Gustav & Ike: impact on ethylene & NGL feedstocks October 2008

1. Gustav & Ike:impact on ethylene & NGL feedstocksOctober 2008 knowledge to bridge the gap

2. Hurricane Ike – Wed afternoon Petral Worldwide Inc knowledge to bridge the gap

3. Ike was a BIG storm Petral Worldwide Inc knowledge to bridge the gap

4. Hurricane Ike • Geographically, Ike was a very large storm • hurricane force winds extended 115 miles from the center – primarily east of the center • storm surge extended from Galveston to the Sabine River – more than 100 miles of coastline Petral Worldwide Inc knowledge to bridge the gap

5. Hurricanesfactors that cause damage • wind • hurricanes will always cause power outages • Gustav caused power outages in southeast Louisiana • Ike caused power outages from Houston to Beaumont Port Arthur • storm surge & flooding • Ike’s maximum storm surge was 15 feet at Port Arthur but surge extended from 11 feet at Galveston to the Sabine River • Ike caused flooding in New Orleans days before landfall Petral Worldwide Inc knowledge to bridge the gap

6. How Many Gas Pipelines? • MMS reported damage to 102 platforms due to Ivan in 2004 • MMS reported damage to 70 pipelines due to Katrina and 28 pipelines due to Rita. • To date – MMS reported damage to only 6 pipelines but this number will probably increase during the coming months Petral Worldwide Inc knowledge to bridge the gap

7. Natural Gas Productionimpact of Gustav & Ike source: Minerals Management Service Petral Worldwide Inc knowledge to bridge the gap

8. Natural Gas ProductionGustav & Ike -- cumulative impact source: Minerals Management Service Petral Worldwide Inc knowledge to bridge the gap

9. Impact of Gustav & Ikeweekly natural gas injection rates • After Katrina & Rita, natural gas prices spiked based on the premise that natural gas inventories would fall far short of required volumes for the winter heating season – an incorrect premise • This year, we can expect gas inventory injection rates to be equal or higher than average during Oct and early Nov source: Energy Information Administration Petral Worldwide Inc knowledge to bridge the gap

10. Natural Gas Inventory Peak2000-2008 • Inventories in working storage normally reach the seasonal peak during the first 2 weeks of Nov • After Katrina & Rita, inventories continued to accumulate and reached a peak of 3.3 Tcf • After Gustav & Ike, gas inventories are likely to reach a peak of 3.3-3.4 Tcf -- more than enough for anything but a record cold winter source: Energy Information Administration Petral Worldwide Inc knowledge to bridge the gap

11. Waiver of Liability • Petral Worldwide, Inc. (PWI) is not liable for any use or misuse of the contents of this presentation • PWI provides no express or implied warranty regarding the accuracy of the information contained in this segment of the presentation. • PWI does not advocate trading strategies, feedstock acquisition strategies, or feedstock marketing strategies. Any actions taken by attendees to the PFAA 2008 October luncheon based on this presentation are at your own risk. Petral Worldwide Inc knowledge to bridge the gap

12. ethylene production &feedstock demand All historical olefins production volumes& feedstock demand volumes are based on Petral survey results. All estimates of production losses & curtailments of feedstock demand are Petral estimates. All ethylene production costs are based on Petral estimates. Sources of historical prices for spot ethylene & RGP include Petrochem Wire & direct contact with producers. Petral Worldwide Inc knowledge to bridge the gap

13. Olefins operating rates were 94% for LPG crackers & 85% for multi-feed crackers ethylene production was 4.5-4.6 billion pounds (4% lower than Jul but 2% above 2nd quarter avg.) propylene production was 1 billion lb (12% lower than July but 9% above 2nd quarter average) butadiene production was 260-270 million pounds Feedslates total fresh feed averaged 1.64-1.65 million bpd ethane demand averaged 780-800 mbpd propane demand was 345-355 mbpd demand for heavy feeds was 390-410 mbpd August Baseline Statistics Petral Worldwide Inc knowledge to bridge the gap

14. Petral Worldwide Inc knowledge to bridge the gap

15. ethylene production capacityat risk due to hurricanes • Katrina & Rita disrupted output in SE Louisiana, Lake Charles, Beaumont, Pt Arthur, & Orange – capacity totaled 20 billion lb per year or 33% of total U.S. capacity • Gustav & Ike disrupted output in SE Louisiana, Lake Charles, Beaumont, Pt Arthur, Orange, the Houston Ship Channel & Point Comfort • Capacity at risk in Sep 2008 totaled 54 billion lb or 90% of U.S. capacity Petral Worldwide Inc knowledge to bridge the gap

16. ethylene production lossesdue to Gustav & Ike • Estimated production losses for September were 2.5 billion pounds • Some ethylene producers got plants back on-stream after Gustav just in time to shut down for Ike • Production losses for some plants will extend into October – total losses are likely to reach 3.0 billion pounds Petral Worldwide Inc knowledge to bridge the gap

17. ethane demand curtailmentsdue to Gustav & Ike • Curtailments due to Gustav averaged 220-240 mbpd during the 1st week but losses were less than 10 mbpd by the week of Sep 22 • Curtailments due to Ike before landfall were 175-190 mbpd & jumped to 550-575 mbpd during the week following landfall • Curtailments totaled 12+ million barrels during Sep with 9+ million barrels in plants that received supply from Mont Belvieu Petral Worldwide Inc knowledge to bridge the gap

18. propane demand curtailmentsdue to Gustav & Ike • Curtailments due to Gustav averaged 65-75 mbpd during the 1st week but losses were 10 mbpd or less by the week of Sep 29 • Curtailments due to Ike before landfall were 115-125 mbpd & jumped to 175-200 mbpd during the week following landfall • Curtailments totaled 5+ million barrels during Sep with nearly 4 million barrels in plants that receive supply from Mont Belvieu Petral Worldwide Inc knowledge to bridge the gap

19. heavy feed demand curtailmentsdue to Gustav & Ike • Curtailments due to Gustav averaged 160-180 mbpd during the 1st week but losses were 5 mbpd or less by the week of Sep 22 • Curtailments due to Ike before landfall were 175-190 mbpd & jumped to 300-320 mbpd during the week following landfall • Curtailments remained above 100 mbpd during the week of Sep 29 Petral Worldwide Inc knowledge to bridge the gap

20. ethylene prices & production costspre and post hurricanes • Spot prices fell to 45-47 ¢ per lb in mid-Aug but recovered to 50+ ¢ per lb prior to Gustav • Spot prices were steady after Gustav -- because demand was curtailed as much as supply during the interim between Gustav & Ike • Demand began to recover in Louisiana within 2 weeks but Ike caused major production losses & supply for transfer to Louisiana was very tight during the first 2 weeks after Ike’s landfall • Naphtha feeds were again profitable for the first time in months – ethane remained the low cost feed (large volume feeds only) Petral Worldwide Inc knowledge to bridge the gap

21. RGP prices & production costspre and post hurricanes • From a YTD peak of 76-78 ¢ per lb in early July, spot prices fell steadily through mid-Sep to a low of 53-54 ¢ per lb • Spot prices were below parity versus Gulf Coast ULR for a week or two -- due to the typical post storm rally in ULR prices • In spite of extensive RGP supply losses, spot prices remained steady – propylene demand in derivative plants remained weak • Reportedly, PGP contract prices were settled at 70 ¢ per lb. For Sept – maintaining a very wide premium versus spot prices for RGP Petral Worldwide Inc knowledge to bridge the gap

22. Katrina & Rita and Gustav & Ikedéjà vu with a twist • The 1st storms in 2005 and 2008 both made landfall during Labor Day weekend; the 2nd storms made landfall 3 weeks (Rita) and 2 weeks later (Ike) • Storms in both years caused extensive disruption to oil and gas production and infrastructure in the Gulf of Mexico and widespread electric power outages • Landfall for all storms were in Louisiana or the Upper Texas Coast; storms in both years caused extensive downtime for refineries, ethylene plants, and gas plants • After Katrina we watched the aftermath on TV & helped refugees from New Orleans • After Ike we stood line at FEMA PODS, read by candlelight, bought ice every few days, cooked on our propane grills & made plans to install full house natural gas fired back-up generators -- for the next time Petral Worldwide Inc knowledge to bridge the gap

23. perspectives for the 4th quarter • Natural gas production curtailments in the Gulf of Mexico will extend into November or December. • Gas plant NGL production losses in Louisiana during September were 40-50% and losses of 20-40% are likely for the 4th quarter. • Refinery propane production losses in Louisiana and the Upper Texas Coast were 60-80% in September but will probably be 20-30% in October and are expected to be near normal levels in November/December • Ethylene production losses of 200 million pounds per week will persist through at least mid-October. • Feedstock demand curtailments during the first half of October will probably average 75-100 mbpd for ethane and 30-40 mbpd for propane. Petral Worldwide Inc knowledge to bridge the gap