Copyright 2008 by E-MetaVenture, Inc. All Rights Reserved. The Potential Contribution of Coal- to-Liquids Technology to the US and Global Energy Pool NPRA.

Copyright 2008 by E-MetaVenture, Inc. All Rights Reserved.

The Potential Contribution of Coal-The Potential Contribution of Coal-to-Liquids Technology to the US to-Liquids Technology to the US and Global Energy Pooland Global Energy Pool

NPRA Annual MeetingMarch 2008San Diego, California

AM-08-56

Iraj Isaac Rahmim, Ph.D.E-MetaVenture, Inc.Houston, Texas

E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08-56

IntroductionIntroduction

Significant recent interest in non-crude-based sources of energy

CTL of particular interest in US, China, Russia, India, Australia,…

Much of the technology is old but specific applications are considered

Key topics:

– CTL technology– Interested parties and drivers– CTL implementation status and projections– Likely impacts of CTL commercialization– Issue of CO2 recovery and sequestration


CTL BlocksCTL Blocks

Gasification involves pyrolysis, combustion, and gasification chemistries:2 C-H + 3/2 O2 2CO + H2O + HeatC-H + H2O CO + 1.5 H2

Also, some Water-Gas Shift: CO + H2O CO2 + H2

F-T converts SynGas to hydrocarbons:CO + ? H2 —CH2— + CO2 + H2O + Heat

(long chain)


Typical Overall CTL BalanceTypical Overall CTL BalanceTwo Recent StudiesTwo Recent Studies

* NETL study for DOD/Air Force (August 2007)** NETL/DOE study (April 2007)*** Not verified. Does not include all energy recovered in process.

Total Liquid Product Capacity 11,000 BPD* 50,000 BPD**

Coal (Illinois #6, bituminous)—TPD 4,891 24,533

Other feeds: air, water, …

Diesel—BPD 7,500 27,819

Naphtha—BPD 3,509 22,173

CO2—TPD 6,035 32,481

Net Power—MW 9.7 124.3

Other products: S, slag, fuel gas,…

Bbl Liquid/Ton Coal 2.25 2.04

Ton CO2/Ton Coal (carbon/carbon) 0.53 0.57

Ton CO2/Ton Coal 1.23 1.32

Overall Thermal Efficiency—% HHV 51*** 47***


CTL ProductsCTL Products Product Upgrading can involve a number of activities:

– Primarily hydrocracking of wax to lighter diesel and naphtha

Sample product slate for 50 MBD facility

No HC With HC Comments

LPG 1 2 Similar to other plant (LNG, refinery) LPG

Can be co-processed and marketed with them

Naphtha 9 13 Straight chain paraffinic Near zero sulfur

Preferred use: steam cracker feed

Diesel 25 35 High cetane Near zero sulfur

Low density Low aromatics

Lubes 15 <1 High grade Low volatility Low pour point

Low viscosity Low sulfur

Wax 5 <1 High quality


Interested Parties & DriversInterested Parties & Drivers

Interested parties: – Governments and agencies– Environmental stake-holders– Private sector– Indirect stake-holders– General public

Drivers:– Energy resource limitations and crude/NG price– Projected product demand growth– Large coal reserves (over 140 years at current production)– Resource security concerns (majority of world coal outside the Middle

East)– Significant technological improvements in CTL ( improved economics)


Driver: Energy and Product DemandDriver: Energy and Product DemandGlobal ReservesGlobal Reserves

ResourceOil

(incl. CanadianOil Sands)

Natural GasCoal

(4 Grades)

Proved Reserves1,372 X 109 Bbl191 X 109 Tons

6,405 TCF 479 X 109 Tons

Energy Basis (quadrillion Btu) 7,600 6,600 8,500

MTOE Basis(million tons oil equivalent)

191,000 165,000 213,000

Years Remaining (at current production)

41 63 147

BP Statistical Survey or World Energy (2007)


Driver: Resource Availability/StrategyDriver: Resource Availability/StrategyGlobal Distribution of Coal ResourcesGlobal Distribution of Coal ResourcesMillion Tons of Proved Reserves (2006)Million Tons of Proved Reserves (2006)

EIA (2007).

254,43228%

19,8932%

287,09532%

50,7556%

296,88932%

North America

S. & Cent. America

Europe & Eurasia

Africa & Middle East

Asia Pacific

246,643

157,010

114,500

92,445

78,500

USA

Russian Federation

China

India

Australia


Driver: Resource Availability/StrategyDriver: Resource Availability/StrategyDistribution of Coal Resources—USADistribution of Coal Resources—USA

US Geological Survey Open-File Report OF 96-92.

Anthracite, Semi-Anthracite, Meta-Anthracite

Coking CoalMedium and High-Volatile Bituminous

Low-Volatile Bituminous Lignite

Sub-Bituminous


Driver: Energy and Product DemandDriver: Energy and Product DemandGlobal Middle Distillate Demand ProjectionsGlobal Middle Distillate Demand Projections

Issue of Refinery Gap


Driver: TechnologyDriver: Technology

Individual CTL process elements have been around for many decades

Significant technical improvements during the past two decades:– Fischer-Tropsch– Hydroprocessing

“Evolutionary” advancements in gasification, gas treating, power generation,…

Other angles including MTG, polygeneration, direct liquefaction

CO2 capture, compression, transportation, sequestration

Impact on Process

Economics

Environmental Concerns Later


CTL Facilities and ProjectsCTL Facilities and ProjectsHistorical —approx. 150,000 BPDHistorical —approx. 150,000 BPD

Company Location Size (BPD) Comments

Sasol I Sasolburg, South Africa 5,600

1955; Sasol technology; Now using Mozambique NG (2004)

Sasol II/III Secunda, South Africa 124,000

1955/1980; Light olefins and gasoline; Sasol technology; To be converted to NG feed

Petro SA (formerly Mossgas)

Mossel Bay, South Africa 22,500

1991; Gasoline and diesel; Sasol technology; now using NG feed

A number of operational pilot plants. Examples: Rentech (15 BPD), Headwaters (30 BPD). A word on GTL: two commercial GTL units operational.


CTL Facilities and ProjectsCTL Facilities and ProjectsEIA Projection to 2030: Coal used in CTL (USA)EIA Projection to 2030: Coal used in CTL (USA)

2007 Projections

As % Total Consumption:

2015: 1.2

2020: 1.9

2025: 5.2

2030: 6.3

2008 (Early Release)

~ 40% higher


CTL Facilities and ProjectsCTL Facilities and ProjectsEIA Projection to 2030: Liquid Fuels from CTL (USA)EIA Projection to 2030: Liquid Fuels from CTL (USA)

2007 Projections

As % Total Jet+Distillate Consumption:

2015: 1.3

2020: 1.9

2025: 5.6

2030: 6.2

2008 (Early Release): 8.7% in

20300

100,000

200,000

300,000

400,000

500,000

600,000

2004 2009 2014 2019 2024 2029

Year

Pro

ject

ed U

S L

iqu

id F

uel

s fr

om

CT

L (

Bar

rels

/Day

)


More on US CTL Diesel ProjectionsMore on US CTL Diesel ProjectionsFederal Task Force on Strategic Unconventional Fuels (2007)Federal Task Force on Strategic Unconventional Fuels (2007)

CTL considered important component of strategy CTL objectives

2035 (thousand BPD liq prod) Regulatory Basis

Base 400-500 Current law (similar to EIA2007 projections)

“Measured” 1,500 20% investment tax credit

“Accelerated” 2,500-2,60020% investment tax credit$5/bbl production tax creditSome engineering and design cost share

Projections by others:National Coal Council (2006) set objective of 2.6 million BPD by 2025

Southern States Energy Board (2006): very aggressive projection 5.6 million BPD by 2030 Baker and O’Brien study (2006): potential 250 MBD of middle distillates


CTL Facilities and ProjectsCTL Facilities and ProjectsIn the Works (USA)—PartialIn the Works (USA)—Partial

Project Lead Project Partners Location Feedstock Status Capacity (BPD) Cost (US$ million)

American Clean Coal Fuels None cited Oakland, IL Bituminous, Biomass Feasibility 25,000 N/A

Synfuels, Inc. GE,Haldor-Topsoe,NACC,XOM Ascension Parish, LA Lignite Feasibility N/A 5,000

DKRW Advanced Fuels Rentech, GE Medicine Bow, WY Bituminous Design (2011) 15,000-20,000 1,400 (?)

DKRW Advanced Fuels Rentech, GE, Bull Mountain Land Co. Roundtop, MT Sub-bituminous,

Lignite Feasibility 22,000 1,000-5,000

AIDEA ANTRL, CPC Cook Inlet, AK Sub-bituminous Feasibility 80,000 5,000-8,000

Mingo County Rentech WV Bituminous Planning 25,000 2,000 (?)

WMPI Sasol, Shell, DOE Gilberton, PA Anthracite Culm Design 5,000 612

Rentech/Peabody N/A MT Sub-bituminous, Lignite Feasibility 10,000-30,000 N/A

Rentech/Peabody N/A IL, SW IN, KY Bituminous Feasibility 10,000-30,000 N/A

Rentech Natchez, MS Coal, Petcoke, Biomass Planning 1,600 (Ph. I) N/A

Baard Energy AMEC Paragon Wellsvile, OH Sub-bituminous, Lignite Feasibility 35,000 4,000

DOE/Office of Fossil Energy—DOE/FE-0509, Green Car Congress, Syngas Refiner


More on CTL Diesel ProjectionsMore on CTL Diesel ProjectionsNon-USNon-US

PRC :– A large number of projects under study/planning/construction (>100?)

Example: 20 MBD direct liquefaction plant in Inner Mongolia (planned 2008 start-up)

– CTL considered a key component of the PRCs overall, long-term energy strategy– A new key issue: recent environmental concerns of the PRC government– IEA (2007) projections for PRC:

180 MBD by 2015 750 MBD by 2030

– CERA (2008): 1.5 million BPD by 2015!

Other countries: various projects under study/planning in India, Australia, southern Africa,…

2020 Hand-waving estimate (non-US): 300-500 MBD 2030: 600-1,000 MBD—many unknown factors


CTL Facilities and ProjectsCTL Facilities and ProjectsIn the Works (Non-US)—PartialIn the Works (Non-US)—Partial

Project Lead Location Status Capacity (BPD)

Shenhua (Direct Coal Liquefaction) Ordos City, Inner Mongolia, PRC Construction (on-line in 2008) 20,000

Lu’an PRC Planning 3,000-4,000

Yankuang PRC Planning 40,000-180,000

Sasol JV PRC Planning 80,000

Shell/Shenhua PRC Planning 70,000-80,000

Headwaters/UK Race Investments PRC Planning 700-1,400

Pertamina/Accelon Indonesia Construction? 76,000

Headwaters Philippines Planning 50,000

Alton Resources plc, Jacobs Consultancy, MineConsult Australia Feasibility 45,000

Anglo American (Monash), Shell Victoria, Australia Feasibility 60,000

Sasol, Tata Group India Planning 9,000

Sasol South Africa Feasibility 80,000

CIC Energy Botswana Feasibility N/A

L&M Group New Zealand Planning 50,000

DOE/Office of Fossil Energy—DOE/FE-0509, Green Car Congress, Syngas Refiner

Also, a number of related projects world-wide: gasification, CCS, direct coal-to-liquids, coal-to-chemicals,...


What Impact will CTL have on…What Impact will CTL have on…

Coal market? Proved reserves, production, production increase capability– Interesting fact: PRC became a net coal importer in 2007 (first time)

Liquid fuels market? Supply/demand, change in other sources– Diesel—overall (1.5-3% by 2030?) and regional– Jet– Naphtha (for cracking or blending)

US v. worldwide Regional markets

A word on specialty products: lubes and waxes

Environmental impact: CO2 emissions and water use

Some factors affecting CTL growth:

- Petroleum prices

-Capital availability

- E&C resources

- Technology

- Movement on CCS

- Incentives and regulations


““Typical” CTL EconomicsTypical” CTL Economics50,000 BPD50,000 BPD**

CAPITAL COST**

Coal and Slurry Prep $ 425 MM

Gasification $ 1,150 MM

Air Separation Unit $ 425 MM

SynGas Clean-Up $ 850 MM

WGS + FT $ 510 MM

Product Upgrading $ 210 MM

Power Generation $ 255 MM

Other $ 425 MM

TIC $ 4,250 MM

OPERATING COST*(annual, 1st year basis)

Fixed $ 230 MM

Variable (net) $ -20 MM

Purchased Feed $ 300 MM

TOC $ 510 MM

• * One scenario. For discussion purposes only. Results depend on a number of variables and parameters including: product prices, plant availability, EPC cost, % debt financing,…

** Excludes CO2 compression, transportation, sequestration costs.

ROI 16.8 %

Simple Payout 6 years

67%

12%

5%

16%

~ $85,000 per barrel installed capacity


Policy ActionPolicy ActionRegulations and Incentives—Key FactorRegulations and Incentives—Key Factor Direct subsidies or price guarantees: 2005 Federal Transportation Bill—

$0.50/gallon of FT naphtha and diesel. Extended in 2007 Farm Bill to 2010 (incl. requirement for 50-75% CO2 CCS)

Loan guarantees: EPAct 2005—loan guarantees for gasification projects with < 65% output as electricity.

Investment tax credit: EPAct 2005—20% credit applied to first $650MM investment during first year of operation

USAF Synthetic Fuel Initiative: successfully tested 50/50 Syntroleum FT fuel; targeting certification for all planes by 2011 and 50% synfuel use (domestic) by 2016; awarded 7,500 Bbl FT jet fuel for 2007.

Environmental regulations/incentives on fuels and plants

In flux. Subject to lobbying by interest groups on all sides. Highly politicized.

KEY ISSUE

Lack of CO2 emission regulatory framework is resulting in many

parties waiting to see.


A Word on Energy Independence and A Word on Energy Independence and Security Act of 2007Security Act of 2007 Signed into law in December Key provisions involve

– Biofuels– CAFE standards– Efficiencies in appliances, buildings, industry– R&D in solar, geothermal, …– International programs– …

Title VII: Carbon Capture and Sequestration– R&D, demonstrations, assessment– At least 7 large-scale sequestration tests (excl. FutureGen): $1.2 billion

over 5 years– Large-scale carbon capture demonstration: $1 billion over 5 years– Other: CS capacity assessment, R&D with universities,…


COCO22 from CTL from CTL

Given production of a typical 0.65 ton CO2 per Bbl of liquid products

– 50,000 BPD plant: 11.3 million tons CO2/year

Question:

– Is this significant?

– How important is it to capture, compress, transport, and sequester (CCS)?

Large stationary source CO2 in 2005: 13,466 million tons


Worldwide Worldwide LargeLarge StationaryStationary CO CO22 Sources Sources

Process Number of SourcesEmissions

(million tons CO2/year)

Power 4,942 10,539

Cement Production 1,175 932

Refineries 638 798

Iron and Steel Industry 269 646

Petrochemicals Industry 470 379

Oil and Gas Processing Not Available 50

Other Fossil Fuels 90 33

Bioethanol and Bioenergy 303 91

TOTAL 7,887 13,466

Intergovernmental Panel on Climate Change (2005)

EIA Est. for 2005 emissions(million TpY)

Worldwide: 28,000

US:6,000


COCO22 Emission Projections from CTL Emission Projections from CTL

Typical CCS in the context of CTL: 80-90% CO2 emission reduction

CTL with no CCS: emissions better than coal-fired power plants CTL with CCS: emissions on par with refineries

Consider earlier EIA (2007) US CTL projections:

Projected Emissions from CTL

(million tons CO2/years)without CCS with CCS

2015 10-41 1-8

2020 28-61 3-12

2030 175-230 17-46

2030 CTL Emissions as % 2005 Global Large Stationary Sources 1.3-1.7 0.1-0.3

KEY NOTE

All parties agree that the CO2 issue is critical, that they plan

to incorporate CCS,and that there will be no CTL

without CCS .


COCO22 CCS CCS Background—1Background—1 Capture includes separation/concentration, treating (e.g., dehydration), etc.

– Mature technology used extensively in gas plants and refineries worldwide

Compression: to pressure acceptable to pipeline

Transport—a number of factors– Distance– Tons per year– <1000 km + >millions of tons per year: pipeline most economical– >1000 km + <millions of tons per year: tankers– Mature technology (e.g., >2,500 km pipelines transporting > 40 million

tons of CO2 per year in the US


COCO22 CCS CCSBackground—2Background—2

Sequestration can involve– Use in enhanced oil recovery (EOR)

Example: currently, in US, 30 millions tons per year CO2 is injected for EOR applications

– Injection in depleted oil/gas fields or other suitable geologic formations Most likely option (largest capacity, location, stability/leak) Current example: 1 million tons per year CO2 from Sleipner gas field is injected into

saline aquifer under North Sea

– Ocean storage In R&D; Technical issues

– Conversion to inorganic carbonates or direct industrial use Small, interesting R&D. Example: JV for algae bioreactor for CO2 conversion.

In essence: every one of the elements in the CCS chain is tested/run-commercially. However, not all together in one chain.

– Very active area: R&D as well as commercial testing– Very high likelihood of technical success– QUESTION: impact on economics? Impact on schedule?

Issue: the results from many of the larger-scale tests not out for a few years. This will likely affect CTL implementation schedules, at least in the US.


Some CCS Tests and DemosSome CCS Tests and Demos FutureGen: “First global integrated CO2 sequestration project”

– FutureGen Alliance: non-profit, representing some of world’s largest coal and utility companies

– $1.7 billion budget. 74% funded by US government. 26% industry. $50 million spent, to date.

– Power plant, H2 co-production, syngas production– CO2 sequestered in deep underground geologic formations– Site selected Dec. 2007: Matton, IL– DOE cancelled funding in Jan. 2008. Will it be revived this year?

Plains CO2 Reduction Partnership: “World’s largest CCS experiment”– Part of $300 million program; 3 regions on North America tested– Example: 1 million TpY CO2 into remnant of an ancient sea about 10,000 ft. below

North Dakota– Used CO2 from coal-fired power plant which was compressed into liquid and

sequestered

Australia $17.5 million for CCS demonstration (part of Clean Coal Initiative)

Others: GreenGen in China; Coal21 in Australia; Asia Pacific Partnership;…

Key issue: how long will these tests/demos take? Impact on timing of commercial CTL implementation?


Economics of CTL + CCSEconomics of CTL + CCS CCS economics vary wildly, depending on factors such as capture process specifics,

pipeline length, injection reservoir type and depth, etc.

One study (IPCC 2005) (incl. amortized add’l capital):– Capture from power plant: $15-75/ton CO2

– Transport (250 km): $1-8– Geological storage (excl. remediation/liability): $0.5-8

Another study (MIT 2007, criticized, being re-worked):– Capture/compression: $25/ton CO2

– Transportation/storage: $5

A third study (Australia 2006) (capital cost for 0.5 million TPY CO2, equiv. to approx. 2,200 BPD with 50 km pipeline):

– Capture: $25 MM– Compression: $8 MM– Pipeline: $15 MM– Sequestration: $3 MM– Net operating cost: $24/ton CO2 captured (incl. amortized capital)


Rough CTL+CCS EconomicsRough CTL+CCS Economics50,000 BPD*50,000 BPD*

Consider 50,000 BPD CTL

Addition of CCS (incl. 50 km pipeline): – $300 MM extra to TIC– Or $230 MM/year to operating costs (including amortized

TIC addition)

Case CTL CTL+CCS

ROI 16.8 % 11.3 %

Simple Payout 6 years 9 years

* One scenario. For discussion purposes only. Results depend on a number of variables and parameters.


SummarySummary

Significant new interest in CTL

Many parties—pro and con—in a number of countries– Energy security and strategy, economics, environmental impact, product

quality

Mature technology; many recent technical improvements affecting economics

Large number of projects—mostly in study; a few in design or construction

Projection for CTL diesel suggests 1-2% of US demand by 2020, 6-9% by 2030– 1-3% of global demand by 2030

Environmental impact key—CO2 capture, compression, transmission, sequestration


Contact InformationContact Information

Iraj Isaac Rahmim, PhDE-MetaVenture, Inc.P. O. Box 271522Houston, Texas 77277-1522USATelephone: USA (713) 446-8867Email: [email protected]

Copyright 2008 by E-MetaVenture, Inc. All Rights Reserved. The Potential Contribution of Coal- to-Liquids Technology to the US and Global Energy Pool NPRA.

Documents

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