1. 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 Annual Meeting March 2008 San Diego, California AM-08-56 Iraj Isaac Rahmim, Ph.D. E-MetaVenture, Inc. Houston, Texas

2. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Introduction 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 CO 2 recovery and sequestration

3. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL Blocks Gasification involves pyrolysis, combustion, and gasification chemistries: 2 C-H + 3/2 O2 2CO + H 2 O + Heat C-H + H 2 O CO + 1.5 H 2 Also, some Water-Gas Shift: CO + H 2 O CO 2 + H 2 F-T converts SynGas to hydrocarbons: CO + ? H 2 CH 2 + CO 2 + H 2 O + Heat (long chain)

4. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Typical Overall CTL Balance Two 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 Capacity11,000 BPD*50,000 BPD** Coal (Illinois #6, bituminous)TPD4,89124,533 Other feeds: air, water, … DieselBPD7,50027,819 NaphthaBPD3,50922,173 CO 2 TPD6,03532,481 Net PowerMW9.7124.3 Other products: S, slag, fuel gas,… Bbl Liquid/Ton Coal2.252.04 Ton CO 2 /Ton Coal (carbon/carbon)0.530.57 Ton CO 2 /Ton Coal1.231.32 Overall Thermal Efficiency% HHV51***47***

5. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL 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 HCWith HCComments LPG12 Similar to other plant (LNG, refinery) LPG Can be co-processed and marketed with them Naphtha913 Straight chain paraffinic Near zero sulfur Preferred use: steam cracker feed Diesel2535 High cetane Near zero sulfur Low density Low aromatics Lubes15<1 High grade Low volatility Low pour point Low viscosity Low sulfur Wax5<1 High quality

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

7. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Driver: Energy and Product Demand Global Reserves Resource Oil (incl. Canadian Oil Sands) Natural Gas Coal (4 Grades) Proved Reserves 1,372 X 10 9 Bbl 191 X 10 9 Tons 6,405 TCF479 X 10 9 Tons Energy Basis (quadrillion Btu) 7,6006,6008,500 MTOE Basis (million tons oil equivalent) 191,000165,000213,000 Years Remaining (at current production) 4163147 BP Statistical Survey or World Energy (2007)

8. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Driver: Resource Availability/Strategy Global Distribution of Coal Resources Million Tons of Proved Reserves (2006) EIA (2007).

9. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Driver: Resource Availability/Strategy Distribution of Coal ResourcesUSA 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

10. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Driver: Energy and Product Demand Global Middle Distillate Demand Projections Issue of Refinery Gap

11. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Driver: 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 CO 2 capture, compression, transportation, sequestration Impact on Process Economics Environmental Concerns Later

12. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL Facilities and Projects Historical approx. 150,000 BPD CompanyLocation 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.

13. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL Facilities and Projects 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

14. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL Facilities and Projects 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 2030

15. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 More on US CTL Diesel Projections Federal Task Force on Strategic Unconventional Fuels (2007) CTL considered important component of strategy CTL objectives 2035 (thousand BPD liq prod) Regulatory Basis Base400-500 Current law (similar to EIA2007 projections) Measured1,50020% investment tax credit Accelerated2,500-2,600 20% investment tax credit $5/bbl production tax credit Some 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 OBrien study (2006): potential 250 MBD of middle distillates

16. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL Facilities and Projects In the Works (USA)Partial Project LeadProject PartnersLocationFeedstockStatusCapacity (BPD)Cost (US$ million) American Clean Coal FuelsNone citedOakland, ILBituminous, BiomassFeasibility25,000N/A Synfuels, Inc. GE,Haldor- Topsoe,NACC,XOM Ascension Parish, LALigniteFeasibilityN/A5,000 DKRW Advanced FuelsRentech, GEMedicine Bow, WYBituminous Design (2011) 15,000-20,0001,400 (?) DKRW Advanced Fuels Rentech, GE, Bull Mountain Land Co. Roundtop, MTSub-bituminous, LigniteFeasibility22,0001,000-5,000 AIDEAANTRL, CPCCook Inlet, AKSub-bituminousFeasibility80,0005,000-8,000 Mingo CountyRentechWVBituminousPlanning25,0002,000 (?) WMPISasol, Shell, DOEGilberton, PAAnthracite CulmDesign5,000612 Rentech/PeabodyN/AMTSub-bituminous, LigniteFeasibility10,000-30,000N/A Rentech/PeabodyN/AIL, SW IN, KYBituminousFeasibility10,000-30,000N/A RentechNatchez, MSCoal, Petcoke, BiomassPlanning1,600 (Ph. I)N/A Baard EnergyAMEC ParagonWellsvile, OHSub-bituminous, LigniteFeasibility35,0004,000 DOE/Office of Fossil EnergyDOE/FE-0509, Green Car Congress, Syngas Refiner

17. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 More on CTL Diesel Projections Non-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 MBDmany unknown factors

18. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CTL Facilities and Projects In the Works (Non-US)Partial Project LeadLocationStatusCapacity (BPD) Shenhua (Direct Coal Liquefaction)Ordos City, Inner Mongolia, PRCConstruction (on-line in 2008)20,000 LuanPRCPlanning3,000-4,000 YankuangPRCPlanning40,000-180,000 Sasol JVPRCPlanning80,000 Shell/ShenhuaPRCPlanning70,000-80,000 Headwaters/UK Race InvestmentsPRCPlanning700-1,400 Pertamina/AccelonIndonesiaConstruction?76,000 HeadwatersPhilippinesPlanning50,000 Alton Resources plc, Jacobs Consultancy, MineConsultAustraliaFeasibility45,000 Anglo American (Monash), ShellVictoria, AustraliaFeasibility60,000 Sasol, Tata GroupIndiaPlanning9,000 SasolSouth AfricaFeasibility80,000 CIC EnergyBotswanaFeasibilityN/A L&M GroupNew ZealandPlanning50,000 DOE/Office of Fossil EnergyDOE/FE-0509, Green Car Congress, Syngas Refiner Also, a number of related projects world-wide: gasification, CCS, direct coal-to-liquids, coal-to-chemicals,...

19. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 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 –Dieseloverall (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: CO 2 emissions and water use Some factors affecting CTL growth: - Petroleum prices -Capital availability - E&C resources - Technology - Movement on CCS - Incentives and regulations

20. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Typical CTL Economics 50,000 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, 1 st 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 CO 2 compression, transportation, sequestration costs. ROI16.8 % Simple Payout6 years 67% 12% 5% 16% ~ $85,000 per barrel installed capacity

21. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Policy Action Regulations and IncentivesKey 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% CO 2 CCS) Loan guarantees: EPAct 2005loan guarantees for gasification projects with < 65% output as electricity. Investment tax credit: EPAct 200520% 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 CO 2 emission regulatory framework is resulting in many parties waiting to see.

22. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 A Word on Energy Independence and Security 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,…

23. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CO 2 from CTL Given production of a typical 0.65 ton CO 2 per Bbl of liquid products –50,000 BPD plant: 11.3 million tons CO 2 /year Question: –Is this significant? –How important is it to capture, compress, transport, and sequester (CCS)? Large stationary source CO 2 in 2005: 13,466 million tons

24. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Worldwide Large Stationary CO 2 Sources ProcessNumber of Sources Emissions (million tons CO 2 /year) Power4,94210,539 Cement Production1,175932 Refineries638798 Iron and Steel Industry269646 Petrochemicals Industry470379 Oil and Gas ProcessingNot Available50 Other Fossil Fuels9033 Bioethanol and Bioenergy30391 TOTAL7,88713,466 Intergovernmental Panel on Climate Change (2005) EIA Est. for 2005 emissions (million TpY) Worldwide: 28,000 US: 6,000

25. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CO 2 Emission Projections from CTL Typical CCS in the context of CTL: 80-90% CO 2 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 CO 2 /years) without CCSwith CCS 201510-411-8 202028-613-12 2030175-23017-46 2030 CTL Emissions as % 2005 Global Large Stationary Sources 1.3-1.70.1-0.3 KEY NOTE All parties agree that the CO 2 issue is critical, that they plan to incorporate CCS, and that there will be no CTL without CCS.

26. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CO 2 CCS Background1 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 Transporta number of factors –Distance –Tons per year – 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 CO 2 per year in the US

27. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 CO 2 CCS Background2 Sequestration can involve –Use in enhanced oil recovery (EOR) Example: currently, in US, 30 millions tons per year CO 2 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 CO 2 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 CO 2 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.

28. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Some CCS Tests and Demos FutureGen: First global integrated CO 2 sequestration project –FutureGen Alliance: non-profit, representing some of worlds largest coal and utility companies –$1.7 billion budget. 74% funded by US government. 26% industry. $50 million spent, to date. –Power plant, H 2 co-production, syngas production –CO 2 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 CO 2 Reduction Partnership: Worlds largest CCS experiment –Part of $300 million program; 3 regions on North America tested –Example: 1 million TpY CO 2 into remnant of an ancient sea about 10,000 ft. below North Dakota –Used CO 2 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?

29. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Economics 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 addl capital): –Capture from power plant: $15-75/ton CO 2 –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 CO 2 –Transportation/storage: $5 A third study (Australia 2006) (capital cost for 0.5 million TPY CO 2, 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 CO 2 captured (incl. amortized capital)

30. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Rough CTL+CCS Economics 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) CaseCTLCTL+CCS ROI16.8 %11.3 % Simple Payout6 years9 years * One scenario. For discussion purposes only. Results depend on a number of variables and parameters.

31. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Summary Significant new interest in CTL Many partiespro and conin a number of countries –Energy security and strategy, economics, environmental impact, product quality Mature technology; many recent technical improvements affecting economics Large number of projectsmostly 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 keyCO 2 capture, compression, transmission, sequestration

32. E-MetaVenture, Inc. 2008 NPRA Annual Meeting AM-08- 56 Contact Information Iraj Isaac Rahmim, PhD E-MetaVenture, Inc. P. O. Box 271522 Houston, Texas 77277-1522 USA Telephone: USA (713) 446-8867 Email: iir@e-metaventure.com www.e-metaventure.com