10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from . . . . . . . . . . to . . . . . . . . . ..

Commission file number 1-10145

LYONDELL CHEMICAL COMPANY

(Exact name of registrant as specified in its charter)

Delaware	95-4160558
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1221 McKinney Street,	77010
Suite 700, Houston, Texas	(Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code:  (713) 652-7200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes __ No ü

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):Large accelerated filer __ Accelerated filer __Non-accelerated filer üSmaller reporting company __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes __ No ü

Number of shares of common stock outstanding as of September 30, 2008:1,000

There is no established public trading market for the registrant’s common stock.

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

LYONDELL CHEMICAL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

	Successor			Predecessor			Successor			Predecessor
	For the three months ended						For the nine months ended
	September 30,						September 30,
Millions of dollars	2008			2007			2008			2007
Sales and other operating revenues:
Trade	$	7,575		$	7,019		$	23,950		$	19,749
Related parties		124			250			363			599
		7,699			7,269			24,313			20,348
Operating costs and expenses:
Cost of sales		7,532			6,637			23,739			18,504
Selling, general and administrative expenses		115			188			344			527
Research and development expenses		16			18			50			55
		7,663			6,843			24,133			19,086
Operating income		36			426			180			1,262
Interest expense:
Related parties		(175	)		- -			(550	)		- -
Other		(249	)		(144	)		(705	)		(499	)
Interest income:
Related parties		26			- -			68			- -
Other		5			6			9			26
Other income (expense), net		21			24			14			(15	)
Income (loss) from continuing operations before equity investments and income taxes		(336	)		312			(984	)		774
Income (loss) from equity investments		(2	)		- -			(5	)		2
Income (loss) from continuing operations before income taxes		(338	)		312			(989	)		776
Provision for (benefit from) income taxes		(105	)		115			(321	)		245
Income (loss) from continuing operations		(233	)		197			(668	)		531
Income (loss) from discontinued operations, net of tax		1			9			15			(130	)
Net income (loss)	$	(232	)	$	206		$	(653	)	$	401

See Notes to the Consolidated Financial Statements.

1

LYONDELL CHEMICAL COMPANY

CONSOLIDATED BALANCE SHEETS

Millions, except shares and par value data	September 30, 2008		December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	406	$	370
Deposits with related party		1,091		135
Short-term investments		169		- -
Accounts receivable:
Trade, net		787		1,212
Related parties		166		165
Inventories		3,267		3,354
Prepaid expenses and other current assets		178		232
Note receivable from related party		- -		2
Total current assets		6,064		5,470
Property, plant and equipment, net		12,289		12,842
Investments and long-term receivables:
Investment in PO joint venture		543		564
Notes receivable from related party		835		835
Other		234		187
Goodwill		5,048		5,247
Intangible assets, net		1,923		2,060
Other assets		181		187
Total assets	$	27,117	$	27,392

See Notes to the Consolidated Financial Statements.

2

LYONDELL CHEMICAL COMPANY

CONSOLIDATED BALANCE SHEETS – (Continued)

Millions, except shares and par value data	September 30, 2008			December 31, 2007
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term debt	$	1,359		$	435
Related party borrowings		751			717
Accounts payable:
Trade		1,645			2,287
Related parties		117			132
Accrued liabilities		489			726
Deferred income taxes		557			431
Total current liabilities		4,918			4,728
Long-term debt:
Banks and other unrelated parties		10,087			9,454
Related parties		8,000			8,000
Other liabilities		823			827
Deferred income taxes		3,402			3,884
Commitments and contingencies
Minority interests		115			126
Stockholder’s equity (deficit):
Common stock, $1.00 par value, 1,000 shares authorized and issued at September 30, 2008 and December 31, 2007		- -			- -
Additional paid-in capital		455			507
Accumulated deficit		(743	)		(144	)
Accumulated other comprehensive income		60			10
Total stockholder’s equity (deficit)		(228	)		373
Total liabilities and stockholder’s equity	$	27,117		$	27,392

See Notes to the Consolidated Financial Statements.

3

LYONDELL CHEMICAL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Successor			Predecessor
	For the nine months ended
	September 30,
Millions of dollars	2008			2007
Cash flows from operating activities:
Net income (loss)	$	(653	)	$	401
(Income) loss from discontinued operations, net of tax		(15	)		130
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		998			662
Equity investments –
Amounts included in net income (loss)		5			(2	)
Distributions of earnings		- -			1
Push-down debt interest		175			- -
Deferred income taxes		(370	)		184
Debt prepayment premiums and charges		2			47
Changes in assets and liabilities that provided (used) cash:
Accounts receivable		591			(489	)
Inventories		56			(12	)
Accounts payable		(665	)		396
Other, net		(299	)		(424	)
Net cash provided by (used in) operating activities – continuing operations		(175	)		894
Net cash provided by (used in) operating activities – discontinued operations		15			(161	)
Net cash provided by (used in) operating activities		(160	)		733
Cash flows from investing activities:
Expenditures for property, plant and equipment		(279	)		(360	)
Advances under related party loan agreements		(1,002	)		- -
Payments to discontinued operations		- -			(97	)
Proceeds from sale of assets		145			12
Short-term investments		(169	)		- -
Reimbursement of acquisition-related tax payments		- -			(94	)
Contributions and advances to affiliates		(9	)		(34	)
Other		- -			2
Net cash used in investing activities – continuing operations		(1,314	)		(571	)
Net proceeds from sale of discontinued operations before required repayment of debt		- -			1,089
Other net cash provided by investing activities – discontinued operations		- -			82
Net cash provided by (used in) investing activities		(1,314	)		600

See Notes to the Consolidated Financial Statements

4

LYONDELL CHEMICAL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

	Successor			Predecessor
	For the nine months ended
	September 30,
Millions of dollars	2008			2007
Cash flows from financing activities:
Net borrowings under revolving credit facilities		1,847			- -
Repayment of long-term debt		(300	)		(1,831	)
Issuance of long-term debt		- -			510
Proceeds from loan agreements with related parties		8			- -
Dividends paid		- -			(171	)
Proceeds from and tax benefits of stock option exercises		- -			81
Other, net		(45	)		7
Net cash provided by (used in) financing activities – continuing operations		1,510			(1,404	)
Debt required to be repaid upon sale of discontinued operations		- -			(99	)
Other net cash provided by financing activities – discontinued operations		- -			23
Net cash provided by (used in) financing activities		1,510			(1,480	)
Effect of exchange rate changes on cash		- -			4
Increase (decrease) in cash and cash equivalents		36			(143	)
Cash and cash equivalents at beginning of period		370			446
Cash and cash equivalents at end of period	$	406		$	303

See Notes to the Consolidated Financial Statements.

5

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

1.	Basis of Preparation	7
2.	Accounting and Reporting Changes	9
3.	Hurricane Effects	10
4.	Acquisition of Lyondell by LyondellBasell Industries	10
5.	Discontinued Operations	11
6.	Related Party Transactions	12
7.	Investment in PO Joint Ventures	13
8.	Accounts Receivable	13
9.	Inventories	14
10.	Property, Plant and Equipment and Goodwill	14
11.	Accounts Payable	16
12.	Long-Term Debt	16
13.	Derivatives and Financial Instruments	20
14.	Pension and Other Postretirement Benefits	22
15.	Income Taxes	23
16.	Commitments and Contingencies	24
17.	Stockholder’s Equity	27
18.	Comprehensive Income (Loss)	27
19.	Segment and Related Information	28
20.	Subsequent Event	30

6

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

1.      Basis of Preparation

Lyondell Chemical Company (“LCC”), together with its consolidated subsidiaries (collectively, “Lyondell” or “the Company”), is a refiner of heavy, high-sulfur crude oil, a significant producer of gasoline blending components, a manufacturer of chemicals and a North American manufacturer of plastics.

On December 20, 2007, LyondellBasell Industries AF S.C.A. (formerly known as Basell AF S.C.A.) indirectly acquired all of the shares of Lyondell common stock.  As a result, Lyondell is now an indirect wholly owned subsidiary of LyondellBasell Industries AF S.C.A. (together with its consolidated subsidiaries, “LyondellBasell Industries,” and without Lyondell, the “Basell Group”).  See Note 4. Concurrent with the acquisition by LyondellBasell Industries, Lyondell sold certain of its non-U.S. subsidiaries to subsidiaries of the Basell Group.

As a result of Lyondell’s acquisition by LyondellBasell Industries on December 20, 2007, Lyondell’s assets and liabilities were revalued to reflect the values assigned in LyondellBasell Industries’ accounting for the purchase of Lyondell, resulting in a new basis of accounting.  In addition, Lyondell recorded $834 million of debt for which it is not the primary obligor, but which it has guaranteed, and which was used by LyondellBasell Industries in the acquisition of Lyondell (“push-down debt”), and $179 million of related debt issuance costs.

Also, with the new basis of accounting, Lyondell applied the accounting policies of LyondellBasell Industries.  For those U.S. inventories for which the last-in, first-out (“LIFO”) method of determining inventory costs is used for reporting for U.S. federal income taxation, the LIFO method has been adopted as LyondellBasell Industries’ accounting policy.  For all other inventories except materials and supplies, costs are determined by LyondellBasell Industries using the first-in, first-out (“FIFO”) method.  Previously, Lyondell used the LIFO method to determine costs of all inventories except materials and supplies.  Lyondell’s loss for the nine months ending September 30, 2008 was reduced by $15 million (after tax), which represents the effect of the change that was not included in Lyondell’s successor period ended December 31, 2007.

The consolidated statements of income for the three and nine months ended September 30, 2008 reflect post-acquisition depreciation and amortization expense based on the new value of the related assets and interest expense that resulted from the debt used to finance the acquisition; therefore, the financial information for the periods prior to and subsequent to the acquisition on December 20, 2007 is not generally comparable.  To indicate the application of a different basis of accounting for the period subsequent to the acquisition, periods prior to the acquisition are designated “predecessor” periods, and those subsequent to the acquisition are designated “successor” periods.

Although this presentation may not reflect the likely future demands on Lyondell’s resources for servicing the debt of LyondellBasell Industries, it provides an indication of that financial position after considering the possible demand on Lyondell resources relating to the debt of LyondellBasell Industries.

In Staff Accounting Bulletin (“SAB”), Topic 5J, Push Down Basis of Accounting Required in Certain Limited Circumstances, the Securities and Exchange Commission requires, among other things, that, in situations where debt is used to acquire substantially all of an acquiree’s common stock and the acquiree guarantees the debt or pledges its assets as collateral for the debt, the debt and related interest expense and debt issuance costs be reflected in, or “pushed down” to, the acquiree’s financial statements.

7

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

1.      Basis of Preparation – (Continued)

The accompanying consolidated financial statements are unaudited and have been prepared from the books and records of Lyondell in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information.  Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included.  For further information, refer to the audited consolidated financial statements and notes thereto included in the Lyondell Chemical Company Annual Report on Form 10-K for the year ended December 31, 2007.  Certain previously reported amounts have been reclassified to conform to current period presentation.

On September 1, 2008, Lyondell completed the sale of its toluene diisocyanate (“TDI”) business, including production assets in Pont-du-Claix, France, related inventories, contracts, customer lists and intellectual property.  Accordingly, certain amounts previously reported in Lyondell’s consolidated statements of income and cash flows have been reclassified to present the operations of the TDI business as a discontinued operation (see Note 5).  Assets held for sale and associated liabilities are not material to the consolidated balance sheets of Lyondell.  Unless otherwise indicated, information presented in the notes to the consolidated financial statements relates only to Lyondell’s continuing operations.

LyondellBasell Industries manages the cash and liquidity of Lyondell and its other subsidiaries as a single group and a global cash pool.  Substantially all of the group’s cash is managed centrally, with operating subsidiaries participating through an intercompany uncommitted revolving credit facility.  The majority of the operating subsidiaries of LyondellBasell Industries, including Lyondell, have provided guarantees or collateral for the debt of various LyondellBasell Industries subsidiaries totaling approximately $23 billion at September 30, 2008 that was used primarily to acquire Lyondell.  Accordingly, Lyondell's liquidity and capital resources are integrated with LyondellBasell Industries.

The current global financial crisis and recessionary concerns have created substantial uncertainty for the global economy and the markets in which LyondellBasell Industries, including Lyondell, operates.  LyondellBasell Industries’ markets are experiencing a softening of demand combined with continued unprecedented volatility in raw material costs.  During the fourth quarter of 2008, polymer demand in major markets and spot prices for some of LyondellBasell Industries’ products have declined significantly.  In addition, demand for gasoline in North America has declined substantially compared to the third quarter of 2007, which in turn has reduced  LyondellBasell Industries’ margins in its fuels business.  These conditions have also had a negative impact on trade credit available to LyondellBasell Industries and its suppliers and customers.

These conditions, which are expected to continue during the fourth quarter of 2008 and which may continue into 2009, could place further demands on LyondellBasell Industries’ liquidity particularly in the first quarter when it historically has had significant operating cash flow requirements for annual compensation costs, property taxes, annual insurance premiums and annual rebate payments to customers. In addition, LyondellBasell has two key debt compliance ratios based on EBITDA that LyondellBasell Industries must continue to comply with in the fourth quarter of 2008 and in each quarter of 2009 and thereafter.

LyondellBasell Industries is taking steps to reduce costs, working capital and discretionary capital spending, including the temporary idling of one of its U.S. Gulf Coast ethylene facilities, representing 11 percent of its U.S. olefins capacity, and reduction of operating rates of certain integrated cracker operations as well as adjusting operating rates at its facilities globally to optimize working capital requirements. Furthermore, LyondellBasell Industries has expanded its synergy program to a broader, more substantial cost reduction program in anticipation of a potentially deeper economic downturn. As part of this program, LyondellBasell Industries is evaluating all of its strategic options with respect to asset utilization, including possible sales or other monetization of some assets, and a restructuring of the organization, including anticipated head count reductions of approximately 15 percent, to reduce costs.  LyondellBasell Industries expects full implementation of these programs within the next 12 to 18 months, but the benefits of these programs may not be realized until later periods.  LyondellBasell Industries expects to record a charge related to severance and related costs associated with the reorganization in the fourth quarter of 2008 and charges related to other costs associated with the potential impacts to LyondellBasell Industries’ assets as incurred.

LyondellBasell Industries believes that, with lower raw material costs, the post-hurricane restoration of substantially all of its U.S. Gulf Coast operations, the anticipated early December 2008 restart of the second coker unit at the Houston Refinery, reduced capital expenditures and the implementation of its cost reduction initiatives, conditions will be such that LyondellBasell Industries can comply with its debt covenants and that operating cash flows, together with  availability under various liquidity facilities, will be adequate to meet anticipated future cash requirements, including scheduled debt service obligations, necessary capital expenditures and ongoing operations, for the foreseeable future.  However, should demand for its products be significantly below LyondellBasell Industries’ expectations, unplanned plant outages occur or product margins compress below expectations, whether because raw material prices return to the high levels experienced in the first part of 2008 or otherwise, LyondellBasell Industries’ cash flow could be lower than expected or negative.  While liquidity at the present time is adequate, a sustained lower-than-expected or negative cash flow could result in existing sources of liquidity not being adequate to fund operations and meet debt service requirements.  Failure to comply with quarterly debt covenants will result in a default under LyondellBasell Industries’ loan agreements.  See "Effects of Breach" in Note 16.

The consolidated financial statements of LyondellBasell Industries and Lyondell have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

8

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2.      Accounting and Reporting Changes

On April 25, 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 142-3, Determination of the Useful Life of Intangible Assets.  This FSPamends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets in orderto improve the consistency between the useful life of a recognized intangible asset under Statement No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and other U.S. generally accepted accounting principles.  This FSP is effective for Lyondell beginning in 2009. Early adoption is prohibited.  Lyondell does not expect the application of FSP 142-3 to have a material effect on its consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, which amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, by requiring qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.  SFAS No. 161 will be effective for Lyondell beginning in 2009.  Lyondell is currently evaluating the effect of SFAS No. 161 on its disclosures.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51, which establishes new accounting and disclosure requirements for noncontrolling, or minority, interests, including their classification as a separate component of equity and the adjustment of net income to include amounts attributable to minority interests.  SFAS No. 160 also establishes new accounting standards requiring recognition of a gain or loss upon deconsolidation of a subsidiary.  SFAS No. 160 will be effective for Lyondell beginning in 2009, with earlier application prohibited.

Also in December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which requires an acquiring entity to recognize all assets acquired and liabilities assumed in a transaction at the acquisition date at fair value with limited exceptions.  SFAS No. 141 (revised 2007) will change the accounting treatment for certain specific items, including: expensing of most acquisition and restructuring costs; recording acquired contingent liabilities, in-process research and development and noncontrolling, or minority, interests at fair value; and recognizing changes in income tax valuations and uncertainties after the acquisition date as income tax expense.  SFAS No. 141 (revised 2007) also includes new disclosure requirements.  For Lyondell, SFAS No. 141 (revised 2007) will apply to business combinations with acquisition dates beginning in 2009.  Earlier adoption is prohibited.

Although certain past transactions, including the acquisition of Lyondell by LyondellBasell Industries, would have been accounted for differently under SFAS No. 160 and SFAS No. 141 (revised 2007), application of these statements in 2009 will not affect historical amounts.

SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115, which permits election of fair value to measure many financial instruments and certain other items, was applicable to Lyondell effective January 1, 2008.  Lyondell has elected not to apply the fair value option to any assets or liabilities.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.  The new standard defines fair value, establishes a framework for its measurement and expands disclosures about such measurements.  In February 2008, the FASB issued FASB Staff Position FAS 157-2, delaying the effective date of SFAS No. 157 for certain nonfinancial assets and liabilities until January 1, 2009.  Lyondell is currently evaluating the effect to its consolidated financial statements of prospectively applying the provisions of SFAS No. 157 to those assets and liabilities.

9

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2.      Accounting and Reporting Changes – (Continued)

Implementation of the provisions of SFAS No. 157 to financial assets and liabilities beginning January 1, 2008 did not have a material effect on Lyondell’s consolidated financial statements.

In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.  FSP FAS 157-3, which is effective October 10, 2008, including prior periods for which financial statements have not yet been issued, provides guidance on the application of SFAS No. 157 in determining the fair value of a financial asset in the current financial environment when the market for that financial asset is not active.  The application of FSP FAS 157-3 by Lyondell did not have a material effect on its consolidated financial statements at September 30, 2008.

Lyondell adopted the provisions of FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007.  As a result of the implementation of FIN No. 48, Lyondell recognized a $47 million increase in the liability related to uncertain income tax positions, which was accounted for as a $41 million increase in goodwill related to the acquisition of Millennium Chemicals, Inc. (together with its consolidated subsidiaries, “Millennium”), a $4 million increase in deferred tax assets and a $2 million increase of the January 1, 2007 balance of retained deficit.

3.      Hurricane Effects

During late August and mid-September 2008, two hurricanes, Gustav and Ike, disrupted U.S. Gulf Coast refining and chemical industry operations.

As a result of Hurricane Ike, Lyondell incurred various costs that, to the extent they exceed the deductible amount under the relevant policies, will be subject to insurance reimbursements.  Such costs, including costs incurred in conjunction with suspending operations at substantially all of its Gulf Coast plants, damage to facilities, including a $7 million pretax charge for impairment of the carrying value of assets, and costs to restore operations totaled $43 million as of September 30, 2008.  Additional amounts, including damage to facilities, are currently estimated to range from $20 million to $60 million.  This estimate includes the cost of restoring operations of a plant that has not yet restarted.

4.      Acquisition of Lyondell by LyondellBasell Industries

On December 20, 2007, LyondellBasell Industries indirectly acquired the outstanding common shares of Lyondell for $48 per common share in an all cash transaction.  As a result, Lyondell became an indirect, wholly owned subsidiary of LyondellBasell Industries.

Concurrent with the acquisition by LyondellBasell Industries, Lyondell sold certain of its non-U.S. subsidiaries to other subsidiaries of the Basell Group.  

From December 20, 2007, Lyondell’s consolidated financial statements reflect a revaluation of Lyondell’s assets and liabilities, to reflect the values assigned in LyondellBasell Industries’ accounting for the purchase of Lyondell.  In addition, Lyondell recognized in its financial statements $834 million of the debt it has guaranteed, but for which it is not the primary obligor, and $179 million of related debt issuance costs.  The purchase of Lyondell’s outstanding common stock and other equity instruments, assumption of debt and related transaction costs resulted in a total purchase price of $20,873 million, including the purchase of Lyondell common stock and other equity instruments for $12,371 million, the fair value of retained and refinanced debt of $7,506 million and transaction and other costs of $996 million.

10

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4.      Acquisition of Lyondell by LyondellBasell Industries – (Continued)

The goodwill resulting from the acquisition is not deductible for tax purposes.  The purchase price allocations used in the preparation of the September 30, 2008 and December 31, 2007 financial statements are preliminary due to the continuing analyses relating to the determination of the fair values of the assets and liabilities acquired.  Based upon additional information received to date, the fair values of the assets and liabilities acquired were adjusted during the nine month period ended September 30, 2008.  The adjustments and their effect on goodwill for the nine month period ended September 30, 2008 are summarized in Note 10.  Any further changes to the estimates of fair value of net assets acquired would result in additional adjustments to assets and liabilities and corresponding adjustments to goodwill.  Management does not expect the finalization of these matters to have a material effect on the allocation.

5.      Discontinued Operations

On September 1, 2008, Lyondell completed the sale of its TDI business, including production assets in Pont-du-Claix, France, related inventories, contracts, customer lists and intellectual property receiving proceeds of $113 million.  The sales price will be adjusted based on the agreed upon value of working capital at the closing date.  As indicated above, the operations of the TDI business are presented as discontinued operations in the consolidated financial statements of income and cash flows.

On May 15, 2007, Lyondell completed the sale of its worldwide inorganic chemicals business in a transaction valued at $1.3 billion, including the acquisition of working capital and assumption of certain liabilities directly related to the business.  The operations of the inorganic chemicals business have been classified as discontinued operations in the consolidated statements of income and cash flows.

Amounts included in income (loss) from discontinued operations are summarized as follows:

	Successor				Predecessor
	Three months ended September 30,		Nine months ended September 30,		Three months ended September 30,		Nine months ended September 30,
Millions of dollars	2008		2008		2007		2007
Sales and other operating revenues	$	79	$	282	$	116	$	822
Loss on sale of discontinued operation	$	- -	$	- -	$	- -	$	(21	)
Other income (loss) from discontinued operations		6		35		17		(24	)
Provision for income taxes		5		20		8		85
Income (loss) from discontinued operations, net of tax	$	1	$	15	$	9	$	(130	)

The adjusted estimate of sales proceeds from the sale of the TDI business resulted in an increase in goodwill, net of tax effects, of $16 million (see Note 10).

The settlement in the third quarter of 2008 of the inorganic chemicals business working capital at the closing date resulted in a $10 million write off of accounts receivable with a corresponding increase in goodwill.

11

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.      Discontinued Operations – (Continued)

Lyondell ceased production of TDI at the Lake Charles, Louisiana TDI plant in the third quarter of 2005.Other income (loss) from discontinued operations for the first nine months of 2007 reflected charges of $64 million, before tax, relating to resolution of commercial arrangements associated with the facility under which payments will be made over the next four years.

The provision for income taxes in the three and nine months ended September 30, 2007 primarily reflected the unfavorable effect of capital losses, the potential benefits of which were not expected to be available to Lyondell within the expiration period of such benefits.  Income taxes payable related to the sale of the worldwide inorganic chemicals business were $88 million.

6.      Related Party Transactions

Notes Receivable from Subsidiaries of the Basell Group—On September 30, 2008, Lyondell and the Basell Group amended an existing loan agreement entered into on January 1, 2001 by Lyondell and one of the non-U.S. subsidiaries sold to the Basell Group as part of the December 20, 2007 LyondellBasell Industries acquisition of Lyondell.  The loan agreement, which is payable upon demand, was amended to increase the amount of the agreement from $100 million to $250 million.  Advances under this loan agreement bear interest at the three-month London Interbank Offered Rate (“LIBOR”) plus 375 basis points and is due quarterly.  At September 30, 2008, the balance of loans outstanding under this agreement was $151 million.

On June 30, 2008, Lyondell received a promissory note from and advanced $51 million to the Basell Group under a loan agreement, which permits the Basell Group to borrow up to $100 million from Lyondell.  Notes under this loan agreement, which mature on June 30, 2013, bear interest at LIBOR plus 400 basis points.  Interest, which is due quarterly, will automatically be added to principal if unpaid at the “Interest Payment Date”, as defined, and such unpaid interest will constitute an advance under the loan.  As of September 30, 2008, there was no balance outstanding under this facility.

Current Account Agreements with Subsidiary of the Basell Group—On February 11, 2008, Lyondell and the Basell Group entered into two unsecured current account agreements for an indefinite period, under which Lyondell may deposit excess cash balances with the Basell Group and have access to uncommitted revolving lines of credit in excess of deposits.  Deposits bear interest at the LIBOR 1 month rate minus fifteen basis points.  Borrowings under the lines of credit bear interest at the LIBOR 1 month rate plus 350 basis points.  At September 30, 2008, the balances under the two current account agreements reflected net deposits totaling $180 million, and are reflected in the Consolidated Balance Sheets as deposits with related party.

Also at September 30, 2008, Lyondell had net deposits totaling $760 million, and net borrowings of $751 million under two current account agreements entered into with the Basell Group on December 20, 2007.  These amounts are reflected in the Consolidated Balance Sheets as deposits with related parties and related party borrowings.  See the “New Revolving Credit Facility with Access” and “Related Party Notes Payable” sections of Note 12 for a discussion of other related party transactions.

Tax Sharing Agreement with Millennium—As of September 30, 2008, a settlement of $73 million was made under the tax sharing agreement with Millennium.

12

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7.      Investment in PO Joint Ventures

Lyondell, together with Bayer AG and Bayer Corporation (collectively “Bayer”), share ownership in a U.S. propylene oxide (“PO”) manufacturing joint venture (the “U.S. PO Joint Venture”) and a separate joint venture for certain related PO technology.  Bayer’s ownership interest represents ownership of 1.6 billion pounds of annual in-kind PO production of the U.S. PO Joint Venture.  Lyondell takes in kind the remaining PO production and all co-product styrene monomer (“SM”) and tertiary butyl alcohol (“TBA”) production from the U.S. PO Joint Venture.

A separate manufacturing joint venture (the “European PO Joint Venture”), which includes a world-scale PO/SM plant at Maasvlakte near Rotterdam, The Netherlands, is owned 50% by Bayer and, through December 20, 2007, 50% by Lyondell.  Concurrent with the December 20, 2007 acquisition of Lyondell by LyondellBasell Industries, Lyondell sold certain non-U.S. subsidiaries to the Basell Group, including Lyondell’s subsidiaries that owned Lyondell’s investment in the European PO Joint Venture.

Changes in Lyondell’s investment in the U.S. and European PO joint ventures for the nine-month periods ended September 30, 2007 and 2008 are summarized as follows:

	U.S. PO			European PO			Total PO
Millions of dollars	Joint Venture			Joint Venture			Joint Ventures
Predecessor
Investment in PO joint ventures – January 1, 2007	$	504		$	274		$	778
Cash contributions		13			21			34
Depreciation and amortization		(25	)		(11	)		(36	)
Effect of exchange rate changes		- -			23			23
Investment in PO joint ventures – September 30, 2007	$	492		$	307		$	799
Successor
Investment in PO joint ventures – January 1, 2008	$	564
Cash contributions		9
Depreciation and amortization		(30	)
Investment in PO joint venture – September 30, 2008	$	543

At January 1, 2008 Lyondell’s investment in the U.S. PO Joint Venture reflects a revaluation to the value assigned to the investment in LyondellBasell Industries’ accounting for the December 20, 2007 purchase of Lyondell.

8.      Accounts Receivable

Lyondell has a $1,150 million accounts receivable securitization facility, which matures in December 2012.  Pursuant to the facility, Lyondell sells, through a wholly owned, bankruptcy-remote subsidiary, on an ongoing basis and without recourse, interests in a pool of U.S. accounts receivable to financial institutions participating in the facility.  Lyondell is responsible for servicing the receivables.  As of September 30, 2008 and December 31, 2007, the amounts of outstanding receivables sold under the facility were $975 million and $1,000 million, respectively.

The Accounts Receivable Securitization Facility was amended effective May 6, 2008 to conform to certain amendments to the Senior Secured Credit Facility and make other changes, including technical and typographical corrections (see Note 12).

13

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8.      Accounts Receivable – (Continued)

For a discussion of LyondellBasell Industries’ €620 million European accounts receivable securitization program under which certain of Lyondell’s European subsidiaries are sellers, see Note 12.

Net of receivables sold, Lyondell had a trade accounts receivable balance of $787 million and $1,212 million as of September 30, 2008 and December 31, 2007, respectively.  These balances were net of an allowance for doubtful accounts, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, of $8 million and $7 million at September 30, 2008 and December 31, 2007, respectively.

9.      Inventories

Inventories consisted of the following components:

	September 30,		December 31,
Millions of dollars	2008		2007
Finished goods	$	1,490	$	1,856
Work-in-process		228		245
Raw materials		1,307		1,019
Materials and supplies		242		234
Total inventories	$	3,267	$	3,354

10.           Property, Plant and Equipment and Goodwill

The components of property, plant and equipment, at cost, and the related accumulated depreciation were as follows:

	September 30,			December 31,
Millions of dollars	2008			2007
Land	$	94		$	82
Manufacturing facilities and equipment		12,662			12,502
Construction in progress		392			310
Total property, plant and equipment		13,148			12,894
Less accumulated depreciation		(859	)		(52	)
Property, plant and equipment, net	$	12,289		$	12,842

14

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10.           Property, Plant and Equipment and Goodwill – (Continued)

Depreciation and amortization expense is summarized as follows:

	Successor		Predecessor		Successor		Predecessor
	For the three months ended September 30,				For the nine months ended September 30,
Millions of dollars	2008		2007		2008		2007
Property, plant and equipment	$	284	$	194	$	846	$	573
Investment in PO joint ventures		10		12		30		36
Patent and license costs		9		1		27		4
Software costs		3		2		8		17
Other		27		14		87		32
Total depreciation and amortization	$	333	$	223	$	998	$	662

Lyondell believes that there are asset retirement obligations associated with some of its facilities, but that the present value of those obligations normally is not material in the context of an indefinite expected life of the facilities.  Lyondell continually reviews the optimal future alternatives for its facilities.  Any decision to retire one or more facilities would result in an increase in the present value of such obligations.  The liabilities that had been recognized for all asset retirement obligations were $15 million and $16 million at September 30, 2008 and December 31, 2007, respectively.

Based on additional information received to date, adjustments to the preliminary purchase price allocated to the fair value of assets and liabilities acquired as a result of Lyondell’s acquisition by LyondellBasell Industries resulted in a decrease in goodwill from $5,247 million at December 31, 2007 to $5,048 million at September 30, 2008.

The following table summarizes the changes to Lyondell’s goodwill during the nine months ended September 30, 2008, by reportable segment.  Lyondell’s reportable segments include fuels, chemicals and polymers (see Note 19).

Millions of dollars	Fuels			Chemicals			Polymers			Total
Goodwill at January 1, 2008	$	2,300		$	2,697		$	250		$	5,247
Acquisition of Lyondell:
Adjustments to the estimated fair value of contracts		(47	)		(84	)		- -			(131	)
Adjustments to property, plant and equipment and other assets and liabilities		- -			14			(6	)		8
Realization of deferred tax assets		- -			(18	)		- -			(18	)
Other adjustments to estimated income and other taxes		21			(79	)		- -			(58	)
		(26	)		(167	)		(6	)		(199	)
Goodwill at September 30, 2008	$	2,274		$	2,530		$	244		$	5,048

Lyondell evaluates the carrying value of goodwill and other intangible assets in the fourth quarter of each year to test whether the carrying amounts may exceed fair value.  The Company has experienced declines in its operating results during 2008.  Continuing adverse changes in the Company’s future estimated operating results compared to the estimated operating results on the date of acquisition, when the goodwill and intangible assets were recorded, could result in non-cash impairment charges in the future related to the goodwill and the intangible asset valuations.

15

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.           Accounts Payable

Accounts payable at September 30, 2008 and December 31, 2007 included liabilities in the amounts of $10 million and $17 million, respectively, for checks issued in excess of associated bank balances but not yet presented for collection.

12.           Long-Term Debt

Lyondell’s long-term debt includes credit facilities and debt obligations maintained by Lyondell’s wholly owned subsidiaries, Equistar and Millennium, and by Lyondell Chemical Company without its consolidated subsidiaries.

Loans, notes, debentures and other long-term debt due to banks and other unrelated parties consisted of the following:

Millions of dollars	September 30, 2008			December 31, 2007
Bank credit facilities:
LCC senior secured credit facility:
Term loan A due 2013	$	1,447		$	1,500
Term loan B due 2014 ($67 million of discount)		7,427			7,475
$1,000 million revolving credit facility		728			- -
Lyondell $1,600 million inventory-based credit facility		1,163			100
Accounts receivable securitization programs		53			- -
LCC notes and debentures:
Debentures due 2010, 10.25% ($3 million of premium)		103			104
Debentures due 2020, 9.8% ($3 million of discount)		222			222
Senior Unsecured Notes due 2014, 8%		- -			3
Senior Unsecured Notes due 2016, 8.25%		- -			1
Equistar notes and debentures:
Senior Notes due 2008, 10.125%		- -			8
Senior Notes due 2011, 10.625%		- -			4
Debentures due 2026, 7.55% ($20 million of discount)		130			129
Notes due 2009, 8.75%		- -			15
Millennium notes and debentures:
Senior Debentures due 2026, 7.625% ($69 million of discount)		172			170
Convertible Senior Debentures due 2023, 4%		- -			158
Other debt		1			- -
Total		11,446			9,889
Less current maturities		(1,359	)		(435	)
Long-term debt – banks and other unrelated parties	$	10,087		$	9,454

16

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12.           Long-Term Debt – (Continued)

Revolving Credit Facility with Access—In March 2008, LyondellBasell Industries entered into a senior unsecured $750 million, eighteen-month revolving credit facility, which may be extended by mutual agreement of the parties.  Lyondell and a subsidiary of the Basell Group are borrowers under the facility.  The $750 million revolving credit facility is in addition to the existing credit facilities available to LyondellBasell Industries, and is provided by Access Industries Holdings, LLC, an affiliate of Access Industries, which indirectly owns LyondellBasell Industries.  The revolving credit facility has substantially the same terms as the Senior Secured Credit Facility, except that it is unsecured and is not guaranteed by the subsidiaries of LyondellBasell Industries.

As of September 30, 2008, there were no borrowings outstanding under the facility.  At each borrower's option, loans under the revolving credit facility bear interest at rates equal to LIBOR plus 6% or the higher of the (i) federal funds rate plus 0.5% and (ii) the prime rate, plus, in each case, 5%.  Interest rates may be adjusted, from time to time, based upon the First Lien Senior Secured Leverage Ratio as calculated at such time and as further described in the revolving credit facility.

Related Party Notes Payable—On December 20, 2007, Lyondell entered into a note payable with LyondellBasell Industries and received proceeds of $7,166 million.  The note, which matures in 2014, bears interest at the same rate as the Basell Group’s Interim Loan plus 0.5%.  In addition, Lyondell recognized in its financial statements $834 million of push-down debt for which Lyondell is not the primary obligor, but which it has guaranteed, and which was used by LyondellBasell Industries in the acquisition of Lyondell.  Combined, these represented the $8,000 million of Long-term debt – Related parties in the Consolidated Balance Sheet.  At September 30, 2008, the balances of the note payable and the push-down debt are $7,140 million and $860 million, respectively.

Interim Loan—The Interim Loan, together with proceeds from borrowings under the Senior Secured Credit Facility, was used to finance the acquisition of Lyondell.  If not repaid or exchanged prior to the 12 months tenure, the Interim Loan converts to an extended senior secured loan in December 2008 and is due June 2015.  Prior to giving effect to the amendments discussed below, the Interim Loan bore interest at LIBOR plus an initial margin of 4.625%, which margin increased by 0.5% in each of June 2008 and September 2008 and increases by 0.5% for each three-month period thereafter, subject to a maximum interest rate of 12% per annum (or 12.5% in the event of certain rating declines) (the “Applicable Margin”).  Through a series of actions, the validity of which LyondellBasell Industries disputed, the JLAs (as defined below) had attempted to increase the applicable rate under the Interim Loan to 12% per annum.  Since June 16, 2008, LyondellBasell Industries had been paying 12% interest, which was approximately 4% higher than the applicable rate under the Interim Loan at June 30, 2008, in order to avoid any allegation of default by the lenders.  LyondellBasell Industries had protested the higher rate of interest and had reserved its right to recover any such amounts based upon a determination that the JLAs’ attempt to impose a rate increase is not supported by the terms of the applicable loan documentation.

On October 17, 2008, the agreement governing the Interim Loan was amended and restated.  Under the amended and restated agreement, the $8 billion principal amount of initial loans outstanding were retranched into:

(a)   $3.5 billion of fixed rate second lien loans, which bear interest at a rate equal to 12% per annum (12.5% in the case of certain ratings downgrades),

(b)   $2.0 billion of floating rate second lien loans and

(c)   $2.5 billion of floating rate third lien loans.

All of the floating rate loans bear interest at a rate equal to LIBOR (in the case of U.S. dollar loans) or EURIBOR (in the case of euro loans) plus the Applicable Margin.

17

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12.           Long-Term Debt – (Continued)

The economic impact of the interest rates applicable to the retranched loans is effective as of June 16, 2008.

The amendments also include provisions allowing lenders

(i)   within 180 days after October 17, 2008, to convert retranched fixed rate second lien loans into fixed rate second lien notes or a combination of fixed rate second lien notes and up to $1 billion in aggregate principal amount of fixed rate third lien notes and/or fixed rate unsecured notes (and pursuant to a notice provided by the lenders on October 17, 2008, all of the fixed rate second lien loans will automatically convert into fixed rate second lien notes if no election is made by the lenders to convert a portion of the fixed rate second lien loans to fixed rate third lien or unsecured notes within this 180-day period) and

(ii)   following the time that the fixed rate second lien loans have been converted into exchange notes and certain lenders under the amended and restated agreement hold, in aggregate, less than $950 million of such notes, to convert new floating rate second lien loans into fixed rate second lien notes and to convert new floating rate third lien loans into fixed rate third lien notes and/or fixed rate unsecured notes.  In all such cases, the exchange notes will bear interest at a rate equal to 12% per annum (12.5% in the case of certain ratings downgrades), may be denominated in euro or dollars, and will have maturity dates between June 2015 and December 2019.

In addition, the amendments include revisions to some of the terms of the exchange notes to make them consistent, in some instances, with similar provisions of the senior secured credit facility.  The amendments also make other changes, including technical and typographical corrections.

In May 2008, an affiliate of Access Industries, which indirectly owns LyondellBasell Industries, entered into a swap, with one of the JLAs based on a notional amount of $1.6 billion of the Interim Loan.  Under the swap, Access will receive a single payment at maturity determined with reference to the payments made by LyondellBasell Industries on the Interim Loan prior to maturity.  Access’s obligations under the swap are partly collateralized with collateral posted by Access Industries or its affiliates (excluding LyondellBasell Industries and its subsidiaries). Neither LyondellBasell Industries nor its affiliates are a party to this transaction.

Debt Agreement Amendments—Under the terms of the financing for the Lyondell acquisition, the joint lead arrangers (“JLAs”) retained the right to flex certain provisions of the financing, including pricing and the reallocation and retranching of the Term Loans.  Effective April 30, 2008, the JLAs exercised the price flex provisions and, in conjunction with the exercise, the Senior Secured Credit Facility was amended to (i) convert each of the U.S. Tranche B Dollar Term Loan and the German Tranche B Euro Term Loan into three separate tranches, some of which tranches are subject to a prepayment penalty, (ii) increase interest rates and fee rates by 0.5%, (iii) establish a LIBOR floor of 3.25% on the U.S. Tranche B Dollar Term Loan, (iv) modify certain debt covenants, including increasing a general debt basket from $750 million to $1,000 million, eliminating an interest rate hedging requirement, increasing the asset backed facility basket by $500 million, and adding a covenant prohibiting reduction of aggregate commitments under the Revolving Credit Facility with Access Industries before its initial maturity, (v) amend the calculation of Consolidated EBITDA, as defined, for the purpose of determining compliance with the debt requirements, to reflect adjustments for 2007 cost of sales in accordance with FIFO inventory accounting, and (vi) make other changes, including technical and typographical corrections.

In conjunction with the exercise by the JLAs of their flex rights, additional amendments were made to each of the Interim Loan, Senior Secured Inventory-Based Credit Facility, Revolving Credit Facility with Access Industries and Accounts Receivable Securitization Facility.  The amendments to the Interim Loan and Senior Secured Inventory-Based Credit Facility and the Revolving Credit Facility with Access Industries were effective on April 30, 2008.  The amendments to the Accounts Receivable Securitization Facility were effective on May 6, 2008.

18

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12.           Long-Term Debt – (Continued)

Each of the Interim Loan, the Senior Secured Inventory-Based Credit Facility, the Accounts Receivable Securitization Facility and Revolving Credit Facility with Access Industries were amended to (i) conform to certain of the amendments to the Senior Secured Credit Facility and (ii) make other changes, including technical and typographical corrections.  In addition, the Senior Secured Inventory-Based Credit Facility was amended to allow Lyondell the future option to increase the aggregate amount of commitments under the facility by a further $500 million.  

Under the terms of the Senior Secured Inventory-Based Credit Facility, as amended, Lyondell could elect to increase commitments under the facility by up to an aggregate $1,100 million.  Effective April 30, 2008, Lyondell exercised the option to increase the facility by $600 million and, as a result, aggregate commitments under the facility increased from $1,000 million to $1,600 million.  Concurrent with the exercise of the increase in commitments, Lyondell Chemical Company became a lien grantor and added the following as collateral: (i) a first priority pledge of all equity interests owned by Lyondell Chemical Company in, and all indebtedness owed to it by, LyondellBasell Receivables I, LLC (the seller under the Accounts Receivable Securitization Facility) and (ii) a first priority security interest in all accounts receivable, inventory and related assets owned by Lyondell Chemical Company, subject to customary exceptions.

European Accounts Receivable Securitization Program—LyondellBasell Industries has an accounts receivable securitization program, which provides funding up to €620 million ($889 million) to certain European subsidiaries.  In April 2008, LyondellBasell Industries obtained an amendment to the facility to add certain of its Lyondell subsidiaries as sellers under the programs.

Transfers of accounts receivable under the program do not qualify as sales, therefore the transferred accounts receivable and the proceeds received through such transfers are included in trade receivables, net, and current maturities of long-term debt in the consolidated balance sheets.  At September 30, 2008, the balance of accounts receivable outstanding under the program was $53 million.

In August 2008, Standard and Poor’s downgraded LyondellBasell Industries’ corporate credit rating from B+ to B.  As a result, LyondellBasell Industries has daily reporting requirements under the €620 million accounts receivable securitization program, which could impact the availability of funds under the facility in the future.

Other—LCC and certain of its subsidiaries are guarantors of certain debt of the Basell Group, including an $8,000 million Interim Loan, 8.375% High Yield Notes due 2015, comprising borrowings of $615 million and €500 million ($717 million), and amounts borrowed by the Basell Group under the Senior Secured Credit Facility, consisting of $482 million borrowed under term loan A and €1,290 million ($1,849 million) under term loan B.  The Interim Loan is secured by second and third priority interests over the collateral securing the Senior Secured Credit Facility.

During the first nine months of 2008, Lyondell made quarterly amortization payments of $53 million and $57 million, respectively, on Term Loan A and Term Loan B of the Senior Secured Credit Facility.  In the first quarter of 2008, Lyondell repaid the remaining $31 million principal amount due under notes that were called in 2007 but were not tendered until the first quarter 2008, and paid premiums totaling $2 million.  Also during the first quarter of 2008, Lyondell repaid the $158 million related to Millennium’s 4% convertible debentures.

19

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12.           Long-Term Debt – (Continued)

Current maturities of long-term debt at September 30, 2008 included $68 million of Term Loan A due 2013, $75 million of Term Loan B due 2014, $1,163 million of LCC’s $1,600 million Senior Secured Inventory-Based Credit Facility and $53 million under LyondellBasell Industries’ €620 million European Accounts Receivable Securitization Programs.  At December 31, 2007, current maturities of long-term debt included the annual amortization of $71 million and $75 million, respectively, for Lyondell’s Term Loan A and Term Loan B, $100 million principal amount outstanding under Lyondell’s Senior Secured Inventory-Based Credit Facility, $158 million of Millennium’s 4% Senior Convertible Debentures and $31 million of untendered debt that was called and paid in the first quarter 2008.

Amortization of debt discounts, premiums and debt issuance costs resulted in expenses of $55 million and $1 million for the three-month periods ended September 30, 2008 and 2007, respectively, and expenses of $159 million and a net credit of $6 million for the nine-month periods ended September 30, 2008 and 2007, respectively, that were included in interest expense in the Consolidated Statements of Income.  The increase is due primarily to the debt LyondellBasell Industries incurred in relation to the acquisition of Lyondell.

Effects of a Breach—A breach by LCC or any other obligor of the covenants or the failure to pay principal and interest when due under any of the Interim Loan, Senior Secured Credit Facilities, Asset-Based Facilities or other indebtedness of LCC or its affiliates could result in a default or cross-default under all or some of those instruments.  If any such default or cross-default occurs, the applicable lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.  In such circumstances, the lenders under the Senior Secured Credit Facilities and the ABL Inventory-Based Credit Facility also have the right to terminate any commitments they have to provide further borrowings, and the counterparties under the ABL Asset-Based Receivables Facility, as well as under legacy Basell U.S. and European securitization programs, may terminate further purchases of interests in accounts receivable and receive all collections from previously sold interests until they have collected on their interests in those receivables, thus reducing the entity’s liquidity.  In addition, following such an event of default, the lenders under the Senior Secured Credit Facilities and the counterparties under the ABL Inventory-Based Credit Facility have the right to proceed against the collateral granted to them to secure the obligations, which in some cases includes its available cash.  If the obligations under the Interim Loan, Senior Secured Credit Facilities, the Asset-Based Facilities or any other material financing arrangement were to be accelerated, it is not likely that the obligors would have, or be able to obtain, sufficient funds to make these accelerated payments, and as a result Lyondell could be forced into bankruptcy or liquidation.

13.           Derivatives and Financial Instruments

Commodity Price Risk Management—Lyondell is exposed to commodity price volatility related to anticipated purchases of natural gas, crude oil and other raw materials and sales of its products.  Lyondell selectively uses commodity swap, option and futures contracts with various terms to manage the volatility related to these risks.  Such contracts are generally limited to durations of one year or less.  Cash-flow hedge accounting is normally elected for these derivative transactions; however, in some cases, when the duration of a derivative is short, hedge accounting is not elected.  When hedge accounting is not elected, the changes in fair value of these instruments are recorded in earnings.  When hedge accounting is elected, gains and losses on these instruments are deferred in accumulated other comprehensive income (“AOCI”) until the underlying transaction is recognized in earnings.

Lyondell entered into futures contracts in the first nine months of 2008, with respect to sales of gasoline and heating oil.  These futures transactions were not designated as hedges, and the changes in the fair value of the futures contracts were recognized in earnings.  During the first nine months of 2008, Lyondell settled futures positions of 594 million gallons and 194 million gallons, respectively, of gasoline and heating oil, which resulted in net gains of $1 million and $8 million, respectively.

20

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.           Derivatives and Financial Instruments – (Continued)

At September 30, 2008, futures contracts for 27 million gallons of gasoline in the notional amount of $67 million, maturing from November 2008 through January 2009, were outstanding.  The fair value, based on quoted market prices, resulted in net receivables of $5 million and $1 million, respectively, at September 30, 2008 and December 31, 2007.

Also during the first nine months of 2008, Lyondell entered into commodity swaps with respect to purchases of crude oil and sales of distillates, which mature in the period from October 2008 through April 2009.  These swaps were designated as cash flow hedges.  Accordingly, changes in the fair value of these commodity swaps are deferred in AOCI until the underlying transaction occurs.  During the first nine months of 2008, Lyondell settled futures positions of 2 million barrels, which resulted in a net gain of $8 million.  At September 30, 2008 swaps for 5 million barrels in the notional amount of $179 million were outstanding.  The fair value, based on quoted market prices, resulted in a net receivable of $87 million at September 30, 2008.

Interest Rate Risk Management—During the first nine months of 2008, Lyondell entered into interest rate swap agreements, maturing in 2013, in the notional amount of $2,350 million.  Settlements under those agreements will begin in April 2009.  These interest rate swaps have been designated as cash-flow hedges of the interest cash flows that will occur between April 2009 and 2013 and effectively convert a portion of Lyondell’s variable rate, long-term debt to fixed rate debt for the period of the hedge.  The variable portion of the interest rate will be converted to a fixed rate ranging from 3.9% to 4.6%.  The fair value of these interest rate swaps agreements, resulted in a payable of $22 million at September 30, 2008.  

The following table summarizes financial instruments outstanding as of September 30, 2008 that are measured at the fair value on a recurring basis and the bases used to determine their fair value in the consolidated balance sheets.

Millions of dollars	Notional Amount		Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets at fair value:
Derivatives:
Purchases of crude oil and sales of distillates	$	179	$	87	$	- -	$	87	$	- -
Gasoline and heating oil		67		5		5		- -		- -
	$	246	$	92	$	5	$	87	$	- -
Liabilities at fair value:
Derivatives:
Interest rate swaps	$	2,350	$	22	$	- -	$	22	$	- -

The recent volatility in global financial markets has created a considerable amount of uncertainty as major financial institutions undergo financial difficulties.  Lyondell is monitoring the risk of nonperformance by the counterparties to these financial instruments.

21

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.           Derivatives and Financial Instruments – (Continued)

As a result of financial difficulties experienced by major financial institutions beginning in the latter part of the third quarter of 2008, Lyondell received notice that rights of redemption had been suspended with respect to a money market fund in which Lyondell invested approximately $174 million.  As of October 31, 2008, Lyondell had received $89 million and has been advised that additional redemptions are forthcoming.  Based on publicly available information, Lyondell has recorded a provision for an estimated loss of $5 million related to the money market fund and reclassified $169 million from cash and cash equivalents to short-term investments as of September 30, 2008.

14.           Pension and Other Postretirement Benefits

Net periodic pension benefits included the following cost components:

	Successor						Predecessor
	For the three months ended September 30, 2008						For the three months ended September 30, 2007
Millions of dollars	U.S.			Non-U.S.			U.S.			Non-U.S.
Service cost	$	13		$	- -		$	13		$	3
Interest cost		23			1			22			3
Expected return on plan assets		(27	)		(1	)		(26	)		(4	)
Amortization		- -			- -			5			- -
Net periodic pension benefit cost	$	9		$	- -		$	14		$	2

	Successor						Predecessor
	For the nine months ended September 30, 2008						For the nine months ended September 30, 2007
Millions of dollars	U.S.			Non-U.S.			U.S.			Non-U.S.
Service cost	$	37		$	- -		$	39		$	8
Interest cost		67			2			66			8
Expected return on plan assets		(81	)		(2	)		(74	)		(10	)
Amortization		- -			- -			10			1
Net periodic pension benefit cost	$	23		$	- -		$	41		$	7

Net periodic other postretirement benefits, which are provided to U.S. employees, included the following cost components:

	Successor		Predecessor			Successor		Predecessor
	For the three months ended September 30,					For the nine months ended September 30
Millions of dollars	2008		2007			2008		2007
Service cost	$	1	$	1		$	4	$	4
Interest cost		4		4			12		11
Amortization		- -		(1	)		- -		(5	)
Net periodic other postretirement benefit cost	$	5	$	4		$	16	$	10

22

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.           Pension and Other Postretirement Benefits – (Continued)

In the third quarter of 2008, Lyondell announced that it would amend the existing U.S. defined benefit plans of Lyondell Chemical Company and Equistar Chemicals, LP effective January 1, 2009.  Under this change, which was approved by management in July 2008, retirement benefits for affected employees will be based on a cash balance formula.  As a result of the amendment, the affected plans were remeasured as of September 30, 2008, resulting in a reduction of the projected benefit obligation of $113 million due to the plan amendment and $77 million due to an increase in the discount rate.  The declining market values resulted in a decrease of $154 million in plan assets at September 30, 2008.  The discount rate used to determine the projected benefit obligation at September 30, 2008 was 7.5% compared to the 6.25% used at December 31, 2007.  The net increase in the funded status of the plans is reflected as a credit in Accumulated Other Comprehensive Income at September 30, 2008 and will be recognized as a reduction in net periodic pension costs beginning in the fourth quarter of 2008.

The assumptions used in the remeasurement of the affected benefit plans were as follows at September 30:

	2008	2007
Discount rate	7.50%	6.25%
Expected return on plan assets	8.00%	8.00%
Rate of compensation increase	4.50%	4.50%

The decrease in the fair value of the amended plans’ assets and the increase in the discount rate reflected the significant turmoil in financial markets since December 31, 2007 that included declines in asset values and increases in corporate bond yields.  The decrease in the value of the amended plans’ assets represented a decrease of approximately 17% since December 31, 2007.  Lyondell has other pension plans, which are remeasured annually at December 31 and, absent changes in financial market conditions, are subject to decreases in plan asset values and increases in discount rates.

15.           Income Taxes

Lyondell’s operations are included in the consolidated U.S. federal income tax return of LyondellBasell Finance Company (“Finance Company”), a U.S. subsidiary of LyondellBasell Industries.  The U.S. federal income tax allocated to Lyondell is substantially the same as it would have been had Lyondell not been included in Finance Company’s consolidated U.S. income tax return, but filed a separate return, except that any interest expense related to debt recorded by Lyondell that was incurred by other subsidiaries of LyondellBasell Industries in the acquisition of Lyondell, but for which Lyondell is not the primary obligor, is treated as deductible interest expense of Lyondell.  Any resulting receivable or payable is settled with Finance Company.  The same principles apply to tax sharing for unitary, consolidated and combined state income taxes.

The estimated annual effective income tax rate was 32% for the first nine months of 2008 and 2007.  The 2008 estimated annual effective income tax rate was lower than the statutory 35% rate primarily due to the effects of non-U.S. operations.  The lower estimated annual effective income tax rate for the 2007 period was primarily due to a benefit from newly-enacted Texas state legislation, which allowed the carryforward of certain tax losses for state income tax purposes.

23

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.           Commitments and Contingencies

Commitments—As a result of the sale of its TDI business in September 2008, Lyondell’s annual purchase obligations  decreased by the annual commitment to reimburse Rhodia for the costs of operating the TDI facility at Pont-du-Claix, France.  Using foreign currency exchange rates, market prices of raw materials and other variable cost components such as utility costs in effect at December 31, 2007, Lyondell estimated the annual purchase commitment related to the TDI business, which would have continued through 2016, at approximately $230 million.

Environmental Remediation—Lyondell’s accrued liability for future environmental remediation costs at current and former plant sites and other remediation sites totaled $199 million and $207 million as of September 30, 2008 and December 31, 2007, respectively.  The remediation expenditures are expected to occur over a number of years, and not to be concentrated in any single year.  In the opinion of management, there is no material estimable range of reasonably possible loss in excess of the liabilities recorded for environmental remediation.  However, it is possible that new information about the sites for which the accrual has been established, new technology or future developments such as involvement in investigations by regulatory agencies, could require Lyondell to reassess its potential exposure related to environmental matters.

The following table summarizes the activity in Lyondell’s accrued environmental liability for the nine-months ended September 30:

	Successor			Predecessor
Millions of dollars	2008			2007
Balance at January 1	$	207		$	176
Additional provisions		- -			12
Amounts paid		(14	)		(13	)
Adjustments to purchase price allocation		6			- -
Balance at September 30	$	199		$	175

The liabilities for individual sites range from less than $1 million to $137 million.  The $137 million liability relates to the Kalamazoo River Superfund Site.

A Millennium subsidiary has been identified as a Potential Responsible Party (“PRP”) with respect to the Kalamazoo River Superfund Site.  The site involves cleanup of river sediments and floodplain soils contaminated with polychlorinated biphenyls, cleanup of former paper mill operations, and cleanup and closure of landfills associated with the former paper mill operations.

In 2000, the Kalamazoo River Study Group (the “KRSG”), of which the Millennium subsidiary and other PRPs are members, submitted to the State of Michigan a Draft Remedial Investigation and Draft Feasibility Study, which evaluated a number of remedial options for the river.  The estimated costs for these remedial options ranged from $0 to $2.5 billion.  Although the KRSG study identified a broad range of remedial options, not all of those options would represent reasonably possible outcomes.  Management does not believe that any single remedy among those options represented the highest-cost reasonably possible outcome.

In 2004, Lyondell recognized a liability representing the Millennium subsidiary’s interim allocation of 55% of the $73 million total of estimated cost of riverbank stabilization, recommended as the preferred remedy in 2000 by the KRSG study, and of certain other costs.

24

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.           Commitments and Contingencies – (Continued)

At the end of 2001, the U.S. Environmental Protection Agency (“EPA”) took lead responsibility for the river portion of the site at the request of the State of Michigan.  In 2004, the EPA initiated a confidential process to facilitate discussions among the agency, the Millennium subsidiary, other PRPs, the Michigan Departments of Environmental Quality and Natural Resources, and certain federal natural resource trustees about the need for additional investigation activities and different possible approaches for addressing the contamination in and along the Kalamazoo River.  As these discussions have continued, Millennium has obtained new information about regulatory oversight costs and other remediation costs, including a proposed remedy to be applied to a specific portion of the river, and has been able to reasonably estimate anticipated costs for certain other segments of the river, based in part on experience to date with the remedy currently being applied to the one portion of the river.  As a result, management can reasonably estimate the probable spending for remediation of three segments of the river, which has been accrued as of September 30, 2008.  Management’s best estimates for costs relating to other segments of the river, which may remain uncertain for the foreseeable future, also have been accrued, based on the KRSG study.

As of September 30, 2008, the probable additional future remediation spending associated with the river cannot be determined with certainty, but the amounts accrued are believed to be the current best estimate of future costs, based on information currently available.  At September 30, 2008, the balance of the liability related to the river was $92 million.

In addition Lyondell has recognized a liability primarily related to Millennium’s estimated share of remediation costs for two former paper mill sites and associated landfills, which are also part of the Kalamazoo River Superfund Site.  At September 30, 2008, the balance of the liability was $45 million.  Although no final agreement has been reached as to the ultimate remedy for these locations, Millennium has begun remediation activity related to these sites.

Millennium’s ultimate liability for the Kalamazoo River Superfund Site will depend on many factors that have not yet been determined, including the ultimate remedies selected, the determination of natural resource damages, the number and financial viability of the other PRPs, and the determination of the final allocation among the PRPs.

The balance, at September 30, 2008, of Lyondell remediation liabilities related to Millennium sites other than the Kalamazoo River Superfund Site was $37 million.

Litigation—On April 12, 2005, BASF Corporation (“BASF”) filed a lawsuit in New Jersey against Lyondell asserting various claims relating to alleged breaches of a PO sales contract and seeking damages in excess of $100 million.  Lyondell denies it breached the contract.  Lyondell believes the maximum refund due to BASF is $22.5 million on such PO sales and has paid such amount to BASF.  On August 13, 2007, the jury returned a verdict in favor of BASF in the amount of approximately $170 million (which includes the above $22.5 million).  On October 3, 2007, the judge determined that prejudgment interest on the verdict would be $36 million.  Lyondell is appealing this verdict and has posted a bond, which is collateralized by a $200 million letter of credit.  Lyondell does not expect the verdict to result in any material adverse effect on its business, financial position, liquidity or results of operations.

Together with alleged past manufacturers of lead-based paint and lead pigments for use in paint, Millennium has been named as a defendant in various legal proceedings alleging personal injury, property damage, and remediation costs allegedly associated with the use of these products.  The majority of these legal proceedings assert unspecified monetary damages in excess of the statutory minimum and, in certain cases, seek equitable relief such as abatement of lead-based paint in buildings.  Legal proceedings relating to lead pigment or paint are in various trial stages and post-dismissal settings, some of which are on appeal.

25

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.           Commitments and Contingencies – (Continued)

One legal proceeding relating to lead pigment or paint was tried in 2002.  On October 29, 2002, the judge in that case declared a mistrial after the jury declared itself deadlocked.  The sole issue before the jury was whether lead pigment in paint in and on Rhode Island buildings constituted a “public nuisance.”  The re-trial of this case began on November 1, 2005.  On February 22, 2006, a jury returned a verdict in favor of the State of Rhode Island finding that the cumulative presence of lead pigments in paints and coatings on buildings in the state constitutes a public nuisance; that a Millennium subsidiary, Millennium Holdings, LLC, and other defendants either caused or substantially contributed to the creation of the public nuisance; and that those defendants, including the Millennium subsidiary, should be ordered to abate the public nuisance.  On February 28, 2006, the judge held that the state could not proceed with its claim for punitive damages.  On February 26, 2007, the court issued its decision denying the post-verdict motions of the defendants, including the Millennium subsidiary, for a mistrial or a new trial.  The court concluded that it would enter an order of abatement and appoint a special master to assist the court in determining the scope of the abatement remedy.  On March 16, 2007, the court entered a final judgment on the jury’s verdict.  On March 20, 2007, the Millennium subsidiary and the other defendants filed a notice of appeal with the Rhode Island Supreme Court.  On December 18, 2007, the trial court appointed two special masters to serve as “examiners” and to assist the trial court in the proposed abatement proceedings.  On May 15, 2008, the Rhode Island Supreme Court heard oral argument on, among other things, Millennium’s appeal of the jury’s verdict in favor of the State of Rhode Island.  On July 1, 2008, the Rhode Island Supreme Court unanimously reversed the jury’s verdict and subsequent judgment against Millennium and the other defendants.  The Rhode Island Supreme Court’s verdict effectively ends this legal proceeding.

Millennium’s defense costs to date for lead-based paint and lead pigment litigation largely have been covered by insurance.  Millennium has insurance policies that potentially provide approximately $1 billion in indemnity coverage for lead-based paint and lead pigment litigation.  Millennium’s ability to collect under the indemnity coverage would depend upon, among other things, the resolution of certain potential coverage defenses that the insurers are likely to assert and the solvency of the various insurance carriers that are part of the coverage block at the time of such a request.

While Lyondell believes that Millennium has valid defenses to all the lead-based paint and lead pigment proceedings and is vigorously defending them, litigation is inherently subject to many uncertainties.  Any liability that Millennium may ultimately incur, net of any insurance or other recoveries, cannot be estimated at this time.

Indemnification—Lyondell and its subsidiaries are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation of joint ventures.  For example, Lyondell entered into indemnification arrangements in connection with the transfer of assets and liabilities from Atlantic Richfield Company to Lyondell prior to Lyondell’s initial public offering and in connection with Lyondell’s acquisition of the outstanding shares of ARCO Chemical Company; Equistar and its owner companies (including Lyondell and Millennium) entered into indemnification arrangements in connection with the formation of Equistar; and Millennium entered into indemnification arrangements in connection with its demerger from Hanson plc.  Pursuant to these arrangements, Lyondell and its subsidiaries provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions.  These indemnification arrangements typically include provisions pertaining to third party claims relating to environmental and tax matters and various types of litigation.  As of September 30, 2008, Lyondell has not accrued any significant amounts for such indemnification obligations.  Lyondell cannot determine with certainty the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.

26

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.           Commitments and Contingencies – (Continued)

Other—Lyondell and its joint ventures are, from time to time, defendants in lawsuits and other commercial disputes, some of which are not covered by insurance.  Many of these suits make no specific claim for relief.  Although final determination of any liability and resulting financial impact with respect to any such matters cannot be ascertained with any degree of certainty, management does not believe that any ultimate uninsured liability resulting from these matters will, individually or in the aggregate, have a material adverse effect on the financial position, liquidity or results of operations of Lyondell.

General—In the opinion of management, the matters discussed in this note are not expected to have a material adverse effect on the financial position or liquidity of Lyondell.  However, the adverse resolution in any reporting period of one or more of these matters could have a material impact on Lyondell’s results of operations for that period, which may be mitigated by contribution or indemnification obligations of others, or by any insurance coverage that may be available.

17.           Stockholder’s Equity

Additional paid in capital was $455 million and $507 million as of September 30, 2008 and December 31, 2007, respectively.  The $52 million decrease was primarily due to adjustments of the Lyondell purchase price, which reduced LyondellBasell Industries’ investment in Lyondell.

The tax benefits of stock options exercised during the nine months ended September 30, 2007 were $20 million.

18.           Comprehensive Income (Loss)

The components of comprehensive income (loss) were as follows:

	Successor			Predecessor		Successor			Predecessor
	For the three months ended September 30,					For the nine months ended September 30,
Millions of dollars	2008			2007		2008			2007
Net income (loss)	$	(232	)	$	206	$	(653	)	$	401
Other comprehensive income, net of tax:
Continuing operations:
Foreign currency translation, net of tax		(79	)		39		(39	)		75
Derivative instruments		68			- -		66			- -
Changes in unrecognized employee benefit plan gains and losses		23			3		23			4
Discontinued operations:
Foreign currency translation		- -			- -		- -			17
Sale of discontinued operations		- -			- -		- -			(72	)
Total other comprehensive income		12			42		50			24
Comprehensive income (loss)	$	(220	)	$	248	$	(603	)	$	425

27

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19.           Segment and Related Information

At the time of the acquisition of Lyondell by LyondellBasell Industries, LyondellBasell Industries established new business segments.  Lyondell’s operations, which are managed as part of LyondellBasell Industries, are primarily in three of these segments:

·   Fuels, primarily manufacturing and marketing of refined petroleum products, including gasoline, ultra low sulfur diesel, jet fuel, aromatics, lubricants (“lube oils”), and gasoline blending components, such as methyl tertiary butyl ether (“MTBE”), ethyl tertiary butyl ether (“ETBE”) and alkylate;

·   Chemicals, primarily manufacturing and marketing of ethylene; its co-products, including propylene, butadiene and aromatics, which include benzene and toluene; ethylene derivatives, including ethylene glycol, ethylene oxide (“EO”) and other EO derivatives, as well as ethanol; acetyls, including vinyl acetate monomer, acetic acid and methanol; PO; PO co-products, including styrene and tertiary butyl alcohol (“TBA”), TBA derivative, isobutylene; PO derivatives, including propylene glycol, propylene glycol ethers and butanediol; fragrance and flavors chemicals; and

·   Polymers, including manufacturing and marketing of polyethylene, including high density polyethylene, low density polyethylene and linear low density polyethylene, and polypropylene.

Segment operating results reported to management reflect cost of sales determined under the FIFO method of accounting for inventory.  These FIFO-basis operating results are reconciled to LIFO-basis operating results in the following table.  Sales between segments are made primarily at prices approximating prevailing market prices, with the exception of sales of MTBE and ETBE sourced from PO co-products, representing approximately 75% of MTBE/ETBE capacity, which are sold by the chemicals segment to the fuels segment at a formula-based cost.

On September 1, 2008, Lyondell completed the sale of its TDI business, including production assets in Pont-du-Claix, France, related inventories, contracts, customer lists and intellectual property receiving proceeds of $113 million.  As a result, Lyondell’s TDI business, which was part of Lyondell’s chemicals segment, is presented as discontinued operations in Lyondell’s consolidated statements of income and cash flows (see Notes 1 and 5) and therefore is excluded from the operations of the chemicals segment below.

On May 15, 2007, Lyondell completed the sale of its worldwide inorganic chemicals business (see Note 5) and substantially all of the inorganic chemicals segment was reclassified as a discontinued operation.

28

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19.           Segment and Related Information – (Continued)

Summarized financial information concerning reportable segments is shown in the following table for the periods presented:

Millions of dollars	Fuels			Chemicals			Polymers			Other			Total
Successor
For the three months ended September 30, 2008:
Sales and other operating revenues:
Customer	$	3,568		$	3,147		$	984		$	- -		$	7,699
Intersegment		252			749			- -			(1,001	)		- -
		3,820			3,896			984			(1,001	)		7,699
Segment operating loss		(251	)		(71	)		(33	)		(55	)		(410	)
Adjustment to LIFO basis														446
Operating income														36
Loss from equity investments		- -			(2	)		- -			- -			(2	)
Predecessor
For the three months ended September 30, 2007:
Sales and other operating revenues:
Customer	$	3,349		$	3,011		$	903		$	6		$	7,269
Intersegment		260			654			- -			(914	)		- -
		3,609			3,665			903			(908	)		7,269
Segment operating income (loss)		372			166			62			(29	)		571
Adjustment to LIFO basis														(145	)
Operating income														426

29

LYONDELL CHEMICAL COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19.           Segment and Related Information – (Continued)

Millions of dollars	Fuels		Chemicals			Polymers			Other			Total
Successor
For the nine months ended September 30, 2008:
Sales and other operating revenues:
Customer	$	11,683	$	9,641		$	2,989		$	- -		$	24,313
Intersegment		756		2,260			- -			(3,016	)		- -
		12,439		11,901			2,989			(3,016	)		24,313
Segment operating income (loss)		509		33			(68	)		(71	)		403
Adjustment to LIFO basis													(223	)
Operating income													180
Loss from equity investments		- -		(5	)		- -			- -			(5	)
Predecessor
For the nine months ended September 30, 2007:
Sales and other operating revenues:
Customer	$	8,851	$	8,896		$	2,595		$	6		$	20,348
Intersegment		699		1,734			- -			(2,433	)		- -
		9,550		10,630			2,595			(2,427	)		20,348
Segment operating income (loss)		1,022		603			98			(22	)		1,701
Adjustment to LIFO basis													(439	)
Operating income													1,262
Income from equity investments		- -		2			- -			- -			2

Sales and other operating revenues and operating income in the “Other” column above include elimination of intersegment transactions and businesses that are not reportable segments.  The 2007 segment information presented above has been reclassified to conform with the new business segments created during the acquisition of Lyondell by LyondellBasell Industries.

20.           Subsequent Event

As part of LyondellBasell Industries’ efforts to reduce fixed costs and respond to significant market volatility, LyondellBasell Industries has determined that it is necessary to pursue a reorganization which will decrease the size of the top levels of LyondellBasell Industries, including Lyondell, and streamline the remaining levels.  The program is expected to result in approximately a 15 percent reduction in the total workforce with potential impacts on production and office facilities in every region, aside from the fastest-growing areas, over the next 12 to 18 months, but the benefits of these programs may not be realized until later periods.  The Company expects to record a charge related to severance and related costs associated with the reorganization in the fourth quarter of 2008 and charges related to other costs, associated with the potential impacts to the Company’s assets, as incurred.

30

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with information contained in the Consolidated Financial Statements of Lyondell Chemical Company, together with its consolidated subsidiaries (collectively, “Lyondell” or “the Company”), and the notes thereto contained elsewhere in this report.  References to “LCC” are to Lyondell Chemical Company without its consolidated subsidiaries.

Lyondell’s consolidated operating results are determined using the last-in, first-out (“LIFO”) method of accounting for certain inventory and are discussed in the following “Overview” and “Results of Operations” sections.  This discussion is supplemented by a discussion of Lyondell’s segment operating results under the “Segment Analysis” heading of “Results of Operations.”  For purposes of evaluating segment results, management reviews operating results determined using the first-in, first-out (“FIFO”) method of accounting for inventory.

In addition to comparisons of current operating results with the same period in the prior year, Lyondell has included, as additional disclosure, certain “trailing quarter” comparisons of third quarter 2008 operating results to second quarter 2008 operating results.  Lyondell’s businesses are highly cyclical, in addition to experiencing some less significant seasonal effects.  Trailing quarter comparisons may offer important insight into current business directions.

The consolidated statement of income for the three and nine months ended September 30, 2008 reflects post-acquisition depreciation and amortization expense based on the new value of the related assets and interest expense that resulted from the debt used to finance the acquisition; therefore, the financial information for the periods prior to and subsequent to the acquisition on December 20, 2007 is not generally comparable.  To indicate the application of a different basis of accounting for the period subsequent to the acquisition, the 2007 financial information presents separately the period prior to the acquisition (“Predecessor”) and the period after the acquisition (“Successor”).

References to industry benchmark prices or costs, including the weighted average cost of ethylene production, are generally to industry prices and costs reported by Chemical Marketing Associates, Incorporated (“CMAI”), except that crude oil and natural gas benchmark price references are to industry prices reported by Platts, a reporting service of The McGraw-Hill Companies.

Lyondell’s operating income in the periods under review has been adversely affected by lost production at the Houston refinery attributable to a major planned maintenance turnaround, an FCC unit upgrade and catalyst changes; lost production due to unplanned maintenance on the Houston refinery’s FCC unit; an incident involving a contractor company’s crane at the Houston refinery in July 2008, which lead to a re-scoping and time extension of a major maintenance turnaround, and lost production during an approximately two to three week period in September 2008 when substantially all of the Company‘s U.S. Gulf Coast operations were temporarily off-line as a result of Hurricane Ike.

We present below the estimated effect of this lost production on our operating income.  The effect on operating income is calculated by multiplying the profit margins being achieved by the relevant facility during or prior to the relevant period by the estimated amount of lost production volume in that period and may not give effect to any market driven increase or decrease in profit margins in the relevant periods or any potential recovery of lost production volume in future periods.  The estimated effect on operating income is provided for illustrative purposes only, and does not purport to present what Lyondell’s actual results of operations would have been in the absence of the events described above.

ACQUISITION

On December 20, 2007, Basell AF S.C.A. (“Basell”) indirectly acquired the outstanding common shares of Lyondell.  As a result, Lyondell became an indirect wholly owned subsidiary of Basell, and Basell was renamed LyondellBasell Industries AF S.C.A. (together with its consolidated subsidiaries, “LyondellBasell Industries” and without Lyondell, the “Basell Group”).

31

OVERVIEW

General—Lyondell is a refiner of heavy, high sulfur crude oil, a significant producer of gasoline blending components, a manufacturer of chemicals and a North American manufacturer of plastics.

As a result of the acquisition by LyondellBasell Industries, Lyondell reassessed segment reporting based on the current management structure, including the impact of the integration of Lyondell’s businesses into the LyondellBasell Industries’ portfolio of businesses.  Based on this analysis, Lyondell concluded that management is focused on the fuels segment, the chemicals segment and the polymers segment.  See “Segment Analysis” below for a description of the segments.

On September 1, 2008, Lyondell completed the sale of its toluene diisocyanate (“TDI”) business, including production assets in Pont-du-Claix, France, related inventories, contracts, customer lists and intellectual property receiving proceeds of $113 million.  The sales price will be adjusted based on the agreed upon value of working capital at the closing date.  As a result, the TDI business, which is part of Lyondell’s chemicals segment, is reported as a discontinued operation.

On May 15, 2007, Lyondell completed the sale of its worldwide inorganic chemicals business in a transaction valued at $1.3 billion, including the acquisition of working capital and assumption of certain liabilities directly related to the business.  As a result, the inorganic chemicals business segment was reported as a discontinued operation in 2007.

Unless otherwise indicated, the following discussion of Lyondell’s operating results excludes the TDI and the inorganic chemicals businesses.

The third quarter 2008 was marked by a number of significant events, including slowing world economic growth, decreasing crude oil prices, two U.S. Gulf Coast hurricanes and a crisis in global financial markets.  The U.S. Gulf Coast hurricanes, Gustav and Ike, disrupted Gulf Coast refining and chemical industry operations during late August and mid-September 2008, resulting in a significant loss of third quarter 2008 North American industry production.  Underlying operating results reflected the crude oil price decrease, which led to lower prices for crude oil-related raw materials used in the production of chemical products.  Although they decreased during the third quarter 2008, crude oil prices averaged higher compared to the third quarter 2007.

In the first nine months of 2008 compared to the same period in 2007, heavy crude refining margins benefited from strong demand for diesel fuel and the cost differential between light crude oil and heavy crude oil, while margins for fuels products, such as methyl tertiary butyl ether (“MTBE”) and ethyl tertiary butyl ether (“ETBE”), benefited from higher gasoline prices.  Higher average prices for crude oil and natural gas liquids contributed to higher raw material costs for chemical producers, putting pressure on chemical product margins, particularly ethylene.  Fuels, chemicals and polymers markets in the U.S. experienced some weakening of demand during the 2008 period.

Lyondell’s third quarter 2008 operating results were negatively impacted by the effects of planned and unplanned outages related to Hurricane Ike and a maintenance turnaround at the Houston refinery, all of which resulted in lost production and higher costs during the third quarter 2008.  During September 2008, Lyondell suspended refining and chemical operations at almost all of its U.S. Gulf Coast plants as a result of the hurricane.  The duration of the outage related to the scheduled Houston refinery turnaround increased due to the hurricane and an incident involving a contractor company’s crane.

In addition to the negative effects of the hurricane and the refinery turnaround, Lyondell’s operating results for the first nine months of 2008, compared to the same period in 2007, reflected the negative effect of significantly higher average raw material costs.  Additionally, as a result of the acquisition, higher debt levels resulted in an increase in net interest expense.

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RESULTS OF OPERATIONS

Revenues—Lyondell’s revenues of $7,699 million in the third quarter 2008 were 6% higher compared to revenues of $7,269 million in the third quarter 2007, and revenues of $24,313 million in the first nine months of 2008 were 19% higher compared to $20,348 million in the first nine months of 2007, due to higher average sales prices across all business segments, particularly in the fuels segment partly offset by lower sales volumes.  Concurrent with the acquisition by LyondellBasell Industries, Lyondell sold certain of its non-U.S. subsidiaries to other subsidiaries of the Basell Group.  Sales of these subsidiaries for the quarter and nine months ending September 30, 2007 were $619 million and $1,835 million, respectively.

Cost of Sales—Lyondell’s cost of sales of $7,532 million in the third quarter 2008 was 13% higher compared to $6,637 million in the third quarter 2007, and cost of sales of $23,739 million in the first nine months of 2008 was 28% higher compared to $18,504 million in the first nine months of 2007.  Cost of sales increases in the third quarter and the first nine months of 2008 were primarily due to escalation in raw material and energy costs across all business segments.  Cost of sales of the non-U.S. subsidiaries sold to the Basell Group was $566 million and $1,646 million, respectively, for the quarter and nine months ending September 30, 2007.

SG&A Expenses—Selling, general and administrative (“SG&A”) expenses were $115 million in the third quarter 2008 compared to $188 million in the third quarter 2007 and $344 million in the first nine months of 2008 compared to $527 million in the first nine months of 2007.  The decreases were primarily due to lower employee bonus and long-term incentive expense. The effect of the sale of certain non-U.S. subsidiaries to LyondellBasell Industries in the acquisition was substantially offset by higher legal expenses and higher losses on the sale of accounts receivable due to the significantly higher volume of such sales in the 2008 periods.

Operating Income—Lyondell had operating income of $36 million in the third quarter 2008 compared to $426 million in the third quarter 2007 and $180 million in the first nine months of 2008 compared to $1,262 million in the first nine months of 2007.  The decreases were primarily attributable to the effect of escalating raw material costs, particularly in the second quarter 2008, and the negative effects of the planned and unplanned outages related to the Houston refinery maintenance turnarounds and Hurricane Ike.  In addition, as a result of the adjustment of Lyondell’s assets to fair value after the acquisition, depreciation and amortization expense increased $110 million and $336 million in the third quarter and first nine months of 2008 compared to the same periods in 2007.  Operating income for the quarter and nine months ended September 30, 2007 included $70 million and $209 million, respectively, of operating income of the non-U.S. subsidiaries sold to the Basell Group.  Operating results are reviewed further in the “Segment Analysis” section below.

Interest Expense—Interest expense was $424 million in the third quarter 2008 compared to $144 million in the third quarter 2007 and $1,255 million in the first nine months of 2008 compared to $499 million in the first nine months of 2007.  Lyondell had related party interest expense of $175 million and $550 million, respectively, in the third quarter and first nine months of 2008.  The increase in interest expense was attributable to an approximately $13.5 billion increase in debt since September 30, 2007 primarily as a result of the acquisition of Lyondell by LyondellBasell Industries.  

Other Income (Expense), Net—Lyondell had other income, net, of $21 million and $24 million, respectively, in the third quarter of 2008 and 2007 and other income, net, of $14 million and other expense, net, of $15 million, respectively, in the first nine months of 2008 and 2007.  Other income in all periods primarily reflected foreign exchange gains, which were offset in the first nine months of 2007 by net expenses related to debt prepayments.

Income Tax—The estimated annual effective income tax rate was 32%  for the first nine months of 2008 and 2007.  The 2008 estimated annual effective income tax rate was lower than the statutory 35% rate primarily due to the effects of non-U.S. operations. The lower estimated annual effective income tax rate for the 2007 period was primarily due to a benefit from newly-enacted Texas state legislation, which allowed the carryforward of certain tax losses for state income tax purposes.

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Income (Loss) from Continuing Operations—The following table summarizes the major components contributing to income (loss) from continuing operations.

	Successor			Predecessor			Successor			Predecessor
	For the three months ended						For the nine months ended
	September 30,						September 30,
Millions of dollars	2008			2007			2008			2007
Operating income	$	36		$	426		$	180		$	1,262
Interest expense, net		(393	)		(138	)		(1,178	)		(473	)
Other, net		19			24			9			(13	)
Provision for (benefit from) income taxes		(105	)		115			(321	)		245
Income (loss) from continuing operations	$	(233	)	$	197		$	(668	)	$	531

As described below under “Segment Analysis,” in the third quarter and first nine months of 2008, significantly higher average costs of raw materials were only partially offset by higher average product sales prices, contributing to the lower overall operating results compared to the same periods in 2007.  In addition, higher debt levels, as a result of the acquisition, contributed to the higher interest expense.

Income from Discontinued Operations, Net of Tax—Income from discontinued operations, net of tax, was $1 million in the third quarter 2008 compared to $9 million in the third quarter 2007 and $15 million in the first nine months of 2008 compared to a loss of $130 million in the first nine months of 2007.  The loss in the first nine months of 2007 was primarily due to the May 2007 sale of the inorganic chemicals business and reflected the unfavorable tax effect of nondeductible capital losses resulting from the sale.

Third Quarter 2008 versus Second Quarter 2008

Lyondell had a loss from continuing operations of $233 million in the third quarter 2008 compared to a loss of $202 million in the second quarter 2008.  Underlying operating results improved benefiting from the decrease in crude oil prices, partly offset by seasonally lower fuels margins. However, the third quarter 2008 was negatively affected by an estimated $330 million negative effect of lost production due to planned and unplanned outages related to the maintenance turnaround at the Houston refinery and Hurricane Ike and related costs of $43 million, including a $7 million impairment of the carrying value of assets.  The second quarter 2008 was negatively affected by an estimated $147 million as a result of lost production due to operational outages at the Houston refinery, including the fluid catalytic cracker (“FCC”) unit.

Segment Analysis

At the time of the acquisition of Lyondell by LyondellBasell Industries, Lyondell established new business segments through which its operations are managed.  The 2007 information has been reclassified to reflect current business segments.  Lyondell’s operations are primarily in three reportable segments: fuels, chemicals and polymers.

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For purposes of evaluating segment results, management reviews operating results, as presented below, determined using the FIFO method of accounting for inventory.  The following discussion is supplemental to the above “Overview” and “Results of Operations” sections, which discuss Lyondell’s consolidated operating results determined using the LIFO method of accounting for certain U.S. inventories.

	Successor			Predecessor			Successor			Predecessor
	For the three months ended						For the nine months ended
	September 30,						September 30,
	2008			2007			2008			2007
Millions of dollars
Sales and other operating revenues:
Fuels segment	$	3,820		$	3,609		$	12,439		$	9,550
Chemicals segment		3,896			3,665			11,901			10,630
Polymers segment		984			903			2,989			2,595
Other, including intersegment eliminations		(1,001	)		(908	)		(3,016	)		(2,427	)
Total	$	7,699		$	7,269		$	24,313		$	20,348
Operating income (loss):
Fuels segment	$	(251	)	$	372		$	509		$	1,022
Chemicals segment		(71	)		166			33			603
Polymers segment		(33	)		62			(68	)		98
Other, including intersegment eliminations		(55	)		(29	)		(71	)		(22	)
LIFO adjustment		446			(145	)		(223	)		(439	)
Total	$	36		$	426		$	180		$	1,262

Fuels Segment

Overview—In its fuels segment, Lyondell produces refined petroleum products, including gasoline, ultra low sulfur diesel, jet fuel, aromatics, lubricants and gasoline blending components, such as MTBE and ETBE and alkylate.

In the first nine months of 2008, benchmark heavy crude refining margins benefited from strong demand for diesel fuel and the differential between the cost of light crude oil and heavy crude oil. Benchmark margins for gasoline blending components, such as MTBE and ETBE, benefited from higher gasoline prices.

Third quarter 2008 fuels segment operating results reflected seasonally lower product margins, following the summer driving season, and the negative effects of the planned and unplanned outages due to the turnaround and the hurricane, which resulted in lost production and additional costs during the period.

Underlying operating results reflected a significant decrease in product margins compared to the third quarter 2007, due to the effect of the decrease in crude oil prices.  While sales prices declined with the decreasing crude oil prices in the third quarter 2008, the cost of sales reflected higher-priced product sold from inventory.

Lyondell scheduled a maintenance turnaround at the Houston refinery in the third quarter 2008 for one of the refinery’s crude trains and coker units.  As a result of an incident early in the quarter involving a contractor company’s crane and Hurricane Ike later in the quarter, the coker unit was down through the end of the third quarter 2008, and is scheduled to restart in early December 2008.

In addition to the planned and unplanned outages in the third quarter, operating results in the 2008 period were negatively impacted by an unplanned outage of a FCC unit and other operating units at Houston Refining, all of which resulted in lost production and additional maintenance costs.  The first nine months of 2007 included a major planned maintenance turnaround as well as planned and unplanned outages, which negatively impacted sales volumes and costs.

See “Financial Condition-Liquidity and Capital Resources” regarding the July 2008 incident at the Houston refinery.

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The following table sets forth the fuels segment’s sales and other operating revenues, operating income and sales volumes for refined products and certain gasoline blending components.

	Successor			Predecessor		Successor		Predecessor
	For the three months ended					For the nine months ended
	September 30,					September 30,
Millions of dollars	2008			2007		2008		2007
Sales and other operating revenues	$	3,820		$	3,609	$	12,439	$	9,550
Operating income (loss)		(251	)		372		509		1,022
Sales volumes, in millions
Gasoline blending components – MTBE/ETBE (gallons)		115			306		337		878
Thousands of barrels per day
Refined products sales volumes:
Gasoline		150			149		133		122
Diesel and heating oil		62			85		76		82
Jet fuel		9			17		13		20
Aromatics		1			7		3		7
Other refined products		73			118		107		127
Total refined products sales volumes		295			376		332		358
Crude processing rates		143			271		227		255
Market margins - $ per barrel
WTI – 2-1-1		15.80			11.66		13.50		14.54
WTI Maya		11.20			12.31		16.35		11.51
Total		27.00			23.97		29.85		26.05

Revenues—The fuels segment had revenues of $3,820 million in the third quarter 2008, which were 6% higher compared to revenues of $3,609 million in the third quarter 2007, while revenues of $12,439 million in the first nine months of 2008 were 30% higher compared to revenues of $9,550 million in the first nine months of 2007.  The increases in the third quarter and first nine months of 2008 were primarily due to the effects of higher average refined product and gasoline blending component sales prices, partially offset by decreases in sales volumes of gasoline blending components and refining products.

The lower refining product sales volumes were due to the planned and unplanned outages.  The decreases in sales volumes of gasoline blending components during the third quarter and first nine months of 2008 were primarily due to the sale of certain of Lyondell’s non-U.S. subsidiaries to other subsidiaries of the Basell Group in late 2007.

Operating Income—The fuels segment had an operating loss of $251 million in the third quarter 2008 compared to operating income of $372 million in the third quarter 2007 and had operating income of $509 million in the first nine months of 2008 compared to $1,022 million in the first nine months 2007.  The decrease in operating income in the third quarter and first nine months of 2008 compared to the same 2007 periods was due to lower product margins and the negative effects of the planned and unplanned outages related to the maintenance turnaround and the hurricane.

The lower product margins in the 2008 periods reflected the effects of the decrease in crude oil prices in the third quarter 2008.  Sales prices declined with the decreasing crude oil prices in the third quarter 2008, while the cost of sales reflected higher-priced product sold from inventory in the 2008 periods.  During the same 2007 periods, sales prices increased more than the cost of sales, as some of the raw material cost increases were deferred and carried in inventory.

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The third quarter was negatively affected by an estimated $200 million effect of lost production due to the planned and unplanned outages, and related costs of $13 million.  In addition to the third quarter 2008 effects of the extended maintenance turnaround and the hurricane, lower operating income during the first nine months of 2008 compared to the first nine months of 2007 reflected an estimated $187 million effect of lost production due to unplanned maintenance on the refinery’s FCC and other operating units, including $16 million of higher costs, partially offset by higher margins for diesel, jet fuel and gasoline blending components.  The first nine months of 2007 were negatively affected by an estimated $195 million effect of a major planned maintenance turnaround and other outages, which negatively affected sales volumes and costs in that period.

Third Quarter 2008 versus Second Quarter 2008

The fuels segment had an operating loss of $251 million in the third quarter 2008 compared to operating income of $521 million in the second quarter 2008.  The third quarter reflected lower product margins, due to seasonality and the effect of the decrease in crude oil prices.  The third quarter 2008 were negatively affected by the negative effect of the planned and unplanned outages at the Houston refinery related to the maintenance turnaround and Hurricane Ike, which resulted in an estimated $200 million of lost production and related costs of $13 million.  The second quarter was negatively affected by an estimated $147 million as a result of lost production due to operational outages at the Houston refinery, including the FCC unit.  Crude processing rates for the Houston refinery were 143 thousand barrels per day in the third quarter 2008 and 273 thousand barrels per day in the second quarter 2008.

Chemicals Segment

Overview—In its chemicals segment, Lyondell manufactures and markets ethylene and its co-products, primarily propylene, butadiene and aromatics, which include benzene and toluene; ethylene derivatives, including ethylene glycol (“EG”), ethylene oxide (“EO”) and other EO derivatives, as well as ethanol; acetyls, including vinyl acetate monomer (“VAM”), acetic acid and methanol; propylene oxide (“PO”); PO co-products, including styrene monomer (“styrene” or “SM”) and tertiary butyl alcohol (“TBA”); TBA derivative, isobutylene; PO derivatives, including propylene glycol (“PG”), propylene glycol ethers (“PGE”) and butanediol (“BDO”); and fragrance and flavors chemicals.

During a substantial portion of the first nine months of 2008 compared to the same period in 2007, U.S. ethylene producers using crude oil-based raw materials experienced lower profitability as increases in benchmark ethylene and co-product sales prices did not keep pace with rapidly rising raw material costs.  As discussed below, benchmark prices of both crude oil-based liquid raw materials and natural gas liquids-based raw materials averaged higher in the 2008 periods, with crude oil prices reaching record levels during the second quarter 2008.

Prior to the U.S. Gulf Coast hurricanes, which negatively affected third quarter 2008 U.S. operating rates and ethylene demand, U.S. ethylene operating rates, including the 2007 periods, were in the 90% to 95% range.  Demand for ethylene in the U.S. decreased an estimated 18% and 8% in the third quarter and first nine months of 2008, respectively, compared to the same periods in 2007.  Markets for ethylene derivatives and ethylene co-products and PO and PO derivatives began to experience weaker demand in 2008, and styrene markets continued to be oversupplied compared to the same periods in 2007.

Although benchmark crude oil prices decreased during the third quarter 2008, leading to lower sales prices, chemicals segment operating results reflected the effect of higher-priced product sold from inventory.  The chemicals segment’s underlying operating results declined in the first nine months of 2008 compared to the same 2007 periods due to significantly higher raw material costs including the negative effect of selling inventories recorded at fair value in the acquisition of Lyondell.  Operating results were also negatively affected by Hurricane Ike, which resulted in lost production and additional costs during the third quarter and first nine months of 2008.

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Ethylene Raw Materials—Benchmark crude oil and natural gas prices generally have been indicators of the level and direction of movement of raw material and energy costs for ethylene and its co-products in the chemicals segment.  Ethylene and its co-products are produced from two major raw material groups:

·   crude oil-based liquids (“liquids” or “heavy liquids”), including naphthas, condensates, and gas oils, the prices of which are generally related to crude oil prices; and

·   natural gas liquids (“NGLs”), principally ethane and propane, the prices of which are generally affected by natural gas prices.

Although the prices of these raw materials are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly.

Lyondell has the ability to shift its ratio of raw materials used in the production of ethylene and its co-products to take advantage of the relative costs of heavy liquids and NGLs.  However, this ability is limited and, in the first nine months of 2008, was not sufficient to offset the significant differential increase in the price of liquids versus NGLs and the failure of the co-product price increases to offset this differential increase.  During the third quarter 2008, the price differential between liquids and NGLs decreased as crude oil prices began to decline, making liquids more competitive.

The following table shows the average U.S. benchmark prices for crude oil and natural gas for the applicable three-month and nine-month periods, as well as benchmark U.S. sales prices for ethylene and propylene, which Lyondell produces and sells or consumes internally.  The benchmark weighted average cost of ethylene production, which is reduced by co-product revenues, is based on CMAI’s estimated ratio of heavy liquid raw materials and NGLs used in U.S. ethylene production and is subject to revision.

	Average Benchmark Price And Percent Change Versus Prior Year Period Average
	For the three months ended							For the nine months ended
	September 30,							September 30,
	2008		2007		Change			2008		2007		Change
Crude oil – dollars per barrel		117.83		75.40		56	%		113.24		66.09		71	%
Natural gas – dollars per million BTU’s		9.28		6.19		50	%		9.46		6.67		42	%
NWE Naphtha – dollars per barrel		109.72		74.97		46	%		106.50		70.35		51	%
Weighted average cost of ethylene production – cents per pound		52.22		38.73		35	%		52.36		33.80		55	%
Ethylene – cents per pound		68.00		50.17		36	%		64.94		44.94		45	%
Propylene – cents per pound		76.83		50.83		51	%		68.22		47.96		42	%

While the increase in natural gas prices was not as dramatic as that of crude oil, NGL prices were significantly higher during the third quarter and the first nine months of 2008 compared to the third quarter and the first nine months of 2007.  These increases were indicative of the pressure on Lyondell’s raw material costs, both crude oil-based and NGL-based.

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The following table sets forth the chemicals segment’s sales and other operating revenues, operating income and selected product sales volumes.

	Successor			Predecessor		Successor		Predecessor
	For the three months ended					For the nine months ended
	September 30,					September 30,
	2008			2007		2008		2007
Millions of dollars
Sales and other operating revenues	$	3,896		$	3,665	$	11,901	$	10,630
Operating income (loss)		(71	)		166		33		603
Sales volumes, in millions
Ethylene and derivatives (pounds)		2,500			2,952		8,203		8,934
Intersegment sales to polymers included above (pounds)		1,143			1,335		3,680		4,064
Other ethylene derivatives included above (pounds)		409			551		1,514		1,703
Ethylene co-products:
Non-aromatics (pounds)		1,575			1,951		5,063		5,985
Aromatics (gallons)		52			89		201		271
PO and derivatives (pounds)		410			783		1,570		2,445
Co-product styrene (pounds)		529			971		1,882		2,949

Revenues—Revenues of $3,896 million in the third quarter 2008 were 6% higher compared to revenues of $3,665 million in the third quarter 2007, while revenues of $11,901 million in the first nine months of 2008 were 12% higher compared to revenues of $10,630 million in the first nine months of 2007.  Revenues increased in both 2008 periods due to higher average sales prices, partially offset by the effect of lower sales volumes.

Ethylene, ethylene derivatives and ethylene co-products sales volumes in the third quarter and the first nine months of 2008 were lower compared to the same periods of 2007 as a result of lost production due to the suspension of operations for Hurricane Ike.  In addition, ethylene co-product sales volumes decreased due to a shift to NGL-based raw materials, which yield lower co-products volumes than crude-oil based raw materials.  PO, PO derivatives and styrene sales volumes in the third quarter and first nine months of 2008 were lower compared to the same periods in 2007 primarily due to the sale of certain of Lyondell’s non-U.S. subsidiaries to other subsidiaries of the Basell Group in late 2007.  Revenues of these subsidiaries were $394 million and $1,255 million in the third quarter and the first nine months of 2007, respectively.

Operating Income—The chemicals segment had an operating loss of $71 million in the third quarter 2008 compared to operating income of $166 million in the third quarter 2007 and operating income of $33 million in the first nine months of 2008 compared to $603 million in the first nine months of 2007.  The decreases in operating income were primarily due to lower ethylene product margins and lower sales volumes in the 2008 periods.

Sales prices declined with the decreasing crude oil prices in the third quarter 2008, while the cost of sales reflected higher-priced product sold from inventory in the 2008 periods.  During the same 2007 periods, sales prices increased more than the cost of sales, as some of the raw material cost increases were deferred and carried in inventory.

The third quarter and first nine months of 2008 included an estimated $120 million negative impact of lost production due to the suspension of operations for Hurricane Ike and related costs of $26 million, including a $7 million charge for the impairment of the carrying value of assets.  Operating results for the first nine months of 2008 were affected by a $77 million unfavorable effect of selling inventories that were recorded at fair value as a result of the Lyondell acquisition.  The lower results were also due to the sale of certain of Lyondell’s non-U.S. subsidiaries to other subsidiaries of the Basell Group.  Operating income of these subsidiaries was $44 million and $144 million in the third quarter and the first nine months of 2007, respectively.

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Third Quarter 2008 versus Second Quarter 2008

The chemicals segment had an operating loss of $71 million in the third quarter 2008 compared to operating income of $148 million in the second quarter 2008.  The third quarter was negatively affected by the lost production, estimated at $120 million, and related costs of $26 million,  including a $7 million charge for impairment of the carrying value of assets, resulting from Hurricane Ike.  The remaining decrease of $73 million reflects the effects of lower product margins and lower sales volumes in the third quarter 2008.  The lower third quarter product margins reflected sales prices that decreased during the quarter more than related costs of sales, primarily for ethylene.  The benchmark price of ethylene decreased $11.50 per pound, or 18%, from July to September 2008.

Polymers Segment

Overview—The polymers segment includes polyethylene, including high density polyethylene (“HDPE”), low density polyethylene (“LDPE”) and linear low density polyethylene (“LLDPE”), and polypropylene.

During the first nine months of 2008 compared to the same 2007 period, U.S. markets experienced weaker demand with the third quarter 2008 U.S. Gulf Coast hurricanes having a significant negative effect on North American sales in that period.  Total U.S. demand for polyethylene decreased an estimated 11% in the third quarter and 4% in the first nine months of 2008 compared to the same periods in 2007.  Prior to the third quarter 2008, polyethylene operating rates, including the 2007 periods, were in the 85% to 90% range.  Higher raw material costs in the first nine months of 2008 compared to the same 2007 period put pressure on polymers product margins.

Polymers segment operating results in the third quarter and first nine months of 2008 compared to the same 2007 periods were negatively affected by lower product sales volumes and margins.  The lower margins were primarily due to higher raw material costs, including, in the first nine months of 2008, an unfavorable effect from selling inventories that were recorded at fair value as a result of the Lyondell acquisition.

The following table sets forth the polymer segment’s sales and other operating revenues, operating income, product sales volumes and average benchmark market prices for HDPE.

	Successor			Predecessor		Successor			Predecessor
	For the three months ended					For the nine months ended
	September 30,					September 30,
Millions of dollars	2008			2007		2008			2007
Sales and other operating revenues	$	984		$	903	$	2,989		$	2,595
Operating income (loss)		(33	)		62		(68	)		98
Sales volumes, in millions
Polyethylene (pounds)		1,127			1,327		3,770			4,115
Polypropylene (pounds)		29			64		120			196
Average benchmark price
HDPE – cents per pound		100.67			76.00		92.44			69.89

Revenues—Revenues of $984 million in the third quarter 2008 were 9% higher compared to revenues of $903 million in the third quarter 2007, and revenues of $2,989 million in the first nine months of 2008 were 15% higher compared to $2,595 million in the first nine months of 2007.  The increases in both 2008 periods reflected higher average sales prices partially offset by the effect of lower sales volumes.  Sales volumes averaged 17% lower in the third quarter 2008 and 10% lower in the first nine months of 2008 compared to the same periods in 2007.

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Operating Income—The polymers segment had operating losses of $33 million and $68 million in the third quarter and first nine months of 2008, respectively, compared to operating income of $62 million and $98 million in the third quarter and first nine months of 2007, respectively.  The effect of lower sales volumes and lower product margins negatively affected profitability in the third quarter and first nine months of 2008.  The lower product margins reflected higher raw material costs that more than offset increases in average sales prices.  Operating results for the first nine months of 2008 also included a $24 million unfavorable effect of selling inventories during the first quarter of 2008 that were recorded at fair value.

Third Quarter 2008 versus Second Quarter 2008

The polymers segment had operating losses of $33 million in the third quarter 2008 and $16 million in the second quarter 2008.  The increased loss was primarily due to lower sales volumes and, to a lesser extent, lower product margins in the third quarter 2008 compared to second quarter 2008.

FINANCIAL CONDITION

Operating Activities—Operating activities of continuing operations used cash of $175 million in the first nine months of 2008 compared to providing cash of $894 million in the first nine months of 2007.  The $1,069 million decrease primarily reflected significantly lower operating results in 2008.

Changes in the main components of working capital used cash of $18 million in the first nine months of 2008 compared to $105 million in the first nine months of 2007.  The main components of working capital during 2008 reflected the disruptive effects of Hurricane Ike on the Company’s U.S. Gulf Coast operations and the planned and unplanned outages related to the Houston refinery turnaround, which resulted in lower sales volumes.  

In addition to turnaround-related expenditures, the Houston refinery had to purchase lighter grades of crude oil on less favorable credit terms during the turnaround.  A general tightening of trade credit in the industry also contributed to the decrease in liquidity.

The main components of working capital in the 2007 period primarily reflected the effects of escalating sales prices and raw material costs.

The use of cash indicated by changes in other, net in both periods reflected annual payments primarily of employee bonus awards and property taxes.

Investing Activities—Investing activities of continuing operations used cash of $1,314 million in the first nine months of 2008 and $571 million in the first nine months of 2007.  The $743 million increase primarily related to $1,002 million of advances to related parties, partially offset by proceeds from the sale of the toluene diisocyanate (“TDI”) business and reduced capital expenditures in 2008 compared to the 2007 period.

As a result of financial difficulties experienced by major financial institutions beginning in the latter part of the third quarter of 2008, Lyondell received notice that rights of redemption had been suspended with respect to a money market fund in which Lyondell invested approximately $174 million.  As of October 31, 2008, Lyondell had received $89 million and has been advised that additional redemptions are forthcoming.  Based on additional information, Lyondell has recorded a provision for an estimated loss of $5 million related to the money market fund and reclassified $169 million from cash and cash equivalents to short-term investments as of September 30, 2008.

On September 1, 2008, Lyondell completed the sale of its TDI business, including production assets in Pont-du-Claix, France, related inventories, contracts, customer lists and intellectual property, receiving proceeds of $113 million (see Note 5 to Consolidated Financial Statements).

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The following table summarizes capital expenditures and capital-related contributions to joint ventures as well as 2008 planned capital spending.

			Successor		Predecessor
			For the nine months ended
			September 30,
Millions of dollars	Plan 2008		2008		2007
Capital expenditures by segment:
Fuels	$	205	$	153	$	173
Chemicals, including contributions to PO Joint Ventures		193		123		187
Polymers		22		11		9
Other		8		5		3
Total capital expenditures		428		292		372
Less:
Contributions to PO Joint Ventures		8		13		12
Consolidated capital expenditures	$	420	$	279	$	360

The lower capital expenditure levels in the first nine months of 2008 compared to the same 2007 period primarily reflected a decrease in spending for environmental and regulatory requirements, as projects were completed or neared completion.

The first nine months of 2007 included $1,089 million of net cash proceeds from the sale of Lyondell’s worldwide inorganic chemicals business, which were used to reduce debt.  See Note 5 to the Consolidated Financial Statements.  In addition, the 2007 period included $94 million of acquisition-related tax payments and $97 million of payments to discontinued operations.

Investing activities of discontinued operations provided cash of $82 million in the first nine months of 2007.

Financing Activities—Financing activities of continuing operations provided cash of $1,510 million in the first nine months of 2008 and used cash of $1,404 million in the first nine months of 2007.

In the first nine months of 2008, Lyondell borrowed $1,063 million under the inventory-based credit facility, $728 million under the senior secured revolving credit facility and $56 million under LyondellBasell Industries’ European accounts receivable securitization program.

In April 2008, LyondellBasell Industries amended its €620 million ($888 million) accounts receivable securitization program to add certain Lyondell subsidiaries as sellers under the program.  As a result of the August 2008 Standard and Poor's Rating Service ("S&P") downgrade of LyondellBasell Industries’ corporate credit rating from B+ to B, LyondellBasell Industries has daily reporting requirements under the €620 million accounts receivable securitization facility, which could impact the availability of funds under the facility in the future  (see Note 12 to the Consolidated Financial Statements).

During the first nine months of 2008, Lyondell made amortization payments totaling $110 million on term loans A and B.  Also in the first nine months of 2008, Lyondell called and repaid the remaining $31 million principal amount due under notes that were not tendered in December 2007, and paid premiums totaling $2 million and repaid $158 million related to Millennium’s 4% convertible debentures.

In addition, in the first nine months of 2008, Lyondell made payments totaling $44 million for fees primarily related to the April 2008 debt amendments described in the “Debt Agreement Amendments” section of “Liquidity and Capital Resources” below.

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In March 2008, LyondellBasell Industries entered into a senior unsecured $750 million, eighteen-month revolving credit facility, under which Lyondell and a subsidiary of the Basell Group are borrowers.  The $750 million revolving credit facility is in addition to the existing credit facilities available to LyondellBasell Industries and is provided to LyondellBasell Industries by Access Industries Holdings, LLC, an affiliate of Access Industries, which indirectly owns LyondellBasell Industries.  The revolving credit facility has substantially the same terms as the Senior Secured Credit Facility except that it is unsecured and is not guaranteed by the subsidiaries of LyondellBasell Industries.

As of September 30, 2008, there were no borrowings outstanding under the facility.  At each borrower’s option, loans under the revolving credit facility bear interest at rates equal to London Interbank Offered Rate (“LIBOR”) plus 6% or the higher of the (i) federal funds rate plus 0.5% and (ii) prime rate, plus, in each case, 5%.  Interest rates may be adjusted, from time to time, based upon the First Lien Senior Secured Leverage Ratio as calculated at such time and as further described in the revolving credit facility.

In the first nine months of 2007, Lyondell repaid $278 million principal amount of LCC’s 11.125% Senior Secured Notes due 2012, paying a premium of $18 million.  In addition, Lyondell issued $510 million principal amount of LCC 6.875% Senior Unsecured Notes due 2017, paying debt issuance costs of $8 million, and repaid, at par, the outstanding $500 million principal amount of LCC’s 10.875% Senior Subordinated Notes due 2009.  Lyondell subsequently repaid $510 million principal amount of the 6.875% Senior Unsecured Notes due 2017 in December 2007 and paid a premium of $79 million.  In addition, Lyondell repaid $13 million principal amount of the LCC term loan due 2013.

In the first nine months of 2007, Equistar repaid $300 million principal amount of its 10.125% Senior Notes due 2008 and $300 million principal amount of its 10.625% Senior Notes due 2011, paying premiums totaling $32 million, and Millennium repaid the remaining $373 million principal amount of its 9.25% Senior Notes due 2008, paying a premium of $13 million, and $4 million principal amount of its 7.625% Senior Debentures due 2026.

In January 2007, Occidental Chemical Holding Corporation (“OCHC”), a subsidiary of Occidental Petroleum Corporation, notified Lyondell that it was exercising the warrant held by OCHC for the purchase of 5 million shares of Lyondell common stock for $25 per share.  In February 2007, pursuant to the terms of the warrant, OCHC received a net payment of 682,210 shares of Lyondell common stock, having a value of $20 million.

Quarterly cash dividends of $0.225 per share of common stock were paid, totaling $171 million in the first nine months of 2007.

Proceeds from the exercise of stock options and the related tax benefits of $20 million totaled $81 million in the first nine months of 2007.

The repayment of debt upon the May 15, 2007 sale of the discontinued operations used cash of $99 million.  Financing activities of discontinued operations provided cash of $23 million in the first nine months of 2007.

Liquidity and Capital Resources—Lyondell’s consolidated balance sheet is highly levered and its available cash, access to additional capital and business and future prospects could be limited by its significant amount of debt and other financial obligations, restrictive loan covenants and the current condition of the capital markets.  Lyondell requires a significant amount of cash to service its indebtedness, and its ability to generate cash will depend on future operating performance, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond its control.  In addition, Lyondell could be impacted by the operating performance and cash requirementsof the subsidiaries of the Basell Group.

LyondellBasell Industries manages the cash and liquidity of Lyondell and its other subsidiaries as a single group and a global cash pool.  Substantially all of the group’s cash is managed centrally, with operating subsidiaries participating through an intercompany uncommitted revolving credit facility.  The majority of the operating subsidiaries of LyondellBasell Industries, including Lyondell, have provided guarantees or collateral for the debt of various LyondellBasell Industries subsidiaries totaling approximately $23 billion at September 30, 2008 that was used primarily to acquire Lyondell.  Accordingly, Lyondell's liquidity and capital resources are integrated with LyondellBasell Industries.

LyondellBasell Industries’ total liquidity, including cash on hand and unused availability under various liquidity facilities was $1,575 million at September, 30, 2008 compared to $2,856 million at June 30, 2008.  The primary factors for the decline in liquidity included:

·   The impacts of Hurricanes Ike and Gustav, which resulted in the temporary shutdown of 13 of LyondellBasell Industries’ 14 U.S. Gulf Coast plants.

·   The turnaround of the Houston refinery, which was extended by the collapse of a contractor company’s crane installed in preparation for the turnaround of a coker unit.

·   Inability to access $169 million of cash equivalents, which were reclassified as short term investments.  LyondellBasell Industries subsequently collected $89 million of this amount and expects the remainder to be forthcoming within the next 12 months.

·   Lower margins and a general decrease in demand for fuels, chemicals and polymers products, reflecting the present economic slowdown in a number of LyondellBasell Industries’ markets globally.

·   Payment of the working capital settlement of $373 million related to the Berre refinery acquisition, partly offset by the benefit of adding the Berre refinery and the Solvay Engineered Plastics business in 2008.

The current global financial crisis and recessionary concerns have created substantial uncertainty for the global economy and the markets in which LyondellBasell Industries, including Lyondell, operates.  LyondellBasell Industries’ markets are experiencing a softening of demand combined with continued unprecedented volatility in raw material costs.  During the fourth quarter of 2008, demand in major markets and spot prices for some of LyondellBasell Industries’ products have declined significantly.  In addition, demand for gasoline in North America has declined substantially compared to the third quarter of 2007, which in turn has reduced LyondellBasell Industries’ margins in its fuels business.  These conditions have also had a negative impact on trade credit available to LyondellBasell Industries and its suppliers and customers.

These conditions, which are expected to continue during the fourth quarter of 2008 and which may continue into 2009, could place further demands on LyondellBasell Industries’ liquidity particularly in the first quarter when it historically has had significant operating cash flow requirements for annual compensation costs, property taxes, annual insurance premiums and annual rebate payments to customers. In addition, LyondellBasell has two key debt compliance ratios based on EBITDA that LyondellBasell Industries must continue to comply with in the fourth quarter of 2008 and in each quarter of 2009 and thereafter.

LyondellBasell Industries is taking steps to reduce costs, working capital and discretionary capital spending, including the temporary idling of one of its U.S. Gulf Coast ethylene facilities, representing 11 percent of its U.S. olefins capacity, and reduction of operating rates of certain integrated cracker operations as well as adjusting operating rates at its polymers facilities globally to optimize working capital requirements. Furthermore, LyondellBasell Industries has expanded its synergy program to a broader, more substantial cost reduction program in anticipation of a potentially deeper economic downturn. As part of this program, LyondellBasell Industries is evaluating all of its strategic options with respect to asset utilization, including possible sales or other monetization of some assets, and a restructuring of the organization, including anticipated head count reductions of approximately 15 percent, to reduce costs.  LyondellBasell Industries expects full implementation of these programs within the next 12 to 18 months, but the benefits of these programs may not be realized until later periods.  LyondellBasell Industries expects to record a charge related to severance and related costs associated with the reorganization in the fourth quarter of 2008 and charges related to other costs associated with the potential impacts to LyondellBasell Industries’ assets as incurred.

LyondellBasell Industries believes that, with lower raw material costs, the post-hurricane restoration of substantially all of its U.S. Gulf Coast operations, the anticipated early December  2008 restart of the second coker unit at the Houston Refinery, reduced capital expenditures and the implementation of its cost reduction initiatives, conditions will be such that LyondellBasell Industries can comply with its debt covenants and that operating cash flows, together with availability under various liquidity facilities, will be adequate to meet anticipated future cash requirements, including scheduled debt service obligations, necessary capital expenditures and ongoing operations, for the foreseeable future.  However, should demand for its products be significantly below LyondellBasell Industries’ expectations, unplanned plant outages occur or product margins compress below expectations, whether because raw material prices return to the high levels experienced in the first part of 2008 or otherwise, LyondellBasell Industries’ cash flow could be lower than expected or negative.  While liquidity at the present time is adequate, a sustained lower-than-expected or negative cash flow could result in existing sources of liquidity not being adequate to fund operations and meet debt service requirements.  Failure to comply with quarterly debt covenants will result in a default under LyondellBasell Industries’ loan agreements.  See "Effects of Breach" below.

The consolidated financial statements of LyondellBasell Industries and Lyondell have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

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Total debt, including current maturities and related party borrowings, under which Lyondell is the primary obligor was $19,337 million as of September 30, 2008.

The major credit rating agencies have assigned a corporate rating to LyondellBasell Industries as a group relevant to such borrowings.  Management believes this corporate rating is reflective of the inherent credit for Lyondell, as well as for the group as a whole.

In August 2008, S&P lowered the LyondellBasell Industries corporate rating to B from B+, citing weaker-than-expected earnings for the second quarter of 2008 and a more challenging business outlook for the coming quarters.  The S&P outlook for LyondellBasell Industries remains negative.  In May 2008, Moody’s Investors Service affirmed LyondellBasell Industries’ corporate rating at B1 and lowered its outlook for LyondellBasell Industries from stable to negative citing LyondellBasell Industries’ lower than expected operating results and the effect the current weakness in the U.S. olefins market may have on LyondellBasell Industries’ plan to substantially reduce debt.

During the third quarter 2008, a planned maintenance turnaround of several units was commenced at the Houston refinery.  On July 18, 2008, a crane installed in preparation for the turnaround of a coker unit collapsed resulting in four contractor fatalities, injuries to seven other contract workers and some physical damage at the refinery, primarily to one storage tank.  As a result of the incident, the turnaround of the coker unit was extended through early December 2008 at which time the coker unit is expected to commence operations.  The turnaround of the other Houston refinery units, including the crude unit, was completed and those units commenced operations in late August 2008.  Investigations into the cause of the crane collapse are underway, including an inquiry by representatives of the U.S. Occupational Safety and Health Administration.  A lawsuit against Lyondell has been filed.  Management believes that the cumulative impact of any litigation related to this incident will not have a material adverse effect on the Company’s financial statements.

Lyondell’s liquidity, including cash on hand and unused availability under various liquidity facilities was $1,358 million at September 30, 2008.  Total unused availability under various liquidity facilities available to Lyondell was $952 million as of September 30, 2008, after giving effect to a total minimum unused availability requirement of $100 million under the Accounts Receivable Securitization Facility and the Senior Secured Inventory-Based Credit Facility, and included the following:

·   $119 million under a $1,000 million Senior Secured Revolving Credit Facility, which matures in December 2013.  Availability under the revolving credit facility is reduced to the extent of outstanding borrowings by LyondellBasell Industries, including Lyondell, under the credit facility, outstanding letters of guarantee and outstanding letters of credit under the credit facility.  As of September 30, 2008, there were $21 million of letters of guarantee and letters of credit outstanding.  At September 30, 2008,the outstanding borrowing under the Senior Secured Revolving Credit Facility at was $860 million, of which $728 million was on the part of Lyondell and $132 million was on the part of the Basell Group.

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·   $175 million under Lyondell’s five-year $1,150 million Accounts Receivable Securitization Facility, after giving effect to the amount of accounts receivable available for sale and outstanding amounts of accounts receivable sold at September 30, 2008.  The agreement currently permits the sale of up to $1,150 million of total interest in domestic accounts receivable of LCC, Equistar, and Houston Refining.  At September 30, 2008, the outstanding amount of accounts receivable sold under the Accounts Receivable Securitization Facility was $975 million.

·   $8 million in total under a five-year $1,600 million senior secured inventory-based credit facility of Lyondell and a subsidiary of the Basell Group, after giving effect to the borrowing base net of $299 million of outstanding letters of credit under the Senior Secured Inventory-Based Credit Facility as of September 30, 2008.  The borrowing base is determined using a formula applied to inventory balances.  At September 30, 2008, the outstanding borrowing under the Senior Secured Inventory-Based Credit Facility was $1,293 million of which $1,163 million was on the part of Lyondell and $130 million was on the part of the Basell Group.

·   $750 million under the senior unsecured eighteen-month revolving credit facility provided to LyondellBasell Industries by Access Industries Holdings, LLC.  At September 30, 2008, there were no outstanding borrowings under the facility.

Lyondell’s liquidity may be negatively affected due to the effects of the current weak business conditions on accounts receivable and inventory levels, which determine the borrowing base under, respectively, the Accounts Receivable Securitization Facility and the Senior Secured Inventory-Based Credit Facility.  Illiquidity in global financial markets could also affect Lyondell’s access to funds under its liquidity facilities.

The fair values of Lyondell’s pension plans assets have decreased since December 31, 2007 as a result of significant turmoil in financial markets.  For additional information, see Note 14 to Lyondell’s Consolidated Financial Statements.  Further declines in the fair values of the pension plans assets could require additional payments by Lyondell in order to maintain specified funding levels.

Capital Markets—The recent volatility in global financial markets has created a considerable amount of uncertainty as major financial institutions undergo financial difficulties.  Lyondell is monitoring its positions with these institutions and taking steps to minimize its exposure to potential loss.

Lyondell has derivatives contracts with counterparties that include major financial institutions reported to be experiencing financial difficulties.  The fair values of these derivative contracts at September 30, 2008 resulted in aggregate receivables of $92 million and payables of $22 million.  Lyondell is monitoring the risk of nonperformance by the counterparties to these financial instruments.

During the first nine months of 2008, Lyondell entered into interest rate swap agreements, maturing in 2013, for notional amounts of $2,350 million under which Lyondell variable rate, long-term debt will effectively be converted to fixed rate debt.  Settlements under those agreements will begin in April 2009.

Lyondell makes short-term investments in money market funds.  In September 2008, Lyondell received notice that rights of redemption had been suspended with respect to a money market fund in which Lyondell had invested approximately $174 million.  As of October 31, 2008, Lyondell had received $89 million and has been advised that additional redemptions are forthcoming.  As a result, in September 2008, Lyondell recognized a pretax loss related to its investment in that money market fund and reclassified $169 million from cash and cash equivalents to short-term investments as of September 30, 2008.  Other short-term investments have been moved into Treasury Money Market Funds to minimize potential loss exposure.

In view of the interrelated nature of the credit and liquidity position of LyondellBasell Industries and its subsidiaries, and pursuant to Staff Accounting Bulletin Topic 5J of the Securities and Exchange Commission, as of September 30, 2008, Lyondell has recognized debt of $860 million for which it is not the primary obligor, but which it has guaranteed (the push-down debt), that was used in the acquisition of Lyondell by LyondellBasell Industries.

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Lyondell’s near-term profitability and cash flow, particularly in ethylene-related products, may continue to be impacted by the unpredictability of price movements in crude oil and other raw materials.

Lyondell believes that its cash balances, cash generated from operating activities, Lyondell’s ability to move cash among its wholly owned subsidiaries, funds from lines of credit and cash generated from funding under various liquidity facilities available to Lyondell through LyondellBasell Industries will be adequate to meet anticipated future cash requirements, including scheduled debt repayments, necessary capital expenditures, and ongoing operations.

Interim Loan and Amendments—The Interim Loan, together with proceeds from borrowings under the Senior Secured Credit Facility, was used to finance the acquisition.  If not repaid or exchanged prior to the 12 months tenure, the Interim Loan converts to a senior secured loan in December 2008 and is due June 2015.  Prior to giving affect to the amendments discussed below, the Interim Loan bore interest at LIBOR plus an initial margin of 4.625%, which margin increased by 0.5% in each of June 2008 and September 2008 and increases by 0.5% for each three-month period thereafter, subject to a maximum interest rate of 12% per annum (or 12.5% in the event of certain ratings declines) (the “Applicable Margin”).  Through a series of actions, the validity of which LyondellBasell Industries disputed, the Joint Lead Arrangers (“JLAs”) had attempted to increase the applicable rates under the Interim Loan to 12% per annum.  Since June 16, 2008, LyondellBasell Industries had been paying interest on the Interim Loan at a rate of 12%, which was approximately 4% higher than the applicable rate under the Interim Loan as of June 30, 2008, in order to avoid an allegation of default by the Lenders.  LyondellBasell Industries had protested the higher rate and had reserved its right to recover any such amounts based upon a determination that the JLAs’ attempt to impose a rate increase is not supported by the terms of the applicable loan documentation.

On October 17, 2008, the agreement governing the Interim Loan was amended and restated.  Under the amended and restated agreement, the $8 billion principal amount of initial loans outstanding were retranched into:

(a)   $3.5 billion of fixed rate second lien loans, which bear interest at a rate equal to 12% per annum (12.5% in the case of certain ratings downgrades),

(b)   $2.0 billion of floating rate second lien loans and

(c)   $2.5 billion of floating rate third lien loans.

All of the floating rate loans bear interest at a rate equal to LIBOR (in the case of U.S. dollar loans) or EURIBOR (in the case of euro loans) plus the Applicable Margin.

The economic impact of the interest rates applicable to the retranched loans is effective as of June 16, 2008.

The amendments also include provisions allowing lenders

(i)   within 180 days after October 17, 2008, to convert retranched fixed rate second lien loans into fixed rate second lien notes or a combination of fixed rate second lien notes and up to $1 billion in aggregate principal amount of fixed rate third lien notes and/or fixed rate unsecured notes (and pursuant to a notice provided by the lenders on October 17, 2008, all of the fixed rate second lien loans will automatically convert into fixed rate second lien notes if no election is made by the lenders to convert a portion of the fixed rate second lien loans to fixed rate third lien or unsecured notes within this 180-day period) and

(ii)   following the time that the fixed rate second lien loans have been converted into exchange notes and certain lenders under the amended and restated agreement hold, in aggregate, less than $950 million of such notes, to convert new floating rate second lien loans into fixed rate second lien notes and to convert new floating rate third lien loans into fixed rate third lien notes and/or fixed rate unsecured notes.  In all such cases, the exchange notes will bear interest at a rate equal to 12% per annum (12.5% in the case of certain ratings downgrades), may be denominated in euro or dollars, and will have maturity dates between June 2015 and December 2019.

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In addition, the amendments include revisions to some of the terms of the exchange notes to make them consistent, in some instances, with similar provisions of the senior secured credit facility.  The amendments also make other changes, including technical and typographical corrections.

Debt Agreement Amendments—Under the terms of the financing for the Lyondell acquisition, the JLAs retained the right to flex certain provisions of the financing, including pricing and the reallocation and retranching of the Term Loans.  Effective April 30, 2008, the JLAs exercised the price flex provisions and, in conjunction with the exercise, the Senior Secured Credit Facility was amended to (i) convert each of the U.S. Tranche B Dollar Term Loan and the German Tranche B Euro Term Loan into three separate tranches, some of which tranches are subject to a prepayment penalty, (ii) increase interest rates and fee rates by 0.5%, (iii) establish a LIBOR floor of 3.25% on the U.S. Tranche B Dollar Term Loan, (iv) modify certain debt covenants, including increasing a general debt basket from $750 million to $1,000 million, eliminating an interest rate hedging requirement, increasing the asset backed facility basket by $500 million, and adding a covenant prohibiting reduction of aggregate commitments under the Revolving Credit Facility with Access Industries before its initial maturity, (v) amend the calculation of Consolidated EBITDA, as defined, for the purpose of determining compliance with the debt requirements, to reflect adjustments to present 2007 cost of sales in accordance with FIFO inventory accounting, and (vi) make other changes, including technical and typographical corrections.

In conjunction with the exercise by the JLAs of their flex rights, additional amendments were made to each of the Interim Loan, Senior Secured Inventory-Based Credit Facility, Revolving Credit Facility with Access Industries and Accounts Receivable Securitization Facility.  The amendments to the Interim Loan and Senior Secured Inventory-Based Credit Facility and the Revolving Credit Facility with Access Industries were effective on April 30, 2008.  The amendments to the Accounts Receivable Securitization Facility were effective on May 6, 2008.

Each of the Interim Loan, the Senior Secured Inventory-Based Credit Facility, the Accounts Receivable Securitization Facility and Revolving Credit Facility with Access Industries were amended to (i) conform to certain of the amendments to the Senior Secured Credit Facility and (ii) make other changes, including technical and typographical corrections.  In addition, the Senior Secured Inventory-Based Credit Facility was amended to allow LyondellBasell Industries the future option to increase the aggregate amount of commitments under the facility by a further $500 million.  

Under the terms of the Senior Secured Inventory-Based Credit Facility, as amended, Lyondell could elect to increase commitments under the facility by up to an aggregate $1,100 million.  Effective April 30, 2008, Lyondell exercised the option to increase the facility by $600 million and, as a result, aggregate commitments under the facility increased from $1,000 million to $1,600 million.  Concurrent with the exercise of the increase in commitments, Lyondell Chemical Company became a lien grantor and added the following as collateral: (i) a first priority pledge of all equity interests owned by Lyondell Chemical Company in, and all indebtedness owed to it by, LyondellBasell Receivables I, LLC (the seller under the Accounts Receivable Securitization Facility) and (ii) a first priority security interest in all accounts receivable, inventory and related assets owned by Lyondell Chemical Company, subject to customary exceptions.

In connection with the BASF Corporation lawsuit described in the “Litigation” section of Note 16 to the Consolidated Financial Statements, Lyondell posted appeal bonds, which are collateralized by a $200 million letter of credit issued under the inventory-based credit facility.

In April 2006, Lyondell was granted an arbitration award related to a commercial dispute with Bayer AG and Bayer Corporation (collectively, “Bayer”).  The award, which has not been recognized in earnings, pertains to several issues related to the U.S. PO and PO technology joint ventures and included declaratory judgment in Lyondell’s favor concerning interpretation of the contract provisions at issue.  Lyondell was awarded $121 million through June 30, 2005, plus interest and costs of arbitration.  Post-judgment interest on the award continues to accrue.  In August 2006, Lyondell filed a motion in federal district court in Texas to enforce the award, and Bayer subsequently filed motions and other proceedings to vacate or otherwise attack the arbitration award.  These motions and proceedings are still pending.

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LCC and certain of its subsidiaries, including Equistar and Millennium, are guarantors of certain of the Basell Group’s debt, including a Senior Secured $8,000 million Interim Loan, 8.375% High Yield Notes due 2015, comprising borrowings of $615 million and €500 million ($717 million), and amounts borrowed by the Basell Group under the Senior Secured Credit Facility, consisting of $482 million borrowed under term loan A and €1,290 million ($1,849 million) under term loan B as well as amounts borrowed by the Basell Group under the $1,000 million revolving credit facility.  At September 30, 2008, borrowings totaling $860 million were outstanding under the revolving credit facility, of which $728 million was on the part of Lyondell and $132 million was on the part of the Basell Group.

In addition, certain subsidiaries of LCC are guarantors under the Senior Secured Inventory-Based Credit Facility.

LCC also guarantees $150 million of Equistar debt, consisting of the 7.55% Debentures due 2026.  The level of debt and the limitations imposed by current or future debt agreements, as further discussed below could have significant consequences on Lyondell’s business and future prospects.

LCC Debt and Accounts Receivable Securitization Facility—On December 20, 2007, Lyondell entered into a five-year $1,150 million Accounts Receivable Securitization Facility and together with other affiliates in the Basell Group entered into a Senior Secured Credit Facility and a five-year $1,000 million Senior Secured Inventory-Based Credit Facility.  As discussed in “Debt Agreement Amendments” above, effective April 30, 2008, Lyondell increased the Senior Secured Inventory-Based Credit Facility to $1,600 million.

The Senior Secured Credit Facility, Accounts Receivable Securitization Facility, Senior Secured Inventory-Based Credit Facility and the Interim Loan contain restrictive covenants, including covenants that establish maximum levels of annual capital expenditures and require the maintenance of specified financial ratios by LyondellBasell Industries on a consolidated basis.  These covenants, as well as debt guarantees, are described in Note 15 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.  See “Effects of a Breach” below for discussion of the potential impact of a breach of these covenants.

Equistar Debt—The indenture governing Equistar’s 7.55% Notes due 2026 contains covenants that, subject to exceptions, restrict among other things, debt incurrence by subsidiaries, lien incurrence, sale and leaseback transactions and mergers.  These covenants are described in Note 15 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Millennium Debt—Millennium’s indentures contain certain covenants; however Millennium is no longer prohibited from making certain restricted payments, including dividends to Lyondell, nor is it required to maintain financial ratios as a result of the repayment in June 2007 of its 9.25% Senior Notes due 2008.  The remaining covenants are described in Note 15 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

The $158 million of the 4% Convertible Senior Debentures outstanding at December 31, 2007 was paid in January 2008.

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Effects of a Breach—A breach by LCC or any other obligor of the covenants or the failure to pay principal and interest when due under any of the Interim Loan, Senior Secured Credit Facilities, Asset-Based Facilities or other indebtedness of LCC or its affiliates could result in a default or cross-default under all or some of those instruments.  If any such default or cross-default occurs, the applicable lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.  In such circumstances, the lenders under the Senior Secured Credit Facilities and the ABL Inventory-Based Credit Facility also have the right to terminate any commitments they have to provide further borrowings, and the counterparties under the ABL Asset-Based Receivables Facility, as well as under legacy Basell U.S. and European securitization programs, may terminate further purchases of interests in accounts receivable and receive all collections from previously sold interests until they have collected on their interests in those receivables, thus reducing the entity’s liquidity.  In addition, following such an event of default, the lenders under the Senior Secured Credit Facilities and the counterparties under the ABL Inventory-Based Credit Facility have the right to proceed against the collateral granted to them to secure the obligations, which in some cases includes its available cash.  If the obligations under the Interim Loan, Senior Secured Credit Facilities, the Asset-Based Facilities or any other material financing arrangement were to be accelerated, it is not likely that the obligors would have, or be able to obtain, sufficient funds to make these accelerated payments, and as a result Lyondell could be forced into bankruptcy or liquidation.

Off-Balance Sheet Arrangements—Lyondell’s off-balance sheet arrangements are described in Item 7 of its Annual Report on Form 10-K for the year ended December 31, 2007.  Lyondell’s off-balance sheet arrangements did not change materially as of September 30, 2008.

Contractual and Other Obligations—With the completion of the sale of Lyondell’s TDI business, Lyondell’s annual purchase obligations will decrease by the annual commitment to reimburse Rhodia for the costs of operating the TDI facility at Pont-du-Claix, France.  Using foreign currency exchange rates, market prices of raw materials and other variable cost components such as utility costs in effect at December 31, 2007, Lyondell estimated the annual purchase commitment related to the TDI business, which would have continued through 2016, at approximately $230 million.

CURRENT BUSINESS OUTLOOK 

During October 2008, Lyondell’s Houston refinery and substantially all Gulf Coast chemical operations were restarted following the hurricane.  The maintenance turnaround of the Houston refinery coker unit is expected to be completed and the unit returned to production in early December 2008.

The current global financial crisis and recessionary concerns have created substantial uncertainty for the global economy and the markets in which LyondellBasell Industries, including Lyondell, operates.  The Company’s markets are experiencing a softening of demand combined with continued unprecedented volatility in raw material costs.  During the fourth quarter of 2008, polymer demand in major markets and spot prices for some of the Company’s products have declined significantly.  In addition, demand for gasoline in North America has declined substantially compared to the third quarter of 2007, which in turn has reduced the Company’s margins in its fuels business.  These conditions have also had a negative impact on trade credit available to the Company and its suppliers and customers.

These conditions, which are expected to continue during the fourth quarter of 2008 and which may continue into 2009, could place further demands on the Company’s liquidity as it historically has had significant operating cash flow requirements in the first quarter for annual compensation costs, property taxes, annual insurance premiums and annual rebate payments to customers. In addition, LyondellBasell Industries has two key debt compliance ratios based on EBITDA that it must continue to comply with in the fourth quarter of 2008 and in each quarter of 2009 and thereafter.

Lyondell is taking steps to reduce costs, working capital and discretionary capital spending, including the temporary idling of one of its U.S. Gulf Coast ethylene facilities, representing 11 percent of its U.S. olefins capacity, and reduction of operating rates of certain integrated cracker operations as well as adjusting operating rates at its polymers facilities to optimize working capital requirements.  Furthermore, LyondellBasell Industries has expanded its synergy program to a broader, more substantial cost reduction program in anticipation of a potentially deeper economic downturn.  As part of this program, it is evaluating all of its strategic options with respect to asset utilization, including possible sale or other monetization of some assets, and a restructuring of the organization, including anticipated head count reductions of approximately 15 percent, to reduce costs.  The Company expects full implementation of these programs within the next 12 to 18 months, but the benefits of these programs may not be realized until later periods.  The Company expects to record a charge related to severance and related costs associated with the reorganization in the fourth quarter of 2008 and charges related to other costs, associated with the potential impacts to the Company’s assets, as incurred.

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CRITICAL ACCOUNTING POLICIES

The Company applies those accounting policies that management believes best reflect the underlying business and economic events, consistent with accounting principles generally accepted in the U.S.  Inherent in such policies are certain key assumptions and estimates made by management.  Management periodically updates its estimates used in the preparation of the financial statements based on its latest assessment of the current and projected business and general economic environment.  Information regarding the Company’s Critical Accounting Policies is included in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

ACCOUNTING AND REPORTING CHANGES

For a discussion of the potential impact of new accounting pronouncements on Lyondell’s consolidated financial statements, see Note 2 to the Consolidated Financial Statements.

Item 3.  Disclosure of Market Risk

Lyondell’s exposure to market risk is described in Item 7A of its Annual Report on Form 10-K for the year ended December 31, 2007.  Lyondell’s exposure to market risk has not changed materially in the nine months ended September 30, 2008 except as disclosed below.

Commodity Price Risk—At September 30, 2008, futures contracts for 27 million gallons of gasoline in the notional amount of $67 million, maturing from November 2008 through January 2009, were outstanding.  The fair value, based on quoted market prices, resulted in net receivables of $5 million at September 30, 2008.  Using sensitivity analysis and a hypothetical unfavorable change in market prices ranging from 21% to 61%, based on historical price changes reflecting the tenor of open positions from those in effect at September 30, 2008, the effect would be to reduce net income by approximately $2 million.

At September 30, 2008 swaps for 5 million barrels of crude oil and distillates in the notional amount of $179 million, maturing from October 2008 through April 2009, were outstanding.  The fair value, based on quoted market prices, resulted in a net receivable of $87 million at September 30, 2008.  Using sensitivity analysis and hypothetical unfavorable changes in market prices ranging from 74% to 204%, based on historical price changes reflecting the tenor of open positions from those in effect at September 30, 2008, the effect would be to reduce net income by approximately $136 million.

Interest Rate Risk—At September 30, 2008, Lyondell had an interest rate swap agreements under which a total of $2,350 million notional amount of Lyondell variable-rate, long-term debt will effectively be converted to fixed rate debt.  The fair value of the swap resulted in a net payable of $22 million at September 30, 2008.  Using sensitivity analysis and a hypothetical unfavorable change in interest rates of 50 basis points from those in effect at September 30, 2008, or approximately 12%, the effect of the interest rate swap would be to reduce net income by $28 million.

The quantitative information about market risk is necessarily limited because it does not take into account the effects of the underlying operating and financing transactions.

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Item 4.  Controls and Procedures

Lyondell performed an evaluation, under the supervision and with the participation of its management, including the President and Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), of the effectiveness of the Lyondell disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of September 30, 2008.  Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the Lyondell disclosure controls and procedures are effective.

There were no changes in Lyondell’s internal control over financial reporting that occurred during Lyondell’s last fiscal quarter (the third quarter 2008) that have materially affected, or are reasonably likely to materially affect, Lyondell’s internal control over financial reporting.

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FORWARD-LOOKING STATEMENTS

Certain of the statements contained in this report are “forward-looking statements” within the meaning of the U.S. federal securities laws.  Forward-looking statements can be identified by words such as “estimate,” “believe,” “expect,” “anticipate,” “plan,” “budget” or other words that convey the uncertainty of future events or outcomes.  Many of these forward-looking statements have been based on expectations and assumptions about future events that may prove to be inaccurate.  While Lyondell’s management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond Lyondell’s control.  Lyondell’s actual results (including the results of its joint ventures) could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to:

·    Lyondell’s ability to comply with debt covenants and service its substantial debt,

·   the availability, cost and price volatility of raw materials and utilities, particularly the cost of oil and natural gas,

·   uncertainties associated with the U.S. and worldwide capital markets and economies,

·   the supply/demand balances for Lyondell’s and its joint ventures' products, and the related effects of industry production capacities and operating rates,

·   legal, tax and environmental proceedings,

·   the cyclical nature of the chemical and refining industries,

·   available cash and access to capital markets,

·   technological developments, and Lyondell’s ability to develop new products and process technologies,

·   operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, supplier disruptions, labor shortages or other labor difficulties, transportation interruptions, spills and releases and other environmental risks),

·   current and potential governmental regulatory actions in the U.S. and in other countries,

·   international political unrest and terrorist acts,

·   competitive products and pricing pressures,

·   Lyondell’s ability to implement its business strategies, including integration within LyondellBasell Industries, and

·   risks and uncertainties posed by international operations, including foreign currency fluctuations.

Any of these factors, or a combination of these factors, could materially affect Lyondell’s future results of operations (including those of its joint ventures) and the ultimate accuracy of the forward-looking statements.  These forward-looking statements are not guarantees of future performance, and Lyondell’s actual results and future developments (including those of its joint ventures) may differ materially from those projected in the forward-looking statements.  Lyondell’s management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels.

All forward-looking statements in this Form 10-Q are qualified in their entirety by the cautionary statements contained in this section, elsewhere in this report and in Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2007.  See “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Lyondell” for additional information about factors that may affect Lyondell’s businesses and operating results (including those of its joint ventures).  These factors are not necessarily all of the important factors that could affect Lyondell and its joint ventures.  Use caution and common sense when considering these forward-looking statements.  Lyondell does not intend to update these statements unless applicable securities laws require it to do so.

In addition, this Form 10-Q contains summaries of contracts and other documents.  These summaries may not contain all of the information that is important to an investor, and reference is made to the actual contract or document for a more complete understanding of what is discussed in this 10-Q, the contract or document involved.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

There have been no material developments with respect to Lyondell’s legal proceedings previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2007 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008, except as disclosed below:

Lyondell—During the third quarter 2008, a planned maintenance turnaround of several units was commenced at the Houston refinery.  On July 18, 2008, a crane installed in preparation for the turnaround of a coker unit collapsed resulting in four contractor fatalities, injuries to seven other contract workers and some physical damage at the refinery, primarily to one storage tank. As a result of the incident, the coker unit will require additional downtime.  Alternative turnaround options are under evaluation with the expectation that the coker unit will remain down through the third quarter versus an original restart date in mid-September.  Work on the turnaround at the other units has been resumed.   Prior to the incident, the refinery was operating at reduced operating rates for purposes of the turnaround.  Operations continue at the scheduled reduced rates.  Investigations into the cause of the crane collapse are underway, including an inquiry by representatives of the U.S. Occupational Safety and Health Administration. A lawsuit against Lyondell has been filed.  Lyondell does not expect the resolution of these matters to result in any material adverse effect on its business, financial position, liquidity or results of operations.

Two shareholder lawsuits styled as class actions have been filed against LCC and its directors.  The lawsuits are entitled Plumbers and Pipefitters Local 51 Pension Fund, On Behalf of Itself and Others Similarly Situated v. Lyondell Chemical Company, et al. (filed July 23, 2007 in the District Court of Harris County, Texas) and Walter E. Ryan Jr., Individually and on Behalf of All Other Similarly Situated v. Lyondell Chemical Company, et al. (filed August 20, 2007 in the Court of Chancery of the State of Delaware).  The Ryan case also named as defendants Basell and its subsidiary that merged with and into Lyondell on December 20, 2007 (“Merger Sub”).  On August 29, 2007, the Plumbers petition was amended to add as defendants Basell and Merger Sub.  The complaints generally allege that (1) LCC’s board of directors breached their fiduciary duties in negotiating and approving the merger and by administering an unfair sale process that failed to maximize shareholder value, and engaged in self dealing by obtaining unspecified personal benefits in connection with the merger not shared equally by other shareholders; and (2) LCC, Basell and Merger Sub aided and abetted the LCC board of directors in breaching their fiduciary duties.  In addition, the complaints allege that LCC and its board of directors failed to disclose in the preliminary proxy statement certain information regarding the merger and the process leading up to the merger.  The plaintiffs in these lawsuits sought to enjoin the merger.  In the Texas case, a hearing was held on November 9, 2007 on a motion filed by plaintiff for a preliminary injunction against the merger and the taking of the shareholder vote.  On November 13, 2007, the judge in the Texas case denied the plaintiff’s motion for preliminary injunction.  On February 1, 2008, the judge granted a plea to the jurisdiction and dismissed the case; the deadline for plaintiff to appeal this decision expired March 3, 2008.  In the Delaware case, a hearing was held on November 26, 2007 on motions filed by defendants for summary judgment and for certification of the plaintiff class.  The court granted the motion for certification and did not rule on the motion for summary judgment.  On July 29, 2008, the court issued an order on the pending summary judgment motions and granted summary judgment in favor of the defendants on all claims other than certain claims related to LCC’s board of directors and LCC.  The merger was consummated on December 20, 2007.  Plaintiffs seek rescission of the merger, a constructive trust upon any benefits improperly received by any of the defendants, other unspecified equitable relief, and an award of attorneys’ fees and costs.  LCC believes that the lawsuits are without merit and that it has valid defenses to all claims and will vigorously defend this litigation.

Millennium—Together with alleged past manufacturers of lead-based paint and lead pigments for use in paint, Millennium has been named as a defendant in various legal proceedings alleging personal injury, property damage, and remediation costs allegedly associated with the use of these products. Millennium is currently named a defendant in 13 cases arising from Glidden’s manufacture of lead pigments.  These cases are in various stages of the litigation process.  Of these cases, most seek damages for personal injury and are brought by individuals, and two of the cases seek damages and abatement remedies based on public nuisance and are brought by states, cities and/or counties in two states (California and Ohio).

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On October 29, 2002, after a trial in which the jury deadlocked, the court in State of Rhode Island v. Lead Industries Association, Inc., et al. (which commenced in the Superior Court of Providence, Rhode Island, on October 13, 1999) declared a mistrial.  The sole issue before the jury was whether lead pigment in paint in and on public and private Rhode Island buildings constituted a “public nuisance.”  The new trial in this case began on November 1, 2005.  On February 22, 2006, a jury returned a verdict in favor of the State of Rhode Island finding that the cumulative presence of lead pigments in paints and coatings on buildings in the state constitutes a public nuisance; that a Millennium subsidiary and other defendants either caused or substantially contributed to the creation of the public nuisance; and that those defendants, including the Millennium subsidiary, should be ordered to abate the public nuisance.  On February 28, 2006, the judge held that the state could not proceed with its claim for punitive damages. On February 26, 2007, the court issued its decision denying the post-verdict motions of the defendants, including Millennium, for a mistrial or a new trial.  The court concluded that it would enter an order of abatement and appoint a special master to assist the court in determining the scope of the abatement remedy.  On March 16, 2007, the court entered a final judgment on the jury’s verdict.  On March 20, 2007, Millennium filed its notice of appeal with the Rhode Island Supreme Court.  On December 18, 2007, the trial court appointed two special masters to serve as “examiners” and to assist the trial court in the proposed abatement proceedings.  On May 15, 2008, the Rhode Island Supreme Court heard oral argument on, among other things, Millennium’s appeal of the jury’s verdict in favor of the State of Rhode Island.  On July 1, 2008, the Rhode Island Supreme Court unanimously reversed the jury’s verdict and subsequent judgment against Millennium and the other defendants, holding that the trial court should have granted Millennium’s motion to dismiss for failure to state a claim.  The Rhode Island Supreme Court’s verdict effectively ends this legal proceeding; however, Millennium along with the other former defendants are seeking recovery of their costs incurred defending the case.

Environmental Matters

In December 2006, the State of Texas filed a lawsuit in the District Court, Travis County, Texas, against Equistar and its owners, Lyondell and Millennium, alleging past violations of various environmental regulatory requirements at Equistar’s Channelview, Chocolate Bayou and La Porte, Texas facilities and Millennium’s La Porte, Texas facility, and seeking an unspecified amount of damages.  The previously disclosed Texas Commission on Environmental Quality (“TCEQ”) notifications alleging noncompliance of emissions monitoring requirements at Equistar’s Channelview facility and Millennium’s La Porte facility and seeking civil penalties of $167,000 and $179,520, respectively, have been included as part of this lawsuit.  In July 2008, Equistar signed an Agreed Final Judgment resolving this lawsuit.  Under the terms of the settlement, Equistar Chemicals and Millennium Petrochemicals Inc. each agreed to pay $3,250,000 in penalties (with $500,000 being offset by funding of various local supplemental environmental projects by each company).  The companies also agreed to each pay $250,000 in attorney fees to the state.  This agreement resolved outstanding alleged violations at several company-owned and/or operated Texas facilities.  No other additional expenditures are required.  In September 2008, the settlement was entered by the court.

Houston Refining—In May 2007, the TCEQ notified Houston Refining that it is seeking a civil penalty of $892,700 in connection with alleged noncompliance with various provisions of the Texas Clean Air Act during 2006 and 2005.  The TCEQ subsequently reduced the proposed penalty to $481,105.  In June 2008, Houston Refining signed an agreed order to settle this matter.  Under the agreed order, the Company agreed to pay a penalty of $384,884 (with half of the amount being offset by funding a local supplemental environmental project).  In October 2008, the agreement was approved by the TCEQ commissioners.

Item 1A.  Risk Factors

There have been no material developments with respect to Lyondell’s risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2007 and in the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008, except as disclosed below:

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Risks Related to Indebtedness

Lyondell is highly leveraged, and its available cash, access to additional capital, and business and future prospects could be limited by its significant amount of debt and other financial obligations and the current weak condition of the capital markets.

Lyondell is highly leveraged.  At September 30, 2008, Lyondell had $19.4 billion of consolidated debt, including short-term debt and the current portion of long-term debt.  This debt represented 100% of its consolidated capitalization.  Substantially all of the indebtedness is secured by its assets pledged as collateral.  In addition, Lyondell has contractual commitments and ongoing pension and post-retirement benefit obligations that will require cash contributions in the future.  See "—Contractual and Other Obligations" under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.

Lyondell’s level of debt and other obligations could have significant adverse consequences on its business and its future prospects, including that it could:

·   make it more vulnerable to a downturn in its businesses, its industry or the economy in general as a significant percentage of its cash flow from operations is required to make payments to service its indebtedness;

·   require it to dedicate a substantial portion of its future cash flow from operations to the payment of principal and interest on indebtedness, thereby reducing the availability of its cash flow to maintain or grow its business and to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

·   constrain its ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, on satisfactory terms or at all, especially given the current weak environment in the capital markets;

·   make it more difficult for it to satisfy its financial and other obligations;

·   place it at a competitive disadvantage as compared to competitors that have less debt and lower debt service requirements; and

·   make it more vulnerable to increases in interest rates since part of its indebtedness is, and any future debt may be, subject to variable interest rates.

For a discussion regarding its ability to pay or refinance its debt, see the "—Liquidity and Capital Resources" section under "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.  The substantial level of indebtedness and other financial obligations of Lyondell, as well as LyondellBasell Industries generally, also increases the possibility that LCC, or another borrower whose obligations are guaranteed by LCC, may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of its indebtedness and other financial obligations.  If LCC, or another borrower for which LCC or one of its subsidiaries is a guarantor, was unable to pay principal of, and interest on, debt when due, a default would exist under the terms of that debt instrument and could result in an event of default (and acceleration of debt repayments) under its other debt instruments.  See "— Failure to comply with covenants or to pay principal and interest when due could result in an acceleration of debt."

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Lyondell requires a significant amount of cash to service its indebtedness, and its ability to generate cash depends on many factors beyond its control, and on the performance of its subsidiaries and their ability to make distributions to Lyondell.

Lyondell’s businesses may not generate sufficient cash flow from operations to meet debt service obligations, future borrowings may not be available under current or future credit facilities in an amount sufficient to enable it to pay its indebtedness at or before maturity and Lyondell may not be able to refinance its indebtedness on reasonable terms, if at all.  Factors beyond its control affect its results of operation and accordingly its ability to make these payments and refinancings.  These factors are discussed elsewhere in "Risk Factors" and "Forward-Looking Statements."

Further, its ability to fund capital expenditures and working capital may depend on the availability of funds under lines of credit and other liquidity facilities.  If, in the future, sufficient cash is not generated from operations to meet debt service obligations and funds are not available under lines of credit or other liquidity facilities, Lyondell may need to reduce or delay non-essential expenditures, such as capital expenditures and research and development efforts.  In addition, Lyondell may need to refinance debt, obtain additional financing or sell assets, which Lyondell may not be able to do on reasonable terms, if at all.  Global financial markets have been, and continue to be, volatile, which has caused a substantial deterioration in the credit and capital markets.  These conditions will likely continue and may make it difficult to obtain funding for Lyondell’s ongoing capital needs.  In particular, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets generally has diminished significantly.  Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets generally has increased as many lenders and institutional investors have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at maturity on terms that are similar to existing debt, and reduced, or in some cases ceased, to provide funding to borrowers.

The current difficult economic market environment is causing contraction in the availability of credit in the marketplace.  This could potentially reduce Lyondell’s sources of liquidity.  In particular, Lyondell relies upon trade creditors to meet a substantial portion of its working capital requirements.  These suppliers could decrease payment periods, reduce the amount of credit extended to us, demand letters of credit or prepayments or cease doing business with it as a result of its significant leverage, a further ratings downgrade, any default under its debt instruments or as a result of the state of credit markets generally.

Although Lyondell is highly leveraged, subject to limitations in its debt instruments, its parent may cause it to pay dividends for the benefit of the parent and its affiliates.  Cash used to pay dividends would not be available to pay principal of or interest on its debt, to make capital expenditures or for general corporate purposes.

Failure to comply with covenants or to pay principal of, and interest on, indebtedness when due could result in an acceleration of debt.

A breach by LCC or any other obligor of the covenants or the failure to pay principal and interest when due under any of the Interim Loan, Senior Secured Credit Facilities, Asset-Based Facilities or other indebtedness of LCC or its affiliates could result in a default or cross-default under all or some of those instruments.  If any such default or cross-default occurs, the applicable lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.  In such circumstances, the lenders under the Senior Secured Credit Facilities and the ABL Inventory-Based Credit Facility also have the right to terminate any commitments they have to provide further borrowings, and the counterparties under the ABL Asset-Based Receivables Facility, as well as under legacy Basell U.S. and European securitization programs, may terminate further purchases of interests in accounts receivable and receive all collections from previously sold interests until they have collected on their interests in those receivables, thus reducing the entity's liquidity.  In addition, following such an event of default, the lenders under the Senior Secured Credit Facilities and the counterparties under the ABL Inventory-Based Credit Facility have the right to proceed against the collateral granted to them to secure the obligations, which in some cases includes its available cash.  If the obligations under the Interim Loan, Senior Secured Credit Facilities, the Asset-Based Facilities or any other material financing arrangement were to be accelerated, it is not likely that the obligors would have, or be able to obtain, sufficient funds to make these accelerated payments, and as a result Lyondell could be forced into bankruptcy or liquidation.

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The terms of the Interim Loan, Senior Secured Credit Facilities, the Access Revolving Credit Facility Basell Notes due 2015 and Asset-Based Facilities and other financing instruments may restrict Lyondell’s current and future operations, particularly its ability to respond to changed business conditions or to take certain actions.

The Interim Loan, Senior Secured Credit Facilities, Access Revolving Credit Facility, Basell Notes due 2015, Asset-Based Facilities and other financing instruments contain a number of restrictive covenants that impose significant operating and financial restrictions on Lyondell, as well as LyondellBasell Industries, and may limit Lyondell’s ability to engage in acts that may be in its long-term best interests.  These include covenants restricting, among other things, Lyondell’s ability to: incur, assume or permit to exist indebtedness or guarantees; incur, assume or permit to exist liens; make loans and investments; make external dividends or distributions, engage in mergers, acquisitions, and other business combinations; prepay, redeem or purchase certain indebtedness; amend or otherwise alter terms of certain indebtedness, and other material agreements; make dispositions of assets; engage in transactions with affiliates; enter into or permit to exist contractual obligations limiting its ability to make distributions or to incur or permit to exist liens; and alter the conduct of business.  In addition, the Senior Secured Credit Facilities, Access Revolving Credit Facility and Asset-Based Facilities contain covenants that limit the level of capital expenditures per year.  The Senior Secured Credit Facilities and Access Revolving Credit Facility also require the maintenance by LyondellBasell Industries of specified financial ratios: (1) a maximum First Lien Senior Secured Leverage Ratio (as defined) of 3.75:1.0 on a consolidated basis; and (2) a minimum Consolidated Debt Service Ratio (as defined) of 1.1:1.0 on a consolidated basis.  The Asset-Based Facilities require that total excess availability (as defined) under the Asset-Based Facilities may not be less than $100 million for two or more consecutive business days.  The Asset-Based Facilities also provide that if for any period of four consecutive fiscal quarters LyondellBasell Industries’ Fixed Charge Coverage Ratio (as defined), on a consolidated basis, is less than 1.10:1.0, then LyondellBasell Industries must maintain minimum levels of total excess availability (as defined).  In addition, due to a recent credit downgrade, LyondellBasell Industries is required to consult on a daily basis with the lenders under its securitization program in Europe, which could impact the availability of funds under such facility in the future.  Similar provisions could be triggered under the Basell securitization program in the U.S. The ability to meet those financial ratios and other requirements can be affected by events beyond Lyondell’s control and, over time, these covenants may not be satisfied.  Given Lyondell’s high debt level and other financial obligations, these and other financial ratios could significantly restrict its liquidity and its ability to incur additional debt through its various credit facilities or by accessing the financial markets.

A ratings downgrade may increase its interest costs and make it more difficult to finance Lyondell’s operations.

Any downgrade in Lyondell corporate ratings by any of the major credit rating agencies may result in more onerous terms for trade credit and higher borrowing costs for other indebtedness, and any new financing or credit facilities, if available at all, may not be on terms as attractive as those Lyondell have currently or other terms acceptable to Lyondell.  As a result, ratings downgrades could adversely affect its ability to obtain financing for working capital, capital expenditures or acquisitions or to refinance existing indebtedness.  The failure to obtain sufficient financing or to refinance existing indebtedness could increase the risk that its leverage may adversely affect its future financial and operating flexibility.

The current instability and uncertainty in the global financial markets have created increased counterparty risk.

Lyondell has exposure to various financial institutions under hedging arrangements, including interest rate, commodity and currency hedging contracts, and the risk of counterparty default is currently higher in light of existing capital market and economic conditions.  The recent credit crisis has also resulted in the potential losses on certain of its assets as a result of counterparty risk.  Reduced liquidity or financial losses resulting from exposure to the risk of counterparties could have a material adverse effect on our cash flow and financial condition.

The instability and uncertainty in the financial markets has also made it difficult to assess the risk of counterparties to current and future financing arrangements, investments and other contracts.  The financial markets, the U.S. economy and most European economies have altered the ability and willingness of certain financial institutions to extend credit in line with past practices.

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Despite current indebtedness levels, Lyondell may still be able to incur more debt.  This could increase the risks associated with its substantial level of financial obligations.

Although Lyondell currently has limited ability to incur additional debt under certain of its debt arrangements, Lyondell may be able to incur additional indebtedness in the future.  Although its debt instruments contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and Lyondell could incur additional indebtedness in compliance with these restrictions.  Among other things, Lyondell may guarantee or incur additional obligations to the extent there is available capacity under the revolving credit facility portion of the Senior Secured Credit Facilities or under the Asset-Based Facilities.  See the "—Liquidity and Capital Resources" section under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."  If Lyondell and its subsidiaries incurs or guarantees additional financial obligations above the existing levels, the risks associated with its substantial level of financial obligations would increase.

Lyondell’s variable rate obligations subject it to interest rate risk, which could cause its debt service obligations to increase significantly.

As of September 30, 2008, taking into account the amendment and restatement of the Interim Loan on October 17, 2008, LCC was an obligor with respect to approximately $21.4 billion of variable rate borrowings.  Although Lyondell and its co-obligors may have interest rate hedge arrangements in effect from time to time, its interest expense could increase if interest rates increase, because its variable rate obligations may not be fully hedged and they bear interest at floating rates, generally equal to EURIBOR and LIBOR plus an applicable margin or, in the case of the Senior Secured Credit Facilities, may instead bear interest at the alternate base rate plus an applicable margin.  Additionally, the Asset-Based Facilities, consisting of the ABL Asset-Based Receivables Facility entered into in connection with the Lyondell acquisition and the ABL Inventory-Based Credit Facility, bear interest at floating rates or the alternate base rate plus an applicable margin.  In addition, $4.5 billion principal amount of loans under the Interim Loan bear interest at a floating rate equal to LIBOR or EURIBOR plus an applicable margin.  A change of 100 basis points or 1% of the floating rates as of September 30, 2008, taking into account the amendment and restatement of the Interim Loan on October 17, 2008, would change its total pre-tax interest charges by $213 million annually.

Risks Relating to the Business

The cyclicality and volatility of the industries in which Lyondell participates may cause significant fluctuations in Lyondell’s operating results.

Lyondell’s historical operating results are subject to the cyclical and volatile nature of the supply-demand balance in the chemical and refining industries, and its future operating results are expected to continue to be affected by this cyclicality and volatility.  These industries historically have experienced alternating periods of capacity shortages leading to tight supply, causing prices and profit margins to increase, followed by periods when substantial capacity is added, resulting in oversupply, declining capacity utilization rates and declining prices and profit margins.  The volatility these industries experience occurs as a result of changes in the supply and demand for products, changes in energy prices and changes in various other economic conditions around the world.  The cyclicality and volatility of the chemical and refining industries results in significant fluctuations in profits and cash flow from period to period and over the business cycles.

The global economic and political environment continues to be uncertain, and a decline in demand could place further pressure on its results of operations.  In addition, new capacity additions by some participants in the industry, especially those in Asia, including the Middle East, that began in 2006 and are expected to continue, could lead to another period of oversupply and low profitability.  The timing and extent of any changes to currently prevailing market conditions is uncertain and supply and demand may be unbalanced at any time.  As a consequence, Lyondell is unable to accurately predict the extent or duration of future industry cycles or their effect on its business, financial condition or results of operations, and can give no assurances as to any predictions made in this document with respect to the timing, extent or duration of future industry cycles.

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Lyondell may reduce production at or idle a facility for an extended period of time or exit a business because of an oversupply of a particular product and/or a lack of demand for that particular product, or high raw material prices, which makes production uneconomical.  Lyondell may also reduce production at its facilities because it has either fixed or minimum off-take arrangements with joint ventures or third parties.  Any decision to permanently close facilities or exit a business would result in impairment and other charges to earnings.  Temporary outages sometimes last for several quarters or, in certain cases, longer, and could cause it to incur costs, including the expenses of maintaining and restarting these facilities.  In addition, even though Lyondell may need to reduce production, Lyondell may still be required to continue to purchase or pay for utilities or raw materials under take-or-pay supply agreements.  It is possible that factors such as increases in raw material costs or lower demand in the future will cause it to reduce operating rates, idle facilities or exit uncompetitive businesses.

Costs of raw materials and energy, as well  as reliability of supply, may result in increased operating expenses and reduced results of operations.

Lyondell purchase large amounts of raw materials and energy for its businesses.  The cost of these raw materials and energy, in the aggregate, represents a substantial portion of its operating expenses.  The costs of raw materials and energy generally follow price trends of, and vary with the market conditions for, crude oil and natural gas, which may be highly volatile and cyclical.  Many raw material and energy costs have recently experienced significant fluctuations, reaching historically record high levels.  Moreover, a weak U.S. dollar adds to the volatility in its raw material costs.  There have been, and will likely continue to be, periods of time when Lyondell is unable to pass raw material and energy cost increases on to customers quickly enough to avoid adverse impacts on its results of operations.  Customer consolidation also has made it more difficult to pass along cost increases to customers.  Its results of operations have been, and could be in the future, significantly affected by increases and volatility in these costs.  Cost increases also may increase working capital needs, which could reduce its liquidity and cash flow.  In addition, when raw material and energy costs increase rapidly and are passed along to customers as product price increases, the credit risks associated with certain customers can be compounded.  To the extent Lyondell increase its product sales prices to reflect rising raw material and energy costs, demand for products may decrease as customers reduce their consumption or use substitute products, which may have an adverse impact on its results of operations.  See "—Lyondell sells products in highly competitive global markets and face significant price pressures" below.

In addition, higher North American natural gas prices relative to natural gas cost-advantaged regions, such as the Middle East, have diminished the ability of many domestic chemical producers to compete internationally since natural gas prices affect a significant portion of the industry's raw materials and energy sources.  This environment has in the past caused, and may in the future cause, a reduction in Lyondell’s exports from North America, and has in the past reduced, and may in the future reduce, the competitiveness of U.S. producers.  It also has in the past increased the competition for product sales within North America, as production that would otherwise have been sold in other geographic regions.  This resulted in excess supply and lower margins in North America and Europe, and may do so in the future.

Furthermore, across its business, there are a limited number of suppliers for some of its raw materials and utilities and, in some cases, the number of sources for and availability of raw materials and utilities is specific to the particular geographic region in which a facility is located.  It is also common in the chemical and refining industries for a facility to have a sole, dedicated source for its utilities, such as steam, electricity and gas.  Having a sole or limited number of suppliers may result in it having limited negotiating power, particularly in the case of rising raw material costs.  Alternatively, where Lyondell have multiple suppliers for a raw material or utility, these suppliers may not make up for the loss of a major supplier.  Any new supply agreements Lyondell enter into may not have terms as favorable as those contained in its current supply agreements.  For some of its products, the facilities and/or distribution channels of raw material suppliers and utilities suppliers and Lyondell form an integrated system.  This is especially true in the U.S. Gulf Coast where the infrastructure of the chemical and refining industries is tightly integrated such that a major disruption of supply of a given commodity or utility can negatively affect numerous participants, including suppliers of other raw materials.

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If one or more of its significant raw material or utility suppliers were unable to meet its obligations under present supply arrangements, raw materials become unavailable within the geographic area from which they are now sourced, or supplies are otherwise disrupted, its businesses could suffer reduced supplies or be forced to incur increased costs for their raw materials or utilities, which would have a direct negative impact on plant operations.  For example, Hurricanes Katrina and Rita negatively affected crude oil and natural gas supplies, as well as supplies of some of its other raw materials, contributing to increases in raw material prices during the second half of 2005 and, in some cases, disrupting production.  In addition, hurricane-related disruption of rail and pipeline traffic in the U.S. Gulf Coast area will negatively affect shipments of raw materials and product.

In addition, in light of recent volatility in raw material costs and its current debt levels, its suppliers could impose more onerous terms on it, resulting in shorter payment cycles and increasing its working capital requirements

Disruptions in financial markets and an economic downturn could adversely affect Lyondell’s customers, and, therefore, its business.

Lyondell’s results of operations are materially affected by conditions in the financial markets and economic conditions generally, both in the U.S. and elsewhere around the world.  An economic downturn in the businesses or geographic areas in which it sells its products could substantially reduce demand for these products and result in a decrease in sales volumes.  Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining residential real estate market in the U.S. have contributed to increased volatility and diminished expectations for the global economy and markets.  These factors, combined with volatile raw material prices, declining business and consumer confidence, increased unemployment and continuing financial market fluctuations, have precipitated an economic slowdown and could lead to an extended worldwide economic recession.  An economic slowdown caused by a recession could adversely effect Lyondell’s business as these events would likely reduce worldwide demand for its products, in particular from its customers in industrial markets generally and specifically in the automotive, housing and consumer packaging industries.  Any of the foregoing events could result in an impairment of its assets, including goodwill.

Moreover, many of Lyondell’s customers and suppliers rely on access to credit to adequately fund their operations.  These disruptions in financial markets and an economic slowdown could also adversely impact the ability of customers to finance the purchase of its products and creditworthiness of customers, and could adversely impact the ability or willingness of suppliers to provide us with raw materials for its business.

External factors beyond Lyondell’s control can cause fluctuations in demand for its products and in its prices and margins, which may result in lower operating results.

External factors beyond Lyondell’s control can cause volatility in the price of raw materials and other operating costs, as well as significant fluctuations in demand for its products, and can magnify the impact of economic cycles on its businesses.  Examples of external factors include:

·   supply of and demand for crude oil and other raw materials;

·   changes in customer buying patterns and demand for its products;

·   general economic conditions;

·   domestic and international events and circumstances;

·   competitor actions;

·   governmental regulation; and

·   severe weather and natural disasters.

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Also, Lyondell believes that global events have had an impact on its businesses in recent years and may continue to do so.

In addition, a number of its products are highly dependent on durable goods markets, such as the construction and automotive markets, which also are cyclical and impacted by many of the external factors referenced above.  Many of its products are components of other chemical products that, in turn, are subject to the supply-demand balance of both the chemical and refining industries and general economic conditions.  The volatility and relatively elevated level of prices for crude oil and natural gas have resulted in increased raw material costs as compared to prior years, and the impact of the factors cited above and others may once again cause a slowdown in the business cycle, reducing demand and lowering operating rates and, ultimately, reducing profitability.

Lyondell sells products in highly competitive global markets and faces significant price pressures.

Lyondell sells its products in highly competitive global markets.  Due to the commodity nature of many of its products, competition in these markets is based primarily on price and to a lesser extent on product performance, product quality, product deliverability, reliability of supply and customer service.  As a result, Lyondell generally is not able to protect its market position for these products by product differentiation and may not be able to pass on cost increases to its customers.

In addition, Lyondell faces increased competition from companies that may have greater financial resources and different cost structures or strategic goals than us, such as large integrated oil companies (many of which also have chemical businesses), government-owned businesses, and companies that receive subsidies or other government incentives to produce certain products in a specified geographic region.  Increased competition from these companies could limit its ability to increase product sales prices in response to raw material and other cost increases, or could cause it to reduce product sales prices to compete effectively, which could reduce its profitability.  Competitors which have greater financial resources than Lyondell do may be able to invest significant capital into their businesses, including expenditures for research and development.  In addition, specialty products Lyondell produce may become commoditized over time.

Accordingly, increases in raw material and other costs may not necessarily correlate with changes in prices for its products, either in the direction of the price change or in magnitude.  In addition, its ability to increase product sales prices, and the timing of those increases, are affected by the supply-demand balances for its products, as well as the capacity utilization rates for those products.  Timing differences in pricing between rising raw material costs, which may change daily, and contract product prices, which in many cases are negotiated only monthly or less often, sometimes with an additional lag in effective dates for increases, have reduced and may continue to reduce profitability.  Even in periods during which raw material prices decline, Lyondell may suffer decreasing profits if raw material price reductions occur at a slower rate than decreases in the selling prices of its products.

Further, volatility in costs and pricing can result in commercial disputes with customers and suppliers with respect to interpretations of complex contractual arrangements.  Significant adverse resolution of any such disputes also could reduce profitability.

Interruptions of operations at its facilities may result in liabilities or lower operating results.

Lyondell owns and operates large-scale facilities, and its operating results are dependent on the continued operation of its various production facilities and the ability to complete construction and maintenance projects on schedule.  Material operating interruptions at its facilities, including interruptions caused by the events described below, may materially reduce the productivity and profitability of a particular manufacturing facility, or it as a whole, during and after the period of such operational difficulties.

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In addition, because the Houston Refinery is Lyondell’s only North American refining operation, an outage at the refinery could have a particularly negative impact on its operating results.  Unlike its chemical production facilities, which may at times have sufficient excess capacity to mitigate the negative impact of lost production at another similar facility of Lyondell, it does not have the ability to increase refining production elsewhere in North America in an effort to mitigate the negative impact on operating results resulting from an outage at the refinery.  For example, as a result of Hurricane Ike, Lyondell temporarily shut down the Houston Refinery on September 13, 2008.  In addition, in July 2008, a crane installed in preparation for the turnaround of a coker unit collapsed resulting in four contractor fatalities, injuries to seven other contract workers and some physical damage at the refinery, primarily to one storage tank.  As a result of the incident, the coker unit will require additional time to complete the turnaround.

Although Lyondell take precautions to enhance the safety of its operations and minimize the risk of disruptions, its operations, along with the operations of other members of the chemical and refining industries, are subject to hazards inherent in chemical manufacturing and refining and the related storage and transportation of raw materials, products and wastes.  These potential hazards include:

·   pipeline leaks and ruptures;

·   explosions;

·   fires;

·   severe weather and natural disasters;

·   mechanical failure;

·   unscheduled downtimes;

·   supplier disruptions;

·   labor shortages or other labor difficulties;

·   transportation interruptions;

·   remediation complications;

·   chemical spills;

·   discharges or releases of toxic or hazardous substances or gases;

·   storage tank leaks;

·   other environmental risks; and

·   terrorist acts.

Some of these hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations, the shutdown of affected facilities and the imposition of civil or criminal penalties.  Furthermore, Lyondell also will continue to be subject to present and future claims with respect to workplace exposure, exposure of contractors on its premises as well as other persons located nearby, workers' compensation and other matters.

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Lyondell maintain property, business interruption, product, general liability, casualty and other types of insurance, including pollution and legal liability, that Lyondell believe are in accordance with customary industry practices, but Lyondell is not fully insured against all potential hazards incident to its businesses, including losses resulting from natural disasters, war risks or terrorist acts.  Changes in insurance market conditions have caused, and may in the future cause, premiums and deductibles for certain insurance policies to increase substantially and, in some instances, for certain insurance to become unavailable or available only for reduced amounts of coverage.  If Lyondell were to incur a significant liability for which Lyondell were not fully insured, Lyondell might not be able to finance the amount of the uninsured liability on terms acceptable to it or at all, and might be obligated to divert a significant portion of its cash flow from normal business operations.

Further, because a part of its business involves licensing polyolefins process technology, its licensees are exposed to similar risks involved in the manufacture and marketing of polyolefins.  Hazardous incidents involving its licensees, if they do result or are perceived to result from use of its technologies, may harm its reputation, threaten its relationships with other licensees and/or lead to customer attrition and financial losses.  Its policy of covering these risks through contractual limitations of liability and indemnities and through insurance may not always be effective.  As a result, its financial condition and results of operation would be adversely affected, and other companies with competing technologies may have the opportunity to secure a competitive advantage.

Lyondell’s crude oil contract with PDVSA-Petròleos S.A.  is subject to the risk of enforcing contracts against non-U.S. affiliates of a sovereign nation and political, force majeure and other risks.

Lyondell’s crude oil contract with PDVSA-Petròleos S.A.  ("PDVSA Oil"), an affiliate of Petròleos de Venezuela, S.A.  ("PDVSA"), the national oil company of Venezuela, provides for the purchase and supply of 230,000 barrels per day of heavy, high sulfur crude oil (approximately 86% of the refining capacity at the Houston Refinery).  There are risks associated with reliance on PDVSA Oil for supplies of crude oil and with enforcing the provisions of contracts with companies such as PDVSA Oil that are non-U.S. affiliates of a sovereign nation.  For example, from time to time in the past, PDVSA Oil has declared itself in a force majeure situation and subsequently reduced deliveries of crude oil purportedly based on announced OPEC production cuts.  All of the crude oil supplied by PDVSA Oil under the crude oil contract is produced in Venezuela, and it is impossible to predict how governmental policies may change under the current or any subsequent Venezuelan government.  In addition, there are risks associated with enforcing judgments of U.S. courts against entities whose assets are located outside of the U.S. and whose management does not reside in the U.S. Any modification, breach or termination of the crude oil contract, or any interruption in this source of crude oil on its current terms, could adversely affect us, as alternative crude oil supplies with similar margins may not always be available for purchase and may require modification to the Houston Refinery that may result in significant costs or down time.

Lyondell’s operations and assets are subject to extensive environmental, health and safety and other laws and regulations, which could result in material costs or liabilities.

Lyondell cannot predict with certainty the extent of future liabilities and costs under environmental, health and safety and other laws and regulations and whether liabilities and costs will be material.  Lyondell also may face liability for alleged personal injury or property damage due to exposure to chemicals or other hazardous substances at its current or former facilities or chemicals that Lyondell manufactures, handles or owns.  In addition, because its products are components of a variety of other end-use products, Lyondell, along with other members of the chemical industry, is inherently subject to potential claims related to those end-use products.  Although claims of the types described above have not historically had a material impact on its operations, a substantial increase in the success of these types of claims could result in the expenditure of a significant amount of cash by it to pay claims, and could reduce its operating results.

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Lyondell (together with the industries in which it operates) is subject to extensive national, regional, state and local environmental laws, regulations, directives, rules and ordinances concerning, and is required to have permits and licenses regulating, emissions to the air, discharges onto land or waters and the generation, handling, storage, transportation, treatment, disposal and remediation of hazardous substances and waste materials.  Many of these laws and regulations provide for substantial fines and potential criminal sanctions for violations, and permits and licenses are subject to renewal, modification and in some circumstances, revocation.  Some of these laws and regulations are subject to varying and conflicting interpretations.  In addition, some of these laws and regulations require it to meet specific financial responsibility requirements.   Lyondell generally expects that regulatory controls worldwide will become increasingly more demanding, but cannot accurately predict future developments, such as increasingly strict environmental laws, and inspection and enforcement policies, as well as higher compliance costs, which might affect the handling, manufacture, use, emission or disposal of products, other materials or hazardous and non-hazardous waste.  Stricter environmental, safety and health laws, regulations and enforcement policies could result in increased costs and liabilities to it or limitations on its operations, and could subject its handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than at present.

Some risk of environmental costs and liabilities is inherent in its operations and products, and there is no assurance that material costs and liabilities will not be incurred.

Environmental laws may have a significant effect on the nature and scope of cleanup of contamination at current and former operating facilities, the costs of transportation and storage of raw materials and finished products and the costs of the storage and disposal of wastewater.  In the U.S., the Superfund Amendments and Reauthorization Act of 1986 (the "Superfund") statutes may impose joint and several liability for the costs of remedial investigations and actions on the entities that generated waste, arranged for disposal of the wastes, transported to or selected the disposal sites and the past and present owners and operators of such sites.  All such responsible parties (or any one of them, including Lyondell) may be required to bear all of such costs regardless of fault, the legality of the original disposal or ownership of the disposal site.  In addition, similar environmental laws and regulations that have been or may be enacted in other countries outside of the U.S. may impose similar liabilities and costs upon Lyondell.

Some of Lyondell’s manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal.  It is anticipated that corrective measures will be necessary to comply with national and state requirements with respect to some of these facilities.  Lyondell also have liabilities under the U.S. Resource Conservation and Recovery Act and various U.S. state and non-U.S. government regulations related to several current and former plant sites.  Lyondell also is responsible for a portion of the remediation of certain off-site waste disposal facilities.  Lyondell is contributing funds to the cleanup of several waste sites throughout the U.S. under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") and the Superfund, including the Kalamazoo River Superfund Site discussed below.  Lyondell also have been named as a Potentially Responsible Party (“PRP”) under CERCLA or similar law at several other sites.  Its policy is to accrue remediation expenses when it is probable that such efforts will be required and the related expenses can be reasonably estimated.  Estimated costs for future environmental compliance and remediation are necessarily imprecise due to such factors as the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among the potentially responsible parties under applicable statutes.  For further discussion regarding its environmental matters, related accruals and environmentally related capital expenditures, see Note 16 to the Unaudited Consolidated Financial Statements, and see Note 20 to the Consolidated Financial Statements, “Item 1. Legal Proceedings—Environmental Matters" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Lyondell’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and Note 20 to the Consolidated Financial Statements, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Item 1. Business—Environmental Capital Expenditures," and "Item 3. Legal Proceedings—Environmental Matters” included in Lyondell’s Annual Report on Form 10-K for the year ended December 31, 2007.  If actual expenditures exceed the amounts accrued, that could have an adverse effect on its results of operations and financial position.

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Kalamazoo River Superfund Site—Lyondell acquired Millennium on November 30, 2004.  A Millennium subsidiary has been identified as a PRP under CERCLA or similar law with respect to the Kalamazoo River Superfund Site.  The site involves cleanup of river sediments and floodplain soils contaminated with polychlorinated biphenyls, cleanup of former paper mill operations, and cleanup and closure of landfills associated with the former paper mill operations.  Litigation concerning the matter commenced by the State of Michigan in December 1987 was recently dismissed, although the State reserved its right to bring certain claims in the future if the issues are not resolved in the CERCLA process.  In 2000, the Kalamazoo River Study Group (the "KRSG"), of which the Millennium subsidiary and other PRPs are members, submitted to the State of Michigan a Draft Remedial Investigation and Draft Feasibility Study, which evaluated a number of remedial options for the river.  The estimated costs for these remedial options ranged from $0 to $2.5 billion.

Although the KRSG study identified a broad range of remedial options, management does not believe that any single remedy among those options represented the highest-cost reasonably possible outcome.  In 2004, Lyondell recognized a liability representing Millennium's interim allocation of 55% of the $73 million total of estimated cost of riverbank stabilization, recommended as the preferred remedy in 2000 by the KRSG study, and of certain other costs.

At the end of 2001, the U.S. EPA took lead responsibility for the river portion of the site at the request of the State of Michigan.  In 2004, the EPA initiated a confidential process to facilitate discussions among the agency, the Millennium subsidiary, other PRPs, the Michigan Departments of Environmental Quality and Natural Resources, and certain federal natural resource trustees about the need for additional investigation activities and different possible approaches for addressing the contamination in and along the Kalamazoo River.

As these discussions have continued, management has obtained new information about regulatory oversight costs and other remediation costs, including a proposed remedy to be applied to a specific portion of the river, and has been able to reasonably estimate anticipated costs for certain other segments of the river, based in part on experience to date with the remedy currently being applied to the one portion of the river.  As a result, management can reasonably estimate the probable spending for remediation of three segments of the river, which has been accrued as of September 30, 2008.  Management's best estimates for costs relating to other segments of the river, which may remain uncertain for the foreseeable future, also have been accrued, based on the KRSG study.  As of September 30, 2008, the probable additional future remediation spending associated with the river cannot be determined with certainty but the amounts accrued are believed to be the current best estimate of future costs, based on information currently available.

In addition, Lyondell has recognized a liability primarily related to Millennium's estimated share of remediation costs for two former paper mill sites and associated landfills, which are also part of the Kalamazoo River Superfund Site.  Although no final agreement has been reached as to the ultimate remedy for these locations, Millennium has begun remediation activity related to these sites.

Millennium's ultimate liability for the Kalamazoo River Superfund Site will depend on many factors that have not yet been determined, including the ultimate remedies selected, the determination of natural resource damages, the number and financial viability of the other PRPs, and the determination of the final allocation among the PRPs.  See Note 16 of the Consolidated Financial Statements in Lyondell’s Quarterly Report for the quarter ended September 30, 2008, for more information as to the accrued liabilities related to the Kalamazoo River and the two former paper mill sites with associated landfills.

Other regulatory requirements—In addition to the matters described above, Lyondell is subject to other material regulatory requirements that could result in higher operating costs, such as regulatory requirements relating to the security of its facilities, and the transportation, exportation or registration of its products.  Although Lyondell has compliance programs and other processes intended to ensure compliance with all such regulations, Lyondell is subject to the risk that its compliance with such regulations could be challenged.  Non-compliance with certain of these regulations could result in the incurrence of additional costs, penalties or assessments that could be significant.

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Legislative and other actions have eliminated substantially all U.S. demand for MTBE.  Therefore, Lyondell has been selling its U.S.-produced MTBE for use outside of the U.S., and may in the future produce an alternative gasoline blending component in the U.S., which may be less profitable than MTBE.

Substantially all refiners and blenders have discontinued the use of MTBE in the U.S., partly as a result of U.S. federal governmental initiatives to increase use of bio-ethanol in gasoline as well as some state legislation to reduce or ban the use of MTBE.  Accordingly, Lyondell is marketing its U.S.-produced MTBE for use outside of the U.S. However, there are higher distribution costs and import duties associated with exporting MTBE outside the U.S., and the increased supply of MTBE may reduce profitability of MTBE in these export markets.  Its U.S.-based and European-based MTBE plants generally have the flexibility to produce either MTBE or ETBE to accommodate market needs.  Lyondell produce and sell ETBE in Europe to address Europe's growing demand for bio-based fuels.  In addition, Lyondell may, in the future, modify equipment at its Channelview, Texas facility to provide it with the flexibility to produce an alternative gasoline blending component or either MTBE or ETBE at that facility in the future.  Any decision to produce an alternative gasoline blending component will depend on the timing and cost of equipment modifications, and product decisions will continue to be influenced by regulatory and market developments.  The profit contribution related to an alternative gasoline blending component may be significantly lower than that historically realized on MTBE and ETBE.

Proceedings related to the alleged exposure to lead-based paints and lead pigments could require Millennium to spend material amounts in litigation and settlement costs and judgments.

Together with alleged past manufacturers of lead-based paint and lead pigments for use in paint, Millennium has been named as a defendant in various legal proceedings in the U.S. alleging personal injury, property damage, and remediation costs allegedly associated with the use of these products.  The plaintiffs include individuals and governmental entities, and seek recovery under a variety of theories, including negligence, failure to warn, breach of warranty, conspiracy, market share liability, fraud, misrepresentation and nuisance.  The majority of these legal proceedings assert unspecified monetary damages in excess of the statutory minimum and, in certain cases, seek equitable relief such as abatement of lead-based paint in buildings.  These legal proceedings are in various trial stages and post-dismissal settings, some of which are on appeal.

While Lyondell believes that Millennium has valid defenses to all the lead-based paint and lead pigment proceedings and is vigorously defending them, litigation is inherently subject to many uncertainties.  Additional lead-based paint and lead pigment litigation may be filed against Millennium in the future asserting similar or different legal theories and seeking similar or different types of damages and relief, and any adverse court rulings or determinations of liability, among other factors, could affect this litigation by encouraging an increase in the number of future claims and proceedings.  In addition, from time to time, legislation and administrative regulations have been enacted or proposed to impose obligations on present and former manufacturers of lead-based paint and lead pigment respecting asserted health concerns associated with such products or to overturn successful court decisions.  Lyondell is unable to predict the outcome of lead-based paint and lead pigment litigation, the number or nature of possible future claims and proceedings, or the effect that any legislation and/or administrative regulations may have on Millennium and, therefore, Lyondell.  In addition, Lyondell cannot reasonably estimate the scope or amount of the costs and potential liabilities related to such litigation, or any such legislation and regulations.  Thus, any liability Millennium incurs with respect to pending or future lead-based paint or lead pigment litigation, or any legislation or regulations could, to the extent not covered or reduced by insurance or other recoveries, have a material impact on Millennium's and, therefore, Lyondell’s results of operations.  In addition, Lyondell has not accrued any liabilities for judgments or settlements against Millennium resulting from lead-based paint and lead pigment litigation.  Any liability that Millennium may ultimately incur with respect to lead-based paint and lead pigment litigation is not affected by the sale of the inorganic chemicals business, which closed on May 15, 2007.  See "Item 1. Legal Proceedings" included in Lyondell’s Quarterly Report for the quarter ended September 30, 2008, for additional discussion regarding lead-based paint and lead pigment litigation.

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Lyondell’s international operations are subject to exchange rate fluctuations, exchange controls, political risks and other risks relating to international operations.

Lyondell has substantial international operations, which are subject to the risks of doing business on a global level, including fluctuations in currency exchange rates, transportation delays and interruptions, war, terrorist activities, epidemics, pandemics, political and economic instability and disruptions, restrictions on the transfer of funds, the imposition of duties and tariffs, import and export controls, changes in governmental policies, labor unrest and current and changing regulatory environments.  These events could reduce the demand for its products internationally, decrease the prices at which Lyondell can sell its products internationally, disrupt production or other operations internationally, require substantial capital and other costs to comply, and/or increase security costs or insurance premiums, all of which could reduce its operating results.  In addition, Lyondell obtains a substantial portion of its principal raw materials from international sources that are subject to these same risks.  Its compliance with applicable customs, currency exchange control regulations, transfer pricing regulations or any other laws or regulations to which Lyondell may be subject could be challenged.  Furthermore, these laws may be modified, the result of which may be to prevent or limit subsidiaries from transferring cash to Lyondell.

Furthermore, Lyondell may experience difficulty enforcing agreements in certain jurisdictions.  In jurisdictions where bankruptcy laws and practices may vary, Lyondell may experience difficulty collecting receivables through the applicable legal systems.  Lyondell is subject to certain existing, and may be subject to possible future, laws that limit or may limit its activities while some of our competitors may not be subject to such laws, which may adversely affect its competitiveness.

In addition, Lyondell generates revenue from export sales and operations that may be denominated in currencies other than the relevant functional currency.  Exchange rates between these currencies and functional currencies in recent years have fluctuated significantly and may do so in the future.  Future events, which may significantly increase or decrease the risk of future movement in currencies in which Lyondell conduct its business, cannot be predicted.  Lyondell also may hedge certain revenues and costs using derivative instruments to minimize the impact of changes in the exchange rates of those currencies compared to the respective functional currencies.  It is possible that fluctuations in exchange rates will result in reduced operating results.

Significant changes in pension fund investment performance or assumptions relating to pension costs may adversely affect the valuation of pension obligations, the funded status of pension plans, and its pension cost.

Lyondell’s funding policy for pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations.  Lyondell’s pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets.  Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets, particularly equity securities, or in a change of the expected rate of return on plan assets.  Any change in key actuarial assumptions, such as the discount rate, would impact the valuation of pension obligations, affecting the reported funded status of its pension plans as well as the net periodic pension cost in the following fiscal years.  Certain of its current pension plans are underfunded.  The fair values of Lyondell’s pension plans assets have decreased since December 31, 2007 as a result of significant turmoil in the financial markets.  Further declines in the fair values of the pension plans assets could require additional payments by Lyondell in order to maintain specified funding levels.  See Note 14 to the Consolidated Financial Statements included in Lyondell’s Quarterly Report for the quarter ended September 30, 2008.

Lyondell’s U.S. pension plans are subject to the Employment Retirement Income Security Act of 1974, or "ERISA." Under ERISA, the Pension Benefit Guaranty Corporation, or "PBGC," has the authority to terminate an underfunded pension plan under limited circumstances.  In the event that its U.S. pension plans are terminated for any reason while the plans are underfunded, Lyondell will incur a liability to the PBGC that may be equal to the entire amount of the underfunding.

67

Lyondell pursues acquisitions, dispositions, partnerships and joint ventures, which may require significant resources and may not yield the expected benefits.

Lyondell seeks opportunities to generate value through business combinations, purchases and sales of assets, partnerships, contractual arrangements or joint ventures.  Any future transaction may require that Lyondell make significant cash investment, incur substantial debt or assume substantial liabilities.  In addition, these transactions may require significant managerial attention, which may be diverted from its other operations.  These capital, equity and managerial commitments may impair the operation of its businesses.

Transactions that Lyondell pursue may be intended to, among other things, result in the realization of synergies, the creation of efficiencies or the generation of cash to reduce debt.  Although these transactions may be expected to yield longer-term benefits if the expected efficiencies and synergies of the transactions are realized, they could reduce its operating results in the short term because of the costs, charges and financing arrangements associated with such transactions or the benefits of a transaction may not be realized to the extent anticipated.  Other transactions may advance future cash flows from some of its businesses, thereby yielding increased short-term liquidity, but consequently resulting in lower cash flows from these operations over the longer term.  Also, any future acquisitions of businesses or facilities could entail a number of additional risks, including, problems with effective integration of operations, the inability to maintain key pre-acquisition business relationships, increased operating costs, exposure to unanticipated liabilities, and difficulties in realizing projected efficiencies, synergies and cost savings.

Integration of the Lyondell businesses with the historical Basell businesses may lead to unanticipated costs and operations may be disrupted.

The process of effectively integrating Basell and Lyondell into one company will continue to require significant managerial and financial resources.  The costs and time required to integrate these businesses into one organization could cause the interruption of, or a loss of momentum in, the activities of any one, or several, of the operations of the constituent entities.  Furthermore, the Acquisition has significantly increased its size and has also substantially increased the scope and complexity of its operations.  There can be no assurance that Lyondell will be able to effectively manage this newly enlarged operation, or achieve the desired profitability from the Acquisition.  A failure to successfully integrate Lyondell with Basell's legacy business operations within the expected time frame could adversely affect its business, financial condition and results of operations.  The Acquisition also may expose it to certain additional risks, including:

·   difficulties arising from operating a significantly larger and more complex organization and adding Lyondell's operations to Basell's legacy operations;

·   difficulties in the assimilation of the assets and operations of the Lyondell businesses with the assets and operations of Basell, especially when the assets are in business segments not shared historically by both companies or involve joint venture partners;

·   the loss of, or difficulty in attracting, customers, business partners or key employees as a result of uncertainties associated with the Acquisition or otherwise;

·   customers and business partners of Lyondell being unwilling to continue doing business on the same or similar terms as a result of the Acquisition;

·   challenges associated with the implementation of changes in management in connection with the Acquisition and the integration of the combined company management team;

·   difficulties in consolidating the workforces of Lyondell and Basell and coordinating geographically disparate organizations, systems and facilities;

·   the diversion of management attention from other business concerns;

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·   difficulties arising from coordinating and consolidating corporate and administrative functions, including integration of internal controls and procedures and information technology systems;

·   unforeseen legal, regulatory, contractual, labor or other issues; and the failure to realize expected synergies, profitability or growth.

Further, unexpected costs and challenges may arise whenever businesses with different operations or management are combined and Lyondell may experience unanticipated delays in realizing the benefits of the Acquisition.

Conflicts of interest between Lyondell and its owner, LyondellBasell Industries, could be resolved in a manner that may be perceived to be adverse to Lyondell.

Lyondell is an indirect, wholly-owned subsidiary of LyondellBasell Industries.  All executive officers of Lyondell and all members of Lyondell’s Board of Directors also serve as officers of LyondellBasell Industries.  Conflicts of interest may arise between LyondellBasell Industries and Lyondell when decisions arise that could have different implications for LyondellBasell Industries and Lyondell, and conflicts of interest could be resolved in a manner that may be perceived as adverse to Lyondell.

Shared control of joint ventures may delay decisions or actions regarding the joint ventures.

A portion of Lyondell’s operations currently are, and may in the future be, conducted through joint ventures.  Lyondell share control of these joint ventures with third parties.

Lyondell’s forecasts and plans with respect to these joint ventures assume that its joint venture partners will observe their joint venture obligations.  In the event that any of its joint venture partners do not observe their joint venture obligations, it is possible that the affected joint venture would not be able to operate in accordance with its business plans or that Lyondell would be required to increase its level of commitment in order to give effect to such plans.

As with any such joint venture arrangements, differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major matters, potentially adversely affecting the business and operations of the joint ventures and in turn its business and operations.

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Item 6.  Exhibits

4.2	Amended and Restated Senior Secured Credit Agreement Dated as of April 30, 2008 (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 6, 2008 and incorporated herein by reference)
4.3	Amended and Restated Bridge (Interim) Loan Credit Agreement Dated as of October 17, 2008 (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on October 23, 2008 and incorporated herein by reference)
4.5(a)	Amendment No. 1 to Senior Secured Inventory-Based Credit Agreement Dated as of April 30, 2008 (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 6, 2008 and incorporated herein by reference)
4.8(a)	Amendment No. 1 to Receivables Purchase Agreement and Undertaking Agreement Dated as of April 30, 2008 (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 7, 2008 and incorporated herein by reference)
4.12	Long Term Intercompany Loan Agreement dated as of February 22, 2008 (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)
4.12(a)	Amendment No. 1 to Long Term Intercompany Loan Agreement dated as of March 20, 2008 (filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference)
4.15	Revolving Credit Agreement dated as of March 27, 2008 (filed as an exhibit to the Registrant’s Form 10-Q for the quarter ended March 31, 2008 and incorporated herein by reference)
4.15(a)	Consent letter executed on August 13, 2008 and effective as of April 30, 2008 by Access Industries Holdings LLC (filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on August 19, 2008 and incorporated herein by reference)
10.2	Amended and Restated Lyondell Chemical Company Supplemental Executive Retirement Plan
10.4	Amended and Restated Lyondell Chemical Company Executive Deferral Plan
10.17(a)	Instrument Amending Lyondell Chemical Company Executive Severance Pay Plan
10.22	Agreement dated January 23, 2008 between Morris Gelb and Registrant (filed as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)
10.23	LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan
10.23(a)	First Amendment to LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan
10.24	Form of LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan Phantom Unit Award Agreement
10.25	LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan Phantom Unit Award Agreement between LyondellBasell Industries AF S.C.A. and Morris Gelb

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10.25(a)	LyondellBasell Industries AF S.C.A. Phantom Unit Award Amendment between LyondellBasell Industries AF S.C.A. and Morris Gelb
10.26	LyondellBasell Industries AF S.C.A. Mid-Term Incentive Plan
10.27	Form of LyondellBasell Industries AF S.C.A. Mid-Term Incentive Plan Award Agreement
31.1	Rule 13a – 14(a)/15d – 14(a) Certification of Principal Executive Officer
31.2	Rule 13a – 14(a)/15d – 14(a) Certification of Principal Financial Officer
32.1	Section 1350 Certification of Principal Executive Officer
32.2	Section 1350 Certification of Principal Financial Officer

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Lyondell Chemical Company
Dated:  November 13, 2008	/s/ Eberhard Faller
	Eberhard Faller
	Vice President, Controller and Chief Accounting Officer
	(Duly Authorized and
	Principal Accounting Officer)

EX-10.2

LYONDELL CHEMICAL COMPANY

SUPPLEMENTARY EXECUTIVE

RETIREMENT PLAN

As Amended and Restated Effective November 4, 2008

Lyondell Chemical Company

Supplementary Executive Retirement Plan

TABLE OF CONTENTS

			PAGE
ARTICLE I - GENERAL PROVISIONS			1
	Section 1.1	Purpose and Intent	1
	Section 1.2	Effective Date	1
	Section 1.3	Plan Costs	1
	Section 1.4	Definitions	1
ARTICLE II - SUPPLEMENTARY BENEFITS			5
	Section 2.1	Types of Supplementary Benefits	5
	Section 2.2	General Eligibility	5
	Section 2.3	Amount of Supplementary Benefits (or Survivor Benefit) in General	5
	Section 2.4	Deferral/Incentive Supplement	6
	Section 2.5	Qualification Limit Supplement	7
	Section 2.6	Special Supplements	8
ARTICLE III - BENEFIT FORM			9
	Section 3.1	Supplementary Benefits	9
ARTICLE IV - TIMING OF BENEFIT PAYMENT			10
	Section 4.1	Supplementary Benefits	10
	Section 4.2	Key Employees	10
	Section 4.3	Small Benefit	10
ARTICLE V - ADMINISTRATION			11
	Section 5.1	Interpretation	11
	Section 5.2	Administrative Records	11
	Section 5.3	Claims	11
	Section 5.4	Committee Liability	12

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Lyondell Chemical Company

Supplementary Executive Retirement Plan

TABLE OF CONTENTS (cont'd)

ARTICLE VI - MISCELLANEOUS			13
	Section 6.1	Unfunded Benefit Plan	13
	Section 6.2	Unsecured General Creditor	13
	Section 6.3	Grantor Trust	13
	Section 6.4	Non-Assignment	13
	Section 6.5	No Employment Right	14
	Section 6.6	Adjustments	14
	Section 6.7	Obligation to Company	14
	Section 6.8	Protective Provisions	14
	Section 6.9	Gender, Singular and Plural	14
	Section 6.10	Governing Law	14
	Section 6.11	Validity	14
	Section 6.12	Notice	15
	Section 6.13	Successors and Assigns	15
	Section 6.14	Incapacity	15
ARTICLE VII - AMENDMENT AND DISCONTINUANCE			16
	Section 7.1	Plan Amendment	16
	Section 7.2	Termination	16
	Section 7.3	Effect of Amendment or Termination	16
	Section 7.4	Effect of Legislation	16

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ARTICLE I

GENERAL PROVISIONS

Section 1.1            Purpose and Intent.

This Plan is intended to provide supplemental retirement allowances according to its provisions to those Employees who are eligible to receive Awards under the Lyondell Chemical Company annual incentive plans, and who

(a)           have deferred a portion of their Salary under the Lyondell Chemical Company Deferral Plan or

(b)           have had the amount of their benefit reduced, due to federal legal requirements, under a tax-qualified, defined benefit retirement plan maintained by Lyondell Chemical Company, or

(c)           have been granted a Special Supplement under Section 2.6.

Section 1.2           Effective Date.

This Plan document shall be effective November 4, 2008 and shall apply to Employees who are employed by the Company on or after November 4, 2008, unless certain provisions specify that they are effective on a different date.

This Plan amends and restates the Prior Plan.

Section 1.3            Plan Costs.

The Company shall bear all Plan costs, including administrative costs, and no Employee contributions shall be required or permitted.

Section 1.4             Definitions.

Actuarial Equivalent or Actuarially Equivalent means, in comparing benefits payable in different forms or at different times or in different circumstances, a value under one set of circumstances which is the same as the value under a different set of circumstances.  The value shall be computed and determined by using mortality assumptions, interest rates and other actuarial factors and assumptions used to calculate actuarial equivalents under the Retirement Plan.

Administrative Committee means the Benefits Administrative Committee of Lyondell Chemical Company.

Award means an immediate cash award made under the Lyondell Chemical Company annual incentive plans for executives or senior managers or awards under any other plan that the Company’s Supervisory Board or its Remuneration Committee, has authorized the Company to accept and to treat as awards under this Plan.

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Base Pay means the annual amount of “Base Pay," as defined in the Retirement Plan.

Basic Allowance means an annuity payable for the Participant’s life, with a guarantee that an amount equal to 60 monthly payments will be made to the Participant and his Beneficiary.

Beneficiary means a person designated by the Participant to be entitled to receive the Survivor Benefit under Sections 2.4, 2.5 and/or 2.6 when the Participant dies or, if the Participant has failed to designate a person, the Participant’s spouse, if the Participant was married at his death, or the Participant’s estate, if the Participant was not married at his death.

                Code means the Internal Revenue Code of 1986, as amended, including any successor provisions and any regulations or other guidance promulgated by applicable governmental agencies.

Company means Lyondell Chemical Company, a Delaware corporation, or its successor.

Deferral/Incentive Supplement means a Supplementary Benefit described under Section 2.4.

Deferred Compensation means any amount of Salary which a Participant elects to defer according to the terms of the Lyondell Chemical Company Deferral Plan.

Employee means a regular salaried employee of the Company.

ERISA means the Employee Retirement Income Security Act of 1974, as amended, including any successor provisions and any regulations or other guidance promulgated by applicable governmental agencies.

Financial Hardship means a condition of severe financial difficulty due to an unforeseeable emergency resulting from (a) an illness or accident of the Participant, his spouse or dependent; (b) a casualty causing a Participant’s property loss; or (c) other similar or extraordinary and unforeseeable circumstances created by events beyond the Participant’s control, as determined by the Administrative Committee, upon advice of counsel, based on written information supplied by the Participant and which is sufficient, in counsel’s judgment, to justify a change in the elected benefits form under Section 3.1 without causing the Participant or any other Plan Participant to receive taxable income from the Plan before actual payment of Plan benefits.

Key Employee means an Employee who, at any time during the prior Plan Year, was identified as (a) an officer of the Company with annual compensation greater than $130,000, as adjusted, (b) a five percent (5%) owner of the Company, or (c) a one percent (1%) owner of the Company with annual compensation from the Company of more than $150,000, as adjusted, as determined according to the requirements of Code Sections 409A and 416(i).  For Plan Distribution purposes, an Employee identified as a Key Employee during a year ending on an identification date shall be considered a Key Employee for a twelve (12) month period beginning on the following April 1.  December 31 of the prior Plan Year shall be used as the identification date to identify Key Employees under Code Section 409A.

2

Participant means an active Employee or a former Employee who, at his Separation from Service, retirement or death, was employed by the Company or a Related Company and who is entitled to receive Plan benefits by reason of having  received one or more Awards that would be used to compute the Employee's Average Final Base Pay under the Retirement Plan, if the Awards were recognized as a part of Base Pay under the Retirement Plan and who (a) deferred a portion of his Salary that would be used to calculate the Employee's Average Final Base Pay under the Retirement Plan if the Deferred Compensation recognized as a part of Base Pay under the Retirement Plan; (b) had his benefit under the Retirement Plan reduced due to required limitations under the Code or ERISA; and/or (c)  had been granted a Special Supplement under Section 2.6.  Participant shall include a former Employee who has not received the entire benefit to which he is entitled under this Plan.

Plan means this Supplementary Executive Retirement Plan of Lyondell Chemical Company.

Pre-Retirement Survivor Annuity means the annuity or death benefit paid under the Retirement Plan to a survivor, attributable to Company contributions, that is payable due to the Participant's death before a retirement allowance commences and after the Participant became entitled to a retirement allowance payable from Company contributions under the Retirement Plan.

Prior Plan means this Plan, as in effect before this amendment and restatement.

Qualified Limit Supplement means a Supplementary Benefit described in Section 2.5.

Related Company means

(a)           Any corporation that is a member of a controlled group of corporations within the meaning of section 1563(e)(3)(C), of which Lyondell Chemical Company is a member, and

(b)           All trades or businesses, whether or not incorporated, which, under regulations prescribed by the Secretary of the Treasury pursuant to Section 210(d) of ERISA, are under common control with Lyondell Chemical Company.

Retirement Plan means the Lyondell Chemical Company Retirement Plan.

Remuneration Committee means the Remuneration Committee of the Supervisory Board of LyondellBasell Industries.

Salary means the Employee's regular base salary paid by the Company or a Related Company, excluding Awards and any other special or additional compensatory payments.

Separation from Service means the Participant’s employment termination from the Company or a Related Company which complies with the requirements of Code Section 409A.  A transfer to or from the Company and any Related Company shall not be a Separation from Service under this Plan.

3

Special Supplement means a supplementary retirement benefit approved for payment to an Employee under Section 2.6.

Supplementary Benefit means any of the types of supplementary benefits provided in Sections 2.4, 2.5 or 2.6.

Supplementary Benefits means, collectively, all Supplementary Benefits provided by this Plan, or all those Supplementary Benefits to which a particular Participant is entitled, as the context requires.

Survivor Benefit means any survivor benefit payable to a Participant's Beneficiary under Article II.

4

ARTICLE II

SUPPLEMENTARY BENEFITS

Section 2.1            Types of Supplementary Benefits Provided.

This Plan provides for the following types of Supplementary Benefits:

(a)           Deferral/Incentive Supplements, as described in Section 2.4;

(b)           Qualification Limit Supplements, as described in Section 2.5;

(c)           Special Supplements, as described in Section 2.6.

Section 2.2            General Eligibility

(a)           Benefit Eligibility.  An Employee who has a Separation from Service with a nonforfeitable right to a retirement allowance from the Retirement Plan automatically is eligible for each type of Supplementary Benefit provided by Sections 2.4 and 2.5, to the extent he satisfies the specific eligibility requirements of the applicable Section.  Supplementary Benefits shall be paid in the form and at the time provided under Articles III and IV, respectively.

(b)           Survivor Benefit Eligibility.  If a Participant dies before any Supplementary Benefit to which the Participant is entitled commences, his Beneficiary will be eligible to receive a Survivor Benefit that relates to the particular Supplementary Benefit.  The Participant must designate the same person as his Beneficiary for purposes of all Survivor Benefits payable under this Plan.  Survivor Benefits to which a Beneficiary is entitled under this Article will automatically be paid to the Beneficiary.  If a Participant dies after commencing Plan benefits in a form that provides for continued payments after the Participant's death, benefit payments shall continue according to the terms and provisions of that benefit form.

Section 2.3 Amount of Supplementary Benefits (or Survivor Benefit) in General.

The total amount of Supplementary Benefits (or Survivor Benefits, if applicable) payable under this Plan shall be the sum of the benefits to which the Participant is entitled (or Survivor Benefits to which the Participant's Beneficiary is entitled, if applicable) under all types of Supplementary Benefits whose requirements are satisfied by or with respect to the Participant.

Each type of Supplementary Benefit payable from this plan to a Participant is the Participant’s Excess Retirement Benefit.  "Excess Retirement Benefit" means

the excess of

(1)           the Participant's "Hypothetical Amount", as defined separately for purposes of each type of Supplementary Benefit, and payable as a lump sum, over

(2)           the Participant’s “Basic Amount”, which is the single payment that is the Actuarial Equivalent of

5

(A) the retirement allowance the Participant is entitled to receive at retirement from the Retirement Plan and would have received as a lump sum (or as a Basic Allowance for any portion of the retirement allowance not payable as a lump sum);

(B) any Supplementary Benefit paid to a Participant or to a trustee or custodian on the Participant’s behalf under the ARCO Chemical Company Supplementary Executive Retirement Plan as a result of the Company’s acquisition of ARCO Chemical Company; and

(C) any Supplementary Benefit paid to a Participant or to a trustee or custodian on the Participant’s behalf under this Plan as a result of the change in control of the Company on December 20, 2007.

Section 2.4.           Deferral/Incentive Supplement.

(a)           Eligibility for Deferral/Incentive Supplement.  A Participant is eligible for a Deferral/Incentive Supplement if his Excess Retirement Benefit, using the Hypothetical Amount in 2.4(b)(1), is positive.  If a Participant entitled to receive a Deferral/Incentive Supplement dies before commencing this benefit, his Beneficiary will be paid a Survivor Benefit described in Section 2.4(b)(2) below.

(b)           Calculation of Deferral/Incentive Supplement.

(1)           Participant's Benefit.  Subject to Sections 2.4 (c), (d) and (e) and Section 2.7, the Hypothetical Amount of the Participant's Deferral/Incentive Supplement shall be

the single payment that is the Actuarial Equivalent of the retirement benefit the Participant would have received as a lump sum (or as a Basic Allowance for any portion of the benefit not payable as a lump sum) from the Retirement Plan,

determined as if the Base Pay used to calculate that benefit under the Retirement Plan had included the Participant's Awards and Deferred Compensation.

If the Participant transfers directly from the Company’s employment to a Related Company’s employment, Base Pay to calculate the Hypothetical Amount will include the Participant’s Awards and Deferred Compensation while he is employed by the Related Company, if the Company recognizes the Participant’s salary while employed by the Related Company to determine the Participant's Retirement Plan benefits.

(2)           Survivor Benefit.  The monthly amount of the Survivor Benefit payable when a Participant dies before commencing a Deferral/Incentive Supplement under his Plan shall be (A) minus (B), where:

6

(A)           is the monthly Pre-Retirement Survivor Annuity calculated using the Participant's Hypothetical Amount described in Section 2.4(b)(1), and

(B)           is the actual monthly Pre-Retirement Survivor Annuity.

The Survivor Benefit is a lump sum that is the Actuarial Equivalent of the monthly benefit described above.

(c)           Maximum Limit on Deferral/Incentive Supplement Benefits.

Notwithstanding the provisions of Section 2.4(a) and (b), the amount of a Participant’s Deferral/Incentive Supplement (or Survivor Benefit, as applicable) shall be reduced to the extent necessary so the annual equivalent of benefits payable to or on the Participant’s behalf (1) from the Retirement Plan; (2) as a Qualification Limit Supplement, if any, under Section 2.5; and (3) as a Deferral/ Incentive Supplement, under this Section, will not exceed 65 percent of the greater of (i) the sum of the Participant's annual Salary at his Separation from Service plus his most recent Award, or (ii) the average of the Participant's highest three (3) consecutive years of Salary and Awards for each year during the Participant's prior ten (10) years of employment with the Company or a Related Company.

Annual equivalent benefits payable from the Retirement Plan shall exclude annuities resulting from voluntary employee contributions to the Retirement Plan and increased benefits resulting from election of a Level Income Option under the Retirement Plan.

(d)           Recalculation Due to Subsequent Award.  If the Participant receives an Award after Separation from Service, that Award shall be included in Awards used to calculate the Hypothetical Amount under Section 2.4(b)(1) and the Deferral/Incentive Supplement shall be recalculated.  A Supplement already paid or being paid may be increased, but not decreased, by this recalculation.

(e)           Separation from Service.  If a Participant is not eligible for a retirement allowance from the Retirement Plan at the time of his Separation from Service or if a Pre-Retirement Survivor Annuity is not payable, the rights of a Participant or any person claiming under or through the Participant to any Deferral/Incentive Supplement benefits shall cease.

Section 2.5            Qualification Limit Supplement.

(a)           Eligibility for Qualification Limit Supplement.  An Employee shall be eligible for a Qualification Limit Supplement if his Excess Retirement Benefit using the Hypothetical Amount in Section 2.5(b)(1) is positive.  If a Participant entitled to receive a Qualification Limit Supplement dies before commencing this benefit, his Beneficiary will be paid the Survivor Benefit described in Section 2.5(b)(2) below.

7

(b)           Amount of Qualification  Limit Supplement.

(1)           Participant's Benefit.  The Hypothetical Amount of the Participant's Qualification Limit Supplement shall be

the single payment that is the Actuarial Equivalent of the retirement benefit the Participant would have received as a lump sum (or as a Basic Allowance for any portion of the benefit not payable as a lump sum) from the Retirement Plan,

determined as if the amount of the Participant's retirement benefit under the Retirement Plan was not subject to limits or reductions required under the Code or ERISA.

(2)           Survivor Benefit.  The monthly amount of a Survivor Benefit payable when a Participant dies before commencing a Qualification Limit Supplement under this Plan shall be (A) minus (B), where:

(A)           is the monthly Pre-Retirement Survivor Annuity calculated using the Participant’s Hypothetical Amount described in Section 2.5(b)(i), and

(B)           is the actual monthly Pre-Retirement Survivor Annuity.

The Survivor Benefit is a lump sum that is the Actuarial Equivalent of the monthly benefit described above.

Section 2.6            Special Supplements.

In addition to any other Supplementary Benefits to which a Participant may be entitled under this Plan, at its sole discretion, the Remuneration Committee may award a Special Supplement to any Employee in an amount, or to be computed on a basis it determines.  These awards may be granted for any reason the Remuneration Committee deems appropriate, including, without limit, recognition of all or any part of the Employee's years of service with an organization or entity acquired by, or merged into, the Company, any Related Company, or any predecessor of the Company.  A Special Supplement shall not be granted to or on behalf of any Employee who is not a member of a select group of management or other highly compensated employee, as defined from time to time by the Remuneration Committee.  A certified copy of the resolution granting a Special Supplement shall be furnished to the Administrative Committee before any Plan payment is to be made.

8

ARTICLE III

BENEFIT FORM

Section 3.1.           Supplementary Benefits.

(a)           Lump Sum Benefit.

Payments of Supplementary Benefits under Article II to a Participant or payments of Survivor Benefits to a Beneficiary of such a Participant shall be paid as a lump sum.

(b)           Elections.

Any existing election of an optional benefit form for Supplementary Benefits or Survivor Benefits by a Participant who is an Employee shall be void and unenforceable.

9

ARTICLE IV

TIMING OF BENEFIT PAYMENT

Section 4.1            Supplementary Benefits.

(a)           Supplementary Benefits shall commence as soon as administratively practical on the later of (1) Separation from Service or (2) the earlier of the date the Participant (i) attains age fifty-five (55) with at least ten (10) years of service recognized by the Company or (ii) attains sixty-five (65) if the Participant has less than ten (10) years of service recognized by the Company.

Notwithstanding the foregoing, Supplementary Benefits may be distributed earlier due to death, Financial Hardship or for other reasons as may be provided under Code Section 409A.

(b)           Survivor Benefit payments will commence immediately following the Participant’s death.

Section 4.2            Key Employees.

If a Participant is a Key Employee entitled to payment of Supplementary Benefits due to Separation from Service, payment shall not begin until six (6) months following the Key Employee’s Separation from Service; provided, however, that this Section shall apply only if the Company is a corporation any stock in which is publicly traded on an established securities market or otherwise.

Section 4.3            Small Benefit.

Notwithstanding any Participant election, the Administrative Committee, in its sole discretion, may pay Supplementary Benefits of amounts less than $10,000 to the Participant or the Participant’s Beneficiary immediately on Separation from Service or death.

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ARTICLE V

ADMINISTRATION

Section 5.1            Interpretation.

The Administrative Committee has the exclusive right and discretionary authority to interpret the Plan’s provisions and to decide questions arising in its administration. The Administrative Committee’s decisions and interpretations shall be final and binding on the Company, Employees, Participants and all other persons.

Section 5.2            Administrative Records.

The Administrative Committee shall keep records reflecting Plan administration, which the Company may audit.

Section 5.3            Claims.

If a Participant makes a written request alleging a right to receive Plan benefits or alleging a right to receive an adjustment in Plan benefits being paid, the Administrative Committee shall treat it as a benefit claim.  All benefit claims under the Plan shall be sent to the Administrative Committee and must be received within thirty (30) days after Separation from Service.  The decision will be made within ninety (90) days after the Administrative Committee receives the claim unless the Administrative Committee determines additional time due to special circumstances is needed.  If the Administrative Committee determines that an extension to process a claim is required, the final decision may be deferred up to one hundred eighty (180) days after the claim is received, if the claimant is notified in writing of the need for the extension and the anticipated date of a final decision before the end of the initial ninety (90) day period.

If the Administrative Committee decides that any individual who has claimed a right to receive benefits, or different benefits, under the Plan is not entitled to receive all or any part of the benefits claimed, it will inform the claimant in writing or electronically, in terms calculated to be understood by the claimant, of the specific reasons for the denial, the Plan provisions on which the denial is based, a description of additional material or information necessary to perfect the claim and an explanation of why the material or information is needed, and an explanation of the Plan’s claim review procedures.  If no action is taken on the claim within these time periods, the claim shall be deemed denied on the last day of the applicable time period.  The claimant is entitled to a full and fair review of the denied claim after actual or constructive notice of a denial.

The claimant, or his authorized representative, must file a written request for review with the Administrative Committee setting forth the grounds for the request and any supporting facts, comments or arguments he wishes to make, within sixty (60) days after actual or constructive notice.  If a written request for review is not received within this sixty (60) day period, the denial will be final.  The claimant shall have reasonable access to all relevant documents pertaining to the claim.

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The Administrative Committee or the persons responsible to conduct the review on the Administrative Committee’s behalf shall conduct a full review of the claim.  Unless special circumstances require an extension of the review period, the Administrative Committee will render its decision no later than the date of its next regularly scheduled meeting, unless the request is filed less than thirty (30) days before that meeting.  If the request is filed less than thirty (30) days before a regularly scheduled meeting, the Administrative Committee will render its decision no later than the date of the second regularly scheduled meeting after it receives the request.  However, if special circumstances require an extension of the review period, a final decision shall be rendered no later than the third regularly scheduled meeting after it receives the request for review, if the claimant is notified in writing of the special circumstances and the date of the expected decision, before the time is extended due to special circumstances.  If the decision on review is not furnished to the claimant within the applicable time period(s), the claim shall be denied on the last day of the applicable period.  Administrative Committee decisions shall be in writing and provided no later than five (5) days after the decision is made.  The decision shall include specific reasons for the action taken, including the specific Plan provisions on which the decision is based.  The claimant shall be notified of the right to reasonable access, on request, to relevant documents or other information without charge.

Section 5.4            Committee Liability.

No Administrative Committee member shall be liable for any action taken in good faith or for exercise of any power given to the Administrative Committee, or for the actions of other Administrative Committee members.

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ARTICLE VI

MISCELLANEOUS

Section 6.1            Unfunded Benefit Plan.

(a)           Benefits under Sections 2.4 and 2.6 are intended to constitute an unfunded plan maintained primarily for the purpose of providing deferred compensation in the form of additional retirement benefits to a select group of management or highly compensated employees, as defined in ERISA Sections 201(a)(2), 301(a)(3) and 401(a)(1).

(b)           Benefits under Section 2.5 are intended to constitute an unfunded "excess benefit plan" within the meaning of ERISA Section 3(36).

Section 6.2            Unsecured General Creditor.

Participants and their Beneficiaries shall have no legal or equitable rights, claims or interests in any specific Company assets or property, nor are they the Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts, or the proceeds of those policies or contracts which the Company owns or acquires (the "Policies").  Any Policies or other Company assets shall be and shall remain general, unpledged, unrestricted Company assets. The Company's obligation under the Plan is merely an unfunded and unsecured Company promise to pay money in the future.

Section 6.3            Grantor Trust.

Although the Company is responsible for all Plan benefits, the Company, in its discretion, may contribute funds to a grantor trust, as it deems appropriate, to pay Plan benefits. The trust may be irrevocable, but trust assets shall be subject to the claims of creditors of Lyondell Chemical Company.  To the extent any Plan benefits are actually paid from the trust, the Company shall have no further obligation for those benefits, but to the extent the benefit is not paid, benefits shall remain the obligation of, and shall be paid by, the Company. Participants shall be unsecured creditors insofar as their legal claim for Plan benefits and Participants shall have no security interest in the grantor trust.

Section 6.4            Non-Assignment.

Payments to and benefits under this Plan are not assignable, transferable or subject to alienation since they are primarily for the support and maintenance of the Participants and their joint annuitant or Beneficiaries after retirement. Likewise, payments shall not be subject to attachments by creditors of, or through legal process against, the Company, the Administrative Committee or any Participant.  Payments may be offset by the Company as provided under Section 6.7.

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Section 6.5            No Employment Right.

The Plan provisions shall not give an Employee the right to be retained in Company service nor shall this Plan or any action taken under it be construed as an employment contract.

Section 6.6            Adjustments.

At the Company’s request, the Administrative Committee may adjust the Participant's Plan benefit or make other adjustments required to correct administrative errors or provide uniform treatment of Participants, in a manner consistent with the Plan’s intent and purpose.

Section 6.7            Obligation to Company.

If a Participant becomes entitled to a distribution of Plan benefits and the Participant has any debt, obligation, or other liability representing an amount owed to the Company, a Related Company or any Company or Related Company benefit plan, then the Administrative Committee, in its sole discretion, may offset the amount owed against the amount of benefits otherwise distributable under this Plan.

Section 6.8            Protective Provisions.

Each Participant shall cooperate with the Company by furnishing any and all information the Company requests to facilitate the payment of Plan benefits, taking any physical examinations the Company deems necessary and taking other relevant action the Company requests.  If a Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan.  If the Participant makes any material misstatement of information or nondisclosure of medical history, no benefits will be payable to the Participant or his Beneficiary unless, at the Company’s sole discretion, benefits are payable in an amount reduced to compensate the Company for any loss, cost, damage or expense suffered or incurred by the Company as a result in any way of any Participant action, misstatement or nondisclosure.

Section 6.9            Gender, Singular and Plural.

All pronouns and any variations are deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons requires.  The singular may be read as the plural and the plural as the singular, as the context may require.

Section 6.10          Governing Law.

This Plan shall be construed, regulated and administered under the laws of the State of Texas, except to the extent that those laws are preempted by ERISA.

Section 6.11          Validity.

If any Plan provision is held invalid, void or unenforceable, it shall not affect the validity of any other Plan provision in any respect whatsoever.

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Section 6.12         Notice.

Any notice or filing required or permitted to be given to the Administrative Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Company’s principal office, directed to the attention of the Secretary of the Administrative Committee.  Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown or the postmark on the receipt for registration or certification.

Section 6.13         Successors and Assigns.

This Plan shall be binding upon the Company and its successors and assigns.

Section 6.14          Incapacity.

If the Administrative Committee deems that any person entitled to receive any Plan payment is incapable of receiving or disbursing the payment because of minority, illness or infirmity, mental incompetence, or incapacity of any kind, the Administrative Committee, in its sole discretion, may take any one or more of the following actions: it may apply the payment directly for the person’s comfort, support and maintenance; it may reimburse any person for any support previously supplied to the person entitled to receive any payment; or it may pay any other person the Administrative Committee selects to disburse the payment for the person’s comfort, support and maintenance, including, without limit, to any relative who has undertaken, wholly or partially, the expense of person's comfort, care and maintenance, or any institution in whose care or custody the person entitled to the payment may be.  The Administrative Committee, in its sole discretion, may deposit any payment due to a minor to the minor's credit in any savings or commercial bank of the Administrative Committee's choice.

Payments or deposits under this Section shall be a complete discharge, to the extent of the payment or deposit, of the Plan and all other liability of the Administrative Committee, the Company and this Plan.  Receipt of any payment, distribution or deposit shall be a complete acquittance by the persons(s) receiving the payment.  There shall be no liability to see to the application of any Plan payments, distributions or deposits.

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ARTICLE VII

AMENDMENT AND DISCONTINUANCE

Section 7.1            Plan Amendment.

This Plan may be amended from time to time by a resolution of the Remuneration Committee.

Section 7.2            Termination.

The Company intends to continue this Plan indefinitely, but reserves the right to terminate it at any time for any reason, in its sole discretion.

Section 7.3            Effect of Amendment or Termination.

No Plan amendment or termination may adversely affect the benefit payable to any Participant receiving or entitled to receive Plan benefits before the effective date of the amendment or termination.  However, the Company may amend the Plan to eliminate any optional form of payment or to comply with any law or regulation, including but not limited to, reformation of any Plan provision that would result in an excise tax being imposed under Code Section 409A, and if so, the amendment or reformation will not be deemed to adversely affect any Participant’s benefit entitlement.

Section 7.4            Effect of Legislation.

It is intended that the provisions of the Plan satisfy the requirements of Code Section 409A and that the Plan be operated in a manner consistent with such requirements to the extent applicable.  Therefore, the Administrative Committee may make adjustments to the Plan and may construe the provisions of the Plan in accordance with the requirements of Code Section 409A.  If any Plan provision would result in imposition of an excise tax under Code Section 409A, the terms of Code Section 409A shall apply and that Plan provision will be reformed to avoid the excise tax.

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EX-10.4

Lyondell Chemical Company

DEFERRAL PLAN

Amended and Restated, November 4, 2008

Lyondell Chemical Company

Deferral Plan

Table of Contents

ARTICLE I GENERAL PROVISIONS		1
Section 1.1	Purpose and Intent	1
Section 1.2	Effective Date	1
Section 1.3	Definitions	1
ARTICLE II PARTICIPATON AND DEFERRAL ELECTIONS		5
Section 2.1	Eligibility and Participation	5
Section 2.2	Deferral Types	5
Section 2.3	Deferral Elections	5
Section 2.4	Deferral Limits	5
Section 2.5	Separation from Service	6
Section 2.6	Transfers	6
Section 2.7	Modification of Deferral Elections	6
ARTICLE III  DEFERRED COMPENSATION ACCOUNTS		7
Section 3.1	Accounts	7
Section 3.2	Deferred Compensation	7
Section 3.3	Interest Rate	7
Section 3.4	Account Value	7
Section 3.5	Vesting	8
Section 3.6	Account Statements	8
ARTICLE IV  PLAN BENEFITS		9
Section 4.1	Basic Plan Benefit	9
Section 4.2	Distribution Elections	9
Section 4.3	Amount and Form of Survivor Benefits	10
Section 4.4	Early Distribution	11
Section 4.5	Financial Hardship Distribution	11
Section 4.6	Valuation and Settlement	11
Section 4.7	Small Benefit	12
ARTICLE V  BENEFICIARY DESIGNATION		13
Section 5.1	Beneficiary Designation	13
Section 5.2	Failure to Designate a Beneficiary	13

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ARTICLE VI   ADMINISTRATION		14
Section 6.1	Interpretation	14
Section 6.2	Administrative Records	14
Section 6.3	Claims	14
Section 6.4	Committee Liability	15
ARTICLE VII  AMENDMENT AND TERMINATION		16
Section 7.1	Plan Amendment	16
Section 7.2	Termination	16
Section 7.3	Effect of Amendment or Termination	16
Section 7.4	Effect of Legislation	16
ARTICLE VIII  MISCELLANEOUS		17
Section 8.1	Unfunded Benefit Plan	17
Section 8.2	Unsecured General Creditor	17
Section 8.3	Grantor Trust	17
Section 8.4	Non-Assignment	17
Section 8.5	No Employment Right	18
Section 8.6	Adjustments	18
Section 8.7	Obligation to Company	18
Section 8.8	Protective Provisions	18
Section 8.9	Gender, Singular and Plural	18
Section 8.10	Governing Law	18
Section 8.11	Notice	19
Section 8.12	Successors and Assigns	19
Section 8.13	Incapacity	19

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ARTICLE I

GENERAL PROVISIONS

Section 1.1 Purpose and Intent.

This Plan is intended to provide the opportunity for eligible Employees to accumulate supplemental funds for retirement or special needs before retirement through deferral of portions of their regular Salary, Awards and Executive Supplementary Savings Plan benefits.

This Plan replaces the deferral provisions of the Lyondell Chemical Company Executive Deferral Plan for amounts deferred before 2005 (“Prior Plan”) to conform to the requirements of Code Section 409A and any related regulation or other guidance promulgated by applicable governmental agencies (“Code Section 409A”) and establishes the provisions of this Plan as intended to apply to deferrals of compensation earned or accrued in 2005 and thereafter.  

Section 1.2 Effective Date.

This Plan document generally shall be effective as of November 4, 2008 and shall apply to Plan Participants on or after November 4, 2008, unless certain provisions specify that they are effective on a different date.

Section 1.3 Definitions.

Account means a separate bookkeeping account maintained by the Company for each Employee which measures and determines the amounts to be paid to the Employee under the Plan.  An Account may be divided in subaccounts as needed to reflect particular Deferral Elections.

Administrative Committee means the Benefits Administrative Committee of the Company.

Awards means immediate cash awards made under the Lyondell Chemical Company annual incentive compensation plans for executives and senior managers or awards under any other plan that the Board of Directors of Lyondell Chemical Company, or its Compensation and Human Resources Committee, has authorized the Company to adopt and to treat as Awards under this Plan.

Beneficiary means a person who is entitled to receive a Participant’s interest under this Plan when the Participant dies before his Account is totally distributed.

Code means the Internal Revenue Code of 1986, as amended, including any successor provisions and any regulations or other guidance promulgated by applicable governmental agencies.

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Company means Lyondell Chemical Company, a Delaware corporation, or its successor.

Deferral Election means a Participant’s election to defer Salary, Awards, and/or ESSP Benefits during a Deferral Period according to Article II.

Deferral Period means the particular calendar year for which a Deferral Election is made.  A new Deferral Period begins each January 1 and ends each December 31.

Deferred Compensation means the amount of Salary, Awards and/or ESSP Benefits a Participant elects to defer by a Deferral Election.

Disability means a medically determinable physical or mental impairment which is expected to last for at least a continuous twelve (12) month period or is expected to result in death, where the Participant (i) either cannot engage in any substantial gainful employment due to the impairment or (ii) is receiving disability benefits for at least three (3) months under the Company’s applicable disability plan.

Distribution means a distribution of a Participant’s Account as a result of a Separation from Service or other event specified under this Plan and permitted by Code Section 409A.

Early Distribution means a Distribution before Separation from Service as specified in Section 4.4 and permitted by Code Section 409A.

Effective Date means November 4, 2008.

Employee means a regular salaried employee of the Company.

ERISA means the Employee Retirement Income Security Act of 1974, as amended, including any successor provisions and any regulations or other guidance promulgated by applicable governmental agencies.

ESSP Benefits means benefits under the Company’s Executive Supplementary Savings Plan.

Financial Hardship means a condition of severe financial difficulty due to an unforeseeable emergency resulting from (i) an illness or accident of the Participant, his spouse or dependent; (ii) a casualty causing a Participant’s property loss; or (iii) other similar or extraordinary and unforeseeable circumstances created by events beyond the Participant’s control, as determined by the Administrative Committee, upon advice of counsel, based on written information supplied by the Participant and which is sufficient, in counsel’s judgment, to justify a change in a Distribution election under the Plan without causing the Participant or any other Participant to receive taxable income from the Plan before the Participant actually receives his benefit.

Interest Rate means the interest rate announced by the Company before the Deferral Period and applied to the Participant’s Account during that Plan Year.

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Key Employee means an Employee who, at any time during the prior Plan Year, was identified as (i) an officer of the Company with annual compensation greater than $130,000, as adjusted, (ii) a five percent (5%) owner of the Company, or (iii) a one percent (1%) owner of the Company with annual compensation from the Company of more than $150,000, as adjusted, as determined according to the requirements of Code Sections 409A and 416(i).  For Plan Distribution purposes, an Employee identified as a Key Employee during a year ending on an identification date shall be considered a Key Employee for a twelve (12) month period beginning on the following April 1.  December 31 of the prior Plan Year shall be used as the identification date to identify Key Employees under Code Section 409A.

Participant means any Employee who is participating in this Plan under Article II, and any former Employee who has not received the entire benefit to which he is entitled under this Plan.

Plan means this Lyondell Chemical Company Deferral Plan.

Plan Year means each calendar year beginning on January 1 and ending on December 31.

Salary means the Employee’s regular, biweekly salary, excluding Awards and any other special or additional compensatory payments made by the Company.

Separation from Service means the Participant’s employment termination from Lyondell Chemical Company, or any of its Subsidiaries and Affiliates, which complies with the requirements of Code Section 409A.  A transfer to or from Lyondell Chemical Company and any of its Subsidiaries or Affiliates shall not be a Separation from Service under this Plan.

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Subsidiaries or Affiliates means:

(a) All corporations that are members of a controlled group of corporations within the meaning of Code Section 414(b) and of which the Company is then a member, and

(b) All trades or businesses, whether or not incorporated, that are then under common control with the Company within the meaning of Code Section 414(c).

Survivor Benefit means the benefit under Section 4.3 provided when a Participant dies before his Account is distributed.

Valuation Date means the last day of each month, or another date the Administrative Committee determines, in its discretion, which may be either more or less frequent, used to value Participants’ Accounts.

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ARTICLE II

PARTICIPATION AND DEFERRAL ELECTIONS

Section 2.1 Eligibility and Participation.

(a) Eligibility.   Eligibility to participate in this Plan shall be limited to Employees who (1) are eligible to receive an Award (2) are participants in the Executive Supplementary Savings Plan, or (3) have been designated as eligible by a specific resolution of the Administrative Committee upon recommendation of the Company’s Vice President, Human Resources.  An Employee who becomes eligible to participate in this Plan after a Deferral Period begins shall not be eligible to participate until the following Deferral Period.

(b) Participation. An eligible Employee may elect to participate in the Plan by submitting a Deferral Election for a Deferral Period.

Section 2.2 Deferral Types.

A Participant may elect to defer Salary, Awards and/or ESSP Benefits, subject to any limits, conditions or restrictions, such as minimum or maximum deferral amounts, as the Administrative Committee prescribes before the Deferral Period begins.  A Participant may also elect to defer an Early Distribution at the time and in the manner the Administrative Committee prescribes.

Section 2.3 Deferral Elections.

Before each Deferral Period, at a time and in the manner the Administrative Committee prescribes, each eligible Employee may elect to defer Salary, Awards, and/or ESSP Benefits.  The time and form of Distribution of the deferred amount shall be elected when the Deferral Election is made.  This Deferral Election shall be irrevocable after the Deferral Period begins, unless modifications are authorized under Section 2.7.

Section 2.4 Deferral Limits.

Deferral Elections are subject to the following limits:

(a) A Participant may not defer more than fifty percent (50%) of his Salary.

(b) The Administrative Committee shall establish a minimum amount that may be deferred before the Deferral Period begins.

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Section 2.5 Separation from Service.

Any outstanding Deferral Election relating to Awards and/or ESSP Benefits payable after Separation from Service shall remain binding; otherwise, a Participant’s Deferral Elections shall terminate on the Participant’s Separation from Service.

Section 2.6 Transfers.

A Participant’s Deferral Elections shall be irrevocable regardless of a transfer of employment among Lyondell Chemical Company, any of its Subsidiaries or Affiliates, or Houston Refining LP.  When a transfer occurs, the Participant’s Deferral Election shall continue to apply to Awards, Salary or ESSP Benefits granted by the transferee company and the transferee company’s deferral plan shall assume responsibility for the remainder of the Deferral Period, if any, subject to any Deferral Election that the Participant made under the transferor company’s plan.

Section 2.7 Modification of Deferral Elections.

The Administrative Committee may permit a Participant to cease remaining deferrals under a Deferral Election upon finding that the Participant has suffered a Financial Hardship, to the extent that the Deferral Election may be revoked as a result of Financial Hardship under the Code Section 409A or a hardship Distribution under Code Section 401(k).

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ARTICLE III

DEFERRED COMPENSATION ACCOUNTS

Section 3.1 Accounts.

Accounts shall be maintained for each Participant for record-keeping purposes only.  A Participant’s Account may be divided into subaccounts if necessary to determine how a Participant’s Distribution Elections shall apply to portions of the Account.

Section 3.2 Deferred Compensation.

A Participant’s Deferred Compensation shall be credited to the Participant’s Account on the date when the corresponding non-deferred portion of the compensation is paid or would have been paid but for the Deferral Election.  The Company shall have the right to withhold from Salary (or otherwise to cause the Participant or the executor or administrator of his estate, or his Beneficiary) to pay any federal, state, local and/or foreign taxes required to be withheld on any Deferred Compensation.

Section 3.3 Interest Rate.

Interest shall be credited monthly on the balance of the Account on each Valuation Date beginning on the date when deferred amounts are credited to the Account.  A Participant’s Account will be credited with interest monthly during each Plan Year before the full Distribution of the Participant’s Account at the Interest Rate previously announced by the Company to apply during the Plan Year.  The monthly Interest Rate during the Plan Year shall be based on the previous monthly average of the closing yield to maturity, as reported by Bloomberg, of Lyondell Chemical Company’s most junior publicly traded debt on December 1 of the prior Plan Year.  If this debt is retired during the Plan Year, the monthly interest Rate shall be based on the previous monthly average of the then longest maturity for the Company’s most junior publicly traded debt.

Section 3.4 Account Value.

A Participant’s Account on each Valuation Date shall consist of the balance of the Participant’s Account on the immediately preceding Valuation Date, plus the amount of the Participant’s Deferred Compensation since the Valuation Date, plus interest credited to the Account, and minus any Distributions or reductions made from the Account since the immediately preceding Valuation Date.

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Section 3.5 Vesting.

Each Participant shall be one hundred percent (100%) vested at all times in the amounts credited to the Participant’s Account.

Section 3.6 Account Statements.

The Company shall provide each Participant with periodic statements setting forth the Participant’s Account balance.

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ARTICLE IV

PLAN BENEFITS

Section 4.1 Basic Plan Benefit.

Except as provided in Section 4.2, if a Participant has a Separation from Service, the Company shall pay a Plan benefit equal to the Participant’s Account, including interest at the Interest Rate established in Section 3.3.  Interest is payable on a Participant’s Account balance until the Account is fully distributed.

Section 4.2 Distribution Elections.

(a) Time and Form of Distribution.  If the Participant becomes entitled to a Distribution due to Separation from Service on or after attaining age fifty-five (55) with at least ten (10) years of service recognized by the Company or due to Disability, Distribution shall be made at the time and form specified in the applicable Deferral Elections, except as provided in this section or in (f)(2) below.  However, if the Participant’s Separation from Service is due to a transfer to Houston Refining LP, the Participant will become entitled to a Distribution in the tenth (10th) calendar year following the year when the transfer occurred.

A Participant may elect one or more of the following forms and commencement dates for all or portions of his Account.

(1) Lump Sum.A single payment of all of the amount deferred under a Deferral Election.

(2) Installment Payments.  Monthly installment payments for five (5), ten (10) or fifteen (15) years of the amount deferred under a Deferral Election in substantially equal payments of principal and interest.

Notwithstanding the foregoing, a Participant’s Account may be distributed earlier under the Plan terms due to death or Financial Hardship, as provided in Sections 4.3 and 4.5, or for other reasons as may be provided under Code Section 409A.

(b) Distribution Elections Inapplicable.  If a Participant’s Account becomes distributable due to Separation from Service before attaining age fifty-five (55) with at least ten (10) years of service recognized by the Company, the Participant’s Deferral Elections shall be disregarded and the Participant’s Account will be paid in substantially equal payments of principal and interest over a three (3) year period.  Distribution shall begin as soon as administratively possible, but no later than sixty (60) days after a Separation from Service or as provided in (e) if the Participant is a Key Employee unless the Participant’s Separation from Service is due to a transfer to Houston Refining LP.  However, if the Participant transfers to Houston Refining LP, the Participant will become entitled to a Distribution in the tenth (10th) calendar year following the year when the transfer occurred.  The amount of each monthly installment shall be redetermined, effective January 1 of each year, based on the remaining balance subject to the installment payment election and the remaining number of installment payments.

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(c) Failure to Make a Distribution Election.  If the Participant becomes entitled to a Distribution on Separation from Service on or after attaining age fifty-five (55) with at least ten (10) years of service recognized by the Company or due to a Disability and has failed to make a Distribution election for an amount deferred for a particular Deferral Period, except as provided in (f)(2) below, that portion of the Participant’s Account balance will be distributed immediately in a single cash payment as soon as administratively possible, but no later than sixty (60) days following that distributable event or as provided in (e) if the Participant is a Key Employee.

(d) Change in Time or Form of Distribution.  A Participant may elect to delay the commencement, or change the form, of a Plan Distribution, according to procedures adopted by the Administrative Committee, but (1) the election may not become effective until at least twelve (12) months after the date the Distribution election is made, (2) the election must defer payment for a period of at least five (5) years after the original Distribution date and (3) the new Distribution election must be made at least twelve (12) months before the date the original Distribution was scheduled to occur.

(e) Key Employees.  If a Participant is a Key Employee whose Account becomes distributable due to Separation from Service, a Distribution shall not begin until six (6) months following the Key Employee’s Separation from Service, whether in a lump sum or installment payment form.  Lump sum and installment payments shall be calculated on the Account value at the delayed Distribution date and shall commence as soon as administratively possible following the delayed Distribution date; provided, however, that this Section 4.2 (e) shall apply only if the Company is a corporation any stock in which is publicly traded on an established securities market or otherwise.

Section 4.3             Amount and Form of Survivor Benefits.

If the Participant dies before his Account Distribution begins, the Plan shall pay a Survivor Benefit equal to the value of the Participant’s Account balance, increased by the applicable Interest Rate on the unpaid Account balance during the period when Survivor Benefit payments are being made to the Participant’s Beneficiary.  A Participant may elect the form of Survivor Benefit payments and the election will apply to his entire Account balance.  A Participant may elect Survivor Benefits payable in a lump sum or monthly installments for five (5), ten (10) or fifteen (15) years in substantially equal payments of principal and interest.  If the Participant has changed the Survivor Benefit election, the change shall not be effective until twelve (12) months after the date the change was made.  If the Participant fails to elect a form of  Survivor Benefit payments, the Participant’s Account balance shall be distributed in a lump sum as soon as practical following the Participant’s death.

If the Participant dies after his Account Distribution begins, any Survivor Benefit payment elected under this Plan shall not apply and the Participant’s Account balance shall continue to be paid to the Beneficiary in the benefit form that was payable to the Participant, until all remaining payments that would have been made to the Participant if the Participant had lived have been made.  Payments shall be increased by the applicable Interest Rate credited on the deceased Participant’s unpaid Account balance during each year payment is made to the Beneficiary.

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Section 4.4 Early Distribution.

A Participant may elect to receive an Early Distribution from his Account subject to the following restrictions:

(a) Election.  The election to take an Early Distribution for a particular Deferral Election must be made at the same time the Participant makes that Deferral Election.

(b) Amount.  The amount which a Participant can elect to receive as an Early Distribution shall be the portion of the amounts deferred under a particular Deferral Election, as prescribed by the Administrative Committee before the Deferral Period.  If a previously elected amount exceeds the related Account balance when an Early Distribution is to be made, only the Account balance will be paid.

(c) Time of Early Distribution.  The Early Distribution shall begin at a time elected by the Participant when the Deferral Election was made and the date elected for an Early Distribution must be at least two (2) years after the Deferral Election becomes effective.  If the Participant has a Separation from Service before the Early Distribution date, the Early Distribution election will be canceled and Distribution will be made under Section 4.2.

(d) Distributions from Account.  Amounts paid to a Participant under this Section shall be treated as Distributions from the Participant’s Account.

Section 4.5 Financial Hardship Distribution.

(a) Financial Hardship Distribution.  When the Administrative Committee finds that a Participant has suffered a Financial Hardship, following the Participant’s written application, the Administrative Committee shall distribute all or a portion of the Participant’s Account reasonably necessary to satisfy the Financial Hardship.  The amount necessary to satisfy the Financial Hardship shall be the amount determined according to the requirements of Code Section 409A.  The Distribution shall be paid in a lump sum as soon as administratively practical following the Financial Hardship finding.

(b) Review of the Request for Financial Hardship Distribution. Counsel for the Plan, on an ongoing basis, shall review legal and tax developments to assure continuous compliance with the relevant authorities governing plan design to prevent constructive receipt of taxable income by any Participant, and shall advise the Administrative Committee of the applicable law.

Section 4.6 Valuation and Settlement.

The Settlement Date shall be the earlier of the date when a lump sum is paid or when installment payments commence.  The Settlement Date for a Distribution shall be no more than thirty (30) days after the last day of the month when the Participant or his Beneficiary becomes entitled to a Distribution, or six (6) months later, if the Participant is a Key Employee.  The Settlement Date for an Early Distribution shall be the month that the Participant has elected to commence payment.  The amount of a lump sum and the initial amount of installment payments for a Participant’s Account shall be based on the value of the Participant’s Account on the Valuation Date at the end of the immediately preceding month before the Settlement Date.

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Section 4.7 Small Benefit.

Notwithstanding any Distribution Election, the Administrative Committee, in its sole discretion, may pay any benefit as a lump sum payment to the Participant or any Beneficiary, if the lump sum amount of the Account balance that remains in the Account, or which is payable to the Participant or Beneficiary in installments when payments to the Participant or Beneficiary would otherwise commence, is less than $10,000.

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ARTICLE V

BENEFICIARY DESIGNATION

Section 5.1 Beneficiary Designation.

Each Participant has the right to designate a Beneficiary or Beneficiaries to receive his interest in his Account on his death.  The designation shall be made in the time and manner the Administrative Committee prescribes.  The Participant has the right to change or revoke any designation from time to time by filing a new designation or notice of revocation, and no notice to any Beneficiary nor consent by any Beneficiary shall be required to make any change or revocation.

Section 5.2 Failure to Designate a Beneficiary.

If a Participant fails to designate a Beneficiary before his death, or if no designated Beneficiary survives the Participant, the Administrative Committee shall direct the Company to pay his Account balance in a lump sum to the executor or administrator of his estate.

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ARTICLE VI

ADMINISTRATION

Section 6.1 Interpretation.

The Administrative Committee has the exclusive right and discretionary authority to interpret the Plan’s provisions and to decide questions arising in its administration.  The Administrative Committee’s decisions and interpretations shall be final and binding on the Company, Participants, Employees and all other persons.

Section 6.2 Administrative Records.

The Administrative Committee shall keep records reflecting Plan administration, which the Company may audit.

Section 6.3 Claims.

If a Participant makes a written request alleging a right to receive Plan benefits or alleging a right to receive an adjustment in Plan benefits being paid, the Administrative Committee shall treat it as a benefit claim.  All benefit claims under the Plan shall be sent to the Administrative Committee and must be received within thirty (30) days after Separation from Service.  The decision will be made within ninety (90) days after the Administrative Committee receives the claim unless the Administrative Committee determines additional time due to special circumstances is needed.  If the Administrative Committee determines that an extension to process a claim is required, the final decision may be deferred up to one hundred eighty (180) days after the claim is received, if the claimant is notified in writing of the need for the extension and the anticipated date of a final decision before the end of the initial ninety (90) day period.

If the Administrative Committee decides that any individual who has claimed a right to receive benefits, or different benefits, under the Plan is not entitled to receive all or any part of the benefits claimed, it will inform the claimant in writing or electronically, in terms calculated to be understood by the claimant, of the specific reasons for the denial, the Plan provisions on which the denial is based, a description of additional material or information necessary to perfect the claim and an explanation of why the material or information is needed, and an explanation of the Plan’s claim review procedures.  If no action is taken on the claim within these time periods, the claim shall be deemed denied on the last day of the applicable time period.  The claimant is entitled to a full and fair review of the denied claim after actual or constructive notice of a denial.

The claimant, or his authorized representative, must file a written request for review with the Administrative Committee setting forth the grounds for the request and any supporting facts, comments or arguments he wishes to make, within sixty (60) days after actual or constructive notice.  If a written request for review is not received within this sixty (60) day period, the denial will be final.  The claimant shall have reasonable access to all relevant documents pertaining to the claim.

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The Administrative Committee or the persons responsible to conduct the review on the Administrative Committee’s behalf shall conduct a full review of the claim.  Unless special circumstances require an extension of the review period, the Administrative Committee will render its decision no later than the date of its next regularly scheduled meeting, unless the request is filed less than thirty (30) days before that meeting.  If the request is filed less than thirty (30) days before a regularly scheduled meeting, the Administrative Committee will render its decision no later than the date of the second regularly scheduled meeting after it receives the request.  However, if special circumstances require an extension of the review period, a final decision shall be rendered no later than the third regularly scheduled meeting after it receives the request for review, if the claimant is notified in writing of the special circumstances and the date of the expected decision, before the time is extended due to special circumstances.  If the decision on review is not furnished to the claimant within the applicable time period(s), the claim shall be denied on the last day of the applicable period.  Administrative Committee decisions shall be in writing and provided no later than five (5) days after the decision is made.  The decision shall include specific reasons for the action taken, including the specific Plan provisions on which the decision is based.  The claimant shall be notified of the right to reasonable access, on request, to relevant documents or other information without charge.

Section 6.4 Committee Liability.

No Administrative Committee member shall be liable for any action taken in good faith or for exercise of any power given the Administrative Committee, or for the actions of other Administrative Committee members.

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ARTICLE VII

AMENDMENT AND TERMINATION

Section 7.1 Plan Amendment.

This Plan may be amended from time to time by a resolution of the Remuneration Committee of the Supervisory Board of LyondellBasell Industries.

Section 7.2 Termination.

The Company intends to continue this Plan indefinitely, but reserves the right to terminate it at any time for any reason.

Section 7.3 Effect of Amendment or Termination.

No Plan amendment or termination may adversely affect the benefit payable to any Participant receiving or entitled to receive Plan benefits before the effective date of the amendment or termination.  However, the Company may amend the Plan to eliminate any form of payment or to comply with any law or regulation, including but not limited to, reformation of any Plan provision that would result in an excise tax being imposed under Code Section 409A, and if so, that amendment or reformation will not be deemed to adversely affect any Participant’s benefit entitlement.

Section 7.4 Effect of Legislation.

It is intended that the provisions of the Plan satisfy the requirements of Code Section 409A and that the Plan be operated in a manner consistent with such requirements to the extent applicable.  Therefore, the Administrative Committee may make adjustments to the Plan and may construe the provisions of the Plan in accordance with the requirements of Code Section 409A.  If any Plan provision would result in imposition of an excise tax under Code Section 409A, the terms of Code Section 409A shall apply and that Plan provision will be reformed to avoid the excise tax.

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ARTICLE VIII

MISCELLANEOUS

Section 8.1 Unfunded Benefit Plan.

This Plan is intended to constitute an unfunded plan which is maintained primarily to provide deferred compensation in the form of additional benefits to a select group of management or highly compensated employees, as defined in ERISA Sections 201(a)(2), 301(a)(3) and 401(a)(1).

Section 8.2 Unsecured General Creditor.

Participants and their Beneficiaries shall have no legal or equitable rights, claims or interests in any specific Company assets or property, nor are they the Beneficiaries of, or have any rights, claims or interests in, any life insurance policies, annuity contracts, or the proceeds of those policies or contracts which the Company owns or acquires (“Policies”).  Any Policies or other Company assets shall be and shall remain general, unpledged, unrestricted Company assets.  The Company’s obligation under the Plan is merely an unfunded and unsecured Company promise to pay money in the future.

Section 8.3 Grantor Trust.

Although the Company is responsible for all Plan benefits, the Company, in its discretion, may contribute funds to a grantor trust, as it deems appropriate, to pay Plan benefits.  The trust may be irrevocable, but trust assets shall be subject to the claims of creditors of Lyondell Chemical Company.  To the extent any Plan benefits are actually paid from the trust, the Company shall have no further obligation for those benefits, but to the extent the benefit is not paid, benefits shall remain the obligation of, and shall be paid by, the Company.  Participants shall be unsecured creditors insofar as their legal claim for Plan benefits and Participants shall have no security interest in the grantor trust.

Section 8.4 Non-Assignment.

Payments to and benefits under this Plan are not assignable, transferable or subject to alienation since they are primarily for the support and maintenance of the Participants and their Beneficiaries.  Likewise, payments shall not be subject to attachments by creditors of, or through legal process against, the Company, the Administrative Committee or any Participant.  Payments may be offset by the Company as provided under Section 8.7.

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Section 8.5 No Employment Right.

The Plan provisions shall not give an Employee the right to be retained in Company service nor shall this Plan or any action taken under it be construed as an employment contract.

Section 8.6 Adjustments.

At the Company’s request, the Administrative Committee may adjust a Participant’s Plan benefit or make other adjustments required to correct administrative errors or provide uniform treatment of Participants, in a manner consistent with the Plan’s intent and purpose.

Section 8.7 Obligation to Company.

If a Participant becomes entitled to a Distribution of Plan benefits and the Participant has any debt, obligation, or other liability representing an amount owed to the Company, or its Subsidiaries and Affiliates or any Company, Subsidiary or Affiliate benefit plan, then the Administrative Committee, in its sole discretion, may offset the amount owed against the amount of benefits otherwise distributable under this Plan.

Section 8.8 Protective Provisions.

Each Participant shall cooperate with the Company by furnishing any and all information the Company requests to facilitate Plan benefit payments, taking any physical examinations the Company deems necessary and taking other relevant action as the Company requests.  If a Participant refuses to cooperate, the Company shall have no further obligation to the Participant under the Plan.  If the Participant makes any material misstatement of information or nondisclosure of medical history, no benefits will be payable to the Participant or his Beneficiary unless, at the Company’s sole discretion, benefits are payable in an amount reduced to compensate the Company for any loss, cost, damage or expense suffered or incurred by the Company as a result in any way of any Participant action, misstatement or nondisclosure.

Section 8.9 Gender, Singular and Plural.

All pronouns and any variations are deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons requires.  The singular may be read as the plural and the plural as the singular, as the context may require.

Section 8.10 Governing Law.

This Plan shall be construed, regulated and administered under the laws of the State of Texas, except to the extent that those laws are preempted by ERISA.

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Section 8.11 Notice.

Any notice or filing required or permitted to be given to the Administrative Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Company’s principal office, directed to the attention of the Secretary of the Administrative Committee.  Notice shall be deemed given on the delivery date or, if delivery is made by mail, on the date shown on the postmark on the receipt for registration or certification.

Section 8.12 Successors and Assigns.

This Plan shall be binding on the Company and its successors and assigns.

Section 8.13 Incapacity.

If the Administrative Committee deems any person entitled to receive any Plan payment is incapable of receiving or disbursing the payment because of minority, illness or infirmity, mental incompetency, or incapacity of any kind, the Administrative Committee, in its sole discretion, may take any one or more of the following actions:  it may apply the payment directly for the person’s comfort, support and maintenance; it may reimburse any person for any support supplied to the person entitled to receive any payment; or it may pay any other person the Administrative Committee selects to disburse the payment for the person’s comfort, support and maintenance, including, without limit, to any relative who has undertaken, wholly or partially, the expense of the person’s comfort, care and maintenance, or any institution in whose care or custody the person entitled to the payment may be.  The Administrative Committee, in its sole discretion, may deposit any payment due to a minor to the minor’s credit in any savings or commercial bank of the Administrative Committee’s choice.

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EX-10.17(A)

INSTRUMENT AMENDING

LYONDELL CHEMICAL COMPANY

EXECUTIVE SEVERANCE PAY PLAN

Lyondell Chemical Company hereby amends the Lyondell Chemical Company Executive Severance Pay Plan (“Plan”), effective as of January 1, 2008, unless otherwise indicated, as follows:

Section 4.(h) is amended and restated in its entirety to read as follows:

(h)           Time of Payments.       Any cash payment under this Section shall be paid to a Participant within thirty (30) days of the Participant’s employment termination, unless the Participant is a Key Employee.  Cash payments and benefits to a Participant who is a Key Employee shall be made six (6) months after that Participant’s severance from service, to the extent required by the Act; provided, however, that this six-month delay shall apply only if the Company is a corporation any stock in which is publicly traded on an established securities market or otherwise.  Any Additional Gross-up Payment shall be made by the end of the calendar year next following the calendar year in which the Participant remits the related taxes.

The second paragraph of Section 8 is amended and restated in its entirety to read as follows:

It is intended that the provisions of the Plan satisfy the requirements of the Act and that the Plan be operated in a manner consistent with such requirements to the extent applicable.  Therefore, the Committee may make adjustments to the Plan and may construe the provisions of the Plan in accordance with the requirements of the Act.  If any Plan provision would result in an additional tax under the Act, that provision will be reformed to avoid the additional tax and no action taken to comply with the Act shall be deemed to adversely affect a Participant’s rights.  Without limiting this general provision, the Plan may be amended to modify (i) the definition of “Constructive Termination for Good Reason,” (ii) the conditions for eligibility under Section 3(c), (iii) the time to pay or provide benefits under Section 4, and (iv) eligibility for insurance coverage under Section 4, including retiree medical coverage, to the extent necessary to avoid imposition of an additional tax under the Act.

IN WITNESS WHEREOF, the undersigned, being duly authorized on behalf of the Company, has executed this Instrument on this 3rd day December, 2007.

ATTEST:		LYONDELL CHEMICAL COMPANY
BY:	/s/  Mindy G. Davidson	BY:	/s/  Dan F. Smith
	Assistant Secretary		Dan F. Smith
			Chairman, President and
			Chief Executive Officer

EX-10.23

LYONDELLBASELL INDUSTRIES AF S.C.A.

LONG-TERM INCENTIVE PLAN

(As Established Effective April 1, 2008)

1.            Objectives.

LyondellBasell Industries AF S.C.A., a Luxembourg company (the “Company”), hereby establishes the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan (the “Plan”) for the purposes of:

(a) Focusing Participants on key measures of value creation;

(b) Providing significant upside and downside award potential commensurate with shareholder value creation;

(c) Encouraging a long-term management perspective and reward for sustained long-term performance;

(d) Enhancing the ability of the Company and its Subsidiaries and Affiliates to attract and retain highly talented and competent individuals;

(e) Reinforcing a team orientation among top management; and

(f) Encouraging ownership of Equity Interests among top management.

2.             Definitions.

As used herein, the terms set forth below shall have the following respective meanings:

“Affiliate” means, with respect to any Person or entity, any other Person or entity that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with such Person or entity.  “Control” means the power to direct the management and policies of a Person or entity, affirmatively (by direction) and negatively (by veto), directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Appraised Unit Value” has the meaning set forth in Section 4.

“Appraised Value,” as of any date, shall mean the value of NAG that a willing buyer would pay to a willing seller in an arm’s length transaction as of such date, determined by the Supervisory Board of the Company (the “Supervisory Board”), in its reasonable discretion and acting in good faith following receipt of a valuation opinion regarding the range of appropriate Appraised Values from a third-party accounting firm, investment banking firm or other expert that regularly engages in the business of valuation (a “Third Party Appraiser”). The Appraised Value shall take into consideration all valuation factors that the Supervisory Board or the Third Party Appraiser considers relevant under the circumstances, which may include but not be limited to (i) the nature and history of NAG’s business; (ii) the economic outlook in general and the condition and outlook of NAG’s specific industry in particular; (iii) the book value of the NAG Units and the financial condition of NAG’s business; (iv) NAG’s earnings capacity; (v) the existence of enterprise goodwill or other intangible value; and (vi) the market price of publicly traded stocks of corporations engaged in the same or similar lines of business; provided, however, that the Appraised Value shall not take into consideration any discounts for lack of marketability of the NAG Units, any minority discount or any control premium.  If any subsidiary of NAG has a class of publicly traded equity securities, then the value of that subsidiary for appraisal purposes shall be based on the market value of those publicly traded securities.  The Third Party Appraiser shall deliver its opinion regarding the range of appropriate Appraised Values of NAG as of the applicable Valuation Date, and shall, to the extent commercially practicable, deliver such opinion by a date no more than 21 days after the applicable Valuation Date.  The Supervisory Board shall use reasonable efforts to cause the Third Party Appraiser to do so within such time period.  The requesting party shall bear all fees and expenses associated with obtaining a fairness opinion.

The Supervisory Board shall, if it deems necessary or if requested by either Management LLC or AI Petrochemicals LLC, request an opinion regarding the fairness of such valuation to Management LLC and/or AI Petrochemicals LLC performed by a reputable third party firm that regularly provides such opinions.  All parties will cooperate and use reasonable efforts to ensure that the date of determination will comply with any legal requirements with respect to timing of valuation and payment.  The requesting party shall bear all fees and expenses associated with obtaining a fairness opinion.

“Award” means any Phantom Units granted to a Participant pursuant to the applicable terms, conditions and limitations set forth in this Plan document or the Award Agreement or as otherwise established by the Company.

“Award Agreement” means an agreement in the form prescribed by the Plan Administrator that sets forth the terms, conditions and limitations applicable to an Award.

 “Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

“Company” means LyondellBasell Industries AF S.C.A.

“Deferral Elections” means the Participant’s election of the date upon which Company shall make a distribution to the Participant of his or her interest in any vested Phantom Units in accordance with the terms of the Award Agreement, if and to the extent permitted by the Plan Administrator; provided, however, that (a) such Deferral Election shall be irrevocable and (b) any Deferral Election must be made on the form provided by the Plan Administrator.

“Delegate” shall have the meaning ascribed to such term in Section 3(a).

“Employee” means an individual employed by the Company, or any of its  Subsidiaries or Affiliates.

“Equity Interests” means, with respect to any Person, all of the capital stock of such Person and all warrants, options or other rights to acquire the capital stock of such Person, including any contribution from shareholders without any issuance of shares (but excluding any debt security that is convertible into, or exchangeable for, such capital stock).

“Equity Purchase Agreement” means that certain equity purchase agreement between LyondellBasell Management Holdings LLC, a Delaware limited liability company, and Participant setting forth the terms and conditions pertaining to Participant’s equity investment in LyondellBasell Management Holdings LLC, which has an equity investment in NAG.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Indemnified Person” shall have the meaning ascribed to such term in Section 3(b).

“Management LLC” means LyondellBasell Management LLC, a Delaware limited liability company.

 “NAG” means NAG Investments LLC, a Delaware limited liability company, which, directly or indirectly, owns 12,987 Voting Redeemable Preference A Shares (“Preference A Shares”) in Nell Limited (“Nell”), Access Industries Holdings LLC owns 13 Preference A Shares in Nell and Mr. Leonard Blavatnik owns 1,000 Voting Redeemable Preference B Shares in Nell; Nell in turn indirectly owns all of the outstanding Equity Interests of the Company.  For purposes hereof, NAG shall include the surviving entity in any merger or successor entity resulting from any conversion of NAG.

“NAG Unit” means a unit representing limited liability company interests in NAG issued by NAG to its members in exchange for capital contributions as evidence of such member’s ownership interest in NAG.  For purposes hereof, the term “NAG Unit” shall also include the equity securities of any entity with which NAG shall be merged, or into which it shall be converted, pursuant to its limited liability company agreement and the laws of the State of Delaware.

“Participant” means an Employee who has entered into an Equity Purchase Agreement and whose name is listed on Schedule A, as amended from time to time.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Phantom Unit” means the right to the Appraised Unit Value, if any, of a NAG Unit and is used solely for the purpose of determining benefits under this Plan.

“Plan” means the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan, as amended from time to time.

“Plan Administrator” means the Company or its Delegate, as set forth in Section 3(a).

“Subsidiary” means with respect to any Person, (a) a corporation a majority of the voting Equity Interests of which are at the time, directly or indirectly, owned by such Person; and (b) any other Person (other than a corporation), including, a partnership, limited liability company, business trust or joint venture, in which such Person, at the time thereof, directly or indirectly, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions), or (c) for so long as the Company or any of its Subsidiaries has a 50% ownership interest in Lyondell Bayer Manufacturing Maasvlakle VOF, Lyondell Bayer Manufacturing Maasvlakle VOF.

“Valuation Date” has the meaning set forth in the Award Agreement.

3.              Plan Administration and Designation of Participants.

(a)           Administration.  The Plan Administrator of this Plan shall be the Company, which shall have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or appropriate.  The Company may delegate its duties hereunder as Plan Administrator to the Chief Executive Officer or other senior officers of the Company (a “Delegate”), subject to such rules and regulations as the Company establishes.  The Plan Administrator may, in its discretion, retain the services of an outside administrator for the purpose of performing any of its functions hereunder.  The Plan Administrator may, in its discretion, accelerate the vesting of an Award, eliminate or make less restrictive any restrictions contained in an Award Agreement, waive any restriction or other provision of this Plan or an Award Agreement, or otherwise amend or modify an Award in any manner that is either (i) not adverse to the Participant who holds the Award or (ii) consented to by such Participant.  The Plan Administrator may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award Agreement in the manner and to the extent the Plan Administrator deems necessary or desirable to further the Plan purposes.  Any decision of the Plan Administrator in the interpretation and administration of this Plan shall lie within its sole and absolute discretion, and shall be final, conclusive and binding on all parties concerned.

(b)           Indemnification.  No Delegate (an “Indemnified Person”) shall be liable in any manner whatsoever in connection with the administration, construction or interpretation of this Plan, except arising out of such person’s willful misconduct or as expressly provided by statute.  Under no circumstances shall an Indemnified Person be liable for the acts of another Indemnified Person.  In the performance of its duties, an Indemnified Person shall be entitled to rely upon the information and advice furnished by the Company’s counsel, tax advisors and any other person whose information or advice the Company deems necessary or advisable, and no Indemnified Person shall be liable for any action taken or not taken in reliance upon any such advice.  The Company shall indemnify each Indemnified Person for any loss or damages that it, he or she incurs in connection with, or arising out of, this Plan, except for any loss or damages that result from such Indemnified Person’s willful misconduct or as expressly provided by statute.

(c)           Eligibility.  The Plan Administrator may, from time to time, amend Schedule A to recognize an Employee as a Participant in this Plan following the consummation of  such Employee’s equity investment in accordance with the terms set forth in an Equity Purchase Agreement.

4.             Determination of the Appraised Unit Value.

The appraised unit value of the common equity securities of NAG (the “Appraised Unit Value”), as of any date, shall mean the Appraised Value of NAG as of the applicable Valuation Date divided by the number of outstanding NAG Units as of such Valuation Date.

5.             Award Agreement.

Each Award granted hereunder shall be described in an Award Agreement, which shall be subject to the terms and conditions of the Plan.  The Award Agreement shall specify the number of Phantom Units granted to the Participant, any vesting requirements and the date on which such Award is made.

6.             Form of Award.

An Award shall be in the form of Phantom Units that may be reflected in a bookkeeping or other such account designated by the Plan Administrator.  The terms, conditions and limitations applicable to any Award of Phantom Units shall be determined by the Plan Administrator.

7.             Payment of Awards.

(a)           Form.  Payment of Awards shall be made in the form of a lump-sum cash payment at the time specified in the Award Agreement.

(b)           Deferral.  The Plan Administrator may, in its discretion, provide for the deferral of an Award under this Plan, and thereafter the Participant may elect to defer the receipt of any payment to which he or she is entitled in satisfaction of Phantom Units by the completion of a valid Deferral Election.  All deferrals must comply with the requirements of Section 409A of the Code.

(c)           Dividend Equivalents.  Dividend equivalent rights shall be extended to and made part of any Award, subject to such terms, conditions and restrictions as the Company may establish and set forth in the Award Agreement.

(d)           No Payments Prior to January 2, 2009.  In no event shall any payments be made under this Plan and the Award Agreement prior to January 2, 2009, other than dividend equivalents, as described in Section 7(c).  Any payment that a Participant would have been entitled to receive prior to January 2, 2009 but for the operation of this Section 7(d) shall be made in full on January 2, 2009 without interest.

8.             Termination of Employment.

The terms of the Award Agreement shall govern the treatment of any deferred or unpaid Awards payable to the Participant upon the termination of employment.  Termination of employment is governed by the laws of employment of the country in which the Participant is employed.  Notwithstanding anything contained herein to the contrary, no Participant who is a U.S. taxpayer shall be considered to have terminated employment for purposes of the Plan and the Award Agreement unless the Participant would be considered to have incurred a “separation from service” within the meaning of Section 409A of the Code.

9.             Assignability.

The Participant’s rights under the Plan and any Award Agreement are personal.  No assignment or transfer of the Participant’s rights under and interest in an Award Agreement may be made by the Participant other than by will or the laws of descent and distribution.Any attempted assignment or transfer in violation of this Section 9 shall be null and void.

10.           Adjustments.

(a)           The existence of outstanding Phantom Units shall not affect in any manner the right or power of NAG to make or authorize any or all adjustments, recapitalization, reorganizations or other changes in the ownership of NAG or its business or any merger or consolidation of NAG, or any issue of bonds, debentures or other obligations, or the dissolution or liquidation of NAG or its business, or any sale or transfer of all or any part of its assets or business, or any other act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.

(b)           In the event of a distribution, split, recapitalization, extraordinary distribution, merger, consolidation, combination or exchange of NAG Units or similar change, or upon the occurrence of any other event that the Plan Administrator, in its sole discretion, deems appropriate, then the Plan Administrator, if and to the extent that it deems appropriate to prevent dilution or enlargement of rights, shall adjust (i) the number of Phantom Units granted pursuant toany outstanding Award and (ii) the appropriate Appraised Unit Value for such Award as of the Valuation Date preceding such event.

11.           Tax Withholding.

The Company shall have the right to deduct applicable taxes from any Award payment and withhold an appropriate amount of cash for payment of taxes required by law, or to take such other action as, in the opinion of the Company, may be necessary to satisfy all obligations for withholding of such taxes.

12.           Amendments or Termination.

The Company may amend, alter or terminate this Plan, except that no amendment, alteration or termination shall impair the rights of any Participant under any Award Agreement in effect at the time of such amendment, alteration or termination without the written consent of such Participant.

13.           Unfunded Plan.

This Plan shall be unfunded.  Any bookkeeping accounts established with respect to a Participant’s Award shall be used merely as a convenience.  Neither the Company, a Subsidiary nor an Affiliate shall be required to segregate any assets for the purpose of providing benefits hereunder, nor shall this Plan be construed as providing for such segregation.  Furthermore, neither the Company, the Supervisory Board of the Company, the Plan Administrator, a Subsidiary nor an Affiliate shall be deemed to be a trustee of any cash, NAG Units, units in LyondellBasell Management Holdings LLC or rights determined with respect thereto under this Plan.  Any liability or obligation of the Company to any Participant with respect to an Award under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company or any Subsidiary or Affiliate shall be deemed to be secured by any pledge or other encumbrance on any property of the Company or such Subsidiary.  Neither the Company, the Supervisory Board of the Company, the Plan Administrator, a Subsidiary nor an Affiliate shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.

14.           No Right to Employment.

The granting of an Award under the terms of this Plan shall not impose upon the Company, a Subsidiary or an Affiliate any obligation to maintain any Participant as an Employee, and shall not diminish the power of the Company, a Subsidiary or an Affiliate to discharge any Participant at any time.

15.           Tax Compliance Issues.

(a)           For Participants who are U.S. Taxpayers:  For Participants who are U.S. taxpayers, the Company intends that any amounts payable under the Plan must satisfy the requirements of Section 409A of the Code in order to avoid imposition of applicable taxes thereunder.  Thus, notwithstanding anything in this Plan to the contrary, if any Plan provision or amount under the Plan would result in the imposition of an applicable tax under Section 409A of the Code and related regulations and Treasury pronouncements, that Plan provision or amount may be reformed to avoid imposition of the applicable tax, and no action taken to comply with Section 409A shall be deemed to adversely affect the rights of any Participant.  Notwithstanding the foregoing, neither the Company nor the Plan Administrator shall have any obligation to take any action under this Section 15 that would impose any expenses upon or increase any costs to the Company.

(b)           For Participants who are not U.S. Taxpayers:  For Participants who not U.S. taxpayers, Award payments are subject to the compliance with the tax laws of the applicable jurisdictions.

16.           Construction.

Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.  Words in the masculine gender shall include the feminine gender, the plural shall include the singular, and the singular shall include the plural.

17.           Arbitration of Disagreements.

(a)           For Participants Paid on a U.S. Dollar Payroll:  For Participants who are paid on a U.S. Dollar Payroll,  any dispute, controversy or claim arising out of or relating to Plan obligations shall be settled by final and binding arbitration conducted by the American Arbitration Association (the “AAA”) in the State of Delaware.  The arbitrator shall be selected by mutual agreement of the parties, if possible.  If the parties fail to reach agreement upon appointment of an arbitrator within 30 days after one party receives the other party’s notice of desire to arbitrate, the arbitrator shall be selected from a panel or panels submitted by the AAA.  The selection process to be used is set forth in the rules of the AAA, but if the parties fail to select an arbitrator from one or more panels, AAA shall not have the power to appoint an arbitrator but shall continue to submit additional panels until an arbitrator has been selected.  All fees and expenses of the arbitration, including a transcript if requested, will be borne by the parties equally.

(b)           For Participants Paid other than on a U.S. Dollar Payroll:  For Participants who are paid other than on a  U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to Plan obligations shall be settled by final and binding arbitration conducted according to the laws of the Grand Duchy of Luxembourg.

18.           Governing Law.

(a)           For Participants Paid on a U.S. Dollar Payroll:  For Participants who are paid on a U.S. Dollar payroll, this Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by, and construed and enforced according to, the laws of the State of Delaware.

(b)           For Participants Paid other than on a U.S. Dollar Payroll:  For Participants who are paid other than on a U.S. Dollar payroll, this Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or securities laws of the United States, shall be governed by, and construed and enforced according to, the laws of the Grand Duchy of Luxembourg.

LYONDELLBASELL INDUSTRIES AF S.C.A.
By:	/s/ C. Bart de Jong
	C. Bart de Jong
	Senior Vice President, Human Resources

EX-10.23(A)

FIRST AMENDMENT

LYONDELLBASELL INDUSTRIES AF S.C.A

LONG-TERM INCENTIVE PLAN

(As Established Effective April 1, 2008)

WHEREAS, LyondellBasell Industries AF S.C.A. (the “Company”) established the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan, effective April 1, 2008 (the “Plan”) for the benefit of certain eligible employees; and

WHEREAS, the Company desires to amend the Plan to provide that non-employee directors may participate in the Plan;

NOW, THEREFORE, the Company hereby amends the Plan, effective as of September 23, 2008, as follows:

1.             Section 2 of the Plan is hereby amended by adding the following new definition thereto:

“‘Non-Employee Director’ means an individual who serves on the Supervisory Board or the Board of Directors of a Subsidiary or an Affiliate.”

2.             The definition of “Participant” in Section 2 of the Plan is hereby amended to read as follows:

“‘Participant’ means an Employee or a Non-Employee Director who has entered into an Equity Purchase Agreement and whose name is listed on Schedule A, as amended from time to time.”

3.             Section 3(c) of the Plan is hereby amended to read as follows:

“(c)           Eligibility.  The Plan Administrator may, from time to time, amend Schedule A to recognize an Employee or a Non-Employee Director as a Participant in this Plan following the consummation of such individual’s equity investment in accordance with the terms set forth in an Equity Purchase Agreement.”

4.             Section 8 of the Plan is hereby amended in its entirety to read as follows:

“8.           Termination of Employment or Board Service.

The terms of the Award Agreement shall govern the treatment of any deferred or unpaid Awards payable to the Participant upon the termination of employment or, if applicable, service as a Non-Employee Director.  Notwithstanding anything contained herein to the contrary, no Participant who is a U. S. taxpayer shall be considered to have terminated employment or, if applicable, service as a Non-Employee Director for purposes of the Plan and the Award Agreement unless the Participant would be considered to have incurred a “separation from service” within the meaning of Section 409A of the Code.”

5.             Section 14 of the Plan is hereby amended in its entirety to read as follows:

“14.           No Right to Employment or Board Service.

The granting of an Award under the terms of this Plan shall not impose upon the Company, a Subsidiary or an Affiliate any obligation to maintain any Participant as an Employee or, if applicable, as a Non-Employee Director, and shall not diminish the power of the Company, a Subsidiary or an Affiliate to discharge any Participant at any time.”

IN WITNESS WHEREOF, the undersigned, being duly authorized on behalf of the Company, has executed this Instrument on this 20th day October, 2008.

ATTEST:		LYONDELLBASELL INDUSTRIES AF S.C.A
By:	/s/   Mindy G. Davidson	By:	/s/  C. Bart de Jong
			C. Bart de Jong
			Senior Vice President, Human Resources

EX-10.24

LYONDELLBASELL INDUSTRIES AF S.C.A.

LONG-TERM INCENTIVE PLAN

PHANTOM UNIT AWARD AGREEMENT

By letter dated April 1, 2008 (the “Grant Letter”), LyondellBasell Industries AF S.C.A., a Luxembourg company (the “Company”), grants to the recipient of the Grant Letter (the “Participant”) an award under the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan (the “Plan”), as further described herein.

Effective as of April 1, 2008 (the “Grant Date”), the Company now grants to Participant and Participant accepts the number of Phantom Units set forth in the Grant Letter (the “Award”).  This Award is subject to the terms and conditions of the Plan, this Award Agreement, and the Grant Letter.

1.           Relationship to the Plan.

This Award is subject to all of the terms and conditions of the Plan and to such administrative requirements or interpretations as the Plan Administrator, acting in its sole discretion, may adopt.

2.           Definitions.

Except as defined in this Award Agreement, capitalized terms have the meanings ascribed to them in the Plan, and, if not defined therein, the Equity Purchase Agreement.

“Affiliate” means, with respect to any Person or entity, any other Person or entity that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with such Person or entity.  “Control” means the power to direct the management and policies of a Person or entity, affirmatively (by direction) and negatively (by veto), directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Appraised Unit Value,” as of any date, shall mean the Appraised Value of NAG as of the applicable Valuation Date divided by the number of outstanding NAG Units as of such Valuation Date.

 “Appraised Value,” as of any date, shall mean the value of NAG that a willing buyer would pay to a willing seller in an arm’s length transaction as of such date, determined by the Supervisory Board of the Company (the “Supervisory Board”), in its reasonable discretion and acting in good faith following receipt of a valuation opinion regarding the range of appropriate Appraised Values from a third-party accounting firm, investment banking firm or other expert that regularly engages in the business of valuation (a “Third Party Appraiser”). The Appraised Value shall take into consideration all valuation factors that the Supervisory Board or the Third Party Appraiser considers relevant under the circumstances, which may include but not be limited to (i) the nature and history of NAG’s business; (ii) the economic outlook in general and the condition and outlook of NAG’s specific industry in particular; (iii) the book value of the NAG Units and the financial condition of NAG’s business; (iv) NAG’s earnings capacity; (v) the existence of enterprise goodwill or other intangible value; and (vi) the market price of publicly traded stocks of corporations engaged in the same or similar lines of business; provided, however, that the Appraised Value shall not take into consideration any discounts for lack of marketability of the NAG Units, any minority discount or any control premium.  If any subsidiary of NAG has a class of publicly traded equity securities, then the value of that subsidiary for appraisal purposes shall be based on the market value of those publicly traded securities.  The Third Party Appraiser shall deliver its opinion regarding the range of appropriate Appraised Values of NAG as of the applicable Valuation Date, and shall, to the extent commercially practicable, deliver such opinion by a date no more than 21 days after the applicable Valuation Date.  The Supervisory Board shall use reasonable efforts to cause the Third Party Appraiser to do so within such time period.

The Supervisory Board shall, if it deems necessary or if requested by either Management LLC or AI Petrochemicals LLC, request an opinion regarding the fairness of such valuation to Management LLC and/or AI Petrochemicals LLC performed by a reputable third party firm that regularly provides such opinions.  All parties will cooperate and use reasonable efforts to ensure that the date of determination will comply with any legal requirements with respect to timing of valuation and payment.  The requesting party shall bear all fees and expenses associated with obtaining a fairness opinion.

“Award” means the Phantom Units granted to a Participant pursuant to this Award Agreement.

“Award Agreement” means this agreement which, together with the Plan, sets forth the terms, conditions and limitations applicable to this Award.

“Blavatnik Group” means, collectively, (a) Mr. Leonard Blavatnik, his spouse, direct descendants, siblings, parents, children of siblings, or grandchildren, grand nieces and grand nephews, any other members of the immediate Blavatnik family, (b) any trust or any entity directly or indirectly controlled by, or for the benefit of, one or more members of the Blavatnik family described above, or (c) any trust (a “Blavatnik Charitable Trust”)  (i) for the benefit of a charity created by any member of the Blavatnik family described above, (ii) to which any such member of the Blavatnik family described above is a substantial donor or grantor, (iii) the estate, executor, administrator or committee of beneficiaries of any member of the Blavatnik Group listed in clause (i) or (ii) of this definition;  provided that, in the case of any Blavatnik Charitable Trust, a member of the Blavatnik Group described in clause (i) or (ii) of this definition maintains control thereof.  For purposes of this definition only, “control” of a Blavatnik Charitable Trust means the possession of the power to direct or cause the direction of management and policies of such Blavatnik Charitable Trust in respect of the issued share capital of NAG Holdings LLC owned by such Blavatnik Charitable Trust.

 “Board of Directors” means, as to any Person, the board of directors (or similar governing body) of such Person (or, if such Person is a partnership and does not have a board of directors (or similar governing body), the board of directors (or similar governing body) of such Person’s general partner) or, except with respect to the definition of “Change of Control” any duly authorized committee thereof.

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“Cause” means (a) the Participant’s continued and willful refusal to substantially perform his duties (other than a willful refusal resulting from the Participant’s incapacity due to physical or mental illness) after the Plan Administrator delivers a demand for substantial performance that specifically identifies the Plan Administrator’s determination of the manner in which the Participant has not substantially performed his duties and the Participant’s performance is not cured to the Plan Administrator’s reasonable satisfaction within thirty (30) days from that demand;  (b) the Participant’s engagement in willful misconduct or dishonesty that is materially injurious, monetarily or otherwise, to the Company, a Subsidiary, or an Affiliate;  or (c) a Participant’s final conviction of a felony.  Notwithstanding the foregoing, a Participant shall not be deemed terminated for Cause without (1) the Plan Administrator’s reasonable written notice to a Participant setting forth the reasons the Plan Administrator intends to characterize the Participant’s termination as a termination for Cause and (2) the Participant’s opportunity, together with his counsel, to be heard before the Plan Administrator.  It is specifically agreed that Cause shall exclude any act or omission by a Participant in the good faith exercise of the Participant’s business judgment as an officer.

“Change of Control” for purposes of this Agreement, a Change of Control means the occurrence of any of the following:  (a) the Sponsor ceases to hold legally and beneficially (i) issued share capital having the right to cast at least 51% (or, following a Listing, at least 35%) of the votes capable of being cast in general meetings of the Company or NAG or (ii) before a Listing, the right to determine the composition of the majority of the board of directors or equivalent body of the Company or NAG; (b) following a Listing, any Person or group of Persons acting in concert (other than the Sponsor) owns, directly or indirectly, a greater percentage of the issued share capital or issued share capital with voting rights of the Company or NAG than the Sponsor or, at any time, otherwise acquires control of the Company or NAG; (c) the replacement of a majority of the Board of Directors of the Company or NAG over a two-year period from the directors who constituted the Board of Directors of the Company or NAG, as applicable, at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company or NAG, as applicable then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved; or (d) the adoption by the stockholders of the Company or members of NAG of a plan or proposal for the liquidation or dissolution of the Company or NAG, respectively, or the sale of all or substantially all the assets of the Company or NAG, respectively.

“Code” means the Internal Revenue Code of 1986, as amended.

“Deferral Election” means the Participant’s election of the date upon which the Company shall make a distribution to him of his interest in any vested Phantom Units in accordance with the terms of this Award Agreement, if and to the extent permitted by the Plan Administrator; provided, however, that (i) such Deferral Election shall be irrevocable and (ii) any Deferral Election must be made on the form provided by the Plan Administrator.

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“Disability” means a permanent and total disability, as defined in the applicable long-term disability plan or policy of the Company or its Subsidiaries.

“Employment” means employment as an employee of the Company or any of its Subsidiaries or Affiliates.  Neither the Participant’s transfer from employment by the Company to employment by any Subsidiary or Affiliate, the Participant’s transfer from employment by any Subsidiary or Affiliate to Company employment, nor the Participant’s transfer between Subsidiaries and/or Affiliates shall be deemed to be a termination of Participant’s employment.  Moreover, a Participant’s employment shall not be deemed to terminate because the Participant is absent from active employment due to temporary illness, during authorized vacation, during temporary leaves of absence granted by the Company or the employing Subsidiary or Affiliate for professional advancement, education, health or government service, during military leave for any period if the Participant returns to active employment within 90 days after military leave terminates, or during any period required to be treated as a leave of absence by any valid law or agreement.  Termination of employment is governed by the laws of employment of the country in which the Participant is employed.  Notwithstanding anything contained herein to the contrary, no Participant who is a U.S. taxpayer shall be considered to have terminated employment for purposes of the Plan and the Award Agreement unless the Participant would be considered to have incurred a “separation from service” within the meaning of Section 409A of the Code.

“Equity Interests” means, with respect to any Person, all of the capital stock of such Person and all warrants, options or other rights to acquire the capital stock of such Person, including any contribution from shareholders without any issuance of shares (but excluding any debt security that is convertible into, or exchangeable for, such capital stock).

“Equity Purchase Agreement” means that certain equity purchase agreement between Management LLC and Participant setting forth the terms and conditions pertaining to Participant’s equity investment in Management LLC., which has an equity investment in NAG.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Holding Company” means, in relation to a company, corporation or other legal entity, any other  company, corporation or other legal entity in respect of which the former company, corporation or other legal entity is a Subsidiary.

“IPO” means, with respect to any entity, the first public offering of the common equity securities of such entity pursuant to a registration statement (other than a Form S-8 or successor form) filed with and declared effective by the United States Securities and Exchange Commission or any similar transaction conducted outside the United States.

“Listing” means a listing of all or any of the share capital of the Company or any of its Subsidiaries or any Holding Company or any of its Subsidiaries (excluding the Sponsor (to the extent not a Subsidiary of the Company) and any such Holding Company of the Company or any of its Subsidiaries, but in each case only if a majority of the investments of such company are not constituted by the Company or any of its Subsidiaries) on any investment exchange or any other sale or issue by way of flotation or public offering or any equivalent circumstances in relation to the Company or any of its Subsidiaries or any Holding Company of the Company or any of its Subsidiaries (excluding the Sponsor (to the extent not a Subsidiary of the Company) and any such Holding Company of the Company or any of its Subsidiaries, but in each case only if a majority of the investments of such company are not constituted by the Company or any of its Subsidiaries) in any jurisdiction or country.

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“Management LLC” means LyondellBasell Management LLC, a Delaware limited liability company.

“NAG” means NAG Investments LLC, a Delaware limited liability company, which, directly or indirectly, owns 12,987 Voting Redeemable Preference A Shares (“Preference A Shares”) in Nell Limited (“Nell”), Access Industries Holdings LLC owns 13 Preference A Shares in Nell and Mr. Leonard Blavatnik owns 1,000 Voting Redeemable Preference B Shares in Nell; Nell in turn, indirectly owns all of the outstanding Equity Interests of the Company, and shall include the surviving entity in any merger or successor entity resulting from any conversion of NAG.

“NAG Unit” means a unit representing limited liability company interests in NAG issued by NAG to its members in exchange for capital contributions as evidence of such member’s ownership interest in NAG.  The term “NAG Unit” shall also include the equity securities of any entity with which NAG shall be merged, or into which it shall be converted, pursuant to its limited liability company agreement and the laws of the State of Delaware.

“Parent” means BI S.à r.l., a société à responsabilité limitée incorporated under the laws of the Grand Duchy of Luxembourg.

“Payment Date” means the Payment Date specified in a valid Deferral Election, or if no Deferral Election is made, the earliest of  (a) the Normal Vesting Date;  (b) 60 days following termination due to death, Disability, involuntary termination without Cause, or Retirement; or (c) 30 days following a Change of Control that meets the requirements of Section 409A(a)(2)(A)(v) and any related regulations or pronouncements. Notwithstanding the foregoing, (1) in no event shall any Payment Date occur prior to January 2, 2009 except as otherwise permitted by Section 4(c) of this Award Agreement, and (2) any payment that the Participant would have been entitled to receive prior to January 2, 2009 but for the operation of this sentence shall be made in full on January 2, 2009 without interest.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Phantom Unit” means the right to the Appraised Unit Value, if any, of a NAG Unit and is used solely for the purpose of determining benefits under the Plan.

“Plan Administrator” means the Company or its Delegate (as such term is defined in the Plan).

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“Retirement” means the Participant’s voluntary termination of Employment on or after the earliest of (a) age 65, (b) age 55 with 10 years of participation service credited under a qualified defined benefit pension plan that is maintained by the Company, a Subsidiary or an Affiliate and in which the Participant is eligible to participate, or (c) with regard to a Participant whose primary place of employment with the Company, a Subsidiary or an Affiliate is now or has ever been outside the United States, whenever retirement is permitted under applicable law and Participant is eligible to receive a retirement benefit.  The Plan Administrator shall have the authority, in its sole discretion, to determine the location of the Participant’s primary place of employment and the applicable law.

“Specified NAG Subsidiary” means any entity directly or indirectly owned by NAG that, together with the subsidiaries of such entity, accounts for a majority of the consolidated assets or revenues of NAG, based on the latest available year-end financial statements of NAG (which shall be audited if NAG prepares audited financial statements in the ordinary course of business).

“Sponsor” means (a) the Blavatnik Group and/or (b) other funds, limited partnerships or companies managed or controlled by Mr. Leonard Blavatnik, including Parent, for so long as so managed or controlled.

“Subsidiary” means with respect to any Person, (a) a corporation a majority of the voting Equity Interests of which are at the time, directly or indirectly, owned by such Person; (b) any other Person (other than a corporation), including, a partnership, limited liability company, business trust or joint venture, in which such Person, at the time thereof, directly or indirectly, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions); or (c) for so long as LBI or any of its Subsidiaries has a 50% ownership interest in Lyondell Bayer Manufacturing Maasvlakle VOF, Lyondell Bayer Manufacturing Maasvlakle VOF.

“Valuation Date” means the earlier of:

(a)           December 31 of the year preceding the Normal Vesting Date; or

(b)           the December 31 that occurs on or immediately preceding (i) the date of involuntary termination of a Participant’s Employment without Cause, or (ii) the date of the termination of a Participant’s Employment due to death, Disability or Retirement;

provided, however, that if a Change of Control or an IPO of NAG or an IPO of a Specified NAG Subsidiary (each a “Trigger Event”) has occurred following the valuation date as determined pursuant to clause (a) or (b) above and on or before the Payment Date, then the “Valuation Date” shall be the date of the Trigger Event rather than the date set forth in clause (a) or (b) above that would otherwise apply.  Furthermore, in the event the Payment Date occurs on or after the date of an IPO of NAG, the applicable Valuation Date shall be the most recent preceding date upon which a sale of common equity securities in NAG is reported by the principal securities exchange on which such shares are traded.  Notwithstanding the foregoing, if a Participant has made a Deferral Election, the applicable Valuation Date shall be the valuation date as specified in the Deferral Election.

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“Vesting Date” means the earlier of (a) the third anniversary of the Grant Date (the “Normal Vesting Date”) or (b) such other date specified for vesting of all or a portion of an award pursuant to Section 3.

3.             Vesting.

(a)           All Phantom Units shall vest on the Normal Vesting Date; provided, however, that, except as otherwise set forth in this Section 3, (i) the Participant must be in continuous Employment at all times between the Grant Date and the Normal Vesting Date, and (ii) in the event of termination of Employment prior to the Normal Vesting Date, all Phantom Units shall be forfeited.

(b)           If, prior to the Normal Vesting Date, the Participant’s Employment with the Company is terminated due to death, Retirement, Disability or involuntary termination without Cause, then the Participant shall become vested in a reduced number of Phantom Units, which shall be calculated by multiplying the number of Phantom Units awarded under this Award Agreement by a fraction, the numerator of which is the number of calendar days that have elapsed from the Grant Date through the date of his termination of Employment and the denominator of which is 1095.  Any Phantom Units in excess of such number shall remain unvested and shall be forfeited as of the date of his termination of Employment.

(c)           Notwithstanding any provision in this Award Agreement to the contrary, the Participant shall become fully vested in all outstanding Phantom Units granted under this Award Agreement upon the occurrence of a Change of Control or an IPO of NAG.

(d)           Upon the exercise of a put option with regard to all or some of the Units that the Participant has obtained as set forth in the Equity Purchase Agreement, the Participant shall forfeit an equivalent number of any unvested Phantom Units.

(e)           No vesting requirements shall apply to any dividend equivalents payable in accordance with Section 4(c) of this Award Agreement.

4.             Payment.

(a)           The Company shall pay, or cause the employing Subsidiary or Affiliate to pay, the Participant a lump-sum cash payment upon the Payment Date in an amount equal to the product of  (i) the number of vested Phantom Units multiplied by (ii) the Appraised Unit Value as of the applicable Valuation Date.

(b)           From and after such time as the Plan Administrator, acting in its sole discretion, decides to permit deferrals under the Plan, the Participant may elect to defer the receipt of any payment to which he is entitled in satisfaction of the Phantom Units by the completion of a valid Deferral Election.

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(c)           The Participant shall be entitled to receive a payment that is equivalent to the dividend payable on a particular date for a NAG Unit, multiplied by the number of Phantom Units granted to him pursuant to this Award.  The payment of such dividend equivalents shall occur on the same date as the payment of dividends on NAG Units.  The Participant may not defer the receipt of such dividend equivalents.

(d)           Notwithstanding any provision of this Agreement to the contrary, if upon the Participant’s termination of employment during the term of this Agreement, the Participant is providing services to “a corporation any stock in which is publicly traded on an established securities market or otherwise” within the meaning of Section 409A(2)(B)(i) of the Code, then this Section 4(d) shall apply.  If the Participant is identified by the Plan Administrator as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which he has a separation from service (other than due to death) within the meaning of Section 1.409A-1(h) of the Treasury Regulations, then any payment to which he may become entitled in satisfaction of his vested Phantom Units under the terms of this Plan shall not take place prior to the earlier of (i) the first business day following the expiration of six months from the date of such separation from service, (ii) the date of Participant’s death or (iii) such other date as complies with the requirements of Section 409A of the Code.

5.             Tax Compliance Issues for Participants who are U.S. Taxpayers.

For Participants who are U.S. taxpayers:

(a)           This Award Agreement shall be interpreted and operated in a manner consistent with Section 409A of the Code, so as to avoid adverse tax consequences in connection with this Award of Phantom Units.

(b)           Notwithstanding the foregoing or any other provision of this Award Agreement to the contrary, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of Participant, whether paid or payable or distributed or distributable pursuant to the terms of this Award Agreement or otherwise would be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then the amount of “parachute payments” (as defined in Section 280G of the Code) payable or required to be provided to Participant shall be automatically reduced (a “Reduction”) to the minimum extent necessary to avoid imposition of such Excise Tax if, and only if, by reason of the Reduction, the net after-tax benefit shall exceed the net after-tax benefit if the Reduction were not made.  “Net after-tax benefit” for these purposes shall mean the sum of (i) the total amount payable to Participant under this Agreement, plus (ii) all other payments and benefits which Participant receives or is then entitled to receive from the Company, a Subsidiary or an Affiliate that, alone or in combination with the payments and benefits payable under this Agreement, would constitute a “parachute payment” within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Participant (based upon the rate in effect for such year as set forth in the Code at the time of the payment under this Award Agreement), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code.

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6.           Tax Compliance Issues for Participants who are not U.S. Taxpayers.

For Participants who are not U.S. taxpayers, Award payments are subject to compliance with the tax laws of the applicable jurisdictions.

7.           Withholding.

The Company has the right to deduct applicable taxes from any Phantom Unit Award payment, withhold an appropriate amount of cash for payment of taxes required by law at delivery or when cash vesting occurs under this Plan, or to take other action that, in the Company’s opinion, is necessary to satisfy all tax withholding obligations.

8.           Successors and Assigns.

This Phantom Unit Award shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective successors and assigns (including personal representatives, heirs and legatees), but the Participant may not assign any rights or obligations under this Award Agreement except to the extent and in the manner expressly permitted by the Plan.

9.           Shareholder Rights.

This Award Agreement shall not confer any rights upon the Participant as a unitholder of NAG or Management LLC or any right to receive NAG Units or any other form of equity interest in NAG, or any equity interest in Management LLC.

10.           No Right to Employment.

No provision of this Award Agreement shall confer any right to continued employment with the Company, a Subsidiary or an Affiliate, or to any employment with Management LLC, NAG or any other entity.

11.           Arbitration of Disagreements.

(a)           For Participants Paid on a U.S. Dollar Payroll:  For Participants paid on a U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted by the American Arbitration Association (the “AAA”) in the State of Delaware.  The arbitrator shall be selected by mutual agreement of the parties, if possible.  If the parties fail to reach agreement upon appointment of an arbitrator within 30 days after one party receives the other party’s notice of desire to arbitrate, the arbitrator shall be selected from a panel or panels submitted by the AAA.  The selection process to be used is set forth in the rules of the AAA, but if the parties fail to select an arbitrator from one or more panels, AAA shall not have the power to appoint an arbitrator but shall continue to submit additional panels until an arbitrator has been selected.  All fees and expenses of the arbitration, including a transcript if requested, will be borne by the parties equally.

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(b)           For Participants Paid other than on a U.S. Dollar Payroll:  For Participants paid other than on a U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted according to the laws of the Grand Duchy of Luxembourg.

12.           Governing Law.

(a)           For Participants Paid on a U.S. Dollar Payroll:  For Participants paid on a U.S. Dollar payroll, this Award Agreement shall be governed by, and construed and enforced according to, the laws of the State of Delaware.

(b)           For Participants Paid other than on a U.S. Dollar Payroll:  For Participants paid other than on a U.S. Dollar payroll, this Award Agreement shall be governed by, and construed and enforced according to, the laws of the Grand Duchy of Luxembourg.

	LYONDELLBASELL INDUSTRIES AF S.C.A.
	By:
Date		C. Bart de Jong
		Senior Vice President, Human Resources
Date		Participant

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EX-10.25

LYONDELLBASELL INDUSTRIES AF S.C.A.

PHANTOM UNIT AWARD AGREEMENT

Effective as of April 1, 2008 (the “Grant Date”), LyondellBasell Industries AF S.C.A., a Luxembourg company (the “Company”), grants to Morris Gelb (“Executive”) and Executive accepts 68,992 Phantom Units (the “Award”), subject to the terms and conditions set forth in this Agreement (the “Award Agreement”).

1.           Definitions.

“Affiliate” means, with respect to any Person or entity, any other Person or entity that, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person or entity.  The term “Control” means the power to direct the management and policies of a Person or entity, affirmatively (by direction) and negatively (by veto), directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Appraised Unit Value,” as of any date, shall mean the Appraised Value of NAG as of the applicable Valuation Date divided by the number of outstanding NAG Units as of such Valuation Date.

 “Appraised Value,” as of any date, shall mean the value of NAG that a willing buyer would pay to a willing seller in an arm’s length transaction as of such date, determined by the Supervisory Board of the Company, in its reasonable discretion and acting in good faith following receipt of a valuation opinion regarding the range of appropriate Appraised Values from a third-party accounting firm, investment banking firm or other expert that regularly engages in the business of valuation (a “Third Party Appraiser”). The Appraised Value shall take into consideration all valuation factors that the Supervisory Board or the Third Party Appraiser considers relevant under the circumstances, which may include but not be limited to (i) the nature and history of NAG’s business; (ii) the economic outlook in general and the condition and outlook of NAG’s specific industry in particular; (iii) the book value of the NAG Units and the financial condition of NAG’s business; (iv) NAG’s earnings capacity; (v) the existence of enterprise goodwill or other intangible value; and (vi) the market price of publicly traded stocks of corporations engaged in the same or similar lines of business; provided, however, that the Appraised Value shall not take into consideration any discounts for lack of marketability of the NAG Units, any minority discount or any control premium.  If any Subsidiary of NAG has a class of publicly traded equity securities, then the value of that Subsidiary for appraisal purposes shall be based on the market value of those publicly traded securities.  The Third Party Appraiser shall deliver its opinion regarding the range of appropriate Appraised Values of NAG as of the applicable Valuation Date, and shall, to the extent commercially practicable, deliver such opinion by a date no more than 21 days after the applicable Valuation Date.  The Supervisory Board shall use reasonable efforts to cause the Third Party Appraiser to do so within such time period.

The Supervisory Board shall, if it deems necessary or if requested by either Management LLC or AI Petrochemicals LLC, request an opinion regarding the fairness of such valuation to Management LLC and/or AI Petrochemicals LLC performed by a reputable third party firm that regularly provides such opinions.  All parties will cooperate and use reasonable efforts to ensure that the date of determination will comply with any legal requirements with respect to timing of valuation and payment.  The requesting party shall bear all fees and expenses associated with obtaining a fairness opinion.

“Award” means the Phantom Units granted to the Executive pursuant to this Award Agreement.

“Award Agreement” means this agreement which sets forth the terms, conditions and limitations applicable to this Award.

“Blavatnik Group” means, collectively, (a) Mr. Leonard Blavatnik, his spouse, direct descendants, siblings, parents, children of siblings, or grandchildren, grand nieces and grand nephews, any other members of the immediate Blavatnik family, (b) any trust or any entity directly or indirectly controlled by, or for the benefit of, one or more members of the Blavatnik family described above, or (c) any trust (a “Blavatnik Charitable Trust”)  (i) for the benefit of a charity created by any member of the Blavatnik family described above, (ii) to which any such member of the Blavatnik family described above is a substantial donor or grantor, (iii) the estate, executor, administrator or committee of beneficiaries of any member of the Blavatnik Group listed in clause (i) or (ii) of this definition;  provided that, in the case of any Blavatnik Charitable Trust, a member of the Blavatnik Group described in clause (i) or (ii) of this definition maintains control thereof.  For purposes of this definition only, “control” of a Blavatnik Charitable Trust means the possession of the power to direct or cause the direction of management and policies of such Blavatnik Charitable Trust in respect of the issued share capital of NAG Holdings LLC owned by such Blavatnik Charitable Trust.

 “Board of Directors” means, as to any Person, the board of directors (or similar governing body) of such Person (or, if such Person is a partnership and does not have a board of directors (or similar governing body), the board of directors (or similar governing body) of such Person’s general partner) or, except with respect to the definition of “Change of Control” any duly authorized committee thereof.

“Board Service” means, with respect to Executive, service on the Supervisory Board or the Board of Directors of an Affiliate of the Company.

“Cause” means (a) the Executive’s continued and willful refusal to substantially perform his duties (other than a willful refusal resulting from the Executive’s incapacity due to physical or mental illness) after the Company delivers a demand for substantial performance that specifically identifies the Company’s determination of the manner in which the Executive has not substantially performed his duties and the Executive’s performance is not cured to the Company’s reasonable satisfaction within thirty (30) days from that demand;  (b) the Executive’s engagement in willful misconduct or dishonesty that is materially injurious, monetarily or otherwise, to the Company, a Subsidiary, or an Affiliate; or (c) the Executive’s final conviction of a felony.  Notwithstanding the foregoing, the Executive’s Employment shall not be deemed terminated for Cause without (1) the Company’s reasonable written notice to the Executive setting forth the reasons the Company intends to characterize the Executive’s termination as a termination for Cause and (2) the Executive’s opportunity, together with his counsel, to be heard before the Company.  It is specifically agreed that Cause shall exclude any act or omission by the Executive in the good faith exercise of the Executive’s business judgment as an officer.

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“Change of Control” for purposes of this Agreement, a Change of Control means the occurrence of any of the following:  (a) the Sponsor ceases to hold legally and beneficially (i) issued share capital having the right to cast at least 51% (or, following a Listing, at least 35%) of the votes capable of being cast in general meetings of the Company or NAG or (ii) before a Listing, the right to determine the composition of the majority of the board of directors or equivalent body of the Company or NAG; (b) following a Listing, any Person or group of Persons acting in concert (other than the Sponsor) owns, directly or indirectly, a greater percentage of the issued share capital or issued share capital with voting rights of the Company or NAG than the Sponsor or, at any time, otherwise acquires control of the Company or NAG; (c) the replacement of a majority of the Board of Directors of the Company or NAG over a two-year period from the directors who constituted the Board of Directors of the Company or NAG, as applicable, at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company or NAG, as applicable then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved; or (d) the adoption by the stockholders of the Company or members of NAG of a plan or proposal for the liquidation or dissolution of the Company or NAG, respectively, or the sale of all or substantially all the assets of the Company or NAG, respectively.

“Code” means the Internal Revenue Code of 1986, as amended.

“Deferral Election” means the Executive’s election of the date upon which the Company shall make a distribution to him of his interest in any vested Phantom Units in accordance with the terms of this Award Agreement, if and to the extent permitted by the Company; provided, however, that (i) such Deferral Election shall be irrevocable and (ii) any Deferral Election must be made on the form provided by the Company.

“Disability” means a permanent and total disability, as defined in the applicable long-term disability plan or policy of the Company or its Subsidiaries.

“Employment” means employment as an employee of the Company or any of its Subsidiaries or Affiliates.  Neither the Executive’s transfer from employment by the Company to employment by any Subsidiary or Affiliate, the Executive’s transfer from employment by any Subsidiary or Affiliate to Company employment, nor the Executive’s transfer between Subsidiaries and/or Affiliates shall be deemed to be a termination of Executive’s employment.  Moreover, the Executive’s employment shall not be deemed to terminate because the Executive is absent from active employment due to temporary illness, during authorized vacation, during temporary leaves of absence granted by the Company, the employing Subsidiary or Affiliate for professional advancement, education, health or government service, during military leave for any period if the Executive returns to active Employment within 90 days after military leave terminates, or during any period required to be treated as a leave of absence by any valid law or agreement.  Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated Employment for purposes of this Award Agreement unless the Executive would be considered to have incurred a “separation from service” within the meaning of Section 409A of the Code.

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“Equity Interests” means, with respect to any Person, all of the capital stock of such Person and all warrants, options or other rights to acquire the capital stock of such Person, including any contribution from shareholders without any issuance of shares (but excluding any debt security that is convertible into, or exchangeable for, such capital stock).

“Equity Purchase Agreement” means that certain equity purchase agreement between Management LLC and Executive setting forth the terms and conditions pertaining to Executive’s equity investment in Management LLC., which has an equity investment in NAG.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Holding Company” means, in relation to a company, corporation or other legal entity, any other  company, corporation or other legal entity in respect of which the former company, corporation or other legal entity is a Subsidiary.

“IPO” means, with respect to any entity, the first public offering of the common equity securities of such entity pursuant to a registration statement (other than a Form S-8 or successor form) filed with and declared effective by the United States Securities and Exchange Commission or any similar transaction conducted outside the United States.

“Listing” means a listing of all or any of the share capital of the Company or any of its Subsidiaries or any Holding Company or any of its Subsidiaries (excluding the Sponsor (to the extent not a Subsidiary of the Company) and any such Holding Company of the Company or any of its Subsidiaries, but in each case only if a majority of the investments of such company are not constituted by the Company or any of its Subsidiaries) on any investment exchange or any other sale or issue by way of flotation or public offering or any equivalent circumstances in relation to the Company or any of its Subsidiaries or any Holding Company of the Company or any of its Subsidiaries (excluding the Sponsor (to the extent not a Subsidiary of the Company) and any such Holding Company of the Company or any of its Subsidiaries, but in each case only if a majority of the investments of such company are not constituted by the Company or any of its Subsidiaries) in any jurisdiction or country.

“Management LLC” means LyondellBasell Management LLC, a Delaware limited liability company.

“NAG” means NAG Investments LLC, a Delaware limited liability company, which, directly or indirectly, owns 12,987 Voting Redeemable Preference A Shares (“Preference A Shares”) in Nell Limited (“Nell”), Access Industries Holdings LLC owns 13 Preference A Shares in Nell and Mr. Leonard Blavatnik owns 1,000 Voting Redeemable Preference B Shares in Nell; Nell in turn indirectly owns all of the outstanding Equity Interests of the Company, and shall include the surviving entity in any merger or successor entity resulting from any conversion of NAG.

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“NAG Unit” means a unit representing limited liability company interests in NAG issued by NAG to its members in exchange for capital contributions as evidence of such member’s ownership interest in NAG.  The term “NAG Unit” shall also include the equity securities of any entity with which NAG shall be merged, or into which it shall be converted, pursuant to its limited liability company agreement and the laws of the State of Delaware.

“Parent” means BI S.à r.l., a société à responsabilité limitée incorporated under the laws of the Grand Duchy of Luxembourg.

“Payment Date” means the Payment Date specified in a valid Deferral Election or, if no Deferral Election is made, the earliest of

(a)           April 1, 2011;

(b)           60 days following termination of Employment or, if applicable, Board Service due to the Executive’s death or Disability;

(c)           30 days following a Change of Control that meets the requirements of Section 409A(a)(2)(A)(v) and any related regulations or pronouncements.

Notwithstanding the foregoing, (1) in no event shall any Payment Date occur prior to January 2, 2009 except as otherwise permitted by Section 3(c) of this Award Agreement, and (2) any payment that the Executive would have been entitled to receive prior to January 2, 2009 but for the operation of this sentence shall be made in full on January 2, 2009 without interest.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Phantom Unit” means the right to the Appraised Unit Value, if any, of a NAG Unit and is used solely for the purpose of determining benefits under this Award Agreement.

“Retirement” means the Participant’s voluntary termination of Employment on or after the earliest of (a) age 65, (b) age 55 with 10 years of participation service credited under a qualified defined benefit pension plan that is maintained by the Company, a Subsidiary or an Affiliate and in which the Participant is eligible to participate, or (c) with regard to a Participant whose primary place of employment with the Company, any Subsidiary or an Affiliate is now or has ever been outside the United States, whenever retirement is permitted under applicable law and Participant is eligible to receive a retirement benefit.  The Company shall have the authority, in its sole discretion, to determine the location of the Participant’s primary place of employment and the applicable law.

“Specified NAG Subsidiary” means any entity directly or indirectly owned by NAG that, together with the Subsidiaries of such entity, accounts for a majority of the consolidated assets or revenues of NAG, based on the latest available year-end financial statements of NAG (which shall be audited if NAG prepares audited financial statements in the ordinary course of business).

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“Sponsor” means (a) the Blavatnik Group and/or (b) other funds, limited partnerships or companies managed or controlled by Mr. Leonard Blavatnik, including Parent, for so long as so managed or controlled.

“Subsidiary” means with respect to any Person, (a) a corporation a majority of the voting Equity Interests of which are at the time, directly or indirectly, owned by such Person; (b) any other Person (other than a corporation), including, a partnership, limited liability company, business trust or joint venture, in which such Person, at the time thereof, directly or indirectly, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions); or (c) for so long as LBI or any of its Subsidiaries has a 50% ownership interest in Lyondell Bayer Manufacturing Maasvlakle VOF, Lyondell Bayer Manufacturing Maasvlakle VOF.

“Supervisory Board” means the Supervisory Board of the Company.

“Valuation Date” means the earlier of:  (a) December 31, 2010 or (b) the December 31 that occurs on or immediately preceding the date of the Executive’s death or Disability; provided, however, that if a Change of Control or an IPO of NAG or an IPO of a Specified NAG Subsidiary (each a “Trigger Event”) has occurred following the valuation date as determined pursuant to clause (a) or (b) above and on or before the Payment Date, then the “Valuation Date” shall be the date of the Trigger Event rather than the date set forth in clause (a) or (b) above that would otherwise apply.  Furthermore, in the event the Payment Date occurs on or after the date of an IPO of NAG, the applicable Valuation Date shall be the most recent preceding date upon which a sale of common equity securities in NAG is reported by the principal securities exchange on which such shares are traded.  Notwithstanding the foregoing, if the Executive has made a Deferral Election, the applicable Valuation Date shall be the valuation date as specified in the Deferral Election.

“Vesting Date” means the earlier of (a) April 1, 2011 or (b) such other date specified for vesting of all or a portion of an award pursuant to Section 2.

2.             Vesting.

(a)           All Phantom Units shall vest on April 1, 2011; provided, however, that, except as otherwise set forth in this Section 2, the Executive is continuously in Employment or Board Service at all times between April 1, 2008 and April 1, 2011 (inclusive).

(b)           Upon death or Disability during Employment or Board Service, involuntary termination without Cause, or Retirement, the Executive shall become vested in a reduced number of Phantom Units, which shall be calculated by multiplying the number of Phantom Units awarded under this Award Agreement by a fraction, the numerator of which is the number of calendar days that have elapsed from the Grant Date through the date of such event and the denominator of which is 1095;  provided, however, that if the  Executive dies or becomes Disabled while engaged in Board Service that commenced immediately following Retirement, then the numerator of such fraction shall be increased by the number of calendar days that have elapsed from the date immediately after Retirement to the date that he ceases to perform Board Service as a result of death or Disability.  Any Phantom Units in excess of such number shall remain unvested and shall be forfeited as of the date of such event.

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(c)           Notwithstanding any provision in this Award Agreement to the contrary, the Executive shall become fully vested in all outstanding Phantom Units granted under this Award Agreement upon the occurrence of a Change of Control or an IPO of NAG.

(d)           Upon the exercise of a put option with regard to all or some of the Units that the Participant has obtained as set forth in the Equity Purchase Agreement, the Participant shall forfeit an equivalent number of any unvested Phantom Units.

(e)           No vesting requirements shall apply to any dividend equivalents payable in accordance with Section 3(c) of this Award Agreement.

3.             Payment.

(a)           The Company shall pay, or cause the employing Subsidiary or Affiliate to pay, the Executive a lump-sum cash payment upon the Payment Date in an amount equal to the product of  (i) the number of vested Phantom Units multiplied by (ii) the Appraised Unit Value as of the applicable Valuation Date.

(b)           From and after such time as the Company, acting in its sole discretion, decides to permit deferrals under the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan (as effective April 1, 2008) (the “LTIP”), the Executive may likewise elect to defer the receipt of any payment to which he is entitled under the terms of this Agreement;  provided, however, that no such Deferral shall be valid unless and until the Company receives a completed valid Deferral Election on or before December 31, 2008.  Notwithstanding the foregoing, both the Company and the Executive affirm and agree that the Executive is not and at no time has been a participant in the LTIP.

(c)           The Executive shall be entitled to receive a payment that is equivalent to the dividend payable on a particular date for a NAG Unit, multiplied by the number of Phantom Units granted to him pursuant to this Award.  The payment of such dividend equivalents shall occur on the same date as the payment of dividends on NAG Units.  The Executive may not defer the receipt of such dividend equivalents.

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4.             Tax Compliance Issues.

(a)           This Award Agreement shall be interpreted and operated in a manner consistent with Section 409A of the Code, so as to avoid adverse tax consequences in connection with this Award of Phantom Units.

(b)           Notwithstanding the foregoing or any other provision of this Award Agreement to the contrary, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Award Agreement or otherwise would be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then the amount of “parachute payments” (as defined in Section 280G of the Code) payable or required to be provided to Executive shall be automatically reduced (a “Reduction”) to the minimum extent necessary to avoid imposition of such Excise Tax if, and only if, by reason of the Reduction, the net after-tax benefit shall exceed the net after-tax benefit if the Reduction were not made.  “Net after-tax benefit” for these purposes shall mean the sum of (i) the total amount payable to Executive under this Agreement, plus (ii) all other payments and benefits which Executive receives or is then entitled to receive from the Company, a Subsidiary or an Affiliate that, alone or in combination with the payments and benefits payable under this Agreement, would constitute a “parachute payment” within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Executive (based upon the rate in effect for such year as set forth in the Code at the time of the payment under this Award Agreement), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code.

5.             Withholding.

The Company has the right to deduct applicable taxes from any Phantom Unit Award payment, withhold an appropriate amount of cash for payment of taxes required by law at delivery or when cash vesting occurs under this Award Agreement, or to take other action that, in the Company’s opinion, is necessary to satisfy all tax withholding obligations.

6.             Successors and Assigns.

This Phantom Unit Award shall bind and inure to the benefit of and be enforceable by the Executive, the Company and their respective successors and assigns (including personal representatives, heirs and legatees), but the Executive may not assign any rights or obligations under this Award Agreement except to the extent and in the manner expressly permitted herein.

7.             Shareholder Rights.

This Award Agreement shall not confer any rights upon the Executive as a unitholder of NAG or Management LLC or any right to receive NAG Units or any other form of equity interest in NAG, or any equity interest in Management LLC.

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8.             No Right to Employment.

No provision of this Award Agreement shall confer any right to continued employment with the Company, a Subsidiary or an Affiliate to any employment with Management LLC, NAG or any other entity.

9.             Arbitration of Disagreements.

Any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted by the American Arbitration Association (the “AAA”) in the State of Delaware.  The arbitrator shall be selected by mutual agreement of the parties, if possible.  If the parties fail to reach agreement upon appointment of an arbitrator within 30 days after one party receives the other party’s notice of desire to arbitrate, the arbitrator shall be selected from a panel or panels submitted by the AAA.  The selection process to be used is set forth in the rules of the AAA, but if the parties fail to select an arbitrator from one or more panels, AAA shall not have the power to appoint an arbitrator but shall continue to submit additional panels until an arbitrator has been selected.  All fees and expenses of the arbitration, including a transcript if requested, will be borne by the parties equally.

10.             Governing Law.

This Award Agreement shall be governed by, and construed and enforced according to, the laws of the State of Delaware.

	LYONDELLBASELL INDUSTRIES AF S.C.A.
April 1, 2008	By:	/s/  C. Bart de Jong
Date		C. Bart de Jong
		Senior Vice President, Human Resources
April 1, 2008		/s/   Morris Gelb
Date	Executive

 -9-

EX-10.25(A)

LYONDELLBASELL INDUSTRIES AF S.C.A.

PHANTOM UNIT AWARD AGREEMENT

AMENDMENT

WHEREAS, pursuant to that certain Phantom Unit Award Agreement (the “Agreement”) between LyondellBasell Industries AF S.C.A., a Luxembourg company (the “Company”) and  Morris Gelb (the “Executive”) effective as of April 1, 2008, the Company granted and Executive accepted an award of Phantom Units (the “Award”);  and

WHEREAS, the Company and the Executive now desire to amend the Agreement to provide that Executive’s Award shall be subject to the terms and conditions of the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan, as established effective as of April 1, 2008 (the “LTIP”);

NOW, THEREFORE, effective as of September 23, 2008, the Company and the Executive agree to amend the Agreement as follows:

1. The last sentence of Section 3(b) is deleted and replaced with the following sentence:

“The Company and the Executive affirm and agree that the Executive is a participant in the LTIP and that the Award and this Award Agreement are subject to the terms and conditions of the LTIP; provided, however, that in the event of any conflict between the LTIP and the express terms of this Award Agreement, the terms of this Award Agreement shall be controlling.”

2. Section 3 is further amended by including a new subsection (d), as follows:

“Notwithstanding any provision of this Agreement to the contrary, if upon the Executive’s termination of employment during the term of this Agreement, the Executive is providing services to “a corporation any stock in which is publicly traded on an established securities market or otherwise” within the meaning of Section 409A(2)(B)(i) of the Code, then this Section 4(d) shall apply.  If the Executive is identified by the Plan Administrator as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which he has a separation from service (other than due to death) within the meaning of Section 1.409A-1(h) of the Treasury Regulations, then any payment to which he may become entitled in satisfaction of his vested Phantom Units under the terms of this Plan shall not take place prior to the earlier of (i) the first business day following the expiration of six months from the date of such separation from service, (ii) the date of Executive’s death or (iii) such other date as complies with the requirements of Section 409A of the Code.

IN WITNESS WHEREOF, the Company and the Executive have executed and delivered this Agreement this 20th day of October, 2008.

LYONDELLBASELL INDUSTRIES, AF S.C.A.

     /s/   C. Bart de Jong

C. Bart De Jong

Senior Vice President, Human Resources

     /s/   Morris Gelb

Morris Gelb

EX-10.26

LYONDELLBASELL INDUSTRIES AF S.C.A.

MID-TERM INCENTIVE PLAN

(As Established Effective April 1, 2008)

1.             Objectives.

LyondellBasell Industries AF S.C.A., a Luxembourg company (the “Company”), hereby establishes the LyondellBasell Industries AF S.C.A. Mid-Term Incentive Plan (the “Plan”) for the purposes of:

(a) Focusing Participants on key measures of Company financial performance;

(b) Providing significant award potential commensurate with Company financial performance;

(c) Encouraging a forward management perspective and reward for sustained future performance;

(d) Enhancing the ability of the Company and its Subsidiaries and Affiliates to attract and retain highly talented and competent individuals; and

(e) Reinforcing a team orientation among top management.

2.             Definitions.

As used herein, the terms set forth below shall have the following respective meanings:

“Affiliate” means, with respect to any Person or entity, any other Person or entity that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with such Person or entity.  “Control” means the power to direct the management and policies of a Person or entity, affirmatively (by direction) and negatively (by veto), directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Award” means an award payable in cash that is paid, vested or otherwise deliverable solely based on achieving one or more Financial Measures.

“Award Agreement” means an agreement in the form prescribed by the Plan Administrator that sets forth the terms, conditions and limitations applicable to an Award.

 “Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

“Company” means LyondellBasell Industries AF S.C.A.

“Delegate” shall have the meaning ascribed to such term in Section 3(a).

“Employee” means an individual employed by the Company, or any of its  Subsidiaries or Affiliates.

“Grant Date” means the date the Company grants an Award.

“Indemnified Person” shall have the meaning ascribed to such term in Section 3(b).

“Participant” means an Employee to whom an Award has been granted under this Plan, or a former Employee who still holds an outstanding Award.

“Performance Cycle” means the period beginning on January 1 of the year in which the Grant Date occurs and ending on December 31 of the third calendar year (including the year of the Grant) after the Grant Date, or such other period as determined by the Company and specified in the Grant Letter.

“Plan” means the LyondellBasell Industries AF S.C.A. Mid-Term Incentive Plan, as amended from time to time.

“Plan Administrator” means the Company or its Delegate, as set forth in Section 3(a).

“Subsidiary” means with respect to any Person, (a) a corporation a majority of the voting Equity Interests of which are at the time, directly or indirectly, owned by such Person; or (b) any other Person (other than a corporation), including, a partnership, limited liability company, business trust or joint venture, in which such Person, at the time thereof, directly or indirectly, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions).

3.             Plan Administration and Designation of Participants.

(a)           Administration.  The Plan Administrator of this Plan shall be the Company, which shall have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or appropriate.  The Company may delegate its duties hereunder as Plan Administrator to the Chief Executive Officer or other senior officers of the Company (a “Delegate”), subject to such rules and regulations as the Company establishes.  The Plan Administrator may, in its discretion, retain the services of an outside administrator for the purpose of performing any of its functions hereunder.  The Plan Administrator may, in its discretion, eliminate or make less restrictive any restrictions contained in an Award Agreement, waive any restriction or other provision of this Plan or an Award Agreement, or otherwise amend or modify an Award in any manner that is either (i) not adverse to the Participant who holds the Award or (ii) consented to by such Participant.  The Company may grant an Award to an individual whom it expects to become an Employee of the Company or any Subsidiary or Affiliate within the following six months, with the Award subject to the individual’s actually becoming an Employee within that time, and subject to other terms and conditions the Company establishes.  The Plan Administrator may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award Agreement in the manner and to the extent the Plan Administrator deems necessary or desirable to further the Plan purposes.  Any decision of the Plan Administrator in the interpretation and administration of this Plan shall lie within its sole and absolute discretion, and shall be final, conclusive and binding on all parties concerned.

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(b)           Indemnification.  No Delegate (an “Indemnified Person”) shall be liable in any manner whatsoever in connection with the administration, construction or interpretation of this Plan, except arising out of such person’s willful misconduct or as expressly provided by statute.  Under no circumstances shall an Indemnified Person be liable for the acts of another Indemnified Person.  In the performance of its duties, an Indemnified Person shall be entitled to rely upon the information and advice furnished by the Company’s counsel, tax advisors and any other person whose information or advice the Company deems necessary or advisable, and no Indemnified Person shall be liable for any action taken or not taken in reliance upon any such advice.  The Company shall indemnify each Indemnified Person for any loss or damages that it, he or she incurs in connection with, or arising out of, this Plan, except for any loss or damages that result from such Indemnified Person’s willful misconduct or as expressly provided by statute.

4.             Award Agreement.

Each Award granted hereunder shall be described in a Grant Letter and an Award Agreement, which shall be subject to the terms and conditions of the Plan.

5.             Financial Measures and Award Calculation.

(a)           Within 90 days after the beginning of the calendar year, the Company will establish one or more objective performance goals for the Financial Measures for each calendar year within a Performance Cycle, including an objective methodology to determine the MTI Funding Ratio that corresponds with the attained performance goals.  The Company will certify the MTI Funding Ratio reached for a calendar year within 60 days after that calendar year ends.

(b)           Eligible employees’ Awards for Performance Cycle will be calculated by multiplying each eligible employee’s Target Award Amount for the Performance Cycle by the MTI Funding Ratio for the Performance Cycle.

(c)           The Target Award Amount for an eligible employee for a Performance Cycle shall be stated in the Grant Letter.

6.             Payment of Awards.

Payment of Awards shall be made in the form of a lump-sum cash payment at the time specified in the Award Agreement.

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7.             Termination of Employment.

The terms of the Award Agreement shall govern the treatment of any unpaid Awards payable to the Participant upon the termination of employment.  Termination of employment is governed by the laws of employment of the country in which the Participant is employed.  Notwithstanding anything contained herein to the contrary, no Participant who is a U.S. taxpayer shall be considered to have terminated employment for purposes of the Plan and the Award Agreement unless the Participant would be considered to have incurred a “separation from service” within the meaning of Section 409A of the Code.

8.             Assignability.

The Participant’s rights under the Plan and any Award Agreement are personal.  No assignment or transfer of the Participant’s rights under and interest in an Award Agreement may be made by the Participant other than by will or the laws of descent and distribution.Any attempted assignment or transfer in violation of this Section 8 shall be null and void.

9.             Adjustments.

(a)           The existence of outstanding Awards shall not affect in any manner the right or power of the Company to make or authorize any or all adjustments, recapitalization, reorganizations or other changes in the ownership of the Company or its business or any Company merger or consolidation, or any issue of bonds, debentures or other obligations, or the Company’s dissolution or liquidation, or any sale or transfer of all or any part of its assets or business, or any other Company act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.

(b)           If the Company’s ownership structure changes, or a merger, consolidation or similar corporate transaction involving the Company or an Affiliate occurs, or there is a sale of a substantial portion of the Company’s or an Affiliate’s assets, or any other event occurs that the Company determines justifies an adjustment, the Company may adjust outstanding Awards as it deems necessary and appropriate in its sole discretion.  Adjustments include, but are not limited to, issuing additional or substitute Awards or adjusting Financial Measures and targets associated with Awards, except where limited by Section 409A of the Code and related regulations and Treasury pronouncements.

10.           Tax Withholding.

The Company shall have the right to deduct applicable taxes from any Award payment and withhold an appropriate amount of cash for payment of taxes required by law, or to take such other action as, in the opinion of the Company, may be necessary to satisfy all obligations for withholding of such taxes.

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11.            Amendments or Termination.

The Company may amend, alter or terminate this Plan, except that no amendment, alteration or termination shall impair the rights of any Participant under any Award Agreement in effect at the time of such amendment, alteration or termination without the written consent of such Participant.

12.            Unfunded Plan.

This Plan shall be unfunded.  Any bookkeeping accounts established with respect to a Participant’s Award shall be used merely as a convenience.  Neither the Company, a Subsidiary nor an Affiliate shall be required to segregate any assets for the purpose of providing benefits hereunder, nor shall this Plan be construed as providing for such segregation.  Furthermore, neither the Company, the Supervisory Board of the Company, the Plan Administrator, a Subsidiary nor an Affiliate shall be deemed to be a trustee of any cash or rights determined with respect thereto under this Plan.  Any liability or obligation of the Company to any Participant with respect to an Award under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company or any Subsidiary or Affiliate shall be deemed to be secured by any pledge or other encumbrance on any property of the Company or such Subsidiary.  Neither the Company, the Supervisory Board of the Company, the Plan Administrator, a Subsidiary nor an Affiliate shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.

13.            No Right to Employment or Future Awards.

The granting of an Award under the terms of this Plan shall not impose upon the Company, a Subsidiary or an Affiliate any obligation to maintain any Participant as an Employee, and shall not diminish the power of the Company, a Subsidiary or an Affiliate to discharge any Participant at any time.Nor shall the granting of an Award under the terms of this Plan confer any right to any future Award.

14.            Offsets for Certain Other Incentive Payments.

The Company reserves the right to offset from payment of any Award any amount paid or owed to an eligible employee through an incentive program, scheme, arrangement, or other plan required by law, regulation, custom, contract or agreement, other than payments made under the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan or the annual short-term incentive program for employees of the Company and its Subsidiaries or Affiliates.

15.            Code Section 409A Compliance Provisions for Participants who are U.S. Taxpayers.

For Participants who are U.S. taxpayers, the Company intends that any amounts payable under the Plan must satisfy the requirements of Section 409A of the Code in order to avoid imposition of applicable taxes thereunder.  Thus, notwithstanding anything in this Plan to the contrary, if any Plan provision or amount under the Plan would result in the imposition of an applicable tax under Section 409A of the Code and related regulations and Treasury pronouncements, that Plan provision or amount may be reformed to avoid imposition of the applicable tax, and no action taken to comply with Section 409A shall be deemed to adversely affect the rights of any Participant.  Notwithstanding the foregoing, neither the Company nor the Plan Administrator shall have any obligation to take any action under this Section 15 that would impose any expenses upon or increase any costs to the Company.

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16.           Special Provisions for Certain Participants.

(a)           Exchange Rates.        For Participants who are not paid on a U.S. Dollar payroll, the currency exchange rate for calculating a Target Award Amount shall be determined as of the Grant Date.  The currency exchange rate for calculating the amount to be paid with respect to an Award shall be determined as of the date the MTI Funding Ratio for the applicable Performance Cycle is approved by the Plan Administrator.

(b)           Tax Compliance.         For Participants who are not U.S. taxpayers, Award payments are subject to compliance with the tax laws of the applicable jurisdictions.

17.           Tax Normalization for Expatriates.

Grants of Awards and payments of Awards made to expatriate Employees will be, pursuant to the Company’s Expatriate Assignment Policy, tax normalized based on typical income taxes and social security taxes in the expatriate Employee’s home country relevant to the expatriate Employee’s domestic circumstances.

18.           Construction.

Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.  Words in the masculine gender shall include the feminine gender, the plural shall include the singular, and the singular shall include the plural.

19.           Arbitration of Disagreements.

(a)           For Participants Paid on a U.S. Dollar Payroll:       For Participants paid on a U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted by the American Arbitration Association (the “AAA”) in the State of Delaware.  The arbitrator shall be selected by mutual agreement of the parties, if possible.  If the parties fail to reach agreement upon appointment of an arbitrator within 30 days after one party receives the other party’s notice of desire to arbitrate, the arbitrator shall be selected from a panel or panels submitted by the AAA.  The selection process to be used is set forth in the rules of the AAA, but if the parties fail to select an arbitrator from one or more panels, AAA shall not have the power to appoint an arbitrator but shall continue to submit additional panels until an arbitrator has been selected.  All fees and expenses of the arbitration, including a transcript if requested, will be borne by the parties equally.

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(b)           For Participants Paid other than on a U.S. Dollar Payroll:For Participants paid other than on a U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted according to the laws of the Grand Duchy of Luxembourg.

20.           Governing Law.

(a)           For Participants Paid on a U.S. Dollar Payroll:      For Participants paid on a U.S. Dollar payroll, this Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by, and construed and enforced according to, the laws of the State of Delaware.

(b)           For Participants Paid other than on a U.S. Dollar Payroll:For Participants paid other than on a U.S. Dollar payroll, this Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the tax or securities laws of the applicable jurisdiction, shall be governed by, and construed and enforced according to, the laws of the Grand Duchy of Luxembourg.

LYONDELLBASELL INDUSTRIES AF S.C.A.
By:	/s/   C. Bart de Jong
	C. Bart de Jong
	Senior Vice President, Human Resources

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EX-10.27

LYONDELLBASELL INDUSTRIES AF S.C.A.

MID-TERM INCENTIVE PLAN

AWARD AGREEMENT

By letter (the “Grant Letter”), LyondellBasell Industries AF S.C.A., a Luxembourg company (the “Company”), has granted to the recipient of the Grant Letter (the “Participant”) an award under the LyondellBasell Industries AF S.C.A. Mid-Term Incentive Plan (the “Plan”), effective on the date specified in the Grant Letter (“Grant Date”).

This Award is subject to the terms and conditions of the Plan, this Award Agreement, and the Grant Letter.

1.           Relationship to the Plan.

This Award is subject to all of the terms and conditions of the Plan and to such administrative requirements or interpretations as the Plan Administrator, acting in its sole discretion, may adopt.

2.           Definitions.

Except as defined in this Award Agreement, capitalized terms have the meanings ascribed to them in the Plan, and, if not defined therein, the Grant Letter.

“Affiliate” means, with respect to any Person or entity, any other Person or entity that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with such Person or entity.  “Control” means the power to direct the management and policies of a Person or entity, affirmatively (by direction) and negatively (by veto), directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Award” means the cash award granted to a Participant pursuant to this Award Agreement.

“Award Agreement” means this agreement which, together with the Plan, sets forth the terms, conditions and limitations applicable to this Award.

“Beneficiary” means (i) the Participant’s designated beneficiary under the Company’s or Affiliate’s group life insurance plan in which the Participant is eligible to participate, (ii) if there is no group life insurance designation, the Participant’s surviving spouse, or (iii) if there is no surviving spouse, the personal representative of the Participant’s estate.

“Code” means the Internal Revenue Code of 1986, as amended.

“Disability” means a permanent and total disability, as defined in the applicable long-term disability plan or policy of the Company or its Subsidiaries.

“Employment” means employment as an employee of the Company or any of its Subsidiaries or Affiliates.  Neither the Participant’s transfer from employment by the Company to employment by any Subsidiary or Affiliate, the Participant’s transfer from employment by any Subsidiary or Affiliate to Company employment, nor the Participant’s transfer between Subsidiaries and/or Affiliates shall be deemed to be a termination of Participant’s employment.  Moreover, a Participant’s employment shall not be deemed to terminate because the Participant is absent from active employment due to temporary illness, during authorized vacation, during temporary leaves of absence granted by the Company or the employing Subsidiary or Affiliate for professional advancement, education, health or government service, during military leave for any period if the Participant returns to active employment within 90 days after military leave terminates, or during any period required to be treated as a leave of absence by any valid law or agreement.  Termination of employment is governed by the laws of employment of the country in which the Participant is employed.  Notwithstanding anything contained herein to the contrary, no Participant who is a U.S. taxpayer shall be considered to have terminated employment for purposes of the Plan and the Award Agreement unless the Participant would be considered to have incurred a “separation from service” within the meaning of Section 409A of the Code.

“EBITDA” means the Company’s earnings for a calendar year before interest, taxes depreciation and amortization, as calculated under the formula in Schedule A.

“Financial Measures” means EBITDA and other objective measures of the Company’s financial and operational performance used by the Company to evaluate the Company’s performance over the Performance Cycle.  The Company may use any performance measures as Financial Measures.  The specific performance measures used by the Company are set forth in Schedule A.

“MTI Funding Ratio” means the amount available for Awards determined as set forth on Schedule A.

“Payment Date” means the date when an Award is paid or delivered to the Participant.  The Payment date for any Award shall be no later than March 15 of the calendar year following the end of the Performance Cycle, except than an Award to a non-US eligible employee may be paid as soon as administratively feasible after March 15.

“Performance Cycle” means the period beginning on January 1 of the year in which the Grant Date occurs and ending on December 31 of the third calendar year (including the year of the Grant) after the Grant Date, or such other period as determined by the Company and specified in the Grant Letter.

“Plan Administrator” means the Company or its Delegate (as such term is defined in the Plan).

“Retirement” means the Participant’s voluntary termination of Employment on or after the earliest of (a) age 65, (b) age 55 with 10 years of participation service credited under a qualified defined benefit pension plan that is maintained by the Company, a Subsidiary or an Affiliate and in which the Participant is eligible to participate, or (c) with regard to a Participant whose primary place of employment with the Company, a Subsidiary or an Affiliate is now or has ever been outside the United States, whenever retirement is permitted under applicable law and the Participant is eligible to receive a retirement benefit.  The Plan Administrator shall have the authority, in its sole discretion, to determine the location of the Participant’s primary place of employment and the applicable law.

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“Subsidiary” means with respect to any Person, (a) a corporation a majority of the voting Equity Interests of which are at the time, directly or indirectly, owned by such Person; or (b) any other Person (other than a corporation), including, a partnership, limited liability company, business trust or joint venture, in which such Person, at the time thereof, directly or indirectly, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Person performing similar functions).

“Target Award Amount” means the amount stated in the Grant Letter.

3.             Conditions Applicable to Awards.

(a)           For each Award, the Grant Letter shall specify the Target Award Amount, the Performance Cycle and the Grant Date.

(b)           The Award shall be forfeited if the Participant is not employed, or has terminated Employment for any reason other than death, Disability or Retirement, before payment of the Award is approved by the Plan Administrator.

(i)           If the Participant’s Employment ends due to death, Disability or Retirement before the Performance Cycle ends, the Participant’s Award will be pro-rated based on the number of days the Participant was an employee during the Performance Cycle. The Participant, or his Beneficiary, will be eligible for the pro-rated amount of the award for that Performance Cycle.

(ii)           If the Participant’s Employment ends due to death, Disability or Retirement after the end of the Performance Cycle but before payment of the Award is approved by the Plan Administrator, the Participant or his Beneficiary will be eligible for the full amount of the Award for that Performance Cycle.

(c)           Notwithstanding the foregoing or any other provision of this Award Agreement to the contrary, the Company, in its sole discretion, may permit continued participation, proration or early distribution for Awards that would otherwise be forfeited, unless an individual is a “covered employee” under Section 162(m)(3) of the Code.

4.             Calculation and Payment of Awards.

(a)           Eligible Employee’s Awards will be calculated by multiplying the eligible employee’s Target Award Amount by the MTI Funding Ratio determined at the end of the Performance Cycle.

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(b)           The Company will certify the amount of the MTI Funding Ratio within 60 days after the end of the Performance Cycle.

(c)           An Award will be paid in cash on the Payment Date.

5.             Tax Compliance Issues for Participants who are U.S. Taxpayers.

For Participants who are U.S. Taxpayers:

(a)           This Award Agreement shall be interpreted and operated in a manner consistent with Section 409A of the Code, so as to avoid adverse tax consequences in connection with this Award.

(b)           Notwithstanding the foregoing or any other provision of this Award Agreement to the contrary, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of Participant, whether paid or payable or distributed or distributable pursuant to the terms of this Award Agreement or otherwise would be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then the amount of “parachute payments” (as defined in Section 280G of the Code) payable or required to be provided to Participant shall be automatically reduced (a “Reduction”) to the minimum extent necessary to avoid imposition of such Excise Tax if, and only if, by reason of the Reduction, the net after-tax benefit shall exceed the net after-tax benefit if the Reduction were not made.  “Net after-tax benefit” for these purposes shall mean the sum of (i) the total amount payable to Participant under this Agreement, plus (ii) all other payments and benefits which Participant receives or is then entitled to receive from the Company, a Subsidiary or an Affiliate that, alone or in combination with the payments and benefits payable under this Agreement, would constitute a “parachute payment” within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Participant (based upon the rate in effect for such year as set forth in the Code at the time of the payment under this Award Agreement), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code.

6.             Tax Compliance Issues for Participants who are not U.S. Taxpayers.

For Participants who are not U.S. taxpayers, Award payments are subject to compliance with the tax laws of the applicable jurisdictions.

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7.             Withholding.

The Company has the right to deduct applicable taxes from any Award payment, withhold an appropriate amount of cash for payment of taxes required by law at delivery, or to take other action that, in the Company’s opinion, is necessary to satisfy all tax withholding obligations.

8.              Offsets for Certain Other Incentive Payments.

The Company reserves the right to offset from payment of any Award any amount paid or owed to an eligible employee through an incentive program, scheme, arrangement, or other plan requiredby law, regulation, custom, contract oragreement, other than payments made under the LyondellBasell Industries AF S.C.A. Long-Term Incentive Plan or the annual short-term incentive program for employees of the Company and its Subsidiaries or Affiliates.

9.             Successors and Assigns.

This Award shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective successors and assigns (including personal representatives, heirs and legatees), but the Participant may not assign any rights or obligations under this Award Agreement except to the extent and in the manner expressly permitted by the Plan.

10.            No Right to Employment or Future Awards.

No provision of this Award Agreement shall confer any right to continued employment with the Company or a Subsidiary or an Affiliate.  Furthermore, no provision of this Award Agreement shall confer any right to any future Awards.

11.            Arbitration of Disagreements.

(a)           For Participants Paid on a U.S. Dollar Payroll:      For Participants paid on a U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted by the American Arbitration Association (the “AAA”) in the State of Delaware.  The arbitrator shall be selected by mutual agreement of the parties, if possible.  If the parties fail to reach agreement upon appointment of an arbitrator within 30 days after one party receives the other party’s notice of desire to arbitrate, the arbitrator shall be selected from a panel or panels submitted by the AAA.  The selection process to be used is set forth in the rules of the AAA, but if the parties fail to select an arbitrator from one or more panels, AAA shall not have the power to appoint an arbitrator but shall continue to submit additional panels until an arbitrator has been selected.  All fees and expenses of the arbitration, including a transcript if requested, will be borne by the parties equally.

(b)           For Participants Paid other than on a U.S. Dollar Payroll:      For Participants paid other than on a U.S. Dollar payroll, any dispute, controversy or claim arising out of or relating to this Award Agreement shall be settled by final and binding arbitration conducted according to the laws of the Grand Duchy of Luxembourg.

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12.            Governing Law.

(a)           For Participants Paid on a U.S. Dollar Payroll:       For Participants paid on a U.S. Dollar payroll, this Award Agreement shall be governed by, and construed and enforced according to, the laws of the State of Delaware.

(b)           For Participants Paid other than on a U.S. Dollar Payroll:For Participants paid other than on a U.S. Dollar payroll, this Award Agreement shall be governed by, and construed and enforced according to, the laws of the Grand Duchy of Luxembourg.

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LYONDELLBASELL INDUSTRIES AF S.C.A.

MID-TERM INCENTIVE PLAN

AWARD AGREEMENT

2008-2010 AWARD

SCHEDULE A – MTI FUNDING FOR 2011 PAYOUT

MTI Funding Percentages

The MTI Funding Percentages are determined according to EBITDA performance with threshold funding starting at $3.5B annually over a three-year Performance Cycle as follows:

EBITDA	Below $10.5B	$10.5B	$10.65B	$10.8B	$10.95B	$11.1B	$11.25B	Over $11.25B
MTI Funding Percentage	0%	0.167%	0.200%	0.233%	0.267%	0.300%	0.333%	0.333%

MTI funding percentages shall be interpolated between the values listed in the chart above.

MTI Pool

Budgeted Pool  = Budgeted EBITDA for the Performance Cycle x .333%

= ($5.3B + $4.8B + $4.5B) x .333% = $48.67MM

Actual Pool = Actual EBITDA for the Performance Cycle x MTI Funding Percentage

“Budgeted EBITDA” means the amount of assumed EBITDA budgeted for the Performance Cycle to calculate individual Target Award Amounts.

MTI Funding Ratios

MTI Funding Ratios for each Performance Cycle shall be determined according to the following formula:

Funding Ratio = Actual Pool

Budgeted Pool

Award Calculation

The actual Award for each Performance Cycle shall be determined according to the following formula:

Award = Funding Ratio for the Performance Cycle x Target Award Amount

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EBITDA

EBITDA is an abbreviation for "Earnings Before Interest, Taxes, Depreciation and Amortization." It is calculated by taking all profits, operating and non-operating, before deducting interest, income taxes, depreciation, amortization, and asset impairment, but including cash dividends received from Associates. The intent of EBITDA is to analyze a company's operating profitability before such non-operating expenses as interest and taxes and non-cash charges (depreciation and amortization and asset impairment). It also represents a measure of the Company’s success in operating the existing assets for the Plan year.

EBITDA is calculated as follows:

	Net Income
Add	Total Interest Expense and Accounts Receivable Securitization Interest and Fees
Deduct	Total Interest Income
Add	Provision For Taxes
Add	Depreciation-Total
Add	Amortization-Total
Add	Asset Impairment
Add	Other non-cash unusual items including inventory fair value revaluation step up impacts due to an acquisition
Add	Cash dividends received from Associates

The target EBITDA for MTI purposes is set at the beginning of the effective performance cycle and typically represents as a target the EBITDA forecast of the current year LRP (long range plan).

If extraordinary events occur during the calendar year which alters the basis upon which the EBITDA is calculated, the effect of these events, with the Company’s approval, may be removed from or added to EBITDA.  Events warranting this action may include, but are not limited to, major acquisitions, divestitures, or recapitalization.

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LYONDELLBASELL INDUSTRIES AF S.C.A.

MID-TERM INCENTIVE PLAN

AWARD AGREEMENT

2008-2009 AWARD

SCHEDULE A-1 – MTI FUNDING FOR 2009 PAYOUT

MTI Funding Percentages

The MTI Funding Percentages are determined according to EBITDA performance with threshold funding starting at $3.5B for the one-year Performance Cycle as follows:

EBITDA	Below $3.5B	$3.5B	$3.55B	$3.6B	$3.65B	$3.7B	$3.75B	Over $3.75B
MTI Funding Percentage	0%	0.167%	0.200%	0.233%	0.267%	0.300%	0.333%	0.333%

MTI funding percentages shall be interpolated between the values listed in the chart above.

MTI Pool

Budgeted Pool = ((2008 Budgeted EBITDA x 2) + 2009 Budgeted EBITDA) x MTI Funding Percentage

                           = ($5.3B + $5.3B + $4.8B) x .333% = $51.33MM

Actual Pool = Actual EBITDA for 2008 x MTI Funding Percentage (from above chart)

“Budgeted EBITDA” means the amount of assumed EBITDA budgeted for the one-year Performance Cycle to calculate individual Target Award Amounts.

MTI Funding Ratios

MTI Funding Ratios for each Performance Cycle shall be determined according to the following formula:

Funding Ratio = Actual Pool

   Budgeted Pool

Award Calculation

The actual Award for each Performance Cycle shall be determined according to the following formula:

Award   = Funding Ratio for the Performance Cycle x Target Award Amount

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LYONDELLBASELL INDUSTRIES AF S.C.A.

MID-TERM INCENTIVE PLAN

AWARD AGREEMENT

2008-2009 AWARD

SCHEDULE A-2 – 2010 PAYOUT

MTI Funding Percentages

The MTI Funding Percentages are determined according to EBITDA performance with threshold funding starting at $3.5B annually over a three-year Performance Cycle as follows:

EBITDA	Below $10.5B	$10.5B	$10.65B	$10.8B	$10.95B	$11.1B	$11.25B	Over $11.25B
MTI Funding Percentage	0%	0.167%	0.200%	0.233%	0.267%	0.300%	0.333%	0.333%

MTI funding percentages shall be interpolated between the values listed in the chart above.

MTI Pool

Budgeted Pool = ((2008 Budgeted EBITDA x 2) + 2009 Budgeted EBITDA) x MTI Funding Percentage

                           = ($5.3B + $5.3B + $4.8B) x .333% = $51.33MM

Actual Pool = ((2008 Actual EBITDA x 2) + 2009 Actual EBITDA) x MTI Funding Percentage

“Budgeted EBITDA” means the amount of assumed EBITDA budgeted for the Performance Cycle to calculate individual Target Award Amounts.

MTI Funding Ratios

MTI Funding Ratios for each Performance Cycle shall be determined according to the following formula:

Funding Ratio = Actual Pool

   Budgeted Pool

Award Calculation

The actual Award for each Performance Cycle shall be determined according to the following formula:

Award = (Funding Ratio for the Performance Cycle x Target Award Amount) Less 2009 Payout

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Morris Gelb, President and Chief Executive Officer of Lyondell Chemical Company, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Lyondell Chemical Company;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 13, 2008	/s/   Morris Gelb
	Morris Gelb
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Alan Bigman, Chief Financial Officer of Lyondell Chemical Company, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Lyondell Chemical Company;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 13, 2008	/s/ Alan Bigman
	Alan Bigman
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

In connection with the accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (the “Periodic Report”), I, Morris Gelb, President and Chief Executive Officer of Lyondell Chemical Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d)); and

(2)   the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Lyondell Chemical Company.

Date:  November 13, 2008	/s/  Morris Gelb
	Morris Gelb
	President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Lyondell Chemical Company and will be retained by Lyondell Chemical Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

In connection with the accompanying Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (the “Periodic Report”), I, Alan Bigman, Chief Financial Officer of Lyondell Chemical Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d)); and

(2)   the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Lyondell Chemical Company.

Date:  November 13, 2008	/s/ Alan Bigman
	Alan Bigman
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Lyondell Chemical Company and will be retained by Lyondell Chemical Company and furnished to the Securities and Exchange Commission or its staff upon request.