October 2018 Perspectives On Climate . - Marathon Petroleum

C O R P O R AT E G O V E R N A N C EEXECUTIVE LEADERSHIPMPC’s executive leadership team is charged with managing risk under the oversight of the Board and itscommittees. The company has a strong ERM process for identifying, assessing and managing risk, as well asmonitoring the performance of risk mitigation strategies. The governance of this process is managed throughthe executive sponsorship of our chairman and CEO and our senior vice president and CFO. Our ERMprocess is led by an enterprise risk manager and supported by officers and senior managers responsible forworking across the business to manage enterprise-level risks and identify emerging risks. As part of the ERMprocess, we conduct an annual risk review with executive management and the Board of Directors. Risks thatcould materially impact our company are discussed in the Risk Factors section of our Annual Report on Form10-K filed with the Securities and Exchange Commission.In 2018, we enhanced our ERM process by establishing two internal non-executive committees dedicated toassessing climate-related issues. The Climate Policy Steering Committee focuses on identifying and analyzingpolicy-related issues such as greenhouse gas (GHG) regulations, consumer mandates, biofuel mandates,methane regulations, cap and trade systems, carbon taxes, and general stakeholder concerns that couldaffect our business. The Emerging Technology Steering Committee focuses on technical issues surroundingemerging technologies such as automobile engine efficiency, renewable energy and electric vehicles tounderstand if or when a potential significant market penetration could occur. Both committees providevaluable information on climate-related risks as part of the ERM process and periodically report out throughthe executive committees described below.There are various executive leadership committees that oversee differing aspects of company policy andstrategy. Two principal committees are described below:S T R AT E G I C S T E E R I N G C O M M I T T E EProvides a routine forum for presentations by subject matter experts (both internal and external) to executive leadershipand discussion of topics that affect the long-term strategy of the company. Such topics include business and marketenvironment updates, political and regulatory trends, and potential market disruptors (technology or otherwise).HES&S MANAGEMENT COMMITTEEMeets quarterly with key health, environmental, safety and security (HES&S) personnel and leadership fromthroughout our company to evaluate performance and discuss strategic HES&S, corporate citizenship and public policyissues. This interactive forum ensures executive leadership remain informed and up to date on HES&S and corporatecitizenship matters affecting the company, including climate-related matters, and provides a platform to discuss theseissues with HES&S leadership.6 MARATHON PETROLEUM CORPORATION

Risk ManagementMPC has a mature enterprise risk management(ERM) process that provides the structure andcorporate oversight to ensure that major risksto our business are identified and proactivelymanaged. The following sections provideadditional details into how we are addressingpotential transitional and physical climaterelated risks.BUSINESS PLANNINGAND CAPITAL ALLOCATIONClimate-related risks assessed through our ERMprocess are some of the many considerationsin our business planning processes. Oureconomists use information from our ClimatePolicy and Emerging Technology Committees,along with market data and projections fromthe International Energy Agency and U.S.Energy Information Administration, to developlong-term price forecasts that form the basisfor capital allocation. Using this data, we applya risk-based capital allocation process withhigher return-on-investment thresholds forbusiness segments with the greatest financialand regulatory uncertainty. While we do not usea specific carbon price, business segments thatwould be most affected by high carbon pricing,like our refineries, have higher internal return oninvestment thresholds than assets that would beless affected by carbon pricing, like our naturalgas gathering and processing operations. Inaddition to capital allocation, the risk areasdescribed on the following pages are alsoconsiderations in business planning.The Bluestone gas processingcomplex owned by MPLX LP,MPC's midstream partnership,in Evans City, Pennsylvania7

RISK MANAGEMENTCLIMATE-RELATED POLICIES AND TRANSITIONAL RISKSMPC recognizes the continued use of fossil fuels willhelp meet the world’s growing energy needs.Policies must ensure our nation’s – and the world’s– long-term needs for environmental stewardship,energy security and economic development are met.Scenarios from recognized international bodies,such as the International Energy Agency (IEA),continue to indicate that oil and natural gas willbe the dominant sources of energy well intothe future.1 The climate-related policies beingconsidered in the various carbon-constrainedscenarios are not suggesting elimination of the oiland gas industry. Instead, these scenarios modela market in which inefficient, high-cost producersand assets would be phased out, allowing the lowcost, more efficient producers and assets to thrive– leading to an overall reduction in GHG emissions.As we describe later in this report, based on areview of our company portfolio against the variousclimate scenarios, we expect MPC will continue tobe successful well into the future.biofuel mandates, methane regulations, capand trade systems, carbon taxes, and generalstakeholder concerns that could affect ourbusiness. The Emerging Technology SteeringCommittee focuses on technical issues surroundingemerging technologies such as automobile engineefficiency, renewable energy and electric vehicles tounderstand if or when a potential significant marketpenetration could occur, and what the impactwould be to our business. Both committees providevaluable information on climate-related risks tothe executive committees described on Page 6 forconsideration in the ERM process, and short- andlong-term business planning.With this in mind, we continually monitor andassess environmental and climate-relatedlegislation, polices and regulations, as well asparticipate in the legislative and rulemakingprocess. We participate to ensure effectiveplanning, and that regulations are transparent andbased on sound technical and economic principles.For more information on our political engagementactivities, please see our website at http://www.marathonpetroleum.com by selecting “CorporateCitizenship” and clicking on “Political Engagementand Disclosure.”As we described on Page 6, to ensure we remainengaged in the policy and regulatory challengesrelated to climate change, we have establishedtwo internal committees dedicated to assessingclimate-related issues. The Climate Policy SteeringCommittee focuses on identifying and analyzingpolicy-related issues such as GHG regulations,A refining engineer at MPC’s GalvestonBay refinery in Texas City, TexasUnder the IEA, Sustainable Development Scenario (SDS) – its most carbon-constrained scenario – the IEA projects the oil and gasshare of the total primary energy mix will fall from its current 54 percent share in 2016 to 48 percent in 2040, but will continue to be thedominant sources of energy.1 8 MARATHON PETROLEUM CORPORATION

Strategy andScenario PlanningTHE CLIMATE-RELATED SCENARIOSA wind turbine located atMPLX's pipeline stationin Harpster, OhioIn last year’s report, we applied three hypothetical scenariosdeveloped by the International Energy Agency to analyzethe effects on our business of various climate-relatedpolicies over the long term. The three scenarios – theIEA’s Current Policies Scenario, New Policies Scenario and450 Scenario – are widely used around the world and arerecommended by the TCFD.2In this year’s report, we are providing an update basedon the IEA’s World Energy Outlook 2017 along with adiscussion of the IEA’s newest scenario – the SustainableDevelopment Scenario:¡¡ Current Policies Scenario (CPS) – considers only thoseclimate policies that have been formally adopted bygovernments. This scenario provides a comparisonpoint against which new policies can be assessed.¡¡ New Policies Scenario (NPS) – incorporates existingenergy policies, as well as an assessment of the resultslikely to occur from implementation of announcedintentions, notably those in climate pledges submittedfor the Paris Climate Agreement (COP21).¡¡ Sustainable Development Scenario (SDS) –a hypothetical construct of policy-drivenimprovements with multiple goals, including:(1) to ensure universal access to affordable, reliable,sustainable and modern energy services by 2030;(2) to substantially reduce air pollution; and(3) to limit worldwide temperature increases to below2 degrees Celsius.SCENARIOS ARE NOTINTENDED TO REPRESENTA FULL DESCRIPTION OFTHE FUTURE, BUT RATHERTO HIGHLIGHT CENTRALELEMENTS OF A POSSIBLEFUTURE AND TO DRAWATTENTION TO THE KEYFACTORS THAT WILL DRIVEFUTURE DEVELOPMENTS. ITIS IMPORTANT TO REMEMBERTHAT SCENARIOS AREHYPOTHETICAL CONSTRUCTS;THEY ARE NOT FORECASTS ORPREDICTIONS, NOR ARE THEYSENSITIVITY ANALYSES.2 ask Force on Climate Related Financial Disclosures, The Use of ScenarioTAnalysis in Disclosure of Climate-Related Risks and Opportunities (June2017); International Energy Agency, World Energy Outlook 2016 (2016).TCFD, THE USE OF SCENARIO ANALYSIS INDISCLOSURE OF CLIMATE-RELATED RISKSAND OPPORTUNITIES (JUNE 2017)9

S T R AT E G Y A N D S C E N A R I O P L A N N I N GIEA’s Projections for Oil and Natural Gas: The IEA’s New Policies Scenario projects oil and natural gas willmeet approximately 52 percent of global energy demand in 2040, while the SDS shows a slight decrease, at48 percent of global demand. Even under the SDS, oil and natural gas are still, by far, the dominant sourcesof energy. By comparison, wind and solar energy in 2040 are expected to provide around 6 percent of energydemand in the New Policies Scenario and 14 percent in the SDS, up from less than 2 percent today.The IEA’s projections for the transportation sector in 2040 also indicate that oil-based fuels will continue tobe the dominant source of energy for transportation worldwide. The IEA projects that in 2040, oil will provide83 percent of total transportation-related energy demand under the New Policies Scenario and 62 percentunder the SDS. Electricity, on the other hand, is projected to have the largest percentage gain, but wouldstill only reach 11 percent of the transportation sector’s energy under the SDS – up from 1 percent today.Transportation in North America has a similar outlook. The IEA forecasts that in 2040, oil will provide 79percent of the energy needed for transportation in North America under the New Policies Scenario and 54percent under the SDS. Both biofuels and electricity are projected to have larger market penetration in NorthAmerica at 22 percent and 13 percent respectively; however, oil-based fuels remain the dominant sources.The other notable outlook from the IEAis an increase in natural gas demandunder all three scenarios. Natural gasdemand continues to increase in thepower sector, as a move away from coalto a less carbon-intensive fuel createsmore room for gas to grow. The U.S.continues to be the leading producerof natural gas over the outlook period,and by the mid-2020s is expected to bethe world’s largest exporter of liquifiednatural gas (LNG) as well.Worldwide Petroleum-Based Liquids Demand140Million bpd1201008060402002016CPSRoad TransportAviation and NavigationSDSCPSNPS SDS2040Industry & PetrochemicalsOther IEA, World Energy Outlook 2017Projected Worldwide Natural Gas Production6,0004,0002,00002016IEA, World Energy Outlook 201710 MARATHON PETROLEUM CORPORATIONNPS2025IEA, World Energy Outlook 2017Billion cubic metersOverall, demand for petroleumbased liquids increases through2040 in the New Policies Scenario.The SDS also projects an increase indemand for petroleum-based liquidsthrough 2025, followed by a declinethrough 2040. The SDS assumesfuel economy standards, rather thanelectric vehicles or fuel switching, willbe the primary factor that leads oildemand for transportation to peak inthe mid-2020s. This also means thathigher-efficiency internal combustionengines are expected to continue tobe deployed and operable for manyyears to come.CPS NPS SDS2025CPS NPS SDS2040

SUMMARY OF CLIMATE-RELATED RISKS AND OPPORTUNITIESIn performing the scenario analyses, we also identified relevant climate-related risks and opportunities.Potential Risks:Potential Opportunities:¡¡ Starting as early as 2020, the demand fortraditional transportation fuels could decrease inmany Organisation for Economic Co-operationand Development (OECD) countries, includingthe U.S., due to higher corporate averagefuel economy (CAFE) standards, increasedmarket share of electric vehicles3 and biofuelsconsumption in the transportation fleet.¡¡ GHG regulations could be implemented,such as methods to further reduce methaneemissions from our midstream assets, a carbontax or similar effort that increases the costs ofour products, thereby reducing demand.¡¡ We could face increased litigation with respectto our operations or products in connection withclimate-related policy.¡¡ Physical risks, such as intense weather patternsor sea level rise, have the potential to impactour facilities.¡¡ While we do not conduct hydraulic fracturingoperations, we do provide gathering,processing and fractionation services withrespect to natural gas, oil and NGLs producedby our producer customers, as well as, purchasecrude oil as feedstock for our refineries. As aresult, any prohibitions on hydraulic fracturing orincreased regulation of the upstream oil and gasindustry could affect our business.¡¡ Worldwide and domestic demand for naturalgas and NGLs is expected to increase through2040, even in the carbon-constrained SDS.This higher demand is driven by increaseduse in the power, industrial and transportationsectors.¡¡ Worldwide demand for petrochemicalfeedstocks is expected to increase through2040. The IEA notes there are few substitutesfor oil-based feedstocks for the petrochemicalindustry.¡¡ Energy-efficiency requirements for facilitiesare projected to increase. We consider energyefficiency to be a core business function andopportunity, because it reduces costs whilereducing GHG emissions, putting our assets ina better competitive position.¡¡ Through 2040, gasoline and diesel demand isexpected to increase in many countries thatare not members of the OECD. Our assetsare favorably located for export to thesecountries.¡¡ Worldwide and domestic demand for biofuelsin the transportation fleet is expected toincrease through 2040, especially in thecarbon-constrained SDS.¡¡ Increased regulations surrounding pipelineconstruction and siting, including considerationof GHG emissions downstream of pipelineoperations.3 here are considerable challenges to reaching the levels of electric vehicles and other renewable technologies predicted by the IEATNew Policies Scenario and SDS. Particularly, “the technologies assumed to populate the clean energy shift — wind, solar, hydrogen,and electricity systems — are in fact significantly MORE material intensive in their composition than current traditional fossil-fuel-basedenergy supply systems.” [Source: World Bank, The Growing Role of Minerals and Metals for a Low-Carbon Future (June 2017); see alsoDawkins et. al., Stockholm Environmental Institute, Metals in a Low-Carbon Economy: Resource Scarcity, Climate Change and Businessin a Finite World (2012)].PERSPECTIVES ON CLIMATE-RELATED SCENARIOS RISKS AND OPPORTUNITIES11

S T R AT E G Y A N D S C E N A R I O P L A N N I N GRESULTS OF THE CLIMATE-RELATED SCENARIO ANALYSESThe results of the analyses of these climate-related risks and opportunities to MPC’s three main businesssegments are as follows:Refining and Marketing: The IEA revised its projections to be slightly more favorable to the North Americanrefining sector in its 2017 rendition of its New Policies Scenario:4¡¡ Net refining capacity is expected toincrease by another 13.7 million bpdthrough 2040. Most of the capacityincreases are expected to occur in theMiddle East, China, India and SoutheastAsia. The largest decreases in capacity areprojected in Europe, Japan and Korea.¡¡ Demand for refined products is expectedto be approximately 91.6 million bpd, or82 percent of projected capacity in 2040.Considering required downtime, the IEAprojects refining capacity could exceeddemand by 14 million bpd in 2040. Europehas the highest percentage of capacity atrisk (31 percent), followed by Japan andKorea (23 percent), China (13 percent) andNorth America (13 percent), according tothe IEA’s projections.¡¡ Under the New Policies Scenario,demand for gasoline and heavy fuel oilsis expected to decrease, whereas thedemand for other refined products such aspetrochemical feedstocks and distillates isexpected to increase, because alternativesare scarce for the aviation, freight,maritime and petrochemical sectors.This indicates an overall increase inrefined product demand.¡¡ Under the SDS, the IEA models reduceddemand for all transportation fuels,assuming regulations and technology willincrease the efficiency of the transport,maritime and aviation sectors.4Worldwide Petroleum Liquid Products DemandNew Policies Scenario and SDS120100Million bpdWorldwide Refining80604020020152020New Policies Scenario20302040Sustainable Development ScenarioIEA, World Energy Outlook 2017North American Refining¡¡ North American refining is expected to experiencea modest capacity decrease of 400,000 bpd from 2016to 2040.¡¡ In its 2017 report, the IEA adjusted its projections forNorth America, and specifically refineries in the UnitedStates. Despite a decline in gasoline demand in the U.S.over the long term from higher vehicle fuel efficiency,the IEA notes U.S. refiners benefit from a high level ofcomplexity, meaning they have a greater capability toproduce the refined products most in demand globally.They also have an ample supply of domestic oil, lowernatural gas costs and are favorably situated such thatthey can readily export to regions with increaseddemand for transportation fuels and other refinedproducts where demand is growing (Latin America,Africa and Asia).¡¡ The IEA also notes that over the long term, as gasoli

TABLE OF CONTENTS Glossary of Terms Barrel: 42 U.S. gallons – a common volume measure for crude oil and petroleum products bpcd: barrels per calendar day – the average of how much crude oil or other feedstock a