KNPC Think K Event Tuesday 27th October 2015 Refinery – Petrochemical Integration

Agenda World Refining Scenario Benefits of integration Strategic Advantage KPC’s Strategic Direction ZOR – Petchem Study Configuration options Conclusion & Path Forward

World Refining Scenario In the past, Refining was seen as more of an independent business enjoying good margins. Currently Refining business is facing challenges due to Volatile oil prices Unstable refining margins Increased alternative fuel awareness Global overcapacity Superior product quality requirements Stringent emission regulations Increased processing of heavy and sour crude Increased emphasis on bottom-of-the-barrel conversion Integration with Petrochemical is vital to deal with ongoing uncertainty in refining business and to sustain and improve Profitability.

Benefits of integration Proximity of Feedstock Reduction in transport (costs and risks) Working capital savings Synergies from joint infrastructures and logistics Reduction in Operating costs (steam, utilities) Shared support services: maintenance, HR, HSEQ management, F&A, etc.

Strategic advantage Product Diversification Reduced exposure to market risk Independence and supply security Long-term stream exchanges Common business and investment strategy

KPC’s Strategic Direction Grow KPC domestic refining capacity up to 1.4 mmbpd on the medium term Maximize disposal of Kuwaiti heavy crude in domestic refineries Maximize complexity of KPC domestic refineries, while meeting local energy demand requirement Provide petroleum products that  meet domestic energy, transportation and industrial requirements and international market needs in terms of Quantity and quality Operate KNPC refineries with high standards of operational excellence Provide required Gas Processing capacity according to upstream Gas availability profiles Maximize integration of refining and petrochemical operations domestically

Objective of ZOR-Petchem Integration Pre Feasibility Study “Establish the most feasible petrochemical option for Kuwait on a commercially competitive basis and to develop a configuration for a World-Scale Petrochemical Complex Integrated with ZOR” Achieved by conducting: Market Study Strategic Assessment Prefeasibility Study Feasibility Study Single configuration to be selected to develop in more detail

Key study basis Two crudes would be run for each proposed configuration: Mixed crude as the reference case Kuwait Export Crude (KEC) Maximise economic returns for each proposed configuration Meet gasoline (95/98 octane) demand (1-2 MMTPA) while minimising impact on LSFO supply Increase synergies between the domestic refining & petrochemical business 8 of 10

Configuration options (Paraxylene) Options (Propane Dehydrogenation)

Conclusion and Path Forward Option 3 and Option 6 are shortlisted after Pre Feasibility Study Option 3 results in good integration economics, Option 6 provides higher product diversification. One option will be selected at the end of Feasibility Study which is expected to complete by Dec. 2015 FEED is expected to start by early 2017 World scale Grass root ZOR – Petrochemical complex will place KPC and Kuwait in a privileged position in World’s Oil Industry

Thank you

Glossary PDH – Propane Dehydrogenation PX – Para Xylene FCC – Fluidised Catalytic Cracker SC – Steam Cracker LSAR – Law Sulfur Atmospheric Residue VGO – Vaccum Gas Oil

Products considered in ZOR - Petchem Integration study Option 3 Core Products Derivatives Key Uses Aromatics Block   Para Xylene PTA / PET Plastic Industry Benzene Styrene FCC Block Propylene To PDH Block Mogas Local Market / Export PDH Block Poly Propylene, Propylene Oxide, Propylene Glycol, Polyols Acrylic Polymers, Glycol, Epoxy Resins Option 6 Core Products Derivatives Key Uses Aromatics Block   Para Xylene PTA / PET Plastic Industry Benzene To Cracker Block FCC Block Propylene Mogas Local Market / Export Cracker Block Ethylene PE (Poly Ethylene), EAO (Ethanol Amine), MEG (Mono Ethylene Glycol), Styrene PVC (Poly Vinyl Chloride), Polyesters Poly Propylene, Propylene Oxide, Propylene Glycol, Polyols Acrylic Polymers, Glycol, Epoxy Resins

Back Up

Petrochemical derivatives considered 6-Jan-06 Petrochemical derivatives considered EAO Ethylene Benzene PX Butene-1 PE EO Styrene PP PO Propylene MEG PG Polyols Butadiene PTA PET Core Assessed Abbr. Long form PE Poly Ethylene EO Ethanol Oxide EAO Ethanol Amines MEG Mono Ethyl Glycol PP Poly Propylene PO Propylene Oxyde PG Propylene Gylcol PTA Purified Terephthalic Acid PET Polyethylene Terephthalate OrgChartTemplate.ppt

Petrochemical Derivatives

Option 3 configuration Aromatics Block FCC Block PDH / PP Block * all values in TPD Aromatics Block PDH / PP Block FCC Block

Option 6 configuration Propylene Derivatives * all values in TPD Ethylene Derivatives Propylene Derivatives

Incremental Economics Refinery Option1 Option2* Option3 Option4 Option5 Option6 Total Project Capex 18180 24238 22823 25177 30383 30284 31874 Total Project IRR -1.10% 0.8% 3.4% 4.6% 2.6% 4.5% Integration IRR 6.0% 10.2% 13.8% 7.3% 7.4% 9.9% Based on Economics Option 2, 3 && 6 are shortlisted Option-2 was excluded as it is more of a refining option, without much integration with petrochemicals Option 3 & 6 both have Aromatics and FCC. Additionally Option 3 has PDH and Option 6 has Steam Cracker Option 3 provides integration with Propylene Value chain Option 6 provides integration with Propylene as well as Ethylene value chain Options

Preferred Options Based on Economics Option 2, 3 && 6 are shortlisted Option-2 was excluded as it is more of a refining option, without much integration with petrochemicals Option 3 & 6 both have Aromatics and FCC. Additionally Option 3 has PDH and Option 6 has Steam Cracker Option 3 provides integration with Propylene Value chain Option 6 provides integration with Propylene as well as Ethylene value chain Options

Integration Synergies / Benefits Naphtha, raffinate and LPG integration Use of these streams can be optimized by routing to steam cracker feed, PX feed, hydrogen feed or gasoline pool as optimal One naphtha hydrotreater only to serve the entire project All LPG used internally Depending on the selected option, all naphtha also used internally FCC and steam cracking have a number of synergies: Ethylene recovery from FCC dry gas Propylene recovery C4s and MTBE Use of LCO as quench oil (not in the LP) Common or linked hydrogen system Common or linked fuel gas system Capital cost synergies in the utilities and off-site system Estimated at 1-2% of OSBL costs in a very preliminary manner Operating cost synergies Specific to Option 6 FS expected to provide a better estimate

Ethylene Uses Ethylene - C2H4 - is used for accelerating the ripening of bananas, and maturing the color of citrus fruits. It is also used to increase the growth rate of seedlings, vegetables, and fruit trees; in oxyethylene welding and cutting of metals; in manufacture of mustard gas, ethylene oxide, ethylene alcohol, polyethylene and other plastics; and as an inhalation anesthetic. The simplest member of the olefinic hydrocarbon series and one of the most important raw materials of the organic chemical industry; chemical formula, CH2 {double bond} CH2. It occurs in both petroleum and natural gas, but the bulk of the industrial material is produced by heating of higher hydrocarbons. Numerous large-scale processes have been developed, using raw materials ranging from ethane to whole crude oil; in the U.S., ethane and ethane-propane mixtures are commonly used. Ethylene undergoes polymerization (combination of small molecules to form large molecules) to polyethylene, a plastic material having many uses, particularly in packaging films, wire coatings, and squeeze bottles. The polymerization may be carried out at high pressures and temperatures or by the more recently introduced Ziegler process, which uses a catalyst. With sulfuric acid, ethylene forms a mixture of sulfates that can be hydrolyzed to ethyl alcohol; it combines with chlorine or bromine to yield the corresponding ethylene dihalides, useful solvents and gasoline additives. The reaction of ethylene and oxygen gives ethylene oxide, used in the manufacture of antifreeze, detergents, and other derivatives. Ethylene and benzene combine to form ethylbenzene, which is dehydrogenated to styrene for use in the production of plastics and synthetic rubber. In botany, ethylene is a plant hormone that inhibits growth and promotes leaf fall. In fruit, how-ever, ethylene is regarded as a ripening hormone. Involved in its action in fruit is some other factor that influences ethylene sensitivity of the tissues. Pure ethylene is a colourless, flammable gas having a sweetish taste and odour; it freezes at -109.4° C (-272.9° F) and boils at -103.9° C (-155.0° F).