Hello, and welcome to the LyondellBasell Teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question and answer session. I'd now turn the conference over to Mr. David Kinney, head of Investor Relations. Sir, you may begin.

Thank you, Operator. Hello, and welcome to LyondellBasell's Third Quarter 2021 Teleconference. I'm joined today by Bob Patel, our Chief Executive Officer, and Michael McMurray, our Chief Financial Officer. Before we begin the discussion, I would like to point out that a slide presentation accompanies today's call, and is available on our website at www.lyondellbasell.com. Investor relations. Today, we will be discussing our business results while making reference to some forward-looking statements and non-GAAP financial measures. We believe the forward-looking statements are based upon reasonable assumptions and the alternative measures are useful to investors. Nonetheless, the forward-looking statements are subject to significant risks and uncertainty. We encourage you to learn more about the factors that can lead our actual results to differ by reviewing the cautionary statements in the presentation slides and regulatory filings, which are also available at our Investor website. Additional documents on our Investor website provide reconciliations of non-GAAP financial measures to GAAP financial measures together with other disclosures, including the earnings release. A recording of this call will be available by telephone beginning at 1:00 PM Eastern Time today until November 30th by calling 877-660-6853 in the United States and 201-612-7415 outside the During today's call, we will focus on Third Quarter results. The current environment, our near-term outlook, and provide an update on our growth initiatives. Before turning the call over to Bob, I would like to call your attention to the non-cash lower cost or market inventory adjustments or LCM that we've discussed on past calls. These adjustments are related to our use of last-in, first-out or LIFO accounting, and the volatility in prices for our raw material and finished goods inventories. During the Third Quarter of 2020, we recognized a non-cash impairment of $582 million that reflected our expectation for reduced profitability from our Houston Refinery States. Comments made on this call will be in regard to our underlying business results, excluding the impacts of the refinery impairment and the LCM inventory adjustments. But that being said, I would now like to turn the call over to Bob.

Thank you, Dave. I'm pleased to join for my 28th and last earnings call as CEO of LyondellBasell. Per our usual practice, we will review our results from the quarter. As I prepare to leave the Company at the end of the year, I have taken some time to reflect on the strong Company we have built, and our outlook for the future. Without a doubt, LyondellBasell's future is very bright. Because of the efforts of our incredibly talented and hardworking global team, we've built a Company that has proven it can perform under a range of conditions. During an event like a global pandemic that no one could have predicted or imagined, we were able to fund our dividend with cash from operations and grow our Company through accretive M&A. I'm confident that LyondellBasell will continue to deliver for its stakeholders in the future. This is a Company that is focused on building value for the long term, and one that is built to stand the test of time. With that said, let's review our third quarter results. Please turn to slide three. LyondellBasell's businesses are continuing to benefit from robust global demand and tight market conditions. In the third quarter, our Company delivered $5.25 per share of earnings, more than four times higher than the same quarter last year. EBITDA was approximately $2.7 billion, a year-over-year quarterly improvement of $1.8 billion. Efficient cash conversion generated $2.1 billion in cash from operating activities, a new quarterly record for our Company. These results are indicative of strong markets, the discipline with which we approached running our business, and the increased earnings power from our value-driven investments and accretive growth over the past several years. We remain focused on improving LyondellBasell's cash generation through all stages of the business cycle. Please turn to Slide 4 to review our quarterly profitability. While our portfolio delivered to $2.7 billion of EBITDA, this quarter's results reflect a sequential decline of 11%. Increased costs for natural gas, ethane, NAPFA, and butane compressed margins for many products from the high seen in the second quarter. This, however, does not change how we see the future. We continue to see very solid demand for our products and remain highly constructive on the outlook for our businesses as global reopening continues to play out over the coming quarters. We expect the combination of a well-funded economy and pent-up consumer demand for durable goods, as well as the non-durable goods associated with travel, leisure, and other in-person activities will continue to create attractive markets. In short, we remain confident that a reopening global economy, and eventual normalization of global supply chains will support continued growth for our businesses over the coming quarters. Let's turn to slide 5 and review our safety performance. Our year-to-date total recordable incident rate for employees and contractors rose to 0.24 during the third quarter. Much of this increase is associated with the tragic incident in our asset deals facility in La Porte, Texas during July. We remain committed to learning from this incident, and incorporating the learnings from the investigations to help prevent such tragedies from ever happening again. Looking more closely at the chart, we are encouraged by the notable improvement in chemical industry safety performance during 2020. We are watching to see if this is a durable trend or perhaps a one-time benefit from reduced in-person work hours during the peak of the pandemic. At LyondellBasell, continuous learning and a self-improving culture are our key focus areas in our pursuit of goal zero, safety performance for both our employees and our contractors. On slide six, I would like to highlight LyondellBasell's increased commitments to help address the global challenge of climate change. In late September, we announced accelerated targets and a goal to achieve net zero, scope 1 and scope 2 greenhouse gas emissions from our global operations by 2030. We now aim to reduce absolute emissions from our global operations by 30% relative to a 2020 baseline. We plan to achieve these goals by advancing progress on several fronts. First, we are improving energy efficiency in all our plants and reducing our need for high carbon content fuel sources, such as coal. We are already moving on this front. In September, we announced our plan to phase out coal from the power plant at our site investment in Germany. Second, we intend to procure at least 50% of our electricity from renewable sources by 2030. Third, we are focusing on minimizing flare emissions from our clients, particularly during shutdowns and startup events. In addition, we're evaluating a portfolio of technology options across the Company's manufacturing footprint, including sustainable hydrogen, increased electrification, and carbon capture for storage, for re-utilization in our processes. We believe this strategy puts us on an achievable pathway toward our net zero goal. In the near-term, we do not expect significant increases in our overall capital budget, as reduced spending associated with the completion of our PO/TBA project in 2022 will be offset by an increasing share of climate-related investment. With that, I will turn the call over to Michael who will describe our financial and segment results in more detail.

Thank you, Bob. Good morning, everyone. Before I begin, I would like to share my sincere gratitude to Bob for his tireless work, inspirational energy, and thought partnership in leading and growing LyondellBasell for nearly 12 years. We're all sad to see you go, Bob, but we will be eagerly watching your progress and wishing you continued success. Please turn to Slide 7 and let me begin by highlighting our strong cash-generation, which has been bolstered by our recent growth investments. In the third quarter, LyondellBasell generated a record $2.1 billion of cash from operating activities that contributed towards the $5.4 billion of cash generated over the last 12 months. Our pre-operating cash flow for the third quarter improved by more than 10% relative to the second quarter, and our pre-operating cash flow yield was 15% over the last 12 months. We expect this chart will continue to improve during the fourth quarter as 2020 results drop-off from our trailing performance. Let's turn to slide 8 and review the details of our cash generation and deployment during the third quarter. As I've mentioned during previous calls, we are highly focused on shareholder returns. A strong and progressive dividend plays a fundamental role in our capital deployment strategy. In addition to our dividend, we also resumed share repurchases during the third quarter and reduced our share count by approximately 1 million. We continue to invest in maintenance and growth projects with more than $500 million in capital expenditures. Strong cash flows supported debt reduction of nearly $700 million, bringing our year-to-date debt reduction to $2.4 billion. We closed the third quarter with cash and liquid investments of $1.9 billion. In July, S&P Global Ratings recognized the improvement in our balance sheet by upgrading our credit ratings and indicating a stable outlook. During the fourth quarter, we expect that robust cash generation and an anticipated tax refund will enable continued progress on our goal to reduce debt by up to $4 billion during 2021 and further strengthen our investment-grade balance sheet. After the quarter closed, we repaid an additional $650 million of bonds in late October. We do not foresee the need for additional debt repayment in 2022. Confidence around our deleveraging targets enabled us to resume share repurchases in September, and we continued to opportunistically repurchase shares during October. As of October 22nd, we have repurchased a total of 1.6 million shares. Now, I would like to highlight the results for each of our segments on slide nine. In the third quarter of 2021, LyondellBasell business portfolio delivered EBITDA of $2.7 billion. Our results reflect strong margins, supported by robust demand for our products and tight market conditions, offset by higher costs primarily in our OMP Europe, Asia, international segment and our I&D segment. Let's begin the individual segment discussions on slide 10 with the performance of our Olefins and Polyolefins America's segment. Robust demand drove EBITDA to about $1.6 billion, slightly lower than the second quarter. Olefins results decreased approximately $75 million compared to the second quarter due to lower margins and volumes. Despite relatively stable benchmark ethylene margins, our margins declined, as we purchased ethylene supplement production, and met strong derivative demand. Volumes decreased due to unplanned maintenance, resulting in a cracker operating rate of 89%. Polyolefins results increased more than $75 million during the third quarter as robust demand and tight markets drove spreads higher with Polyolefin prices increasing slightly more than monomer prices. In fact, our polypropylene spreads reached a historic high. We continue to see strong demand for our products as we begin the fourth quarter. However, higher energy and feedstock costs, along with typical seasonal demand softness toward the end of the year, are likely to compress margins for our O&P America businesses. Now, please turn to Slide 11 to review the performance of our Olefins and Polyolefins in Europe, Asia, International segment. Higher feedstock costs and lower seasonal demand during summer holidays reduced margins and volumes in our EAI markets, resulting in a third quarter EBITDA of $474 million, $234 million lower than the second quarter. Olefins results declined about $50 million as margins decreased, driven by higher feedstock costs despite the higher ethylene and co-product prices. We operated our crackers at a rate of 92% of capacity due to planned maintenance. Combined Polyolefins results decreased approximately $120 million compared to the prior quarter. Lower seasonal demand drove declines in Polyolefins price spreads relative to monitor costs and reduced volumes. Declining Polyolefins spread also affected our joint venture equity income by about $35 million. During the fourth quarter, we expect to see further margin declines from higher energy and feedstock costs along with end-of-year seasonality. Our ethylene volumes are expected to decline due to planned maintenance. Please turn to Slide 12 as we take a look at our intermediates and derivatives segment. Rising feedstock and energy costs drove margin declines in most businesses, resulting in third quarter EBITDA of $348 million, $248 million lower than the prior quarter. Results were impacted by approximately $25 billion due to site closure costs associated with the exit of our ethanol business. Third quarter propylene oxide and derivative results decreased about $15 million, as margins declined slightly from the historical highs of the second quarter. Durable goods demand remained strong, resulting in increased volumes. Intermediate chemicals results decreased approximately $140 million. Margins declined in most businesses, primarily serene, and volumes decreased as a result of downtime in our acetyl business. Oxyfuels and related products results decreased about $40 million as increased butane feedstock prices more than offset the increased volume from improved gasoline demand. In the fourth quarter, we expect volumes to increase with the restart of our LaPorte Acetyl Facility and continued strength in demand for durable goods. Margins are likely to moderate with fourth-quarter seasonality and higher raw material costs for the I&D segment. Now, let's move forward and review the results of our advanced polymer solutions segment on Slide 13. Customer supply chain constraints continue to hinder results with third quarter EBITDA of $121 million, $8 million lower than the second quarter. Compounding and solution results were relatively unchanged. Margins were higher, but partially offset by a decrease in volume due to restricted production and downstream markets including the automotive sector, appliance manufacturing, and other industries affected by semiconductor shortages. Advanced polymer results decreased about $10 million driven by lower margins and volumes, primarily due to plant maintenance. We expect results will be similar in the fourth quarter as it will likely take several quarters before supply chain constraints begin to improve. Now, let's turn to Slide 14 and discuss the result of our refining segment. Margins improved significantly in the third quarter, resulting in an EBITDA improvement of $122 million to a positive $41 million. In the third quarter, prices for by-products increased, costs for renewable identification number credits or RINs decreased, and the Maya 2-1-1 benchmark increased by $1.65 per barrel to $23.11 per barrel. The average crude throughput at the refinery increased to 260 thousand barrels per day, and operating rates of 97%. Improved demand from increasing mobility should be supportive for our refining margins and could enable continued profitability during the fourth quarter. Let's finish the segment discussion on slide 15 with the result of our technology segment. Increased licensing revenue drove third quarter EBITDA to a record $155 million, $63 million higher than the prior quarter. We expect the fourth quarter profitability for our technology business will return to similar quarterly levels as the first half of this year, based on the anticipated timing of licensing revenue and catalyst demand. With that, I will turn the call over to Bob.

Thank you, Michael. Please turn to slide 16 for a summary of the value-driven growth initiatives that our Company has developed since 2018. Our approach is to pursue prudent and accretive investments that chart a clear path for increasing EBITDA. In 2018, we expanded our compounding business by acquiring A. Schulman and forming the advanced polymer solutions segment from both legacy and acquired businesses. With the integration complete, we have a solid platform for future growth and synergies should become increasingly visible as volumes recover in the market served by this segment. In the second quarter of 2020, we started a 500,000 ton per year polypropylene plant in Houston, utilizing our next-generation hyperzone HDP technology. At full nameplate capacity and average margins from 2017 to 2019, we estimate this facility is capable of generating $170 million of annual EBITDA. In September of 2020, we established a new integrated cracker joint venture in Northeastern China. This investment is capable of generating $150 million of annual EBITDA for our Company, again, based upon full capacity and historical industry margins. In December of 2020, we closed the transaction for the integrated polyethylene joint venture in Louisiana. At full capacity and historical margins, this investment is capable of contributing $330 million in EBITDA for our Company. In our intermediate and derivatives segment, the combination of two new propylene oxide investments in China and Houston starting in 2022 and 2023, puts together nearly $500 million of annual estimated EBITDA. Taken together, we estimate these initiatives could add up to $1.5 billion of EBITDA to our mid-cycle earnings. Slide 17 provides a historical view of LyondellBasell's profitability over the course of the first complete business cycle for our Company. Over the period from 2011 to 2019, we delivered a little over an average of $6.5 billion of EBITDA, excluding LCM and impairment. In fact, we reached $8.1 billion in 2015 during my first year as CEO of our Company. And today's strong market and with many of our growth initiatives providing strong contributions, our last 12 months performance was $8.6 billion exceeding our previous record, and reaching nearly 30% above the historical average. While no two cycles are exactly alike, our performance during prior business cycles provides valuable context on how these growth initiatives might perform and reposition LyondellBasell during the next cycle with a larger asset base. Let me summarize our view of current conditions and the outlook for our business with slide 18. In the near to mid-term, further progress with vaccination rollouts should continue to support solid demand and margin for our products. With 7 billion doses of vaccines administered worldwide, approximately half of the world's population has now received at least one dose of a COVID vaccine. New cases in the U.S. have fallen to less than half the level seen during the delta-driven spike of August and September. We're keeping a watchful eye on rising case rates in the UK and parts of Europe, but most virus indicators are trending in a favorable direction. Over the coming months, margins are expected to face headwinds from typical fourth quarter seasonality combined with increasing feedstock and energy prices. We anticipate some margin compression, but expect markets to remain relatively strong. Logistics constraints and the pace of vaccination are currently hindering demand. Eventually, consumers will have more options when purchasing a new car. More furniture will become available. And all of us will find a way to resume traveling, whether for business or leisure. Pent-up demand is tangible, and consumers have ample liquidity to drive purchases of both services and manufactured goods. Monetary stimulus may taper, but the unprecedented levels of stimulus deployed during the pandemic will have lasting effects that are typically supportive for commodities. Let me close with Slide 19. As I think about the coming weeks and prepare to pass the baton to the next leader of LyondellBasell, I draw comfort from the knowledge that the broader team we have in place is incredibly talented and has created great momentum that will endure for many years. In the end, our assets don't run themselves and decisions don't get made by spreadsheets. I'm confident that this remarkable team will continue to take our Company to greater heights. Our Company has never forgotten our core values built upon safety, reliability, and cost efficiency. These attributes form the basis for leading advantage positions in our industry. With these strong foundations in place, we are deploying our business model across a larger asset base with embedded growth through projects such as our PO/TBA facility and further expansion of our global partnerships. Contending with our investment to reduce carbon emissions, we're also building innovative business models that will increase our utilization of plastic waste as a circular feedstock. My belief is that over the next decade, LyondellBasell will become a global market leader, in the exciting and rapidly growing market for sustainable plastics. With strong markets and new sources of EBITDA, our team works diligently to maximize cash conversion. and we have taken care to reinvest that hard-earned cash into accretive investments that add value, and drive future growth. All of this work is underpinned by a disciplined financial strategy. We stand by our dual commitments to a growing dividend and an investment-grade credit rating through cycles. We are confident that we can complete our deleveraging and achieve our target of reducing debt by $4 billion before the end of this year with strong cash flows and no need for further debt reduction, we expect to continue reinvesting in our Company through the opportunistic repurchase of LyondellBasell's shares. I hope you share my sincere enthusiasm about the future of our Company. We are now pleased to take your questions.

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please do so. We ask that you limit your questions to one in order to allow time for everyone. Our first question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Thanks very much. Bob, what do you think that the skill set of the new CEO of Lyondell should be? That is, what should he understand? What should his particular strengths be?

Okay. Thank you, Jeff. Good morning. Well, I think to be successful in the business that we compete in, having a long-term view about the importance of safety, reliability, and cost efficiency, it's what we did in the early days when we came out of the Chapter 11 process. And that will be important. And I recall as I, seven years ago, roughly was named the CEO here. I talked about the importance of strategy and culture. And so, my sense is if I were to think about the next chapter, the things that I would add would be focus on circularity and our sustainability initiatives. And I think the uniqueness of our culture is that the next CEO who's grounded, rigorous, and works in service of the employees and the shareholders will be successful.

Thank you. Our next question comes from Vincent Andrews of Morgan Stanley. Please proceed with your question.

Thanks. And good morning, everyone and thanks, Bob, and good luck going forward. If I could just ask you, it's obviously been an unusual year with the weather and the outages and the shipping issues. If you could help us think about utilization rates for your assets in 2022, assuming no unplanned activity. When do you think you'll see polypropylene rates get back over 90% in the U.S.? I noticed polypropylene in the EAI had very high volume in the third quarter. Is that a function of less demand for compounding PPs because of auto production? But just how should we think about PP utilization rates in the U.S. and Europe for next year?

Thank you, Vincent. To start, I want to highlight a few points regarding Q3 and the challenges we faced. We experienced some significant, unexpected outages, the first of which was related to the asset deals and resulted in unplanned downtime. This affected our Q3 volumes and margins, lowering earnings by approximately $75 million. Additionally, there were several other larger atypical events in O&P Americas that further reduced volume and impacted earnings by around $200 million. Overall, these outages contributed to a drop of about $275 million in Q3. While we also had some typical unplanned outages during the quarter, it was an unusual situation overall. Looking ahead to next year, there are still considerable constraints on demand. The global supply chain is not running as efficiently as it has in the past, with issues like chip shortages and shipping challenges, including high container costs and misalignment of ship locations. I strongly believe these issues should start to normalize by mid-year, allowing more typical global trade patterns to emerge. With a more robust durable goods market, particularly in the automotive and appliance sectors—areas where availability has been limited—this should benefit polypropylene more than polyethylene. Thus, I expect that by mid-next year, operating rates will remain above 90%, and many of these constraints will ease.

Thank you. Our next question comes from Kevin McCarthy with Vertical Research Partners. Please proceed with your question.

Good morning. Bob, I'd echo many of the comments Michael made in his prepared remarks about you and wish you all the best of luck in the future. My question for this morning is on the refinery; better operational results there in the quarter, but six or seven weeks ago, I think you also announced the intent to revisit strategic options there. And so just wondering if you could comment on both of those: the near-term operational outlook, as well as the options on the strategic menu and progress on that front lately.

Thank you, Kevin, for your kind words. First, regarding the business side and the refinery, things have indeed improved. We turned a profit in Q3, as mentioned in our prepared remarks, and Q4 is expected to be stronger than Q3. Recently, with rising oil prices, we are seeing more Canadian sour crude arriving in the U.S., leading to a wider light-heavy differential, which benefits our refinery. I believe this trend may continue for at least the next quarter. On the product front, distillate inventories are very low, and distillate cracks have expanded. Air travel in the U.S. has returned to about 80% of pre-COVID levels, and miles driven are now back to pre-COVID levels as well. All these demand trends, including the heavy differential, suggest sequential improvement from Q3 to Q4, and we are pleased to be profitable in refining again. Regarding the process and the transaction, we are currently working through it, aiming to move towards a transaction in the next quarter or two. We still believe that the best value this refinery can provide is by being integrated into a system that optimizes crude purchasing, logistics, and co-product processing. We think a 270 thousand barrel a day refinery on the Houston ship channel is well-positioned and can generate significant value as part of a system.

Thank you. Our next question comes from Edlain Rodriguez with Jefferies. Please proceed with your question.

Thank you. Good morning guys. And quick question for you, Bob. I mean, when you look over the next 12 to 24 months, clearly your expectation is for margins to moderate. You're not expecting a margin cliff like some more bearish participants out there. But the question is 1. Where can you be wrong? And 2. What are the market dynamics that you believe should prevent a worst-case scenario?

Yes. Great question, Edlain. This has been the debate for the last 12/15 months. Many of you will recall that I talked about demand being stronger for longer. I still believe that. I think as you go quarter after quarter, all of the market forecasters have underestimated demand growth. And I think that will continue to play out. I mean, think about it. We still have reopening ahead of us. There's a lot of buying power in the hands of consumers. Highest historic savings rates in the U.S. and in many other regions around the world. They have still accommodative central bank policies. Even if tapering starts, we still have a very low interest rate environment here and abroad. And so much pent-up demand from goods and services that we couldn't access because of shortages or because of limitations on travel. So I think this sort of scenario of moderating margins is based on continued strong demand and strengthening as reopening really takes hold. And some of these supply chain constraints relieve themselves like the chip shortages. The impact on our compounding business felt because auto production is low is significant. Once those chips are available, we think that our polypropylene business, RPO business, and our compounding business will benefit materially from more automotive production. You asked about what could go wrong; I think in the near term, we'll have to watch energy prices. There could be points where we could see potentially spikes in energy price. But I think sustained high energy prices are unlikely because, at some point, they will be met with more supply. So I think that's what we have to watch.

Thank you. Our next question comes from Bob Koort with Goldman Sachs. Please proceed with your question.

Good morning, this is Mike here in for Bob. I wanted to ask about the dynamics surrounding energy controls and efforts for decarbonization in China. What do you anticipate as future implications for petrochemicals in that context, and could you share the strategy for expansion in that region?

Yes. So I don't profess to have the exact picture of what could happen, but I'll give you a few of my thoughts about what could happen. In terms of dual controls in the near term, you do see some lowering of petrochemical production. I think ultimately that will require more imports, which benefits exporting regions like the U.S., whether it's in the I&D business or in the OMP business, I think that's a net positive. I think the reduction of coal use will likely turn off some of the CTO complexes requiring more imports of polyethylene and polypropylene, favorable for global producers like us. The shipping constraints have been a net negative in the near-term, as they've not been producing for exports as much of finished goods for two reasons. One, they can't get enough containers. Two, because shipping costs in many cases are 10X when you consider both the sea freight plus the container costs. They're just not able to pass that kind of increase on. I think as that normalizes, I would think that demand should increase in China as they're able to export more finished goods next year and I think the longer-term outlook is that as there's less coal consumption, it seems to me that the amount of expansion that could take place in China could be less than what we've seen in the past. Certainly, MTO and CTO based technology or based capacity will likely not be as robust as what we've seen in the last 10 years. So I think there are many bullish aspects to how this could play out. But I think it'll be choppy over the next couple of quarters until we get back to something more normal.

Thank you. Our next question comes from Hassan Ahmed with Olympic Global. Please proceed with your question.

Morning, Bob, and wishing you all the best. Bob, a question around near-term polyethylene dynamics. In the marketplace, it seems there are two camps now; you have the IHS guys talking about as much as $0.15 a pound in margin compression for polyethylene in Q4. And you have Dow that's talking about $0.07 to $0.08 a pound. So just trying to figure out which camp Lyondell's in?

Yeah. So in terms of PD price moderation in price is kind of where we are and we have them for some time. If you look back over the last 10 years, most every year you see some moderation in Q4 in polyethylene price, and I think this year will be very similar. And at the same time, we do have feedstock costs that have come up some here in the U.S. by sensors on the feedstock side that ethane saves very abundant and available. And what sets the price for ethane is the natural gas price. And it seems that natural gas prices have kind of settled out here in the high $4 to $5 per million Btu range. If that's our assumption. Of course, we can have a spike here or there, but let's say we get through the winter in that range. I think the cost side is kind of where we are and there could be some moderation in margin. $0.15 feels heavy to me; I suspect that it will be something more modest than that.

Thank you. Our next question comes from David Begleiter with Deutsche Bank. Please proceed with your question.

Thank you. Good morning, Bob. As well, again, all the best in your future endeavors. Bob, one of your competitors has recently announced plans to spend a billion dollars a year to decarbonize their asset base. How do you think about Lyondell's efforts to decarbonize your base, and how much it will cost going forward?

Yes. Thank you, Dave. First, let me talk more broadly about our sustainability strategy and how we think about that. We've been very clear that we want to lead on circularity, and we want to be a fast follower when it comes to CO2. So what that means is that on circularity, we want to lean into innovation and developing technologies. Whereas on CO2 reduction, we could co-develop with others, but we may also combine that with licensing technology. So having said all of that, when you think about our CapEx, first of all, we've been consistent that we believe our CapEx will be about $2 billion per year through 2025. So the next four full years, we expect to be around $2 billion of CapEx. In the back half of the decade, as we look to implement technologies like electric furnaces or whatever comes about, we think the CapEx could step up by about $0.5 billion a year in the back half of the decade. So instead of $2 billion, it could be $2.5 billion per year starting in 2026. But I don't expect that to be sooner than that. $1 billion per year in sustainability-related CapEx that's not part of our plans as we sit here today.

And Dave, when you think about next year, we have CapEx rolling off from PO/TBA projects getting completed. So we do have room within the budget above that line there.

Thank you. Our next question comes from P.J. Juvekar with Citi. Please proceed with your question.

Good morning. And Bob will miss you. Good luck in your next endeavor.

Thank you, P.J.

Question on feedstock slate. As natural gas prices and natural gas liquid prices, NGL prices are going up in the U.S., ethane, propane how did you change your feedstock slate in North America and what do you expect going forward? And similar question in Europe where the natural gas prices also spiked. So how did the European feedstock slate change? And what do you see there as well?

Thank you, P.J. I want to provide some context regarding energy prices before discussing our feedstock flexibility in both the U.S. and Europe. Looking at the forecast for oil prices, I anticipate they will remain high over the next two to three years. There has been no significant return of large integrated oil companies to drilling, although independents are starting to increase their drilling activities. However, major companies active in areas like the Permian are not resuming drilling. High oil prices benefit LyondellBasell, and I believe there will be sufficient ethane available in the long run due to increased gas supply from more drilling. Ethane should remain abundant while gas prices are likely to remain stable, especially with our feedstock flexibility allowing us to switch to alternative feeds. In the short term, ethane remains our preferred feedstock. Prices for propane and butane have risen significantly, making them less favorable. We have also been cracking some gas oil and heavy feeds, maintaining a mix of light and heavy feeds without significant cracking in the U.S. In Europe, due to high LPG prices, we have primarily been cracking LPG, and co-product values have been decent. Overall, I expect propane and butane to be largely excluded from our mix for most of the winter, and we will concentrate on ethane and heavier feeds in the U.S. and NAPFA in Europe.

Thank you. Our next question comes from Chris Parkinson with Mizuho. Please proceed with your question.

Thank you very much. Can you shed on our current demand trends and intermediates, where do you sense chain inventories are? How do you see the setup for 2022 profitability evolving in the context of more normalized operations? And maybe just a quick update on Oxyfuels as well. Thank you so much.

Sure. Thank you, Chris. So first of all, on I&D, PO continues to be very strong. Proplene oxide demand is strong, the market continues to be tight. We will have a record year this year in our PO business. And we see that continuing as I mentioned earlier, in one of the prior questions, as auto demand comes back, appliance demand comes back because of constraints being relieved. We think that favors a continued strength in the PO business. I actually think that our new capacity in '23 could come on at a time when the market desperately needs more PO, and I think it could be absorbed very quickly. So we're very constructive on PO next year. Acetyl continues to be strong. Power plant is back up and running as of early October. We're back to running at full rates and we're enjoying the benefits of a very good market and we think that'll carry well into '22. On Oxyfuels, demand is back, but unfortunately, the challenge today is higher butane price. So butane as a percent of crude oil, has grown 90%. Likely through the winter months, we won't get much relief on that. But next year as we get into the spring, and LPG prices moderate after we get through the winter season, and the demand should continue to improve and be better as driving improves in Europe and other parts of the world. I think Oxyfuels will get back to the typical contribution of $400 to $450 million annually prior to the new projects starting out. Styrene likely mixed. When there are outages, we see styrene get a bump when everyone runs. Styrene is either side of break even. I think the real kind of gems in the portfolio next year will be propylene oxide, acetyls, and oxyfuels likely starting in the spring.

Thank you. Our next question comes from Steve Byrne with Bank of America. Please proceed with your question.

Yes. Thank you. So Bob, you made a comment that you want Lyondell to lead on circularity. And it's not a surprising comment coming from you given your leadership years ago that aligns to plastic waste. Is that an ethical issue or are you saying that because your customers are demanding it? You have these Circulon products. And my question for you is, do you have significant demand for those products now that you can't meet the supply? How long before you might have paralysis-based production or renewable feedstock-based production? How far away is this and is it meaningful?

Yes. Thank you, Steve. First, I think there are two aspects to this. The first is the demand side, and the second is playing to our strengths. On the demand side, absolutely, our customers are asking for more and more circular products and plastics each year. That's demand that we can't meet, and that's driven by their own commitments to increase recycled content and packaging. So the entire value chain is pulling, starting with the brand owners. They're pulling more circular products, and I think that will just grow as the years progress. Why I think we should lead on circularity is that we have a strong technology base in Polyolefins. We have Polyolefins process technology, catalyst technology, also we're developing this Martec technology, which is the Molecular Recycling. That pilot plant should be operational in the coming weeks. I suspect by about March, April, we will know whether we have an investable technology. My sense is that we will, the question will be to what degree can we get the yields that we want from pyrolysis oil. Our current plan is by the end of next year to be in a position to dedicate some of our CapEx to building a Martec plant, either in the U.S. or in Europe. So I think it plays to our strengths and the demand fall is there from brand owners.

Thank you. Our next question comes from John Roberts with UBS. Please proceed with your question.

Thanks and just in case we don't get another call with you, Bob, best wishes in the future.

Thank you, John.

Your licensing activity gives an early look into industry expansion activity. I assume that new license discussions declined during the pandemic, but have discussions for new plant licenses increased significantly coming out of the recession and any differences between polyethylene and polypropylene?

Sure. So John, we had a gap during the pandemic as you said, so I think probably something around 12, 15 months of much, much lower activity. It has picked up in Q3. More polypropylene than polyethylene and quite a bit of it in China. I think that's a trend that we've seen. Having said that, pickup in demand or activity in Q3, we're still not quite back to 2019 levels. So I think still modest. And as you think about where you're going with this question, John is, what does it mean for supply 3, 4, 5 years out, I do think we're going to find a gap in new supply 3 years from now because those decisions to expand were delayed or paused during the pandemic. And then if you look further out and you think about operating rates to more fully answer your question, beyond the couple of new projects that are coming in the U.S. and some pace of capacity in China, it seems to me that polyethylene and polypropylene operating rates likely reach some sort of a bottom in '22 or '23 and steadily increase. That bottom is very shallow, if not maybe sideways from where we are today given our outlook on demand. So I think we do see operating rates increase as we move through into the middle of the decade.

Thank you. Our next question comes from Arun Viswanathan with RBC Capital Markets. Please proceed with your question.

Great. Thanks for taking my question and I'll add my congrats and best wishes to you Bob, as well. Pleasure working with you. Just wanted to, I guess, ask about polypropylene and the acetyl chain. So polypropylene, I guess, was definitely impacted by the automotive shortages. Do you see that evolving to a better spot over the next two quarters? And then similarly with acetyl, was it mainly the downtime that held that business back in the quarter? And I guess maybe strident outlook there as well. Thanks.

Certainly, I'll start with acetyl. Definitely, the downtime is what impacted us in Q3. As I mentioned at Q3 margins, that lost volume reduced our earnings by about $75 million. Backup and running full rates now. Our outlook is very good for acetyls, and our view is that margins should be very healthy even going into next year. So we're quite positive about that business. On polypropylene, auto was weak for packaging was quite strong and we had a lot of kind of medical-related demands. So that helped polypropylene up. Now as we see auto come back for our Company, we have much more leverage to the auto recovery. As you think about our polypropylene sales to OEMs or tier 2s plus what goes through compounding plus some of our polyethylene that goes into plastic fuel tanks. Our Company will benefit immensely from the chip shortage hopefully alleviating as a result of the next few quarters. I think you'll see that in the EPS business; there should be a meaningful step-up once we see the automotive segment come back. And as a result of all of that, I think the PP business will remain tight. It's frankly pretty tight today, and demand continues to be really strong. In our third quarter, there was more production shortfall because we had two weeks of downtime in Charlesberg facilities here in the United States as well.

Our next question comes from Frank Mitsch with Fermium Research. Please proceed with your question.

Hell of a run, Bob. Hell of a run. What are you most proud of during your tenure as CEO, and what do you think is the biggest piece of unfinished business that perhaps the next CEO ought to address early on in his or her tenure?

Thank you, Frank. It's really been great working with all of you and getting to know all of you better. What I'm most proud of, well, been 12 years with the Company. I almost joined a very different Company back in March of 2010. I'm proud of the employees who stuck through it, through thick and thin. There are many people here who stayed during the Chapter 11 process, and won their Company back. I'm really proud to have been a part of going from where we were back in March 2010 to where we are today. In terms of what's ahead, I think it's really about continuing to capture value from all these growth projects that we've implemented. We've invested around $9 billion in 5 or 6 discrete initiatives, both organic and inorganic. It provides an incredible runway for earnings growth. So I think it's really just capturing the value from the growth that we've been through, continue to lean into circularity, focus on CO2 reduction, and be value-minded when it comes to M&A. Deep value like we have been and be okay with saying no when the deal doesn't make sense. I think we've built an incredible cash machine here at LyondellBasell.

Our next question comes from Duffy Fischer with Barclays. Please proceed with your question.

Yeah, good morning. Two questions around Europe. So when you look at your business, one of your calling cards over the last decade was you guys going to lighter and more into LPG. At least in the near-term, that doesn’t seem to be as beneficial. What's your view longer-term LPG versus NAPFA ratio? Where does that go? What does it do to the competitiveness of your business within Europe? And then the second one is, if carbon prices are just structurally going to be higher in Europe, whether that's natural gas or LPG coming in, what does that do to the competitiveness of the European petrochemical business? Should we look to see meaningful reductions in production there, maybe over the next five years or so on the back of that?

Thanks, Duffy. Both really great questions. On the European LPG competitiveness. I think this will have inflow. We've seen periods when LPG became expensive in Europe. We've seen when butane is traded at 45% of crude price. I think that'll continue. Part of the lower prices scenario will be when U.S. exports of butane and propane increase. As there's more oil production, associated gas, and the NGL that come with that. I think having flexibility benefits Companies like us, because it's so hard to predict what will be favored when. But if you have flexibility, you tend to do well in a range of environments. I think our Company has that both in the U.S. and in Europe. And your second question about competitiveness in Europe and the carbon initiatives. A lot of legislation is being considered. The way I think about it is that relative competitiveness is really important. And I think within the region, we have one of the most competitive asset bases. We've built that through all the work we did earlier in the last decade. Over time, you could see regulation that provides for border adjustments or things that help protect the industrial economy in Europe. I think industrial employment is a very important part of the European economy, and I can't imagine that will just attrit away. So I always ask my team to focus on regional competitiveness and make sure that we're at the most competitive end of the cost curve regionally.

Thank you. Our next question comes from Matthew Blair with Tudor, Pickering & Holt. Please proceed with your question.

Good morning. Thanks for taking my question. Wishing you the best, Bob, we'll definitely miss you. Something you could expand a little bit on your ethylene outlook. You mentioned the supply is abundant now. We do have some new crackers coming online plus the potential ramp of ethane exports. So for those incremental demands, is that something that you think would be covered by incremental production? Just given the recent increase in the rig count or would it need to pull from either tankage or inventory?

Thank you, Matt. It's been a pleasure working with you as well. I've had lots of discussions with some of our largest suppliers on this topic, and I think with new capacity coming here in Corpus, and more demand for ethane, my sense is that between the amount that's rejected today that could be recovered and the incremental output from the independents who are starting to ramp up in the Permian, I think there's enough ethane. The price setter on ethane, I continue to believe, will be natural gas with a modest frac spread to get to the ethane price. We've done a lot of work on this and we think that likely is a scenario. And then longer term, I think the feedstock flexibility here in the U.S. will serve us well. As the various scenarios play out, and you could make a good argument for the oil-to-gas ratio widening as we get past summer of 2022 and into the next couple of three years.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I will now turn the call over to Bob Patel for closing remarks.

Thank you again for all the thoughtful questions. Let me offer a few closing remarks. First of all, we continue to believe that demand will remain strong well into 2022 for all of our products and markets we serve. Though we are likely to face some margin pressure from rising energy and feedstock costs, we expect that our earnings and cash flow will remain robust. LyondellBasell has an array of options to create shareholder value, ranging from a growing dividend, share repurchases, and value-driven M&A. It's been my sincere pleasure and honor to serve and privilege to serve as CEO and support of our incredible employees and shareholders for nearly 7 years. We've built an incredibly strong Company over the past 12 years and I'm thankful to have been a part of it. I've enjoyed getting to know all of you and working with you. And we remain very optimistic about the future of LYB. Thank you and best wishes to all of you. We're now adjourned.

Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.