BASF Petrochemicals

PetrochemicalsHeart of the VerbundDr. Werner PrätoriusPresident Petrochemicals DivisionSeptember 2005

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Disclaimer

This presentation contains forward-looking statements under the US Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate.

Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors includethose discussed in BASF’s Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this presentation.

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Key Facts

• BASF is the #1 Chemical Company worldwide

• The unique Verbund concept is key to our strategy

• Petrochemicals are the heart of the Verbund

• Its major role is to provide reliable and secure supply for the most important value chains of BASF

• Products used in all BASF divisions apart from Inorganics, Agricultural Products and Oil&Gas

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BASF’s Balanced PortfolioPetrochemicals – a Division in the Chemicals Segment

*including other activities 2004: 1.6 billion EUR (4%)

2004 Group sales*: 37.5 billion EUR

Agriculture &Nutrition

PerformanceProducts

21%

Plastics 28%

Chemicals• Petrochemicals• Inorganics• Intermediates

Oil & Gas

14%

14%

11%

19%

5

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

2000 2001 2002 2003 20040

50

100

150

200

250

300

350

Salesin million EUR

Total Sales (internal and external) EBIT (index 2000 = 100)

EBIT indexed

Sales & EBIT Development

Average annual growthrate 2000-2004:

• GDP: 2.4%

• Chemical Prod.*: 2.3%

• BASF PetrochemicalsSales: 15.6%

• Drivers for EBIT improvement:- High capacity utilization- Higher margins

* Without Pharma

3,879 3,951

4,8865,372

6,935

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CrackerProducts

Solvents

Alkylene Oxides& Glycols

2004 total sales: 6.9 bn EUR

15%

14%59%

Industrial Gases

3%

9%

Plasticizers

Sales Distribution PetrochemicalsInternal and External Sales by Business Unit

Market driven

• Major market player

• Proprietary technology

Supply Driven

• Focus on competitive supply to the Verbund

• External sales to optimize capacity utilization

• State-of-the-art technology

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Petrochemicals – Heart of the Verbund

Coatings1%

FineChemicals

2%

Others1%

Poly-urethanes

10%Styrenics

35%

PerformancePolymers

1%

PerformanceChemicals

17%

Inter-mediates

18%

FunctionalPolymers

15%

2004Internal Sales

Petrochemicals:2.7 bn EUR

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Petrochemicals and the BASF Verbund

Petrochemicals

Value Chains of the

BASF Verbunddeliver

~ 8000 Products

e.g.Plasticizers

Glycols

• EthyleneGlycol

• PropyleneGlycol

Solvents

• Oxo- & higher Alcohols

• Glycolethers

Cracker Products

• Ethylene

• Propylene

• Butadiene

• Benzene

• Toluene

• ...

Alkylene Oxides

• Ethylene Oxide

• Propylene Oxide

1 | Cracker Products

2 | Alkylene Oxides & Glycols

3 | Plasticizers & Solvents

4 | Key Statements

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Naphtha-based Cracker Provides Full Slate of Cracker Products

• BASF’s broad demand portfolio for cracker products does not fully match Naphtha-based cracker output

0.04

0.25

0.17

0.55

1.0

Naphtha(3.0)

0.11

1.52

0.13

0.97

1.0

2004

BASFDemand

0.0

0.01

0.03

0.02

1.0

Ethane(1.3)

Typical Cracker Output

Benzene

Butadiene

Toluene

Propylene

Ethylene

Feedstock

t/t Ethylene

Source: Ullmann, BASF

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• BASF is a net buyer of benzene and propylene

• BASF is a net seller of ethylene - however, very low representation in the ethylene merchant market (<15% of ethylene production)

Production/Demand Balance ofBASF Cracker Products

Ethylene

Butadiene

Propylene

Benzene

BASF Own Production

Global Position

low

low high

high

BA

SF

Cap

tive

Dem

and

Toluene

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Global Ethylene Market Segments

Source: CMAI, BASF

BASF in the Ethylene MarketSmall and Different

BASF:

• Participates only in about 30% of the ethylene derivatives markets*- Glycols- Styrene- Others,

e.g. EO derivatives

• Can manage and balance the limited direct impact of Middle East ethylene derivatives imports inside the Verbund

GlycolsPVCPolyethylene Styrene Others

57%

16%

7%

7%

13%

* BASF PVC sales via Solvin(Solvay)

Global Ethylene Market 2004:103 million tons

BASF Sales to Ethylene Applications

9%

14%

32%

45%

BASF Sales 2004:1.7 million tons

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0

50

100

150

200

250

300

350

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

2

4

6

8

10

12

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• Correlation between ethylene margin and

- Verbund margin: 13%

- Group margin: 25%

BASF Verbund Margin in % (rhs) **Europe C2 Cash Margin in EUR/t (lhs) *

Ethylene Margin Not Suitable as a Proxy for BASF’s Profitability

* Based on CMAI figures: NWE ethylene contract price./. naphtha-based cash cost

** Verbund margin = EBIT / sales (in Chemicals, Plastics,Performance Products – figuresadjusted to today’s portfolio)

*** Group margin = EBIT / sales (all segments; figures adjusted to today’s portfolio)

BASF Group Margin in % (rhs) ***

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85%

25%

13%

10%

-11%

-13%

-20% 0% 20% 40% 60% 80% 100%

Potential Proxies for BASF’s Profitability

Correlation

Industrial Production and BASF Margin

Ethylene Margin and BASF Margin

Propylene Margin and Verbund Margin

Benzene Margin and Verbund Margin

Oil Price and BASF Margin

Ethylene Margin and Verbund Margin

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Strategic Objective Cracker Products:

To ensure reliable and competitive supply of BASF-Verbund with cracker products

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Strategy for Cracker Products

R&DAssets

Continuous strivefor optimization ofown production assets

• Capacity expansions• Productivity

enhancements• Logistics enhancements

Participation in world-scale capacity and infra-structure investments

• Joint ventures• (Future) participation in

existing or new facilities

Promotion of dedicated technologiesto match up captive supply/ demand

• Metathesis• Dehydrogenation• Dealkylation

Focus on upgrading of cracker “co-products”, e.g. C5- and C9-streams

Make & Trade

Selective participationon both sides (buyer/ seller) of the market

• Homogeneous andheterogeneous swaparrangements

• Hedging

in close combinationwith own production

Business

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Petrochemical Market DynamicsRegional Trends

• Mature Market

• Slow demand growth

• High feedstock cost (gas)

• Declining exports

NAFTAIn a Defensive Position

• Mature market

• Slow demand growth inWestern Europe

• Integrated industry network

EuropeThe Retiring Hero?

• Demand growth 4.5% p.a.

• No self-sufficiency forseen

until 2015

AsiaThe Infinite Sponge

Middle EastEmerging Ethylene Center• Negligible home market

• Capitalizing on feedstock

advantages (ethane)

• World-scale capacities

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Worldwide Cracker Locations

AntwerpLudwigshafen

Port Arthur

NanjingGeismar

BASF Capacities:

• Ludwigshafen:- C2: 620,000t- C3. 370,000t

• Antwerp:- C2: 800,000t- C3: 480,000t

• Port Arthur*:- C2: 830,000t- C3: 860,000t

• Geismar (ethane based)**:- C2: 575,000t- C3: 35,000t

• Nanjing***:- C2: 600,000t- C3: 300,000t

* BASF share: 60%** BASF share: 41.6%*** BASF share: 50%

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Strategy EuropeMeasures for Future Development

Reliable production platform - less capacity loss than competition(BASF 2.5%, industry average 6.7% in 2004)

• Antwerp:- Leading cost position- Capacity expansion in 2007- Opportunities for broadening of

product slate

• Ludwigshafen: - Competitive cost position- Synergies through integration of

both crackers

Further integration into European industry network:

• Active participation in joint European pipeline projects (e.g. EPS, EPDC)

• New business models to shareworld-scale economics and tominimize logistics cost

BusinessAssets

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Strategy North AmericaStatus Quo

• New world-scale assets in Port Arthur, Texas

• Integrated into petrochemical network on US Gulf Coast

• Over the fence supply for captive demand

• Advantageous market position in North America:

- BASF operates naphtha based cracker- 64% of total ethylene capacity in North America is gas-based- Naphtha based cracker margins expected to remain aboveethane based cracker margins

- Enhanced propylene yield by Metathesis (C2:C3 = 1:1 instead of 1:0.6)

- World-Scale C4-Verbund in tight market

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• Logistics enhancements to allow for further feedstock flexibility

• Capitalizing on further integration opportunities with the refinery

• Selective capacity/product slate expansions (e.g. for Aromatics)

• Low cost debottleneckingpotential

Strategy North AmericaMeasures for Future Development

Cracker

C4-Complex

Refinery

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• Commercial start-up in June 2005

Measures for Future Development

• Low cost debottleneckingpotential of existing plants, construction of new plants

Strategy Asia/PacificIntegrated Petrochemical Site in Nanjing, China

23 0 0 0

New Options through R&D

BenzeneBroadening of the feedstock basisto take advantage of market fluctuations e.g. benzene from steam-dealkylation

ButadieneCapturing of market opportunitiesfrom dedicated productione.g. butadiene ex butane

Propylene EthyleneTargeted closure of the captive supply/demand gape.g. metathesis, PDH

Ethylene

Butadiene

Propylene

Benzene

BASF Own Production

Global Position

low

low high

high

BA

SF

Cap

tive

Dem

and

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4 | Key Statements

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Alkylene Oxides and Glycols

Petrochemicals

Value Chains of the

BASF Verbunddeliver

~ 8000 Products

e.g.Plasticizers

Solvents


• Glycolethers

Cracker Products

• Ethylene

• Propylene

• Butadiene

• Benzene

• Toluene

• ...

Alkylene Oxides

• Ethylene Oxide

• Propylene Oxide

Glycols

• EthyleneGlycol

• PropyleneGlycol

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Products

• Ethylene oxide (EO)

• Ethylene glycol (EG)

• Propylene oxide (PO)

• Propylene glycol (PG)

• Used in production of: Polyester fibers, PET, surfactants, polyols, antifreeze, amines and break fluids

Positioning

• Leading ethylene oxide equivalent producer in Europe, #4 worldwide

• 50% for internal added value chains

• 50% of sales to third parties


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Strategy

• Secure supply of alkylene oxides and alkylene glycols to BASF´s downstream derivatives at most competitive conditions

• Maintain strong merchant market position in European EG market

• Investments in new EO and EG facilities in Nanjing (started up in May 2005) to benefit from growth opportunities in China


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4 | Key Statements

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Plasticizers and Solvents

Petrochemicals

Value Chains of the

BASF Verbunddeliver

~ 8000 Products

e.g.Plasticizers

Solvents


• Glycolethers

Cracker Products

• Ethylene

• Propylene

• Butadiene

• Benzene

• Toluene

• ...

Alkylene Oxides

• Ethylene Oxide

• Propylene Oxide

Glycols

• EthyleneGlycol

• PropyleneGlycol

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Products

• Oxo-C4-products: Butyraldehyde, butanols, 2-Ethylhexanol (2-EH)

• Raffinate based oxo-alcohols: Isononanol (INA), 2-Propylheptanol (2-PH), Tridecanol (TDN)

• Solvents: Propionaldehyde, alcohols, glycol ethers, butylacetate

Positioning

• World leader oxo-C4 products, #2-3 in C4 based alcohols, sole producer of 2-PH


• Proprietary technologies

Solvents

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Strategy

• Secure competitive supply of Verbund-added value chains (i.e. acrylates and surfactants)

• Selectively expand business in NAFTA and Europe

• Exit 2-EH production in Europe

• Restructure oxo-portfolio in NAFTA (2-EH plant in Freeport; 2-PH plant in Pasadena)

• Expand business in Asia (oxo-C4 in Kuantan and Nanjing)

Solvents

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Products

• Phthalic anhydrid (precursor)

• Phthalic esters

• Polymeric plasticizer

• Hexamoll DINCH

• Increase flexibility of normally rigid PVC thereby opening a wide range of applications (e.g.cables, roofing films, medical devices, flooring)

Positioning

• #2 worldwide


• Proprietary technology for phthalic anhydrid

Plasticizers

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Strategy

• Secure and develop global #2 position on the basis of regional Verbundproduction

• Shift towards cheaper raw materials, i.e. C2/C3 à C4

• Strengthen modern and cost efficient 2-PH based DPHP as well as eco-efficient Hexamoll DINCH plasticizer business

• Restructure production platform and business in NAFTA

Plasticizers

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4 | Key Statements

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BASF PetrochemicalsKey Statements

• Profitable cornerstone of BASF‘s petrochemicals-based value chains throughout the regions

• Manufacturing and marketing of a broad portfolio of alkylene oxides, glycols, plasticizers and solvents

• Reliable and competitive supply of cracker products and other petrochemical raw materials primarily for captive use and complementarily to third party customers

• Strategic focus on „Local Production for Local Consumption“

BASF Petrochemicals

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