abdullah al dabibi

SABIC 2005

Vision

To be a leading global manufacturer and marketer of hydrocarbon and metal products.

To provide distinctive high quality industrial products and services to our customers, meeting the expectations of our shareholders through optimum utilization of our available human and natural resources together with the use of state-of-the-art technology - maintaining safe and environmentally sound practices .

Mission

SABIC Today Established in September 1976 to

spearhead Saudi Arabia’s industrialization beyond oil.

One of the top 10 diversified chemical companies in the world.

Produces and markets globally superior quality chemicals, fertilizers, polymers, fibers and metals to more than 100 countries.

A family of 18 world-scale industrial complexes in Saudi Arabia, two complexes in Netherlands and Germany, and interests in offshore industrial ventures.

SABIC Today (Contd.)

International recognition and awards for being amongst the safest in the industrial sectors in which we compete.

Largest industrial R&T complex in the Middle East.

Provides high-level customer services through 12 international affiliates and our European operations.

Shared Services

Petrochemical Coordination

Fertilizers MetalsBasic Chemicals

Inter-mediates

Poly-olefins

PVC & Polyester

Strategic Business Units

Vice Chairman

FinanceControl

R& T HR

Corp. Core

SABIC Organization

Production Growth(Million Metric tons)

6

10

17

28

43

64

0 20 40 60 80

1985

1990

1995

2000

2004

2008

Productivity per Employee (per Metric tons)

1050

1170

1450

1950

2680

0 1000 2000 3000

1985

1990

1995

2000

2004

Sales Volume (Million Metric tons)

5

11

17

21

34

0 10 20 30 40

1985

1990

1995

2000

2004

Sales Revenue(Billion US Dollars)

0.5

4

6

7

18

0 5 10 15 20

1985

1990

1995

2000

2004

Total Assets (Billion US Dollars)

6

9

16

24

33

0 10 20 30 40

1985

1990

1995

2000

2004

Metals

Intermediates

FertilizersPolyolefins

PVC & Polyester

Basic Chemicals

Total Production

12%

8%

18%

44%

2%

16%

The World of SABIC

SABIC 100%SABIC 100%SABIC 100%

SABIC 75%

Pension General Organization 15%

General Organization for Social Insurance 10%

SABIC 100%

SABIC 100%

SABIC 90%

Fobak 10%

SABIC 41%

SAFCO Employees 10%

Private SAFCO and Al-Jubail

Shareholders 49%

SABIC 50%

Al-Jubail Chemical Fertilizer Co. Taiwan

Fertilizer Company 50%

SABIC 57.17%

Private Sector 42.83%

The World of SABIC

SABIC 50%

Exxon Mobil 50%

SABIC 50%

Exxon Mobil 50%

SABIC 70%

Neste Oy-Finland 10%

Ecofuel-Italy 10%

Saudi-European Petrochemical Co.

Arab Petroleum Investment Corporation

APICORP 10%

SABIC 50%

Celanese 25%

Duke Energy 25%

SABIC 50%

SAFCO National Chemical Fertilizer Co. 50%

SABIC 50%

Shell Oil Co 50%

SABIC 70%

National Industrial Gases Co. and Yanbu Industrial Gases 30%

SABIC 50%

Japanese Eastern Petrochemical Company

led by Mitsubishi Corporation 50%

SABIC 50%

Japanese companies led by Mitsubishi Gas Chemical Co. 50%

SABIC 51.7%

15 Saudi Arabian and Regional Arabian

Industrial Fibers Co Private Sector partners 48.3%

Vital statisticsEthylene

Secular growth: ~4%

Global capacity: 250 bn lbs/yr

Average revenues: $55 bn

Average EBITDA: $20 bn

Estimated value: $90 bn

Natural state: Gas

Propylene*

Secular growth: ~5%

Global capacity: 125 bn lbs/yr

Average revenues: $25 bn

Natural state: Gas

* for chemical uses

Collectively 6% of global chemical sales; closer to 15% in terms of major downstream (derivative) product equivalents

Source: Goldman Sachs Research, SRI

1

What does it cost to build plants from scratch?

33 3540

43

5054

0

10

20

30

40

50

60

Eth

ane

Eth

ane/

Pro

pane

Pro

pane

But

ane

Nap

htha

Gas

Oil

Cap

ital

co

st,

c/lb

eth

ylen

e

Costs for greenfield builds:

•Brownfields range from 70%-85% of greenfields•Debottlenecks range from 30%-60% of brownfields

Source: Chemical Data, Goldman Sachs Research

What’s downstream?

Polyethylene55%

PVC15%

Ethylene glycol12%

Alpha olefins6%

Polystyrene5%

VAM3%

Others4%

2001

Polypropylene63%

Acrylonitrile10%

Oxos9%

PO7%

Acrylic acid4%

Other4%

Cumene3%

Ethylene Propylene

The growth disconnect: Polypropylene (PP) is outpacing polyethylene (PE) by about 150 bps

Source: Goldman Sachs Research, CMAI

Where do they show up eventually?

Ethylene

PE: Packaging (shrink wrap, tupperware), fabricated parts (buckets, trash cans, pipes), wire and cable insulation

PVC: Housing & construction (pipes, siding, window profiles, fencing, decking), wire & cable insulation

Glycol: PET resin - packaging (beverage/water bottles); Polyester fiber - apparel, carpets; antifreezeAlpha-olefins: Detergents, consumer products

Polystyrene: Hard goods, packaging, insulation

VAM: Coatings (paints), adhesives

7

Where do they show up eventually?

Propylene

PP: Packaging (cheaper alternative to PET resin, bottle caps), hygiene products (diapers), carpets (cheaper alternative to nylon), fabricated parts

Acrylonitrile: Apparel (acrylic, nylon), autos (nylon, ABS), synthetic rubber, carpeting (nylon)Oxos: Plasticizers (make PVC flexible), coatings

PO: Autos & furniture (polyurethane foams); apparel (spandex), aviation antifreeze (propylene glycol), pharmaceuticals, autos (BDO/PBT)

Acrylic acid: Coatings (paints)

Cumene: Autos, CDs, DVDs, electronic equipment (polycarbonate), construction (phenolic resins)

Ethylene economics: Producing cheap is necessary but not sufficient

0

5

10

15

20

25

30

Eth

yle

ne

pro

du

ctio

n

HD

PE

con

ve

rsio

n

Bag

gin

g/log

isti

cs

Oce

an

fre

igh

t

Inla

nd

fre

igh

t

Tari

ff

De

live

red

Co

st,

c/l

b e

thyle

ne o

r H

DP

EPlant level Add-ons

10.6

8.21.5

3.01.5

1.8 26.6

US naphtha-based HDPE delivered to China*:

Add-ons account for 30% of the costs on averageAssumes ~$20/bbl average price for crude oil

Source: Goldman Sachs Research

9

Ethylene economics: Cheap feedstock and market proximity are the optimal combination

Competitive positioning vis-à-vis the Chinese market:

Note: US (N) = US naphtha-based; US (E): US ethane-based

-25

-20

-15

-10

-5

0

Mid

Ea

st

Ch

ina

Alb

ert

a

Ma

lays

ia

Ta

iwa

n

Sin

ga

po

re

US

(N

)

Ko

rea

US

(E

)

W. E

uro

pe

Jap

an

Dis

ad

van

tag

e to

co

st le

ad

er,

c/lb

Average Current

Middle East (cheap feedstock), China (location) and Alberta (a bit of both) are ahead


Implications: The Middle East and Asia continue to grow preferentially in ethylene

0%

20%

40%

60%

80%

100%

1980 1985 1990 1995 2000 2005E

Glo

bal

cap

acit

y sh

are,

%

US/Canada Europe Asia Mid East/Africa Latin America

Source: Goldman Sachs Research, SRI

Market participants: Who are the majors?Ethylene

bn lbs share Dow 23.6 9% Exxon Mobil 16.8 7% Shell 13.3 6% SABIC 11.8 5% Equistar 11.7 5% BP 8.6 4% Chevron Phillips 7.8 3% Formosa 7.0 3% NOVA 6.6 3% BASF 5.2 2%

Propylene

bn lbs share Exxon Mobil 8.4 6% Shell 7.6 5% Equistar 5.0 3% BP 4.8 3% Dow 4.7 3% Enichem 2.9 2% Chevron Phillips 2.9 2% Formosa 2.7 2% Total Fina 2.3 2% BASF 2.3 2%

Top 10 make up less than 50%; no outsized playerSource: Goldman Sachs Research, SRI

What’s the supply outlook for key products?

0%

2%

4%

6%

8%

10%

'00 '01 '02 '03E '04E '05E

Glo

bal s

uppl

y gr

owth

, % y

oy

Ethylene PE Glycol

0%

2%

4%

6%

8%

10%

12%

'00 '01 '02 '03E '04E '05E

Glo

bal s

uppl

y gr

owth

, % y

oy

PP PO

Ethylene chain: Propylene chain:

2003 and 2004: Relatively quiet years; for ethylene, 2005 too


17

SABIC around the World

SABIC Headquarters

SABIC Research & Technology

Distribution and Storage Facilities

Jubail

Suez Canal

Vadodara

Mumbai

New Delhi

Chnnai

Hong KongSingapore

Jakarta

Shanghai

Taipei

Ulsan

SakurajimaTokyo

Namikata

Lavera

Barcelona

Marseille

Livorno

Rome

Malta

MilanBologna

LondonFelixstowe

Gainsborough

HoustonWilmington

Payne

Los Angeles

AntwerpRotterdam

Essen

Wallhamn

Moscow

Paris

Gebze

Manila

SittardGelsenkirchen

SABIC Manufacturing Sites

SABIC International Subsidiaries & Sales Offices

Mer

New Jersey

Seoul

RiyadhDammam

YanbouBahrain

Dubai, Jabal Ali

Geleen

Dusseldorf

Imam Port

Istanbul

Business Opportunities in Saudi Arabia

• Largest market in the Gulf Cooperation Council states (GCC)

• Some 3,700 factories• 26 industrial cities• Land at reasonable prices• Modern utilities and infrastructure in industrial cities• Royal Commission for Jubail and Yanbu• Saudi Industrial Development Fund (SIDF) and

commercial banks• Between 2.5% to 5.5% SIDF contribution toward

consultancy fees for business case research and assessment

Business Opportunities with SABIC

•SABIC’s supply of value added products stimulated an embryonic growth in the local downstream industry

•1980’s - fewer than a 100 plastic converters• 2002 - over 500, a 437% increase • 1986 - 41kmt of plastics consumed• 2002 – 770kmt , a 1700% increase• Value addition upstream stimulates further value

addition downstream.


150 projects downstream using SABIC products. SABIC is the feedstock supplier and also offers R&T support.

8 examples:• Amino Resins• Linear Alpha Olefins Sulphanates• PolyAlpha Olefin Sulphanates• Safety Chairs for Children• Toluene Disocyanate (TDI)• Alkyd resins• Paraformaldehyde• Polyether Polyols

Business Opportunities with SABICAmino Resins

Applications: Major adhesive for production of plywood, waferboard, tranndboard and particle board

Demand: 30,000 mt/yMarket: Industrialized countries in western

Europe, Japan, U.S.Capacity: 32,000 mt/y combining urea or melamine

with formaldehydeCapital Investment: US $32.5 million Funding: Equity; SIDF loan; Commercial bank loanManpower: 17 workmenReturn on Investment: 11.63%Pay Back: 9 years

Business Opportunities with SABICAmino Resins (cont)

Materials: 23,700 mt/y forlmaldehyde; 21,720 mt/y urea; 2,000

mt/y melamine

Manufacturing: Amino resins are made both by batch

and continuous process, according to process the

planned sales products as special or general purpose

amino resins. Important mole ratio factors are – mole

ratio of reactants; catalyst, pH or reaction mixture,

reaction time and temperature.


Linear Alpha Olefin Sulphanates

Application: Soap additive

Market: Regional and international

Capacity: 20,000 mt

Capital investment: US $14 million

Funding: 75% loan; 25% equity

Manpower: 20 workmen

Return on Investment: 31%

Pay back period: 3 years

Material: C12-C18

Manufacturing process: Sulphanation of LAO

Business Opportunities with SABICPolyAlpha Olefin Sulphanates from Decene-1

Application: Oil base for high performance

Market: Regional and international

Capacity: 15,000 mt/y


Funding: 75% loan; 25% equity


Return on Investment: 34%


Material: Decene-1

Manufacturing process: Linear branching with catalyst

Business Opportunities with SABICSafety Chairs for ChildrenCapacity: 450,000 units/year

Capital investment: US $6.114 million (SR 22.87

million)

Funding: 50% equity; 50% SIDF loan


Raw materials: Polypropylene, High density

Polyethylene

Internal rate of return: 26.5%

Break even point: 26.6%


Annual sales: US $18.85 million (SR 70.5

million)

Manufacturing method: Injection molding, blow molding

International companies producing machinery:

Seokyung Engineering, Seoul,

Korea Permanent ARC Mold,

Taiwan

Business Opportunities with SABICToluene Disocyanate (TDI) (Aromatics Chain)

Products: Flexible foam for furniture, bedding

Applications: Used in the production of polyurethane systems, primarily

flexible foam for furniture, bedding and other

applications

Demand: KSA’s demand is projected to grow around 8% per annum.

Over 75% of the demand is in the main industrialized

regions, some consumption is dispersed throughout

developing countries. Local GCC consumption is around

7,000 tons with good growth prospects.

Market: KSA, GCC, U.S., Japan, Western Europe



Materials: 0.6580 tons Toluene; 0.9500 tins Nitric Acid; 0.11 tons

Hydrogen; 0.96 tons Chlorine; 0.4250 tons carbon monoxide,

catalyst chemicals

Business Opportunities with SABICToluene Diisocyanate (TDI) (Aromatics Chain) Cont

Manufacturing process: Toluene diisocyanate is

currently produced by three unit processes:

nitration of toluene to dinitrotoluene; reduction of

dinitrotoluene to toluene diamine; phosgenation of

toluene diamine to toluene diisocyanate

Recommendation: The following firms have competitive TDI

technology (joint venture basis):

Allied Chemicals Nippon Soda ICI

Bayer Olin

Tolochemie

DuPont Rhone Poulenc

Mitsui Toatsu

Mitsubishi Chemical Union

Carbide


Alkyd Resins (Aromatics Chain)

Products: Paints

Applications: Used in paint production, mainly for exterior quality

products

Demand: GCC 11,000 mt/y and growing

Market: KSA; Kuwait; US; Europe


Capital investment:US $7 million


Materials: 0.1865 tons PAN; 0.1040 tons Glycerine; 0.3145 tons

Linseed oil; 0.1600 tons Xylene; 0.2950 tons white

spirit

Business Opportunities with SABICAlkyd Resins (Aromatics Chain) cont

Manufacturing process: The production of alkyd

resins involves the sterification of polyhydric

alcohol and polybasic acids in the presence of

small quantities of solvent (azeotropic process).

The product is then blended with a solvent to

make the alkyd resin products.

Recommendation: Suppliers of technology include Courtaulds;

Deutsch Texaco; Hoechst; Hygrotherm (UK); ICI

Business Opportunities with SABICParaformaldehyde

Applications: Used in preparing solvent based coatings or for

reconversion to formaldehyde in places when 37%

solutions of formaldehyde are not available.

Demand: 150,000 mt/y held by a limited number of

producers with large formaldehyde interests

Market: 11,000 mt/y

Capacity: US $8.02 million (SR 30 million)

Capital investment: 30% equity; 20% commercial loan; 50% SIDF loan


Materials: Formaldehyde, process chemicals

Business Opportunities with SABICParaformaldehyde (cont)

Manufacturing process: Paraformaldehyde is

made by the vacuum concentration of 37%

aqueous formaldehyde. As concentration

increases polymerisation begins and can be

taken up to 98% when it is a white solid.

Recommendation: From a competitive point of view, formaldehyde

(as the 37% solution in water) will always be

preferred as a raw material as it is cheaper and

usually readily available locally since most

countries, especially those with large

wood/timber industries, produce formaldehyde

based on (imported) methanol.

Business Opportunities with SABICPolyether Polyols

Applications: Used in the production of

polyurethan systems, primarily flexible foam but

with rigid foam and other uses also significant

Demand: World consumption is growing to

over 2.1 million mt/y, local GCC consumption is

23,000 tons and is likely to reach 40,000 tons

Market: GCC, western europe, Japan, U.S.




Materials: 0.0350 tons of Glycerine; 1.01

tons prop Ethylen Oxide

Business Opportunities with SABICPolyether Polyols (cont)

Manufacturing process: Polyether polyols

production consists of four basic process

operations – the polymerization reaction of

propylene oxide initiated with glycerine and

catalyst (KOH pellets); the neutralization of the

catalysts; the treatment of the polyol with

decoloring agents and the filtration step to

remove the other materials used in the

preceding step.

Business Opportunities with SABICPolyether Polyols (cont)

Recommendation: Potential sources of batch polymerization

technology for PO production are ARCO; Chemetics;

Pressindustria. There are two main uses for polyols

in the GCC with the largest being in flexible

polyurethane foam slabstock for the furniture and

bedding industry. The second application is in rigid

polyurethane foams for the building industry.

Foams may be supplied either in a prefabricated

form (SAPTEX) or applied on site by spraying (Al

Babtain)


• Details on these and other projects contact our Riyadh headquarters

• Flexibility in discussing arrangements

• Your business comes first

SABIC and its Suppliers

Supply Management organization (SMO)

• Manages the supplier relationship worldwide• Database of approved suppliers with at least 1,000

active at any one time• Quality control

Join the approved suppliers list by calling SMO in Al-Jubail on the Gulf coast of Saudi Arabia

SABIC Strategy

• Consolidate, restructure and focus on core competencies

• 800,000 mt/y PE plant at PETROKEMYA• 17th affiliate – Jubail United Petrochemical

Company• Two million tons additional capacity by 2002-

2004

SABIC Strategy

•Production target of 48 million mt/y by 2010

•Constantly exploring overseas opportunities for expansion