INEOS: Our Role in Improving UK Competitiveness in Bulk Chemicals and Beyond

THOMAS CROTTYDirector Communications and Corporate Affairs

INEOS Background

A world scale producer of petrochemicals and speciality chemicals Turnover $54bn (2014) 18,600+ employees* 105 manufacturing sites worldwide in 22 countries Asset value of $55 billion 60 million tonnes of chemicals capacity 20 million tonnes of refinery products (400,000 bbls/day) Supplying natural gas to 1 in 10 UK homes

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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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over

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SD M

illio

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Acquired ICIschemicals

businesses

Acquired BPspetrochemicals

businesses

Over 20 acquisitions from blue chip companies including: BP, BASF, Bayer, Dow, ICI, NorskHydro, Solvay

INEOS Growth

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USD Millions

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Sheet1

INEOS GROUP - PRO FORMA REVENUE

mIGLEVCChlorEnterprisesParaformBorealisABSKerlingTOTAL INEOS

1998149.1149.1

1999230.6230.6

2000337.0337.0

20011,530.71,071.6594.63,196.9

20022,235.81,053.8538.33,827.9

20032,530.41,032.2553.121.34,137.0

20043,396.11,222.0447.8174.150.65,290.6

20054,958.21,222.0529.4211.052.06,972.6

200626,587.4748.2295.8340.766.128,038.3

2006 PF26,587.4748.2295.8340.766.1310.0865.0830.030,043.3

GBP/EUR0.6744USD/EUR1.40

$mIGLEVCChlorEnterprisesParaformBorealisABSKerlingTOTAL INEOS

1998210.0

1999320.0

2000470.0

20014,500.0

20025,400.0

20035,800.0

20047,400.0

20059,800.0

200635,500.0

200743,600.0

200847,400.0

200928,900

201036,200

201143,000

201243,000

201347,000

201454,000

Sheet2

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Sheet5

South Houston4.1 mtes

North America

22 sites: 12 mtes

Mobile0.8 mtes

Asia6 sites:

Grangemouth11.9 mtes

Runcorn4.0 mtes

Antwerp2.4 mtes

Lavra11.0 mtes

Wilhelmshaven1.0 mtes

Ruhr1.4 mtes

Europe37 sites: 31.8

mtes

Kln5.5 mtes

Rafnes2.3 mtes

INEOS A Global Company

US Shale Gas

Unlocking the Barnett led to rapid development in other US plays

US Shale Gas Revolution

One shale basin in the US (the Marcellus) has grown from 1 bcf/d in 2007 to over 15 bcf/day today

For comparison, total UK gas demand is 8 bcf/day

The US Shale Revolution

US gas prices have disconnected from European and global markets due to

infrastructure and regulatory constraints

Source UK NBP and Henry Hub wholesale prices

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Sep-

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HH (usd/MMBTU) NBP (USD/MMBTU)

Gas Pricing

Fuel, Power Costs (% of total costs) for Selected Chemical Products

Fuel-based inputs are significant in chemicals production most sectors >50% of total costs

This has a major impact on the competitivity of the industry

Other energy intensive industries are similarly impacted (eg, Refining, Iron and Steel, Glass, Cement, Paper)

Source - American Chemistry Council

Influence of energy costs

Worldwide Chemicals 4.3 trillion dollars/year Automotive 2.8 trillion dollars/year

Europe Chemicals 1.0 trillion dollars/year Automotive 1.0 trillion dollars/year

Chemicals in Europe employs 1.7 million people direct 7.0 million people including indirects

European Chemicals exports 70 billion dollars/year

Most other major industry sectors rely on the European chemical industry for their raw materials

A sense of scale

Are chemicals important?

Source: ICIS

US and Western European costs were comparable in 2005

US shale gas has been a game changer

Impact on global chemicalseconomics

Source: ICIS

US and Western European costs were comparable in 2005

Ethylene costs are now 3x higher in Western Europe

Western European manufacturers are struggling to compete

US ethylene costs are now comparable with the Middle East

US shale gas has been a game changer

Impact on global chemicals economics

Source: ACC 2012

>$120bn planned spend on chemical capacity to 2022

485,000 new jobs during construction, and over 500,000 new permanent jobs

Adding $80-120bn in economic output

A long term threat to the European chemicals business

US Chemical Industry response

Rationalisation- closure of uneconomical sites- mergers

Performance improvement- Invest to improve cost of production - Concentrate on specific specialty sectors

Access improved feedstock and energy costs

- Import feedstocks- Produce shale gas locally

There will be an impact, but we need to respond and

mitigate the impact

What can European Petrochem manufacturers do?

Shale Gas to Europe

The Ineos US Ethane Project

Rafnes (Norway)

600 ktonnes/y of ethylene capacity Largest worldwide seaborne ethane importer One of the few facilities worldwide that can import

and crack LPG mixes New ethane tank built

* pressurised

700 ktonnes/year of ethylene capacity

Flexible gas steam cracker

New ethane import terminal & tank being built

Grangemouth (UK)

Source: Wood Mackenzie

North Sea Gas Decline

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Gas (cm/y)

North Sea Gas Decline (billion cm/y)

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Gas (cm/y)

200585

200676

200768

200865

200955

201051.5

201145

201248

201348

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201549

To resize chart data range, drag lower right corner of range.

Utilise a national asset for national benefit- Exchequer revenue- Balance of payments- Wealth and job creation- Downward pressure on gas price- Security of supply

Play a part in making European energy and feedstock prices competitive

The very survival of the Chemicals industry and other energy intensive industries is at stake

Source: BGS 2013

What can UK and EU shale production deliver?

What is shale gas? Shale gas is natural gas trapped in fine sedimentary rock known as shale

Shale is generally the source rock for conventional gas deposits gas migrates over long periods to form conventional reservoirs

Most of the worlds gas and oil production has been from conventional deposits

Shale gas can vary from dry (mostly methane) to NGL rich (ie, contains ethane and heavier hydrocarbons)

Shale gas - what is it?

http://en.wikipedia.org/wiki/File:GasDepositDiagram.jpghttp://en.wikipedia.org/wiki/File:GasDepositDiagram.jpg

Horizontal Well Construction

Injection of 95-98% water, 1.5-4.5% sand and 0.5% additives into the shale At high pressure To fracture the shale and release the trapped gas Well is hydraulically fractured in stages taking 1 hour for each stage The sand carried in the fluid props open the fissures created during the fracturing process

Hydraulic Fracturing

GUAR GUMThickens water and found in cooking sauces, toothpaste and ice cream

CROSSLINKERSUsed in soap and cosmetics

BRINETypically produced with potassium chloride, a low sodium table salt substitute

SCALE INHIBITORSUsed in antifreeze

BIOCIDESUsed to sterilise medical and dental equipment. Prevents bacteria from forming

FRICTION REDUCERSUsed in water treatment and face creams

HYDROCHLORIC ACIDUsed in food production, cleaning swimming pools and created naturally in the stomach

BREAKERSUsed in detergent and hair cosmetics

CORROSION INHIBITORSPrevents corrosion of pipes. Used in pharmaceuticals, food flavouring, cosmetics and beverage production

ADJUSTING AGENTSUsed in soap, water softener, glass and ceramics

Fracking additives uses in everyday life

Drilling Rig

Hydraulic Fracture Spread

Production Site

The industry needs to win the general support of the public

Well never convince everyone But we must ensure that we dont kill the

opportunity without proper scientific assessment of the facts

There is much expert third party evidence that says we can develop this resource safely and without harm to the environment

Can we extract Shale Gas safely?

INEOS committed to working with and properly consulting hos