Etileno/Propileno Update

Etileno/Propileno Update FORO PEMEX Petroquimica 2011 John Stekla Director Ethylene JStekla@cmaiglobal.com 1 281 752 3244 has acquired ForoBangkok PEMEX Petroquímica - Junio 2011 Singapore Shanghai Houston New York London Düsseldorf Dubai

IHS Who We Are We are 5,500 people, in 30 countries, speaking 50 languages all working each day to: Serve businesses and all levels of governments worldwide Ranging from 80% of Global Fortune 500 to small businesses Customers in 180 countries Provide comprehensive content, software and expert analysis and forecasts Customers around the world use our products and services to make faster and more confident decisions. Advancing Decisions that Advance the World Copyright 2011 IHS Inc. All Rights Reserved.

IHS Capabilities IHS is the leading information company with comprehensive content, insight and expert analysis in key areas shaping today s global business landscape, including: Advancing Decisions that Advance the World 3

CMAI: Enhancing Our Country & Industry Forecasting Capability for the Chemical & Petrochemical Industry Country & Industry Forecasting Our Country & Industry Forecasting capability provides consistently accurate forecasts and analysis of the economic, business and investment climates in over 200 countries and over 170 industries to support strategic planning and decision making. The combined products and services of the successful acquisitions of Cambridge Energy Research Associates, Global Insight, SRI Consulting, Harriman Chemsult and Chemical Week and now, CMAI, enhance this capability giving customers access to solutions to navigate the complex business challenges they face every day, all from a single source: IHS. 4

CMAI: Enhancing Our Consulting Capability for the Chemical & Petrochemical Industry Consulting Capabilities At IHS, we leverage an unmatched combination of information, insight, and expertise to effect the powerful transformation of data into knowledge and value. Our combined capabilities empower you to solve your greatest strategic and operational challenges. It's what distinguishes IHS Consulting in the global marketplace and provides a greater, lasting value to your organization. The combined products and services of the successful acquisitions of Cambridge Energy Research Associates, Global Insight, SRI Consulting, Jane s, Lloyd s Register Fairplay and now, CMAI, enhance this capability giving customers access to solutions to navigate the complex business challenges they face every day, all from a single source: IHS.

Shale Natural Gas Feedstocks

Michigan Basin Antrim Appalachian Basin Marcellus Arkoma Basin Fayetteville Illinois Basin New Albany Delaware Basin Barnett/Woodford North LA, East TX Haynesville & Bossier Black Warrior Basin Floyd & Chattanooga Rich Shale Gas Lean Shale Gas US Lean Gas Shale Plays Source: Enterprise Products

Williston Basin Bakken Uinta Basin Mancos. Powder River Basin Niobrara Denver Basin Niobrara Michigan Basin Utica Piceance Basin Mancos Anadarko Basin Woodford Arkoma Basin Woodford Appalachian Basin Marcellus & Huron & Ohio San Juan Basin Mancos Ft Worth Basin Barnett Permian Basin Avalon & Wolfcamp South TX Eagle Ford & Pearsall US Rich Gas Shale Plays Source: Enterprise Products Rich Shale Gas Lean Shale Gas

Williston Basin Bakken Michigan Basin Antrim Appalachian Basin Marcellus Uinta Basin Mancos. Powder River Basin Niobrara Michigan Basin Utica Denver Basin Niobrara Piceance Basin Mancos San Juan Basin Mancos Anadarko Basin Woodford Ft Worth Basin Barnett Arkoma Basin Woodford Arkoma Basin Fayetteville Illinois Basin New Albany Appalachian Basin Marcellus & Huron & Ohio Permian Basin Avalon & Wolfcamp Black Warrior Basin Floyd & Chattanooga Delaware Basin Barnett/Woodford North LA, East TX Haynesville & Bossier Rich Shale Gas Lean Shale Gas South TX Eagle Ford & Pearsall All US Shale Plays Source: Enterprise Products

Stranded Liquids from Wet Shale Gas Need to Find a Home Steam Crackers Source: EIA

100% U.S. Natural Gas Production by Source 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: EIA 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Shale Gas Associated Tight Gas Coalbed Methane Other Offshore Alaska

Ethane Relative Prices Fallen Most 120% US Price Ratios To WTI Crude Oil 100% 80% 60% 40% 20% 0% US Propane to Crude Price Ratio US Ethane- to- Crude Price Ratio US Naphtha to Crude Price Ratio 2000 2002 2004 2006 2008 2010 2012 2014 Source: Purvin & Gertz

750 Gas-Based Competitive Advantage Bubbles Up, Globally Dollars Per Ton, Ethylene Manufacturing Cash Costs By Plant 950 2003: WTI Crude = $31/bbl; US Natural Gas = $5.50/mmbtu 850 2009: WTI Crude = $62/bbl; US Natural Gas = $4.00/mmbtu 2009 650 550 450 350 250 150 50 Asia Middle East West Europe North America 0 25 50 75 100 125 150 Cumulative Ethylene Capacity (Million Tons) 2003

Eagle Ford Map Source: Doxa Energy

Five Key Points for the Ethylene Industry

1. Ethylene Demand Driven By What We Consume PVC Polystyrene/ABS PET/Ethylene Glycol Ethylene Polyethylene LDPE HDPE LLDPE

2. Heavy Feeds & Polyethylene Dominate Global Ethylene Market Propane & Butane 12% 2010 Ethylene Supply Other 2% Ethane 33% 2010 Ethylene Demand EDC/VCM/PVC 11% Styrene 7% Ethylene Oxide/Glycol 13% Other 8% Naphtha/Gas Oil 53% Polyethylene 61% 120 Million Tons Ethylene

3. Asia Dominates Demand Growth; NAM Domestic Demand Recovering Million Metric Tons, Ethylene & Primary Derivative Consumption 60 50 40 2009 Consumption (kg/capita): North America = 50 West Europe = 48 Asia = 13 30 20 10 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 North America West Europe Asia Others Middle East

140.0 120.0 100.0 80.0 60.0 40.0 20.0 4. Global Operating Rates Are Cyclical 0.0 Resulting in Cyclical Profitability Million Metric Tons, Global Ethylene Capacity & Demand 180.0 160.0 Peak Peak Trough 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Demand Trough Capacity Operating Rate, Percent Forecast 96.0 94.0 Peak 92.0 Trough Operating Rate 90.0 88.0 86.0 84.0 82.0 80.0 78.0

$ / MM Btu 20 18 16 14 12 10 8 6 4 2 0 5. A Favorable Energy Outlook for North America 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Crude (WTI) Natural Gas Gas as % of Crude Gas as % of Crude 120% 100% 80% 60% 40% 20% 0%

Middle East Wave Almost Complete New Middle East Ethylene Capacity, Million Metric Tons 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Forecast Cumulative 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 0.0 United Arab Emirates Saudi Arabia Qatar Kuwait Iran Cumulative Capacity Addition

Demand Leading Asia s Growth New Asia Ethylene Capacity, Million Metric Tons 7.0 6.0 Forecast Cumulative 20.0 5.0 25.0 4.0 15.0 3.0 2.0 10.0 1.0 0.0-1.0 2008 2009 2010 2011 2012 2013 2014 2015 Japan Philippines Singapore Thailand China Korea (South) Taiwan Cumulative Capacity Addition 5.0 0.0

Ethylene Production Cash Cost Drivers Feedstocks Natural Gas Prices vs. Crude Oil Prices Ethane Prices Other Feedstock Pricing Co-Product Credits

Cents Per Pound 55 50 45 40 35 30 25 20 15 10 5 0 U.S. Daily Ethylene Cash Costs Data through 2 June Dollars Per Metric Ton 1323 Spot Cash Cost Drivers 1213 1102 992 882 772 661 551 441 331 220 110 0 Apr 08 Apr 15 Apr 25 May 02 May 09 May 16 May 23 May 31 Light Naphtha Weighted Average Propane Gas Oil Purity Ethane Coprod. Int. Lt. Naphtha Butane

Global Monthly Ethylene Prices Dollars Per Metric Ton 2,100 Forecast 1,900 1,700 1,500 1,300 1,100 900 700 500 300 09 A J O 10 A J O 11 A J O 12 A J O U.S. Large Buyer Contract Price WEP Contract Price SEA CFR Spot Price

Nameplate Capacity Deficit Without Capacity Additions Million Metric Tons % of Capacity 2.5 10.00 9.00 2.0 8.00 7.00 1.5 6.00 5.00 1.0 4.00 3.00 0.5 2.00 1.00 0.0 0.00 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1011 12 13 14 15 Net Deficit Deficit (% of capacity)

Nameplate Capacity Deficit With Capacity Additions Million Metric Tons % of Capacity 2.5 10.00 9.00 2.0 8.00 7.00 1.5 6.00 5.00 1.0 4.00 3.00 0.5 2.00 1.00 0.0 0.00 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1011 12 13 14 15 Net Deficit Deficit (% of capacity)

Billion Pounds 17 16 U.S. Ethylene Supply/Demand Outlook Operating Rate Forecast 100% 15 14 13 12 11 10 9 95% 90% 85% 80% 75% 70% 65% 01 Q3 02 Q3 03 Q3 04 Q3 05 Q3 06 Q3 07 Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 Total Demand Effective Operating Rate Nameplate Operating Rate

NA Ethylene Expansion Talk In The Press ~ 6.0 Million Tons By 2017 Company 2012 2013 2014 2015** 2016+ Announced (-000- MT) Westlake, Lake Charles 110 110 Ineos, Chocolate Bayou 115 Chevron Phillips 1200* Dow 384 1400* Equistar 230 Shell 1000* Braskem/Idesa 1000 Unconfirmed (-000- MT) Williams 100 Formosa 450 Total 839 100 110 2650 2400 Cumulative Total 839 939 1049 3699 6099 * Dow, Shell, and Chevron Phillips capacity additions shown are CMAI estimates

US Ethylene Industry has SIgnificant Exports of Derivatives Barrels Per Day,Ethane Equivalents Million Metric Tons, Ethylene Equivalents 374 6.0 Net Exports 312 5.0 Proportion of US Ethylene Production 30% Forecast 25% 250 187 125 62 4.0 3.0 2.0 1.0 20% 15% 10% 5% 0 0.0 0% - 62-1.0 Net Imports -5% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Ethylene Vinyls/PVC Styrenics Polyethylene Oxide/Glycol Others

Net Equivalent Ethylene Trade Thousand Metric Tons 500 Net Exports 0 Mexico -500-1000 -1500-2000 Net Imports 05 06 07 08 09 10 11 12 13 14 15 Others Glycol Polyethylene Styrenics Vinyls Ethylene Net Trade

Ethylene Market Summary Economic recession and longterm manufacturing trends hurt domestic demand in N. America and Europe Asia demand growth healthy and is the world s demand future Anticipated Middle East capacity wave slow to have full impact N. America shale gas revolutionizes competitiveness; keeps margins strong; investment will be coming! Polyethylene Bags

Propileno

Crude Oil Motor Gasoline Crude Unit Propylene Supply Profile Gas Oil Motor Gasoline FCC Unit Isobutane Alkylation Unit High Octane Alkylate Gasoline Other Fuel Uses Refining Industry Chemical Industry Naphtha Propane Dehydro Metathesis Olefin Cracking HSFCC RG Propylene Market Ethane Propane Methanol-to-Olefins Others Steam Cracker or Olefin Plant Other Technologies Cumene, Oligomers Isopropanol Purification Splitter Unit Propane to LPG Ethylene & Olefins PG & CG Propylene Markets Polypropylene Unit Injection Molding, Fibers, Films Other propylene consumers: acrylonitrile, propylene oxide, acrylic acid, oxo-alcohols

On- Purpose 10% Production Shift By 2015 Stm. Crackers FCC 35% Splitters 55% On- Purpose 5% FCC Splitters 24% Stm. Crackers 71% On- Purpose 16% FCC/ Splitters 24% Stm. Crackers 60% On- Purpose 53% Stm. Crackers 44% On- Purpose 22% FCC Splitters 49% Stm. Crackers 51% FCC Splitters 3% FCC Splitters 23% Stm. Crackers 55% Total Production = 97.5 Million Metric Tons

China + Coal = Olefins Chinese CTO/MTO Capacity 2010-2015 ( 000 metric tons per year) Yulin Energy & Chem Yulin, Shaanxi C2/C3 300/300 (MTO) Shaanxi Yanchang Yan an, Shaanxi C2/C3 450/450 (MTO) Shenhua Group Baotou, Inner Mongolia C2/C3 300/300 (MTO) Datang International Power Duolun, Inner Mongolia C3 500 (MTP) Shenhua Ningmei Yuling, Shaanxi C3 500 (MTP) Yankuang Guohong Zoucheng, Shandong C2/C3 300/300 (MTO) Pucheng Clean Energy Pucheng, Shaanxi C2/C3 300/380 (MTO) CTO/MTO 2010 CTO/MTO 2011-2015 Zhongyuan PC Puyang, Henan C2/C3 60/103 (MTO) Zhejiang Tiansheng Shaoxing, Zhejian C2/C3 300/300 (MTO)

US C3/C4 Olefin Volumes Decline 1.20 Index 1.0 = US Olefin Production From Steam Crackers in 2000 1.10 1.00 0.90 0.80 0.70 0.60 0.50 US Ethylene Production US Propylene Production US Butadiene Production 2000 2002 2004 2006 2008 2010 2012 2014

US C3/C4 Olefin Prices Skyrocket 250% 225% 200% US Price Ratios To Ethylene US Propylene-to-Ethylene Price Ratio US Butadiene-to-Ethylene Price Ratio 175% 150% 125% 100% 75% 50% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Propylene Production in the U.S. Not Million Metric Tons 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Likely to Improve 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Metathesis (-0.9/19.8) Dehydro (0.0/69.0) FCC Splitters (0.2/0.3) Stm. Crackers (-5.6/-2.7) Total Capacity (-0.2/1.0) (% AAGR = 05-10/10-15)

Net Equivalent Propylene Trade Thousand Metric Tons 200 Net Exports 0-200 -400-600 -800 Mexico -1000-1200 Net Imports 05 06 07 08 09 10 11 12 13 14 15 Propylene Acrylonitrile Polypropylene Others Net Trade

Net Equivalent Propylene Trade Thousand Metric Tons 4500 Net Exports 4000 3500 3000 2500 2000 1500 1000 500 0 Net Imports -500 United States 05 06 07 08 09 10 11 12 13 14 15 Propylene Acrylonitrile Polypropylene Others Net Trade

US AN Still Needed By the World 2010 Global Acrylonitrile Trade Patterns Thousand Metric Tons 400 50 135 90 240 40 70 20 160 60

Propylene Prices The world order has flipped.u.s. now the highest Transition began in 2007/2008 but was masked by the recession during 2009 Presents good investment opportunities

Short-term Propylene Forecast 3,000 2,500 2,000 $/ton Naphtha Northeast Asia Spot Average US$/Metric Ton C&F Japan Crude Oil Brent West Europe Spot, Avg. 1st Month $/ton FOB North Sea Propylene Polymer Grade Southeast Asia Spot, Avg. US$/Metric Ton CFR SE Asia May 2011 Prices US = 97.0 cpp WEP = 1,245 E/ton ASP = 1,555 $/ton 1,500 1,000 Propylene Polymer Grade North America Contract-Benchmark Stream Value Cents/Pound Delivered United States Propylene Contained Value West Europe Contract-Benchmark Contained Value Euro/Metric Ton Delivered W. Europe 500 0

Long Term Propylene Price Forecast Dollars Per Metric Ton 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 NAM Net Trans. Contract Price WEP Contract Price SEA CFR Spot Price

Propylene Market Summary Shale gas revolution in North America and declining refining industry results in supply of propylene to be structurally short US propylene consumers lose competiveness, especially for PP, as Middle East and Asia continue to add PP investments Propylene supply gap will be filled with on-purpose technologies and demand moderation throughout the world Higher propylene feedstock prices will require PP to compete on properties more than cost, resulting in slower demand growth relative to history Other propylene derivatives (acrylonitrile, phenol, etc.) will be key price drivers of propylene. Polypropylene Caps

Potential Risks to U.S. Propylene Investments Overbuild of non-pp derivatives in other regions backs out U.S. exports Overbuild of new on-purpose production units causes RG to move back to the incremental supply Gas to crude parity Methanol to Propylene gains a large market share