Economics of chemicals and fuels from forest biomass Tom Browne

1. 1 Economics of chemicals and fuels from forest biomassTom Browne

2. Annual average oil prices, $US/bbl $80 to $100/bbl: the new normal? Apart from a couple of geopolitical events in the 1970�s and 1980�s, oil has been at $20/bbl from the end of WWII to about 2004. At $20, there are not a lot of commercially-viable biomass-based opportunities for new products. Barring unforeseen events such as a glut of shale oil driving prices down, new oil production costs a lot more than drilling a hole in Saudi Arabia. The cash costs associated with deep offshore or arctic drilling, or oil sands production, imply a new long-term price of $80 to $100 which leaves lots of room for new bio-products.Apart from a couple of geopolitical events in the 1970�s and 1980�s, oil has been at $20/bbl from the end of WWII to about 2004. At $20, there are not a lot of commercially-viable biomass-based opportunities for new products. Barring unforeseen events such as a glut of shale oil driving prices down, new oil production costs a lot more than drilling a hole in Saudi Arabia. The cash costs associated with deep offshore or arctic drilling, or oil sands production, imply a new long-term price of $80 to $100 which leaves lots of room for new bio-products.

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4. Regional newsprint demand Severe drop in NA, flat in EU, growth in Asia

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6. A Lesson from Petroleum Refineries

7. Today�s Forest �Bio-refinery�

8. Scale of Refineries

9. Economies of scale vs. feed costs

10. Economies of scale vs. feed costs

11. Volume or Value?

12. Substitution of Existing Chemical Feeds Tactical approach: Requires an exact molecular replicate of existing feeds Cost, product performance will be crucial Olefins: thin margins, strong competition Bio-ethylene from Brazilian sugar cane BTX: Breakthrough required No easy path from lignin to commercial aromatics The same issues of volumes vs. capex arise

13. New Chemicals Based on Bio-properties Identify novel products based on unique biomass properties Requires strategic thinking Cost less critical if new functionalities available? Exact molecular replicate less critical? New capital infrastructure? Is this our 4%?

14. Approach Identify value-added products from wood Focus on chemicals first, then energy from residues Early economic evaluation (Bio-Pathways) Start with bolt-on additions to existing plants Improve economics of existing infrastructure Reduce costs due to shared infrastructure Build relationships with customers Lab-scale samples initially, pilot scale as demand arises Ensure product meets customer�s needs Involve engineering firms early Good estimates of capex, opex, unexpected problems

15. Long term: brownfield biorefineries Located on an existing mill site Reuse existing equipment Integrated with forestry supply logistics Build it as big as possible, consistent with supply costs Produce a cheap-to-ship intermediate Better understanding of processes and markets allows this Use all components of wood in profitable fashion Energy self-sufficient Integrated with end-users infrastructure Minimize changes to existing petro-chemicals

16. Pathways

17. Forestry-Chemical Industry: one model

18. Conclusion Biomass is bulky, wet and distributed Petroleum is cheap, dense, comes out of a pipe GWTH-scale of forestry installations: Driven by feedstock costs Implies additives, not wholesale replacement Competing in commodities will be very challenging The petroleum example is critical 4% of feed makes 42% of revenues Doing something useful with the other 96% is equally critical We can always burn the residues Combustion, fermentation are among our oldest technologies

19. Mankind�s oldest technologies The pointy stick� To catch dinner

20. Thank you for your attention Support came from Natural Resources Canada�s Transformative Technologies Program Tom.Browne@FPInnovations.ca +1 514 630 4104