GTL technology: innovation vital for Russia

1. GTL technology:innovation vital for Russia Institute for Financial Studies (Moscow)

2. Why do we search for new technologies? • Restricted access to Russia’s gas transportation network • Limited capacity of Russia’s gas transportation network • Distant provinces

3. Alternative natural gas technologies • Liquefied natural gas (LNG) • Methanol (methyl alcohol) • Carbon • FT-process based Gas-to-Liquid

4. GTL benefits • High quality synthetic petroleum • High quality synthetic fuel • Octane levelup to 95 units (against 92) • Cetane number – up to 75 (against 55) • Hydrocarbons content – 0.1% (against 6%) • Sulphur content – <1 (against 15)

5. GTL disadvantages • Poor research and development • Facility launch specifics • Transportation by railway only

6. Impulses for GTL development

7. Impulses for GTL development

8. Pilot GTL facilities Research and development spending: ExxonMobile – $600 million ConocoPhillips – $400 million Syntroleum – $200million

9. Operating GTL facilities

10. GTL product structure (one ton, average by producer) Other (naphtha, liquefied hydrocarbon gas, lubricants) 30% Diesel fuel 70%

11. Compare market shares of traditional and synthetic diesel fuels (2006 data) Synthetic diesel 0.5% Traditional diesel 99.5%

12. Conversion block Vapor conversion Feedstock purification block Pure methane and water vapor mixture Synthesis gas compression of methane Rectification block FT-synthesis block Hydrocracking Synthetic petroleum Fischer-Tropsch synthesis block - gasoline Ai 92-95 Diesel (cetane up to 75) Lubricants Domestic market. Exports. Bulked cargo railway terminal (automotive fuels and lubricants market Sales Storage tank Tank car GTL production&sales scheme

13. Expenses Construction Assembly 6 4.3 Know how 2.7 Documentation. Inspection. 7.2 Equipment 79.5

14. Other 17.3% Waste Transport disposal 39% 5.8% Catalysts 17% Workshop and Depreciation plant 10% expenses 10.7% Operational expenses

15. Economic efficiency of the project

16. Non-production restrictions • Minimumproduction– 12 billion cubic meters • Intermediary – an engineering company - is required • High probability of additional terms of cooperation

17. Conclusions GTL – science-intensive, economically efficient utilization technology GTLmarket – newmarket of quality automotive fuels Prospects – provision of remote Far North with fuel and energy

18. Independent producer Х Develop Ready to Build State support Tax exemptions Tax holidays Lower emissions Direct participation in social development of a region Technological development of the industry Basis for GDP growth State State support – industry development

19. Negative impacts of underdeveloped processing • Higher local emissions • Loss of socio-economic profit • Jobs • Tax inflow • Loss of energy resources • Industry lagging • No possibility to form a new ‘growth point’ for the economy

20. Possible solutions • Working out a stimulating mechanism through the taxation system. • Searching for possibilities to develop domestic Gas-to-Liquid technology. Patenting and licensing of this technology.

21. Thank you for attention