Indian Petrochem - 2012 November 8, 2012 Mumbai, India

Global Petrochemical Industry Overview

Sanjay S j Sharma Sh Managing Director Chemical Consulting, IHS Chemical Dubai, UAE sanjay.sharma@ihs.com j h @ih

Presentation Outline
Global Petrochemical Industry overview North America Industry Revival MDE Industry Impact on R t of Rest f th the I Industry d t C a Industry China dust y Opportunities and Challenges C Conclusions l i

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Current State of the Global Industry

Global Markets are focusing on rapidly growing economies and absorbing a spread out wave of new supply Production expansion mostly in the Middle East or China, but Shale Oil and Gas is putting the U.S. and Canada back in play Large cost position differences have inflated profits for some The rest are forced (by the market) to maintain strict price, production and inventory discipline

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Economy: Slower Pace of Economic Growth

Quarterly Annualized Value Constant Trillions 2005 U.S. Dollars

Global Economy was Trillions $60 off ff the th growth th curve for f seven quarters $58 Expanding again, but $54 pace has slowed to 3.0% p per y year due to $52 EU and inflation $50 Taking g longer g than $48 expected to recover to $46 trend line performance $44 05
4

$56
Peak Q3 2008 Back to Previous Peak Q2 2010 Trough - Q1 2009 Source: IHS Global Insight

06

07

08

09

10

11

12

13

14

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Demand: Shift in Demand Distribution is evident

Economic Expansion: Basic demand to fast growth emerging economies is evident Investment I t t Decisions D i i : Two Options: Produce in demand centers or l leverage a clear l cost t advantage Tomorrow s Market: Tomorrows Sustainability includes a systematic addition of performance products

Distribution of Global Demand

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Basic Chemicals and Plastics

All Others Middle East W. Europe N. America Other Asia

China

1990 1995 2000 2005 2010 2015 2020

C t of Center f Industry I d t has h shifted hift d to t Asia A i

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Capacity: Resources Attract Capacity Cumulative Capacity Growth Capacity growth indicates demand p pull Million Metric Tons 800 and/or relative cost Middle East (Hydrocarbon) 700 position Developing Countries Demand growth feeds 600 China on local labor; supports 500 Developed Countries diversified investment 400 N A N. America i International Markets 300 expand as target for less developed or low less-developed low- 200 100 growth economy
- if you can compete 0 90 95 00 05 10 15 20

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Trade: Ethylene Equivalents Trade - 2020

International Market depends heavily on existing supply channels
Net trade of Ethylene Equivalents in 2020 equals 21% of Global production Middle Middl E East t&N North th A American i supply l supports t rapid id economic i growth th elsewhere l h
40 35 30 25 20 15 10 5 0 Middle East North America Other Asia China Europe India South All America Others
Millions of Metric Tons

-40 -35 -30 -25 20 -20 -15 -10 -5 0

Export Supply

Import Demand

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 7

Global FeedFeed-slate Still Heavily Weighted Towards OilOil-Based Feeds

World Ethylene Feedstock Percentages - 2006/2011/2016 Comparison

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 06 11 16 06 11 16 06 11 16 06 11 16 06 11 16 06 11 16 06 11 16 NAM SAM WEP MDE NEA SEA Others
8

ISC

Natural Gas Liquids

Naphtha/Gas Oil

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

MDE and North America have clear advantage

Dollars per Metric Ton, Ethylene 1650 1450 1250 1050 850 650 450 250 50 0 20 U.S. Avg. U.S. U S Ethane Middle East Avg. Northeast Asia Avg. Southeast Asia Avg. WTI Crude $102/Barrel West Europe Avg.

Typical China

Alberta Ethane 40 60 80 100 120 140 160

Cummulative Ethylene Capacity (million metric tons)

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Presentation Outline
Global Petrochemical Industry overview North America Industry Revival MDE Industry Impact on R t of Rest f th the I Industry d t C a Industry China dust y Opportunities and Challenges C Conclusions l i

10

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Shale ImpactEmergence of two regions of low cost production

Shale development has enabled North America to become one of the

lowest cost regions in the global market

Combined with the Middle East, over 40% of the global ethylene

capacity is cost advantaged

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

N. America Energy Market Shift Felt around the Petrochemical World

$US per Million Btu 20
18 16 14 12 10 8 6 4 2 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Crude (WTI) Natural Gas Gas as % of Crude
12

Gas as % of Crude 120%

100% 80% 60% 40% 20% 0%

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

North American Ethylene Capacity Increases To Leverage Ethane Feedstock

Announced (-000- MT)
BASF/Fina (Port Arthur) Chevron Phillips (Cedar Bayou) Dow (Taft / Freeport) Equistar (All locations) Exxon (Baytown) Formosa (Point Comfort) Ineos (Chocolate Bayou) Oxy (Ingleside) Sasol (Lake Charles) Shell (Northeast) Westlake (Lake Charles) ) Williams ( (Geismar) Nova (Eastern Canada) Braskem/Idesa (Mexico) Total C l ti Total T t l Cumulative
* Dow, Shell, NOVA, and Oxy capacity additions shown are IHS estimates
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

2012-2014 180 386 521

2016-2020 1500 1500* 1500 800

107 550* 1400 1000* 220 300 250* 1000 9,500 11 214 11,214

1,714

Dow, 13 Shell, NOVA, and Oxy capacity additions shown are CMAI estimates

North America Exports .Come Back Into Focus

Demand growth in
Million Metric Tons, Ethylene

developing p g regions g outpace capacity

Asia requires increasing

9.0 8.0 7.0 6.0 5.0 40 4.0 3.0 2.0 Ethylene Others Glycol Styrenics Polyethylene

derivative imports
Assume Middle East will

grow market share

North America returns as 1.0

competitive supplier

0.0 90 95 00 05 10 15
14

20

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Presentation Outline
Global Petrochemical Industry overview North America Industry Revival MDE Industry Impact on R t of Rest f th the I Industry d t C a Industry China dust y Opportunities and Challenges C Conclusions l i

15

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

The Middle East has Doubled Ethylene Capacity over Five Years
Capacity, Million Metric Tons 40 3 35 30 25 20 15 10 5 0 06 07 08 Iran 09 Qatar 10 11 12 13 14 15 16 Saudi Arabia Kuwait United Arab Emirates Other MDE

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

The Middle East Ethylene Story So Far... Capacity Additions 20082008-12

Iran
Arya Sasol Q1 2008 Q1 2008 Q3 2010 Jam Q3 2008 Q3 2008 Q2 2009 Q3 2009 Q4 2009 Q3 2010 Q1 2012 TKOC RLOC Borouge 2
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Saudi Arabia
Jubail Chevron Phillips p Saudi Ethylene Polyethylene Co. Petro-Rabigh Yansab Sharq Saudi Kayan Sa di Pol Saudi Polymers mers

Morvarid

Other Oth
Q4 2008 Q1 2009 Q3 2010

A Global Impact
Ethylene Production, Million Metric Tons 200 180 160 140 120 100 80 60 40 20 0 MDE Portion of Total, Total, Percent

20 18 16 14 12 10 8 6 4 2 0

90 92 94 96 98 00 02 04 06 08 10 12 14 16 Middle East Rest of World Middle East Portion

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

18

Aromatics Investments - a More Modest Pace

Iran Saudi Arabia

Saudi Chevron Phillips p (Bz) ( ) Jubail Chevron Phillips (Styrene) Saudi Kayan (Bz, Phenol) 2008 2008 2010 Borzuyeh (Bz, Px) 2008 Pars (Styrene) 2010

Other
Kuwait Aromatics (Bz, Px) TKSC (Styrene) Oman Aromatics (Bz, Px) 2009 2009 2009

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Investment Plans
Saudi Arabia Saudi Polymer 1300kt 2012 Sadara 1500kt 2016 Qatar QP/Shell QP/QAPCO 1300kt 2017 1300kt 2018

United Arab Emirates Borouge 3 1500kt 2014

Kuwait PIC 1400kt 2017/8

Iran Kavyan 1 Kavyan 2 Ilam 1000kt 2012 1000kt 2013 458kt 2014

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

20

The Middle East Will Add Less Ethylene Capacity than North America or China in the Next Ten Years
Incremental Ethylene Capacity 20122012-2022*
North America

Middle East

China

Rest of the World 0 2 4 6 Million Metric Tons 8 10 12 14 16 18 20

* Includes Hypothetical Capacity

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Products Will Follow the Most Cost Effective Path to Market Downstream Industry Development??

Hydrocarbon Value Labor Cost C Consumer Demand

?
Energy/Feedstocks Finished Goods
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

22

Presentation Outline
Global Petrochemical Industry overview North America Industry Revival MDE Industry Impact on R t of Rest f th the I Industry d t C a Industry China dust y Opportunities and Challenges C Conclusions l i

23

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

China - Leading the Global Demand Growth

China Share in Global Demand (Million Metric Tons) 2007 2009 2011

26% 74% 69%

31% 66%

34%

World = 289

World = 284

World = 330

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Fast Growing Chinese Market

Million Metric Tons 160 140 120 100 80 60 40 20 0 1996 1998 2000 2002 2004 Demand 2006 2008 2010 2012 Production

The key y success factors: I. Government support II. Strong demand growth from downstream manufacturing sectors III. Chinese companys nimble growth strategy

Aggregate of PE, PP, PVC, MEG, methanol, phenol, styrene, PTA, butadiene
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Coal Chemical is a Fast Growing Sector Coal 80%

Other 20% MTO 4%

Coal 88%
Oth Other 12% Coal 11%

Ethylene Cracker 96%

Ethylene 89%

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Demand For Import Remain Strong

Million Metric Tons
50

40

30

20

10

0 2006 2007 2008 2009 2010 Methanol PE PP PVC MEG 2011 2012 2013 2014 2015 2016 Phenol Butadiene PTA Styrene

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Presentation Outline
Global Petrochemical Industry overview North America Industry Revival MDE Industry Impact on R t of Rest f th the I Industry d t C a Industry China dust y Opportunities and Challenges C Conclusions l i

28

2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

Conclusions
Increased ethane cracking in North America Reduces supply of C3 and C4 co-products
Investments in on-purpose on purpose technology required

Results in significant increase in exports from NAM Returns as primary investment location
Co Competes petes with t low-cost o cost Middle dd e East ast

The Middle East will remain a substantial olefin derivative supplier to Asia

and other regions

Future investments will be limited by availability of low cost feedstocks Industry is moving downstream slowly to add value and create jobs

Long-term demand growth remains robust in China China remains a very competitive world factory floor Domestic consumption outlook remains strong
2012, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.