P' 1

1
Major Investment Opportunitiesin the 21st
CenturyThe Changing World of theGlobal
Ethylene BusinessGlobal Super Projects
ConferenceSaudi Arabia
2
Changing Environment

• Mergers acquisitions will re-define the term
  Competitive Edge in the future
• From multiple producers at many diverse sites to
  merged large corporations with global strategies
• By 2003, close to 50 of worlds ethylene
  production will come from 11 conglomerates
• All 11 conglomerates are in PE market and need
  ethylene to grow that market

3
World Ethylene Producers by Shareholder

• Committed
  Share
• 2003 Capacity
  Percent
• Rank Shareholder
  (000 m tons) of Total
• 1 Dow / UCC Chemical Company 10,977
  9.7
• 2 ExxonMobil Corporation 8,068
  7.2
• 3 Royal Dutch Shell Group 6,272
  5.6
• 4 Equistar 5,112 4.5
• 5 Saudi Arabia Basic Industries Corp. 4,163
  3.7
• 6 Chevron / Phillips 3,885
  3.5
• 7 BP 3,461 3.1
• 8 Elf / Total / FINA Group 2,989
  2.7
• 9 NOVA Corporation 2,960
  2.6
• 10 Formosa Plastics Corporation
  2,845 2.5
• 11 BASF AG 2,676
  2.4
• Total 47.5

4
Key Objectives for AnnouncedMergers and Joint
Ventures

• Build a global presence in a global market
• Petrochemicals are world commodities requiring
  world performance
• Improve total cost position in commodity markets
  through improved efficiencies in marketing,
  production and logistics
• Demand growth requires large investments

5
Globalization Price Levels Same Across Regions
/TON (LOW DENSITY POLYETHYLENE DELIVERED)
GULF WAR
PRC BEGINS PE IMPORTS
6
Ethylene Market Drivers

• Derivative Demand
• Consumption of plastics, fibers, etc.
• Locations Driven by Feedstock Cost
• a) Gas Cracking Low Ethane Price
• b) Liquid Cracking Integrated Refinery
• Feeds, cracking lowest value feedstock of
• the day

7
Ethylene Cost Curve HighlightsAdvantages of
Stranded Ethane...

• Cost curve displays competitive sources of
  international derivative supplies
• Ethane in the Arabian Gulf area provides very
  competitive costs
• U.S. in 1999 had about a 50 disadvantage

Courtesy CMAI
8
Feedstock Cost - Impact on Locations
Market Forecast

• Low Ethane Price Examples
• Arabian Gulf Saudi Arabia Qatar
• Iran U.A.E.
• Africa Algeria Libya
• Nigeria
• North America Canada
• South America Venezuela Trinidad
• FSU Uzbekistan (future)

9
Ethylene demand increases in line with GDP
growth, but at a faster rate
Source CMAI, Mar-99
10
Worldwide Ethylene Supply / Demand_at_ 5.5 World
Growth Rate
Sixteen additional 1 MM tons/hr plants
or Thirty-two 500 KTA plants by 2005
Thousands of Metric Tons
11
Worldwide Ethylene Supply / Demand_at_ 4.1 World
Growth Rate
Eight 1 MM tons/yr plants or sixteen additional
500 KTA plants by 2005
Thousands of Metric Tons
12
Regional Growths in Ethylene Capacity
NAFTA
Europe
Asia
Arabian Gulf/Africa
Japan
13
Ethylene Opportunities

• Rest with
• Areas with access to low cost feedsotcks
• Companies with acces to low cost feedstocks
• Likely scenarios
• SABIC and Arabian Gulf countries have a
  significant opportunity
• Major international oil companies will be
  interested in their own reserves and joint
  venture operations

14
Competitive Performance

• Will need
• Every technology edge available
• Large capacities to gain the benefits of the
  economics of size

15
Steam Cracker Size Continues To IncreaseSize Vs.
Year Of Startup
NOVA/UCC Ethane
EXXONMOBIL BAYTOWN EXPANDED (SINGLE
TRAIN)
IRAN
BASF/FINA
DOW, CANADA
KTA ETHYLENE
SHELL, USA
DOW FREEPORT (TX)
BAYTOWN (TX)
EXXON BATON ROUGE (LA)
ICI WILTON (UK)
16
KBR Olefins Technology
BROWN ROOT
MW KELLOGG
SCORE
EXXONMOBIL
17
How Big Can We Build Them?

• Only recently world-scale meant 600,000 to
  800,000 t/yr
• With KBR SCORE technology a 1,500,000 t/yr
  cracker is possible

18
Equipment LimitationsFurnaces

• Furnaces are the heart of the ethylene plant
• Represent 25 - 35 of ISBL installed cost
• SCORE SC-1 furnace provides highest selectivity
  in the industry

19
Equipment Limitations Furnaces

• Capacity considerations
• Economy of Scale
• A SCORE furnace can be built with a 200,000 to
  250,000 t/yr capacity
• KBRs analysis indicates 5 - 8 furnaces is the
  optimum balance

20
Equipment LimitationsTowers

• What limits tower size?
• Transportation
• Limited number of ships fpr transport
• Diameter limit is about 15 meters
• Site conditions for off-loading and transit
• Cranes
• Limits are 1200 to 1500 tons
• Will require more dress-out at site
• Availablity often is an issue
• These limits drive large plants to use lower
  pressure towers

21
C2 Recovery
WITHOUT ACP WITH ACP
22
Equipment LimitationsProcess Gas Compressor

• Low Pressure Casing is at its limit
• Two drivers are required
• Required by turbine limits
• HP casing turns faster - higher efficiency
• Adds to cost, but reduces power requirement
• Operational benefit Depropanizer operation is
  isolated from rest of PGC

23
Overall Process Flow Scheme
Tail gas
Compressor
Cold Box Expander
Caustic
1-3
4
Ethylene
Furnaces
Water
Reactor
Demeth
Wash
Feed
C2
Dryer
Chillers
Splitter
TLEs
Deethanizer
C3
24
Equipment LimitationsPropylene Refrigeration
Compressor

• Low Pressure C2 Splitter shifts load out of PRC
  and into ERC
• Advanced C2 Process further reduces PR power
  requirement
• C3 Splitter will require its own heat pump
  compressor
• Shift in loads keeps compressor well within
  existing limits of the technology

25
Conclusions for Large Plants

• A 1,500,000 t/yr cracker can be built today
• PGC first stage suction volume is a limit
• Turbine drivers are a limit
• Economy of scale still exists at the capacity

26
Changes in the Ethylene IndustrySummary

• Demand Growth Requires Investment
• Cyclicality and risk
• Margin Decline
• Consolidations and new technology are competed
  away......the Experience Curve at work
• Globalization
• Petrochemicals are world commodities
• World competitive performance required

27
Changes in the Ethylene IndustrySummary

• The technology for very large, efficient plants
  exists and is available to everybody
• Very high standards of performance, especially
  safety and environmental performance, are basic
  requirements
• Very strong competitors result from structural
  changes such as mergers, acquisitions and
  consolidations

28
Changes in the Ethylene IndustrySummary

• Olefin producers must continually change to
  improve all aspects of performance...... or risk
  disappearing
• Opportunity for large integrated companies with
  access to low cost feedstocks