Whats Different Today Versus The Mid 1990s Morgan Stanley Basic Materials Conference February 25, 20

1
Whats Different Today Versus The Mid
1990s?Morgan Stanley Basic Materials
Conference February 25, 2004Dan F.
SmithPresident and CEO

2
Safe Harbor Language
Statements in this presentation relating to
matters that are not historical facts are
forward-looking statements. These forward-looking
statements are just predictions or expectations
and are subject to risks and uncertainties.
Actual results could differ materially, based on
factors including but not limited to the cyclical
nature of the chemical and refining industries
availability, cost and volatility of raw
materials and utilities governmental regulatory
actions and political unrest global economic
conditions industry production capacity and
operating rates the supply/demand balance for
Lyondell's and its joint ventures' products
competitive products and pricing pressures
access to capital markets and technological
developments and other risk factors. For more
detailed information about the factors that could
cause our actual results to differ materially,
please refer to Lyondell Chemical Companys
Annual Report on Form 10-K for the year ended
December 31, 2002, filed in March 2003,
Lyondells Quarterly Report on Form 10-Q, filed
in November, 2003, and Lyondells Annual Report
on Form 10-K for the year ended December 31,
2003, which will be filed in March 2004.
Reconciliations of GAAP financial measures to
non-GAAP financial measures are provided at the
end of this presentation.
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Whats Different?Lyondell Is Different
We have created significant change since the
mid-1990s
Rexene Polymers Purchase of LDPE PP Assets
LCR/Refinery Upgrade Partnered with PDVSA
Equistar 2 Oxychem joins Equistar Partnership
Bayer Divested polyols business to Bayer
PO BDO Europe
1985 Formation ARCO Olefins, Houston Refinery
1998
2000
2001-03
1985-95
1999-00
1996-97
Merged Structure Combined management of Equistar
and Lyondell
Equistar 1 Joined with Millennium to
form Equistar
Increase Equistar Ownership Purchased Oxys
share of Equistar
ARCO Chemical Purchased ACC
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Weve Developed A Balanced Portfolio
Lyondell
Growth International Presence -- A leading
global producer of PO and derivatives -- Process
technology strength
ICD
Cash Generation -- Unique capability to refine
heavy crude oils -- Contractually stable
business strong cash flow generator
LCR
Commodity Leverage -- A leading North American
producer of ethylene, propylene and
polyethylene -- Low cost position based on
feedstock flexibility and scale
Equistar
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Leading Product Positions Create Significant
Earnings Leverage
Pre-Tax Leverage (?1/unit)
(1)
(1)
Product
Annual Capacity
Capacity Position
Intermediate Chemicals and Derivatives
(2)
st
Propylene Oxide
(
lbs)
4.5 billion
1
in North America
23MM
st
1
in the world
st
Styrene Monomer (
lbs)
5.0 billion
1
in North America
21MM
th
4
in the world
(4)
st
MTBE (bbl/day)
58,500
1
in North America
9MM
st
1
in the world
Equistar
nd
Ethylene (
lbs)
11.6 billion
2
in North America
116MM
th
5
in the world
(3)
nd
Propylene (
lbs)
5.0 billion
2
in North America
50MM
th
7
in the world
rd
Polyethylene (
lbs)
5.7 billion
3
in North America
57MM
th
4
in the world
1 Source LYO capacities as of January 2004,
CMAI 2 Includes 100 of joint venture volumes 3
Does not include refinery-grade material or
production from the product flexibility unit at
Equistars Channelview facility. 4 Based on
1/gal change
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Weve Significantly Strengthened Our Operations
Safety Performance Enterprise Incident Rate
Average SGA and RD, Sales 2000 - 2002
Peers include Dow, Nova, Eastman, Celanese,
Solutia, Westlake, Millennium, Georgia Gulf
1st Quartile 02 1.00
Recordable Injury Rate
Days of Working Capital
Capital Spending
Days
MM
2004 Budget
1999
Based on accounts receivable (including those
sold), inventories accounts payable as of
12/03, and fourth-quarter days of sales.
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Lyondells Portfolio Is Significantly Larger Than
In The Early 1990s

• Early 1990s Today
• Petrochemicals - 100 Owned - 70.5 Owned
• Polymers - 2 Ethylene Plants - 8 Ethylene
  Plants
• - 1 Polymer Plant - 7 Polymer Plants
• - 2 MEG Plants
• Refining - 100 Owned - 58.75 Owned
• - Sour Crude Refinery - Heavy Crude Refinery
• - PDVSA Contract
• ICD - 100 Owned
• - 3 POSM Plants
• - 5 PO/MTBE Plants
• - Nihon Oxirane JV POSM
• Plant

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Weve Increased Market Cap and Liquidity

• Late 1993 Jan-Feb 2004
• Shares Outstanding 80 MM 176 MM
• Share Price 20 23 17 19
• Trading Liquidity 100 M Shares/Day 1 MM
  Shares/Day

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We Have Increased Cycle Leverage
Early 1994
Jan. 1, 2004
Lbs/Share
Lbs/ Invested
Lbs/Share
Lbs/ Invested
Petrochemicals
Ethylene
45
2.1
46.5
2.6
Styrene
--
--
16.5
0.9
Propylene Oxide
--
--
13.5
0.8
TDI
--
--
3
0.2
45
2.1
79.5
4.5
Derivatives
Polyolefins
5.5
0.3
24
1.3
Ethylene Oxygenates
--
--
6.5
0.4
PO Derivatives
--
--
9.5
0.5
5.5
0.3
40
2.2
Notes Lbs refers to capacity times ownership
percentage. 1994 2004 Share Count
80 MM 176 MM Share Price 21.50 18
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Lyondell Stock Has Performed Well In Recessions
and Recoveries
1990 1995 Cycle
2000 200? Cycle
?
Shareholder Return / Yr
Source Bloomberg
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Most But Not All Industry Fundamentals Are
Unchanged

• Energy prices have changed
• Economy emerging from a downturn
• Cyclicality has not been repealed
• Product growth driven by improved quality of life
• Sustained advantage requires differential cost,
  scale and/or technology

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The Energy World Was Very Different

Source Platts
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Global Conditions Are Strikingly Similar To The
Early 1990s
Coming out of the U.S. recession of 1991
1992 and 1993 confirmed the worse fears of
pessimists
U.S. hoping to sustain economic growth of late
1993
Europe headed to moderate economic recovery
Iraq will comply with UN edict andexport crude
Source 1993 World Light Olefins Analysis, CMAI
14
The Global Economy is Emerging from a Difficult
Period
Global GDP
(Percent change in real GDP)
Source Global Insights
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Within The Ethylene Industry, There Are Striking
Similarities Between 1993 And 2003
Demand forecasts

• Annual rate of 4.9 per year 1992-1998 period

• Worldwide growthduring 1993 . . . 2

• New light olefins in Asia/Pacific and
  Africa/Middle East will severely impact exports

Operating rate forecasts

• Slowly improve from 85 in 1993

• Between 1993 and 199717.9 MM tons capacity
  will be added

• In the U.S. between 1990 and 1992 three new
  world scale plants

Source 1993 World Light Olefins Analysis, CMAI
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North American Supply/Demand Balance Is On Track
To Improve Significantly
Source CMAI / Equistar (September/2003)
17
We Believe that Global Ethylene Supply/Demand is
on a Path to a Tight Balance
CMAI base case
Sensitivity
104
96
99
Source CMAI
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The Emergence of a Middle Class Increases Local
Demand for Plastics
PE Consumption/capita, lbs
China PE Demand Domestic vs. Export
US
Singapore
Korea
Taiwan
WE
Malaysia
Japan
Thailand
China India
Indonesia
2000 GDP/Capita
Sources CMAI 2001 Nexant Chemsystems
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Historically Ethylene And Styrene Have Had The
Most Leverage To A Cyclical Upturn
Contract Pricing Margin Change Trough To
Peak 1992/93 vs. 1995
? Margin / lb
Source CMAI Lyondell Databook
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Enterprise Earnings Capability Far Exceeds Recent
Trough Results
Cycle EBITDA Potential
Peak
Recession/ Trough
Pre- Recession
1.40 / share
6.90 / share
2003 Proportional Interest, Dividends Capital
1
1
1
1 Chem Data/CMAI industry margins conditions for
ICD and Equistar products (ex. MTBE) applied to
current capacities and ownership, LCR 2003
EBITDA. Note Assumes current capital
structure 175 MM shares.
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Investing Based on Differential Technology PO
Derivatives

• Growth rate 4-5/yr
• End Use
• Polyols seating, mattresses, insulation,
  coatings
• PG deicers, boat hulls, coatings,
  countertops/showers, personal care
• Ethers coatings, electronics
• BDO Spandex, electrical auto parts
• Basis of differentiation
• Proprietary process technology/cost
• Global position
• Derivative integration

2003 PO Capacity Share
2003 Derivative Demand
Source SRI, Tecnon, Lyondell estimates
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Propylene Oxide Is Differentiated From Other
Commodity Petrochemicals By Its Technology
Position
PO Technology Source
PO Regional Capacity
American Region
Chlorine- Based Technology
LYO Partners
LYO
LYO
Asian Region
European Region
Co-Product Technology
LYO
Source SRI, Tecnon , Lyondell estimates
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The PO Industry Has Absorbed a Period of Capacity
Additions
Demand at 4.4 growth
Source SRI / Lyondell
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The Lyondell Enterprise Has A Well Established
Presence in Asia

• Presence established in 1972
• 40 interest in Nihon Oxirane
• 1 B revenue 1
• 2.5 B lbs of sales 1
• Leading PO and derivative positions
• Strong styrene relationships

Beijing
?
Tokyo
?
?
Shanghai
?
?
?
Guangzhou
Taipei
?
?
?
Hong Kong
?

?
?
Offices Inventory Point
Manufacturing
?
?
1 Includes 100 of Nihon Oxirane
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The Asian / Middle East Propylene And PO Chain
Supply / Demand Balance Represent An Opportunity
Propylene Growth
Propylene Oxide Growth
Blbs
Blbs
2002 - 2007
2002 - 2007
2007 - 2010
FCC Co-Product
Ethylene Co-Product
Source CMAI, SRI, Lyondell Estimates
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LyondellWhat Is NOT Different? Our Financial
Strategy

• Maintain Sufficient Liquidity
• Repay Debt
• Create Shareholder Value

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Lyondell Stock Has Performed Well In Recessions
and Recoveries
1990 1995 Cycle
2000 200? Cycle
?
Shareholder Return / Yr
Source Bloomberg
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