=============================================================================
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                 FORM 10-K

            Annual Report Pursuant to Section 13 or 15(d) of the
                      Securities Exchange Act of 1934

                FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998

                       Commission file number 1-2918

                                ASHLAND INC.
                          (a Kentucky corporation)

                           I.R.S. No. 61-0122250
                             1000 Ashland Drive
                          Russell, Kentucky 41169

                      Telephone Number: (606) 329-3333

              Securities Registered Pursuant to Section 12(b):

                                                      Name of each exchange
            Title of each class                        on which registered
            -------------------                        -------------------
 Common Stock, par value $1.00 per share             New York Stock Exchange
                                                   and Chicago Stock Exchange
Rights to Purchase Series A Participating           New York Stock Exchange
      Cumulative Preferred Stock                   and Chicago Stock Exchange

           Securities Registered Pursuant to Section 12(g): 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 was 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 /

     At October  30,  1998,  based on the New York Stock  Exchange  closing
price, the aggregate market value of voting stock held by non-affiliates of
the  Registrant  was  approximately  $3,249,504,576.  In  determining  this
amount, the Registrant has assumed that directors, certain of its executive
officers,  and persons known to it to be the beneficial owners of more than
five percent of its common stock are affiliates.  Such assumption shall not
be deemed conclusive for any other purpose.

     At October 30,  1998,  there were  75,057,315  shares of  Registrant's
common stock outstanding.

                    Documents Incorporated by Reference

     Portions of Registrant's  Annual Report to Shareholders for the fiscal
year ended  September 30, 1998 are  incorporated  by reference into Parts I
and II.

     Portions of  Registrant's  definitive  Proxy Statement for its January
28, 1999 Annual Meeting of Shareholders  are incorporated by reference into
Part III.

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<PAGE>
                             TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                     Page

<S>       <C>                                                                        <C>
PART I
          Item 1.    Business .......................................................  1
                              Ashland Chemical.......................................  1
                              APAC...................................................  3
                              Valvoline..............................................  4
                              Refining and Marketing.................................  5
                              Arch Coal..............................................  7
                              Miscellaneous..........................................  9
          Item 2.    Properties...................................................... 12
          Item 3.    Legal Proceedings............................................... 12
          Item 4.    Submission of Matters to a
                       Vote of Security Holders...................................... 13
          Item X.    Executive Officers of Ashland................................... 13
PART II
          Item 5.    Market for Registrant's Common Stock and Related
                       Security Holder Matters....................................... 14
          Item 6.    Selected Financial Data......................................... 14
          Item 7.    Management's Discussion and Analysis of Financial
                       Condition and Results of Operations........................... 14
          Item 7A.   Quantitative and Qualitative Disclosures About Market Risk...... 14
          Item 8.    Financial Statements and Supplementary Data..................... 14
          Item 9.    Changes in and Disagreements with Accountants
                       on Accounting and Financial Disclosure........................ 14
PART III
          Item 10.   Directors and Executive Officers of the Registrant.............. 14
          Item 11.   Executive Compensation.......................................... 14
          Item 12.   Security Ownership of Certain Beneficial
                       Owners and Management......................................... 14
          Item 13.   Certain Relationships and Related Transactions.................. 14
PART IV
          Item 14.   Exhibits, Financial Statement Schedules and Reports
                       on Form 8-K................................................... 15


</TABLE>
<PAGE>


                                   PART I

ITEM 1. BUSINESS

     Ashland Inc. is a Kentucky corporation, organized on October 22, 1936,
with  its  principal  executive  offices  located  at 1000  Ashland  Drive,
Russell,  Kentucky 41169 (Mailing Address: P.O. Box 391, Ashland,  Kentucky
41114) (Telephone:  (606) 329-3333).  Effective January 4, 1999,  Ashland's
principal executive offices will be located at 50 E. RiverCenter Boulevard,
Covington,  Kentucky 41012 (Mailing Address:  50 E. RiverCenter  Boulevard,
P.O. Box 391, Covington,  Kentucky 41012-0391) (Telephone: (606) 815-3333).
The terms  "Ashland" and the "Company" as used herein include  Ashland Inc.
and its  consolidated  subsidiaries,  except  where the  context  indicates
otherwise.

     Ashland's businesses are grouped into five industry segments:  Ashland
Chemical, APAC, Valvoline,  Refining and Marketing and Arch Coal. Financial
information about these segments for the three fiscal years ended September
30,  1998 is set  forth on Pages 60 and 61 of  Ashland's  Annual  Report to
Shareholders  for  the  fiscal  year  ended  September  30,  1998  ("Annual
Report").

     Ashland   Chemical   distributes   industrial   chemicals,   solvents,
thermoplastics and resins, and fiberglass  materials,  and manufactures and
sells a wide variety of  specialty  chemicals  and certain  petrochemicals.
APAC performs  contract  construction  work,  including  highway paving and
repair,  excavation  and  grading,  and bridge  construction,  and produces
asphaltic  and  ready-mix  concrete,  crushed  stone and  other  aggregate,
concrete  block  and  certain  specialized  construction  materials  in the
southern and midwestern United States.

     Valvoline is a marketer of branded,  packaged motor oil and automotive
chemicals,   automotive  appearance  products,  antifreeze,  filters,  rust
preventives  and coolants.  In addition,  Valvoline is engaged in the "fast
oil change" business through outlets  operating under the Valvoline Instant
Oil Change(R) name.

     Effective  January 1,  1998,  Ashland  and  USX-Marathon  completed  a
transaction to form Marathon Ashland Petroleum LLC ("MAP"),  which combined
major  portions  of the  supply,  refining,  marketing  and  transportation
operations  of the two  companies.  Marathon has a 62% interest in MAP, and
Ashland holds a 38% interest.  MAP operates seven  refineries  with a total
crude oil refining  capacity of 935,000 barrels per day.  Refined  products
are distributed through a network of independent and company-owned  outlets
in the Midwest,  the upper Great Plains and the southeastern United States.
Ashland  accounts  for its  investment  in MAP using the  equity  method of
accounting.

     Ashland's coal operations are conducted by Arch Coal,  Inc.,  which is
owned  55%  by  Ashland  and  is  publicly  traded.   Arch  Coal  produces,
transports,  processes  and  markets  bituminous  coal  produced in Central
Appalachia and the western and midwestern  United States.  Ashland accounts
for its investment in Arch Coal using the equity method of accounting.

     At September 30, 1998,  Ashland and its consolidated  subsidiaries had
approximately 21,200 employees (excluding contract employees).


                              ASHLAND CHEMICAL

     Ashland  Chemical  Company,  a division of Ashland,  is engaged in the
manufacture,  distribution  and sale of a wide variety of  chemicals,  fine
ingredients  and plastic  products.  Ashland  Chemical owns and operates 36
manufacturing   facilities  and  participates  in  13  manufacturing  joint
ventures  in 11 states  and 19  foreign  countries.  In  addition,  Ashland
Chemical owns or leases approximately 100 distribution  facilities in North
America and 25  distribution  facilities in 17 foreign  countries.  Ashland
Chemical is comprised of the following operations: 

DISTRIBUTION

     INDUSTRIAL  CHEMICALS  &  SOLVENTS  DIVISION - This  division  markets
specialty chemicals, additives and solvents to industrial chemical users in
major markets through  distribution  centers in the United States,  Canada,
Mexico and Puerto  Rico.  It  distributes  approximately  7,000  chemicals,
solvents,  additives and raw materials made by many of the nation's leading
chemical  manufacturers  and a growing  number of  offshore  producers.  It
specializes  in  supplying   mixed   truckloads   and   less-than-truckload
quantities to many  industries,  including  the paint and  coatings,  inks,
adhesives,  polymer,  rubber,  industrial  and  institutional  compounding,
automotive,  appliance  and  paper  industries.  It also  offers  customers
chemical  waste  collection,  disposal and recycling  services,  working in
cooperation with major chemical waste services companies.


                                     1
<PAGE>
     GENERAL  POLYMERS  DIVISION - This  division  markets a broad range of
thermoplastic  resins to injection molding,  extruders,  blow molders,  and
rotational molders in the plastics industry through distribution  locations
in the United  States,  Canada,  Mexico and Puerto Rico.  It also  provides
plastic material  transfer and packaging  services and  less-than-truckload
quantities of packaged  thermoplastics.  The division's  basic resins group
markets bulk wide-spec and off-grade  thermoplastic  resins to a variety of
proprietary processors in North America.

     FRP  SUPPLY  DIVISION - This  division  markets  to  customers  in the
reinforced  plastics and cultured  marble  industries  mixed  truckload and
less-than-truckload  quantities of polyester  resins,  fiberglass and other
specialty  reinforcements,  catalysts and allied products from distribution
locations located throughout North America.

      FINE INGREDIENTS  DIVISION - This division  distributes  cosmetic and
pharmaceutical specialty chemicals and food-grade and nutritional additives
and ingredients across North America.

     ASHLAND  PLASTICS  EUROPE - This  division  markets  a broad  range of
thermoplastics  to  processors  in  Europe.  Ashland  Plastics  Europe  has
distribution centers located in Belgium, Finland, France, Germany, Ireland,
Italy, the Netherlands,  Norway,  Spain,  Sweden and the United Kingdom and
has compounding manufacturing facilities located in Italy and Spain.

SPECIALTY CHEMICALS

     COMPOSITE  POLYMERS DIVISION - This division  manufactures and sells a
broad  range  of  chemical-resistant,  fire-retardant  and  general-purpose
grades of  unsaturated  polyester and vinyl ester resins for the reinforced
plastics industry. Key markets include the transportation, construction and
marine industries.  It has manufacturing plants in Jacksonville,  Arkansas;
Los Angeles,  California;  Bartow, Florida;  Ashtabula, Ohio; Philadelphia,
Pennsylvania;  Kelowna,  British Columbia,  Canada;  Benicarlo,  Spain; and
through a joint venture in Jeddah, Saudi Arabia. In addition,  the division
also  manufactures  products  through  other  Ashland  Chemical  facilities
located in Mississauga, Ontario, Canada and Neville Island, Pennsylvania.

     FOUNDRY  PRODUCTS  DIVISION  - This  division  manufactures  and sells
foundry  chemicals   worldwide,   including   sand-binding  resin  systems,
refractory  coatings,  release agents,  engineered  sand  additives,  riser
sleeves, and die lubricants.  This division serves the global metal casting
industry from 22 locations in 18 countries.

     DREW  INDUSTRIAL   DIVISION  -  This  division  supplies   specialized
chemicals  and  consulting  services  for the  treatment  of boiler  water,
cooling  water,  steam,  fuel and waste streams.  It also supplies  process
chemicals  and  technical  services  to  the  pulp  and  paper  and  mining
industries and additives to  manufacturers  of latex and paint. It conducts
operations  throughout  North  America,  Europe  and the Far  East  through
subsidiaries,  joint venture companies and  distributors.  The division has
manufacturing plants in Kansas City, Kansas;  Kearny, New Jersey;  Houston,
Texas; Ajax, Ontario, Canada; Somercotes,  England;  Singapore;  Sydney and
Perth, Australia; and Auckland, New Zealand.

     ELECTRONIC CHEMICALS DIVISION - This division manufactures and sells a
variety of ultrapure  chemicals  for the worldwide  semiconductor  industry
through various manufacturing locations and also custom blends and packages
ultrapure liquid chemicals to customer specifications. It recently opened a
new  $45  million   state-of-the-art   manufacturing  facility  in  Pueblo,
Colorado.  The  division  also  operates  manufacturing  plants in  Newark,
California;  Milan,  Italy;  Easton,  Pennsylvania;  and Dallas,  Texas. In
addition,  it enters into long-term  agreements to provide complete on-site
chemical  management  services,   including  purchasing,   warehousing  and
delivering  chemicals  for  in-plant  use,  at  major  facilities  of large
consumers of high purity  chemicals.  This division  formed a joint venture
with Union Petrochemical Corporation of Taipei, Taiwan to build and operate
an  ultrapure  process  chemicals  manufacturing  facility  in  Taiwan.  In
addition,  the division has acquired  property in Korea to build a facility
to manufacture specialty stripper products for semiconductor manufacturing.

     SPECIALTY POLYMERS & ADHESIVES  DIVISION - This division  manufactures
and sells  specialty  phenolic resins for paper  impregnation  and friction
material  bonding;  acrylic  polymers  for  pressure-sensitive   adhesives;
emulsion  polymer   isocyanate   adhesives  for  structural  wood  bonding;
polyurethane  and  epoxy  structural   adhesives  for  bonding   fiberglass
reinforced plastics,  composites,  thermoplastics and metals in automotive,
recreational,  and industrial  applications;  induction bonding systems for
thermoplastic  materials;  elastomeric  polymer  adhesives and butyl rubber
roofing  tapes for  commercial  roofing  applications;  and  vapor  curing,
high-performance  urethane coatings systems. It has manufacturing plants in
Calumet City, Illinois;  Norwood, New Jersey;  Ashland and Columbus,  Ohio;
and Totowa, New Jersey.
                                     2
<PAGE>

     DREW MARINE DIVISION - This division supplies specialty  chemicals for
water  and fuel  treatment  and  general  maintenance,  as well as  sealing
products,  welding and  refrigerant  products and fire  fighting and safety
services to the  world's  merchant  marine  fleet.  Drew  Marine  currently
provides shipboard technical service for more than 10,000 vessels from more
than 100 locations serving 600 ports throughout the world. 

PETROCHEMICALS

     This division  manufactures  maleic  anhydride at Neal, West Virginia,
and Neville Island, Pennsylvania, and methanol near Plaquemine,  Louisiana.
Its Energy  Services  business  unit  provides  industrial  and  commercial
businesses with expert  management of their total energy  requirements,  by
sourcing and supplying natural gas and natural gas liquids.

OTHER MATTERS

     DUBLIN,  OHIO  HEADQUARTERS  TECHNICAL  CENTER  EXPANSION - In October
1998,  Ashland  Chemical  completed  construction of a  115,000-square-foot
facility expanding its Technical Center in Dublin, Ohio.

     For  information  on Ashland  Chemical  and  federal,  state and local
statutes  and  regulations  governing  releases  into  the  environment  or
protection of the environment,  see "Item 1.  Miscellaneous - Environmental
Matters" and "Item 3. Legal Proceedings - Environmental Proceedings."


                                    APAC

      The APAC  group  of  companies  performs  construction  work  such as
paving, repairing and resurfacing highways, streets, airports,  residential
and  commercial  developments,  sidewalks and  driveways;  grading and base
work; and excavation and related  activities in the construction of bridges
and  structures,  drainage  facilities  and  underground  utilities  in  14
southern and midwestern  states.  APAC also produces and sells construction
materials,  such as hot-mix asphalt and ready-mix  concrete,  crushed stone
and other aggregate and, in certain markets, concrete block and specialized
construction materials, such as architectural block.

     To  deliver  its  services  and  products,   APAC  utilizes  extensive
aggregate-producing properties and construction equipment. It currently has
24 permanent  operating  quarry  locations,  32 other aggregate  production
facilities,  46 ready-mix concrete plants, 167 hot-mix asphalt plants and a
fleet of over 10,000 mobile equipment units,  including heavy  construction
equipment and transportation-related equipment.

     Raw aggregate generally consists of sand, gravel,  granite,  limestone
and sandstone.  About 24% of the raw aggregate  produced by APAC is used in
APAC's  own  contract  construction  work  and the  production  of  various
processed construction  materials.  The remainder is sold to third parties.
APAC also  purchases  substantial  quantities of raw  aggregate  from other
producers whose proximity to the job site render it economically  feasible.
Most  other raw  materials,  such as liquid  asphalt,  portland  cement and
reinforcing steel, are purchased from third parties.  APAC is not dependent
upon any one supplier or customer.

     Approximately 60% of APAC's revenues are derived directly from highway
and other public sector sources.  The other 40% are derived from industrial
and commercial  customers,  private developers and other contractors to the
public sector.  The 1998 highway funding  authorization  package  increased
federal  funding for highways by $52 billion over a six-year  period.  More
importantly,  the  states in which  APAC  operates  should  see an  average
increase  in  annual  funding  of 59% or $3.3  billion,  based  on  current
estimates.

     Climate and weather  significantly affect revenues in the construction
business.  Due to its  location,  APAC  tends  to enjoy a  relatively  long
construction  season.  Most of APAC's  operating income is generated during
the construction period of May to October.

     Total backlog at September 30, 1998 was $838 million, compared to $693
million at September 30, 1997. The backlog orders at September 30, 1998 are
considered firm, and a major portion is expected to be filled during fiscal
1999.

                                     3
<PAGE>
                                 VALVOLINE

     The  Valvoline  Company,  a division  of  Ashland,  is a  marketer  of
automotive and industrial oils, automotive chemicals, automotive appearance
products and automotive and environmental services, with sales in more than
140 countries.  The Valvoline(R) trademark was federally registered in 1873
and is the oldest  trademark  for a lubricating  oil in the United  States.
Valvoline is comprised of the following business units:

     NORTH AMERICAN  PRODUCTS - This unit,  Valvoline's  largest  division,
markets  automotive,  commercial,  and  industrial  lubricants,  automotive
chemicals and  automotive  appearance  products to a broad network of North
American  customers.  This unit markets Valvoline branded motor oil, one of
the top selling  brands in the U.S.  private  passenger car and light truck
market.  In  1998,  this  unit  introduced  a  line  of  premium  synthetic
SynPower(R) automobile chemicals for "under-the-hood" use.

     North   American   Products  also  markets  Eagle  One(R)   automotive
appearance   products,   Zerex(R)   antifreeze  and  Pyroil(R)   automotive
chemicals.  Zerex is the  second  leading  antifreeze  brand in the  United
States. This division also markets R-12, an automotive refrigerant that was
phased out of production in 1995. R-12 is being replaced in the market by a
new generation of refrigerants.

     The domestic  commercial/fleet  group of the North  American  Products
unit  continued  its  strategic  alliance  with Cummins  Engine  Company to
distribute heavy-duty lubricants to the commercial market.

     EAGLE ONE - Acquired in February 1998, Eagle One is a brand of premium
automobile  chemicals for "above-the-hood"  applications.  Products include
waxes,  polishes  and wheel  cleaners.  Managed by  Valvoline as a separate
business unit,  Eagle One markets its products  through  Valvoline's  North
American Products and Valvoline International divisions.

     VALVOLINE  INTERNATIONAL - Valvoline  International  markets Valvoline
branded  products,  TECTYL(R)  rust  preventives  and Eagle One  automotive
appearance products worldwide through company-owned affiliates or divisions
in Argentina,  Australia, Austria, Belgium, Denmark, France, Germany, Great
Britain,   Italy,  the  Netherlands,   Poland,  South  Africa,  Sweden  and
Switzerland.  Licensees and distributors  market products in other parts of
Europe,  Mexico,  Central and South America,  the Far East, the Middle East
and certain  African  countries.  Joint  ventures have been  established in
Ecuador,  India and the  Netherlands.  Packaging  and  blending  plants and
distribution centers in Australia, Canada, Denmark, the Netherlands, Sweden
and the United States supply international customers.

     VALVOLINE INSTANT OIL CHANGE(R)  ("VIOC") - VIOC is one of the largest
competitors  in the  expanding  U.S.  "fast oil change"  service  business,
providing  Valvoline with a significant  share of the installed  segment of
the  passenger  car and light truck motor oil market.  As of September  30,
1998, 391 company-owned  and 183 franchised  service centers were operating
in 34 states.

     In 1998, VIOC continued it's customer service  innovation  through its
Maximum  Vehicle  Performance  program  ("MVP").  MVP  is a  computer-based
program  that  maintains   system-wide  service  records  on  all  customer
vehicles.  MVP also  contains a database  on all car models,  which  allows
employees to make service  recommendations  based on vehicle owner's manual
recommendations.

     ECOGARD,  INC. - Ecogard,  Inc.  through its First Recovery  division,
collects used motor oil from a network of automotive  aftermarket retailers
and service businesses in 48 states and Puerto Rico. Completing Valvoline's
"total  fluid  management"  approach to customer  service,  First  Recovery
provides an  environmental  service to  Valvoline  customers  in the United
States, collecting used antifreeze and oil filters as well.

     As a fulfillment  of its strategy to market premium  branded  products
worldwide, Valvoline began construction in 1998 of a $4 million new product
development laboratory at its headquarters complex in Lexington,  Kentucky.
The laboratory is expected to open in early calendar 1999.

                                     4
<PAGE>

                           REFINING AND MARKETING

     Refining  and  Marketing  operations  are  conducted  by MAP  and  its
subsidiaries,  including its wholly-owned subsidiary, Speedway SuperAmerica
LLC. As previously discussed, effective January 1, 1998, the major elements
of Ashland's and  USX-Marathon's  refining,  marketing  and  transportation
operations  were  conveyed to MAP.  Marathon has a 62% interest in MAP, and
Ashland holds a 38% interest.

REFINING

     MAP owns and operates  seven  refineries  with an  aggregate  refining
capacity of 935,000  barrels of crude oil per calendar day. The table below
sets forth the  location  and daily  throughput  capacity  of each of MAP's
refineries as of September 30, 1998:

           Garyville, Louisiana........................................ 232,000
           Catlettsburg, Kentucky...................................... 222,000
           Robinson, Illinois.......................................... 192,000
           Detroit, Michigan..........................................   74,000
           Canton, Ohio...............................................   73,000
           Texas City, Texas..........................................   72,000
           St. Paul Park, Minnesota...................................   70,000
                                                                        -------
                                                                        935,000
                                                                        =======

     MAP's   refineries   include   crude  oil   atmospheric   and   vacuum
distillation,    fluid    catalytic    cracking,    catalytic    reforming,
desulfurization   and  sulfur  recovery  units.  The  refineries  have  the
capability  to process a wide variety of crude oils and to produce  typical
refinery products,  including reformulated gasoline ("RFG"). In addition to
typical  refinery   products,   the  Catlettsburg   refinery   manufactures
lubricating oils and a wide range of petrochemicals. During the nine months
ended September 30, 1998, 73% of MAP's  production of lubricating  oils was
purchased by Valvoline and 38% of MAP's  production of  petrochemicals  was
purchased by Ashland Chemical.

     MAP  also  produces  asphalt  cements,  polymerized  asphalt,  asphalt
emulsions and industrial asphalts. Additionally, MAP manufactures petroleum
pitch, primarily used in the graphite electrode, clay target and refractory
industries.

     The  table  below  sets  forth  MAP's   refinery  input  and  refinery
production by product  group for the nine months ended  September 30, 1998.
Due  to  the  recent  formation  of  MAP,  comparative  information  is not
available.
<TABLE>
<CAPTION>

                                                                                     For the Nine Months ended
                                                                                     -------------------------
                                                                                         September 30, 1998
                                                                                         ------------------
<S>                                                                                             <C>    
           Refinery Input (In thousands of barrels per day).................................    1,023.3
           ------------------------------------------------

           Refined Product Yields (In thousands of barrels per day)
           -------------------------------------------------------
           Gasoline.........................................................................      539.8
           Distillates......................................................................      269.2
           Propane..........................................................................       20.9
           Feedstocks & Special Products....................................................       71.7
           Heavy Fuel Oil...................................................................       47.4
           Asphalt..........................................................................       69.3
                                                                                               ---------
                           Total............................................................    1,018.3
                                                                                               =========
</TABLE>

       MAP and Epsilon Products  Company have agreed to develop  facilities
   to produce 800 million  pounds per year of polymer  grade  propylene and
   polypropylene  at the  Garyville  refinery.  MAP will build and  operate
   facilities to produce polymer grade propylene. Production of the polymer
   grade  propylene is scheduled to begin in the second quarter of calendar
   1999.  Epsilon Products Company will construct and own the polypropylene
   facilities and market its output.

 
                                    5
<PAGE>


MARKETING

     MAP's principal marketing areas for gasoline,  kerosene and light oils
include the  Midwest,  the upper Great Plains and the  southeastern  United
States. MAP's production of gasoline,  kerosene and light fuel oils is sold
in  26  states  through  wholesale  channels  of  distribution   (including
company-owned  and exchange  terminals in 25 states) and at retail  through
jobber and dealer-operated  locations under the brand names Marathon(R) and
Ashland(R).   Gasoline  is  sold  at  wholesale  primarily  to  independent
marketers,  jobbers and chain retailers who resell through several thousand
retail  outlets  principally  under  their own  names,  and also  under the
Marathon and Ashland brand names. MAP also supplies  lessee-dealer  outlets
using the Marathon and Ashland brand names. Gasoline, kerosene, distillates
and aviation products are also sold to utilities,  railroads,  river towing
companies, commercial fleet operators, airlines and governmental agencies.

     The table below shows the volume of MAP's consolidated refined product
sales for the nine months ended September 30, 1998.
<TABLE>
<CAPTION>
                                                                                     For the Nine Months ended
                                                                                     -------------------------
                                                                                         September 30, 1998
                                                                                         ------------------

<S>                                                                                               <C>
           Refined Product Sales (In thousands of barrels per day)
           ------------------------------------------------------
           Gasoline.........................................................................      659.1
           Distillates......................................................................      312.9
           Propane..........................................................................       20.8
           Feedstocks & Special Products....................................................       68.8
           Heavy Fuel Oil...................................................................       48.4
           Asphalt..........................................................................       73.7
                                                                                              ---------
                           Total............................................................    1,183.7
                                                                                               ========

           Matching Buy/Sell Volumes included in above......................................       38.4
</TABLE>

     To comply with provisions of the 1990 Amendments to the Clean Air Act,
MAP  sells  RFG in a small  part of its  marketing  territory  where RFG is
required, primarily Chicago, Illinois; Louisville, Kentucky; Northern
Kentucky and Milwaukee, Wisconsin.

     Retail sales of gasoline  and diesel fuel are also made through  MAP's
wholly-owned  subsidiary,  Speedway  SuperAmerica LLC, which operates 2,291
stores  in 19  states  in the  Southeast  and  Midwest  under  brand  names
including  Speedway(R),  SuperAmerica(R),  Rich(R),  United,  Bonded(R) and
others. The convenience  store-gasoline locations offer consumers gasoline,
diesel fuel (at selected  locations)  and a broad mix of other products and
services,  such as fresh-baked  goods,  automated  teller  machines,  video
rentals,  automotive  accessories and a line of  private-label  items.  The
truck stops offer  diesel fuel,  gasoline  and a variety of other  services
associated  with such locations.  Several truck stop and convenience  store
locations also have on-premises brand-name restaurants.

     During the nine months ended  September 30, 1998,  64% of the revenues
(excluding  excise  taxes) of the  Speedway  SuperAmerica  LLC stores  were
derived from the sale of gasoline and diesel fuel and 36% of such  revenues
were derived from the sale of merchandise.

SUPPLY AND TRANSPORTATION

     The  crude  oil  processed  in  MAP's   refineries  is  obtained  from
negotiated  lease,  contract and spot purchases or exchanges.  For the nine
months ended September 30, 1998, MAP's negotiated lease,  contract and spot
purchases of U.S. crude oil for refinery input averaged 333,900 barrels per
day (1 barrel = 42 United  States  gallons)  including an average of 25,600
barrels per day acquired  from  Marathon  Oil Company.  For the nine months
ended  September 30, 1998,  MAP's foreign crude oil  requirements  were met
largely  through  purchases  from various  foreign  national oil companies,
producing companies and traders. Purchases of foreign crude oil represented
63% of MAP's crude oil requirements for the nine months ended September 30,
1998.

     In addition,  MAP,  through its  subsidiaries,  is actively engaged in
purchasing,  selling and trading crude oil, principally at Midland,  Texas;
Cushing,   Oklahoma;  and  St.  James,   Louisiana,   three  of  the  major
distribution  points for U.S.  crude oil,  as well as at major  trading and
distribution hubs in western Canada.

 
                                    6
<PAGE>
     MAP's  ownership  or  interest  in  domestic  pipeline  systems in its
refining and marketing  areas is  significant.  MAP owns,  leases or has an
ownership  interest  in 9,981 miles of active  pipeline in 16 states.  This
network  transports  crude oil and refined  products to and from terminals,
refineries  and  other  pipelines.  It  includes  2,639  miles of crude oil
gathering  lines,  4,485  miles of crude oil trunk lines and 2,857 miles of
refined product lines.

     MAP has a 46.7% ownership interest in LOOP LLC ("LOOP"),  which is the
owner and  operator of the only U.S.  deepwater  port  facility  capable of
receiving crude oil from very large crude carriers.  Ashland has retained a
4% ownership  interest in LOOP. MAP also owns a 49.9% ownership interest in
LOCAP  INC.  ("LOCAP"),  which is the  owner  and  operator  of a crude oil
pipeline  connecting  LOOP to the Capline  system.  Ashland has retained an
8.6% ownership interest in LOCAP. In addition,  MAP has a 37.169% ownership
interest in the Capline system. These port and pipeline systems provide MAP
with access to common carrier  transportation from the Louisiana Gulf Coast
to Patoka,  Illinois.  At Patoka,  the Capline  system  connects with other
common   carrier   pipelines   owned  or  leased   by  MAP  which   provide
transportation  to MAP's  refineries  in Illinois,  Kentucky,  Michigan and
Ohio.

     MAP also has a stock  interest in Minnesota  Pipe Line Company,  which
owns a crude  oil  pipeline  in  Minnesota.  Minnesota  Pipe  Line  Company
provides  MAP with access to 270,000  barrels  per day nominal  capacity of
crude oil common  carrier  transportation  from  Clearbrook,  Minnesota  to
Cottage Grove, Minnesota,  which is in the vicinity of MAP's St. Paul Park,
Minnesota, refinery.

     MAP's marine  transportation  operations  include  towboats and barges
that  transport  refined  products on the Ohio,  Mississippi  and  Illinois
rivers, their tributaries,  and the Intracoastal Waterway. In addition, MAP
leases on a long-term  basis two 80,000  deadweight ton tankers,  which are
primarily used for third-party  delivery of foreign crude oil to the United
States.  These  tankers are not  essential for MAP to satisfy its own crude
oil requirements.

     MAP leases rail cars in various sizes and  capacities  for movement of
petroleum  products  and  chemicals.  MAP  also  owns  a  large  number  of
tractor-trailers, tank trailers and general service trucks.

     In addition,  MAP owns and operates 88 terminal  facilities from which
it sells a wide range of petroleum products.  These facilities are supplied
by a  combination  of barges,  pipeline,  truck and rail.  MAP also owns or
operates a number of other  terminals that are used in connection  with the
transportation of petroleum products or crude oil.

OTHER MATTERS

     MAP experiences normal seasonal  variations in its sales and operating
results. This seasonality is due primarily to increased demand for gasoline
during the summer driving season,  higher demand for distillate  during the
winter heating season and increased demand for asphalt from the road paving
industry during the construction season.

     For  information  on MAP and  federal,  state and local  statutes  and
regulations  governing  releases into the  environment or protection of the
environment,  see  "Item  1.   Miscellaneous-Environmental   Matters."  For
information  relating  to  certain  environmental  litigation  retained  by
Ashland, see "Item 3. Legal Proceedings-Environmental Proceedings."


                                 ARCH COAL

     Ashland owns  approximately  55% of Arch Coal, Inc.  ("Arch Coal"),  a
publicly-traded corporation (NYSE:ACI) resulting from the merger of Ashland
Coal,  Inc. and Arch Mineral  Corporation on July 1, 1997.  Arch Coal files
periodic  reports,  including annual reports on Form 10-K,  pursuant to the
Securities Exchange Act of 1934.

     Arch Coal is engaged in the production, transportation, processing and
marketing  of  bituminous  and  sub-bituminous  coal  produced  in  Central
Appalachia and the western and midwestern  United States.  Arch Coal is the
nation's second largest coal producer, with annual production that accounts
for almost  10% of annual  U.S.  coal  production.  Arch Coal  concentrates
primarily on acquiring and  developing  low-sulfur  steam coal reserves for
sale to electric  utility  customers in the United States and abroad.  Arch
Coal relies on third-party rail, barge and truck  transportation to deliver
coal to its domestic  customers.  Shipments to international  customers are
made primarily from a terminal  facility in Newport News,  Virginia,  and a
terminal facility in Los Angeles, California.

     On June 1,  1998,  Arch  Coal  acquired  the  Colorado  and Utah  coal
operations  of  Atlantic  Richfield  Company  ("ARCO")  and  simultaneously
combined the acquired ARCO operations,  Arch Coal's Wyoming  operations and
ARCO's  Wyoming  operations  in a new  joint  venture  named  Arch  Western
Resources, LLC ("Arch Western"). Arch Western is 99% owned by Arch Coal and
1% owned by ARCO. All of the domestic coal reserves  acquired from ARCO are
compliance coal, meeting the sulfur dioxide emissions requirements of Phase
II of the Clean Air Act.

                                     7
<PAGE>
     The following  discussion  includes pro forma combined  operating data
which gives effect to the merger of Ashland  Coal and Arch  Mineral  (which
occurred on July 1, 1997) as if it had  occurred at the  beginning  of each
period  presented and to the  acquisition  of ARCO's U.S.  operations as of
June 1, 1998.  The pro forma  combined  operating  data does not purport to
represent  the  operating  results  which would have been  achieved had the
merger of Ashland Coal, Inc. and Arch Mineral Corporation actually occurred
as of the beginning of the periods presented or dates indicated,  or of the
operating results which may be achieved in the future.

     Arch Coal and its independent operating subsidiaries sold 67.3 million
tons of coal in the twelve months ended  September 30, 1998, as compared to
53.7 and 50.6 million tons sold in the twelve  months ended  September  30,
1997 and 1996, respectively. Of the total tonnage sold in the twelve months
ended  September  30, 1998 (which does not include tons sold by Canyon Fuel
as Arch Coal's  interest  therein is accounted  for on the equity  method),
approximately  76.5% was  sold under long term  contracts,  as  compared to
72.4% and 74.7% for the twelve  months ended  September  30, 1997 and 1996,
respectively, with the balance being sold on the spot market. In the twelve
months ended September 30, 1998,  Arch Coal and its  independent  operating
subsidiaries sold 3.8 million tons of coal in the export market (which does
not include tons sold by Canyon Fuel), compared to 2.7 and 3.1 million tons
in the twelve months ended September 30, 1997 and 1996, respectively.

     During the  twelve  months  ended  September  30,  1998,  Arch  Coal's
combined  sales to  affiliates  of The Southern  Company and  affiliates of
American  Electric  Power  accounted  for  approximately  13.1% and  12.9%,
respectively,  of combined  revenues  from coal sales for such period.  The
loss of such customers could have a material adverse effect on Arch Coal.

     As of September 30, 1998,  Arch Coal  estimates it owned or controlled
measured  (proven) and indicated  (probable) coal reserves of approximately
3.4 billion tons, as set forth in the following  table.  Reserve  estimates
are prepared by Arch Coal's  engineers and  geologists and are reviewed and
updated periodically. Total reserve estimates will change from time to time
reflecting  mining  activities,  analysis of new engineering and geological
data,  changes in reserve  holdings and other factors.  Anticipated  losses
from  extraction  and,  where  applicable,  washing  of the coal  have been
eliminated  from the estimate.  Arch Coal believes that a majority of these
reserves  have a sulfur  content of less than 1.6 pounds of sulfur  dioxide
per million Btu, and a  substantial  portion have a sulfur  content of less
than 1.2 pounds of sulfur dioxide per million Btu.  Ashland has not made an
independent  verification of the reserve  estimate or sulfur content of the
estimated reserves.
<TABLE>
<CAPTION>

     RECOVERABLE COAL*
                                                                          Measured      Indicated           Total
                                                                         ----------     ---------           -----
                                                                                      (Thousands of Tons)
<S>                                                                      <C>            <C>                <C>      
         Central Appalachia .........................................    1,018,098      436,789            1,454,887
         Illinois ...................................................      308,579      101,499              410,078
         Colorado ...................................................      120,917       25,872              146,789
         Utah .......................................................      135,082       91,454              226,536**
         Wyoming ....................................................    1,067,510       43,449            1,110,959
         Other ......................................................            0       28,815               28,815
                                                                         ---------      -------            ---------
                           Total.....................................    2,650,186      727,878            3,378,064
                                                                         =========      =======            =========
      *  Does not include reserves associated with the Thundercloud Tract acquired in October, 1998.
     **  Represents  100% of the  reserves  held by Canyon  Fuel  Company,  LLC,  in which  Arch  Coal  holds a 65%
interest.
</TABLE>


                                     8
<PAGE>


     On  October  1,  1998,  Arch  Coal was the  successful  bidder  on the
3,546 acre  Thundercloud  Tract in the Powder  River Basin of Wyoming.  The
Thundercloud  Tract contains an estimated 412 million tons of  demonstrated
coal reserves and is contiguous with Arch Coal's Black Thunder mine.  Final
approval  of this  coal  lease is  expected following routine  governmental
review.

     Arch Coal's coal properties are either owned outright or controlled by
lease. Royalties paid to lessors on leased properties are either on a fixed
price per ton basis or on a percentage of the gross sales price basis. Most
of these leases run until the exhaustion of mineable and merchantable coal.
The  remaining  leases have primary terms ranging from one to 40 years from
the date of  their  execution,  with  most  containing  options  to  renew.
Approximately  73,778 acres of Arch Coal's total 638,518 acres of coal land
(which totals include 100% of the acreage held by Canyon Fuel Company, LLC,
in which  Arch Coal  holds a 65%  interest)  are  leased  from the  federal
government with terms expiring between January 1, 1999 and October 1, 2015,
subject to  readjustment  and/or  extension and to earlier  termination for
failure to meet diligent development  requirements.  Those term and federal
leases covering  principal  reserves under Arch Coal's current mining plans
are not  scheduled to expire prior to expiration of those plans in 2003 (at
Arch Coal's  Coal Mac,  Inc.  operations)  and 2006 (at the balance of Arch
Coal's operations). Mining plans are not necessarily indicative of the life
of the mine. The extent to which reserves will  eventually be mined depends
upon a  variety  of  factors,  including  future  economic  conditions  and
governmental  actions  affecting  both  the  mining  and  marketability  of
low-sulfur steam coal.

     Arch Coal's  Apogee Coal Company and Hobet Mining,  Inc.  subsidiaries
are members of the  Bituminous  Coal Operators  Association,  and each is a
signatory to a collective bargaining agreement with the United Mine Workers
of  America  that  expires  on  December  31,  2002.  Two  other  Arch Coal
subsidiaries  are  signatories  to collective  bargaining  agreements  with
independent  employee  associations.  Employees  of the  remainder  of Arch
Coal's operating subsidiaries are not represented by labor unions.

     For   information  on  federal  and  state  statutes  and  regulations
governing the coal industry,  see "Item 1.  Miscellaneous  -  Environmental
Matters."

                               MISCELLANEOUS

ENVIRONMENTAL MATTERS

     Ashland has implemented a company-wide  environmental  policy overseen
by the  Public  Policy -  Environmental  Committee  of  Ashland's  Board of
Directors.  Ashland's  Environmental,  Health  and  Safety  group  has  the
responsibility   to  ensure  that  Ashland's   operating   groups  maintain
environmental   compliance  in   accordance   with   applicable   laws  and
regulations.

     Federal,  state  and  local  laws  and  regulations  relating  to  the
protection  of the  environment  have a  significant  impact on how Ashland
conducts  its  businesses.  These  include the Clean Air Act  ("CAA")  with
respect to air emissions, the Clean Water Act ("CWA") with respect to water
discharges,  the Resource  Conservation  and  Recovery  Act  ("RCRA")  with
respect to solid and hazardous  waste  generation,  treatment,  storage and
disposal,  the  Comprehensive  Environmental  Response,  Compensation,  and
Liability Act ("CERCLA") and the Superfund  Amendments and  Reauthorization
Act of 1986 ("SARA") with respect to releases and  remediation of hazardous
substances  (CERCLA  and SARA are  sometimes  referred to  collectively  as
"Superfund"),  the Toxic  Substances  Control Act ("TSCA")  with respect to
chemical formulation and use, the Oil Pollution Act of 1990 ("OPA 90") with
respect  to  oil  pollution,   spill   response  and  financial   assurance
requirements  for  marine  operations,   the  Surface  Mining  Control  and
Reclamation  Act of 1977  ("SMCRA")  with  respect to surface  mining,  the
Federal  Occupational  Safety  and  Health  Act  ("OSHA")  with  respect to
workplace health and safety  standards,  the Federal Mine Safety and Health
Act of 1977 ("MSHA") with respect to health and safety  standards on mining
operations,  and various other federal, state and local laws related to the
environment,  health and safety.  In addition,  many foreign countries have
laws dealing with the same matters.

     In  connection  with the  formation of MAP,  Marathon and Ashland each
retained  responsibility  for certain  environmental  costs  arising out of
their   respective   prior   ownership  and  operation  of  the  facilities
transferred to MAP. In certain  situations,  various  threshold  provisions
apply,   eliminating  or  reducing  the  financial  responsibility  of  the
contributing  party until certain levels of expenditure  have been reached.
In other  situations,  sunset  provisions  gradually  diminish the level of
financial responsibility of the contributing party over time.

                                     9
<PAGE>

     Ashland's capital  expenditures for air, water and solid waste control
facilities  amounted to $25 million in fiscal 1998, $26 million in 1997 and
$38 million in 1996.  The amounts for 1998  include  expenditures  for air,
water and  solid  waste  control  facilities  transferred  to MAP for which
Ashland has retained responsibility.

     At  September   30,  1998,   Ashland's   reserves  for   environmental
assessments and remediation efforts were $172 million, reflecting Ashland's
current estimate of the costs which are most likely to be incurred over the
period during which the clean-up will be performed to remediate  identified
environmental conditions for which costs are reasonably estimable.

     Based on current  environmental  regulations,  Ashland  estimates that
capital expenditures for air, water and solid waste control facilities will
be $30 million in fiscal 1999.  Expenditures for investigatory and remedial
efforts in future years are subject to the  uncertainties  associated  with
environmental  exposures,  including  identification  of new  environmental
sites and  changes  in laws and  regulations  and their  application.  Such
expenditures,  however,  are not expected to have a material adverse effect
on Ashland's consolidated financial position,  cash flow or liquidity.  For
information regarding the 1996 multimedia  inspections which were conducted
by the United States  Environmental  Protection Agency ("EPA") at Ashland's
three former  refineries,  see "Item 3. Legal  Proceedings -  Environmental
Proceedings."

     AIR - The CAA imposes stringent limits on air emissions, establishes a
federally  mandated  operating  permit  program  and  allows  for civil and
criminal  enforcement  sanctions.  The requirements of the CAA have a major
impact on both the day-to-day activities of the refining,  distribution and
marketing  operations of MAP and MAP's product formulation  decisions.  CAA
requirements  have a lesser effect on the other operations of Ashland.  The
CAA establishes air quality attainment  deadlines and control  requirements
based on the severity of air pollution in a geographical area. In addition,
the  standards  for RFG will become even more  stringent  in the year 2000,
when Phase II RFG will be required.

     In July 1997, the EPA  promulgated  revisions to the National  Ambient
Air Quality Standards for ground level ozone and particulate  matter,  both
of which are primarily  associated  with auto  emissions.  The ground level
ozone is also associated with the use of certain volatile organic compounds
used and distributed in Ashland's  chemical  business.  The impact of these
revised standards could be significant and lead to additional  reduction of
ozone  precursors,  but the potential  financial effects on Ashland and MAP
cannot be reasonably estimated until the states develop and implement State
Implementation Plans covering their standards.

     WATER - Ashland's  businesses  maintain numerous  discharge permits as
required under the National Pollutant  Discharge  Elimination System of the
CWA, and have implemented  systems to oversee their compliance  efforts. In
addition,  MAP is  regulated  under OPA 90 which  amended  the CWA.  OPA 90
requires  the owner or  operator of a tank vessel or a facility to maintain
an emergency plan to respond to discharges of oil or hazardous  substances.
Also, in case of such spills, OPA 90 requires responsible  companies to pay
removal costs and damages, including damages to natural resources, provides
for substantial civil penalties,  and allows for the imposition of criminal
sanctions.  Additionally, OPA 90 requires that new tank vessels entering or
operating  in domestic  waters be  double-hulled,  and that  existing  tank
vessels that are not  double-hulled be retrofitted or removed from domestic
service, according to a phase-out schedule.

     SOLID  WASTE  -  Ashland's  businesses  are  subject  to  RCRA,  which
establishes  standards for the  management  of solid and hazardous  wastes.
Besides affecting current waste disposal practices, RCRA also addresses the
environmental  effects  of  certain  past waste  disposal  operations,  the
recycling  of  wastes  and the  regulation  of  underground  storage  tanks
("USTs") containing regulated substances.  Under RCRA, USTs used for retail
distribution  of petroleum  products must be brought into compliance with a
variety of engineering  specifications and leak protection  technologies by
calendar  year end 1998.  MAP  anticipates  that its USTs will be in timely
compliance.  In addition,  new laws are being enacted and  regulations  are
being adopted by various regulatory agencies on a continuing basis, and the
costs of  compliance  with these new rules  cannot be  estimated  until the
manner in which they will be implemented has been more accurately defined.

     REMEDIATION - MAP operates  certain retail  outlets where,  during the
normal course of operations,  releases of petroleum products from USTs have
occurred.  Federal and state laws require that contamination caused by such
releases at these sites be assessed and, if  necessary,  remediated to meet
applicable standards. The enforcement of the UST regulations under RCRA has
been delegated to the states, which administer their own UST programs.


                                    10

<PAGE>
     Ashland also currently or has in the past operated various  facilities
where,  during the  normal  course of  operations,  releases  of  hazardous
constituents  have  occurred.  Federal  and state laws,  including  but not
limited to RCRA and various  remediation laws,  require that  contamination
caused by such releases be assessed  and, if necessary,  remediated to meet
applicable standards.

     SURFACE  MINING - SMCRA was enacted to regulate the surface  mining of
coal and the surface  effects of  underground  coal  mining.  All states in
which Arch Coal's  subsidiaries  operate have similar laws and  regulations
enacted  pursuant to SMCRA.  These laws impose,  among other  requirements,
environmental   performance   standards   and   requirements   to   perform
reclamation.

     A lawsuit  brought by private  individuals has challenged the legality
of surface  mining in West Virginia  which results in the  construction  of
"valley  fills." A valley  fill is an  engineered  work  located at a lower
elevation  from the surface  mine where the excess rock and earth is placed
during mining. Arch Coal is contesting this legal challenge vigorously, but
it  is  impossible  to  predict  the  outcome  of  these  proceedings  with
certainty.  If these proceedings result in substantial  changes in permits,
significant   delays  in  obtaining  new  permits,   or   substantial   new
restrictions on Arch Coal's existing  operations,  such changes,  delays or
restrictions   would  have  a  material   adverse  affect  on  Arch  Coal's
operations. 

RESEARCH

     Ashland  conducts a program of research and  development to invent and
improve  products and processes and to improve  environmental  controls for
its existing  facilities.  It maintains its primary research  facilities in
Dublin,  Ohio.  Research  and  development  costs are  expensed as they are
incurred  and totaled  $28 million in fiscal 1998 ($29  million in 1997 and
$28 million in 1996).

COMPETITION

     In all its operations,  Ashland is subject to intense competition both
from  companies in the industries in which it operates and from products of
companies in other  industries.  In most of these segments,  competition is
based  primarily  on price,  with factors  such as  reliability  of supply,
service and quality also being  considered.  Ashland Chemical competes in a
number of  chemical  distribution,  specialty  chemical  and  petrochemical
markets.  Its chemicals and solvents  distribution  businesses compete with
national,  regional  and local  companies  throughout  North  America.  Its
plastics  distribution  businesses  compete  worldwide.  Ashland Chemical's
specialty chemicals  businesses compete globally in selected niche markets,
largely on the basis of technology and service,  while holding  proprietary
technology  in  virtually  all  their   specialty   chemicals   businesses.
Petrochemicals are largely commodities,  with pricing and quality being the
most  important  factors.  The  majority  of the  business  for which  APAC
competes is obtained by competitive  bidding.  

     Valvoline  competes  primarily  with domestic oil companies  and, to a
lesser  extent,  with  international  oil  companies on a worldwide  basis.
Valvoline's  brand recognition and increasing market share in the "fast oil
change" market are important  competitive  factors.  MAP competes primarily
with  other  domestic  refiners  and,  to a lesser  extent,  with  imported
products.  MAP's  refineries are located close to its market areas,  giving
MAP a  geographic  advantage  in  supplying  these  regions.  MAP's  retail
operations compete with major oil companies,  independent oil companies and
independent  marketers.  The coal industry is highly competitive,  and Arch
Coal  competes  (principally  in price,  location and quality of coal) with
other coal producers.

FORWARD-LOOKING STATEMENTS

     This Form 10-K and the  documents  incorporated  by reference  contain
forward-looking  statements  within  the  meaning  of  Section  27A  of the
Securities  Act of 1933 and Section 21E of the  Securities  Exchange Act of
1934,   including  various  information  within  the  "Capital  Resources,"
"Derivative  Instruments,"  "Year 2000 Readiness" and "Outlook" sections in
Management's Discussion and Analysis in Ashland's Annual Report. Words such
as  "anticipates,"   "believes,"   "estimates,"   "expects,"  "is  likely,"
"predicts,"  and  variations  of such  words and  similar  expressions  are
intended to identify  such  forward-looking  statements.  Although  Ashland
believes  that its  expectations  are based on reasonable  assumptions,  it
cannot assure that the  expectations  contained in such  statements will be
achieved.  Important  factors  which could cause  actual  results to differ
materially  from those  contained in such  statements  are discussed  under
"Risks  and  Uncertainties"  in Note A of Notes to  Consolidated  Financial
Statements in Ashland's  Annual Report.  Other factors and risks  affecting
Ashland's  revenues and operations are discussed below, as well as in other
portions of this Form 10-K.



                                    11
<PAGE>


     Ashland's  operations  are  affected  by  domestic  and  international
political,  legislative,  regulatory  and legal  actions.  Such actions may
include  changes in the  policies of OPEC or other  developments  affecting
oil-producing countries, changes in tax laws, and changes in environmental,
health and safety laws.

     Domestic and international  economic conditions,  such as recessionary
trends, inflation, interest and monetary exchange rates, as well as changes
in demand for products and services,  can also have a significant effect on
Ashland's  operations.  Although Ashland maintains reserves for anticipated
liabilities  and carries  various  levels of  insurance,  Ashland  could be
affected by civil, criminal,  regulatory or administrative  actions, claims
or proceedings.  In addition,  climate and weather can significantly affect
Ashland in several of its operations such as its  construction  activities,
MAP's heating oil businesses and Arch Coal's sales and production of coal.

ITEM 2. PROPERTIES

     Ashland's  corporate  headquarters,  which is  leased,  is  located in
Russell,   Kentucky.   Effective  January  4,  1999,   Ashland's  corporate
headquarters, which will be leased, will be located in Covington, Kentucky.
Principal  offices of other major  operations  are located in Dublin,  Ohio
(Chemical);  Atlanta, Georgia (APAC); and Lexington,  Kentucky (Valvoline), 
all of which are leased. Ashland's principal  manufacturing,  marketing and
other  materially  important  physical  properties are described  under the
appropriate segment under Item 1. Additional information concerning certain
leases may be found in Note H of Notes to Consolidated Financial Statements
in Ashland's Annual Report.

ITEM 3. LEGAL PROCEEDINGS

     ENVIRONMENTAL  PROCEEDINGS - (1) As of September 30, 1998, Ashland had
been  identified  as  a  "potentially   responsible  party"  ("PRP")  under
Superfund or similar state laws for potential  joint and several  liability
for  clean-up  costs in  connection  with  alleged  releases  of  hazardous
substances in connection with 83 waste  treatment or disposal sites.  These
sites  are  currently   subject  to  ongoing   investigation  and  remedial
activities,  overseen  by the EPA or a state  agency,  in which  Ashland is
typically participating as a member of a PRP group. Generally,  the type of
relief sought includes remediation of contaminated soil and/or groundwater,
reimbursement for past costs of site clean-up and administrative oversight,
and/or  long-term  monitoring  of  environmental  conditions  at the sites.
Ashland carefully  monitors the investigatory and remedial activity at many
of  these  sites.  Based  on its  experience  with  site  remediation,  its
familiarity with current  environmental laws and regulations,  its analysis
of the  specific  hazardous  substances  at issue,  the  existence of other
financially  viable  PRPs  and  its  current  estimates  of  investigatory,
clean-up  and  monitoring  costs at each site,  Ashland  believes  that its
liability at these sites,  either  individually or in the aggregate,  after
taking into account its insurance coverage and established  reserves,  will
not have a material  adverse  effect on  Ashland's  consolidated  financial
position,  cash flow or  liquidity.  However,  such  matters  could  have a
material effect on results of operations in a particular  quarter or fiscal
year as they develop or as new issues are  identified.  Estimated costs for
these  matters  are  recognized  in  accordance  with  generally   accepted
accounting  principles governing the likelihood that costs will be incurred
and Ashland's ability to reasonably estimate future costs.

     (2) In 1996,  the EPA conducted  so-called  multimedia  inspections of
Ashland's three  refineries in which it evaluated  virtually all aspects of
the environmental operations of these facilities.  The EPA and Ashland have
reached an agreement and have finalized a settlement  document with respect
to alleged  violations  discovered  during these  inspections.  Ashland has
agreed  to pay  $5.864  million  in  civil  penalties.  Ashland  will  also
undertake  specific  remedial  projects  and  improvements  at the refinery
sites, as well as a number of supplemental environmental projects involving
improvements to the facilities' operations, which will exceed current state
and federal environmental requirements. The total cost of these projects is
expected  to be $26  million.  In  connection  with the  formation  of MAP,
Ashland  agreed to retain  responsibility  for  matters  arising out of the
multimedia inspections.

     LOCKHEED  LITIGATION  - Ashland  is a  defendant  in a series of cases
involving   more  than  600  former   workers  at  the  Lockheed   aircraft
manufacturing  facility  in  Burbank,  California.  The  plaintiffs  allege
personal injuries  resulting from exposure to chemicals sold to Lockheed by
Ashland,  and inadequate  labeling of such  chemicals.  The cases are being
tried in the Superior  Court of the State of  California  for the County of
Los Angeles.  To date, five trials involving  approximately  130 plaintiffs
have  resulted  in total  verdicts  adverse to Ashland,  after  taking into
consideration a reduction of the punitive  damages award in the fifth trial
ordered by the trial judge,  of $79.4  million  ($73.9  million of which is
punitive  damages).  The damage  awards  have been,  or will be,  appealed.
Ashland  continues  to believe,  upon  advice of  counsel,  that there is a
substantial probability that the punitive damage awards will be reversed or
substantially further reduced, and that, after taking into account probable
recoveries under insurance  policies,  these cases will not have a material
adverse effect on Ashland's consolidated  financial position,  cash flow or
liquidity.




                                    12

<PAGE>


     In addition, Ashland filed an action in Kentucky against approximately
44  insurance  carriers  to  confirm  coverage  for  liabilities  under the
Lockheed  cases.  One of the insurance  carriers in turn filed an action in
California  seeking to deny  insurance  coverage for  liabilities  in these
cases. 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security  holders,  through the
solicitation  of proxies or otherwise,  during the quarter ended  September
30, 1998.

ITEM X.  EXECUTIVE OFFICERS OF ASHLAND

     The following is a list of Ashland's  executive  officers,  their ages
and  their  positions  and  offices  during  the last  five  years  (listed
alphabetically  after  the  top  two  officers  as  to  other  Senior  Vice
Presidents, Administrative Vice Presidents and other executive officers.)

     PAUL W. CHELLGREN* (age 55) is Chairman of the Board,  Chief Executive
Officer and  Director of Ashland and a Director of Arch Coal,  Inc. and has
served in such capacities  since 1997,  1996, 1992 and 1997,  respectively.
During  the past five  years,  he has also  served as  President  and Chief
Operating Officer of Ashland.

     JOHN A.  BROTHERS* (age 58) is Executive Vice President of Ashland and
has served in such  capacities  since 1997.  During the past five years, he
has also served as Senior Vice President and Group Operating  Officer - The
Valvoline Company and Ashland Chemical Company.

     JAMES R. BOYD* (age 52) is Senior Vice  President and Group  Operating
Officer of Ashland - APAC, Inc. and a Director of Arch Coal,  Inc.,  having
served in such capacities since 1989, 1993 and 1997, respectively.

      DAVID J.  D'ANTONI*  (age 53) is Senior Vice President of Ashland and
President  of Ashland  Chemical  Company and has served in such  capacities
since 1988.

     THOMAS L. FEAZELL* (age 61) is Senior Vice President,  General Counsel
and Secretary of Ashland and a Director of Arch Coal,  Inc. and has served
in such capacities since 1992, 1981, 1992 and 1997, respectively.

      JAMES J.  O'BRIEN  (age 44) is Senior Vice  President  of Ashland and
President of The Valvoline  Company and has served in such capacities since
1997 and 1995, respectively. During the past five years, he has also served
as Vice President of Ashland,  Vice President of Ashland  Petroleum Company
and Executive Assistant to the Chief Executive Officer.

     CHARLES F.  POTTS (age 54) is Senior  Vice  President  of Ashland  and
President of APAC, Inc. and has served in such capacities since 1992.

     J. MARVIN QUIN* (age 51) is Senior Vice President and Chief  Financial
Officer of Ashland and a Director of Arch Coal, Inc. and has served in such
capacities since 1992 and 1997, respectively.

     KENNETH  L.  AULEN  (age  49) is  Administrative  Vice  President  and
Controller of Ashland and has served in such capacities since 1992.

     PHILIP W. BLOCK*  (age 51) is  Administrative  Vice  President - Human
Resources of Ashland and has served in such capacity since 1992.

     LAMAR M.  CHAMBERS  (age 44) is Auditor  of Ashland  and has served in
such capacity since September 1998. During the past five years, he has also
served  as  Vice  President  and  Controller  of MAP,  Administrative  Vice
President - Finance of Ashland Petroleum,  Executive Assistant to the Chief
Executive Officer and Assistant Controller of Ashland.

     DANIEL B.  HUFFMAN  (age 53) is Treasurer of Ashland and has served in
such capacity since November 1998.  During the past five years, he has also
served as Assistant Treasurer of Ashland.

     Each executive  officer (other than Vice  Presidents who are appointed
by Ashland's management) is elected by the Board of Directors of Ashland to
a term of one year, or until his or her  successor is duly elected,  at the
annual meeting of the Board of Directors,  except in those  instances where
the  officer  is elected  other  than at an annual  meeting of the Board of
Directors,  in which case his or her tenure  will expire at the next annual
meeting of the Board of Directors unless the officer is re-elected.

-----------------------
*Member of Ashland's Executive Committee

                                    13
<PAGE>
                                  PART II

ITEM 5. MARKET FOR  REGISTRANT'S  COMMON STOCK AND RELATED  SECURITY HOLDER
        MATTERS  

     There is hereby incorporated by reference the information appearing in
Note O of Notes to Consolidated  Financial  Statements in Ashland's  Annual
Report.

     At September  30, 1998,  there were  approximately  20,900  holders of
record of Ashland's Common Stock. Ashland Common Stock is listed on the New
York and  Chicago  stock  exchanges  (ticker  symbol  ASH) and has  trading
privileges on the Boston, Cincinnati,  Pacific,  Philadelphia and Amsterdam
stock exchanges.

ITEM 6.  SELECTED FINANCIAL DATA

     There is hereby  incorporated by reference the  information  appearing
under the caption "Five-Year Selected Financial  Information" on Page 62 in
Ashland's Annual Report.  

ITEM 7.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

     There is hereby  incorporated by reference the  information  appearing
under the caption "Management's  Discussion and Analysis" on Pages 34 to 41
in Ashland's Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There is hereby  incorporated by reference the  information  appearing
under the caption  "Derivative  Instruments" on Page 39 in Ashland's Annual
Report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     There is hereby  incorporated by reference the consolidated  financial
statements appearing on Pages 43 through 61 in Ashland's Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE

     None

                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     There is hereby  incorporated  by reference the  information to appear
under  the  caption  "Ashland  Inc.'s  Board  of  Directors"  in  Ashland's
definitive  Proxy  Statement  for its January  28,  1999 Annual  Meeting of
Shareholders,  which  will be filed  with  the SEC  within  120 days  after
September  30, 1998  ("Proxy  Statement").  See also the list of  Ashland's
executive  officers and related  information  under "Executive  Officers of
Ashland" in Part I - Item X herein. 

ITEM 11. EXECUTIVE COMPENSATION

     There is hereby  incorporated  by reference the  information to appear
under the captions  "Executive  Compensation,"  "Compensation of Directors"
and  "Personnel   and   Compensation   Committee   Interlocks  and  Insider
Participation" in Ashland's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     There is hereby  incorporated  by reference the  information to appear
under the caption  "Stock  Ownership of Directors  and Certain  Officers of
Ashland" and the  information  regarding  the  ownership of  securities  of
Ashland in Ashland's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     There is hereby  incorporated  by reference the  information to appear
under the caption "Business Relationships" in Ashland's Proxy Statement.

                                    14

<PAGE>
                                  PART IV

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

     (a)  DOCUMENTS  FILED  AS PART OF THIS  REPORT  

     (1) and (2)  Financial Statements   and  Financial   Schedule  
     The  consolidated  financial  statements  and  financial  schedule  of
Ashland presented or incorporated by reference in this report are listed in
the index on Page 19.

     (3) Exhibits

         3.1   -    Second Restated Articles of Incorporation of Ashland,
                    as amended to January  30,  1998 (filed as Exhibit 3 to
                    Ashland's  Form 10-Q for the quarter ended December 31,
                    1997,  and  incorporated  herein by  reference).  

         3.2   -    Bylaws of  Ashland,  as  amended  to March  19,  1998
                    (filed as Exhibit 3 to Ashland's Form 10-K/A (Amendment
                    No. 1) for the fiscal  year ended  September  30,  1998
                    filed  on May  1,  1998,  and  incorporated  herein  by
                    reference).

         4.1   -    Ashland  agrees to  provide  the SEC,  upon  request,
                    copies of instruments defining the rights of holders of
                    long-term debt of Ashland,  and all of its subsidiaries
                    for  which  consolidated  or  unconsolidated  financial
                    statements are required to be filed with the SEC.

         4.2   -    Indenture,  dated as of August 15,  1989,  as amended
                    and restated as of August 15, 1990, between Ashland and
                    Citibank,  N.A.,  as Trustee  (filed as Exhibit 4(a) to
                    Ashland's Form 10-K for the fiscal year ended September
                    30, 1991, and incorporated herein by reference).

         4.3   -    Rights Agreement,  dated as of May 16, 1996,  between
                    Ashland  Inc.  and  Harris  Trust  and  Savings   Bank,
                    together  with  Form of  Right  Certificate  (filed  as
                    Exhibits 4(a) and 4(c), respectively, to Ashland's Form
                    8-A  filed   with  the  SEC  on  May  16,   1996,   and
                    incorporated herein by reference).

     The following  Exhibits 10.1 through 10.18 are  compensatory  plans or
arrangements  or  management  contracts  required  to be filed as  exhibits
pursuant to Item 601(b)(10)(ii)(A) of Regulation S-K.

         10.1  -    Amended  Stock  Incentive  Plan for Key  Employees of
                    Ashland  Inc.  and its  Subsidiaries  (filed as Exhibit
                    10.1 to  Ashland's  Form 10-K for the fiscal year ended
                    September  30,  1996,   and   incorporated   herein  by
                    reference).

         10.2  -    Ashland  Inc.   Deferred   Compensation   and  Stock
                    Incentive  Plan  for  Non-Employee  Directors.  

         10.3  -    Ashland  Inc.  Director  Retirement  Plan  (filed as
                    Exhibit  10(c).3 to Ashland's  Form 10-K for the fiscal
                    year ended September 30, 1988, and incorporated  herein
                    by reference).

         10.4  -    Ninth Amended and Restated Ashland Inc.  Supplemental
                    Early   Retirement   Plan  for  Certain  Key  Executive
                    Employees.

         10.5  -    Ashland Inc. Amended  Performance Unit Plan (filed as
                    Exhibit 10.5 to Ashland's Form 10-K for the fiscal year
                    ended  September 30, 1994, and  incorporated  herein by
                    reference).

         10.6  -    Ashland Inc.  Incentive  Compensation  Plan (filed as
                    Exhibit 10.6 to Ashland's Form 10-K for the fiscal year
                    ended  September 30, 1993, and  incorporated  herein by
                    reference).

         10.7  -    Ashland Inc. Director Death Benefit Program (filed as
                    Exhibit  10(c).10 to Ashland's Form 10-K for the fiscal
                    year ended September 30, 1990, and incorporated  herein
                    by reference).

         10.8  -    Ashland  Inc.  Salary  Continuation  Plan  (filed as
                    Exhibit  10(c).11 to Ashland's Form 10-K for the fiscal
                    year ended September 30, 1988, and incorporated  herein
                    by reference).


  
                                  15
  

<PAGE>
         10.9  -    Forms of Ashland Inc. Executive  Employment  Contract
                    between Ashland Inc. and certain executive  officers of
                    Ashland  (filed as Exhibit  10(c).12 to Ashland's  Form
                    10-K for the fiscal year ended  September 30, 1989, and
                    incorporated herein by reference).
         10.10 -    Form of  Indemnification  Agreement  between  Ashland
                    Inc. and each member of its Board of  Directors  (filed
                    as  Exhibit  10(c).13  to  Ashland's  Form 10-K for the
                    fiscal year ended September 30, 1990, and  incorporated
                    herein by reference).
         10.11 -    Ashland Inc. Nonqualified Excess Benefit Pension Plan.
         10.12 -    Ashland  Inc.  Long-Term  Incentive  Plan  (filed as
                    Exhibit  10.12 to  Ashland's  Form 10-K for the  fiscal
                    year ended September 30, 1996, and incorporated  herein
                    by   reference).   
         10.13 -    Ashland  Inc.  Directors'  Charitable  Award  Program
                    (filed as Exhibit 10.13 to Ashland's  Form 10-K for the
                    fiscal year ended September 30, 1996, and  incorporated
                    herein by reference).
         10.14 -    Ashland  Inc.  1993 Stock  Incentive  Plan  (filed as
                    Exhibit  10.14 to  Ashland's  Form 10-K for the  fiscal
                    year ended September 30, 1996, and incorporated  herein
                    by reference).
         10.15 -    Ashland  Inc.  1995  Performance  Unit Plan (filed as
                    Exhibit  10.15 to  Ashland's  Form 10-K for the  fiscal
                    year ended September 30, 1996, and incorporated  herein
                    by reference).
         10.16 -    Ashland  Inc.  Incentive  Compensation  Plan for Key
                    Executives  (filed as Exhibit  10.16 to Ashland's  Form
                    10-K for the fiscal year ended  September 30, 1996, and
                    incorporated herein by reference).
         10.17 -    Ashland  Inc.  Deferred  Compensation  Plan (filed as
                    Exhibit  10.17 to  Ashland's  Form 10-K for the  fiscal
                    year ended September 30, 1997, and incorporated  herein
                    by reference).
         10.18 -    Ashland Inc. 1997 Stock Incentive Plan.
         11    -    Computation of Earnings Per Share  (appearing on Page
                    49  of  Ashland's   Annual   Report  to   Shareholders,
                    incorporated by reference  herein,  for the fiscal year
                    ended September 30, 1998).
         13    -    Portions of Ashland's  Annual Report to Shareholders,
                    incorporated by reference  herein,  for the fiscal year
                    ended September 30, 1998.
         21    -    List of subsidiaries.
         23    -    Consent of independent auditors.
         24    -    Power of Attorney, including resolutions of the Board 
                    of Directors.
         27.1  -    Financial Data Schedule for the fiscal year ended 
                    September 30, 1998.
         27.2  -    Restated  Financial Data Schedule for the fiscal year
                    ended September 30, 1997.
         27.3  -    Restated  Financial Data Schedule for the fiscal year
                    ended September 30, 1996.

     Upon written or oral  request,  a copy of the above  exhibits  will be
furnished at cost.
     (b) REPORTS ON FORM 8-K
     None


                                    16
<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 REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                        ASHLAND INC.
                                         (Registrant)

                                        By:    /s/ Kenneth L. Aulen
                                            --------------------------------
                                           (Kenneth L. Aulen, Administrative
                                            Vice President and Controller)

                                            Date:   November 30, 1998

     PURSUANT TO THE  REQUIREMENTS OF THE SECURITIES  EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT, IN THE CAPACITIES INDICATED, ON NOVEMBER 30, 1998.

         Signatures                    Capacity
         ----------                    --------


/s/ PAUL W. CHELLGREN         
------------------------      Chairman of the Board, Chief Executive Officer
PAUL W. CHELLGREN               and Director


/s/ J. MARVIN QUIN
------------------------      Senior Vice President and Chief Financial Officer
J. MARVIN QUIN


/s/ KENNETH L. AULEN          
------------------------      Administrative Vice President, Controller and
KENNETH L. AULEN                Principal Accounting Officer


           *                  
------------------------      Director
SAMUEL C. BUTLER


          *                   
------------------------      Director
FRANK C. CARLUCCI


          *                   
------------------------      Director
ERNEST H. DREW


          *                   
------------------------      Director
JAMES B. FARLEY


          *                   
------------------------      Director
RALPH E. GOMORY


                                    17

<PAGE>

          *                   
------------------------      Director
BERNADINE P. HEALY


          *                   
------------------------      Director
MANNIE L. JACKSON


          *                   
------------------------      Director
PATRICK F. NOONAN


          *                   
------------------------      Director
JANE C. PFEIFFER


          *                   
------------------------      Director
MICHAEL D. ROSE


          *                   
------------------------      Director
WILLIAM L. ROUSE , JR.






       *  By: /s/ Thomas L. Feazell
             --------------------------
              Thomas L. Feazell
              Attorney-in-Fact





       Date:  November 30, 1998



                                    18
<PAGE>



            INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE

                                                                        PAGE
     Consolidated financial statements:
     Statements of consolidated income ...................................*
     Consolidated balance sheets .........................................*
     Statements of consolidated stockholders' equity .....................*
     Statements of consolidated cash flows ...............................*
     Notes to consolidated financial statements ..........................*
     Information by industry segment .....................................*


     Consolidated financial schedule:
     II - Valuation and qualifying accounts..............................21
     -----------

         *The  consolidated  financial  statements  appearing  on  Pages 43
through 61 in Ashland's Annual Report are incorporated by reference in this
Annual Report on Form 10-K.

         Schedules  other than that listed above have been omitted  because
of the absence of the  conditions  under which they are required or because
the information required is shown in the consolidated  financial statements
or the notes thereto.  Separate financial  statements for MAP and Arch Coal
required by Rule 3-09 of  Regulation  S-X will be filed as an  amendment to
this Form 10-K within 90 days after the end of these entities' fiscal years
ending  December  31,  1998.   Separate   financial   statements  of  other
unconsolidated  affiliates  are  omitted  because  each  company  does  not
constitute a  significant  subsidiary  using the 20% tests when  considered
individually.  Summarized  financial  information  for such  affiliates  is
disclosed  in Note D of  Notes  to  Consolidated  Financial  Statements  in
Ashland's Annual Report.



                                    19

<PAGE>



                       REPORT OF INDEPENDENT AUDITORS

     We have audited the consolidated  financial statements and schedule of
Ashland Inc. and consolidated subsidiaries listed in the accompanying index
to  financial   statements  and  financial  schedule  (Item  14(a)).  These
financial  statements  and  schedule  are the  responsibility  of Ashland's
management.  Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those  standards  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. An audit also includes assessing the accounting principles used
and  significant  estimates made by  management,  as well as evaluating the
overall  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

     In our opinion,  the financial  statements  listed in the accompanying
index to financial  statements (Item 14(a)) present fairly, in all material
respects,   the  consolidated   financial  position  of  Ashland  Inc.  and
consolidated  subsidiaries  at  September  30,  1998  and   1997,  and  the
consolidated  results of their  operations and their cash flows for each of
the three years in the period ended  September 30, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial  statement  schedule,  when  considered  in relation to the basic
financial  statements  taken as a whole,  presents  fairly in all  material
respects the information set forth therein.

                
                                              /s/  Ernst & Young LLP


Louisville, Kentucky
November 4, 1998

                                    20
<PAGE>
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------------
Ashland Inc. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

-----------------------------------------------------------------------------------------------------------------------------------
(In millions)                                              Balance at      Provisions                                      Balance
                                                            beginning      charged to      Reserves          Other          at end
Description                                                   of year        earnings      utilized          changes       of year
===================================================================================================================================
<S>                                                           <C>              <C>            <C>           <C>             <C>
YEAR ENDED SEPTEMBER 30, 1998
Reserves deducted from asset accounts
   Accounts receivable                                        $25              $  8           $(10) (F1)       $ (4)           $19
   Inventories                                                 11                 2             (2)               -             11
-----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1997
Reserves deducted from asset accounts
   Accounts receivable                                        $27              $  9           $(10) (F1)       $ (1)           $25
   Inventories                                                 10                 2             (1)               -             11
-----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1996
Reserves deducted from asset accounts
   Accounts receivable                                        $25               $10          $  (8) (F1)      $   -            $27
   Inventories                                                  6                 6             (2)               -             10
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
(F1)  Uncollected amounts written off, net of recoveries of $2 million in 1998, 1997 and 1996.

</FN>
                                       21
</TABLE>

                                  EXHIBIT INDEX

      Exhibit No.                        Description

         10.2     -        Ashland  Inc.  Deferred   Compensation  and  Stock
                           Incentive Plan for Non-Employee Directors.
         10.4     -        Ninth   Amended   and   Restated   Ashland   Inc.
                           Supplemental  Early  Retirement  Plan for Certain Key
                           Executive Employees.
         10.11    -        Ashland Inc.  Nonqualified  Excess Benefit  Pension
                           Plan.
         10.18    -        Ashland Inc. 1997 Stock Incentive Plan.
         13       -        Portions   of   Ashland's    Annual   Report   to
                           Shareholders,  incorporated by reference herein,  for
                           the fiscal year ended September 30, 1998.
         21       -        List of subsidiaries.
         23       -        Consent of independent auditors.
         24       -        Power of  Attorney,  including  resolutions  of the
                           Board of Directors.
         27.1     -        Financial Data Schedule for the fiscal year ended
                           September 30, 1998.
         27.2     -        Restated Financial Data Schedule for the fiscal year
                           ended September 30, 1997.
         27.3     -        Restated Financial Data Schedule for the fiscal year
                           ended September 30, 1996.