Introduction of a French-Korean Joint-Venture: SAMSUNG ATOFINA Co. Ltd. By: Eric QUENET Seoul, March 31, 2004

Introduction of SAMSUNG-ATOFINA Co. Ltd. Company Profile 50/50 Joint-Venture between Samsung and Atofina (Chemical branch of Total) Date of establishment: August 1st, 2003 PRODUCTS: Monomers = Ethylene (650Kt), Propylene (350Kt) Styrene (675Kt), Paraxylene (500Kt), MEG (120Kt) Polymers = Polyethylene (400Kt), Polypropylene (275Kt) Byproducts = C3/C4, aromatics, solvents, heavy ends (550Kt for all byproducts) FEEDSTOCKS: Naphtha and Condensate (3,200Kt), refinery derivatives. Revenues (2003): $ 1,685 Millions Operating results (2003): $ 232 Millions Numbers of employees: 960 4 Atofina expatriates

SAMSUNG-ATOFINA Co. Ltd.: a wide range of products Automobile Electronics Samsung-Atofina is producing a wide range of intermediates products to serve almost every applications. Agriculture Building

SAMSUNG-ATOFINA Co. Ltd SAMSUNG-ATOFINA Co. Ltd.: a strategic location to serve the Chinese market HARBIN  BEIJING DALIAN SAMSUNG-ATOFINA SALES (2003 volumes) Korea: 60% China: 30% Other Asia: 3% USA/Europe: 7%   TIANJIN TOKYO DAESAN Complex  400km QINGDAO OSAKA SHANGHAI TAIPEI XIAMEN   GUANGZHOU  SHENZHEN HONG KONG

SAMSUNG-ATOFINA Co. Ltd.: an impressive and efficient complex

Samsung and Total: two similar giants with different strategies 2003 turnover (in M$) 96,476 (115 Trillion KRW) 119,188 (105 G€) 2003 operating results (in M$) 8,725 (10.3 Trillion KRW) 14,810 Number of people 175,000 127,905 Activities Electronics industries Finance Machinery & heavy industries Chemical industries Others  Oil exploration & production: 48% Refining & marketing: 26% Chemicals: 26% Company strategy To be a world class player in IT sector To be a world class player in Oil sector Remark avg. exchange rate in 2003: 1192 KRW/$ (2003) 1.13 $/Euros(2003)

The Total Group strategy in chemicals: to reinforce its petrochemicals activity and develop its presence on the Asian market Total Chemicals activity Total Petrochemicals position → Strong synergies with refining activities in feedstock. → Industrial synergies in Europe with refineries → A leading position in Europe → A significant position in North America → A minor position in Asia before the Samsung Atofina joint-venture

Asia petrochemicals: the biggest market with the highest growth rate Consumption in 2002 WORLD = 101 MT ASIA = 37% of the global demand Incremental & AAGR 2002-2010 WORLD = + 51 MT (+5.2% / year) ASIA = 45% of the global growth forecast Consumption in 2010 WORLD = 152 MT ASIA = 40% of the global demand Driven by the Chinese demand, the Asian market will become in 2010 as big as North American + Western Europe markets

The Samsung-Atofina Joint-Venture: a strategic opportunity for Total The options The Chinese grassroots project A difficult option A 10-year process before start-up The alliance opportunity in Korea Ongoing restructuring and available competitive opportunities The Samsung opportunity Samsung was willing to set-up an alliance with a foreign partner in its chemicals activity Good geographical location on the west coast facing China (400 km) Relatively new assets (91-97) with good and well proven technology Excellent reliability and highly skilled personnel Specialty-focused portfolio A significant position locally and on the Chinese market

The Joint-Venture negotiation Timing + Initial contacts in April 2001 + Negotiation period: March 2002-April 2003 + Joint-venture launch: August, 1st 2003 Major Points + Assets evaluation: 1.55 billion $ + Debt/Equity ratio: 100% + Creation of a new company + Total took 50% of the new company. Cash transfer 388 M$ The major difficulties faced during the joint-venture negotiation How did we overcome them? The asset evaluation Evaluation team & intensive due-diligence The joint-venture control 50/50 ratio Shared management: 2 Joint Representative Directors Shared responsibilities between Samsung & Atofina for key positions The liability issues Financial & industrial liabilities: creation of a new company Intensive due-diligence with external companies The deadlock and take-over A positive and flexible mechanism for sole development & possibility of take-over to prevent stopping the joint-venture Conclusions + Very direct negotiation + Be clear & consistent in your strategy . Do not hesitate to maintain clearly your position.

The results after 8 months of operation: an overall success The results met the expectations of Total and exceeded them in: Efficiency and reliability of the plant High quality and skilled quality people especially in the industrial sector Well-organized company under a strong and efficient leadership In terms of financial results (more than 20% over business plan for 2003) But the challenge is still there In terms of organization and responsibility In terms of communication and reporting

Still the cultural challenge remains KOREAN WESTERN CORPORATE SYSTEM Chaebols: interlaced company ownership with major influence on entire country activities Holding companies: clear division of activities and minimal influence on rest of life LABOR Group mentality: strong work ethic; expectation of wage increases far above inflation/growth Individualistic: weaker work ethic; expectation of wage increases in line with inflation/growth APPROACH Directive: decisions made at very high levels and little change possible without top agreement Collaborative: authority is delegated and independent action is expected

Which lessons for potential investment: can Korea represent an alternative to China? The advantages of the Korean market Steady and impressive growth since 1960 Developed market with GNP per capita over 11.400 $ in 2003 Ability to rebound to cataclysm Its geographical location Significant legal and transparency improvement since the IMF crisis The majority of the foreign investments has been successful and well accepted by the Korean authorities since the IMF crisis Its major strength: the Korean people High-education level Dedicated and motivated Well organized people The disadvantages of the Korean market The Korean prejudice – bad image of Korea Still a conservative society The social issues The salary increase

Conclusion Korea can represent an alternative to China or be integrated within a Chinese strategy but: the investments must be selective (high tech, not labor intensive) and be persistent in your strategy and policy 東 西 合 璧