Millennium Challenges

1
Millennium Challenges Dr. B. E. Grote October
2001
2
Bleak Global Environment
3
Cyclicality - Investment Margin
Investment Decision Lag
Capital Spend
Index 1990 100
Margin
Selection of major petrochemical companies
4
Context for Reinvestment
Years of Market Growth to fill New Plant
Ethylene Cracker
HDPE
5
Supply Flexibility Compared
Rig Numbers Respond Up Down to Gas Price
but Ethylene Capacity Only Continues to
Increase
USA
USA
Gas Price mm/btu
Rig Numbers
Cracker Margin c/lb
Capacity mmtons
6
Ethylene - Fewer Players
20 companies own 50 of 80 mmte capacity
11 companies own 50 of 108 mmte capacity

Eni
Chevron
Mobil
TFE
Borealis
Amoco
Nova
Pemex
Elf
Chev/Phil
BP
Sabic
Oxy
Quantum
Sinopec
Lyondell
BASF
BP
Phillips
UCC
Equistar
Sabic
Eni
Sinopec
Shell
Nova
Exxon
Exxon/Mobil
Shell
Dow/UCC
Dow
7
HSE Safety in the Workplace
BP Group Safety Performance (As measured by
DAFWCF)
96 97 98 99 00 01ytd BP
Chemicals 0.27 0.23 0.29 0.24 0.21 0.19
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Environment Impact - CO2 Emissions
European Chemical Industry CO2 Creation
Index 1990 100
per unit of energy used
per unit of production
Source CEFIC
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Product Safety Regulatory Impact
Policy defining our processes markets
European Chemicals Policy White Paper Policy
Overview - a single system ensuring safety in
consumption - cost 7bn - implementation by
2010-12 Industry Concern - impact on European
competitiveness Industry Response - dialogue
to design a more effective route to meet
objectives
UK government estimate
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A Holistic Approach
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Continuity and Change
Change
HSE
Few new bulk chemicals
Cycles
Development outside the OECD
Performance Culture
Regulation perception defined markets process
Industry rationalisation renewal
Continuity
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Why Restructuring?
Remunerating capital now requires leveraging .

• Integration feedstocks derivatives
• Scale of operation
• Operational excellence
• Technology control/access
• Market reach
• Financial resources

. and fewer players can differentiate
themselves
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The Way Forward - P3
Performance
Deliver continuous improvement in environmental
performance and...
Perceptions
capture the reputational benefits of that
improvement in order to...
Policy
favourably influence public opinion policy
outcomes
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Summary
The industry must manage the objective world
and the subjective world with equal skill