Carbon Monetization for India’s Petroleum Industry

Outline

About Us

Carbon Monetization

We are industry leaders with innovative technology and commercial experience around carbon management

Sarasijam Technologies

Carbon Management

Solutions

GTC Technology Adi Analytics

1

2 3

Leading global engineering and technology licensing company

Reputed India-based energy technology consulting company

Management consulting company for energy and chemical industry

Sarasijam brings deep oil/gas expertise to help clients solve problems using innovation and technology

About Sarasijam Technologies

New Delhi-based consulting firm Established in 1999

Services Offered Facilitate sales and operations in India Lead R&D and develop technologies Synthesize insight with market reports

Domain Expertise

Deep expertise in oil, gas, chemicals, energy, and industrials

Talented, cost-effective staff of PhDs, MBAs, and experts

INTERNATIONAL CLIENTS

GTC is an established licensor of chemical, refining, and gas processes …

About GTC Technology

Houston-based chemical, refining, and gas technology licensor

Foster Wheeler and Glitsch heritage

Services Offered Technology and equipment licensing Feasibility analysis and engineering Reliability and maintenance services

Domain Expertise Chemicals and petrochemicals Natural gas and CO2 processing Refining and fuels treatment

SELECT LICENSEES

… With proven capabilities in project development, R&D, engineering, technical services, and mass transfer equipment

ProjectDevelopment

Engineering

Licensing

Tech Services

Research & Development

Mass Transfer

Solutions & Equipment

GTC Technology

• Feasibility study• Basic engineering• Detailed engineering

• Petrochemical• Refinery• Gas processing

• Start-up and commissioning• Site installation and supervision• Operations training

• Pilot plant testing

• Mass transfer technology• Solvents and catalysts

• Equity participation• Product marketing

ADI Analytics is a boutique consulting firm serving clients in both industry and the public sector

Driven by hypotheses, data, and analytics

Collaborative with client staff

Grounded in industry expertise

Evaluate markets and opportunities to grow businesses

Gather and analyze difficult-to-get information to address uncertainty

Identify needs, ideas, and opportunities to optimize costs

Design and implement processes to improve organizations

We use a Clear and Robust Approach …

… To Deliver Actionable Consulting and Insight

We specialize in energy, chemicals, and industrials with expertise across the value chain …

MARKETS OPERATIONS FUNCTIONS

OIL & GAS

GASOIL REFINING DISTRIBUTION

UTILITIES & INDUSTRIALS

COAL UTILITIES CARBONAUTO

RENEWABLES & CLEANTECH

GEOTHERMALBIOMASS WINDSOLAR

… Offering a variety of consulting services to help clients improve their strategy, operations, and technology

Build valuation models to analyze investments in capital projects, businesses, or capabilities to estimate economic value, ROI, NPV, IRR, risks, and other metrics

Investment Analysis

Develop and explore carefully drawn future scenarios to define medium-, long-term visions and pressure-test them through quantitative, analytical models

Scenario Planning

Advise clients on competencies and improving them with organization and resource alignment to enhance competitiveness, entry barriers, and shareholder value

Business Strategy

Understand technologies including their business impact, cost, trends, competing options, deployment risk, and commercialization success

Technology Assessment

Assess organizational goals and “as is” processes to identify gaps and design “to be” processes that fill gaps and achieve target goals

Process Design

Implement programs for ideation, portfolio development, stage-gate maturation, open innovation, IP management, functional excellence, and talent development

Innovation Strategy

Conduct in-depth research and analysis to identify new markets or segments, their size, profitability, growth, competitive landscape, client fit, and execution strategy

Market Research

Benchmark client capabilities, costs, and competitiveness against industry based on public information and rigorous modeling and suggest improvement ideas

Competitive Benchmarking

Recent clients include the U.S. Department of Energy, a biofuels start-up, and a national oil company

Assess technology pathways and their economics for upgrading bio-crude oilScout for emerging technologies to improve economics of bio-crude oil upgradingSupport company’s pricing and regulatory strategy for bio-crude oil

VC-Backed Biofuels Start-

Up

Develop investment options in the area of carbon capture and storage (CCS) Reviewed state-of-the-art of CCS technology for use in oil and gas plants Identified two technology acquisition opportunities

National Oil Company

Evaluating life cycle economics of alternative energy technologies Estimating and analyzing costs of advanced geothermal energy technologies Developing novel analytics to study and forecast cost implications of innovation

Outline

About Us

Carbon Monetization

Stabilizing atmospheric carbon at 500 ppmv will require dramatic reductions in CO2e emissions over time

55

62

85

2008 2030 2050

Stern Review Target of 20 GtCO2e

Current and Projected CO2e Emissions(Gigatons)

68% Reduction

76% Reduction

Sources: Stern Review, New York Times

It will take a portfolio of technologies and $40-50 trillion to reduce carbon emissions by 50% in 2050

215 Million Sq. M.Solar PV Annually

32 New Nuclear Plants

Annually

17,759 Wind Turbines

Annually

70% Gain in Fuel Mileage and 95% Advanced Cars

CCS for 55 Coal Plants

Annually

Double World’s Energy

Efficiency

50% Reduction in CO2e Emissions by 2050

Sources: Chevron, International Energy Agency

Although Copenhagen failed to produce a global accord, several emerging economies pledged voluntary carbon cuts

To date, a total of 55 countries have pledged voluntary or mandated cuts in carbon emissions

Mo

Mo

New Zealand

Australia

ChinaJapan

Indonesia

South Korea

Morocco

Sierra Leone

Finland

Sweden

Norway

Great Britain

Ireland

SpainPortugal

France

Italy

GermanyPoland Kazakhstan

India

Russia

South Africa

Syria

Israel

Ethiopia

Madagascar

DemocraticRepublic of the Congo

Romania

Greece

Costa Rica

Brazil

Alaska

USA

Canada

MoldovaAustriaBelgium

Bulgaria

Cyprus

Czech

Denmark

Croatia

Maldives

Marshall Islands

Georgia

Jordan

Singapore

Macedonia

Estonia

Hungary

LatviaLithuania

Luxembourg

Malta

Netherlands

SlovakiaSlovenia

Transport Distribution Total

6%

RefiningE&P

Oil and gas companies will be forced to assess and cut greenhouse gas emissions across the value chain …

1%

12% 1%

80% 100%

Combustion / End-Use

CO2e Emissions Across Oil and Gas Value Chain (Based on Emissions in 2008)

Source Category

Combustion

Vents

Area

Non-Routineand Indirect

Representative Sources

Boilers, heaters, engines, turbines, incinerators, and flares Vehicles, barges, ships, and railcars

FCC catalyst regeneration, hydrogen plants, and coking units Storage tanks and loading racks

Fuel gas system and other equipment leaks Wastewater collection and treating equipment

Equipment blowdown and heater / boiler-tube decoking Pressure relief valves and emergency shutdown devices Offsite production of electricity, steam, and hydrogen

... But this will be difficult because of the fragmented source of greenhouse gas emissions across the value chain

Source of CO2e Emissions in Oil Refineries

Petroleum companies will have to respond using three levers – corporate strategy, innovation, and carbon markets

Key Carbon Monetization LeversIllustrative List

Corporate Strategy

Baseline carbon footprint Benchmark with competitors Plan strategy through war-games

Innovation

Improve and optimize operations Deploy new technologies Invest in emerging technologies

Carbon Markets

Understand carbon markets Evaluate and nurture offsets Develop CDM projects

1 2

3

Corporate strategy must drive carbon monetization initiatives

Key Carbon Monetization LeversIllustrative List

Corporate Strategy

Baseline carbon footprint Benchmark with competitors Plan strategy through war-games

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A four-step approach to develop a corporate carbon strategy

Description Understand the current state of an enterprise

Identify and invest in “no regret” or low-cost options

Engage and monetize through carbon markets

Pave path to “low-carbon” future

Estimate company’s carbon footprint

Develop competitive intelligence

Review and project regulatory scenarios

Inventory options to improve operations

Define near-term risks and responses

Deploy engagement and advocacy plan

Identify and engage carbon markets

Inventory near-term projects, e.g., CDM

Pilot 2-3 projects to gain experience

Integrate learnings from initial efforts

Establish long-term carbon strategy

Implement strategy with dedicated team

Tasks

InitiativeManageBaseline Monetize Amplify

1 32 4

Scenario planning can help explore strategic themes …

Break-through!

Signposts include many demos, early adoption, and integration with infrastructure

Winners are majors with equity in innovators from corporate venture groups

Signposts include more voluntary cuts, growth of shale gas, and higher gas penetration

Gas Galore!

Winners include players with assets producing or using gas

Winners include early movers in cleantech

Clean Clean

Energy!

Signposts include public incentives, leapfrogging by BRICs, and price inelasticity

Winners include conventional oil and gas majors

Signposts include more squabbling, new discoveries, and continued recession

Oil is King! Degree of Energy

Affordability

Degree of Global Cooperation on Carbon

Regulatory Scenarios

… War games can help companies test efficacy of multiple strategic options

Strategy and Operations

Stakeholder Impact

Oil Major

Oil Super Major

Ind. RefinerAuto Maker

Biofuels Start-Up Electric Utility

National

Regional

Players simulate regulators to draw up likely and unlikely scenarios

Financial and shareholder returns are computed using complex models

A wide range of stakeholders develop compliance strategies using a menu

Identify and evaluate critical assumptions Uncover and assess major risks Develop unconventional strategic paths Describe show stoppers and fatal flaws Build new insights and sensitivity

Innovation and technology are critical enablers

Key Carbon Monetization LeversIllustrative List

Innovation

Improve and optimize operations Deploy new technologies Invest in emerging technologies

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In upstream, fugitive emissions can be reduced through incremental – but NPV positive – improvements in operations

The Problem

Nearly 600,000 pneumatic devices in U.S gas industry …

… Used as liquid level controllers, pumps, and pressure regulators …

…Each emit 100 avoidable tons CO2e/yr of methane

The Solution

Replace high-bleed inventory with low-bleed devices

Verify reductions in emissions

Audit and certify emission reductions

Monetize resulting CERs

The Opportunity

Developed the first U.S. carbon offset methodology for fugitive methane emission reductions in oil / gas

Established baseline without direct measurements

Piloted retrofit program in Washakie Basin, WY

Measured leaks before and after with a third-party

Completed several hundred retrofits within a month

Observed devices after installation to allay concerns about failures and “upsets”

Planning next phases in Oklahoma and Texas

Auditing emission reductions of 65,000 - 80,000 tons of CO2e per year

Similarly, refineries too offer “low-hanging fruit” although deep cuts in greenhouse gas emissions are expensive

Carbon Abatement Opportunities in Refineries

Life Cycle Cost, $/tCO2e

Potential Reduction in Refinery CO2e Emissions, Percent

Sequester CO2 from units Integrate gasification in refining

Export fuel oil Use cogeneration Reduce hydrogen use

Clean heaters Use more exchangers Recover APH heat Switch fuel gas

There are a number of “no regret” options

that can pay off in less than three years

Sulfur RecoveryFlue Gas

(H2S, CO2, HC, etc.)

Unit to Polish H2S Traces

Flue Gas

(20-30 ppm H2S)

Sulfur

BoilerScrubber + Quencher

GT-CO2 Unit

Sweet Flue Gas with light hydrocarbons

Dryer + Compressor

Water Steam

N2 + O2

CO2 + N2 + O2

CO2

DMC Unit

Pipeline-grade CO2

Ethylene Oxide + Methanol

Dimethyl Carbonate

Flue gas desulfurization and feed prep

Carbon dioxide capture

Carbon dioxide utilization

1

2

3

Process licenses from GTC Technology

Since industry prefers integrated solutions, GTC, Sarasijam, and ADI have proposed one for multiple applications

In Step 1, flue gas desulfurization improves CO2 capture performance to produce pipeline-ready CO2

Commercially proven desulfurization technology– Patented process for medium-scale sulfur removal

– Operating commercially at natural gas plant in Germany

Novel reaction chemistry– Modified liquid-phase, non-aqueous Claus reaction

– Converts H2S into elemental sulfur

– Uses mild SO2 oxidant

Advantages– Compatible with wide pressure range (0.1 to 10+

MPag)

– Avoids chronic problems of conventional processes, e.g., plugging, foaming, and high chemical costs

– Tolerant to contaminants (e.g., CO2, SO2, NH3, O2, heavy hydrocarbons) with no operating penalty

– Solvent selective to H2S and has excess capacity eliminating need to match H2S to SO2 ratio

– Low-corrosion carbon steel construction

10,000 100,000 1,000,0001000

Gas Flowrate, M3/hr

H2S

Co

nc

en

tra

tio

n

100 ppm

1000 ppm

5000 ppm

1%

5%

10%

0.1 TPD sulfur

100 TPD sulfur

25 TPD sulfur5 TPD sulfur

1 TPD sulfurScavenging

Amine/Claus/TGT

5000 50,000

500 ppm

CrystaSulfCrystaSulf(All Applications)(All Applications)

High CO

High CO22 & Unconventional Gas

& Unconventional Gas

Applications

Applications

0

20

40

60

80

100

120

140

160

180

200

0 2 4 6Hours

Inle

t C

on

ce

ntr

ati

on

(m

g/N

m3)

0

2

4

6

8

10

Ou

tle

t C

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ntr

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(m

g/N

m3

)

Inlet

Outlet

Relevance to CO2 StreamsRelevance to CO2 Streams

High Desulfurization PerformanceHigh Desulfurization Performance

Flue Gas Desulfurization

In Step 2, CO2 is captured using the cost-effective, high-performance, and commercially proven GT-CO2 process

GT-CO2 process advantages

– Higher CO2 removal (>90%) than regular amines

– Packed-bed absorption with blended solvent

– High oxygen tolerance suitable for flue gas

– Cost-effective due to higher CO2 capture levels and standard construction material

– Higher carrying capacity allows reduced circulation rates and lower energy costs

GTC’s commercial experience – GTC experts have designed, supported, and

operated commercial CO2 capture projects 1980s

– Designed the first world-scale CO2 recovery plant at Lubbock, TX

– GTC is a leader in mass transfer equipment, a critical component of the GT-CO2 technology

– GTC has designed commercial absorption and fractionation towers using high-efficiency packing, e.g., world’s largest refinery vacuum tower with a diameter of 17 m

Commercial ReferencesCommercial References

DMC SECTION: Transesterification

EC

MeOH

Vacuum

Lights

EG

MeOH/DMC Azeotrope

DMC

EG

Se

pa

rati

on

EG

Pu

rifi

cat

ion

MAKE-UPCATALYST

Rea

ctiv

e D

isti

lla

tio

n

Heavy Purge

DM

C S

epar

ati

on

In Step 3, a phosgene-free, environment-friendly process converts CO2 to dimethyl carbonate (DMC)

Reaction– CH2OCH2 + CO2 (CH2O)2C=O (Ethylene

Carbonate)

– (CH2O)2C=O + 2CH3OH (CH3O)2C=O (Dimethyl carbonate) + HOCH2CH2OH (Ethylene Glycol)

Process features– High ethylene carbonate (EC) conversion (95-99%)

– High EC selectivity (>98%) to dimethyl carbonate (DMC) and ethylene glycol (EG)

– Reactive distillation for equilibrium controlled reaction

– Based on novel catalysts with high carbon utilization

– Uses or produces no hazardous raw materials and intermediates

Commercial experience– Second step producing DMC commercialized

– First step producing EC tested at 5 KTA pilot scale

EO

CO2

CO2Vacuum

EC TANKTo DMCSection

Purge

MAKE-UPCATALYST

Heavy Purge

EC SECTION: Epoxide to Alkylene Carbonate1

2

Two-Step DMC ProcessTwo-Step DMC Process

DMC is an intermediate used in polycarbonates, lubricants, solvents, fuel additives, and other products

Uses Features

Octane additive Road octane 105; high oxygen content, good blending characteristics

Solvent High solvency, thermal stability, and biodegradability; low vapor pressure and toxicity

Polycarbonate resin precursor

Phosgene substitute

Dimethyl CarbonateDimethyl Carbonate

Dimethyl Carbonate Uses and FeaturesDimethyl Carbonate Uses and Features

OxygenOxygen

HydrogenHydrogen

CarbonCarbon

Our integrated solution enables multiple end uses of the recovered CO2 stream

Dryer + Compressor

DMC Unit

Pipeline-grade CO2, e.g., for EOR

Ethylene Oxide + Methanol

Dimethyl Carbonate

CO2 Other products, e.g., urea, fuels, etc.

Most CO2 conversion

technologies are at lab-scale; DMC has

commercial and pilot-tested

components.

Our integrated offering can produce contaminant-free CO2 …

– … Meeting specs for transportation by pipeline or …

– … Ready as raw material for conversion to dimethyl carbonate or other products

The optimal end-use of the recovered CO2 stream should be evaluated in a feasibility study:

– Total volume of recovered CO2 stream

– Supply, transportation logistics, and cost of raw materials

– Reformed products’ demand, supply, and market dynamics

– Ability to generate carbon credits

Effective carbon management will require competitive technologies for capture, transport, storage, and utilization

Segment

Status

TransportCarbon Capture

Three processes

– Post-combustion– Pre-combustion– Oxy-combustion

No clear winner yet

Storage Utilization

Three routes

– Pipeline– Ship– Rail

Pipelines are most cost effective

Three sinks

– Old oil fields– Coal seams– Saline aquifers

Saline aquifers have the most capacity

Nascent field with multiple paths

Limited R&D effort

71

Integrated Completed Canceled or Delayed

31

80

Active or Planned

Large-scale, integrated

Total Projects

87

Carbon capture is advancing through several R&D and pilot and a few commercial projects across the world …

59

210

Global Portfolio of CCS Projects

… While carbon storage has a number of options

Enhanced Oil Recovery

Uses CO2 already to increase oil production Offers financial incentive for injection and storage

Depleted Oil and Gas

Fields

Creates storage for CO2 as production declines and formation pressures drop

Enables utilization of existing infrastructure

Coal Seams Utilizes abandoned or unproductive coal seams Leverages affinity of coal for CO2

Saline Aquifers

Exploits permeable formations in oceans Creates use for undeployed formations

Low

Low

Medium

High

High

High

Low

Minimal

Potential Knowledge

In comparison to carbon capture, transport, and storage, CO2 utilization has received little attention

Segment

Status

TransportCarbon Capture

Three processes

– Post-combustion– Pre-combustion– Oxy-combustion

No clear winner yet

Storage Utilization

Three routes

– Pipeline– Ship– Rail

Pipelines are most cost effective

Three sinks

– Old oil fields– Coal seams– Saline aquifers

Saline aquifers have the most capacity

Nascent field with multiple paths

Limited R&D effort

In comparison, CO2 utilization has received little

attention

Direct Mineralization

Chemical Utilization

Chemical Utilization

Biological Utilization

Biological Utilization

Utilization of Supercritical CO2

Aqueous precipitation to carbonates (Calera)

Direct capture and conversion to carbonates (Skyonic)

Catalytic conversion to polycarbonates (Novomer)

Small organic compoundsElectrochemical utilizationMethane reforming

Enzymatic conversion to soluble carbonates (Alcoa)

Algal-based conversion to biofuels (Touchstone, Phycal)

Fixation using algal systemsUtilization in bioreactors

ExtractionCatalysisEnvironmental remediation

EXISTING

EMERGING

Several new technologies are emerging for CO2 utilization

Novomer has attracted funding, partners, and recognition around its catalytic route to convert CO2 to polymers

Investors

DSM Venturing Flagship Ventures Physic Ventures OVP Venture Partners KensaGroup

PartnersExternal Recognition

U.S. Department of Energy funding of $18.4 M over multiple phases

MIT Technology Review TR 50 New York State Energy R&D

Authority funding of $0.8 M

Eastman Kodak Albemarle Praxair Cornell University

Key Advantages Commercialization StatusKey Challenges

Uses CO2 as a reactant … … Allowing it to compete effectively

against plant-based routes Use of catalyst enables flexibility Equipped with funds and resources

Difficult to make high MW polymers Polymer processability and end-use Catalyst and process scale-up Catalyst lifetime and stability Overall process economics

Synthesized in 25 gallon batches Demonstrated in 500 gallon reactor Investigating flow process Using product for adhesives Testing polymer processing

Process RouteCompany

EPOXIDES

+ CO2 POLYCARBONATES

+ COACRYLIC ACID

1,3-PROPANEDIOL

Calera seeks to convert CO2 to cement and other usable materials

Investors

Khosla Ventures

PartnersExternal Recognition

U.S. Department of Energy funding of $19.9 M

Multiple awards in making ‘Green’ building materials

Dynegy Gruppo de Nora Bechtel Peabody Energy

Key Advantages Commercialization StatusKey Challenges

Utilizes CO2, … … Fly ash, and … Flue gas process heat … Producing cement and aggregates,

excellent for carbon storage

Requires use of extra power … … Hazardous fly ash and … … Additional energy inputs for key

unit operations of spray drying and aggregate formation

Demo plant in Mass Landing, CA to capture 30,000 tons per year of CO2

Plant to be expanded to handle 550,000 tons per year of CO2 from a 100 MWe plant

Process RouteCompany

CARBONATE PRECIPITATION

CEMENT

THICKING AND SPRAY DRYING

FILL MATERIAL

FLUE GAS

FLY ASH

BRINE

POWER+

+

+

Carbon markets are a powerful lever but require engagement to fully exploit their potential

Key Carbon Monetization LeversIllustrative List

Carbon Markets

Understand carbon markets Evaluate and nurture offsets Develop CDM projects

3

Carbon markets have enjoyed accelerated growth and are likely to continue growing exponentially …

Annual Transactions, Million Tons CO2e

Volumes of CO2e Reductions (Commitments up to 2012)

Sources: The World Bank

… Driven by demand from Europe, which is seeking to comply with its emission reduction goals

Buyers of CO2e Credits (Commitments up to 2012)

Sources: The World Bank

China – the emerging “Green Giant” – is the predominant supplier of credits

Suppliers of CO2e Credits (Commitments up to 2012)

Sources: The World Bank

Energy efficiency and fuel switching were the dominant goals; renewable energy is slowly gaining steam

Types of CDM Projects (Commitments up to 2012)

Sources: The World Bank

The CDM process is suffering from too much success and throughput has fallen due to increased scrutiny …

CDM Project Pipeline Activity (Commitments up to 2012)

Sources: The World Bank

… Increasing the time a project spends at each stage and decreasing actual credits delivered to the market

CDM Projects – Days in Each Step (Commitments up to 2012)

Projected Delivery of CERs (Commitments up to 2012)

Sources: The World Bank

Carbon markets responded to the recession with a sell-off of allowances, flight to security, and reduced projects demand

Carbon Credit Markets (European Union Emission Trading System)

Sources: The World Bank

Engaging carbon markets will require a strong understanding of both the CDM project development process and …

CDM Project Development and Credit Monetization ProcessCDM Project Development and Credit Monetization Process

Analyze project feasibility and environmental impacts Draft Project Design Document Seek Designated National Authority (DNA) approval

Identify baseline and monitoring methodologies Propose new methodology if required Designated Operational Entity (DOE) consults

stakeholders and issues validation report

Register project with Executive Board (EB) Pay project registration fees Evaluate external financing options, if required

Identify key data needs and reporting templates Develop plan to collect and store data Collect, store, and report data

Support annual, on-site DOE verification inspections Provide monitoring reports to DOE team Ensure DOE submits certification report to EB

Obtain Certified Emission Reduction (CER) credits Analyze economics of trading credits on global

emission markets vs. use for internal compliance Monetize CERs through most advantaged route

Key Steps

… Insight into factors that shape carbon credit pricing

CDM Certification Impacts on CER Price(Carbon Credit, $/ton)

CDM Certification Impacts on CER Price(Carbon Credit, $/ton)

Summary

Carbon reduction in the oil and gas industry is challenging …

… But can be achieved through strategy, innovation, and carbon markets

Scenario planning and war gaming are two tools to develop carbon management strategies

Innovation will occur at the incremental and disruptive levels

– Incremental innovations will drive operational improvements and integrated solutions

– Disruptive innovations are still in the pipeline

Finally, the industry must engage carbon markets and build experience to derive value