Note 78. Trade Receivables Securitization

Note 89. Contingent Liabilities

SIGNATURE

Filing Compare · CHEVRON PHILLIPS CHEMICAL CO LLC

Income before interest and taxes for Aromatics & Styrenics totaled $106 million in the first six months of 2005 compared with $62 million in the prior-year period. Earnings improved across most product lines from higher margins. Revenues increased as a result of significantly higher sales prices, partially offset by slightly lower volumes. Overall feedstock costs increased primarily due to higher benzene and benzene feedstock prices.Other

Income beforeCAUTIONARY interestSTATEMENTS andREGARDING taxes for Specialty Products totaled $8 million in the second quarter of 2005 compared with $19 million in the second quarter in 2004, and $23 million in the first half of 2005 compared with $34 million in the same period in 2004. Earnings in the 2005 periods presented include a $4 million charge resulting from the adjustment of the economic life of certain leasehold improvements at a thirdFORWARD-partyLOOKING tolling facility.INFORMATION

Other

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~THE~~For ~~SECURITIES~~the ~~EXCHANGE~~quarterly ~~ACT~~period ~~OF 1934~~ended March 31, 2006

~~For~~o TRANSITION ~~the~~REPORT ~~quarterly~~PURSUANT ~~period~~TO ~~ended~~SECTION ~~June 30,~~13 ~~2005~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file no. 333-59054-01

Chevron Phillips Chemical Company LLC

(Exact name of the Registrant as specified in its charter)

Delaware		73-1590261
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

10001 Six Pines Drive

The Woodlands, TX 77380-1498

(Address of principal executive offices, including zip code)

(832) 813-4100

(Registrant’s telephone number, including area code)

NONE

(Former name, former address and former fiscal year if changed since last report)

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 o No ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or ~~(as~~a ~~defined~~non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No ý

Chevron Phillips Chemical Company LLC

Index

			Page
Part I.	Financial Information (Unaudited)
	Item 1.	Financial Statements
		Condensed Consolidated Statement of Operations for the three and six-month periods ended June 30, 2005 and 2004	3
		Condensed Consolidated Statement of Operations for the three months ended March 31, 2006 and 2005	3
		Condensed Consolidated Balance Sheet at June 30, 2005 and December 31, 2004	4
		Condensed Consolidated Balance Sheet at March 31, 2006 and December 31, 2005	4
		Condensed Consolidated Statement of Cash Flows for the six-month periods ended June 30, 2005 and 2004	5
		Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2006 and 2005	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2120
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2523
	Item 4.	Controls and Procedures	2523
Part II.	Other Information
	Item 1.	Legal Proceedings	26
	Item 6.	Exhibits	24
	Item 6.	Exhibits	26
Signature			24
Signature			26

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Chevron Phillips Chemical Company LLC

Condensed Consolidated Statement of Operations

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	Three months ended March 31,
Millions	~~2005~~2006			~~2004~~2005			~~2005~~			~~2004~~
Revenue
Net sales	$	2,~~503~~799		$	2,~~091~~640		$	~~5,161~~		$	~~4,084~~
Equity in income of affiliates, net	3952			4450			89			71
Other income	4070			2126			66			40
Total revenue	2,~~582~~921			2,~~156~~716			~~5,316~~			~~4,195~~
Costs and Expenses
Cost of goods sold	2,~~254~~367			12,~~922~~191			~~4,459~~			~~3,720~~
Selling, general and administrative	~~123~~100			106			~~233~~			~~210~~
Research and development	10			1110			20			21
Total costs and expenses	2,~~387~~477			2,~~039~~307			~~4,712~~			~~3,951~~
Income Before Interest and Taxes	~~195~~444			~~117~~409			~~604~~			~~244~~
Interest income	45			24			8			4
Interest expense	(2018		)	(1920		)	~~(40~~		)	~~(37~~		)
Income Before Taxes	~~179~~431			~~100~~393			~~572~~			~~211~~
Income taxes	(67		)	(34		)	~~(10~~		)	(6		)
Net Income	~~173~~424			97389			~~562~~			~~205~~
Distributions on members’ preferred interests	—			(52		)	(2		)	~~(11~~		)
Income Attributed to Members’ Interests	$	~~173~~424		$	92387		$	~~560~~		$	~~194~~

See Notes to Condensed Consolidated Financial Statements.

Chevron Phillips Chemical Company LLC

Condensed Consolidated Balance Sheet

(Unaudited)

Millions	June 30, 2005		December 31, 2004
	March 31,		December 31,
Millions	2006		2005
ASSETS
Current assets
Cash and cash equivalents	$	3034	$	6340
Accounts receivable, net	1,~~204~~378		1,~~266~~393
Inventories
Finished goods and raw materials	~~733~~756		~~733~~720
Materials, supplies and other	4959		5156
Total inventories	~~782~~815		~~784~~776
Other current assets	3352		4366
Total current assets	2,~~049~~279		2,~~156~~275
Property, plant and equipment, net	3,~~692~~551		3,~~768~~580
Investments in and advances to affiliates	~~948~~1,102		~~893~~1,057
Other assets and deferred charges	4255		5548
Total Assets	$	6,~~731~~987	$	6,~~872~~960
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
Accounts payable	$	~~774~~915	$	~~884~~1,017
Accrued income and other taxes	4745		6064
Secured borrowings and other debt	~~154~~105		~~201~~105
Accrued distributions to members	~~217~~362		39302
Other current liabilities and deferred credits	~~130~~126		~~157~~169
Total current liabilities	1,~~322~~553		1,~~341~~657
Long-term debt	1,~~169~~228		1,~~390~~186
Other liabilities and deferred credits	90106		9187
Total liabilities	2,~~581~~887		2,~~822~~930
Members’ preferred interests	—		75
Members’ capital	4,062		4,000
Members’ capital	4,120		3,925
Accumulated other comprehensive income	38		30
Accumulated other comprehensive income	30		50
Total members’ equity	4,100		4,030
Total members’ equity	4,150		3,975
Total Liabilities and Members’ Equity	$	6,987	$	6,960
Total Liabilities and Members’ Equity	$	6,731	$	6,872

See Notes to Condensed Consolidated Financial Statements.

Chevron Phillips Chemical Company LLC

Condensed Consolidated Statement of Cash Flows

(Unaudited)

	Six months ended June 30,
	Three months ended March 31,
Millions	~~2005~~2006			~~2004~~2005
Cash Flows From Operating Activities
Net income	$	~~562~~424		$	~~205~~389
Adjustments to reconcile net income to net cash flows provided by operating activities
Depreciation, amortization and retirements	~~142~~72			~~139~~69
Undistributed equity in income of affiliates, net	(3452		)	(5950		)
Changes in operating working capital	(89174		)	(34123		)
Other operating cash flow activity	10—			17
Net cash flows provided by operating activities	~~591~~270			~~252~~292
Cash Flows From Investing Activities
Capital and investment expenditures	(7935		)	(9633		)
Investments in and advances to Jubail Chevron Phillips Company	(20		)	(4		)
Advance repayment from Qatar Chemical Company Ltd. (Q-Chem)	15			—
Investment in Qatar Chemical Company Ltd. (Q-Chem)	—			(18		)
Proceeds from the sale of assets	5			—
Advance repayment from Saudi Chevron Phillips Company	9			—
Net cash flows used in investing activities	(15		)	(33		)
Net cash flows used in investing activities	(90		)	(118		)
Cash Flows From Financing Activities
Increase (decrease) in commercial paper, net	~~(221~~41		)	54(125		)
Decrease in secured borrowings, net	(50		)	(100		)
Redemptions of members’ preferred interests	—			(75		)
Increase (decrease) in other debt, net	3			(14		)
Distributions on members’ preferred interests	—			(2		)
Redemptions of members’ preferred interests	(75		)	—
Other distributions to members	(302		)	(64		)
Distributions on members’ preferred interests	(2		)	(39		)
Net cash flows used in financing activities	(261		)	(266		)
Other distributions to members	(189		)	(36		)
Net Decrease in Cash and Cash Equivalents	(6		)	(7		)
Net cash flows used in financing activities	(534		)	(135		)
Cash and Cash Equivalents at Beginning of Period	40			63
Net Decrease in Cash and Cash Equivalents	(33		)	(1		)
Cash and Cash Equivalents at End of Period	$	34		$	56
Cash and Cash Equivalents at Beginning of Period	63			43
Cash and Cash Equivalents at End of Period	$	30		$	42

See Notes to Condensed Consolidated Financial Statements.

Chevron Phillips Chemical Company LLC

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. General Information

The company, through its subsidiaries and equity affiliates, manufactures and markets a wide range of petrochemicals on a worldwide basis, with manufacturing facilities in the United States, Puerto Rico, Singapore, China, South Korea, Saudi Arabia, Qatar, Mexico and Belgium. Chevron Phillips Chemical Company LLC is owned 50% each by Chevron Corporation (“Chevron~~,” formerly ChevronTexaco Corporation~~) and ConocoPhillips (collectively, the “members”).

The accompanying unaudited condensed consolidated financial statements include the accounts of Chevron Phillips Chemical Company LLC and its wholly owned subsidiaries (collectively, “CPChem”), and should be read in conjunction with the consolidated financial statements included in CPChem’s Annual Report on Form 10-K for the year ended December 31, ~~2004~~ 2005. The financial statements and ~~accompanying~~ accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations have been prepared in conformity with the rules ~~and~~ ~~regulations~~and regulations of the Securities and Exchange Commission (the “SEC”). ~~Some~~ Some information and footnote disclosures required by generally accepted accounting principles have been condensed or omitted pursuant to such rules ~~and~~ and regulations. The financial statements include all normal recurring adjustments that CPChem considers necessary for a fair presentation. Certain amounts for ~~prior~~ prior periods have been reclassified in order to conform to the current ~~reporting~~ reporting presentation. Results for the periods presented in this report are not necessarily indicative of future financial performance.

Note 2. Accounting Pronouncements

~~The~~In November 2004, the Financial Accounting Standards Board (~~the “~~FASB”) issued ~~Interpretation No. 46 (revised December 2003), “Consolidation~~Statement of ~~Variable~~Financial ~~Interest~~Accounting ~~Entities,”~~Standards (~~FIN~~SFAS) No. ~~46(R))~~ ~~which~~151, ~~provides~~“Inventory ~~guidance~~Costs, asan toAmendment ~~when~~of aARB ~~company~~No. is43, ~~required~~Chapter to4.” The statement ~~include~~amends ~~in its financial statements~~ the ~~assets,~~ ~~liabilities~~guidance ~~and~~in ~~activities~~Accounting ofResearch aBulletin ~~variable interest entity~~ (~~a “VIE”~~ARB) No. A ~~VIE is generally a corporation~~43, ~~partnership,~~Chapter ~~trust~~4, or“Inventory ~~any~~Pricing,” ~~other~~to ~~legal~~clarify ~~structure~~the ~~used~~accounting for ~~business~~abnormal ~~purposes~~amounts ~~that~~of ~~either~~idle ~~does~~facility ~~not~~expense, ~~have~~freight, ~~equity~~handling ~~investors~~costs ~~with~~and ~~voting~~spoilage, ~~rights~~requiring or that ~~has~~ ~~equity~~such ~~investors~~costs ~~that~~be dorecognized ~~not~~as ~~provide~~current-period ~~sufficient~~charges. ~~financial~~It ~~resources~~also ~~for the entity to support its activities. FIN No. 46(R)~~ requires ~~a VIE to be consolidated by a company if~~ that ~~company is subject to a~~ ~~majority~~allocation of ~~the~~fixed ~~risk~~production ofoverheads ~~loss~~to ~~from~~ the ~~activities~~costs of ~~the~~conversion ~~VIE~~be orbased ~~is entitled to~~on ~~receive a majority of~~ the ~~residual~~normal ~~returns~~capacity of the ~~VIE. FIN~~production Nofacilities. ~~46(R)~~ ~~also~~CPChem ~~requires~~implemented ~~disclosures~~the ~~about~~provisions ~~VIEs that are not required to be consolidated by a company, but in which the company has a significant variable interest. The consolidation requirements~~ of ~~FIN~~SFAS No. ~~46(R) became~~ 151 effective January 1, ~~2005~~2006. ~~for~~Implementation ~~CPChem. FIN~~of ~~No. 46(R)~~this standard did not ~~require the~~impact ~~consolidation~~consolidated results of ~~any~~operations, ~~existing VIE into CPChem’s consolidated~~ financial ~~statements~~position or liquidity.

In September ~~November 2004~~2005, the Emerging Issues Task Force (EITF) of the FASB ~~issued~~reached ~~SFAS~~a consensus on Issue No. ~~151~~ 04-13, “~~Inventory~~Accounting ~~Costs,~~for anPurchases ~~Amendment~~and Sales of ~~ARB~~Inventory with ~~No. 43,~~the ~~Chapter~~Same 4Counterparty.” ~~The~~ In situations ~~statement~~in ~~amends~~which ~~the~~one ~~guidance~~inventory ~~in Accounting~~transaction ~~Research~~is ~~Bulletin~~entered ~~(ARB)~~into ~~No. 43,~~in ~~Chapter~~contemplation of 4,another ~~“Inventory~~inventory ~~Pricing,” to~~transaction ~~clarify~~in the ~~accounting~~same ~~for~~line ~~abnormal amounts~~ of ~~idle~~business ~~facility~~with ~~expense,~~the same ~~freight~~counterparty, ~~handling~~the ~~costs~~two ~~and~~inventory ~~spoilage,~~transactions ~~requiring~~are ~~that~~deemed ~~such~~to ~~costs~~ be ~~recognized as~~a ~~current~~single non-~~period~~monetary ~~charges~~exchange transaction. It ~~also requires~~was determined that ~~allocation~~such ~~of fixed production overheads to the costs of~~transactions ~~conversion~~should generally be ~~based~~recognized onat the ~~normal~~carrying ~~capacity~~amount of the ~~production facilities~~inventory transferred. For CPChem, the provisions of ~~SFAS~~EITF Issue No. ~~151 are~~ 04-13 were effective April ~~January~~ 1, 2006. CPChem believes that implementation of ~~this~~EITF ~~standard~~Issue ~~will~~No. 04-13 will not have a material impact on consolidated results of operations, financial position or liquidity.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-Monetary Assets, an Amendment of APB Opinion No. 29.” The guidance in Accounting Principles Board (APB) Opinion No. 29, “Accounting for Non-Monetary Transactions,” is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged, with certain exceptions. This statement amends APB Opinion No. 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange does not have commercial substance if the future cash flows of the entity are not expected to change significantly as a result of the exchange. For CPChem, the provisions of SFAS No. 153 are effective July 1, 2005. CPChem believes that implementation of this standard will not have a material impact on consolidated results of operations, financial position or liquidity.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143” (FIN No. 47) which mainly clarifies the timing of the recording of certain asset retirement obligations required by FASB Statement No. 143, “Accounting for Asset Retirement Obligations.” For CPChem, the provisions of FIN No. 47 are effective December 31, 2005. CPChem is evaluating what impact, if any, FIN No. 47 will have regarding its asset retirement obligations, but currently believes that implementation of FIN No. 47 will not have a material impact on consolidated results of operations, financial position or liquidity.

Note 3. Comprehensive Income

	Three months ended June 30,						Six months ended June 30,
	Three months ended March 31,
Millions	~~2005~~2006			~~2004~~2005			~~2005~~			~~2004~~
Net income	$	~~173~~424		$	97389		$	~~562~~		$	~~205~~
Foreign currency translation adjustments	~~(13~~8		)	(27		)	~~(20~~		)	(5		)
Comprehensive income	$	~~160~~432		$	95382		$	~~542~~		$	~~200~~

Note 4. ~~Postretirement~~Business ~~Benefits~~Interruption ~~Information~~Insurance Partial Payment

CPChem recognized ~~expects~~$39 tomillion ~~contribute~~of ~~approximately~~Other ~~$55~~Income ~~million to~~in ~~its~~the ~~pension~~first ~~plans~~quarter ~~for~~of ~~pension~~2006 ~~benefits~~related ~~during~~to the ~~2005. Contributions~~recognition ~~totaling~~of ~~$20~~a ~~million~~payment ~~were~~commitment ~~made~~from insurers towards CPChem’s business ~~during~~interruption ~~the~~insurance ~~first~~claim ~~half~~attributable ofto losses sustained from Hurricane Rita in 2005. ~~There were~~ noThis ~~contributions~~amount ~~during~~is ~~the~~included ~~first~~in ~~half~~Accounts ofReceivable ~~2004~~at March 31, 2006.

Note 5. Postretirement Benefits Information

CPChem expects to contribute approximately $40 million to its pension plans for pension benefits during 2006. There were no contributions to the pension plans in the first quarters of 2006 or 2005.

Net periodic benefit costs for pension and other postretirement benefits follow:

	Three months ended June 30,						Six months ended June 30,
	Pension Benefits						Other Postretirement Benefits
Millions	2005			2004			2005			2004
	Three months ended March 31,						Three months ended March 31,
Pension Benefit Costs
Millions	2006			2005			2006			2005
Service cost on benefits earned	$	78		$	6		$	131		$	11—
Interest cost on projected benefit obligations	6			45			112			91
Expected return on plan assets	(65		)	(34		)	(101		)	(6—		)
Amortization of prior service costs	34			3			61			61
Net actuarial loss	—			1			—			1
Net periodic benefit cost	$	13		$	10		$	3		$	2
Net periodic benefit cost	$	10		$	11		$	20		$	21
Other Postretirement Benefit Costs
Service cost on benefits earned	$	1		$	1		$	1		$	1
Interest cost on projected benefit obligations	1			1			2			2
Expected return on plan assets	(1		)	(1		)	(1		)	(1		)
Amortization of prior service costs	—			1			1			2
Net actuarial loss	1			—			1			—
Net periodic benefit cost	$	2		$	2		$	4		$	4

7Note 6. Taxes

Note 5. Taxes

CPChem is treated as a flow-through entity for federal income tax and for most state income tax purposes whereby each member is taxable on its respective share of income and loss. However, CPChem is directly liable for federal and state income taxes and franchise taxes on certain separate legal entities and for any foreign taxes incurred. CPChem follows the liability method of accounting for these income taxes.

CPChem is required to make quarterly distributions to its members in amounts representing the liability for combined federal and state income taxes calculated at specified rates based on CPChem’s estimate of federal taxable income. ~~Tax distributions~~ ~~paid~~At toMarch ~~members~~31, ~~totaled~~2006, ~~$164~~Accrued ~~million~~Distributions ~~during~~to ~~the~~Members ~~first~~included ~~half~~$137 million of ~~2005~~ ~~and~~tax ~~$36~~distributions ~~million~~that ~~during~~will be paid in the ~~first~~second ~~half~~quarter of ~~2004~~2006. At December ~~June 30~~31, 2005, $92122 million of tax distributions were accrued ~~in Other Current Liabilities~~ and ~~Deferred~~were ~~Credits that will be~~ paid in the ~~third~~first quarter of ~~2005~~2006. ~~At December 31, 2004, accrued tax distributions totaled $39 million.~~

~~Note 6. Investments~~7

Note 7. Investments

Qatar Chemical Company Ltd. (Q-Chem)

Qatar Chemical Company Ltd. (Q-Chem) is a 49%-owned joint venture company that owns a petrochemical complex in Mesaieed, Qatar. Prior to achieving project completion, CPChem made certain advances to Q-Chem under a subordinated loan agreement. In addition, CPChem agreed to provide up to $75 million of loans to Q-Chem if there is insufficient cash to pay the minimum debt service payments on Q-Chem’s senior bank financing. CPChem also agreed to loan funds to Q-Chem through December 2006 if there is insufficient cash to make Q-Chem’s ~~target~~ targeted debt service payments. This loan iswould be limited to the amount of lost operating margins resulting from sales volumes being less than design capacity, or the actual cash deficiency, whichever is less. CPChem believes it is unlikely that funding under these support agreements will be required.

CPChem’s rights under the subordinated loan agreement and the other contingent loan agreements related to Q-Chem previously described are subordinate to Q-Chem’s senior bank debt. Security interests in the notes related to such loans have been granted to the banks to support the terms of subordination. ~~Advances~~ Outstanding advances to Q-Chem, including accrued interest, under the subordinated loan agreement totaled $~~317~~ 258 million at ~~June 30~~March 31, ~~2005~~2006 and $~~310~~273 million at December 31, ~~2004~~2005. As it applies to CPChem, Q-Chem is not considered to be a variable interest entity (VIE) under the provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (FIN No. 46(R)).

~~CPChem records its 49% share~~Qatar ofChemical ~~Q-Chem’s~~Company ~~operating~~II ~~results using the equity method of accounting for investments~~Ltd. ~~Q-Chem~~ ~~is a VIE under the provisions of FIN No. 46~~(~~R). CPChem’s maximum exposure to loss per FIN No. 46(R) was $419 million at June 30, 2005, representing CPChem’s carrying value of its investment in and advances to~~ Q-Chem. II)

~~Saudi~~CPChem and ~~Chevron~~Qatar Petroleum announced plans in 2001 for the development of a ~~Phillips~~petrochemical project in Mesaieed, Qatar. The planned polyethylene and normal alpha olefins plants will be owned by Qatar Chemical Company II Ltd. (Q-Chem II), an equity affiliate that is owned 49% by CPChem and 51% by Qatar Petroleum. Both plants will be located on a site adjacent to the existing complex owned by Qatar Chemical Company Ltd. (Q-Chem). In connection with this project, CPChem and Qatar Petroleum (the “co-venturers”) entered into a separate agreement in 2002 with Total Petrochemicals and Qatar Petrochemical Company Ltd., establishing a joint venture to develop an ethylene cracker in Ras Laffan Industrial City, Qatar. The cracker will provide ethylene feedstock via pipeline to the plants.

~~Saudi~~The ~~Chevron~~ethylene ~~Phillips~~cracker ~~Company~~and ~~(SCP)~~pipeline iswill abe ~~joint~~owned ~~venture~~by ~~company~~Ras ~~that~~Laffan ~~owns~~Olefins anCompany, a ~~aromatics~~joint ~~complex~~venture inof AlQ-Chem ~~Jubail,~~II ~~Saudi~~and ~~Arabia~~Qatofin Company Limited (Qatofin). Q-Chem II ~~The~~will ~~subsidiary~~own 53.85% of ~~Chevron~~the ~~Phillips~~capacity ~~Chemical~~rights ~~Company~~to ~~LLC~~the ~~which~~ethylene ~~directly~~cracker and pipeline, ~~owns~~and the ~~50%~~balance ~~interest~~will inbe ~~SCP~~held by Qatofin. Collectively, ~~along~~Q-Chem ~~with~~II’s interest in the ~~other~~ethylene ~~co-venturer~~cracker and pipeline, ~~have~~and ~~each guaranteed~~the ~~their~~polyethylene ~~respective~~and ~~50%~~normal ~~share~~alpha olefins ofplants ~~certain~~are ~~loans~~referred to ~~SCP~~as ~~from~~“the aQ-Chem ~~Saudi Arabian~~II ~~governmental agency~~project.” ~~These~~Construction ~~loans~~began in late 2005, with ~~totaled~~start-up ~~$16~~anticipated ~~million~~in ~~(gross)~~late at2008. ~~June 30,~~The ~~2005~~project ~~and~~will ~~$69~~be ~~million~~financed atthrough ~~December 31,~~limited ~~2004. CPChem~~recourse ~~believes~~loans itfrom iscommercial ~~unlikely that~~banks ~~funding~~and ~~under~~an ~~this~~export ~~guarantee~~credit ~~will~~agency be(collectively, “senior ~~required. Chevron~~debt”), ~~Phillips~~and ~~Chemical~~equity ~~Company~~contributions ~~LLC~~and issubordinated ~~not~~loans from the aco-venturers. ~~party~~As it applies to ~~this~~CPChem, ~~guarantee. SCP~~Q-Chem II is not considered to be a VIE under the provisions of FIN No. 46(R).

Effective with the financial closing of the Q-Chem II project in November 2005, the following commitments and guarantees were granted:

Under the terms of the financing agreements, funding available from the senior debt is limited to 70% of project costs, as defined, or $1.478 billion, whichever is lower. Principal and accrued interest outstanding under the commercial bank loans and the loan from the export credit agency totaled $61 million at March 31, 2006 and $48 million at December 31, 2005. The co-venturers are obligated to each fund their pro rata ownership share of Q-Chem II’s share of project costs that are not funded by senior debt and operating cash flow through equity contributions and non-interest-bearing subordinated loans, subject to stated maximum amounts for each co-venturer. After these amounts are reached, additional project costs, if any, related to Q-Chem II’s share of total project costs will be funded by an interest-bearing subordinated loan from CPChem. These funding obligations terminate upon achieving project completion, as defined in the financing agreements.

Under the terms of completion guarantees in the financing agreements, each co-venturer, on a pro rata basis, has guaranteed the periodic debt service requirements of the senior debt until project completion is achieved. In addition, upon the occurrence of certain defined events prior to project completion, or if project completion has not occurred by June 30, 2011, the senior debt lenders will have the right to demand from each co-venturer, on a pro rata basis, repayment of all outstanding principal and interest on the senior debt. CPChem believes it is unlikely that performance under these guarantees will be required.

Each co-venturer has also agreed to provide loans to Q-Chem II, on a pro rata basis and for a period of three years after project completion, if there is insufficient cash available to pay the targeted quarterly principal amounts due on the senior debt. These loans (a) are limited to the amount of lost operating margins directly resulting from any shortfalls in feedstock supplies, or the actual cash deficiency, whichever is less, and (b) are capped at $50 million for the co-venturers, combined. CPChem believes that any funding required under this support agreement is unlikely to have a material adverse effect on CPChem’s consolidated results of operations, financial position or liquidity.

The total carrying amount of liabilities recorded, discounted and weighted for probability, for the aforementioned guarantees related to Q-Chem II totaled $3 million at both March 31, 2006 and December 31, 2005. The liabilities are recorded as Other Liabilities and Deferred Credits, with an offsetting increase to Investments in and Advances to Affiliates.

Saudi Chevron Phillips Company

Saudi Chevron Phillips Company (SCP) is a joint venture company that owns an aromatics complex in Al Jubail, Saudi Arabia. The subsidiary of Chevron Phillips Chemical Company LLC which directly owns the 50% interest in SCP, along with the other co-venturer, have each guaranteed their respective 50% share of certain loans to SCP from a Saudi Arabian governmental agency. These loans totaled $5 million at March 31, 2006 and $12 million at December 31, 2005. CPChem believes it is unlikely that funding under this guarantee will be required. As it applies to CPChem, SCP is not considered to be a VIE under the provisions of FIN No. 46(R).

Jubail Chevron Phillips Company

Jubail Chevron Phillips Company (JCP), a joint venture company, was formed in 2003 to develop an integrated styrene facility in Al Jubail, Saudi Arabia. Construction of the JCP facility is in conjunction with an expansion of SCP’s benzene plant, together called ~~the~~ “~~JCP~~the JCP project.” Construction began in the fourth quarter of 2004 and operational start-up is anticipated in late 2007. It It is estimated that project completion, as defined in the JCP project’s financing agreements, will be achieved in the first half of 2008. ~~JCP~~ As it applies to CPChem, JCP is not considered to be a VIE under the provisions of FIN No. 46(R).

The JCP project is being financed through equity contributions and subordinated loans from the co-venturers, in proportion to their equal ownership interests, and limited recourse loans from commercial banks and two Saudi Arabian governmental agencies (collectively, called “senior debt”). Principal and accrued interest outstanding under the commercial bank loans and the loan from the first governmental agency totaled $71325 million at ~~June 30~~March 31, ~~2005~~ 2006 and $50 266 million at December 31, ~~2004~~2005. ~~Principal~~ ~~and~~Amounts ~~accrued interest~~ outstanding under ~~loans~~the ~~from~~loan agreements with the ~~first~~ second governmental agency totaled $~~132~~31 million at ~~June 30,~~March ~~2005 and $42 million at December~~ 31, ~~2004~~2006. No ~~amounts~~No amounts were outstanding ~~under~~with ~~the~~this ~~loan~~agency ~~agreements~~at ~~with~~December ~~the~~31, ~~second governmental agency~~2005.

Under the terms of the commercial bank facilities, funding available from the senior debt is limited to 75% of the estimated project cost, as defined. The JCP co-venturers are obligated to each fund their respective 50% share of the remaining estimated project cost through equity contributions and subordinated loans. In addition, the co-venturers are obligated to each fund their respective 50% share, through equity contributions or subordinated loans, of any project costs incurred in excess of the estimated project cost and of any project costs not funded by senior debt. These funding obligations terminate upon achieving project completion.

~~Certain~~Under ~~bridge~~the ~~loan~~terms of completion guarantees, ~~obligated~~if ~~the~~project ~~JCP~~completion ~~co-venturers~~has tonot ~~each~~occurred by March 31, ~~repay~~2009, ~~their~~the ~~respective~~commercial ~~50%~~bank ~~share~~lenders ofand the ~~commercial~~first ~~bank~~Saudi ~~loans~~Arabian governmental agency will have the right to demand from each JCP ~~and~~co-venturer, ~~SCP~~on ifa pro rata basis, funds to cover the ~~loans~~periodic ~~from~~debt service requirements associated with the ~~second~~JCP ~~Saudi~~project ~~Arabian~~that ~~governmental~~become ~~agency~~due ~~were~~and ~~not~~payable ~~available by~~after ~~June 21~~March 31, ~~2005~~2009 until project completion is achieved. ~~Conditions~~ Furthermore, if project completion has not occurred by ~~precedent~~March to31, 2010, they will have the ~~availability~~right ofto ~~loans~~demand from ~~the~~each ~~second~~co-venturer, ~~Saudi~~on ~~Arabian~~a ~~governmental~~pro ~~agency~~rata ~~were satisfied~~basis, ~~and~~repayment ~~the~~of ~~bridge~~all ~~loan~~outstanding ~~guarantees~~principal ~~were terminated~~and interest.

~~Under~~The ~~the~~subsidiary ~~terms~~ of CPChem ~~completion~~which ~~guarantees,~~directly ~~the~~owns ~~commercial bank lenders and~~ the ~~first~~50% ~~Saudi~~interest ~~Arabian~~in ~~governmental~~JCP, ~~agency~~along ~~have~~with the ~~right to demand from~~other ~~each JCP~~ co-venturer, onhave aeach ~~pro~~guaranteed ~~rata~~their ~~basis,~~respective ~~funds~~50% toshare ~~cover~~of ~~the~~certain ~~debt service~~loans ~~requirements~~payable ~~associated~~by ~~with the~~ JCP ~~project~~to ~~that are due after March 31, 2009 until project completion. Furthermore, if~~ the ~~project~~second ~~is not completed by March 31, 2010, the commercial bank lenders and the first~~ Saudi Arabian governmental agency ~~have~~ for the ~~right to demand from each co-venturer, on a pro rata basis, repayment of~~duration ~~all~~of ~~outstanding~~the ~~principal and interest~~loans.

~~The~~In addition ~~subsidiary~~to ~~of CPChem which directly owns~~ the ~~50%~~above ~~interest in JCP~~guarantees, ~~along~~ ~~with~~each ~~the other~~ co-venturer, ~~have each~~ guaranteed their respective 50% share of ~~certain~~payment ~~loans~~to ~~payable~~a bycontractor ~~JCP~~for tocertain ~~the~~construction ~~second~~costs ~~Saudi~~of ~~Arabian governmental~~the ~~agency~~project, ~~for~~limited ~~the~~to ~~duration~~a maximum of ~~the~~$103 ~~loans~~million each. ~~Chevron~~ ~~Phillips~~The ~~Chemical~~guarantee ~~Company~~remains ~~LLC~~in effect isuntil ~~not~~payment afor ~~party~~those toconstruction ~~this~~costs ~~guarantee~~is made.

InThe ~~addition~~total tocarrying amount ~~the~~of ~~above~~liabilities ~~guarantees~~recorded, ~~each~~discounted ~~co-venturer guaranteed~~and ~~their~~weighted ~~respective~~for ~~50%~~probability, ~~share~~for the ofaforementioned ~~payment~~guarantees related to athe ~~contractor~~JCP ~~for~~project ~~certain construction~~totaled ~~costs~~$10 ofmillion ~~the~~at March ~~project~~31, ~~limited~~2006 toand ~~a maximum of~~ $~~103~~11 million ~~each. The~~ ~~guarantee~~at ~~remains~~December in31, ~~effect until~~2005. ~~payment~~The ~~for~~liabilities ~~those~~are recorded ~~construction~~as ~~costs~~Other isLiabilities ~~made. Each~~and ~~co-venturer~~Deferred ~~also~~Credits, ~~granted~~with aan ~~guarantee,~~offsetting onincrease ato ~~pro~~Investments ~~rata~~in ~~basis,~~and ~~related~~Advances to ~~the~~Affiliates. ~~delivery~~CPChem ofbelieves ~~stated~~it ~~amounts~~is ofunlikely that ~~JCP’s~~performance ~~styrene monomer~~under ~~production~~any toof athe ~~JCP~~guarantees ~~customer~~will be required. However, ~~limited~~should such toperformance abe ~~maximum~~required, ofCPChem $8believes ~~million each. This~~it ~~guarantee~~would ~~terminates~~not ~~upon~~have ~~the~~a material ~~achievement~~adverse ofeffect ~~commercial~~on ~~production~~consolidated results of ~~styrene~~operations, byfinancial ~~JCP~~position or liquidity.

910

The total carrying amount of liabilities recorded, discounted and weighted for probability, for the aforementioned guarantees related to the JCP project totaled $9 million at June 30, 2005 and $4 million at December 31, 2004. The liabilities are recorded as Other Liabilities and Deferred Credits, with an offsetting increase to Investments in and Advances to Affiliates. CPChem believes it is unlikely that performance under any of the guarantees will be required. However, should such performance be required, CPChem believes it would not have a material adverse effect on consolidated results of operations, financial position or liquidity.

Summarized Financial Information

In accordance with the SEC’s rules pertaining to equity investments that are deemed to be “significant,” during any of the periods presented, summarized financial information for CPChem’s equity investments, shown at 100%, follows:

	Three months ended June 30,					Six months ended June 30,
	Three months ended March 31,
Millions	~~2005~~2006			~~2004~~2005		~~2005~~		~~2004~~
Q-Chem
Revenues	$	81141		$	70130	$	~~211~~	$	~~133~~
Income before income taxes	1777			2966		83		47
Net income	1056			2947		57		47
Saudi Chevron Phillips Company
Revenues	~~122~~200			~~148~~163		~~285~~		~~259~~
Income before income taxes	3868			6068		~~106~~		93
Net income	3868			6068		~~106~~		93
Other equity investments
All others in the aggregate
Revenues	~~280~~276			~~219~~287		~~567~~		~~424~~
Income before income taxes	13(1		)	215		28		7
Net income	12(2		)	113		25		5

CPChem had secured borrowings outstanding totaling $~~150~~100 million at ~~June 30,~~both ~~2005~~March 31, 2006 and ~~$200 million at~~ December 31, ~~2004~~ 2005 under a trade receivables securitization agreement. ~~These~~ These borrowings are classified as short-term and were secured by $~~652~~748 million and $~~665~~821 million of trade receivables, respectively. ~~CPChem~~ ~~renewed~~The ~~its $300 million~~ trade receivables securitization agreement expires in ~~the~~May ~~second~~2006. ~~quarter~~CPChem ~~of 2005~~has oncommitments ~~terms~~from ~~substantially~~banks, subject ~~similar~~ to ~~those~~final ofdocumentation, ~~the~~to ~~prior~~renew ~~agreement. The~~the ~~new~~receivables securitization agreement ~~expires~~through in May ~~2006~~ 2007.

In the case of known contingent liabilities, CPChem records an undiscounted liability when a loss is probable and the amount can be reasonably estimated. These liabilities are not reduced for potential insurance recoveries. If applicable, undiscounted receivables are recorded for probable loss recoveries from insurance or other ~~third-party recoveries.~~ parties. As facts concerning contingent liabilities become known, CPChem reassesses its position with respect to accrued liabilities and other potential exposures. Estimates that are particularly sensitive to future change include legal matters and contingent liabilities for environmental remediation. ~~Estimated~~ Estimated future environmental remediation costs are subject to change due to such factors as the unknown magnitude of cleanup costs, prospective changes in laws and regulations, the unknown timing and extent of remedial actions that may be required and the determination of CPChem’s liability in proportion to those of other responsible parties. Estimated future costs related to legal matters are subject to change as events occur and as additional information ~~becomes~~ becomes available.

1011

Other than ~~those~~ the matters discussed below and based on currently available information, CPChem believes it is remote that future costs related to known contingent liabilities will exceed current accruals by an amount that would have a material adverse effect on consolidated results of operations, financial position or liquidity.

Legal Matters

CPChem is a party to certain asbestos lawsuits for which the financial responsibility between CPChem and ConocoPhillips is disputed. CPChem, ~~and~~ ConocoPhillips and Chevron are attempting to resolve ~~where~~whether ~~the~~ConocoPhillips ~~financial~~or CPChem has financial responsibility for these lawsuits ~~rests~~. In the meantime, ConocoPhillips is managing and defending these lawsuits. In the event the financial responsibility ~~for~~ for these lawsuits is ultimately determined to rest with CPChem, CPChem may be required to record a charge to operations that could be material to the period reported. However, CPChem believes that any such charge, if required, would not have a material adverse effect on financial position or liquidity.

CPChem is a party to a number of other legal proceedings that arose in the ordinary course of business for which, in many instances, no provision has been made in the financial statements. While the final outcome of these proceedings cannot be predicted with certainty, CPChem believes that none of these individual proceedings, when resolved, will have a material adverse effect on consolidated results of operations, financial position or liquidity.

~~Electricity~~Note ~~Deregulation~~10. Guarantees and Indemnifications

Legislation for electricity deregulation enacted in 1999 allowed utilities to file an application with the Public Utility Commission of Texas (the “PUCT”) for the determination and reimbursement of certain costs associated with utility asset devaluation that may have occurred due to that legislation. CenterPoint Energy Houston Electric LLC (CenterPoint), which previously provided electricity to CPChem’s Cedar Bayou manufacturing facility and Kingwood research center, both located in Texas, filed its application for such determination with the PUCT on March 31, 2004. A number of entities intervened in the PUCT proceedings to object to certain claims in CenterPoint’s application. In November 2004, the PUCT entered an order for a recovery of approximately one-half of Centerpoint’s request. Both sides are appealing the decision.Guarantees

~~If it~~CPChem’s headquarters building is ~~determined~~leased ~~that~~under ~~CenterPoint~~a issynthetic ~~entitled~~lease toagreement, ~~recover~~entered ~~any~~into in of2002 ~~the~~and ~~costs~~subsequently ~~claimed~~ extended in ~~its~~March ~~application~~2005, itwhich iscontains ~~currently~~a ~~expected~~fixed ~~that~~price purchase ~~CPChem~~option ~~would~~and ~~receive~~ a ~~monthly~~ ~~charge~~residual ~~added~~guarantee. toThe ~~its~~purchase ~~electricity~~option ~~cost~~price ~~over~~was considered anto ~~extended~~be ~~period~~the fair market value of the building at the time toof the ~~pay~~extension ~~for~~of ~~such~~the ~~reimbursement~~lease. ~~Based~~ onIf CPChem does not extend the lease or exercise the ~~stated~~purchase ~~amounts~~option upon the current expiration of ~~CenterPoint’s~~the ~~application~~lease ~~and~~in 2010, CPChem has an obligation to pay the ~~PUCT’s~~lessor ~~subsequent~~the ~~order~~shortfall, itif any, in the proceeds realized isfrom ~~currently~~the ~~anticipated~~sale ~~that~~of the ~~additional~~building ~~monthly~~to ~~cost~~a third party relative to the purchase option price, not to exceed $27 million. CPChem is entitled to receive any proceeds from the sale of the building that isare in excess of the purchase option price. While ~~approved~~it byis not possible to predict with certainty the ~~PUCT~~amount, ~~when~~if ~~finalized~~any, that CPChem would ~~not~~be ~~have~~required to pay or be entitled to receive should the building be sold to a ~~material~~third ~~adverse~~party ~~effect~~upon the expiration of the lease, CPChem believes that the onamount paid or received would not be material to consolidated results of operations, financial position or liquidity.

See also Note ~~9. Guarantees~~7 ~~and~~for ~~Indemnifications~~a discussion of certain guarantees related to CPChem’s equity investments.

~~Guarantees~~Indemnifications

~~CPChem’s~~As ~~headquarters~~part ~~building~~of ~~is leased under a synthetic lease~~CPChem’s ~~agreement,~~ongoing ~~entered~~business ~~into~~operations ~~in 2002~~ and ~~subsequently~~consistent ~~extended~~with ingenerally ~~March 2005, which~~accepted ~~contains a fixed price purchase option~~ and recognized aindustry ~~residual~~practice, ~~guarantee. The~~CPChem ~~purchase~~enters ~~option~~into ~~price~~numerous ~~was~~agreements ~~considered~~with toother beparties ~~the~~which ~~fair~~apportion ~~market~~future ~~value~~risks ofbetween the ~~building~~parties atto the ~~time~~transaction ~~of the extension of the~~or ~~lease. If~~relationship ~~CPChem~~governed ~~does~~by ~~not extend~~ the ~~lease~~ oragreements. ~~exercise~~One ~~the~~method ~~purchase option upon the current expiration~~ of ~~the~~apportioning ~~lease in~~risk ~~2010,~~is ~~CPChem has an obligation to pay~~ the ~~lessor the shortfall, if any, in~~ ~~the~~inclusion ~~proceeds realized from the sale~~ of ~~the~~provisions ~~building~~requiring toone ~~a third~~ party ~~relative~~ to indemnify the ~~purchase~~other ~~option price, not to exceed $27 million. CPChem is entitled to receive any proceeds~~party ~~from~~against ~~the~~losses ~~sale~~that ofmight ~~the~~be ~~building~~incurred ~~that are~~ in ~~excess of~~ the ~~purchase option price~~future. ~~While~~ itMany isof ~~not~~CPChem’s agreements, ~~possible~~including totechnology ~~predict~~license ~~with certainty the amount~~agreements, ifcontain ~~any,~~indemnities that require CPChem ~~would~~to beperform ~~required~~certain toacts, ~~pay~~such oras ~~be entitled~~defending tocertain ~~receive~~licensees against ~~should~~patent ~~the~~infringement ~~building~~claims beof ~~sold~~others, toas a ~~third~~result ~~party upon the expiration~~ of the ~~lease,~~occurrence ~~CPChem believes that the amount paid or received would~~of ~~not~~a betriggering ~~material~~event ~~to consolidated results of operations, financial position~~ or ~~liquidity~~ condition.

1112

~~See~~The ~~also~~nature ~~Note~~of 6these indemnity ~~for~~obligations aare ~~discussion~~diverse and numerous and each has different terms, business purposes, and triggering events or conditions. In addition, the indemnities in each agreement vary widely in their definitions of ~~certain~~both ~~guarantees~~the triggering ~~related~~event toand the resulting obligation, which is contingent upon that triggering event. Because many of CPChem’s ~~equity~~indemnity ~~investments~~obligations are not limited in duration or potential monetary exposure, CPChem cannot reasonably calculate the maximum potential amount of future payments that could possibly be paid under the indemnity obligations stemming from all of CPChem’s existing agreements. In the case of known contingent liabilities, however, CPChem records an undiscounted liability when a loss is probable and the amount can be reasonably estimated.

~~Indemnifications~~CPChem is not aware of the occurrence of any triggering event or condition that would have a material adverse impact on consolidated results of operations, financial position or liquidity as a result of an indemnity obligation arising from such triggering event or condition.

~~As part~~Note of CPChem’s ongoing business operations and consistent with generally accepted and recognized industry practice, CPChem enters into numerous agreements with other parties which apportion future risks between the parties to the transaction or relationship governed by the agreements11. ~~One~~ ~~method~~Segment of apportioning risk is the inclusion of provisions requiring one party to indemnify the other party against losses that might be incurred in the future. Many of CPChem’s agreements, including technology license agreements, contain indemnities that require CPChem to perform certain acts, such as defending certain licensees against patent infringement claims of others, as a result of the occurrence of a triggering event or condition.Information

~~The~~Financial ~~nature~~information ofby ~~these~~segment indemnity obligations are diverse and numerous and each has different terms, business purposes, and triggering events or conditions. In addition, the indemnities in each agreement vary widely in their definitions of both the triggering event and the resulting obligation, which is contingent upon that triggering event. Because many of CPChem’s indemnity obligations are not limited in duration or potential monetary exposure, CPChem cannot reasonably calculate the maximum potential amount of future payments that could possibly be paid under the indemnity obligations stemming from all of CPChem’s existing agreements. In the case of known contingent liabilities, however, CPChem records an undiscounted liability when a loss is probable and the amount can be reasonably estimated.follows:

CPChem is not aware of the occurrence of any triggering event or condition that would have a material adverse impact on consolidated results of operations, financial position or liquidity as a result of an indemnity obligation arising from such triggering event or condition.

Millions	Olefins & Polyolefins		Aromatics & Styrenics		Specialty Products		Corporate, Other & Eliminations			Consolidated
Three months ended March 31, 2006
Net sales – external	$	1,968	$	676	$	155	$	—		$	2,799
Net sales – inter-segment	81		1		1		(83		)	—
Income before interest & taxes	416		—		23		5			444

Three months ended March 31, 2005
Net sales – external	1,647		861		132		—			2,640
Net sales – inter-segment	85		1		—		(86		)	—
Income (loss) before interest & taxes	302		93		15		(1		)	409

Total assets – March 31, 2006	4,273		2,089		512		113			6,987
Total assets – December 31, 2005	4,333		1,997		504		126			6,960

~~Note 10. Segment Information~~13

~~Financial~~Note ~~information~~12. byCondensed Consolidating ~~segment~~Financial ~~follows:~~ Statements

Millions	Olefins & Polyolefins		Aromatics & Styrenics		Specialty Products		Corporate, Other & Eliminations			Consolidated
Three months ended June 30, 2005
Net sales – external	$	1,633	$	743	$	127	$	—		$	2,503
Net sales – inter-segment	73		—		1		(74		)	—
Income (loss) before interest & taxes	183		13		8		(9		)	195
Three months ended June 30, 2004
Net sales – external	1,258		708		125		—			2,091
Net sales – inter-segment	59		—		1		(60		)	—
Income (loss) before interest & taxes	56		48		19		(6		)	117
Six months ended June 30, 2005
Net sales – external	3,298		1,604		259		—			5,161
Net sales – inter-segment	158		1		1		(160		)	—
Income (loss) before interest & taxes	485		106		23		(10		)	604
Six months ended June 30, 2004
Net sales – external	2,497		1,347		240		—			4,084
Net sales – inter-segment	120		—		1		(121		)	—
Income (loss) before interest & taxes	159		62		34		(11		)	244
Total assets – June 30, 2005	4,145		2,003		486		97			6,731
Total assets – December 31, 2004	4,108		2,125		508		131			6,872

Condensed consolidating financial statements follow. This information is presented in accordance with SEC rules and regulations as they relate to the debt jointly and severally issued by Chevron Phillips Chemical Company LLC and Chevron Phillips Chemical Company LP.

12The LLC is the non-operating parent holding company. The LP is the primary U.S. operating company. “Other Entities” is principally comprised of foreign operations and the holding companies that have direct ownership of the LP. These condensed consolidating financial statements were prepared using the equity method of accounting for investments.

~~Note~~Chevron ~~11.~~Phillips ~~Condensed Consolidating~~Chemical ~~Financial~~Company ~~Statements~~LLC

Condensed ~~consolidating~~Consolidating ~~financial~~Statement ~~statements~~of follow. This information is presented in accordance with SEC rules and regulations as they relate to the debt jointly and severally issued by Chevron Phillips Chemical Company LLC and Chevron Phillips Chemical Company LP.Operations

~~The~~For ~~LLC is~~ the ~~non-operating~~three ~~parent holding company. The LP is the primary U.S. operating~~months ~~company. “Other~~ended ~~Entities”~~March is31, principally comprised of foreign operations and the holding companies that have direct ownership of the LP. These condensed consolidating financial statements were prepared using the equity method of accounting for investments.2006

~~Chevron Phillips Chemical Company LLC~~(Unaudited)

Condensed Consolidating Statement of Operations

Millions	LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales	$	—		$	2,561		$	351		$	(113	)	$	2,799
Equity in income (loss) of affiliates, net	441			(2		)	409			(796		)	52
Other income	—			58			36			(24		)	70
Total revenue	441			2,617			796			(933		)	2,921

Costs and Expenses
Cost of goods sold	—			2,154			320			(107		)	2,367
Selling, general and administrative	—			105			25			(30		)	100
Research and development	—			10			—			—			10
Total costs and expenses	—			2,269			345			(137		)	2,477

Income Before Interest and Taxes	441			348			451			(796		)	444

Interest income	—			8			5			(8		)	5
Interest expense	(16		)	—			(10		)	8			(18		)

Income Before Taxes	425			356			446			(796		)	431

Income taxes	(1		)	(1		)	(5		)	—			(7		)

Net Income	$	424		$	355		$	441		$	(796	)	$	424

~~For the three months ended June 30, 2005~~14

Note 12. Condensed Consolidating Financial Statements (~~Unaudited~~continued)

Millions	LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales	$	—		$	2,284		$	395		$	(176	)	$	2,503
Equity in income (loss) of affiliates, net	191			(1		)	170			(321		)	39
Other income	—			30			32			(22		)	40
Total revenue	191			2,313			597			(519		)	2,582
Costs and Expenses
Cost of goods sold	—			2,046			376			(168		)	2,254
Selling, general and administrative	—			125			28			(30		)	123
Research and development	—			10			—			—			10
Total costs and expenses	—			2,181			404			(198		)	2,387
Income Before Interest and Taxes	191			132			193			(321		)	195
Interest income	—			4			4			(4		)	4
Interest expense	(18		)	—			(6		)	4			(20		)
Income Before Taxes	173			136			191			(321		)	179
Income taxes	—			(1		)	(5		)	—			(6		)
Net Income	173			135			186			(321		)	173
Distributions on members’ preferred interests	—			—			—			—			—
Income Attributed to Members’ Interests	$	173		$	135		$	186		$	(321	)	$	173

Chevron Phillips Chemical Company LLC

13Condensed Consolidating Statement of Operations

~~Note~~For ~~11.~~the ~~Condensed~~three months ~~Consolidating~~ended ~~Financial~~March ~~Statements~~31, ~~(continued)~~2005

~~Chevron Phillips Chemical Company LLC~~(Unaudited)

Condensed Consolidating Statement of Operations

Millions	LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales	$	—		$	2,361		$	485		$	(206	)	$	2,640
Equity in income (loss) of affiliates, net	407			(1		)	368			(724		)	50
Other income	—			17			29			(20		)	26
Total revenue	407			2,377			882			(950		)	2,716

Costs and Expenses
Cost of goods sold	—			1,943			445			(197		)	2,191
Selling, general and administrative	—			105			30			(29		)	106
Research and development	—			10			—			—			10
Total costs and expenses	—			2,058			475			(226		)	2,307

Income Before Interest and Taxes	407			319			407			(724		)	409

Interest income	—			3			4			(3		)	4
Interest expense	(18		)	—			(5		)	3			(20		)

Income Before Taxes	389			322			406			(724		)	393

Income taxes	—			(1		)	(3		)	—			(4		)

Net Income	389			321			403			(724		)	389

Distributions on members’ preferred interests	(2		)	—			—			—			(2		)

Income Attributed to Members’ Interests	$	387		$	321		$	403		$	(724	)	$	387

~~For the three months ended June 30, 2004~~15

Note 12. Condensed Consolidating Financial Statements (~~Unaudited~~continued)

Millions	LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales	$	—		$	1,861		$	356		$	(126	)	$	2,091
Equity in income of affiliates, net	118			1			89			(164		)	44
Other income	—			15			21			(15		)	21
Total revenue	118			1,877			466			(305		)	2,156
Costs and Expenses
Cost of goods sold	—			1,715			322			(115		)	1,922
Selling, general and administrative	—			111			21			(26		)	106
Research and development	—			11			—			—			11
Total costs and expenses	—			1,837			343			(141		)	2,039
Income Before Interest and Taxes	118			40			123			(164		)	117
Interest income	—			5			2			(5		)	2
Interest expense	(21		)	(1		)	(2		)	5			(19		)
Income Before Taxes	97			44			123			(164		)	100
Income taxes	—			—			(3		)	—			(3		)
Net Income	97			44			120			(164		)	97
Distributions on members’ preferred interests	(5		)	—			—			—			(5		)
Income Attributed to Members’ Interests	$	92		$	44		$	120		$	(164	)	$	92

Chevron Phillips Chemical Company LLC

14Condensed Consolidating Balance Sheet

~~Note~~March ~~11.~~31, ~~Condensed Consolidating Financial Statements (continued)~~2006

~~Chevron Phillips Chemical Company LLC~~(Unaudited)

Condensed Consolidating Statement of Operations

Millions	LLC		LP			Other Entities		Eliminations			Total
Current assets
Cash and cash equivalents	$	—	$	5		$	29	$	—		$	34
Accounts receivable, net	16		1,262			1,086		(986		)	1,378
Inventories	—		608			207		—			815
Other current assets	2		41			9		—			52
Total current assets	18		1,916			1,331		(986		)	2,279

Property, plant and equipment, net	—		3,293			258		—			3,551
Investments in and advances to affiliates	5,819		66			5,352		(10,135		)	1,102
Other assets and deferred charges	18		39			26		(28		)	55

Total Assets	$	5,855	$	5,314		$	6,967	$	(11,149	)	$	6,987

Current liabilities
Accounts payable	$	192	$	773		$	936	$	(986	)	$	915
Secured borrowings and other debt	—		1			104		—			105
Other current liabilities and deferred credits	373		136			24		—			533
Total current liabilities	565		910			1,064		(986		)	1,553

Long-term debt	1,221		7			—		—			1,228
Other liabilities and deferred credits	7		88			39		(28		)	106

Total liabilities	1,793		1,005			1,103		(1,014		)	2,887

Members’ capital	4,062		4,310			5,825		(10,135		)	4,062
Accumulated other comprehensive income (loss)	—		(1		)	39		—			38
Total members’ equity	4,062		4,309			5,864		(10,135		)	4,100

Total Liabilities and Members’ Equity	$	5,855	$	5,314		$	6,967	$	(11,149	)	$	6,987

~~For the six months ended June 30, 2005~~16

Note 12. Condensed Consolidating Financial Statements (~~Unaudited~~continued)

Millions	LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales	$	—		$	4,663		$	880		$	(382	)	$	5,161
Equity in income (loss) of affiliates, net	598			(2		)	538			(1,045		)	89
Other income	—			47			61			(42		)	66
Total revenue	598			4,708			1,479			(1,469		)	5,316
Costs and Expenses
Cost of goods sold	—			4,003			821			(365		)	4,459
Selling, general and administrative	—			234			58			(59		)	233
Research and development	—			20			—			—			20
Total costs and expenses	—			4,257			879			(424		)	4,712
Income Before Interest and Taxes	598			451			600			(1,045		)	604
Interest income	—			7			8			(7		)	8
Interest expense	(36		)	—			(11		)	7			(40		)
Income Before Taxes	562			458			597			(1,045		)	572
Income taxes	—			(2		)	(8		)	—			(10		)
Net Income	562			456			589			(1,045		)	562
Distributions on members’ preferred interests	(2		)	—			—			—			(2		)
Income Attributed to Members’ Interests	$	560		$	456		$	589		$	(1,045	)	$	560

Chevron Phillips Chemical Company LLC

15Condensed Consolidating Balance Sheet

~~Note~~December ~~11.~~31, ~~Condensed Consolidating Financial Statements (continued)~~2005

Chevron Phillips Chemical Company LLC

Millions	LLC		LP			Other Entities		Eliminations			Total
Current assets
Cash and cash equivalents	$	—	$	19		$	21	$	—		$	40
Accounts receivable, net	58		1,104			1,000		(769		)	1,393
Inventories	—		613			163		—			776
Other current assets	1		57			8		—			66
Total current assets	59		1,793			1,192		(769		)	2,275

Property, plant and equipment, net	—		3,322			258		—			3,580
Investments in and advances to affiliates	5,485		69			5,028		(9,525		)	1,057
Other assets and deferred charges	19		37			20		(28		)	48

Total Assets	$	5,563	$	5,221		$	6,498	$	(10,322	)	$	6,960

Current liabilities
Accounts payable	$	63	$	913		$	810	$	(769	)	$	1,017
Secured borrowings and other debt	—		1			104		—			105
Other current liabilities and deferred credits	314		198			23		—			535
Total current liabilities	377		1,112			937		(769		)	1,657

Long-term debt	1,179		7			—		—			1,186
Other liabilities and deferred credits	7		70			38		(28		)	87

Total liabilities	1,563		1,189			975		(797		)	2,930

Members’ capital	4,000		4,033			5,492		(9,525		)	4,000
Accumulated other comprehensive income (loss)	—		(1		)	31		—			30
Total members’ equity	4,000		4,032			5,523		(9,525		)	4,030

Total Liabilities and Members’ Equity	$	5,563	$	5,221		$	6,498	$	(10,322	)	$	6,960

~~Condensed Consolidating Statement of Operations~~17

~~For~~Note ~~the~~12. ~~six~~Condensed Consolidating ~~months~~Financial ~~ended June 30,~~Statements ~~2004~~(continued)

~~(Unaudited)~~Chevron Phillips Chemical Company LLC

Millions	LLC			LP			Other Entities			Eliminations			Total
Revenue
Net sales	$	—		$	3,656		$	687		$	(259	)	$	4,084
Equity in income of affiliates, net	246			1			185			(361		)	71
Other income	—			30			43			(33		)	40
Total revenue	246			3,687			915			(653		)	4,195
Costs and Expenses
Cost of goods sold	—			3,343			616			(239		)	3,720
Selling, general and administrative	—			219			44			(53		)	210
Research and development	—			21			—			—			21
Total costs and expenses	—			3,583			660			(292		)	3,951
Income Before Interest and Taxes	246			104			255			(361		)	244
Interest income	—			9			4			(9		)	4
Interest expense	(41		)	(1		)	(4		)	9			(37		)
Income Before Taxes	205			112			255			(361		)	211
Income taxes	—			—			(6		)	—			(6		)
Net Income	205			112			249			(361		)	205
Distributions on members’ preferred interests	(11		)	—			—			—			(11		)
Income Attributed to Members’ Interests	$	194		$	112		$	249		$	(361	)	$	194

Condensed Consolidating Statement of Cash Flows

16For the three months ended March 31, 2006

~~Note 11. Condensed Consolidating Financial Statements~~ (~~continued~~Unaudited)

Chevron Phillips Chemical Company LLC

Millions	LLC			LP			Other Entities			Eliminations			Total
Cash Flows From Operating Activities
Net income	$	424		$	355		$	441		$	(796	)	$	424
Adjustments to reconcile net income to net cash flows provided by operating activities
Depreciation, amortization and retirements	—			66			6			—			72
Undistributed equity in income (loss) of affiliates, net	(330		)	3			(318		)	593			(52		)
Changes in operating working capital	170			(328		)	(16		)	—			(174		)
Other operating cash flow activity	1			5			(6		)	—			—
Net cash flows provided by operating activities	265			101			107			(203		)	270

Cash Flows From Investing Activities
Capital and investment expenditures	—			(28		)	(7		)	—			(35		)
Advance repayment from Q-Chem	—			—			15			—			15
Proceeds from the sale of assets	—			5			—			—			5
Other investing cash flow activity	(4		)	—			—			4			—
Net cash flows provided by (used in) investing activities	(4		)	(23		)	8			4			(15		)

Cash Flows From Financing Activities
Increase in commercial paper, net	41			—			—			—			41
Distributions to members	(302		)	(92		)	(111		)	203			(302		)
Contributions from members	—			—			4			(4		)	—
Net cash flows used in financing activities	(261		)	(92		)	(107		)	199			(261		)

Net Increase (Decrease) in Cash and Cash Equivalents	—			(14		)	8			—			(6		)
Cash and Cash Equivalents at Beginning of Period	—			19			21			—			40

Cash and Cash Equivalents at End of Period	$	—		$	5		$	29		$	—		$	34

~~Condensed Consolidating Balance Sheet~~18

~~June 30,~~Note ~~2005~~12. Condensed Consolidating Financial Statements (continued)

~~(Unaudited)~~Chevron Phillips Chemical Company LLC

Millions	LLC		LP			Other Entities		Eliminations			Total
Current assets
Cash and cash equivalents	$	—	$	5		$	25	$	—		$	30
Accounts receivable, net	26		997			943		(762		)	1,204
Inventories	—		584			198		—			782
Other current assets	2		28			3		—			33
Total current assets	28		1,614			1,169		(762		)	2,049
Property, plant and equipment, net	—		3,391			301		—			3,692
Investments in and advances to affiliates	5,608		31			5,077		(9,768		)	948
Other assets and deferred charges	19		31			20		(28		)	42
Total Assets	$	5,655	$	5,067		$	6,567	$	(10,558	)	$	6,731
Current liabilities
Accounts payable	$	139	$	646		$	751	$	(762	)	$	774
Secured borrowings and other debt	—		1			153		—			154
Other current liabilities and deferred credits	229		145			20		—			394
Total current liabilities	368		792			924		(762		)	1,322
Long-term debt	1,161		8			—		—			1,169
Other liabilities and deferred credits	6		78			34		(28		)	90
Total liabilities	1,535		878			958		(790		)	2,581
Members’ capital	4,120		4,190			5,578		(9,768		)	4,120
Accumulated other comprehensive income (loss)	—		(1		)	31		—			30
Total members’ equity	4,120		4,189			5,609		(9,768		)	4,150
Total Liabilities and Members’ Equity	$	5,655	$	5,067		$	6,567	$	(10,558	)	$	6,731

Condensed Consolidating Statement of Cash Flows

17For the three months ended March 31, 2005

~~Note 11. Condensed Consolidating Financial Statements~~ (~~continued~~Unaudited)

Chevron Phillips Chemical Company LLC

Millions	LLC			LP			Other Entities			Eliminations			Total
Cash Flows From Operating Activities
Net income	$	389		$	321		$	403		$	(724	)	$	389
Adjustments to reconcile net income to net cash flows provided by operating activities
Depreciation, amortization and retirements	—			64			5			—			69
Undistributed equity in income (loss) of affiliates, net	(308		)	1			(269		)	526			(50		)
Changes in operating working capital	184			(261		)	(46		)	—			(123		)
Other operating cash flow activity	1			(6		)	12			—			7
Net cash flows provided by operating activities	266			119			105			(198		)	292

Cash Flows From Investing Activities
Capital and investment expenditures	—			(29		)	(4		)	—			(33		)
Net cash flows used in investing activities	—			(29		)	(4		)	—			(33		)

Cash Flows From Financing Activities
Decrease in commercial paper, net	(125		)	—			—			—			(125		)
Redemptions of members’ preferred interests	(75		)	—			—			—			(75		)
Distributions on members’ preferred interests	(2		)	—			—			—			(2		)
Other distributions to members	(64		)	(99		)	(99		)	198			(64		)
Net cash flows used in financing activities	(266		)	(99		)	(99		)	198			(266		)

Net Increase (Decrease) in Cash and Cash Equivalents	—			(9		)	2			—			(7		)
Cash and Cash Equivalents at Beginning of Period	—			15			48			—			63

Cash and Cash Equivalents at End of Period	$	—		$	6		$	50		$	—		$	56

~~Condensed Consolidating Balance Sheet~~19

~~December 31,~~ITEM ~~2004~~2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Millions	LLC		LP			Other Entities		Eliminations			Total
Current assets
Cash and cash equivalents	$	—	$	15		$	48	$	—		$	63
Accounts receivable, net	16		945			1,013		(708		)	1,266
Inventories	—		601			183		—			784
Other current assets	2		34			7		—			43
Total current assets	18		1,595			1,251		(708		)	2,156
Property, plant and equipment, net	—		3,453			315		—			3,768
Investments in and advances to affiliates	5,496		32			4,968		(9,603		)	893
Other assets and deferred charges	20		32			31		(28		)	55
Total Assets	$	5,534	$	5,112		$	6,565	$	(10,339	)	$	6,872
Current liabilities
Accounts payable	$	100	$	710		$	782	$	(708	)	$	884
Secured borrowings and other debt	—		1			200		—			201
Other current liabilities and deferred credits	50		181			25		—			256
Total current liabilities	150		892			1,007		(708		)	1,341
Long-term debt	1,381		9			—		—			1,390
Other liabilities and deferred credits	3		85			31		(28		)	91
Total liabilities	1,534		986			1,038		(736		)	2,822
Members’ preferred interests	75		—			—		—			75
Members’ capital	3,925		4,127			5,476		(9,603		)	3,925
Accumulated other comprehensive income (loss)	—		(1		)	51		—			50
Total members’ equity	3,925		4,126			5,527		(9,603		)	3,975
Total Liabilities and Members’ Equity	$	5,534	$	5,112		$	6,565	$	(10,339	)	$	6,872

This discussion should be read in conjunction with the condensed consolidated financial statements and notes preceding this discussion, and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes included in CPChem’s Annual Report on Form 10-K for the year ended December 31, 2005.

18Results of Operations

Note 11. Condensed Consolidating Financial Statements (continued)

	Three months ended March 31,
Millions	2006			2005
Income (loss) before interest and taxes
Olefins & Polyolefins	$	416		$	302
Aromatics & Styrenics	—			93
Specialty Products	23			15
Corporate & Other	5			(1		)
Consolidated	444			409
Net interest expense and income taxes	(20		)	(20		)
Net income	$	424		$	389

~~Chevron~~Net income for the ~~Phillips~~three-month ~~Chemical~~period ~~Company~~ended ~~LLC~~March 31, 2006 was $424 million compared with net income of $389 million during the same three-month period in 2005. Consolidated net sales revenue was higher in the 2006 period on higher overall sales prices, partially offset by lower sales volumes. Equity earnings from affiliates remained constant, and Other Income rose in the 2006 quarter as a result of the recognition of a $39 million payment commitment from insurers towards a business interruption insurance claim attributable to losses sustained from Hurricane Rita in 2005. Cost of Goods Sold increased due to higher feedstock prices and utility costs.

~~Condensed~~Income ~~Consolidating~~(loss) ~~Statement~~before ofinterest ~~Cash~~and ~~Flows~~taxes

~~For the six months ended~~Olefins ~~June 30,~~& ~~2005~~Polyolefins

(Unaudited)

	Three months ended March 31,
Millions	2006		2005
Income before interest and taxes	$	416	$	302

Millions	LLC			LP			Other Entities			Eliminations			Total
Cash Flows From Operating Activities
Net income	$	562		$	456		$	589		$	(1,045	)	$	562
Adjustments to reconcile net income to net cash flows provided by operating activities
Depreciation, amortization and retirements	—			131			11			—			142
Undistributed equity in income of affiliates, net	(114		)	—			(58		)	138			(34		)
Changes in operating working capital	34			(99		)	(24		)	—			(89		)
Other operating cash flow activity	2			(6		)	14			—			10
Net cash flows provided by operating activities	484			482			532			(907		)	591
Cash Flows From Investing Activities
Capital and investment expenditures	—			(69		)	(10		)	—			(79		)
Investments in Jubail Chevron Phillips Company	—			—			(20		)	—			(20		)
Advance repayment from Saudi Chevron Phillips Company	—			—			9			—			9
Other investing cash flow activity	3			—			—			(3		)	—
Net cash flows provided by (used in) investing activities	3			(69		)	(21		)	(3		)	(90		)
Cash Flows From Financing Activities
Decrease in commercial paper, net	(221		)	—			—			—			(221		)
Decrease in secured borrowings, net	—			—			(50		)	—			(50		)
Increase in other debt, net	—			—			3			—			3
Redemptions of members’ preferred interests	(75		)	—			—			—			(75		)
Distributions on members’ preferred interests	(2		)	—			—			—			(2		)
Other distributions to members	(189		)	(423		)	(487		)	910			(189		)
Net cash flows used in financing activities	(487		)	(423		)	(534		)	910			(534		)
Net Decrease in Cash and Cash Equivalents	—			(10		)	(23		)	—			(33		)
Cash and Cash Equivalents at Beginning of Period	—			15			48			—			63
Cash and Cash Equivalents at End of Period	$	—		$	5		$	25		$	—		$	30

Income before interest and taxes for Olefins & Polyolefins was $416 million in the first quarter of 2006 compared with $302 million in the prior-year period, primarily due to significantly higher earnings from olefins, alpha olefins and polyethylene on improved margins. Revenues increased as a result of higher overall sales prices and volumes. Cost of Goods Sold also increased due to higher feedstock prices and utility costs. Equity earnings from affiliates were up slightly, as higher earnings from Q-Chem offset lower earnings from Phillips Sumika Polypropylene Company. Other Income rose in the 2006 quarter as a result of the recognition of a payment commitment from insurers towards a business interruption insurance claim previously described.

1920

~~Note~~Aromatics ~~11. Condensed Consolidating Financial Statements~~& ~~(continued)~~Styrenics

Chevron Phillips Chemical Company LLC

~~Condensed~~Results ~~Consolidating~~were breakeven ~~Statement~~for Aromatics & Styrenics in the three-month period ended March 31, 2006 compared with $93 million of ~~Cash~~income ~~Flows~~before interest and taxes in the 2005 period. Earnings were lower in 2006 across most product lines, primarily from benzene and paraxylene. Earnings from benzene and paraxylene were down as a result of lower margins, lower sales volumes and operational issues at the Pascagoula, Mississippi facility. Sales revenues for Aromatics & Styrenics decreased due to lower overall sales prices and volumes. Cost of Goods Sold was also lower in 2006 due to decreased volumes, partially offset by higher utility rates and feedstock prices.

~~For the six months ended~~Specialty ~~June 30, 2004~~Products

(Unaudited)

	Three months ended March 31,
Millions	2006		2005
Income before interest and taxes	$	23	$	15

Millions	LLC			LP			Other Entities			Eliminations			Total
Cash Flows From Operating Activities
Net income	$	205		$	112		$	249		$	(361	)	$	205
Adjustments to reconcile net income to net cash flows provided by operating activities
Depreciation, amortization and retirements	—			128			11			—			139
Undistributed equity in income of affiliates, net	(243		)	(1		)	(173		)	358			(59		)
Changes in operating working capital	19			(95		)	42			—			(34		)
Other operating cash flow activity	70			(69		)	—			—			1
Net cash flows provided by operating activities	51			75			129			(3		)	252
Cash Flows From Investing Activities
Capital and investment expenditures	—			(79		)	(21		)	—			(100		)
Investments in Q-Chem	—			—			(18		)	—			(18		)
Other investing cash flow activity	(30		)	—			—			30			—
Net cash flows used in investing activities	(30		)	(79		)	(39		)	30			(118		)
Cash Flows From Financing Activities
Increase in commercial paper, net	54			—			—			—			54
Decrease in secured borrowings, net	—			—			(100		)	—			(100		)
Decrease in other debt, net	—			(1		)	(13		)	—			(14		)
Distributions on members’ preferred interests	(39		)	—			—			—			(39		)
Other distributions to members	(36		)	—			—			—			(36		)
Contributions from members	—			—			27			(27		)	—
Net cash flows used in financing activities	(21		)	(1		)	(86		)	(27		)	(135		)
Net Increase (Decrease) in Cash and Cash Equivalents	—			(5		)	4			—			(1		)
Cash and Cash Equivalents at Beginning of Period	—			12			31			—			43
Cash and Cash Equivalents at End of Period	$	—		$	7		$	35		$	—		$	42

Income before interest and taxes for Specialty Products totaled $23 million in the first quarter of 2006 compared with $15 million in the first quarter of 2005. The improvement in earnings was primarily the result of increased sales volumes of Specialty Chemicals.

20Corporate & Other

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Three months ended March 31,
Millions	2006		2005
Income (loss) before interest and taxes	$	5	$	(1)

~~This~~Income ~~discussion~~before interest ~~should~~and betaxes ~~read~~for inCorporate ~~conjunction~~and ~~with~~Other was $5 million in the ~~condensed~~three-month ~~consolidated~~period ~~financial~~ended ~~statements~~March ~~and~~31, ~~notes~~2006, ~~preceding~~compared ~~this~~to ~~discussion~~a $1 million loss in the three-month period in 2005. At year-end, certain employee benefit and ~~with~~incentive plan ~~Management’s~~expenses ~~Discussion~~are often accrued and ~~Analysis~~held ofat ~~Financial~~the ~~Condition~~Corporate level and ~~Results~~subsequently allocated to the business segments during the first quarter of the following ~~Operations~~year, ~~and~~which ~~the~~results ~~consolidated~~in ~~financial~~lower ~~statements~~first-quarter ~~and~~Corporate ~~notes~~expenses. ~~included~~The reduction in ~~CPChem’s~~expenses ~~Annual~~resulting ~~Report~~from onthe ~~Form 10-K~~allocation ~~for~~was higher in the ~~year~~first ~~ended~~quarter ~~December 31,~~of 2006 ~~2004~~as compared with the first quarter of 2005.

~~Results of Operations~~Outlook

	Three months ended June 30,						Six months ended June 30,
Millions	2005			2004			2005			2004
Income (loss) before interest and taxes
Olefins & Polyolefins	$	183		$	56		$	485		$	159
Aromatics & Styrenics	13			48			106			62
Specialty Products	8			19			23			34
Corporate & Other	(9		)	(6		)	(10		)	(11		)
Consolidated	195			117			604			244
Net interest expense and income taxes	(22		)	(20		)	(42		)	(39		)
Net income	$	173		$	97		$	562		$	205

Overall chemical industry sales volumes and earnings are expected to be strong in 2006. However, prices and margins for certain products could decline from recent levels due to various factors, including uncertain energy and feedstock prices, U.S. and international economic conditions, imbalances in international trade and geopolitical pressures.

~~Net~~At ~~income~~this ~~for~~time, the ~~three-month period ended June 30,~~ ~~2005~~amount ~~increased~~and ~~$76~~timing ~~million~~of tofurther ~~$173~~reimbursements ~~million,~~from ~~compared~~business ~~with~~interruption ~~net income of $97~~and ~~million~~property ~~during~~damage ~~the~~insurance ~~same~~claims ~~three-month~~from ~~period in 2004. Consolidated net sales revenue rose in the~~ 2005 ~~period~~hurricane onactivity ~~higher~~is ~~overall~~uncertain. ~~sales prices~~However, ~~partially offset by lower~~ ~~volumes. Other~~such ~~income~~reimbursements ~~rose~~may ashave a ~~result of~~material ~~higher~~positive ~~commission~~impact income and a legal settlement discussed below. Cost of Goods Sold increased as a result of higher feedstock and utility costs, partially offset by lower turnaround costs. Increased distribution costs and foreign currency transaction expenses contributed to ~~higher~~the ~~Selling,~~period ~~General~~or ~~and~~periods ~~Administrative~~when ~~expense in the second quarter of 2005~~recorded.

~~Results in 2005 include a $12 million net benefit,~~Liquidity recorded to Other Income in the second quarter, from a legal settlement related to a styrene column collapse at the St. James, Louisiana facility in 2001. Also included in second quarter 2005 results was a $9 million benefit recorded to Cost of Goods Sold to recognize unit/line fill inventory at various manufacturing facilities, and aCapital ~~$4 million cumulative charge to depreciation resulting from the adjustment of the economic life of certain leasehold improvements at a third-party tolling facility.~~Resources

~~Net~~Cash ~~income~~balances ~~for the first six months of 2005 was~~were $~~562~~34 million at March 31, ~~representing~~2006 aand $~~357~~40 million ~~improvement~~at ~~over~~December ~~net~~31, ~~income~~2005, of ~~$205~~which $29 million ~~during~~and ~~the~~$21 ~~same~~million, ~~period in 2004. Consolidated net sales revenue rose significantly in the 2005 period on higher overall sales prices~~respectively, ~~while Equity Earnings from Affiliates~~ were ~~higher primarily~~held onby ~~improved~~foreign ~~results from Phillips Sumika Polypropylene Company (Phillips Sumika)~~subsidiaries. ~~Other~~ ~~income rose as~~CPChem’s aobjective ~~result~~is ofto ~~higher~~minimize ~~commission~~cash ~~income~~balances ~~and~~in ~~the~~its ~~legal~~worldwide ~~settlement~~operations ~~discussed~~while ~~above. Cost~~utilizing ofthe ~~Goods~~commercial ~~Sold~~paper ~~increased primarily~~program ~~as a result of higher feedstock costs. Increased distribution costs and foreign currency transaction expenses contributed~~ to ~~higher~~meet ~~Selling,~~its ~~General~~daily ~~and~~operating ~~Administrative expense in the 2005 period~~requirements.

~~Income (loss)~~Operating ~~before interest and taxes~~Activities

~~Olefins &~~Cash ~~Polyolefins~~provided by operating activities totaled $270 million during the first three months of 2006, compared with $292 million during the same period in 2005. Improved earnings in the 2006 period were partially offset by a higher net increase in operating working capital.

	Three months ended June 30,				Six months ended June 30,
Millions	2005		2004		2005		2004
Income before interest and taxes	$	183	$	56	$	485	$	159

Investing Activities

~~Income~~Capital ~~before interest~~ and ~~taxes for Olefins &~~ ~~Polyolefins~~investment ~~increased~~expenditures tototaled $~~183~~35 million induring the ~~second~~first ~~quarter~~three months of 2006, ~~2005~~ compared with $5633 million in the prior-year period~~, primarily due to significantly higher earnings from olefins and polyethylene on improved margins~~. ~~Revenues~~ ~~increased~~Approximately ~~as a result of higher~~$22 ~~overall~~million ~~sales prices, while feedstock costs also increased due to higher prices. Equity Earnings from Affiliates increased slightly in the 2005 quarter on improved results~~ of ~~Phillips~~2006 ~~Sumika, partially~~expenditures ~~offset~~was byinvested ~~lower earnings from Q-Chem. The improvement~~ in Olefins & Polyolefins’, ~~earnings was also~~$6 ~~attributable~~million ~~to lower turnaround costs~~ in ~~2005,~~Aromatics ~~partially~~& ~~offset by costs associated with the restart of one of CPChem’s ethylene plants. The plant~~Styrenics, ~~located~~$5 atmillion ~~its Sweeny facility~~ in ~~Old~~ ~~Ocean,~~Specialty ~~Texas~~Products and ~~idle~~the ~~since~~remaining $2 ~~2001,~~million ~~was restarted~~ in ~~the~~corporate-level ~~second quarter of 2005~~expenditures. ~~Results~~ inInvesting ~~2005~~activities ~~include~~during ~~a $2~~the ~~million~~2006 ~~benefit~~period ~~recorded~~also inincluded ~~the~~$15 ~~second~~million ~~quarter associated with the recognition~~ of ~~unit/line~~advance ~~fill~~repayments ~~inventory~~from Q-Chem.

~~Income~~For ~~before~~the ~~interest~~full ~~and taxes for Olefins &~~year ~~Polyolefins~~2006, ~~totaled~~CPChem ~~$485~~expects ~~million~~to ininvest ~~the~~a ~~first~~total ~~half~~ of ~~2005~~approximately ~~compared with~~ $~~159~~ 250 million in ~~the 2004 period.~~ capital ~~Significantly higher earnings from olefins~~ and ~~polyethylene~~investment ~~on higher margins were the main drivers of the improved results~~expenditures. Revenues increased from significantly higher sales prices. Feedstock costs increased largely due to higher energy prices. Equity Earnings from Affiliates were higher in the first half of 2005 on improved results of Phillips Sumika and Q-Chem.

~~Aromatics & Styrenics~~Financing Activities

	Three months ended June 30,				Six months ended June 30,
Millions	2005		2004		2005		2004
Income before interest and taxes	$	13	$	48	$	106	$	62

Cash used in financing activities totaled $261 million in the first three months of 2006 compared with $266 million in the prior-year period. Commercial paper balances outstanding increased $41 million during the first three months of 2006 compared to a $125 million decrease during the 2005 period. Financing activities in 2006 also included $122 million of distributions to members to fund their estimated federal and state income tax liabilities attributable to CPChem, compared with $39 million of such distributions in 2005. Discretionary distributions paid to members totaled $180 million in the 2006 period, compared with $25 million of such distributions in 2005. In the 2005 period, CPChem also voluntarily redeemed the remaining $75 million of outstanding members’ preferred interests and paid $2 million of distributions on members’ preferred interests. At March 31, 2006, accrued discretionary distributions to members totaled $225 million and accrued distributions to fund the members’ estimated tax liabilities totaled $137 million. These distributions will be paid in the second quarter of 2006.

~~Income before~~CPChem ~~interest~~had ~~and~~secured borrowings ~~taxes~~outstanding ~~for~~totaling ~~Aromatics & Styrenics totaled~~ $13 100 million inat ~~the~~both ~~three-month~~March ~~period ended June 30~~31, ~~2005~~2006 ~~compared with $48 million in the 2004 period. Lower earnings from benzene~~ and ~~styrene accounted for most of the decrease. Benzene earnings were lower due to lower margins~~ ~~and~~December ~~sales volumes~~31, ~~partially~~2005 ~~due~~under to a ~~turnaround~~trade atreceivables ~~the~~securitization ~~Pascagoula, Mississippi benzene facility in June~~agreement. ~~The~~ ~~plant~~These ~~remained~~borrowings ~~down~~are ~~through~~classified ~~most~~as ofshort-term ~~July due to catalyst issues~~ and ~~hurricane activity~~were insecured ~~the~~by ~~Gulf~~$748 ofmillion ~~Mexico~~ and $821 ismillion ~~in the process~~ of ~~being~~trade ~~re-started~~receivables, respectively. ~~Results~~ ~~for~~The ~~styrene~~trade ~~were lower due to~~receivables ~~decreased~~securitization ~~sales~~agreement ~~volumes,~~expires ~~partially~~in ~~offset~~May ~~by higher margins~~2006. ~~Sales~~ ~~revenues~~CPChem ~~for~~has ~~the~~commitments ~~segment increased on~~from ~~higher overall prices~~banks, ~~partially~~subject ~~offset~~to byfinal ~~lower~~documentation, ~~sales~~to ~~volumes. Feedstock~~renew ~~costs increased despite~~ the ~~lower~~receivables ~~volumes. Equity Earnings from Affiliates decreased in~~securitization ~~the~~agreement ~~2005~~through ~~quarter~~May ~~on lower earnings from Saudi Chevron Phillips Company~~2007.

~~Results~~CPChem believes incash requirements over the ~~2005~~next ~~periods~~twelve ~~presented~~months ~~include~~will be funded through a combination of cash on hand, cash flows from operations and commercial paper. In addition, it is anticipated that redemption of the $12500 million ~~net~~of ~~benefit~~53/8% notes scheduled to mature in June 2007 will be funded by cash from aoperations ~~legal~~and/or new debt proceeds. CPChem is not aware of any conditions that ~~settlement~~exist ~~related~~as toof the ~~St.~~date ~~James~~of ~~styrene~~this ~~column~~report ~~collapse~~that would cause any of its debt obligations to be in ~~2001~~or ~~and~~at risk of default. In addition, a $7change in CPChem’s ~~million~~credit ~~benefit~~ratings ~~for~~would ~~unit/line~~not ~~fill~~result ~~inventory~~in the acceleration of any existing debt obligation maturities.

22Contingencies. See Note 9 of Notes to Condensed Consolidated Financial Statements for a discussion of contingent liabilities.

~~Specialty~~New ~~Products~~Accounting Pronouncements. See Note 2 of Notes to Condensed Consolidated Financial Statements for a discussion of new accounting pronouncements.

	Three months ended June 30,				Six months ended June 30,
Millions	2005		2004		2005		2004
Income before interest and taxes	$	8	$	19	$	23	$	34

~~Earnings~~This report contains certain “forward-looking statements.” Such statements can generally be identified with words and phrases such as “believes,” “expects,” “anticipates,” “should,” “estimates” or other words and phrases of similar meaning. Where CPChem expresses an expectation or belief as to future events or results, there can be no assurance that the expectation or belief will result, be achieved or be accomplished. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, CPChem believes such assumptions or bases to be reasonable and to be made in good faith. Assumed facts or bases almost always vary from actual results, and the differences ~~second~~between ~~quarter~~assumed facts or bases and actual results can be material, depending on the circumstances. Significant assumptions that, if erroneous, could cause actual results to differ materially from those expressed relate to the following factors, among others: the timing and duration of ~~2005~~periods ~~were~~of ~~lower~~expansion ~~compared~~and ~~with~~contraction within the ~~second~~chemicals ~~quarter~~business; plans for the construction, modernization, start-up or de-bottlenecking of ~~2004~~domestic and foreign chemical plants; prices of feedstocks, energy and products; force majeure events; severe weather; accidents; labor relations; political risks; terrorist acts; war; changes in ~~both~~foreign ~~Ryton®~~and domestic laws, rules and ~~polyphenylene~~regulations ~~sulfide~~and ~~(PPS)~~the interpretation and ~~Specialty~~enforcement ~~Chemicals. Ryton®~~thereof; ~~PPS~~the ~~earnings~~effects ~~decreased~~of accounting ~~due~~rule changes under generally accepted accounting principles promulgated by various rule-setting bodies; regulatory decisions relating to taxes, ~~lower~~the ~~margins~~environment and human resources; results of operations and the financial condition of equity affiliates; the global economy; results of financing efforts; and overall financial market conditions. ~~Specialty~~ ~~Chemicals~~All forward-looking ~~earnings~~statements ~~decreased~~and ~~due~~risk tofactors ~~higher~~in ~~feedstock~~this ~~costs,~~report ~~partially~~are ~~offset~~qualified in their entirety by the ~~higher~~cautionary statements contained herein. Unpredictable or unknown factors ~~sales~~not ~~volumes~~discussed herein could also have material adverse effects on such forward-looking statements. CPChem does not undertake to update, revise or correct any of the forward-looking information.

~~Income~~ITEM ~~before~~3. ~~interest~~Quantitative and ~~taxes~~Qualitative ~~for~~Disclosures ~~Specialty Products~~about ~~for~~Market the first half of 2005 decreased due to lower earnings from Specialty Chemicals. Lower margins, largely driven by the impact of a feedstock supply interruption that occurred earlier in the year at the Borger, Texas facility, were partially offset by higher overall sales volumes.Risk

~~Corporate &~~CPChem’s ~~Other~~exposure to market risk is described in Item 7A of its Annual Report on Form 10-K for the year ended December 31, 2005. CPChem believes its exposure to market risk has not changed materially at March 31, 2006.

	Three months ended June 30,						Six months ended June 30,
Millions	2005			2004			2005			2004
Income (loss) before interest and taxes	$	(9	)	$	(6	)	$	(10	)	$	(11	)

ITEM 4. Controls and Procedures

~~Loss~~As of the end of ~~before~~the ~~interest~~period covered by this report, and ~~taxes~~with ~~for~~the ~~Corporate~~participation of management, CPChem’s Chief Executive Officer and ~~Other~~Chief ~~was~~Financial $9Officer ~~million~~carried inout an evaluation of the ~~second quarter~~effectiveness of ~~2005~~the ~~compared~~design ~~with~~and $6operation ~~million~~of CPChem’s disclosure controls and procedures (as defined in ~~the~~Securities ~~prior~~Exchange ~~year~~Act ~~period~~Rules 13a-15(e) and 15d-15(e)). ~~Higher~~ ~~employee~~Based ~~benefit~~upon that evaluation, the Chief Executive Officer and ~~incentive~~Chief ~~plan~~Financial Officer have concluded that CPChem’s disclosure ~~expenses~~controls and procedures are effective in ~~the~~providing ~~2005~~them ~~period~~with ~~contributed~~timely material information that is required to ~~the~~be ~~increase. Certain~~disclosed ~~employee~~in ~~benefit~~reports ~~and~~CPChem ~~incentive~~files ~~plan~~under ~~expenses~~Section ~~that~~13 or 15(d) of the Securities Exchange Act. There were ~~accrued~~no ~~and~~changes ~~held~~in CPChem’s atinternal ~~the~~control ~~Corporate~~over ~~level~~financial atreporting ~~year-end~~(as ~~2004~~defined ~~and~~in Securities ~~allocated~~Exchange toAct ~~the~~Rules ~~business~~13a-15(f) ~~segments~~and 15d-15(f)) that occurred during the ~~first~~period covered ~~quarter~~by ofthis ~~2005~~report ~~offset~~that ~~the~~have materially affected, or are reasonably likely ~~effects~~to ofmaterially ~~the~~affect, ~~second~~CPChem’s ~~quarter~~internal control over financial reporting.

~~Outlook~~23

~~CPChem continues~~PART ~~to maintain its focus on safety, operational reliability, improving margins and increasing sales volumes~~II. ~~Results~~ ~~from CPChem’s Middle East joint ventures in the first half of~~OTHER 2005 were strong due in part to good market conditions and favorable local feedstock costs. Commodity chemicals demand growth rates have generally moderated as compared with 2004 and the first quarter of 2005. During the second quarter of 2005, customer demand softened in various product lines as some inventory de-stocking occurred, impacting overall sales volumes. As a result, utilization rates at certain domestic production facilities fell and an oversupply in a number of product lines caused margin contraction. However, the continuing tightening of available supply due to a lack of significant capacity additions within the industry during 2003-2004 is expected to support solid profitability over the next several years.INFORMATION

~~Liquidity~~ITEM ~~and~~6. ~~Capital Resources~~Exhibits

Cash balances were $30 million at June 30, 2005 and $63 million at December 31, 2004, of which $25 million and $48 million, respectively, were held by foreign subsidiaries. CPChem’s objective is to minimize cash balances in its worldwide operations while utilizing its commercial paper program for daily operating requirements.

31.1		Certification of Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934

31.2		Certification of Chief Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934

Operating Activities

Cash provided by operating activities totaled $591 million during the first six months of 2005, compared with $252 million during the same period in 2004. The improvement was primarily driven by higher earnings in 2005.

Investing Activities

Capital and investment expenditures, excluding investments related to the JCP Project, totaled $79 million during the first half of 2005, compared with $96 million in the prior-year period. Approximately $61 million of 2005 expenditures was invested in Olefins & Polyolefins, $8 million in Aromatics & Styrenics, $6 million in Specialty Products and the remaining $4 million in corporate-level expenditures. In addition, CPChem invested $20 million in the JCP Project in 2005. In the 2004 period, CPChem invested $18 million in additional shares of Q-Chem.

For the year 2005, CPChem expects to invest a total of approximately $200 million in capital and investment expenditures and approximately $45 million towards the JCP project.

See Note 6 of Notes to Condensed Consolidated Financial Statements for further discussion of commitments relating to Q-Chem and the JCP project.

Financing Activities

Cash used in financing activities totaled $534 million in the first six months of 2005 compared to $135 million in the prior-year period. Commercial paper balances outstanding decreased $221 million during the first half of 2005 compared to a $54 million increase during the 2004 period. Borrowings outstanding under the accounts receivable securitization program decreased an additional $50 million during the 2005 period, compared with a decrease of $100 million during the prior-year period. CPChem voluntarily redeemed the remaining $75 million of outstanding members’ preferred interests in 2005 and paid distributions on members’ preferred interests totaling $2 million and $39 million in the 2005 and 2004 periods, respectively. Financing activities in 2005 also included $164 million of distributions to members to fund their estimated federal and state income tax liabilities attributable to CPChem, compared with $36 million in 2004. Discretionary distributions to members totaled $25 million in 2005.

CPChem had secured borrowings outstanding totaling $150 million at June 30, 2005 and $200 million at December 31, 2004 under a trade receivables securitization agreement. These borrowings, classified as short-term, were secured by $652 million and $665 million of trade receivables, respectively. CPChem renewed its $300 million trade receivables securitization agreement in the second quarter of 2005 on terms substantially similar to those of the prior agreement. The new agreement expires in May 2006.

CPChem believes cash requirements over the next twelve months will be funded through a combination of cash on hand, cash flows from operations and commercial paper. CPChem is not aware of any conditions that exist as of the date of this report that would cause any of its debt obligations to be in or at risk of default. In addition, CPChem does not have any debt obligations whose maturities would be accelerated as the result of a credit rating downgrade.

Contingencies. See Note 8 of Notes to Condensed Consolidated Financial Statements for a discussion of contingent liabilities.

New Accounting Pronouncements. See Note 2 of Notes to Condensed Consolidated Financial Statements for a discussion of new accounting pronouncements.

This report contains “forward-looking statements” within the meaning of the federal securities laws. Such statements can generally be identified with words and phrases such as “believes,” “expects,” “anticipates,” “should,” “estimates” or other words and phrases of similar meaning. Where CPChem expresses an expectation or belief as to future events or results, there can be no assurance that the expectation or belief will result, be achieved or be accomplished. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, CPChem believes such assumptions or bases to be reasonable and to be made in good faith. Assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. Significant assumptions that, if erroneous, could cause actual results to differ materially from those expressed relate to the following factors, among others: the timing and duration of periods of expansion and contraction within the chemicals business; plans for the construction, modernization, start-up or de-bottlenecking of domestic and foreign chemical plants; prices of feedstocks, energy and products; force majeure events; accidents; labor relations; political risks; terrorist acts; war; changes in foreign and domestic laws, rules and regulations and the interpretation and enforcement thereof; regulatory decisions relating to taxes, the environment and human resources; the global economy; results of financing efforts; and overall financial market conditions. All forward-looking statements and risk factors in this report are qualified in their entirety by the cautionary statements contained herein. CPChem does not undertake to update, revise or correct any of the forward-looking information.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

CPChem’s exposure to market risk is described in Item 7A of its Annual Report on Form 10-K for the year ended December 31, 2004. CPChem believes its exposure to market risk has not changed materially at June 30, 2005.

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, and with the participation of management, CPChem’s Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of CPChem’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that CPChem’s disclosure controls and procedures are effective in providing them with timely material information that is required to be disclosed in reports CPChem files under Section 13 or 15(d) of the Securities Exchange Act. There were no changes in CPChem’s internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, CPChem’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

Governmental Agency Proceeding

In July and August 2004, the Texas Commission for Environmental Quality (the “TCEQ”) conducted an annual air compliance inspection at CPChem’s facility in Port Arthur, Texas. By letter dated December 30, 2004, the TCEQ issued a Notice of Enforcement letter to CPChem with a proposed Agreed Order and recommended penalty amount. In June 2005, CPChem and the TCEQ agreed to settle this matter by entering into an Agreed Order providing for the payment of a penalty and performance of a Supplemental Environmental Project for a combined value of $278,250. CPChem also agreed to submit a permit application to authorize emissions from the cyclohexane unit that were originally authorized under a permit by rule.

ITEM 6. Exhibits

31.1		Certification of Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2		Certification of Chief Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934

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.

	~~CHEVRON PHILLIPS CHEMICAL COMPANY LLC~~	CHEVRON PHILLIPS CHEMICAL COMPANY LLC
Date: July 29, 2005		/s/ Greg G. Maxwell
Date: May 2, 2006			/s/ Greg G. Maxwell
		~~Greg G. Maxwell~~	Greg G. Maxwell
		~~Senior Vice President,~~	Senior Vice President,
		~~Chief Financial Officer and Controller~~	Chief Financial Officer and Controller

2624

Three months ended
March 31,

Millions

Income before interest and taxes