Investment Opportunities in the Petrochemical Sector in Qatar

1. Investment Opportunities in the Petrochemical Sector in Qatar By: Hamad Rashid Al Mohannadi Vice Chairman of QAPCO Board of Directors & General Manager of QAPCO Qatar Economic Forum 17-18 April 2006

2. Presentation Outline • The Global Petrochemical Evolution • Global Ethylene and Polyethylene supply demand • Global Polyethylene evolution and per capita consumption • Regional petrochemical equivalent trade • The Middle East Petrochemical Scenario • Regional Ethylene cost curve • Factors for Middle East Cost Advantage • Qatar’s Petrochemical Sector • Background and introduction • Qatar’s hydrocarbon resources strategy • Advantages of investing in Qatar • Qatar’s economic evolution • Evolution of Qatar’s petrochemical industry • Conclusion

3. Petrochemical Evolutionthe global Scenario

4. Global Ethylene Capacity Growth Millions of tons - World 160 145 140 120 120 100 80 80 60 40 20 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source : CMAI

5. Million Tons 7.0 Annual change in demand 6.0 5.0 4.0 3.0 2.0 1.0 0.0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 World Regional Ethylene Capacity Additions North America Middle East Total Asia West Europe Others Annual Demand Increase Source : CMAI

6. Polyethylene Evolution In ‘000 ton/ Year 8 to 9% 7 to 8% 2 to 3% Source : CMAI

8. China Ethylene Net Equivalent Trade Thousand Tons 2000 0 -2000 -4000 -6000 -8000 -10000 -12000 Net Imports -14000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Ethylene Vinyls Styrene Polyethylene Glycol Others Source : CMAI

9. Thousand Tons 500 Net Exports 0 -500 -1000 -1500 -2000 Net Imports -2500 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Ethylene Vinyls Styrene Polyethylene Glycol Others Indian Subcontinent Ethylene Net Equivalent Trade Source : CMAI

10. Thousand Tons 16000 Net Exports 14000 12000 10000 8000 6000 4000 2000 0 Net Imports -2000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Ethylene Vinyls Styrene Polyethylene Glycol Others Middle East Ethylene Net Equivalent Trade Source : CMAI

11. Middle East:The World’s Future Petrochemicals Production Hub

12. Global Ethylene Cost Curve Positions of Key Regions versus Asia Northeast Asia (308) North America (294) Southeast Asia (266) West Europe (301) World (274) Middle East (132) World Ethylene Cost Curve (Dollars per Ton) 600 Brent Crude = $25/bbl US Nat. Gas = $3.30/MMBtu 500 400 300 200 100 0 0 20 40 60 80 100 120 140 Cumulative Capacity (Million Tons) Source : CMAI

13. Returns for new Middle East investments in the polyolefins chain are substantially higher than in Europe Integrated chain returns for cracker plus LLDPE plant * ROCE, percent Middle East, ethane 1100 kt cracker 300 kt LLDPE Factors of Middle East cost advantage: • Cheap gas • Lower capital cost for ethane crackers • Scale benefits NW Europe, naphtha 700 kt cracker 300 kt LLDPE * Brownfield site; ethylene transferred at cash cost Source: Chem Systems, McKinsey analysis

14. QATAR Taking off to become a global leader in petrochemicals

15. BACKGROUND Qatar was the first country in the Middle East to establish a Petrochemical Plant (QAPCO) in 1974. Diversification of the economy started with Phase one of North Field gas project starting in 1987. North Field is the world’s largest natural gas resource with reserves estimated over 25 trillion cubic meters.

16. INTRODUCTION • Based on these gas reserves, major fertilizer and petrochemical complexes have been built and more are being created; • World scale size plants for Ethylene, Polyethylene and other petrochemical products are being built; • “Qatar will be the GTL capital of the world” and the largest supplier of LNG by the end of this decade.

17. Qatar's Hydrocarbon Resources’ Vision & Strategy • To Utilize available large natural gas reserves • To establish World Scale projects with sizable Investments • To Develop new downstream value added industry • To capitalize on Qatar's world scale experience in producing and marketing derivatives

18. Qatar :A Petrochemical Investment Haven • The Low Cost of Feed Gas Stock • Low cost Utilities and Gas • Well Developed Infrastructure and Support • Fiscal Incentives, Exemptions • Government Support Through Policies and Legislation • Political and Social Stability • Geographic Advantageous Positioning in targeting Asian, African and European Markets

19. Qatar is in the process of transforming into a leading regional economy through a prudent investment strategy in four key sectors Over $120 Billion to be invested in Qatar over the next few years Oil, Gas, Utilities & Hydrocarbons Industrial/ Commercial/ Transportation Infrastructure Tourism, Sports & Recreational Facilities Education, Health & Training Facilities

20. Over $15 Billion to be invested in Qatar’s petrochemical sector by 2012 Development of Human Resources Increasing need of supply chain partners & logistics providers to transport increasing volume of petrochemicals globally Strong commitment to build Small to Medium Enterprises (SMEs) to diversify our manufacturing industry Increasing need to build next generation services to serve the core petrochemical sectors (e.g. Outsourcing, Information Technology) Due to the tremendous investments and growth opportunities in the petrochemical sector, Qatar needs to have several next generation services

21. Source : Contax

22. POLYETHYLENE - PRODUCTION Qatar

23. ETHYLENE - PRODUCTION Qatar

24. CAPACITY - QATAR

25. CAPACITY FOR MAIN PETROCHEMICALS IN QATAR

26. Conclusion Qatar’s Petrochemical industry is poised to leverage its abundant gas reserves and is positioned to rapid expansion: establishing itself as one of the world leaders in the Petrochemical production, where Qatar’s petrochemical production capacity in 2012 will reach over 27 million MT per year with diversified product portfolio of covering 16 different products. Such giant petrochemical development plans, will necessitate the creation and development of associated and supporting services and industries required to serve these projects, hence establishing additional tremendous horizon of small and medium size investment opportunities for years to come.

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