Presented to ANIQ 2009 Annual Convention Acapulco, Mexico September 2009

1. Global Olefins Market Outlook Presented to ANIQ 2009 Annual Convention Acapulco, Mexico September 2009 Mark Eramo Executive Vice President Market Advisory Services meramo@cmaiglobal.com

2. Global Olefins Market Outlook • The “Big Picture” • New Capacity • The Economy & Demand Growth • Energy Impact on Regional Competition • Profit Cycle Forecast • Questions & Answers

3. Petrochemical Supply-Chain Dynamics Retail Consumers Converters Petrochemicals Energy Derivatives

4. Crude Oil Ethylene Propylene Methane/Hydrogen Refinery • Crude C4 • Butadiene • Mixed Butylenes Naphtha Gas Oil Ethane Ethylene Unit • Pygas • Benzene • Toluene/Xylene • Heavy Aromatics • C5/C6 Non Aromatics Propane Butanes Gas Separation Unit Field Condensates Fuel Oil Natural Gas Bridging The Gap Between Energy and Consumers Energy Feedstocks Petrochemicals

5. 2009 World Ethylene Supply & Demand Forecast Total Production/Consumption ~ 111 Million Metric Tons ( 2007 Production ~ 115 million metric tons )

6. 2009 World Propylene Supply & Demand Forecast _____ _ _____ _____ _ __ __ Total Production/Consumption ~ 67 Million Metric Tons ( 2007 Production ~ 70 million metric tons )

7. Recover in demand will rely on return to strong global economic growth • Demand declined more than 4.0 million tons in 2008. • Worst contraction since early 1980’s • Driven by the global recession and the crash in crude oil prices in 2H08.

8. Supply Growth Outlook • Peak-cycle conditions accelerating investments in Middle East and Asia • Modest to no additions in Europe and North America • Closures announced, others likely by end of 2010 • Some expansion plans for other regions have slowed due to economy • New “On-purpose” propylene capacity accelerating • Supply growth is too much too fast creating highest level of surplus capacity since the early 1980’s Al-Jubail, Saudi Arabia Ethylene Unit

9. Asia/Pacific Will Add 26 Million Ton representing 50% of total additions Middle East Will Add 23 Million Ton representing 43% of total additions

11. China Is Seeking “Upstream Integration” Into Petrochemicals

12. Asia/Pacific Capacity Additions2008 - 2010 Ethylene Capacity: -000- Metric Tons

13. Derivative delays cause lower utilization and/or excess monomer in the market

14. Middle East Capacity Additions9.5 Million Tons During 2008-09

16. Propylene From Traditional Sources Reduced • Refiners increase diesel production flexibility • Limited new investment for FCC units in North America and West Europe • Propylene from refineries will stagnate or decrease in developed regions although developing regions add new refineries • Flexible steam crackers consume very light feedstocks in short term reducing propylene output

17. Global Propylene Capacity Additions2008 - 2010 PG/CG Propylene Capacity: -000- Metric Tons

18. Middle East Propylene Start-Up Profile: 2008-09

19. Acceleration In “On Purpose” Causing Oversupply Million Metric Tons Global PG/CG Capacity Additions

20. Global Olefins Market Outlook • The “Big Picture” • New Capacity • The Economy & Demand Growth • Energy Impact on Regional Competition • Profit Cycle Forecast • Questions & Answers

21. Demand Growth Driven By Steady Economic Growth • Petrochemical demand ultimately driven by consumption of durable/non-durable goods • Contractions in economic activity appear to have ended in many countries • Signs of stabilization in the financial markets and confidence levels among businesses and consumers improving • China and the rest of Asia will likely lead the gradual economic recovery • Tighter credit conditions, higher inflation, large national account deficits can limit growth • Global GDP is forecast to contract in 2009 by 2.4% followed by positive growth

22. Economic Activity Levels as Defined by GDP "The Return to Good Business In Canada & the U.S." Trillions of Constant 2007 Dollars by Quarter $13.0 4Q11 $12.8 2.5 year Loss in Growth Curve 2Q08 4Q10 $12.6 $12.4 $12.2 2Q09 $12.0 2006 2007 2008 2009 2010 2011

23. Global GDP Periods of very strong light olefins demand growth.

26. Forecast calls for annual average growth from 2009 - 2013: Ethylene = 4.4% AAGR Propylene = 4.9% AAGR

27. Global Olefins Market Outlook • The “Big Picture” • New Capacity • The Economy & Demand Growth • Energy Impact on Regional Competition • Profit Cycle Forecast • Questions & Answers

28. U.S. Natural Gas Production:Shale has a significant impact on supply picture Source: EIA.

29. Energy Volatility In North America

30. Advantage: Middle East 2008 Global Ethylene Cash Cost Curve Dollars Per Ton 1850 U.S. Gulf Coast Natural Gas = $8.99/MM Btu 1650 Brent Crude Oil = $97.51/Bbl ($13.16/MM Btu) 1450 1250 NEA NAM WEP 1050 SEA SAM High crude oil and natural gas prices in other regions provides a substantial advantage to Middle East producers, who dominate the first quartile on the cost curve. Alberta 850 650 MDE 450 250 50 0 20 40 60 80 100 120 140 160 180 Cumulative Ethylene Capacity (Million Tons)

31. Energy Matters To Middle East Competitiveness Dollars Per Ton 1850 Brent Crude Oil Prices: 2003 = $30/bbl 2008 = $97/bbl 1650 2008 1450 1250 1050 2003 850 650 450 MDE 250 50 0 20 40 60 80 100 120 140 160 180 Cumulative Ethylene Capacity (Million Tons)

35. Navigating Through Cycle-Trough Conditions • Surplus capacity in the global market has forced lower utilization on a global basis starting at the end of 2008 • Cash margins and prices have declined reaching cycle-trough levels • Cycle-trough conditions forecast to persist well into 2012

38. Forecast assumes regional high-cost units will shut down near term in order to manage the significant level of surplus capacity that will build up by 2010.

41. Closing Thoughts • Combination of economic recession and excessive capacity additions lead to significant surplus capacity • Cycle-trough conditions forecast to persist into 2012 despite assumption of 6 MM tons in closures • Ethane/LPG cracking seeing benefits of high-crude and low-gas energy scenario • 2009 performance better than expected, however bottom of trough still to come

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