XTL: Opportunities and Challenges

XTL: Opportunities and Challenges Jan van Schijndel, Shell Global Solutions Jornadas Latinoamericanas de Refinación – Instituto Argentino de Petróleo y del Gaz Mendoza, 1 November 2006

Presentation Overview • What is XTL • Industry Overview • XTL Products • Potential Impact of XTL Products • Overview of Pearl GTL Project in Qatar

High temperature (Fe)  Lighter products XTL = GTL, CTL or BTL “The synthetic fuels continuum” Low temperature (Co) Middle Distillates What is ‘XTL’ ? GTL G Shell Gasification Process Natural Gas BTL B Biomass Syngas Gasifier CTL C Shell Coal Gasification Process Identical High Quality Synthetic Products Fischer-Tropsch process Coal

Worldwide GTL Capacity Announcements Source: Purvin&Gertz

Catalyst + + Water Fischer-Tropsch Distillates Carbon monoxide Hydrogen Shell XTL Technology & Fischer Tropsch

Shell XTL Technology Conversion Air Separation Waxes Solvents Detergent feeds Air Raw FT products FT Synthesis Hydrocarbon Products Oxygen Naphtha Kerosene Gasoil Waxy Raffinate Gasification Separation Natural Gas Synthesis Gas Byproducts: Nitrogen, Water, Bio-sludge

Characteristics of the XTL Industry • Capital intensive • Technology based • High complexity • Value chain integration • High entry hurdles  Few large players • GTL led by Qatar • Long lead times from concept to start-up

Pearl GTL, Qatar World Scale Plant - FID July 2006 - End decade start-up Bintulu Commercial Plant - 1993 Amsterdam Pilot Plant - 1983 Amsterdam Laboratory – 1970’s Shell GTL from Laboratory Bench to World Scale Plant

Algeria Oryx II Pearl II ConocoPhilips SasolChevron Marathon Potential XTL Capacity Build-up 1,000,000 900,000 Bintulu 800,000 Oryx Escravos 700,000 Pearl ExxonMobil 600,000 500,000 Capacity (bbl/day) 400,000 + Potential projects in Iran, Egypt, Indonesia, Bolivia & other locations 300,000 200,000 + Potentially ~300,000 bpd CTL 100,000 0 2010

Production Costs Differs for GTL, CTL & BTL Equivalent Crude Oil price [$/bbl] 100 50 0 GTL CTL BTL (Indicative figures only)

XTL Capacity Build-up Factors • Markets for bulk materials and equipment – capacity & costs? • EPC market – capacity & costs? • Technical scale-up – risks? • Oil price – remaining high? • Financing – capacity & appetite? • Qatar: end of ‘moratorium’? • Specialities markets – saturation? • CTL - CO2 issue? Assumption: 0.8 mln bpd ~ 33 mln ton/a by 2015

Core XTL Gasoil Cleaner burning - emission benefits Normal Paraffins Detergents feedstock - cost competitive Specialities XTL Base Oil Highest quality - lowest cost Indicative Relative Volumes XTL Products LPG Commodity XTL Naphtha Paraffinic – excellent cracker yields

XTL ‘Standard’ Naphtha: % paraffins ~100 ~70 Kerosene: Smoke Point 110 25 Gasoil: 75 - 80 46 - 50 Cetane number Density ~0.78 0.82 – 0.845 (Gr. III) Base Oils: Viscosity Index 130-145 125 -130 Oxid. Resist. 13,500 9,500 XTL Products: Unique Properties Clear, clean burning products, biodegradable, virtually free of sulphur and aromatics

XTL Naphtha World Demand (ktpa) • The projected XTL Naphtha production by 2015 (~ 8,000 ktpa) is insignificant compared with current world demand and projected demand growth • The quality of the XTL naphtha (100 % paraffinic) will offer higher yields in crackers and/or allow blending with inferior quality naphtha • GTL Naphtha from ME projects will predominantly be consumed in the Asia Pacific region

XTL Gasoil World Demand (ktpa) • The projected XTL Gasoil production by 2015 (~ 20,000 ktpa) is insignificant compared with current world demand and projected demand growth • The low density/high cetane XTL gasoil will be an attractive blending component for refineries with gasoil pool density / cetane constraints • GTL gasoil for the Middle East will primarily flow to the gasoil deficient European market

Premium Retail Fuel Neat XTL Fuel in Advanced engines Refinery Blending Commodity Gasoil Potential Applications of XTL Gasoil Potential Value Potential Market

London Toyota trial China Michelin Bibendum Challenge Thailand Shell Pura Diesel Germany, Austria, Netherlands, Italy, Switzerland Germany Fleet trial with Volkswagen Continued XTL Fuel Market Developments Japan Fleet trial London Bus trial with Daimler-Chrysler Japan Aichi hybrid bus USA Dept. of Transport Yosemite Water Greece Shell Diesel 2004 China Taxi trial Shanghai 100% GTL Fuel Diesel/ GTL Fuel blend China Bus trial Shanghai

Emission Benefits of XTL Fuel Existing engines Optimised engines Conventional S-free diesel 100% 50% 0% NOx PM HC CO % reduction 5-45% 25-40% 45-60% 40-85% • XTL Fuel will reduce criteria pollutants from new AND existing vehicles • Engines optimized to run on XTL fuel can deliver further emissions reductions,particularly for NOx • Emissions benefits vary depending on vehicle type and technology level

XTL Fuel: Mega-cities Air Quality Solution • XTL Fuel most beneficial in Mega-cities where air quality is under strain • XTL Fuel is cost-effective in making use of existing infrastructure • Expression of interest: • China • Japan • US / California • EU (UK, Germany, Netherlands) • Mega-cities: • Population ~ 10 million people • and with air quality issues • Number: 27 worldwide • Notional number of vehicles: • ~ 10,000 buses • ~ 40,000 taxis One world-scale XTL plant can supply neat XTL Fuel to buses and taxis in: 10 to 15 Mega-cities Growing importance of clean public transport

XTL Normal Paraffin World Demand (ktpa) • If included in half of the projected XTL projects the XTL Normal Paraffin (NP) production by 2015 (~ 700 ktpa) is comparable with the projected world demand growth • NP from XTL would allow LAB plants to be located away from refineries and/or to be de-bottlenecked irrespective of refinery constraints • Manufacturing costs for XTL Normal Paraffin is well below that of conventional plants using kerosene as feedstock

XTL Base Oils World Demand (mln t/a) • XTL Plants will offer highest quality (light) Base Oils at lowest costs • Base Oil production from one world-scale XTL plants nearly saturate the market demand for Group III+IV • Currently high growth rate for Group III+IV at the expense of Gr. I and this trend might be accelerated with the emergence of the XTL Base Oils • Heavier viscosity grades will continue to be produced from crude oil

Pearl GTL - Project Overview Ethane Propane Butane Condensate Sulphur North Field GTL Naphtha GTL Gasoil Normal Paraffin GTL Base Oils • Fully integrated project: “From Reservoir to Market’ • 1,600 MMscf/d well head gas • ~120,000 b/d Condensate, LPG & ethane • 140,000 b/d GTL products • Based on proprietary Shell GTL technology • Start-up: end of the decade in two phases

Pearl GTL design is fully underpinned by the operational experiences of Bintulu • Only limited scale-up from Bintulu on equipment level From Bintulu Shell MDS to Pearl GTL • Bintulu start-up in 1993, 12,500 bpd expanded to 14,700 bpd in 2003 • ~10 years of experiences resulting in world class operational excellence • Commercial scale Shell GTL Technology proven to be safe, reliable and profitable • World-wide experiences in the marketing of GTL Products

1440 meters 1610 meters Process: Shaft power consumption 1,200 MW Heat consumption 850 MW Steam generation 8,000 tons/hr Catalysts (5 processes) 5,630 tons Pearl GTL Onshore: Huge Dimensions Construction: Plot area: 250 ha Equipment number >3,000 items Piping 1.5 mln LM Structural steel 105,000 tons Concrete 490,000 m3 Cables 7,600 km Heavy lifts > 1,200 tons > 24 I/O: 45,000 Field Instruments: 50,000 Manhours: >170 mln Peak workforce: 35,000 FEED: Number P&IDs ~ 1000 Number documents ~ 4,600 Number Volumes ~ 120

Presentation Overview • What is XTL • Industry Overview • XTL Products • Potential Impact of XTL Products • Overview of Pearl GTL Project in Qatar • Summary

Opportunities and Challenges from XTL • XTL = GTL, CTL and BTL • The growth of XTL capacity is likely to fall short of earlier projections • Potential volumes of ‘core’ XTL products (naphtha and gasoil) are insignificant relative to projected global demand growth • Naphtha and gasoil could offer attractive blending options to refiners • XTL specialties products (normal paraffin and base oils) will saturate projected demand growth • The Pearl GTL Project in Qatar is reality and will signify a step-change in XTL products entering the global oil products markets

XTL: Opportunities and Challenges