Global Olefins & Polyolefins

Bob Patel
LyondellBasell Investor Day December 8, 2010

Discussion Topics
Introduction to Olefins and Polyolefins Where are we in the ethylene cycle? LyondellBasell - global leader in PE & PP

Bob Patel

U.S. ethane advantage U.S. and European feedstock flexibility Recent portfolio adjustments Downstream integration into
compounding

SVP Olefins & Polyolefins Europe, Asia, International as of November 2010. Previously was SVP Olefins & Polyolefins, Americas since April 2010 General Manager, Olefins and Natural Gas Liquids for ChevronPhillips Chemical Company (CP Chem, 2009-10) President, Asia Pacific region for CP Chem (2008-09) Business manager, Olefins for CP Chem (2005-08) Business manager, Polyethylene for CP Chem (2000 - 05) Styrenics manufacturing and marketing, Chevron Chemical (1990 2000)
2

Technology advantage (Licensing,

Catalysts)

Summary
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Oil and Gas to Polyolefins

Basic Sources Feedstocks
Natural Gas Liquids

Cracker

Basic Petrochemicals
Typical Output ( %) from

Next step Derivatives

Our Chemicals
PE Polyethylene PVC Ethylene Glycol Styrene

Olefins

Ethane

Naphtha

Fractionation

Ethane Propane Butanes Condensates Light Fractions Naphtha Off-Gases Gas Oil Butadiene 2 5 Ethylene 80 31

Natural Gas

PVC EG

Steam Cracking
Propylene 3 16

Distillation

Crude Oil

PP PO PB

Polypropylene Propylene Oxide Polybutadiene Butadiene rubbers

Olefins, the basic building blocks, can be produced from either crude oil or natural gas Cost of feedstocks, scale and vertical integration are the main factors in overall competitiveness
Source: LyondellBasell

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Where are we in the Global Ethylene Cycle?

Global Ethylene Operating Rates U.S. Ethylene Cash Profit Margins

95

35

Naphtha Ethane

Cash Margin (c/lb)

2010 Fcst.

Nameplate operating Rate, %

90
2009 Fcst.

25

85

15

80

75

2000

02

04

06

08

10

12E

14E

-5 2004

05

06

07

08

09

10E

1-2 years ahead in recovery vs. prior views Naphtha price providing an umbrella for strong ethane profits
Source: CMAI, 2009-2011 Reports

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U.S. Ethane Advantage

Crude Oil Versus Natural Gas
Price ($ / million BTU) Ratio $ / Barrel ($ / million BTU)
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Ethylene Cash Cost Curve

$/metric ton 1,050
Middle East North America

Average Feedstock Basis

18 16 14 12 10 8 6 4 2 0

Natural gas (USGC) WTI (Cushing) Crude to Natural Gas Ratio

850
16 14 12 10 8 6 4 2 0

NE Asia SE Asia

2009

650

Western Europe

450 2004 250

50 0 20 40 60 80 100 120 140 Cumulative Ethylene Capacity (million tons) 160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

U.S. natural gas price continues to stay disconnected from global crude oil price, as U.S. natural gas supply increases with U.S. shale gas production

North America is the second lowest cost ethylene producing region in the world

Source: CMAI September 2010

Source: CMAI 2009 Curve: February 10, 2010 Asia Light Olefins Market Advisory Service (Graphical Analysis) 2004 Curve: 2005 World Light Olefins Analysis

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U.S. Feedstock Trends

Olefins Feedstock vs. Crude Oil Prices
% of Crude, BTU basis

U.S. Propylene to Ethylene Ratio

1.5

130% 120% Light Naphtha 110% 100%

1.3

1.0 90% Propane 80% 70% 60% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Ethane 0.8

0.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Since 2008, the relative price of U.S. ethane (as a percent of crude oil price) has been trending down, due to cheaper U.S. natural gas

Propylene / Ethylene price ratio continues to increase as ethylene production from ethane increases and propylene production from steam naphtha crackers declines
Source: CMAI - November 2010, Propylene Chemical Grade Contract Price ratio to Ethylene Contract Price - Net Transaction Pipeline

Source: CMAI - September 2010

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Outlook For U.S. Ethane Supply Appears Positive

U.S. Ethane Price Over Fuel Value
cents / gallon 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Thousand Barrels per Day 1,000 950 900 850 800 750 700 650 600 550 500 2007 2008 2009 2010 2011 2012 2013 Avg Sept-2010 YTD Ethane Demand
1% Increase vs. 2009 5% 11% 7%

U.S. Ethane Supply / Demand

Cash breakeven for ethane

Additional Anticipated Ethane Supply Capability 1

The potential is ~20 /gal ethane price decrease which equals to ~10 /lb of ethylene cost Ethane spread over its fuel value has improved with the increase in steam cracker feedstock demand displacing propane and heavier feedstocks

Existing Ethane Supply Capability (including announced fractionation expansions and refinery ethane)

Several expansions in U.S. Gulf Coast ethane fractionation capacity in 2011-12 should increase available supply to U.S. ethylene producers

Source: CMAI - September 2010

Source: EnVantage, Jacobs Consultancy - September 2010 1 Additional Anticipated Ethane Supply Capability includes estimates of ethane from unannounced plants (Eagle Ford), LNG, and Marcellus

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Shale Gas The Game Changer?

Horizontal drilling yielding substantial new production of gas from shale Many shale locations are rich in ethane: Eagle Ford, Bakken, Granite Wash, Marcellus Estimated U.S. reserves 245 TCF, Annual U.S. consumption 23 TCF >10 years of supply identified

Source: EnVantage

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LyondellBasell is Well-Positioned in the U.S. Olefins Market

Feedstock flexibility: content of natural gas liquids could vary from 35% to 85% of the total ethylene Advantaged Midwest ethane crackers Co-product capabilities
20 18 16 14
cents/gal

12 10 8 6 4 2 0 2000
Source: OPIS

FCCU propylene and splitter Butadiene recovery Metathesis unit

Overall, LyondellBasell produced strong results in 2010, due to a combination of company-specific advantages and a favorable U.S. olefins market

Mont Belvieu to Conway Spread

01

02

03

04

05

06

07

08

09

10E

Average Quarterly EBITDA(R) since Q209: ~$525 million

800
USD, millions
O&P - Europe, Asia, International O&P - Americas

600 400 200 0 Q109 Q209 Q309 Q409 Q110 Q210

1 2

Q310

1 See appendix for reconciliation of EBITDA and EBITDA to net income. 2 Excludes $171 million and $5 million LCM inventory valuation adjustments in O&P Americas and O&P EAI, respectively. 3 Excludes $26 million and $5 million LCM inventory valuation adjustments in O&P Americas and O&P EAI, respectively.

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PE and PP Industry Chain Margins

cents/lb ethylene

Ethylene Chain

cents/lb propylene

Propylene Chain

35 30 25 20 15 10
Polyethylene Cash Margin Ethylene Margin (from Ethane) Ethane Margin (from Fuel)

25

Polypropylene Cash Margin Polymer Grade Propylene Margin over Refinery Grade Refinery Grade Propylene Spread over Alky Value

20

15

10

5 5 0 0 -5
Source: CMAI 2010 Ethane: GC Natural Gas to Purity Ethane Mont Belvieu Ethylene: GC Ethane Cash Cost to Ethylene Avg Acq Price PE: Margin (pre-tax Contract Sales, HD Blow Molding)

-5

Source: CMAI

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

With shift of ethylene production to ethane in 2007-10, ethane suppliers' share of chain profits increased Meanwhile, ethylene and PE profits for U.S. PE producers in 2005-10 remained in a steady range, comparable with the previous 2005 cyclical peak We expect more upside with global upcycle in 2014-15

With increased shift to light feedstocks, U.S. crackers are making less propylene Tighter supply / demand of U.S. propylene has resulted in much higher price volatility Given our large, flexible position in U.S. propylene, LyondellBasell is in a good position to benefit from propylene tightness
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Low U.S. Producer Inventories Lead to Price Volatility

U.S. Ethylene
Billion lbs
5.0 4.5 4.0 3.5 3.0 2.5 2.0 Million lbs (left axis) 1.5 Days (right axis) 1.0 0.5 0.0 01 02 03 04 05 06 07 08 09 10 Est.
Source: NPRA, average of quarterly data

U.S. Polyethylene
Days 5.0 4.5 4.0 3.5 3.0
Billion lbs (left axis) Days (right axis)

50 45 40 35 30 25 20 15 10 5 0

2.5 2.0 1.5 1.0 0.5 0.0 01 02 03 04 05 06 07 08 09 10 Est.

Source: ACC, average of monthly data

Combined days of U.S. producer inventory decreased over 45% during the past decade. This has contributed to larger price increases during unplanned outages.
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Global Ethylene Capacity & Demand Changes

Billion lbs
30 25 20 15 10 5 ---(5) (10) (15) 2000 01 02 03 04 05 06 07 08 09 10E 11E 12E 13E 14E 2015E

Forecast

Operating Rate, %
95 90 85 80 75 70 65 60 55 50

North America Asia Global Operating Rate

West Europe Other

Middle East Global Demand

2010 capacity increase can be absorbed over 2011 12

Source: CMAI 2010

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Largest Polyolefin Producers

LyondellBasell SINOPEC Exxon Mobil ExxonMobil Dow SABIC CNPC Ineos TOTAL Formosa Reliance CP Chem Borealis Enichem IPIC Repsol 0 2,000 4,000 6,000 8,000

HDPE

LLDPE 10,000

LDPE

PP 12,000

KT

Most of these top 10 producers operate one or more of LyondellBasell licensed processes
Source: CMAI 2010, LyondellBasell 1. Capacity ranking includes LyondellBasell wholly owned capacity and 100% of JV capacity as of December 31, 2009.

Capacity Ranking (1)

U.S. #2 #3 #1

W. Europe #7 #1 #1

Olefins PE PP

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Polyethylene Applications
HDPE
Other 15% Blow Molding 26%

LLDPE
Other 12% Pipe and Extrusion 2%

LDPE
Others 16%

Pipe and Extrusion 13%

Injection Molding 7%

Rotomolding 3%
Film & Sheet 26% Injection Molding 20%

Extrusion Coating 10%

Film & Sheet 76%

Injection Molding 7%

Film & Sheet 67%

Source: CMAI, 2009

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Polypropylene and Catalloy Applications

Source: LyondellBasell

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Olefins and Polyolefins Assets Americas

Ohio
Fairport Harbor (Polyethylene)

Illinois Iowa
Clinton (Olefins, Polyethylene) Morris (Olefins, Polyethylene) Tuscola (Polyethylene)

Tennessee
Jackson (PCMA*)

Louisiana
Lake Charles (Polypropylene)

Texas Mexico (JV)

Tampico (Polypropylene, PCMA*) Bayport (Polypropylene) Channelview (Olefins) Chocolate Bayou (Polyethylene) Corpus Christi (Olefins) La Porte (Olefins, Polyethylene) Matagorda (Polyethylene) Mansfield (PCMA*) Victoria (Polyethylene)

Brazil
Pindamonhangaba (PCMA*)

Argentina
Ensenada (Polypropylene, PCMA*)
* PCMA (compounding) business is incorporated in EAI O&P financials
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Olefins and Polyolefins Assets Europe

Polyolefins and/or Compound Monomers

United Kingdom Carrington Milton Keynes

Netherlands Moerdijk

Germany Wesseling / Knapsack Mnchsmnster Bayreuth Frankfurt

Poland

Basell Orlen JV
France Berre / Aubette

Spain

Tarragona

Italy Ferrara Brindisi

The nature and location of our European sites reflects a long history of consolidation through the 1990s and 2000s.
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Improvements to our European Assets

Self-help measures paid off
75%

Proactive rationalization
1,250 1,000
European Rationalizations European Capacity Additions Saudi JV Capacity Additions

60%

750
45%

2008

500

Net change

Total Volume, %

Million pounds

2010
30%

250 0 -250 -500 -750

Net change

15%

0%

First Quartile

Second Quartile

Third Quartile

Fourth Quartile

-1,000

PP

PE

Step-change in our European Polyolefin Plant Fixed Cost Quartile Positions 2008 vs. 2010 This self-improvement should help European segment in 2011-12, given expected impact from Middle East new production
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We have done a significant re-positioning of our European assets in 2008-2010. More similar steps are expected from other European producers

Note: Saudi JV capacity additions reflect proportional share of added capacity.

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PP Compounding is a Significant Global Business

Significant potential for PP compounds to replace existing materials
Engineering plastic replacement Fuse Boxes ( PBT, PA ) Front Ends ( PA, LFT-PP ) Engine covers (PA) Water tanks (PA) ABS & ABS/PC replacement Instrument panel carriers Consoles Grilles Steel replacement Hatchbacks Battery support Water drainage beams Pedal supports Door modules Fender module Seat structures

Region
EU North America South America Asia Softell for interiors Instrument panel parts Door panels Interior trims

Market Share
45% 25% 45% 10%

Automotive market recovery forecasted at an annual rate of 7.5% from 09, up to ~ 90 M vehicles by 2015. Innovation pipeline increasing PP-based products in a car, replacing other materials (e.g., metal, ETPs).
Note: Image courtesy of VW. Automotive market forecast refers to IHS Automotive Light Vehicle Production Forecast, June 2010, Copyright 2010, CSM Worldwide, Inc

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International Assets and Joint Ventures

Saudi Arabia SEPC (JV) SPC (JV) Al Waha (JV)

Chemical Monomers Polyolefins and/or Compound

LyondellBasell is
geographically well positioned in Asia, enabling U.S. to supply a fastgrowing market

Two JVs in Saudi Arabia

started up recently, and should increase dividends
Asia Pacific* HMC (JV) Suzhou Guangzhou/Nansha Poly Pacific (JV)

Japan & South Korea Poly Mirae (JV) Sun Allomer (JV)

Australia Geelong Clyde

Note: Each circle represents the presence of a Business at a site, irrespective of the number of plants/lines the business has at that site. As of September 30, 2010.

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Technology Business
This is a hi-tech, fully integrated, high-margin and fast growing business (14% CAGR 2002-09).

Licensing
Performance driven by
industry investment cycle on capacities additions: large opportunities in 2004-09, less in 2010-14

PolyolefinCatalysts
Usually long-term customer
partnerships with unique technology solutions, thus stable and predictable financial performance.

Services
Integrated start-up and poststartup services to licensees over the lifetime of the project, capitalizing on LyondellBasell in-house technical expertise

However, this lull in new

construction activity should be helpful to our own PE, PP business in their upcycles

Sales volume should

continue to increase due to steadily higher global Polyolefins production, licensing share and our product innovation capability

Flexible resource
management and professional execution processes in place

Commercializing Innovation
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Comprehensive Portfolio of Technologies for Licensing

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Global Olefins & Polyolefins Summary

Global Ethylene Cycle
Stronger in 2010 than expected Remaining new capacity of the last wave should be absorbed in 2011-12

Focus on Restructuring and Reliability

Implemented U.S. restructuring in early 2010, further plans to align other regions Reliability and safety remain a focus

U.S. Ethane Advantage

Structural and sustainable benefits LyondellBasell still retains feedstock flexibility

Licensing, Catalysts & Services

Super-specialty business: highly profitable, strong & global technology position Pace of new capacity additions impacts licensing

U.S. Olefins is set at higher performance

Record financial results in 2010, while retaining upside to the global ethylene peak U.S. market should be tight due to exports

Global Polyolefins (PE + PP)

LyondellBasell is a global leader by scale, technology and a cost-curve position Strong performer in 2010, leverage to upcycle

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