DACF EV/ Yield ROACE Gearing EV/Barrel
Avg. (RMBmn) (RMBmn) (RMB) (x) (RMB) (x) (x) EBITDA (%) (%) (%) US$/bbl
2006 8.44 688,978 142,224 6.6% 0.777 11.2 3.28 2.6 9.6 7.3 3.1% 24.3% 3.9% 12.4
2007 11.76 836,353 146,750 3.2% 0.802 14.5 4.11 2.8 9.0 7.4 3.2% 20.8% 0.3% 13.2
2008 9.49 1,072,604 114,453 -22.0% 0.625 13.6 4.32 2.0 6.7 5.8 3.7% 13.3% 11.8% 10.4
2009 8.13 1,019,275 103,387 -9.7% 0.565 12.7 4.63 1.5 6.5 5.6 2.6% 10.6% 17.4% 9.4
2010 9.11 1,465,415 139,992 35.4% 0.765 10.5 5.13 1.6 5.8 5.1 3.5% 12.7% 20.0% 10.8
2011E 11.16 1,784,353 176,214 25.9% 0.963 10.2 5.71 1.7 6.2 5.3 4.4% 13.7% 31.2% 14.0
2012E 11 16
11.16 1 879 404
1,879,404 184 403
184,403 4 6%
4.6% 1 008
1.008 98
9.8 6 27
6.27 16
1.6 61
6.1 52
5.2 4 6% 12.3%
4.6% 12 3% 34 1%
34.1% 14 5
14.5
2013E 11.16 1,991,636 189,763 2.9% 1.037 9.5 6.85 1.4 6.0 5.2 4.7% 11.4% 38.1% 15.0
* Based on share price of HK$11.6 @ 29 April
Source: Company data, Nomura estimates.
ASIA
Chinese companies’ domestic production and reserves

Crude oil production (2010) – [1,322mn bbl] Natural gas production (2010) – [2,803 bcf]
Sinopec,
Sinopec,
Si 16%
25%
CNOOC,
8%
Petrochina
, 58%
CNOOC,
17%
Petrochina
, 76%
Petrochina CNOOC Sinopec Petrochina CNOOC Sinopec
C d oil
Crude il reserve (2010) – [14,496
[14 496 mn bbl] N t
Natural
l gas reserve (2010) – [71,652
[71 652 b
bcf]
f]
Sinopec,
Sinopec, 9%
20% CNOOC,
6%
CNOOC,
10%
Petrochina
, 70%
Petrochina
, 85%
Petrochina CNOOC Sinopec Petrochina CNOOC Sinopec
Source: PetroChina, Sinopec, CNOOC, Nomura research
ASIA
P t Chi (857 HK) — valuation

PetroChina l ti
Sum-of-the-parts EBIT breakdown
Normalized Rmb in millions 2008 2009 2010 2011E 2012E 2013E
US$ mn Rmb m HK$/Share EBITDA Multiple Basis EBIT
DCF calculation based on estimated
E&P 205,579 1,342,534 8.74
recoverable reserves at 8% discount rate
E&P 240,470 105,019 153,703 209,347 209,907 215,975
R&C 37,886 247,413 1.61 24,741 10.0 avg EV/EBITDA. Refining & Chemicals (93,830) 17,308 7,847 (9,020) 3,718 3,932
Marketing 58,464 381,797 2.48 38,180 10.0 avg EV/EBITDA. Marketing 7,982 13,265 15,956 28,613 28,697 28,735
Gas 34,485 225,204 1.47
DCF calculation based on projected gas sales Natural Gas 16,057 19,046 20,415 21,669 23,741 26,876
at 8% discount rate
Subtotal 170,679 154,638 197,921 250,609 266,063 275,519
Total Enterprise Value 336,413
336 413 2,196,948
2 196 948 14.30
14 30
Less: Avg. Net debt at FY10 1.22
% of subtotal
28,774 187,911
Equity Value 307,639 2,009,037 13.07 E&P 141% 68% 78% 84% 79% 78%
# of Shares Outstanding (mn) 1,830 183,021 Refining & Chemicals -55% 11% 4% -4% 1% 1%
NAV (US$/Shr; HK$/Shr) 168.09 13.07 Marketing 5% 9% 8% 11% 11% 10%
Value of overseas assets (HK$/US$) 0.03 0.21 Natural Gas 9% 12% 10% 9% 9% 10%
Total NAV (US$/Shr; HK$/Shr) 168.12 13.28
E&P revenue %
Oil 93% 87% 88% 89% 86% 83%
Gas 7% 13% 12% 11% 14% 17%
R l
Replacement
t costt 2011F sensitivity
iti it table
t bl
Total amount Rmb
Unit Price (US$ m) /share
Reserves Crude oil price (US$/bbl)
Oil (mm bbl) 11,278 US$ 12 /bbl 135,336 5.1 80 90 100 110 120 130 140
Gas (bcf) 65,503 US$ 1.8 /mcf 117,905 4.4 2.0 72,680 96,140 119,600 143,061 166,521 189,981 213,441
30
3.0 85 308
85,308 108 768
108,768 132 228
132,228 155 689
155,689 179 149
179,149 202 609
202,609 226 069
226,069
Natural Gas Price

e
Overseas assets (mm BOE) 795 4,947 0.2
E&P (total) 258,188 9.6 4.0 97,936 121,396 144,856 168,317 191,777 215,237 238,697
(U$/mcf)
Refining capacity ('000b/d) 2,671 US$14,000 per bbl 37,669 1.4 4.6 105,833 129,294 152,754 176,214 199,674 223,134 246,594
Marketing (Gas stations) 17,996 US$ 1 m/station 13,041 0.5 5.0 110,564 134,024 157,484 180,945 204,405 227,865 251,325
Chemical (Ethylene capacity (m tonne)) 3.71 US$ 3,500 per ton 12,985 0.5 6.0 123,192 146,652 170,112 193,573 217,033 240,493 263,953
Pipeline (Length of natural gas pipelines (km)) 56,840 US$ 2.0 mn per km 113,680 4.2 7.0 135,820 159,280 182,740 206,201 229,661 253,121 276,581
others ,
23,074 0.9 8.0 148,448 171,908 195,368 218,829 242,289 265,749 289,209
Total NAV (US$ mils) 458,637 17.1 9.0 161,076 184,536 207,996 231,457 254,917 278,377 301,837
Total NAV (Rmb mils) 3,132,490 17.1
Less: net debt (Rmb mils) 187,911
Total (Rmb mil) 2,944,579
Total NAV per share (HK$) 18.26
Source: Nomura estimates.

ASIA
P t Chi — band
PetroChina b d charts
h t and
d target
t t price
i derivation
d i ti
Forward P/E band Forward P/B band
PE band chart PB band chart
32.0 26.0
4.5x
30.0 24.0
28.0 25x 22.0 4.0x
26.0
20.0
3.5x
24.0
18.0
22.0 20x
16.0 30
3.0x
20.0
18.0 14.0 2.5x
HK$
HK$
16.0 15x 12.0

14.0 2.0x
10.0
12.0 10x 8.0
10.0 1.5x
6.0
8.0 1.0x
4.0
6.0 5x
2.0 0.5x
4.0
2.0 0.0
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
Jan-01
Sep-01
Jan-02
Sep-02
Jan-03
Sep-03
Jan-04
Sep-04
Jan-05
Sep-05
Jan-06
Sep-06
Jan-07
Sep-07
Jan-08
Sep-08
Jan-09
Sep-09
Jan-10
Sep-10
Jan-11
0.0
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
J an-01
J an-02
J an-03
J an-04
J an-05
J an-06
J an-07
J an-08
J an-09
J an-10
J an-11
ep-01
ep-02
ep-03
ep-04
ep-05
ep-06
ep-07
ep-08
ep-09
ep-10
Se
Se
Se
Se
Se
Se
Se
Se
Se
Se
Target price derivation Forward EV/EBITDA band

Risk Free Rate 2.5% 24
Risk Premium 6.5% 22

12.0x
Beta 1.2 20
Cost of Debt 2.2% 18

10.0x
Cost of Equity 10.2% 16
2011F ROACE 13.7% 14 8.0x
WACC 8.1%
HK$
12
6.0x
EV (Rmb bn) 2,470 10
Capital Employed (Rmb bn) 1 456

1,456 8
ROACE 13.7% 2,470 6 4.0x

= = 1.7 =
WACC 8.1% 1,456 4
Fair values per share (HK$) HK$ 13.29 2
2.0x
Value of Overseas Assets 0.21 0

Target Price (HK$) HK$ 13.50
Sep--01
Sep--02
Sep--03
Sep--04
Sep--05
Sep--06
Sep--07
Sep--08
Sep--09
Sep--10
May--01
May--02
May--03
May--04
May--05
May--06
May--07
May--08
May--09
May--10
May--11
Jan--01
Jan--02
Jan--03
Jan--04
Jan--05
Jan--06
Jan--07
Jan--08
Jan--09
Jan--10
Jan--11
Source: Datastream, Company data, Nomura estimates

ASIA
Si
Sinopec (386 HK)
HK), BUY
BUY, PT
PT: HK$9
HK$9.0
0
 An integrated oil company geared more towards downstream oil and chemicalschemicals. It is geared most to domestic demand
growth in oil products and petrochemicals.
 Sinopec announced 1Q11 net profit of RMB20.6bn, up +25% y-y. Despite refining losses of RMB576mn, its
petrochemical and marketing divisions achieved strong EBIT growth of 64% and 41% y-y, respectively.
 W expectt refining
We fi i losses
l tto widen
id andd petrochemical
t h i l margins i tto squeeze iin 2Q11
2Q11.
 However, we believe there is room for the Chinese government to hike oil product prices by the end of 2Q11F at the
latest due to potential supply shortages.
 Near-term investment risks: 1) oil product price controls; 2) inflation risks; and 3) regulatory risks such as resource tax.
 Upside potential – 1) petrochemical upcycle; 2) further upstream asset injections by parent; 3) improvement in oil
product pricing mechanism; and 4) positive changes in taxes (VAT on oil products and windfall tax).
Yr to Dec Share Price Sales Net Profit YoY% EPS (WA) PER BVPS P/B EV/DACF EV/ Yield ROACE Gearing EV/Barrel
(HK$) (RMBmn) (RMBmn) (RMB) (x) (Rmb) (x) (x) EBITDA (%) (%) (%) US$/bbl
2006 4.88 1,061,741 53,603 29% 0.618 8.1 3.05 1.7 6.3 4.8 3.0% 13.9% 59.4% 18.6
2007 8.50 1,204,843 56,533 5% 0.652 12.9 3.55 2.4 7.4 6.4 2.0% 13.7% 56.3% 29.6
2008 7.13 1,444,291 28,525 -50% 0.329 19.4 3.78 1.7 10.3 9.3 1.9% 8.9% 69.9% 27.6
2009 5.92 1,345,052 63,147 121% 0.728 7.2 4.33 1.2 NM 4.3 3.4% 13.5% 55.8% 25.0
2010 6.53 1 913 182
1,913,182 71 800
71,800 14% 0 828
0.828 70
7.0 4 83
4.83 12
1.2 38
3.8 40
4.0 3 0% 13.2%
3.0% 13 2% 46 0%
46.0% 26 0
26.0
2011E 7.82 2,376,901 81,153 13% 0.936 7.4 5.55 1.2 6.3 4.3 3.4% 13.2% 41.4% 29.6
2012E 7.82 2,542,700 93,005 15% 1.073 6.4 6.37 1.1 4.8 3.8 3.9% 13.6% 36.0% 29.6
2013E 7.82 2,633,708 94,164 1% 1.086 6.3 7.18 1.0 4.7 3.8 4.0% 12.4% 34.7% 30.2
Source: Company data,

data Nomura estimates

ASIA
Sinopec refining margins

(US$/bbl) Refining margins Quarterly avg.
Jan-09 2.7
Feb-09 8.6
% of Price (incl. VAT) Price (incl. VAT) Market Barrel Price (ex VAT) Price Price
Mar 09
Mar-09 73
7.3 1Q09 62
6.2
ex consumption tax ex consumption tax Apr-09 9.6
Production (Rmb/Tonne) (Rmb/Tonne) Unit Price or Factor US$/tonne US$/tonne US$/bbl May-09 7.6
Jun-09 10.4 2Q09 9.2
(A) Gov't Price (B) AxB Jul-09 6.1
Gasoline 18.0% 8,580 7,192 US$/bbl 109.9 8.5 936 168.4 Aug-09 0.1
Jet/kero 6.0% 6,840 5,843 US$/bbl 96.5 7.9 760 45.6 Sep-09 2.6 3Q09 2.9
Oct-09 (1.0)
Diesel/GO 41.5% 7,730 6,789 US$/bbl 118.7 7.4 883 366.6 Nov-09 2.5
ue o
Fuel oil 11.0%
0% 4,804
,80 4,804
,80 US$/bbl
US$/bb 96.7
96 6.5
6 5 625
6 5 68.8
68 8 Dec-09
Dec 09 (1 3)
(1.3) 4Q09 01
0.1
LPG 5.0% 6,529 6,529 US$/tonne 850 12.4 850 42.5 Jan-10 0.4
Feb-10 (0.7)
Napththa 12.0% 6,376 6,376 US$/bbl 98.2 8.5 830 99.6 Mar-10 3.3 1Q10 1.0
Gross Product Value 791.5 108.8 Apr-10 4.1
Costs May-10 (0.7)
Jun-10 (5.9) 2Q10 (0.9)
Dubai crude (Lag 1.5 months) US$/bbl 108.62 7.275 790.2 108.6 Jul-10 2.8
Refining margin 1.3 0.2 Aug-10 3.9
Operating cost 29 1
29.1 40
4.0 p
Sep-10 2.4 3Q10
Q 3.1
Oct-10 5.8
Nov-10 3.9
Refining profit (US$/tonne) (27.8) Dec-10 2.7 4Q10 4.1
Refining profit (US$/bbl) (3.8) (3.8) Jan-11 1.1
Feb-11 0.2
Mar-11 (2.7) 1Q11 (0.5)
Apr-11 (3.8)
Source: NDRC, Thomson Reuters Datastream, Nomura research
 The product pricing mechanism gives no clarity on what refining margins the government intends for the domestic
refineries.
 Oil product prices may be adjusted every 22 working days if average crude oil prices move by 4% since the last
adjustment.
 According to the benchmark retail and ex-refinery price differences, marketing margins are around RMB700/tonne,
around 30% lower than historical levels.
 Longer term, we expect full liberalisation of product pricing.

ASIA
Si
Sinopec (386 HK) — valuation
l ti
Sum-of-the-parts EBIT breakdown
Normalized (Rmb in millions) 2008 2009 2010 2011E 2012E 2013E
Sum-of-the parts US$ mn Rmb m HK$/share EBITDA Multiple Basis EBIT
DCF based on recoverable E&P 66,569 23,894 47,149 60,213 65,747 66,704
E&P 73,092 499,439 6.5 n/a Refining (63,635) 27,508 15,855 (3,850) 5,112 5,161
reserves at 10.2% discount rate
Refining 10,259 70,103 0.9 17,526 4.0 Average EBITDA multiple Marketing 38,519 30,300 30,760 35,683 35,845 35,869
Marketing 59,628 407,439 5.3 40,744 10.0 Average EBITDA multiple Chemicals (12 950)
(12,950) 13 805
13,805 15 037
15,037 25 150
25,150 26 545
26,545 27 879
27,879
Chemicals 27,837 190,213 2.5 31,702 6.0 Average EBITDA multiple Subtotal 28,503 95,507 108,801 117,197 133,250 135,613
Total Enterprise Value 170,817 1,167,194 15.3 % of subtotal
Net debt at 2010 (28,230) (192,895) (2.5) E&P 234% 25% 43% 51% 49% 49%
Equity Value 142,587 974,299 12.75 Refining -223% 29% 15% -3% 4% 4%
# of O/S Shares bn 867.0 86.7 Marketing 135% 32% 28% 30% 27% 26%
NAV (US$/ADR, HK$/Shr) 164.5 12.75 Chemicals -45% 14% 14% 21% 20% 21%
Replacement cost FY11 earnings sensitivity table

Replacement cost
Total Amount
Unit Price (US$ m) Rmb/share Crude Oil Price (US$/bbl)
E&P
80 90 100 110 120 130 140
oil (mm bbl) 2,888 US$ 12 /bbl 34,656 2.73
7.00 58,169 67,077 75,985 84,893 93,800 102,708 111,616
Natural Gas Price

natural gas (bcf) 6,447 US$ 1.8 /mcf 11,605 0.91
New discovery
6.50 56,979 65,887 74,794 83,702 92,610 101,517 110,425
(US$/kcf)
Tahe, Xinjiang (Oil) (recoverable reserve) 511 US$ 12 /bbl 6,132 6.00 55,788 64,696 73,604 82,511 91,419 100,327 109,235
E&P (Oil and Gas reserves) 52,393 4.13 5.43 54,430 63,338 72,245 81,153 90,061 98,968 107,876
Refining 59,840 4.72 5.50 54,598 63,505 72,413 81,321 90,229 99,136 108,044
Marketing (gas station operated by SNP) 30,116 US$ 1 m/station 21,823 1.72 5.00 53,407 62,315 71,222 80,130 89,038 97,946 106,853
Chemical (Ethylene capacity (m tonne)) 9.33 US$
$ 3,500 per ton 32,638 2.57 4 0
4.50 52,216 61,124 70,032 78,940 87,847 96,755 105,663
Others 5,018
Total NAV (US$ mil) 171,711 13.53
Total NAV (Rmb mil) 1,173,300 13.53
Less: net debt (Rmb mil) (192,895) (2.2)
Total (Rmb mil) 980,405 11.31
Total NAV per share (HK$) 12.83

ASIA
Si
C
Beta
Cost
WACC
WACC
ROACE
HK$
off D
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
New target
b
Debt
Oct-00
EV (Rmb bn)
p
Jan-01
Cost of Equity
Risk Premium
Apr-01
Risk Free Rate
FY11F ROACE
Jul-01
Oct-01
g price
Jan-02
Apr-02
Sinopec
Jul-02
Oct-02
Jan-03
Apr-03
(HK$)
( $)
Jul-03
Oct-03
=
Fair value per share (HK$)
Jan-04
Capital Employed (Rmb bn)

Apr-04
Jul-04
Oct-04

Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
10.2%
13.2%
Jul-06
PE band chart
Oct-06
Jan-07
Apr-07
Jul-07
=
Oct-07
Jan-08
Apr-08
— band
Jul-08
Source: Datastream, Company data, Nomura estimates

Oct-08
Jan-09
Forward P/E band
New target price (HK$) (round up to 1 decimal)

Apr-09
Jul-09
Oct-09
1.29
Target price derivation
Jan-10
Apr-10
7.0x
5 0x
5.0x
9.0x
Jul-10
11.0x
15.0x
13.0x
Oct-10
Jan-11
Apr-11
=
b d charts
HK$
1.2
9.00
13.4%
HK$ 9.00
10.2%
2 8%
2.8%
13.2%
2.5%
689
9.0%
$ 9.00
887
689
887
h t and t
d target
HK$
HK$
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
00
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Oct-00
Oct-00 Jan-01
Jan-01 Apr-01
Apr-01 Jul-01
Jul-01 Oct-01
Oct-01 Jan-02
Jan-02 Apr-02
Apr-02 Jul-02
Jul-02 Oct-02
Oct-02 Jan-03
t price
Jan-03 Apr-03
Apr-03 Jul-03
Jul-03 Oct-03
Oct-03 Jan-04
Jan-04 Apr-04
Apr-04 Jul-04
Jul-04
Oct-04
Oct-04
Jan-05
Jan-05
Apr-05
Apr-05
Jul-05
Jul-05
Oct-05 Oct-05
Jan-06 Jan-06
Apr-06 Apr-06
PB band chart
Jul-06 Jul-06
Oct-06 Oct-06
Jan-07 Jan-07
Apr-07 Apr-07
Jul-07 Jul-07
Oct-07 Oct-07
Jan-08 Jan-08
Apr-08 Apr-08
Forward P/B band
Jul-08
3.5x
Jul-08
Oct-08
10
Oct-08
d i ti
2.0x
3.0x
0.5x
1.0x
2.5x
Jan-09 Jan-09
1.5x
Apr-09 Apr-09
Jul-09 Jul-09
Oct-09 Oct-09
Forward EV/EBITDA band
9.0x
Jan-10 Jan-10
Apr-10 Apr-10
3.0x
7.5x
Jul-10 Jul-10
4.5x
6.0x
i derivation
Oct-10 Oct-10
Jan-11 Jan-11
Apr-11 Apr-11
109
ASIA
CNOOC Ltd (883 HK)

HK), BUY
BUY, PT
PT: HK$23
HK$23.0
0
 The second-largest listed pure E&P company in the world in terms of reserves and China’s
China s only pure E&P company.
company
 CNOOC 1Q11 oil and gas production volume came in at 85.2mmboe up 26.6% y-y.
 There may be revision of full-year production target of 355-365mmboe (up 8-10% y-y) depending on: 1) progress of its
acquisition completion dates; and 2) new project starts-ups and the production interruption due to its damaged FPSO.
 Our Brent oil price forecasts are US$110/bbl in 2011-13F and our long-term oil price estimate is US$75/bbl.
 Investment risks – 1) declining returns and margins as company expands overseas; 2) limited reserve base; 3) resource (or
some other) taxes; 4) rising operating cost – lifting cost, exploration expenses; 5) lower production growth; and
6) international regulatory risks
risks.
 Our target price of HK$23.0 is derived from 2011F ROACE/WACC (30.5%/8.6%) with a long-term growth rate of 1%.
Yr to Dec Share Price Sales Net Profit YoY% EPS PER BVPS P/B EV/DAC EV/ Yield ROACE Gearing EV/Barrel LT crude oil price (US$/bbl) NAV (HK$)
40 8.41
(HK$) (RMBmn) (RMBmn) (Rmb) (x) (Rmb) (x) (x) EBITDA (%) (%) (%) US$/bbl
60 9.56
2006 6.40 88,947 30,927 22% 0.71 9.2 2.49 2.6 7.0 5.6 3.9% 36% Net Cash 14.4 75 (base case) 10.28
2007 9.36 90,724 31,258 1% 0.71 13.0 3.03 3.0 9.1 7.5 3.0% 29% Net Cash 19.8 80 10.52
2008 10.76 125,977 44,375 42% 0.99 9.7 3.59 2.7 7.0 6.1 3.7% 35% Net Cash 23.1 100 11.48
120 12.44
2009 9 79
9.79 105 195
105,195 29 486 -34%
29,486 34% 0.660
0 660 13 1
13.1 3 89
3.89 22
2.2 74
7.4 61
6.1 4 1% 21% Net
4.1% N tCCash
h 17 6
17.6 140 13.40
2010 14.01 183,053 54,410 85% 1.218 10.1 4.83 2.6 6.3 5.1 3.2% 32% Net Cash 26.1 160 14.36
2011E 19.16 235,179 70,482 30% 1.578 10.7 5.97 2.83 6.7 5.7 3.1% 28% Net Cash 36.2 180 15.32
200 16.28
2012E 19.16 239,781 71,116 1% 1.592 10.6 7.04 2.40 6.6 5.5 3.1% 29% Net Cash 35.1 220 17.24
2013E 19.16 251,917 71,912 1% 1.610 10.5 8.12 2.08 6.1 5.1 3.1% 30% Net Cash 34.1 240 18.20
* Based on share price of HK$19
HK$19.16
16 @ 29 April 260 19.16
280 20.12
Source: Company data, Nomura estimates 300 21.08

ASIA
CNOOC — band
b d charts
h t and
d target
t t price
i derivation
d i ti
24.0 PB Band Chart
PE Band Chart
24.0 5x
21x 22.0
22.0
20.0
20.0 18x
4x
18.0
18.0
15x 16.0
16.0
14.0 3x
14.0
12x
HK$
12.0
HK$
12.0
10.0
10.0 2x
8.0
8.0 9x
6.0
6.0
6x 4.0 1x
4.0
2.0
2.0
0.0
0.0
May-02
May-07
Feb-01
Jul-01
Mar-03
Feb-06
Jul-06
Mar-08
Feb-11
Dec-01
Oct-02
Aug-03
Nov-04
Apr-05
Sep-05
Dec-06
Oct-07
Aug-08
Nov-09
Apr-10
Sep-10
Jan-04
Jun-04
Jan-09
Jun-09
Dec-01
Oct-02
Nov-04
Dec-06
Oct-07
Nov-09
Jan-04
Jun-04
Jan-09
Jun-09
May-02
May-07
Jul-01
Jul-06
Feb-01
Mar-03
Feb-06
Mar-08
Feb-11
Aug-03
Apr-05
Sep-05
Aug-08
Apr-10
Sep-10

24.0
11x
Risk Free Rate 2.5% 22.0
Risk Premium 6.5% 20.0

9x
Beta 13
1.3 18.0
Cost of Debt 4.1%
16.0
Cost of Equity 10.7% 7x
LT growth rate (g) 1.0% 14.0
FY11F ROACE 31.5%
HK$
12.0
5x
WACC 9.6% 10.0
EV (Rmb bn) 890 0

890.0 8.0
Capital Employed (Rmb bn) 251.2 6.0

3x
ROACE - g 30.5% 890.0
= = 3.5 = 4.0
WACC - g 8.6% 251.2
2.0
New target Price (HK$) HK$ 23.00
0.0
ay-01
ay-02
ay-03
ay-04
ay-05
ay-06
ay-07
ay-08
ay-09
ay-10
eb-01
eb-02
eb-03
eb-04
eb-05
eb-06
eb-07
eb-08
eb-09
eb-10
eb-11
ug-01
ov-01
ug-02
ov-02
ug-03
ov-03
ug-04
ov-04
ug-05
ov-05
ug-06
ov-06
ug-07
ov-07
ug-08
ov-08
ug-09
ov-09
ug-10
ov-10
Ma
Ma
Ma
Ma
Ma
Ma
Ma
Ma
Ma
Ma
Fe
Fe
Fe
Fe
Fe
Fe
Fe
Fe
Fe
Fe
Fe
Au
No
Au
No
Au
No
Au
No
Au
No
Au
No
Au
No
Au
No
Au
No
Au
No
Source: Datastream, Company data, Nomura estimates.
ASIA
MENA crisis
i i impact
i t on Chinese
Chi oil
il companies
i
FY11F earnings sensitivity (RMB mn) FY11F earnings sensitivity on oil prices
Sinopec Base case
Crude oil price (US$/bbl) 110 130 140 145 150 (RMB mn)
Refining margin (US$/bbl) (0.37) 0.0 (10.0) (15.0) (20.0) Oil price US$95 +$10/bbl
FY11F net profit (RMB mn) 81,153 101,799 34,194 391 (33,411)
FY11F net profit EPS FY11F net profit EPS % change
EPS (RMB) 0.94 1.17 0.39 0.00 (0.39)
Petrochina Base case (RMB mn) (RMB) (RMB mn) (RMB)
Crude oil price (US$/bbl) 110 130 140 145 150 Petrochina 176,214 0.96 199,674 1.09 13.3%
Refining margin (US$/bbl) (2.23) 0.0 (10.0) (15.0) (20.0) Sinopec 81,153 0.94 90,061 1.04 11.0%
FY11F net profit (RMB mn) 176,214 233,576 210,277 198,628 186,979 CNOOC 70,482 1.58 80,209 1.80 13.8%
EPS (RMB) 0.96 1.28 1.15 1.09 1.02
FY11F refining EBIT sensitivity (RMB mn)

Base for SNP Base for PTR
Refining marings 2.00 1.00 0.00 (0.37) (1.00) (2.00) (2.23) (5.00) (10.00)
Petrochina (RMB mn) 196,007 191,331 186,655 NA 181,979 177,304 176,214 163,276 139,897
Sinopec (RMB mn) 99,287 91,635 83,984 81,153 76,333 68,681 NA 45,727 7,471

ASIA
E&P capital
it l expenditure
dit (PetroChina,
(P t Chi Sinopec
Si and
d CNOOC)
300,000
250,000 1999 - 2011E CAGR: 20.7%

Rmb in Millions
200,000
150 000
150,000
100,000
R
50,000
2011E
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2
Petrochina Sinopec CNOOC
Source: Company data,
data Nomura estimates

ASIA
COSL (2883 HK),

HK) REDUCE,
REDUCE PT
PT: HK$10
HK$10.3
3
 COSL was incorporated in December 2001 and provides drilling, well, geophysical and marine and transport services;
CNOOC (parent company) currently holds a 61.58% stake in COSL.
 COSL reported FY10 earnings up 32% y-y, 6% higher than our estimate. The difference was mainly due to a lower
effective tax rate of only 2% in 4Q10 vs 15% normally and slightly higher +3% EBIT in drilling.
 Management maintains its cautious view on the drilling day rates and expects intense competition due to overcapacity
in 2011.
 We are forecasting modest earnings growth of 7% in 2011F and a stronger recovery of 12% in 2012F. Longer term, the
company’s growth direction is unclear to us, as new investment plans have not been determined.
 Investment risks: 1) share price sensitive to oil price movement; 2) dependence on CNOOC Ltd; 3) engaged in high-
risk business (offshore drilling); 4) older technology; 5) high gearing; and 6) share placement.
Yr to Dec Share Price Sales Net profit EPS (WA) YoY% PER BVPS P/B EV/ DPS Yield ROACE Gearing
Avg.
g ((RMBmn)) (
(RMBmn) ) ((RMB)) ((x)) (RMB)
( ) ((x)) EBITDA ((RMB)) ((%)) ((%)) ((%))
2006 4.08 6,365 1,128 0.282 37% 14.6 2.10 2.0 7.8 0.06 1.5% 16.0% Net Cash
2007 10.57 9,008 2,237 0.542 98% 19.1 4.04 2.6 10.4 0.12 1.2% 24.5% Net Cash
2008 11.01 12,143 3,102 0.690 39% 14.3 4.26 2.3 13.1 0.14 1.4% 12.9% 123.1%
2009 7.55 16,802 3,135 0.697 1% 9.5 4.82 1.4 9.1 0.14 2.1% 8.2% 125.0%
2010 11.28 17,561 4,128 0.918 32% 10.8 5.51 1.8 8.2 0.18 1.3% 9.5% 95.1%
2011E 15.36 20,407 4,421 0.983 7% 13.8 6.30 2.1 9.4 0.19 1.4% 9.8% 82.6%
2012E 15.36 23,219 4,957 1.103 12% 12.3 7.19 1.9 8.5 0.22 1.6% 10.2% 70.7%
2013E 15.36 25,312 5,460 1.215 10% 11.1 8.17 1.7 7.7 0.24 1.8% 10.4% 60.8%
*Based
Based on share price of HK$15.36
HK$15 36 @ 29 April

ASIA
COSL — capacity
it expansion
i plan
l and
d rigs
i profile
fil
COSL capacity
p y expansion
p plan
p (2008
( – 2011)) EBIT breakdown
(Rmb in millions) 2008 2009 2010 2011F 2012F 2013F
Drilling services 2,118 2,748 3,505 3,685 4,027 4,158
2010 2011 2012 Well services 471 743 814 956 1,105 1,278
Drilling 1) 2x 350feet drilling rigs commenced operation 1) 2x 200feet drilling rigs (COSL 921 & 922) to commerce operation 1) Pioneer operating days to increase Marine support & transpo 491 654 542 658 736 826
2) 2x 200 feet drilling rigs (COSL 921 & 922) delivered 2) 2x 200feet drilling rigs (COSL 923&924) to be delivered 2) Innovator to commence operation
3) Pioneer delivered 3) Pioneer to commence operation 3) Promoter to be delivered
Geophysical services 551 323 339 408 458 641
4) Innovator to be delivered EBIT 3,631 4,468 5,200 5,707 6,327 6,904
5) Ultra deep water SS981 to be delivered % of EBIT
Well Services 1) 2x Liftboats 1) Vessels introducing acidification and crushing delivered for operation
Drilling services 58% 61% 67% 65% 64% 60%
2) Well services equipment
Marine Support 1) 1x well-workover support barge 1) 2x deep water ATHS vessels Well services 13% 17% 16% 17% 17% 19%
Geophysical 1) 1x underwater cable team 1) Underwater cable team Marine support & transpo 14% 15% 10% 12% 12% 12%
2) 12-streamer seismic vessel, Deepwater survey vessel Geophysical services 15% 7% 7% 7% 7% 9%
Awilco rigs profile Total number of rigs

W depth (ft) Delivery Customer Dayrate (USD/day) Contract 2008 2009 2010 2011 2012 2013
Jack-ups COSL
WilPower 375 Delivered ADC 70 000
70,000 Aug 2006 - Aug 2011
J k
Jackup 19 22 24 26 26 26
WilCraft 400 Delivered Peak Group 255,000 Mar 2007 - Aug 2008
WilSuperior 375 Delivered in 2Q07 Thang Long 225,000 Sep 2007 - Sep 2008 Jackup (leased) 1 1 1 1 1 1
WilBoss 400 Delivered at 07YE Premier Oil 220,000 Mar 2007 - Aug 2008 Semi-sub 3 3 3 6 7 7
WilForce 375 Delivered in 1Q08 Repsol, LOI 198,000 3Q2008 - 1Q2009
Semi-sub (operator) 1 1 1 1 1
WilSeeker 375 2Q08 195000
WilStrike 400 2Q09 Sub-total 23 27 29 34 35 35
WilConfidence 375 2Q09 Accommodation 2 2 2 2 2 2
Average 193,833
Module rigs 4 4 4 4 4 4
Semi-submersibles
WilPioneer 2500 2H2010 BP 300,000 2Q2009 to 4Q2011 Land rigs 4 6 6 6 6 6
WilInnovator 2500 1H2011 StatoilHydro 350,000 mid 2009 to 2017/2025 Sub-total 10 12 12 12 12 12
WilPromoter 2500 1H2012 StatoilHydro 350,000 mid-2010 to mid-2018
Average 333,333
Total 33 39 41 46 47 47
Accommodation Beds W depth
p ((ft))
Port Rigmar 358 1,500 ConocoPhilips 155,000 Aug 2007 - Oct 2009
Port Reval 326 300 ConocoPhilips US$76,500/day to US$149,500/day Jul 2007 - May 2009

115
ASIA
COSL — band
b d charts
h t and
d target
t t price
i derivation
d i ti
25.0 25.0
35.0x 30.0x 4.5x
20.0 25.0x 20.0
3.5x
20.0x
15 0
15.0 15 0
15.0
2.5x
HK$
15.0x
HK$
10.0 10.0
10.0x 1.5x
5.0 5.0
5.0x 0.5x
0.0
0.0
Mar-03
Jul-03
Mar-04
Jul-04
Mar-05
Jul-05
Mar-06
Jul-06
Mar-07
Jul-07
Mar-08
Jul-08
Mar-09
Jul-09
Mar-10
Jul-10
Mar-11
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Risk free rate 2.5% 25.0
Risk premium 7.9%

25.0x
Beta 1.3 20.0
00
Cost of debt 1.9%
Cost of equity 12.7% 15.0 20.0x
ROACE (2011E) 9.8%
WACC 7.9% HK$
10.0 15.0x
EV (Rmb mil) 64,197
CE (R
(Rmb b mil)
il) 51 738
51,738
ROACE 9.8% 64,197 5.0 10.0x
= = 1.2 =
WACC 7.9% 51,738
5.0x
Target Price (HK$) HK$ 10.30 0.0
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
ov-02
ov-03
ov-04
ov-05
ov-06
ov-07
ov-08
ov-09
ov-10
No
No
No
No
No
No
No
No
No
J
J
M
M
Source: Thomson Reuters Datastream, Company data, Nomura research
ASIA
0
20
40
60
80
100
120
140
160
180
200
220
240
Jan-97
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
May-97
M 1/1/2001
Sep-97
S 4/1/2001
Jan-98 7/1/2001
May-98
M 10/1/2001
Sep-98
S 1/1/2002
Jan-99 4/1/2002
May-99
M 7/1/2002
Sep-99
S
10/1/2002
Jan-00
1/1/2003
May-00
M
4/1/2003
Sep-00
S
7/1/2003
Jan-01
10/1/2003
May-01
M
1/1/2004
Sep-01
S
4/1/2004
Jan-02
US GOM
7/1/2004

May-02
M
Sep-02
S 10/1/2004
Source: ODS-Petrodata, Nomura research

Jan-03 1/1/2005
Jackups, COSL dayrate (US$ '000) (excl. Awilco)

Jackups, NW Europe, Harsh Standard (US$'000)
May-03
M 4/1/2005
Sep-03
S 7/1/2005
Jan-04 10/1/2005
May-04
M
North West Europe

1/1/2006
Sep-04
S 4/1/2006
Jan-05
7/1/2006
May-05
M
10/1/2006
Sep-05
S
1/1/2007
Jan-06
4/1/2007
May-06
M
SE Asia Pacific
7/1/2007
Sep-06
S
10/1/2007
Jan-07
1/1/2008
May-07
M
Jackups, Asia, 300' Cantilever (US$'000)

Sep-07
S 4/1/2008
Jan-08 7/1/2008
10/1/2008
Jackups, Gulf of Mexico, 250' Cantilever (US$'000)

May-08
M
Sep-08
S 1/1/2009
Jan-09 4/1/2009
May-09
M 7/1/2009
Sep-09
S 10/1/2009
Jackup and semi-submersible utilisation and dayrates
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
400
420
440
Jan-97
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
May-97
M 1/1/2001
Sep-97
S 4/1/2001
Jan-98 7/1/2001
May-98
M 10/1/2001
Sep-98
S 1/1/2002
Jan-99 4/1/2002
May-99
M 7/1/2002
Sep-99
S
Global offshore rig utilisation and dayrate
10/1/2002
Jan-00
1/1/2003
May-00
M
4/1/2003
Sep-00
S
7/1/2003
Jan-01
10/1/2003
May-01
M
1/1/2004
Sep-01
S
4/1/2004
Jan-02
US GOM
May-02
M 7/1/2004
Sep-02
S 10/1/2004
Jan-03 1/1/2005
Semi-sub, COSL dayrate (US$ '000) (excl. Awilco)
Semisubmersibles, Gulf of Mexico, 0-3000' (US$'000)
May-03
M 4/1/2005
Sep-03
S 7/1/2005
Jan-04 10/1/2005
May-04
M
North West Europe
1/1/2006
Sep-04
S 4/1/2006
Jan-05
7/1/2006
May-05
M
10/1/2006
Sep-05
S
1/1/2007
Jan-06
4/1/2007
May-06
M
SE Asia Pacific
7/1/2007
Sep-06
S
10/1/2007
Semi-sub, Asia, 0-3000 (US$'000)
Jan-07
1/1/2008
May-07
M
Sep-07
S 4/1/2008
Jan-08 7/1/2008
10/1/2008
Semisubmersibles, UK, Harsh Standard (US$'000)
May-08
M
Sep-08
S 1/1/2009
Jan-09 4/1/2009
May-09
M 7/1/2009
Sep-09
S 10/1/2009
117
ASIA
Gl b l Day
Global D Rate
R t and
d Utili
Utilisation
ti Rate
R t
Source: ODS-Petrodata, Nomura research

ASIA
Sh
Shanghai
h i Petrochem
P t h (338 HK)
HK), BUY
BUY, PT
PT: HK$4
HK$4.5
5
 SPC was originally founded in 1972 as a large-scale petrochemical complex and was established as a separate
subsidiary of Sinopec Group in June 1993
1993.
 1Q11 net profit came in RMB912mn, up 2% y-y. Stripping out RMB185mn of impairment loss, earnings would have
increased 17% y-y. The impairment loss was prompted to cushion refining losses in 2Q11.
 We think the government will eventually hike oil product prices due to product shortages albeit not in the near term.
 Two main factors are expected to determine SPC’s share price: 1) sector fundamentals; and 2) market expectations of
when SPC will be privatised.
 Upside catalysts — 1) petrochemical upcycle; 2) improvement in oil product pricing; and 3) potential privatisation.
 Investment risks: 1) lower-than-expected oil product price hikes; 2) government regulatory risks; and 3) petrochemicals
downcycle.
Hi t i l
Historical Hi t i l
Historical
Yr to Dec Share Price Sales Net Profit YoY% EPS PER BVPS P/B EV/ Gross Div. Payout Yield ROACE Gearing
(HK$) (HK$ mn) (HK$ mn) (HK$) (x) (HK$) (x) EBITDA (HK$) Ratio (%) (%) (%) (%)
2007 4.40 3,843 1,963 15% 0.405 10.8 1.86 2.4 4.4 0.12 30% 2.7% 16% Net Cash
2008 3.43 6,788 3,385 72% 0.711 4.8 2.44 1.4 1.9 0.15 20% 4.4% 41% Net Cash
2009 5 68
5.68 6 164
6,164 1 234
1,234 -64% 0 275
0.275 20 7
20.7 2 99
2.99 19
1.9 93
9.3 0 07
0.07 28% 1 2%
1.2% 11% Net Cash
2010 10.37 9,068 2,426 97% 0.491 21.1 3.28 3.2 9.2 0.14 28% 1.3% 15% Net Cash
2011F 13.76 22,226 5,868 142% 0.821 16.8 6.07 2.3 6.7 0.23 28% 1.7% 17% 12%
2012F 13.76 34,663 6,757 15% 0.945 14.6 6.78 2.0 5.7 0.27 28% 1.9% 12% 9%
2013F 13.76 47,600 8,172 21% 1.143 12.0 7.66 1.8 4.8 0.32 28% 2.3% 13% 5%

ASIA
Sh
Shanghai
h i Petrochem
P t h — band
b d charts
h t and
d PT derivation
d i ti
Price target derivation EBIT breakdown
Risk Free Rate 2.5%
(Rmb in millions) 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F
Risk Premium 6.5% Synthetic Fibers 250 263 196 (82) (1,652) 11 436 656 674 651
Beta 1.0 Resins and Plastics 1,887 1,491 1,162 656 (2,177) 844 991 1,360 1,484 1,622
Intermediate Petrochemicals 1,551 981 680 814 (43) 191 365 595 625 728
Cost of Debt 6.0% Petroleum Products 987 (447) (1,698) (644) (3,946) 805 1,140 (206) 296 387
q y
Cost of Equity 9.0% Others 351 240 212 149 ((1)) 172 35 40 40 42
ROACE (2011E) 11.1% Total EBIT 5,025 2,528 553 893 (7,817) 2,023 2,967 2,445 3,119 3,430
%
WACC (%) 8.1% Synthetic Fibers 5% 10% 35% -9% 21% 1% 15% 26.8% 22% 19%
EV (Rmb bn) 33.0 Resins and Plastics 38% 59% 210% 74% 28% 42% 33% 55.6% 48% 47%
Capital Employed (Rmb bn) 24.0 Intermediate Petrochemicals 31% 39% 123% 91% 1% 9% 12% 24.3% 20% 21%
Petroleum Products 20% -18% -307% -72% 50% 40% 38% -8.4% 9% 11%
ROACE 11.1% 33 Others 7% 9% 38% 17% 0% 9% 1% 1.6% 1% 1%
= = 1.4 =
WACC 8 1%
8.1% 24
New target price (HK$) HK$ 4.50
Forward P/E band (x) Forward P/BV band (x)

PE chart 3.0 PB chart
h t
50.0
45.0
2.5
40.0
35.0
2.0
30.0
+1SD: 1.6x
PE (x)
PB (x)
25.0 +1SD: 23.0x 1.5
20.0
PB mean: 1.1x
PE mean: 15.1x 1.0
15.0
-1SD: 0.7x
10.0
-1SD: 7.3x
0.5
5.0
0.0
0.0
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Source: Thomson Reuters Datastream, Company data, Nomura estimates.
ASIA
K l
Kunlun E
Energy (135 HK)
HK), BUY
BUY, PT
PT: HK$17
HK$17.0
0
 Kunlun Energy (formerly known as CNPC HK) was listed on the HK Stock Exchange on 1 June 1998. Following
Petrochina’s capital injection in late 2008, Kunlun Energy became the flagship of Petrochina to access the natural gas
downstream market in addition to its E&P business.
 Kunlun Energy announced FY10 net profit of RMB2,426mn, up 97% y-y, in line with consensus.
 We attribute the strong earnings growth in 2011F to Petrochina Beijing Pipeline company contribution, which accounts
for 63% of FY11F EBIT breakdown.
 Its E&P business accounting for 27% of FY11F EBIT is geared to high oil price.
 Its new business of natural gas distribution (mainly CNG) is able to pass on price hikes although the government has
prevented full pass-through of price hike for Towngas business
 Potential asset injection from Petrochina to achieve revenue target of RMB50-100bn by 2015F.
 Upside share price catalysts — (i) potential asset injections, (ii) favourable government policies on natural gas usage,
(iii) natural gas price reform,
reform (iv) high crude oil price,
price and (v) high gasoline price
price.
 Investment risks: (i) government regulatory risks and (ii) share issuance to raise capital.
Historical Historical
Yr to Dec Share Price Sales Net Profit YoY% EPS PER BVPS P/B EV/ Gross Div. Payout Yield ROACE Gearing
(HK$) (HK$ mn) (HK$ mn) (HK$) (x) (HK$) (x) EBITDA (HK$) Ratio (%) (%) (%) (%)
2007 4.40 3,843 1,963 15% 0.405 10.8 1.86 2.4 4.4 0.12 30% 2.7% 16% Net Cash
2008 3.43 6,788 3,385 72% 0.711 4.8 2.44 1.4 1.9 0.15 20% 4.4% 41% Net Cash
2009 5.68 6,164 1,234 -64%
% 0.275 20.7 2.99 1.9 9.3 0.07 28%
% 1.2%
% 11%
% Net Cash
C
2010 10.37 9,068 2,426 97% 0.491 21.1 3.28 3.2 9.2 0.14 28% 1.3% 15% Net Cash
2011F 13.76 22,226 5,868 142% 0.821 16.8 6.07 2.3 6.7 0.23 28% 1.7% 17% 12%
2012F 13.76 34,663 6,757 15% 0.945 14.6 6.78 2.0 5.7 0.27 28% 1.9% 12% 9%
2013F 13.76 47,600 8,172 21% 1.143 12.0 7.66 1.8 4.8 0.32 28% 2.3% 13% 5%
* Based on share price of HK$13
HK$13.76
76 @ 29 April

ASIA
Kunlun Energy - band charts and target price derivation

16.0 16.0
25.0x
14.0 14.0
4.0x
12.0 20.0x 12.0
10.0
3.0x
10.0
HK$
HK$
8.0 8.0
15.0x
2.0x
6.0 10.0x 6.0
4.0 4.0
1.0x
5.0x
2.0 2.0
0.0 0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Price target derivation EBIT Breakdown

2%
Risk Free Rate 2.5% 100% 0% 0% 0%
Risk Premium 6.5% 90%
Beta 0.9 80% 31%
Cost of Debt 3.3% 70% 63% 63% 65%

Cost of Equity 8.4% 60%
LT growth rate (g) 3.0%
50% 100% 100% 100%
FY11F ROACE 16.8%
40% 1%
WACC 7.1% 7%
66% 10%
EV (R
(Rmb bbbn)) 127 30% 9%
1%
10%
Capital Employed (Rmb bn) 38 20% 9%
ROACE - g 13.8% 127 10%

27%
19%
= = 3.35 = 16%
WACC - g 4.1% 38 0%
Target Price (HK$) HK$ 17.00 2007 2008 2009 2010 2011F 2012F 2013F
E&P
Natural gas (CNG)
Natural gas (Xinjiang Xinjie pipeline)
Natural Gas (LNG)
Natural gas (Beijing pipeline)

ASIA
China fertiliser

ASIA
Chi ffertiliser
China tili demand
d d and
d supply
l
Fertiliser demand supply Fertiliser consumption breakdown

(‘000 tonnes) (‘000 tonnes)
('000 tonnes)
80,000 60,000
70 000
70,000
50,000
60,000
40,000
50,000
40,000 30,000
30,000
20,000
20,000
10,000
10,000
0 -
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Production ('000 tonnes) Consumption ('000 tonne)
Nitrogenous Phosphate Potash Compound
Source: China National Statistical Yearbook, Nomura research

ASIA
China fertiliser demand-supply

Potash consumption Urea consumption
('000 tonnes) Production Import Export Net Imp./(Exp.) App. Cons. ('000 tonnes) Production Import Export Net Imp./(exp.) App. Cons.
2006 2,673 7,300 353 6,947 9,620 2006 47,581 37.55 1,367 (1,330) 46,251
2007 2,545 9,593 117 9,476 12,020 2007 54,387 0.54 5,254 (5,253) 49,134
2008 2,832 5,248 150 5,098 7,929 2008 56,497 0.07 4,360 (4,360) 52,137
2009 3,735 2,074 396 1,678 5,413 2009 63,981 38.80 3,379 (3,340) 60,641
2010 57,809 13.26 7,026 (7,013) 50,796
2010 4,125 5,355 82 5,273 9,398
Jan-11 4,404 0.00 346 (346) 4,058
Jan-11 147 517 19 499 646
Feb-11 4,613 0.10 196 (196) 4,417
Feb-11 145 166 2 165 310
Mar-11 5,280 0.11 54 (53) 5,227
Mar 11
Mar-11 311 401 0 401 712
Jan-Mar 2011 14,298 0.20 596 (596) 13,702
Jan-Mar 11 603 1,084 20 1,064 1,667
YoY%
YoY% 2006 9.1% -47.1% -12.9% -11.3% 9.8%
2006 11.7% -19.1% 157.4% -21.8% -14.7% 2007 14.3% -98.6% 284.3% 295.1% 6.2%
2007 -4.8% 31.4% -66.7% 36.4% 25.0% 2008 3.9% -87.6% -17.0% -17.0% 6.1%
2008 11.3% -45.3% 27.7% -46.2% -34.0% 2009 13.2% NM -22.5% -23.4% 16.3%
2009 31.9% -60.5% 163.9% -67.1% -31.7% 2010 -9.6% -65.8% 107.9% 109.9% -16.2%
2010 10 4%
10.4% 158 2%
158.2% -79.3%
79 3% 214 2%
214.2% 73 6%
73.6% Jan-11 -12.9% NM -14.0% -13.3% -12.9%
Jan-11 42.7% 51.5% -4.7% 54.9% 52.0% Feb-11 -6.3% NM -64.8% -64.6% 1.1%
Feb-11 49.5% -50.7% -74.2% -50.2% -27.6% Mar-11 1.3% NM -77.7% -77.2% 5.0%
Mar-11 -3.1% -23.8% NM -23.7% -15.9% Jan-Mar 11 -5.9% NM -50.4% -49.9% -2.2%
Jan-Mar 11 15.7% -10.0% -24.0% -9.7% -1.9%
Phosphate consumption M th
Methanol
l consumption
ti
('000 tonnes) Production Import Export Net Imp/(Exp.) App. Cons.
('000 tonnes) Production Import Export Net Imp/(Exp.) App. Cons.
2006 19,616 1,460 1,261 199 19,815
2006 7,458 1,127 190 937 8,395
2007 20,795 557 3,906 (3,349) 17,446
2007 10,127 845 563 282 10,410
2008 19,659 101 1,754 (1,653) 18,006
2008 11,100 1,434 368 1,066 12,167
2009 23,245 444 2,569 (2,125) 21,120 2009 11,231 5,288 14 5,274 16,505
2010 27,048 455 4,923 (4,468) 22,581 2010 15 753
15,753 5 189
5,189 12 5 177
5,177 20 930
20,930
Jan-11 1,786 94 231 (138) 1,648 Jan-11 1,303 393 0 392 1,695
Feb-11 1,884 0 66 (66) 1,818 Feb-11 1,439 276 0 276 1,715
Mar-11 1,995 0 96 (96) 1,900 Mar-11 1,817 533 0 533 2,350
Jan-Mar 2011 5,666 94 393 (299) 5,367 Jan-Mar 11 4,559 1,202 1 1,201 5,760
YoY % YoY %
2006 12.3% -22.1% 34.9% -78.8% 7.7% 2006 39.1% -17.1% 248.7% -28.2% 25.9%
2007 35.8% -25.0% 196.1% -69.9% 24.0%
2007 6 0%
6.0% -61
61.8%
8% 209.7%
209 7% NM -12
12.0%
0%
2008 9.6% 69.7% -34.6% 277.6% 16.9%
2008 -5.5% -81.9% -55.1% -50.6% 3.2%
2009 1.2% 268.8% -96.2% 394.7% 35.7%
2009 18.2% 340.0% 46.5% 28.5% 17.3%
2010 40.3% -1.9% -10.1% -1.8% 26.8%
2010 16.4% 2.5% 91.6% 110.2% 6.9% Jan-11 0.6% 77.8% 324.3% 77.7% 11.8%
Jan-11 0.4% -50.8% 25.1% NM -7.7% Feb-11 20.3% -20.4% -93.7% -19.5% 11.4%
Feb-11 3.9% NM -30.0% NM -0.1% Mar-11 32.2% 19.5% -0.6% 19.6% 29.1%
Mar-11 -11.7% NM 0.9% NM -17.3% Jan-Mar 11 18.0% 18.6% -78.5% 19.0% 18.2%
Jan-Mar 11 -3 2%
-3.2% -77 9%
-77.9% 5 0%
5.0% NM -9 1%
-9.1%

ASIA
China fertiliser demand-supply

Potash consumption Urea consumption
('000 tonnes)
2,000 (000 tonnes)
6,000
1,800 5,600
1,600 5,200
1 400
1,400 4 800
4,800
1,200 4,400
1,000 4,000
800 3,600
600 3,200
400 2 800
2,800
200 2,400
2,000
0
02 03 04 05 06 07 08 09 10 11
02 03 04 05 06 07 08 09 10 11
Phosphate consumption Methanol consumption

('000 tonnes) (000 tonnes)
3000 2,200
2800 2,000
2600 1 800
1,800
2400 1,600
2200 1,400
1,200
2000
1,000
1800
800
1600 600
1400 400
1200 200
1000 0
800
02 03 04 05 06 07 08 09 10 11
02 03 04 05 06 07 08 09 10 11

ASIA
Fertiliser prices
Urea prill, China domestic price (RMB/tonne) Urea prices: US vs China (US$/tonne)
(Rmb/tonne) (US$/tonne)
2,600 1,000
2,400 900
800
2,200 700
2 000
2,000 600
1,800 500
400
1,600 300
1,400 200
1 200
1,200 100
0
1,000
02 03 04 05 06 07 08 09 10 11 02 03 04 05 06 07 08 09 10 11
China Urea Price US Urea Price
DAP, US vs China (US$/tonne) US DAP price vs its raw material prices (US$/tonne)
(US$/tonne) (US$/tonne)
1,400 1400
1,200 1200
1,000 1000
800 800
600 600
400 400
200 200
- 0
02 03 04 05 06 07 08 09 10 11 98 99 00 01 02 03 04 05 06 07 08 09 10 11
China DAP Price US DAP Price US DAP Price Sulfur p
price
Source: Thomson Reuters Datastream, Nomura research.

ASIA
Potash and methanol prices

Potash price (Vancouver Std Grade) (US$/tonne) China potash price (RMB/tonne)
(US$tonne) (Rmb/tonne)
5000
600
500 4000
400 3000
300
2000
200
1000
100
0 0
02 03 04 05 06 07 08 09 10 02 03 04 05 06 07 08 09 10 11
Potash Vancouver Standard Grade Potash (Domestic) Potash (Imported)
China methanol prices (RMB/tonne) China vs US methanol price (US$/tonne)

(Rmb/tonne) (US$/tonne)
5,000 1,000
4,500
,
800
4,000
3,500 600
3,000
400
2 500
2,500
2,000 200
1,500
-
1,000
07 08 09 10 11
02 03 04 05 06 07 08 09 10 11
Source: Bloomberg, Thomson Reuters Datastream, Nomura research. China Methanol Price US Methanol Price

ASIA
Si f t (297 HK;
Sinofert HK REDUCE;
REDUCE PT
PT: HK$3
HK$3.00)
00)
 Sinofert is one of China’s 10 licensed fertiliser importers and has the widest domestic distribution network throughout
China.
 Sinofert reported FY10 earnings of RMB536mn (vs a loss of RMB1.4bn in FY09) significantly below market and our
expectations.
 We attribute the earnings disappointment to a lower-than-expected gross profit margin, flattish sales volume growth
and lower contribution from Qinghai Salt Potash.
 Sinofert concluded contract prices about US$400/tonne for 1H11 supply with international potash producers.
I t
International
ti l potash
t h producers
d are lik
likely
l tto raise
i ththe contract
t t prices
i iin 2H11 d
due tto increase
i in
i ddemand
d globally.
l b ll
 We estimates FY11F earnings to increase 90% y-y to RMB1.0bn on the back of sales volume growth (12% y-y) and
overall gross profit margin to improve from 5.1% in 2010 to 6.8% in 2011.
 However, FY11F valuations appear demanding
However demanding. The company is trading at 20x FY11F PE above the historical trading
range of 10x-18x with historical avg. of 15.2x (excluded an exception 2007 PE).
 Risks: 1) adverse weather conditions during plantation season; 2) potential share placement/bank borrowing for
Qinghai Salt Lake Potash acquisition; and 3) margin squeeze due to high potash costs/weak potash prices.
Share Price ^ Sales Net Profit YoY% EPS (WA) PER BVPS P/B EV/ Gross Div. Yield ROACE Gearing ROE
Yr to Dec Avg. (HK$) (RMBmn) (RMBmn) (Rmb) (x) (Rmb) (x) EBITDA (x) (Rmb) (%) (%) (%) (%)
2005 1.47 20,269 830 51% 0.154 10.1 0.67 2.3 9.0 0.023 1.5% 20.2% 34% 23%
2006 2.71 21,684 920 11% 0.158 17.6 0.75 3.7 15.2 0.023 0.8% 17.0% 37% 20%
2007 5.12 28,382
, 641 -30% 0.107 47.0 1.25 4.0 17.1 0.030 0.6% 16.6% 65% 19%
2008 5.36 45,393 1,913 198.3% 0.267 18.0 1.94 2.5 21.7 0.041 0.8% 12.2% 64% 14%
2009 3.87 27,011 (1,444) NM (0.206) NM 1.73 2.0 NM 0.000 0.0% -1.8% 66% -6%
2010 4.17 29,271 536 NM 0.076 48.2 1.80 2.0 45.3 0.009 0.3% 3.7% 55% 4%
2011E 3.24 36,540 1,018 90.0% 0.145 19.7 1.93 1.5 16.6 0.018 0.6% 6.6% 51% 8%
2012E 3.24 42,187 1,306 28.3% 0.186 15.4 2.10 1.4 13.4 0.023 0.8% 7.6% 46% 9%
2013E 3.24 49,094 1,684 29.0% 0.240 11.9 2.32 1.2 10.8 0.029 1.0% 9.0% 41% 10%
^ 2010-11E share price is based on the closing price of HK$3.24 on 29 April

ASIA
Chi BlueChem
China Bl Ch (3983 HK
HK; BUY
BUY; PT
PT: HK$7
HK$7.00)
00)
 China BlueChem is one of China’s leading urea, phosphate and methanol producers.
 China Blue Chemical reported FY10 net profit of RMB1,175mn, up 19.5% y-y from RMB985mn in FY09.
This was mainlyy due to lower-than-expected
p realized fertilizer and methanol p
prices and the 2-month
delay of its new methanol plant (800k tonnes) which was finally launched in December 2010.
 We continue to like the company due to 1) capacity expansions to drive volume and earnings growth; 2)
cost leadership
p in the industry;
y; and 3)) strong
g balance sheet ((net cash).
)
 Risks: 1) government regulatory risk; 2) weak fertiliser and methanol demand globally; 3) competition
from coal-based fertiliser producers; 4) weak crop prices; and 5) production cuts due to natural
disasters.
Share Price ^ Sales Net Profit YoY% EPS (WA) PER BVPS P/B EV/ Gross Div. Yield ROACE Gearing
Yr to Dec Avg. (HK$) (RMBmn) (RMBmn) (Rmb) (x) (Rmb) (x) EBITDA (x) (Rmb) (%) (%) (%)
2005 3.05 2,371 944 31% 0.205 15.7 0.82 3.9 13.0 0.00 0.0% 29.0% Net Cash
2006 3.05 3,466 1,646 74% 0.357 8.8 1.46 2.1 5.8 0.00 0.0% 24.3% Net Cash
2007 4.29 4,340 1,448 -12% 0.314 13.3 1.75 2.4 8.0 0.08 1.9% 25.0% Net Cash
2008 4 35
4.35 6 812
6,812 1 608
1,608 11% 0 349
0.349 11 1
11.1 2 23
2.23 17
1.7 55
5.5 0 10
0.10 2 4%
2.4% 24 2%
24.2% N t Cash
Net C h
2009 4.16 5,795 985 -39% 0.214 17.2 2.10 1.7 7.4 0.07 1.9% 12.2% Net Cash
2010 5.24 6,867 1,175 19% 0.255 23.5 2.29 2.6 8.0 0.09 1.5% 12.4% Net Cash
2011E 6.79 9,080 1,800 53% 0.391 15.3 2.59 2.3 6.7 0.13 2.1% 16.6% Net Cash
2012E 6.79 11,397 2,344 30% 0.509 11.8 2.97 2.0 5.2 0.17 2.8% 19.7% Net Cash
2013E 6 79
6.79 13 148
13,148 2 793
2,793 19% 0 606
0.606 99
9.9 3 41
3.41 18
1.8 41
4.1 0 20
0.20 3 3%
3.3% 21 9%
21.9% Net Cash
^ 2011-13E share price is based on the closing price of HK$6.79 on 29 April
ASIA
R
Revenue b
breakdown
kd & price
i target
t t derivation
d i ti
Sinofert Operating data China BlueChem revenue breakdown
(Rmb mil.)
Potash
2007
11,915
2008
16,125
2009
6,750
2010
7,322
2011E
9,899
2012E
11,823
2013E
14,050
(Rmb mils) 2007 2008 2009 2010E 2011E 2012E
Nitrogen 6,873 10,728 8,255 9,876 11,403 13,171 15,212 Urea 3,035 3,613 3,340 3,661 3,759 4,806
Compound 3,979 7,557 4,716 4,547 5,430 6,024 6,931
Phosphate 4,525 8,565 6,511 6,380 7,570 8,585 9,915
Methanol 1,146 1,672 1,240 1,717 3,036 3,325
others 1,090 2,418 778 1,146 2,238 2,585 2,986 Phosphate 0 0 0 1,235 1,399 2,370
Total Sales 28,382 45,393 27,011 29,271 36,540 42,187 49,094
% of total
POM (Polyoxymethylene) 0 0 0 0 542 599
Potash 42% 36% 25% 25% 27% 28% 29% Rendering of services 159 425 358 560 555 561
Nitrogen
g 24% 24% 31% 34% 31% 31% 31%
Compound 14% 17% 17% 16% 15% 14% 14% Subtotal 4 340
4,340 5 710
5,710 4 937
4,937 7 174
7,174 9 290
9,290 11 661
11,661
Phosphate 16% 19% 24% 22% 21% 20% 20% Less: intersegment sales 0 (199) (134) (185) (210) (264)
others 4% 5% 3% 4% 6% 6% 6%
Gross profit Revenue 4,340 5,511 4,803 6,989 9,080 11,397
Potash 1,527 1,990 (1,728) 395 846 1,000 1,186
Nitrogen 280 608 314 217 456 527 608 % of subtotal
Compound 407 463 264 332 396 440 506
Urea 70% 63% 68% 51% 40% 41%
Phosphate 344 158 521 555 659 747 863
others 182 182 67 (9) 112 129 149 Methanol 26% 29% 25% 24% 33% 29%
Total GP
GP margins
2 741
2,741 3 401
3,401 (563) 1 491
1,491 2 469
2,469 2 842
2,842 3 313
3,313
Ph
Phosphate
h t 0% 0% 0% 17% 15% 20%
Potash 12.8% 12.3% -25.6% 5.4% 8.5% 8.5% 8.4% POM (Polyoxymethylene) 0% 0% 0% 0% 6% 5%
Nitrogen 4.1% 5.7% 3.8% 2.2% 4.0% 4.0% 4.0%
Compound 10.2% 6.1% 5.6% 7.3% 7.3% 7.3% 7.3% Rendering of services 4% 7% 7% 8% 6% 5%
Phosphate 7.6% 1.8% 8.0% 8.7% 8.7% 8.7% 8.7%
others 16.7% 7.5% 8.6% -0.8% 5.0% 5.0% 5.0%
Sinofert PT China BlueChem PT

Risk Free Rate 2.5% Risk free rate 2.5%
Risk Premium 5.0% Equity risk premium % 5.5%
Beta 0.6 Beta 0.8
Cost of Equity 5.6% Cost of Equity % 6.9%
Cost of Debt 4.0% C t off debt
Cost d bt % 4 5%
4.5%
WACC% 6.9%
WACC % 5.2%
FY11F ROACE 16.5%
ROACE (2011E) 6.6%
ROACE 16.5% 26.1

ROACE 6.6%
6 6% 25 = = 2 40
2.40 =
= = 1.26 = WACC 6.9% 10.9
WACC 5.2% 20
Avg. Capital Employed (Rmb bn) 10.9
Avg. Capital Employed (Rmb bn) 20
Enterprise Value based on fair value (Rmb bn) 26.1
Enterprise Value based on fair value (Rmb bn) 25
# of shares outstanding (mil shares) 4,610
Fair value per share (HK$) HK$ 3.00 Fair Value per share (HK$) HK$ 7.00

131
ASIA
India

ASIA
I di Oil and
Indian d Gas
G – Stock
St k selection
l ti
Summary of ratings and price targets
Com pany Ticker Price Market Cap Rating PT (INR/sh) Upsides
(INR/sh) US$bn New New (%)
Reliance Industries RIL IN 984 72.8 BUY 1,200 22%
GAIL GAIL IN 476 13.6 BUY 600 26%
Cairn India CAIR IN 349 15.0 BUY 405 16%
Gujarat State Petronet GUJS IN 99 1.3 BUY 135 37%
Petronet LNG PLNG IN 132 2.2 BUY 180 36%
Indraprastha Gas IGL IN 322 1.0 BUY 450 40%
Gujarat Gas GGAS IN 367 1.1 Neutral 415 13%
BPCL BPCL IN 630 5.1 Neutral 620 -2%
IOCL IOCL IN 340 18 7
18.7 N t l
Neutral 365 7%
HPCL HPCL In 373 2.9 Neutral 380 2%
Key market information

Nam e Ticker Rating Market M Cap Free Float FII 3M TO 52W H/L PT Upside Valuation
price ((US$bn)
S$ ) holdings ((US$m
S$ n)) Method
Reliance Industries RIL IN BUY 984 72.8 55.3 17.6 122.6 1,187 - 841 1,200 22% SOTP
GAIL GAIL IN BUY 476 13.6 42.7 12.5 11.3 536 - 402 600 26% SOTP
Cairn india CAIR IN BUY 349 15.0 19.4 11.7 65.7 372 - 266 405 16% SOTP
Gujarat State Petronet GUJS IN BUY 99 1.3 62.3 11.3 2.8 128 - 88 135 37% DCF
Petronet LNG PLNG IN BUY 132 2.2 50.0 10.8 5.4 141 - 77 180 36% DCF
Indraprastha Gas IGL IN BUY 322 1.0 55.0 17.0 2.1 374 - 215 450 40% DCF
Gujarat Gas GGAS IN NEUTRAL 367 1.1 34.9 15.9 0.3 454 - 260 415 13% DCF
BPCL BPCL IN NEUTRAL 630 5.1 45.1 6.9 8.1 840 - 509 620 -2% P/B
IOCL IOCL IN NEUTRAL 340 18 7
18.7 21 1
21.1 09
0.9 49
4.9 457 - 290 365 7% P/B
HPCL HPCL In NEUTRAL 373 2.9 49.0 8.4 7.3 556 - 304 380 2% P/B
Note: Ratings and price targets are as of the date of the most recently published report (http://www. Nomura.com) rather than the date of this document. Share prices as of 29th April 2011. Gujarat Gas has Dec
accounting year end.

133
ASIA
Reliance Industries (RIL IN, BUY, PT - INR1,200)

Risk-reward keeps getting better
 Marked underperformance despite several positives—under-performed ~13/35% over 1Y/2Y vs. Sensex.
 Delays in KG-D6 ramp-up, no guidance on KG-D6 plans and several unrelated acquisitions are perhaps key reasons.
 Although some near-term concerns remain on KG-D6, the BP deal allays a lot of these concerns and restores faith in
the LT E&P potential, apart from setting a valuation benchmark for the E&P segment.
 The stock seems to be ignoring several positives in core refining and petchem business (73% of EBIT in FY11)
 Refining strength has surpassed all expectations – Refining EBIT increase sharp 53% in FY11.
 We believe Petchem is entering a “Golden Age” - aromatics and polyester margins to remain strong.
 With nearly US$10bn cash,
cash investor focus is also likely to remain on cash usage plans
plans. Beyond petchem/E&P/shale
gas, RIL, in our view, will keep looking for M&A in the energy chain.
Price
Key financials and valuations Key market
K k t iinformation
f ti (INR) Rel MSCI India
FY Mar (INR) 2010 2011 2012F 2013F Market Data
1150 110
Revenue (bn) 2,037 2,658 3,267 3,304 Market Cap (INR bn) 3,220
1100 105
OP. Inc (bn) 309 390 422 437 Market cap (US$bn) 72.8
1050
Net earnings (bn) 159 202 259 292 Shares Outstanding (mn) 3,272 100
1000
EPS 49 62 78 88 3mth Dailt T/O (US$mn) 122.6 95
950
DPS 7 8 8 8 Free Float 55%
900 90
Yield 0.7 0.8 0.8 0.8
850 85
P/BV 2.3 2.0 1.8 1.6
M aay 10
J uun 10
J ul 10
A uug 10
S eep 10
O c t 10
N oov 10
D eec 10
J aan 11
F eeb 11
M aar 11
A ppr 11
P/E 20 2
20.2 15 9
15.9 12 6
12.6 11 2
11.2
Note: Share prices as of 29th April 2011.

Source: Bloomberg, Datastream, Nomura estimates
134
ASIA
Reliance Industries (RIL IN,

IN BUY,
BUY PT
PT- INR1,200)
INR1 200)
Key assumptions RIL – EBIT breakdown by segment
FY10 FY11 FY12 FY13 FY10 FY11 FY12F FY13F
R fi i
Refining Margins
M i (US$/bbl) EBIT breakdow
b kd n (INRbn)
(INRb )
Singapore Complex 3.5 5.2 7.5 6.8 E&P 54 67 59 69
Premium over Singapore GRM 3 3.1 3.6 3.9 Refining 60 92 129 147
Avg GRM of RIL 6.5 8.4 11.1 10.7 Petrochemicals 86 93 92 95
EBIT change (%)
Exchange Rate (INR / US$) 47.5 45.6 43.7 43.5 E&P and others 27% 27% 20% 22%
KG-D6 gas production (mmscmd) 39 56 50 55 Refining 30% 36% 50% 47%
KG-D6 Oil production (kbpd) 11 24 18 Petrochemicals 43% 37% 30% 31%

18
Earnings sensitivities to key variables RIL – SOTP Valuations

FY12F FY13F INR /
Base EPS 78 88 INR Bn $ bn Share Comm ents
EPS change INR/shr % INR/shr % 1 Refining 1,319 30.2 445 7x FY13 EBITDA
g GRM
Refining 2 Petrochemicals 873 20.0 295 7x FY13 EBITDA
Base Case (US$/bbl) 11.1 10.7 3 E&P 1,039 24.1 351
+1 US$/bbl 5.2 6.7% 5.6 6.4% Part of BP deal 699 16.0 236 BP to take 30% stake
KG-D6 gas production KG-D6 Gas 393 9.0 133 DCF
Base Case (mmscmd) 50 55 KG-D6 Oil 56 1.3 19 DCF
+ 5 mmscmd 14
1.4 1 7%
1.7% 15
1.5 1 7%
1.7% Exploration assets 249 5.7 84
KG-D6 gas prices Not part of BP deal 340 8.1 115
Base Case (US$/mmbtu) 4.34 4.34 PMT 199 4.6 67 7x FY13 EBITDA
+1 US$/mmbtu 3.7 4.7% 4.3 4.9% CBM Blocks 47 1.1 16
KG-D6 Oil Production Shale gas 88 2 30
Base Case (kbpd) 18 18 Oth

Others 6 0 2
+ 5 kbpd 1.0 1.3% 1.2 1.3% 4 Investments 413 10.5 139

Exchange Rate Enterprise Value 3,645 84.7 1,230
Base Case (INR/US$) 43.7 43.5 Less: Net Debt 106 2.4 36 FY12E end
INR 1 depreciation 3.1 4.0% 3.4 3.9%
E it Value
Equity V l 3 539
3,539 82 3
82.3 1 195
1,195 E t
Ex-treasury shares
h off 2962mn
2962
Target Price 1,200
135
ASIA
GAIL (GAIL IN
IN, BUY
BUY, PT
PT- INR600)
Concerns look overdone
 Revenue impact
p of lower domestic volume offset by
y – Higher
g LNG imports;
p ; higher
g tariffs on new LNG of new HVJ
(over 100% of old HVJ); and ship-or-pay provisions for KG-D6 contracts
 Subsidy is a concern, but GAIL is least impacted among oil PSUs - unlike other upstream companies, GAIL shares
are burdened only by cooking fuels (~13% of upstream’s one-third share) - as the price of oil rises, the bulk of
incremental under
under-recoveries
recoveries are due to diesel that GAIL does not share.
 Petchem prices strong, capacity on the rise - GAIL recently raised its petchem capacity by ~20% to 490ktpa – it
plans to further raise its capacity to 900ktpa by FY14F - we expect PE prices to remain resilient.
 We continue to like GAIL for operating upside and re-rating from gas growth.
Key financials and valuations Key market information

f
Price
FY Mar (INR) 2010 2011F 2012F 2013F Market Data (INR) Rel MSCI India
Revenue (bn) 250 324 388 427 Market Cap (INR bn) 603 540 120
OP. Inc (bn) 47 56 68 77 Market cap (US$bn) 13.6 520

115
500
Net earnings
g ((bn)) 31 37 44 49 Shares
S a es Ou
Outstanding
s a d g ((mn)) 1,268
, 68 480 110
EPS 25 29 35 39 3mth Dailt T/O (US$mn) 11.3 460 105

440
DPS 8 9 10 12 Free Float 43% 420
100
Yield 1.6 1.8 2.2 2.5 400 95
M ay 10
J un 10
J ul 10
A ug 10
S ep 10
O c t 10
N ov 10
Dec 10
J an 11
F eb 11
M ar 11
A pr 11
P/BV 3.6 3.1 2.7 2.4
P/E 19 2
19.2 16 3
16.3 13 6
13.6 12 2
12.2
Source: Bloomberg, Datastream, Nomura Estimates
Note: Share prices as of 29 April 2011

136
ASIA
GAIL (GAIL IN
IN, BUY
BUY, PT
PT- INR600)
GAIL – Key assumptions GAIL – SOTP valuation
FY10 FY11F FY12F FY13F
(INRbn) (US$bn) INR / Share Com m ents
Gas Transm ission
Volume (mmscmd) 107 119 130 140 Gas transmission 521 11.4 411 10x FY13F EBITDA
Avg. Tarif f (INR/mscm) 813 883 920 953 Petrochemicals 127 2.8 100 7x FY13F EBITDA
Petrochem icals LPG & liquid HC 62 1.4 49 6x FY13F EBITDA
Polymers production (KT) 417 414 475 480 E&P upside 19 0.4 15
Avg. realisation (INR/kg) 71 71 72 77 Investments 58 1.3 46
LPG & Other liquid HC Enterprise value 787 17.3 621
LPG sales (KT) 1,101 1,081 1,157 1,180 Less: net debt FY12F
22 0.5 18
Other HC sales (KT) 343 298 320 328 Equity value 765 16.8 603
LPG prices (US$/MT) 610 766 905 899 Price target 600
Subsidy (INR mn) 13,267 18,277 25,207 23,317
Tax rate (%) 31 33 32 32
GAIL – EBIT breakdown by segment GAIL – Earning sensitivities to key variables

FY09 FY10 FY11F FY12F FY13F FY12F FY13F
EBIT breakdow n (INRbn) Base case EPS (INR/share) 35 39
Transmission & trading 21.7 28.9 36.9 41.6 46.0 EPS Change INR/Share % INR/Share %
Petrochemicals Gas transm ission volum e
12.1 13.3 10.8 14.3 16.4
LPG & Liquid HC Base volumes (mmscmd) 130 140
86
8.6 61
6.1 72
7.2 87
8.7 94
9.4
+10 mmscmd 1.2 3.6% 1.3 3.3%
EBIT breakdow n (%) Gas transm ission tariffs

Base avg tariff (Rs/'000 SCM) 920 953
Transmission & trading 51 60 67 64 64
5% higher tariff 1.2 3.4% 1.3 3.4%
Petrochemicals 29 28 20 22 23
Polym er prices
LPG & liquid HC 20 13 13 13 13
Base case ($/MT) 1650 1760
10% higher prices 1.8 5.2% 2.0 5.1%
Subsidy burden
Base (INRbn) 25.2 23.3
10% hi
higher
h subsidy
b id -1.4
14 -3.9%
3 9% -1.3
13 -3.2%
3 2%
137
ASIA
Cairn India (CAIR IN, BUY, PT-

PT INR405)
LT story positive despite royal(ty) mess
 The fate of Vedanta deal is still a big
g unknown and a near -term overhang
g - lost co-relation to oil p
prices
since the deal announcement.
 Nearly 9 months have elapsed - The deal appeared simple initially, but royalty issues have delayed
approvals.
 Uncertainty could continue and a decision may not come by the new timelines
timelines.
 Royalty cost recovery - NAV dilutive (INR57/share) and potential deal breaker.
 The stock is an oil play, but range-bound currently on confusion over the deal.
 Deal or no deal – underlying resource story remains intact
 Early decision is key to clear the overhang – the deal itself does not materially change Cairn India.
 Operating performance remains strong and the correlation to oil prices could return.
 Large resource upsides – with 4bboe of discovered and a further 2
2.5bboe
5bboe of prospective exploration
resources.
Price
K fi
Key financials
i l and
d valuations
l ti K market
Key k t iinformation
f ti (INR) Rel MSCI India
FY Mar (INR) 2010 2011F 2012F 2013F Market Data 380 115
OP. Inc (bn) 10 82 144 159 Market cap (US$bn) 15.0 340 105
Net earnings (bn) 11 61 104 118 Shares

S a es Ou
Outstanding
s a d g ((mn)) 1,901
,90 320 100
EPS 6 32 55 62 3mth Dailt T/O (US$mn) 65.7 300 95

280 90
DPS - - 5 5 Free Float 19%
260 85
Yield na na 1.4 1.4
J un 10
J ul 1 0
A ug 10
S ep 10
O c t 10
N ov 1 0
Dec 10
J an 11
Feb 11
M ar 1 1
A pr 1 1
M ay 11
P/BV 2.0 1.7 1.3 1.1
P/E 63 0
63.0 10 8
10.8 64
6.4 56
5.6
Note: Share prices as of 29 April 2011
Source: Bloomberg, Datastream, Nomura estimates
138
ASIA
Cairn India (CAIR IN,

IN BUY,
BUY PT
PT- INR405)
CAIRN – SOTP valuation
2P + EOR Resource
INR/
US$Mn INR bn Share m m boe US$/boe Rem arks
Rajasthan Block
Conventional Recovery 9,888 451 237 494 20.0 DCF Based
Enhanced Recovery 1,269 78 41 216 5.9 DCF Based
Other Producing Blocks
Ravva 258.0 12.2 6 23 11.2 DCF Based
Cambay 86.9 3.5 2 7 12.4 DCF Based
Future upsides in Rajasthan block
20 small fields - Contingent 2P Resources 588 27 14 98 6.0 2P reserves @ US$6/boe
20 small fields - prospective resources 1,232 56 30 1.0 GHIP of 1.9bboe @ US$1/boe
Fut expl upside - prosp recov resour 1,050 48 25 175 6.0 Gross 250mmboe @US$ 6/boe
KG-DWN-98/2 210 10 5 35 6.0 2P reserves @ US$6/boe
Enterprise Value 14,582 685 361 1048 13.9
N tC
Net Cash
h 1 868
1,868 85 45 FY12 end
d
Equity Value 16,450 770 405 1048 15.7
Target Price 405
R
Royalty
lt costt recovery iimpacts
t NAV b
by 14% ... … and cess by 4%
We assum e Govt dem and Cairn dem and
Royalty NAV EPS (INR/sh)
Cess (INR/tonne)
% (INR/sh) FY12F FY13F
FY12/13F 2,625 2,625 0
Base case Nil 405 55 62
LT 927 2,625
, 0
Royalty - cost recoverable 20% 349 46 50
Impact (INR/sh) 57 8 12
NAV (INR) 405 387 427
Impact (%) -14% -15% -20%
% impact -4% 5%
S
Source: Nomura
N estimates
ti t
139
ASIA
Petronet LNG (PLNG IN, BUY, PT

PT- INR180)
Pure LNG upside play
 Pipeline bottlenecks that restricted gas growth are behind now. With limited visibility on domestic gas for next 4-5
years, LNG is likely to be the key source of gas availability.
 PLNG owns 75% of India’s LNG re-gas capacity – its near-term capacity is all booked with short-term contracts, yet
few spot cargoes could keep surprising.
 Re-gas capacity to double to 20mmtpa by FY14 – we believe PLNG will remain a key gateway for LNG imports.
 “Too good to believe” LT GSPA, with the re-gas tariff increasing 5% pa. Apart from getting the same tariff on
short/spot cargoes, the company keeps surprising on marketing gains on cargo that it markets.
 In the current framework, we see not much risk of regulatory intervention in tariffs
 Hi h sensitivity
High iti it tto volume
l assumption
ti – FY12F EPS increases
i 13% ffor every 1MT iincrease iin RLNG volumes.
l
 New LT contracts for new capacity could be the key catalyst – PLNG remains our favorite in mid-cap gas names.
Key financials and valuations Key market information

Price
120
Net earnings (bn) 4 6 8 9 3mth Dailt T/O (US$mn) 54
5.4 140
EPS 5 8 11 12 Free Float 50% 100
120
DPS 2 2 2 2 No of shares(million) 750 80
100
Yield 1.3 1.5 1.5 1.5
Major shareholders 60 80
P/BV 4.4 3.7 3.0 2.5
- GAIL 12.5
M ay 10
J un 10
J ul 10
A ug 10
S ep 10
O c t 10
Nov 10
Dec 10
J an 11
F eb 11
M ar 11
A pr 11
P/E 24.5 16.0 12.5 10.8
- ONGC
O GC 12.5
Note: Share prices as of 29th April 2011

140
ASIA
Petronet LNG (PLNG IN,

IN BUY,
BUY PT
PT- INR180)
PLNG - DCF Valuations
Key assum ptions and Valuation FY13 end
Terminal Grow th rate 1%
WACC 10%
Valuation (INRm n)
Discounted FCFF 70,692
Terminal cash flow 99,896
Enterprise Valuation 170,588
Net Debt (FY12end) 37,301
Im plied Mcap 133,288
Value per share (INR) 179
Price Target (INR) 180
FY11F FY12F FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F FY21F
LNG Volumes (MMT)
- Dahej 8.6 10.1 10.4 11.0 11.3 11.3 11.3 11.3 11.3 11.3 11.3
- Kochi 0.0 0.0 0.5 2.0 2.0 2.0 2.0 2.0 2.5 2.5 2.5
Net back Margins (INR/mmbtu)
- Dahej 31.9 33.2 35.1 37.8 37.8 37.8 37.8 37.8 37.8 37.8 37.8
- Kochi - - 80.0 84.0 80.0 84.0 88.2 92.6 92.6 92.6 92.6
EBIT 10,432 13,213 15,460 20,851 19,157 19,338 19,544 19,768 21,617 21,459 21,300
FCFF -9,658 2,339 16,570 16,857 17,153 17,461 18,854 18,907 18,959
Discounted FCFF -9,658 2,127 13,703 12,677 11,730 10,859 10,663 9,724 8,867
Market seems to be building in no tariff growth and only 75% utilisation

Levelised utilisation rate at Dahej
70% 75% 80% 84% 90% 100%

Levelised ttariff
0% 119 135 152 164 184 216

1% 130 148 165 179 200 234
2% 143 162 181 195 217 253
3% 157 177 197 212 236 274
4% 172 193 214 231 256 297
5% 188 211 233 251 278 322
Source: Bloomberg, Nomura Estimates

141
ASIA
Indraprastha
p Gas (IGL
( IN,, BUY,, PT- INR450))
A secular CGD story
 IGL is our preferred gas downstream play – a beneficiary of CNG growth in NCR and industrial volume growth long term.
 It has the twin advantages of being in Delhi NCR — India
India’s
s largest metropolitan area
area, where discretionary conversion to
CNG is driving growth. CNG penetration is still low — ~15% of overall three/four vehicles and ~40% of annual additions.
 CNG is fast becoming the fuel of choice in Delhi. It is about 36-62% cheaper than liquid fuels and is now widely available.
Most key automakers have started to supply factory fitted CNG vehicle – growth rates can ramp-up quickly.
 Historically, due to paucity of gas IGL could not grow beyond Delhi and could not tap large potential demand in
industrial/commercial segments. With increased gas availability, it has stepped-up operations in NCR areas and focus
now is to tap industrial/commercial segment.
 Concerns on its ability to pass along gas costs have been reduced by the ease with which it has passed on all cost
increases over the past year (including a more than 100% APM increase) to raise CNG prices by 35%.
 More APM allocation likely - CNG is a high priority area in current gas allocation policy – IGL is seeking allocation of
about 0.25mmscmd for the Ghaziabad and pooling of all the gas allocation for the Delhi NCR area.
Key financials and valuations Key market information Price


140
340
Net earnings (bn) 2 3 3 4 3mth Dailt T/O (US$mn) 21
2.1 320 130
300
EPS 15 19 23 27 Free Float 55% 280
120
DPS 5 5 5 5 No of shares(million) 140

260
240
110
100
Yield 1.4 1.4 1.4 1.4 Major shareholders 220
200 90
P/BV 5.5 4.4 3.6 2.9 - GAIL 22.5
M a y 10
J u n 10
J uul 10
A u g 10
S e p 10
O c t 10
N oov 10
D e c 10
J a n 11
F e b 11
M aar 11
A ppr 11
P/E 20 9
20.9 17 3
17.3 14 1
14.1 12 1
12.1 - BPCL 22.5
142
ASIA
Indraprastha Gas (IGL IN,

IN BUY,
BUY PT-
PT INR450)
IGL – DCF Valuations
(INRmn) FY10 FY11F FY12F FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F FY21F
Total Volume (mmscmd) 2.1 2.7 3.3 3.9 4.6 4.9 5.3 5.6 6.0 6.3 6.6 6.9
CNG (mmscmd) 1.9 2.2 2.6 3.0 3.5 3.7 4.0 4.3 4.6 4.8 5.1 5.3
PNG (mmscmd) 0.2 0.5 0.7 0.9 1.1 1.2 1.3 1.3 1.4 1.4 1.5 1.5
EBITDA (INR/scm) 4.9 5.1 5.2 5.2 5.0 4.9 4.8 4.7 4.5 4.4 4.3 4.2
EBITDA 3,808 4,913 6,149 7,309 8,464 8,815 9,174 9,549 9,940 10,120 10,304 10,492
EBIT 3,033 3,908 4,883 5,648 6,575 6,747 7,058 7,385 7,728 7,860 7,996 8,136
FCFF (1,105) (3,113) (312) 1,197 2,494 3,575 6,031 6,297 6,574 6,711 6,850 6,991
Discounted FCFF 1,197 2,249 2,906 4,420 4,161 3,917 3,605 3,318 3,053
DCF Summary (INRmn) FY13 End

Assumptions
Terminal Growth rate 2.5%
WACC 11%
Valuation summary
Discounted free cash flow 28,826
Terminal valuation 37,204
Enterprise Value 66,030
Net Debt / (Cash) incl investments 2,695
Implied Mcap 63,335
Value per share 453
Target price 450
IGL – 1 year forward P/E band chart IGL – 1 year forward P/B band chart
(INR/share)
(INR/ h )
(INR/share)
5.0x
400 400
16x 4.0x
350 350
14x
300 300
12x
250 3.0x
10x 250
200 2.5x
8x 200
150 6x 2.0x
150
100 1.5x
100
50
50
Jul-06
6
Nov-06
6
Jul-07
7
Nov-07
7
Jul-08
8
Nov-08
8
Jul-09
9
Nov-09
9
Jul-10
0
Nov-10
0
Apr-06
6
Mar-07
7
Mar-08
8
Mar-09
9
Mar-10
0
Mar-11
Jul-06
Nov-06
Jul-07
Nov-07
Jul-08
Nov-08
Jul-09
Nov-09
Jul-10
Nov-10
Apr-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Source: Company data, Nomura Estimates 143
ASIA
Gujarat State Petronet (GUJS IN

IN, BUY,
BUY PT
PT- INR135)
Emerging pan-India gas transmission play – Regulatory uncertainties near term
 Present in 16 of 26 districts of Gujarat with a pipeline network of ~1,700kms
1,700kms ; has 25+%
25 % of gas transmission market.
 The pure transmission model works on an open-access basis, in line with the spirit of the new regulations. It does not
buy or sell gas, and thus does not take any commodity price risk.
 In 3QFY11, GSPL’s JV (GSPL owns 52%),emerged as the winner in all three long-distance pipelines - On completion,
GSPL will
ill emerge as a pan-India
I di ttransmission
i i company with
ith a network
t k over 5,500km
5 500k (3x(3 off 1,700km
1 700k now).
)
 But the formal letter is not issued yet due to regulatory delays – limited clarity on capex, funding, timing, equity
dilutions , etc.
 Tariff setting is also delayed due to regulatory delays . We do not expect sharp tariff cuts yet but build conservative
tariff estimates.
Key financials and valuations Key market information Price


Net earnings (bn) 4 5 6 6 3mth Dailt T/O (US$mn) 2.8 110

115
EPS 7 9 10 11 F
Free Float
Fl t 62% 100
110
DPS 1 2 2 2 No of shares(million) 562 105

90 100
Yield 1.0 1.5 1.5 1.5 Major shareholders
80 95
P/BV 3.5 2.8 2.3 1.9 - GSPC 37.8
M ay 10
J un 10
J ul 10
A ug 10
S ep 10
O c t 10
Nov 10
Dec 10
J an 11
F eb 11
M ar 11
A pr 11
P/E 13.4 11.5 9.8 9.1 - Gujarat Maritime Board 6.6
144
ASIA
Gujarat State Petronet (GUJS IN, BUY, PT-

PT INR135)
GSPL - DCF Valuations
DCF Summary (INRmn) FY13 end
Discounted FCFF 37,507
WACC 10.4%
Enterprise Value of core business 88,373
Investment 866
Enterprise Valuation 89,239
Net Debt (FY12 - Rsm) 12,785
Implied Mcap (Rsm) 76,454
Per share Value 136
Target price 135
(INRmn) FY10 FY11F FY12F FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F FY21F
Gas Volumes (mmscmd) 32.0 35.7 41.2 46.8 53.2 54.8 56.5 58.1 59.9 61.7 63.5 65.4
Tariffs (Rs/MSCM) 850 807 775 750 750 750 750 750 750 750 750 750
EBIT (Rsm) 7,049 8,036 9,447 10,273 11,682 11,304 11,608 11,923 12,251 12,592 12,947 13,314
FCFF (Rsm) 1,732 3,133 6,750 7,055 7,367 7,688 8,018 8,356 8,703
Discounted FCFF (Rsm) 1 732
1,732 2 837
2,837 5 535
5,535 5 239
5,239 4 954
4,954 4 681
4,681 4 421
4,421 4 172
4,172 3 935
3,935
1-yr forward P/E band chart 1-yr forward P/B band chart
(INR/share) (INR/share)
15x 3.5x
140 140
12x 30
3.0x
120 120
2.5x
100 10x 100
2.0x
80 8x 80
1.5x
60 60
5x
1.0x
40 40
20 20
0 0
Aprr-08
Octt-10
Novv-06
Decc-07
g-08
p-09
n-06
n-09
n-10
Jull-07
Mayy-09
b-06
Marr-07
b-10
Marr-11
Apr--08
Oct--10
Nov--06
Dec--07
Aug--08
Sep--09
Jun--06
Jan--09
Jun--10
Jul--07
May--09
Feb--06
Mar--07
Feb--10
Mar--11
Feb
Feb
Aug
Sep
Jun
Jan
Jun
Source: Bloomberg, Nomura Estimates
145
ASIA
Gujarat
j Gas (GGAS
( IN,, NEUTRAL,, PT- INR415))
Limited growth visibility
 Gujarat Gas has faced severe gas shortages since its PMT (Panna-Mukta-Tapti fields) allocation was cut by 30%
in 2Q08.
 CGD is a priority area for APM and KG-D6 gas allocation. Yet, compared to the current need of ~0.5mmscmd for
CNG and domestic piped gas, GGAS’ allocation is limited to 0.15mmscmd of APM gas.
 Due to limited domestic gas supply, GGAS is increasingly relying on spot/short-term RLNG.
 As RLNG prices fluctuate,
fluctuate the company is now resorting to more frequent pricing change
change, but is facing some
consumer resistance. After a sharp 16% increase in December 2010, it has further raised prices for the industrial
segment by a sharp 25% from April 2011.
 Sacrificing volume growth in already mature markets - slowing volumes with rising prices.
 To further grow, GGAS needs to expand, but seems not to be pursuing aggressive growth.
Key fi
K financials
i l and
d valuations
l ti Key market
K k t iinformation
f ti (INR)
Price
P i
Rel MSCI India
FY Dec (INR) 2009 2010 2011F 2012F Market Data
440 150
Revenue (bn) 14 18 23 26 Market Cap (INR bn) 47 420
140
400
360
Net earnings (bn) 2 3 3 3 3mth Dailt T/O (US$mn) 0.3 340
120
320 110
EPS 13 20 24 26 Free Float 35% 300
100
DPS 8 12 10 10 Major shareholders 280
260 90
Yield 2.1 3.2 2.7 2.7 - BG Group 65.1
M ay 10
J un 10
J ul 10
A ug 10
S ep 10
O c t 10
Nov 10
D ec 10
J an 11
F eb 11
M ar 11
A pr 11
P/BV 6.2 5.6 4.8 4.0 - Aberdeen 11.4
P/E 27.9 18.8 15.9 14.5
146
ASIA
Gujarat Gas (GGAS IN, REDUCE, PT

PT- INR415)
GGAS – DCF Valuation
(INRmn) 2010 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F
Gas Sales (mmscmd) 3.32 3.56 3.84 4.17 4.50 4.77 5.04 5.36 5.68 6.02
EBITDA (INR/scm)
(INR/ ) 3 43
3.43 3 76
3.76 3 76
3.76 3 76
3.76 3 51
3.51 3 51
3.51 3 51
3.51 3 51
3.51 3 51
3.51 3 51
3.51
EBIT(INRmn) 3,614 4,272 4,617 5,001 4,984 5,288 5,613 5,960 6,330 6,725
FCFF 1,832 2,312 2,458 2,764 2,812 3,657 3,916 4,190 4,479 4,785
Discounted FCFF 2,458 2,488 2,277 2,665 2,569 2,473 2,379 2,287
DCF Summary CY12end

Discounted free cash flow 19,596
WACC 11%
Enterprise Value of core business 46,794
Investments 5 488
5,488
Enterprise valuation 52,282
Net Debt / (Cash) - CY11F (1,090)
Preference shares 144
Implied Mcap (Rsm) 53,228
Per share Value 415
Target price 41
415
GGAS – 1 Yr forward P/E band chart GGAS – 1 Yr forward P/B band chart
(INR/share)
(INR/share) 24x 500
500 20x 55
5.5x
450
450 400
400 16x 4.5x
350
350
300 3.5x
300 12x 250
250 2.5x
200
200 8x 150 1.5x
150
100
100
50 50
0 0
Novv-06
Mayy-09
Aprr-07
Oc t-09
p-07
Decc-08
g-10
n-06
n-06
n-11
Jul-08
b-08
Marr-10
Sep--06
Sep--07
Sep--08
Sep--09
Sep--10
Jan--06
Jan--07
Jan--08
Jan--09
Jan--10
Jan--11
May--06
May--07
May--08
May--09
May--10
Feb
Sep
Aug
Jan
Jun
Jan
147
ASIA
Oil marketing companies – In dire straits

Key operating numbers
IOC BPCL HPCL
Refining
g
Number of refineries x 8 2 2
Refining capacity MMT 51 22 15
FY10 throughput MMT 51 20 16
FY10 operating rate % 99 95 106
Refining m arket share % 27% 11% 9%
FY10 avg GRM US$/bbl 4.5 3.0 2.7

Last 3 yr avg GRM US$/bbl 5.8 4.6 4.4
Marketing
Marketing volume MMT 70 28 26
Market share % % 51% 20% 19%
Marketing to Refining vol 1.38 1.36 1.67
Number of outlets
- Retail outlets x 18,643 8,692 9,127
- LPG Distributors x 5,095 2,187 2,404
- LPG Customers millions 57 28 29
- LPG bottling plants x 89 49 44
Pipeline Netw ork
Product Pipelines MMT 34 12 13
Crude Pipelines MMT 40
Total MMT 75 12 13
Market share
- Product pipeline % 54% 18% 20%
- Crude pipeline % 44%
FY10 thruput MMT 66 11 12
Source: Company data, PPAC, Nomura research

148
ASIA
OMCs – Deteriorating financial health

De-growth in operating profits despite growth in PAT - Dictated less by operating matrix, more by
operating volumes govt decisions on subsidy
% growth FY04 FY05 FY06 FY07 FY08 FY09 FY10 (INRbn) Reported
p net p
profit Net p
profit ex subsidyy
Key operating matrix 200
Refining thruput 0.1 (0.0) 0.2 15.6 5.8 2.4 (0.3)
100
Marketing sales 3.7 4.2 (1.3) 13.9 9.4 4.7 4.8
Retail outlets 13.6 15.7 15.5 18.9 6.6 3.1 3.5 0
LPG
G Customers
Custo e s 10.4
0 99.4 55.2 7.33 66.2 55.7 7.33 (100)
(200)
Operating profit 14 (33) (16) 75 (9) (17) 44
(300)
(400)
(500)
(600)
FY04 FY05 FY06 FY07 FY08 FY09 FY10
OMCs: Gross under-recoveries vs. reported

p PAT OMCs: Net U/Rs (post upstream/cash support) vs. PAT
(INRbn) Net under-recoveries PAT
(INRbn) Gross U/Rs PAT 180
1200 160
1000 140
120
800 100
600 80
60
400 40
200 20
0
0 (20) FY05 FY06 FY07 FY08 FY09 FY10
FY05 FY06 FY07 FY08 FY09 FY10

149
ASIA

OMCs: Increased share of other income in PBT OMCs: Other income enabling to stay in black
((INRbn)) Core PBT Other income ((INRbn))

Reported net profit Net profit ex other income
135 140
115 56% 120
95 100
120% 80
75 50%
60
55 31% 40
42%
35 18% 26% 20
15 0
(20)
(5)
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY04 FY05 FY06 FY07 FY08 FY09 FY10
OMCs combined debt up

p 5.3x over last 6 years
y OMCs – Rising interest costs / falling interest cover
(INRbn) Debt (LHS) (%) (INRbn) Interst cost (LHS) (x)

1000 140 Interest cover (RHS)
Debt - Equity ratio (RHS) 90 25
900
120 80
800
70 20
700 100
60
600 80 15
50
500
400 60 40
10
300 30
40
200 20 5
20 10
100
0 0 0 0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY04 FY05 FY06 FY07 FY08 FY09 FY10

150
ASIA

OMCs: Deteriorating key return ratios – Lower oil OMC quarterly PAT – Rather than refining margin,
price came to rescue in FY10 earnings depend on subsidy
(%) ROAE ROACE ROAIC (INRbn) OMCs quarterly PAT((LHS))
(INRbn) (US$/bbl)
200 (RHS)
(LHS)
Singapore complex GRM (US$/bbl)
(RHS)
(LHS) 10.0
35
30 150 7.5
100 5.0
25
50 25
2.5
20
0 0.0
15 (50) (2.5)
10 (100) (5.0)
5 (150) (7 5)
(7.5)
1QFY06
2QFY06
3QFY06
4QFY06
1QFY07
2QFY07
3QFY07
4QFY07
1QFY08
2QFY08
3QFY08
4QFY08
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
0
FY04 FY05 FY06 FY07 FY08 FY09 FY10
Between April-Sep
p p 2010 OMC saw sharp
p rally
y on reform hopes
p – Nearly
y all g
gains lost by
y Feb-2011
Rally on hope of reforms Hopes puncutred Some recent recovery Declines

start peak lows declines CMP gains from Sept-10
Apr-10 Sep-10 gains Feb-11 Apr-11 % peaks
BPCL 491 802 63% 539 -33%
33% 630 17% -22%
22%
IOCL 274 450 64% 293 -35% 340 16% -24%
HPCL 295 546 85% 309 -43% 373 21% -32%

ASIA
OMCs – Limited downside post correction

Stocks are back to trading around book values
PB (x)
2.5
IOC BPCL HPCL
2.3
2.0
1.8
1.5
1.3
1.0
0.8
0.5
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
We use 3yr average 1yr fwd P/B multiple for OMCs – our P/B valuation methodology
valuing OMCs
1 yr fwd P/B IOC BPCL HPCL BPCL IOCL HPCL
1Year 1.5 1.5 1.1 Book value per share - FY13 497 281 380
2Year 1.4 1.4 1.1 Target multiple (x) - Last 3yrs avg 1yr fwd P/B 1.25 1.30 1.00
Implied equity value 622 365 380
3Year 13
1.3 1 25
1.25 10
1.0
Price Target 620 365 380
Our current target multiple 1.3 1.25 1.0
Earlier multiple 1.0 1.0 0.8
Source: Company data, Bloomberg, Nomura estimates

152
ASIA
Korea

ASIA
Currency
y ((KRW)) FY10 FY11F FY12F FY13F
S-Oil (010950 KS; BUY; CMP: W159,500; PT: W200,000)

Revenue (bn) 20,530 28,478 29,481 30,137
Reported net profit
(bn) 677 1,873 2,034 1,798
Norm alised net profit
Beneficiary of polyester chain strength (bn) 677 1,873 2,034 1,798
Norm alised EPS 6 016 20 16,638.50
6,016.20 16 638 50 18,065.30
18 065 30 15,971.50
15 971 50
 ACTION: BUY as earnings will be resilient. After a strong rally over Norm . EPS grow th (%) 212.3 176.6 8.6 -11.6
26.5 9.6 8.8 10
the last 6 months, S-Oil’s outperformance has slowed down recently. Norm . P/E (x)
EV/EBITDA 19.6 7.7 6.6 7.3
We attribute this to market concern that refining and PX margins may Price/book (x) 4 2.9 2.4 2.2
have peaked out and that 2Q11 profit may weaken due to the subsidy Dividend yield (%) 15
1.5 34
3.4 37
3.7 37
3.7
ROE (%) 16.1 35.3 30.1 23.4
imposed on domestic gasoline and diesel (effective early April). We Net debt/equity (%) 39.1 21.1 4.3 net cash
believe the concern is overdone, and any share correction should be
seen as a buying opportunity.
 Catalyst: PX strength in 2H11, sustainable refining margin. S-Oil’s
new PX plant started operation in April 2011 (PX capacity up by +129%
to 1.6mn tpa; benzene up +140% to 0.5mn tpa), and the company
started to generate revenue and profit from mid-April.
mid April We expect PX
margin to surge again from 2H11 due to the start-up of new PTA plants.
Furthermore, we believe current high refining margins are sustainable
for the next few months on continued strong oil demand and the
possibility of diesel shortages in China due to electricity rationing this
summer.
 Maintain BUY; PT W200,000. Our PT of W200,000 is based on FY11F
P/BV of 33.8x,
8x which represents a 20% premium to the peak
peak-cycle
cycle
multiple seen over FY04-10. Risks include 1) weakening polyester
demand hurting PX margin; 2) new petrochemical plants facing
operational problems; and 3) management not paying out enough.
Note: Pricing as of 29 Apr 2011 close 154

ASIA
S-Oil: dividends and quarterly earnings

Dividends
( W/share) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
1Q 8,300
2Q 250 625 375 750 1,500 1,500 1,750 600 300 1,000 1,000
3Q 750 750 1 750
1,750
4Q 1,250 1,000 1,250 1,875 1,750 4,000 2,875 2,875 5,125 1,500 750 2,200 4,500 5,000
DPS 1,250 1,250 1,875 1,875 2,125 4,750 5,125 5,125 13,425 5,000 1,350 2,500 5,500 6,000
EPS 2,654 58 246 2,297 3,127 11,144 5,682 6,505 6,347 3,902 1,927 6,016 16,639 18,065
P
Pay-out
t 47% 2155% 762% 82% 68% 43% 90% 79% 212% 128% 70% 42% 33% 33%
Source: Company data, Nomura
FY11F OP breakdown
Petrochemical
18%
Lubricant
19%
Petroleum
63%
Source: Nomura
155
ASIA
SK IInnovation
ti (096770 KS; BUY, CMP: W232,000; PT: W330,000)
Currency (KRW) FY10 FY11F FY12F FY13F
Turning to value stocks Revenue (bn) 43,864 53,201 55,172 55,925
Reported net profit
(bn) 1206 2,526
, 2,698
, 2,566
,
 Action: BUY the less expensive refiners.
f S Innovation (SKI)
SK (S ) has Norm alised net profit
(bn) 1206 2,526 2,698 2,566
lagged other Asian refiners in share price performance, likely due to Norm alised EPS 13,151.10 27,551.10 29,430.00 27,986.60
its smaller exposure to parayxlene and limitations faced pricing Norm . EPS grow th (%) 78.1 109.5 6.8 -4.9
Norm . P/E (x) 19 9.1 8.5 8.9
domestic g gasoline and diesel in 2Q11. We find SKI attractive not only
y EV/EBITDA 11 1
11.1 72
7.2 63
6.3 64
6.4
on the cyclical upturn of the refining/chemical industry but on Price/book (x) 2.1 1.8 1.6 1.4
Dividend yield (%) 0.8 0.8 0.8 0.8
structural improvements (costs, operational efficiency). ROE (%) 13 21.7 19.8 16.5
Net debt/equity (%) 58.4 45.1 27.5 19.3
 Catalyst: Capital gain from Brazilian oil block sale. In December
2010, SKI sold its stakes in Brazilian oil blocks to Denmark’s Maersk
Oil at a price of USD2.4bn. SKI plans to use the proceeds to fund
other international deals and to “upgrade” its E&P portfolio. This
deal,, once approved
pp by
y the Brazilian g
government,, should create a
cash inflow of over USD1.4bn (or capital gain of circa KRW1.0trn),
on our estimates.
 Maintain BUY, PT W330,000. We reiterate BUY on SK Innovation,
with a PT of KRW300,000. Our PT is based on 2.4x FY11F P/BV
(KRW136,665), a 20% premium to the peak cycle multiple over
FY07-10. Risks include crude prices and volatile refining and
chemical margins.

Note: Pricing as of 29 Apri 2011 close 156
ASIA
SK Innovation – SOTP NAV
(W bn) Remark
Refining
EBITDA 1,551 2011F EBITDA * OP contribution (57%)
Target multiple (x) 10 6
10.6 20% premium to Asia refiner average (2011F)
EV 16,374
Petrochemical
EBITDA 637 2011F EBITDA * OP contribution (23%)
T
Targett multiple
lti l ((x)) 90
9.0 K
Korea petrochem
t h average (2011F)
EV 5,736
E&P
EV/barrel (US$/bbl) - oil 20.0
EV/barrel (US$/bbl)
$ - gas 10.0
Proven reserves (mn bbl) 534 oil (25%), gas (75%)
EV 7,409 2011F KRW/USD: 1110
EV 29,519
Net debt 3,316 2011F net debt
Fair market cap 26,203
# of shares (mn) 92
gy fair value (W/share)
SK Energy ( ) 283,372
,
Source: Company data, Nomura
157
ASIA
SK Energy: business segments

Sales by division (2010) OP by division (2010)
E&P Oth
Others
2% 4%
E&P
Petrochemical 22%
28%
Petroleum
53%
Petroleum
70% Petrochemical
21%
Source: Company data Source: Company data
158
ASIA
How SK Innovation has changed

Previous New
SK Holdings SK Holdings
33.4% 33.4%
Refining
Petrochemicals E&P
SK Energy SK Innovation
E&P
New businesses
-information/electronic
information/electronic materials
New businesses -battery
-green technology
SK Lubricants (100%) SK Energy (100%)
SK marketing & company (50%) SK Global Chemical (100%)
Dopco (38.3%) SK Lubricants (100%)
NeTruck (33.7%) SK marketing & company (50%)
SK Mobile Energy (100%) Dopco (38.3%)
SK Petrochemical (100%) NeTruck (33.7%)
SK Encar (87
(87.5%)
5%) SK Mobile Energy
gy ((100%))
etc. SK Petrochemical (100%)
SK Encar (87.5%)
etc.
Source: Company data

159
ASIA
GS Holdings (078930 KS; BUY; CMP: W89

W89,500;
500; PT: W115,000)
W115 000)
Structural changes taking place Revenue (bn)

Reported net profit
929 1,187 1,204 1,200
(bn) 799 1,038 1,048 1,054

 Action: BUY on market jitters over refining and PX margin.
margin Norm alised net profit
Recent share weakness may be attributable to concern about the (bn) 799 1,038 1,048 1,054
Norm alised EPS 8,596.00 11,171.10 11,284.00 11,347.10
sustainability of refining and PX margin, in our view, along with Norm . EPS grow th (%) 61.6 30 1 0.6
subsidies by GS Caltex (GSC) on domestic gasoline and diesel in Norm . P/E (x) 10.4 8 7.9 7.9
EV/EBITDA 10 2
10.2 75
7.5 7 65
6.5
Q11 W
Q11. We believe
b li th
the concern iis overdone,
d and
d share
h correction
ti Price/book (x) 1.7 1.4 1.2 1.1
should be seen as a buying opportunity. GS Retail (GSR) has filed Dividend yield (%) 1.4 1.7 1.7 1.7
for listing on the KRX this year, and assuming a 30% stake sale, ROE (%) 17.9 19.5 16.8 14.7
Net debt/equity (%) 12.1 2.2 net cash net cash
GSH mayy see a capital g gain of W250-300bn.
 Catalyst: PX strength, sustainable refining margin, volume
growth. Following completion of two hydrocrackers in 2007 and
2010, GSC is constructing another fluid catalytic cracker (FCC) with
start-up
t t i 2013F
in 2013F. GSC iis also
l undertaking
d t ki smallll expansionsi thi
this
year for base oil. We expect deleveraging from GSC’s sector-high
gearing (net debt/equity ratio of 113% at end-2010), as the high
capex
p cycle
y ((W1.2tn p
pa over the ppast 5 yyears)) ended in FY10. PX
margin should surge again from 2H11 on the start-up of new PTA
plants while refining margins appear sustainable on strong oil
demand and possible diesel shortages in China this summer.
 Maintain BUY, PTW115,000. Our O PT off W115,000 is based on
FY11F P/BV of 1.8x, which is a 20% premium to the peak-cycle
multiple over FY07-10F. Risks: 1) operational problems at the new
y
hydrocracker;; 2)) delays
y in GS Retail’s listing
g and/or the company’s
p y
new FCC schedule.
160
Note: Pricing as of 29 Apr 2011 close
ASIA
GS Holdings – SOTP NAV
(W bn) Remark
Fixed tangible asset 556 GS Tower
GS Caltex 8,621 2011F book value 2.0x
GS Retail 915 2010 book value
GS Homeshopping 143 25% discount to Nomura fair value
GS Sports 11 25% discount to 2010 book value
GS EPS 248 25% discount to 2010 book value
GS Global 193 25% discount to market cap
Brand royalty & rental income 517 NPV of 20 yr brand royalty (FY11F)
Investment asset 11,205
Net debt 129
NAV 11,076
# of shares (mn) 95
GS Holdings fair value (W/share) 116,586
161
ASIA
GS Holdings:
H ldi breakdown
b kd
Revenue breakdown
Annual ((Wbn)) FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11F FY12F
Revenue 274 424 393 420 139 534 929 1,187 1,204
Equity income 263 396 359 364 71 471 858 1,079 1,092
Rental income 11 28 34 35 37 36 40 40 40
B dR
Brand Royalty
l (0) 0 0 21 31 26 31 68 72
2
NAV breakdown 2010 Equity income breakdown (FY11F)
GS Home GS EPS GS Global

GS GS Global Shopping 5% 0%
Homeshopping 2% GS Sports 3%
2% 0%
GS EPS
6% GS Retail
10%
GS Retail
17%
GS Caltex
73% GS Caltex
82%
Source: Company data Source: Nomura 162

ASIA
LG Chem (051910 KS; BUY, CMP: W530,000; PT: W700,000) Currency (KRW)
Revenue (bn)
Reported net profit
FY10
19,471
FY11F
22,631
FY12F
25,022
FY13F
24,966
Multi-year re-rating in place (bn)

2169 2,717 3,050 3,183
(bn) 2169 2,717 3,050 3,183

 Action: BUY for multi-year re-rating. LG Chem (LGC) has rallied Norm alised EPS 32,727.20 40,993.30 46,017.10 48,030.10
Norm . EPS grow th (%) 40.4 25.3 12.3 4.4
continuously for 2 years. We are diligently watching for potential Norm . P/E (x) 16 12.8 11.4 10.9
de-rating catalysts but none seem in sight. Any traction in EV EV/EBITDA 10

4.4
8
3.4
7
2.9
6.5
2.5
Price/book ((x))
b tt i should
batteries h ld b be positive.
iti LCD substrate
b t t start-up
t t may turn
t outt Dividend yield (%) 0.8 0.9 0.9 0.9
to be timely, potentially dovetailing with the LCD cycle upturn. ROE (%)
Net debt/equity (%)
31.7
9.3
30.1
2.4
27.6
0.1
24.9
net cash
 Catalysts: Petrochemicals resilient, IT recovery to play

catalyst
t l t . Following
F ll i record d quarterly
t l profit
fit in
i 1Q
1Q, we think
thi k ABS/EP
(sales: +10% q-q), acrylate (+28% q-q) and BR (+23% q-q) should
see healthy trends in 2Q. The next 2 quarters should be backed by
seasonality and tight supply of rubber and acrylates. Capacity
expansion of BR is planned to be ready in Aug. We believe
potential recovery in LCD/ IT has yet to be priced in.
 Maintain BUY, PTW700,000. Our PT of KRW700,000 is based on
SOTP. Our PT reflects a more positive view of the petrochemical
and car battery units. We value the auto battery and LCD glass
segments at KRW29,000/share and KRW28,000/share. Risks
i l d 1) petrochem
include: t h and
d LCD cyclel volatility;
l tilit 2) execution
ti off car
battery production.

Note: Pricing as of 29 Apr 2011 close 163
ASIA
LG Chem: SOTP valuation

Previous
(W bn) Remark
valuation
l i
Electronic material EV (a) 15,999 11,938
EBITDA 1,333 PV of 2012F 1,194
Multiple (x) 12 0
12.0 20% premium to Korea tech average; unchanged 10 0
10.0
Petrochemical EV (b) 26,754 17,627
EBITDA 3,111 PV of 2012F 2,540
Multiple (x) 8.6 LGC's peak cycle multiple in 2010 6.9
LCD glass EV (c) 2,306 2,306
Auto battery EV (d) 2,387 2,139
EV (a)+(b)+(c)+(d) 47,446 34,010
( ) Net
(-) N t debt
d bt 13 2012F 232
Market cap 47,433 33,777
(-) preferred share market cap 1,377 Market cap 2 May 1,014
Fair market cap 45 990
45,990 32,697
32 697
# of shares (mn) 66.3 Common share 66
LGC fair value (W/share) 693,970 493,386
164
ASIA
H
Honam P
Petrochemical
t h i l (011170 KS; BUY, CMP: W378,000; PT: W480,000)
Seeking global growth platform Revenue (bn)
Reported net profit
7,189 8,434 9,568 10,216
 BUY ffor th
the sweett spott – polyester
l t chain:
h i Among
A K
Korean companies,i HPC (b )
(bn) 784 1 100
1,100 1 223
1,223 1 390
1,390
has the greatest exposure to the polyester chain though MEG (capacity: 1.0mn (bn) 784 1,100 1,223 1,390
tpa), PTA (950k tpa), PX (750k tpa). MEG price and margin have seen the Norm alised EPS 24,616.40 34,538.60 38,382.60 43,619.00
largest correction year-to-date, but we see an improving outlook in 2H11. We Norm . EPS grow th (%) -1.6 40.3 11.1 13.6
Norm . P/E (x) 9.4 6.7 6 5.3
believe HPC should be one of Asia’s
Asia s biggest beneficiaries of strong polyester EV/EBITDA 6.7 5.1 4.3 3.6
demand growth and tight MEG supply. Price/book (x) 1.7 1.3 1.1 1
Dividend yield (%) 0.8 0.8 0.8 0.8
 Catalyst: Price pick up from end-May, expanding scale. While petrochemical ROE (%) 19.2 22.1 20.1 19.4
prices and margins may slow in May due to inactive buying demand from China, Net debt/equity (%) 27.6 15.1 5 net cash
weeeexpect
pect demand to pick upp as in
inventories
entories appear thin
thin. HPC’s CEO has
reportedly (Korea Economy, 17 April) stated his interest in acquiring the
remaining 48% stake in KP Chemical this year. HPC intends to complete 14%
ethylene capacity expansion in 2012F and will also seek asset acquisitions in
Asia to achieve targeted sales of W40tr by 2019
2019. HPC is developing
rechargeable batteries with a US energy storage system provider, with
commercialisation targeted for 2015. HPC is also developing battery separator
(dry-type) and electrolytes.
 Maintain BUY,
BUY PTW480,000.
PTW480 000 Our target price of KRW480,000
KRW480 000 is based on sumsum-
of-the parts methodology. We have raised FY11F EBITDA by 8% and our target
EV/EBITDA multiple to 9.3x, which represents the peak multiple in 2010. Risks
may come from: 1) input and product price volatility; and 2) HPC buying assets at
unattractive prices.
prices
© Nomura International (Hong Kong) Limited Note: Pricing as of 29 Apr 2011 close 165
ASIA
Honam Petrochemical: SOTP valuation
(Wbn) Remark
EBITDA 1,445 2011F EBITDA
Multiple (x) 9 3 Honam peak cycle multiple 2010
9.3
EV 13,496
Lotte Construction 1,249 33% stake; sector average multiple (1.5x) to 4Q10
KP Chem 1 350 52% stake,
1,350 stake market cap; 2 May
Investment asset 2,599
Net debt 832 2011F
Fair mkt cap 15 264
15,264
Fair value (W /share) 478,082
166
ASIA
Honam Petrochemical — update

 Revenue goal. Lotte Group is targeting consolidated petrochemical sales to rise to W40tn
by FY19F (FY09: W8tn). W30tn of this will be from the core chemical business, while W10tn
will be from other businesses, such as refining and resources.
 How? W30tn chemical revenue target should stem from: 1) commodity chemical; and 2)
special chemical and green energy. Honam says it is considering various M&A
opportunities.
 Investments
Investments. The Qatar cracker project has been cancelled due to: 1) construction cost
being too high; and 2) project financing wasn’t as easy as they had initially thought due to
the global financial crisis. This 1.3mn tpa cracker consisted of 50:50 naphtha and ethane,
and apparently Qatar wanted to use ethane for something else else.
 Expansions. Honam’s ethylene capacity expansion under W520bn capex (completion
target in 2012) would make its ethylene capacity at 2mn tpa the largest in Korea. The
company believes the completion of this expansion could coincide with the cyclical upturn. It
has timed its previous ethylene expansion right and have seen good returns since then.
 Capex.
p FY10F capex
p is expected
p at W500bn and FY11F at around W1.0tn.
 KP Chemical. After failing to merge last year (due to excessive put options exercised by
shareholders), Honam is looking for the right timing.
167
ASIA
Malaysia

ASIA
Petronas Chemicals (PCHEM MK

MK, BUY
BUY, PT
PT: RM8
RM8.4)
4)
Middle East meets the Far East
 PCG is the chemical division of Petronas and Malaysia’s fifth-largest stock by market
capitalisation.
 Key advantages include: 1) Cheap gas feedstock; 2) diversified products; and 3) strategic
location.
 Leveraged to the chemical upcycle and rising oil prices.
 Key catalysts: 1) Rising chemical margins; and 2) firmer expansion plans
plans.
 China energy policy to play a key role.
 Our earnings estimates are 12% above consensus on higher product margin forecasts.
 Key risks: ringgit appreciation and feedstock price escalation.
Sh Price Sales NPAT EPS PE BVPS P/B EV/ DPS Yield ROCE Gearing
(RM) (RM m) (RM m) (RM) YoY % (X) (NT$) (x) EBITDA (NT$) (%) % (%)
FY08 - 12,855 3,904 - - - - - - - - - -
FY09 - 12,367 2,823 - - - - - - - - - -
FY10 - 12,203
, 2,195
, - - - - - - - - - -
FY11F 6.76 13,566 2,811 0.37 28% 18.6 2.4 2.8 10.0 0.2 2.6 21 (27)
FY12F 6.76 14,541 3,445 0.43 23% 15.7 2.7 2.5 8.3 0.2 3.2 24 (34)
FY13F 6.76 16,146 3,893 0.49 13% 13.9 3.0 2.3 7.2 0.2 3.6 27 (39)
As of 24 Mar 11. Source: Bloomberg, Company data, Nomura estimates.

ASIA
Strong price & margin momentum

moment m
PCG’s key chemical price trends (1)
1Q10 2Q10 3Q10 4Q10 1Q11 Q-Q
Q Q (%) Y-Y
Y Y (%)
Naphtha 723 711 666 807 874 8 21
Ethylene 1,273 1,143 942 1,099 1,252 14 (2)
HDPE 1,242 1,164 1,065 1,221 1,284 5 3
LDPE 1,459 1,370 1,288 1,568 1,695 8 16
LLDPE 1,370 1,258 1,141 1,335 1,407 5 3
MEG 965 822 757 976 1 181
1,181 21 22
PVC 990 964 917 976 1,003 3 1
Propylene 1,226 1,205 1,133 1,239 1,351 9 10
PP 1,273 1,278 1,214 1,386 1,510 9 19
2-EH 1,616 1,775 1,601 1,783 1,869 5 16
Butyl acrylate 2,250 2,720 2,661 3,174 3,336 5 48
Benzene 970 923 846 971 1 123
1,123 16 16
SM 1,282 1,163 1,067 1,265 1,414 12 10
Paraxylene 1,052 988 928 1,255 1,578 26 50
MTBE 831 811 777 884 974 10 17
Methanol 309 261 261 355 354 (0) 15
Acetic acid 405 380 377 455 396 (13) (2)
U
Urea 311 259 299 365 372 2 19
PCG’s key chemical margin trends (1)

1Q10 2Q10 3Q10 4Q10 1Q11 Q-Q (%) Y-Y (%)
Ethylene - Ethane 1,183 1,053 852 1,009 1,162 15 (2)
HDPE - Ethane 1 152
1,152 1 074
1,074 975 1 131
1,131 1 194
1,194 6 4
LDPE - Ethane 1,369 1,280 1,198 1,478 1,605 9 17
LLDPE- Ethane 1,280 1,168 1,051 1,245 1,317 6 3
EG - Ethylene 205 136 192 317 425 34 107
PVC - Ethylene 351 392 446 427 378 (11) 8
Propylene - Propane 866 845 773 879 991 13 14
PP - Propane 913 918 854 1 026
1,026 1 150
1,150 12 26
2-EH - Propylene 386 582 461 540 509 (6) 32
Butyl acrylate - Propylene 902 1,395 1,415 1,811 1,846 2 105
Benzene - Naphtha 254 211 180 164 240 47 (6)
Styrene - Naphtha 558 453 400 457 541 18 (3)
PX - Naphtha 339 277 262 448 677 51 100
A ti acid
Acetic id - M
Methanol
th l 236 236 234 260 202 (23) (14)

ASIA
B llish signals in key

Bullish ke prod
products
cts
Methanol price trend (1) China methanol & urea production (monthly) (2)
(US$/t)
$ (k t) Methanol Urea (k t)
700 1,600 3,000
2,800
1,400
600 2,600
1,200 2,400
500
1,000 2,200
400 2,000
800 1,800
300 1,600
600
1,400
200 400
1,200
100 200 1,000
06 07 08 09 10 05 06 07 08 09 10
PX price & margin trend (1) China anthracite coal prices (2010) (2)
(Rmb/t)
(US$/t) PX Naphtha Margin 1400
1750
1500 1300
1250 1200
1000
1100
750
1000
500
900
250
0 800
06 07 08 09 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

2. Source: CEIC
ASIA
Potential catalysts
catal sts
 World scale urea plant – 1mn tpa plant or a 70% increase in urea capacity. Total investment cost
of US$1bn and potential net profit boost of RM150-200mn pa.
 BASF Petronas expansion – Specialty chemical expansion being studied. Total investment cost
of US$500mn and potential net profit boost of RM300mn pa.
 Integrated refinery/petchem complex – A potential doubling of current chemical capacity. Total

investment cost of US$2bn but might take 4-5 years to complete.
 Higher dividend payout – Current guidance of 50% payout ratio could be raised.

ASIA
Taiwan

ASIA
T i
Taiwan — the
th Formosa
F Group
G
Formosa Group comparisons
Company Unit FPCC NYP FPC FCFC
Summary details
Bloomberg 6505 TT 1303 TT 1301 TT 1326 TT
Rating Neutral Buy Buy Buy
Price target NT$ 110
110.00
00 NT$ 105
105.00
00 NT$ 136
136.00
00 NT$ 134
134.00
00
Share price (29 April 11) NT$ 100.50 NT$ 87.80 NT$ 117.00 NT$ 115.50
Market cap (24 Mar 11) US$ m 33 24 23 25
Free Float % 17% 64% 78% 60%
Keyy data ((2011F))
Sales NT$ m 898,685 243,811 226,806 322,544
Operating profit NT$ m 62,340 33,473 33,724 34,543
Investment income NT$ m 2,422 25,204 32,982 31,198
Net profit NT$ m 59,369 52,154 60,569 59,701
EPS NT$ 6.0 6.6 9.8 10.5
DPS NT$ 5.6 6.0 9.0 9.5
Key ratio (2011F)
EBIT Margin % 6.9% 13.7% 14.9% 10.7%
I
Investmetn
t t income
i as % off PBT % 3 9%
3.9% 42 8%
42.8% 49 0%
49.0% 47 3%
47.3%
Valuations (2010F)
PE (x) 16.3 12.4 11.4 10.1
PBV (x) 3.5 2.2 2.4 2.1
ROE % 22 5%
22.5% 17 9%
17.9% 22% 21%
ROIC % 16.6% 22.3% 25% 26%
EV/EBITDA (x) 11.2 11.1 11.4 9.9
Dividiend yield % 5.7% 7.3% 8.1% 9.0%
Source: Bloomberg
Bloomberg, Nomura estimates.
estimates

ASIA
Key themes and drivers

 We prefer Formosa parent companies (with higher earnings growth) to FPCC (flat earnings).
 ECFA would benefit FCFC the most, in our view, followed by FPC and NYP.
 High dividend yields (c7%) with a cash payout ratio rising 80-90%.
 We think valuation are not cheap anymore, but the cycle is still about two years from the peak.
 Likely street earnings upgrades, in our view, given recent strong margin momentum.
 Top picks – FCFC (BUY, PT NT$110), FPC (BUY, PT NT$136) and NYP (BUY, PT NT$105).

ASIA
ECFA – potential
t ti l impact
i t
Potential ECFA impact on Formosa group (1)
 88 petrochemicals and 136 synthetic fibres included in the early
harvest list.
Capacity Chg in tariff (%) Chg in OP (NT$m)
(ktpa) 2011 2012 2011 2012
FCFC
PP 510 -1.5 -6.5 176 764
 Chemicals include: PP, PS, acrylic acid, PC, PU and MMA.
PS 320 -1.5 -6.5 111 479
PC 195 0.0 -3.0 0 292
Nylon 204 -2.0 -7.0 235 823  Import duties to progressively decline to 0% by 1 January, 2012.
Rayon 161 -2.0 -7.0 155 541
Total 676 2899
% chg
h ini FCFC OP 33
3.3 13 6
13.6  Products with current tariff >5% to fall to 5% on 1 January
January, 2011
2011.
% chg in FCFC NP 1.6 6.8
FPC
PP 400 -1.5 -6.5 138 599  Products with current tariff <5% to fall to 0% on 1 January, 2011.
Acrylic acid 262 -0.5 -5.5 63 692
MMA 98 -0.5
0.5 -5.5
5.5 24 259
Total 225 1549  PP and PS were surprise inclusions.
% chg in FPC OP 1.4 8.6
% chg in FPC NP 0.6 4.0
NYP  Limited near-term impact but positive implications for LT.
PVC sheets 286 -1.0 -6.0 66 396
P l
Polyester
t fib
fiber 642 -1.0
10 -6.0
60 148 888
Total 214 1283  FCFC likely to benefit the most – potential upside of 7% to our
% chg in NYP OP 1.0 6.0 FY12F earnings estimates.
% chg in NYP NP 0.5 3.1

ASIA
Formosa Chemical & Fibre (1326 TT

TT, BUY
BUY, PT
PT: NT$134)
Preferred polyester play
 Strong polyester fundamentals – low inventory, record cotton prices, strong demand.
 PTA is good proxy to polyester strength based on tightening supply/demand through 2012F.
 Phenol
Ph l & ABS – stable
t bl margin
i ttrends
d underpinned
d i dbby consumer d
demand.
d
 SM – dearth of additions post 2010 should see improving margins.
 Strong turnaround in China operations – NT$5bn pa contribution from zero previously
previously.
 Trading at 2.4x 2011F P/BV, representing the mid-to-up cycle.
 Sustainable dividend yyield of 7-8%.
(NT$) (NT$m) (NT$m) (NT$) YoY % (X) (NT$) (x) EBITDA (NT$) (%) % (%)
2006 49.5 181,981 32,572 5.90 -4% 8.5 36.9 1.3 8.2 4.8 9.7% 14% 31%
2007 73.0 240,005 47,693 8.63 46% 9.0 47.1 1.5 8.6 7.0 9.6% 16% 24%
2008 63.4 249,817 6,098 1.10 -87% 43.1 32.1 2.0 39.8 0.9 1.4% 4% 44%
2009 52.3 219,729 29,440 5.17 369% 10.2 40.5 1.3 7.6 4.5 8.6% 11% 32%
2010F 107 5
107.5 279 522
279,522 47 616
47,616 8 37
8.37 62% 92
9.2 43 7
43.7 18
1.8 82
8.2 75
7.5 9 8%
9.8% 16% 22%
2011F 107.5 292,712 52,139 9.16 9% 11.7 45.3 2.4 11.5 8.2 7.7% 17% 21%
2012F 107.5 319,973 54,866 9.64 5% 11.1 46.7 2.3 11.2 8.7 8.1% 17% 21%
2013F 107.5 319,628 47,215 8.30 -14% 13.0 46.3 2.3 15.0 7.5 6.9% 14% 24%
As of 24 Mar, 2011. Source: Bloomberg, Company data, Nomura estimates.

ASIA
Formosa Chemical & Fibre

FCFC PT derivation (1) FCFC P/BV band chart (2)
Unit 2010F NT/sh Remarks (NT$) Sh price 2.5x 1.9x
Average invested capital NTD m 113,032 120 1.3x .7x
Target EV/IC (x) 2.4

100
Implied EV NTD m 274,990 48.3
Less debt NTD m (
(44,283)
) ( )
(7.8) 80
Add associates:
FPCC (25%) NTD m 227,710 40.0 PT@ NT$96/sh 60
NYP (5%) NTD m 37,690 6.6 PT NT$96/sh
FPC (8%) NTD m 57,782 10.2 PT NT$118/sh 40
FTC (37%) NTD m 18,076 3.2 Mkt price@NT$29/sh
$
20
Other investments NTD m 109,281 19.2 At 2011 book value
Implied market capitalisation NTD m 681,246 0
Implied price target NTD 120.0 00 01 02 03 04 05 06 07 08 09 10 11
FCFC EBIT breakdown (3) FCFC investment income breakdown (3)
NT$ mn 2009 2010F 2011F 2012F 2013F (NT$m) Stake 2009 2010F 2011F 2012F 2013F
Textiles 943 5,108
5 108 6,320
6 320 7,252
7 252 6,306
6 306 FPCC 26% 9 597
9,597 10 754
10,754 11 923
11,923 13 351
13,351 14 630
14,630
Aromatics 8,198 18,773 22,864 22,381 13,673 Formosa Taffeta 37% 29 1,197 1,221 1,245 1,058
Others 1,102 2,134 2,247 2,309 2,080 Formosa Cayman 100% 5,217 5,954 6,251 6,314 5,051
Total 10,242 26,015 31,431 31,942 22,059 Mailiao Power 25% 2,209 1,771 1,683 1,716 1,751
Vietnam JV 43% 175 254 267 280 294
Others - 1 054
1,054 942 942 942 942
Total 18,282 20,872 22,287 23,849 23,727
1. Source: Nomura estimates.

g Nomura estimates
2. Source: Bloomberg,
3. Source: Company data, Nomura estimates

ASIA
Formosa Plastics (1301 TT

TT, BUY
BUY, PT
PT: NT$136)
A steady performer
 PVC margins to remain robust on strong demand and energy conservation in China
China.
 Caustic prices rising on improved global demand.
 Specialty chemicals margins could remain high on strong demand.
 Key drawbacks – polyolefin margins are likely to worsen next year
 Investment income appears to be rising gradually due to rising contributions from FPCC,
FPC USA and Chinese divisions.
 Trading at 2.3x FY11F P/BV, representing the mid-to-upcycle range.
 Medium-term
M di t sustainable
t i bl didividend
id d yield
i ld off 7
7-8%.
8%
2006 48.4 147,458 31,119 5.44 -11% 8.8 33.7 1.4 9.3 4.4 9.1% 16% 33%
2007 75.0 181,607 47,811 8.36 54% 9.4 43.6 1.7 10.2 6.7 8.9% 21% 25%
2008 71.3 182,042 19,709 3.45 -59% 20.3 31.5 2.3 18.5 1.8 2.5% 9% 39%
2009 56.9 156,970 27,533 4.50 31% 12.6 36.8 1.5 10.1 4.0 7.0% 13% 25%
2010 100.5 194,446 45,547 7.44 65% 9.9 42.6 1.7 7.8 6.6 8.9% 21% 17%
2011F 100.5 207,798 50,165 8.20 10% 12.3 44.2 2.3 11.4 7.3 7.3% 21% 16%
2012F 100.5 230,307 54,184 8.85 8% 11.4 45.7 2.2 10.9 7.9 7.8% 22% 15%
2013F 100.5 244,537 57,710 9.43 7% 10.7 47.3 2.1 10.5 8.4 8.3% 23% 14%
ASIA
Formosa Plastics
FPC price target derivation (1) FPC P/BV band chart (2)
(NT$) Sh price 2.9x 2.3x
140 1.6x 1.x
120
100
80
60
40
20
0
00 01 02 03 04 05 06 07 08 09 10 11
FPC EBIT breakdown (3) FPC investment income breakdown (3)
(NT$ mn) 2009 2010F 2011F 2012F 2013F (NT$m) Stake 2009 2010F 2011F 2012F 2013F
Plastics 2,185 9,346 12,612 11,577 11,745 FPCC 30% 12,058 12,362 13,706 15,347 16,818
Tair lan
Tairylan 2 207
2,207 9 143
9,143 8 488
8,488 8 137
8,137 7 900
7,900 FPC USA 22% 1 376
1,376 3 554
3,554 2 488
2,488 2 612
2,612 2 873
2,873
Polyolefin 4,927 3,806 2,989 5,579 6,371 Formosa Sumco 30% (194) 141 169 195 224
Others 1,221 4,621 4,631 4,743 4,918 Mailiao Power 25% 2,209 1,877 1,784 1,819 1,856
Total 10,540 26,916 28,719 30,036 30,935 Formosa Cayman 100% 2,809 3,412 3,582 3,762 4,326
Others - 505 508 602 606 610
T t l
Total 18 762
18,762 21 854
21,854 22 331
22,331 24 341
24,341 26 706
26,706

2 Source: Bloomberg,
2. Bloomberg Nomura estimates
estimates.
3. Company data, Nomura estimates
180
ASIA
Nan a Plastics (1303 TT

Nanya TT, BUY
BUY, PT
PT: NT$105)
The tide turns
 MEG margins at exceptional levels and should be sustained for the next few years
years.
 Polyester margins exceptionally strong – expected to last through 1H11.
 Specialty chemical margins (epoxy resin
resin, 1
1,4
4 BG) appear to be on an improving trend
trend.
 Copper-clad laminate (CCL) margins likely to remain strong on glass fibre shortage.
 Nanya
y Tech is the key
y risk – breakeven level at US$1.5/Gb p
post migration.
g
 Strongest earnings growth in the group this year – we forecast EPS growth of 21% y-y for
FY11F.
 Sustainable dividend yield of 6-7% for FY11-13F.
2006 46.6 181,652 47,669 6.25 16% 7.9 32.5 1.4 8.5 5.0 10.7% 15% 31%
2007 72.0 228,700 59,047 7.75 24% 9.7 37.8 1.9 8.6 6.7 9.3% 17% 26%
2008 59 7
59.7 208 719
208,719 9 386
9,386 1 23
1.23 -84% 43 0
43.0 29 5
29.5 20
2.0 18 2
18.2 08
0.8 1 3%
1.3% 4% 42%
2009 44.9 160,964 16,404 2.09 70% 21.5 31.9 1.4 13.6 1.9 4.2% 6% 34%
2010F 84.0 214,275 40,719 5.19 148% 12.1 35.3 1.8 9.4 4.7 7.5% 13% 22%
2011F 84.0 225,080 49,127 6.26 21% 13.4 36.9 2.3 12.1 5.7 6.8% 15% 19%
2012F 84.0 233,049 52,739 6.72 7% 12.5 37.9 2.2 11.9 6.1 7.3% 16% 19%
2013F 84.0 235,136 55,686 7.09 6% 11.8 38.9 2.2 11.8 6.5 7.7% 16% 19%
As of 24 Mar 11. Source: Bloomberg, Company data, Nomura estimates.
ASIA
Nan a Plastics
Nanya
NYP price target derivation (1) NYP P/BV band chart (2)
(NT$) Sh price 3.x 2.2x
120 1.5x .7x
100
80
60
40
20
0
00 01 02 03 04 05 06 07 08 09 10 11
NYP EBIT breakdown (3) NYP Investment Income breakdown (3)
NT$ mn 2009F 2010F 2011F 2012F 2013F (NT$ m) Stake 2009 2010F 2011F 2012F 2013F
Plastics 4,250 5,973 7,973 7,638 7,437 FPCC 24% 9,340 9,858 10,938 12,257 13,438
Polyester
y 1,787
, 7,304
, 10,856
, 11,237
, 11,266
, Nanya PCB 68% 1,403 1,385 2,380 3,373 3,710
Nanya Tech 30% (7,804) (3,433) (3,967) (3,570) (2,400)
Electronic materials 1,777 8,629 8,199 8,098 7,988
Nanya Plastics, USA 100% 837 2,659 2,925 3,071 3,225
Others 896 5,009 4,955 5,261 5,192
Nanya Plastics, HK 100% 773 5,381 5,488 5,598 5,710
Total 8,710 26,914 31,984 32,234 31,883
Others 2,605 2,847 2,703 2,759 2,817
Total 7,155 18,698 20,468 23,488 26,500

2. Bloomberg, Nomura estimates

ASIA
Formosa Petrochemical (6505 TT,

TT NEUTRAL,
NEUTRAL PT: NT$110)
Expensive valuations
 High conviction on stronger refining margins in 2011 (US$5.6/bbl vs US$4.7/bbl in 2010).

 Less bearish than before on olefin margins – propylene to stay tighter than ethylene.
 Recent
R t plant
l t fires
fi h
have raised
i d concern on safety
f t record.
d
 Strong earnings growth from 2012 onwards on completion of RFCC repairs.
 We expect FY11F dividend yield of 5%
5%, lower than parent Formosa companies
companies.
 Expensive multiples at 3.5x FY11F P/BV vs ROE of 19%.
2006 60.13 529,566 44,476 4.81 -25% 12.6 23.5 2.6 9.5 4.4 7.3% 12.8% 66%
2007 83.00 699,315 69,611 7.53 57% 11.1 27.9 3.0 8.7 6.7 8.1% 18.5% 52%
2008 81.08 875,573 15,193 1.64 -78% 29.1 21.0 3.9 14.8 1.2 1.5% 7.8% 101%
2009 74.70 634,232 39,192 4.11 150% 16.6 24.4 3.1 10.1 3.8 5.1% 12.2% 66%
2010 92.00 747,307 40,923 4.30 4% 20.5 25.6 3.2 12.4 3.9 4.8% 10.9% 53%
2011F 92.00 712,946 45,355 4.76 11% 19.3 26.5 3.5 12.5 4.4 4.8% 13.8% 31%
2012F 92.00 841,815 50,930 5.35 12% 17.2 27.5 3.3 11.2 4.9 5.3% 15.9% 24%
2013F 92.00 850,302 55,838 5.86 10% 15.7 28.4 3.2 10.0 5.4 5.9% 17.8% 15%

ASIA
Formosa Petrochemical
FPCC price target derivation (1) FPCC P/BV band chart (2)
(
(NT$)
) Sh p
price 4.4x 3.6x
140 2.8x 2.x
120
100
80
60
40
20
04 05 06 07 08 09 10 11
FPCC refining margins vs Singapore (3) FPCC EBIT breakdown (4)

(US$/bbl) FPCC export Sg complex
20 (NT$ bn) 2008 2009 2010F 2011F 2012F 2013F
18 Refinery 22.2 19.3 15.6 22.5 25.3 26.6
16 Olefins -2.0 12.3 17.7 20.5 25.9 33.8
14 Utilities 3.5 8.2 9.0 5.1 6.4 6.5
12 Total 23.8 39.8 42.3 48.1 57.6 66.9
10
8
6
4
2
0
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
1. Nomura estimates.
2
2. Bl
Bloomberg,
b Nomura
N estimates
ti t
3. Company data, Reuters
184
ASIA
Thailand

ASIA
Th il d — PTT Group
Thailand G
Group structure
Government
Free Float
of Thailand
68% 32%
PTT
E&P Gas & Power Oil Refining Petrochemicals

PTT E&P 66% Trans Thai Msia 50% PTT Intl. Trading100%
g Thai Oil 50% PTT Chemical 50%
PTT Utility 40% Subic Bay 100% PTTAR 49% Bkk PE 50%
Thai Oil Power 26% Retail Business 49% Star Petroleum 36% PTT Phenol 40%
IPT 20% PTT Mart 49% IRPC 32%
PTT LNG 100% Thai Lube 49% Bangchak 20%
PetroAsia 35%
Thai Petro 34%
Source: Company data, Nomura research

ASIA
PTT PCL (PTT TB,

TB BUY,
BUY PT:
PT Bt440)
The stars align
 Key overhangs removed – the Montara incident and Map Ta Phut court case have been favourably
resolved.
 Recent LPG p
price hike benefits Thai refiners and indicate a lighter
g regulatory
g y touch.
 1Q11 startup of GSP#6 with 1.8mn tpa of value-added products could add Bt7-8bn of net profits.
 Expectations of higher refining and chemical margins to provide strong associates income growth.
 M&A to be a key driver of future growth.
 Key risks: national service obligations, delays to Rayong plant expansions.
(Bt) (Bt m) (Bt m) (Bt) YoY % (X) (Bt) (x) EBITDA (Bt) (%) % (%)
2007 279 1,495,806 86,808 31.0 11.0 9.0 129 2.2 6.0 11.5 4.1 14.8 40.4
2008 269 2,000,816
2 000 816 51 706
51,706 18 3
18.3 -40 9
-40.9 14 7
14.7 136 20
2.0 56
5.6 80
8.0 30
3.0 92
9.2 41 2
41.2
2009 214 1,586,174 54,865 19.4 6.1 11.0 152 1.4 5.9 8.5 4.0 8.6 58.0
2010 347 1,900,004 71,232 25.2 29.8 10.7 172 1.6 5.3 11.7 4.4 9.7 47.0
2011F 347 2,037,814 91,122 32.3 27.9 10.9 192 1.8 6.5 12.8 3.7 10.2 47.7
2012F 347 2,200,504
2 200 504 109 149
109,149 38 3
38.3 18 6
18.6 91
9.1 217 16
1.6 51
5.1 15 3
15.3 44
4.4 11 3
11.3 39 2
39.2
2013F 347 2,312,664 111,662 39.1 2.3 8.9 241 1.4 4.7 15.7 4.5 10.8 30.4
As of 24 March, 2011. Source: Company data, Nomura estimates.

ASIA
PTT PCL
PTT valuation(1) PTT P/BV band chart (3)
(Bt) Sh price
i 25
2.5x 2
2.x
600 1.4x .9x
500
400
300
200
100
0
02 03 04 05 06 07 08 09 10 11
PTT NPAT breakdown(2)

Bt m 2008 2009 2010F 2011F 2012F
Pre-ex NPAT breakdown
Natural Gas 24,608 11,326 24,315 32,160 37,773
Oil marketing 5,390 7,899 8,625 5,225 5,344
E&P 28,024 16,695 21,608 27,560 35,649
Refining (13 147)
(13,147) 15 350
15,350 9 799
9,799 18 036
18,036 20 271
20,271
Chemicals 6,829 3,594 5,477 9,117 11,121
Total 51,706 54,865 69,823 92,098 110,158
YoY change (%) -40 6 27 32 20
% of total NPAT
Natural Gas 48 21 35 35 34
Oil marketing 10 14 12 6 5
E&P 54 30 31 30 32
Refining -25 28 14 20 18
Chemicals 13 7 8 10 10
Total 100 100 100 100 100
1 Source: Nomura estimates.
1. estimates
3. Bloomberg, Nomura estimates
ASIA
PTT E&P (PTTEP TB,

TB NEUTRAL,
NEUTRAL PT:
PT Bt202)
Looking ahead to 2012
 Production
P d ti volume
l growth
th ttargets
t off +4%
4% ffor FY11F
FY11F, +17%
17% ffor FY12F and
d -3%
3% ffor FY13F.
FY13F
 2011 net profits likely to be flat due to Baht appreciation and flat production volume.
 Bullish on Brent oil forecasts of US$95/110 p
per bbl for FY11F/12F.
 KKD acquisition is potentially transformative, but appears expensive and is unlikely to contribute
meaningfully until 2015.
 Each US$10/bbl change in oil prices impacts NPAT by 20%
20%.
 Top pick if crude prices continue to rise.
 Each 1% appreciation in Baht reduces pre-ex net profits by 1.3% on our estimates.
2006 109 86,339 28,047 8.6 13.4 27 4.0 5.5 3.2 1.8 21.5 -10.5
2007 117 90,764 28,455 8.6 1 13.6 32 3.6 5.5 3.3 2.8 18.8 -3.7
2008 143 132,621 41,675 12.6 46 11.1 41 3.5 4.6 5.4 3.8 23.8 -18.2
2009 125 115 548
115,548 22 154
22,154 67
6.7 -47
47 18 2
18.2 43 29
2.9 59
5.9 27
2.7 21
2.1 11 2
11.2 91
9.1
2010 183 138,474 41,739 12.6 88 12.9 52 2.9 5.2 5.0 3.3 16.6 14.1
2011F 183 149,859 41,758 12.6 0 14.5 60 3.1 5.9 5.0 2.8 15.6 24.3
2012F 183 205,292 54,014 16.3 29 11.2 70 2.6 4.3 6.5 3.6 17.5 13.8
2013F 183 212 107
212,107 56 595
56,595 17 1
17.1 5 10 7
10.7 80 23
2.3 40
4.0 68
6.8 37
3.7 17 4
17.4 32
3.2
As of 24 March, 2011. Source: Company, Nomura estimates.

ASIA
PTT E&P
PTTEP valuation(1) PTTEP P/BV band chart (2)
Unit (Bt) Sh price 4.8x 3.8x
Average capital employed Bt m 307,770 250 2.9x 1.9x
Target EV/CE (x) 2.0
Implied EV Bt m 627,620
200
Less: net debt Bt m (32,168)
Add: Exploration upside Bt m 62 762
62,762
Implied market capitalisation Bt m 658,214 150
Price target Bt 202
Key assumptions: 100
WACC % 9%
Long-term growth rate % 1%
ROCE (2011-2013F)
(2011 2013F) % 17% 50
No shares mn 3,318
0
00 01 02 03 04 05 06 07 08 09 10 11
PTTEP sensitivity analysis(1)

US$/bbl Unit -20 -10 95 +10 +20
2011F EPS Bt/sh 8.8 10.7 12.6 14.5 16.4
2011F ROCE % 11% 13% 16% 18% 20%

2. Source: Bloomberg, Nomura estimates

ASIA
Th i Oil (TOP TB,

Thai TB NEUTRAL,
NEUTRAL PT
PT: Bt85/sh)
Bt85/ h)
Fully valued
 We believe TOP’s integrated refinery operations enables it to generate profits from oil products,
aromatics or lubricants.
 It has a low cash cost of p
production of US$1/bbl.
$
 Trading at 2.1x FY11F P/BV, in line with upcycle valuations.
 Trading at 1.4x EV/replacement cost, a significant discount to 1.8x of PTTAR.
 TOP’s sustainable dividend yield of 3%, in our view, should underpin its share price.
 Key risk: Possible merger with PTT refining associates in the next 12 months.
2007 73 261,051 19,176 9.4 9 8.7 33 2.2 5.8 4.5 6.2 18.2 40.9
2008 62 399 125
399,125 224 01
0.1 -99
99 561 7
561.7 29 21
2.1 12 7
12.7 28
2.8 45
4.5 69
6.9 70 5
70.5
2009 36 284,123 12,062 5.9 5295 6.1 33 1.1 4.7 2.6 7.1 12.2 51.2
2010 81 318,391 8,999 4.4 -25 11.3 35 1.4 7.6 2.0 4.0 6.9 42.0
2011F 81 364,177 11,681 5.7 30 14.1 39 2.1 7.9 2.3 2.8 11.9 24.1
2012F 81 397,610
, 11,505
, 5.6 -2 14.3 42 1.9 7.8 2.3 2.8 12.1 12.5
2013F 81 395,872 10,330 5.1 -10 15.9 45 1.8 8.0 2.0 2.5 11.2 12.5
As of 24 March, 2011. Source: Company, Nomura estimates

ASIA
PTT Aromatics (PTTAR TB

TB, BUY
BUY, PT
PT: Bt50)
Geared towards PX
 55 kb/d upgrading unit (processing condensate residue to diesel) is likely to improve profitability.
 Current diesel cracks of >US$10/bbl are a strong positive.
 Aromatics margins testing new highs in 1Q11
1Q11.
 Most operational leverage in our universe – each US$50/tonne revision in aromatics margins
changes NPAT by 16%, on our estimates.
 Valuations appear attractive at 1.6x FY11F P/BV and a dividend yield of 4%.
 Key risks: A 94% end-2010 net gearing and possible merger with PTT refining associates.
2008 25.9 251,387 (8,465) -2.9 -8.2 18 1.5 -14.6 0.5 1.9 -7.3 132.7
2009 17 9
17.9 225 300
225,300 9 162
9,162 31
3.1 n/m 58
5.8 20 09
0.9 81
8.1 13
1.3 70
7.0 90
9.0 124 0
124.0
2010 37.5 273,767 6,343 2.1 -31 13.1 21 1.3 11.3 0.9 3.1 4.6 94.7
2011F 37.5 303,394 10,813 3.6 70 10.3 24 1.6 8.1 1.5 3.9 9.8 69.5
2012F 37.5 377,312 12,969 4.4 20 8.6 27 1.4 6.8 1.7 4.6 11.4 54.0
2013F 37 5
37.5 389 008
389,008 9 990
9,990 34
3.4 -23
23 11 2
11.2 28 13
1.3 80
8.0 13
1.3 36
3.6 88
8.8 43 8
43.8

ASIA
PTT Chemical (PTTCH TB

TB, BUY
BUY, PT
PT: Bt200)
Good news priced in
 Largest volume growth amongst regional peers with startup of new 1mn tpa ethane cracker at end-2010.
 Beneficiary of rising oil prices due to gas feedstock advantage.
 Low net gearing levels (FY10F: 26%) should provide a cushion.
 Appreciating baht and narrow product portfolio are key concerns.
 Despite an estimated doubling of NPAT by FY12F from FY10F levels, we project FY12F ROE of 16%,
below the 24% level achieved in 2006
2006.
 Currently trading at 1.8x FY11F P/BV, above the historical peak level.
 Key risks – Potential merger with other refining and chemical affiliates of PTT.
2007 99 73,870 19,167 12.9 5 7.9 63 1.6 5.5 6.0 6.1 22.5 -3.4
2008 81 84,117 11,739 7.8 -39 10.3 64 1.3 6.5 4.0 4.9 13.1 24.4
2009 54 83,952 6,802 4.5 -42 14.9 68 0.8 7.1 2.0 3.7 5.9 33.8
2010 146 98,656 10,290 6.8 49 25.0 71 2.0 14.2 2.6 1.8 8.0 28.2
2011F 146 128,322 17,893 11.8 74 12.3 81 1.8 7.5 5.2 3.6 13.9 9.0
2012F 146 140,405 21,854 14.4 22 10.1 90 1.6 6.4 6.3 3.6 16.2 -5.3
2013F 146 149,711 24,424 16.1 12 9.0 100 1.5 5.6 7.1 3.6 17.3 -17.0

ASIA
PTT Aromatics
A ti – PTT Chemicals
Ch i l merger
New petrochemical flagship emerges
 Fourth-largest stock on the SET, with strong growth prospects.

 Diversified earnings base – 60% olefins, 25% aromatics, 15% refining – should result in more stable
earnings
g stream.
 Main benefits from larger market cap and liquidity – synergy benefits are less obvious.
 Prospects for both companies appear bright, but share prices could consolidate until the listing.
Pro-forma financials and valuations ((1))
PTTCH PTTAR Mergeco
(Bt m) 2010 2011F 2012F 2010 2011F 2012F 2010 2011F 2012F
Sales 101,547 130,924 143,059 273,767 303,394 377,312 375,314 434,318 520,372
Operating profit 11,366 20,787 23,644 7,362 14,739 17,560 18,728 35,525 41,204
NPAT 10,290 17,893 21,854 6,343 10,813 12,969 16,633 28,706 34,823
EPS (Bt) 6.8 11.8 14.4 2.1 3.6 4.4 3.7 6.4 7.7
DPS (Bt) 3.1 5.3 6.5 0.9 1.5 1.7 1.6 2.7 3.3
No of shares 1516 1516 1516 2979 2979 2979 4494 4494 4494
Net debt 30,429 10,948 (7,182) 59,703 49,528 43,144 90,132 60,476 35,962
Net gearing 28% 9% -5% 95% 69% 54% 53% 32% 17%
Sh equity 106,108 120,122 134,103 63,032 71,308 79,952 169,140 191,430 214,055
Bbg Rating M. Cap Sh pr. PT PE (x) PB (x) ROE (%) Div. yld (%)
(US$ m) (Bt) (Bt) 11F 12F 11F 12F 11F 12F 11F 12F
PTT Chem PTTCH TB Buy 8,137 160.0 200.0 12.2 10.0 1.8 1.6 16.2 17.5 3.6 4.4
PTTAR PTTAR TB Buy 4,117 41.3 50.0 10.2 8.5 1.5 1.4 16.1 17.1 3.9 4.7
Mergeco n/a n/a 12,254 n/a n/a 11.5 9.5 1.7 1.5 15.9 17.2 3.7 4.5
1. As of 28 February, 2011. Source: Company, Nomura estimates

ASIA
V l ti methodologies
Valuation th d l i
 AWE: We value the company using DCF with a 10.9% WACC and a 3.5% terminal growth rate. Models find fair value of AWE at A$1.7/share.
 Bharat Petroleum Corporation: Our 12-month price target of INR620 is based on 1.25x P/B FY13F book value per share of INR497.
 Cairn India: We value Cairn India on a SOTP basis
basis, combining NAV and DCF
DCF. We calculate the NAV of its key fields Mangala
Mangala, Bhagyam and Aishwariya (under development) and
Rageshwari & Saraswati (FDP approved) using a discounted cash flow (DCF) methodology. Our NAV of MBA and R&S field is INR278/share. The Ravva and Cambay blocks are valued
at INR6/share and INR2/share, respectively. We value Cairn's 10% share in the 2P reserves in KG-DWN-98/2 block at a conservative US$6/boe. We value recoverable resources
(140mmboe now) in other 20 fields at US$6/boe and prospective resources of 1.76bboe (net of recoverable resources) at US$1/boe. We also assign a value of US$6/boe to exploration
upsides (prospective recoverable resources of 250mmboe — Cairn’s share of 175mmboe). Our SOTP-based NAV for Cairn is INR405/share. Our PT for Cairn India is INR405.
 Cheil Industries: Our price target of W160,000 is based on sum-of-the parts valuation. We believe that the stock will re-rate further owing to strong EPS growth of a 27% CAGR in
2010-12F on the efforts
ff off all divisions and structural changes coming from
f polarizer film,
f OLED
O products and chemicals.
 China BlueChem: Our price target of HK$7 is based on an FY11F ROACE/WACC of 16.5%/6.9%.
 COSL: Our PT of HK$10.3 is based on FY11E ROACE of 9.8% and WACC of 7.9%.
 CNOOC: Our price target of HK$23.0 is based on our FY11F ROACE and WACC of 31.5% and 9.6%, respectively, with a long term growth rate of 1%.
 Eastern Star Gas: We value ESG using a DCF model which finds fair value at A$0.92/share. We make use of a cost of equity (Ke) of 11%, zero debt, which lead us to a weighted-
weighted
average cost of capital (WACC) of 11.0%.
 Formosa Chemical & Fibre: Our PT of NT$134 is based on sum-of-the-parts analysis, which values FCFC’s core business at 3.0x EV/IC (average FY11F-12F ROIC of 24.5%; WACC
of 8.5%), investments in the Formosa group at our price targets, other listed investments at market price and unlisted investments at 1.5x book value.
 Formosa Petrochemical: Our PT if NT$110 is based on a 13.2x P/CF multiple, based on an average FY11-13E OpFCF and WACC of 7.6%.
 Formosa Plastics: Our price target of NT$136 is based on sum-of-the-parts
sum of the parts analysis
analysis, which values FPC
FPC’ss core business at 3.9x
3 9x EV/IC (average FY11F-12F
FY11F 12F ROIC of 32
32.5%;
5%; WACC of
8.5%), investments in the Formosa group at our price targets, other listed investments at market price and unlisted investments at 1.5x book value.
 GAIL: We have used sum-of-the-parts as our primary tool to value GAIL’s diversified business. We have valued its gas transmission business (including gas trading) at 10x its FY13F
EBITDA. We have assigned a multiple of 7x FY13F EBITDA for petrochemical and 6x FY12F estimated EBITDA for the LPG business. We also value E&P upside at a conservative
INR15/share. Our target price is INR600.
 GS Holdings: g Our p price target
g of W115,000 is based on FY11F P/BV ((W62,368)) of 1.8x, which is a 20% p
premium to the p
peak-cycle
y multiple
p seen over FY07-10F ((unchanged).
g ) The
absolute peak P/BV (forward looking) was 1.8x in FY07. We apply a 20% premium to the FY07-10F peak multiple with a view that structural changes and strong industry fundamentals
will lift valuation to above historical levels.
 Gujarat Gas: We use DCF methodology to value Gujarat Gas. We use a WACC of 11% and a terminal growth rate of 2.5%. Our DCF-based price target is INR415/share.
 Gujarat State Petronet: We use DCF methodology to value GSPL. We use a WACC of 10.4% and terminal growth rate of 2.5%. Our DCF-based price target is INR135.
 Hanwha Chemical: Our PT of KRW69,000
, is based on SOTP. We use a target g EV/EBITDA multiplep of 10.8x,, which represents
p the p
peak multiple
p in 2010 ((EV: KRW8,605bn
, ; FY11F
EBITDA: KRW797bn). We believe the industry upturn will be sustainable over the next 20 months.
 Hindustan Petroleum Corporation: Our 12-month target price of INR380 is based on 1.0x P/B FY13F book value per share.
 Honam Petrochemical: Our target price of KRW480,000 is based on sum-of-the parts methodology. We apply a target EV/EBITDA multiple of 9.3x, which represents the peak multiple
in 2010 (EV: KRW13,496bn; FY11F EBITDA: KRW1,445bn).
 Indian
da O Oil Corporation:
Co po at o OuOur 12-month
o t price
p ce ta
target
get of
o INR365
365 is
s based o
on 1.3x
3 P/B
/ multiple
u t p e to FY13F
3 boo
book value
a ue pe
per sshare.
ae
 Indraprastha Gas: We use DCF methodology to value IGL, assuming a WACC of 11% and a terminal growth rate of 2.5%. This derives a target price of INR450/share.
 Kunlun Energy: Our price target of HK$17.0/share is based on FY11F ROACE of 16.8% and WACC of 7.1% with a LT growth rate of 3%.
ASIA
V l ti methodologies
Valuation th d l i
 LG Chem: Our TP of KRW700,000 is based on a sum-of-the-parts methodology and reflects our positive view of the petrochemical and car battery business units. We value the auto
battery and LCD glass segments at KRW29,000/share and KRW28,000/share, respectively.
 Nan Ya Plastics: Our PT of NT$105 is based on sum-of-the-parts analysis, which values NYP’s core business at 2.8x EV/IC (average FY11F-12F ROIC of 23.5%; WACC of 8.5%),
investments in the Formosa group at our price targets
targets, other listed investments at market price and unlisted investments at book value.
value
 Oil Search: Our fair value of Oil Search makes use of our DCF valuation and a sum-of-the-parts (SOTP) methodology, finding a price target of A$7.7, with our core DCF valuation of
A$6.7 per share leaning heavily on the delivery of the PNG LNG project by 2014. Included in our SOTP valuation is A$1.0 per share for a third train at the PNG LNG site with our models
assuming that two development wells scheduled for 2012 will confirm consensus belief that the Hides gas field holds sufficient reserves to support a third train, with our expectations that
an expansion train could come online as early as 2016. Our DCF models make use of 9.5% WACC and 3.5% terminal growth.
 g Energy:
Origin gy Our models value Origin
g using
g a combination of DCF models and the sum of the p
parts ((SOTP),
), finding
g a fair value of A$18.8/share.
$ Our models currentlyy price
p in A$3.0
$
per share for APLNG.
 PetroChina: Our 12-month price target of HK$13.50 is based on its FY11F ROACE/WACC (13.7%/8.1%).
 Petronas Chemicals Group: We value PCG at RM8.40 based on a target EV/CE multiple of 3.4x that is derived from an average FY12-14F ROCE of 29.4% and WACC of 9%.
 Petronet LNG: We use a DCF methodology to value Petronet LNG. Based on WACC of 10% and terminal growth of 1%, our DCF-based price target is INR180.
 PTT: We
PTT W valuel PTT att THB440 usingi a SOTP that
th t is
i based
b d on: marking
ki PTT'
PTT's listed
li t d investments
i t t att our price
i targets
t t or market
k t price,
i PTT' natural
PTT's t l gas business
b i on a DCFWACC off
9%, oil marketing business at 8x FY10F EBITDA, and unlisted investments at BV.
 PTT Aromatics & Refining: Our PT of THB50 is based on based on PTTAR’s one-third stake in the PTTAR-PTTCH merged entity, which we value at US$15.2bn, derived from an
EV/IC multiple of 1.7x (ROIC of 15.7% and WACC of 9%).
 PTT Chemical: Our price target of THB200 is based on based on PTTCH’s two-third stake in the PTTAR-PTTCH merged entity, which we value at US$15.2bn, derived from an EV/IC
multiple of 1
1.7x
7x (ROIC of 15
15.7%
7% and WACC of 9%)
9%).
 PTTEP: Our price target of THB202 is based on a target EV/CE multiple of 2.1x, which is derived from a ROCE of 17%, WACC of 9% and g of 1%.
 Reliance Industries: We use the SOTP method to value RIL’s different businesses. For its core businesses, we use EV/EBITDA multiples. We use a 7x FY13F EV/EBITDA multiple for
its refining and petrochemical business. We use DCF to value the company's new E&P business. Our TP is INR1,200/share.
 Santos: We continue to find value using a combination of our DCF model and a sum-of-the-parts (SOTP) methodology. We find a fair value of A$16.1/share. Our DCF models make use
of an 8.5%
8 5% WACC and a 3.5%
3 5% terminal growth rate
rate. Remember that included in our DCF are both its 30% stake in GLNG which we value at A$2.2
A$2 2 per share and its 13.5%
13 5% stake in PNG
LNG which has a standalone value of A$1.5 per share.
 Sinofert: Our price target of HK$3.00 is based on average FY11F ROACE/WACC (6.6%/5.2%).
 Sinopec: Our price target of HK$9.0 is based on FY11F ROACE of 13.2% and WACC of 10.2%.
 Sinopec Shanghai Petrochemical: Our price target of HK$4.50 is based on FY11F ROACE/WACC of 11.1%/8.1%.
 SK Innovation: Our TP of KRW330,000 is based on 2.4x FY11F P/BV (KRW136,665), a 20% premium to the peak cycle multiple seen over FY07-10.
 S-Oil Corp: Our price target of W200,000 is based on an FY11F P/BV (W54,228) of 3.8x, which represents a 20% premium to the peak-cycle multiple seen over FY04-10 (previously
FY11F P/BV of 3.0x based on peak-cycle see in FY07-10).
 Thai Oil: Our PT of THB85 is based on a FY11-12F ROCE of 15.5% and WACC of 9%.
 Woodside Petroleum: Our valuation models use a combination of a DCF model and a sum-of-the-parts (SOTP) approach. Our DCF valuation focuses on WPL's core business and
makes use of an 8.5% WACC and a 3.5% terminal growth rate. The fair value of the core business, which includes Pluto T1 and T2, comes in at A$48/share. Our SOTP valuation adds
Sunrise and Browse. All in, we arrive at a price target of A$56.4 per share.

ASIA
Ri k
Risks
 AWE: Upside risks to our Neutral call are significant oil discoveries in the Middle East fields and much higher oil prices. Downside risks include operations risks and
loss of production near and medium term.
term
 Bharat Petroleum Corporation: Key upside risks: Significant change in government policy on fixing retail prices. Complete deregulation would be a significant positive
in the long term and could lead to a re-rating. Even partial deregulation, but with a clear policy on sharing of any under-recoveries, would also be positive for BPCL. A
significant and sustained decline in global oil prices would also be positive, since losses on retail fuels decline sharply at low oil prices. Refining margins that are higher
than our estimates would be a positive for BPCL. Key downside risks: Higher oil prices, lower-than-expected refining margins and higher net under-recoveries are key
downside risks.
risks
 Cairn India: Delays in ramp-up of production; lower oil prices and higher discounts and royalty payments or cost recovery of royalty.
 Cheil Industries: Downside risks to our PT include: 1) a delay in launching OLED products; 2) worse-than-expected LCD and LED cycle; 3) macro concerns
weakening petrochemical pricing; and 4) slower-than-expected domestic consumption recovery, which could negatively affect the apparel business.
 China BlueChem: Risks include 1)) adverse weather in peak
p p
plantation season;; and 2)) weak fertilizer and methanol demand.
 COSL: Upside risks to our price target include: 1) if the market (both oil and equity) continues its positive momentum; and 2) if investors look beyond the trough of 2010
and focus on the company's longer-term growth after its expansions are completed.
 CNOOC: Downside risks include: 1) rising operating costs; 2) lower-than-budgeted production; 3) acquisition risks; and 4) weather-related risks — offshore China often
experiences a large number of typhoons, which could affect the development and production of natural gas.
 E
Eastern Star
S Gas:
G Ri k to our iinvestment view
Risks i entailil llower growth
h iin organic
i volumes
l and
d llower pricing
i i received
i d ffor these
h volumes,
l as wellll as higher
hi h operational
i l and
d
project costs which would lower cash-flow and profitability.
 Formosa Chemical & Fibre: Key risks include volatile crude prices, volatile aromatic margins and plant mechanical failure.
 Formosa Plastics: Key risks include volatile crude prices, volatile chemical margins and plant mechanical failure.
 Formosa Petrochemical: Upside risks to our price target include stronger
stronger-than-expected
than expected refining/olefin margins and crude prices.
prices Downside risks include plant
mechanical failure and weaker-than-expected refining/olefin margins.
 GAIL: Lower transmission volume growth, a sharp cut in overall tariffs by the regulator (we do not assume any cut), a sharper polymer price decline than our
assumption and higher subsidy burden than our assumptions.
 GS Holdings: Key risks include: 1) operational problems at the new hydrocracker; 2) delays in GS Retail’s listing and/or the company’s 3rd FCC schedule.
 Gujarat Gas: Key upside risks include: 1) an increase in domestic gas availability; 2) success in winning new cities in currently ongoing city gas bidding process; and
3) rupee appreciation. Key downside risks include: 1) lower-than-expected volume growth; and 2) a sharp increase in RLNG costs.
 Gujarat State Petronet: Key downside risks: lower-than-expected growth in transmission volumes, a sharp cut in the transmission tariff by the PNGRB post
application of new regulations, and an eventually higher social contribution as per the directives of the Gujarat government (in our estimates, we do not factor any
outgoing
g g here). )
 Hanwha Chemical: Risks include: 1) petrochemical price volatility; 2) execution risks on new businesses.

ASIA
Ri k
Risks
 Hindustan Petroleum Corporation: Key upside risks: Significant change in government policy on fixing retail prices. Complete deregulation would be a significant positive in the long
term and could lead to a re-rating. Even partial deregulation, but with a clear policy on sharing of any underrecoveries, would be positive for HPCL, we believe. A significant and
sustained decline in g
global oil p
prices would also be p
positive,, since losses on retail fuels decline sharply
p y at low oil p
prices. Refining
g margins
g that are higher
g than our estimates would be
positive for HPCL. Key downside risks: Higher oil prices, lower-than-expected refining margins and higher net under-recoveries are key downside risks.
 Honam Petrochemical: Risks may come from: 1) input and out price volatility; and 2) HPC buying assets at unattractive prices.
 Indian Oil Corporation: Key upside risks - Significant change in government policy on fixing retail prices. Complete deregulation would be a significant positive in the long term and
could lead to a re-rating. Even partial deregulation, but with a clear policy on sharing of any underrecoveries, would also be positive for IOCL. A significant and sustained decline in
global oil prices would also be positive, as losses on retail fuels decline sharply at low oil prices. Refining margins that are higher than our estimates would be a positive for IOCL. Key
downside risks – Higher oil prices, lower than expected refining margins, higher net under-recoveries are key downside risks.
 Indraprastha Gas: Under the new PNGRB regulations, the regulator can only control network tariff (based on 14% post tax ROCE principle) and not end-product pricing. Therefore, we
do not expect any major risk to IGL’s margins. However, any sharp cut in the overall tariff would negatively impact our valuations. Any slowdown in CNG conversions and new PNG
connections could also present downside risk.
 Kunlun Energy: Risks: 1) government regulatory risks; 2) uncertainty about whether there will be asset injections of Petrochina’s subsidiaries, Kunlun Gas and Kunlun Natural Gas; 3)
limited LNG earnings visibility in FY12F; 4) crude oil price and production risks
risks, and; 5) share issuance leading to earnings dilution.
dilution
 LG Chem: Risks are: 1) petrochemical and LCD cycle volatility; 2) execution of car battery production.
 Nan Ya Plastics: We believe the key risk remains the earnings volatility of Nanya Tech.
 Oil Search: Upside risks include significant oil and gas discoveries in PNG, or in the Middle East where they are currently drilling new wells. Downside risks to our forecasts and views
include much lower oil prices, operational risks, and project risks which could arise from delays and large project cost overruns of the PNG LNG project.
 Origin Energy: Risks to the achievement of our price target include oil price volatility, operational risks, and project risk from delays and large cost overruns.
 PetroChina: Risks to its earnings are: 1) losses from gas imported from Turkmenistan, and; 2) refining losses if the government stops increasing oil product prices in an extremely high
oil price environment.
 Petronas Chemicals Group: Key risks include volatile crude prices, volatile chemical margins and plant mechanical failure.
 Petronet LNG: Keyy downside risks: 1)) Lower-than-expected
p spot
p volumes could result in downside to our numbers. 2)) The Dahejj off-take agreement
g provides for 5% annual rises in the
p
regasification charges. Although we believe we are conservative in our assumptions on re-gasification charges, a sharp cut could have a negative impact on profitability and valuations.
3) PLNG’s Kochi terminal is under construction and execution delays and cost overruns could hurt our valuation of the Kochi terminal.
 PTT: Key risks to our investment case are volatile crude prices, delays to start-up of new gas fields or new plants and potential national service obligations.
 PTT Aromatics & Refining: Downside risks to our price target include weaker-than-expected refining or aromatic margins, plant mechanical failure, and declining crude prices.
 PTT Chemical: Keyy p
positive risks include stronger-than-expected
g p ethylene
y and p
polyethylene
y y margins,
g , and vice versa.
 PTTEP: PTTEP’s earnings are sensitive to crude oil price changes. Other risks include delays to field start-ups or operational accidents.
 Reliance Industries: 1.Deterioration in refining and petchem margins. 2. Further delays in the ramp-up of KGD6 volumes. 3. Delays in government approvals for the E&P deal with BP.
4. Sharper rupee appreciation vs. the US dollar than our assumptions.

ASIA
Ri k
Risks
 Santos: Risks to our forecasts and investment view include oil price volatility, operational risks, project risk from delays and large cost overruns.
 Sinofert: Upside risks: 1) 2H11F potash contract prices being lower than our expectations; 2) strong sales volume growth; and 3) higher-than-expected potash margin
if domestic potash price surges.
 Sinopec: Downside risks to our view include rising inflation, chemical downcycle and resources tax. Upside risks include potential change in oil product pricing
mechanism and lifting of the windfall tax hurdle rate.
 Sinopec Shanghai Petrochemical: Downside risks to our price target: 1) lower than- expected oil product price hikes; and 2) government regulatory risks.
 SK Innovation: Risks to our target price include crude prices and volatile refining margins
margins. Material progress on the new businesses may provide upside risks to our
target price.
 S-Oil: Risks include: 1) weakening polyester demand hurting PX price and margin; 2) new petrochemical plants facing operational problems; and 3) management not
paying out enough of earnings.
 Thai Oil: Upside risks to our PT include stronger-than-expected refining/aromatics margins and crude prices. Downside risks include plant mechanical failure or
weaker-than-expected refining/aromatic margins and crude prices.
 Woodside Petroleum: Risks to our forecasts and investment view include oil price volatility, operational risks from offshore operations, and project risk from delays
and large cost overruns.

ASIA
Any Authors named on this report are Research Analysts unless otherwise indicated
Analyst Certification
I, Chiew Cheng Khoo, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2)
no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my compensation is tied to any specific
investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures

Mentioned companies
Issuer name Ticker Price Price date Stock rating Sector rating Disclosures
001300 121000.00
Cheil Industries KS KRW 11-May-2011 Buy Not Rated 4,135
078930 87000.00
GS Holdings KS KRW 11-May-2011 Buy Not Rated
009830 47750.00
Hanwha Chemical Corp KS KRW 11-May-2011 Buy Not Rated
011170 394000.00
Honam Petrochemical KS KRW 11-May-2011 Buy Not Rated
051910 520000.00
LG Chem KS KRW 11-May-2011
y Buy
y Not Rated 4,112
010950 143000.00
S-Oil Corporation KS KRW 11-May-2011 Buy Not Rated 4,156
096770 226000.00
SK Innovation KS KRW 11-May-2011 Buy Not Rated 4,131
Disclosures required in the European Union

4 Market maker
Nomura International plc or an affiliate in the global Nomura group is a market maker or liquidity provider in the securities /
related derivatives of the issuer.
Disclosures required in Korea

112 Liquidity Provider for Equity Linked Warrant
Nomura Financial Investment (Korea) Co., Ltd. is a liquidity provider (LP) or LP & issuer for ELW which the underlying is
LG Chem (051910.KS), and holds 21,041,940 warrants as of 11-May-2011.
SK Innovation (096770.KS), and holds 5,801,710 warrants as of 11-May-2011.
Cheil Industries (001300.KS), and holds 14,065,500 warrants as of 11-May-2011.
S Oil Corp (010950.KS),
S-Oil (010950 KS) and holds 13
13,573,440
573 440 warrants
arrants as of 1111-May-2011.
Ma 2011

ASIA
Previous Rating
Issuer name Previous Rating Date of change

Cheil Industries Neutral 22-Feb-2011
GS Holdings Not Rated 09-Jun-2009
Hanwha Chemical Corp Neutral 03-Nov-2010
Honam Petrochemical Neutral 03-Nov-2010
LG Chem Neutral 09-Sep-2009
S-Oil Corporation Neutral 11-Oct-2010
SK Innovation Reduce 09-Jun-2009
Cheil Industries (001300 KS) 121000.00 KRW (11-May-2011) Buy (Sector rating: Not Rated)
Rating and target price chart (three year history)
Date Rating Target price Closing price
22-Feb-2011 160000.00 121000.00
22-Feb-2011 y
Buy 121000.00
30-Jun-2010 93000.00 94400.00
30-Jun-2010 Neutral 94400.00
10-Mar-2010 73000.00 60500.00
17-Sep-2009 63000.00 52700.00
04-Jun-2009 56000.00 45850.00
24-Feb-2009 49000.00 36000.00
30-Sep-2008 60000.00 51700.00
30-Sep-2008 Buy 51700.00
01-Jul-2008 68500.00 47250.00
For explanation of ratings refer to the stock rating keys located after chart(s)
Valuation Methodology Our price target of W160,000 is based on sum-of-the parts valuation. We believe that the stock will
re-rate further owing to strong EPS growth of a 27% CAGR in 2010-12F on the efforts of all divisions and structural changes
coming from polarizer film, OLED products and chemicals.
Risks that may impede the achievement of the target price Downside risks to our PT include: 1) a delay in launching
OLED products; 2) worse-than-expected LCD and LED cycle; 3) macro concerns weakening petrochemical pricing; and 4)
slower-than-expected domestic consumption recovery, which could negatively affect the apparel business.

ASIA
GS Holdings (078930 KS) 87000.00 KRW (11-May-2011) Buy (Sector rating: Not Rated)
28-Jan-2011 105000.00 83300.00
11-Oct-2010 68000.00 56700.00
09-Jun-2009 42000.00 32000.00
09-Jun-2009 Buy 32000.00
Valuation Methodology Our price target of W115,000 is based on FY11F P/BV (W62,368) of 1.8x, which is a 20% premium to
the peak-cycle multiple seen over FY07-10F (unchanged). The absolute peak P/BV (forward looking) was 1.8x in FY07. We
apply a 20% premium to the FY07-10F peak multiple with a view that structural changes and strong industry fundamentals will
lift valuation to above historical levels.
Risks that may impede the achievement of the target price Key risks include: 1) operational problems at the new
hydrocracker; 2) delays in GS Retail’s listing and/or the company’s 3rd FCC schedule.
Hanwha Chemical Corp (009830 KS) 47750.00 KRW (11-May-2011) Buy (Sector rating: Not Rated)
R ti
Rating and
d ttargett price
i chart
h t (th
(three year hi
history)
t )
03-Nov-2010 40000.00 32150.00
03-Nov-2010 Buy 32150.00
06-Sep-2010 25000.00 25750.00
06-Jul-2010 20000.00 17500.00
04-Sep-2009 14000.00 13300.00
p
04-Sep-2009 Neutral 13300.00
01-Jul-2009 9400.00 10500.00
14-Apr-2009 7100.00 12050.00
14-Nov-2008 4000.00 4960.00
14-Nov-2008 Reduce 4960.00
01-Jul-2008 12000.00 11450.00
01-Jul-2008 Neutral 11450.00
Valuation Methodology Our PT of KRW69,000 is based on SOTP. We use a target EV/EBITDA multiple of 10.8x, which
represents the peak multiple in 2010 (EV: KRW8,605bn ; FY11F EBITDA: KRW797bn). We believe the industry upturn will be
sustainable over the next 20 months.
Risks that may impede the achievement of the target price Risks include: 1) petrochemical price volatility; 2) execution risks
on new businesses.
ASIA
Honam Petrochemical (011170 KS) 394000.00 KRW (11-May-2011) Buy (Sector rating: Not Rated)
03-Nov-2010 330000.00 268000.00
03-Nov-2010 Buy 268000.00
06-Jul-2010 160000.00 147000.00
06-Jul-2010 Neutral 147000.00
17-Dec-2009 82000.00 106500.00
04-Sep-2009 81000.00 91000.00
01-Jul-2009 70000.00 79100.00
14-Apr-2009 49000.00 72500.00
14-Nov-2008 37000.00 45900.00
01-Jul-2008 65000.00 72600.00
01-Jul-2008 Reduce 72600.00
Valuation Methodology Our target price of KRW480,000 is based on sum-of-the parts methodology. We apply a target
EV/EBITDA multiple of 9.3x, which represents the peak multiple in 2010 (EV: KRW13,496bn; FY11F EBITDA: KRW1,445bn).
Risks that may impede the achievement of the target price Risks may come from: 1) input and out price volatility; and 2)
HPC buying assets at unattractive prices.
LG Chem (051910 KS) 520000.00 KRW (11-May-2011) Buy (Sector rating: Not Rated)
D t
Date R ti
Rating Targett price
T i Closing
Cl i price
i
03-Nov-2010 500000.00 382000.00
06-Jul-2010 430000.00 290500.00
09-Sep-2009 270000.00 212000.00
09-Sep-2009 Buy 212000.00
24-Jul-2009 150000.00 138000.00
24-Jul-2009 Neutral 138000.00
p
28-Apr-2009 120000.00 128000.00
17-Mar-2009 66000.00 99226.80
17-Mar-2009 Reduce 99226.80
13-Jan-2009 71000.00 89463.06
14-Nov-2008 71000.00 79585.80
16-Oct-2008 Neutral 85943.58
16-Oct-2008 77000.00 85943.58
09-Sep-2008 75000.00 101383.90
09 S
09-Sep-2008
2008 R d
Reduce 101383 90
101383.90
01-Jul-2008 107000.00 116937.76
01-Jul-2008 Neutral 116937.76
Valuation Methodology Our TP of KRW700,000 is based on a sum-of-the-parts methodology and reflects our positive view of
th petrochemical
the t h i l and d car b
battery
tt b
business
i units.
it W We value
l ththe auto
t bbattery
tt and
d LCD glass
l segments
t att KRW29,000/share
KRW29 000/ h and
d
KRW28,000/share, respectively.
Risks that may impede the achievement of the target price Risks are: 1) petrochemical and LCD cycle volatility; 2)
execution of car battery production.
ASIA
S-Oil Corporation (010950 KS) 143000.00 KRW (11-May-2011) Buy (Sector rating: Not Rated)
28-Jan-2011 150000.00 112000.00
11-Oct-2010 85000.00 71700.00
11-Oct-2010 Buy 71700.00
04-Feb-2010 59000.00 52700.00
22-Oct-2009 66000.00 60000.00
21-Sep-2009 63000.00 64200.00
31 J l 2009
31-Jul-2009 61000 00
61000.00 58500 00
58500.00
09-Jun-2009 63000.00 55900.00
09-Jun-2009 Neutral 55900.00
23-Jan-2009 47000.00 58900.00
14-Nov-2008 Reduce 63000.00
01-Sep-2008 60000.00 65700.00
Valuation Methodology Our price target of W200

W200,000
000 is based on an FY11F P/BV (W54
(W54,228)
228) of 3
3.8x,
8x which represents a 20%
premium to the peak-cycle multiple seen over FY04-10 (previously FY11F P/BV of 3.0x based on peak-cycle see in FY07-10).
We have lifted the target multiple as new 2011F ROE rises to 35% (from 22%) on higher net profit and DPS (new DPS: W6,000;
old DPS W3,000) estimates.
Risks that may impede the achievement of the target price Risks include: 1) weakening polyester demand hurting PX price
and margin; 2) new petrochemical plants facing operational problems; and 3) management not paying out enough of earnings.
SK Innovation
S o at o (096770
(096 0 KS)
S) 226000.00
6000 00 KRW ((11-May-2011)
ay 0 ) Buy
uy (Sec
(Sector
o rating:
a g Noto Rated)
a ed)
28-Jan-2011 260000.00 199000.00
11-Oct-2010 190000.00 151000.00
05-May-2010 145000.00 123500.00
04-Feb-2010 135000.00 104000.00
28-Oct-2009 140000.00 113000.00
24 J l 2009
24-Jul-2009 133000 00
133000.00 99 00 00
99700.00
09-Jun-2009 135000.00 115000.00
09-Jun-2009 Buy 115000.00
13-Jan-2009 51000.00 78800.00
14-Nov-2008 52000.00 63300.00
01-Sep-2008 75000.00 81200.00
01-Sep-2008 Reduce 81200.00
28-May-2008 145000.00 123500.00
Valuation Methodology Our TP of KRW330,000 is based on 2.4x FY11F P/BV (KRW136,665), a 20% premium to the peak
cycle multiple seen over FY07-10.
Risks that may impede the achievement of the target price Risks to our price target include crude prices and volatile
refining margins. Material progress on the new businesses may provide upside risks to our target price.
ASIA
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contact your Nomura Securities International, Inc. salesperson (1-877-865-5752) or email grpsupport-eu@nomura.com for assistance.
O li availability
Online il bilit off research
h and
d additional
dditi l conflict-of-interest
fli t f i t t disclosures
di l
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The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by Investment Banking activities.
Industry Specialists identified in some Nomura International plc research reports are employees within the Firm who are responsible for the sales and trading effort in the sector for which they have coverage. Industry
Specialists do not contribute in any manner to the content of research reports in which their names appear.
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sector for which they have coverage. Marketing Analysts may also contribute to research reports in which their names appear and publish research on their sector.
Distribution
st but o ofo ratings
at gs (Global)
(G oba )
The distribution of all ratings published by Nomura Global Equity Research is as follows:
49% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 37% of companies with this rating are investment banking clients of the Nomura Group*.
40% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 46% of companies with this rating are investment banking clients of the Nomura Group*.
11% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 16% of companies with this rating are investment banking clients of the Nomura Group*.
As at 31 March 2011.
*The
The Nomura Group as defined in the Disclaimer section at the end of this report
report.
Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America for ratings published from 27 October 2008
The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to target price defined as (fair value
- current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation
methodology such as discounted cash flow or multiple analysis, etc.
STOCKS
A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months.
A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months.
A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months.
A rating of 'Suspended', indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting
in an advisory capacity in a merger or strategic transaction involving the company.
Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page:
http://www.nomura.com/research);Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology.
SECTORS
A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months.
A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months.
A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months.
Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

ASIA
Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January
2009
STOCKS
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price
will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc.
A 'Buy' recommendation indicates that potential upside is 15% or more.
A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%.
A 'Reduce' recommendation indicates that potential downside is 5% or more.
A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in
an advisory capacity in a merger or strategic transaction involving the subject company.
Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or
additional information from Nomura relating to such securities and/or companies.
SECTORS
A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.
A 'Neutral' rating
g means most stocks in the sector have ((or the weighted
g average
g recommendation of the stocks under coverage
g is)) a neutral absolute recommendation.
A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.
Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US and Latin
America published prior to 27 October 2008)
STOCKS
A rating of '1'
1 or 'Strong
Strong buy',
buy , indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months.
A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months.
A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months.
A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months.
A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months.
Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it undertakes no obligation to
update the analysis, estimates, projections, conclusions or other information contained herein.
SECTORS
A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months.
A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months.
A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months.
Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector - Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W
Europe Business Services; Business Services: FTSE W Europe; Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg World
Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.

ASIA
Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008
STOCKS
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair Value will
equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think
the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an
assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this
horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation.
A 'Strong buy' recommendation indicates that upside is more than 20%.
A 'Buy'
Buy recommendation indicates that upside is between 10% and 20% 20%.
A 'Neutral' recommendation indicates that upside or downside is less than 10%.
A 'Reduce' recommendation indicates that downside is between 10% and 20%.
A 'Sell' recommendation indicates that downside is more than 20%.
SECTORS
A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation.
A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation.
A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.
Target Price
A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks
related to the company or the market, and may not occur if the company's earnings differ from estimates.
Di l i
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d i i Pl
Please see th
the ffurther
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l i iin th
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i covered dbby Nomura
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l t available
il bl att www.nomura.com/research
/ h under
d th the 'Di
'Disclosure'
l ' ttab.
b
Nomura Group produces a number of different types of research product including, among others, fundamental analysis, quantitative analysis and short term trading ideas; recommendations contained in one type of
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Nomura Oil Outlook

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ASIA

NOMURA INTERNATIONAL (HK) LIMITED

Asia Oil & Gas/Chemicals

Cheng Khoo cheng.khoo@nomura.com +852 2252 6180 Team Head

Michael Lo michael.lo@nomura.com +852 2252 6225 Global Oil Market

Xavier Grunauer xavier.grunauer@nomura.com +61 2 8062 8416 Australia

Gordon Wai gordon.wai@nomura.com +852 2252 6176 China

Anil Sharma anil.sharma.1@nomura.com +91 22 4037 4338 India

Cindy Park cindy.park@nomura.com +822 3783 2324 Korea

Yong Liang Por yongliang.por@nomura.com +852 2252 6220 Taiwan, Thailand

© Nomura International (Hong Kong) Limited 3

Structure of oil and petrochemical industry

LPG Gasoline Naphtha Kerosene Diesel Fuel oil

Olefin plant Aromatics plant

Ethylene Propylene Mixed C4 Butylene Benzene Toluene Xylene

© Nomura International (Hong Kong) Limited 4

© Nomura International (Hong Kong) Limited 8

Crude oil fundamentals

© Nomura International (Hong Kong) Limited 9

refiners return from maintenance season in the

© Nomura International (Hong Kong) Limited 10

Loss of Libyan crude to boost sweet crude premium

World major crudes by quality

Source: IEA, Eni, Nomura estimates

Sweet-Sour crude spread (Brent – Dubai)

Japanese oil demand to increase this summer

Source: FEPC, Nomura research

Seasonal demand upswing in US and Europe

Demand from refineries to increase in coming months

European refinery turnaround Global refinery throughput

70 Prior4 Year Range Prior 4 Year Average

Source: IEA Source: IEA

Demand growth to remain strong

Source: IEA, Nomura estimates

2011F global demand change 2012F global demand change

Source: Nomura estimates.

April Chinese PMI dips but remains strong

Source: Nomura Global Economics

Source: Nomura Global Economics Source: Nomura Global Economics 16

Chinese oil demand continues in upward trajectory

© Nomura International (Hong Kong) Limited 17

Indian oil demand remains strong

Source: Thomson Reuters, Nomura research

New supply peaked in 2009

Source: IEA, Nomura estimates

Peak capacity coming online Global Supply-Demand Balance

OPEC spare capacity continues to fall

OPEC Crude Production Capacity OPEC Crude Production

Source: IEA, Nomura estimates

Source: International Energy Agency, Nomura estimates

Iraq supply could be swing factor in 2013 & beyond

Iraq production capacity estimates Iraq capacity additions by fields

14 Iraq Prod Capacity as per Licensing Rounds

Current Capacity Round I Round II Kurdistan

Source: Bloomberg, Nomura research

Rig count points to intensifying investments

Inventories could continue to fall

Mideast Gulf Asia Pacific Med

Source: Bloomberg, Gibson, Nomura research

Global product floating storage

Mideast Gulf Asia Pacific Med

Source: Bloomberg, Gibson, Nomura research

Demand a mere fraction of trading volumes