Technology Trend of Fuels in the Future

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1 Northeast Asia Petroleum Forum Session-6 Technology Trend of Fuels in the Future September 22, 2005 Nippon Oil Corporation Nobuyuki Osawa 1

2 Contents 1.Background CO2-reduction goal Forecast of Oil supply 2.Efforts being made by oil industry to reduce CO2 emissions Efforts to meet the Voluntary action program made by NIPPON KEIDANREN Additional efforts by the industry 3.Development of alternative energy sources GTL Biomass Fuels (ETBE, BPF) 2

3 CO2 - Reduction goal in Japan Reduction goal of CO2 emissions generated by energy consumption in Japan Source : Agency for Natural Resource and Energy Energy Demand and Supply Outlook for 2030 BaU case Target set in the Kyoto Protocol 3

4 Production Scenarios of Crude USGS Estimates of Ultimate Recovery Long-Term World Oil Supply Scenarios by EIA Probability Ultimate Recovery, BBls LOW (95%) 2,248 Mean (expected value) 3,003 High (5%) 3,896 New Field EOR GTL Biomass Shale Oil Tar Sand 4

5 Contents 1.Background CO2-reduction goal Forecast of Oil supply 2.Efforts being made by oil industry to reduce CO2 emissions Efforts to meet the Voluntary action program made by NIPPON KEIDANREN Additional efforts by the industry 3.Development of alternative energy sources GTL Biomass Fuels (ETBE, BPF) 5

6 CO2 Reduction Voluntary Actions by by PAJ (1) (1) Energy- saving at Refineries <TARGET> Energy consumption ratio -10% * Energy consumption in KL (crude oil equivalent) /Crude oil processed in thousand KL Energy consumption ratio Target 9.17 FY <Countermeasures> Promotion of heat recovery Heat exchangers Flare gas recovery Optimization of equipments Heat management among equipments Promotion of computerization 6

7 CO2 Reduction Voluntary Actions by by PAJ (2) (2) Optimization of Transportation Transportation fuel consumption Mkl <TARGET> Fuel consumption -9% Target 1,370Mkl FY <Countermeasures> Lorry, Tanker Large scale freight Efficient loading Product exchange Oil terminal Joint management Fueling station Large scale storage Joint transportation, Night/Holiday delivery 7

8 CO2 Reduction Voluntary Actions by by PAJ (3) (3) Consumers diffusion of co-generation <TARGET> Energy saving -1,400Mkl Mkl FY Energy Saving Target -1,400Mkl 8

9 Sulfur Standards in Japan The road to to Sulfur-free Gasoline N/A 0.01% 100 ppm) 0.005% 50 ppm) 0.001% (10 ppm) "Sulfur free" Diesel 1.2% 0.5% 0.2% Voluntary introduction of Sulfur- free by Japanese oil industries in the top runner in the world. 0.05% 0.005% 50 ppm) % 10 ppm) "Sulfur free"

10 Increase CO2 Reduction Additional efforts by by the industry Introduction of Sulfur-free gasoline and diesel CO2 Increase at Refinery (2 million ton per year) CO2 emission Decrease -600 Automotive CO2 reduction The rate of reduction will increase year by year along with the introduction of high performance vehicles. Sulfur-free is necessary for high performance vehicles. Year (2005) 1 (2006) 2 (2007) 3 (2008) 4 (2009) 5 (2010) 6 (2011) 7 (2012) 8 (2013) Sulfur-free completed Reference:JCAP2 10

11 Sulfur-free to Diesel Shift % WTW Energy Efficiency Introduction of free diesel fuel Sulfur-free Development of Clean Diesel with advanced technology CO2 emission from refinery (Thousand ton CO2) 0 Reference: METI Clean up the image Diesel is dirty The popularization of diesel vehicle with excellent fuel economy Diesel Shift ,000-1,200-1,400-1,600-1,800 Reference: PAJ CO2 Reduction estimation by JARI and PAJ Vehicle: 2 million ton reduction with 10% enhancement of diesel passenger vehicle ratio Refinery: 1.7 million ton reduction with 10% increase of diesel fuel production to replace gasoline 11

12 Contents 1.Background CO2-reduction goal Forecast of Oil supply 2.Efforts being made by oil industry to reduce CO2 emissions Efforts to meet the Voluntary action program made by NIPPON KEIDANREN Additional efforts by the industry 3.Development of alternative energy sources GTL Biomass Fuels (ETBE, BPF) 12

13 Natural Gas CO 2 20 CO2 Reduction: 5% (Symgas section) Existing Process Natural Gas containing CO 2 Air Sulfur Removal CO 2 Removal Sulfur Removal Oxygen Generator Syngas FT Synthesis Syngas Syngas Conditioning Hydrocracking Hydrocracking FT Synthesis Syngas Production CO2/Steam Reforming No need for : -CO2 Removal -O2 Generator -Syngas Conditioning Capex: : 85% of ATR FT Synthesis Own Technology Hydrocracking Own Technology Syngas Production ATR (Autothermal Reforming) Partial Oxydation 13

14 GTL, ATL and CTL Liquefaction Asphalt Asphalt to Liquid ATL Gas to Liquid GTL Natural Gas C H Reformulation Synthetic Gas C O H Gasification Wax Fisher-Tropsch Hydrocracking Liquid Fuel Naphtha Kerosene Diesel Fuel Gasification Coal Coal to Liquid CTL 14

15 GTL Plant Construction Plans GTL Plant Construction and Operation Plans Shell - Malaysia 12.5MBD Sasol South Africa 105MBD PetroSA - South Africa 30.2MBD Sasol - Qatar 34MBD Sasol - Nigeria 34MBD Sasol - Qatar 66MBD Shell Qatar 70MBD Conoco Qatar 80MBD Blue: Constructed Red: Plan The capacity in total will reach 450MBD in 2010, equivalent to 18 million kl as diesel fuel--- only 3% of OECD demand. Products will be supplied to EU ---- very small amount of products left for Asia? Automotive fuels are Sulfur-Free in Japan. GTL has little advantage in view of low sulfur property. GTL is the candidate of automotive fuel diversity in a long-term. ---Meaningless as the countermeasure for environmental concerns in near-term 15

16 Biomass, Why? For agriculture industries Economic revitalization Own energy supply source Why in the US, EU and Brazil CO2 reduction For agriculture industries? Economic revitalization? Own energy supply source? Why in Japan? CO2 reduction? The reason in the US, EU and Brazil etc. Why in Japan? 16

17 Concerns with Ethanol-contained Gasoline Energy Security, Cost Import = Brazil is the only one candidate ---- Lack of confidence in energy security High cost Domestic Production = Under development In the case of production from waste of buildings = the cheapest way Cost: over 100 /L Raw material availability: 0.9million kl/y as ethanol The effect of CO2 reduction 55-87% WTW CO2 reduction (100% as the Kyoto protocol rule) CO2 reduction cost : over 10,000 /t-co2 ---CO2 market: 1,300 /t-co2 Distribution Ethanol must be blended at the very end of distribution = To prevent water contamination, phase separation Ethanol corrodes certain kind of materials Cost of new facility construction: over 330 billion Very difficult to observe Fuel quality maintenance low Product Quality Vapor Pressure : 5-7 kpa increase = Increase of Evaporative emission Aluminum corrosion with over 3% ethanol blend Exhaust emission: Increase of NOx and aldehyde 17

18 ETBE FCC C4 fraction ETBE Production Composition iso-butene 13% n-butene 34% Butane 50% Iso-butene C 4 H 8 Ethanol C 2 H 5 OH Butane(C 4 H 10 ) Isomerize de-hydrogen iso-butene ETBE C 2 H 5 OC 4 H 9 Comparison of ETBE with Ethanol CO2 Reduction: Almost the same using the same amount of ethanol, ethanol 3% = ETBE 7% Energy security, cost : Concerns of raw ethanol are the same. ETBE production facilities are necessary. Distribution: No problem Product qualityno vapor pressure increase The same with the effect on exhaust emission The influence on ground water has to be proven. (US-problem, EU-No problem) 18

19 <EU> Production, thousand ton Bio-diesel Trend in the world Germany France Italy 2004 Production Capacity 2004 Production Austria BDF Price:0.6$/L Denmark UK Spain Sweden <US> Raw material: Soybean Production:103 thousand ton (2004) 1,100 thousand ton (2005 estimation) BDF Price: 0.7$/L Reference: METI BDF Tax incentives Germany France Italy Austria US $/L <Brazil> Raw material: Soybean, Palm Production: 720 thousand ton (2005 estimation) 19

20 BDF Concerns Raw material availability, Cost Raw materials production Production per area Production, million ton/year Palm Palm oil has the biggest production/area ratio. Cotton Rapeseed Sunflower Soybean Peanut Palm oil Soybean oil Rapeseed oil Reference Oil World Annual 2002 Cost of Palm BDF: 60-70/L CIF Japan PEC estimation 20

21 Contact: 21

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