1
Presentation Overview
SK Energy introduction
Group III base oil characteristics
Group III base oil supply / demand forecast
Market Forces and Demand Drivers for Group III Base Oil
Summary
2
SK Group
 One of the largest enterprises in Korea
 “Most preferred company to work for” in Korea
Energy & Chemicals
86
51%
75
Revenue (US B$)
71
61
50
50
56
SK
Group
25
Telecommunications
‘03
‘04
‘05
‘06
‘07
19%
Trading &
Services
30%
3
SK Energy
• Founded in 1962 as Korea’s first oil refiner
• Continues to be the nation’s leading player
• Third-largest refining capacity in Asia-Pacific region
Refining & Marketing
CDU:
1,115,000 B/D
RFCC:
H/C:
117,000 B/D
Upstream
Reserves:
500 Mil. Bbl
Ethylene:
Production:
22,000 B/D
Propylene: 840,000 Ton/Yr
BTX:
45,000 B/D
Lubricant:
4,000 B/D
Base Oil:
28,000 B/D
Petrochemicals
4
730,000 Ton/Yr
2,607,000 Ton/Yr
SK Energy
• Two production facilities, Ulsan and Incheon
• Operates in more than 20 Countries
Domestic
Global
Employees:
5,661
Gas Stations:
4,519
Storage Terminals: 11
Moscow
Almaty
London
Beijing
Houston
Tokyo
Kuwait
Incheon
Seoul (HQ)
Daejeon
Shanghai
Guangdong
Dubai
Singapore
Branch
Subsidiary
Ulsan
Exploration
LNG Business
5
New Jersey
Spin-off Structure
According to the BOD resolution on 16th July, Lubricants business of
SK Energy split off to a new company “SK Lubricants (tentative name)”
Spin-off (‘09.10.1)
As-Is
100% subsidiary
SK Energy
SK Energy
SK Lubricants
Refining
Chemical
E&P
Lubricants
Refining
Chemical
E&P
윤활유

 SK Energy unships Lubricants Biz.
Lubricants business exist as one of
SK Energy’s biz units
in a form of physical division.
Newly established company
“SK Lubricants” will be launched
(100% SK Energy owned subsidiary)
6
Background
SK Energy plans to enhance value of the company through separation of competitive individual business
units such as lubricants biz.
Corporate
Governance
‘09 『Best corporate governance』, 『Best audit system』
BOD Focused
Management
Increasing
Competitiveness of
each business
Create
Corporate
Value
Business
Structure
Biz structure improvement
through spin-off
- Active response to environment changes
- Acquire appropriate management system for the
individual business
Developing
Growth Options
- Responsible management through performance
separation
- Create value as a lubricants specialized company
Enhance flexibility of
biz. structure
Financial
Structure
Maintaining
Credit Rating
Secure liquidity and maintain proper investment level
7
Presentation Overview
SK Energy introduction
Group III base oil characteristics
Group III base oil supply / demand forecast
Market Forces and Demand Drivers for Group III Base Oil
Summary
8
Base Oil Classification
API Base Oil Classification
API
Category
Viscosity
Index (VI)
Saturates
(%)
Sulfur
(%)
Group I
80-120
< 90 and/or
＞0.03
Group II
80-120
≥ 90 and
≤ 0.03
Group III
120 +
≥ 90 and
≤ 0.03
GRP II+
GRP III+
Group IV
PAO
Group V
All others
9
Properties of Group III Base Oils
4 cSt Grades
Item
ASTM
Method
HC
Residue
HC Residue Slack Wax
(High
(1)
Waxy)
GTL
(2)
KV @ 100°C, cSt
D 445
4.2
4.15
3.9~4.1
3.8~4.2
Viscosity Index(VI)
D 2270
122
134
136
135
NOACK Volatility, wt%
D 5800
15.2
13.0
<14.8
12.0
D 92
-15
-18
<-18
<-30
D 5293
1590
1130
<1000
<1000
Pour Point, °C
CCS Vis @-30°C, cP
Source: (1) ExxonMobil website, (2) The 3rd Fuel & Lube Asian Pacific Conference
10
YUBASE Physical Properties
Physical properties, YUBASE slate
YUBASE 4 YUBASE 4+
YUBASE 6
YUBASE6+
Vis. @40℃, cSt
19.5
18.4
36.9
35.4
Vis. @100℃, cSt
4.22
4.20
6.48
6.65
Viscosity Index
124
134
130
146
Pour Point, ℃
-15
-18
-12
-12
CCS @-25℃, cP
-
-
2920
2420
CCS @-30℃, cP
1590
1190
5200
4160
Noack (A), wt%
15.2
13.5
7.5
4.1
11
Presentation Overview
SK Energy introduction
Group III base oil characteristics
Group III base oil supply / demand forecast
Market Forces and Demand Drivers for Group III Base Oil
Summary
12
Group III Production Capacity
Most Group III supplier production is located in Asia
38% SK
14% S-Oil
19% Others
3% Petro-Canada
8% Petronas
7% Neste
12% Asia (non-merchant)
Source: 2008 Lubes ’N’ Greases
13
60% (3
largest
suppliers)
Group III Production Capacity

How is the capacity of Group III base oil
growing and evolving?
14
Base Stock Availability Interdependence
Increasing
quality
requirements
Demand
shifts to
Groups II, III
Diminishing
production of
Group I
2008 Global, bpd
Increasing
production of
Group III
stocks
2013 Global, bpd
Group III
50,780
Group III
108,170
Group II
199,810
Group II
234,810
Group I
612,450
Source: Lubes N Grease 2008
Group I
??
Announced upcoming capacities.
15
SK Base Oil Production Plan
1~3rd
3rd
+4.5 KBD
4th
+10 KBD
5th
+10 KBD
2n
d
1st
World largest Group III base oil manufacturer
Hydro-cracked / CDW / All hydro processing route
Total Group III production capacity is 1.1 million MT/Y
Additional new plants will be available in 2012 & 2014 with revamping
of current plant(#1~3 plant)
16
Group III Supply/Demand Forecast
A : Technical Demand A for Group III (16% annual increase)
B : Technical Demand B for Group III (21% annual increase)
C : Technical(B) + Commercial Demand for Group III
[BPD]
C
125,000
B
Global Supply
Supply by SK energy
100,000
GTL
GTL
GTL
* O : Other Suppliers
O
GTL
75,000
O
O
SK
50,000
O
SK
SK
SK
SK
SK
SK
SK
2012
2013
2014
O
New Plants
- SK & Pertamina
- PETRONAS/GS
O
Commerical Demand
25,000
Technical Demand
2003
....... 2007
2008
2009
17
2010
2011
A
Main Issues to be concerned for the future
 Invisible releasing timing of announced new plants
- GTL, New Group III plants....(?)
 When 0W-20/5W-20 will become the main-grade in the
After-Market (Service Fill)?
- 2013 after GF-5 ?
- Movement toward top tier product
 The economics of Group I plants
 Emerging new markets
18
Presentation Overview
SK Energy introduction
Group III base oil characteristics
Group III base oil supply / demand forecast
Market Forces and Demand Drivers for Group III Base Oil
Summary
19
Market Forces Driving the Use of High Quality Base Oils
Legislation
Consumers
Global
Economy
Lubricant
Manufacturers
OEMs
20
OEMs Continue Shift From 10W-30
OEM
0W-20
5W-20
5W-30
Toyota*
2AZ-FE engine:
Camry, Solara,
Highlander & RAV4
Genuine Oil grade
since 2006
1.5 L, 3.5 L
Ford Cars
and Trucks
Main grade
Honda
Main grade
Nissan
2.0 L
2.5 L, 3.5 L
Hyundai
2.0 L, 2.4 L, 3.3 L
BMW
3.0 L
Chevrolet Cars
and Trucks
2.2 L, 3.9 L,
4.3 L, 4.8 L
GM
2.4 L, 3.8 L,
5.3 L
* Source:Toyota TSB EG018-06
21
Grade Shift in US Sales
‘06
MM gals
% Change
‘06 vs ‘05
% Change
‘07 vs ‘06
5W-20
65.3
+22 %
+11 %
5W-30
231.1
+6 %
+5%
10W-30
235.0
-14 %
-13 %
10W-40
58.3
-13 %
-14 %
20W-50
22.5
-14 %
-19 %
5W-40
1.9
+22 %
+34 %
10W-30
10.5
+12 %
-24 %
15W-40
299.7
0.7 %
-0.2 %
Top Selling Grades
Gasoline
Higher
Fuel
Efficiency
Diesel
Source: NPRA Sales Report
22
US Gasoline Engine Oil Sales
Source: NPRA US Sales Reports
Million Gallons
350
10W-30
300
+11 %
250
200
5W-30
-16 %
150
100
50
+20 %
5W-20
0W-20
0
2003
2004
2005
2006
23
2007
2008
Demand Drives the Use of High Quality Base Oils
5W-20
0W-20
•Better Fuel Economy
• Durability
Base Oil/
Formulation
Technology
24
The changes of standard from GF-4 to GF-5
Source: Lubrizol,[www.gf-5.com]
25
ILSAC GF-5

API will announce the new GF-5 specification by the end of 2009, at
the earliest; car manufacturers have to use GF-5 for year 2011
vehicle models.

Higher fuel economy expectations will increase demand for low
viscosity SAE grades: 0W-20, 5W-20.

Sequence VID (6D) will be the method used to test for fuel economy
 Currently developed by a consortium of OEMs, marketers and additive
companies.
 ILSAC GF-5 proposes higher fuel economy specifications than GF-4
limits.
 The new Sequence VID still to be benchmarked against the existing
Sequence VIB test.
 VID test isn’t ready so comparisons between VIB and VID limits are
premature.
26
America’s Outlook for 2010 to 2015

Gasoline Engine Oil
- Expect growth of SAE 0W-20 grade for Gasoline Engine
 Well accepted that SAE 0W-20 will increase fuel economy
 Honda and Toyota already announced SAE 0W-20
requirements for current (since 2006) and future engines
 Light Duty Diesel Engine Oil
 OEMs will want to steer away from SAE 15W-40 oils
to gain fuel economy
 Look for SAE 5W-30 and 5W-40 grades, if not 0W-30
and 0W-40, to maximize fuel economy
27
Key Market Trends – Fuel Economy
 Group III demand increases with increased fuel economy demands  2011MY CAFE(Corporate Average Fuel Economy) standard may be 27.3mpg,
~8% above current, and 35mpg by 2020
 GF-5 will cause 0W-20 and 0W-30 oils to become mainstream
 OEMs recommend lower viscosity grades for CAFE and fuel
economy marketing
100% Group III
Group III < 10%
0W-xx
5W-20
5W-30
Select
models :
10W-xx
Toyota,
15W-xx
Honda,
20W-xx
Nissan, GM,
Monogrades BMW, others
28
Ford main grade
Honda main grade
Toyota Genuine Oil
Hyundai select
models
Toyota, select
models
Fuel economy

What do these market shifts mean for the Group
III Marketers and the Group III base oil markets?
29
Presentation Overview
SK Energy introduction
Group III base oil characteristics
Group III base oil supply / demand forecast
Market Forces and Demand Drivers for Group III Base Oil
Summary
30
Summary
 Market forces continue to increase the demand for
Group III base stocks
 SAE 5W-20 and 0W-20 grades will grow and
increase demand for Group III base stocks
 Global Group III new supply from 2011 to 2014 may
experience a surplus, depending on announced
project schedules
 Higher VI Group III base stocks enable product
differentiation
31