ENHANCING IRAN S HYDROCARBON ECONOMY THROUGH ON PURPOSE OLEFINS

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1 Iranian Petrochemical Value Chain Summit Paris, France, April 2018 UOP Limited Nigel Orchard ENHANCING IRAN S HYDROCARBON ECONOMY THROUGH ON PURPOSE OLEFINS

2 UOP Creates Knowledge for the Oil and Gas Industry 1 Refining Petrochemicals Natural Gas Renewables 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 Better Economics Continuous Innovation Reliability Expertise 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 Process Technology Catalysts Adsorbents Equipment Services 2,500 Engineers and scientists 3,000+ Active patents 200 with PhDs 800+ R&D employees 31out of 36 refining technologies in use today were developed by UOP Largest process licensing organization in the world 2016 by UOP Limited. All rights reserved.

3 Global Olefin Markets Grow Strongly 2 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 Source: International Market Consultant Higher propylene growth being met by on purpose technologies

4 Iran's Hydrocarbon Economy 3 Crude Oil ~3.8mbd production 2.6mbd export ~$66Bn Gasoline & Diesel LPG 1.0mbd 0.25mbd, 0.21mbd export ~$2.9Bn Condensate ~0.7mbd production Domestic 1.9mbd Fuel Oil Naphtha 0.32mbd 0.37mbd Natural Gas ~225BCM/Yr Production (~300BCM/Yr capacity) Domestic ~ 210Bn CM/Yr Polyolefins Fertilsers MeOH 3.4M MTA Export ~$4.5Bn Mostly internal use 3.8M MTA Export ~ $1.3Bn 13BCM/Yr export $0.7Bn Max ~80BCM export ~$4.5Bn Relies on pipelines and LNG Source: UOP Ltd analysis/ International Market Consultant Currently available Gas for export is only ~$4.5bn

5 Iran's Hydrocarbon Economy Additional Petrochemicals 4 MTBE, Alkylate Fuels 0.21mbd NGL C4= ~$1100/Te ~$450/Te LPG PDH/ BDH C3= ~$1000/Te Polyolefins, ~$1300/Te Natural Gas ~225BCM/Yr Production (300BCM/Yr capacity) 10BCM/Yr BCM/Yr MeOH ~$350/Te MTO C2=/C3= Export value changes LPG Gas MTBE/Alkylate Potential Delta value $B vs Base Polyolefins Source: UOP Ltd analysis/ International Market Consultant TOTAL Export Power Convert Export LPG and 5% Natural Gas to Olefins ~ $13.3Bn opportunity

6 Why are On-purpose Routes to Olefins Attractive MeOH, Naphtha, C2=, C3= Pricing Propane / C3= Price spreads North East Asia Pricing, $/MT North East Asia Pricing, S/MT 1,600 1, ,400 1,400 1,200 1,200 1, MeOH spread strengthens and more favourable than Naphtha 1, C3/C3= uplift improves with C3= demand increase Methanol, Spot CFR NE Asia US$ per Metric Ton Ethylene, Spot CFR NE Asia US$ per Metric Ton Naphtha, Spot C&F Japan US$ per Metric Ton Propylene (PG), Spot CFR NE Asia US$ per Metric Ton Propylene (PG), Spot CFR NE Asia US$ per Metric Ton Propane, Spot CIF Japan US$ per Metric Ton Source: International Market Consultant Price spreads highly favourable for both MTO and PDH

7 Oleflex Case Study 1M MTA Mixed LPG Feed 6 LPG $450/MT 1000KMTA MeOH $350/MT ~190KMTA C3 UOP Oleflex Process C4 UOP Oleflex + UOP Ethermax Process Propylene $1000/MT ~540KMTA MTBE $750/MT ~ 520KMTA >$400M annual product value uplift

8 MTO/PO Case Study 1.85M MTA MeOH Feed 7 MeOH $350/MT 1850 KMTA UOP Advanced MTO Process Polyolefins production Polyolefins $1300/MT ~750KMTA >$300M annual product value uplift

9 8 Value chain uplifts MTO Route Market Price, $/MT PDH Route Market Price, $/MT $ lift for MTO $ lift for PDH Natural Gas Methanol C2=/C3= PP/ PE EVA, EPDM, PVA, EDC etc Natural Gas Methanol 0 Propane C3= PP EVA, EPDM, PVA, EDC etc Propane C3= PP EVA, EPDM, PVA, EDC etc C2=/C3= PP/ PE EVA, EPDM, PVA, EDC etc 2020 Price Forecast Strongest value addition is in olefin production step

10 Olefin Production Economics Cash Cost of Production Price Forecast netback Iran 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) Naphtha crackers less attractive than alternative technologies

11 C 3 Oleflex Complex By-product H 2 C 2 - Oleflex Process Deethanizer Propylene Propylene Propane Splitter 10 Depropanizer C 3 LPG SHP C 4 + UOP C3 Oleflex Process used for 67% of operating PDH units

12 UOP Leads the Way in Dehydrogenation 11 Award, Design, Construction Commissioned UOP awarded 48 out of 60 dehydro projects globally since Since first commercialized, 7 repeat customers & 7 takeaways from competition 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

13 Pre-Tax ROI $/MT Spread, $/MT C3 Oleflex- Profitable and Resilient to Price Volatility % 1, % High 1, % 40.0% 30.0% 1, Typical Low 1, % % % C3/C3= Spread ($/MT) Source: IHS 0.00 Propane Propylene Price Spread Basis: 600 KMTA Oleflex, Propane priced at 630 $/MT, NE Asia Pricing, 100% equity Oleflex technology delivers high ROI even when prices are low Cost-advantaged propane provides potential for even higher return UOP

14 UOP Advanced MTO Technology 13 Overall Block Flow Diagram CH 3 OH C 2 = Reactor/Regenerator (Rx/Rg) Section Olefin Purification Unit (OPU) H 2 O C 3 = C 4 =+ C 2 = + C 3 = Olefin Cracking Process (OCP) C 4 =+ By-Product 2016 UOP Ltd. A Honeywell Company All rights reserved. All Sections Commercially Proven

15 Carbon Yield % C2= + C3= Carbon Yield % UOP Advanced MTO Yield Performance 14 Technology Comparison Ethylene Propylene Naphtha MTP MTO Advanced MTO 2016 UOP Ltd. A Honeywell Company All rights reserved. UOP Advanced MTO yields = highest added value

16 UOP Advanced MTO vs Alternate MTO Technology 15 Comparison of project financial performance: 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% UOP Advanced MTO technology provides the best project economics 2016 UOP Ltd. A Honeywell Company All rights reserved.

17 UOP Advanced MTO On-Stream Units 16 Jiangsu Sailboat (830KMTA C2= & C3=) Nanjing (300KMTA C2=& C3=) Shandong Yangmei (300KMTA C2=& C3=) Commercially proven technology

18 Commercialization Status # Owner Location Status Chengzhi Yongqing Energy Technology Co. Ltd. (Wison) Jiutai Energy (Zhungeer) Company, Ltd. Shandong Yangmei Hengtong Chemicals Company, Ltd. 4 Jiangsu-Sailboat 5 Shandong Better Energy Nanjing, Jiangsu Ordos, Inner Mongolia Linyi, Shandong Lianyungang, Jiangsu Dongying, Shandong Onstream 2013 SU 2017 Onstream 2015 On Stream Jan 2017 Licensed 17 6 Undisclosed China SU Undisclosed China Licensed 8 LUXI Chemical Group Co. Ltd. Liaocheng, Shandong Design 9 Connell Chemical Industrial Co. Ltd. Jilin City, Jilin SU Chengzhi Yongqing Energy Technology Co. Ltd. Nanjing, Jiangsu Licensed 2016 UOP Ltd. A Honeywell Company All rights reserved. Commercially Proven Technology

19 Summary 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. On Purpose Olefin Technologies offer financeable investment Opportunities in Iran 2016 UOP Ltd. A Honeywell Company All rights reserved.