BASF + PETRONAS: A powerful combination in Southeast Asia · Aroma ingredients –a quantum leap in product portfolio Citral value chain will support diversification into specialty

– 1

Stefan Beckmann, Managing Director

BASF PETRONAS Chemicals

May 12, 2015

BASF + PETRONAS: A powerful

combination in Southeast Asia

– 2

− Unique combination focused on ASEAN Region:

15 Markets, 2 billion+ consumers

− Verbund site at Kuantan expanding to meet downstream

demand

− Continued enhancement of production and cost efficiencies

− Target growth above BASF group average

− Aim to increase EBITDA margins significantly due to more

attractive downstream portfolio

BASF + PETRONAS: building on a powerful

partnership

– 3

1 | World-scale Verbund site in ASEAN

2 | Markets and business performance

4 | Further growth plans

3 | Success factors

Content

– 4

Ideally located in the heart of ASEAN region

Ulsan

Bangkok

Dongguan

Sydney

Jiangyin

Mumbai

4000 miles

1500 miles

2300 miles

3100 miles

Dahej

Kuantan

Melbourne

Kaohsiung

– 5

Verbund site Kuantan at a glance

Sales ~USD 996 million* in 2014

Site area1.35 km2 Gebeng site

1.05 km2 Port Tank Farm

Production output** 1 million metric tons p.a.

Pipelines450 km (surface)

30 km (underground)

Production facilities 13 production plants

Employees*** 702

*exchange rate 2014 US$/€1.33 (source: ZZS), **total production output of upstream and downstream plants ,

***100% BASF PETRONAS Chemicals and 100% Toray BASF PBT Resins, as of end 2014

– 6

Waste water

treatment

plant

Oxo

complex

BDO

complex

Central

office

building

Acrylics

complex

Kuantan Verbund (135 hectare) site includes…

• Acrylics complex: production started in 2000 with a current capacity of 160kt p.a.

• Oxo/Syngas complex: production started in 2001 with a current capacity of 330kt p.a.

• Butanediol complex: production started in 2003 with a current capacity of 100ktp.a.

Total investment from 1999 till 2014: USD 1.6 billion

Verbund site with world class technology

– 7

Propylene

Natural gas

Syngas

Acrylic acid2-Ethylhexyl acrylate

Butyl acrylate

Sales ProductsIntermediatesRaw Materials

Normal butanol

2-Ethylhexanol

Tetrahydrofuran

gamma-Butyrolactone

1,4-Butanediol

BDO

Equiv.

Normal butanol

2-Ethylhexanol

Crude acrylic acid

Glacial acrylic acid

n-Butane

Normal

butyraldehyde

Maleic anhydride

supplied by PETRONAS

IsobutanolIsobutanolIsobutyral-

dehyde Isobutyraldehyde

Operates integrated C3 and C4 value chains

Acrylics

Oxo

– 8

1 | World-scale Verbund site in ASEAN

2 | Markets and business performance

4 | Further growth plans

3 | Success factors

Content

– 9

South Asia and ASEAN chemicals market have the highest

growth rate after China

Greater ChinaJapan South AsiaSouth Korea ASEAN ANZ

Data source: BASF

1836 2578Asia Pacific: 5.8%

Greater China: 7.1%

Chemical production excluding pharma in Asia Pacific

(USD billion)

CAGR 2014 – 2020

ASEAN: 4.8%

South Asia: 5.7%

1257

1893

214129

171

154

92

148

205116

17

18

2014

2020

CONFIDENTIAL

– 10

BA 2EHA BDO

Korea

(Ulsan)

Taiwan

(Kaohsiung)

Thailand

(Bangkok)

(Dongguan)

Australia

(Melbourne &

Sydney)

China

(Jiangyin)

IBOL

BASF PETRONAS is well

positioned to serve the

markets outside of China

• Access to 15 countries in

Asia Pacific through BPC

marketing and BASF sales

network

• Serving ~600+ customers

• Set up tank operations to be

closer to customers

• Logistic advantage-

Efficient supply chain

management and logistics

ensure short lead times

• Production base in Malaysia

has the benefit of ASEAN

Free Trade Agreement (FTA)

Malaysia is a strategic location to serve growth markets

Malaysia

(Kuantan)

Vietnam

(Dongnai)

BA: Butyl acrylate, 2EHA:2-Ethylhexyl acrylate, IBOL:Isobutanol, BDO: 1,4-Butanediol

CONFIDENTIAL

– 11

Construction

CAGR 2010-2020: 5.1%

Hygiene

CAGR 2010-2020: 5.6%

Packaging

CAGR 2010-2020: 6.5%

BASF PETRONAS offers attractive portfolio to high growth

industry in Asia Pacific

Plastic

CAGR 2010-2020: 5.8%

Textile

CAGR 2010-2020: 6.3%

Pharmaceutical

CAGR 2010-2020: 8.5%

Source: BASF

CONFIDENTIAL

– 12

Strong sales growth over a decade

BASF PETRONAS’ growth

• Net sales grew steadily

between 2002-2014

• BASF PETRONAS

recovered quickly from the

financial crisis in 2008-09

• Net sales in 2014 still on

high level but impacted by:

− downward trend in the

selling price for basic

commodities

− unplanned shutdown of

acrylics complex

• BASF PETRONAS earned

premium on cost of capital

in 2014

Net sales

(Index)

BASF PETRONAS’ sales growth 2001-2014

0

50

100

150

200

250

300

350

400

450

500

CONFIDENTIAL

– 13

1 | World-scale Verbund site in ASEAN

2 | Markets and business performance

4 | Further growth plans

3 | Success factors

Content

– 14

BASF

• Broad customer base

• Extensive sales

network

• Downstream

production

• Unique “Verbund”

sites

• Strong in technology

BASF and PETRONAS: a growing partnership

PETRONAS Chemicals

Group (PCG)

• Leading integrated

chemicals producer

• Part of PETRONAS

Group for Natural Gas

maximization

• Fully integrated world

class production sites

BASF PETRONAS Chemicals and PETRONAS Chemicals

Group (PCG) plants in Kuantan are considered as one

“Kuantan Verbund”

Long-term partnership through thick-and-thin, regular

strategic dialogues on all levels

Two partners ventured into new investment projects e.g. aroma

ingredients and 2-Ethylhexanoic acid

– 15

Verbund generates >€1 bn p.a. global cost savings*

* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.

− A pipeline structure of 450 km between plants and from site to port tank farm results in

logistic savings

− Shared use of on-site facilities (e.g. waste water treatment, security, fire department)

− Significant reduction in energy demand and CO2 emissions

BASF PETRONAS Chemicals, Kuantan

– 16

Competitive and secure raw material supply

Long term supply contract with

PETRONAS

• PETRONAS’ total hydrocarbon

reserves stand at

~27 billion barrels of oil

equivalent (boe) with an

average production of 1.1

million boe per day

• Long term supply contract with

market oriented pricing for

Natural Gas, Propylene,

n-Butane

• Utilities & Power - long-term

security and sustainability of the

gas supply at Gebeng industrial

area via Peninsular Gas

Utilisation (PGU) system

• Fully backward integrated into

PETRONAS off-shore gas fieldsKuantanPCMTBE

KertehGPP*

Jerneh

Resak

Angsi

Bekok

South China

Sea

DuyongMALAYSIA

Production

Gas Pipeline

* Gas processing plant

– 17

Alliance with MNCs and local key players with high potential

Reliability and supply consistency

Long term supplier/customer relationship

Highest safety standards along the full supply chain,

including product stewardship

Sharing of knowledge and best-practices

Enhanced market access through BASF sales network

Unique value propositions to our customers

CONFIDENTIAL

– 18

Growing local talent

BASF PETRONAS aims to attract and grow best fit

talent

• Structured program for talent management

focuses on hiring, on-boarding and retaining

• Training and development supports talent

management:

− BASF PETRONAS organized 296 learning &

development programs, 31 structured in-house

“Technician Development Program”, 40 in-

house trainers in 2014

− Total training spend in 2014 is more than

USD 300,000

• BASF PETRONAS is the Employer of Choice

− The attrition rate is significantly below the

industry average

− Won several awards such the national “Human

Resource Minister Award in 2014”

Picture

Picture

Human resource minister award 2014

Employer of choice – silver award 2012

– 19

1 | World-scale Verbund site in ASEAN

2 | Markets and business performance

4 | Further growth plans

3 | Success factors

Content

– 20

Operational excellence to support downstream expansion T

ech

nic

al p

rocess

op

tim

izati

on

Hibiscus

• Technical process

optimization

– Root cause analysis

– Technical improvement

– Support by technical experts

• Plant and site org.

development

– Optimize work processes

– Clear roles and

responsibilities

Plant and site org. development

total savings

* expected by end of 2016

• 99 measures to increase

the reliability of plants

• Make us fit for new projects

million

p.a.*

Operational excellence

CONFIDENTIAL

– 21

Key Features• Premium specialty chemicals

• Cutting edge technology

• New product portfolio

based on BASF technology

End market• Flavor &

fragrances

• Plastic Additives,

Coatings, Cosmetics

Capacity • 30kt/a • 30kt/a

Plant start-up date• ~Q2 2016

• ~Q1 2017 (Menthol)• ~Q4/2016

Major investments in the next 5 years

Aroma

ingredients2-EHAcid*

* 2-EHAcid: 2-Ethylhexanoic Acid

CONFIDENTIAL

– 22

Aroma ingredients complex of USD 500 million

This complex is BASF PETRONAS’ largest

investment in a single project

Current scope

• Current scope includes Citral, Citronellol and

Menthol

Strategic rationale

• An important second production foothold in the

rapidly growing Asian market

• Cost leadership position while accessing

competitive raw material

• Citral availability for further extension of

downstream production in Ludwigshafen and

Kuantan

Market

• Aroma ingredients are resilient to economic cycle

• Global market size is €6 billion with 3-4 percent

growth rate until 2020

• Will supply aroma ingredients to global market

Ground-breaking on April 10, 2014

Aroma complex under construction

– 23

Aroma ingredients offers wide array of application

Citral• Lemon, citrus, fruity

and green scent

• Fragrances & flavour compositions for

imitation of lemon,

grapefruit and

orange

• Fragrances & flavor compositions for

imitation of citrus,

cherry, strawberry,

peach and tutti-

frutti flavours

Citronellol

L-Menthol

• Floral, rose, citrus

and green scent

• Essence of

freshness and

cooling effect

Application industryFragrances & flavour

• Pharmaceuticals, cosmetics, oral

products

– 24

FormaldehydeIsobutene

Isoprenol

Prenal

Prenol

Vitamin A

Citronellol

Geraniol

Ionone

Citronellylnitrile

Citronellal

Beta-Carotene

Hydroxycitronellal

Rose Oxide

Linalool

Vitamin E

Menthol

Pyranol

Aroma ingredients – a quantum leap in product portfolio

Citral value chain will

support diversification

into specialty chemicals:

• BASF PETRONAS will

be the pioneer in

production of citral in

Asia

• Citral is the basis for

Vitamins A, E and many

other aroma chemicals

• Availability of citral will

attract downstream

investment at BASF and

at the customers

– 25

Propylene

Natural gas

Sales ProductsIntermediatesRaw Materials

Normal butanolNormal butanol

Isobutanol

2-EthylhexanolNormal

butyraldehyde

Isobutyral-

dehyde Isobutyraldehyde

Tetrahydrofuran

gamma-Butyrolactone

1,4-Butanediol

BDO

Equiv.n-Butane Maleic anhydride

2-Ethylhexanoic acid*

IsoprenolCitral

Methyl tertiary butyl ether

iso-Butene

Formaldehyde

Citronellol

Citral

Menthol

Citral*

Isobutanol

2-Ethylhexanol

Syngas

Verbund at Kuantan tomorrow….

* startup 2016

CONFIDENTIAL

Oxo

Acrylic acid2-Ethylhexyl acrylate

Butyl acrylate

Crude acrylic acid

Glacial acrylic acid

Acrylics

– 26

− Unique combination focused on ASEAN Region:

15 Markets, 2 billion+ consumers

− Verbund site at Kuantan expanding to meet downstream

demand

− Continued enhancement of production and cost efficiencies

− Target growth above BASF group average

− Aim to increase EBITDA margins significantly due to more

attractive downstream portfolio

BASF + PETRONAS: building on a powerful

partnership

– 27

– 28

2-EHAcid: Product diversification

2-Ethylhexanoic acid

• Protect PVC from UV

sunlight, oxygen

and heat

• Transparent very sticky

sheet placed between

2 glass layers to improve

security, sound

attenuation and sun

protection - mainly for

automotive industry

• Synthetic lubricants

used in aviation

refrigerants

• Drying agent in paints,

enamels, varnishes &

printing inks

PVC stabilizers PVB film Lubricants Coating