Capturing the Value of Energy Efficiency

Progressive Energy, Environment & Sustainability Summit

February 23, 2011

Noel Garza

2

Marathon Statistics at a Glance

Fortune 50 company

Established in 1887

4th largest US integrated oil & gas company

5th largest US refiner

Market Cap: ~$31.5 billion

2010 Revenues: $73 billion

2010 Net income: $2.57 billion

Employees: > 28,000

Headquartered in Houston, Texas

3

Marathon’s Business Segments

Exploration & Production

Refining, Marketing &

Transportation

Integrated Gas

Oil Sands Mining

4

Marathon consumes approximately $1.5B/yr in energy

80% natural gas

80% downstream

Using less energy

Lower costs

Projects generate solid returns

Operational Excellence

Is aligned with HES Policy

Reduces CO2e emissions

Long history of energy efficiency focus

Energy Efficiency

5

Established an Energy Efficiency Leadership Team (EELT)

EELT established rules

Btu common unit

Energy Intensity not a fit for Upstream

Common methodology to measure Energy Efficiency (EE)

– Implemented projects

– Procedural changes

Established Energy Efficiency Policy

Built database to capture efficiencies

%EE improvement = % reduction in energy use (assuming constant volumes)

Set 2009 Energy Efficiency Goals

1.2 TBtu/yr Reduction in Energy Use

By year-end realized 2.6 Tbtus of savings

Energy Efficiency - In 2009

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EE Champion Downstream Refining

EE Champion Downstream Transportation & Logistics

EE Champion Downstream Retail – SpeedwaySuperAmerica

EE Champion Downstream Main Office Building Findlay, OH

EE Champion Upstream North America Production

EE Champion Upstream International Production

EE Champion Upstream Main Office Building Houston, Texas

EE Coordinator Corporate

VP Corporate HES Sponsor

HES Professional Downstream

HES Professional Upstream

Energy Efficiency Leadership Team

Each Champion leads Energy Efficiency Sub-team

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Some of our Energy Efficiency Goal Rules

1. Absolute reduction target will be set every year for each Business Unit

2. Credit annualized

3. Reductions in energy use measured in Btu/yr can be derived from less:

a) flared hydrocarbons,

b) combusted hydrocarbons,

c) vented hydrocarbons,

d) electricity consumption, and

e) utilization of steam (produced or purchased).

4. Energy reductions must be permanent

5. Projects must be verifiable

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Energy Efficiency

63

221284

0

100

200

300

Upstream Downstream Total

In T

ril

lio

ns o

f B

tu

s p

er Y

ea

rMarathon 2010 Total Energy Use

(Estimated using 2009 actuals adjusted for Garyville Expansion)

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Marathon Refinery EPA ENERGY STAR Recognition

2006

Canton

Garyville

Texas City

2007

Canton

Detroit

Garyville

2008

Canton

Detroit

Garyville

Texas City

2009

Canton

Detroit

Garyville

In 2008 and 2009, only Marathon refineries received EPA ENERGY STAR recognition.

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Energy Efficiency

1.57 1.85 1.92

6.21

3.49

8.06

0.00

2.00

4.00

6.00

8.00

10.00

Upstream Goal

Upsteam Actual

Downstream Goal

Downstream Actual

Total Goal Total Actual

In T

rill

ion

s o

f B

tus

pe

r Ye

ar

Marathon 2010 Energy Use Reduction Goals

Includes 2.7 TBtus of reductions from Refinery expansion incremental EE investments

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Marathon Energy Efficiency External Goal

2.8

5.5

8.2

10.9

13.6

8.06

10.56

0

3

6

9

12

15

2009 2010 2011 2012 2013 2014

En

erg

y S

avi

ng

s (T

BT

Us)

Years of Savings

2010 YTD EE Savings Status Relative to 5-Year External Goal

1%/yr Projected Baseline 2010 Savings 2011 Projected Savings

Includes 2.7 TBtus of reductions from Refinery expansion incremental EE investments

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$(60)

$(40)

$(20)

$-

$20

$40

$60

2009 20102011 20122013 20142015 2016 2017 2018 20192020

$ M

illio

nsIndicative Energy Efficiency Cash Flow

Represents only 2009 and 2010 Efforts

Energy Efficiency

NPV ~$192MM

IRR ~67%

Cash flow net of costs

Costs captured are those incurred solely for energy efficiency purposes

$125MM of costs (capital and expense) incurred in two year period

of which $40MM estimated for GME

Assumes $4.40/MMBtu gas & 10 year life for projects

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Energy Efficiency

2008 increase due to less refinery throughput

2009 reduction due to new production from Norwegian Upstream Asset

2010 reduction due to refinery expansion

428

433

420

411

390

400

410

420

430

440

2007 2008 2009 2010

Tho

usa

nd

s o

f Btu

s p

er B

OE

Total Marathon Energy Intensity

Estimated

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Energy Efficiency

195

836

-

200

400

600

800

1,000

2009 2010

Tho

usa

nd

To

nn

es

of

CO

2e

Cumulative Annual CO2e Emission Reductions

Estimated cumulative CO2e reductions from 2 years of energy efficiency efforts

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Marathon Energy Efficiency Examples of Business Unit 2010 Projects

Business Segment Projects

Findlay Office Complex Chiller replacement and lighting

Houston Tower Lighting and ventilation air optimization

Upstream International Production

EGLNG Advanced Process Control implementation, EGLNG Exchanger enhancement, MEGPL compressor optimization, Norway reduced flaring,

and UK compressor optimization

Upstream North America Production

Bakken advanced controls for pumping units to reduce electricity consumption, plunger lift installations, compressor optimization, low

efficiency submersible pump replacements, conversion of disposal system from high pressure to low pressure to reduce venting, and cross-linked

polymer well treatment reducing water production and handling

Downstream Refining

Canton Dehex Tower Overhead Temp Control, Canton DHT Stripping Steam Reduction, Catlettsburg improved insulation and steam system

enhancements, Catlettsburg compressor shutdowns and exchanger additions, Detroit Naptha Hydrotreater tube replacements, Garyville

heater upgrade, Robinson insulation work, and Texas City steam optimization.

Downstream Retail SpeedwaySuperAmerica

Cooler door LED lighting installations, cooler fan motor installations, and numerous other lighting upgrades

Downstream Transportation & Logistics

Towboat replacement with more efficient units, pipeline pump operation optimization, insulation work, truck replacement with units with better

fuel efficiency, terminal office roof insulation work, and operational changes to reduce fuel use.

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“…energy efficiency is the most viable, readily available and least expensive form of

new energy …”

Energy Efficiency

Capturing the Value of Energy Efficiency

Noel Garza