petrochemical feedstocks

1. Staying Competitive in a Feedstock Driven Market
Market Challenges and Implications of Evolving Megatrends
APIC ANNUAL MEETING, South Korea
7-8 May 2015
Clive Gibson
Vice President, Nexant
cgibson@nexant.com

2. Nexant Overview
A Global Advisor to the Energy & Chemicals Industry with Proven
Track Record
2
Headquarters Main Offices
Representative Offices
San Francisco
Washington, DC
White Plains
London
Frankfurt
Sao Paulo
Bahrain
Tokyo
Seoul
Shanghai
Singapore
Kuala Lumpur
Bangkok
Our People
 Over 150 consultants
worldwide in Energy &
Chemicals Advisory
 Expertise covering strategic,
commercial, operational and
technical aspects with deep
energy and chemicals sector
knowledge
 Nexant’s consultants are
typically Chemical Engineers,
Economists and MBA graduates
who have significant prior
experience working at energy
& chemical producers
Proven Track Record
 Advising clients in the energy &
chemicals industry for 50 years
 Completed over 2,000 client
assignments including market
assessments, technology
evaluations, valuations /
appraisals and due diligence
Global Footprint
 Strong international presence provides valuable insights through our consultants’ local
market knowledge and our vast network of sector specialists

3. 40
60
80
100
120
140
Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015
US$perBarrel
What a difference a year makes
Brent Crude Oil Price Decline, mth average
Source: Nexant
5

4. 6
What a difference a year makes…..
Job Number
0
50
100
150
BrentCrudeOilUS$/bbl
0
500
1000
1500
ProductsUS$perton
Q1 2014 Q1 2015

5. 0
25
50
75
100
125
0
25
50
75
100
1986 1990 1994 1998 2002 2006 2010 2014
BrentcrudeoilpriceUS$/bbl
ShellEBITDAUS$billion
EBITDA Brent crude oil
7
Crude oil price continues to the key driver of profitability for
International Integrated Major Energy Players
Job Number
Company Performance with Crude Oil price
Source: Nexant, Company Results

6. Advantaged refining and petrochemicals portfolios continue to
deliver reasonable returns across the industry cycle
Company Financial Performance by Sector - ExxonMobil
0
10
20
30
40
50
60
2001 2003 2005 2007 2009 2011 2013
ReturnonAverageCapitalEmployed
percent
Upstream Downstream Chemicals
8
Source: Nexant, Company Results

7. 40
60
80
100
120
140
Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015
US$perBarrelLower oil prices to impact investments in several major
oil producing countries
Crude Oil Price Decline and its Impact
Source: Nexant / EIA
Iran
Venezuela
Libya
Russia
Saudi Arabia
Kuwait
UAE
Nigeria
Iraq
Government Fiscal
Break Even - 2014
9

8. -6
-5
-4
-3
-2
-1
0
1
2
3
EstimatedChangeinGDP,percent
$40 Crude Oil $10 Decline in Crude Oil
Impact of oil prices on economies results in winners and losers
10

9. Crude oil price drivers have shifted focus to marginal production
Indicative Simplified Crude Oil Production Cost Curve
0 10 20 30 40 50 60 70 80
ProductionCost($perbarrel)
Production (milion barrel per day)
SaudiArabia
OtherOPEC
Russia
USexcl.Shale
Kazakhstan
China
Norway
Othernon-OPEC
USShale
Brazil
Mexico
CanadaOilSands
11

10. 0
20
40
60
80
100
120
1980 1990 2000 2010 2020
US$/bbl
History May-15 Feb-15 Jan-15 Nov-14 May-14
Futures Curve
Oil price futures – an indication of market sentiment
Brent Oil Price ($/bbl) and Recent Futures Evolution
12

11. Uncertain times – but sources of competitive advantage
remain clear and robust in refining and chemicals sectors
PARAMETER KEY OBJECTIVES
Size
Location
Configuration
Integration
Capture economies of scale
Access to low cost feedstocks/
deficit markets
Cost advantage/ product
differentiation
Synergies with adjacent facilities

12. -2
0
2
4
6
8
10
12
2000 2004 2008 2012
US$perbarrelAsian refining margins improved significantly in late 2014/early 2015
Hydroskimming
Complex
Singapore Gross Refining Margins
Dubai Crude – annual average
14
Sources of Competitive Advantage - 2014
Size Location Configuration Integration
1Q2015

13. Refinery investments remain focused in China and Middle East
15
Bubble size – scale of total capacity additions
Global Refinery Capacity Changes 2014-2017

14. Ethylene margins have improved in Asia but remain behind cost
advantaged regions
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012 2013 2014
Naphtha Cash Margin US Cash Margin Brent Crude Oil
Source: Nexant
Olefins Cash Margin Index
BrentCrudeOil$/barrel
16

15. 0
500
1000
1500
2000
2500
3000
0 50 100 150 200
EthyleneCashCost
(CurrentUSdollarspertonethylene)
Ethylene Cumulative Capacity (million tons)
Oil Price
(US$ per bbl)
140
100
70
50
Lighter feedstocks
Liquids cracking
Petrochemicals feedstock cost advantages remain at
lower oil prices but are substantially reduced
Global ethylene production cost curves versus crude oil price
17

16. 0
5
10
15
50 100
GasPriceUS$/mmBTU
Brent Crude Oil Price US$/bbl
0
50
100
150
50 100
CoalPriceUS$/ton
Brent Crude Oil Price US$/bbl
18
Price volatility introduces uncertainty in assessing the benefits of
alternative feedstocks
APIC 2015
Gas Advantage
Liquids Advantage
Indicative Breakeven production costs
Ethane vs Naphtha Coal vs Naphtha
Coal Advantage
Liquids Advantage

17. NAM
27%
ME
25%
China
32%
Other
16%
Significant new ethylene capacity anticipated in the next decade
requiring a diverse mix of feedstocks
Ethylene Capacity Drivers
232
0
50
100
150
200
250
2014 2025
Milliontons
Source: Nexant
19
Ethylene Capacity Additions by Region
Key Sources of Value Differentiation
Feedstock sourcing
Integration

18. 20
Regional petrochemicals trends –
Changing dynamics but familiar themes
Job Number
US Middle East China
Lighter feedstocks
Export markets
Capital costs
Product differentiation
Diversified feedstocks
Economic growth
Environmental issues
Product differentiation
Heavier feedstocks
Export markets
Integration
Product differentiation

19. ME focusing on integration to maintain sources of competitive advantage
and capture through the value chain
Source: Nexant
0
20
40
60
80
100
15
20
25
30
IncreasingProjectCAPEX
Increasing Project Complexity
Ethane
with PO
E/P
with PO
E/P, PO &
C3 derivs
Plus
C4 derivs
IncreasingReturnonInvestment
0%
25%
50%
75%
100%
2007 2012 2020
Ethane Propane Butane Naphtha
Impact of Derivatives on Complex Economics ME Ethylene Production by Feedstock
21

20. Over 50 Coal based projects focused in China
Phase 1: Coke Based Phase 3: New TechnologyPhase 2: Syngas
Acetylene based
VCM
Benzene
Methanol/Ammonia
MTO/MTP
MEG via oxalate ester
Acetyl to ethanol
Methanol to PX
22

21. Many projects in implementation phase but facing increasing
challenges
CTO CTMEG MTO
Major Development Trends
Opportunity to valorise “stranded coal”.
Coastal projects importing methanol
23
Sector Challenges
Environmental issues
Capital cost
Production cost competitiveness

22. US ethane exports to supplement LPG for some seeking sources of
petrochemicals feedstock cost advantage
Sunoco Logistics & Enterprise:
First movers in establishing US
ethane export terminals.
INEOS, SABIC and Borealis:
Installing ethane receiving terminals
Reliance: long-term shipping
agreements to transport ethane.
Target is 1.5 million tpa.
24

23. Increased requirement for on-purpose production shifts propylene
balance away from conventional production routes
Global Propylene Capacity Development by Feedstock/Technology
Source: Nexant
(million tons per year):
0%
25%
50%
75%
100%
2010 2015 2020
Cracker Refinery On-Purpose
Incremental supply from co-product sources continuing to be
insufficient to balance propylene demand growth.
2010 2015 2020
Cracker:
2010 2015 2020
Refinery:
2010 2015 2020
On-Purpose
+7.4
+5.9
+26
25

24. 26
China’s propylene expansion driving non-conventional
technology routes
0
10000
20000
30000
40000
2010 2015 2020
Thousandtons
Refinery Cracker CTO/MTO On-Purpose
0%
25%
50%
75%
100%
2010 2015 2020
Technology
Refinery Cracker CTO/MTO On-Purpose
China Propylene Capacity Profile China Propylene Capacity Development

25. On purpose investments driving China towards self sufficiency
27
0%
25%
50%
75%
100%
0
10
20
30
40
2008 2010 2012 2014 2016 2018
Utilisationrates
Milliontons
Net Export Net Import
Total Capacity Production
Consumption Utilisation Rates
Polypropylene market dynamics - China
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2008 2010 2012 2014 2016 2018
Percentnetimportoftotaldemand
PP (Actual) PP (Forecast)

26. Revisiting sustainable value drivers in turbulent times
2020 VISION
Feedstocks
Integration
Technology
Sourcing a competitive cost advantage
Creating value via optimising molecules
Innovation to capture cost advantages
Lower oil prices may bring longer term benefits for industry
leaders
Stronger global GDP growth and product demand growth
Weaker capacity growth… in the near term
Lower capital costs….in the longer term

27. Nexant Asia Limited
22nd Floor, Rasa Tower 1
555 Phahonyothin Road
Kwaeng Chatuchak,
Khet Chatuchak
Bangkok 10900,
Thailand
Telephone: + 66 2 793 4600
Facsimile: + 66 2 937 0144
www.thinking.nexant.com
“This presentation was prepared by Nexant Limited (“Nexant”). Except where specifically stated
otherwise in the presentation, the information contained herein was prepared on the basis of
information that is publicly available and has not been independently verified or otherwise examined to
determine its accuracy, completeness or financial feasibility. Neither NEXANT, nor any person acting on
behalf of NEXANT assumes any liabilities with respect to the use of or for damages resulting from the
use of any information contained in this presentation. NEXANT does not represent or warrant that any
assumed conditions will come to pass.
This presentation is integral and must be read in its entirety.
The presentation is given on the understanding that the recipient will maintain the contents confidential
except for internal use. The presentation should not be reproduced, distributed or used without first
obtaining prior written consent by NEXANT. This presentation may not be relied upon by others.
This notice must accompany every copy of this presentation.”
Nexant, Inc.
San Francisco
New York
Houston
Washington
London
Frankfurt
Bahrain
Singapore
Bangkok
Shanghai
Kuala Lumpur
M: +66 89 890 6450
T. +66 2793 4600
E. cgibson@nexant.com
Energy & Chemicals Advisory
Clive Gibson
Vice President