N Transforming American Industry through Alternative Materials MARK COSTA Senior Vice President Corporate Strategy and Marketing
NTransforming American Industry through Alternative Materials
MARK COSTASenior Vice President
Corporate Strategy and Marketing
Eastman At-A-Glance• A global manufacturer of chemicals,
plastics and fibers
• Leading producer of differentiated coatings adhesives, and specialty plastics products
• One of the world's largest manufacturers of PET polymers for packaging
• Leading supplier of cellulose acetate fibers
• 2006 sales revenue of $7.5B
EASTMAN Chemicals from Wood (1920)
Chemicals from Coal (1983)
Eastman Chemical CompanyAt-A-Glance
Coal Gasification based since 1983
Strong, Consistent Acetyl Stream Earnings An Industrial Gasification Competitive Advantage
2001 2002 2003 2004 2005
Acetyl Stream
Olefins and Polyester Streams
~ 20% of products based on gasification, but…
~ 50% or more of earnings based on gasification
East
man
Che
mic
al C
ompa
nyO
pera
ting
Earn
ings
The Costliest ComponentCommodity Chemical Costs
Conversion Costs(including energy costs)
Logistics
Raw Materials Costs
$0
$2
$4
$6
$8
$10
$12
1990 1992 1994 1996 1998 2000 2002 2004 2006$0
$10
$20
$30
$40
$50
$60
$70
$80
Crude$/bbl
Natural Gas $/MMBTU
Crude (West Texas Intermediate) Natural Gas (Houston Ship Channel)
Rising Costs of Conventional Raw Materials
Note: All prices are in constant 2007 dollars (YTD October)Source: Eastman, Global Energy Decisions
U.S. Industry Options
• Close Shop
• Move Out
• Transform American Industry
Impact to the Ammonia & Methanol Industries(Since 2003 – Approximately 20 Ammonia and 6 Methanol Plants Closed)
Illustration OnlySources: U.S. Geological Survey, Mineral Commodities Summaries, 2007
Chemical Economics Handbook - SRI Consulting, 2007
Ammonia PlantsMethanol Plants
The Exodus
“ Through the worst downturn in industry history, the North American chemical industry vowed never to build a world-scale chemical plant again.”
--Joseph Chang, EditorICIS Chemical Business magazine
(August 6, 2007)
The Exodus
Eastman Announced
Plants!
Source:ICIS Chemical Business
Eastman's Answer
• Transform the Company through Industrial Gasification of Alternative Domestic Materials– Coal– Petcoke– Biomass– Secondary Recycled Materials
$0
$2
$4
$6
$8
$10
$12
1990 1992 1994 1996 1998 2000 2002 2004 2006$0
$10
$20
$30
$40
$50
$60
$70
$80Coal & Petcoke vs. Conventional Raw Materials
Natural Gas, Coal & Petcoke $/MMBTU
Crude$/bbl
Industrial Gasification is AdvantageousCoal/Petcoke: Lower Cost & Less Volatile
The spread is large and growing…
Note: All prices are in constant 2007 dollars (YTD August)Source: Eastman, Global Energy Decisions
Crude (West Texas Intermediate) Natural Gas (Houston Ship Channel)Coal (Illinois Basin) Petroleum Coke
Industrial Gasification is AdvantageousU.S. has more than 25% of the World's Coal Reserves
0%
10%
20%
30%
40%
50%
Coal Crude Oil Natural Gas
U.S.Non-U.S.
% o
f Tot
al W
orld
Res
erve
s U.S. has 250-plus year supply of coal(largest single-nation fossil reserves on earth)
Source: International Energy Agency and Dept. of Energy Information Adm. (EIA)
Coal Gasification is AdvantageousEnvironmentally Friendly Choice
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
SCPC (FGD/ESP/SCR) IGCC (MDEA, No SCR) Industrial Gasification (IG)
NOxSO2Particulates
Lb/M
MB
tu
Lower air emissions and water usageLower solid wastesInexpensive mercury removalMuch lower costs for CO2 capture
Gasification Advantages
SCPC and IGCC Source: EPA Report – "Environmental Footprints and Costs of Coal-Based IGCC and PC Technologies", July 2006
Carbon Capture and Compression Costs(per metric ton)
$20
$40
$10 $8-10
$0$5
$10$15$20$25$30$35$40$45$50
Pulverized Coal IGCC Coal to Liquid IndustrialGasification
Source: MIT’s The Future of Coal, 2007Note: Does not include pipeline transportation and injection costs
The Challenges
• High Capital Costs• Reliability Concerns• Financing Issues• Economies of Scale• Off-take Agreements & Market Risks
1989 2006
Eastman's Performance HistoryAnnual Syngas Production
Continual Process Improvement
New Production Record!
Eastman's Gasification CredentialsDemonstrated Best-In-Class Performance (sustained high reliability)
Industry Start-up History
0102030405060708090
100
Plan
t Ava
ilabi
lity
%
Eastman
Average Industry Range of Performance
A
1 2 3 4 5 6 7 8Years from Mechanical Completion
9 10 11
Source, excluding Eastman data: J. Phillips, EPRI, "Integrated combined cycles with CO2 capture", GCEP research symposium, Stanford University, June 13-16, 2005.
CoalCoal
Petroleum CokePetroleum Coke
Gasification
Removal of: Sulfur,Mercury, Arsenic & Other Components
Carbon Dioxide
Ultra-CleanSyngas
Methanol
Enhanced Oil Recovery (EOR)or other sequestration options
EMN Strategic Chemicals
HydrogenBaseload
Hydrogen
Ammonia
Eastman's Strategy for Growth:
The Future is Here.
Right Now.
Thank you for your attention!
www.eastman.com