CPA Presented to AIChE, Metro New York Section New York Institute of Technology, Gallery 61 Studio 16 West 61st Street - 11th Floor (61st Street and Broadway),

CPA

CPA

Presented to AIChE, Metro New York SectionNew York Institute of Technology, Gallery 61 Studio

16 West 61st Street - 11th Floor (61st Street and Broadway), NYC

Chemicals & Plastics Advisory ©2010

Howard R. Blum & Lee DiestelowChemicals & Plastics Advisory “CPA”Ambler, PAContact: +1-215-802-0052

May 17, 2010

CPA

Background

Fuels

Chemicals

Polymers

Conclusion

Chemicals & Plastics Advisory ©2010 2

CPA Chemicals & Plastics Advisory ©2010 3

Background


Biomass is not new – it has always been here - trees, grasses, other plants, and the sea (e.g. algae) , and of course animals

Ironically, fossil fuels come from very ancient biomass sources, but are not considered biomass because the contained carbon has been "out" of the carbon cycle for a long time Therefore, fossil fuel emissions such as CO2 or CO are “additive” to the overall content

of today’s atmospheric carbon gases and considered by many as an environmental problem

Examples of fuels derived from biomass: wood chips, methane, ethanol & bio-diesel Outside the fuels market, the global chemical industry, including polymers is estimated to

exceed $3 Tril. in sales Chemicals enable many adjacent industries such as pharmaceuticals & healthcare, paints

& coatings, adhesives, packaging, building products, soap & detergents and many more There are literally hundreds of biomass derived chemicals including bio-ethylene, various

polyols, propanediol, surfactants and many types of specialties for personal care There are also many types of biomass derived polymers, such as bio-polyethylene,

polylactic acid (PLA), polyhydroxy alkanoate (PHA), epoxy resins, alkyd resins, regenerated cellulosics and many more

Chemicals and polymers, combined with adjacent end use sectors represent a broad and fertile potential for biomass derivatives

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Economically attractive biomass conversion, and therefore successful monetization of biomass feedstock and its derivatives, are partly based on the competitive price point for using competitive fossil fuels and derivatives

Government legislation of laws and codes that promote biomass conversion will play a strong role in terms of numerous impact-points; e.g.

Tax incentives to produce biomass feedstocks and biofuels

Carbon trading and carbon taxes

Rules on environmental outputs; e.g. VOCs

The public’s interest to consume so-called “green” products has seen exceptional motivation since oil price escalation in mid-2008 and the general mistrust of the political system

Therefore, competitive technology and raw material sourcing will be key ingredients in achieving success in bio-derivatives



Ultimately, routes to Biorenewability succeed if they enable economic paths to complete the Carbon-cycle – from biomass to derivatives & back again


Fuels

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6996

1882

1033

996

958

827

506

1377BBL/Day (000)

Domestic Production

Canada

Mexico

Nigeria

Saudia Arabia

Venezuela

Iraq

25 Others


US Crude Oil Sources, 2009

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2010 2022

10084

1015

0 21non-Corn Starch- pirrenial crops, forest sources, waste oil greases, virgin plant oils,algea Corn Starch

Hydrocarbon


Production Targets and Projected Fuel Demand


RFS1 notes 7.5 BG in

2012

RFS2: Higher renewable fuel volumes by 2012 and beyond

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Renewable Fuel Standard RFS2 was set by EISA 2007

The EPA Administers Transportation Bio-fuels; biofuel production requirements were recently revised (Feb 2010), adjusting cellulosic ethanol timeframe & clarifying biofuel sources

Biofuel production requirements: Implementation timeframe adjusted to reflect R&D reality

9.0 Bil. Gal. in 2008 & 12.95 Bil. Gal. in 2010

36.0 Bil. Gal.- 2022 (requires 21.0 Bil. Gal. from cellulosic ethanol)

Four types of fuel described as CBAR (60% GHG reduction of lifecycle emissions by 2022 vs the RFS1 commercial gasoline pool of 2005):

Type C Cellulosic Biofuels must show a 60% GHG reduction – (produce 16 BG)

Type B Biomass-Based Diesel must show a 50% GHG reduction – (produce >1 BG TBD)

Type A Advanced Biofuels must show at least a 50% GHG reduction – (produce 21 BG)

Type R Renewable fuel (total) must show at least a 20% GHG reduction – 37 BG)

Existing ethanol production facilities are subject to grandfathering requirements that exempt them from the GHG performance requirements for a defined period of time

RFS2 further supports:

Corn Ethanol, Advanced- Ethanol, other alcohols (butanol), multiple feed stocks- cellulose, ligno-cellulose, algae, and biodiesel


GHG=Green House Gases

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The energy debate: how do we perceive the balance of energy? Energy Inputs > or = or < Energy Output (how to measure)? Inputs must be less than outputs to win the argument – use LCA LCA (Life Cycle Analysis) includes:

Energy Input from all Sources- Raw Material Production, Supply Chain, Processing Water Consumption Fertilizer

ETOH – Easiest & most common – but not the best source Corn – Energy balance is open to debate, But USDA studies

confirm viability of corn as a feed stock Non-food sources are cellulosics…

Rice straw Corn Stover Bagasse Corn Fiber Dedicated Energy Crops



Major Liquid Fuels

FuelEnergydensity

Air-fuelratio

Specificenergy

Heat ofvaporization RON MON

Gasoline & biogasoline

32 MJ/L 14.6 2.9 MJ/kg air 0.36 MJ/kg 91–99 81–89

Butanol fuel 29.2 MJ/L 11.1 3.2 MJ/kg air 0.43 MJ/kg 96 78

Ethanol fuel 19.6 MJ/L 9.0 3.0 MJ/kg air 0.92 MJ/kg 107 89

Methanol 16 MJ/L 6.4 3.1 MJ/kg air 1.2 MJ/kg 106 92

[e


Thermochemical Reactor

Biochemical Pyrolysis

Proven commercial equipment exists for biofuels from ligno-cellulosics Thermochemical Rx

Equipment &Biochem. Pyrolysis

Source: European Biofuels Technical Platform- Biofuel STP.EU

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1st Generation Biofuels

Ethanol- Clean burning oxygenate, high octane gasoline replacement & extender Commercial since 1970’s Brazil, US New studies confirm favorable net

energy balance 1.67:1 (neg. in 1990s) USDA- 2002, 2004- 34% more energy

released than put in Corn ethanol is cost competitive with

gasoline when crude is priced above $50/BBL; ($30/BBL sugar cane)

Has a 35% gain in the bushel/ lb fertilizer; yield per acre up 50% to 125 BU/Acre

Biodiesel- high cetane, sulfur free alternative for diesel and heating oil Europe commercialized in 1990’s

2nd Generation Biofuels

R&D Efforts- Increasing range of feedstocks

(cellulosics; e.g. corn stover) Reducing biomass to liquid costs Two technology platforms

o Biochemical path- cellulose to sugars followed by fermentation to alcohols (C2, C4)

o Thermochemical path- gasification to syngas followed by synthesis to fuels

Commercial renewable diesel plants being built

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DOE’s Joint BioEnergy Institute (JBEI) - engineered a strain of E-Coli for advanced biofuel from biomass

‘Permitting’ concerns exist over use of GMO’s - an issue dependent on local regulations

E-coli produces fatty acids that are bound to carrier proteins; accumulation of bound fatty acids limits production of additional fatty acid

E-coli are efficient in the use of energy and don’t produce excess fatty acid. By breaking the bond with the carrier protein, additional fatty acid will be produced

This diverts fatty acid metabolism to produce fuels & chemicals from glucose

JBEI E-Coli strain of enzymatic bacteria produce hemicellulose (complex sugars - the major portion of biomass)

In the same step, the enzymes can ferment the hemicellulose

E-Coli that ferments both cellulose and hemicellulose eliminates the need for costly enzymes; greatly improves economics of Biofuels - maximizes conversion efficiency

Furthermore, the costs of recovering biodiesel are less than cost to distill ethanol

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Algae to:Methanol, Ethanol, Butanol & Biodiesel

Major Players in Algae based Bio-fuels

2nd Generation 15 start ups demonstrate viability Backing is coming from major energy

producers like Shell, BP and Chevron

Bio-butanol Butamax: DuPont & BP JV

demonstration Conventional feedstocks include corn

and sugarcane But will move into cellulosics

(grasses and corn stalks) and even algae lipid feedstock


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Corn starch

While under considerable scrutiny, Corn starch routes to ETOH appear to have a positive energy balance using current data

Scalability and demand vs. food supply use remain an issue; (public’s perception)

Targets are being met


Ligno-cellulosics

Advances in Enzyme technology are improving economicsSupply Chain Logistics and material handling techniques are being improved & proven Commercial material preparation methods are being adapted for new processes

Algae and Bacterial derived Fuels

Demonstrated technologies can produce biodiesel and bioethanolScale up and efficiency gains are required for sustainable businesses


Chemicals

CPA20Chemicals & Plastics Advisory ©2010

The NREL and DOE have proposed a very complex biobased product flow

Source: NREL / DOE

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The 12 building block chemicals are produced from sugars via biological or chemical conversions, and subsequently converted to a number of high-value bio-based chemicals or materials

The building block chemicals are molecules with multiple functional groups that possess the potential to be transformed into new families of useful molecules, including:

• 1,4 succinic, fumaric and malic acids• 2,5 furan dicarboxylic acid• 3 hydroxy propionic acid• aspartic acid• glucaric acid• glutamic acid• itaconic acid• levulinic acid• 3-hydroxybutyrolactone• glycerol• sorbitol• Xylitol / arabinitol



Various pathways exist for creating the building blocks

Source: NREL / DOE

• The top building blocks and their derivatives can be converted in a two-part pathway:

1st part is the transformation of sugars to the building blocks

2nd part is the conversion of the building blocks to secondary chemicals or families of derivatives

• Biological conversion account for the majority of routes from plant feedstocks to building blocks, but going from the building blocks to derivatives uses chemical conversion routes

• The challenges and complexity of conversion pathways means that R&D still needs to improve the production economics


3-Hydroxypropionic acid & succinic acid are good example of building block conversion to various intermediates

The acrylics chain

&Polyesters,

Polyurethanes

BDO & its derivatives, THF

& Pyrrolidone

Source: NREL / DOE


Polymers

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Ironically, biopolymers are more than 100 years old and led much of the early commercial success for petrochemical analogues

Today we see co-mingling of bio and synthetic polymers in many applications


1839 1862 1863 190818941872

Natural Rubber (Goodyear)

Cellulose Nitrate; films & billiard balls

Parkesine; molded cellulose

Polyvinylchloride (PVC)

Viscose Rayon; regen. cellulose fibers

Cellophane film (viscose based)

Polymer Timeline; Biopolymers – The First PolymersPolymer Timeline; Biopolymers – The First Polymers

1909

Bakelite; phenol-formaldehyde resin

PetrochemPolymers

100 YEARS >>>

2009

BiopolymersRe-emerge

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Global polymer value approaches $600 million Over the last ten years, Asia has become the leader in global polymer share of demand Thermoplastics represent more than 65% of all global polymer demand


Regional Polymer Demand Share, 2008 Estimate

Europe 25%

N. America25%

Asia Pacific35%

ROW 15%

World Consumption of All Polymers, 2008250 million MT (550 billion lb.)

Biorenewable ?

Bio-building blocks or Biopolymers or biomaterials ?

Biodegradable ?

Biosustainable ?

Bioplastics ?

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Biopolymer demand is a fraction of total polymer demand

Highest demand biopolymers include starch-based, cellulosics, polyesters and polyurethanes

It is interesting to note that thermoplastics are perceived more ‘green’ than thermosets due to their inherent melt-processable recyclability.

Biopolymer thermoplastics will therefore provide a unique blend of biorenewability and recyclability, especially for consumer needs. But, this only works if active recycling exists


Biopolymer Global Demand, 2007-2008 Estimate

Developing Markets

25%

Key CommercialProducts

80%

World Consumption of Biopolymers, 2007-08600 Thousand MT (1.3 billion lb.)

• Epoxy resins• Bio-polyethylene• Bio-PVC• Bio-nylons (11 and 610)• PDO-based• Poly-succinates• Bio-elastomers & rubber• PPC (CO2 based) e.g. pp-carbonate

• Starch blends• PLA• Cellulosics e.g. viscose & regen.

• Alkyds (vegetable oil based)• Bio-polyols (urethanes)• PDO-based e.g. PTT, other polyesters• PHA

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Cost of fossil-fuels is likely the most impacting on future competitive acceptance of biopolymers Monomer feedstock costs for the incumbent petrochemical derived polymers, are generally the most

impacting cost element in the overall manufacturing process Therefore, the competitive price-point for biopolymers is very much influenced by the cost

relationship of the incumbent fossil-fuel derived polymers


Eco

no

mic

Via

bil

ity

$40 + > $100$75

Epoxies

Polyethylene

Poly-succinates

PDO-polyesters

Polylactic acid

Polyhydroxy- alkanoates

Bio-polyols(urethanes)

Starch-Blends

Crude Price ($/bbl)

Biopolymer Economic Viability vs. Crude oil Pricing

We are here today

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There are many new biopolymer suppliers and technologies that have created a broad portfolio of grades suitable for both commodity and performance end uses

Many producers provide a much stronger asset base than existed in previous years – a ‘critical mass’ large enough to self-perpetuate as long as demand maintains



De

gre

e o

f B

io-D

eg

rad

ab

ilit

y (

%)

100%Bio

100 %FossilDegree of Bio-Renewability vs. Fossil Fuel (%)

Glycerin from Bio-Diesel Soy & Castor Oils:

For Polyols-UPR & PU

Product Biorenewability - Illustrative

0

100

Polymer / Natural Fibers Compounds & Composites

Polylactic Acid (PLA)NatureWorksPoly-Hydroxy

Alkanoate (PHA)Metabolix (Telles)

others

Naphtha or Gas to C2 & C3

olefins to PE & PP Resins

DuPont SoronaBio-PDO to PTT,

PU, PTMEG Fibers/Elastomers

Cargill Ecoflex Modified Aliphatic

Polyester

Cargill Ecovia Compound of Ecoflex & PLA

Dow & Braskem Bio-PE from Sugar

cane

Bio-Epoxy/Composites Dow: Glycerin to ECH

Non-starch Bio-

Degradable Compounds

Bio-Succinates Polymer Derivatives

Novomer CO2 Bio-polycarbonate

Provided by courtesy of Kline & Company

Bio-Degradable Starch

Compounds


Conclusion

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In conclusion, the issue of whether biorenewable processes and products can succeed can be viewed as: “not if, but when”?

We continue to undergo an extended period of energy transition and economic uncertainty Uncertainties also continue to surround the future of fossil fuels vs. alternative approaches and

the resulting energy costs Although we know another oil shortage is coming, we don’t know when

We however do know that a sufficient critical mass has been built in many chemical sectors that will drive new technologies and new approaches in achieving biorenewable solutions

The resulting new industry dynamics is causing a shift in the competitive position of many producers and in many cases a shift towards biorenewable systems

But, capitalizing on these opportunities and creating greater value will not be easy Longer term however, fossil fuel costs will escalate to economically critical levels and regulations

will drive greater use of biorenewables Just as the petrochemical industry has found success from added-value business models and

integrating production economics, biorenewables will likely adapt analogous models This concept of an integrated approach extends to technology and processes, beginning with

enabling “white biotechnology” such as enzymes & microorganisms and integrated through fuels, to chemical building blocks and monomers to the biopolymers



TypicalChemicalProducts

Acetylene

Olefins Coal

SynthesisGas

Aromatics

Oil

BiomassBio-renewables

Energy Generation

NGL‘s

Conclusion, fossil fuels will remain the key feedstock for some time, BUT… biorenewables will increasingly be integrated into all chemical pathways

CPA Presented to AIChE, Metro New York Section New York Institute of Technology, Gallery 61 Studio 16 West 61st Street - 11th Floor (61st Street and Broadway),

Documents

biomass derivatives

biomass feedstocks

attractive biomass conversion

gas btg biomass

ancient biomass sources

sales chemicals

carbon cycle

contained carbon