Prepared by: Ken Otto Purvin & Gertz, Inc. Global LP Gas Supply & Demand Prepared For: 22nd World LP Gas Forum October 8, 2009 Rio de Janeiro, Brazil                                                                                                                Prepared by: Ken Otto Purvin & Gertz, Inc.

Key LPG/Energy Market Headlines Many dramatic changes have occurred in the LPG industry and other energy markets since the 3QTR 2008. First, the global economy was slowed by the rapid rise in energy costs in 2008—then, many countries were pushed into a severe recession by the world financial crisis. The rapid run-up in energy prices and the economic recession has caused global demand for petroleum products to decline fairly sharply. Crude oil prices have staged a recovery during 2009, but considerable uncertainty remains in the petroleum industry. Many regional LPG markets have been hurt by the steep price increases that occurred in 2008 and the impact of the economic downturn. These factors (higher prices & the economic recession) have slowed the development of many LPG markets with strong long-term growth potential. Use of LPG as petrochemical feedstock has attracted more attention—but global petrochemical markets remain fairly weak.

Crude Oil Prices Reached Record High Levels in Mid 2008, Dropped Hard in Late 2008 & Recovered Somewhat Spot Brent Crude Oil Pricing, US$ per Barrel

Natural Gas Prices Are Very Low in the U. S Natural Gas Prices Are Very Low in the U.S. Due to an Oversupply of Natural Gas & Weak Demand Spot Henry Hub Price (USA), US$ per Million BTU

Current LPG/Energy Market Environment Global economies are still weak in late 2009 — but some positive signs are emerging. The economy appears to have already bottomed out Unemployment is still rising, but not as fast as early 2009 Stock markets have started a long recovery Consumer confidence remains fairly low, but appears to be improving Global/regional economies are expected to begin to recover by early 2010—the question is will the recovery be fast or slow. Crude oil markets remain under some pressure—OPEC reduced production rates and this has helped prices to recover somewhat. The cutback in OPEC crude production has reduced LPG production in the Mideast. Global petrochemical demand is soft and is not expected to recover very quickly—This will reduce feedstock demand in the short term and could lead to weak market conditions for both LPG and naphtha in the future.

Global LPG Supply is Still Expected to Rise Significantly Between 2009 and 2012 LPG Supply, Million Tonnes LPG production is rising in most regions of the world. Global prod. (2009) is slightly over 240 MM tonnes (7.8 MMBPD). However, only modest growth is occurring in 2009—due to petroleum production cutbacks & project delays. Supply growth is expected to be very strong in the Middle East over the next several years—dependent on global economic recovery & the success of key projects. The Middle East will surpass North America to become the largest LPG producing region in the world.

LPG Supply is Rising Fast in the East of Suez Region LPG Supply, Million Tonnes per Year Both LPG supply and demand are growing relatively fast in the East of Suez region. Significant expansion of Middle East crude oil and natural gas production is the key driver in this supply trend. Significant expansion of Asian refining industry is also an important factor. Over time, LPG production in the East of Suez region will approach parity with production in the West of Suez.

Middle East LPG Production is Expected to Significantly Expand Over the Next Few Years LPG Supply, Million Tonnes Middle East LPG production dropped slightly during the early 2000s. Production increased fairly sharply from 2002 to 2005. LPG production was poised to rise significantly over the past 1-2 years. Delays to the regional supply build-up have occurred—Production will not increase very much this year. A more significant supply build is expected in 2010 and 2011. Significant growth is anticipated in LPG production from Qatar, the UAE and Iran.

LPG Demand, Million Tonnes LPG Demand Will Continue to Rise in the Future as Global Supplies Increase LPG Demand, Million Tonnes Both Asia and the Middle East have exhibited strong growth in LPG demand. Asia is the largest LPG consuming region in the world, and is still expanding. The Middle East is becoming a more significant LPG demand center—Driven by both the rapid expansion of the petrochemical industry and continued growth in the res/com sector. Overall, European and North American LPG demand is reasonably flat—Increasing if price sensitive LPG supplies are available. LPG consumption is expanding again in Latin America—which is the fourth largest consumer of LPG in the world.

Regional LPG Demand - 2009 Million Tonnes Note: Includes Price-Sensitive LPG Demand

LPG Consumption Should Continue to Rise Fairly Fast in the Middle East and Asia Regional LPG Demand, Million Tonnes The strongest areas of LPG demand growth are expected to continue to be the Middle East and Asia. Around two-thirds of the total world demand growth is occurring in these two regions. The Middle East is the fastest growing region--Boosted by the rapid expansion of the petrochemical industry. Asia has a large, growing population and economic growth will bring about higher energy needs in the future.

World LPG Demand, Million Tonnes The Res/Com and Chemical Market Sectors Continue to Dominate Global LPG Consumption World LPG Demand, Million Tonnes LPG demand in the residential/commercial market has been a high growth sector of the overall market. However, growth in the res/com sector has slowed somewhat due to higher prices & the economic recession. Together the res/com and chemical market sectors account for nearly 75% of total global LPG consumption. Future LPG market growth is very dependent on these two large end-use markets. Engine fuel markets also have high growth potential over the longer term.

Consumption of LPG as Res/Com Fuel will Continue to Expand—Particularly in Asia Residential & Commercial LPG Demand, Million Tonnes Asia is clearly the largest user of LPG for residential & commercial applications. Asia also has the largest growth potential in this end-use sector—This market sector should continue to expand as economic conditions improve. Latin America will remain the second largest consuming region in this sector. The Middle East is growing fairly fast.

Consumption of LPG as Chemical Feedstock is Rising Very Rapidly in the Middle East Chemical LPG Demand, Million Tonnes LPG consumption as chemical feedstock will increase in North America and Europe if global supplies expand as expected. However, the largest expansion is expected to occur in the Middle East—Demand is expected to nearly double between 2008 and 2012. The Middle East chemical industry is undergoing a major expansion—based on ethane and LPG feedstock. The Middle East will overtake Europe to become the second largest chemical LPG market by 2012 and may eventually challenge North America for the top position.

Global LPG Exports Will Significantly Expand Over the Next Few Years Major World LPG Exports, Million Tonnes Global LPG exports ramped up between 2002 and 2007—But have not increased since 2007. LPG exports were expected to rise in 2009—However, delays have occurred in some of the export volumes. Global trade may contract slightly in 2009 and start to rise again in 2010. The Middle East will have the biggest impact on global LPG trade over the next few years. A significant rise in total world LPG exports is expected to occur over the next few years.

Conclusions Improvements in global/regional economies are expected to occur during the rest of 2009 & in 2010. Global LPG supplies are expected to expand fairly modestly in 2009—followed by fairly strong supply growth in 2010 & 2011. However, unexpected market developments might slow part of this supply build. If the expansion in global LPG supply buildup proceeds as expected, supply growth should outpace the growth in base demand for LPG. This will impact the future global supply/demand balance—pushing more supplies toward the petrochemical feedstock sector—increasing the amount of LPG available for the price sensitive feedstock market. Thus, LPG should be priced below competitive feedstock relationships—improving market conditions in several important market sectors—including petrochemical, engine fuel and industrial markets. This should help stimulate LPG demand growth in many markets throughout the world. 16 16

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