World Heavy Oil CongressPuerto La Cruz, Venezuela

November 3 – 5, 2009

ETX Systems Inc. © 2007

IYQ Upgrading – An Industry Altering Technology for Primary Upgrading of Heavy Oil

Executive SummaryIYQ Upgrading is an industry altering primary upgrading technology, Compared to industry standard of Delayed Coking, IYQ has

9% liquid yield advantage (demonstrated in 1 bpd pilot)hydrogen retention advantage (demonstrated in 1 bpd pilot)25 – 30% capital scope advantage9% emissions advantage

Combined impact of the above advantages is IRR of 25%

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BACKGROUNDIEA projects a 45% increase in energy demand between 2006 and 2030 with oil continuing to be the dominant fuelChina and India account for over half of the incremental energy demand to 2030, while demand in the OECD regions fallsWorld oil demand is projected to increase from 85M BPD in 2007 to 106M BPD in 2030 – an average growth rate of approximately 1% per year

ETX Systems Inc. © 20073IEA World Energy Outlook 2008, November 2008

The Future is Unconventional Heavy OilProduction of conventional light oil has peaked and will begin declineWorldwide crude supply is becoming heavier and more sourSignificant investment will be required to add capability to process heavier, sour feedstockCanada and Venezuela have 2/3 of the world’s known heavy reserves2 million bpd of incremental oil sands production is scheduled to come on line over next 15 years in Western Canada

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Conventional Light/Med Conventional Heavy Oil Sands

CAPP Crude Oil Forecast, Markets & Pipeline Expansions, June 2009

Current production level

The Requirement for UpgradingPrimary Upgrading is the conversion of resid into distillable liquids suitable for transportation in a pipelineSecondary Upgrading is a hydrogen addition process to make a product suitable as feedstock for a conventional refineryOpportunity to directly capture the value associated with the heavy oil differentialPrimary Upgrading captures 2/3 of the upgrading margin with 1/3 of the capital investment “sweet spot”

ETX Systems Inc. © 20075

Adapted From Purvin & Gertz 2007

Heavy Oil Value ChainAthabasca

Bitumen

Refined Products

Sour Synthetic

Crude

8 API, 4.8% Sulfur

18% Distillate & Lighter

32% Gas Oil

50% Resid

> 50 API, < 0.003% Sulfur

57% Gasoline

43% Diesel / Jet Fuel

33 API, 0.2% Sulfur

20% Naptha & Lighter

50% Distillate

30% Gas Oil

PRIMARY

UPGRADING REFININGSECONDARY

UPGRADING

20 API, 4.3% Sulfur

15% Naptha & Lighter

30% Distillate

55% Gas Oil

Sweet Synthetic

Crude

The Science of UpgradingAll primary upgrading schemes produce 3 streams – distillable liquids, non-condensable gas, and a carbon-rich byproductObjective is to maximize distillable liquids while minimizing non-condensable gas and byproduct

ETX Systems Inc. © 20076

The Economics of UpgradingRevenues associated with upgrading will be enhanced by higher liquid yields and higher quality of liquidsRequired capital scope and operating expense to achieve increased revenue must also be consideredIn the case of hydrogen addition processes such as LC Fining, top line revenues may be superior to delayed coking but associated capital and operating expenses result in inferior business caseCapital costs for secondary upgrading can be double those of primary upgrading processes such as IYQ UpgradingPrimary upgrading targets capture of the heavy or “coking” margin while secondary upgrading targets a margin more closely linked to the inferior “cracking” margin more closely linked to refineriesOver the next decade, one hundred billion dollars of new investment in primary upgrading infrastructure is required to mesh increasing heavy oil supplies with existing refinery infrastructure.

ETX Systems Inc. © 20077

Economic Returns in Upgrading – The Heavy Oil DifferentialHeavy Oil Differential – defined as price difference between WTI (Cushing, OK) and LLB (Hardisty, AB)Bitumen producers can hedge against fluctuating bitumen pricing by extension into primary upgrading

ETX Systems Inc. © 20078

0.0%

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60.0%

Heavy Oil Differen

tial (%

)0.00

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Heavy Oil Differen

tial ($

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IYQ Upgrading – The TechnologyAn “industry-altering” technology for the primary upgrading of heavy oil that converts residue (“bottom of barrel”) to distillable liquidsIYQ Upgrading

Novel combination of two commercially proven technologiesResidence time of the fluidized solids and liquid feed is optimizedAssociated lower reactor temperature maximizes liquid production while minimizing gas and coke byproducts

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Fluidization gas

Liquid feed

Fluidized solids

Liquid Products

Gas, CokeByproducts

IYQ Upgrading Capital AdvantageKey is a real reduction in capital scopeETX’s claim to capital advantage is driven by two main factors – a simplified flowsheet and the continuous nature of the IYQ process

Simplified flowsheet - no requirement for distillation or solvent deasphalting steps to prepare resid; ultimately, a simpler flowsheet results in less “pots and pans” and a lower capital costthe continuous nature of fluid bed processes eliminates the duplication of equipment related to the switching of delayed coking drums

ETX Systems Inc. © 200710

IYQ Upgrading Yield and Quality AdvantageIYQ Upgrading is a continuous process, eliminating the loss of potential product related to delayed coking drum cycle requirementsIn contrast to the “well-mixed” nature of other fluid bed coking approaches, the ability of solids in the ETX reactor to flow as a “plug” from inlet to outlet, prevents loss of liquid yield due to short circuiting of unreacted or partially reacted feedRelative to competing fluid bed processes, reactor temperatures can be reduced significantly and reactor products can be quenched quickly - these are key attributes for maximizing the yield of and reducing the generation of incondensable gasesOn bitumen feeds typical of the Athabasca Oil Sands, IYQ Upgrading will provide an incremental 9 vol% yield of quality distillable liquids - the work that ETX has done in support of yield and quality claims has been extensively reviewed and vetted by recognized industry experts

ETX Systems Inc. © 200711

IYQ Upgrading Scalability and Environmental FootprintIYQ Upgrading is well suited for applications as low as 20,000 BPD

Opportunity even more compelling for field upgrading opportunities with thermal producers

Lower capital intensity associated lower environmental footprintGreater liquid yields and lower byproduct formation ultimately translate into 9% reduction in upstream lifecycle CO2e

Downstream, further reductions in CO2e emissions and energy savings may be possible due to the higher hydrogen content of the IYQ Upgrading SCO

ETX Systems Inc. © 200712

IYQ Upgrading – The BenefitsCompared to delayed coking, IYQ Upgrading

Produces higher quality liquids hydrogen retention advantageHas capital scope reduction of 25 - 30%Increases liquid yield by 9% (whole crude basis)Reduces upstream lifecycle GHG (Green House Gas) by 9%Can be deployed at smaller scale without compromising economicsDoubles project IRR (Internal Rate of Return) – incremental $10 per barrel netback

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+ hydrogen retention advantage

+ emissions reduction advantage

$0

$2

$4

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$12

Liquid Yield Advantage

Operating Advantage

Capital Advantage

Netback Advantage

Incr

emen

tal V

alue

$/b

bl

IYQ Advantage vs. Delayed Coking

Incremental Value of IYQ UpgradingRigorous benchmarking has been done against delayed cokingIYQ Upgrading is shown to have a $15,000 - $25,000 advantage per bitumen barrel of nameplate capacityIYQ incremental value over DC is ~$20,000 per bpd @ US$80 WTICap advantage contributes approx 40% of incremental value @ US$80 WTI – incremental value from yield increases as crude prices increase

ETX Systems Inc. © 200714

60,000 BPD, 12% Discount, 90% Plant Utilization

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emen

tal N

PV12

WTI(US$)

IYQ Incremental Value Over DC

IYQ Capital Advantage IYQ Yield Advantage

Navigating the Heavy Oil Differential

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Delayed coking typically requires a differential of 25% – 35% to achieve commercial returnsIYQ Upgrading can provide commercial returns with heavy oil differential as low as 15%

IYQ 25% -35% IRR

IYQ 10% -25% IRR

DC 10% -20% IRR

Heavy Oil Differential defined as WTI Cushing – LLB Hardisty

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Heavy Oil Differen

tial (%

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End ProductEnd product from IYQ Upgrading will be bottomless sour SCOThere is an established market for sweet SCO and it has recently been trading at a premium to light crude

bottomless (no resid material) yield more refined products elevated amounts of VGO yield more dieselDiesel trading at a premium to gasoline further supports favourablepricing of SCO relative to conventional crude

ETX believes that, over time, the pricing of sour SCO should be at minimal discount to the price of sweet SCO - that will be dependent on sufficient hydrotreating infrastructure being built

ETX Systems Inc. © 200716

MODELING IYQ UPGRADINGFundamental assumption is that, over the long term, delayed coking will drive heavy oil differential – i.e. investment in upgrading capacity will not occur unless delayed coking project can attain IRR of 12%

For a given WTI price, differential will be set such that delayed coking can achieve an IRR of 12%

Model is used to quantify incremental value associated with IYQ advantages

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entia

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WTI (US$)

Differential vs. Crude Price

8%

10%

12%

14%

16%

DC IRR's

MODELING IYQ UPGRADING

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IYQ IRR is 27% @ US$80 WTI (vs.12% for delayed coking) and increases as bitumen price increases

($8,000)($6,000)($4,000)($2,000)

$0 $2,000 $4,000 $6,000

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Delayed Coking IYQ Upgrading

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IRR

WTI(US$)

Project IRR's

Delayed Coking IYQ Upgrading

IYQ Upgrading Modeling ImplicationsAs per the modeling of IYQ Upgrading, over the 30 year life of a typical plant with 90% utilization and a 12% before tax hurdle rate, we expect the incremental NPV over delayed coking to range from ~$16,500 per barrel at low crude prices (US$60 WTI) to over $27,000 per barrel at higher prices (US$120 WTI)Deployed at a 60,000 bpd scale, this represents an incremental value of approximately $1 billion at the low end to over $1.6 billion at higher prices

ETX Systems Inc. © 200719

CONCLUSIONETX’s fluid bed coking reactor is a revolutionary technology developed to convert heavy crude feedstock, such as Athabasca Bitumen, into a bottomless synthetic crude oil, and to provide the following key benefits to the primary upgrading market:

Maximize saleable liquid productsMinimize low value byproductsSubstantial capital and operating cost advantageReduced environmental footprint including GHG emissionsSuitable for field upgrading and integration with thermal production,Produce pipeline stable SCO with no diluent required to transport

IYQ Upgrading changes the economics of primary upgrading and can facilitate feasible, financeable primary upgrading projects that may otherwise not be able to get off of the ground

ETX Systems Inc. © 200720