Transcript Debt Reduction Clear Focus on Execution

Jerry Parker
Vice President, Polymer Sales
February 26, 2002
“An Introduction to Polymers”
Safe Harbor Language
Statements in this presentation relating to matters that are not
historical facts are forward-looking statements. These forwardlooking statements are just predictions or expectations and are
subject to risks and uncertainties. Actual results could differ
materially, based on factors including but not limited to future global
economic conditions, access to capital markets, industry
production capacity and operating rates, technological
developments, the supply demand balance for the products
produced by the Company and its joint ventures, competitive
products and pricing pressures, increases in raw material and/or
energy costs, changes in governmental regulations and other risk
factors. For more detailed information about the factors that could
cause our actual results to differ materially, please refer to Lyondell
Chemical Company's Annual Report on Form 10-K for the year
ended December 31, 2000, Lyondell’s Quarterly Report on Form 10Q for the quarter ended September 30, 2001, as well as Lyondell’s
Annual Report on Form 10-K for the year ended December 31, 2001
which will be filed with the SEC.
Page 2
Lyondell Operates in 3 Major Businesses

Lyondell Chemical Company - Intermediate Chemicals and
Derivatives
– World’s leading producer of PO and derivatives
– 100% Ownership

Equistar - Petrochemicals and Polymers
– A leading North American producer of ethylene, propylene and
polyethylene
– Low cost position based on feedstock flexibility and scale
– 41% Ownership

LCR - Refining
– Unique capability to refine heavy crude oils
– Contractually stable business; strong cash flow generator
– 58.75% Ownership
Page 3
Equistar: formed from consolidation of
three like businesses
41%
29.5%
29.5%
2001 Revenue: $5.9 billion
Petrochemicals
2001 Revenue: $3.9 billion
Polymer Products
2001 Revenue: $2.0 billion
• Ethylene
• Oxygenated Products
• Polyethylene
• Propylene
• Aromatics
• Polypropylene
• Butadiene
• Specialty Products
• Performance Polymers
Page 4
Equistar Second in North American
Ethylene Capacity
Rank 2001
16000
Billions Lbs/Yr
12000
8000
4000
0
Dow
Source: CMAI
Equistar
Exxon Mobil
CP Chem
Nova
Page 5
Significant Ethylene consolidation
in last decade
66%
Top 5 North American
Ethylene Producers
Nova
8%
ChevronPhillips
11%
40%
Exxon
7%
Union Carbide
7%
Nova
8%
Dow
9%
ExxonMobil
12%
Equistar
16%
Dow/Carbide
19%
Shell
9%
Source: CMAI
1991
2001
Page 6
Feedstock Flexibility is a Key Advantage
Equistar Capability
Liquid Cracking Advantage
NGL
37%
Ethane - Light Naphtha Cost of Ethylene Spread
8
Liquid
Prior 15 Yr Average
7
N. American Industry
(ex. Equistar)
Liquid
22%
¢/lb ethylene
63%
6
5
4
3
2
78%
Source: CMAI and Lyondell.
Source: ChemData,
Page 7
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
NGL
1988
0
1987
1
Increasing Vertical Integration
74% Integrated
83% Integrated
1995 Merchant Ethylene Market
12.1 Bil Lbs (26% of Total)
2000 Merchant Ethylene Market
9.3 B Lbs (17% of Total)
19%
34%
Ethylene
27%
PE
34%
Vinyls
Ethylene
producers
producers
Vinyls
16%
PE
6%
20%
9%
12%
4%
9%
Source: Lyondell estimates
5%
5%
Page 8
Equistar Vertically Integrated
Strategically Linked
• Owned and Partner
Capacity = 85% Integration
• End-Use Balance Similar
to Industry
POLYETHYLENE
5.7 BILLION LBS
Other
ETHYLENE
EO/EG
POLYETHYLENE
54%
PS
85%
11.6 BILLION LBS
ETHYLENE OXIDE
& DERIVATIVES
PVC
ETHYLENE
DICHLORIDE
VINYL ACETATE
2001 Ethylene
End Use Breakout
Source: CMAI / Lyondell
STYRENE
Page 9
Equistar Third in
North America Polyethylene
Rank 2001
Billions Lbs/Yr
12000
8000
4000
0
Dow
Source: CMAI
ExxonMobil
Equistar
CP Chem
Nova
Page 10
Polyethylene Value Creation through
Technology and Know How
Process
•
•
•
•
Co-Monomers
• Butene
• Hexene
• Octene
Source: Lyondell estimates
Gas Phase
Solution
Slurry
High Pressure
Polymer
Physical
Properties
End-Use
Requirements
Catalysts
•
•
•
•
Ziegler-Natta
Single-Site
Chromium
Peroxide
Page 11
End-Uses Have Broad
Physical Property Requirements
Food
Packaging
Trash
Grocery
Bags
Detergent
Bags
Conduit
Pipes
Tubs
Cups
Source:
Lyondell
estimates
Pharm
Bottles
Wire &
Cable
Lids
Caps
Food
Bottles
Packaging
Stretch
Wrap
Milk Bottles
Extruded
Pressure
Pipe
Sheet
High Density
Liner
Products
Film
Rotomold
Linear Low Density
Shrink
wrap
Extrusion
Coating
Low Density
Page 12
Equistar has
Broad Technology Capabilities
Food
Packaging
Trash
Grocery
Bags
Detergent
Bags
Conduit
Pipes
Tubs
Cups
Pharm
Bottles
Wire &
Cable
Lids
Caps
Food
Bottles
Packaging
Stretch
Wrap
Milk Bottles
Extruded
Pressure
Pipe
Sheet
Liner
Products
Film
Rotomold
Shrink
wrap
Extrusion
Coating
Slurry
{Bimodal}
{Solution}
3055 MM Lbs
Gas Phase
1130 MM Lbs
Source:
Lyondell
estimates
High Density
Linear Low Density
High Pressure
{Autoclave}
{Tubular}
1465 MM Lbs
Low Density
Page 13
Equistar Targets
Higher Value End-Uses
Wire &
Cable
Extrusion
Margin Premium,
Rotomold
Coating
Premium
Pressure
Pipe
Food
Packaging
Shrink
wrap
Food
Packaging
Grocery Tubs
Cups
Bags
Sheet
Pharm
Bottles
Trash
Extruded
Bags
Products
Detergent
Milk Bottles
Bottles
Attractive
Stretch
Wrap
Lids
Caps
Liner
Pails
Film
Conduit
Pipes
Commodity
Market Growth Rates
Source: Lyondell estimates
Page 14
Advantaged Market Positions in
Polymers
US
Industry
~33%
Market Segment Rank
Premium
Equistar
~40%
~21%
Attractive
~37%
~46%
Source: Lyondell estimates
Commodity
~23%
Page 15
Recent Downstream Inventory Decline
has Sapped Producer Sales
Polyethylene Sales 1991-2003
31000
U.S.
29000
Millions Lbs
27000
25000
23000
Inventory
Decline
21000
19000
17000
Consumption
15000
CMAI 2/02
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: CMAI
Page 16
Capacity Additions Peak in ’02
Shut-Downs are Significant
N. American Polyethylene Capacity
Bil Lb
Canada & U.S.
2
1.5
1
0.5
0
-0.5
2000
2001
2002
2003
-1
-1.5
-2
Additions
Source: CMAI
Retirements
Net Additions
Page 17
Capacity Surplus grew
with Weak Economy and Demand
PE Capacity Surplus
10000
100%
{North America.}
80%
5000
70%
60%
0
50%
1996
Source: CMAI
1997
1998
1999
2000
Surplus
2001
2002
2003
2004
Operating Rate
2005
2006
Cmai 2/02
Page 18
% of Capacity
Millions Lbs
90%
Equistar Petrochemicals & Polymers
Low cost ethylene production via flexible
crackers
 Downstream market access through
Equistar & affiliate derivatives
 Diverse polymer production assets and
technology
 Differentiated polymer sales through
market & technology breadth

Page 19
Jerry Parker
Vice President, Polymer Sales
February 26, 2002
“An Introduction to Polymers”