Ethylene Good Today Better Tomorrow 22mar2011 FINAL

Ethylene: Good Today, Better Tomorrow
Sergey Vasnetsov SVP Strategic Planning and Transactions

Presented at Goldman Sachs 2011 Houston Chemical Intensity Day March 22, 2011
Cautionary Statement
The information in this presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. Actual outcomes and results may differ materially from what is expressed or forecast in such forwardlooking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ from forward-looking statement include, but are not limited to, availability, cost and price volatility of raw materials and utilities; supply/demand balances; industry production capacities and operating rates; uncertainties associated with worldwide economies; legal, tax and environmental proceedings; cyclical nature of the chemical and refining industries; operating interruptions; current and potential governmental regulatory actions; terrorist acts; international political unrest; competitive products and pricing; technological developments; the ability to comply with the terms of our credit facilities and other financing arrangements; the ability to implement business strategies; and other factors affecting our business generally as set forth in our filings with the Securities and Exchange Commission, which can be found at www.lyondellbasell.com on the Investor Relations page and on the Securities and Exchange Commissions website at www.sec.gov.
This presentation contains time sensitive information that is accurate only as of the date hereof. Information contained in this presentation is unaudited and is subject to change. We undertake no obligation to update the information presented herein except as required by law.
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Ethylene - Good Today, Better Tomorrow
Three Components Of The Longer Term Outlook

First, lets establish a baseline current view Then lets consider near-future global demand and supply trends
and balance
Finally, naphtha / ethane price ratio impact on U.S.
Ethylene: Good Today, Better Tomorrow
Global Operating Rates Indicate Trough Conditions

95
Global Operating Rate, %
90
?
85
80 1990 1995 2000 2005 2010
Peaks follow troughs, generally with a steep incline

Source: CMAI. Operating rates based on nameplate capacities
Naphtha Margins Have Been Choppy @ Trough

North America
30 25 Margin (cents / lb) 20 15 10 5 0 -5 -10 -15
Jan-09 Apr Jul Oct Jan-10 Apr Jul Oct Jan-11
North America Spot Naphtha Margin Historic Peak Historic Trough
Western Europe
30 25 Margin (cents / lb) 20 15 10 5 0 -5
Western Europe Spot Naphtha Margin Historic Peak Historic Trough
Northeast Asia
30 25 Margin (cents / lb) 20 15 10 5 0 -5 -10
Northeast Asia Spot Margins Historic Peak Historic Trough
A trough-to-peak increase was in a range of 10-15 /lb historically LYB has ~14 billion lbs of ethylene capacity
Note: Peak and trough margins from 1990-2009. Source: CMAI
Divergence of Oil - Nat Gas Prices Creates Opportunity

Crude Oil vs. Natural Gas
120 100 80 $ / barrel 60 40 20 0
WTI Crude Oil Natural Gas (USGC)
North American Ethane and Naphtha Margins

20 18 16 14 12 10 8 6 4 2 0 $ / MMBTU
Cash Margin, cents / lb
25 20 15 10 5 0 -5 1990
Ethane Margin Naphtha Margin
1990
1995
2000
2005
2010
1995
2000
2005
2010
Despite the current supply / demand situation and low naphtha spot margins, the crude oil to natural gas ratio has created a positive environment in North America
LYB O&P Americas segment profits reflect this positive environment

Source: CMAI
Promising Global Economic and Demand Forecasts

GDP and Industrial Production Outlook
5
GDP Industrial Production
Global Demand Scenarios for 2015

400 Demand (billion pounds ethylene) 350 300 250 200 150 100 50 0
Percent
0 2001-2010 2011-2015
2010 Demand
CMAI 2011 Forecast
1.3x - 1.5x CMAI 1.3x - 1.5x Wall Global GDP Street Global Outlook GDP Outlook
Global Insight forecasts global GDP and industrial production growth of >4% in 2011-15
This global growth requires production of 35+ worldscale ethylene plants
Economic forecasts indicate potential for strong demand growth

Sources: Global Insight, CMAI
China and India Still Hold Tremendous Potential

Regional Demand Growth 2000-2009
PE Consumption per Capita, LBS
Polyethylene Consumption by Region 2009 per capita consumption

80 70
N. America
120 2000 Demand (billion pounds ethylene) 100 2009
60 50 40
Middle East
W. Europe
30
Northeast Asia
20 10 0 0
SE Asia
S. America CIS & Baltic States
80
Indian Subcontinent Africa
10
15
20
25
30
35
40
45
2009 GDP per Capita, Thousands
60
Population (billion)
Population
1.5
40
1.0
20
0.5
Coastal China
0
North America
Source: CMAI
Europe
Asia
0.0
China
India
United States
Western Europe
8
We Have Passed The Period Of Peak Capacity Additions

Capacity Additions (billion lbs)
25 20
Potential Demand Growth
15 10 5 0 2011 2012 2013 2014
Nameplate Additions 43 billion pounds
2015
World Scale Plant Startups

2011 Middle East India NE Asia SE Asia ROW (equiv. plants) TOTAL 3 2 2 7 2012 1 1 1 3 2013 4 1 5 2014 1 2 2 5 2015 1 1 1 1 4 Total 5 2 7 3 7 24
18 grass root plants

Source: CMAI
Plants have a 4-5 year long construction cycle Demand suggests need for 35+ active world scale projects Only 24 of new equivalent plants have been identified by CMAI
Lower Reliability May Become The New Norm

N. America Ethylene Production Losses, % of capacity
12% 10% 8% 6% 4% 2% 0%
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10E Avg Avg 90s 00s
U.S. Gulf Coast operates as a network

Storage Olefins Derivatives
deep trough shutdowns
hurricanes
Planned Loss (maintenance)
Unplanned
Hurricanes
Middle Eastern and Asian sites are not interconnected

Refinery / Gas Plant Olefins Derivatives
W. Europe Ethylene Production Losses, % of capacity

14% Deep trough shutdowns reflect extraordinary circumstances and extreme declines in ethylene demand, in tandem with industrial demand declines globally
12%
10%
8%
96% x 96% x 96% = 88%
6%
4%
2%
0%
03 04 05 06 07 08 09 10 Avg Avg 90s 00s
Planned Loss (maintenance)
Unplanned
Aging U.S. and European plants Isolated vs. interconnected
Source: CMAI
10
Operating Rates Under Different Demand Scenarios

105
Effective Operating Rate Nameplate Operating Rate
Potential upside
100
95
90
85
80 1990 1995 2000 2005 2010 2015
Effective operating rates historically 4-6% stronger than nameplate recent history is higher Practical limits are reached at effective rates in the high 90% range
Source: CMAI - nameplate operating rate. Effective operating rate estimated as nameplate operating rate + 5%.
11
What Could Alter This Path?
CouldWeSeeSlowerDemandGrowth? Base case is 3.6% global GDP similar to historic China GDP growth targets are 8%-10% per year - Surpassed targets in past years - Regional GDP indicates historical growth has
largely been on the coast
2 billion people on cusp of increased consumption in

China & India
This train, with its forward momentum, will be difficult to derail

Source: CMAI
12
What Could Alter This Path?

CouldSupplySurpassTheOutlook?
New plant construction

Difficult to accelerate if not already underway today
Delays have been more typical
Raw Materials
Middle East natural gas / ethane availability is
limited. For example:
Energy production from liquid fuels in Middle East - Saudi Arabia, Kuwait Kuwait / UAE gas shortfalls Dolphin pipeline Local needs Electricity / Water / Reinjection Slow refinery growth Asia auto sales
Naphtha supply growth is limited

-
Middle East political instability is escalating Improved reliability ex. Iran

10% improvement is only 1.3% global operating rate
impact
13
NGL Availability Is Focused On The Gulf Coast
Source: EnVantage
14
Ethane Fractionation Capacity Is Being Added

Ethane Extraction Capacity
1,200
New Natural Gas Liquids Projects
Extraction Capacity (thousand bbl/day)
1,000
Year
Company
Ethane (000 BPD)
+380 / +53%
800
2011
600
Targa Copano Exxon Markwest ConocoPhillips Enterprise Oneok Hess Formosa Dominion
40 10 10 30 20 40 30 50 20 15 265
90
2012
400
140
200
2013
0 2001 2005 2010 2015
TOTAL
Sources: Company reports, EnVantage, LyondellBasell
Marcellus currently has no ethane recovery
15
Required natural gas price for 15% IRR ($/MMBTU)
Source: Goldman Sachs research
Nat Gas Drilling Economics Supporting $5-6 price
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00

~$5/MMBTU hedges are common Companies have stated that NGL value adds several $/MMBTU
16
G ra W ni a te tte W nb as e h rg -h - A or P iz C Pi o ne M nt a da ar l le ce llu A W Na nt ic s at t te ura lin nb l e e B Ca rg utte Ap pa na oth s la W o e r ch o s ia df tig ord Po h w tg de a rR s Ea iv gl er Fa e F ye or tte d vi lle Ha Pi o yn es n v G M ille ro on es tn Ca bec B ey ar k rth h o ne a t r Ar ge izo t k o ho n t m riz al a on W Wo ta e s od l t T fo av rd Ho Ja m ap rn es ut s R L Pi ive im e ce r an B a ce si Ye Co B n nv Ca llo a rth w sin A pp ag Jac Co a nv la e ve ket c Co ent hia rtic nv ion ve al r a e G nt l S tica ra io ni na . Te l te xa l Co W E s nv Gr a s . Te xa en oe h tio s b ve s na ec rtic l M k v al id er t c o ic nt al in en t
Possible Outlets For Marcellus Ethane
Sarnia
Pipeline options to existing ethylene plants and storage
Marcellus Shale
Conway
Texas Midwest Louisiana Sarnia

Mt. Belvieu LA ethylene plants
Ship ethane to existing ethylene plants and storage New ethylene capacity?
17
Major Shifts Would Be Required To Lose This Advantage

Base prices
Crude Oil Price: $114 / bbl, Natural gas - $3.75/MMBTU Recent ethane vs. naphtha spread: 20 - 30 /lb ethylene
Natural Gas / Ethane changes required to equilibrate with Naphtha cost of ethylene
Other, 7%
Required Fractionation Spread, /gal Natural Gas Price, $ / MMBTU 45 - 70 /gal $6 - $10
Fuel gas, 15%
Ethylene, 78%
Typical ethane yields
Crude oil / Co-product changes required to equilibrate with Ethane cost of ethylene
Required Cumulative Chemical Co-Product Price Increases Propylene / Butadiene, /lb Benzene, $/gal Crude Oil Price Decline 22 - 33 /lb $1.60 - 2.40 /gal $42 - $70
Fuel gas, 21% Ethylene, 31%
Fuel based coproducts, 21%
Chem. CoProducts, 28%
Typical naphtha yields

Source: CMAI, LyondellBasell
Trends tend to point in opposing directions Required shifts are very large and thus, less likely
18
Naphtha Co-Products Should Carry A High Value

Global Propylene Supply/Demand
On - purpose, 10%
Global Light Vehicle Builds (million)
Global Butadiene Supply / Demand

Light Vehicle Production
100 90 80 70 60 50 40 2000 2005 2010 2015
Olef ins Plants, 56% Ref ineries, 34%
2010 Sources Of Propylene
billion lbs
1990
2000
2010
2015
billion lbs
1990
2000
2010
2015
Supply from Co-products Olefins plants Refineries On-purpose Total % Co-product 46.7 18.7 0.4 65.8 99% 77.8 37.2 3.2 118.2 97% 96.7 59.6 17.4 173.7 90% 110.2 68.4 36.2 214.8 83%
Supply from Olefins plants On-purpose Total % Co-product 11.8 1.9 13.7 86% 17.7 0.5 18.2 97% 20.7 0.6 21.3 97% 24.8 0.7 25.5 97%
Significant higher-cost on-purpose propylene production required to meet demand

Source: CMAI, IHS
Increased vehicle builds will contribute to rising butadiene demand
19
Good Today, Better Tomorrow

Tightened Supply / Demand
95
Naphtha cash margin, cents / pound
Expanded Naphtha Margins

20
Advantaged Ethane
1,200 Ethand Extraction Capacity (thousand bbl/day)
Trough Peak
1,000
15
90
800
10
600
85
400
200
80
1990 1995 2000 2005 2010 2015
0
North America W. Europe
0 2006 2010 2015
Positioned for tightening supply / demand Lower 90% nameplate equates to upper 90% effective
Naphtha cracking margins can improve by ~ 15 /lb
Ethane advantage appears sustainable and could grow
Fractionator spread decrease Crude / natural gas ratio
Margins can be additive, supported by S/D at various steps of the vertical chain
Source: CMAI, EnVantage
20
The Stars Are Aligning For A Bright Tomorrow

Positive macro factors Global GDP Asian development Supply trends Limited construction Limited Middle East gas avails Existing asset reliability U.S. natural gas A Middle East analog Fractionator construction Elevated crude oil price
21

Ethylene Good Today Better Tomorrow 22mar2011 FINAL

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Ethylene: Good Today, Better Tomorrow

Sergey Vasnetsov SVP Strategic Planning and Transactions

Ethylene - Good Today, Better Tomorrow

Three Components Of The Longer Term Outlook

Finally, naphtha / ethane price ratio impact on U.S.

Ethylene: Good Today, Better Tomorrow

Ethylene - Good Today, Better Tomorrow

Global Operating Rates Indicate Trough Conditions

Global Operating Rate, %

80 1990 1995 2000 2005 2010

Peaks follow troughs, generally with a steep incline

Ethylene - Good Today, Better Tomorrow

Naphtha Margins Have Been Choppy @ Trough

Note: Peak and trough margins from 1990-2009. Source: CMAI

Ethylene - Good Today, Better Tomorrow

Divergence of Oil - Nat Gas Prices Creates Opportunity

North American Ethane and Naphtha Margins

Ethane Margin Naphtha Margin

LYB O&P Americas segment profits reflect this positive environment

Ethylene - Good Today, Better Tomorrow

Promising Global Economic and Demand Forecasts

Global Demand Scenarios for 2015

CMAI 2011 Forecast

This global growth requires production of 35+ worldscale ethylene plants

Economic forecasts indicate potential for strong demand growth

Ethylene - Good Today, Better Tomorrow

China and India Still Hold Tremendous Potential

Polyethylene Consumption by Region 2009 per capita consumption

120 2000 Demand (billion pounds ethylene) 100 2009

S. America CIS & Baltic States

Indian Subcontinent Africa

2009 GDP per Capita, Thousands

Ethylene - Good Today, Better Tomorrow

We Have Passed The Period Of Peak Capacity Additions

15 10 5 0 2011 2012 2013 2014

Nameplate Additions 43 billion pounds

World Scale Plant Startups

Lower Reliability May Become The New Norm

U.S. Gulf Coast operates as a network

deep trough shutdowns

Planned Loss (maintenance)

Middle Eastern and Asian sites are not interconnected

W. Europe Ethylene Production Losses, % of capacity

96% x 96% x 96% = 88%

Planned Loss (maintenance)

Aging U.S. and European plants Isolated vs. interconnected

Ethylene - Good Today, Better Tomorrow

Operating Rates Under Different Demand Scenarios

Global Operating Rate, %

80 1990 1995 2000 2005 2010 2015

Ethylene - Good Today, Better Tomorrow

What Could Alter This Path?

2 billion people on cusp of increased consumption in

This train, with its forward momentum, will be difficult to derail

Ethylene - Good Today, Better Tomorrow

What Could Alter This Path?

New plant construction

Naphtha supply growth is limited

Middle East political instability is escalating Improved reliability ex. Iran

Ethylene - Good Today, Better Tomorrow

NGL Availability Is Focused On The Gulf Coast

Ethylene - Good Today, Better Tomorrow