Ethylene/ Polyethylene Polypropylene

Ethylene/ Polyethylene Polypropylene Nick Vafiadis Senior Director: Global Polyolefins and Plastics Key Issues for the Global Polyethylene Industry Short term: - Demand: Global demand growth for PE may be slowing as China demand weakens, and Europe contends with recession. Long Term: Supply: Two low cost regions (North America and the Middle East) are set to compete for much of the global demand growth. The industry has never before included two major cost advantaged regions. Numerous capacity additions expected in North America as producers in the region seek to leverage cost advantage driven by shale gas. Continued demand strength anticipated for specialty polyethylene products such as metalocenes and bio-resins. i While annual Integrated margins are generally expected to trend higher, most of the margin is forecast to remain with the ethylene molecule. 1

What Does Shale Gas Development Do? Increasing NGL supplies within North America Thousand Barrels Per Day 3,5 North American NGL Production Outlook 3, 2,5 2, 1,5 1, Ethane Propane n-butane 5 i-butane Natural Gasoline 25 21 215 22 225 23 Source: IHS Purvin & Gertz North American Investment Themes Increase logistical capability to maximize the value of the liquids Company/Pipeline Region/Play Capacity Date EPCO/Yoakum-Mt. Belvieu Eagle Ford 7 Mb/d 1Q 212 Oneok/Arbuckle Midcontinent 6 Mb/d 2Q 212 Oneok/Bakken Bakken 6 Mb/d 1Q 213 DCP/Southern Hills Granite Wash 15 Mb/d Mid 213 EPCO/Texas Express Permian 2 Mb/d 2Q 213 Oneok/Sterling III Midcontinent 35 Mb/d Late 213 EPCO/ATEX Express Marcellus 19 Mb/d 1Q 214 Crosstex/Cajun-Sibon Louisiana 7 Mb/d 1H 213 Lone Star/West Texas Gateway Permian 29 Mb/d 1Q 213 EPCO/MAPL Rocky Mountains 55 Mb/d 3Q 214 ETP/Jackson to Mt. Belvieu Eagle Ford 34 Mb/d 3Q 212 EPCO Skelly to Mt. Belvieu Granite Wash 17 Mb/d 2Q 213 Vantage Bakken 4 Mb/d 2H 213 4 2

North America Energy Price Trends Dollars Per MMBtu 18 16 14 12 1 8 6 4 2 Gas as a% of Crude, BTU Basis 7 8 9 1 11 12 13 14 15 16 17 Crude (WTI) Natural Gas Gas as % of Crude 6% 5% 4% 3% 2% 1% % U.S. Natural Gas Liquids Price Gas Liquids, Cents Per Gallon Natural Gas, $/MMbtu 2 1 18 16 14 12 1 8 6 4 2 7 8 9 1 11 12 13 14 15 16 17 Natural Gas Ethane Propane N-Butane 8 6 4 2 3

Ethylene 212 Ethylene Cost Curve (Dollars per Ton) 165 145 WTI Crude $94/Barrel Nat Gas $3.16/MMBtu 125 Ethane 35.3 3 cpg 15 85 65 SE Asia Avg. West Europe Avg. NE Asia Avg. 45 25 5 MDE Ethane MDE Avg. Alberta Ethane U.S. Ethane U.S. Average 2 4 6 8 1 12 14 16 CUMULATIVE ETHYLENE CAPACITY (million tons) 4

Influence of Shale Development North American ethylene advantage U.S. Dollars Per Metric Ton 1,543 1,323 1,12 882 661 441 22 World Ethylene Cash Cost Comparison Ethylene Cash Costs From Ethane in Saudi Arabia Western Canada U.S. Ethane U.S. Weighted Average U.S. Coprod. Int. Light Naphtha U.S. Light Naphtha U.S. Cents Per Pound 7 Northeast Asia Naphtha August 212 July 212 Southeast Asia Naphtha West Europe Naphtha 6 5 4 3 2 1 Producers in the U.S. & Canada are among the lowest cost producers in the world Cost position affords export flexibility in times of lower demand Energy intensive derivatives, such as PVC, get an additional boost from low natural gas prices U.S. Ethylene Daily Cash Costs Cents Per Pound 8 7 6 5 4 3 2 1 Purity Ethane = 12.8 cpp Weighted Average = 18.7 cpp Propane = 17.8 cpp Gas Oil = 74.3 cpp Ethylene Cash Costs as of Sep 25 Light Naphtha = 42.8 cpp Coprod. Int. Lt. Naphtha = 3.7 cpp Butane = 32.2 cpp Dollars Per Metric Ton Aug 1 Aug 8 Aug 15 Aug 22 Aug 29 Sep 6 Sep 13 Sep 2 Light Naphtha Coprod. Int. Lt. Naphtha Gas Oil Purity Ethane Propane Weighted Average Butane 1543 1323 112 882 661 441 22 1 5

U.S. Cost Advantage Supports Exports U.S. To NEA Cost Ratio Price Ratio 2.5 2 2. 1.5 1..5. Million Metric Tons 8.. 9 92 94 96 98 2 4 6 8 1 12 14 16 Ethane Weighted Average Ethylene Net Equivalent Trade 7. 6. 5. 4. 3. 2. 1. 11 212 U.S. Ethylene Production Lost Forecast Million Pounds, Monthly 1,2 1, 8 6 4 2 Jan Feb Mar Apr May Jun Jul Aug Million Pounds, Cumulative Sep Oct Nov Dec Planned* Unplanned** '12 Cumulative Production Loss '11 Cumulative Production Loss Forecast '13 Cumulative Production Loss * Includes both confirmed and unconfirmed outages **Forecast period assumes a forecast of unplanned outages 3,5 3, 2,5 2, 1,5 1, 5 12 6

U.S. Ethylene Supply/Demand Outlook Billion Pounds 16 15 14 13 12 11 1 Operating Rate 1% 9% 8% 7% 9 1 Q4 Q3 Q2 4 Q4 Q3 Q2 7 Q4 Q3 Q2 1 Q4 Q3 Q2 13 Q4 6% Total Demand Effective Operating Rate Nameplate Operating Rate Global Annual Feedstock Cash Margins Dollars Per Metric Ton 1, 8 6 4 2-2 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 U.S. Ethane U.S. Integrated Lt. Naphtha WEP Naphtha Discounted Price SEA Naphtha U.S. Weighted Average 14 7

Ethylene Market View North American Capacity Additions Leverage Ethane Announced (-- MT) 212 213 214 Future BASF/Fina (Port Arthur) 18 Chevron Phillips (Cedar Bayou) 15 Dow (Taft / Freeport) 386 15* Equistar (All locations) 121 31 9 Exxon (Baytown) 15 Formosa (Point Comfort) 8 Ineos (Chocolate Bayou) 5 57 Oxy (Ingleside) 55* Sasol (Lake Charles) 14 Shell (Northeast) 1* Westlake (Lake Charles) 3 11 8 Williams (Geismar) 2 7 21 Nova (Sarnia) 25* Braskem/Idesa (Mexico) 1 Unidentified 145 11 Total 1 169 6 95 Cumulative Total 1 1169 1769 11269 * Dow, Shell, NOVA, and Oxy capacity additions shown are IHS estimates Dow, 15Shell, NOVA, and Oxy capacity additions shown are CMAI estimates Ethylene Market View Global Net Ethylene Capacity Million Tons, Ethylene Capacity Growth (Bars) or Demand Growth (Line) 12 1 8 6 4 2-2 -4-6 -8 2 22 24 26 28 21 212 214 216 Americas Europes/CIS/Baltics Middle East/Africa Asia Change in World Demand 16 8

1/1/212 4:18 PM Ethylene Market View Development of two low production cost regions Shale development has enabled the North American producer to become one of the lowest cost producers in the world Combined with the Middle East, East over 4% of the global ethylene capacity is now cost advantaged Other cracking capacity likely to trend towards increased LPG consumption in order to try and remain competitive Higher cost countries may respond with protectionist measures Polyethylene 9

Domestic Demand by Region NEA EUR NAM AFR/MDE SEA SAM ISC 4.9% 5.8% 9.1% 6.7% 1.9% 2.7% 6.2% 212 217 212-21 7 Average Annual Growth Rate, Total Demand: 4.7% %: 12-17 Average Annual Growth Rate. 1. 2. 3. 4. Demand by Region, Million Metric Tons World Consumption by End Use Other Raffia Fiber Rotomolding Wire & Cable Blow Molding Extrusion Coating Pipe & Profile Injection Molding Film & Sheet 4.5% 6.% 5.% 3.4% 3.% 2.6% 5.7% 4.6% 5.% 212 217 212-21 7 Average Annual Growth Rate, Total Demand: 4.7% 4.9% %: 12-1717 Average Annual Growth Rate. 1. 2. 3. 4. 5. 6. 1

1/1/212 4:18 PM Global Polyethylene Capacity Additions Capacity, Million Metric Tons 1 Global Capacity AAGR 12 12--17: 4.9% Global Demand AAGR 1212-17: 4.7% 8 6 4 2-2 -4 27 28 29 21 211 212 213 214 215 216 217 Asia/Pacific North America Central Europe/ CIS Global Demand Change Africa/ Middle East South America West Europe Global Operating Rates Accelerate Polyethylene, Operating Rate, % 95 9 85 8 75 7 27 28 29 North America 21 211 West Europe 212 213 Middle East 214 215 216 Northeast Asia 217 World 11

North America Key Issues: PE Nearly 6.7 MMT of cost advantaged new production capacity is anticipated to be added within the region during the next five years*. NearlyN l 5.4 MMT of the referenced capacity is expected in the U.S. An additional 6.5 MMT tons of new production capacity is expected to come on line in the 217 222 timeframe. While most of the new production capacity will be targeted into the export market, the domestic price premium that has existed within the region is expected to erode as competition for the domestic demand is anticipated to increase. North America Key Issues: PE cont. The first new major complex to start up in the region (Braskem / Idesa) will impact trade flows from the U.S. to Mexico when production begins. U.S. producers are likely to look further south in an effort to move any displaced sales volume. While legislation aimed at discouraging shale gas production is not expected, any such development would likely impact the forecast for capacity additions and margins. 12

US PE Resin Demand Growth Vs GDP Year % Change PE Domestic Demand % Change US GDP 27-1.1 1.9 28-12.9 -.3 29-5.7-3.5 21 8.3 3. 211 3.6 1.7 212 1. 2.2 going to 1.8 AAGR 7-12 -1.4.6 AAGR 12-17 2.5 =.85 x gdp 2.9 25 PE: North America Current Situation Domestic demand is positive by 2.6% through August Export volumes are negative by 3.5 % YTD. Total demand is higher versus 211 YTD by 1.2% Domestic / total demand has been trending higher since April low point due to increased production capacity, lower prices, and restocking. Export volumes averaging about 7 million pounds per month = 22% of total through August. Exports as a % of production about 5% below 211 level, but avg monthly shipments are about 25 million pounds lower than 211 YTD. We expect demand to continue on the recent track and forecast total 212 demand to approximate 211 levels. 213 growth slightly below GDP levels 13

PE: N. America: Current + Forecast Contract PE prices increased 6. cents Jan April due to tight ethylene and high spot / contract ethylene prices, but later declined by 14. cents over May/June as supplies improved and ethylene prices collapsed. Prices recently rebounding with +5 in Aug achieved and +5 in October announced. Integrated margins were recently near record levels = 28 cpp in Aug vs ytd avg of 28.75 cpp. Rest of yr. avg margin = 25.5 cpp and 213 avg of 25.3 cpp. Margins fcst to move higher and peak in 215/216 prior to start up of new capacity. Non int. margins only slightly positive today US / Canada Film Resin Demand vs. GDP Demand, Million Pounds 3.5 GDP Growth, % 3. 3. 2.5 211 GDP Growth= 1.9 % Film Resin Growth = 4.% 212 GDP Growth = 2.2 % Film Resin Growth = 1.2% YTD 213 GDP Growth = 1.8 % Film Resin Growth = 2.% 2.8 2.5 2.3 2. 2. 1.8 1.5 Q1-11 Q3-1 Q1 Q1-1111 Q3-11 Q1-1212 Q3-12 Q1-13 13 Q3-13 TotPE Film Demand GDP 1.5 28 14

HDPE Film Resin Demand 211 vs. 212 YTD August HDPE Percent Change Film 12 Mils and Below 59 5.9 Packaging Film 4.8 Food Packaging Film 3.5 Non-Food Packaging Film 6.2 Non-Packaging Film 6.4 Retail Bags 7.5 Trash and Can Liners 6.7 Other Non-Packaging Film 1.1 Source: ACC, Plastics Division; Gov t Trade Data LLPE Film Resin Demand 211 vs. 212 YTD August LLDPE Film (12 Mils and Below) Packaging Film Food Packaging Film Non-Food Packaging Film Non-Packaging Film Percent Change -.9.8-4.8 5.9-3.7 Source: ACC, Plastics Division; Gov t Trade Data 15

1/1/212 4:18 PM LLPE Film Resin Demand 211 vs. 212 YTD August LDPE Film (12 Mils and Below) Packaging Film Food Packaging Film Non--Food Packaging Film Non Non--Packaging Film Non Percent Change.3-2..1-1.3 11.7 S Source: ACC CC, Plastics Division; Gov t Trade Data U.S. & Canada PE Resin Producer Inventory Million Pounds 14 Days Inventory 7 12 6 1 5 8 4 6 3 4 2 2 1 Jan--6 Jan Jan Jan--7 Jan Jan--8 Jan Jan--9 Daily Demand Jan Jan--1 Jan Jan--11 Days Inventory Jan Jan--12 32 16

Regional LLDPE Butene Prices Cents Per Pound 1 9 8 7 6 5 4 3 2 1 Jan-7 Nov-7 Sep-8 Jul-9 May-1 Mar-11 Jan-12 Nov-12 Sep-13 NAM Cash Cost, Integrated WEP LLDPE NAM LLDPE CHINA LLDPE (Spot) 33 Polyethylene Chain Margins Cents Per Pound, Polyethylene 4 3 2 1 Dollars Per Metric Ton 88 66 44 22-1 27 28 29 21 211 212 213 214 215 216 217-22 Ethylene Margin - Average Acquisition Ethylene Price Minus Ethane Cracking Costs PE Margin - Contract HDPE Blow Molding Non-Int. Including Discounts 34 17

North America New PE Projects Company Location Country LDPE LLDPE HDPE Startup Type 214-215 Equistar LaPorte, TX United States 3 Q1 214 Hypo (1) Equistar Morris, IL United States 5 Q1 214 Hypo (1) Nova Sarnia Canada 1 Q1 215 Hypo 216 Braskem Idesa Coatzacoalcos Mexico 3 75 Q1 216 (1) Nova Joffre Canada 25 Q1 216 Hypo (1) Formosa Point Comfort, TX United States 3 Q4 216 (1) ExxonMobil Mont Belvieu, TX United States 65 65 Q3 216 (1) 217 Dow Gulf Coast United States 55 65 Q3 217 Hypo CPChem Sweeny, TX United States 5 5 Q3 217 (1) 218-219 Nova Sarnia Canada 35 Q3 218 Hypo (1) Sasol Gulf Coast United States 5 5 Q3 218 Hypo Shell Marcellus, United States 5 5 Q3 219 Hypo Totals, 's MT 15 33 355 79 Notes: (1): Announced projects included in our capacity database; (2): Announced expansions with IHS estimate of product and size, also not included in database; Hypo (1): reported projects not fully verified or approved and not included in the database; Hypo: IHS estimates of product and size for announced ethylene crackers - PE not in database. 35 PE Summary Global demand growth exceeds GDP growth with particular strength in Asia and Latin America Domestic demand growth in developed economies continues to lag GDP Significant capacity additions forthcoming in North America as producers leverage shale based economics Primary threats to margin growth are continued weakness in the global economy and longer term the start up of new capacity in U.S. and MDE Environmental issues curtail growth for HDPE HMW applications but green PE demand growth remains attractive. M LLDPE resins represent superior demand and margin growth opportunities 36 18

Outlook for Polypropylene Propylene Supply Profile Crude Oil PDH Motor Gasoline Motor Gasoline Crude Unit Gas FCC Unit Oil Refining i Industry Chemical Industry Naphtha Metathesis MTO and MTP HSFCC Olefin Cracking Others RG Propylene Market Ethane Propane Isobutane Cumene, Oligomers Isopropanol Purification Splitter Unit Propane to LPG Steam Cracker or Olefin Plant Other Technologies Ethylene & Olefins Alkylation Unit Other Fuel Uses PG & CG Propylene Markets Polypropylene Unit High Octane Alkylate Gasoline Injection Molding, Fibers, Films Other propylene consumers: acrylonitrile, propylene oxide, acrylic acid, oxo-alcohols 19

Ethane Cracking Chemistry Reduces Co- Product Volumes Million Tons, Production Yield for World Scale 1 Million Ton Cracker 3.5 3. 2.5 2. 1.5 1. Other Benzene Butadiene Propylene Ethylene.5. Ethane Naphtha North America Propylene/C4 Olefin Volumes Decline Index 1. = NAM Olefin Production From Steam Crackers in 2 1.4 1.3 1.2 1.1 1..9.8.7 6.6.5 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 NAM Ethylene Production NAM Butadiene Production NAM Propylene Production 2

Global On-Purpose Propylene Production Million Metric Tons 25. 2. 15. 1. 5.. 27 28 29 21 211 212 213 214 215 216 Propane Dehydro Olefin Cracking Metathesis Methanol-to-Olefins Others HS FCC Propylene Capacity Additions: N. America North America Propylene:Polymer/Chemical Grade Capacity Expansions/Closures and Ownership Changes Company Location 214 215 216 217 218 219 Canada Williams Redwater, Alta 2 2 Total Canada 2 2 United States Dow Freeport,TX 375 375 Freeport,TX 375 375 Enterprise Mont Belvieu, TX 57 Mont Belvieu, TX 175 575 Equistar Channelview, TX 114 113 FPC Point Comfort 3 3 Total United States 171 663 125 3 375 375 Total North America 171 663 125 5 575 375 21

Domestic Demand by Region Northeast Asia 4% Europe 2% South America Indian 5% Subcontinent 7% Southeast Asia 8% Africa/ Middle East 1% North America 1% 212-217217 AAGR Europe = 2.5% North America = 1.4% South America = 5.4% Northeast Asia = 6.2% Southeast Asia = 4.8% Indian Sub. = 9.6 % Africa/MDE = 5.9% Global AAGR 7-12 = 3.6% 12-1717 = 5.1% 212 Total Global Demand = 53.7 Million Metric Tons US PP Resin Demand Growth Vs GDP Year % Change PP Domestic Demand % Change US GDP 27-2.6 1.9 28-99 9.9 -.3 3 29-7.1-3.5 21 1.3 3. 211-5. 1.7 212 -.4 2.2 going to 1.8 AAGR 7-12 -2.6.6 AAGR 12-17.9 =.31x gdp 2.9 44 22

PP Film Demand 211 vs. 212 YTD August PP Category Percent Change Film 1 Mils and Below -1.1 11 Oriented Film 3.5 Non- Oriented Film -19.4 Sheet 1 Mills and Over.9 Packaging -1.5 Other Sheet 26.5 Source: ACC, Plastics Division; Gov t Trade Data PP Cost Position Changed Price Ratio 1.4 1.3 1.2 1.1 1..9.8.7 2 21 22 23 24 25 26 27 28 29 21 211 PP/HDPE North America PP/HDPE West Europe PP/HDPE China 23

North America: Loss of Propylene Supply Also Affects Demand Billion Pounds 16.5 16. 15.5 15. 14.5 14. 13.5 Million Pounds 4 3 2 1-1 -2-3 13. Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-12 May-12 Monthly Growth Rolling 12 Month Domestic Demand -4 47 Economy & Cost Causing PP Demand To Fall below Capacity growth Growth, Million Metric Tons 5. 4. 3. 2. 1.. -1 Cumulative Growth, Million Metric Tons 35. 3. 25. 2. 15. 1. 5 24