The Sector in the Middle East a regional overview

Marcus Jakt 4th Middle East Industrial Gases Conference Dubai, UAE December 3-5, 2013 gasworld Business Intelligence

Providing added insight and in-depth analysis:

• Country and regional profiles

• Financial performance

• BI Online

High value business information for the industry at an affordable cost Global Gases Market Valued at $74.1 Billion in 2012

Africa Middle East South Pacific 2% 3% Rim 6% North America 27%

North Pacific Rim 24%

South America 6% Indian sub- continent 2% Eastern Europe Western Europe 5% 25% Middle East Gases Market Valued at $2 Billion in 2012

Iraq 2% Others 15% 29% 3% 5% 5%

Iran UAE 12% Turkey 15% 14% Middle East Gases Market Valued at $2 Billion in 2012

Delvar Afzar Gulf Cryo 5% Linde 5% Habas 17% 5%

Air Liquide 7%

NIGC Praxair 20% 4% Air Products 3% Abdullah Messer 1% Hashim Others 3% 30% Middle East Gases Market Valued at $2 Billion in 2012

OSP 11% Bulk 6%

Packaged 11% Other 1% Captive 71%

Note: if Captive Market added to total revenues, market size increases to ~$7 Billion in 2012 Middle East Revenue evolution & forecast 2000-2020

Gas Market Growth and Forecast, 2000-2020 4500

4000

3500

3000 Macro Economic 2500 Forecast $m 2000 Gas Intensity Forecast 1500

1000

500

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

between +6.1% p.a (low) to +9.3% p.a. (high) in 2012-2020 timeframe Turkey Gases Market Valued at $294 million in 2012

Air Liquide Others 4% 7% Messer Habas 10% 36%

Linde 43% Turkey Gas Market Growth and Forecast by end-use sector 2000-2020 600.0

500.0 Others Glass 400.0 Healthcare Pulp & Paper

300.0 Electronics $m Food Gen Manufacturing 200.0 Metallurgy Refining & Energy 100.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +6.7% p.a (low) to +8.8% p.a. (high) in 2012-2020 timeframe Turkey

• IG market recorded impressive CAGR of 12.8% p.a. in 2002- 2012 timeframe

• Deregulated, competitive economy increasingly driven by medium-to-heavy industry and service sector

• Significant automotive, construction, and electronics industries active within the country

• Large potential for further contracts related to captive- to-onsite conversion – AL has started the ball rolling Lebanon Gases Market Valued at $23 million in 2012

Others 14%

SOAL/Air Liquide 40%

Chehab Industrial & Medical Gas 46% Lebanon Gas Market Growth and Forecast by end-use sector 2000-2020 40.0

35.0 Others 30.0 Glass Healthcare 25.0 Pulp & Paper

20.0 Electronics $m Food 15.0 Gen Manufacturing Metallurgy 10.0 Refining & Energy 5.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +4.5% p.a (low) to +7.1% p.a. (high) in 2012-2020 timeframe Lebanon

• Relatively large healthcare sector – accounts for more than 25% of total IG revenues

• Not much in the way of heavy industry. Predominantly a merchant market (bulk & packaged) & also

import/export hub for N2O and special gases • Limited indigenous gas production capacity – currently only one operational merchant ASU (Chehab, 80 tpd)

• AL suffering as a result of relying on ASU capacity in Syria (onsite/merchant ASU near Damascus). This has led to shortages and loss of market share Jordan Gases Market Valued at $25 million in 2012

Others RUM Gases 6% 8%

Jordan Gases Middle East 46% Gases/ National Industrial Gas 40% Jordan Gas Market Growth and Forecast by end-use sector 2000-2020 40.0

35.0 Others 30.0 Glass Healthcare 25.0 Pulp & Paper

20.0 Electronics $m Food 15.0 Gen Manufacturing Metallurgy 10.0 Refining & Energy 5.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +4.4% p.a (low) to +5.5% p.a. (high) in 2012-2020 timeframe Jordan

• Market centred around supply of medical gases (mainly LOX) and cutting & welding gases for light manufacturing activities

• Relative lack of heavy industries means limited scope for any tonnage business

• Higher electricity pricing (due to subsidies being eliminated) has led to much lower capacity utilisation – and extensive imports from Kuwait and Saudi

• CO2 is by and large also imported, mainly from Egypt and/or Saudi Saudi Arabia Gases Market Valued at $595 million in 2012 Riyadh Others Abdullah 2% Hashim 2% 12%

Linde/SIGAS 9%

Air Liquide Al Khafrah Industrial Gases NIGC 6% 69% Saudi Arabia Gas Market Growth and Forecast by end-use sector 2000-2020 1,400.0

1,200.0 Others Glass 1,000.0 Healthcare

800.0 Pulp & Paper Electronics $m 600.0 Food Manufacturing 400.0 Metallurgy Refining 200.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +6.7% p.a (low) to +10.8% p.a. (high) in 2012-2020 timeframe Saudi Arabia

• Largest IG market in the Middle East – largely thanks to large downstream chemical and petrochemical sector. Industry also boosted by relatively low energy costs

• Onsite trade historically ‘reserved’ for NIGC – but AL’s recent large onsite hydrogen contract for 300,000 3 Nm /hr of H2 at Yanbu alters this dynamic significantly

• Linde/SIGAS and Air Products/Abdullah Hashim no doubt ‘waiting in the wings’ for similar projects

• Growing industrial gas demand driven by continued expansion in petrochemical/chemical sector and state- encouraged efforts to diversify into other industries Yemen Gases Market Valued at $17 million in 2012

AGL 38% IYGC 39%

Yemen BIT YEC 8% 15% Yemen Gas Market Growth and Forecast by end-use sector 2000-2020 35.0

30.0 Others Glass 25.0 Healthcare

20.0 Pulp & Paper Electronics $m 15.0 Food Gen Manufacturing 10.0 Metallurgy Refining & Energy 5.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +6.1% p.a (low) to +9% p.a. (high) in 2012-2020 timeframe Yemen

• Small market with limited business opportunities: little industrial activity, sometimes politically volatile backdrop

• Nonetheless quite impressive growth registered during last decade (but from a low base)

• Demand mainly driven by cutting & welding as well as medical requirements, but also some bulk gas in support of metallurgical and petrochemical industries

• Possible future driver for demand: shale oil extraction. Some of Yemen’s geology may be suitable for such operations Oman Gases Market Valued at $58 million in 2012 National Gulf Oman Ind. Cryo Gases 2% 4%

Muscat Man. ALSIG 21% 21%

Ajwaa Gases 10% Al Wid M H Darwish Trading 34% 4% Bin Saloom 4% Oman Gas Market Growth and Forecast by end-use sector 2000-2020 140.0

120.0 Others Glass 100.0 Healthcare

80.0 Pulp & Paper Electronics $m 60.0 Food Manufacturing 40.0 Metallurgy Refining 20.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +6.9% p.a (low) to +10.7% p.a. (high) in 2012-2020 timeframe Oman

• Demand boosted by increase in construction activity related to new oil and gas processing plants in Sohar

• ALSIG onsite plants operational since 2006 for petrochemical clients, AP/Abdullah Hashim onsite plants for steel client since 2012

• Authorities recognise importance of diversifying economy beyond oil sector

• Going forward, IG revenues should benefit from development of steel and manufacturing activities UAE Gases Market Valued at $303 million in 2012

Others AP/ Ajwaa 2% 1% Arabian Industrial Gas 12%

ROC Praxair (ex-EIG) Elixier (Linde/ 18% ADNOC JV) 53% AL/PHG 4% Gulf Sharjah Industrial Gas 3% 7% UAE Gas Market Growth and Forecast by end-use sector 2000-2020 700.0

600.0 Others Glass 500.0 Healthcare

400.0 Pulp & Paper Electronics $m 300.0 Food Manufacturing 200.0 Metallurgy Refining 100.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +6.4% p.a (low) to +11% p.a. (high) in 2012-2020 timeframe UAE

• Elixier EOR project has been main driver for recent growth surge: 2012 revenues up more than +108% on 2010

• Beyond hydrocarbon economy, substantial steel, glass and aluminium industries (in part to support Dubai- centric construction activities)

• Substantial scope for further supply scheme business – good captive-to-onsite conversion potential remains

• Elixier something of a one-off in terms of scale but nonetheless expect continued good demand growth across most end-user categories Qatar Gases Market Valued at $98 million in 2012

Qatar Oxygen Others 4% 2%

NIGP 32% Air Liquide JV 45%

Buzwair 17% Qatar Gas Market Growth and Forecast by end-use sector 2000-2020 250.0

200.0 Others Glass Healthcare 150.0 Pulp & Paper Electronics $m Food 100.0 Manufacturing Metallurgy 50.0 Refining Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +8.1% p.a (low) to +11.7% p.a. (high) in 2012-2020 timeframe Qatar

• IG revenues predominantly from oil & gas sector currently – but expect some upside in steel and construction sectors also from Qatar 2022 World Cup event (though this not evident yet)

• Good onsite activity thanks to GASAL’s supply contracts with Oryx GTL and Qatar Steel

• However, much higher volumes of oxygen produced for Pearl GTL – though this was a sale-of-equipment rather than sale-of-gas project

• Qatar II Refining Facility operational as of mid- 2013 – tripling nominal capacity from 17.4m Nm3/year to 52.2m Nm3/year Bahrain Gases Market Valued at $25 million in 2012

Others 4% BMIG ROC Praxair 27% 15%

Gulf Cryo 2%

Yateem Oxygen 52% Bahrain Gas Market Growth and Forecast by end-use sector 2000-2020 50.0

45.0

40.0 Others Glass 35.0 Healthcare 30.0 Pulp & Paper

25.0 Electronics $m Food 20.0 Manufacturing 15.0 Metallurgy 10.0 Refining Chemicals 5.0

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +5.4% p.a (low) to +7.4% p.a. (high) in 2012-2020 timeframe Bahrain

• YoY revenue growth muted in 2010-2012 timeframe due to political unrest

• Underlying prospects however good, even if industrial growth somewhat constrained by Bahrain’s small size and population

• Nascent onsite activity thanks to ROC Praxair’s new ASU for United Steel Company (on-stream in 2012)

• Other new capacity includes additional CO2 capacity for Yateem Oxygen (200 tpd) Kuwait Gases Market Valued at $100 million in 2012

Others 4%

Shuaiba KOAC/KIGC Oxygen 39% (Gulf Cryo/ Air Liquide) 32%

ROC/Praxair 25% Kuwait Gas Market Growth and Forecast by end-use sector 2000-2020 180.0

160.0 Others 140.0 Glass 120.0 Healthcare Pulp & Paper 100.0 Electronics $m 80.0 Food Manufacturing 60.0 Metallurgy 40.0 Refining

20.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +5.6% p.a (low) to +7% p.a. (high) in 2012-2020 timeframe Kuwait

• Economy predicated on oil & gas sector. Hitherto only limited efforts to diversify economic activities into other industries

• Strong indigenous IG companies with regional footprints beyond Kuwait: Gulf Cryo and ROC Praxair

• Some onsite business activities (notably Shuaiba Oxygen) but most tonnage gas currently captive

produced (especially H2) • Comparatively muted growth prospects but perhaps some opportunities for captive-to-onsite conversion contracts (?) Iraq Gases Market Valued at $40 million in 2012

ROC Praxair 8%

Gulf Cryo Iraq 17%

Al Mansour 41% Air Liquide Iraq 14%

Diala Group Iraqi Gas 4% Somar Company Oxygen 8% 8% Iraq Gas Market Growth and Forecast by end-use sector 2000-2020 100.0

90.0

80.0 Others Glass 70.0 Healthcare 60.0 Pulp & Paper

50.0 Electronics $m Food 40.0 Manufacturing 30.0 Metallurgy 20.0 Refining Chemicals 10.0

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +8.2% p.a (low) to +12.3% p.a. (high) in 2012-2020 timeframe Iraq

• Relatively strong growth in last 4-5 years as internal conflict has subsided/burnt itself out – but from low base

• IG business largely dependent on imports of bulk gas from Kuwait, Turkey, Jordan and (on occasion) Iran

• Kurdish north more or less running itself independent of Baghdad central government. This is the calmest and most industrially developed part of Iraq currently

• Economic near-term focus will be on oil production infrastructure. Downstream infrastructure unlikely until 2015 at earliest – upside for IG sector some time off Iran Gases Market Valued at $235 million in 2012

Arkan Gas Others 7% 20% Roham Gas 20% Varian Gas 5%

Shiraz Ind. Gas 7% Delvar Afzar 41% Iran Gas Market Growth and Forecast by end-use sector 2000-2020 450.0

400.0 Others 350.0 Glass 300.0 Healthcare Pulp & Paper 250.0 Electronics $m 200.0 Food Manufacturing 150.0 Metallurgy 100.0 Refining

50.0 Chemicals

- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 between +3.4% p.a (low) to +6.3% p.a. (high) in 2012-2020 timeframe Iran

• 2012 YoY IG revenue evolution flat due to tough economic sanctions imposed by international community

• Economy fairly diverse compared to neighbouring countries, but would probably benefit from deregulation and less central control

• Highly fragmented IG marketplace, especially for packaged gases. Probable scope for consolidation

• Nonetheless, some onsite activity plus a growing merchant bulk market. Assuming some loosening of sanctions regime: a market with reasonable potential Middle East Future challenges and opportunities

• Hydrocarbon wealth now increasingly employed to develop downstream industries plus fund economic diversification beyond oil & gas

• Loosening of market structures opening up new IG opportunities: potentially huge supply scheme business in GCC, Turkey and, in due course, possibly Iran

• Demographics coupled with increasingly sophisticated economies should ensure high rates of growth for some time to come Middle East Future challenges and opportunities

• Have and have-nots: many countries in the Middle East enjoy huge natural resources, but some do not. How to optimise differently structured economies to maximise regional growth?

• Continued investment in power and logistical infrastructure remains key – especially against backdrop of fast growing populations and industrial expansion

• Political and economic stability, plus a stable security environment: whilst some improvement in recent years, still a potential deal-breaker in parts of the Middle East Further information available: gasworld Business Intelligence reports, Middle East: • Saudi Arabia • Turkey • Yemen • Lebanon • Oman • Jordan • UAE • Iraq • Qatar • Iran • Bahrain • Kuwait Further information available: gasworld BI Online: Thank You!