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Successful Growth in a Mature Market


                  Bob Muir
Vice President – New Business Development
           Infineum International


 Reproduction of any material whether by photocopying or storing in any medium by electronic means
      or otherwise is prohibited without prior written consent of Infineum International Limited.
                      © Copyright INFINEUM INTERNATIONAL LIMITED 2004.
                                          All rights reserved
Who we are

? A leading developer of lubricant and fuel additive
  technologies

? Circa $1.5 billion global enterprise

? 50/50 joint venture between Shell and ExxonMobil

? 70 years history




                                         © Copyright INFINEUM INTERNATIONAL LIMITED 2004
Changing                                  Slow demand growth                                         Increasingly tough
  Industry                      Global annual lube growth 0.5 % yr                                 emissions legislation drives
                                                                                                     specifications & costs
   Short product life cycles persist                                                               1989 - Fuel volatility limits set
   as engine test costs continue rising.                                                           1990 - EPA sets S limits in Diesel
   development cost vs payback                                                                     1992 - Euro I emissions introduced
   time becomes unsustainable                                                                      1996 - Leaded gasoline removed in US
   forcing closer industry alliances                                                               1996 - Euro II emissions introduced
                                                                                                   2000 - Fuel volatility limits set
     Life Cycle                                                                                    2005 - 30-50% reductions vs 2000 in HDD
     of Formulations
     (Years)                            3000


     10 years                             Development
                                        1000 Costs                                                                    Difficult trading conditions
                                            (kUS$)


     Year
            1930       1960   1990   2010               The Lubricant & Fuel
                                                         Additives Industry
                                                                                                                 Customers under pressure
    Increased industry
                                                                                                                  forcing mergers & JV’s
 competition & consolidation
                                                                                                               1997 - BP-Mobil JV in Europe
1992 - Ethyl purchases Amoco additives                                                         OEM
                                                              No. of OEM’
                                                                        s                                      1998 - Shell & Texaco USA Mkting JV
1996 - Ethyl purchases Texaco additives                 60
                                                                                             mergers
                                                              52                                               1998 - Pennzoil & Quaker State merge
1998 - Lubrizol purchases Adibis                        50

                                                        40
                                                                      30
                                                                                             continue,         1999 - BP-Amoco: ExxonMobil;
1998 - Infineum gains approval
1999 - Infineum operational
                                                        30

                                                        20
                                                                                    19       industry                 Repsol YPF; TotalFina
                                                        10                                   structure         2000 - BP-Amoco-Castrol-Arco; TFE
                                                        0
                                                             1964       1980        1998        may            2001 - ChevronTexaco: BPCastrol/Aral:
                                                                                                                      Shell/DEA
                                                             North-America   Asia   Europe
                                                                                              change           2001 - Shell/PQS

                                                                                                             © Copyright INFINEUM INTERNATIONAL LIMITED 2004
Technology Drivers – a Virtuous Circle?
                                   Better       Better
                                 cleanliness   durability
                                                               Longer service
                   Better fuel                                   intervals
                   economy
                                                                               Longer oil drains
         Cleaner
          fuels
                                                                      Which result in:
   Reduced
  emissions                                                           Hardware changes


                                                                   Fuel additivation &
    Fuel additives, flow                                         lube grade proliferation
    improvers, lubricity
     improvers, cetane
                                                             Change in
        improvers,
                                  Greater use of       base oils & additives
        detergents
                                 non-conventional        eg lower P, S, ash
                                  base stocks in       ( low/medium SAPs)
                                    lubricants
                                                            © Copyright INFINEUM INTERNATIONAL LIMITED 2004
Hi-Tech ‘
        Mature’Industry
     ……… but with inexorable environmental drivers

? Technologies complex and costly

? Markets large, risk averse

? ‘
  Growth Platforms’to consolidate opportunities




                                      © Copyright INFINEUM INTERNATIONAL LIMITED 2004
Possible Growth Platforms:
Distillate Fuel/Refinery Additives
                           ULS
                           Diesel      China
                New




                           LS     East         USA   High T
                           diesel Europe             detergents
      Markets




                                                     cold flow




                                                           OEM Relationship
                Existing




                                    Wax crystal                   NOVA 2        NOVA 3
                                    Modification                  High T        Additives for
                                    Polymer design                detergents/   ULS Fuels
                                    Harms testing                 stabilisers




                                        Existing                            New
                                                     Capabilities                    © Copyright INFINEUM INTERNATIONAL LIMITED 2004
NBD Lessons Learned

? Profitable growth opportunities can be created in mature
  businesses
    ? We can ‘
             know’the future

? Success founded strongly in Infineum competencies

? Challenges of new business requires, different skills and
  approaches, persistence and patience
    ? Often challenges existing business model eg emission trading

? As projects advance, increased focus and dedication of
  resources is critical for early commercial success

? ‘
  Growth Platforms’provide a sound model for future success

                                              © Copyright INFINEUM INTERNATIONAL LIMITED 2004
The information contained in this document is based upon data believed to be reliable at the time of going to press and relates only to the matters specifically mentioned in this document. Although Infineum has used
reasonable skill and care in the preparation of this information, in the absence of any overriding obligations arising under a specific contract to supply goods or services,: no representation, warranty (express or
implied), or guarantee is made as to the suitability, accuracy, reliability of completeness of the information; nothing in this document shall reduce the user’ responsibility to satisfy itself as to the suitability, accuracy,
                                                                                                                                                               s
reliability, and completeness of such information for its particular use; there is no warranty against intellectual property infringement; and Infineum shall not be liable for any loss, damage or injury that may occur
from the use of this information other than death or personal injury caused by its negligence. No statement shall be construed as an endorsement of any product or process. For greater certainty, before use of
information contained in this document, particularly if it is used for a purpose or under conditions which are abnormal or not reasonably foreseeable, it must be reviewed with the supplier of such information.

   “Infineum” "Dobanax” “
             ,           , Paratac” “, Synacto” “, Vektron”and the corporate mark comprising the interlocking ripple device are trademarks of
      Infineum International Ltd. “Vistone”is a trademark of Exxon Mobil Corporation used under licence by Infineum International Limited.

                                                            ? Copyright INFINEUM INTERNATIONAL LIMITED 2004. All rights reserved.

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Muir presentation

  • 1. Successful Growth in a Mature Market Bob Muir Vice President – New Business Development Infineum International Reproduction of any material whether by photocopying or storing in any medium by electronic means or otherwise is prohibited without prior written consent of Infineum International Limited. © Copyright INFINEUM INTERNATIONAL LIMITED 2004. All rights reserved
  • 2. Who we are ? A leading developer of lubricant and fuel additive technologies ? Circa $1.5 billion global enterprise ? 50/50 joint venture between Shell and ExxonMobil ? 70 years history © Copyright INFINEUM INTERNATIONAL LIMITED 2004
  • 3. Changing Slow demand growth Increasingly tough Industry Global annual lube growth 0.5 % yr emissions legislation drives specifications & costs Short product life cycles persist 1989 - Fuel volatility limits set as engine test costs continue rising. 1990 - EPA sets S limits in Diesel development cost vs payback 1992 - Euro I emissions introduced time becomes unsustainable 1996 - Leaded gasoline removed in US forcing closer industry alliances 1996 - Euro II emissions introduced 2000 - Fuel volatility limits set Life Cycle 2005 - 30-50% reductions vs 2000 in HDD of Formulations (Years) 3000 10 years Development 1000 Costs Difficult trading conditions (kUS$) Year 1930 1960 1990 2010 The Lubricant & Fuel Additives Industry Customers under pressure Increased industry forcing mergers & JV’s competition & consolidation 1997 - BP-Mobil JV in Europe 1992 - Ethyl purchases Amoco additives OEM No. of OEM’ s 1998 - Shell & Texaco USA Mkting JV 1996 - Ethyl purchases Texaco additives 60 mergers 52 1998 - Pennzoil & Quaker State merge 1998 - Lubrizol purchases Adibis 50 40 30 continue, 1999 - BP-Amoco: ExxonMobil; 1998 - Infineum gains approval 1999 - Infineum operational 30 20 19 industry Repsol YPF; TotalFina 10 structure 2000 - BP-Amoco-Castrol-Arco; TFE 0 1964 1980 1998 may 2001 - ChevronTexaco: BPCastrol/Aral: Shell/DEA North-America Asia Europe change 2001 - Shell/PQS © Copyright INFINEUM INTERNATIONAL LIMITED 2004
  • 4. Technology Drivers – a Virtuous Circle? Better Better cleanliness durability Longer service Better fuel intervals economy Longer oil drains Cleaner fuels Which result in: Reduced emissions Hardware changes Fuel additivation & Fuel additives, flow lube grade proliferation improvers, lubricity improvers, cetane Change in improvers, Greater use of base oils & additives detergents non-conventional eg lower P, S, ash base stocks in ( low/medium SAPs) lubricants © Copyright INFINEUM INTERNATIONAL LIMITED 2004
  • 5. Hi-Tech ‘ Mature’Industry ……… but with inexorable environmental drivers ? Technologies complex and costly ? Markets large, risk averse ? ‘ Growth Platforms’to consolidate opportunities © Copyright INFINEUM INTERNATIONAL LIMITED 2004
  • 6. Possible Growth Platforms: Distillate Fuel/Refinery Additives ULS Diesel China New LS East USA High T diesel Europe detergents Markets cold flow OEM Relationship Existing Wax crystal NOVA 2 NOVA 3 Modification High T Additives for Polymer design detergents/ ULS Fuels Harms testing stabilisers Existing New Capabilities © Copyright INFINEUM INTERNATIONAL LIMITED 2004
  • 7. NBD Lessons Learned ? Profitable growth opportunities can be created in mature businesses ? We can ‘ know’the future ? Success founded strongly in Infineum competencies ? Challenges of new business requires, different skills and approaches, persistence and patience ? Often challenges existing business model eg emission trading ? As projects advance, increased focus and dedication of resources is critical for early commercial success ? ‘ Growth Platforms’provide a sound model for future success © Copyright INFINEUM INTERNATIONAL LIMITED 2004
  • 8. The information contained in this document is based upon data believed to be reliable at the time of going to press and relates only to the matters specifically mentioned in this document. Although Infineum has used reasonable skill and care in the preparation of this information, in the absence of any overriding obligations arising under a specific contract to supply goods or services,: no representation, warranty (express or implied), or guarantee is made as to the suitability, accuracy, reliability of completeness of the information; nothing in this document shall reduce the user’ responsibility to satisfy itself as to the suitability, accuracy, s reliability, and completeness of such information for its particular use; there is no warranty against intellectual property infringement; and Infineum shall not be liable for any loss, damage or injury that may occur from the use of this information other than death or personal injury caused by its negligence. No statement shall be construed as an endorsement of any product or process. For greater certainty, before use of information contained in this document, particularly if it is used for a purpose or under conditions which are abnormal or not reasonably foreseeable, it must be reviewed with the supplier of such information. “Infineum” "Dobanax” “ , , Paratac” “, Synacto” “, Vektron”and the corporate mark comprising the interlocking ripple device are trademarks of Infineum International Ltd. “Vistone”is a trademark of Exxon Mobil Corporation used under licence by Infineum International Limited. ? Copyright INFINEUM INTERNATIONAL LIMITED 2004. All rights reserved.