Shift To Import Parity Market—Case Study of Europe’s Chemical Industry Theo Jan Simons Partner—Global Chemicals Practice The Future of Gulf Coast Petrochemical Industry University of Houston—Conference 29 April 2005 (version 1 May 2005) © 2005 Accenture. All rights reserved. 20-Sep-18

Proposed Agenda Europe versus US Competitiveness High Performance in Petrochemicals Wrap—Up © 2005 Accenture. All rights reserved. 20-Sep-18

European Petrochemical Industry 2 1 Main Petrochemical Complexes Mosmorran/Fife, Grangemouth Stenungsund Wilton Stade, Willemshaven Rotterdam, Antwerp NDG Rurh area Ludwigshaven Porto Maghera/Ferrara Med(Lavera Fos Berre) Taragona Leuna Carling 3 4 5 6 7 12 1’000 km 8 13 9 10 11 © 2005 Accenture. All rights reserved. 20-Sep-18

Comparing Europe and US Chemicals Europe versus USGC Comparing Europe and US Chemicals North America Europe Historical Development Private Companies National and Private Companies Feedstock Gas Some Liquids Liquids Some Gas Location Gulf Coast Across Europe Infrastructure Pipe Line Storage Some Pipe Line Limited Storage Logistics Rail Truck Integration Focus Refining/Feedstock End Market © 2005 Accenture. All rights reserved. 20-Sep-18

Very Similar Trends in Capacity Growth INSTALLED CAPACITY Million Tons 1995 2005 CAGR 2% 2% 2% 4% 3% 2% 6% 7% © 2005 Accenture. All rights reserved. Reference: data Parpinelli TECHNON, Accenture Analysis 20-Sep-18

Europe is closing the gap with US on scale—slowly AVERAGE PLANT SCALE KTA 1995 2005 Growth 30% 25% 25% 35% 40% 20% 55% 50% © 2005 Accenture. All rights reserved. Reference: data Parpinelli TECHNON, Accenture Analysis 20-Sep-18

Closures drive up average scale Closures and Start Ups Closures drive up average scale US WE Capacity (kta) Capacity (kta) PP PP 200 200 PE Typical 2005 PE Typical 1995 100 100 PP PE PP PE Plant Closures (number) 30 Plant Start Ups (#) 30 Reference: data Parpinelli TECHNON, Accenture Analysis © 2005 Accenture. All rights reserved. 20-Sep-18

US more effective than Europe Logistics and Infrastructure US more effective than Europe European Observations High Reliance on Road Logistics Europe will be investing in further Pipe Line infrastructure EC has launched program to upgrade Rail Infrastructure Refinery Integration—will it grow or go away … Reference: Excludes Pipe Line movements. Accenture Analysis © 2005 Accenture. All rights reserved. 20-Sep-18

Ethylene Economics Overall: Change in Ethylene Economics driven by Natural Gas price increase not structural factors ETHYLENE CASH COST US$/ton © 2005 Accenture. All rights reserved. Reference: Nexant/ChemSystems, Deutsche Bank/CMAI estimates, Accenture Analysis 20-Sep-18

US leads Europe in Foreign Investments Foreign Policy US leads Europe in Foreign Investments Ethylene—10 M tons PE—6.6 M tons PP—3.5 M tons Europe 1% Others 75% US 24% US 18% Europe 7% Others 75% Others 92% Europe 4% US Middle East PE—7.4 M tons PP—5.2 M tons Ethylene—9 M tons Europe 8% Other 70% US 22% US US 21% 4% Asia Europe Europe 4% 11% Others Others 85% 75% © 2005 Accenture. All rights reserved. Reference: data Parpinelli TECHNON, Accenture Analysis 20-Sep-18

Role of Middle East Middle East is highly competitive but limited impact with about 10% of volume ETHYLENE GLOBAL SUPPLY CURVE (2004) US (30M $470/ton) US$/ton LA (4M $400/ton) WE (20M $360/ton) Asia (30M $300/ton) ME (10M $150/ton) © 2005 Accenture. All rights reserved. Reference: Nexant/ChemSystems, Deutsche Bank/CMAI estimates, Accenture Analysis 20-Sep-18

US performance appears stronger than Europe Chemical Industry Performance US performance appears stronger than Europe CHEMICAL COMPANY TRS 1995—2005 US 3.6 WE 2.3 Reference: Accenture Analysis. Companies include Air Liquide, Air Products, Akzo Nobel, Bayer, BASF, BOC, Ciba, Clariant, CYTEC, DOW, DSM, DuPont, Eastman Chemicals, ICI, Lyondell, Nova, Praxair, Rohm & Haas © 2005 Accenture. All rights reserved. 20-Sep-18

High Performance Business Performance gap suggests that there is further room for restructuring in Europe Market Focus and Position Distinctive Capabilities Performance Anatomy Creating New Direction Defining Road Map for Differentiation Out-Executing Competition Business Model Selection Active Portfolio Management Articulating the Vision Innovation Customer Focus Operations Management Effective Governance and Financial Flexibility Strong Performance Culture Information Technology as a Strategic Asset © 2005 Accenture. All rights reserved. 20-Sep-18

Borealis is completing impressive transformation Case Study Borealis is completing impressive transformation Past Future Direction (Market Focus and Position) Road Map (Distinctive Capabilities) Execution (Performance Anatomy) Statoil NESTE EXIT Borealis Neste 1998 OMV New Borealis IPIC Sales Euro Bn 3.7 4.6 3.7 3.0 3.5 3.7 ROIC % 9% 11% 3% 2% 3% 3% 1999 2000 2001 2002 2003 2004 © 2005 Accenture. All rights reserved. 20-Sep-18

The jury is still out on a number of other “ventures” European Industry Restructuring The jury is still out on a number of other “ventures” Past Future Direction (Market Focus and Position) Road Map (Distinctive Capabilities) Execution (Performance Anatomy) ENI INEOS EVC ICI New DSM DSM SABIC DSM Sabic EuroPetrochemicals VEBA Advantaged Portfolio A&A BP Chem ??? Innovene ??? Total Petrochemicals Total ??? Arkema © 2005 Accenture. All rights reserved. 20-Sep-18

Way Forward Becoming High Performance Petrochemicals Business—Focus Areas for Differentiation Ongoing Accelerating “New” Refinery Integration and Envelop Optimization Improving Scale and Reliability Upgrading Industry Infrastructure Leverage Advantaged Feedstock Focus on Growth Markets Technology and Innovation and Commercialization Insight To Action—leveraging investments in business process and IT Winning Chains—Market, Customer, Supply Chain, Manufacturing, Procurement working together Join not Beat—Leveraging Global Supply Network © 2005 Accenture. All rights reserved. 20-Sep-18

Wrap—Up In Closing Nothing Wrong With USGC—implementing select lessons from Europe Restructuring in Europe continues—the challenge is differentiation Wrap—Up © 2005 Accenture. All rights reserved. 20-Sep-18