<PAGE>

________________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              -------------------

                                  FORM 10-K/A
                              -------------------

                                AMENDMENT NO. 1
                              -------------------

            [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

              FOR THE TRANSITION PERIOD FROM _________ TO  _________
                        COMMISSION FILE NUMBER: 1-12091

                              -------------------

                           MILLENNIUM CHEMICALS INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                              -------------------

<Table>
<S>                                                     <C>
                DELAWARE                                               22-3436215
    (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)

           230 HALF MILE ROAD                                            07701
              RED BANK, NJ                                             (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</Table>

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 732-933-5000

                              -------------------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
                                                                 NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                                     ON WHICH REGISTERED
          -------------------                                     -------------------
<S>                                                     <C>
        Common Stock, par value                                 New York Stock Exchange
            $0.01 per share
</Table>

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None

    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 is required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ].
    Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
    The aggregate market value of voting stock held by non-affiliates as of
March 22, 2002 (based upon the closing price of $14.85 per common share as
quoted on the New York Stock Exchange), is approximately $900 million. For
purposes of this computation, the shares of voting stock held by directors,
officers and employee benefit plans of the registrant and its wholly owned
subsidiaries were deemed to be stock held by affiliates. The number of shares of
common stock outstanding at March 22, 2002, was 62,900,173 shares, excluding
14,996,413 shares held by the registrant, its subsidiaries and certain Company
trusts, which are not entitled to be voted.

                      DOCUMENTS INCORPORATED BY REFERENCE
    Portions of the Registrant's definitive Proxy Statement relating to the 2002
Annual Meeting of Shareholders, to be filed with the Securities and Exchange
Commission, are incorporated by reference in Part III of this Annual Report on
Form 10-K as indicated herein.

________________________________________________________________________________




<PAGE>




                                EXPLANATORY NOTE

    Millennium Chemicals Inc. (the "Company") is filing this amendment to its
Form 10-K for the fiscal year ended December 31, 2001 to revise the Supplemental
Financial Information of the Company included on pages F-1 through F-5 of such
Form 10-K. The Supplemental Financial Information in this amendment has been
revised to disclose the financial position, results of operations and cash
flows of (i) the Company, (ii) Millennium America Inc., an indirect, wholly
owned subsidiary of the Company ("Millennium America"), and (iii) all
subsidiaries of the Company other than Millennium America, to reflect Millennium
America's and the Company's shareholders' equity as if each of those companies
and their respective subsidiaries were reported on a consolidated basis. The
information in the columns headed "Millennium Chemicals Inc. and Subsidiaries"
is unchanged. Item 14, as amended, is hereby provided in its entirety.







<PAGE>



                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

         (a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

 1.      Supplemental Financial Information.

         The Supplemental Financial Information relating to the Company,
         Millennium America and Equistar consist of the following:

<Table>
<Caption>
                                                                          PAGE OF
                                                                        THIS REPORT
                                                                        -----------
<S>                                                                    <C>
         Supplemental Financial Information of the Company:
             Report of PricewaterhouseCoopers LLP....................       R-1
             Supplemental Financial Information......................       F-1
             Condensed Consolidating Balance Sheets -- December 31,
               2001 and 2000.........................................       F-2
             Condensed Consolidating Statements of
               Operations -- Years Ended December 31, 2001, 2000 and
               1999..................................................       F-3
             Condensed Consolidating Statements of Cash
               Flows -- Years Ended December 31, 2001, 2000 and
               1999..................................................       F-4
         Financial Statements of Equistar:
             Report of PricewaterhouseCoopers LLP....................       F-6
             Consolidated Statements of Income -- Years Ended
               December 31, 2001, 2000 and 1999......................       F-7
             Consolidated Balance Sheets -- December 31, 2001 and
               2000..................................................       F-8
             Consolidated Statements of Cash Flows -- Years Ended
               December 31, 2001, 2000 and 1999......................       F-9
             Consolidated Statements of Partners' Capital -- Years
               Ended December 31, 2001, 2000 and 1999................      F-10
             Notes to Consolidated Financial Statements..............  F-11 to F-27
</Table>

2.  Financial Statement Schedule.

    Financial Statement Schedule II -- Valuation and Qualifying Accounts,
    located on page S-1 of this Annual Report, should be read in conjunction
    with the Financial Statements included in Item 8 of this Annual Report.
    Schedules, other than Schedule II, are omitted because of the absence of the
    conditions under which they are required or because the information called
    for is included in the Consolidated Financial Statements of the Company or
    the Notes thereto.

3.  Exhibits.

<Table>
<Caption>
EXHIBIT
 NUMBER                      DESCRIPTION OF DOCUMENT
 ------                      -----------------------
<S>        <C>
 3.1       -- Amended and Restated Certificate of Incorporation of the Company (Filed as
              Exhibit 3.1 to the Company's Registration Statement on Form 10 (File
              No. 1-12091) (the 'Form 10'))*
 3.2       -- By-laws of the Company (as amended on February 4, 2002) Filed as
              Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
              year ended December 31, 2001 (The "2001 Form 10-K")*
 4.1(a)    -- Form of Indenture, dated as of November 27, 1996, among Millennium America
              (formerly named Hanson America Inc.), the Company and The Bank of New York,
              as Trustee, in respect of the 7% Senior Notes due November 15, 2006 and the
              7.625% Senior Debentures due November 15, 2026 (Filed as Exhibit 4.1 to the
              Registration Statement of the Company and Millennium America on Form S-1
              (Registration No. 333-15975) (the 'Form S-1'))*
 4.1(b)    -- First Supplemental Indenture dated as of November 21, 1997 among
              Millennium America, the Company and The Bank of New York, as Trustee (Filed
              as Exhibit 4.1(b) to the Company's Annual Report on Form 10-K for the year
              ended December 31, 1997 (the '1997 Form 10-K'))*
</Table>

                                       1










<PAGE>


<Table>
<Caption>
EXHIBIT
 NUMBER                      DESCRIPTION OF DOCUMENT
 ------                      -----------------------
<S>        <C>
 4.2       -- Indenture, dated as of June 18, 2001, among Millennium
              America as Issuer, the Company as Guarantor, and The Bank
              of New York, as Trustee (including the form of 9 1/4%
              Senior Notes due 2008 and the Note Guarantee) (filed as
              Exhibit 4.1 to the Registration Statement of the Company
              and Millennium America (Registration Nos. 333-65650 and
              333-65650-1 on Form S-4 (the 'Form S-4'))*
10.1       -- Form of Post-Demerger Stock Purchase Agreement, dated as
              of September 30, 1996, between Hanson and MHC Inc.
              (including related form of Indemnification Agreement and
              Tax Sharing and Indemnification Agreement) (Filed as
              Exhibit 10.6 to the Form 10)*
10.2       -- Demerger Agreement, dated as of September 30, 1996,
              between Hanson, Millennium Overseas Holdings Ltd.
              (formerly Hanson Overseas Holdings Ltd.) and the Company
              (Filed as Exhibit 10.7 to the Form 10)*
10.3       -- Form of Indemnification Agreement, dated as of September
              30, 1996, between Hanson and the Company (Filed as Exhibit
              10.8 to the Form 10)*
10.4       -- Form of Tax Sharing and Indemnification Agreement, dated
              as of September 30, 1996, between Hanson, Millennium
              Overseas Holdings Ltd., Millennium America Holdings Inc.
              (formerly HM Anglo American Ltd.), Hanson North America
              Inc. and the Company (Filed as Exhibit 10.9(a) to the
              Form 10)*
10.5(a)    -- Deed of Tax Covenant, dated as of September 30, 1996,
              between Hanson, Millennium Overseas Holdings Ltd.,
              Millennium Inorganic Chemicals Limited (formerly SCM
              Chemicals Limited), SCMC Holdings B.V. (formerly Hanson
              SCMC B.V.), Millennium Inorganic Chemicals Ltd. (formerly
              SCM Chemicals Ltd.), and the Company (the 'Deed of Tax
              Covenant') (Filed as Exhibit 10.9(b) to the Form 10)*
10.5(b)    -- Amendment to the Deed of Tax Covenant dated January 28,
              1997 (Filed as Exhibit 10.9(c) to the Company's Annual
              Report on Form 10-K for the year ended December 31, 1996
              (the '1996 Form 10-K'))*
10.6(a)    -- Credit Agreement, dated June 18, 2001, among Millennium
              America Inc., as Borrower, Millennium Inorganic Chemicals
              Limited, as Borrower, certain borrowing subsidiaries of
              Millennium Chemicals Inc., from time to time party
              thereto, Millennium Chemicals Inc., as Guarantor, the
              lenders from time to time party thereto, Bank of America,
              N.A., as Syndication Agent and The Chase Manhattan Bank as
              Administrative Agent and collateral agent (filed as
              Exhibit 10.1 to the Form S-4)*
10.6(b)    -- First Amendment, dated as of December 14, 2001, to the
              Credit Agreement dated as of June 18, 2001, with Bank of
              America, N.A. and JP Morgan Chase Bank and the lenders
              party thereto (filed as Exhibit 99.1 to the Company's
              Current Report on Form 8-K dated December 18, 2001)*
10.7       -- Form of Agreement, dated as of July 24, 1998, between
              Millennium America Holdings Inc. and William M. Landuyt,
              Robert E. Lee, C. William Carmean, Richard A. Lamond, and
              John E. Lushefski (Filed as Exhibit 10.1 to the Company's
              Quarterly Report on Form 10-Q for the quarter ended
              September 30, 1998 (the 'September 30, 1998, Form
              10-Q'))*'D'
10.8       -- Form of Agreement, dated as of July 24, 1998, between
              each of the Company's operating subsidiaries and certain
              officers of such subsidiaries. (Filed as Exhibit 10.2 to
              the September 30, 1998, Form 10-Q)*'D'
10.9       -- Form of Agreement, dated as of July 24, 1998, between
              Millennium Petrochemicals Inc. and each of Peter P. Hanik
              and Charles F. Daly (Filed as Exhibit 10.17 to the
              Company's Annual Report on Form 10-K for the year ended
              December 31, 1998 (the '1998 Form 10-K'))*'D'
10.10      -- Form of Change-in-Control Agreement, dated as of July 24,
              1998, between Millennium America Holdings Inc. and each of
              A. Mickelson Foster, James A. Lofredo, Corey A. Siegel and
              Christine F. Wubbolding (Filed as Exhibit 10.2 to the
              September 30, 1998 Form 10-Q)*'D'
</Table>

                                       2








<PAGE>


<Table>
<Caption>
EXHIBIT
 NUMBER                      DESCRIPTION OF DOCUMENT
 ------                      -----------------------
<S>        <C>
10.11      -- Form of Change-in-Control Agreement between each of the
              Company's operating subsidiaries and certain officers of
              such subsidiaries who are not executive officers of the
              Company (Filed as Exhibit 10.19 to the 1998
              Form 10-K)*'D'
10.12(a)   -- Millennium Chemicals Inc. Annual Performance Incentive
              Plan (Filed as Exhibit 10.23 to the Form 10)*'D'
10.12(b)   -- Amendment Number 1 dated January 20, 1997, to the
              Millennium Chemicals Inc. Annual Performance Plan. (Filed
              as Exhibit 10.23(b) to the 1996 Form 10-K)*'D'
10.12(c)   -- Amendment Number 2 dated January 23, 1998, to the
              Millennium Chemicals Inc. Annual Performance Incentive
              Plan (Filed as Exhibit 10.23(c) to the 1997
              Form 10-K)*'D'
10.12(d)   -- Amendment Number 3 dated January 22, 1999, to the
              Millennium Chemicals Inc. Annual Performance Incentive
              Plan (Filed as Exhibit 10.20(d) to the 1998 Form 10-K)*'D'
10.13(a)   -- Millennium Chemicals Inc. Long Term Stock Incentive Plan
              (Filed as Exhibit 10.25 to the Form 10)*'D'
10.13(b)   -- Amendment Number 1 to the Millennium Chemicals Inc. Long
              Term Stock Incentive Plan (Filed as Exhibit 10.6 to the
              Company's Quarterly Report on Form 10-Q for the quarter
              ended September 30, 1997)*'D'
10.13(c)   -- Amendment dated July 24, 1997 to the Millennium Chemicals
              Inc. Long Term Stock Incentive Plan (Filed as Exhibit
              10.25(c) to the 1997 Form 10-K)*'D'
10.13(d)   -- Amendments dated January 23, 1998 and December 10, 1998,
              to the Millennium Chemicals Inc. Long Term Stock Incentive
              Plan (Filed as Exhibit 10.23(d) to the 1998 Form 10-K)*'D'
10.14      -- Millennium Chemicals Inc. Supplemental Executive
              Retirement Plan (Filed as Exhibit 10.15(a) to the
              Company's Annual Report on Form 10-K for the year ended
              December 31, 2000 (the '2000 Form 10-K'))*'D'
10.15      -- Millennium Chemicals Grandfathered Supplemental Executive
              Retirement Plan (Filed as Exhibit 10.15(b) to the 2000
              Form 10-K)*'D'
10.16      -- Millennium Petrochemicals Grandfathered Supplemental
              Executive Retirement Plan (Filed as Exhibit 10.16 to the
              2000 Form 10-K)*'D'
10.17      -- Millennium Inorganic Chemicals Grandfathered Supplemental
              Executive Retirement Plan (Filed as Exhibit 10.17 to the
              2000 Form 10-K)*'D'
10.18      -- Millennium Specialty Chemicals Grandfathered Supplemental
              Executive Retirement Plan (Filed as Exhibit 10.18 to the
              2000 Form 10-K+)*'D'
10.19(a)   -- Millennium Chemicals Inc. Salary and Bonus Deferral Plan
              (Filed as Exhibit 10.30 to the 1996 Form 10-K)*'D'
10.19(b)   -- Amendment Number 1 dated January 23, 1998, to the
              Millennium Chemicals Inc. Salary and Bonus Deferral Plan
              (Filed as Exhibit 10.30(b) to the 1997 Form 10-K)*'D'
10.19(c)   -- Amendment Number 2 dated January 22, 1999, to the
              Millennium Chemicals Inc. Salary and Bonus Deferral Plan
              (Filed as Exhibit 10.28(c) to the 1998 Form 10-K)*'D'
10.20      -- Millennium Chemicals Inc. Supplemental Savings and
              Investment Plan (Filed as Exhibit 10.29 to the 1998 Form
              10-K)*'D'
10.21      -- Millennium Chemicals Inc. Long Term Incentive Plan (Filed
              as Exhibit 10.21 to the 2000 Form 10-K)*'D'
10.22      -- Millennium Chemicals Inc. Executive Long Term Incentive
              Plan (Filed as Exhibit 10.22 to the 2000 Form 10-K)*'D'
10.23      -- Millennium America Holdings Inc. Long Term Incentive Plan
              and Executive Long Term Incentive Plan Trust Agreement
              (Filed as Exhibit 10.23 to the 2000 Form 10-K)*'D'
</Table>

                                       3








<PAGE>



<Table>
<Caption>
EXHIBIT
 NUMBER                      DESCRIPTION OF DOCUMENT
 ------                      -----------------------
<S>        <C>
10.24(a)   -- Millennium Chemicals Inc. Omnibus Incentive Compensation
              Plan (Filed as Exhibit 10.24 to the 2000 Form 10-K)*'D'
10.24(b)   -- Form of Stock Option Agreement under Omnibus Incentive
              Compensation Plan (filed as Exhibit 10.24(G) to the 2001
              Form 10-K)*'D'
10.25(a)   -- Master Transaction Agreement between the Company and
              Lyondell (Filed as an Exhibit to the Company's Current
              Report on Form 8-K dated July 25, 1997)*
10.25(b)   -- First Amendment to Master Transaction Agreement between
              Lyondell and the Company (Filed as an Exhibit to the
              Company's Current Report on Form 8-K dated October 17,
              1997)*
10.26      -- Amended and Restated Limited Partnership Agreement of
              Equistar Chemicals, LP as amended through August 24, 2001
              (Filed as Exhibit 10.6 to the Company's Quarterly Report
              on Form 10-Q for the quarter ended September 30, 2001 (the
              'September 30, 2001 Form 10-Q))*
10.27(a)   -- Asset Contribution Agreement (the 'Millennium Asset
              Contribution Agreement') among Millennium Petrochemicals,
              Millennium Petrochemicals LP LLC and Equistar (Filed as an
              Exhibit to the Company's Current Report on Form 8-K dated
              December 10, 1997)*
10.27(b)   -- First Amendment to the Millennium Asset Contribution
              Agreement dated as of May 15, 1998 (Filed as Exhibit
              10.23(b) to the 1999 Form 10-K)*
10.27(c)   -- Second Amendment to the Asset Contribution Agreement
              among Millennium Chemicals Inc., Millennium Petrochemicals
              LP LLC, and Equistar Chemicals, LP*
10.28      -- First Amendment to Lyondell Asset Contribution Agreement
              dated as of May 15, 1998 (Filed as Exhibit 10.24(b) to the
              1999 Form 10-K)*
10.29(a)   -- Amended and Restated Parent Agreement among Lyondell, the
              Company, Occidental, Oxy CH Corporation, Occidental
              Chemical Corporation, and Equistar, dated as of May 15,
              1998, (Filed as Exhibit 10.37 to the 1998 Form 10-K)*
10.29(b)   -- First Amendment to Amended and Restated Parent Agreement,
              dated as of June 30, 1998 (Filed as Exhibit 10.25(b) to
              the 1999 form 10-K)*
10.30(a)   -- Letter Agreement dated as of August 24, 2001 between
              Millennium America Inc. and Equistar (Filed as Exhibit 10.3
              to the September 30, 2001 Form 10-Q)*
10.30(b)   -- Indemnity Agreement dated as of August 24, 2001 between
              Millennium America Inc. and Equistar (Filed as Exhibit 10.4
              to the September 30, 2001 Form 10-Q)*
10.30(c)   -- Indemnity Agreement dated as of August 24, 2001 between
              Millennium America Inc. and Equistar (Filed as Exhibit 10.5
              to the September 30, 2001 Form 10-Q)*
11.1       -- Statement re: computation of per share earnings (filed as
              Exhibit 10.24(G) to the 2001 Form 10-K)*
21.1       -- Subsidiaries of the Company*
23.1       -- Consent of PricewaterhouseCoopers LLP (filed as Exhibit
              10.24(G) to the 2001 Form 10-K)*
23.2       -- Consent of PricewaterhouseCoopers LLP (filed as Exhibit
              10.24(G) to the 2001 Form 10-K)*
23.3       -- Consent of PricewaterhouseCoopers LLP **
23.4       -- Consent of PricewaterhouseCoopers LLP **
99.1       -- Information relevant to forward-looking statements
              (filed as an Exhibit to the 2001 Form 10-K)*
99.2       -- Form of Letter Agreement, dated July 3, 1996, between
              Hanson and United Kingdom Inland Revenue (Filed as Exhibit
              99.2 to the Form 10)*

</Table>

In addition, the Company hereby agrees to furnish to the SEC, upon request, a
copy of any instrument not listed above that defines the rights of the holders
of long-term debt of the Company and its subsidiaries.

---------

 *   Incorporated by reference
                                              (footnotes continued on next page)

                                       4





<PAGE>



(footnotes continued from previous page)

**   Filed herewith

 'D' Management contract or compensatory plan or arrangement required to be
     filed pursuant to Item 14(c).

(b) REPORTS ON FORM 8-K.

Current Reports on Form 8-K dated October 3, 2001, October 30, 2001, December
19, 2001, February 1, 2002 and March 20, 2002 were filed during the quarter
ended December 31, 2001 and through the date hereof.

                                       5







<PAGE>




                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                                MILLENNIUM CHEMICALS INC.
                                          By:        /s/ JOHN E. LUSHEFSKI
                                              ..................................
                                                      John E. Lushefski
                                                  Senior Vice President and
                                                   Chief Financial Officer

August 14, 2002

                                       6













<PAGE>

                         REPORT OF INDEPENDENT ACCOUNTANTS ON
                        SUPPLEMENTAL FINANCIAL INFORMATION AND
                           THE FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
MILLENNIUM CHEMICALS INC.:

Our audits of the consolidated financial statements referred to in our report
dated January 25, 2002, which appears in the Millennium Chemicals Annual Report
on Form 10-K for the year ended December 31, 2001 also included an audit of the
supplemental financial information of Millennium Chemicals Inc. and the
financial statement schedule listed in Item 14(a) of this Annual Report on
Form 10-K/A. In our opinion, such supplemental financial information of
Millennium Chemicals Inc. and the financial statement schedule present fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.


PricewaterhouseCoopers LLP
Florham Park, New Jersey
January 25, 2002

                                     R-1





<PAGE>



                           MILLENNIUM CHEMICALS INC.
                       SUPPLEMENTAL FINANCIAL INFORMATION

    Millennium America, a wholly owned indirect subsidiary of the Company, is a
holding company for all of the Company's operating subsidiaries other than its
operations in the United Kingdom, France, Brazil and Australia. Millennium
America is the issuer of the 7.00% Senior Notes, the 7.625% Senior Debentures,
and the 9.25% Senior Notes, and is the principal borrower under the Credit
Agreement. Millennium America guarantees all obligations under the Credit
Agreement. The 7.00% Senior Notes, the 7.625% Senior Debentures and the 9.25%
Senior Notes, as well as outstanding amounts under the Credit Agreement, are
guaranteed by the Company. Accordingly, the following Condensed Consolidating
Balance Sheets at December 31, 2001 and 2000, and the Condensed Consolidating
Statements of Operations and Cash Flows for each of the three years in the
period ended December 31, 2001, are provided for the Company as supplemental
financial information to the Company's consolidated financial statements to
disclose the financial position, results of operations and cash flows of (i) the
Company, (ii) Millennium America, and (iii) all subsidiaries of the Company
other than Millennium America (the 'Non-Guarantor Subsidiaries'). The investment
in subsidiaries of Millennium America and the Company are accounted for by the
equity method; accordingly, the shareholders' equity of Millennium America and
the Company are presented as if each of these companies and their respective
subsidaries were reported on a consolidatd basis.

                                      F-1





<PAGE>


                           MILLENNIUM CHEMICALS INC.
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                        AS OF DECEMBER 31, 2001 AND 2000

<Table>
<Caption>

                                        MILLENNIUM   MILLENNIUM                                       MILLENNIUM
                                         AMERICA      CHEMICALS    NON-GUARANTOR                  CHEMICALS INC. AND
                                           INC.         INC.       SUBSIDIARIES    ELIMINATIONS      SUBSIDIARIES
                                         --------    -----------   ------------    ------------      ------------
                                                                         (MILLIONS)
<S>                                     <C>          <C>           <C>             <C>            <C>
2001
                ASSETS
Inventories...........................    $    -       $    -         $  370         $     -            $  370
Other current assets..................         6            -            384               -               390
Propery, plant and equipment, net.....         -            -            880               -               880
Investment in Equistar................         -            -            677               -               677
Investment in subsidiaries............     1,061          968              -          (2,029)                -
Other assets..........................        13            -            296               -               309
Goodwill..............................         -            -            378               -               378
Due from parent and affiliates, net...       590            -              -            (590)                -
                                          ------       ------         ------         -------            ------
    Total assets......................    $1,670       $  968         $2,985         $(2,619)           $3,004
                                          ------       ------         ------         -------            ------
                                          ------       ------         ------         -------            ------

 LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term
  debt................................    $    3       $    -         $    8         $     -            $   11
Other current liabilities.............         8            -            364               -               372
Long-term debt........................     1,156            -             16               -             1,172
Other liabilities.....................         -            1            549               -               550
Due to parent and affiliates, net.....         -           89            501            (590)                -
                                          ------       ------         ------         -------            ------
    Total liabilities.................     1,167           90          1,438            (590)            2,105
Minority interest.....................         -            -             21               -                21
Shareholders' equity..................       503          878          1,526          (2,029)              878
                                          ------       ------         ------         -------            ------
    Total liabilities and
      shareholders' equity............    $1,670       $  968         $2,985         $(2,619)           $3,004
                                          ------       ------         ------         -------            ------
                                          ------       ------         ------         -------            ------
2000
                ASSETS
Inventories...........................    $    -       $    -         $  373         $     -            $  373
Other current assets..................         1            -            513               -               514
Property, plant and equipment, net....         -            -            957               -               957
Investment in Equistar................         -            -            760               -               760
Investment in subsidiaries............     1,098        1,033              -          (2,131)                -
Other assets..........................         3            -            222               -               225
Goodwill..............................         -            -            391               -               391
Due from parent and affiliates, net...       592            -              -            (592)                -
                                          ------       ------         ------         -------            ------
    Total assets......................    $1,694       $1,033         $3,216         $(2,723)           $3,220
                                          ------       ------         ------         -------            ------
                                          ------       ------         ------         -------            ------
 LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term
  debt................................    $  360       $    -         $   31         $     -            $  391
Other current liabilities.............        24            -            368               -               392
Long-term debt........................       749            -             18               -               767
Other liabilities.....................         -            3            662               -               665
Due to parent and affiliates, net.....         -           47            545            (592)                -
                                          ------       ------         ------         -------            ------
    Total liabilities.................     1,133           50          1,624            (592)            2,215
Minority interest.....................         -            -             22               -                22
Shareholders' equity..................       561          983          1,570          (2,131)              983
                                          ------       ------         ------         -------            ------
    Total liabilities and
      shareholders' equity............    $1,694       $1,033         $3,216         $(2,723)           $3,220
                                          ------       ------         ------         -------            ------
                                          ------       ------         ------         -------            ------
</Table>

                                      F-2





<PAGE>



                           MILLENNIUM CHEMICALS INC.
                CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

<Table>
<Caption>
                                                                                                            MILLENNIUM
                                             MILLENNIUM    MILLENNIUM       NON-GUARANTOR                  CHEMICALS INC.
                                            AMERICA INC.  CHEMICALS INC.     SUBSIDIARIES   ELIMINATIONS  AND SUBSIDIARIES
                                            ------------  --------------    ------------    ------------  ----------------
                                                                           (MILLIONS)
<S>                                         <C>            <C>             <C>             <C>           <C>
2001
Net sales...................................   $   -           $ -           $1,590          $   -           $1,590
Cost of products sold.......................       -             -            1,252              -            1,252
Depreciation and amortization...............       -             -              110              -              110
Selling, development and administrative
 expense....................................       -             -              146              -              146
Reorganization and plant closure............       -             -               36              -               36
                                               -----           ---           ------          -----           ------
   Operating income.........................       -             -               46              -               46
Interest expense, net.......................     (81)            -               (1)             -              (82)
Intercompany interest income (expense)......     108            (4)            (104)             -                -
Equity in loss of Equistar..................       -             -              (90)             -              (90)
Equity in loss of subsidiaries..............     (62)          (40)               -            102                -
Other expense, net..........................      (2)           (1)               -              -               (3)
Income taxes................................      (9)            2               93              -               86
                                               -----           ---           ------          -----           ------
   Net loss ................................   $ (46)         $(43)          $  (56)         $ 102           $  (43)
                                               -----           ---           ------          -----           ------
                                               -----           ---           ------          -----           ------
2000
Net sales...................................   $   -           $ -           $1,793          $   -           $1,793
Cost of products sold.......................       -             -            1,267              -            1,267
Depreciation and amortization...............       -             -              113              -              113
Selling, development and administrative
 expense....................................       -             -              200              -              200
                                               -----           ---           ------          -----           ------
   Operating income.........................       -             -              213              -              213
Interest expense, net.......................     (76)            -               (1)             -              (77)
Intercompany interest income (expense)......     109            (4)            (105)             -                -
Equity in earnings of Equistar..............       -             -               39              -               39
Equity in earnings of subsidiaries..........      59           125                -           (184)               -
Other income, net...........................       -             -                7              -                7
Income taxes................................     (12)            1              (49)             -              (60)
                                               -----           ---           ------          -----           ------
   Net income ..............................   $  80          $122           $  104          $(184)          $  122
                                               -----           ---           ------          -----           ------
                                               -----           ---           ------          -----           ------
1999
Net sales...................................   $   -           $ -           $1,589          $   -           $1,589
Cost of products sold.......................       -             -            1,112              -            1,112
Depreciation and amortization...............       -             -              105              -              105
Selling, development and administrative
 expense....................................       -             -              204              -              204
                                               -----           ---           ------          -----           ------
   Operating income.........................       -             -              168              -              168
Interest expense, net.......................     (65)            -               (4)             -              (69)
Intercompany interest income (expense)......     111             -             (111)             -                -
Equity in loss of Equistar..................       -             -              (19)             -              (19)
Equity in loss of subsidiaries..............    (336)         (287)               -            623                -
Loss in value of Equistar investment........       -             -             (639)             -             (639)
Other (expense) income, net.................       -            (1)              25              -               24
Income from discontinued operations (net of
 tax).......................................       -             -               38              -               38
Income taxes................................     (16)            -              225              -              209
                                               -----           ---           ------          -----           ------
   Net loss.................................   $(306)        $(288)           $ (317)        $ 623           $ (288)
                                               -----           ---           ------          -----           ------
                                               -----           ---           ------          -----           ------
</Table>

                                      F-3





<PAGE>



                           MILLENNIUM CHEMICALS INC.
                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

<Table>
<Caption>
                                                                                                                MILLENNIUM
                                             MILLENNIUM      MILLENNIUM       NON-GUARANTOR                   CHEMICALS INC.
                                             AMERICA INC.   CHEMICALS INC.    SUBSIDIARIES    ELIMINATIONS   AND SUBSIDIARIES
                                             -----------    -------------     ------------    ------------   ----------------
                                                                               (MILLIONS)
<S>                                          <C>            <C>              <C>             <C>            <C>
2001
Cash flows from operating activities.......     $   7           $  (5)           $ 110          $   -            $ 112

Cash flows from investing activities

   Capital expenditures....................         -               -              (97)             -              (97)

   Proceeds from sales of property, plant &
    equipment..............................         -               -               19              -               19
                                                -----           -----            -----          -----            -----

      Cash used in investing activities....         -               -              (78)             -              (78)

Cash flows from financing activities

   Dividends to shareholders...............         -             (35)               -              -              (35)

   Proceeds from long-term debt............       741               -               42              -              783

   Repayment of long-term debt.............      (675)              -              (61)             -             (736)

   Intercompany............................       (51)             40               11              -                -

   Decrease in notes payable...............       (17)              -              (17)             -              (34)
                                                -----           -----            -----          -----            -----

      Cash (used in) provided by financing
        activities.........................        (2)              5              (25)             -              (22)
                                                -----           -----            -----          -----            -----

Effect of exchange rate changes on cash....         -               -               (5)             -               (5)
                                                -----           -----            -----          -----            -----

Increase in cash and cash equivalents......         5               -                2              -                7

Cash and cash equivalents at beginning of
 year......................................         -               -              107              -              107
                                                -----           -----            -----          -----            -----

Cash and cash equivalents at end of year...     $   5           $   -            $ 109          $   -            $ 114
                                                -----           -----            -----          -----            -----
                                                -----           -----            -----          -----            -----

2000
Cash flows from operating activities.......     $  21           $  (3)            $  2          $   -            $  20

Cash flows from investing activities

   Capital expenditures....................         -               -             (110)             -             (110)

   Distributions from Equistar.............         -               -               83              -               83

   Proceeds from sales of property, plant &
    equipment..............................         -               -                4              -                4
                                                -----           -----            -----          -----            -----

      Cash used in investing activities....         -               -              (23)             -              (23)

Cash flows from financing activities

   Dividends to shareholders...............         -             (35)               -              -              (35)

   Repurchase of common stock..............         -               -              (65)             -              (65)

   Proceeds from long-term debt............       275               -               36              -              311

   Repayment of long-term debt.............      (165)              -              (22)             -             (187)

   Intercompany............................      (114)             38               76              -                -

   Decrease in notes payable...............       (17)              -                -              -              (17)
                                                -----           -----            -----          -----            -----

      Cash (used in) provided by financing
        activities.........................       (21)              3               25              -                7
                                                -----           -----            -----          -----            -----

Effect of exchange rate changes on cash....         -               -               (7)             -               (7)
                                                -----           -----            -----          -----            -----

Decrease in cash and cash equivalents......         -               -               (3)             -               (3)

Cash and cash equivalents at beginning of
 year......................................         -               -              110              -              110
                                                -----           -----            -----          -----            -----

Cash and cash equivalents at end of year...     $   -           $   -            $ 107          $   -            $ 107
                                                -----           -----            -----          -----            -----
                                                -----           -----            -----          -----            -----
</Table>

                                      F-4







<PAGE>

                           MILLENNIUM CHEMICALS INC.
        CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS -- (CONTINUED)
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

<Table>
<Caption>
                                                                                                                MILLENNIUM
                                             MILLENNIUM      MILLENNIUM       NON-GUARANTOR                   CHEMICALS INC.
                                             AMERICA INC.   CHEMICALS INC.    SUBSIDIARIES    ELIMINATIONS   AND SUBSIDIARIES
                                             -----------    -------------     ------------    ------------   ----------------
                                                                               (MILLIONS)
<S>                                          <C>            <C>              <C>             <C>            <C>
1999
Cash flows from operating activities.......     $  31          $   (3)            $ (5)         $   -            $  23

Cash flows from investing activities

   Capital expenditures....................         -               -             (109)             -             (109)

   Distributions from Equistar.............         -               -               75              -               75

   Proceeds from syngas transaction........         -               -              123              -              123

   Proceeds from sale of Suburban Propane
    investment.............................         -               -               75              -               75

   Proceeds from sales of property, plant &
    equipment..............................         -               -               13              -               13
                                                -----           -----            -----          -----            -----

      Cash provided by investing
        activities.........................         -               -              177              -              177
                                                -----           -----            -----          -----            -----

Cash flows from financing activities

   Dividends to shareholders...............         -             (38)               -              -              (38)

   Repurchase of common stock..............         -               -             (200)             -             (200)

   Proceeds from long-term debt............       115               -                3              -              118

   Repayment of long-term debt.............       (66)              -              (27)             -              (93)

   Intercompany............................      (106)             41               65              -                -

   Increase in notes payable...............        26               -                1              -               27
                                                -----           -----            -----          -----            -----

      Cash (used in) provided by financing
        activities.........................       (31)              3             (158)             -             (186)
                                                -----           -----            -----          -----            -----

Effect of exchange rate changes on cash....         -               -               (7)             -               (7)
                                                -----           -----            -----          -----            -----

Increase in cash and cash equivalents......         -               -                7              -                7

Cash and cash equivalents at beginning of
 year......................................         -               -              103              -              103
                                                -----           -----            -----          -----            -----

Cash and cash equivalents at end of year...     $   -           $   -            $ 110          $   -            $ 110
                                                -----           -----            -----          -----            -----
                                                -----           -----            -----          -----            -----
</Table>

                                      F-5







<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Partnership Governance Committee
of EQUISTAR CHEMICALS, LP

    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of partners' capital and of cash flows
present fairly, in all material respects, the financial position of Equistar
Chemicals, LP (the 'Partnership') and its subsidiaries at December 31, 2001 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP
Houston, Texas
March 8, 2002

                                      F-6







<PAGE>

                             EQUISTAR CHEMICALS, LP
                       CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                                 FOR THE YEAR ENDED
                                                                    DECEMBER 31,
                                                              ------------------------
                                                               2001     2000     1999
                                                               ----     ----     ----
                                                               (MILLIONS OF DOLLARS)
<S>                                                           <C>      <C>      <C>
Sales and other operating revenues:
    Unrelated parties.......................................  $4,583   $5,770   $4,506
    Related parties.........................................   1,326    1,725    1,088
                                                              ------   ------   ------
                                                               5,909    7,495    5,594
                                                              ------   ------   ------
Operating costs and expenses:
    Cost of sales...........................................   5,733    6,908    5,002
    Selling, general and administrative expenses............     181      182      259
    Research and development expense........................      39       38       42
    Amortization of goodwill................................      33       33       33
    Unusual charges.........................................      22        -       96
                                                              ------   ------   ------
                                                               6,008    7,161    5,432
                                                              ------   ------   ------
    Operating income (loss).................................     (99)     334      162
Interest expense............................................    (192)    (185)    (182)
Interest income.............................................       3        4        6
Other income, net...........................................       8        -       46
                                                              ------   ------   ------
    Income (loss) before extraordinary item.................    (280)     153       32
Extraordinary loss on extinguishment of debt................      (3)       -        -
                                                              ------   ------   ------
Net income (loss)...........................................  $ (283)  $  153   $   32
                                                              ------   ------   ------
                                                              ------   ------   ------
</Table>

                See Notes to Consolidated Financial Statements.

                                      F-7







<PAGE>

                             EQUISTAR CHEMICALS, LP
                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                      DECEMBER 31,
                                                                  ---------------------
                                                                   2001          2000
                                                                   ----          ----
                                                                  (MILLIONS OF DOLLARS)
<S>                                                               <C>           <C>
                           ASSETS
Current assets:
    Cash and cash equivalents...............................      $  202        $   18
    Accounts receivable:
        Trade, net..........................................         440           568
        Related parties.....................................         100           190
    Inventories.............................................         448           506
    Prepaid expenses and other current assets...............          36            50
                                                                  ------        ------
        Total current assets................................       1,226         1,332
Property, plant and equipment, net..........................       3,705         3,819
Investment in PD Glycol.....................................          47            53
Goodwill, net...............................................       1,053         1,086
Other assets, net...........................................         277           292
                                                                  ------        ------
        Total assets........................................      $6,308        $6,582
                                                                  ------        ------
                                                                  ------        ------

             LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Accounts payable:
        Trade...............................................      $  331        $  426
        Related parties.....................................          29            61
    Current maturities of long-term debt....................         104            90
    Accrued liabilities.....................................         197           166
                                                                  ------        ------
        Total current liabilities...........................         661           743
Long-term debt..............................................       2,233         2,158
Other liabilities...........................................         177           141
Commitments and contingencies...............................           -             -
Partners' capital:
    Partners' accounts......................................       3,257         3,540
    Accumulated other comprehensive income (loss)...........         (20)            -
                                                                  ------        ------
        Total partners' capital.............................       3,237         3,540
                                                                  ------        ------
        Total liabilities and partners' capital.............      $6,308        $6,582
                                                                  ------        ------
                                                                  ------        ------
</Table>

                See Notes to Consolidated Financial Statements.

                                      F-8







<PAGE>

                             EQUISTAR CHEMICALS, LP

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                               FOR THE YEAR ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
                                                              (MILLIONS OF DOLLARS)
<S>                                                           <C>     <C>     <C>
Cash flows from operating activities:
    Net income (loss).......................................  $(283)  $ 153   $  32
    Adjustments to reconcile net income (loss) to cash
      provided by operating activities:
        Depreciation and amortization.......................    321     310     300
        Net (gain) loss on disposition of assets............     (3)      5      35
        Extraordinary loss on extinguishment of debt........      3       -       -
    Changes in assets and liabilities that provided (used)
      cash
        Accounts receivable.................................    220     (58)   (213)
        Inventories.........................................     61      14      17
        Accounts payable....................................   (129)     28     119
        Accrued liabilities.................................     30     (65)     82
        Other assets and liabilities........................     10     (48)    (28)
                                                              -----   -----   -----
        Cash provided by operating activities...............    230     339     344
                                                              -----   -----   -----
Cash flows from investing activities:
    Expenditures for property, plant and equipment..........   (110)   (131)   (157)
    Proceeds from sales of assets...........................     10       4      75
    Purchase of business from AT Plastics, Inc..............     (7)      -       -
                                                              -----   -----   -----
        Cash used in investing activities...................   (107)   (127)    (82)
                                                              -----   -----   -----
Cash flows from financing activities:
    Net borrowing (payments) under lines of credit..........   (820)     20    (502)
    Proceeds from issuance of long-term debt................  1,000       -     898
    Repayment of other long-term debt.......................    (91)    (42)   (150)
    Repayment of obligations under capital leases...........      -       -    (205)
    Distributions to partners...............................      -    (280)   (255)
    Other...................................................    (28)      -      (6)
                                                              -----   -----   -----
        Cash provided by (used in) financing activities.....     61    (302)   (220)
                                                              -----   -----   -----
Increase (decrease) in cash and cash equivalents............    184     (90)     42
Cash and cash equivalents at beginning of period............     18     108      66
                                                              -----   -----   -----
Cash and cash equivalents at end of period..................  $ 202   $  18   $ 108
                                                              -----   -----   -----
                                                              -----   -----   -----
</Table>

                See Notes to Consolidated Financial Statements.

                                      F-9







<PAGE>

                             EQUISTAR CHEMICALS, LP

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

<Table>
<Caption>
                                                                             ACCUMULATED
                                          PARTNERS' ACCOUNTS                    OTHER
                              -------------------------------------------   COMPREHENSIVE   COMPREHENSIVE
                              LYONDELL   MILLENNIUM   OCCIDENTAL   TOTAL    INCOME (LOSS)   INCOME (LOSS)
                              --------   ----------   ----------   -----    -------------   -------------
                                                         (MILLIONS OF DOLLARS)
<S>                           <C>        <C>          <C>          <C>      <C>             <C>
Balance at January 1,          $ 613       $1,621       $1,651     $3,885       $  -            $   -
  1999......................
    Net income..............      14            9            9         32          -               32
    Distributions to
      partners..............    (105)         (75)         (75)      (255)         -                -
                               -----       ------       ------     ------       ----            -----
    Comprehensive income....                                                                    $  32
                                                                                                -----
                                                                                                -----
Balance at December 31,
  1999......................     522        1,555        1,585      3,662          -                -
    Net income..............      63           45           45        153          -              153
    Distributions to
      partners..............    (114)         (83)         (83)      (280)         -                -
    Other...................       5            -            -          5          -                -
                               -----       ------       ------     ------       ----            -----
    Comprehensive income....                                                                    $ 153
                                                                                                -----
                                                                                                -----
Balance at December 31,
  2000......................     476        1,517        1,547      3,540          -                -
    Net loss................    (115)         (84)         (84)      (283)         -             (283)
    Other comprehensive
      income:
        Unrealized loss on
          securities........       -            -            -          -         (1)              (1)
        Minimum pension
          liability.........       -            -            -          -        (19)             (19)
                               -----       ------       ------     ------       ----            -----
    Comprehensive loss......                                                                    $(303)
                                                                                                -----
                                                                                                -----
Balance at December 31,
  2001......................   $ 361       $1,433       $1,463     $3,257       $(20)
                               -----       ------       ------     ------       ----
                               -----       ------       ------     ------       ----
</Table>

                See Notes to Consolidated Financial Statements.

                                      F-10







<PAGE>

                             EQUISTAR CHEMICALS, LP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. FORMATION OF THE PARTNERSHIP AND OPERATIONS

    Lyondell Chemical Company ('Lyondell') and Millennium Chemicals Inc.
('Millennium') formed Equistar Chemicals, LP ('Equistar' or 'the Partnership'),
a Delaware limited partnership, which commenced operations on December 1, 1997.
On May 15, 1998, Equistar was expanded with the contribution of certain assets
from Occidental Petroleum Corporation ('Occidental'). Equistar is currently
owned 41% by Lyondell, 29.5% by Millennium and 29.5% by Occidental, all through
wholly owned subsidiaries (see also Note 18).

    Equistar owns and operates the petrochemicals and polymers businesses
contributed by Lyondell, Millennium and Occidental, which consist of 18
manufacturing facilities primarily on the U.S. Gulf Coast and in the U.S.
Midwest. The petrochemicals segment manufactures and markets olefins, oxygenated
products, aromatics and specialty products. Olefins include ethylene, propylene
and butadiene, and oxygenated products include ethylene oxide, ethylene glycol,
ethanol and methyl tertiary butyl ether ('MTBE'). The petrochemicals segment
also includes the production and sale of aromatics, including benzene and
toluene. The polymers segment manufactures and markets polyolefins, including
high-density polyethylene ('HDPE'), low-density polyethylene ('LDPE'), linear
low-density polyethylene ('LLDPE'), polypropylene, and performance polymers, all
of which are used in the production of a wide variety of consumer and industrial
products. The performance polymers include enhanced grades of polyethylene,
including wire and cable insulating resins, and polymeric powders.

    Equistar is governed by a Partnership Governance Committee consisting of
nine representatives, three appointed by each general partner. Most of the
significant decisions of the Partnership Governance Committee require unanimous
consent, including approval of the Partnership's strategic plan and annual
updates thereof. Distributions are made to the partners based upon their
percentage ownership of Equistar. Additional cash contributions required by the
Partnership are also based upon the partners' percentage ownership of Equistar.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Basis of Presentation -- The consolidated financial statements include the
accounts of Equistar and its wholly owned subsidiaries.

    Revenue Recognition -- Revenue from product sales is recognized as risk and
title to the product transfer to the customer, which usually occurs when
shipment is made.

    Cash and Cash Equivalents -- Cash equivalents consist of highly liquid debt
instruments such as certificates of deposit, commercial paper and money market
accounts purchased with an original maturity date of three months or less. Cash
equivalents are stated at cost, which approximates fair value. Equistar's policy
is to invest cash in conservative, highly rated instruments and limit the amount
of credit exposure to any one institution. Equistar performs periodic
evaluations of the relative credit standing of these financial institutions
which are considered in Equistar's investment strategy.

    Equistar has no requirements for compensating balances in a specific amount
at a specific point in time. The Partnership does maintain compensating balances
for some of its banking services and products. Such balances are maintained on
an average basis and are solely at Equistar's discretion. As a result, none of
Equistar's cash is restricted.

    Inventories -- Inventories are stated at the lower of cost or market. Cost
is determined on the last-in, first-out ('LIFO') basis, except for materials and
supplies, which are valued at average cost. Inventory exchange transactions,
which involve homogeneous commodities in the same line of business and do not
involve the payment or receipt of cash, are not accounted for as purchases and
sales. Any resulting volumetric exchange balances are accounted for as inventory
in accordance with the normal LIFO valuation policy.

    Property, Plant and Equipment -- Property, plant and equipment are recorded
at cost. Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful

                                      F-11







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

lives of the related assets, generally 25 years for major manufacturing
equipment, 30 years for buildings, 10 to 15 years for light equipment and
instrumentation, 15 years for office furniture and 3 to 5 years for information
systems equipment. Upon retirement or sale, Equistar removes the cost of the
assets and the related accumulated depreciation from the accounts and reflects
any resulting gains or losses in the Consolidated Statement of Income.
Equistar's policy is to capitalize interest cost incurred on debt during the
construction of major projects exceeding one year.

    Long-Lived Asset Impairment -- Equistar evaluates long-lived assets,
including identifiable intangible assets, for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. When it is probable that undiscounted future cash flows will not
be sufficient to recover an asset's carrying amount, the asset is written down
to its fair value. Long-lived assets to be disposed of are reported at the lower
of carrying amount or fair value less cost to sell. Beginning in 2002, as
discussed below, goodwill will be reviewed for impairment under SFAS No. 142
based on fair values.

    Investment in PD Glycol -- Equistar holds a 50% interest in a joint venture
with E.I. DuPont de Nemours and Company that owns an ethylene glycol facility in
Beaumont, Texas. This investment was contributed by Occidental in 1998. The
investment in PD Glycol is accounted for using the equity method of accounting.
At December 31, 2001 and 2000, Equistar's underlying equity in the net assets of
PD Glycol exceeded the cost of the investment by $7 million. The excess is being
accreted into income on a straight-line basis over a period of 25 years.

    Goodwill -- Goodwill includes goodwill contributed by Millennium and
goodwill recorded in connection with the contribution of Occidental's assets.
Goodwill is being amortized using the straight-line method over 40 years, the
estimated useful life. Amortization of goodwill will cease as of January 1, 2002
as described below under Recent Accounting Standards.

    Turnaround Maintenance and Repairs Costs -- Cost of maintenance and repairs
incurred in connection with turnarounds of major units at Equistar's
manufacturing facilities exceeding $5 million are deferred and amortized using
the straight-line method until the next planned turnaround, generally four to
six years. These costs are maintenance, repair and replacement costs that are
necessary to maintain, extend and improve the operating capacity and efficiency
rates of the production units.

    Deferred Software Costs -- Costs to purchase and to develop software for
internal use are deferred and amortized on a straight-line basis over a range of
3 to 10 years.

    Environmental Remediation Costs -- Anticipated expenditures related to
investigation and remediation of contaminated sites, which include operating
facilities and waste disposal sites, are accrued when it is probable a liability
has been incurred and the amount of the liability can be reasonably estimated.
The estimated liabilities have not been discounted to present value.

    Income Taxes -- The Partnership is not subject to federal income taxes as
income is reportable directly by the individual partners; therefore, there is no
provision for income taxes in the accompanying financial statements.

    Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

    Accounting Changes Adopted in 2001 -- As of January 1, 2001, Equistar
adopted Statement of Financial Accounting Standards ('SFAS') No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
Under SFAS No. 133, all derivative instruments are recorded on the balance sheet
at fair value. Gains or losses from changes in the fair value of derivatives
used as cash flow hedges are deferred in accumulated other comprehensive income,
to the extent the hedge is effective, and

                                      F-12







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subsequently reclassified to earnings to offset the impact of the related
forecasted transaction. Implementation of SFAS No. 133 and SFAS No. 138 did not
have a material effect on the consolidated financial statements of Equistar.

    Recent Accounting Standards -- In June 2001, the Financial Accounting
Standards Board ('FASB') issued SFAS No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002. SFAS
No. 141 is effective for business combinations initiated after June 30, 2001 and
is not expected to have a material effect on intangible assets acquired in
business combinations effected prior to July 1, 2001. SFAS No. 142 prescribed
the discontinuance of amortization of goodwill as well as annual review of
goodwill for impairment. Equistar expects the implementation of SFAS No. 142 to
result in the impairment of the entire balance of goodwill, resulting in a $1.1
billion charge that will be reported as the cumulative effect of a change in
accounting principle as of January 1, 2002. Earnings in 2002 and subsequent
years will be favorably affected by $33 million annually because of the
elimination of goodwill amortization.

    In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Adoption of SFAS No. 143 and SFAS
No. 144 in calendar years 2003 and 2002, respectively, is not expected to have a
material effect on the consolidated financial statements of Equistar.

    Reclassifications -- Certain previously reported amounts have been
reclassified to conform to classifications adopted in 2001.

3. UNUSUAL CHARGES

    Equistar shut down its Port Arthur, Texas polyethylene facility in February
2001. The asset values of the Port Arthur production units were previously
adjusted as part of a $96 million restructuring charge recognized in 1999, as
discussed below. During the first quarter 2001, Equistar recorded an additional
$22 million charge, which included environmental remediation liabilities of $7
million (see Note 15), severance benefits of $5 million, pension benefits of $2
million, and other exit costs of $3 million. The severance and pension benefits
covered approximately 125 people employed at the Port Arthur facility. The
remaining $5 million of the charge related primarily to the write down of
certain assets. Payments of $4 million for severance, $3 million for exit costs
and $1 million for environmental remediation were made through December 31,
2001. The pension benefits of $2 million will be paid from the assets of the
pension plans. As of December 31, 2001, the remaining liability included $6
million for environmental remediation costs and $1 million for severance
benefits.

    During 1999, Equistar recorded a charge of $96 million associated with
decisions to shut down certain polymer reactors and to consolidate certain
administrative functions between Lyondell and Equistar. Accordingly, Equistar
recorded a charge of $72 million to adjust the asset carrying values. The
remaining $24 million of the total charge represented severance and other
employee-related costs for approximately 500 employee positions that were
eliminated. The eliminated positions, primarily administrative functions,
resulted from opportunities to share such services between Lyondell and
Equistar. Through December 31, 2001, approximately $19 million of severance and
other employee-related costs had been paid and charged against the accrued
liability. As of December 31, 2001, all of the employee terminations had been
completed and the remaining liability of $5 million was eliminated.

4. EXTRAORDINARY ITEM

    As part of the third quarter 2001 refinancing (see Note 11), Equistar wrote
off unamortized debt issuance costs and amendment fees of $3 million related to
the early repayment of the $1.25 billion bank credit facility and reported the
charge as an extraordinary loss on extinguishment of debt.

                                      F-13







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. RELATED PARTY TRANSACTIONS

    Product Transactions with Lyondell -- Lyondell purchases ethylene, propylene
and benzene at market-related prices from Equistar under various agreements
expiring in 2013 and 2014. Under the agreements, Lyondell is required to
purchase 100% of its ethylene, propylene and benzene requirements for its
Channelview and Bayport, Texas facilities, with the exception of quantities of
one product that Lyondell is obligated to purchase under a supply agreement with
an unrelated third party entered into prior to 1999 and expiring in 2015. In
addition, a wholly owned subsidiary of Lyondell licenses MTBE technology to
Equistar. Lyondell also purchases a significant portion of the MTBE produced by
Equistar at one of its two Channelview units at market-related prices.

    Product Transactions with Occidental Chemical -- In connection with the
contribution of Occidental Chemical assets to Equistar, Equistar and Occidental
Chemical entered into a long-term agreement for Equistar to supply 100% of the
ethylene requirements for Occidental Chemical's U.S. manufacturing plants. The
pricing terms under the agreement between Equistar and Occidental Chemical are
similar to the pricing terms under the ethylene sales agreement between Equistar
and Lyondell. The ethylene raw material is exclusively for internal use in
production at these plants, less any quantities up to 250 million pounds per
year tolled in accordance with the provisions of the agreement. Upon three years
notice from either party to the other, sales may be 'phased down' over a period
not less than five years. No phase down may commence before January 1, 2009.
Therefore, the annual required minimum cannot decline to zero prior to December
31, 2013, unless certain specified force majeure events occur. In addition to
ethylene, Equistar sells methanol, ethers, and glycols to Occidental Chemical.
Equistar also enters into over-the-counter derivatives, primarily price swap
contracts, for crude oil with Occidental Energy Marketing, Inc., a subsidiary of
Occidental Chemical, to help manage its exposure to commodity price risk with
respect to crude oil-related raw material purchases (see Note 13). Equistar also
purchases various products from Occidental Chemical at market-related prices.

    Product Transactions with Millennium Petrochemicals -- Equistar sells
ethylene to Millennium Petrochemicals at market-related prices pursuant to an
agreement entered into in connection with the formation of Equistar. Under this
agreement, Millennium Petrochemicals is required to purchase 100% of its
ethylene requirements for its LaPorte, Texas facility from Equistar. The
contract expires December 1, 2002 and, thereafter, renews annually. Either party
may terminate on one year's notice. The pricing terms of this agreement are
similar to the pricing terms of the ethylene sales agreements with Lyondell and
Occidental Chemical.

    Under an agreement entered into in connection with the formation of
Equistar, Equistar is required to purchase 100% of its vinyl acetate monomer
('VAM') raw material requirements at market-related prices from Millennium
Petrochemicals for its LaPorte, Texas, Clinton, Iowa and Morris, Illinois plants
for the production of ethylene vinyl acetate products at those locations. The
contract expires December 31, 2002 and, thereafter, renews annually.

    Product Transactions with Oxy Vinyls, LP -- Occidental Chemical owns 76% of
Oxy Vinyls, LP ('Oxy Vinyls'), a joint venture partnership. Equistar sells
ethylene to Oxy Vinyls for Oxy Vinyls' LaPorte, Texas facility at market-related
prices pursuant to an agreement which expires on December 31, 2003.

    Transactions with LYONDELL-CITGO Refining LP -- Lyondell's rights and
obligations under the terms of its product sales and raw material purchase
agreements with LYONDELL-CITGO Refining LP ('LCR'), a joint venture investment
of Lyondell, have been assigned to Equistar. Accordingly, certain olefins
by-products are sold by Equistar to LCR for processing into gasoline and certain
refinery products are sold by LCR to Equistar as raw materials. Equistar also
has assumed certain processing arrangements as well as storage obligations
between Lyondell and LCR and provides certain marketing services for LCR. All of
the agreements between LCR and Equistar are on terms generally representative of
prevailing market prices.

                                      F-14







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Transactions with LMC -- Lyondell Methanol Company, L.P. ('LMC') sells all
of its products to Equistar at market-related prices. The natural gas for LMC's
plant is purchased by Equistar as agent for LMC under Equistar master agreements
with various third party suppliers. Equistar provides operating and other
services for LMC under the terms of existing agreements that were assumed by
Equistar from Lyondell, including the lease to LMC by Equistar of the real
property on which LMC's methanol plant is located. Pursuant to the terms of
those agreements, LMC pays Equistar a management fee and reimburses certain
expenses of Equistar at cost.

    Shared Services Agreement with Lyondell -- During 1999, Lyondell provided
certain administrative services to Equistar, including legal, risk management,
treasury, tax and employee benefit plan administrative services, while Equistar
provided services to Lyondell in the areas of health, safety and environment,
human resources, information technology and legal. Effective January 1, 2000,
Lyondell and Equistar implemented a revised agreement to utilize shared services
more broadly. Lyondell now provides services to Equistar including information
technology, human resources, raw material supply, supply chain, health, safety
and environmental, engineering, research and development, facility services,
legal, accounting, treasury, internal audit and tax. Lyondell charges Equistar
for its share of the cost of such services. Direct third party costs, if
incurred exclusively for Equistar, are charged directly to Equistar.

    Shared Services and Shared-Site Agreements with Millennium
Petrochemicals -- Equistar and Millennium Petrochemicals have agreements under
which Equistar provides utilities, fuel streams and office space to Millennium
Petrochemicals. In addition, Millennium Petrochemicals provides Equistar certain
operational services, including utilities as well as barge dock access and
related services.

    Transition Services Agreement with Occidental Chemical -- On June 1, 1998,
Occidental Chemical and Equistar entered into a transition services agreement.
Under the terms of the agreement, Occidental Chemical provided Equistar certain
services in connection with the businesses contributed by Occidental Chemical,
including services related to accounting, payroll, office administration,
marketing, transportation, purchasing and procurement, management, human
resources, customer service, technical services and others. Most of these
services ceased in June 1999. Health, safety, and environmental services were
extended until December 31, 1999.

                                      F-15







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Related party transactions are summarized as follows:

<Table>
<Caption>
                                                   FOR THE YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------
                                           2001                2000                 1999
                                           ----                ----                 ----
                                                     (MILLIONS OF DOLLARS)
<S>                                      <C>               <C>                     <C>
Equistar billed related
  parties for:
    Sales of products and
      processing services:
        Lyondell............               $405                $572                 $246
        Occidental
          Chemical..........                441                 558                  435
        LCR.................                377                 438                  260
        Millennium
          Petrochemicals....                 55                  90                   54
        Oxy Vinyls..........                 48                  67                   93
    Shared services and
      shared site
      agreements:
        LCR.................                  3                   2                    3
        LMC.................                  6                   6                    6
        Millennium
          Petrochemicals....                 17                  24                   21
        Lyondell............                  -                   -                    8
    Gas purchased for LMC...                 86                  85                   46
Related parties billed
  Equistar for:
    Purchases of products:
        LCR.................               $203                $264                 $190
        LMC.................                151                 165                   95
        Millennium
          Petrochemicals....                 15                  16                   12
        Lyondell............                  4                   2                    6
        Occidental
          Chemical..........                  1                   2                    2
    Shared services and
      transition agreements:
        Lyondell............                147                 133                    9
        Millennium
          Petrochemicals....                 19                  22                   24
        LCR.................                  2                   -                    -
        Occidental
          Chemical..........                  -                   -                    2
</Table>

6. PURCHASE AND SALE OF BUSINESSES

    Effective June 1, 2001, Equistar expanded its wire and cable business
through the acquisition of the low- and medium-voltage power cable materials
business of AT Plastics, Inc. Equistar accounted for the acquisition as a
purchase, allocating the $7 million purchase price to property, plant and
equipment and inventory.

    Effective April 30, 1999, Equistar completed the sale of its concentrates
and compounds business. The transaction included two manufacturing facilities,
located in Heath, Ohio and Crockett, Texas, and related inventories. Equistar's
proceeds from the sale were approximately $75 million.

7. ACCOUNTS RECEIVABLE

    Equistar sells its products primarily to other chemical manufacturers in the
petrochemicals and polymers industries. Equistar performs ongoing credit
evaluations of its customers' financial condition and, in certain circumstances,
requires letters of credit from them. The Partnership's allowance for doubtful
accounts, which is reflected in the accompanying Consolidated Balance Sheets as
a reduction of accounts receivable, totaled $14 million and $9 million at
December 31, 2001 and 2000, respectively.

    During 2001, Equistar terminated an agreement with an independent issuer of
receivables-backed commercial paper. Previously, Equistar sold, on an ongoing
basis and without recourse, designated accounts receivable, maintaining the
balance of the accounts receivable sold by selling new receivables as existing
receivables were collected. At December 31, 2000 and 1999, the balance of
Equistar's

                                      F-16







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accounts receivable sold was $130 million. Increases and decreases in the amount
sold were reported as operating cash flows in the Consolidated Statement of Cash
Flows. Costs related to the sales were included in 'Selling, general and
administrative expenses' in the Consolidated Statement of Income.

8. INVENTORIES

    Inventories were as follows at December 31:

<Table>
<Caption>
                                                                   2001                  2000
                                                                   ----                  ----
                                                                      (MILLIONS OF DOLLARS)
<S>                                                                <C>                   <C>
Finished goods............................................         $243                  $273
Work-in-process...........................................           12                    16
Raw materials.............................................          104                   123
Materials and supplies....................................           89                    94
                                                                   ----                  ----
    Total inventories.....................................         $448                  $506
                                                                   ----                  ----
                                                                   ----                  ----
</Table>

    Income in 2001 benefited from a reduction in the levels of raw material and
product inventories, which are carried under the LIFO method of accounting. The
charges to cost of sales associated with the inventory reductions were valued
based on relatively low LIFO inventory values. If these charges had been valued
based on average 2001 costs, cost of sales for 2001 would have been higher by
approximately $10 million. The excess of the current cost of inventories over
book value was approximately $28 million at December 31, 2001.

9. PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS

    The components of property, plant and equipment, at cost, and the related
accumulated depreciation were as follows at December 31:

<Table>
<Caption>
                                                                   2001                  2000
                                                                   ----                  ----
                                                                      (MILLIONS OF DOLLARS)
<S>                                                               <C>                   <C>
Land......................................................        $   79                $   78
Manufacturing facilities and equipment....................         5,929                 5,769
Construction in progress..................................            92                   134
                                                                  ------                ------
    Total property, plant and equipment...................         6,100                 5,981
                                                                  ------                ------
Less accumulated depreciation.............................         2,395                 2,162
                                                                  ------                ------
    Property, plant and equipment, net....................        $3,705                $3,819
                                                                  ------                ------
                                                                  ------                ------
</Table>

    Equistar did not capitalize any interest during 2001, 2000 and 1999 with
respect to construction projects.

    Goodwill, at cost, and the related accumulated amortization were as follows
at December 31:

<Table>
<Caption>
                                                                     2001                  2000
                                                                     ----                  ----
                                                                        (MILLIONS OF DOLLARS)
<S>                                                                 <C>                   <C>
Goodwill....................................................        $1,318                $1,318
Less accumulated amortization...............................           265                   232
                                                                    ------                ------
    Goodwill, net...........................................        $1,053                $1,086
                                                                    ------                ------
                                                                    ------                ------
</Table>

    The unamortized balances of deferred turnaround, software and debt issuance
costs included in 'Other assets, net' were as follows at December 31:

                                      F-17







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                               2001           2000
                                                               ----           ----
                                                              (MILLIONS OF DOLLARS)
<S>                                                           <C>             <C>
Turnaround costs............................................  $   70          $ 75
Software costs..............................................      97           104
Debt issuance costs.........................................      34             9
</Table>

    Depreciation and amortization is summarized as follows for the periods
presented:

<Table>
<Caption>
                                                               FOR THE YEAR ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
                                                              (MILLIONS OF DOLLARS)
<S>                                                           <C>     <C>     <C>
Property, plant and equipment...............................  $237    $229    $221
Goodwill....................................................    33      33      33
Turnaround expense..........................................    20      24      25
Software costs..............................................    12      13      12
Other.......................................................    17      11       9
Debt issuance costs.........................................     2       -       -
                                                              ----    ----    ----
                                                              $321    $310    $300
                                                              ----    ----    ----
                                                              ----    ----    ----
</Table>

10. ACCRUED LIABILITIES

    Accrued liabilities were as follows at December 31:

<Table>
<Caption>
                                                                2001          2000
                                                                ----          ----
                                                              (MILLIONS OF DOLLARS)
<S>                                                           <C>           <C>
Property taxes..............................................   $   68        $   73
Interest....................................................       68            52
Payroll and benefits........................................       49            38
Other.......................................................       12             3
                                                               ------        ------
    Total accrued liabilities...............................   $  197        $  166
                                                               ------        ------
                                                               ------        ------
</Table>

11. LONG-TERM DEBT

    In August 2001, Equistar completed a $1.5 billion debt refinancing. The
refinancing included a bank credit facility consisting of a $500 million secured
revolving credit facility maturing in August 2006 and a $300 million secured
term loan, maturing in August 2007, with scheduled quarterly amortization
payments, beginning December 31, 2001. The revolving credit facility was undrawn
at December 31, 2001. Borrowing under the revolving credit facility generally
bears interest based on a margin over, at Equistar's option, LIBOR or a base
rate. The sum of the applicable margin plus a facility fee varies between 1.5%
and 2.5%, in the case of LIBOR loans, and 0.5% and 1.5%, in the case of base
rate loans, depending on Equistar's ratio of debt to EBITDA. The term loan
generally bears interest at a rate equal to LIBOR plus 3% or the base rate plus
2%, at Equistar's option. Borrowing under the term loan had a weighted average
interest rate of 6.26% during 2001. Certain financial ratio requirements were
modified in the refinancing to make them less restrictive. The bank credit
facility is secured by a lien on Equistar's accounts receivable, inventory,
other personal property and certain fixed assets. The refinancing also included
the issuance of $700 million of new unsecured 10.125% senior notes maturing in
August 2008. The 10.125% senior notes rank pari passu with existing Equistar
notes.

    The August 2001 refinancing replaced a five-year, $1.25 billion credit
facility with a group of banks that would have expired November 2002. Borrowing
under the facility at December 31, 2000 was $820 million and had a weighted
average interest rate of 7.13% at December 31, 2000. Millennium America Inc., a
subsidiary of Millennium, provided limited guarantees with respect to the
payment of principal

                                      F-18







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and interest on a total of $750 million principal amount of indebtedness under
the $1.25 billion revolving credit facility. As a result of the refinancing, the
related guarantees have been terminated.

    In March 2001, Equistar amended the previous $1.25 billion credit facility
making certain financial ratio requirements less restrictive. As a result of the
amendment, the interest rate on the previous credit facility was increased from
LIBOR plus 5/8 of 1% to LIBOR plus 8/10 of 1%.

    In February 1999, Equistar issued $900 million of debt securities. The debt
securities included $300 million of 8.50% Notes, which mature on February 15,
2004, and $600 million of 8.75% Notes, which mature on February 15, 2009.
Equistar used the net proceeds from this offering (i) to repay $205 million
outstanding under a capitalized lease obligation relating to Equistar's Corpus
Christi facility, (ii) to repay the outstanding balance under a $500 million
credit agreement, after which the $500 million credit agreement was terminated,
(iii) to repay $150 million of 10.00% Notes due in June 1999, and (iv) to the
extent of the remaining net proceeds, to reduce outstanding borrowing under the
revolving credit facility and for Partnership working capital purposes.

    The bank credit facility and the indenture governing Equistar's 10.125%
senior notes contain covenants that, subject to certain exceptions, restrict
sale and leaseback transactions, lien incurrence, debt incurrence, sales of
assets and mergers and consolidations. In addition, the bank credit facility
requires Equistar to maintain specified financial ratios. The breach of these
covenants could permit the lenders to declare the loans immediately payable and
could permit the lenders under Equistar's credit facility to terminate future
lending commitments.

    As a result of the continued poor current business environment, Equistar is
seeking an amendment to its credit facility that would increase its financial
flexibility by easing certain financial ratio requirements. Such an amendment
will require the payment of additional fees. Equistar anticipates that the
amendment will become effective prior to March 31, 2002.

    Long-term debt consisted of the following at December 31:

<Table>
<Caption>
                                                               2001           2000
                                                               ----           ----
                                                              (MILLIONS OF DOLLARS)
<S>                                                           <C>            <C>
Bank credit facilities:
    Revolving credit facility due 2006......................  $    -         $  820
    Term loan due 2007......................................     299              -
Other debt obligations:
    Medium-term notes due 2002-2005.........................      31            121
    9.125% Notes due 2002...................................     100            100
    8.50% Notes due 2004....................................     300            300
    6.50% Notes due 2006....................................     150            150
    10.125% Senior Notes due 2008...........................     700              -
    8.75% Notes due 2009....................................     598            598
    7.55% Debentures due 2026...............................     150            150
    Other...................................................       9              9
                                                              ------         ------
        Total long-term debt................................   2,337          2,248
Less current maturities.....................................     104             90
                                                              ------         ------
        Total long-term debt, net...........................  $2,233         $2,158
                                                              ------         ------
                                                              ------         ------
</Table>

    The 8.75% notes have a face amount of $600 million and are shown net of
unamortized discount. The medium-term notes had a weighted average interest rate
of 9.8% and 9.6% at December 31, 2001 and 2000, respectively.

    The medium-term notes, the 9.125% notes, the 6.5% notes and the 7.55%
debentures were assumed by Equistar from Lyondell when Equistar was formed in
1997. As between Equistar and Lyondell, Equistar is primarily liable for this
debt. Lyondell remains a co-obligor for the medium-term

                                      F-19







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

notes and certain events involving only Lyondell could give rise to events of
default under those notes, permitting the obligations to be accelerated. Under
certain limited circumstances, the holders of the medium-term notes have the
right to require repurchase of the notes. Following amendments to the indentures
for the 9.125% notes and 6.5% notes and the 7.55% debentures in November 2000,
Lyondell remains a guarantor of that debt but not a co-obligor. The consolidated
financial statements of Lyondell are filed as an exhibit to Equistar's Annual
Report on Form 10-K for the year ended December 31, 2001.

    Aggregate maturities of long-term debt during the next five years are $104
million in 2002, $32 million in 2003; $303 million in 2004; $8 million in 2005;
$153 million in 2006 and $1.8 billion thereafter.

12. LEASE COMMITMENTS

    Equistar leases various facilities and equipment under noncancelable lease
arrangements for various periods.

    Operating leases include leases of railcars used in the distribution of
products in Equistar's business. Equistar leases the railcars from unaffiliated
entities established for the purpose of serving as lessors with respect to these
leases. The leases include options for Equistar to purchase the railcars during
a lease term. If Equistar does not exercise a purchase option, the affected
railcars will be sold upon termination of the lease. In the event the sales
proceeds are less than the related guaranteed residual value, Equistar will pay
the difference to the lessor. The total guaranteed residual value under these
leases was approximately $225 million at December 31, 2001.

    Certain of Equistar's railcar operating leases contain financial and other
covenants that are substantially the same as those contained in the credit
facility discussed in Note 11 above. A breach of these covenants would permit
the early termination of those leases. As a result of the continued poor current
business environment, Equistar is seeking an amendment to these railcar leases.
Such amendments will require the payment of additional fees. Equistar
anticipates that the amendments will become effective prior to March 31, 2002.

    In addition, the credit rating downgrade in 2002 permits the early
termination of one of Equistar's railcar leases by the lessor, which would
accelerate the payment of $126 million of minimum lease payments. Equistar has
reached an agreement in principal with the lessor to renegotiate the lease.

    At December 31, 2001, future minimum lease payments and residual value
guarantees relating to noncancelable operating leases with lease terms in excess
of one year were as follows:

<Table>
<Caption>
                                                              MINIMUM     RESIDUAL
                                                               LEASE       VALUE
                                                              PAYMENTS   GUARANTEES
                                                              --------   ----------
                                                              (MILLIONS OF DOLLARS)
<S>                                                           <C>        <C>
2002........................................................    $ 95        $ 39
2003........................................................      78           -
2004........................................................      67         186
2005........................................................      43           -
2006........................................................      35           -
Thereafter..................................................     287           -
                                                                ----        ----
    Total minimum lease payments............................    $605        $225
                                                                ----        ----
                                                                ----        ----
</Table>

    Operating lease net rental expense was $110 million, $115 million and $112
million for the years ending December 31, 2001, 2000 and 1999, respectively.

                                      F-20







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. FINANCIAL INSTRUMENTS AND DERIVATIVES

    Equistar enters into over-the-counter derivatives, primarily price swap
contracts, related to crude oil with Occidental Energy Marketing, Inc., a
subsidiary of Occidental Chemical, to help manage its exposure to commodity
price risk with respect to crude oil-related raw material purchases. At December
31, 2000, price swap contracts covering 5.1 million barrels of crude oil were
outstanding. The carrying value and fair market value of these derivative
instruments at December 31, 2000 represented a liability of $13 million, which
was based on quoted market prices. The resulting loss from these hedges of
anticipated raw material purchases was deferred on the consolidated balance
sheet. On January 1, 2001, in accordance with the transition provisions of SFAS
No. 133, Equistar reclassified the deferred loss of $13 million to accumulated
other comprehensive income as a transition adjustment, representing the
cumulative effect of a change in accounting principle. The transition adjustment
was reclassified to the Consolidated Statement of Income during the period
January through July 2001 as the related raw material purchases occurred.

    During 2001, Equistar entered into additional price swap contracts covering
7.2 million barrels of crude oil and primarily maturing from July 2001 through
December 2001. In the third quarter 2001, outstanding price swap contracts,
covering 4.1 million barrels of crude oil and primarily maturing from October
2001 through December 2001, were effectively terminated. The termination
resulted in realization of a gain of nearly $9 million, which was recognized in
the fourth quarter 2001 as the related forecasted transactions occurred. There
were no outstanding price swap contracts at December 31, 2001.

    The following table summarizes activity included in accumulated other
comprehensive income ('AOCI') related to the fair value of derivative
instruments for the year ended December 31, 2001:

<Table>
<Caption>
                                                                     2001
                                                                     ----
                                                                 (MILLIONS OF
                                                                   DOLLARS)
<S>                                                           <C>
Gain (loss):
    Balance at beginning of period..........................         $  -
                                                                     ----
    January 1, 2001 transition adjustment --reclassification
      of December 31, 2000 deferred loss....................          (13)
    Net gains on derivative instruments.....................           35
    Reclassification of gains on derivative instruments to
      earnings..............................................          (22)
                                                                     ----
Net change included in AOCI for the period..................            -
                                                                     ----
    Net gain on derivative instruments included in AOCI at
      December 31, 2001.....................................         $  -
                                                                     ----
                                                                     ----
</Table>

    The fair value of all nonderivative financial instruments included in
current assets and current liabilities, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, approximated
their carrying value due to their short maturity. Based on the borrowing rates
currently available to Equistar for debt with terms and average maturities
similar to Equistar's debt portfolio, the fair value of Equistar's long-term
debt, including amounts due within one year, was approximately $2.3 billion and
$2.1 billion at December 31, 2001 and 2000, respectively.

    Equistar is exposed to credit risk related to its financial instruments in
the event of nonperformance by the counterparties. Equistar does not generally
require collateral or other security to support these financial instruments. The
counterparties to these transactions are major institutions deemed creditworthy
by Equistar. Equistar does not anticipate nonperformance by the counterparties.

    Equistar accounts for certain investments as 'available-for-sale' securities
in accordance with the provisions of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Accordingly, changes in the fair
value of the investments are recognized in the balance sheet and the unrealized
holding gains and losses are recognized in other comprehensive income.

                                      F-21







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. PENSION AND OTHER POSTRETIREMENT BENEFITS

    All full-time regular employees of the Partnership are covered by defined
benefit pension plans sponsored by Equistar. In connection with the formation of
Equistar, no pension assets or obligations were contributed to Equistar, with
the exception of union represented plans contributed by Occidental.

    Retirement benefits are based upon years of service and the employee's
highest three consecutive years of compensation during the last ten years of
service. Equistar accrues pension costs based upon an actuarial valuation and
funds the plans through periodic contributions to pension trust funds. Equistar
also has unfunded supplemental nonqualified retirement plans, which provide
pension benefits for certain employees in excess of the tax qualified plans'
limits. In addition, Equistar sponsors unfunded postretirement benefit plans
other than pensions, which provide medical and life insurance benefits. The
postretirement medical plans are contributory while the life insurance plans are
noncontributory.

    The following table provides a reconciliation of benefit obligations, plan
assets and the funded status of these plans:

<Table>
<Caption>
                                                                                       OTHER
                                                         PENSION BENEFITS     POSTRETIREMENT BENEFITS
                                                         ----------------     -----------------------
                                                         2001       2000         2001          2000
                                                         ----       ----         ----          ----
                                                                     (MILLIONS OF DOLLARS)
<S>                                                     <C>       <C>        <C>            <C>
Change in benefit obligation:
    Benefit obligation, January 1.....................   $120       $ 99         $ 92          $ 77
    Service cost......................................     16         17            2             2
    Interest cost.....................................     10          9            6             6
    Plan amendments...................................      -          -           29             -
    Actuarial loss (gain).............................     12          8          (14)           11
    Benefits paid.....................................    (11)       (12)          (3)           (2)
    Net effect of curtailments, settlements and
      special termination benefits....................      -         (1)           -             1
    Transfer to Lyondell..............................      -          -            -            (3)
                                                         ----       ----         ----          ----
    Benefit obligation, December 31...................    147        120          112            92
                                                         ----       ----         ----          ----
Change in plan assets:
    Fair value of plan assets, January 1..............    117        101            -             -
    Actual return on plan assets......................     (6)        (3)           -             -
    Partnership contributions.........................      7         31            3             2
    Benefits paid.....................................    (11)       (12)          (3)           (2)
                                                         ----       ----         ----          ----
    Fair value of plan assets, December 31............    107        117            -             -
                                                         ----       ----         ----          ----
    Funded status.....................................    (40)        (3)        (112)          (91)
    Unrecognized actuarial loss.......................     48         24            5            20
    Unrecognized prior service cost...................      -          -           29             -
                                                         ----       ----         ----          ----
    Net amount recognized.............................   $  8       $ 21         $(78)         $(71)
                                                         ----       ----         ----          ----
                                                         ----       ----         ----          ----
Amounts recognized in the Consolidated Balance Sheet
  consist of:
    Prepaid benefit cost..............................   $ 22       $ 35         $  -          $  -
    Accrued benefit liability.........................    (33)       (14)         (78)          (71)
    Accumulated other comprehensive income............     19          -            -             -
                                                         ----       ----         ----          ----
    Net amount recognized.............................   $  8       $ 21         $(78)         $(71)
                                                         ----       ----         ----          ----
                                                         ----       ----         ----          ----
</Table>

    The increase in other postretirement benefit obligations in 2001 resulted
from a medical plan amendment that increased Equistar's maximum contribution
level per employee by 25%.

                                      F-22







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Pension plans with benefit obligations in excess of the fair value of assets
are summarized as follows at December 31:

<Table>
<Caption>
                                                              2001   2000
                                                              ----   ----
<S>                                                           <C>    <C>
Benefit obligation..........................................  $129   $63
Fair value of assets........................................    81    40
</Table>

    Pension plans with accumulated benefit obligations in excess of the fair
value of assets are summarized as follows at December 31:

<Table>
<Caption>
                                                              2001   2000
                                                              ----   ----
<S>                                                           <C>    <C>
Accumulated benefit obligation..............................  $106    $9
Fair value of assets........................................    81     6
</Table>

    Net periodic pension and other postretirement benefit costs included the
following components:

<Table>
<Caption>
                                                                                       OTHER
                                                                                   POSTRETIREMENT
                                                             PENSION BENEFITS         BENEFITS
                                                            ------------------   ------------------
                                                            2001   2000   1999   2001   2000   1999
                                                            ----   ----   ----   ----   ----   ----
                                                                     (MILLIONS OF DOLLARS)
<S>                                                         <C>    <C>    <C>    <C>    <C>    <C>
Components of net periodic benefit cost:
    Service cost..........................................  $16    $17    $22    $ 2    $ 2    $ 4
    Interest cost.........................................   10      9      7      6      6      6
    Amortization of actuarial loss........................    2      -      1      -      1      1
    Expected return on plan assets........................  (11)    (8)    (8)     -      -      -
    Net effect of curtailments, settlements and special
      termination benefits................................    3     (1)     -      2      1      -
                                                            ---    ---    ---    ---    ---    ---
    Net periodic benefit cost.............................  $20    $17    $22    $10    $10    $11
                                                            ---    ---    ---    ---    ---    ---
                                                            ---    ---    ---    ---    ---    ---
</Table>

    The assumptions used in determining the net pension cost and the net pension
liability were as follows at December 31:

<Table>
<Caption>
                                                                           OTHER POSTRETIREMENT
                                                     PENSION BENEFITS            BENEFITS
                                                   ---------------------   ---------------------
                                                   2001    2000    1999    2001    2000    1999
                                                   ----    ----    ----    ----    ----    ----
<S>                                                <C>     <C>     <C>     <C>     <C>     <C>
Weighted-average assumptions as of December 31:
    Discount rate................................  7.00%   7.50%   8.00%   7.00%   7.50%   8.00%
    Expected return on plan assets...............  9.50%   9.50%   9.50%       -       -       -
    Rate of compensation increase................  4.50%   4.50%   4.75%   4.50%   4.50%   4.75%
</Table>

    The assumed annual rate of increase in the per capita cost of covered health
care benefits as of December 31, 2001 was 7.0% for 2002 through 2004 and 5.0%
thereafter. The health care cost trend rate assumption does not have a
significant effect on the amounts reported due to limits on Equistar's maximum
contribution level under the medical plan. To illustrate, increasing or
decreasing the assumed health care cost trend rates by one percentage point in
each year would change the accumulated postretirement benefit liability as of
December 31, 2001 by less than $1 million and would not have a material effect
on the aggregate service and interest cost components of the net periodic
postretirement benefit cost for the year then ended.

    Equistar also maintains voluntary defined contribution savings plans for
eligible employees. Contributions to the plans by Equistar were $16 million, $17
million and $20 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

                                      F-23







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. COMMITMENTS AND CONTINGENCIES

    Commitments -- Equistar has various purchase commitments for materials,
supplies and services incident to the ordinary conduct of business. At
December 31, 2001, Equistar had commitments for natural gas and natural gas
liquids at prices in excess of current market. Using December 31, 2001 spot
market prices for these products the estimated negative impact on first quarter
2002 operating results would be approximately $30 million. Since December 31,
2001, natural gas prices have further declined. These fixed-price contracts
substantially terminate by the end of the first quarter 2002. See also Note 5,
describing related party commitments.

    Equistar is party to various unconditional purchase obligation contracts as
a purchaser for products and services, principally for steam and power. At
December 31, 2001, future minimum payments under these contracts with
noncancelable contract terms in excess of one year were as follows:

<Table>
<Caption>
                                                     (MILLIONS OF DOLLARS)
<S>                                                  <C>
2002...............................................         $  109
2003...............................................            132
2004...............................................            135
2005...............................................            137
2006...............................................            138
Thereafter.........................................          1,688
                                                            ------
    Total minimum contract payments................         $2,339
                                                            ------
                                                            ------
</Table>

    Equistar's total purchases under these agreements were $77 million, $51
million and $56 million for the years ending December 31, 2001, 2000 and 1999,
respectively. The increases in 2001, 2002 and 2003 are due to commitments for
steam and power from a new co-generation facility, which is expected to reach
full capacity in mid-2002.

    Indemnification Arrangements -- Lyondell, Millennium Petrochemicals and
certain subsidiaries of Occidental have each agreed to provide certain
indemnifications to Equistar with respect to the petrochemicals and polymers
businesses contributed by the partners. In addition, Equistar agreed to assume
third party claims that are related to certain pre-closing contingent
liabilities that are asserted prior to December 1, 2004 as to Lyondell and
Millennium Petrochemicals, and May 15, 2005 as to certain Occidental
subsidiaries, to the extent the aggregate thereof does not exceed $7 million to
each partner, subject to certain terms of the respective asset contribution
agreements. As of December 31, 2001, Equistar had incurred a total of $17
million for these uninsured claims and liabilities. Equistar also agreed to
assume third party claims that are related to certain pre-closing contingent
liabilities that are asserted for the first time after December 1, 2004 as to
Lyondell and Millennium Petrochemicals, and for the first time after May 15,
2005 as to certain Occidental subsidiaries. As of September 30, 2001, Equistar,
Lyondell, Millennium Petrochemicals and certain subsidiaries of Occidental
amended the asset contribution agreements governing these indemnification
obligations to clarify the treatment of, and procedures pertaining to the
management of, certain claims arising under the asset contribution agreements.
Equistar management believes that these amendments do not materially change the
asset contribution agreements.

    Environmental Remediation -- Equistar's accrued liability for environmental
matters as of December 31, 2001 was $6 million and related to the Port Arthur
facility, which was permanently shut down on February 28, 2001. In the opinion
of management, there is currently no material estimable range of loss in excess
of the amounts recorded for environmental remediation.

    Clean Air Act -- The eight-county Houston/Galveston region has been
designated a severe non-attainment area for ozone by the U.S. Environmental
Protection Agency ('EPA'). Emission reduction controls for nitrogen oxides
('NOx') must be installed at each of Equistar's six plants located in the
Houston/Galveston region during the next several years. Compliance with the plan
will result in increased capital investment, which could be between $200 million
and $260 million, before the 2007

                                      F-24







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

deadline, as well as higher annual operating costs for Equistar. The timing and
amount of these expenditures are subject to regulatory and other uncertainties,
as well as obtaining the necessary permits and approvals. In January 2001,
Equistar and an organization composed of industry participants filed a lawsuit
against the Texas Natural Resource Conservation Commission ('TNRCC') to
encourage adoption of their alternative plan to achieve the same air quality
improvement with less negative economic impact on the region. Adoption of the
alternative plan, as sought by the lawsuit, is expected to reduce Equistar's
estimated capital investments for NOx reductions required to comply with the
standards. However, there can be no guarantee as to the ultimate capital cost of
implementing any final plan developed to ensure ozone attainment by the 2007
deadline.

    The Clean Air Act Amendments of 1990 set minimum levels for oxygenates, such
as MTBE, in gasoline sold in areas not meeting specified air quality standards.
The presence of MTBE in some water supplies in California and other states due
to gasoline leaking from underground storage tanks and in surface water from
recreational water craft has led to public concern about the use of MTBE.
Certain federal and state governmental initiatives have sought either to rescind
the oxygenate requirement for reformulated gasoline or to restrict or ban the
use of MTBE. These initiatives or other governmental actions could result in a
significant reduction in Equistar's MTBE sales, which represented approximately
4% of its total 2001 revenues. Equistar has developed technologies to convert
its process to produce alternate gasoline blending components should it be
necessary to reduce MTBE production in the future. However, implementation of
such technologies would require additional capital investment.

    General -- The Partnership is also subject to various lawsuits and
proceedings. Subject to the uncertainty inherent in all litigation, management
believes the resolution of these proceedings will not have a material adverse
effect on the financial position or liquidity of Equistar.

16. SUPPLEMENTAL CASH FLOW INFORMATION

    Supplemental cash flow information is summarized as follows for the periods
presented:

<Table>
<Caption>
                                                           FOR THE YEAR ENDED
                                                              DECEMBER 31,
                                                          ---------------------
                                                          2001    2000    1999
                                                          ----    ----    ----
                                                          (MILLIONS OF DOLLARS)
<S>                                                       <C>     <C>     <C>
Cash paid for interest..................................  $171    $180    $146
                                                          ----    ----    ----
                                                          ----    ----    ----
</Table>

17. SEGMENT INFORMATION AND RELATED INFORMATION

    Equistar operates in two reportable segments, petrochemicals and polymers.
The accounting policies of the segments are the same as those described in
'Summary of Significant Accounting Policies' (see Note 2). No third-party
customer accounted for 10% or more of sales during the three-year period ended
December 31, 2001.

                                      F-25







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Summarized financial information concerning Equistar's reportable segments
is shown in the following table. Intersegment sales between the petrochemicals
and polymers segments were based on current market prices.

<Table>
<Caption>
                                PETROCHEMICALS   POLYMERS    UNALLOCATED   ELIMINATIONS   CONSOLIDATED
                                --------------   --------    -----------   ------------   ------------
                                                        (MILLIONS OF DOLLARS)
<S>                             <C>              <C>         <C>           <C>            <C>
FOR THE YEAR ENDED DECEMBER 31, 2001:
Sales and other operating
  revenues:
    Customers.................      $3,929        $1,980       $    -        $     -         $5,909
    Intersegment..............       1,455             -            -         (1,455)             -
                                    ------        ------       ------        -------         ------
                                     5,384         1,980            -         (1,455)         5,909
Unusual charges...............           -             -           22              -             22
Operating income (loss).......         275          (186)        (188)             -            (99)
Total assets..................       3,458         1,365        1,485              -          6,308
Capital expenditures..........          84            24            2              -            110
Depreciation and amortization
  expense.....................         204            58           59              -            321

FOR THE YEAR ENDED DECEMBER 31, 2000:
Sales and other operating
  revenues:
    Customers.................      $5,144        $2,351       $    -        $     -         $7,495
    Intersegment..............       1,887             -            -         (1,887)             -
                                    ------        ------       ------        -------         ------
                                     7,031         2,351            -         (1,887)         7,495
Operating income (loss).......         694          (185)        (175)             -            334
Total assets..................       3,693         1,534        1,355              -          6,582
Capital expenditures..........          79            46            6              -            131
Depreciation and amortization
  expense.....................         199            55           56              -            310

FOR THE YEAR ENDED DECEMBER 31, 1999:
Sales and other operating
  revenues:
    Customers.................      $3,435        $2,159       $    -        $     -         $5,594
    Intersegment..............       1,324             -            -         (1,324)             -
                                    ------        ------       ------        -------         ------
                                     4,759         2,159            -         (1,324)         5,594
Unusual charges...............           -             -           96              -             96
Operating income (loss).......         447            51         (336)             -            162
Total assets..................       3,671         1,551        1,514              -          6,736
Capital expenditures..........          61            83           13              -            157
Depreciation and amortization
  expense.....................         194            53           53              -            300
</Table>

    The following table presents the details of 'Operating income (loss)' as
presented above in the 'Unallocated' column for the years ended December 31,
2001, 2000 and 1999.

<Table>
<Caption>
                                                              2001      2000      1999
                                                              ----      ----      ----
                                                                (MILLIONS OF DOLLARS)
<S>                                                           <C>       <C>       <C>
Expenses not allocated to petrochemicals and polymers:
    Principally general and administrative expenses.........  $(166)    $(175)    $(240)
    Unusual charges.........................................    (22)        -       (96)
                                                              -----     -----     -----
        Total -- Unallocated................................  $(188)    $(175)    $(336)
                                                              -----     -----     -----
                                                              -----     -----     -----
</Table>

                                      F-26







<PAGE>

                             EQUISTAR CHEMICALS, LP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    The following table presents the details of 'Total assets' as presented
above in the 'Unallocated' column as of December 31, for the years indicated:

<Table>
<Caption>
                                                               2001     2000     1999
                                                               ----     ----     ----
                                                               (MILLIONS OF DOLLARS)
<S>                                                           <C>      <C>      <C>
Cash........................................................  $  202   $   18   $  108
Accounts receivable -- trade and related parties............      17       16       18
Prepaids and other current assets...........................      20       17       22
Property, plant and equipment, net..........................      44       56       58
Goodwill, net...............................................   1,053    1,086    1,119
Other assets................................................     149      162      189
                                                              ------   ------   ------
                                                              $1,485   $1,355   $1,514
                                                              ------   ------   ------
                                                              ------   ------   ------
</Table>

18. SUBSEQUENT EVENT

    Early in 2002, Lyondell and Occidental agreed in principle for Lyondell's
acquisition of Occidental's 29.5% share of Equistar and Occidental's purchase of
an equity interest in Lyondell. Upon completion of these transactions,
Lyondell's ownership interest in Equistar would increase to 70.5%. Millennium
holds the remaining 29.5% interest in Equistar. There can be no assurance that
the proposed transactions will be completed.

                                      F-27







<PAGE>

                                                                     SCHEDULE II

                           MILLENNIUM CHEMICALS INC.
                       VALUATION AND QUALIFYING ACCOUNTS
                    FOR THE YEARS ENDED 1999, 2000 AND 2001

<Table>
<Caption>
                                                      BALANCE      CHARGE TO                BALANCE AT
                                                    AT BEGINNING   COSTS AND                  END OF
                                                      OF YEAR      EXPENSES    DEDUCTIONS      YEAR
                                                      -------      --------    ----------      ----
                                                                        (MILLIONS)
<S>                                                 <C>            <C>         <C>          <C>
Year ended December 31, 1999
    Deducted from asset accounts:
    Allowance for doubtful accounts...............      $  3        $    -        $ (1)(b)     $ 2
    Valuation allowance...........................       126             -         (60)(a)      76
Year ended December 31, 2000
    Deducted from asset accounts:
    Allowance for doubtful accounts...............         2             2           -           4
    Valuation allowance...........................        76             -          (6)(a)      70
Year ended December 31, 2001
    Deducted from asset accounts:
    Allowance for doubtful accounts...............         4             4          (1)          7
    Valuation allowance...........................        70             -         (70)(c)       -
</Table>

---------

 (a) Valuation allowance for capital loss carryover deferred tax asset.

 (b) Uncollected accounts written off, net of recoveries.

 (c) Underlying capital loss carryover expired.

                                      S-1



                           STATEMENT OF DIFFERENCES
                           ------------------------

The dagger symbol shall be expressed as ................................. 'D'
The section symbol shall be expressed as.................................'SS'