1. 1 The Potential for Gas Based Petrochemical Projects John Page jpage@cmaiglobal.com October 12, 2011

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4. Copyright © 2011 IHS Inc. All Rights Reserved. 4 Presentation Agenda

5. Copyright © 2011 IHS Inc. All Rights Reserved. With 24% of Global Gas Reserves Russia Has 3% of Chemical Capacity

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8. Copyright © 2011 IHS Inc. All Rights Reserved. Now N. America Ethane Has A Significant Advantage Due To Shale Gas Regional Ethylene Cash Costs

9. Copyright © 2011 IHS Inc. All Rights Reserved. 2009 Gas-Based Competitive Advantage Bubbles Up, Globally 50 150 250 350 450 550 650 750 850 950 0255075100125150 Dollars Per Ton, Ethylene Manufacturing Cash Costs By Plant Cumulative Ethylene Capacity (Million Tons) West Europe West Europe North America North America Asia Middle East 2003 2003: WTI Crude = $31/bbl; US Natural Gas = $5.50/mmbtu 2009: WTI Crude = $62/bbl; US Natural Gas = $4.00/mmbtu

10. Copyright © 2011 IHS Inc. All Rights Reserved. 2009 Gas-Based Competitive Advantage Bubbles Up, Globally 50 150 250 350 450 550 650 750 850 950 0255075100125150 Dollars Per Ton, Ethylene Manufacturing Cash Costs By Plant Cumulative Ethylene Capacity (Million Tons) West Europe West Europe North America North America Asia Middle East 2003 2003: WTI Crude = $31/bbl; US Natural Gas = $5.50/mmbtu 2009: WTI Crude = $62/bbl; US Natural Gas = $4.00/mmbtu RUSSIA

11. Copyright © 2011 IHS Inc. All Rights Reserved. New crackers are competitive in Russia BUT lack of gas demand in remote locations restricts feedstocks until NOW and MTO West Siberia- PB East Siberia- PB Caspian Sea-PB Volga-N North West- PBN Far East- N Existing Volga- PBN Middle East-PB West Europe-N China-N Ethylene Capacity (kta) 900 600 1,200 3601,200800 Total Costs 4865007847918038585088411,0521,071 Capital Charge 207236217266175216---- Fixed Costs 68777179556487455839 Other Variable Costs 68611649217514312819223224 Net Raw Materials 143125332354398435293777771809 0 200 400 600 800 1,000 1,200 1,400 Cash Cost Olefins (US$/Tonne) 2015 Net Ethylene Price ($1236/Tonne) @ $90/bbl Brent Crude

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13. Copyright © 2011 IHS Inc. All Rights Reserved. Announced Chinese MTO Projects Methanol-to-olefins is one of the most important development trends in China’s coal chemical industry In August 2010, Shenhua Baotou Chemical put the first methanol-to-olefins plant into commercial production with 600 thousand metric tons of olefins. This plant was built integrated with a methanol unit of 1,800 thousand metric ton capacity. 6.6 million tonnes of methanol will be consumed for MTO/MTP-based olefin production in 2014 CompanyLocationProduct Capacity (-000-Metric Tons) Start-UpDesign StageFeed Shenhua Baotou ChemicalBaotou, Inner Mongolia, ChinaPropylene6002010OperatingCoal Shenhua Baotou ChemicalBaotou, Inner Mongolia, ChinaEthylene3002011OperatingCoal Datang Int'l PowerDuolun, Inner Mongolia, ChinaPropylene5002011OperatingCoal Shenhua NingmeiNingdong, Ningxia, ChinaPropylene5002011OperatingCoal Sinopec Zhongyuan PetrochemicalPuyang, Henan, ChinaOlefins1632013ConstructionMtOH Yulin Energy and ChemicalWeinan, Shaanxi, ChinaOlefins6002013ConstructionCoal Pucheng Clean EnergyWeinan, Shaanxi, ChinaOlefins6802013ConstructionMtOH Shaanxi Yanchang Petroleum GroupYan’an, Shaanxi, ChinaOlefins6002013ConstructionMtOH Shaanxi Yanchang Petroleum GroupYulin, Shaanxi, ChinaOlefins6002016ConstructionMtOH Zhejiang TianshengZhejiang, ChinaOlefins6002014Construction Import MtOH Yankuang GroupYankuang, ChinaOlefins6002014ConstructionMtOH Sinopec/ Henan Coal Chemical Industry Group Hebi, Henan, ChinaOlefins6002015PlannedCoal Shenhua/ Dow ChemicalYulin, Shaanxi, ChinaOlefins5002016PlannedCoal

14. Copyright © 2011 IHS Inc. All Rights Reserved. By 2015, MTO will be 48 percent of alternative ethylene supply. On-purpose ethylene will be 3.5% of total supply As a percentage of total supply

15. Copyright © 2011 IHS Inc. All Rights Reserved. Economics work in China but why only China? In Norway the olefins margin could be substantial but methanol may provide a better return due to a coastal location

16. Copyright © 2011 IHS Inc. All Rights Reserved. It is not all about who has the best technology It is not all about who traded there first It is not all about who has the biggest plant What is Secret to Success in Commodity Petrochemicals? It is about the cost of production 16 And as much as 60% of integrated cash costs are hydrocarbon based

17. Copyright © 2011 IHS Inc. All Rights Reserved. What Does it Mean? Russia has low cost feedstocks Russia has low cost feedstocks Methanol to Olefins technology creates a viable outlet for Natural Gas or Coal in remote locations Methanol to Olefins technology creates a viable outlet for Natural Gas or Coal in remote locations Creates demand for methane and this creates low cost by- products such as: Creates demand for methane and this creates low cost by- products such as: Ethane /Propane Butane Ethane /Propane Butane Russia can compete but ….. Russia can compete but …..

18. Copyright © 2011 IHS Inc. All Rights Reserved.....but can Russia be the next Middle East?