ENHANCING IRAN’S HYDROCARBON ECONOMY

THROUGH ON PURPOSE OLEFINS

Iranian Petrochemical Value Chain

Summit

Paris, France, 26-27 April 2018

UOP Limited – Nigel Orchard

UOP Creates Knowledge for the Oil and Gas Industry

1

Better Economics Continuous Innovation Reliability Expertise

2,500

200 with PhDs

Engineers and scientists

• Process Technology

• Catalysts

• Adsorbents

• Equipment

• Services

UOP technology makes more than 60% of the world’s gasoline, 70% of its polyester and 90% of

biodegradable detergents, and processes more than 40% of its LNG

Petrochemicals Natural GasRefining Renewables

UOP technologies offer a

high return on investment

Continuous technology

improvement allows customer

operations to remain cutting edge

UOP technologies are among the

most widely proven in the world

UOP has a century-long record

leading technology development

for the oil and gas industry

Largestprocess licensing

organization

in the

world

31out of 36refining technologies

in use today were developed by

UOP

800+R&D employees

3,000+ Active patents

© 2016 by UOP Limited. All rights reserved.

Global Olefin Markets Grow Strongly

• Ethylene annual demand growth, 3.4%

• Ethylene demand and production aligned

over period with gradual cracker projects

and:

• NGL (shale) cracker feedstock usage to

continue

• ethylene-to-propylene ratio suppresses

propylene supply from conventional cracking

• Propylene annual demand growth, 3.9% -

More applications than ethylene eg:

- Polypropylene, Acrylonitrile, Acrylic Acid,

Propylene Oxide, Propylene Glycol

• On-purpose technology growing at 9.4%

(avg) to reach ~30% of supply by 2026

Higher propylene growth being met by on purpose technologies

2

Source: International Market Consultant

Iran's Hydrocarbon Economy

Currently available Gas for export is only ~$4.5bn

3

Crude Oil

~3.8mbd production

Natural Gas

~225BCM/Yr

Production

(~300BCM/Yr

capacity)

Condensate

~0.7mbd production

Domestic ~ 210Bn CM/Yr

Gasoline &

Diesel

LPG

Fuel Oil

1.0mbd

0.25mbd, 0.21mbd export ~$2.9Bn

0.32mbd

Naphtha0.37mbd

13BCM/Yr export $0.7Bn

2.6mbd export ~$66Bn

Domestic 1.9mbd

Fertilsers

MeOH

Mostly internal use

3.8M MTA Export ~ $1.3Bn

Max ~80BCM export ~$4.5Bn

Relies on pipelines and LNG

Polyolefins3.4M MTA Export ~$4.5Bn

Source: UOP Ltd analysis/ International Market Consultant

Natural Gas

~225BCM/Yr

Production

(300BCM/Yr

capacity)

Iran's Hydrocarbon Economy – Additional Petrochemicals

Convert Export LPG and 5% Natural Gas to Olefins ~ $13.3Bn opportunity

4

MeOH

LPG

PDH/ BDH

MTO

Polyolefins,

~$1300/Te

~$350/Te

C3= ~$1000/Te

~$450/Te

NGL

Export Power

C4=

MTBE,

AlkylateFuels

~$1100/Te0.21mbd

10BCM/Yr

Source: UOP Ltd analysis/ International Market Consultant

215-290

BCM/Yr

C2=/C3=

Export value

changes

Potential Delta

value $B vs Base

LPG - 2.9

Gas - 0.4

MTBE/Alkylate + 2.4

Polyolefins + 14.2

TOTAL + 13.3

Why are On-purpose Routes to Olefins Attractive

Price spreads highly favourable for both MTO and PDH

5

MeOH, Naphtha, C2=, C3= Pricing Propane / C3= Price spreads

Source: International Market Consultant

0

200

400

600

800

1,000

1,200

1,400

1,600

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

North East Asia Pricing, $/MT

Methanol, Spot CFR NE Asia US$ per Metric Ton Naphtha, Spot C&F Japan US$ per Metric Ton

Ethylene, Spot CFR NE Asia US$ per Metric Ton Propylene (PG), Spot CFR NE Asia US$ per Metric Ton

0

200

400

600

800

1,000

1,200

1,400

1,600

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

North East Asia Pricing, S/MT

Propylene (PG), Spot CFR NE Asia US$ per Metric Ton

Propane, Spot CIF Japan US$ per Metric Ton

C3/C3= uplift

improves with

C3= demand

increase

MeOH spread

strengthens and

more favourable

than Naphtha

Oleflex Case Study – 1M MTA Mixed LPG Feed

>$400M annual product value uplift

6

C3 UOP Oleflex Process

C4 UOP Oleflex +UOP Ethermax Process

LPG

$450/MT

1000KMTA

MeOH

$350/MT

~190KMTA

Propylene

$1000/MT

~540KMTA

MTBE

$750/MT

~ 520KMTA

MTO/PO Case Study – 1.85M MTA MeOH Feed

>$300M annual product value uplift

7

UOP Advanced MTO Process

Polyolefins production

MeOH

$350/MT

1850 KMTA

Polyolefins

$1300/MT

~750KMTA

Value chain uplifts

Strongest value addition is in olefin production step

8

0

200

400

600

800

1000

1200

1400

1600

Natural Gas Methanol C2=/C3= PP/ PE EVA, EPDM,PVA, EDC

etc

Market Price, $/MT

Natural Gas Methanol

C2=/C3= PP/ PE

EVA, EPDM, PVA, EDC etc

0

200

400

600

800

1000

1200

1400

1600

Propane C3= PP EVA, EPDM,PVA, EDC etc

Market Price, $/MT

Propane C3= PP EVA, EPDM, PVA, EDC etc

MTO Route PDH Route

2020 Price Forecast

$ “lift”

for

MTO

$ “lift”

for

PDH

Naphtha crackers less attractive than alternative technologies

9

Olefin Production Economics – Cash Cost of Production

• Naphtha cracking is least attractive route

• High naphtha pricing – linked to crude

• A discount on naphtha of ~30% is needed

to achieve MTO CCOP

• MTO CCOP is based on stand-alone MTO

• In reality a new complex from Gas to

Olefins (Olefin Derivatives) will leverage

the cost position of Iranian Natural Gas

across the whole production chain

• Ethane, propane and gas based technologies

are more attractive

• Feed prices no longer linked to crude

prices

• Ratio on $/energy content has varied

between 3x and 8x in last 7 years despite

low crude prices (less volatility on olefins)2021 Price Forecast – netback Iran

C3 Oleflex Complex

C3 Oleflex Process used for 67% of operating PDH units

10

OleflexProcess

C3 LPG

C4+

By-product H2

C2-

Propylene

SHP

Propylene –

Propane

Splitter

Deethanizer

Depropanizer

UOP 7267-10

UOP Leads the Way in Dehydrogenation

8 repeat customers with two or more units

3 customers who already have a competitor iC4 unit selected UOP for their PDH project

2 Oleflex units announced in Europe in 2016

Oleflex Process is a proven investment and UOP is the market leader

11

Award, Design, Construction

Commissioned

UOP awarded 48 out of 60 dehydro

projects globally since 2011.

Since first commercialized,

7 repeat customers &

7 takeaways from competition

C3 Oleflex- Profitable and Resilient to Price Volatility

12

UOP 7267-12

Basis: 600 KMTA Oleflex, Propane priced at 630 $/MT, NE Asia Pricing, 100% equity

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

350 475 600

Pre

-Tax

RO

I

C3/C3= Spread ($/MT)

Oleflex technology delivers high ROI even when prices are low

Cost-advantaged propane provides potential for even higher

return

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Spre

ad, $

/MT

$/M

T

Source: IHS

Propane Propylene Price Spread

High

Typical

Low

UOP Advanced MTO Technology

13

All Sections Commercially Proven

Reactor/Regenerator

(Rx/Rg) Section

Olefin Cracking

Process (OCP)

Olefin Purification

Unit (OPU)

CH3OH

H2O C3=

C2=

© 2016 UOP Ltd. A Honeywell Company All rights reserved.

Overall Block Flow Diagram

C4=+ C2= + C3=

C4=+ By-Product

0

10

20

30

40

50

60

70

80

90

100

Naphtha MTP MTO AdvancedMTO

Carb

on

Yie

ld %

Ethylene Propylene

UOP Advanced MTO Yield Performance

UOP Advanced MTO yields = highest added value

14

© 2016 UOP Ltd. A Honeywell Company All rights reserved.

Technology Comparison

C2=

+ C

3=

Carb

on

Yie

ld %

UOP Advanced MTO vs Alternate MTO Technology

UOP Advanced MTO technology provides the best project economics

15

© 2016 UOP Ltd. A Honeywell Company All rights reserved.

Project IRR

(100% Equity)

UOP Advanced MTO Alternate MTO

2020 Intl. Expected 30% 21%

2020 Iranian Netback 39% 30%

2017 Iranian Netback 35% 29%

Project IRR

(70/30 Debt/Equity)

UOP Advanced MTO Alternate MTO

2020 Intl. Expected 24% 16%

2020 Iranian Netback 34% 25%

2017 Iranian Netback 30% 24%

• Comparison of project financial performance:

UOP Advanced MTO On-Stream Units

Commercially proven technology

16

Nanjing

(300KMTA C2=& C3=)

Jiangsu Sailboat

(830KMTA C2= & C3=)

Shandong Yangmei

(300KMTA C2=& C3=)

Commercialization Status17

# Owner Location Status

1Chengzhi Yongqing Energy Technology Co.

Ltd. (Wison)

Nanjing, Jiangsu

Onstream

2013

2Jiutai Energy (Zhungeer)

Company, Ltd.

Ordos, Inner Mongolia

SU 2017

3Shandong Yangmei Hengtong Chemicals

Company, Ltd.

Linyi, Shandong

Onstream2015

4 Jiangsu-SailboatLianyungang,

JiangsuOn Stream Jan 2017

5 Shandong Better Energy Dongying, Shandong

Licensed

6 Undisclosed China SU 2018

7 Undisclosed China Licensed

8 LUXI Chemical Group Co. Ltd.Liaocheng, Shandong

Design

9 Connell Chemical Industrial Co. Ltd. Jilin City, Jilin SU 2017

10Chengzhi Yongqing Energy Technology Co.

Ltd.

Nanjing, Jiangsu

Licensed

© 2016 UOP Ltd. A Honeywell Company All rights reserved. Commercially Proven Technology

© 2016 UOP Ltd. A Honeywell Company All rights reserved.

Summary

On Purpose Olefin Technologies offer financeable investment Opportunities in Iran

18

ON PURPOSE OLEFINS PRODUCTION ARE VITAL TO IRAN’S EXPORT EARNINGS

- Market fundamentals support on-purpose olefin projects to upgrade gas value

- Propylene-Propane spread forecast to remain strong

- Natural gas and LPG prices advantaged versus naphtha

- Margins for MeOH as a final product are unlikely to be sustained

• Oleflex process offers the optimum route from C3 to C3=

- Lowest overall cost of production & capital cost

- High on-stream availability and proven technology: 29 operating units

- Selected for 80% of dehydrogenation units competitively bid since 2011

• UOP Advanced MTO produces highest total ethylene and propylene yield at the lowest cost.

- Commercially proven technology: 10 units licensed

- 3 operating units demonstrate stable operation & exceed guaranteed performance

- Provides the best project economics.