1. XTL David Gray, Noblis Harold Schobert, PSU Presentation to NPC Hydrocarbon Liquids Group 9 February 2011

2. Disclaimer The views expressed in this presentation are those of the authors only and do not represent the views of any company or university affiliated with the authors or any government agency.

3. Technology overview XTL—conversion of hydrocarbon resources to liquid fuels via synthesis gas (CO + H 2 ). Processes vary depending on feedstock:  GTL: natural gas  CTL: coal  CBTL: coal and biomass DCL—conversion of coal to liquid fuels via direct reaction with H 2 under pressure and temperature and/or H-containing solvent. 3

4. Status of Commercial XTL Fischer- Tropsch Plants Worldwide

5. XTL MTG Process Commercial -First plant built in New Zealand, plant now produces methanol -JAMG plant in Shenhua, China produces 2,500 BPD -several plants are planned -produces about 90+% high octane gasoline -this contrasts to FT that produces diesel and kerosene 5

6. Barriers to XTL development Technical risks for CTL— advanced gasification and advanced slurry-phase synthesis have never been integrated. Technical risk for CBTL—co- gasification of coal and biomass. Demonstrating successful CO 2 capture and sequestration. Uncertainties about future oil prices. High capital expenditures, ≈$160,000/DB. CTL will require significant expansion of mining, possibly with public opposition. Process equipment, engineering and labor skills bottlenecks if multiple plants built simultaneously. Permitting issues; public opposition to coal. 6

7. Direct coal liquefaction Important contribution to German war effort in Second World War. Pilot plants in U.S., UK, Japan, Germany, and Australia built and successfully operated in 1970-1980s, but have all been dismantled. Worldwide, one plant (Shenhua in Inner Mongolia) is currently operating, mainly producing ≈24,000 BPD diesel and naphtha. 7

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9. Conceptual Advanced FT Technology: Recycle CTL Configuration 9

10. Conceptual Advanced FT Technology: Recycle CBTL Configuration 10

11. Assumptions for XTL plants 11 GTLCTLCBTL PLANT SIZE BPD34,00050,000 CAPITAL COST $/DB70,000150,000157,000 EFFICIENCY %HHV6050 NATURAL GAS FEED MMSCF/D29400 COAL FEED TPD AR023,00020,400 BIOMASS FEED TPD AR003,600 PRODUCT DIESEL BPD23,32434,300 NAPHTHA BPD10,67615,700 NAPHTHA VALUE % DIESEL70 DIESEL:CRUDE FACTOR1.2

12. Economic Assumptions

13. Variation of Required Selling Price (RSP) of Diesel Fuel (COE basis) from GTL with Natural Gas Feed Stock Price 13

14. Variation of Required Selling Price (RSP) of Diesel Fuel (COE basis) from CTL with Coal Feed Stock Price 14

15. Variation of Required Selling Price (RSP) of Diesel Fuel (COE basis) from CBTL with Coal Feed Stock Price (biomass at 15 weight %) 15

16. Potential Supply Curves for XTL Assuming EIA Reference WOP and for Base and High Capex Scenarios 16

17. Potential Supply Curves for XTL Assuming EIA High WOP and for Base and High Capex Scenarios 17

18. Environmental Issues Life cycle GHG emissions -Section 526 of EISA: Petroleum Ratio (PR) assessment based on energy allocation methodology -uncertainty concerning LCA GHG emissions for natural gas production and transport -uncertainty relating to LCA GHG emissions for biomass production because of direct and indirect land use change impacts -uncertainty related to successful implementation of CCS Water usage Issues related to increased coal mining for CTL and CBTL Issues related to hydraulic fracturing for shale gas for GTL Issues related to cost of producing biomass and competition for land 18

19. Environmental Issues Continued TECHNOLOGYCTL (CCS)CBTL (CCS)GTL (NO CCS) PETROLEUM RATIO (PR)* 0.9-1.00.8-0.9??~1.0-1.1?? WATER USE (B/B)2-8**2-8? * PR = LCA carbon (#/MMBtuLHV)/58.5 ** depending on water use strategy 19

20. Generic flow chart for direct liquefaction processes 20

21. Barriers to DCL development DCL will share most of the barriers identified for XTL development. Primary liquid will require substantial downstream refining to meet current environmental and performance standards. DCL plants have large requirement for H 2 ; probably made by coal gasification and thus raising capital and operating costs. Need to verify that DCL primary liquids can indeed be upgraded in standard refinery operations. Also need to verify that upgraded DCL products are fungible with common petroleum products. Other unresolved technical barriers—e.g., solid/liquid separation, materials of construction. 21

22. Environmental issues GHG emissions. DCL does not produce concentrated, “capture-ready” CO 2 streams. Should have very low SO x, NO x, Hg, and other criteria emissions. Primary DCL liquids can contain known or suspect carcinogens. These can generally be destroyed by subsequent hydrotreating. Water usage depends on process design and extent of use of air cooling. Could be 1-10 bbl/bbl. 22

23. Estimated economics for DCL plants A detailed economic analysis of DCL has not been done for ≈20 years. Plants are likely to be more expensive than CTL because a DCL plant will require a gasification section for H 2 production, and CCS is likely to be more difficult. Estimated cost of finished DCL products is ≈$0.20/gallon higher than CTL products. 23

24. Conclusions Both XTL and DCL likely to have very high capital costs, ≥$160,000 DB. A better estimate of XTL Capex is necessary to assess its future contribution to alternate fuels supply. Significant GHG emissions, as much as double comparable petroleum products, if CCS not used so successful commercialization of CCS will be essential before coal can be used for XTL XTL needs to demonstrate integration of advanced gasification with advanced synthesis and co-gasification of coal and biomass. Only one DCL plant running worldwide; no detailed economic study in past 20 years. Shale gas potential must be clearly understood before GTL is viable in the U.S. Biomass costs must be reduced, biomass LC emissions better defined and biomass availability must be confirmed for CBTL to become viable