Coal gasification- An opportunity to meet chemical & Petrochemical demand September 2018

MACRO PERSPECTIVE Increasing energy demand Growing dependence on Imported Energy MACRO PERSPECTIVE Volatile Energy Prices disturbing fiscal maths Regional development & employment growth 70% population looking for affordable energy Wind/Solar tariff touching all time low of Rs.2.44/unit

India - 5th largest coal reserves Proved reserve s in billion Tons India has over 100 years of recoverable coal reserves at current consumption rate Source : BP statistical review of world energy – 2018 The reserves are at the end of 2017 Ukraine is omitted because of abnormal R/P ratio

Coal Utilization Scenario - India Coal production in 2017 -18 : 730 Mn Tons Import in 2017-18 : 213 million Tons Targeted in 2019-20 (Likely revision) : 1 Billion tons The largest consumer of coal is power sector (60%) Due to the advent of Renewable power, CEA indicated that the country doesn’t need more coal based power addition till 2022 Target Alternate utilization of coal needs to be explored for future targets of coal production Taking a cue from China, India may utilize coal reserves for the production valuable fertilizer /chemicals The dream of producing 1 billion tons can be achieved by adopting chemical/fertilizer production through coal gasification Source: Indian coal ministry report 2017-18

Price Advantage of Coal Prices of various energy feedstocks at Coal Pithead In India (in $/MMBtu) USGC Pet-coke 110 $/T LNG 12.2 $/MMBtu Indian coal 35 $/T Crude Oil (YTD) 82 $/bbl Coal offers energy at cheap price thereby offering maximum value addition Petcoke GCV – 8300 kcal/kg (Argus report) LNG- Formula Linkage to 3 months brent crude average (76$/bbl) Indian coal – 4000 kcal/kg & CIL Notified Price Crude Oil(Brent) – 10,880 kcal/kg, YTD – Average year to date

China’s reliance on Gasification Product Production in 2015, Mt Methanol 34 LPG 4* DME 12 Olefin Ethylene glycol 1.7 Oil products 2.4 Urea 60 Sector-wise coal consumption Coal to Poly-generation in China - 2015 China relies on gasification technology to meet Fertilizer, Energy and Petrochem needs. Gasification based ammonia accounts for 79% of China’s total Ammonia output. China is also fulfilling 80% (60 MMTPA) of its Urea production through gasification. China clearly demonstrates the advantages of this technology for utilizing domestic energy sources to produce valuable chemicals & fertilizers. Source: Sector wise coal consumption by Wison – China, Market share of Coal Gasification from Asia chem report 2015

China is leveraging coal resources to meet Energy, chemical and Petrochemical demands Chinese NRDC plan boosted CTC / CTL production Many CTL/CTC projects have been planned in response to the policy Product Production in 2015, Mt Exp. production in 2020, Mt Methanol 34 66 LPG 4* 5 DME 12 20 Olefin 15 Ethylene glycol 1.7 n/a Oil products 2.4 30 Urea 60 Xinjiang CTL: 10mt/a MeOH: 5mt/a Ningxia CTL: 11mt/a DME: 7mt/a 3 Inner Mongolia CTL: tbd MeOH: 10mt/a Heilongjiang CTL: tbd MeOH: tbd 1 5 Jiangsu-Shandong CTL: tbd MeOH: tbd Central China CTL: 6mt/a MeOH: tbd 2 4 Yuannan-Guizhou area CTL: 6mt/a MeOH: tbd 6 7 * - Planned in NRDC Source: BCG ; Research papers and company analysis

Methanol Blending -China China has started using methanol as a vehicle fuel with the advent of Coal to methanol plants. China has significantly Increased blending of Methanol & its derivatives in fuels over the last few years which now stands at 21 MMTPA. Methanol direct blending with Gasoline (8.5 MMTPA) MTBE+MTG blending in gasoline DME blending in LPG Direct blending now stands at 8.5 MMTPA or 9% of transport fuel demand While M15(Methanol-15%, Gasoline 85%) is the main methanol blend available in major cities and provinces. Other blends like M25, M30, M85 and M100 are also being used M15 is sold commercially mainly in the coal-producing provinces such as Shanxi and Shaanxi China has built 43 blending facilities with more than 100,000 tons blending capability each Source: US EIA for Washington Methanol Policy Forum

India - Chemical & Petrochemicals imports trend (KTPA) Source: Chemicals and Petrochemicals statistics 2017

India chemicals and petrochemicals segment is heavily dependent on Imports India chemical and Petrochemical imports is one of the major contributor of Country’s trade deficit Source: Chemicals and Petrochemicals statistics 2017

Meeting challenges through Gasification Monetization of abundant coal reserves equivalent to >130 years of current consumption As emission norms becoming more stringent - timely exploitation of country’s coal resources through environment friendly gasification technology Creating Energy security through effective utilization of gasification industry – resulting in reduction of crude, chemical & Petchem imports Gasification offers cleanest way of utilizing Coal - SOx and NOx emissions are minimal compared to any other coal usage Proven technology with hundreds of reference plants.

Exploitation of coal for Indian Chemical demand Key Chemicals Demand gap by 2025 (MMTPA) Coal required for chemical production (MMTPA) Acetic acid 1.1 7 Methanol* 6.6 32 MEG 1.4 8 PVC 3.7 11 Poly-Olefins 7.0 87 DME* 2.3 4.8 Total 22.1 150 Coal to Chemicals sector could be frontrunner in utilisation of untapped coal reserves Coal requirement calculation is based on Indian Coal of GCV 3300 Kcal/kg and 45% Ash. Demand supply gap taken from ICIS database. *Assumed 15% of Methanol blending with petrol and 10% of DME blending with LPG will be by Govt. 38 MMSCMD of SNG would be generated through slipped methane (FBDB) along with above products

Revenue of coal to chemical clusters Key Chemicals Total capacity of three clusters (MMTPA) Price ($/T) Revenue generation ( Million USD) Acetic acid 1.1 400 440 Methanol 6.6 350 2310 MEG 1.4 750 1068 PVC 3.7 1000 3663 Poly-Olefins 7.0 1100 7700 DME 2.3 420 945 SNG* 38 8 3485 Other by -products 4.2 310 1296 Total Revenue Generation ~21000 Coal to Chemicals can save import bill to the tune of 21 Billion USD per Annum SNG - generation is in MMSCMD, Price is $ per MMBtu

Steps required to catalyse Coal gasification projects in India Ensuring Feedstock Security: Continuous and consistent quality coal supply from a single source to be ensured for Coal to Chemical projects. Economical Feedstock Price: Since Coal Gasification is a clean technology, GST Compensation cess (previously clean environment cess) may be waived off on coal used for gasification Coal may be provided to coal to chemical projects at economical price similar to that of Power plants Product price: Notifying a viable Methanol price for petrol blending. Govt. may allow blending of indigenously produced methanol (with petrol) using domestic/imported coal De-risking Capital Investment: Since coal to chemical projects are capital intensive, Capital Subsidy may be provided from GST compensation cess (previously clean environment Cess) collected on coal.