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Shale Gas:A NEW FEEDSTOCK REALITY
PETER L. CELLA, CEO
CHEVRON PHILLIPS CHEMICAL COMPANY LLC
DECEMBER 14, 2011
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Chevron Phillips Chemical: Our Global Reach
Marketing, Sales &Distribution Offices in23 Countries
37 ManufacturingSites
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Partnerships in Saudi Arabia and Qatar
3
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Olefin Investments Focused on the Middle Eastand China Since 2005
Source: CMAI
Where Will the Next Wave of Capacity Be Built?
Net Capacity Addition 2005-10
4
----
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Middle East China Other Europe Amercias
KTons/A
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North America Has Extensive ShaleFormations Rich In Hydrocarbons
5
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Economic Development of Shale FormationsCombines Two Proven Technologies
Source: American Petroleum Institute
HydraulicFracturing
HorizontalDrilling
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More Than 50% of North America Drilling RigsUse Horizontal Technologies on Shale Plays
0
500
1,000
1,500
2,000
2,500
Directional Horizontal Vertical
Source: Baker Hughes
7
NAActiveDrillingRigCount
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Shale Drilling Economics Improve withProductivity Gains
010
20
30
40
50
1st Quarter2007
2011 YTD
Wells per Year perRig
0
1000
2000
3000
1st Quarter 2007 2011 YTD
30 Day Average InitialProduction (IP) Rate
Mcf/d
138%
0
20000
40000
60000
80000
100000
120000
1st Quarter 2007 2011 YTD
IP Additions per Rig perYear Mcf/d
410%
X
=
114%
Source: SouthwesternEnergy Financials forFayetteville region 8
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-3
-8
80
17
3
1
-2
21
16
16
-5
126
1030
5
8
342
23
153-7
-2
-8
24
1218
10
160
23 26
Dry Gas Focused Area
Liquids-Rich/OilFocused Areas
1,141
Source: RigData,BENTEK: June 3, 2011
MARCELLUS
BAKKEN
PERMIAN
EAGLE FORD
ANADARKO
HAYNESVILLE
DJ- PRB NIOBRARA
Rig Additions Focus on Liquids-Rich Gas and OilShale Plays (Active Rig Additions Since May 2009 Lows)
9
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$0.00
Liquids-Rich Formations Enjoy Much Lower PriceNeeded for Associated Gas to Earn Cost of Capital
Source: RigData,BENTEK: June 3, 2011
Barnett
PRB
Piceance
San Juan
$4.32
$3.79
$2.01
$5.13
Haynesville$3.79
Pinedale$2.52
Marcellus
Eagle Ford $0.00
FayettevilleGranite Wash
Woodford
$4.16$3.97
Cana Woodford
$0.00
Bakken
$0.00
Permian
$3.25
$0.00
$0.00
10
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United States Ethane Supply Expectedto Double by 2016
-
200
400
600
800
1,000
1,200
1,4001,600
Mbbl/day
Source: Bentek
11
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United States Ethane Re-Emerges as aGlobally Competitive Cracker Feedstock
12
0
200
400
600
800
1,000
1,200
1,400
- 25,000 50,000 75,000 100,000 125,000 150,000
$/Ton
Cumulative Ethylene Capacity, KMT
Ethylene Cash Costs By Region
2011 average Sept YTD
2005
Source: CMAI
Middle East
USPropane
US Butane
W. Europe
NA Naphtha
SE Asia NE Asia
USEthane
USPropane
US Butane
W. EuropeSE Asia
NE Asia
NA Naphtha
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North America Midstream and PetroChem Trends
North America midstream companies have announced investments of >$15Bto build pipelines and fractionation capacity
Pipeline capacity increasing by a factor of 3
Fractionation capacity increasing by a factor of 2
American Chemistry Council economic analysis of ethane supply growthimpact on United States
$132B in economic output
$4.4B in tax revenue
17,000 new chemical industry jobs
395,000 new jobs outside chemical industry
Chevron Phillips Chemical announced a world scale cracker and derivativestudy
13
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Shale Gas is a Global Opportunity
14
Legend
Assessed basins with resource estimateAssessed basins without resource estimateCountries within scope of reportCountries outside scope of report
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Looking Ahead: Chevron Phillips ChemicalWill Be There
Ethylene demand growth is forecast to require 50-75 world-scale crackers by 2025 The Middle East and China will continue to see development
Development of global shale resources will also drive new petrochemicalinvestment
0
50
100
150
200
250
2010 2025
Global Ethylene Demand
Mton/yr50-75
Crackers
WhereBuilt?
GrowingDemand
CompetitiveFeedstocks
15Source: CMAI
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ShukranTHANK YOU