Asia-Pacific Petro Patrol Oil & Gas/Energy Update 1See the last page of this report for important disclosuresUnited OPEC stays course » Latest sector insights With the OPEC cartel refusing to meaningfully increase oil exports and the U.S. Fed reiterating the low interest-rate policy, we expect oil prices to resume their uptrend. Specifically, the Brent crude oil price, now flirting with USD100/bbl, should continue to command a large premium over the U.S. WTI benchmark crude. Faster-than-expected renminbi appreciation could trigger more record Chinese crude imports, providing an additional tailwind for the oil-price rally. Our favorite stocks to play the oil price rebound are: CNOOC, COSL, SK Innovation and Cairn India, all of which trade at about 40% P/E discount to their U.S. pure upstream peers, leaving plenty of scope for long-term re-rating. We also like Korea’s S-Oil as the region’s best refining play. » Refined Products The Singapore complex refining margin increased by USD0.1/bbl last week, thanks to higher diesel and kerosene spreads. The naphtha spread is bottoming out as petrochemical plant operation rates increase. U.S. petroleum product inventories have decreased by 2.4m bbl, mostly due to the high demand for heating oil, whose inventory is at the lower-end of its historical range. » Petrochemical The synthetic fiber chain, such as PET, PTA, MEG, and PX spreads, is quite strong, backed by surging cotton prices. Cotton production from China, which accounts for more than 30% of the total supply, is forecast to decrease more than 6% y-y due to chilly and dry weather. S-Oil is the biggest beneficiary of the resultant higher PX spread. News and Comment Company News flow Analyst comments S-Oil 010950 KS, BUY TP: KRW145,000 Korea’s S-Oil 4Q profit beats estimates Korea’s third-biggest oil refiner posted 4Q operating profit of KRW416.8bn, vs. a loss of KRW85.7bn a year ago. The actual profit is 16% above the consensus estimate. Larger rival, SK innovation, also reported last week that profit from refining margins almost doubled thanks to re-accelerated global economic growth and robust demand for fuels/chemicals in China. We have raised our FY11E full-year operating profit and the target price for S-Oil. Petrobras PBR US Petrobras (PBR US) Carioca Find in offshore Santos Basin is very important, CEO says Brazil’s state-run oil producer, Petrobras, said recent discoveries, including a “very important” deepwater find at the offshore Carioca field, may help the company double output earlier than forecast. Petrobras is investing USD224bn through 2014, the global oil industry’s largest spending plan, to develop these deepwater fields. This could translate to potential earnings surprises for Petrobras’ key contractors in the oilfield services and drilling sector, such as Transocean (RIG), Seadrill (SDRL), Diamond Offshore (DO), Schlumberger (SLB), National Oilwell Varco (NOV), FMC Technologies (FTI), Subsea 7 (SUBC), etc. OVERWEIGHT 28 January 2011 Gordon Kwan, Head of Regional Energy, 852 3653 8646 gordon.kwan@miraeasset.hkJae-Chul Park, Chemical/Refinery Analyst, 822 3774 6896 parkjc@miraeasset.com Ricky Ng, Gas utilities Analyst, 852 3653 8634 ricky.ng@miraeasset.hk Nipun Sharma, India Energy Analyst, 852 3653 8624 nipun.sharma@miraeasset.hk Company Rec Price Target priceChina PetroChina (857) BUY HKD10.60HKD12.0Sinopec (386) HOLD HKD8.29HKD8.0CNOOC (883) BUY HKD18.62HKD23.0COSL (2883) BUY HKD16.20HKD23.0Korea Hanhwa Chem (009830) BUY KRW40,600KRW47,000S-Oil (010950) BUY KRW110,500KRW145,000SK Innovation (096770) BUY KRW198,500KRW230,000LG Chem (051910) BUY KRW401,000KRW550,000Kolon Ind (120110) BUY KRW72,100KRW82,000Kogas (036460) BUY KRW43,200KRW57,000India ONGC BUY INR1,113.8INR1,400Oil India (OINL) BUY INR1,262.25INR1,671Cairn India (CAIR) BUY INR335 INR 420Note: Prices are as of 20 Jan. 2011 Source: Bloomberg, Mirae Research estimates Gordon Kwan, Head of Regional Energy, +852 3653 8646, gordon.kwan@miraeasset.hk Jae-Chul Park, Chemical/Refinery Analyst, +822 3774 6896 parkjc@miraeasset.com Asia-Pacific 28 January 2011 Ricky Ng, Gas utilities Analyst, + 852 3653 8634 ricky.ng@miraeasset.hk Nipun Sharma, India Energy Analyst, +852 3653 8624 nipun.sharma@miraeasset.hk Petro Patrol 2TABLE OF CONTENTS News and Comment 1 Petroleum margins by product 3 AP peer valuation 4 AP peer valuation 5 U.S. petroleum inventory overview 6 U.S. petroleum inventory overview 7 Commodity futures trading 8 Prices by major pr