Ethylene – Good Today, Better Tomorrow – A Year …...Goldman Sachs 2012 Chemical Intensity Day...

Tim Roberts, SVP Olefins & Polyolefins Americas

March 27, 2012

Ethylene – Good Today, Better Tomorrow – A Year LaterGoldman Sachs Chemical Intensity Day

lyondellbasell.com

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 forward‐looking 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 statements 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 the “Risk Factors” section of our Form 10-K for the year ended December 31, 2011, which can be found at www.lyondellbasell.com on the Investor Relations page and on the Securities and Exchange Commission’s 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.

Goldman Sachs 2012 Chemical Intensity Day 2

lyondellbasell.com Goldman Sachs 2012 Chemical Intensity Day

Last Year We Said: 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

3

These trends plus two key factors continue to define industry and regional profitability:– Regional Raw Material Costs– Global Supply / Demand

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With Supply/Demand Still Recovering, Natural Gas versus Crude is Currently the Dominant Factor

Goldman Sachs 2012 Chemical Intensity Day

Raw material factors define regional competitiveness

4

Raw Materials &

Utilities

Capital & Labor

Integrated Polyethylene Production Cost Global Capacity Cost Curve

67%33%

Cos

t of E

thyl

ene

Prod

uctio

n

Global Naphtha Cracking

50-60 ¢/lb

Middle East

Ethane Crackers

5-15 ¢/lb

N. Amercia

Ethane Crackers

20-30 ¢/lb

Source: CMAI

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Both Natural Gas and Crude Prices have Contributed to Differential Performance in the US Ethylene Industry


Crude price increases have been as much a factor as have US natural gas price declines

5

0

30

60

90

120

150

0

5

10

15

20

25

Dec-08 Dec-09 Dec-10 Dec-11

US$/

Barr

el

US$

/ Mill

ion

BTU

Crude Oil Brent

Natural Gas

Delta

1H'09 Q1'12 Delta

Ethane-based (US) 20 23 3

Naphtha-based (US) 35 54 19

Ethylene price (NEA) 34 61 27

Cost of Ethylene Production(¢/lbs)

Source: CMAI

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Are Crude Oil Prices likely to Remain Elevated?

6Goldman Sachs 2012 Chemical Intensity Day

Factors influencing continued strong price

Factors influencing to the downside

• Global economic growth and crude consumption

• Global vehicle sales• Rising production costs

– Marginal crude sources– Middle east social cost pressures

• Political instability in producing nations

• US production resurgence• Vehicle fuel efficiency• Regulations diversifying fuel mix

Most experts forecast continued elevated crude oil

Year 2011 2012E 2013E 2014E 2015E 2016E

$/bbl 111 117 103 102 104 108

Brent Crude Oil Forecast

Source: CMAI

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Will Natural Gas Prices Remain Low?


• Production has remained strong despite reduced rig count

• Estimate that rig count must fall below 700 to stabilize inventory levels

Source: EIA, Bentek

7

Source: Global Insight

Year 2011 2012E 2013E 2014E 2015E 2016E

$/mbtu 4.0 2.8 3.7 4.3 4.6 4.9

Henry Hub Price Forecast

40

45

50

55

60

65

70

500

750

1,000

1,250

1,500

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Bcf

per

Day

Rig

Cou

nt

Monthly Gas Rig Count Production

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Drilling Technology is Driving the Success


Potential for further improvements as experience develops and majors become more significant participants

Note: Mcf = thousand cubic feet.

0

200

400

600

800

1,000

1,200

1,400

1,600

2000 2005 2010 2015

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

McfPerDay

8

pre-shale post-shale

Source: IHS CERA. May not be used for any purpose without the express written consent of IHS CERA

Well productivity has increased dramatically

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Low Prices and Abundant Supply are Forecast to Drive Strong Natural Gas Demand Growth


Natural gas end use increase leading to increased ethane production in a well supplied natural gas environment

9

0

1

2

3

4

5

2015 2020

TCF

(cha

nge

from

201

0)

Elec.Gen

Industrial

Trans. Fuels

Exports toMexico

LNG Exports

Gas Demand Growth NG Supply Sources

Source: PIRA Source: EIATC

F

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Natural Gas NYMEX Price Breakevens by Play(15% After Tax Rate of Return)


$2.3

7 $3.1

9

$3.2

3

$3.5

3

$3.6

0

$3.7

5

$3.8

6

$3.8

7

$4.1

2

$4.2

0

$4.5

5

$4.5

8

$4.6

4 $5.2

4

$5.3

1

$5.5

3

$6.6

5

$6.7

6

$6.8

7

$0.0

0

$1.8

5

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

Eagle

Ford Shale

- Liquids

Rich

Marce

llus S

hale - S

W Liqu

ids Rich

Cana W

oodford Shale

Marce

llus S

hale - S

W

Barnett

Shale - S

outhern Liquids

Rich

Barnett

Shale - C

ore

Marce

llus S

hale - N

E

Horn R

iver B

asin

Huron S

halePined

ale

Haynes

ville

Shale - C

ore LA / T

X

Eagle

Ford Shale

- Dry

Gas

Barnett

Shale

Fayett

eville

Shale

Woodford Shale

- Ark

oma

Granite

Was

h - Horiz

.

Piceance

Bas

in Valley

Haynes

ville/

Bossie

r Shale

- NE TX

Cotton Vall

ey H

orizontal

Cotton Vall

ey V

ertica

l

Powder R

iver C

BM

Source: Investment Banks

• Most fields yield an acceptable return at $5-6.00/mmbtu• Low natural gas prices drive production to NGL rich fields

NGL Rich Gas

Dry Gas

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The Value of NGLs Drives Production Even at Low Natural Gas Prices


Dry vs. Rich Gas: NGL Uplift (Margin Over Fuel Value)NGL Component Values vs. Natural Gas

$0

$5

$10

$15

$20

$25

Gas Ethane Propane Butane NaturalGasoline

Mar

ket V

alue

, $/M

MB

TU

$2.41

$5.31

0

1

2

3

4

5

6

Dry Gas Rich Gas(2.5 GPM)

Very Rich Gas(5.5 GPM)

$/M

MB

TU

$0

Potential for further improvements as experience develops and majors become more significant participants

Source: CMAI, LYB

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Trend Toward Wet Wells Benefits US Ethylene Producers


As drilling emphasis shifts, ethane production is not being sacrificed, in fact, it can be increased

12

US NGL ProductionUS Gas Production

If we assume 10% shift from dry gas to wet gas NGL production can increase significantly

Source: LYB

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Both the Mid-Stream and Ethylene Industries are Responding to this Trend


Development has been like a game of leapfrog and the next step is significant fractionation and pipeline

infrastructure addition

13

0

50

100

150

200

1H'2012 2H'12 1H'13 2H'13 1H'14

thou

sand

b/d

0

200

400

600

1H'2012 2H'12 1H'13 2H'13 1H'14

thou

sand

b/d

Gulf Coast Fractionation Capacity Ethane Additions

Pipelines Flowing into Mont Belvieu

Ethane Cracking Capacity Growth

Sources: LYB

0

10

20

30

40

50

1H'12 2H'12 1H'13 2H'13 1H'14

thou

sand

b/d LYB

Other

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Ethane Premiums to Natural Gas have Grown but so has the Advantage Versus Global Naphtha


Ethane price at equivalent value to:• US natural gas energy value: 15-20 c/gal• Global naphtha economics: 115-150 c/gal

0

10

20

30

40

50

00-05 Avg. 06 07 08 09 10 11

¢ / g

al E

than

e

-5

0

5

10

15

20

00-05Avg.

06 07 08 09 10 11

Cos

t of E

thyl

ene,

¢ /

lb

US Ethane Advantage to NE Asia Naphtha

Ethane Premium to Fuel Value ("Frac Spread") US Ethane Advantage to NE Asia Naphtha

Source: CMAI

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Shift in Feed Mix Has Significantly Impacted Co-Products

Estimated Propylene Production (1)

Sources: CMAI.(1) Estimated co-product production based on 2011 ethylene production and 2006 and 2011 feed mixes.


0

5

10

15

20

2006 Mix 2011 Mix

0

2

4

6

8

2006 Mix 2011 Mix50%

100%

150%

200%

250%

2006 Mix 2011 Mix

0%

40%

80%

120%

160%

2006 Mix 2011 Mix

• Co-product capabilities add significant value• Future growth in durable products could further benefit co-products

Estimated Butadiene Production (1)

Propylene Price as a % of Ethylene

Butadiene Price as a % of Ethylene

(MMLbs.)

(MMLbs.)

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Ethane is Not the Only Important NGL in the US Market


Propane:– Can limit ethane pricing– Greatly expands the cracking pool

16

US Cost of Ethylene Production US NGL Supply Growth

0

10

20

30

40

50

2009 2010 2011

¢ / l

bs

Propane COE*Naphtha COEEthane COE

Source: CMAI

* COE – Cost of Ethylene

Source: Bentek

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015 2016

thou

sand

b/

d

C4+

Propane

Ethane

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Strong LYB Results in Global Trough

Global Refining Operating Rates

Global Ethylene Effective Operating Rates

76%

78%

80%

82%

84%

86%

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

Performance has been driven by actions, geographic position and assets, not cycle

80%

85%

90%

95%

100%

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

Trough Peak Trough

Trough Peak Trough

Sources: CMAI, Purvin & Gertz.


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At These Low Operating Rates Global Margins Have Been Near Trough Levels


Asian margins have been weak, Asian prices set the global price

0

10

20

30

40

50

60

70

80

90

2005 2006 2007 2008 2009 2010 2011

cent

s / p

ound

Naphtha-based Production Cost

Spot Ethylene Price

Margin

Typical NE Asian Cycle MarginsNortheast Asian Ethylene Margins

0

5

10

15

20

25

30

Trough Mean Peak

18

Source: CMAI

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40%

50%

60%

70%

80%

90%

100%

100

150

200

250

300

350

400

450

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Eff

ectiv

e O

pera

ting

Rat

e (E

OR

)

Bill

ions

of P

ound

s

DemandCapacity

World EOR @ 95% On-Stream

Cyclical Upside is a Second Chapter in a Positive Story


Balance begins to shift in favor of producers in 2012 / 2013

19

Source: LYB,CMAI

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Economic Progress and Increased Consumption are a Focus in Developing Economies


Economic forecasts anticipate a significant increase in the Asian middle class -this typically drives ethylene demand

20

Expanding Number of Upper/Middle Class Households In Asia

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The Path from Concept to Full Production is Long

A major ethylene project can require 5+ years to move from concept to production


ID Task Name20132012

Q3 Q3 Q2 Q4Q2Q1 Q1 Q1Q2

1 Technology Supplier Selection

2 Basic Engineering and Estimate

3 EPC Bidding and Award

4 FEED Package

5 Permitting

6 Detailed Engineering

7 Major Equipment Procurement

8 Site Prep and Construction

9 Commissioning and Start-up

2016

Q1Q4 Q4 Q2

201520142011

Q4 Q4Q3 Q3Q1Q3 Q1 Q2Q2 Q3

Feasibility

Engineering and Permitting

Construction and Start-up

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

21

lyondellbasell.com Goldman Sachs 2012 Chemical Intensity Day

The Stars Are Aligning For A Bright Tomorrow

• View from a US ethylene producer perspective – Geography, geology, technology are

positively aligned

– Economics of crude oil and natural gas support U.S. producers

– Infrastructure investments are bringing NGL’s to the market

– Supply / demand positioned for a cyclical upside

– New U.S. plants are not forecast to start-up until 2016+

22

We continue to believe: – Good today and better tomorrow– The stars are aligning

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Ethylene – Good Today, Better Tomorrow – A Year …...Goldman Sachs 2012 Chemical Intensity Day...

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