27 March 2012 1 Economics of chemicals and fuels from forest biomass Tom Browne.

27 March 2012 1

Economics of chemicals and

fuels from forest biomass

Tom Browne

2© FPInnovations

Annual average oil prices, $US/bbl

$80 to $100/bbl: the new normal?

http://www.inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp

3© FPInnovations

Mechanical pulpNewsprintSource: FAO

3

4© FPInnovations

Newsprint consumption

0

5,000

10,000

15,000

20,000

1990 1995 2000 2005 2010

'000

s o

f m

etri

c to

nn

es

NAFTA

Asia

Europe

Source: FAO

Regional newsprint demand

• Severe drop in NA, flat in EU, growth in Asia

5© FPInnovations

http://ipod.about.com/od/ipadmodelsandterms/f/ipad-sales-to-date.htm, http://www.macworld.com/article/163101/2011/10/record_mac_ipad_sales_help_apple_turn_in_record_quarter.html

5

6© FPInnovations

A Lesson from Petroleum Refineries

Transportation Fuels

Other Fuels and Products

Chemicals, Plastics, Rubber

Petroleum End-uses

70%

26%

4%

Revenues

43%42%

15%

Source: T. Werpy, 2009 BioWorld Conference

7© FPInnovations

Today’s Forest ‘Bio-refinery’

Solid wood products

Other Fuels and Products

Pulp and paper products

Forestry end-uses

45%

34%

21%

Benefits

57%37%

6%

1 odt wood generates: - 450 kg lumber @ $450/t- 100 kg News @ $600/t - 105 kg kraft @ $675/t- 145 kg BL organics @ $65/t- 200 kg solid fuels @ $65/t

Total value $355/t

8© FPInnovations

Scale of RefineriesWhere What Capacity, GW

Shell refinery, Montreal (shut)

130,000 bbl/d 9 GW oil

Nanticoke 3.5 GW power 11 GW coal

Saudi Aramco

7 refineries1.5 MMbbl/d 105 GW oil

US refining capacity

16 MMbbl/d 1100 GW oil

Canada’s largest pulp mills

5,000 t/d

wood supply1 GW wood

World oil use 78.5 MMbbl/d 5400 GW oil

9© FPInnovations

Plant gate cost per litre, FT Diesel from CDN softwood supply

$0.00$0.20$0.40$0.60$0.80$1.00$1.20$1.40$1.60$1.80$2.00

10 100 1,000 10,000

Annual production (millions of litres)

$/lit

re

Combined Feedstock collection

Other operating Capital repayment

Economies of scale vs. feed costs

10© FPInnovations

Plant gate cost per litre, FT Diesel from CDN softwood supply

$0.00$0.20

$0.40$0.60

$0.80$1.00

$1.20$1.40

$1.60$1.80

$2.00

10 100 1,000 10,000

Annual production (millions of litres)

$/lit

re

Combined Feedstock collection

Other operating Capital repayment

Economies of scale vs. feed costs

1 GW 10 GW

11© FPInnovations

Volume or Value?

aa

Market size / price for co-products derived from biomass

10-1 1 10 102 103 104 105

1012

1011

1010

109

108

107

106

105

104

103

102

101

Biomass-derivedCommodities

Biomass-derivedSpecialty Chemicals

Biomass derivedPharmaceuticals

Market price (US$ / kg)

Cellulose-basedfibers*

Fattyacids

SpecialtyCelluloses

Aldehydes(Vanillin*, SA, TMBA)

EssentialOils

Sterols*

Chitosan& derivatives

Vitamins

BioactivePolyphenols

Maltol*Chiral drugs

Taxans*

cis-3-Hexenoltrans -2-Hexenal

Gallicacid

Proanthocyanidins*

Source: “Thermochemical Strategies for Biofuels, Green Chemicals, Polymeric Biomaterials and Biofuels”, Esteban Chornet, November 2005.

Mar

ket

size

Market price ($/kg)

12© FPInnovations

Substitution of Existing Chemical Feeds

• Tactical approach: – Requires an exact molecular replicate of

existing feeds – Cost, product performance will be crucial

• Olefins: thin margins, strong competition– Bio-ethylene from Brazilian sugar cane

• BTX: Breakthrough required – No easy path from lignin to commercial

aromatics– The same issues of volumes vs. capex arise

13© FPInnovations

New Chemicals Based on Bio-properties

• Identify novel products based on unique biomass properties

• Requires strategic thinking– Cost less critical if

new functionalities

available?– Exact molecular

replicate less critical?

• New capital

infrastructure?• Is this our 4%?

14© FPInnovations

Approach• Identify value-added products from wood

– Focus on chemicals first, then energy from residues

• Early economic evaluation (Bio-Pathways)• Start with bolt-on additions to existing plants

– Improve economics of existing infrastructure– Reduce costs due to shared infrastructure

• Build relationships with customers– Lab-scale samples initially, pilot scale as demand arises– Ensure product meets customer’s needs

• Involve engineering firms early– Good estimates of capex, opex, unexpected problems

15© FPInnovations

Long term: brownfield biorefineries

• Located on an existing mill site– Reuse existing equipment

• Integrated with forestry supply logistics– Build it as big as possible, consistent with supply costs

– Produce a cheap-to-ship intermediate

– Better understanding of processes and markets allows this

– Use all components of wood in profitable fashion

– Energy self-sufficient

• Integrated with end-users infrastructure– Minimize changes to existing petro-chemicals

16© FPInnovations

Pathways

Pulp MillPulp, papers

Chips Conventionalprocesses

LigninNew

productsChemicalprocesses

Ethanol,others

Hemi-cellulose

Fermentationprocesses

Products synthesis

Bark,Sludge

Residues

Gasification,pyrolysis

PolymersChemicalProcesses

Newproducts

Sludge,Effluents

Bio-chemicalprocesses

Cellulose

NewBio-products

Ex: NCC

Chemicalprocesses

17© FPInnovations

Forestry-Chemical Industry: one model

Existing P&P mill

Existing steam plant

Existing effluent

treatment

Softwood

Bark

P&P

Hardwood

Bark

New Process

Fermentation or other new

BuOH, EtOH

Sugar

LigninResins

New processes

Shared infrastructure

18© FPInnovations

Conclusion• Biomass is bulky, wet and distributed• Petroleum is cheap, dense, comes out of a pipe• GWTH-scale of forestry installations:

– Driven by feedstock costs– Implies additives, not wholesale replacement

• Competing in commodities will be very challenging• The petroleum example is critical

– 4% of feed makes 42% of revenues– Doing something useful with the other 96% is equally

critical

• We can always burn the residues– Combustion, fermentation are among our oldest

technologies

19© FPInnovations

Mankind’s oldest technologies

• The pointy stick…– To catch dinner

• Fire…– To cook dinner

• Fermentation…– To wash down dinner

20© FPInnovations

Thank you for your attention

• Support came from Natural Resources Canada’s Transformative Technologies Program

• [email protected]

• +1 514 630 4104