The document discusses price trends in aromatics and gasoline components in 2012. Key points include: 1) Benzene, toluene, and MTBE prices reached record highs in 2012 due to reduced cracker and reformer rates running lighter feedstocks which tightened supply. 2) Inventories were reduced due to "just-in-time" policies which increased volatility and kept the markets in a state of perpetual short-covering. 3) A strong energy complex with firm crude and gasoline economics supported aromatics prices despite reduced overall demand.

1. Aromatics & Gasoline Components
Overview
Sean Bartlett , Gasoline Components & Biofuels, EMEA
David Potter, Aromatics & Crude C4 Chain, EMEA

2. Agenda
• Price trends in 2012
• Fundamentals behind the strength; recurring themes
– Benzene
– Toluene
– MTBE
• Where do we go from here?

3. NWE benzene & toluene in 2012 : A stellar year
• Strong prices through the year
• Record high benzene price of $1,506.50/mt on September 11
– Benzene premium over naphtha hits seven year high of $631.75/mt
on June 8
• Record high toluene price of $1,445/mt on September 24
– Premium of toluene over gasoline hits $387/mt, September 20
Source: Platts

4. MTBE prices 2012
• All-time record outright price:
- $1,603/mt FOB ARA on April 3
• Factor to Eurobob gasoline through Q3 second highest since 2002:
- 2012 Q1-3 = 1.262
Source: Platts

5. Prices vs. 2008
Increase in product prices outstrips energy
2008 2011 2012 to Q3 2012 vs.
2008 (%)
ICE Brent $98.31 $110.84 $112.16 +14.1
Gasoline $836.79 $973.93 $1,042.18 +24.5
Naphtha $791.29 $930.41 $935.18 +18.2
MTBE $947.92 $1,145,95 $1,315.60 +38.8
Benzene $1,020.66 $1,152.64 $1,260.72 +23.5
Toluene $889.90 $1,088.22 $1,200.01 +34.8
Source: Platts

6. Where does the strength come from?
• Cracker rates reduced through the year
– Reduced pygas availability
– Reduced crude C4 and therefore raffinate-1 supply

7. Steam cracker margins suffer
Source: Platts On The Net 7

8. Where does the strength come from?
• Cracker rates reduced through the year. Reformers continue to run
reduced in Europe and US.
• Lighter feedstocks used
– LPG’s used for large parts of the year due to favourable
economics

9. European naphtha vs. propane
Source: Platts On The Net

10. Steamcracker product yields

11. Where does the strength come from?
• Cracker rates reduced through the year. Reformers continue to run
reduced in Europe and US
• Lighter feedstocks used
• Inventories reduced:
- ‘Just in time’ policies keep focus on prompt market
- Credit constraints and payment terms
- Production issues lead to price shocks
- Lack of buffer volumes lead to increased volatility. Marginal demand
sets direction

12. 2012: Backwardation rules from Q2
Brent Crude Gasoline
Benzene
• No incentive to store
• All demand at prompt dates
• Perpetual state of short-covering
Source: Platts On The Net

13. Where does the strength come from?
• Cracker rates reduced through the year. Reformers continue to run
reduced in Europe and US
• Lighter feedstocks used
• Inventories reduced
• Strength in the energy complex
– Firm crude and strong economics for gasoline and gasoline blending,
despite reduced demand overall

14. 2012: NWE benzene vs. naphtha
Styrene
Production issues
demand
Crackers reduced, pygas Dow’s Terneuzen kicks in
constrained shutdown
Average premium = $324.50/mt
Source: Platts On The Net

15. Global benzene markets disconnected
Source: Platts On The Net

16. Benzene backwardation
Above the line = Backwardation
Below the line = Contango
Source: Platts On The Net

17. Toluene 2012: Also riding high
• Production remains reduced in Europe
• Production in the Americas is also hit
• Imports to Europe from US cut back
Source: Platts On The Net

18. Toluene: NWE still producing below capacity
Western European Toluene: Production vs. Capacity
3000
2500
2000
Volume (KT)
Capacity
1500
Production
1000
500
0
2007 2008 2009 2010 2011
Year
Source: Platts

19. Firm US toluene reduces NWE import
opportunities
Source: Platts On The Net

20. MTBE prices 2012
Latin American Export Demand
Extra imports kill factor
Source: Platts On The Net

21. MTBE supply
• Inventories depleted even though producers maximise run-rates:
- Prolonged period of backwardation, lack of incentive to store
- Sporadic feedstock shortages since July 2011 due to low utilization
rates at NWE crackers (petrochemical margins poor)
• External re-supply in NWE limited:
- North West Europe/Singapore price spread at record highs, 2012
average $170/mt v 2011 average of $45/mt, but
- Arab Gulf product committed term to Asia?
- Increased demand for better/cleaner octanes in Arab Gulf
- Backwardation and volatility in NWE price made moving product
risky

22. Flows/Interregional dynamics

23. MTBE demand
Demand maintained despite high factors to Ebob and gasoline backwardation:
- Record high gasoline-naphtha spreads seen, $219.50/mt June 25;
Strongest year for Ebob crack in history of Platts quote
Marginal blending demand minimal due to gasoline backwardation,
but refining margins on gasoline “never better”
- South American demand for octanes unable to be satisfied by traditional
sources of supply on the US Gulf Coast
Main driver of large price movements.

24. Breaking the cycle
• Economic conditions remain difficult, no incentive for the industry to
change the current operational model
• Energy complex backwardated right through the barrel
• Volatility and backwardation discourages storing and inter-regional
flows