Shale Gas:

A NEW FEEDSTOCK REALITY

PETER L. CELLA, CEO CHEVRON PHILLIPS CHEMICAL COMPANY LLC DECEMBER 14, 2011

Chevron Phillips Chemical: Our Global Reach

Marketing, Sales & Distribution Offices in 23 Countries 37 Manufacturing Sites

Partnerships in Saudi Arabia and Qatar

Olefin Investments Focused on the Middle East and China Since 2005
Net Capacity Addition 2005-10
16,000 14,000 12,000

KTons/A

10,000 8,000 6,000 4,000 2,000 ----

Middle East

China

Other

Europe

Amercias

Source: CMAI

Where Will the Next Wave of Capacity Be Built?

4

North America Has Extensive Shale Formations Rich In Hydrocarbons

Economic Development of Shale Formations Combines Two Proven Technologies

Hydraulic Fracturing Horizontal Drilling

Source: American Petroleum Institute

More Than 50% of North America Drilling Rigs Use Horizontal Technologies on Shale Plays
2,500

2,000
NA Active Drilling Rig Count

1,500

1,000

500

Directional

Horizontal

Vertical
Source: Baker Hughes
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Shale Drilling Economics Improve with Productivity Gains

Wells per Year per Rig 114%

50 40 30 20 10 0

30 Day Average Initial Production (IP) Rate Mcf/d

3000

138%
2000

X
1st Quarter 2007 2011 YTD

1000 0
1st Quarter 2007 2011 YTD

IP Additions per Rig per Year Mcf/d

120000

410%

100000 80000 60000 40000 20000

1st Quarter 2007

2011 YTD

Source: Southwestern Energy Financials for Fayetteville region 8

Rig Additions Focus on Liquids-Rich Gas and Oil Shale Plays (Active Rig Additions Since May 2009 Lows)

BAKKEN 1 126

3 -5

16 8 DJ- PRB NIOBRARA 30 23 5 80 17 -8 -2 -7 HAYNESVILLE PERMIAN 342 23 -8 18 160 12 26 10

-3

16 10

MARCELLUS

-2 21

ANADARKO 153

1,141

Dry Gas Focused Area

Source: RigData, BENTEK: June 3, 2011

EAGLE FORD

24 9 Liquids-Rich/Oil Focused Areas

Liquids-Rich Formations Enjoy Much Lower Price Needed for Associated Gas to Earn Cost of Capital

Bakken
$0.00 Pinedale $2.52 Piceance San Juan PRB $4.32 Marcellus $2.01 Cana Woodford $5.13 $0.00 $0.00 Granite Wash Barnett Woodford $3.97 $3.79 $0.00 Eagle Ford $0.00 $3.79 Fayetteville $3.25

$0.00

$4.16

Permian

Haynesville

Source: RigData, BENTEK: June 3, 2011

10

United States Ethane Supply Expected to Double by 2016

1,600
1,400 1,200 Mbbl/day 1,000 800 600 400 200 -

Source: Bentek
11

United States Ethane Re-Emerges as a Globally Competitive Cracker Feedstock

1,400 1,200 1,000 800
US Butane

Ethylene Cash Costs By Region

2011 average Sept YTD 2005

SE Asia W. Europe NA Naphtha

NE Asia

$ / Ton

US Propane

600
SE Asia

US Propane W. Europe

US Butane NA Naphtha US Ethane

400 200 0 25,000

Middle East

NE Asia

50,000

75,000

100,000

125,000

150,000

Cumulative Ethylene Capacity, KMT

Source: CMAI

12

North America Midstream and PetroChem Trends

North America midstream companies have announced investments of >$15B to 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 growth impact 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 derivative study

13

Shale Gas is a Global Opportunity

Legend
Assessed basins with resource estimate Assessed basins without resource estimate Countries within scope of report Countries outside scope of report

14

Looking Ahead: Chevron Phillips Chemical Will 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 petrochemical investment

Global Ethylene Demand Mton/yr

250 200 150 100 50 0 2010
Source: CMAI

50-75 Crackers

Competitive Feedstocks Where Built? Growing Demand

2025
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Shukran
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