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The Potential for the Siting of an Ethane Cracker in the State

The Potential for the Siting of an Ethane Cracker in the State. John Houston Senior Vice President, Bayer Corporation. North America – Business Structure. Breakdown of Total Sales by Subgroup 2010. 25 %. 56 %. MaterialScience. HealthCare. EUR 8.2 billion.

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The Potential for the Siting of an Ethane Cracker in the State

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  1. The Potential for the Siting of an Ethane Cracker in the State John HoustonSenior Vice President, Bayer Corporation

  2. North America – Business Structure Breakdown of Total Sales by Subgroup 2010 25 % 56 % MaterialScience HealthCare EUR8.2 billion • Employees in United States: ~15,100 • Employees in West Virginia: ~1,000 • Employees in Pittsburgh: ~2,700 • Pittsburgh/West Virginia = 24.5% of all U.S. Employees 19 % CropScience As of December 31, 2010 Page 2 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  3. bo·nan·za [buh-nan-zuh] –noun 1: rich mass of ore, as found in mining. 2: a source of great and sudden wealth or luck; a spectacular windfall –noun 1: an exceptionally large and rich mineral deposit (as of an ore, precious metal, or petroleum) 2: a something that is very valuable, profitable, or rewarding : a very large amount : extravaganza

  4. Ethylene Demand Driven By What We Consume Polystyrene/ ABS PET/Ethylene Glycol PVC Ethylene LDPE Polyethylene LLDPE HDPE Source: Chemical Market Associates, Inc. Page 4 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  5. U.S. Ethane Supply/Cracker Capacity Source: Bentek Page 5 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  6. U.S. PE Converters 2010 71 to 105 companies 41 to 70 companies 21 to 40 companies 11 to 20 companies 6 to 10 companies 1 to 5 companies Source: CMAI Page 6 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  7. Statistics • According to the WVONGA-commissioned study by WVU, Marcellus shale development by 2015 could mean • 6,600 and 19,600 additional jobs for the Mountain State • $890 million in employee payrolls (in 2015) • 20% growth rate each year • According to the American Chemistry Council, a 25% increase in ethane supply could mean • 17,000 new knowledge intensive, high paying chemical industry jobs • 395,000 jobs outside the chemical industry • More than $4 billion in federal, state and local tax revenue annually over 10 years • Nearly $33 billion increase in American chemical production • About $16 billion in chemical industry capital investment to build new capacity • More than $132 billion in U.S. economic output Page 7 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  8. Bayer’s Potential Scenario Photo: Ras Laffan Olefin Cracker in Qatar Page 8 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  9. Why West Virginia? Why Bayer? • Well positioned for both feedstocks and consumers • Direct access to major highways, waterways, railroads, pipeline • Available Land • Ethylene producers likely to build where they have an anchor • Long term security of feedstock supply is a key • Project needs a champion Page 9 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  10. Liquids from Wet Shale Gas Seeking a Home Steam Crackers Source: EIA Page 10 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  11. Tug of War Page 11 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  12. Questions

  13. Ethylene – The Ethane / Ethylene Family Tree Ethane (C2H6) Ethylene (C2H4) World’s Highest Vol. Organic Compound Annual Global Production: 113M tons Acetic Acid (CH3COOH) Annual Global Production: 6.5M tons Unsaturated Hydrocarbon Polyethylene ~50% of Global Ethylene World’s most widely used plastic Vinyl Chloride (CH2=CHCl) 31.1M Tons in 2000 Polymerization Vinyl Acetate Monomer (VAM) 40-45% of Global Acetic Acid Acetic Anhydride 25-30% of Global Acetic Acid Halogenation & Polymerization Polymerization OR Polyvinyl Acetate Wood glue, Paints, Adhesives Synthetic fibers & fabrics Cellulose Acetate Synthetic textile, photographic film Alkyl Alkanolamines Absorbents, Coatings, Detergents Flocculants, Metalworking, Textiles Polyvinyl Chloride (PVC) Annual Global Production: 30+M tons Clothing, upholstery, hoses, tubing, flooring Ester of Acetic Acid Inks, paints, coatings Ethanolamines Adhesives, Agro, Cleaners, Pharma, Printing, Surfactants Food Additive (E260) Acidity regulator, condiment (vinegar) Ethylene Oxide (C2H4O) Annual Global Production: 20M tons Ethyleneamines Corrosion Inhibitors, Coatings, Detergents Fungicides, Lubes, Surfactants Polyethylene terephthalate Soft drink bottles Polar Protic Solvent Glycol Ethers Brake Fluids, Detergents, Paints/Inks, Pharma, Plasticizers, Solvents Acetaldehyde (CH3CHO) Annual Global Production: 1M tons Glycol Ester Acetates Adhesives, Coatings, Heat Transfer, Inks, Paints, Polyester, HI&I Ethylene Glycol Antifreeze/Deicing, Dye/printing, Hydraulics, Latex, PET Alpha Olefins Precursors, Detergents, Plasticizers, Lubricants, Additives Oligomerization Polyurethanes Rigid & Flexible Polyols, Coatings, Adhesives, Sealants, Elastomers Ethylbenzene Precursor to styrene (packaging and rubber) Solvents Adhesives, Agro, Dry Cleaning, HI&I, Inks Paints, Coatings, Rubber & Polymer Mfg. Alkylation Page 13 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  14. Demand 2010 Ethylene Ethylene Oxide/Glycol EDC/VCM/PVC 13% 11% Other Styrene 8% 7% Polyethylene 61% Heavy Feeds & Polyethylene Dominate Global Ethylene Market Supply 120 Million Tons Ethylene 2010 Ethylene Ethane Other 33% 2% Propane & Butane 12% Naphtha/Gas Oil 53% Page 14 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  15. An Ethane Primer • Only two uses for ethane • Keep it in the NG stream or separate it out for chemicals production • Natural gas price sets the floor value • Yields only ethylene, hydrogen, and fuel gas when cracked • Ethane cracker capital costs are low • Every 10 cent move in ethane price changes cash costs by 4 cents • A cracker consumes roughly 1.29MT of ethane for 1MT of ethylene • A 1 MM MT/year cracker consumes ~ 63K BPD Page 15 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  16. Refinery Naphtha Gas Oil Ethylene Unit Gas Separation Unit Olefins Flow Diagram Energy Feedstocks Petrochemicals Crude Oil Ethylene Propylene Methane/Hydrogen Crude C4 Butadiene Mixed Butylenes Propane Ethane Butanes Pygas Benzene Toluene/Xylene Heavy Aromatics C5/C6 Non Aromatics Field Condensates Fuel Oil Natural Gas Page 16 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

  17. U.S. Ethylene Expansion “Talk” In The Press ~ 4.0 Million Tons By 2017 * Dow and ChevronPhillips capacity additions shown are CMAI estimates ** 1 MM metric tons Braskem/Idesa JV in Mexico expected to start-up in 2015/16 Page 17 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011

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