A Presentation for the 2 nd BTLtec Conference GTL, CTL and BTL Friends or Enemies Dr Mark Morgan 12 th -13 th September 2007, Vienna 0
Agenda Introduction to Nexant Market Drivers Technology evolution and benefits BTL Technology Developments Process Economics The BTL Challenge The Way Forward 1
Mission Statement Nexant's mission is to be the premier provider of consulting services and technology solutions to governments, utilities, energy producers, petroleum and chemical companies, and energy end-users worldwide Strategy Transactions Markets Oil & Gas and Chemicals Energy Delivery and Management Technology Solutions 2
Market Drivers 3
There are a number of key drivers for the TLs GTL - Monetize remote gas resources - Tactical FPSO option - Alternative to crude oil as a source of liquid transportation fuels - Commercialised initially for fuels but has been and can be exploited for chemicals and lubricants production CTL - Security of motor fuels supply - Abundant reserves within consuming markets - Diversification of energy sources - Exploit for chemicals and lubricants BTL - Biofuel market dynamics... 4
Key drivers and issues for biofuel developments DRIVERS Energy Security Climate Change Agricultural Benefits Technology Developments Product Specifications Government Policy Feedstock Sourcing Pricing Competitiveness ISSUES Engine Compatibility Customer Acceptance Supply & Logistics Environmental Considerations 5
The regional characteristics of biofuels demand calls for different region or country-specific growth strategies. In Europe gasoline and diesel demand are similar with the latter showing some growth GLOBAL MAJOR TRANSPORTATION FUELS DEMAND 500 400 Gasoline 2000 Base Gasoline 2005 Incremental Gasoline 2010 Incremental Diesel 2000 Base Diesel 2005 Incremental Diesel 2010 Incremental million tons per year 300 200 100 0-100 North America Europe Asia ROW North America Source: Nexant Database, incremental demand Europe Asia ROW 6
Combining fuel demand projections and legislation provides a view of future biofuel demand. To meet future supply beyond 2015 second generation technology is needed EUROPEAN BIOFUEL DEMAND PROJECTIONS Ethanol million litres per year 20000 16000 12000 8000 4000 0 Ethanol 2005 Ethanol 2010 Ethanol 2015 Ethanol 2020 Diesel 2005 Diesel 2010 Diesel 2015 Ethanol Big 5 Ethanol Others Biodiesel Others Biodiesel Big 5 Diesel 2020 14000 12000 10000 8000 6000 4000 2000 0 Biodiesel Demand, 000 tons 7
From recent Nexant experience in biofuel project finance in Europe demand and supply drivers are as follows Major Demand Drivers Targets for Minimum Bio-Component in Transport Fuels Fiscal Incentives/Penalties Major Supply Drivers Cost Effectiveness Government Support (tax breaks on product, mandates etc.) Availability of Feedstocks Distribution, Retailing and Vehicle Compatibility Environmental Sustainability Development Aid and Grants for Production Plants 8
Technology Evolution and Benefits 9
Biofuel technology continues to evolve. The industry is now exploiting readily available First Generation technology whilst developing Second Generation process for the future First Generation - Refers to technologies that in general use cash crops as feedstocks - In the case of bioethanol feedstocks include sugar and starch-containing materials such as corn, wheat, rye, sugar, milo, etc, exploiting fermentation processes - For biodiesel the esterification of oils and fats with methanol to form fatty acid methyl ester ( FAME ) Second Generation - Refers to technologies that exploit a broader biomass pool - In the case of bioethanol technology predominantly consumes plant building blocks cellulose/hemi-cellulose using advanced fermentation processes. For gasoline blending biobutanol also features here - For biodiesel conversion of biomass to syngas via gasification is followed by Fischer Tropsch conversion to wax and subsequent upgrading to diesel and by-products. Bio-gasification derived syngas can also be converted to ethanol through petrochemical means. 10
In the case of FAME biodiesel one ton of product requires circa one ton of natural feedstock subject to oil source and quality Natural Oil Methanol Chemicals 1.04 0.1 0.1 Small Worldscale FAME Biodiesel Complex (Million tonnes per year) 1.0 1.0 Biodiesel 0.125 Glycerine Small Waste 11
In BTL production the yield on biomass is relatively low as are carbon yields in CTL and GTL. For BTL the carbon dioxide produced is renewable Carbon Dioxide 0.8 0.8 Biomass Water/ Oxygen 1.01 Worldscale BTL Complex (Million tonnes per year) 0.3 0.3 0.7 0.7 0.7 BTL Products Water/ 0.7 Losses 12
Simplified Second Generation Biodiesel Process The Biomass to Liquids Concept BIOMASS LPG SYNGAS GENERATION NAPHTHA FT FT WAX SYNTHESIS FT FT WAX UPGRADING UNIT DIESEL JET LUBRICANTS UTILITIES, LOGISTICS AND STORAGE 13
The variation of the Alpha value can provide a fuel, chemicals and lubricant focused facility CARBON NUMBER DISTRIBUTIONS 100% 80% Distribution 60% 40% 20% Methane C2-C4 C5-C10 C11-C14 C15-C18 C19+ 0% 0.01 0.08 0.15 0.22 0.29 0.36 0.43 0.5 0.57 0.64 0.71 0.78 0.85 0.92 Alpha Value 14
Large amounts of coal are gasified today to produce synthetic fuels and chemical intermediates COAL LPG SYNGAS GENERATION NAPHTHA FT FT WAX SYNTHESIS FT FT WAX UPGRADING UNIT DIESEL JET LUBRICANTS UTILITIES, LOGISTICS AND STORAGE 15
Coal gasification here shown in IGCC mode, is well proven and power competes with CTL as an outlet Particulate Removal Gas Clean Up Up Water Gas Shift Steam Solid By-product Sulphur By-product Combustion Unit Hydrogen Separation Hydrogen COAL GASIFICATION Oxygen Air Air Air Air Separation Air Gas Turbine Power Generator Electric Power Steam Steam Generator Solid By-product Steam Turbine Power Generator Electric Power 16
But China with its large reserves is seeking to exploit coal for chemicals as well as power and synfuels Ningxia Coal - 2009 570 ktpa MTP 540 ktpa PP Shenua Group - 2008-10 1800 ktpa Methanol 600 ktpa MTO 550 ktpa PO Dow/Shenhua Coal-Chemicals MTO Huating Coal - 2008/9 300 ktpa MTP 130 ktpa PP Xinxiang Zhongxin -2006 200 ktpa Methanol Tianji Coal -2006-08 600 ktpa Methanol & Derivatives Tianji Coal - 2006 400 ktpa Ammonia 600 ktpa Urea Celanese - 2007 600 ktpa Acetic Acid 17
Natural gas reforming under atypical conditions provides syngas for FT processes NATURAL GAS LPG SYNGAS GENERATION NAPHTHA FT FT WAX SYNTHESIS FT FT WAX UPGRADING UNIT DIESEL JET LUBRICANTS UTILITIES, LOGISTICS AND STORAGE 18
Low cost synthesis gas opens the way for a number of fuel, energy and chemical production options subject to feedstock availability Power Lubricants POWER n-paraffins SYNGAS GENERATION Fischer Tropsch DME Diesel FUELS MTO Methanol Carbon Monoxide Formaldehyde Acetyls CHEMICALS Ammonia Fertilisers 19
A Well to Wheel analysis illustrates that GHG performance of BTL exceeds that of FAME, GTL and CTL 400 ILLUSTRATIVE CONCAWE WELL TO WHEEL ANALYSIS 350 WTT TTW gco2 Equivalent / km 300 250 200 150 100 50 0 Waste Wood BTL Farmed Wood BTL FAME CTL Remote GTL Petroleum Diesel 20
BTL is only a small scale play versus CTL and GTL under current conditions COMPARATIVE SCALES OF PRODUCTION 21 BTL Large? BTL (Choren) WMPI Sasol Ningxia Sasol Shenhua Sasol Secunda Mossgas Shell Bintulu Escravos ORYX Shell Pearl 0 40 80 120 160 200 Capacity,KBPSD
Biofuel technology continues to evolve. The industry is now exploiting readily available First Generation technology whilst developing Second Generation process for the future Second Generation Benefits - Exploitation of wider and hopefully lower cost biomass feedstock base - In the case of biodiesel provides for refiners a performance blend stock with enhanced and unchanging properties refiners can exploit - BTL diesel can be handled within existing refinery infrastructure - Enhanced GHG performance amongst other environmental benefits - Opportunities for biomass-driven power-steam co-generation Second Generation Challenges - Increased capital cost - Major increase in process complexity - Reappraisal of agriculture need to meet biomass demands - Increased biomass requirement per ton of biofuel leads to a need for an optimised logistics solution to avoid deleterious GHG performance upstream of the biofuel facility - In the case of ethanol new specialised micro-organisms needed that need to be tailored to specific feedstocks limiting flexibility. 22
BTL Technology Development Status 23
Of the second generation biofuel technologies the conversion of biomass into liquids appears closest to commercialisation CHOREN GmbH is leading the development and commercialisation of BTL for diesel production with the SUNFUEL brand. CHOREN provides biomass gasification with FT/Upgrading supplied by Shell Semi-commercial unit of circa 15 thousand tons per year nearing completion CHOREN is reviewing six sites for the first Sigma plant of 200 thousand tons per year (5 KBPSD) There are alternative providers of different commercial technologies components for a BTL process, e.g. - Sasol for FT/Upgrading (e.g. ORYX GTL in Qatar) - Other non-commercial but demonstrated FT/Upgrading platforms include ConocoPhillips, Syntroleum BP, Rentech, Jomec, etc - Biomass gasification demonstrated as co-feed (Nuon, ethers) Other similar and different BTL platforms are being developed. 24
The CHOREN Beta plant is nearing the end of construction with some processes already being commissioned 25 Source: CHOREN GmbH, April 2007
Process Economics 26
At the Cash Cost level, access to low cost biomass decoupled from the food industry provides BTL with a competitive edge versus FAME BTL COST COMPETITIVENESS AT THE CASH LEVEL 1200 Cost Components, Euro per ton 1000 800 600 400 200 Net Raw Materials Direct Fixed Costs Utilities Allocated Fixed Costs 0 FAME Rapeseed, 200kt/yr FAME Rapeseed, 100kt/yr FAME Soybean, 200kt/yr ESTERFIP Soybean, 200kt/yr BTL Complex, 200kt/yr 27
Compared to its friends BTL is a high cost liquid fuels solution requiring legislation and incentives to support BTL product pricing 80 BTL COST COMPETITIVENESS VERSUS CTL AND GTL Cost Components, $US per bbl 60 40 20 Fixed Costs Variable Costs 0 GTL, $0.75 per MMBtu GTL, $1.50 per MMBtu CTL, $30 per ton BTL, $55 per ton Diesel, Refining, $30 per bbl Diesel, Refining, $65 per bbl 28
Enhancements such as scale economies, renewable power, etc, provide substantial financial performance improvements but biomass requirements rise sharply PRELIMINARY BTL FINANCIALS LOCAL BIOMASS PLATFORM Power/Full ROC $75 per bbl Crude $55 per bbl Crude $45 per bbl Crude Feedstock -20% Feedstock +20% Capex -30% Capex +30% 10 KBPSD Basecase 5 KBPSD Base Case Crude Oil at $65 per bbl 0% 5% 10% 15% 20% 25% 30% Project Internal Rate of Return 29
The BTL Challenge 30
There are a number of challenges that face the development of BTL in the European Union Biomass supply - Optimisation of biomass supply chain is key to BTL variable cost - Competition for biomass resource from power, biogas and in due course lignocellulosic bioethanol. Increases in biomass pricing already evident in Germany and other European countries - Need to consider the best option to exploit a broad and possibly dispersed biomass supply base Legislation and Government support - EU directives and governments are providing a useful starting point to support biofuel development in the EU but will need enhancement possibly via a carbon-related performance credit to support BTL financial viability across a range of oil price scenarios 31
Biomass Supply Issues a 5 KBPSD BTL unit needs more than 1 million tons per year of feedstock WOOD WASTE AGRI- WASTE ENERGY CROPS SWITCH- GRASS ANIMAL WASTE BTLCOMPLEX Biomass logistics cost impact is high given volumes needed. Biomass availability can limit scale and economies therein. CHOREN concept is the distributed BTL model and not the centralised approach which is appropriate for Germany In contrast a UK plant is likely to need a multiple source feedstock base 32
The Way Forward 33
GTL, CTL and BTL are complementary not competitors (yet) GTL The exploiter of low cost natural gas - Commercially proven with further investment underway - A combination of Improvements in GTL technology and access to large volumes of stranded gas make GTL economic at relatively low oil price. CTL The tactical solution for energy security - Key to energy security in some countries - Needs access to low cost local coal, e.g. in China for financial viability - An IGCC/CTL combination potentially improves environmental and economic performance BTL The environmental winner - Looking increasingly economically attractive but many challenges lie ahead in respect of crude oil price, legislation and biomass sourcing - Economics would be improved by: Integrated power generation Carbon Credits Integrated biomass management. 34
A Presentation for the 2 nd BTLtec Conference GTL, CTL and BTL Friends or Enemies Dr Mark Morgan 12 th -13 th September 2007, Vienna 35