Alternative Energy And Feedstock Sources In The Current Chemical Landscape: The Methanol Perspective

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2 Alternative Energy And Feedstock Sources In The Current Chemical Landscape: The Methanol Perspective GPCA, Dubai, November 2016 John Floren President and CEO

3 Forward-looking Statements & Non-GAAP Measures Information contained in these materials or presented orally, either in prepared remarks or in response to questions, contains forward-looking statements. Actual outcomes could differ materially from those outcomes contemplated by the forward-looking statements. For more information, we direct you to our 2015 Annual MD&A and our third quarter 2016 MD&A. 3

4 Methanol An essential ingredient of modern life Essential ingredient used in countless industrial and consumer products Innovative marine fuel of today and the future Clean-burning, biodegradable transportation fuel Emerging power source Can be made from renewable sources 4 Transportation fuel

5 Methanol End Uses 5 Source: Methanex last twelve months ended September 30, 2016

6 Industry Overview ~64 million tonnes global demand in four quarters ended Q Methanex is the global leader ~14% market share 2 Unique global position with sales in all major regions Top producers ~ half of global sales Largest competitors are not materially expanding methanol investments in the near term 1 Excluding integrated methanol to olefins (MTO) demand. 2 Includes Methanex s share of total methanol sales excluding methanol consumed by integrated MTO producers. 6

7 Strong Demand Growth (000s tonnes) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, CAGR: 7% CAGR: 6% E 2017E 2018E 2019E 2020E Chemical MTBE/TAME Fuel DME MTO/MTP (Merchant) Projected 6% CAGR to 2020, led by MTO 7 Source: IHS Chemical, Chemical Supply and Demand Balance Excludes integrated methanol demand for methanol to olefins and propylene.

8 Methanol as Energy Methanol is primarily made from natural gas, and is a liquid fuel and oil product alternative High priced oil versus natural gas creates substitution incentive Energy applications emerged post 2008 when the ratio of oil $/bbl and natural gas $/mmbtu prices exceeded 15:1 Source: Historical annual data and forecast from IHS Chemical, October,

9 Methanol-to-Olefins (MTO) Natural Gas Coal Petroleum Residues Ethylene Oxides (EO) Synthesis Gas Production Methanol Production Methanol to Olefins High Purity Ethylene High Purity Propylene MEG Acrylic Acid (AA) ACN Propylene Oxide Ningbo Skyford s 1.8 MMT merchant methanol to 0.6 MMT olefins plant PE 9 MTO an alternative process to Naptha cracking for olefins production (plastics) Two main pathways Upstream Integrated (CTO) olefins produced directly from coal, methanol an intermediate step Merchant (MTO) methanol purchased from external suppliers China merchant MTO capacity well established, still growing strongly

10 thousands of tonnes of methanol MTO Leading Methanol Demand Growth 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 MTO Methanol Demand (Annualized) Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Actual Potential* Upside demand potential based on current installed capacity Two new plants under construction expected to start up in coming months, third plant later in 2017 Incremental demand potential over 4.5 million tonnes at 90% operating rates * Potential demand based on 90% operating rate. Excludes demand and capacity for methanol-to-propylene plants ( MTP ) 10

11 The Benefits of Methanol as a Vehicle Fuel It s a low-emission fuel It can be made from renewable sources It s high-octane improving performance and efficiency It s used in vehicles worldwide It s an economical option It s accessible around the world 11

12 Methanol as a Vehicle Fuel A clean-burning, affordable and efficient gasoline substitute 12 China (Nanjing) Wholesale Gasoline Price: *$2.41/gallon September 30, 2016 USGC Conventional Regular Gasoline Price: $1.41/gallon September 30, 2016 * Net of 17% VAT. Sources: Oil and Gas China, US Department of Energy, Methanex

13 Methanol Fuel Blending in China China fuel demand growth expected to continue Province Local Methanol Fuel Blending Standards* Implemented Since Shaanxi M15 & M Sichuan M Xinjiang Tibet Qinghai Local standards for low level methanol-blended gasoline are available Local standards for High level methanol-blended gasoline (M85 & M100) are available Local standards for methanol-blended diesel are available Heilongjiang Jilin Liaoning Inner Mongolia BJ TJ Hebei Gansu NX Shanxi Shandong Shaanxi Henan Jiangsu Anhui SH Hubei Sichuan CQ Zhejiang Hunan Jiangxi Guizhou Fujian Yunnan Guangxi Guangdong MAC HK HN Heilongjiang M Liaoning M15, M20 (methanol-blended diesel) 2006 Qinghai M5, M10 & M Shanxi M5, M15, M85 & M Fujian M15 (methanol-blended diesel) 2009 Gansu M15 & M Jiangsu M Zhejiang M15, M30 & M Guizhou M Hebei M Hunan M15, M25 & M Shanghai M Shandong M Ningxia M15 & M * Most of these standards are for methanol-blended gasoline, unless specified otherwise 13

14 Methanol Fuel Blending Outside of China Several countries in assessment or near-commercial stage for methanol fuel blending Iceland U.K. Denmark Russia Netherlands Switzerland Azerbaijan Iran Uzbekistan China Alaska U.S. Trinidad & Tobago Turkmenistan Australia Egypt 14 Commercial / near-commercial Assessment stage New Zealand

15 Di-Methyl Ether (DME) Market DME can be blended directly with LPG (propane) up to approximately 20% for cooking and heating applications. Future promising application for DME is as a diesel replacement: Oberon Fuels Produces DME in the U.S. DME as propane substitute 15 ASTM Standard issued, California approval, qualified under U.S. Renewable Fuel Standard. Volvo developing DME trucks. Ford projects underway in Europe and Canada to test DME in light duty cars and trucks Volvo DME Truck

16 Methanol for Marine Methanol is an innovative alternative fuel solution with many benefits Environmental compliance Low emissions Fuel flexibility Cost competitiveness Wide availability Innovative technology In use today 16

17 Emerging Market Marine Fuel Existing Emissions Control Area Potential future Emissions Control Area 100,000+ commercial vessels in the world operating on high Sulphur Heavy Fuel Oil (HFO). Methanol is Sulphur free. N. Europe and N. America reduced allowable Sulphur emissions to 0.1% in January precludes HFO. IMO to implement 0.5% sulphur cap for all marine fuels globally by MMTPA methanol equivalent market in N. Europe Sulphur Emissions Control Area alone. Source: FCBI Energy Report on Methanol as a Marine Fuel See 17

18 Fuel Flexibility and Emissions Reductions Methanol fuel enables shippers to operate cost effectively and diversify fuel options Methanol is among the lowest emission fuels for marine engines 18

19 $ / tonne Cost Competitiveness: Fuel Methanol is an economically viable alternative marine fuel over the cycle $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 North America (West Coast) MGO Europe MGO $400 China (Shanghai) MGO Middle East MGO $300 Methanol (Energy Equivalent) $200 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec Source: Platts and IHS Chemical Methanol converted to MGO energy equivalent at factor of 2.16

20 /kwh mechanical power Incremental Operating and Conversion Costs Costs are low to convert and operate methanol-fueled vessels Incremental Operating Costs Conversion Costs HFO + Scrubber (closed loop) MGO Methanol LNG 20 Source: Effship Project Summary Report, 2013 * Costs do not include infrastructure development. Fuel cost based on market price Conversion based on 5 year pay-back and 6% interest

21 Wide Availability Methanol infrastructure is well positioned to supply the global marine industry 21 Methanol terminal locations based on available information; not a complete list

22 Methanol in Use Today A number of commercial/near commercial projects are underway Waterfront Shipping: in 2016 launched seven new 50,000 dwt vessels with methanol dual-fuel MAN 2- stroke engines One of Waterfront s first methanol powered vessels Stena Line s first methanol powered ferry 22 Stena Line converted Germanica ferry to run on methanol in Germanica uses Wartsila 4 stroke engines

23 Other Emerging Energy Uses Methanol for Power Generation Industrial Boilers (China) 23 Methanol Fuel Cells

24 Methanol as Renewable Energy Methanol and DME is produced from fossil fuels and renewables 24 LNG = Liquefied Natural Gas; DME = Di-Methyl Ether; OBATE = On Board Alcohol to Ether (i.e. methanol converted to DME on board ships)

25 Methanex is Committed to Responsible Care At Methanex, Responsible Care is the foundation of everything we do and a key element of our global culture:» community safety» employee health and safety» environmental protection» product stewardship» social responsibility As an industry, we must continue to embrace and promote Responsible Care 25

26 Key Takeaways A unique phase of growth for methanol demand driven by Increasing public pressure to protect the environment Evolving more strict emission restrictions Requiring cleaner burning fuels New technology for fuels and chemical feedstocks Shifts in global energy and feedstock markets New energy applications could lead to double GDP growth for methanol demand over the next 5 years 26

27 Key Takeaways New uses of methanol Unique opportunity Bring a positive industry outlook Will benefit all of us Sustainable growth needs support From methanol producers to provide supply security to support new demand growth From service providers to debottleneck transport routes and invest in infrastructure From all of us to promote safe handling practices through Responsible Care From all of us to advocate the future growth of methanol 27

28 Thank You