Strategies for Improving Profitability and Competitiveness and PIC’s initiatives for achieving Growth

1. Strategies for Improving Profitability and Competitiveness and PIC’s initiatives for achieving Growth Yousef Al Ateeqi, Deputy Managing Director (Olefins) Petrochemical Industries Company 14th Feb 2012

2. Content • PIC Introduction • PIC Business Portfolio • Introduction to Petrochemicals • Petrochemicals Industries Business within Kuwait Oil Sector • Strategic Growth • Challenges • PIC efforts to implement LTS

3. PIC Among Kuwait Petroleum Corporation Subsidiaries KOC KAFCO KNPC KUFPEC OSSC PIC is the petrochemical arm of Kuwait Petroleum Corporation KPC ODC KOTC KGOC KPI KPC’s Strategic Direction for PIC is : Increase petrochemicals contribution in KPC’s turnover

4. PIC Vision We aspire to be a recognized global petrochemical player leveraging Kuwait national resources in value added partnerships to drive growth and being admired by our stakeholders PIC Mission • PIC ,as a subsidiary of Kuwait Petroleum Corporation, shall achieve a marked position with downstream extension into high value petrochemical business while ensuring integration with KPC activities both domestically and internationally through: • Maximizing value addition of Kuwait hydrocarbons resources • Excelling our organizational performance through peoples’ empowerment and infusing industry best practices • Creating a challenging and fulfilling environment that will support skills and capabilities development • Collaborating closely with our partners towards a sustained and diversified global growth • Fostering National economy

5. 2030 KPC Downstream Sector Mission & Vision

6. PIC Business Portfolio

7. Petrochemicals Growth in Kuwait Realizing their long term potential, Kuwait ventured into commodity petrochemicals in 1990s A Historical perspective for PIC ….. • 1963 : Started with Fertilizers business • 1993 : MOU signed with UCC for setting up a world scale Olefins Complex • 1995 : EQUATE Petrochemicals Company formed • 1997 : PP Plant and EQUATE Complex successfully commissioned • 2008/2009 : Olefins II, Aromatics and Styrene Plants start up 1997 Polypropylene, Ethylene, Polyethylene and MEG produced for the 1st time in Kuwait

8. PIC Business Portfolio PIC has diversified its position as a significant player in Petrochemicals, with local and International investments International Investments Local Investments Fertilizer Business Polypropylene Business EQUATE is the common operator for (PP, TKOC, TKAC and TKSC) MEGlobal markets Ethylene Glycol produced inside and outside Kuwait

9. PIC Products • 65% of the Petrochemicals products in PIC portfolio are produced in Kuwait • PIC operates the Fertilizer plants • PIC markets • Fertilizer product from Kuwait & GPIC plants • Polypropylene produced in Kuwait • Paraxylene Produced in Kuwait • PIC Joint Ventures • Equate produce PE & EG and market Polyethylene & Styrene • MEGlobal market Ethylene Glycol produced inside and outside Kuwait • Equipolymers produce and markets PET

10. Growth in PIC Profits (1995 – 2011)

11. Introduction to Petrochemicals

12. There are three major building blocks in petrochemicals Ethylene, Propylene, and Aromatics are the essential building blocks for the major petrochemical chains Feed stocks Processes Petrochemical building blocks Petrochemical products Steam Cracking Ethane LPG Polyethylene's EDC/VCM/PVC Ethylene Glycol 1 Ethylene Pygas Pyrolysis Gasoil Fuel Gas Steam Propylene Polypropylene Acrylonitrile Light Naphtha Butadiene Butylenes C5s C4 and C5 Naphtha Splitter Whole Naphtha Heavy Naphtha Naphtha Reforming 2 Styrene Nylon PTA/ Polyester Raffinate Aromatics Reformate Vacuum Gas Oil FCC Propylene 3 Cat Naphtha etc

13. Worldwide Trends in Petrochemicals Source Nexant Since the 1990s, key petrochemicals have achieved above GDP growth rates globally.

14. Middle East Trends in Petrochemicals Market share Source Nexant PIC into petchem • ME started from a small presence & increasingly projected its importance in the petrochemicals sector, registering good growth in market share

15. Future Outlook • Middle East producers are very competitive and well positioned to supply the fast-growing markets. • Middle East feedstock slate will be heavier with lesser advantages. • New projects will require access to technologies and new approaches to development. • Innovation is a joint effort and requires a strong customer oriented culture. • Higher expectation on Job creation and industry returns • Industry cooperation can benefit all.

16. Maintaining Competitive Advantages • Feedstock allocation & pricing– need to be better than netback basis • Competitive energy cost • Improved product offering, packaging and logistics to target growing end users markets • Government Support and incentives to promote investment • Promote downstream units as small and medium business unlike conventional mega projects • Expectation on returns and job creation objective need to be aligned

17. Shift to Differentiated Products

18. Critical Success factors • Scale and level of integration • Access to technology – Differentiated products • Marketing and Distribution • Customer Focus – Innovation and Customer Support • Supply Chain / Logistics efficiency • Improved Projects Management and Execution • CAPEX control and reduce delays • Developing and Retaining best skill

19. Petrochemicals Industries Business within Kuwait Oil Sector

20. KPC Strategic Directions - Petrochemicals • Pursue growth in petrochemicals, both inside and outside of Kuwait, with a partner focusing on high growth petrochemical products. • Pursue full and effective integration between the petrochemical operations and KPC’s operations inside and outside Kuwait. • Build and acquire leading petrochemical assets in mature markets outside Kuwait with a proper foreign partner. • Pursue partial or full privatization of the petrochemical activity.

21. PIC’s previous growth path has resulted in the creation of a successful portfolio KPC’s vision for PIC : Grow in Petrochemicals Inside and Outside Kuwait Stage 1 Stage 2 Create viableoptions Kuwait : Olefins-II, Aromatics, Styrene Overseas : PTA, PET, EG Build emergingbusinesses • Downstream extensions • Further internationalexpansions Extend anddefend corebusinesses • Growth Parameters • New core extensions • Derivatives • Integration • Value creation thru partnerships • Achieve competitiveregional position • Expand domesticpetrochemicalcapacities THE FUTURE COMPLETED COMPLETED Time Frame 2001–2005 2010-2020 2005–2010 In the current Horizon, PIC plans to further strengthen its position inside and outside Kuwait Horizon 2 Horizon 1 Horizon 3

22. PIC’s future growth portfolio will target three key growth themes

23. Create scale and enhance the positioning of its core businesses and diversify its portfolio

24. Strategic Growth

25. Opportunities • feedstock allocation to projects with a diversified product slates • Enhance business scale in near term with new olefins facilities • Access high growth international projects and markets through strategic partnerships • Opportunity to develop required local skills through knowledge transfer and support strategic growth • Investments in downstream specialty chemicals & polymers will add value and diversify the overall portfolio • Opportunity to boost private sector industrialization and participation in local economy.

26. Linking our growth plan to KPC downstream businesses • PIC business growth has key linkages with KPC, KNPC, KPI and KOC : • KPC/KOC for Gas feedstocks for EQUATE and TKOC. • KNPC for liquid feedstocks like Propylene/Naphtha for PP and TKAC • KPI for diversified refinery streams as feedstock to proposed China Project • This value-adding collaboration within downstream sector of KPC will continue, building upon its integrated approach with new petchem projects, inside and outside Kuwait.

27. Sources of Integration Value • Opportunity to create value for both sides “refining & petrochemicals” exists on a large scale • Large new petrochemicals facilities • Existing and planned refineries optimization • Broad product offering to meet Petrochemicals market demand, commodity and specialty products for the integrated complex • Flexibility to process a wide variety of feedstocks • Cost synergies while maintaining resources allocation • Capital optimization through planning to execution

28. Competiveness in International Markets • Building upon core portfolio positions to expand advantaged business positions in olefins and aromatics both within Kuwait and in selected regional locations • Partnering with sister “K” companies to build downstream cracker projects linked to current portfolio • Investing in selected downstream investments that have connectivity to PIC and Partner business interests • Establishing criteria for and pursue opportunistic, financial investments (i.e. M&A) with key caveats

29. Competiveness in International Markets • Aggressive investment in core portfolio with objective of increasing overall regional/global share • Build shared investment projects with KPI & KNPC to achieve refinery /petrochemicals integration diversifying feedstock base • Develop a linked specialty platform • Major geographic diversification investment • Grow/maintain market share in core businesses

30. Key Drivers for Growth • Access to advantaged feedstocks (e.g. methane, ethane, naphtha etc.) • Integration with KPC refining sector, inside & outside Kuwait • Access to world class technology and marketing tie-up with partnerships • KPC financial strength and global positioning • Track record in managing world scale petrochemical complex projects and plants • Geographically located close to high growth Asian markets • Well established relationship with financial sector • Continuing the development of local skills through knowledge transfer and support strategic growth • Enhance private sector industrialization and participation in local economy. • Contribute to the local Economy ( GDP )

31. Petrochemicals industries are a major player in Kuwait GDP creation • Petrochemicals is a key enabler for industrialization • 1$ of direct GDP creation in the chemical sector produces ~1.87 $ of total GDP creation in the Kuwaiti economy • Manufacturing share of GDP approx 6% • Manufacturing share of non Oil GDP approx 10% Contribution of manufacturing sector to GDP lowest in Kuwait among GCC countries

32. Project Opportunities under development • China Project with Kuwait Petroleum International to implement an Integrated Refinery/Petrochemicals Complex • Olefins III Project – World-scale project opportunity in Kuwait • PTA/PET Project in Kuwait. • Refinery/Petrochemicals integration Projects in Kuwait

33. Challenges

34. Challenges • Limited ethane availability, tightening lighter feedstock availability with less feedstock advantage • Constraints related to land availability, utilities and infrastructural facilities • Limited exposure to specialty petrochemicals business • Increased global competition from low cost high scale operators in Middle East and market regions • Interlinked and highly leveraged global economy • Increasing reliance on emerging markets economic prosperity

35. PIC efforts to implement LTS

36. PIC transition to Product Oriented Organization Chairman & Managing Director • The organization is Product Focus • Introduced new functions like Corporate ENGHSE • Established the basis for Growth focused Team work • Introduced best practices and business governance Board Secretary Deputy Chairman & DMD Planning DMD Admin & Finance Finance Corporate Planning Human Resources Engineering and HS&E ERM Information Technology Services & Comm. Six Sigma DMD Fertilizers DMD Aromatics DMD Olefins Business Analysis & Planning Business Analysis & Planning Business Analysis & Planning Marketing Marketing Marketing Fertilizers (Manufacturing) Business Dev. Business Dev. MEGlobal KARO Equipolymers PP GPIC TKSC Olefins II EQUATE

37. Initiatives supporting PIC LTS implementation • Developing the PIC-PGS : A conceptual Gated System was developed for overall execution of Capital Projects • Continuous improvement – Six sigma program • Competency development • Responsible Care and CSR program • Focus on certified management systems in Quality, Environment, Safety & Health

38. Thank you