Olefins/Refining Interface

UBS Warburg Grass Roots Chemical Conference

February 25, 2003

Norm Phillips, Senior Vice PresidentFuels & Raw Materials

2

Safe Harbor Language

Statements in this presentation relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are just predictions or expectations and are subject to risks and uncertainties. Actual results could differ materially, based on factors including but not limited to the cyclical nature of the chemical and refining industries; availability, cost and volatility of raw materials and utilities; governmental regulatory actions and political unrest; global economic conditions; industry production capacity and operating rates; the supply/demand balance for Lyondell's and its joint ventures' products; competitive products and pricing pressures; access to capital markets; and technological developments and other risk factors. For more detailed information about the factors that could cause our actual results to differ materially, please refer to Lyondell Chemical Company’s Annual Report on Form 10-K for the year ended December 31, 2001, Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 and Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2002, which will be filed in March 2003.

3

Company Overview

Lyondell Chemical Company - Intermediate Chemicals and Derivatives (IC&D)

– A leading global producer of PO and derivatives

– Process technology strength Equistar - Petrochemicals and Polymers

– A leading North American producer of ethylene, propylene and polyethylene

– Low cost position based on feedstock flexibility and scale

LCR - Refining

– Unique capability to refine heavy crude oils

– Contractually stable business; strong cash flow generator

($ MM)

Revenues EBITDALyondell

Ownership

IC&D $3,262 $410 100.0%Equistar 5,537 256 70.5LCR 3,392 362 58.75

2002

4

Lyondell Has Built a Balanced Portfolio

Lyondell

IC&D

LCR

Equistar Commodity Leverage

Stability & Growth

Cash Generation

5

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2002 1995 Margins¹ 1988 Margins¹

LCR IC&D Equistar

Significant Cash and Earnings Generation in Up-Cycle

Cycle EBITDA Potential

1 1988/1995 Chem Data/CMAI margins for Ethylene, Polyethylene and Styrene applied to current capacities and ownership Note: Assumes current capital structure; 160MM shares

($MM)

$6.20/share

$1.35/share

6

Our Financial Strategy is Unchanged

Maintain Sufficient Liquidity

Repay Debt

7

The Recent Years Have Been a Period of Optimization

Mid 1990’s

Formation years

LCR Contract and JV

Equistar JV

IC&D Acquisition

1999-2002Position and Optimize

Portfolio Adjustments

Capacity Rationalization

Project Reorientation

Organization Effectiveness– Best practices

– Organization design

8

Optimization of Our Fuel Products and Raw Materials Is A Priority

IC&D

LCR

Equistar

Crude = 268 MB/DNat. Gas = 30 MMSCFD

Butanes = 60 MB/DNat. Gas = 125 MMSCFD

Olefins Feed = 400-450 MB/DNat. Gas = 180 MMSCFD

Purchases Sales

MTBE = 55 MB/D

Blending Comp = 60 MB/DFuel Oils = 10 MB/D

Gasoline = 115 MB/DDiesel = 85 MB/DJet Fuel = 20 MD/D

9

Lyondell’s Fuels and Raw Material Focus Areas

Feedstock Supply

• Exploit olefins feedstock flexibility

MTBE & Fuels Components

• MTBE and alternative Clean Fuels

• Optimize LCR synergies

LCR • Minimize cost of low sulfur gasoline & diesel

• Venezuelan Strike Situation

10

Economic Optimization: Requires Flexibility and Coordination Across the Organization

Optimization

MarketingFeedstock

8 Ethylene

Plants

11

Equistar Capability

NGL

37%

Liquid

63%

N. American Industry

(ex. Equistar)

NGL

78%

Liquid

22%

Optimization Enables Equistar to Maximize Its Feedstock Advantage in a Volatile Market

Source: CMAI and Lyondell.

Ethane - Light Naphtha Cost of Ethylene Spread

0

1

2

3

4

5

6

7

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

¢/lb

eth

yle

ne Average

Liquid Cracking Variable Cost Advantage

Source: ChemData,

12

Regulatory Requirements Will Pressure Gasoline Blending

Low Sulfur

Low Toxicity

Renewable Fuels

Octane

Volume

Vapor Pressure

Requirements Properties Under Pressure

Lyondell Products/Processes Can Help Meet These Requirements

13

600

500

400

300

200

100

MTBE is a Source of Premium Clean Octane to the 19-20 MMB/D Global Gasoline Market

Global Supply/Demand US Market Balance

MB/D

CA

U.S.

Non-U.S.

CARefinery/Olefins

U.S.Dehydro

DehydroNon -US

PO

DEMAND

CAPACITY

DEMAND SUPPLY

Refinery/Olefins

U.S.

Imports

U.S.Dehydro

PO

Source : Dewitt

14

2002 MTBE Legislative Activity

Legislation Could Lead To Any Of Three Options:

• Continue MTBE Production

• Add Iso-octane Flexibility

• Utilize ETBE Capability

Senate Proposal

• Ban MTBE after 4 years

• Ethanol use to 5B gal/yr

• Oxygen requirement eliminated

• ETBE tax equality

House Proposal

• No MTBE ban

• No ethanol mandate

• Oxygen standard intact

15

What are Iso-octane and ETBE ?

Iso-octane

A high octane blending component– 100 octane (definition of octane)

– Present in gasoline today

Why is it attractive to a refiner?– High octane, low volatility, favorable auto emissions

How is it made?– Remove methanol from the current MTBE process

– Add a hydrogenation step

ETBE– MTBE process but renewable ethanol replaces methanol

– High octane, low volatility, much lower water solubility than MTBE

16

Lyondell Products Help Make Clean Gasoline

Octane RVP Toxics VOC NOX

MTBE 109 8 (10.9%) (2.4%) (1.5%)

ETBE 111 4 (7.1%) (6.6%) (1.8%)

Iso-Octane 100 2.5 (3.5%) (2.6%) (2.4%)

Reformulated Gasoline 87 7

Pure ComponentBlending Automobile Emissions

Change in Clean Air Act Pollutants

Calculations based on typical reformulated gasoline in 8 U.S. cities and application of EPA complex model

17

Considerations for Conversion from MTBE

Iso-octane ETBE

Capital $65 - $75 MM minimal

Volume 30% less 15% more

Octane Value 9 points lower 2 points higher

18

Component Premiums Above Gasoline

0

10

20

30

40

50

60

J ul '0

1

Sep '0

1

Nov '0

1

J an '0

2

Mar '

02

May

'02

J ul '0

2

Sep '0

2

Nov '0

2

J an '0

3

Pre

miu

m a

bo

ve

Ga

so

lin

e (

¢/g

al)

MTBE

Alkylate

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Gasoline Sulfur Reduction

• Nationwide regulation requires sulfur reduction to 30ppm

• Low sulfur fuels burn cleaner, extend life of vehicle emission systems

• Direct impact on LCR, secondary impact on Equistar

2004 2005 2006+

Refinery Average NA 30 30

Corporate Pool Avg 120 90 NA

Per-Gallon Cap 300 300 80

Gasoline Sulfur Limits (ppm)

20

A Combination of Approaches will Optimize Our Solution

Methods to Comply 2004 2005 2006+

Sulfur Allotments

Sulfur Credits

Alt. Stream Utilization

Process Reconfiguration

Desulfurization Technology

21

Potential Optimization Opportunities for Low Sulfur Gasoline

Traditional Approach Optimized Solution

Scope of Issue- LCR solution- Equistar Solution

Enterprise Solution

Process solution Treat all streams Optimum stream utilization

Capital Investment New Process Unit Utilize Existing Equipment

High Sulfur Coker Gasoline

Expensive treating Olefins Feedstock

Compliance Timeline Preinvest for 30ppm Utilize Credits

22

LCR Operations During the Venezuelan Strike

Early - Late December

Late December - Mid January

Mid - End January

February To-date

Maintained rates at moderately reduced levels

– Consumed inventory

Reduced rates to approximately 50%

Increased rates to full capacity

Full operating rates

23

Refining Spreads Have Recently IncreasedBy $4-5/Bbl

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

3/2/

1 R

efin

ing

Spr

ead

($/

Bbl

)

WTI Crude Oil Refining Margin

24

Regulatory Requirements Will Pressure Gasoline Blending

Low Sulfur

Low Toxicity

Renewable Fuels

Octane

Volume

Vapor Pressure

Requirements Properties Under Pressure

Lyondell Products/Processes Can Help Meet These Requirements