For 3rd Annual China Methanol ConferenceAugust 2004

9900

0102

0304E

0

2000

4000

6000

8000

10000

12000-000- metric tons

Year

Methanol Demand - Asia'99 - '04E, By Major Consuming Country

Primary Derivative Secondary Derivative Tertiary Derivative Quartenary DerivativeAcetic Acid Vinyl Acetate Polyvinyl Acetate Polyvinyl Alcohol

EVAAcetic Anhydride Cellulose Acetate (filter tow)Terephthalic Acid Polyesters (polyethylene terepthatlate)

Formaldehyde Phenol Formaldehyde ResinsUrea Formaldehyde ResinsMelamine ResinsPolyoxymethylene (POM or Polyacetal)PolyolsButanediol Polyesters (polybutyl terepthalate)MDIIsoprene Rubber (polyisoprene)ParaformaldehydeHexamine

Methyl tert-butyl ether (MTBE)

Methyl Methacrylate Polymethylmethacrylate (PMMA)Methacrylate/Acrylate Co Polymers

Methyl Chloride (Chloromethane) Methylene Chloride (CH2Cl2) Chloroform (CHCl3) Carbon Tetrachloride

MethylaminesMonomethyamineDimethylamineTrimethylamine

OthersDimethyl terephthalate (DMT) Purified Terephthalic Acid (PTA) PolyestersReducing agent Chlorine DioxideMethyl Mercaptan (methanethiol) DL-methionine (amino acid)

Developmental UsesDirect Uses (gasoline blending)Fuel CellsMethanol-to-Olefins

Asia definedfrom China toAustralia toIndiaCompoundedAverage AnnualGrowth (CAGR),99-04E = 7.9% Formaldehyde

= 8.1% Acetic Acid =

15.2%

Japan is onlycountry notexhibitinggrowth in thisperiod

0

2000

4000

6000

8000

10000

12000

14000

1999 2000 2001 2002 2003 2004E

Formaldehyde Acetic Acid Methyl tert-Butyl Ether (MTBE)Methyl Methacrylate Dimethyl terephthalate (DMT) Methanethiol (Methyl Mercaptan)Methylamines Methyl Chloride (Chloromethane) Direct Uses (gasoline blending)

Fuel Cells Methanol-to-Olefins Others

Growth istestament tobreadth of ChinaexpansionCAGR = 11.8% Formaldehyde

= 15.3 Acetic Acid =

12.5%Increased use ofmethanol ingasolineformulationsEstimated thatover 2 millionmetric tons ofdemand will beadded in the 5year period

0

1000

2000

3000

4000

5000

6000

1999 2000 2001 2002 2003 2004E

Formaldehyde Acetic Acid Methyl tert-Butyl Ether (MTBE)Methyl Methacrylate Dimethyl terephthalate (DMT) Methanethiol (Methyl Mercaptan)Methylamines Methyl Chloride (Chloromethane) Direct Uses (gasoline blending)Fuel Cells Methanol-to-Olefins Others

47%

2%9%

9%

5%2%3%3%3%3%

14%

49%

2%12%

8%

4%1%4%

3%3%

2%

12%

Urea Formaldehyde Resins Melamine Formaldehyde Resin

Phenol Formaldehyde Resins POM

Pentaeryithrytol TMP, TME, NPG

1,4 BDO MDI

Paraformaldehyde Hexamine

Others

Like Methanol,Formaldehydederivatives arecomplex and manyAsian demandestimated to be 9.9million tons in 2004Traditional resingrowth anticipatedto continue,followingconstruction trends

Chinaformaldehydedemand 2004E:4.6 million metrictonsPOM, MDI, BDOconsumptionbenefits from theexpansion of theChinese automotiveindustryPF resin useincreases withsophistication ofChina wood panelindustryPCB outsourcingtrend to continue

55%

2%7%

0%7%

1%0%0%4%

4%

20%

51%

1%

13%

4%

4%1%3%

3%

4%

3%

13%

Urea Formaldehyde Resins Melamine Formaldehyde Resin Phenol Formaldehyde Resins

POM Pentaeryithrytol TMP, TME, NPG

1,4 BDO MDI Paraformaldehyde

Hexamine Others

Trend to havingcapacity “bolted on” to downstream facilities to improveefficienciesSmall, silver oxidecatalyzedformaldehydeoperations in Chinawill continue to bepressuredCapacityinformation islimited; someestimates up to 7.5million tons

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%

20%

40%

60%

80%

100%

120%

Total Capacity Production Macro Operating Rate

MethanolCarbonylation tobecome dominantsource of AceticProductionNet trade alsoprovides scope forgrowth in aceticacid and derivativesproductionChina again drivesconsumptiongrowth

Acetic Acid Use in NEABy Derivative

34%

23%

13%

10%

20%

Vinyl Acetate Monomer Terephthalic Acid Acetic Anydride Acetate Esters Others

20033.1+

millionmetrictons

New Projects willgenerateincrementalmethanoldemandChinese MakingStrides inCarbonylationTechnologyImports, localproduction willbe replaced

Development of Methanol/CO Production in AsiaPercent of Nameplate Capacity

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Acetaldehyde Oxidation/Others Methanol Carbonylation

9900

0102

0304E

05E06E

07E08E

09E

0

2000

4000

6000

8000

10000

12000

14000

16000

-000- metric tons

Year

Methanol Demand - Asia'99 - '09E, By Major Consuming Country Total demand

growth over 3.6million tonsCAGR 04E-09E“slows” to 5.3%Near term growthlead by China, laterperiod growth morebroad, includesIndia, SEA

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1999 2000 2001 2002 2003 2004E 2005E 2006E 2007E 2008E 2009E

Formaldehyde Acetic Acid Methyl tert-Butyl Ether (MTBE)Methyl Methacrylate Dimethyl terephthalate (DMT) Methanethiol (Methyl Mercaptan)Methylamines Methyl Chloride (Chloromethane) Direct Uses (gasoline blending)Fuel Cells Methanol-to-Olefins Others

Follows the growth in formaldehyde, acetic acid shown earlierDevelopmental uses not seen to be contributors to growth in this period

Within Asia External to Asia

Country Capacity to Produce Country Capacity to Produce Capacity For Asia(Million metric tons) (Million metric tons) (Million metric Tons)

China 4.70 Saudi Arabia 4.41 2.87Indonesia 0.94 Iran 1.74 1.30Malaysia 0.73 Qatar 0.91 0.55New Zealand 1.24 Bahrain 0.47 0.23India 0.45 Others 2.1 0.45

Total Asia 8.06 Total External 9.63 5.40

Total Available Capacity for Asia:13.46 million metric tons

Demand, Asia, 2004E:12.18 million metric tons

Methanol Production Capacity Serving Asia, 2004E

Red line showsgap in Asiansupply ofmethanol oncumulative basisGreen lineshowscumulativesurplus ofmethanol takingall availablecapacity intoconsiderationImplies thatfuture Chinaprojects forcedto compete withMiddle East,other projects

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

2000 2001 2002 2003 2004E 2005E 2006E 2007E 2008E 2009E

Capacity Additions, Asia Available Capacity Additions Ex Asia

Demand Growth Net - Asia Only

Net - Incl Ex Asia

Almost 2 milliontons of MeOH tobe sourcedoutside of Asianregion in nextfive yearsCapacity tosupply fromOceania notexpected toincrease through2009

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1999 2000 2001 2002 2003 2004E 2005E 2006E 2007E 2008E 2009E

Imports Exports Net

China production economics have set new pricing floor for near term (formerly US position)Producers must ensure they can run for prolonged periods in “badtimes”

Historical Methanol Prices

0

50

100

150

200

250

300

350

400

450

500

Do

llars

Per

To

n

FOB USGC

FOB W. Europe

Spot China, delivered

Gulf War speculation

Slowed US economicactivity and oversupply

Restructuring andMTBE "mania"

Further Industryconsolidation

5.85 Mmtons of newcapacity added (20% of

world demand)

Asian FinancialCrisis

New World Scale FacilityCapacity Impact

Sept 11Attacks

Venezuelan Strikes, NZGas Redetermination

Natural GasCrisis, Strong

China DemandGrowth,Industry

Source: ACN

• Largest proven single line unitsprocess 2500 tpd coal (approx600,000 methanol at 100percent availability) –largerscale envisioned

• “Front end” used in many other processes, including IGCC(combined cycle), Ammoniaproduction (China)

• For methanol, C:H ratio too highand CO2 removal necessary

• Higher Capital Cost

• Higher Fixed O&M costs

• Several Technology Providers

Feed Preparation

Milling. Drying, Pressurizing

and/or Slurrification

Air Separation (O2)

Gasification

Syngas Prep

Cooling

Desulphurization (COS Hydrolysis)

CO2 Removal

Converter/Pressurization

Sulphur Recovery

Water Treatment

To Conventional Methanol Synthesis

Rough Estimate, For Demonstration Only, Requires Further Verification

$100

$120

$140

$160

$180

$200

$220

$240

$15.0 $17.5 $20.0 $22.5 $25.0 $27.5 $30.0 $32.5 $35.0 $37.5 $40.0 $42.5 $45.0 $47.5 $50.0

Coal Cost, $/ton

$100

$120

$140

$160

$180

$200

$220

$240$2.50 $2.75 $3.00 $3.25 $3.50 $3.75 $4.00 $4.25 $4.50 $4.75 $5.00 $5.25 $5.50 $5.75 $6.00

Coal - Modern Coal - Small Scale Natural Gas

Likely China

Likely China

Likely China

Middle East Delivered to China, incl Duty, Typical

Feedstocks are typically “low end” and low cost: Coal, VGO, petroleum coke

High and fluctuating natural gas pricesFor IGCC, enables peak shaving powerFor China –increased self-sufficiency“Cost Maturation” benefitsEnvironmental benefits Lower site emissions –modern processes (with scrubbing capability) In China, syngas is also used to manufacture town gas, eliminating need

for residents to burn coal for home heating, reducing air pollution fromthis source

Also in China, coal slurry can be prepared using wastewater fromexisting processes and remove these discharges into rivers

Capital CostsRisks –technologyUnknowns in O&M fixed costs; can be higher than “advertised” by technology licensorsSponsors typically being “pushed” technology, may require new skills (sulphur, ash disposal, wastewater