Phillips 66 Company Crude Oil Commercial Quantity & Quality Determination Guidelines. Quantity and Quality Determination (Marine Cargoes)

Phillips 66 Company Crude Oil Commercial Quantity & Quality Determination Guidelines Quantity and Quality Determination (Marine Cargoes) I. General (M...
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Phillips 66 Company Crude Oil Commercial Quantity & Quality Determination Guidelines Quantity and Quality Determination (Marine Cargoes) I. General (Marine Cargoes) The quantity and quality of cargo received or delivered shall be determined by a mutually appointed Independent Inspection Company (IIC). Quantity as determined by the IIC shall be final and binding on all parties and shall be the basis for preparing relevant shipping documents and invoices save fraud and/or manifest error. If, for any reason an IIC is not in attendance or if terminal operating procedures prevail, then quantity as determined by terminal personnel shall be final and binding on all parties and shall be the basis for preparing relevant shipping documents and invoices save fraud and/or manifest error. Each commercial party shall have the right to witness the measurement processes, provided adequate notification is given to interested parties. All measurement & sampling equipment, procedures, calculations, and practices (whether performed by IIC or by terminal personnel) shall be performed in conformance with the most current International measurement, sampling and analysis standards (API Manual of Petroleum Measurement Standards (MPMS), Energy Institute Hydrocarbon Management ( EI HM), ISO and ASTM). Volumes shall be adjusted from observed conditions to standard reference conditions (i.e. 60 degrees Fahrenheit/15.56 degrees Celsius, a pressure of one standard atmosphere of 14.696 PSIA etc.) in accordance with the latest revision of API MPMS Chapter 11 (e.g. Table 6A, 54A etc. whichever table is applicable to that commodity). II. Quantity Determination for Marine Cargoes All measurements shall be determined by one of the following methods in descending order of preference; 1.) Meters Meters at or near the point of transfer shall determine the quantity of cargo received or delivered. The IIC shall, where possible, verify the accuracy of all relevant metering equipment, including temperature and pressure measurement devices, transmitters and calculations as well as corresponding meter proving and calibration documentation. NB: See Note 3 below. 2.) Shore Tanks If meters are not available or malfunction (i.e. are deemed to be inaccurate), or if verification of meter performance is not possible, quantity shall be based on shore tank measurements, as determined by the IIC. NB: See Notes 1-3 below. 3.) Vessel Measurements A.) In the event meters are not available or if shore tank(s) are active (vs. static) during any part of the transfer, or if the IIC determines shore quantities to be inaccurate or not representative of the volume of cargo transferred, quantity shall be Phillips 66 Company – Crude Oil Quantity & Quality Addendum Effective July 1, 2013

based on the volumes as determined from measurements of the vessel before and after the transfer and adjusted for the vessel’s Vessel Experience Factor (VEF) as per API MPMS 17.9- EI HM 49 if the vessel’s VEF is determined to be valid and applicable by the IIC. B.) Delivered ex-ship Cargoes involving Lighterage or Ship-to-Ship Transfers (STS). In the event that a cargo is lightered from Seller’s vessel; “Ship to be Lightered” (STBL), the quantity of cargo delivered/received shall be determined from the IIC’s gauging of the receiving vessel’s; “Service Vessel” (SV) tanks and adjusted for the SV’s Vessel Experience Factor (VEF) as per API MPMS 17.9- EI HM 49) if the SV’s VEF is determined to be valid and applicable by the IIC. 4.) Agreement between commercial parties. In the event, the IIC determines that the above custody transfer measurement points are inaccurate or are not representative of the volume(s) of cargo transferred, the parties shall be notified by the IIC and the parties shall agree to negotiate in good faith and without prejudice, a new basis for custody transfer volumes. Note 1: Consistent with API MPMS 3.1A/EI HM 4, measurements taken through unslotted standpipes shall not to be used for custody transfer purposes. Note 2: Consistent with API MPMS 3.1A/EI HM 4, all delivering/receiving shore tanks shall be static and shall have a liquid oil surface at the official point of calibration. All receiving shore tanks shall contain sufficient volumes of oil, prior to commencement of receiving operations, to minimize measurement inaccuracy due to tank bottom movement and/or deformation. Shore tank(s) liquid levels shall not be within their calibrated tank capacity tables floating roof’s critical zone(s) either prior to commencement or completion of cargo transfer operations and/or performance of shore tanks custody transfer measurements. Note 3: A Shore Line Fullness Verification (SLFV) shall be requested by the IIC and performed using any of the approved SLFV Methods in API MPMS Chapter 17.6. Any adjustment to the shore tank(s) delivered/received volumes shall be based upon measurement tolerances consistent with API MPMS 17.6. (i.e. accepted tolerance for a line displacement shall be the total of the volume equating to 1/8” (or ~ 3mm) in the delivering/receiving shore tank calibration tables plus the volume equating to 1/8’’ (or ~ 3mm) in the delivering/receiving vessel tank/s calibration tables, this tolerance represents the measurement precision limit (i.e. 1/8” (or ~ 3mm) for both opening and closing gauges corresponding to shore and vessel tanks combined. If Meters are available, but are not located at or near of the point of transfer, the commercial parties shall agree on an SLFV procedure consistent with API MPMS 17.6 and/or terminal operating procedures prior to commencement of cargo transfer operations. If a SLFV is performed via the Line Displacement Method, it shall be performed by the delivering vessel pumping to the furthermost receiving shore tank to be used during each Marine Vessel custody transfer (delivery/loading). Phillips 66 Company – Crude Oil Quantity & Quality Addendum Effective July 1, 2013

III. Sampling for Marine Cargoes Quality determination of all receipts and deliveries shall be based on a qualified laboratory’s analyses* performed on representative samples obtained by the following methods in descending order of preference; 1.) In-line Sampler A representative sample of the cargo delivered or received shall be obtained via flow-proportional in-line sampler that performs according to API MPMS 8.2 and/or corresponding ISO standard (ISO 3171) to comply with regulatory requirements. 2.) Vessel or Shore Tanks Samples If a flow-proportional in-line sampler is not available or if it malfunctions (per API MPMS 8.2 and/or corresponding ISO standard (ISO 3171) to comply with regulatory requirements), the commercial parties shall agree on alternate custody transfer samples sources (shore tanks or marine vessels). A.) Volumetric composite samples These samples can be comprised of manual samples performed by IIC from delivering/receiving shore tanks or from each of the receiving/delivering marine vessel’s cargo tanks. Manual samples may be obtained via all-level(s) samples (running samples), upper-middle-lower level(s) samples or spot samples at agreed levels consistent with API MPMS 8.1 and/or corresponding ISO standard (ISO 3170). B.) Delivered ex-ship Cargoes involving Lighterage or Ship-to-Ship Transfers (STS); The quality of the cargo transferred shall be determined from analyses performed on a representative sample obtained by the IIC consistent with API MPMS 8.1 and/or corresponding ISO standard (ISO 3170) from the delivering vessel (Ship to be Lightered or STBL) after determination of free water onboard (STBL) and prior to commencement of STS cargo transfer operations. 3.) Agreement between commercial parties In the event, the IIC determines that the above custody transfer samples are not representative of the quality of cargo transferred, the parties agree to negotiate in good faith and without prejudice, a new basis for quality determination. IV.

Lab Analyses for Sediment & Water (S&W)

*Volumetric deductions for S&W content shall be made by one of the methods described in API MPMS Chapter 10 in the following order of preference:

Phillips 66 Company – Crude Oil Quantity & Quality Addendum Effective July 1, 2013

Characteristic Water Sediment

Primary Karl Fisher (ASTM D4928)

Secondary Distillation (ASTM D4006)

Membrane filtration (ASTM D4807)

Extraction (ASTM D473)

Tertiary Centrifuge (ASTM D4007 (Lab) or ASTM D96 (Field) Centrifuge (ASTM D4007 (Lab) or ASTM D96 (Field)

Full deduction for all free water and S&W content shall be made according to the ASTM and API MPMS published methods and standards.

Quantity and Quality Determination (Pipeline, Truck and Rail Car) I. General (Pipeline, Truck and Rail Car) Quantity as determined by terminal personnel shall be final and binding on all parties and will be the basis for preparing relevant shipping documents and invoices save fraud and/or manifest error. Each commercial party shall have the right to witness the measurement processes, provided adequate notification is given to interested parties. All measurement & sampling equipment, procedures, calculations, and practices (whether performed by IIC or by terminal personnel) shall be performed in conformance with the most current International measurement, sampling and analysis standards (i.e. API Manual of Petroleum Measurement Standards (MPMS), Energy Institute of Hydrocarbon Management (EI HM), ISO and ASTM). Volumes shall be adjusted from observed conditions to standard reference conditions (i.e. 60 degrees Fahrenheit/15.56 degrees Celsius, a pressure of one standard atmosphere of 14.696 PSIA etc.) in accordance with the latest revision of API MPMS Chapter 11 (e.g. Table 6A, 54A etc.). II. Quantity Determination for Pipeline, Truck and Rail Car. 1.) Pipeline Receipts/Deliveries Product quantities received from or delivered to pipelines shall be determined by calibrated - custody transfer grade meters. If meters are not available or malfunction (i.e. are deemed to be inaccurate), or if verification of meter performance is not possible, quantity shall be based on shore tank measurements. 2.) Truck Receipts/Deliveries Product quantities received from or delivered to tank trucks at truck racks shall be determined by calibrated - custody transfer grade meters. If meters are not available or malfunction (i.e. are deemed to be inaccurate), or if verification of meter performance is not possible, quantity shall be based on terminal tank measurements. In the event meters are not available or if shore tank(s) are active (vs. static) during

Phillips 66 Company – Crude Oil Quantity & Quality Addendum Effective July 1, 2013

any part of the transfer quantities shall be based on the weighing trucks on certified weigh scales. 3.) Rail Car Receipts/Deliveries Product quantities received from or delivered to rail cars at rail racks shall be determined by calibrated - custody transfer grade meters. If meters are not available or malfunction (i.e. are deemed to be inaccurate), or if verification of meter performance is not possible, quantity shall be based on terminal tank measurements. In the event meters are not available or if shore tank(s) are active (vs. static) during any part of the transfer quantities shall be based on the weighing trucks on certified weigh scales. 4.) Agreement between commercial parties. In the event, the IIC determines that the above custody transfer measurement points are inaccurate or are not representative of the volume(s) of cargo transferred, the parties shall be notified by the IIC and the parties shall agree to negotiate in good faith and without prejudice, a new basis for custody transfer volumes. III. Sampling for Pipeline, Truck and Rail Car Quality determination of all receipts and deliveries shall be based on a qualified laboratory’s analyses* performed on representative samples obtained by the following methods in descending order of preference; 1.) In-line Sampler A representative sample of the cargo delivered or received will be obtained via flowproportional in-line sampler that performs according to API MPMS 8.2. 2.) Terminal Tanks Samples If a flow-proportional in-line sampler is not available or if it malfunctions (per API MPMS 8.2), volumetric composite samples can be comprised of manual samples performed by terminal personnel from delivering/receiving terminal tanks or from each of the receiving/delivering tank trucks or rail cars. Manual samples may be obtained via all-level(s) samples (running samples), upper-middle-lower level(s) samples or spot samples at agreed levels consistent with API MPMS 8.1. IV. Lab Analyses for Sediment & Water (S&W) *Volumetric deductions for S&W content shall be made by one of the methods described in API MPMS Chapter 10 in the following order of preference: Characteristic Water Sediment

Primary Karl Fisher (ASTM D4928)

Secondary Distillation (ASTM D4006)

Membrane filtration (ASTM D4807)

Extraction (ASTM D473)

Phillips 66 Company – Crude Oil Quantity & Quality Addendum Effective July 1, 2013

Tertiary Centrifuge (ASTM D4007 (Lab) or ASTM D96 (Field) Centrifuge (ASTM D4007 (Lab) or ASTM D96 (Field)

Full deduction for all free water and S&W content shall be made according to the ASTM and API MPMS published methods and standards.

Crude Oil Quality (Marine, Pipeline, Truck and Rail Car) The Crude Oil delivered shall be in accordance with the specifications in the applicable contract and shall not contain any organic chlorides, oxygenated hydrocarbons or lead, nor any other contaminants. Unless an alternate S&W volume percent is agreed to

by the parties, the crude oil delivered shall not contain more than one percent (1%) S&W. In the event pipeline transportation (origins or destinations) is involved, all Crude Oil delivered under the Agreement must meet the quality requirements of the applicable transporting pipeline as set out in the applicable tariff/rules and regulations. Seller warrants that the Crude Oil delivered is not contaminated by chemicals foreign to virgin Crude Oil including, but not limited to, chlorinated and/or oxygenated hydrocarbons and lead. Buyer may refuse to accept delivery of any quantities of Crude Oil which do not conform to the specifications set forth in the Provisions of this Agreement. Buyer additionally may, reject and return any quantities of Crude Oil which do not conform to the specifications set forth in the Provisions of this Agreement, even after delivery to Buyer. If Buyer rejects and returns any quantities of Crude Oil which do not conform to the specifications set forth in the Provisions of this Agreement, Seller shall reimburse Buyer for all expenses incurred for the return thereof; including but not limited to full market value of the Crude Oil, transportation and handling fees, tariff fees, quality testing, etc. Buyer hereby acknowledges receipt of a Material Safety Data Sheet from Seller in respect of the properties and safe handling procedures for Crude Oil. Buyer acknowledged that the Crude Oil is a hazardous material and Buyer represents that it is sophisticated and knowledgeable in the storage, handling, transportation and use of Crude Oil.

Phillips 66 Company – Crude Oil Quantity & Quality Addendum Effective July 1, 2013

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