$quot;Praxair is a very focused organisation,$quot; Steve Angel begins, outlining the drivers behind the company's record 2006 results. $quot;We spend a lot of time on the business details, driving productivity, managing price, conducting rigorous capital decision evaluations and ensuring our projects come in on cost and on schedule. We are focused, disciplined and very execution oriented.$quot;

Angel puts Praxair's leading performance amongst the world's top tier gas companies down to disciplined investment and focus on 11 key geographies. $quot;As a result of that focus, we've been able to build strong market positions,$quot; he explains. $quot;We've got enough density to earn very high returns on our investment.$quot;

Angel says the key to creating a good return is to ensure that $quot;when we make an investment in an air separation unit (ASU) in any corner of the world, we optimise the use of all of the gas molecules, whether for chemicals, steel or for smaller end-users that need packaged gas (cylinder) quantities of gas. In the main, we think that when you operate an atmospheric gases business, the best structure is a localised structure, and we certainly think our results bear that out.$quot; There are a couple of exceptions, notably the electronics business and surface technology business. $quot;These are technologies that have global applications and can be leveraged worldwide to global customers. In these businesses, we thought the best structure to address these markets was a global one.$quot;

What Praxair's geographies (including North America, South America, Europe and Asia) have in common is the location of industrial complexes where Praxair can position itself for success.

Angel cites Praxair's contract with CSPC, a joint venture of China National Offshore Oil Corporation (CNOOC) and Shell Petrochemicals Company Ltd., to supply oxygen and nitrogen requirements for its new $4.3bn integrated petrochemical complex in Daya Bay, Huizhou, in Guangdong Province (China). $quot;They require a lot of our core products; it's an opportunity to invest in air separation capacities, with opportunities to sell our molecules as the complex expands,$quot; Angel says. $quot;We have a pipeline there, and we also take gas molecules, liquefy them, and sell them to the merchant market, roughly within a 200-mile radius.$quot;

Praxair has invested a lot in China in recent years, $quot;and we'll continue to invest going forward,$quot; says Angel. $quot;What we're seeing is an ever-improving return on our investment.$quot; He foresees the possibility of double-digit growth for the company in China, where Praxair's Shanghai-headquartered operation oversees 13 wholly owned companies and 11 joint ventures.

China is not only the headquarters of Praxair Asia, but also the hub of engineering resource supporting Praxair's business in Asia. Praxair China announced in January that it is to supply Semiconductor Manufacturing International Corp. (SMIC) with ultra-high-purity nitrogen, oxygen, argon, hydrogen and helium gases to SMIC's new Shanghai facility. Praxair will also build and operate the purification and gas-monitoring systems located on the site.

Keeping a lid on costs
Praxair's 'front end loading' process obtains firm prices from suppliers on 85-90 percent of the total project before providing a price to the customer. $quot;If we had not done that, we would have been surprised by the enormous cost inflation that many companies are very publicly talking about,$quot; Angel says. Despite this, Praxair's costs have gone up by around 25-30 percent too, but the difference is the costs are understood upfront before a price is given to the customer. $quot;In 2006 we completed about 55 projects around the world, including the Gulf Coast, Alberta Canada, California, Texas, China, India and Mexico. Adding up the costs versus what we estimated going in, the total overrun was 3 percent - and I can live with 3 percent compared to some of the projects you hear about overrunning by as much as 50 percent.$quot;

Mexican acquisition
$quot;In Mexico, Praxair has a large profitable position and the economy is growing faster than the US,$quot; says Angel. The company announced the acquisition of Linde's industrial and medical gases business in Mexico in February. $quot;In Mexico we have just added $75m to the business bringing it close to $500m. We have a strong market position, and the acquisition has a lot of synergy with our existing business.$quot; This year the company also will be starting up a major oil recovery project (EOR) for Pemex in Samaria in south eastern Mexico.

In South America, Praxair's strongest position is in Brazil, but Angel sees new opportunities for growth. $quot;For example, we are branching off from our core business into liquid natural gas in partnership with Brazil's state-owned oil company, Petrobras. We liquefy gas near San Paulo and distribute it by truck. This is an area we will continue to expand.$quot; The Brazilian economy is stable and thriving. $quot;There's a strong expansion of the economy around steel and other commodities. We're well positioned with the steel industry, which in Brazil has some of the most cost-competitive steel operations in the world. The picture looks bright and we will continue to expand,$quot; says Angel.

Praxair recently lost out to Air Products in the BOC Poland divestment made by Linde. But Angel is not concerned: $quot;Air Products obviously thought the business was worth a lot more than we did!$quot; He points out that Praxair exited Poland early in 2002 via a sale to BOC.

With the exception of Israel, Praxair has limited involvement in the Middle Eastern market, but Angel says this is an area to evaluate. $quot;It is an area that we would invest under the right circumstances: We don't have to be in every geography across the world just to raise the Praxair flag. But if we can establish a base, build market density and get value, we will look at it.$quot;

Angel follows in Dennis Reilley's shoes as CEO. $quot;Dennis broke the mould, because he came in from a non-gas background and was successful,$quot; says Angel, who also heralds from a non-gas company, General Electric. Angel has $quot;thousands of experts$quot; within the company to draw upon. $quot;I am very interested in the industrial gas business; I have technical curiosity and enjoy continuing to learn all the various aspects of the business. Having said that, what's critical is running the business. Making sure we have the right people, making sure we have the right operating discipline and focusing on the key details of running the business are the prime elements. Our strategy is sound. But we are constantly evaluating our strategy, making refinements and looking for increased gains in productivity.$quot;

Angel worked together on Praxair's strategy with Reilley for six years. $quot;Dennis' strategy and my strategy are one and the same! It's every bit as much my strategy and organisation as Dennis'.$quot; They clearly devised a successful formula: $quot;it's been producing good results through 2006 and will continue to do so, at least until the end of the decade.$quot;

$quot;In May 2006 we laid out what we thought would happen for the next five years and we thought an 8-10 percent growth rate is sustainable for the near future.$quot; Some of the reasons are:

Hydrogen demand for refining should continue to be strong for at least a decade.
Oxygen for medical use continues to grow at a high single digit rate around the globe.
Oxygen has hundreds of applications and customers can improve their productivity, lower costs - especially in energy intensive industries - and meet ever more stringent regulations.

Energy sector drives growth
$quot;In North America natural gas is still in high demand due to shortages, leading to high prices. We provide nitrogen, and carbon dioxide which is used for natural gas fracing, principally in western U.S. and western Canada. You can add to that enhanced oil recovery - as I mentioned earlier, we have a major EOR project with Pemex in Samaria, Mexico whereby we're injecting large amounts of nitrogen in the ground to pressurise oil fields and allow Pemex to recover a lot more oil. Those are two principal growth drivers.

Angel says that natural gas fracing and enhanced oil recovery projects are viable if natural gas stays above $6 per mmbtu and oil prices stay above $35-40 per barrel over the long term. $quot;We're in discussion with a lot of oil field developers about using our technology, whether it's nitrogen injection or CO2 flooding to recover that oil. You'll hear about more and more projects in that vein.$quot;

Production of syngas from coal is another example where Praxair is involved. Praxair recently announced a project with China's leading acetic acid producer Jiangsu SOPO involving a plant integrated with a new low-cost coal-gasification process for SOPO's acetic acid plant. Praxair will design, build, operate, and own a state-of-the-art, large air separation unit (ASU), due to come on stream in 2009. With 3,000 tpd of oxygen, the ASU will be the largest single plant selling gas and also the largest single-train ASU to be built in the Far East.

Angel sees similar plants moving forward in the US. One area is refining complexes with large deposits of petroleum coke that can be used as a feedstock for gasification. $quot;Those are projects that we will participate in by building large air separation plants. In some cases we may take the CO2 and use it for our own needs, such as enhanced oil recovery. Or, we will take the hydrogen and provide it to other refining customers.$quot;

Carbon sequestration is $quot;getting a lot of airtime today, particularly in Washington,$quot; says Angel. $quot;We are one of the largest players with some 90 CO2 plants worldwide. Praxair's capabilities include CO2 capture and purification technology as well as pipeline compression and injection expertise. We'll continue to evaluate those opportunities as they play out.$quot;

Global safety standards
Praxair is working actively to harmonise global standards. $quot;We work through IOMA and we're active with regional gas associations around the globe,$quot; Angel says. $quot;However I would add that we make our own determination in terms of what the appropriate standard is for Praxair operations. In many cases these organisations will recommend minimal standards but based on our experiences and our own analysis and evaluation we have often chosen to go to a more stringent standard.$quot; Praxair's Global Operations Excellence team ensures that these standards are adopted and closely adhered to.

$quot;If you're an industrial gas participant you have to think very seriously about making sure your safety standards are as good as they possibly could be. The health and safety of your employees and customers is at stake as is the reputation of the company. Whether we operate in India or South America we're going to make sure the standards are the same and meet the same stringent criteria we would apply in the US or Europe. There can't be any compromise.$quot;

The future
China will continue to grow at a rapid rate. $quot;China and India industrial gas use per capita is still a fraction of the levels used in the U.S. or Europe,$quot; says Angel. $quot;So there's a lot of growth ahead.$quot; Angel sees good prospects particularly in Brazil. Citing the tar sands in Alberta, Angel suggests: $quot;They'll experience a lot of growth in the future based on energy alone.$quot; He adds that Russia also has untapped potential. $quot;But there are still uncertainties and issues related to doing business in Russia, as we're all aware. They have the potential based on their resources alone to be a growth giant.$quot;

Angel says that the impact of the recent Linde/BOC deal remains to be seen. $quot;At one point we had five large global competitors and now it's down to four. There's more concentration within the industry and we're going to have to wait and see how it all plays out.$quot;

$quot;Praxair is a rather transparent company. If you talk to any of the people working in this company they would say many of the same things that I have regarding how Praxair thinks about business. There is a common understanding of how we run our industrial gas business and what the important things are that we have to do very well to maintain our leading position. It's a good industry, it's down to four major competitors, and I'm just delighted to be a part of the industry.$quot;