When to Go Green and when Not - an industrial perspective -

Lennart Holm

1

Chairman Perstorp Group & Partner BMC Management

Greenchem November 8, 2010

Presentation

2

• Setting the Scene

• The Oil Economy

• Green Chemicals and Fuels

• The Relevant Problem

• My Conclusion

Presentation

3

• Setting the Scene

• The Oil Economy

• Green Chemicals and Fuels

• The Relevant Problem

• My Conclusion

My own story is closely linked to that of Biomass …

• Grew up in the forest / paper mills

• M Sc Chemical Engineering (Chalmers University)

• 30 years of experience from biomass - forest- and chemicals industry

• Today a combination of Entrepreneur and Board professional

• If any “red line” – it would be RESOURCE MANAGEMENT

• Two engagements I will touch upon today:

– Perstorp Group, Specialty Chemicals – former CEO / today Chairman of the board

– BMC Management, Wood Pellets – one of the founding partners / today non-executive advisor

4

BMC Management AB

• Founded 2007 by five old friends from STORA and McKinsey

• Designs, builds and operates large scale biomass based pellets plants for supply of biofuel to the power industry

• Key Success Criteria: World Class Competitiveness thru Scale and Location

• First plant under construction / start-up April 2011

– Located in Georgia, USA, in the middle of an huge underutilized pine plantation area

– Line One - Capacity 750.000 tpa / Capex approximately 180 mUSD

– Additional investments in infrastructure (railway & port facilities)

– Pilot plant for torrefaction included

– Client: German Utility Giant RWE, pellets intended for power plants in UK & Netherlands

• Second plant in pre-project phase

– Project planned to start mid 2011 with start-up H2 2012

– Location Southern USA

5BMC

Perstorp: Long History with Green Roots

• Today: Specialty Chemicals group with a 1.7 bn € turnover and 2 200 employees across the globe

– Since 1881 in the forests of South Sweden

– Started in “Green Chemistry” / Beech wood through dry distillation to Acetic Acid and Formaldehyde

– Switched to petrochemicals in the 50’s

– Become a conglomerate in the 70-80-90’s

– Merger with Neste Chemicals 2001 and focus on Aldehyde Chemistry

– Biodiesel production from 2007 (Leading producer in Scandinavia)

– Significant growth through acquisitions of additional platforms (caprolactone, isophtalic and isocyanate) in 2007-2008 6

Sulfitsprit

MeOH EtOH Finkelolja

Karbid

Acetylen

Monovinyl-

acetat

Etyl-

diacetat

PVA

PVOH

Polyvinyl

formal

Polivinyl

acetat

Polyvinyl

butyrat

Propanol

Butanol

Amyl

alkohol

Hexanol

Borneol

Propyl

acetat

Butyl

acetat

Amyl

acetat

Hexyl

acetat

Metyl

acetat

EtylacetatMonoklor

acetatÄttiksyra Eten

Acet-

aldehyd

Etyl

propionat

Etyllaktat

Diklor

acetat

Kloral

DDT

Etyl

klorid

Etylhydroxyietyl

cellulosa

Etyl

cellulosa

Oorg.

acetater

Org. Acetater el

motsv alkoholer

Monoklor

ättiksyra

Glykol

syra

Tylose

Eten

klorid

Par-

aldehyd

Mjuknings

Medel MSS

Modotiol

latex

ModotiolEten

klorhydrin

EtenoxidPostonal

Kloro

formAcet-

aldol

Kroton-

aldehyd

Butyr

aldehyd

Smörsyra

Butyl-

butyrat

ButanolEtylmetyl

akrolein

Etylpropyl

akrolein

Etylhex

aldehyd

Etyl

hexanol

Etylhexyl

acetat

Etylbutyl

aldehyd

Etyl

butanol

Etylbutyl

acetat

Butyl

acetat

Butyl

propionat

Butyl

glykolat

Dibutyl

formal

Butyl

glykol

Butyldi

glykol

Bytylglykol

acetat

Butyldiglykol

acetat

Etyl

glykol

Etyl

glykol

acetat

Eten

glykol

Etenglykol

monoacetat

Metyl

glykol

Dieten

glykol

Polyeten

glykoler

Etenglykol

diacetat

Dietenglykol

diacetat

Polyeten

glykolacetat

Metylglykol

acetatEtyl

diglykol

Etyl

triglykol

Etyl

polyglykol

Etyl

diglykol

acetat

Monoetanol

amin

Dietanol

amin

Trietanol

amin

Diklor

bensen

Bensen

Mo och Domsjö’s Chemical Tree in 1945

Källor: Skogen ger. Stockholm 1945. Svensk Trävaru och Pappersmassetidnings årsnummer 1943.

Svensk Kemisk Tidskrift 1962 s.132. Festskrift till Carl Kempe, Uppsala 1964

Biomass Bioethanol

7

Presentation

8

• Setting the Scene

• The Oil Economy

• Green Chemicals and Fuels

• The Relevant Problem

• My Conclusion

Up to 1945 utilization of oil was limited by its availability, then came the “Oil Economy” …

9

the oil

economy

2010

Oil

Price

level

coal &

biomass

economy

2007/08

Oil

Price

Peek

140 USD/bbl

Oil Price and World Production

The Oil Economy Product composition of a Naphtha Cracker

Oil Naphtha

Hydrogen

(ca. 1%)

Ethylene

(26–31%)

Propylene

(14–17%)

C4-cut

(8–11%)

C5-cut

(4–5%)

Aromatics

(18–21%)

Cracker complex in Stenungsund, Sweden

Oil is a phenomenal raw material,

concentrated energy in liquid form

10

However availability is not endless , “Peek Oil” is a reality!

11

… but we will not run out of Oil!

• Supply and demand will regulate consumption

• The consequence will be a substantially higher Oil Price

• High value applications will obviously have the highest paying capability, i.e. get continued access to oil

• When Oil demand will outstrip supply?

– Fewer new mega size findings

– More expensive and risky exploration (deep sea)

– Consumption in China, India and other fast growing regions is rising fast

12

Presentation

13

• Setting the Scene

• The Oil Economy

• Green Chemicals and Fuels

• The Relevant Problem

• My Conclusion

HydroformylationAldol reactionAllylationAcetalisationCannizzaro reactionOxidation HydrogenationOxetane chemistryEsterificationMichael addition AlkoxylationTishchenko reactionRing-open polymerizationNitrationPhosgenationIsocyanate chemistry

Perstorp – Carbon chemistry utilizing a wide range of Technologies to transform a few Basic Raw Materials into a wide range of highly Specialized Products

14

• Oil / Naptha

• Natural gas

• Electricity

• Rape Seed Oil

15

BG PP BG SI BG CA

Perstorp - Manufacturing platforms

Mixed Xylenes Ethylene PropyleneSynthesis gas

PRAL N-Bal I-Bal

2-EHNPROP

DEHP PRA 2-EHA NX 795

Bis-MPA BEPD

PA

Alkoxylates

Ethanol

Propionates

P-244

FX Plants

TMP Neo Penta

FoAc

Boltorn

Silage

SoFo / PoFo / CaFo/

Di-Penta

SoSu

Acetic Acid

Oxetanes

Natural Gas

Allylethers

MX

PIA

Benzene Brine

HMDA/IPDA

Capa

monomers

Capa polyols

Capa thermop.

Rapeseed Oil

Biodiesel

Glycerin

TDI/T80

T65

HDI/IPDI

ChlorineTDA

T100

TX

HDI DER.

OX

FX Cat

Charmor

Cyclohex.

EASAQUA

CTFDi-TMP

N-But 2-EHAL I-But

Methanol Toluene

Acetaldehyde

Caustic

FA

15

Propionic acid

3-Hydroxypropionic acid

3-Hydroxypropionaldehyde

Furan dicarboxylic acid

Butanol

PHA

Biomass

Pre-treatment

• Forestry-based

• Agricultural

residues (potato

juice, barley,

straw, etc.)

• Hydrolysis (basic,

acidic)

• Enzymatic

treatment

• Steam explosion

• Extraction

Fermentation /enzymes /

chemical transformation

Gasification of

residuals

Methacrylic acid

Acrylic acid

1,3-PDO

Furan diol

• Synthesis gas

• Biogas

Targets Challenges Activities

Sustainable industrial processes

~20 kt by 2015

Reduced carbon footprint

(>75%)

Raw material supply

Efficient pre-treatment

Process: stability, yield,

productivity

Downstream processing

New technologies

Biobutanol

VINNOVA x 2

Carbon footprint

EcoBuild

Furanics

Greenchem

PHA

Gasification

Perstorp - Chemicals from renewable feedstocks

Polyester

Acrylates

16

Choice of Conversion Technology - No Religion Some opportunities with “green” and “white” chemistries at Perstorp

CONVENTIONAL CHEMISTRY BIOCONVERSION

OF PETRO-BASED RAW

MATERIALSOF RENEWABLE

RAW MATERIALS

OF RENEWABLE RAW

MATERIALS

PROPIONIC ACID

3-HPAFURANE-BASED DIOL

BUTANOL

ETHYLENEBIODIESEL

METHANOL

SYNGAS

FUELS CHEMICALS

DIOIC ACIDS

DIOIC ACIDS

ETHANOL

ETHANOLMETHANOL

1,2-PROPANEDIOL

FURANE-BASED DIACID

OLIGOGLYCEROL

FURANE-BASED DIACID

SUCCINIC ACID

FURANE-BASED DIOL

17

Perstorp - Visionary Integration of Raw Materials and Technologies

Core competence: Applying and combining a strong

knowledge of all aspects of the chemical business

into processing of biobased raw materials, in order to

produce and market both chemicals components and

fuels of non-fossil origin

Methanol

plant

Steam

cracker

Ethanol

plant

Crushing/

refining

Synthesis

Gas unit

Oxo

aldehydes

Bio-

Methanol

plant

Polyols

Oxo

alcohols

FT-

fuels

FAME

unit

Ethanol de-

hydratisation

Biogas

Grain/sugar

Vegetable

oils

Natural gas

Fuels

Plastics

Chemicals

Perstorp SiteExternalNew Existing

18

Green Pentaerythritol as a Green Product Example Voxtar™ gives you pure performance every time

Relative cradle to grave carbon footprint comparison between

Voxtar™ M100 & M50 and Penta-fossil made

0

10

20

30

40

50

60

70

80

90

100

Penta-fossil Voxtar™ M50 Voxtar™ M100

Rela

tive c

arb

on f

ootp

rint

index (

Fossile

= 1

00)

Effect on carbon footprint (cradle to grave)

when comparing Voxtar M100 & M50 with

fossile-based pentaerythritol.

-40% -63%

19

Perstorp - Why renewable raw materials?

MARKET TRENDS & SOCIAL RESPONSABILITY

Higher general awareness of the need for a sustainable society

Business opportunity / customers want to be “green”

Greenhouse effect / global warming in focus / carbon footprint

RELIABILITY & COMPETITIVENESS

Petroleum a limited resource / increasingly expensive

Secure future reliable supply of raw materials

GROWTH and PROFITABILITY SHAREHOLDER VALUE !

20

21

Perstorp Chemistry – green vs. white conversion …Relative cost for various routes to Butanol

Perstorp Chemistry – Green vs. white conversion …Relative cost for various routes to Butanol(provided stable bioethanol prices)

oxo fermentation acetaldehyde green ethylene

if

Sugar-

cane

based

if

Wheat

based

if

Oil price

80

USD/bbl

if

Oil price

160

USD/bbl

22

23

An increased oil prices will most likely lead to a corresponding increase for renewable raw materials!

24

Additional utilization of renewable raw materials will also result in a shortage, as an example for wood supply in Europe alone a shortage of more than 200 million m3 is likely to develop by 2020

European wood supply and demand; million m3 (under bark); 2020

355–370

160–170 515–540

200–260 720–800 340–420

~380

Current forest

biomass

supply

• Mobilization

• Net imports

• Recovered

wood

Estimated supply

Estimated

gap

Estimated

demand

Non-traditional

demand (energy)

Traditional

demand:

• Pulp&Paper

• Wood products

Supply Demand

BMC Management

The future price of carbon will be determined bythe consumption of Energy and Food

25

Oil /

Coal

Agricultural

Products

97 % ENERGY

3 % CHEMICALS

95 % FOOD & FEED

5 % OTHER USES (including Chemicals)

So is “Green” good by definition?

SURPRISE - SURPRICE:

• Very Complex issue …

• Need for a Holistic view …

• Changes over time …

Clearly “Green” is not always good by definition?

26

“Green” Chemicals - BioPlastics as example …Transformation of Sugar Cane into Bioethylene / Bio PE

• Global production of Ethylene: ~120 million tpa

• What would it take to convert this to “Green Ethylene”?

– Agricultural perspective:

• Only viable option: Brazilian sugar cane

• Volume corresponds to ~240 million liters of Ethanol

• Brazilian sugar cane give ~ 6000 l/ha, year

• Surface required: 40 mHa = 60 % of Brazil’s entire cropland

• Serious competitor to food production / price increases

– Financial perspective:

• Investment in Bioethylene capacity: ~ 2000 USD/ton capacity

• The volume would require a Capex of 230 bn USD (~ 50 % of the entire investment budget for the global chemical industry under 10 years)

– Market perspective:

• Massive overcapacity would be created / prices would collapse 27

Anastas & Warners - Green chemistry principles

P. T. Anastas, J. Warner, Green Chemistry Theory and Practice (Oxford Univ. Press, Oxford, 1998)

1. It is better to prevent waste than to treat or clean up waste after it is formed.2. Synthetic methods should be designed to maximize the incorporation of all

materials used in the process into the final product.3. Wherever practicable, synthetic methodologies should be designed to use and

generate substances that possess little or no toxicity to human health and the environment.

4. Chemical products should be designed to preserve efficacy of function while reducing toxicity.

5. The use of auxiliary substances (e.g., solvents, separation agents, and so forth) should be made unnecessary wherever possible and innocuous when used.

6. Energy requirements should be recognized for their environmental and economic impacts and should be minimized. Synthetic methods should be conducted at ambient temperature and pressure.

7. A raw material or feedstock should be renewable rather than depleting wherever technically and economically practicable.

8. Unnecessary derivatization (blocking group, protection/deprotection, temporary modification of physical/chemical processes) should be avoided whenever possible.

9. Catalytic reagents (as selective as possible) are superior to stoichiometric reagents.

10. Chemical products should be designed so that at the end of their function they do not persist in the environment and break down into innocuous degradation products (biodegradable).

11. Analytical methodologies need to be developed further to allow for real-time in-process monitoring and control before the formation of hazardous substances.

12. Substances and the form of a substance used in a chemical process should be chosen so as to minimize the potential for chemical accident. Including releases, explosion, and fires.

28

Presentation

29

• Setting the Scene

• The Oil Economy

• Green Chemicals and Fuels

• The Relevant Problem

• My Conclusion

30

We all tend to have our own “favorite problem”given by narrowly defined frames to reduce complexity …

In addition, our true intentions can be questioned …

31

PoliticianRe-

election?

ScientistFunding?

IndustryleaderProfit?

NGOInfluence?

Stakeholders… true intentions ?

CitizenHigher

Material Standard?Public

servantPension?

ExpertsRecognition?

32

Planet Earth is the required system definition!!!

33

2010:

6,8 bn

people

Population growth!

34

Population consumption!WWF living planet report 2010

The Living Planet Index (LPI)Reflects changes in the health of the planets ecosystems

Our present “consumption”

35

Population consumption!WWF - The Living Planet Index 2010 (LPI)Reflects changes in the health of the planets ecosystems

Worst in Class:

1. UEA (10,7)

2. Qatar (10,5)

3. Denmark (8,3)

4. Belgium (8,0)

5. USA (8,0)

6. Estonia (7,9)

7. Canada (7,0)

8. Australia (6,8)

9. Kuwait (6,3)

10. Ireland (6,3)

11. Netherlands (6,2)

12. Finland (6,1)

13. Sweden (5,9)

…74. China (2,2)

Our present “consumption” = 1,5 earths

1

Presentation

36

• Setting the Scene

• The Oil Economy

• Green Chemicals and Fuels

• The Relevant Problem

• My Conclusion

A few conclusions …• “Green Products” unfortunately more talk than impact

– Fossil based raw materials will remain competitive for many applications also with high oil prices

• Efficient and easy to use / can in many cases be the most “green” solution

• Supported by existing infrastructure / huge investments made / capital limited

– A holistic evaluation (benchmark LCA’s) would likely prove many “green products” less favorable than believed

• It is vital to compare alternative solutions / be open minded / chose the best

– Limited availability / access to renewable raw materials limits potential

• “Green Products” have a potential / they will contribute to a more sustainable world

– We need to widen the definition of “Green” / apply “Green Chemistry Principles”

• It about total resource utilization, not conversion technology or raw material used

– Good examples do exist, the most significant being Bioethanol in Brazil

– The “Greenest” product is the one never produced / save resources 37

A few more conclusions …

• Stakeholders are “using” the environment for their own purposes

– Lack of true vision , conviction and patience

• Oversimplification and narrow defined topics bring suboptimal solutions

• Speedy results overshadow true solutions

– Enormous amounts of public and corporate funding a complete waste

• Marketing and image building rather than serious efforts

– Question yourself!

38

39

Overall Challenge is a huge – a need to Manage Globally: (1) Population growth, (2) Consumption growth and (3) Fair distribution

40

1 Planet Earth!

The Conclusion

I will try to contribute / influence with

my small share by…

• questioning my / our true motives

• applying a holistic perspective

• carefully evaluating the optimal use of

resources and capital

• never giving up / keep driving forward

We all have a long way to go …