BioMCN – producing sustainable feedstock for transport and chemical applications

Paul Hamm, Initiator

Rob Voncken, CEO

Course Master of Business in Energy Systems, Module Business & Strategy

January 2013

1. Methanor plant closed. Former partners DSM,

Akzo Nobel and Dynea declared plant for sale in May 2006

2. BioMCN acquired Methanor assets

3. Production restarted on November 6th, 2006

4. Green (bio-)methanol planned for Q4 2007

5. Based on Inventions by Ing. Sieb Doorn

6. Absolutely new and unique technology (patented) to transfer biomass into methanol in a mixture with natural gas

BACKGROUND

3

OVERVIEW OF THE PLANT

4

COMPANY PROFILE

• Two methanol plants with 500 Kton

capacity each

• 90 FTE highly motivated employees

• Products: • Bio-methanol

• Traditional methanol

• H2

• Markets – focus for transport market: • MTBE

• Direct blends with gasoline

• DME

• Bio-diesel

• Other ‘green’ products

5

START-UP APPROACH

• Continue with traditional methanol

• Pre-marketing of green concepts

• Start of production and marketing bio-methanol • Pilot plant of 20 kton/pa

• Production plant of 200 kton/pa

• Stepwise increase of bio-methanol production to: • 400 kton/pa in the course of 2008

• Start-up of line 2 aligned with growth of bio-methanol demand

• 600-800 kton/pa in 2010

• Next to 200-400 kton/pa traditional methanol

• Exact quantities dependant on commercial optimization

Break-out

• What challenges are the initiators faced with ?

• What factors would drive this business ?

Break-out

• What challenges are the initiators faced with ?

• Re-start and start-up

• Business with a history – not greenfield

• Size of the assets

• New technology, new product, new market

• Government regulated – energy directive

• Technology push !

• What factors would drive this business ?

• Driver is growth of biofuel sector – energy directive

• Availability of feedstock crude glycerine

• Opportunity of idle plant – reducing initial investment

8

2. Biomass

resource market 1. Market

4. Marketing

strategy

6. Vision and partnership

€ 5. Financials

OVERVIEW OF PRESENTATION

3. Bio-methanol

technology

9

2. Biomass

resource market 1. Market

4. Marketing

strategy

6. Vision and partnership

€ 5. Financials

3. Bio-methanol

technology

1. BIOFUEL MARKET

10

Global MeOH Demand

0

10000

20000

30000

40000

500002

00

1

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

KT

/yr

Formaldehyde Acetic Acid MTBE/TAME

Methyl Methacrylate Gasoline Solvents

DMT Other

Bio-methanol – platform chemical for biobased economy

resins

glues

hydrogen

biodiesel

antifreeze

medicine

industrial industrial

HPC HPC

construction construction

automotive automotive

furniture furniture

transportation transportation

plastics

E&E E&E

sweetener

12

GLOBAL BIOFUEL MARKET

• European Union market 2010: 20 billion €

• World market estimate 2010: 50 billion €

• 75% bio-ethanol; 25% biodiesel

• Main future ethanol consumers: Brazil, USA, China, EU

• Drivers: mainly commercial

13

EUROPEAN UNION BIOFUEL DIRECTIVE

• Current transport fuel use: 581 million ton (13,730 PJ)

• Biofuel targets:

• 2% in 2005

• 5.75% in 2010

• Minimum obligation 10% for 2020 defined this year

• Vision of member states and EC towards

> 30% in a few decades

• Total biofuels 2010:

• 789 PJ

• 21.2 million ton bio-diesel equivalent

• Bio-methanol production Delfzijl

• 2008: 0.2 million ton

• 2011: 0.8 million ton

14

BIO-METHANOL MARKET

• EU biofuel directive includes:

• Bio-methanol

• Bio-MTBE (36% counted as biofuel)

• Bio-DME

• Bio-hydrogen

• Synthetic biofuels = synthetic hydrocarbons

• Gasoline standard (EN228) + Fuel directive (98/70/EC):

• 15 vol% ethers (MTBE/ETBE)

• 3 vol% methanol

15

BIO-METHANOL MARKET

• Mainly competing with bio-ethanol:

• > for gasoline replacement

• expensive to produce!

• EU 2010 bio-methanol market:

• Potential gasoline replacement: 20 Mton

• Production BioMCN: 0.8 Mton

• Global bio-methanol market

• Potential global market in ethanol using

countries

Spot the difference

Methanol Bio-methanol

Formula

Purity > 99,85% > 99,85%

Feedstock Natural gas Crude glycerine

CO2 -/- 78%

Energy content counts twice

Because bio-methanol is made from a residue, its energy content shall be counted twice towards the renewable energy target (RED art 21.2)

1.000 kilos

bio-MEOH

1.500 kilo

Bio-ETOH

1 ton of 2nd generation bio-methanol = 1,5 ton bio-ethanol

Wastes, agricultural crop residues, …, and residues from processing, including crude glycerine (glycerine that is not refined), shall be considered to have zero life-cycle greenhouse gas emissions up to the process of collection of those materials.

RED Annex V.C.18

Residues are substances that are not the end product that a process directly seeks to produce, e.g. crude glycerine (EC communication 2010/C 160/02)

What makes a 2nd generation biofuel ?

Duurzaamheidsmeetlat – CE Delft/Greenpeace

Break-out

• Formulate a business mission and proposition

Our mission / proposition

Our mission is to be a leading company in the global transformation towards sustainable non-fossil fuels & materials • recognized status as 2nd generation biofuel (RED) • first to market – frontrunner • commercial availability – RIGHT NOW • high ‘well to wheel’ CO2 savings (>70%) • chemically identical, i.e. low introduction barrier • competitive business proposition as fuel-(component) • market pull from other than fuel applications • potential of feedstock mix natural gas/ biogas/biosyngas

22

2. Biomass

resource market 1. Market

4. Marketing

strategy

6. Vision and partnership

€ 5. Financials

3. Bio-methanol

technology

2.1 Biomass globally

2.2 Glycerol market

2. BIOMASS RESOURCE MARKET

23

FROM METHANOL TO GLYCEROL AND BACK

BioMCN Glycerol

(Other Biomass)

Bio-Methanol

Glycerol Methanol Esterification plant

Vegetable oil Bio-diesel

• Biodiesel / Glycerol ratio about 10 / 1

• Glycerol / Bio-methanol ratio: about 1-1.5 / 1

24

FEEDSTOCK FOR BIODIESEL

• Types of bio-oil as input for biodiesel production:

• Rapeseed -> most widely used

• Sunflower seed -> large production in Russia

• Palm -> sustainability certification needed

• Jatropha -> can grow on arid areas

• Algae -> by far highest yield per hectare

• Quality rapeseed makes it the number one in use

• Russia and Ukraine big potential for new seed cultivation

25

WORLD BIODIESEL PRODUCTION

-

2 ,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Bio

die

se

l p

rod

uc

tio

n [

kto

n/y

r]

G erm any France R est o f Europe U SA R est o f w orld

26

GLOBAL GLYCEROL PRODUCTION

0

500

1,000

1,500

2,000

2,500

3,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Wo

rldw

ide

gly

cerin

e p

rod

uctio

n [

kto

n/y

r]

Biodiesel based glycerine Other glycerine sources

27

CRUDE GLYCEROL PRICE

-

100

200

300

400

500

600

700

800

jun-95 jun-96 jun-97 jun-98 jun-99 jun-00 jun-01 jun-02 jun-03 jun-04 jun-05 jun-06 jun-07

Cru

de

gly

ce

rin

e p

ric

e C

IF R

'da

m [

Eu

ro/t

on

]

28

CRUDE GLYCEROL PRICE

• Between 1995-2006: • Sharp and stable decrease of price because of

biodiesel • Slow reaction on market changes -> oscillations

• In 2007: • Upward development (“oscillation”) • Take-up in animal feed sector • Upper limit has been achieved:

• Now at price of molasses and other feed: about 100 euro/ton

• Next 3 years: • Stabilization expected around current level • Slight oscillations may maintain

Break-out

• How would you assess the feedstock supply situation ?

• Your observations from todays perspective !

Break-out

• How would you assess the feedstock supply situation ?

• All signs were pointing in positive direction – growth of biodiesel and thus crude glycerine

• Expectation was that it was even difficult to meet the targets in the directive (10%)

• Intelligence reports positive about future outlook

• Your observations from todays perspective !

• High pressure on 1st generation biofuels – food versus fuel discussion

• Biomass prices have increased beyond expectations

31

2. Biomass

resource market 1. Market

4. Marketing

strategy

6. Vision and partnership

€ 5. Financials

3. Bio-methanol

technology

3. BIO-METHANOL TECHNOLOGY

3.1. Short term technology

3.2. Medium term techn.

32

METHANOL PRODUCTION PROCESS NG/Glycerol

Reformer 850°C, Ni cat.

15 bar

Compression two steps

1535—100 bar

Synthesis Cu/Zn cat

270 – 300 °C

Distillation

CO/CO2/H2

CO/CO2/H2

Raw methanol

Pure methanol

Pure gas

composition

depending on

feed

33

METHANOL PRODUCTION PROCESS

• BioMCN’s methanol synthesis is based on proven ICI technology

• A combination of existing lay-out, with latest technology of Foster Wheeler for steam reforming and Johnson Matthey for methanol synthesis provides a state of the art methanol process – Reliable (on stream time)

– Proven safety performance

– Optimum capacity

– Optimum costprice

• Infrastructural issues are key in the overall profitability of a methanol project – shipping & landing facilities

- Traditional overall reaction:

• CH4 + H2O CH3OH + H2

- Glycerol (C3H8O3) overall reaction:

• C3H8O3 2CH3OH + CO

- Combined optimum:

• 2CH4 + C3H8O3+ 2H2O 5CH3OH

GLYCEROL REPLACES NATURAL GAS (SHORT TERM)

35

GLYCEROL PREPARATION

• Additional unit to the original plant

• Crude glycerol preferably freed from salts (alternative is to

purchase slightly more expensive qualities)

• Water and FA’s may be present

• For the first generation purification Delfzijl chooses a traditional

one

• Important is the steam/C ratio, which must be at least 3.0

• Process is proven (pilot experiments at catalyst manufacturer

and pilot plant Delfzijl)

• World-wide patents are applied for

36

PRODUCTION PROCES

Salt / waste material

Glycerol

Purification

Crude glycerol

Landing facilities

Glycerol

evaporator

Pre-heaters

Glycerol

Design data:

- Cap. 200kton/year glycerol

Crude glycerol

Storage

Pure glycerol

storage MP Super heater

MP Steam

Steam

Reformer line 1

Turbine

Cooling water

HP Super heater

HP Steam

Break-out

• The pilot plant was opened in april 2008, the 200 kt commercial plant in september 2009; any observations and/comments wrt the production process?

Break-out

• The pilot plant was opened in april 2008, the 200 kt commercial plant in september 2009; any observations and/comments wrt the production process?

• Upscaling process ‘best in class’ by concurrent engineering

• High risk approach, however with limited failures in learning curve

39

2. Biomass

resource market

4. Marketing

strategy

6. Vision and partnership

€ 5. Financials

3. Bio-methanol

technology 1. Market

4. MARKETING STRATEGY

40

GREY METHANOL MARKETING POLICY

• BioMCN mainly operates in the contract market, which means long term volume agreements with all major customers

• In order to minimize our logistical costs we only operate in the N.-W. European market

• Full-load policy: we sell everything we produce (overcommitment)

• We are able to buy additional methanol volumes from third parties to keep/extend our market-share, as well as to cover our “overcommitment”,

• Maintain and to optimize our image as the reliable European methanol producer

41

W-E METHANOL PRICES

Average WE

Methanol price

€ 250/ton

Absolute prices show different trends

2012 ytd

Euro

s/m

ton

Data source: Platts

• Bio-MTBE

• Direct blends with gasoline, e.g.:

– M3 (3% methanol, fits within gasoline specs)

– M60 -> in line with E85 and flexifuel cars

• Bio-DME

• Green formaldehyde

• Green H2 (hydrogen)

• Green ethanol

• Green MTO/MTP

POTENTIAL END USES FOR BIO-METHANOL

44

BIO-METHANOL CUSTOMERS

• MTBE: Sabic, Shell, Lyondell, BP, Total

• DME: Du Pont, Akzo (Body Shop / L’Oreal)

• Direct blends: Oil companies

• Bio-diesel producers

Shell was launching customer, but stepped away during financial crisis and internal reorganization in the first half of 2009

• 2008: direct sales of bio-methanol

– Price green value directly reflected in price

• > 2009:

– Separate sales of methanol and biofuel certificate:

• Methanol sold at normal market prices

• Biofuel certificate sold to parties that have biofuel obligation

– Direct sales of bio-methanol

BIO-METHANOL SALES MODELS

46

METHANOL FORWARD INTEGRATION

OPTIONS

• Current main market: MTBE

• BioMCN is planning to investigate potential forward

investment in esp. DME and H2

Methanol

€ 250/ton

DME

€ 500-700/ton

Transport fuel

H2

€ 1300-2500/ton

Fuel cells

• DME / H2 are medium term higher value markets

Break-out

• Imagine the consequences of the financial crisis on the market development of bio-methanol – what options did we have / how to react ?

Break-out

• Imagine the consequences of the financial crisis on the market development of bio-methanol – what options did we have / how to react ?

• Implementation of RED delayed – strong Public Affairs focus and effort focussed on main countries UK and Germany; BP became launching customer

• Development of low blending application with NorthSea Group in Netherlands

• Development of refined glycerine business

49

2. Biomass

resource market

4. Marketing

strategy

6. Vision and partnership

€ 5. Financials

3. Bio-methanol

technology 1. Market

5. FINANCIALS

50

KEY FIGURES AND FINANCIALS (key factors)

• Benefit from higher value of bio-methanol:

• Bio-methanol: € 475 - € 525

• Grey methanol: € 200 - € 250

• Attractive cost price based on crude glycerol and gas pricing

• Crude glycerol: € 150-200

• Result: high margin per ton

• Goal: profitable growth

51

KEY FIGURES AND FINANCIALS (main upward potentials)

• Third party license income and/or joint venture and trading possibilities

• Upward potential sales price bio-methanol

• No government grants or tax incentives taken into account

• Expansion of capacity at current location possible

• Even lower gas consumption at 100% bio feedstock

• Cheaper technologies for bio-methanol production patented and under investigation

• Exit value conservatively estimated, given new and valuable technologies

Break-out

• Existing bio-methanol pricing is between € 600-700; crude glycerol pricing is at € 300-400; how would you assess the existing business case ?

• What options do we have ?

Break-out

• Existing bio-methanol pricing is between € 600-700; crude glycerol pricing is at € 300-400; how would you assess the existing business case ?

• In one word – critical

• What options do we have ?

• Sourcing outside Europe

• Sourcing low end and cheaper qualities

• Supporting biodiesel industry via Industry Association

• Development of green gas feedstock

• Development of other biomass feedstock - Woodspirit

54

2. Biomass

resource market

4. Marketing

strategy

6. Vision and partnership

3. Bio-methanol

technology 1. Market

€ 5. Financials

6. LONG TERM VISION

55

THE VISION

• Bio-refinery like integrated biomass sites

• Combination of:

• Biomass terminal, storage and pretreatment

• Biofuel production

• Bio-electricity production

• Bio-heat production

• Bio-gas production

• Bio-coal production

• Integrate electricity, syngas and heat flows

• Export this concept to other

Woodspirit: NER300 project – from wood via bio-syngas to biofuels/materials

dried biomass bio-syngas bio-methanol Biofuels/materials

• Sustainable feedstock: 1,5 mio mton/year (wet) wood (EU Directive 2009/28/EC)

• Green Syngas: > 1 billion Nm3/year

• CO2 savings: 900 kton/year

• Bio-methanol: >400 kton = 500 mio liters = ~3 billion clean car kilometers

• Initial investment: several hundred of million €’s

A multi-feedstock & process approach

TIM

E

Feedstock Process Applications

crude glycerine

forestry residue

CO2 feedstock

evaporation

gasification

bio

-meth

an

ol

syn

thesis

fotosynthesis

2016

Now

2020

BioCoMet/

mu

lti-

alc

oh

ol

The challenges

• Slow acceptance of new/unknown business concepts • Delayed implementation of RED incl double counting in several EU member states • Adaption/reduction of ‘bijmengverplichting’ • Changing agenda’s/focus of stake holders • Level playing field disturbance – EU member states, subsidies, feed in, tax – overall biofuels disadvantaged How to accelerate sales ? Cooperation along the business

chain is absolute necessity

Learnings

• Everyone talks about it, just go for it ! • Financing is a qualifier, don’t cry about spilled milk • Innovation is not the issue, but commercialization • Continuous learning curve, adapt when required • Risk mitigation – develop new options • Balance the short/medium/long term business development • Every successful product was once a candidate for closure • Don’t be afraid to make mistakes

THANK YOU! www.biomcn.eu