Coal/Gas Feedstock Combination

Proposed improvement to address technical, project and financial issues of large methanol and GTL facilities.

2 6 May 20092

The data in this presentation is a result of a white paper study based on specific publicly available information and a number of simplifying assumptions. Ricoaland SES project data used with permission. WorleyParsons and InterRAO-WorleyParsons accepts no liability or responsibility whatsoever for it in respect of any use of or reliance upon this presentation by any third party.

InterRAO-WorleyParsons is a joint venture of InterRAO UES, a Russian power generation and transmission company and WorleyParsons.

See full article in Gas Processing News, October 1, 2014 http://gasprocessingnews.com/features/201410/combine-gas-and-coal-feedstocks-to-displace-high-cost-oil.aspx

Co-authors: Vladimir Vaysman Pavel Ivanov

Disclaimers and Acknowledgments

3 6 May 20093

Feedstock Price Transition

Source: Energy Information Administration, October 2012, North American prices

0

2

4

6

8

10

12

14

16

18

20

1990 1995 2000 2005 2010

$/MM BTU

Figure 1: Past Feedstock Prices(constant 2011 dollars)

Coal, bituminous averaged

Gas, Citigate (to 1996) and Electric  Power Price

WTI Cushing

Propane

0

2

4

6

8

10

12

14

16

18

20

2013 2018 2023 2028 2033

$/MM BTU

Figure 2: Projected Feedstock Prices(constant 2011 dollars)

Coal, Other Industrial Gas, Industrial

WTI (from Resid as proxy)

4 6 May 20094

“Demand Substitution”, i.e. replacement of crude-based products, most notably fuels, with natural gas, coal, renewables, etc:

Electric vehicles or plug-in hybrids (mostly coal/NG/nuclear based power)

CNG/LNG bus and truck fleets Coal based methanol M15 and M85 gasoline blends in China Corn or sugar-based ethanol

Together with the substitution at the final consumer, substitution is also taking place further upstream, for example chemicals from coal in China.

“Demand Substitution”

5 6 May 20095

HOWEVER, THERE ARE CHALLENGES

Challenge #1: Mass balance, most products H2/C ratio ~ 1

(shown n-butane has H2/C=1.25, the heavier the closer to 1)

Coal H2/C ratio 0.2 to 0.8, shift reaction to make more H2 is wasteful

CO + H2O CO2 + H2

Methane H2/C ratio = 2, depending on reforming method syngas ~ 2:1 to 3:1

Challenge #2: Molecule size and species: Most crude-based fuels, lubricants, waxes are normal paraffins,

isoparaffins (for example n-butane) or naphthenics with repeating formula (–CH2-)x

Coal is something like:

Natural Gas is mostly:

Challenge #3: Activation energy

MORE CHALLENGES

CURRENT CHALLENGE RESOLUTION

The challenges are addressed by high capital intensity High capital intensity is resolved by large economies of scale

CONSEQUENCES

Large economies of scale bring about further challenges: Very large feedstock requirement, for example:

− At the level of 100,000 bpd GTL plant calls for a 20-year gas production of at least 7.5 trillion scf.

− There may be only 125 fields in the world that have those kind of reserves.

− Number of fields actually available are far fewer.

High project risk:− Feedstock price and availability risk− Absolute magnitude of investment

PROPOSED SOLUTION

Using a combination of coal and gas theoretical mass balance of H2/C ~ 1 can be achieved without expensive shift reaction.

In some reactions, for example GTL, although the final product has H2/C ~ 1 an intermediate syngas must have H2/C ~ 2. A mole of H2 is rejected with water. This can be achieved by either by ATR with natural gas or by SMR

and combination of coal and gas.

Combining coal and gas expands the choice of gas fields and reduces feedstock risk. Coal transportation and logistics investment is lower.

CASE STUDY: Ricoal, Ltd.

1,800 kta methanol, MTO, PE, PP, Rostov Oblast, Russian Federation Potentially first major RF petrochemical

complex on water with access to the Mediterranean.

Rostov is 3rd/4th largest industrial and distribution center in RF.

Potentially first Russian petrochemical facility on waterways year-round ice-free.

Historically a coal-producing region -eastern part of Donets Basin.

Major gas trunklines supplying Blue Stream and potentially South Stream.

Ricoal has long-term industrial roots in the region.

Number of combinations were investigated, varying detail.

Case Study: Ricoal, Ltd (cont.)

Case Study: Ricoal, Ltd (cont.)

Note: ratios above are price of gas in $/MM BTU : price of coal in $/mt

CASE STUDY: ZZ, China

Design capacity 22,000 NM3/hrsyngas, Shandong province Second commercial installation of SES

gasification technology. Commercially demonstrated application of

dual feedstock, in this case syngas from gasification and coke oven gas (COG).

Coal feedstocks run at the plant:− Demonstrated long-term operation on coal

middlings 40% - 55% ash

− Inner Mongolia lignite− Australian sub-bituminous …

Coal is gasified in SES Gasification Technology fluidized bed gasifier typically yielding approximately 1.2 H2/CO

COG is reformed in a steam methane reformer yielding approximately 3.6 H2/CO, somewhat similar to SMR reformed NG.

Case Study: Petro SA Mossel Bay GTL

Started up in 1992 with Sasol license 3 CFB reactors nominal capacity 22,500 bpd.

In contrast with Sasol, gas-fed from offshore E-M and A-F fields. Press reports are:

Fields are depleting, facility is considering options ranging from shutdown to LNG.

Currently operates at 50% capacity to conserve feedstock, despite high oil prices.

Most refinery/petrochemical facilities are expected to operate at least 30-40 years.

These publically reported issues are a demonstration of economies of scale/feedstock availability/project risk issues of demand substitution at the production level.

Conclusion

Combination of coal and gas feedstocks may: Lower project risk Allow a greater number of methanol/GTL projects to go forward Reduce capital cost when compared to a coal-fed facility. Reduce the cost of the feedstocks when compared to a gas-fed

facility. In the United States and other coal and gas-rich countries and

regions, it may provide a way to: − use coal resources while reducing CO2 emissions− conserve gas resources