SABIC in Europe 1 The power to provide Future sources of PP supply in Europe Eric Hogenboom SABIC EuroPetrochemicals Business Unit Director PP

2 SABIC in Europe SABIC: Saudi Arabian Basic Industries Corporation Started from scratch in 1976, produced first tons in Million tons in 2002 Broad chemical and polymers product portfolio Turn-over of 11,4 bln in 2002 Is 70% owned by Saudi government and 30% by private sector Employees in 22 countries Basic Chemicals IntermediatesPolymersFertilizersMetals

3 SABIC in Europe SABIC is a major global PP supplier SABIC EuroPetrochemicals B.V. (SABIC EPC) ownership: SABIC capacity 1090 kt

4 SABIC in Europe SABIC is a major global PP supplier SABIC EuroPetrochemicals B.V. (SABIC EPC) ownership: SABIC capacity 1090 kt Saudi European Petrochemical Company (Ibn Zahr) ownership: SABIC, FORTUM, APICORP capacity: 640 kt

5 SABIC in Europe SABIC is a major global PP supplier SABIC EuroPetrochemicals B.V. (SABIC EPC) ownership: SABIC capacity 1090 kt Saudi European Petrochemical Company (Ibn Zahr) ownership: SABIC, FORTUM, APICORP capacity: 640 kt Saudi Yanbu Petrochemical Company (Yanpet) ownership; SABIC, EXXONMOBIL capacity: 260 kt

6 SABIC in Europe 2002 Net import position (CTP < demand) Net export position (CTP > demand) Global demand-supply balance for polypropylene Asia is a large importer Europe is main exporter

7 SABIC in Europe RealisationForecast Europe will show a continued healthy growth AAGR = 7 % AAGR = 4 % % 2002 Source: PMRG

8 SABIC in Europe WE capacity expansions have outpaced demand growth Consumption growthCapacity growth

9 SABIC in Europe Profit margins depend heavily on industry production rate Profit margin versus West European Production Rate Production Rate (%) Profit margin Sustainable profit level

10 SABIC in Europe Profit margins depend heavily on industry production rate Profit margin versus West European Production Rate Production Rate (%) Profit margin 00 – – 99 Sustainable profit level

11 SABIC in Europe Cost decrease versus margin decrease Surplus decrease:4,5% per year (96 – 03) Cost decrease:2,5% per year (96 – 03) Surplus on C3 (Euro/mt) Surplus on C Cost index PP industry cost index development

12 SABIC in Europe European PP Industry health Capacity additions and rationalisations have brought considerable cost savings into PP industry Margin erosion fueled by overcapacity has eaten away more than these cost savings Profitability level of PP industry is already for many years below sustainable level

13 SABIC in Europe ME producers have a cash cost advantage over WE Gas price ($/mmBTU) Naphtha (EUR/t) Structural delta in cash cost Typical ranges for gas and naphtha Low Cash cost delivered WE HighLowHigh

14 SABIC in Europe Invest and grow Drivers for European industry: We enter a new era Period 96 – 02 Scale and cost Site integration Technology and Catalyst Development Period 03 – 09 Cost & Rationalisation Bottomline cashflow Re-establishment of sustainable profit levels

15 SABIC in Europe W-Europe is predicted to evolve into a net import area Net import position (CTP < demand) Net export position (CTP > demand)

16 SABIC in Europe Summary European PP demand continues to show a healthy growth PP suppliers will focus on costs and cash flow Rationalisation of European asset base is unavoidable ME imports have a sound economical basis and will grow W-Europe will turn into a net importing area

17 SABIC in Europe SABIC in Europe has already re-structered its asset base: Closed down 50 kt slury line in Gelsenkirchen in 2000 Closed down 350 kt slurry capacity in Geleen in 2002 Invested in a world-scale 350 kt gasphase line in 2002 SABIC in Europe has been established as cost efficient organisation with one single face to the customer SABIC in Europe has been actively working on a concise multi-purpose product portfolio

18 SABIC in Europe Closing remark SABIC PP Fit for future growth by combining the best of two worlds: Strong European market and asset position Leading low cost Middle East feedstock position SABIC PP The power to provide