Guido Ghisolfi

Vice President Corporate Operations & Research

Washington, March 5, 2008

BIOETHANOLBIOETHANOLHow sustainable?How sustainable?

How convenient?How convenient?

M&G Group LocationsM&G Group Locations

BangaloreEngineeringEngineering

HoustonHoustonNorth America North America

Regional OfficeRegional Office

Sharon CenterSharon CenterR&D CentreR&D Centre

Apple GroveApple GroveResinResin

AltamiraAltamiraResinResin

PoçosPoços de Caldasde CaldasResinResinFiberFiber

R&D CentreR&D Centre

IndaiatubaIndaiatubaRecycleRecycle

PaulPaulíínianiaPTAPTA

CaboCaboFiberFiber

WilmingtonWilmingtonEngineeringEngineering

Central OfficeCentral Office

MilanMilanGroup Head OfficeGroup Head OfficeEurope Reg. OfficeEurope Reg. Office

VerbaniaVerbaniaResinResin

PreformsPreforms

Cellulose AcetateCellulose Acetate

RivaltaRivaltaR&D CentreR&D Centre

AnagniAnagniResinResin

PreformsPreforms

Pignataro M.Pignataro M.FilmFilm

PatricaPatricaResinResin

TortonaTortonaGroup Head OfficeGroup Head Office

Sao PauloSao PauloSouth America South America

Regional OfficeRegional Office

SuapeSuapeResin Resin

BeijingBeijingEngineeringEngineering

ShangaiShangaiEngineeringEngineering

MumbaiEngineeringEngineering

USAUSAResinResin(on-stream in H1 2009)

Bioethanol Sustainability ConvenienceBioethanol Sustainability Convenience

A lot has been said about bioethanol production cost, price and environmental sustainability.

The interests involved are so large that it would be at least ingenuous to think that all statements on feasibility are moved by scientifical rather than political convictions.

I would like to present a strategical assessment to explain why ethanol can be considered in the portfolio of large chemical companies.

Bioethanol Supply / DemandBioethanol Supply / Demand

USAUSA Mandatory: 7.5 billion gallons = 22 million tons protected by 54 ¢/gallon import duty on Brazilian ethanol. Mandate has been increased in the last Energy Bill to 35 billion gallons by 2022. Capacity installed and under construction: 12 billion gallons.

EUEU Mandatory: 5.5% by 2010 equivalent to 11 million tons. New target set on January 24 by the European Commission to 10% by 2020.Current installed capacity: 3 million tons.

BrazilBrazil Production: 17 million tons from sugar cane.Brazil has 5 million hectares at sugar cane and can double its plantations in the near future.

European SustainabilityEuropean Sustainability

The targets of 20 million tons of The targets of 20 million tons of biofuelbiofuel for 2010 and 40 million for 2010 and 40 million

tons for 2020 are not going to be achieved without importtons for 2020 are not going to be achieved without import. In fact:

� The European Community has published a study (http://reports.eea.europa.eu/eea_report_2006_7/en) on the arable land usable for biofuels with the following results:

Ha Year

12,000,000 2010

16,000,000 202019,000,000 2030

� With a yield of biofuel of 2 t/ha in 2010 and 3 t/ha in 2020, the land might be there.

� Logistics and agricultural economics will prevent though the use of part of this land demanding the import of at least 30% ofthe necessary biofuel.

BioethanolBioethanol: A Global Strategic Assessment: A Global Strategic Assessment

Prof. Ricardo HausmannProf. Ricardo Hausmann, Director of Harvard University’s Center for International Development, writes that (Financial Times, November 7, 2007):

1) In some 95 countries there are more than 700 million hectares of good quality land which is not cultivated;

2) Depending on the assumption about productivity per hectare, today’s production of 85 million b/d of oil can be completely satisfied by the biofuelsproduced on such land;

���� ���� ����

BioethanolBioethanol: A Global Strategic Assessment: A Global Strategic Assessment

3) Even if partially used, this large potential biofuelsupply will cap the price of oil because its supply is much more elastic than the supply of oil.

This will cause the price of oil to be set This will cause the price of oil to be set at marginal cost of bioat marginal cost of bio--energy.energy.

If OPEC tries to raise prices above the price of biofuel, profitability will only crowd in more biofuels.

4) The countries which have the largest endowment of under-utilized lands are in the developing countries, especially Latin America and Africa. Bioenergy will make the needed infrastructure investments socially profitable creating a possible stepping stone into other industries.

LifeLife--Cycle Fossil Energy Use: Cycle Fossil Energy Use:

Corn Grain EthanolCorn Grain Ethanol

CornCorn

57,2%

3,6%1,5%

18,3%

17,1%

0,0%

2,3%

EtOHProduction

EtOH Transport

Vehicle use

Farming

Fertilizers / Chemicals

Farming machineryFeed transport

Most recent studies show positive net energy Most recent studies show positive net energy

balance for corn ethanolbalance for corn ethanol

Use of renewable process fuels improves net Use of renewable process fuels improves net

energy balance significantly for corn ethanolenergy balance significantly for corn ethanol

-400000

-200000

0

200000

400000

600000

800000

Cu

rre

nt

Fu

ture

Cu

rre

nt

Fu

ture

NG

NG

& W

et

NG

& C

HP

1 million Btu fuel produced – Btu fossil energy input

Gasoline Average EtOH

New EtOH with NG

Ne

w E

tOH

wit

h

ga

sif

ica

tio

n o

f b

iom

ass

Improved technology and plant design have Improved technology and plant design have

reduced energy use and operating costs in reduced energy use and operating costs in

corn ethanol plantscorn ethanol plants

Data for new ethanol plants is from Mueller and Cuttica (2006)

0

10000

20000

30000

40000

50000

60000

70000

Btu

/Ga

llo

n

Wet Mill Dry Mill

Average 1980s Average 2005

New NG EtOH Plant Expected at Rivalta Plant 2009

30% reduction 50%

reduction

~1/3 of energy is spent on DDGS drying

Large avoidance of GHG Emissions by Corn Large avoidance of GHG Emissions by Corn

Ethanol with Use of Renewable Process FuelsEthanol with Use of Renewable Process Fuels

-19%-21%

-28%

-32%

-36%-39% -39%

-52%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Relative to gasoline in 2010

Cu

rren

t A

vera

ge

Futu

re A

vera

ge

NG

NG

& C

HP

NG

& S

yru

p

NG

& W

et

DG

S

DG

S

Gasif

icati

on

of

Bio

mass

From corn to sugar cane to cellulosic biomass, From corn to sugar cane to cellulosic biomass,

GHG emissions avoidance are increasedGHG emissions avoidance are increased

-19%

-28%

-39%

-52%

-76% -76%

-85%-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Cellulosic ethanol (hydrolysis of biomass)

Corn ethanol

Curr

ent

NG

DG

S

Bio

mas

s

Sugar

Cane

EtO

H

Sw

itch

gra

ssE

tOH

Fore

st R

esi

duel

EtO

H

Sugar Cane

GHG Emission Reductions by Ethanol Relative to Gasoline (per Energy Unit Basis)

WTP GHG results show that oil sands WTP GHG results show that oil sands

operations are carbonoperations are carbon--intensiveintensive

0

100000

200000

300000

400000

WT

P G

HG

s E

mis

sio

ns

, G

ram

s/b

bl

Con

v. C

rude

Gas

olin

e

OS

Gas

olin

e: m

inin

g, N

G

OS

Gas

olin

e: m

inin

g, c

oal

OS

Gas

olin

e: m

inin

g, n

ucle

ar

OS

Gas

olin

e: in

-situ

, NG

OS

Gas

olin

e: in

-situ

, coa

l

OS

Gas

olin

e: in

-situ

, nuc

lear

OS

Gas

olin

e: m

inin

g, N

G

OS

Gas

olin

e: m

inin

g, c

oal

OS

Gas

olin

e: m

inin

g, n

ucle

ar

OS

Gas

olin

e: in

-situ

, NG

OS

Gas

olin

e: in

-situ

, coa

l

OS

Gas

olin

e: in

-situ

, nuc

lear

Low HLow H22 Use for UpgradeUse for Upgrade High HHigh H22 Use for UpgradeUse for Upgrade

BioethanolBioethanol: Second Generation: Second Generation

It is clear that the target is:

� A cellulosic ethanolcellulosic ethanol competitive with fossil fuels…

� …produced by a relatively cheap biomassrelatively cheap biomass…

� …which can be intensively grownintensively grown…

� …on less available landless available land…

� …using less waterless water and less fertilizersless fertilizers!

LignoLigno--Cellulosic Ethanol: Cellulosic Ethanol:

EU and Italian OverviewEU and Italian Overview

68

49

39

4 4 2

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

Wheat

Straw

Corn

Stover

Barley

Straw

Oat Straw Rye Straw Rice Straw

MM

T/Y

+ 4 + 4 MhaMha Set aside landSet aside land

Agricultural Waste Potential Agricultural Waste Potential -- EUEU

Source: FAO (1999) – data limited to western EU (A, B, L, DK, FI, F, DE, GR, I, NL, P, E, S, UK)

LignoLigno--Cellulosic Ethanol: Cellulosic Ethanol:

EU and Italian OverviewEU and Italian Overview

41%

14%8%

10%

27%

Corn StoverCorn Stover

France

OthersGermany

Spain

Italy

19%

19%

27%

15%

7%

13%

Others

France

Spain

Denmark

UK

Germany

Barley StrawBarley Straw

Agricultural Waste Potential Agricultural Waste Potential -- EUEU

Wheat StrawWheat Straw

Others

France

Spain

Italy

UK

Germany

38%

13%20%

5%

8%

16%

LignoLigno--Cellulosic Ethanol: Cellulosic Ethanol:

EU and Italian OverviewEU and Italian Overview

5,4

13

1,10,2 0

0,9

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

Wheat

Straw

Corn

Stover

Barley

Straw

Oat Straw Rye Straw Rice Straw

MM

T/Y

Agricultural Waste Potential Agricultural Waste Potential -- ItalyItaly

Source: FAO (1999)

BioethanolBioethanol: Second Generation: Second Generation

M&G believes that the objective is at reach.

A biomass that yields 60 dry tons/ha vs. 12 for corn

with only 50 unitN2/ha vs. 170 for corn and no irrigation requirement vs. 3500 m3/ha of corn

M&G has launched the PRO.E.SA. project to achieve this goal within 2012.

BioethanolBioethanol: Conclusions: Conclusions

� M&G has the only corn based 200 kt ethanol plant under construction in Italy with start-up expected for Q3 2009.

� M&G has started a € 120 million R&D program to identify the optimal biomass and the most competitive hydrolysis process for second generation EtOH.

� M&G expects to have a proven 20,000 t/y semi-industrial plant by 2011

and

� Convert the corn ethanol to cellulosic by 2012reducing the necessary hectares to supply the plant from 65,000 to

Thank you!Thank you!