0 Global developments, European Challenges February 1, 2005 Huub Meessen SABIC EuroPetrochemicals B.V. Shaping Success.

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Global developments, European Challenges

February 1, 2005

Huub Meessen

SABIC EuroPetrochemicals B.V.

Shaping Success

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There is no security on this earth,

there is only opportunity

Douglas MacArthur

Chemical industry in Europe is yet again at a cross road Chemical industry in Europe is yet again at a cross road

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1. Competitive pressures in Europe

2. SABIC strategy

1. Competitive pressures in Europe

ContentsContents

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Middle East and Asia determine the global gameMiddle East and Asia determine the global game

2/3 of the global capacity expansions center around the Middle East and Asia Pacific Asian demand growth is approximately half of the global growth ME can supply to Asia and Europe (and lands at lowest cost) Americas and Europe increasingly local for local

Europe

Asia

S. Am.

N. Am.ME Global PE demand from

61 mln tons in 2004 to 76 mln tons in 2009

Global PE demand from 61 mln tons in 2004 to 76 mln tons in 2009

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Imports will claim market shares of more than 20% in PE by 2009

Share of ME in imports raises from 50% today to over 75% in 2009

Imports will take most of WE market growthImports will take most of WE market growth

Market Share of imports in WE

0%

5%

10%

15%

20%

25%

30%

35%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

LDPE

LLDPE

HDPE

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European Producers need to scrap and very selectively build (1)European Producers need to scrap and very selectively build (1)

PE delivered Cost and Price curve development

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulative volume

EU

R/t

on

Delivered cost

Price

Middle east imports

will increase

WE costleader capacity

will increase

So

me sp

ecialties w

ill remain

Non feasible small and old assets that will be scrapped or

replaced

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European Producers need to scrap and very selectively build (2)European Producers need to scrap and very selectively build (2)

50 % of capacity is older than

LDPE: 27 yrs

HDPE: 20 yrs

LLDPE: 10 yrs

Plant age versus total Polyethylene capacity in Europe

0

5

10

15

20

25

30

35

40

45

0 1000 2000 3000 4000 5000 6000 7000 8000

Total installed capacity in Europe (kta)

Pla

nt

ag

e (

yrs)

LDPE

HDPE

LLDPE

Average line size development in Europe

0 100 200 300 400

LDPE

HDPE

LLDPE

Average line size in kta

50% oldest capacity

50% newest capacity

Typical line size for new plant

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Oil and Naphtha determine WE integrated cost position

OPEC can no longer control price within preferred range

A paradigm shift in pricing is logical consequence

Historical range Medium range Peak values

Oil ($/bll) 15 - 25 25 – 45 > 45

AVG PE/PP (EUR/t) 500 - 1000 800 – 1300 1000 - 1500

Price levels will fluctuate between 800 and 1300 Euro/t

Value Chain needs to absorb structural increased price levels (1)Value Chain needs to absorb structural increased price levels (1)

0

200

400

600

800

1000

1200

1400

1600

0 20 40 60

Oil price in $/bll

Po

lyo

lefi

ne

pri

ce i

n E

UR

/to

n

Historical range

Medium range

Peak values

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Injection moulding

Extrusion coating

Extrusion PE-film

Blow moulding

Extrusion Pipes

Value Chain needs to absorb structural increased price levels (2) Value Chain needs to absorb structural increased price levels (2)

WE consumers

will be faced with only

10 euro higher cost per year

when PE prices become 300 euro/ton higher

West-European consumers use

approximately 35 kg of PE

per capita per year

PE is serving a wide variety of markets, adding a lot of value at low cost per consumer

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1. Competitive pressures in Europe

2. SABIC strategy

1. Competitive pressures in Europe

ContentsContents

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Become one of the top 5 global petrochemical companies in 2015

• Increase sales to 30 billion USD by 2015

• Polyolefins are major contributor to turn-over

Grow faster in polyolefins than the market

Leverage SABIC’s unique cost position in KSA

SABIC global ambitionSABIC global ambition

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Within our global strategy of expansion and the European context, we will:

Complete Best in Class manufacturing sites

Build on formidable cost position in Middle East

Use SABIC’s unique complementary strengths

SABIC strategy for Europe: think global, act localSABIC strategy for Europe: think global, act local

SABIC’s new European Head Office

is under construction

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1. Expansion of cracker in Geleen

2. World-scale LDPE tubular line based on SABTEC technology

3. World-scale PP plant

4. State-of-the-art bimodal HDPE plant

SABIC EPC already has excellent cost position.

EurOPE1: European Olefins and Polyolefins ExpansionEurOPE1: European Olefins and Polyolefins Expansion

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SABIC EPC ranking after EurOPE1

the 2nd largest seller in Europe

the largest average line size

the largest capacity per site

0

500

1.000

1.500

2.000

afte

rE

urO

PE

1S

AB

ICE

PC

Bor

ealis

Rep

sol

Dow B

P

Bas

ell

Tot

al P

C

Exx

onM

obil

Pol

imer

i

Polyolefin capacities per site

kto

ns

pe

r si

te0

50

100

150

200

250

afte

rE

urO

PE

1

Exx

onM

obil

SA

BIC

EP

C

Dow BP

Bas

ell

Bor

ealis

Tot

al P

C

Pol

imer

i

Rep

sol

Average polyolefin line size

kto

ns

pe

r lin

e

Mln

to

ns

pe

r ye

ar

0

1

2

3

4

5

6

Bas

ell

afte

rE

urO

PE

1

Bor

ealis

SA

BIC

EP

C BP

Tot

al P

C

Dow

Pol

imer

i

Exx

onM

obil

Rep

sol

PE PP

European polyolefin sales

EurOPE1 will bring SABIC EPC to undisputed cost leadershipEurOPE1 will bring SABIC EPC to undisputed cost leadership

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SABIC’s coverage of EuropeSABIC’s coverage of Europe

Manufacturing center

Focal area European

assets

Vast Gas reserves

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Middle East and Asia determine the global game

By 2009 imports will take more than 20% of the WE market;

approx. 75% will come from the ME

Producers need to scrap and very selectively build in Europe

tremendous amount of scrap potential

cost leaders annually beat inflation

The Value Chain needs to adapt to structural increased price levels

it’s not expected that oil prices will fall back to historical range

SABIC is ready for the future !

ConclusionsConclusions

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Sharing our futures

Thank you