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At the heart of the Verbund
INVESTOR ROUNDTABLE Chemicals segment 2014
Hans Engel Chief Financial Officer Wayne T. Smith Member of the Board of Executive Directors Boston / New York City June 9, 2014
BASF Investor Roundtable Chemicals segment – June 9, 2014 2
Cautionary note regarding forward-looking statements
This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. BASF has based these forward-looking statements on its views and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and BASF does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.
BASF Investor Roundtable Chemicals segment – June 9, 2014 3
Why do we talk about Chemicals today?
BASF Investor Roundtable Chemicals segment – June 9, 2014 4
Chemicals 28%
Chemicals 23%
2013: €74.0 billion* 2013: €10.4 billion*
Chemicals – strong contribution to BASF’s sales and profitability
Functional Materials & Solutions 23%
Performance Products 21%
2013
Sales* to 3rd parties
EBITDA*
Agricultural Solutions 7%
Oil & Gas 20%
Functional Materials & Solutions 15%
Performance Products 19%
2013 Agricultural Solutions 13%
Oil & Gas 30%
* Segment share excluding Other: Sales: €4.7 billion (6% of sales); EBITDA: - €533 million (-5% of total EBITDA )
BASF Investor Roundtable Chemicals segment – June 9, 2014 5
Chemicals in a nutshell (2013)
~1,500 ~6,000 customers in all regions
Verbund site
Global
asset footprint
Core of each €6.4 billion transfers to BASF
downstream divisions
€178 million R&D
expenses
€17 billion sales to third parties
BASF Investor Roundtable Chemicals segment – June 9, 2014 BASF Corp., Geismar, US 5
products*
€3.0 billion EBITDA
* without electronic materials
BASF Investor Roundtable Chemicals segment – June 9, 2014 6
EBIT after cost of capital Chemicals
EBIT after cost of capital* in million €
restated
Chemicals earned a premium on cost of capital even during the 2008 / 2009 recession*** * EBIT after cost of capital concept was introduced in 2004.
*** The former Plastics segment also earned a premium on cost of capital during the 2008 / 2009 recession.
Chemicals is a strong earnings contributor
0
500
1,000
1,500
2,000
2004 2005 2006** 2007** 2008 2009 2010 2011 2012 2013
2,000
1,500
1,000
500
0
** Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Investor Roundtable Chemicals segment – June 9, 2014 7
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth
Ludwigshafen
Antwerp
BASF Investor Roundtable Chemicals segment – June 9, 2014 8
Current trends in the upstream chemical industry
Global growth Sustainability Raw material change
Dynamic competitive environment
BASF Investor Roundtable Chemicals segment – June 9, 2014 9
Real chemical production excluding pharma (World)* in trillion US$
10%
CAGR 2010-2020 World: 4.3% (GDP: 3%)
Emerging Markets: 6.7% (GDP: 5%)
Source: BASF * Revised statistics with new baseline, recognizing larger market demand in Asia; ** BASF not focused on base-products, e.g. PVC, polyolefines, fertilizers
Chemical production continues to outpace GDP, especially in emerging markets
2020 4.7
trillion 2013 3.4
trillion
2010 3.1
trillion 57%
Asia Pacific
Rest of World Europe
North America
9%
18%
16%
50%
10%
22%
18%
45%
20%
25%
Global growth 9
Sustainability Raw material change Competitive environment
Strategically relevant market of BASF’s Chemicals segment 2013: ~US$550 billion**
BASF Investor Roundtable Chemicals segment – June 9, 2014 10
Global growth 10
Sustainability as future growth driver
Enable customers to develop more sustainable solutions
Balancing of sustainability dimensions is key
Governments set regulatory framework
Key aspects for Chemicals
Downstream growth
Energy consumption
Emissions, climate protection
Occupational health and safety
Renewable resources
Sustainable chemicals production balances ecology, economy and society
Operational
Excellence
Society
Economy Ecology
Sustain- ability
Sustainability Raw material change Competitive environment
BASF Investor Roundtable Chemicals segment – June 9, 2014 11
Crude oil and natural gas are the major raw materials for chemicals
Natural gas
Ethylene (C2)
Propylene (C3)
C4-Olefins
Aromatics (C6, C7)
Methanol (C1)
Acetylene (C1*)
Ammonia (C1*)
Downstream Chemicals
Oil
Global growth 11
Sustainability Raw material change * C1-derived
Competitive environment
BASF Investor Roundtable Chemicals segment – June 9, 2014 12
.
Raw materials landscape is diversifying based on regional differences
Shale gas
Naphtha Renewables
Naphtha Abundant coal
Naphtha
Global growth 12
Sustainability Raw material change Competitive environment
Ethane, natural gas Mixed feed
BASF Investor Roundtable Chemicals segment – June 9, 2014 13
Increasing usage of alternative feedstock in global chemicals market
Coal
Renewables
Ethylene
Propylene
C4 Olefins
Aromatics
Methanol
Ammonia
Downstream Chemicals
Oil
Intermediates
Global growth 13
Sustainability Raw material change Competitive environment
Natural gas
Shale gas
Acetylene
BASF Investor Roundtable Chemicals segment – June 9, 2014 14
.
Europe Ongoing restructuring of olefins and polyolefins industry Focus on innovative chemistry Integrated production setups will remain competitive
North America New capacities based on shale gas Export of NGLs*/ LPG** and base-products
China Strong domestic demand will drive capacity additions Abundant coal reserves drive coal-to-chemicals investments Expected to remain a net importer of many basic chemicals
Middle East Diminishing feedstock advantage due to shale gas
(USA) and coal (China) Export hub for raw materials and base-products
South America Focus on renewable resources Will remain net importer of chemicals from the U.S.
Raw material supply and integration concepts will define competitiveness
* Natural Gas Liquids ** Liquefied Petroleum Gas
Global growth 14
Sustainability Raw material change Competitive environment
BASF Investor Roundtable Chemicals segment – June 9, 2014 15
Changes in the competitive environment
Oil & Gas
Commodities
Specialties
Pharma
Crop protection Plant-Biotech
Petro– chemicals
1980
Dow
BASF DuPont
Shell
Hoechst
2013
Sanofi
Shell
Celanese
Conoco
Invista
DuPont
AstraZeneca
Sinopec
Rhône Poulenc
BASF
Ineos
Formosa
Bayer
Dow
Solvay
ICI
Sabic
Clariant
Reliance
Global growth 15
Sustainability Raw material change
Bayer
Competitive environment
Lanxess
Syngenta
AkzoNobel
Lyondell Basell
BASF Investor Roundtable Chemicals segment – June 9, 2014 16
Engineering plastics Catalysts Construction chemicals Water-based resins Pigments, plastic additives Oil & Gas Personal care & food Battery materials Functional crop care Omega-3 fatty acids Enzymes …
BASF core business
Strong partnerships
Gazprom Monsanto Petronas Shell Sinopec Statoil Total
Selected transactions 2001 − today
Acquisitions
~ €16 billion sales
Divestitures
Pharma Agro generics Vitamins premix Printing systems Construction equipment,
wall & flooring systems Gas Trading* …
Global growth 16
Sustainability Raw material change Competitive environment * Closing expected by mid of 2014
~ €22 billion sales ** Transferred into Styrolution JV on Oct. 1, 2011
Fibers Polyolefins Fertilizers Styrenics**
Chemicals divestitures
Active portfolio management at BASF
BASF Investor Roundtable Chemicals segment – June 9, 2014 17
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth
Freeport
Geismar
BASF Investor Roundtable Chemicals segment – June 9, 2014 18
BASF’s Chemicals segment is a strong cash and earnings contributor We will ► continue to strengthen the Verbund, create synergies and
add value ► maintain our high level of profitability through process
innovations and stringent cost management ► grow externally with the chemicals market
Our strategic focus is to enable and support growth of ► BASF’s downstream segments ► BASF in emerging markets
Shale gas is an opportunity for BASF
BASF Investor Roundtable Chemicals segment – June 9, 2014 19
Sales to other BASF segments
Sales to 3rd parties
Chemicals segment grows by selling into the BASF Verbund and to the market
* IFRS 10 & 11 impact: -€1.3Bn; Impact of new segment structure: +€5.3Bn
0
5,000
10,000
15,000
20,000
25,000
2001 2002 2003 2004 2005 2006** 2007** 2008 2009 2010 2011 2012restated
2013
25,000
20,000
15,000
10,000
5,000
0
Sales Chemicals in million €
CAGR 2001-2013 11%
5% Volume CAGR 2001-2013
** Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Investor Roundtable Chemicals segment – June 9, 2014 20
0
100
200
300
400
500
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
EBITDA margin Chemicals / oil price Index 2001 = 100
Chemicals with stable profitability, little correlation to oil price
EBITDA margin Chemicals (as % of sales)
Oil price
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Investor Roundtable Chemicals segment – June 9, 2014 21
Chemicals is a stable earnings contributor to BASF Group
EBITDA BASF Group in million €
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
thereof EBITDA Chemicals
EBITDA BASF Group
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Investor Roundtable Chemicals segment – June 9, 2014 22
2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012restated
2013
Chemicals generates strong and steady free cash flow
Cash flow Chemicals in million €
* Without Catalysts (now part of Functional Materials & Solutions segment)
Free cash flow (EBITDA – additions to plant, property & equipment)
Since 2001, Chemicals contributed ~€17 billion of free cash flow to BASF Group
Operating cash flow (EBITDA)
2,000
3,000
4,000
1,000
-1,000
0
BASF Investor Roundtable Chemicals segment – June 9, 2014 23
Balanced portfolio of products for internal supply and merchant market sales
Industrial gases Acetylene Purified ethylene
oxide Formaldehyde Ammonia Cracker products Butanediol Caprolactam PBT** base resin Acrylic acid MDI
Internal supply driven
TDI PolyTHF®
Amines Higher alcohols Polyalcohols and
specialties Formic acid Inorganic salts Glues and resins
Merchant market driven
** Polybutylene terephthalate
captive use only
BASF Investor Roundtable Chemicals segment – June 9, 2014 24
2004 2005 2007 2008 2012 2013 1999 2006 2010 2011 2000
Continuous development of Chemicals global asset footprint
PVC Polyolefins
Minority share in ‘Williams cracker’
Styrenics
Acrylonitrile, Seal Sands
Divestitures / Joint ventures
BASF Petronas, Kuantan
BASF-YPC, Nanjing
Major investments
Polyamide fibers
Steam cracker, Port Arthur
Isocyanates, China
Expansion BASF-YPC, Nanjing
BASF Specialty Chemicals, Nanjing
Feedflex, Port Arthur
Expansion Antwerp cracker
Fertilizers
BASF Investor Roundtable Chemicals segment – June 9, 2014 25
BASF has leading positions in the chemical markets
MDI, TDI Glacial acrylic acid Acrylic esters Polyamide film Oxo alcohols Polyalcohols
No.1 globally* Leading regional market position
Inorganic salts Glues and
impregnating resins Plasticizers Solvents Standard amines
Butanediol and derivatives
Purified ethylene oxide
Specialty amines Carboxylic acids
(~50% of sales of BASF Chemicals)
BASF Investor Roundtable Chemicals segment – June 9, 2014 BASF SE, Antwerp, Belgium 25
* 2013
BASF Investor Roundtable Chemicals segment – June 9, 2014 26
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth
Ludwigshafen
Antwerp
BASF Investor Roundtable Chemicals segment – June 9, 2014 27
BASF Investor Roundtable Chemicals segment – June 9, 2014 28
We add value as one company
People Verbund
Technology Verbund
Production Verbund
Customer Verbund BASF
BASF Investor Roundtable Chemicals segment – June 9, 2014 29
Ludwigshafen – the role model Verbund site
2,000 buildings
250 production assets**
km pipeline 2,800
km rail tracks
2,100 trucks per day
230 barges per day
~400 ~20
rail cars per day
* Including production area Friesenheimer Insel; ** Organized in 120 production plants
km² *
BASF Investor Roundtable Chemicals segment – June 9, 2014 30
Chemicals global asset footprint: Verbund and major production sites
.
Kuantan
Nanjing
Antwerp
Ludwigshafen
Freeport
Geismar
Port Arthur Shanghai
Yeosu / Ulsan
Production site Verbund site
Chongqing
Schwarzheide
Camaҫari
BASF Investor Roundtable Chemicals segment – June 9, 2014 31
Global reduction in carbon emissions of 6.1 million metric tons/a and reduction of waste
Example Ludwigshafen: avoidance of 7 million metric tons of freight/a = 280,000 fewer truckloads
Shared use of on-site facilities: fire department, security, waste water treatment and analytics
Verbund generates >€1 billion p.a. global cost savings*, supports sustainability
* Savings include only tangible synergies. Additional (intangible) benefits and retained profits are not included.
BASF Investor Roundtable Chemicals segment – June 9, 2014 32
Philosophy of transfer pricing Safe and flexible supply at competitive prices Transfer prices linked to market prices No cross-subsidizing Value driven management in all steps of the
value chain
Additional Verbund benefits Flexible planning along value chains High security of supply, low logistics costs,
no sales and sourcing costs Joint quality management Joint engineering and process development Cross-functional knowledge exchange Additional capacity at Verbund sites dilutes fixed costs
Chemicals is at the heart of the BASF Production Verbund
Additional Verbund benefits
Transfer pricing
Downstream divisions
Chemicals segment
BASF Investor Roundtable Chemicals segment – June 9, 2014 33
Propylene (Steam cracker)
Acrylic acid
Acrylic dispersions
Surfactants
Acrylic esters Acrylic Resins
Superabsorbent polymers
Chemicals Performance Products
Case study acrylic acid: Value chain contributes cash flow of approx. €1 billion*
Each value chain step represents a potential merchant market outlet
* 2012
BASF Investor Roundtable Chemicals segment – June 9, 2014 34
Case study acrylic acid: Leading technology strengthens profitability
Continuous productivity improvements
Smart production increase by run-time extension and higher throughput
All production sites contribute to innovation and improvement ideas
Quick transfer around the world ensured
Source: BASF estimate
Acrylic acid production technology benchmark Industry average costs = 100; normalized
BASF with best-in-class acrylic acid process
80
85
90
95
100
BASFnew process
BASFclassic process
Industry average
BASF Investor Roundtable Chemicals segment – June 9, 2014 35
Natural Gas
Methanol Form-aldehyde
1,4-Butanediol
Tetra-hydrofuran PolyTHF®
POM***
Glues & Resins
gamma- Butyro- lactone
N-Methyl- pyrrolidone
Pyrroli-dones
PBT** Engineering plastics
Thermo- plastic PU
Personal care products
Case study acetylene value chain: cash flow of approx. €500 million*
Chemicals
Acetylene
* 2012 ** Polybutylene terephthalate *** Polyoxymethylene
Downstream units
Other specialties
BASF Investor Roundtable Chemicals segment – June 9, 2014 36
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth Kuantan
Nanjing
BASF Investor Roundtable Chemicals segment – June 9, 2014 37
Chemicals supplies key raw materials to BASF downstream segments
Acrylic acid Acrylates Butadiene Ethylene oxide Propylene oxide Pyrrolidones Amines Isobutene Hydrochloric acid Sodium hydroxide
Performance Products
MDI & TDI Polyamides Mono ethylene glycol PBT PolyTHF Propylene oxide Acrylic acid Acrylates Plasticizers TDI
Functional Materials & Solutions
Solvents Specialty amines Ethylene glycol Nitrotoluene Alcoholates
Agricultural Solutions
BASF Investor Roundtable Chemicals segment – June 9, 2014 38
Merchant Market
Value chains of the BASF
Verbund
Ethylene Propylene Butadiene
Close to entire cracker output in Ludwigshafen is used within Verbund
<5%
Raffinates Aromatics …
Cracker products Ludwigshafen
>95%
BASF-YPC Nanjing supply for captive demand:
2006: 60% 2014: 75% BASF SE, Ludwigshafen, Germany BASF Investor Roundtable Chemicals segment – June 9, 2014 38
BASF Investor Roundtable Chemicals segment – June 9, 2014 39
3rd Party sales Captive demand
MDI global
sales split 2013
High captive share of MDI for BASF’s polyurethane systems
MDI sales to downstream businesses Polyurethane system houses
Thermoplastic polyurethanes
Global production network (capacity: 1,340 kt) Antwerp
Geismar
Caojing
Yeosu (Korea)
BASF Investor Roundtable Chemicals segment – June 9, 2014 40
Acrylic acid global
sales split 2013
3rd Party sales Captive demand
High captive share of acrylic acid for BASF’s SAP* and dispersions
* Superabsorbent polymers
Acrylic acid sales to downstream businesses Superabsorbent Polymers
Dispersions
Esters
Resins
Surfactants
Global production network (capacity: 1,350 kt) Ludwigshafen
Antwerp
Freeport
Nanjing
Kuantan
BASF Investor Roundtable Chemicals segment – June 9, 2014 41
Caprolactam global
sales split 2015+
3rd party sales Captive demand
Growing captive share of caprolactam for BASF’s downstream polyamide polymers
Operational excellence in existing plants (capacity: 800 kt) Ludwigshafen
Antwerp
Freeport
Caprolactam sales to downstream businesses Engineering plastics
Polymers for packaging films
Monofilaments
BASF Investor Roundtable Chemicals segment – June 9, 2014 42
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth
Freeport
Geismar
BASF Investor Roundtable Chemicals segment – June 9, 2014 43
High capex intensity commands extraordinary focus on capex allocation and project control
Extensive use of cash-cost benchmarking
Preparation of solid business cases for all projects ensures sound decision-making
Projects approved only if cost of capital is earned even at hypothetical marginal producer price level
Capex Chemicals
Capex budget 2014-2018 by segment
Other 13%
Chemicals* 33%
Performance Products 15%
€ 20 billion
Agricultural Solutions 7%
Oil & Gas 20%
Functional Materials & Solutions 12%
* Including gas-to-propylene project U.S. Gulf Coast, TDI Ludwigshafen, MDI Chongqing, Isononanol Maoming
BASF Investor Roundtable Chemicals segment – June 9, 2014 44
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006* 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016restated
Consolidated sales indexed (2000 = 100)
Capex as % of sales
Capex focused on organic growth as well as on bottom-line improving projects
Capex as % of sales Chemicals segment
Consolidated sales Chemicals segment
Capex outlook
* Without Catalysts (now part of Functional Materials & Solutions segment)
BASF Investor Roundtable Chemicals segment – June 9, 2014 45
Modelling cost curve dynamics
Market demand
Marginal producer price Cas
h co
sts
Plant 1 Plant 2
Plant 3
Plant 4
Margin
Cash costs are a function of
Technology position
Degree of integration
Scale
Raw materials source
Competitiveness in the market also influenced by
Logistics costs
Sales costs
Production capacity
BASF Investor Roundtable Chemicals segment – June 9, 2014 46
Continuous process innovation leads to best-in-class technology
Proprietary BASF technology, with best-in-class process
Significant cost synergies due to two parallel projects (Nanjing, Camacari)
Acrylic acid will supply downstream units (superabsorbent polymers; acrylates)
Cost curve case study: Acrylic acid China
Acrylic Acid cash cost curve, China average cash costs 2015 in US$/kg
Cas
h co
sts
BAS
F
clas
sic
proc
ess
BAS
F
new
pro
cess
Source: BASF estimate
Production capacity
BASF Investor Roundtable Chemicals segment – June 9, 2014 47
Leading single-train technology
New TDI plant strengthens and benefits from Ludwigshafen Verbund
Schwarzheide plant to be closed after start-up of new plant
New TDI plant re-balances competitive environment of European TDI market
BAS
F Eu
rope
Production capacity
Cas
h co
sts
Source: BASF estimate
TDI cash cost curve, Europe average cash costs 2015 in US$/kg
BAS
F ne
w
Ludw
igsh
afen
BAS
F Sc
hwar
zhei
de
New Ludwigshafen TDI plant will provide superior cost structure in Europe
Cost curve case study: TDI Europe
BASF Investor Roundtable Chemicals segment – June 9, 2014 48
BASF caprolactam production focused on captive demand
BASF plants well positioned on cost curve
Best-in-class cost position in Europe
Constant process improvement ongoing
World-scale caprolactam plants supply downstream demand of polyamide 6 applications
Further cost improvement in North America after start-up of ammonia JV with Yara
Caprolactam cash cost curve average cash costs 2015 in US$/kg
BAS
F N
orth
Am
eric
a
BAS
F Eu
rope
Production capacity
Cas
h co
sts
Cost curve case study: Caprolactam
Source: BASF estimate
BASF Investor Roundtable Chemicals segment – June 9, 2014 49
Sites with major announced investment projects
Camaҫari
Korla
Production site Verbund site
Chemicals investments support growth of downstream units in Emerging Markets
Chongqing
Nanjing Shanghai
Freeport
Geismar Port Arthur
Antwerp
Acrylic acid
Acrylic acid
Ludwigshafen
Kuantan Maoming
BASF Investor Roundtable Chemicals segment – June 9, 2014 50
Sites with major announced investment projects
Korla
Chongqing
Production site Verbund site
Chemicals investments enable growth in Asia, especially in China
Kuantan
Nanjing
Freeport
Geismar Shanghai
Maoming
Port Arthur
MDI
Antwerp
Isononanol
Ludwigshafen
Camaҫari
Polyamides
Butanediol, PolyTHF®
BASF Investor Roundtable Chemicals segment – June 9, 2014 51
.
Sites with major announced investment projects
Korla
Production site Verbund site
Chemicals investments support growth of the Verbund in Europe
Chongqing Barcelona
Freeport
Geismar
Antwerp Ludwigshafen
Shanghai
Maoming
Port Arthur
Butadiene extraction
Kuantan Camaҫari
TDI Nanjing
BASF Investor Roundtable Chemicals segment – June 9, 2014 52
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth
Freeport
Geismar
BASF Investor Roundtable Chemicals segment – June 9, 2014 53
Price development of oil/gas
Shale gas in the U.S.: Lower energy and feedstock cost
Increased U.S. shale gas production disconnected crude oil prices from natural gas prices in North America
Increased production of natural gas liquids (NGLs): ethane, propane, butane
NGL price drop drives shift to lighter cracker feed slates
– Improved profitability of light feed crackers
– Narrow cracker output
Game changer shale gas
Crude Oil WTI
0
5
10
15
20
0
20
40
60
80
100
120
1990 1995 2000 2005 2010 2015 2020
Source: IHS Inc. The use of this content was authorized in advance by IHS. Any further use or redistribution of this content is strictly prohibited without written permission by IHS. All rights reserved. Natural gas price Germany: Statistisches Bundesamt “Grenzübergabepreis” Germany
Natural Gas USA
Natural Gas Germany
Crude oil in US$/bbl
Natural gas in US$/MMBTU
BASF Investor Roundtable Chemicals segment – June 9, 2014 54
Natural Gas Liquids Ethane Propane Butane
► Cracker Feed
Shale gas is beneficial for methane and ethane based chemistry
Methane and ethane to retain their advantageous cost position in North America
Low transportability of ethane ► Shift to ethane crackers
Propane and butane easy to transport ► Export with link to global market
Very limited transportability of methane
Methane to remain an abundant product with low pricing in North America (despite LNG projects)
Methane ► Power plants ► Ammonia ► Methanol
Composition of shale gas
BASF Investor Roundtable Chemicals segment – June 9, 2014 55
Converted Port Arthur cracker with high feed flexibility
# 2 chemical producer in the U.S.*
BASF
Shale gas is a major opportunity for BASF
Low energy costs (energy bill dropped by 55%
compared to 2007**)
Substantial profit improvement
BASF will maximize opportunity of low-cost methane
Strengthen profitability of the Verbund
Grow selected C1 value chains
* Based on sales to local customers ** U.S. data only, normalized costs for natural gas for energy production BASF Investor Roundtable Chemicals segment – June 9, 2014 55
BASF Investor Roundtable Chemicals segment – June 9, 2014 56
Port Arthur cracker* has full feed flexibility benefiting from low raw materials costs
Since Q1 2013, full flexibility to switch to most economic feed: naphtha, ethane, propane, butane
Cracker includes splitting unit, which optimizes quality of shale gas feed
Added 10th cracker furnace, increased capacity to 1 million metric tons
Improved cash margins through feed flexibility
* BASF Total Petrochemicals, LLC; Joint venture BASF 60%, Total 40%
BASF Investor Roundtable Chemicals segment – June 9, 2014 57
Ammonia joint venture* enables low raw materials costs for BASF downstreams
World-scale producer economics plant with focus on captive demand only (BASF)
Site: BASF Verbund site Freeport, Texas
Capacity: 750 kt p.a.
Advantages of hydrogen & nitrogen based technology:
– Lower capital investment
– No greenhouse gas emissions
– Faster execution
Improved cost position for BASF’s downstream products
Caprolactam Isocyanates Amines
Yara
…
Long-term sourcing contracts
Yara-BASF joint venture
BASF Group
Ammonia
Nitrogen** Hydrogen**
merchant market
* Project under evaluation ** Hydrogen and nitrogen are available in the Freeport area
BASF Investor Roundtable Chemicals segment – June 9, 2014 58
BASF is currently a net-purchaser of propylene in North America
Port Arthur propylene production insufficient to cover growing captive demand
Additional quantities are purchased from the market
Propylene is a key raw material for several value chains
Propylene supply North America
Acrylic acid Oxo-alcohols Polyols …
Flexible feed (NGL’s, Naphtha)
Propylene purchase from market
Propylene (Port Arthur cracker)
Downstream products
BASF Investor Roundtable Chemicals segment – June 9, 2014 59
Gas-to-propylene complex* covers internal demand at attractive conditions
U.S. Gulf Coast location
World-scale plant
Start-up: ~2019
Port Arthur cracker and new on-purpose propylene complex to cover entire captive propylene demand
Mid-term no sales to merchant market
Lower cost than alternative PDH technology
Cost leading gas-to-propylene technology covers supply gap
Propylene supply North America
Acrylic acid Oxo-alcohols Polyols …
Propylene Propylene (Port Arthur cracker)
Downstream products
Methanol
Methane (from shale gas)
Flexible feed (NGL’s, Naphtha)
* Project under evaluation
BASF Investor Roundtable Chemicals segment – June 9, 2014 60
Cost position of BASF plants in North America will be in top quartile
Shale gas based projects mostly to supply downstreams
Shale gas based projects will drive bottom line growth
Further selected projects under evaluation
Shale gas-driven investments will significantly improve BASF earnings
BASF Investor Roundtable Chemicals segment – June 9, 2014 61
Agenda
Trends in the chemicals market
Chemicals segment within BASF
Chemicals: At the core of the Verbund
Chemicals support growth of BASF
Shale Gas – An opportunity
Chemicals 2020
Capital expenditures drive profit growth
Freeport
Geismar
BASF Investor Roundtable Chemicals segment – June 9, 2014 62
Chemicals enable growth of downstream businesses
Chemicals benefit from downstream growth
Investment projects mainly improve cost positions
Key success factors Operational and commercial
excellence Process innovation Focused and disciplined
capex plan Further Verbund integration
Chemicals will continue to contribute to BASF profit
Sales Chemicals in billion €
BASF’s Chemicals segment: The success story continues!
EBITDA Chemicals in billion €
0
5
10
15
20
25
30
35
2013 Target 2020
Sales to third parties
Intersegmental transfers EBITDA Chemicals
CAGR 2013-2020 4-5%
0
5
10
15
2013 Target 2020
EBITDA upside range
CAGR 2013-2020 6-7.5%
BASF Investor Roundtable Chemicals segment – June 9, 2014 63
BASF’s Chemicals segment is a strong cash and earnings contributor We will ► continue to strengthen the Verbund, create synergies and
add value ► maintain our high level of profitability through process
innovations and stringent cost management ► grow externally with the chemicals market
Our strategic focus is to enable and support growth of ► BASF’s downstream segments ► BASF in emerging markets
Shale gas is an opportunity for BASF
BASF Investor Roundtable Chemicals segment – June 9, 2014 64
Key figures to remember about BASF Chemicals: ► Growth in line with market (until 2020) : ~4.3% p.a.
► Capex budget (2014 – 2018): ~€6.5 billion ► Consolidated sales 2013: €23.4 billion 2020:~€30 billion ► EBITDA: 2013: €3 billion 2020: €4.5 – €5.0 billion
BASF Investor Roundtable Chemicals segment – June 9, 2014 65
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