Olefins_PolyolefinsBobPatel

(1)

Global Olefins & Polyolefins

LyondellBasell Investor Day

December 8, 2010

(2)

Discussion Topics

Bob Patel

• Introduction to Olefins and Polyolefins

• Where are we in the ethylene cycle?

• LyondellBasell - global leader in PE & PP

–

U.S. ethane advantage

–

U.S. and European feedstock flexibility

–

Recent portfolio adjustments

–

Downstream integration into

compounding

–

Technology advantage (Licensing,

Catalysts)

• Summary

•

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)

(3)

| www.lyondellbasell.com | LyondellBasell Investor Day 2010LyondellBasell Investor Day 2010 333

Oil and Gas to Polyolefins

• 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

Basic Sources Feedstocks Cracker Next step Derivatives

Natural Gas Typical Output ( %) from

Liquids Olefins Ethane Naphtha Our Chemicals

Ethane PE Polyethylene

Propane Ethylene 80 31 PVC PVC

Butanes EG Ethylene Glycol

Condensates Styrene

Light

Fractions Propylene 3 16 PP Polypropylene

Naphtha PO Propylene Oxide

Off-Gases

Gas Oil Butadiene 2 5 PB Polybutadiene

Butadiene rubbers Basic Petrochemicals Natural Gas Crude Oil Steam Cracking F ract io nat ion D is till a tio n

(4)

Where are we in the Global Ethylene Cycle?

Global Ethylene Operating Rates

U.S. Ethylene Cash Profit Margins

Source: CMAI, 2009-2011 Reports

-5 5 15 25 35 2004 05 06 07 08 09 10E C ash M a rg in ( c /l b ) Naphtha Ethane 75 80 85 90 95 2000 02 04 06 08 10 12E 14E N a m e pla te ope ra ti n g R a te , % 2009 Fcst. 2010 Fcst.

• 1-2 years ahead in recovery vs. prior views

(5)

| www.lyondellbasell.com | LyondellBasell Investor Day 2010LyondellBasell Investor Day 2010 555 0 2 4 6 8 10 12 14 16 18 0 2 4 6 8 10 12 14 16 18 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Natural gas (USGC)

WTI (Cushing)

Crude to Natural Gas Ratio

U.S. Ethane Advantage

Source: CMAI – September 2010

•

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

50 250 450 650 850 1,050 0 20 40 60 80 100 120 140 160

Cumulative Ethylene Capacity (million tons)

$/metric ton Average Feedstock Basis

Middle East North America NE Asia SE Asia Western Europe 2009 2004

•

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

Source: CMAI

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

Price ($ / million BTU)

Ratio $ / Barrel ($ / million BTU)

(6)

0.5 0.8 1.0 1.3 1.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 60% 70% 80% 90% 100% 110% 120% 130% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

% of Crude, BTU basis

Ethane

Propane Light Naphtha

U.S. Feedstock Trends

Source: CMAI - November 2010, Propylene Chemical Grade Contract Price ratio to Ethylene Contract Price - Net Transaction Pipeline

Source: CMAI - September 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

(7)

Outlook For U.S. Ethane Supply Appears Positive

Source: CMAI - September 2010

•

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

Source: EnVantage, Jacobs Consultancy - September 2010

1_{Additional Anticipated Ethane Supply Capability includes estimates of ethane from unannounced plants}

(Eagle Ford), LNG, and Marcellus

U.S. Ethane Supply / Demand

U.S. Ethane Price Over Fuel Value

Additional Anticipated Ethane Supply Capability 1

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

500 550 600 650 700 750 800 850 900 950 1,000 2007 2008 2009 2010 2011 2012 2013 Thous a nd B a rr e ls pe r D a y

Avg Sept-2010 YTD

Ethane Demand 1% 5% 7% 11% Increase vs. 2009 Cash breakeven for ethane 0 5 10 15 20 25 30 35 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 cents / gallon

(8)

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 Æ >10 years of supply identified

(9)

| www.lyondellbasell.com | LyondellBasell Investor Day 2010 99

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

–

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

Average Quarterly EBITDA(R) since Q2’09: ~$525 million

0 200 400 600 800 Q109 Q209 Q309 Q409 Q110 Q210 Q310 US D , mil lio n s

O&P - Europe, Asia, International O&P - Americas

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.

0 2 4 6 8 10 12 14 16 18 20 2000 01 02 03 04 05 06 07 08 09 10E cen ts/ g al

Mont Belvieu to Conway Spread

Source: OPIS

(10)

PE and PP Industry Chain Margins

• 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 -5 0 5 10 15 20 25 30 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 cents/lb ethylene

Polyethylene Cash Margin Ethylene Margin (from Ethane) Ethane Margin (from Fuel)

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

0 5 10 15 20 25 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 cents/lb propylene

Polypropylene Cash Margin

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

Source: CMAI

Propylene Chain

Ethylene Chain

(11)

Low U.S. Producer Inventories Lead to Price Volatility

U.S. Polyethylene

U.S. Ethylene

Million lbs (left axis)

Days (right axis)

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 01 02 03 04 05 06 07 08 09 10 Est. Billion lbs

Source: NPRA, average of quarterly 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.

Billion lbs (left axis) Days (right axis)

0 5 10 15 20 25 30 35 40 45 50 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 01 02 03 04 05 06 07 08 09 10 Est. Days

(12)

2010 capacity increase can be absorbed over 2011 – 12

Global Ethylene Capacity & Demand Changes

Source: CMAI 2010 (15) (10) (5) ----5 10 15 20 25 30

2000 01 02 03 04 05 06 07 08 09 10E 11E 12E 13E 14E 2015E

50 55 60 65 70 75 80 85 90 95

North America West Europe Middle East

Asia Other Global Demand

Global Operating Rate

Forecast

(13)

Largest Polyolefin Producers

Most of these top 10

producers operate one or

more of LyondellBasell

licensed processes

Capacity

Ranking (1) U.S. W. Europe

Olefins #2 #7 PE #3 #1 PP #1 #1 0 2,000 4,000 6,000 8,000 10,000 12,000 Repsol IPIC Enichem Borealis CP Chem Reliance Formosa TOTAL Ineos CNPC SABIC Dow Exxon Mobil SINOPEC LyondellBasell

HDPE LLDPE LDPE PP

ExxonMobil

KT

Source: CMAI 2010, LyondellBasell

(14)

Polyethylene Applications

Injection Molding 20% Pipe and Extrusion 13%

Film & Sheet 26% Other

15% _{Blow Molding}

26%

Film & Sheet 67% Extrusion Coating 10% Injection Molding 7% Others 16%

HDPE

LLDPE

LDPE

Source: CMAI, 2009

Film & Sheet 76% Injection Molding 7% Rotomolding 3% Pipe and Extrusion 2% Other 12%

(15)

Polypropylene and Catalloy Applications

(16)

Olefins and Polyolefins Assets – Americas

Texas Louisiana Mexico (JV) Illinois Iowa Bayport (Polypropylene) Channelview (Olefins) Chocolate Bayou (Polyethylene) Corpus Christi (Olefins) La Porte (Olefins, Polyethylene) Matagorda (Polyethylene) Mansfield (PCMA*) Victoria (Polyethylene)

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

Lake Charles (Polypropylene)

Ensenada (Polypropylene, PCMA*)

Argentina Brazil

Tampico (Polypropylene, PCMA*)

Pindamonhangaba (PCMA*)

Ohio

Fairport Harbor (Polyethylene)

Tennessee

Jackson (PCMA*)

(17)

| www.lyondellbasell.com | LyondellBasell Investor Day 2010LyondellBasell Investor Day 2010 171717 United Kingdom • Carrington • Milton Keynes France • Berre / Aubette Spain • Tarragona Germany • Wesseling / Knapsack • Münchsmünster • Bayreuth • Frankfurt Poland • Basell Orlen JV Italy • Ferrara • Brindisi Monomers

Polyolefins and/or Compound

Netherlands

• Moerdijk

Olefins and Polyolefins Assets – Europe

The nature and location of our European sites reflects a long

history of consolidation through the 1990’s and 2000’s.

(18)

Improvements to our European Assets

• 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

2008

2010

PP PE

• We have done a significant re-positioning of our European assets in 2008-2010.

• More similar steps are expected from other European producers 0% 15% 30% 45% 60% 75% First Quartile Second Quartile Third Quartile Fourth Quartile Total Volume, % -1,000 -750 -500 -250 0 250 500 750 1,000 1,250 Net change Net change European Rationalizations European Capacity Additions Saudi JV Capacity Additions

Million pounds

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

Proactive rationalization

(19)

PP Compounding is a Significant Global Business

Region Market Share

EU 45%

North America 25% South America 45%

Asia 10%

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

Softell for interiors

•Instrument panel parts

•Door panels

•Interior trims Steel replacement

•Hatchbacks

•Battery support

•Water drainage beams

•Pedal supports

•Door modules

•Fender module

•Seat structures

Significant potential for PP compounds to replace existing materials

•

Automotive market recovery forecasted at an annual rate of 7.5% from ‘09, up to ~ 90 M vehicles by 2015.

(20)

Asia Pacific* • HMC (JV) • Suzhou • Guangzhou/Nansha • Poly Pacific (JV) Chemical Monomers

Polyolefins and/or Compound

International Assets and Joint Ventures

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

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

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.

Australia • Geelong • Clyde

•

LyondellBasell is geographically well

positioned in Asia, enabling U.S. to supply a

fast-growing market

•

Two JVs in Saudi Arabia started up recently, and should increase dividends

(21)

Technology Business

Commercializing Innovation

Services

• Usually long-term customer

partnerships with unique technology solutions, thus stable and predictable financial performance.

• Sales volume should

continue to increase due to steadily higher global

Polyolefins production, licensing share and our product innovation capability

Polyolefin Catalysts

• Performance driven by

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

• However, this lull in new

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

Licensing

•

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

• Integrated start-up and

post-startup services to licensees over the lifetime of the

project, capitalizing on LyondellBasell in-house technical expertise • Flexible resource management and professional execution processes in place

(22)

(23)

• Implemented U.S. restructuring in early 2010, further plans to align other regions

• Reliability and safety remain a focus

• Structural and sustainable benefits

• LyondellBasell still retains feedstock flexibility

U.S. Ethane Advantage

• Super-specialty business: highly profitable, strong & global technology position

• Pace of new capacity additions impacts licensing

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

U.S. Olefins is set at higher performance

• LyondellBasell is a global leader by scale, technology and a cost-curve position

• Strong performer in 2010, leverage to upcycle

Global Ethylene Cycle

• Stronger in 2010 than expected

• Remaining new capacity of the last “wave” should be absorbed in 2011-12