Coal Gasification Today's Technology of Choice and Tomorrow's Bright Promise

AIChE East TN Section October 29, 2003

David L. Denton Business Development Manager Eastman Gasification Services Company

Why Coal?
The U.S. has lots of it
U.S. recoverable reserves of 297 Billion tons = 250+ years of supply

We can distribute it
Existing infrastructure in rail, barge, mine mouth

It costs less and is less volatile in price

$1.25/MMBtu vs. > $3.50-5.00/MMBtu for Natural Gas

Were familiar with it

50% of current U.S. power is from coal

It broadens our national fuel portfolio

Insulates against price and availability shock of oil and natural gas

Coal Gasification Delivers Fuel Diversity and Energy Security Coal Gasification Delivers Fuel Diversity and Energy Security
Slide provided by ChevronTexaco

U.S. Natural Gas Supply

How Much is Left ?
U.S. Nat gas reserves: Proven: 183.5 trillion cubic feet Unproven: 1105.4 trillion cubic feet Nat gas consumption: 22.6 trillion cubic feet/year and growing significantly Years remaining at current usage: Proven reserves: 8.1 years Unproven reserves: 48.9 years
Source: DOE Energy Information Administration 2003 Annual Energy Outlook http://www.eia.doe.gov/oiaf/aeo/pdf/trend_4.pdf

NG Prices for the Past Year

$1.50/MM Btu Higher Than Last Sept.!

Coal Breakeven

LNG may cap average NG price at $4-5/MM Btu long-term

Many analysts are now predicting a severe NG crisis this winter and several predict prices > $4-5/MM Btu for remainder of the decade !!!

Coal Supply
How Much Coal is Left ? Coal Reserves: Demonstrated Reserve Base: 508 billion tons Estimated % Recoverable: 54% Estimated recoverable: 274 billion tons 2002 Production: 1.093 billion tons

Source: DOE Energy Information Administration US Coal Reserves 1997 update http://www.eia.doe.gov/cneaf/coal/reserves/chapter3p1.html

Years remaining at current levels: 251 years

Other source: National Mining Association http://www.nma.org/pdf/c_most_requested.pdf

Coal needs to return as a key feedstock and energy source in the U.S. !!!
Gasification is the technology of choice for converting coal to clean and efficient power, chemicals, fertilizers, and fuels.

Why Gasification?
It is the cleanest coal technology
Inherently lower SOX , NOX , and PM Lowest collateral solid wastes and wastewater Potential for lowest cost removal of mercury and CO2

It is proven technology
20 years of successful commercial operation at Eastman Multiple commercial IGCCs (e.g., TECO Polk, Wabash)

It is becoming increasingly competitive

Capital cost at parity with other clean coal and dropping Lowest variable cost of all fossil fuel technologies

It is gaining acceptance
Gaining support of environmental groups (e.g., NRDC, CATF) Numerous state and federal initiatives and incentives

It provides great promise for the future

Flexible feedstocks, process options, and products Opens new markets for coal (synfuels, chemicals, fertilizers) It provides the only feasible bridge from coal to hydrogen (directly converts coal to hydrogen)

What is Gasification?
Oxygen

Extreme Conditions: Up to 1,000 psig or more Nominal 2,600 Deg F Corrosive slag and H2S gas

Coal

Products (syngas): CO H2
(Carbon Monoxide) (Hydrogen)

Water

[CO/H2 ratio can be adjusted]

By-products: H 2S CO2 Slag

(Hydrogen Sulfide) (Carbon Dioxide) (Minerals from coal)

Gas Clean-Up Before Product Use!

Acid Gas (Sulfur) Removal Technology Choices

MDEA (methyldiethanolamine) chemical
absorbent, 98+% removal, large CO2 slip, moderate temperature, lowest capital cost

Selexol tm (primarily dimethyl ethers of

polyethylene glycol DEPE) 99+% removal, moderate CO2 slip, moderate cost (+$20 M)

Rectisol tm (methanol) - 99.9+% removal,

complete CO2 removal, cold temperatures, highest cost (+$40 M), needed for most chemicals, H2, and fuels applications

So what can you do with CO and H2 ? Syngas

Building Blocks for Chemical Industry

Transportation Fuels

Clean Electricity

NGCC: Natural Gas Combined-Cycle Plant

Natural Gas

Combustion Turbine Air Steam Most new power plants in the United States in the last 10 to 15 years have been natural gas based
CO2

SteamTurbine Electricity

Integrated Gasification Combined-Cycle (IGCC): Replace NG Feed With Syngas

Natural Gas

X
Air

Combustion Turbine

Steam

CO2

SteamTurbine Electricity

Syngas from Coal Gasification (adjacent or via pipeline)

Integrated Gasification Combined-Cycle (IGCC)

Air Nitrogen Pure Volatile Sulfur Mercury 98+% 90+% Removal Removal

Air Separation Unit (ASU)

Oxygen Slag

Gasification Block
Coal (or other Carbon Source) Water

Crude Syngas

Gas Clean-Up Block

Clean Syngas

CombinedCycle Power Block

Electricity

CO2 Capture (ready for sequestration)

Contaminants Removed Pre-Combustion !!!

Combustion Turbine

Integrated Gasification Combined Cycle (IGCC) Configuration

Oxygen Syngas

Air Steam
CO2

SteamTurbine Electricity

Water

Steam

Hg Removal Particulate Removal

CO2 & Sulfur Removal

Contaminants Removed Pre-Combustion !!!

CO2

Coal Petroleum Coke Refinery Co-products Biomass Wastes Slag/Soot Gasifier

Sulfur

Solids Co-products

Gasification-Based Polygeneration:
Replace NG and/or Oil With Coal
Natural Gas and/or Oil

Combined-Cycle Power Plant Electricity

+
Chemical Facilities Chemicals, Synfuels, Fertilizers, and/or Hydrogen

Syngas from Coal Gasification (adjacent or via pipeline)

Gasification-Based Polygeneration
(Ultimate Flexibility)
Syngas Optional Shift Reactors Water Steam Oxygen

Combustion Turbine Air Steam

CO2

IGCC: Integrated Gasification Combined Cycle

SteamTurbine Electricity
Back-up/ Peaking Fuel

Hg Removal Particulate Removal

CO2 & Sulfur Removal

Syngas Conversion

Chemicals Or Fuels or H2
CO2

Coal Petroleum Coke Refinery Co-products Biomass Wastes Slag/Soot Gasifier

Sulfur

Solids Co-products

Polygeneration Potential of Gasification

Power & Steam Naphtha Waxes FT Diesel FischerTropsch Liquids Car Fuel Coal Town gas Gasification Synthesis Gas Methanol H2 Ammonia & Urea

Dimethyl Ether Ethylene & Propylene Oxo Chemicals

Acetic Acid VAM PVA Ketene

Methyl acetate Acetate Esters

Diketene & Derivatives

Acetic Anhydride

Polyolefins

Why Gasification?
Environmental Factors
Power Plant Typical Emissions by Technology Type
5 4.5 4 3.5

Particulates SO2 NOx CO2/1,000

IGCC Upside Potential: Mercury Removal

CO2 Sequestration
(at fraction of cost for PC)
3.1

4.1

lb/MW-hr

3 2.5 2 1.5 1 0.5 0

~0 ~0
0.2 0.796

1.506

1.506 1.19 0.72 0.47 0.5 0.16

1.679

1.846

0.015 0.025

0.2

0.27

0.06

NGCC

IGCC w/Rectisol

IGCC w/Scrubber

Advanced SCPC

Traditional Pulv. Coal (PC)

Type of Power Plant

Basis: ChevronTexaco White Paper (3/03) And DOE Report (5/99)

Collateral Wastes
CaCO3 + SO2 + O2 => CaSO4+CO2
700 600

Lb/MW-hr (Dry Basis)

500 400 300 200 100 0

Sludge

Sludge Useful Sulfur

Leachable
Pulverized Coal Pulverized Coal

Leachable
Circulating Fluid Bed Circulating Fluid Bed

Vitrified
IGCC IGCC

Slag/ Ash

Sludge

Sulfur

CO2

No Addl CO2 Associated with Sulfur Removal for IGCC No Addl CO2 Associated with Sulfur Removal for IGCC
Slide provided by G.E. Power Systems

DOE Report "Major Environmental Aspects of Gasification-Based Power Generation Technologies", December 2002

Vapor-Phase Mercury Removal

Demonstrated for 20 years at Eastman !

Low-Cost Volatile Mercury Removal for IGCC

An order of magnitude less expensive for IGCC (COE = Cost of Electricity)
Technology Mercury (Hg) removal location Relative volumetric gas flow Cost of Hg removal, $/MWh Fraction of COE Cost of removal, $/pound Hg IGCC Syngas (ahead of AGR) 1.0 $0.254/MWh < 1% $3,412/pound PC Stack gas 160 $3.10/MWh ~ 9% $37,800/pound

DOE Report, "The Cost of Mercury Removal in an IGCC Plant", September, 2002

DOE Report "Major Environmental Aspects of Gasification-Based Power Generation Technologies", December 2002

IGCC Economics are Increasingly Competitive

Lowest Total Variable Costs: IGCC Variable Costs (O&M + Fuel + Materials & By-products) are the lowest of all fossil fuel technologies. Capital Costs Near Parity with PC Plants: Capital costs of pulverized coal plants have been increasing to ~ $1200-1400/KW as emissions requirements have tightened. Capital costs of IGCC have been falling (currently projected as ~ $1200-1400/KW) as multiple plants are built and improved.

Cost of Electricity Comparison

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Natural Gas Coal Combustion Coal Gasification
O&M Costs
Lowest Total Variable Costs

Relative Busbar Cost of Energy in Cents/Kwh

Capital Expenses

Fuel Costs

Materials/Byproducts

Assumptions: Nat. Gas - 65% capacity factor w/ fuel costs of $4/MM Btu and capital costs of $500/kW; Coal Combustion - SCPC plant at 85% capacity factor w/ fuel costs of $1.25/MM Btu and capital costs of $1,200/kW; Coal Gas - IGCC plant at 85% capacity factor w/fuel costs of $1.25/MM Btu and capital costs of $1,250/KW. Data extrapolated from DOE Report "Market-Based Advanced Coal Power Systems", May 1999.

IGCC Capital Cost Improvement

Recent Clean Coal PC Plants

x x
Target Range For IGCC

Source: GE Power Systems, Power-Gen 2002 Presentation

IGCC Capital Cost Breakdown

Combined Cycle Plant
Coal Prep 10% CT/HRSG/ST 43% AGR/SRU 7% Gasifier Block 25% ASU 15%

Overall cost (EPC) = $1200 - $1400 per KW [Can be significantly less if purchase and retrofit an existing NGCC plant at a discounted price!]

Proven Technology
First U.S. commercial coal gasification facility in 1983 at Eastman Chemical Company ACS National Historic Chemical Landmark. First IGCC plant demonstrated in 1984 at Cool Water site in California. 14 current IGCC plants globally, including TECOs Polk Plant and Global Energys Wabash Plant. (~ 130 total global gasifiers) Eastman has achieved world-class success in coal gasification for almost 20 years.

Eastmans Experience with Gasification

We were a pioneer in coal gasification
First commercial U.S. coal gasification facility in 1983 Designated as ACS National Historic Chemical Landmark

Industry leading operating performance

> 98% on-stream time since 1984 < 1% forced outage rate Highest production rate per unit of capacity Single-train reliability of ~90%

Excellent safety record

OSHA recordable rate of 1.0; no lost time in over 11 yrs

Exceptional environmental performance

Remove >99.9% of sulfur Patented sulfur-free start-up process Volatile mercury removal for almost 20 years

Continual process improvement

Reduced maintenance costs > 40% in past 6 years Patented feed injector designs for longer run life

Eastmans Gasification Configuration

Syngas Conversion

Air Products

Clean Syngas Oxygen Shift Reactors Water Steam Raw Syngas Texaco Gasifier (1 + spare)
RECTISOL

Chemicals H2

CO

(Ac20, HOAc, MeOH,

MeOAc)

CO/H2 Separation (Linde)

Hg CO2/H2S Removal Removal

CO2

Coal

Particulate Removal
Sulfur Recovery

Sulfur

SCOT/Claus

Slag/Soot Solids Co-products

Chemicals from Coal The Chemistry

Syn Gas (CO + H2)
Methanol Plant Methyl Acetate Methanol

Methyl Acetate Plant

Carbon Monoxide (CO)

Carbonylation Plant

Primary Reactions: CO + H2 CH3OH (methanol) CH3COOH (acetic acid) CH3CO2CH3 (methyl acetate) (CH3CO)2O (acetic anhydride) Acetic Anhydride Acetic Acid CH3OH + CO

CH3OH+ CH3COOH CO + CH3CO2CH3

Tennessee Eastman Coal Gas Product Flow

Sales Sales

Sales Sales Sales

Gasification Area

Eastman Chemicals from Coal The Big Picture

Coal

Acetic Anhydride Acetic Acid

Its likely you have a product in your home based on coal gasification from Eastmans facility! Several major products are single-sourced from Eastman's coal gasification process!!!

Operating Statistics
Three-Year Cycle (Sept 2000 - Sept 2003) including planned shutdown
On-Stream 98.12 %
Unplanned 1.10%
Not Needed 0.0%

Planned 0.78%

Industry-Leading Performance !!!

Operating Statistics
One-Year Cycle (Sept 2002 - Sept 2003)
On-Stream 98.91 %
Planned 0.0% Unplanned 1.09%

Not Needed 0.0%

Eastman Operating Statistics

Eastman Gasification Plant Historical Forced Outage Rate
10 9 8
% Forced Outage Rate

7 6 5 4 3 2 1 0
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Forced Outage Rate has Averaged < 2% since 1984 !!!

Eastman Operating Statistics

Gasifier Run Data 1983-2002
70 65 60 55 50 45
Time Between Shutdowns Time Between Switches

No of Days

40 35 30 25 20 15 10 5 0

Feed Injector Improvements

2x

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Recently Set 122-Day Run Record (4 x baseline)!

Eastman Operating Statistics

Continual Process Improvement Gasifier Average Production Rate
150

140

Normalized Production Rate

130

120

110

100

90

80

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Eastman Operating Statistics

% On-stream Time and Maintenance costs
110% 100% 90% 80% 70% 60% 50% 40% 1996

On-stream Normalized to 1996

1997

1998

1999

2000

2001

2002

Eastmans Value Proposition

Market Need
High Capital Costs Unfamiliarity to Utilities Time to Capacity Reliability Concerns

Eastman Value Creation

Eastman helps owners make intelligent design choices Eastman knows gasification (20 yrs experience); O&M services Eastman's 20-yrs experience can enable faster start-ups Eastman has the best operating performance in the industry; offering O&M services Eastman can help offer adequate warranties Eastman works with industry and government to understand & plan for uncertainties

Financing of Projects Economic & Environmental Uncertainties

Eastman will help gasifier owners get more out of their plants, including faster start-ups and improved long-term availability and reliability
World-class operational performance Intelligent design choices to limit capital costs Patented technology improvements Exceptional safety and environmental records

Service Offerings:
h Operations & maintenance contracts h Technical services h Critical spare parts fabrication h Specific technology licensing h Cooperative services agreement with ChevronTexaco

The Promise of the Present and of the Future for Gasification:

Competitive cost of electricity (superior variable cost lowest for all fossil fuels) Exceptional environmental performance, including cost effective volatile mercury removal and potential for lowest-cost CO2 capture and sequestration Retrofit of NGCC plants (replacing NG with coal) Production of hydrogen to fuel the coming economy (FutureGen Initiative) Promise of new markets for coal - potential for transformation of the chemical, fuels, and fertilizer industries

Gasification is the future for coal !!!

The Future Looks Bright for Coal Gasification!!!