Excellence in Petrochemicals Dr. Albert Heuser President January 20, 2010
Petrochemicals part of BASF s balanced portfolio Other Agricultural Solutions Chemicals Petrochemicals 3.3 billion 14% 8.7% 8% 9% Oil & Gas 23% Functional Solutions 14% Plastics 14% 18% Performance Products Sales to third parties Q1-Q3 2009: 37.5 billion FY 2008: 62.3 billion, thereof 7.3 billion Petrochemicals (including Acrylics) 1/20/2010 INTERN 2
Petrochemicals the enabler for BASF s value chains Basic Petrochemicals Supply driven Industrial Petrochemicals Market driven Cracker Products Ethylene Propylene Butadiene Raffinate Benzene Industrial Gases Alkylene oxides Ethylene oxides Acrylic acid Alcohols & Solvents Butanols 2-Ethylhexanol Isononanol 2-Propylheptanol... Glycols Ethylene Glycols Acrylates Plasticizers DEHP DINP, DINCH DPHP... Value chains of the BASF Verbund 1/20/2010 INTERN 3
Basic Petrochemicals are the global integrator at all BASF Verbund sites Capacities of Verbund sites 2009 in million Nm³/a (Industrial gases) in kt/a (all other) Basic Petrochemicals Antwerp Cracker products: 2,400 EO (MEG): 500 Industrial gases: - Port Arthur/ Freeport/ Geismar/ Pasadena Antwerp Ludwigshafen Nanjing Kuantan Ludwigshafen Cracker products: 1,500 EO: 350 Industrial gases: 4,200 Port Arthur*/Freeport/ Geismar/Pasadena Cracker products: 2,400 EO: 200 Industrial gases: 550 Kuantan* Cracker products: - EO: - Industrial gases: 450 Nanjing* 2012 Cracker products: 1,200 1,600 EO (MEG): 250 350 Industrial gases: 450 * 1/20/2010 Availability of volumes ex JV s for BASF depending on contractual situation INTERN 4
Industrial Petrochemicals are close to the major customers Capacities of Verbund sites 2009 in kt/a Industrial Petrochemicals Antwerp Oxo-alcohols: - Plasticizers: - Acrylic Acid: 320 Port Arthur/ Freeport/ Pasadena/ Cornwall (CAN) Antwerp Ludwigshafen Nanjing Kuantan Ludwigshafen Oxo-alcohols: 850 Plasticizers: 400 Acrylic Acid: 300 Port Arthur*/Freeport/ Pasadena/Cornwall Oxo-alcohols: 500 Plasticizers: 200 Acrylic Acid: 230 Kuantan* Oxo-alcohols: 300 Plasticizers: 100 Acrylic Acid: 160 Nanjing* 2012 Oxo-alcohols: 300 400 Plasticizers: - Acrylic Acid: 160 * 1/20/2010 Availability of volumes ex JV s for BASF depending on contractual situation INTERN 5
BASF is a global leading player for alcohols, acrylics and plasticizers Market Position 2009 (Installed Capacity share in %) Basic Petrochemicals North America Europe Asia Cracker Products # 13 (~3%) # 6 (~7%) # 23 (~2%) Alkylenoxides & Glycols # 11 (~5%) # 2 (~25%) # 10 (~4%) Industrial Petrochemicals Alcohols & Solvents # 4 (~18%) # 1 (~30%) # 1 (~13%) Plasticizers # 3 (~12%) # 2 (~22%) # 11 (~2%) Acrylics # 3 (~18%) # 1 (~50%) # 3 (~13%) Source: BASF, CMAI 2009 1/20/2010 INTERN 6
Petrochemicals grow with internal and external customers in billion CAGR 2001 2008: 12 11.5 GDP growth: 10 9.6 9.8 3.1% 8 8.2 Chemical Internal production growth**: 6.9 Sales 3.0% 6 4 2 0 4.0 4.9 5.4 2001 2002 2003 2004 2005 2006 2007 2008 * Sales to third parties Petrochemicals BASF: 14%*** ** without Pharma *** CAGR without Acrylics in 2008 * 2008 including Acrylics 1/20/2010 INTERN 7
Cracker Products dominate third party sales in Petrochemicals Alcohols & Solvents Sales to third parties 59% Cracker Products 59% 10% 2008 Sales to third parties 7.3 billion 11% 7% 12% 1% Plasticizers Acrylics Industrial Gases World scale capacities for cracker products and sales of excess volumes to third parties enable economy of scale Alkylene Oxides & Glycols 2008 Sales to third parties 7.3 billion 1/20/2010 INTERN 8
Petrochemicals supply a broad spectrum of industries by region by industry NAFTA Europe Chemicals 22% 23% Others 44% 13% Asia 1% 42% Rest of World Plastics & Rubber Construction 15% 11% 11% 8% Petroleum & Coal 4% 6% Agriculture Food & Beverage Motor Vehicles & Parts 2008 Sales to third parties 7.3 billion 1/20/2010 INTERN 9
Middle East will massively increase its capacity despite the current downturn C2 Capacity Middle East [million metric tons] 45 40 35 30 25 Forecast 2007 Other ME Middle East ~7,5 mio t/a new ethylene capacity 2010/2011 Some olefin projects with delays, but in the end most will come 20 15 10 5 0 Iran Saudi Arabia 2007 2009 2011 2013 2018 Asia ~10 mio t/a new ethylene capacity 2010/2011 China still net importer Source: BASF, Tecnon, CMAI 2009 10
Temporarily global ethylene overcapacities will result in margin reduction Ethylene capacity [million t/a] 180 160 140 120 100 Ethylene Maximum surplus capacity in 2010 (~ 28 Mio t/a nameplate) Capacity closures in US and Europe (~ 5 Mio t/a) 80 60 40 20 0 2007 2008 2009 2010 2011 2012 2013 2014 Propylene Balance depends on Utilization / closures of naphtha cracker Cracker feedstock slate ME + Africa Asia America + Europe Global demand Utilization of refineries Source: CMAI 1/20/2010 INTERN 11
BASF s derivatives are different to Middle East olefins downstream portfolio 2008 Ethylene Middle East Derivatives [%] PE 62 25 MEG 5 PVC 4 4 Styrene Others BASF Derivatives [%] PE 11 Others 12 Styrene* 31 20 28 MEG EO (PEO) Propylene Source: CMAI, BASF PP 91 5 Alcohols 3 Acrylonitrile 1 Others Acrylic acid * planned divestiture will reduce to less than half 1/20/2010 INTERN 12 PO Acrylonitrile 14 24 32 31 Alcohols
Naphtha-based cracker provide full slate of cracker products for BASF to/to Ethylene Feedstock Typical cracker output Ethane (1.3) Naphtha (3.0) Ethylene 1.0 1.0 Propylene 0.02 0.55 Butadiene <0.01 0.15 Butenes <0.01 0.15 Naphtha cracker matches BASF s broad demand for cracker products much better than an ethane-based cracker Middle East ethylene production dominated by ethane (> 70%), only ~ 15% based on naphtha Benzene 0.01 0.25 1/20/2010 INTERN 13
Petrochemicals ensure reliable and competitive supply for internal demand Mission Make to cover optimum of captive use, and Trade to balance surplus and deficit volumes Strengths Verbund synergies World scale assets with excellent to best in class benchmark position Strong partnerships (Asia, North America) Measures to mitigate challenges Strive for operational excellence Active portfolio optimization Accelerate innovation 1/20/2010 INTERN 14
Operational excellence is based on industry leading production know-how Example: Ethylene oxide Results of last Townsend benchmarking BASF plants 100 75 50 25 0 Average world Best quartile world Total manufacturing costs Total manufacturing costs Unplanned production losses Unplanned production losses Cost leadership through consequent process innovation (incl. catalyst) Enhanced technology: Increased selectivity by optimized feed gas Best in class in specific EO yield Significant ethylene savings New catalysts with superior performance in pilot phase 1/20/2010 INTERN 15
Operational excellence drives profitability Petrochemicals [Index 2001 = 100] 600 500 400 300 200 100 EBITDA Sales to third parties Fixed costs* Petrochemicals asset right strategy: Integration into Verbund High capacity utilization Consistent fixed cost management Continuous improvement of state-of-the-art technologies 0 2001 2002 2003 2004 2005 2006 2007 2008 * including depreciation and amortization 1/20/2010 INTERN 16
Cracker expansion enables extension and development of new value chains in Nanjing BASF and Sinopec will jointly invest $1.4 billion to produce downstream chemicals for the Chinese market Expansion of existing steam cracker to 740,000 tons ethylene Development of integrated ethylene oxide value chain Capacity expansion of - ethylene oxide - propionic acid and aldehyde New plant for - non-ionic surfactants - butylglycolether - amines - DMA3 Extension of acrylics value chain New plant for - superabsorbents Development of integrated C4 complex Capacity expansion of - oxo-c4 New plant for - butadiene - isobutene - polyisobutene - 2-propylheptanol 1/20/2010 INTERN 17
Petrochemicals strive for technology and cost leadership by innovation Example: Acrylic acid Competitors (NSC, R+H...) Crude Acid Propylene Air Oxidation Absorption, Extraction Destillation Glacial- Plant Glacial Acid BASF Crude Acid Propylene Air Oxidation Purification Step 1 Purification Step 2 Glacial- Plant Glacial Acid Simplification of process one step less ~20% lower production and investment costs 1/20/2010 INTERN 18
Strategy is built on technology leadership and active portfolio management Strengthen position in growth markets Develop strong C4- value chain in Asia Continuously improve operational excellence for a sustainable and competitive supply Grow cracker profitability by increased feedstock flexibility and improved logistics (pipelines) Active portfolio optimization Strongly grow business with innovative products (Oxo-C5 alcohols and DINCH) Divestiture of nonstrategic businesses Restructure outdated facilities in core businesses (plasticizers) Accelerate innovation New technologies based on alternative raw materials New dedicated technologies to match captive demand Improvement of core technologies through new catalysts and processes New applications for alcohols and plasticizers 1/20/2010 INTERN 19
Essentials Petrochemicals At the heart of the Verbund Agility, flexibility and deep knowledge of markets Continuously develop new processes and optimize existing ones Positioned to manage upcoming capacity increases Relentless focus on operational excellence Dedicated, creative and global team 1/20/2010 INTERN 20
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Forward-looking statements This presentation includes forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. This presentation contains a number of forward-looking statements including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views with respect to future events and financial performance. Actual financial performance of the entities described herein could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. Forward-looking statements represent estimates and assumptions only as of the date that they were made. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. 1/20/2010 INTERN 22