SOUTH AMERICA UPDATE

IHS WPC 2012

Joao Parolin March, 2012

OUTLINE

Oxiteno

2 3
4 5

South America Macro Economics Overview of the Petrochemical Industry in South America
Shale Gas Impact on South America

Conclusions

Oxiteno

OXITENO Oxiteno Profile BUILT ON A SOLID FOUNDATION

Brazilian company part of Largest producer of surfactants in Latin America Sole producer of Ethylene Oxide and Fatty Alcohols in Brazil 10 industrial sites located in Brazil, Mexico and Venezuela Sales offices: So Paulo, Buenos Aires, Caracas, Bogota, Mexico City, Chicago and Brussels R&D centers in Brazil, Mexico and Venezuela 10% of total employees

Revenues (2011): US$ 1.4 billion

US$ million

Year

Product Line

Non-Ionics

Ethanolamines

SURFACTANTS

Anionics Amphoterics Specialties

Ethylene Glycols
PETROCHEMICALS

Oxygenated Solvents White Mineral Oils Functional Fluids Non-Foams

Fatty Alcohols OLEOCHEMICALS Fatty Acids Vegetable Glycerin POLYOLS

Elastomers Rigid Foams

Flexible Foams

South America Macro Economics

South America Economy at a Glance

-2011-

Real GDP (billion US$)

Population (million)

GDP (per Capita - US$)

Brazil Argentina Venezuela Colombia Chile Per Ecuador Uruguay Bolivia Paraguay Region
Source: IHS World Bank

2432 430 336 335 236 175 65 48 23 22 4102

196.4 41.5 28.3 47.3 17.2 29.4 14.5 3.3 10.3 6.7 394.9

12,380 10,360 11,900 7,080 13,700 5,950 4,480 14,500 2,230 3,250 10,400

South America
POPULATION: 395 MILLION (5.6% OF WORLD POPULATION) GDP CURRENT PRICES (2011): US$ 4.1 TRILLION (5.9% OF WORLD GDP)

South America population is

higher than the USA population.

South Americas GDP per

capita is almost double than Chinas.

Population SA = 395 million Population USA = 313 million

(x1.26 times as much)
Source: World Bank / IHS Chemical / Intellichem

GDP pc S.A= 10,400 US$ GDP pc China = 5,300 US$

Economic Growth in South America

GDP Growth (% annual)
17.5 15.0 12.5 10.0 7.5 5.0 2.5 5.5
4.1 6.6 4.0 5.4 1.5 (2.3) (0.5) 6.3 14.2 12.7 9.6 10.4 9.2 9.6

GDP growth in South America has been above the World average , in contrast to USA, EU and Japan.

4.2
4.3 2.8

(2.5)
(5.0) (7.5) 2006 2007 2008 South America China World
Source: World Bank, IHS, Intellichem

2009 USA

2010 Europe

2011 Japan

Social Classes Brazil

MIDDLE CLASS IS ONE OF THE MOST IMPORTANT FUELS FOR THE EXPANSION OF THE LARGEST ECONOMY IN THE REGION
INCREASING PURCHASING POWER In South America, Brazil continues to lead reducing poverty levels.

+17
Million people

+58
Million people

-17
Million people

Source: OECD (SANTANDER) - 2010

Petrochemical Industry in South America

Trade Balance of South America Chemical Industry (2005-2010)

US$ Billions FOB
0.1 -2.5 -2.7 -1.5 -8.0 0.8 -2.3 -3.3 -2.0 -8.4 0.9 -3.3 -3.7 -5.7 -8.4 -13.3 1.8 -4.1 -4.5 2.7 -4.5 -3.6 -4.3 -6.4 2.1 -4.8 -4.9

-15.7
-20.6

Argentina Chile Brazil

Colombia Venezuela

-23.2

Brazilian Trade Balance was (26.5 US$ Billion) in 2011.

2006 2007 2008 2009 2010

2005

Source: ABIQUIM, ASOQUIM, CIQyP, EXI, ACOPLASTICOS, ASIQUIM(2011)

Ethylene Capacity in Latin America (000 -tons) Ethylene Capacity in Brazil

(000 - Tons/Yr)

Camacari /BA 1280 Duque de Caxias /RJ 520 Santo Andre/SP 700
Ethane/Propane base Naphtha/Refinery Gas base Ethanol base

Triunfo/RS 1252 Triunfo/RS 200

Total Capacity 3.952 (000 Tons/Yr)

Source: QuiMax

Ethylene Capacity in Latin America (000 -tons) Tons/Yr) Ethylene Capacity in South America (000

Colombia

Barranca Capacity: 100

Argentina
Ethane/Propane base Naphtha/Refinery Gas base

Santa F /San Lorenzo : 52 Bahia Blanca Capacity: 700

Ethylene Capacity in Latin America (000 -tons) Tons/Yr) Ethylene Capacity in South America (000

Venezuela

El Tablazo(Ana Maria Campos)/Zulia : 636

Ethane/Propane base Naphtha/Refinery Gas base

Chile Concepcion : 50

Ethylene Capacity in South America 2011

Total South America = 5.5 MM Tons/Yr

Colombia Chile 1%
2%

Venezuela
12%

Argentina
14%

South America has a 3.8% of world ethylene capacity

Brazil
71%

Source: Intellichem

Petrochemical Net Trade in South America

Year 2005 (Net: Surplus of 466)

Venezuela Peru Colombia Chile Brazil Argentina (2,500) (1,500) (500) 500 (1,775) 723 1,500 2,500 (1,241) (529) 1,359

Methane derivates Account for Surplus:Chile/Venezuela.

1,929

Volume (-000 metric tons)

Sources: GTIS, MDIC, Intellichem

Trade Includes:Olefins&Derivatives/Aromatics&Derivatives /Urea/Methanol and Chlor-Alkali

Petrochemical Net Trade in South America

Year 2011 (Net: Deficit of 7,504)

Venezuela Peru Colombia Chile (1,673) (937) (5,773) (224) (5,000) (3,000) (1,000) 1,000 3,000

Methane derivates Account for Surplus in Venezuela

(976)

2,079

Brazil Argentina

(7,000)

Volume (-000 metric tons)

Sources: GTIS, MDIC, Intellichem

Trade Includes:Olefins&Derivatives/Aromatics&Derivatives /Urea/Methanol and Chlor-Alkali.

Petrochemical Projects in South America 2012-2018

Argentina YPF evaluating expansion of refinery at La Plata. BP and YPF currently evaluating Shale Gas and Shale Oil. Without raw materials there is no expansion in Argentina. Brazil Pre-salt, the major feedstock development in Brazil, will supply natural gas liquids as raw material for additional olefins units. COMPERJ project NOW considering NGLs for new petrochemical site. Petroquimica Suape new 700,000 tons/yr unit of PTA and 450,000 tons/yr PET to start production 2012/2013.

Additional ethanol-based olefins and derivatives expected in 2016 (Dow Mitsui). Styrenics (Styrene Monomer and ABS) expansions and PVC expansions planned.

Petrochemical Projects in South America 2012-2018

Colombia Ecopetrol working on refinery expansions at Cartagena and Barrancabermeja. Additional naphthas could feed crackers and increase petrochemical production in Colombia. Peru Evaluating expansions based on natural gas resources. No completion time. Healthy economy and demand is driving force for local petrochemical production. Venezuela PDVSA evaluating naphtha supply for petrochemicals. Naphtha currently exported will be enough to produce 800,000 tons per year ethylene. New 15,000 ton per year butene-1 unit under construction to come on-stream late 2012. Production capacity for Urea and Ammonia increasing in Moron.

Shale Gas Impact on South America

Shale Gas : South America

Northern and Southern Basins

Source: EIA Report 2011

Shale Gas in South America Compared with US/Europe

Country Argentina Brazil Chile Paraguay Bolivia Uruguay Colombia Venezuela Risked Gas In-Place (TCF) 2,732 906 287 249 192 83 78 42 Technically Recoverable Gas (TCF) 774 226 64 62 48 21 19 11

South America
Regions Canada /Mexico Europe USA

4,569
Risked Gas In-Place (TCF) 3,856 2,587 1,928

1,225
Technically Recoverable Gas (TCF) 1,069 624 482

Source: EIA 2011-2012

U.S LPG - RAW MATERIAL IN SOUTH AMERICA

U.S. MARITIME EXPORTS OF LPG World and South America
2011 2010
2009

Overall LPG exports are now higher than imports. Surplus is exported. Latin America and Europe have been the preferred markets for incremental exports. U.S. exports should displace other suppliers in these regions

2008 2007
2006

2005
2,000 4,000 6,000 8,000 10,000

LPG is expected to be available as feedstock for the global petrochemical industry.

Volume Exported in tons per day

South America
Source: IHS Chemical

World

South America
Shale Gas Projects and Perspectives WORLD GDP)

Argentina, with largest reserves, leading the efforts to develop commercial projects. YPF and BP investing in early exploration. YPF in Argentina has reported some findings in the Vaca Muerta formation of the Neuquen Basin. However, regulatory environment not fully conducive to foreign investment. Brazil, now focused on conventional sources, but is also looking into Shale oil/gas exploration. In Chile, shale gas could help duplicate the energy potential in the next ten years. The biggest challenges are the high capital investment required and the regulatory environment to attract investments.

Conclusions

South America

Key Changes taking place in the Region

Increased Demand in Emerging Markets The Non-conventional is taking the stage. Ethylene from Ethanol, Propylene from Propane Dehydro. Shale Gas is now an attractive source for feedstock in The Americas. RADICAL CHANGE in Feedstock slate for projects: In Brazil: Comperj evaluating ethane/propane, Venezuela: looking at naphthas for olefins expansion. Mergers and Integrations: Brazil and Mxico leading this effort in the Region.

South America

Impact of Non-Conventional Feedstock in the Petrochemical Market

Foreign investments and alliances are forming: In Argentina: YPF and BP announced a JV to develop shale gas formations in Argentina. Methanex, the worlds largest methanol producer, plans to dismantle Chilean plant and ship it to Louisiana. Additional and competitively priced LPG exports from US could increase PGP supply and PP production in the region.

THANK YOU
Joao.parolin@oxiteno.com