Energy and commodity price benchmarking and market insights

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1 Energy and commodity price benchmarking and market insights London, Houston, Washington, New York, Portland, Calgary, Santiago, Bogota, Rio de Janeiro, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Porto and Johannesburg

2 London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Copyright 2014 Argus Media Ltd. All rights reserved.

3 Global Trends in Aromatics and Derivatives Margins move upstream. Chuck Venezia and Andy Nicholson Argus DeWitt APIC Pattaya, Thailand 15 th May 2014

5 Global Aromatics Supply 41% Benzene 57% 16% BZ (Disp, MSTDP, HDA) Gasoline Pool (Reformate) 77% Toluene PX (MSTDP, MPX) 87% Mixed Xylenes 7% MX (Disp) 94% Copyright 2013 Argus Media Ltd. All rights reserved.

6 Numerous Impacts on Benzene Supply/Price Gasoline Quality / Feed Slate Reformate Pygas Olefin Demand/Feed Slate Toluene BV Benzene Demand HDA Coal Coke/Steel Demand TDP PX Isom Toluene BV PX Demand Copyright 2013 Argus Media Ltd. All rights reserved.

8 The US Shale Oil & Gas Revolution Influence on Products: 1) LNG, LPG, Ethylene 2) Refining, Gasoline & Naphtha

US oil production is up 60% in 60 months as a result of increased shale oil production 1,200 BAKKEN PRODUCTION Th B/d 1,000 800 600 400 200 - Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13

9 US oil production is up 60% in 60 months as a result of increased shale oil production 1,200 BAKKEN PRODUCTION Th B/d 1, Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 1,400 EAGLE FORD PRODUCTION Th B/d 1,200 1, Source: EIA Data Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Copyright 2014 Argus Media Ltd. All rights reserved.

10 US becomes a net product exporter 4 Net Exports of US Products Positive through 2013 US Total Petroleum Products (mm bbls/day) 3 2 US Product Exports 1 0 Net Exports -1-2 US Product Imports Source: EIA Copyright 2012 Argus Media Ltd. All rights reserved.

11 Forecast Overall US NGL Supply Demand, 000b/d Source: EIA Data/Argus DeWitt Includes LPG from refineries Exports could top 800kbl/day on average; over 1mm bl/d in summer With gasoline demand faltering, even more butane could be available Copyright 2014 Argus Media Ltd. All rights reserved.

12 US adding LPG export capacity US now no. 1 exporter Announced projects will result in almost 1.4 mmbl/day of capacity by 2016 Utilization high in the summer, but could hit low 70 s on average if all projects are developed Source: Industry Announcements and Argus DeWitt Copyright 2012 Argus Media Ltd. All rights reserved.

14 $/t US ethane competitive with ROW 1400 Estimated Ethylene Cash Costs, $/mt North Sea Dated Crude ~ $100/bbl US E 25 cpg ME E $2 NG ME P 570/112 EU Naph Asian Naph Net Feedstock Costs Variable Costs Fixed Costs Copyright 2014 Argus Media Ltd. All rights reserved.

ROW ethylene expansions moderate near term 10000 8000 6000 4000 2000 0 North America 2013 2014 2015 2016 2017/18 0-2000 -4000-6000 -8000-10000 2013 2014 2015 2016 2017 West Europe 10000 8000 6000

15 ROW ethylene expansions moderate near term North America / West Europe East Europe /18 East Asia South America Africa/Middle East / South East Asia 2000 Ethylene Net Changes (kta) Copyright 2013 Argus Media Ltd. All rights reserved.

TONS PER TON OF ETHYLENE PRODUCED The choice of

volume of products produced and their economics

17 KT C2 KT Total NPRA US benzene production from pygas compared to total ethylene production Ethylene produced from full range naphtha yields 12 times pygas and 8 times benzene volume per ton of ethylene yield. C2 production in 2005 was 0.6% greater than 2012 Benzene from pygas was 45% higher (1 million tons) primarily due to shift in feedstocks Copyright 2013 Argus Media Ltd. All rights reserved.

18 The US Shale Oil & Gas Revolution Influence on Products: 1) LNG, LPG, Ethylene 2) Refining, Gasoline & Naphtha

US gasoline demand to continue to fall going forward Slow Economic Growth; Does not include exports Renewable Fuel Standard-Target is 36 B gallons of ETOH by

19 US gasoline demand to continue to fall going forward Slow Economic Growth; Does not include exports Renewable Fuel Standard-Target is 36 B gallons of ETOH by 2023(not achievable) CAFÉ Standard with targets of 35.5 MPG by 2016 and 54.5 MPG by 2025 Source: EIA and DeWitt forecast Copyright 2012 Argus Media Ltd. All rights reserved.

20 US Crude Distillation Capacity is expanding, and utilization rates are high Valero and Marathon are adding distillation capacity to process more shale crudes Copyright 2014 Argus Media Ltd. All rights reserved.

6mmbbls per day of Brent/Bonny with Eagle Ford and Bakken With forecast production

21 and as a consequence of the quality of US Shale crudes, much more naphtha is being produced Source: Argus DeWitt Est Based on replacing 1.6mmbbls per day of Brent/Bonny with Eagle Ford and Bakken With forecast production growth of shale crudes (up to 4.0MM bbls per day by 2020) Copyright 2014 Argus Media Ltd. All rights reserved.

$What is Naphtha? Broad term covering among the lightest and most volatile fractions of the liquid hydrocarbons in petroleum.$

22 What is Naphtha? Broad term covering among the lightest and most volatile fractions of the liquid hydrocarbons in petroleum. Naphtha is a colorless to reddish-brown volatile aromatic liquid, very similar to gasoline. Naphtha is used primarily as refinery feedstock to produce high octane gasoline via catalytic reforming in refinery Also used in the bitumen mining industry as a diluent. Feedstock for the petrochemical industry for producing olefins in steam crackers. Feedstock for the chemical industry for solvent applications.

23 Crude oil quality comparison Crude Comparison Table NSD Bonny Lt WTI Eagle Ford Bakken API Gravity Sulfur Wt% Yields Vol% Light Ends C5-165 C Naphtha Jet C Diesel C VGO C Resid 540+ C Total C5-165 C Naptha Vol% Napthenes Aromatics N+A Copyright 2012 Argus Media Ltd. All rights reserved.

24 US Exports of C5+ and naphtha are rising rapidly C5+ condensate going to Canada as diluent for heavy crude production More cargoes are leaving the USGC headed to customers in Asia Forecast for 2022 depicts our view as more light crude is produced Source: EIA and Argus DeWitt forecast Copyright 2012 Argus Media Ltd. All rights reserved.

25 Asia demand for naphtha, selected countries Combined, these countries imported more than 1.0 mmbl/d in 2013 Suppliers Middle East Europe US Japan should see falling demand, as petrochemical market is consolidating Taiwan could also face pressure in the future Copyright 2014 Argus Media Ltd. All rights reserved.

The US has sought to manage this naphtha length by increasing its

Fluid Catalytic Cracking versus Hydrocracking In the 1990 s, FCC was refinery workhorse FCC produces largest percentage of refinery gasoline Also the

27 Fluid Catalytic Cracking versus Hydrocracking In the 1990 s, FCC was refinery workhorse FCC produces largest percentage of refinery gasoline Also the largest contributor to gasoline sulfur The dynamics are changing.. Source: Argus DeWitt and Industry Data Copyright 2014 Argus Media Ltd. All rights reserved.

28 US FCC and Hydrocracking estimated margins Hydrocracker margins are vastly superior to FCC margins US refiners are already planning to rationalize some FCC capacity With low cost natural gas, hydrogen is relatively cheap Source: Argus DeWitt internal models Copyright 2014 Argus Media Ltd. All rights reserved.

29 Conclusions US energy production continues to grow; crude production rises over 1.0 mmbl/d in 2013 US NGL surplus will continue to expand; likely that LPG export capacity will operate at 70% by 2016 US naphtha surplus will grow, but there are several options for disposition Refiners continue to look for ways to produce more diesel at the expense of gasoline; long term trends could affect petrochemicals Copyright 2013 Argus Media Ltd. All rights reserved.

30 Europe and the Middle East

31 The Refining Imbalance in Europe Europe imports diesel, but Exports account for approximately 30% of gasoline production Europe s refineries are ageing and few are world-scale Europe s export markets are under threat from more competitive US refineries and from new capacity in India and the Middle East The IEA estimates that Europe needs to shed a further 1mn b/day refining capacity WE Gasoline Exports 000t USA S. America N.America N. Africa MEAG East Med Africa C. Europe E. Europe S. Asia E.Asia Source: Eurostat Copyright 2012 Argus Media Ltd. All rights reserved.

32 EU Refining Capacity Closures since 2009 Year Company Location Capacity Comments 2009 Petroplus Teesside, UK 117 Permanent Closure 2009 ConocoPhillips Wilhelmshaven, Germany 260 Now Hestya Energy; not operational 2010 Arpechim Romania 65 Permanent Closure 2010 Total Dunkirk, France 141 Permanent Closure 2010 Petroplus Reichstett, France 78 Permanent Closure 2011 Tamoil Cremona, Italy 101 Permanent Closure 2011 LBI Berre, France 82 Permanent Closure 2012 Total/ERG Rome, Italy 86 Permanent Closure 2012 Petroplus Coryton, UK 220 Permanent Closure 2012 Petroplus Petit-Couronne, France 162 Closed - staff laid off from April Shell Harburg 100 Permanent Closure from March 2013 MOL Mantova 69 Conversion to logistics' hub Jan from 2014 total 1550 Copyright 2012 Argus Media Ltd. All rights reserved.

33 Arabian Gulf & Red Sea Refining Expansions (excl. Iran) Refinery Location Country Operator Al Jubail SATORP Saudi Arabia Aramco / Total Yanbu "Red Sea" Saudi Arabia Aramco / Sinopec Ruwais UAE Takreer (ADNOC) Crude Distillation Capacity (kbpd) Rabigh Saudi Arabia Aramco 400 Ras Tanura Saudi Arabia Aramco 550 Ras Laffan expansion Qatar Qatar Petroleum 146 Fujairah UAE IPIC 200 Duqm Oman Oman Oil/IPIC 230 Jazan Saudi Arabia Aramco 400 Al Zour Kuwait KNPC Projected Start-up Copyright 2012 Argus Media Ltd. All rights reserved.

34 Saudi Arabia Refinery and Aromatics Projects Refinery Location Operator Crude Distillation Capacity (kbpd) PX (ktpa) Bz (ktpa) PX s/u Yanbu Al Jubail SATORP Yanbu "Red Sea" Aramco / ExxonMobil Aramco / Total Aramco / Sinopec Q S2 Rabigh Aramco Jazan Aramco Ras Tanura Aramco Totals Copyright 2012 Argus Media Ltd. All rights reserved.

35 Asia The Source of Demand Growth but Over-investment can kill Downstream Profits

36 Paraxylene and Benzene Growth rates World Paraxylene & Benzene Demand Growth Rates for PX have been almost double those for Benzene for 30 years There is no reason to think this will change PX Bz Benzene Pricing has always reflected its Status as a coor byproduct volatile and often weak Copyright 2012 Argus Media Ltd. All rights reserved.

38 Paraxylene & Naphtha Daily Pricing 1,600 $/t 1,400 1,200 1, Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Differential PX cfr China Naphtha c+f Japan Copyright 2012 Argus Media Ltd. All rights reserved.

Expected Global Paraxylene Capacity Additions

40 PX Projects 4Q Q 2014 add 4,150 kta (9%) Country Location Company Timing Expect Start-Up Volume (KTA) China Zhangzhou Tenglong Aromatics (Dragon) Phase I 4Q 2013 October 800 Indonesia Indonesia Restart of TPPI by Pertamina 4Q 2013 Nov China Hainan Sinopec Hainan Petrochemical 1Q 2014 Jan China Sichuan PetroChina Sichuan 1Q 2014 Feb China Qingdao Lidong 1Q 2014 Feb Saudi Arabia Al Jubail Aramco Total (SATORP) 1Q 2014 Mar Copyright 2014 Argus Media Ltd. All rights reserved.

41 PX Projects 2Q 2014 add 3,100 kta (7%) Country Location Company Timing China Zhangzhou Expect Start-Up Volume (KTA) Tenglong Aromatics (Dragon) Phase II 2Q 2014 Apr Korea Daesan Samsung Total 2Q 2014 May Korea Incheon SK Global Chemicals 2Q 2014 Jun Copyright 2014 Argus Media Ltd. All rights reserved.

42 PX Projects 3Q/4Q 2014 add 3,640 kta (8%) Country Location Company Timing Expect Start-Up Volume (KTA) Algeria Skikda Sonatrach 3Q 2014 Jul India Mangalore OMPL (Same as MPRL?) 3Q 2014 Jul Korea Ulsan SK Energy- JX Nippon 3Q 2014 Jul Singapore Singapore Jurong Aromatics 1 3Q 2014 Jul Saudi Arabia Yanbu Aramco Sinopec 3Q Copyright 2014 Argus Media Ltd. All rights reserved.

43 Asia PTA Capacity Expansions E 2015E 2016E 2017E China Korea Taiwan India Thailand Indonesia Other SE Asian regions (Malaysia and Pakistan) Japan Middle East Asia Total Copyright 2012 Argus Media Ltd. All rights reserved.

44 PTA Operating Rates Asia kt/yr 160, , , ,000 80,000 60,000 40,000 20, E 2015E 2016E 2017E 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% PTA capacity, kt/yr PTA production, kt PTA operation rate, % Copyright 2012 Argus Media Ltd. All rights reserved.

46 China Terephthalic Acid & Paraxylene net Trade Terephthalic Acid net Imports kt/yr Paraxylene net Imports kt/yr 7,000 10,000 6,000 9,000 8,000 5,000 7,000 4,000 3,000 6,000 5,000 4,000 2,000 3,000 1,000 2,000 1, Q Q Copyright 2012 Argus Media Ltd. All rights reserved.

47 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 MX and PX Margins & Pricing PX Spot Prices Monthly Averages $/t MX & Naphtha Spot Prices Monthly Averages $/t 1,800 1,600 1,800 1,600 North America FOB Korea West Europe Naphtha Japan 1,400 1,400 1,200 1,200 1,000 1, North America West Europe FOB Korea 600 Copyright 2012 Argus Media Ltd. All rights reserved.

48 Xylene Exports from US; Asia Demand Ramping up since Hovensa S/D US producers working on ways to increase production More investment coming? Globally, only about 30-35% of mixed xylenes produced are recovered for petchems By 2020, this needs to rise to closer to 60% to meet demand Data from US Customs US MX Exports, 000t/yr KT N Am S Am Asia WE EE MEA Copyright 2013 Argus Media Ltd. All rights reserved.

49 PX, MX, and Toluene Outlook 2014 PX from Naphtha will be challenged with PX to N averaging $300/ton for 2014 based on prior historical low levels ( ), due to overcapacity and softness in downstream polyester chain. MX prices will lag blend values in the US during the summer by 30 to 40 c/usg and may see more severe lag due to PX MX to PX production economics will be challenged with margins averaging $150 /ton for (see prior historical lows ) Toluene prices may be 30 c/usg below summer blend value and may see pressure from toluene imports until 3Q and 4Q Copyright 2014 Argus Media Ltd. All rights reserved.

51 Benzene Prices and Asian Developments Chinese benzene imports rose in Regional Spot Benzene Prices - Annual Averages $/t Korean producers gained pricing power in New sources of benzene are linked to paraxylene Differential US - Korea FOB Korea CIF ARA FOB USGC Copyright 2014 Argus Media Ltd. All rights reserved.

52 Top 10 Benzene Producing and Consuming Countries Top 10 Benzene Producing Countries China United States S Korea Japan Netherlands Germany Saudi Arabia Taiwan Thailand India Top 10 Benzene Consuming Countries China United States Japan S Korea Taiwan Netherlands Saudi Arabia Germany Singapore Russia Copyright 2014 Argus Media Ltd. All rights reserved.

53 Caprolactam Capacity Growth Jan million tonnes million tonnes Other Asia 27% Americas 21% Other Asia 18% Americas 14% W.Europe 17% China 12% W.Europe 25% China 40% CEE 11% CEE 15% Copyright 2012 Argus Media Ltd. All rights reserved.

55 Capacity, Demand kt % Oeprating Rate (Nameplate) Global Styrene Supply & Demand-Base Case % Demand Growth yr 10- yr Capacity Operating Rate Demand 90% Op. Rate 95% World % United States Europe % 80% Middle East % China % % 0 60% Copyright 2012 Argus Media Ltd. All rights reserved.

57 Capacity, Demand, Net Export kt % Oeprating Rate (Nameplate) United States Styrene Supply & Demand % Demand Growth United States yr 10- yr Capacity Net Export (Import) 90% Op. Rate Demand Operating Rate 100% 95% Export volumes grow, as USA becomes incremental supplier to the world Advantaged energy, logistics and later olefins will provide competitive edge for EB/SM units ORs approach 95% in 2015, then ease as new capacity started in other regions % 85% 80% 75% 70% Copyright 2012 Argus Media Ltd. All rights reserved.

58 Styrene Facility Closures North America 2008 Sterling Texas City, TX (771 KTA) 2009 Dow Freeport, TX (640 KTA) Western Europe Asia 2009 Total Carling, FR (350 KTA) 2009 Styron Terneuzen, NL (550 KTA) 2012 Ineos Styrenics Marl, Germany (350 KTA) May, 2015 Nihon Oxirane, Japan (440 KTA) Asahi 350 KT announced 2/26 Copyright 2012 Argus Media Ltd. All rights reserved.

59 US Monthly Styrene Exports by Region of Arrival KT N Am S Am Asia WE MEA Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Copyright 2014 Argus Media Ltd. All rights reserved.

60 Styrene Outlook More than 40% of US styrene is now exported POSM rates high in Europe, but EB/SM under pressure Forward balances will depend on new builds and capacity utilization in China Pricing in 2015 and beyond will depend on the rate at which plants are commissioned Further rationalization in Asia, Europe? Copyright 2014 Argus Media Ltd. All rights reserved.

61 Capacity, Demand, Net Export kt % Oeprating Rate (Nameplate) China Styrene Supply & Demand % Demand Growth yr 10- yr China Capacity Net Export (Import) 90% Op. Rate Demand Operating Rate 95% % Domestic product AAGI is 6.4%/yr. through 2022 while demand grows at only 4.3%/yr. for same period. Rates may be constrained by feedstock supplies and availability of imports % 80% 75% 70% 65% Copyright 2012 Argus Media Ltd. All rights reserved.

62 Capacity, Demand, Net Export kt % Oeprating Rate (Nameplate) South Korea Styrene Supply & Demand % Demand Growth yr 10- yr South Korea Capacity Net Export (Import) 90% Op. Rate Demand Operating Rate 105% 100% Better demand due to exports and restocking High energy cost affects competitiveness New capacity in 2014 (restart at SK) and in 2015 (Samsung Total) Rationalization? % 90% 85% 80% 75% 70% 65% Copyright 2012 Argus Media Ltd. All rights reserved.

63 Benzene & Styrene Key Issues US Imports of Benzene, and Exports of Styrene expected to Increase Future of China Benzene Trade Balance? New Benzene Supplies of Mid East, India, and Northeast Asia How much byproduct benzene will come out of new PX capacity? Little new styrene capacity: how will styrene demand growth be met? Over-investment in Derivative Capacity can kill Competitive Advantage Copyright 2014 Argus Media Ltd. All rights reserved.

64 Final Thoughts Don t be carried away by short term developments: Strong Paraxylene Growth will over time tighten Mixed Xylenes Markets Increased Extraction of MX for PX (>60% of global MX production after 2020) will increase the Value of Toluene for Gasoline High Toluene Values will support both Benzene and Xylenes Prices through Disproportionation Economics Pricing for Mixed Xylenes will move above Benzene; the margin between MX & PX will stay squeezed Tightening Feedstock Availability, particularly Heavy Naphtha, will restrict new Construction Aromatics Extraction will be profitable for those with Access to Competitive Feedstock Copyright 2012 Argus Media Ltd. All rights reserved.

65 Any questions?

Services from Argus Dewitt Comprehensive commercial

MTBE markets Accurate price assessments in each

Regular reports Annual global supply demand balance

On-line portal access to supply/demand; capacity;

66 Services from Argus Dewitt Comprehensive commercial analysis of global olefins, aromatics, methanol & MTBE markets Accurate price assessments in each territory 12-month rolling outlook forecasts Regular reports Annual global supply demand balance review country by country basis. On-line portal access to supply/demand; capacity; pricing and economic analysis Copyright 2013Argus Media Ltd. All rights reserved.

US Shale Oil Development and Impact on Aromatics Supplies

US Shale Oil Development and Impact on Aromatics Supplies Chuck Venezia Vice President, Petrochemicals Argus DeWitt September 23, 2014 The Shale revolution in the US has changed global market dynamics