Tim Zenk VP of Corporate Affairs, Sapphire Energy Inc. October 11, 2012
Cost of production ($ per barrel) Algae is a superior renewable feedstock Superior attributes of algae Scalable to millions of barrels per day Cost competitive with marginal crude oil production Completely fungible with infrastructure and fleet Favorable life cycle with respect to CO 2 Does not compete with agricultural products, land, or water Grams CO 2e per MJ 21 74 95 Production, Combustion Total refining, emissions transport Petroleum-based diesel -71 CO2 uptake -68% 30 72 31 Production, Combustion Total refining, emissions transport Sapphire algal diesel Algae fuel can be grown on marginal land with saline water Oil supply marginal cost curve for 2008 WTI equivalent 100 90 80 70 60 Sapphire algal oil production will increasingly compete with traditional oil as marginal costs continue to rise Mexico Other South America and North America Canadian Oil Sands Nigeria Deep Water Angola Deep Water Gulf of Mexico Deep Water Brazil Deep Water UK North Sea 50 Libya 40 30 20 10 Saudi Arabia Other Middle East China Russian Federation Other South America, Europe, Eurasia, and Africa Other North America 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 Cumulative production (million barrels per day) 80 85 90 Source: Cambridge Energy Research Associates 2
Recent forecasts indicate market demand will continue to drive oil prices above today s level Oil prices, historical and forecasted Dollars per barrel (nominal) 150 Today Historical oil price EIA reference case 140 130 120 110 100 90 When will oil prices return back to normal? 80 70 60 50 40 30 20 10 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Energy Information Administration; Annual Energy Outlook 2012 3
Sapphire has the most experience with large-scale production of photosynthetic algae Pilot technology facility 22-acre pilot facility operated since 2009 Over 180,000 hours of large pond cultivation piloting Commercial demonstration facility Sapphire is currently finishing construction of the world s first integrated algal-oil production facility Operations will begin in Q2/Q3 2012 First Commercial design complete in 2015/ construction begins 2016 I/4 mile 4
Extraction: concentrated algae is processed using proprietary technology to extract oil and nutrients Sapphire uses a proprietary, innovative, solvent-based extraction system Concentrated algae enters the extractor as a slurry Slurry undergoes chemical reactions 1. Heat and pressure: the slurry is exposed to heat and pressure, causing separation of materials 2. Chemicals: solvents are added to complete separation process Extraction process creates refinable crude oil 5
Refinery Upgrading The Boduszynski Plot: C# vs. AEBP Algae Oil Feed 6
Sapphire s oil is refinable into drop-in fuels using conventional refining technology, requiring no change in infrastructure Jet fuel Two test flights: Continental Airlines 737-800 (Houston) and Japan Airlines 747-300 (Tokyo) Gasoline and diesel 10-day cross-country tour of plug-in Toyota Prius 7
Policy Priorities for the Algae Industry The Renewable Fuels Standards (RFS) - Algae is a qualifying biomass, with an established pathway, complete part 79-80 - Algae still requires parity in the RFS and the advanced biofuels industry as a whole must work together to support the RFS Tax parity for algae with all other biofuel feedstocks - In August 2012, the Senate Finance Committee passed a bipartisan tax extenders bill that gives algae-based fuels AND green crude parity with cellulosic biofuels Renewable fuels should be given the same incentives as the Oil and Gas industry Farm Bill - The USDA s Farm Bill funds research on developing renewable biomass crops to supplant the RFS requirements through BCAP and Loan Guarantees - Senate has passed a 5-year Farm Bill which includes an Energy Title with mandatory funding DOD Initiatives - February 2010 Quadrennial Defense Review Report identifies climate change and access to reliable supplies of energy as threats to national security - The DoD has set ambitious goals to utilize biofuels to increase national security, it is the responsibility of our nation and our government to ensure that the DoD has the tools to deploy national security initiatives 8