HLG Chemicals Working Group Feedstock, Energy & Logistics February 7, 2008 Brussels

Raw Material Change in the Chemical Industry The General PictureDr. Jrg Rothermel, German Chemical Industry Association (VCI)

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Content Raw materials in the chemical industry a general overview Use of renewable raw materials in the European chemicalindustry Motivation for the use of renewable raw materials Economical advantages Security of supply Climate protection Competition in use of renewable raw materials Technical use concepts of renewable raw materials in the chemical industry Summary of messages

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Raw Materials in the Chemical Industry A General Overview

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Basic Feedstock Demands in the Chemical Industry

Raw Materials for the Chemical industrymust be available in a stable and good quality Security of supply must be garanteed Raw materials must be available at world market prices

Oil and gas meet the demands in an approved way since a long time4

Raw Materials in the Chemical Industry- AlternativesRenewable Resources Syngas

Olefins Coal Gas Oil Acetylene

Value Added Chains

Aromatics

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Feedstock in the Chemical Industry (organic chemicals)

Carbon containing raw materials are the basis for theproduction of organic chemicals: Mineral oil derivatives Natural Gas Coal Renewable raw materials Biomass is the only renewable carbon based feedstock for the chemical industry European chemical industry will increase the share of biobased raw materials as only renewable source of carbon where it is technically and economically useful and sustainable European/world chemical industry needs a flexible feedstock base also in the future to meet the demands of the customers6

Use of Renewable Raw Materials in the European Chemical Industry

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Present Use of Renewable Raw Materials in the Chemical Industry

Chemical Industry in Europe has been using avariety of biobased renewable raw materials since a long time 8 to 10% of feedstock for the organic production of the European chemical industry is biobased: 74,1 Mio t/y fossile raw materials At least 6,4 Mio. t renewable raw materials Renewable raw materials are already used if they are cheaper than fossile raw materials If they offer technical advantages in comparison to fossile raw materials (even if they are more expensive than fossile raw materials)8

EU-25 Industrial Use of RRM (2003)Total industrial use of RRM: ~ 9 Mio. t/yVegetable Oil & Fats 31% Starch 35%

Other 4%

Cellulosics & Fibers 16%

Sugar 14%

estimations based on data from: EU, IENICA, EHGA, CIRFS, EIHA, EuropaBio, AAF, Rper, Kaup, EurObservER, FAOSlide 9

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Motivation for the Use of Renewable Raw Materials

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Motivation for the Use of Renewable Raw Materials

Competitiveness Economical advantages: raw materials with morecompetitive prices Technical advantages: improves processes and products Sustainability (ecological, economical and social aspects) Innovation competitive edge for EU industry Security of supply: fossile feedstock is limited, biomass seems unlimited Climate change: biomass is considered as CO2neutral (biomass based products may have a better carbon footprint)11

Economical Advantages

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Agricultural commodity prices are rocketing

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Economical motivation: competitive raw materials

There was a bigger price difference between fossile andrenewable raw materials in the past Raw material prices have been fluctuating a lot due to multiple influences, e.g. weather climatic change, rising demands for food feed and fiber, regional programs, Result of a study by IFEU for VCI: Raw materials cost are the most significant cost part of production using renewable raw materials Chemical industry needs renewable raw materials at world market prices

Trade aspects: presentation of R. Quick14

Political motivation: security of supply

Security of Supply

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Biomass Potentials Evaluation of future biomass potentials is very difficultfactors which will influence the potentials e.g.: - many

Growth in population Food consumption Climate change Future efficiency in techniques to produce and to convertbiomass

Water availability Other ressource availibility. Uncertainty in the calculation of future biomass is very high Political target setting must be based on sustainability More efficient techniques for use are needed (biorefinery concept) More efficient techniques to produce biomass are needed (plantbiotechnology)16

Biomass Avalibility in 2050: Results German IFEU-Study 2007Oil Equivalents (bn tons) * IEA 2006

22 20 18 16 14 12 10 8 6 4 2 0

Primary Energy demand in 2050*

Biomass availability will bestrongly limited in the future Primary energy need will not be covered by biomass (best case only 70%, worst case only 30%) Most efficient techniques for the use of biomass must be evaluated Other renewable energy sources especially for heat and electricity production must be developed17

Minimum

Maximum

Biomass availability for technical Purpuses in 2050

Biomass Availability by RegionsCaribean and. South America Africa south of Sahara Middle East and Northern Africa East Asia South East Asia

North America Former Soviet Union Pacific

Europe East 3%

Europe West 4%

55 % of the biomass in 2050 will be harvested in Africa South of Sahara, der Caribbean and South America and in the former Soviet Union.18

Role of Green Biotechnology Plant biotechnology and conventional crop protection products aretwo valuable and complementary tools to sustainably meet increasing demand for higher agricultural productivity, food security, feed availability as well as renewable resources. Plant biotechnology can assist in protecting plants from pests, diseases, fungi and abiotic stresses (e.g. drought, heat, cold, and soil salinity) and can lead to more effective weed and pest control and more efficient use of crop protection products. Because of the rising demand for agricultural products, limited farm land and availability of biomass we can keep only pace with the prospective agricultural requirements if we use all the options available for increasing yields and safeguarding harvests. Favorable harmonized conditions to use plant biotechnology are needed

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Competition of Different Uses of Renewable Raw Materials

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Competition in the Use of Biomass and Landuse Competition in biomass use: Food Feed Electricity and heat production Transport fuel Building materials Feedstock in the chemical industry Paper industry Wood industry Severe competition in the use of biomass and also in the landuse to produce the biomass

Economically, ecologically and socially most efficient usemust be evaluated21

Worldwide Material Streams: Fossile and Renewable Raw MaterialsOil, gas + coal~ 10 billion t Oil Equivalents per year 97% energy

3% chemistry

Agricultural products6-7 billion t Dry Matter per year 95% food energy living

5% chemistry like22

Use Competition

Chemical sector is the smallest user of fossil rawmaterials as feedstock in comparison to energy production and transport fuels Chemical sector will also be the smallest user of renewable raw materials in comparison to energy production and transport fuels Because of the use competition chemical industry risks to become the victim of the subsidisation of renewable raw materials in energy and transport sector Already today prices of already established renewable raw materials are rising because of increasing demand in other technical sectors, e.g. tallow, vegetable oils23

Climate Protection

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Political Motivation: Climate Protection In principle CO2 release during combustion of plant material or useas feedstock in the chemical industry is counterbalanced by the CO2 that plants remove from the atmosphere during photosynthesis. Thus the use of plant material has a favorable carbon balance.

Carbon content is not the only parameter which must be consideredby calculating the climate protection importance of biomass Important is a sustainable production and use of biomass including a comprehensive life cycle assessment Agricultural production Harvesting and transportation Processing Recycling

recognize

Biomass can be an attractive feedstock to prevent excessiveemission of green house gases as long as its production is following certified sustainability criteria25

Political Motivation: Climate Protection - Example Biofuels

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Comparison of Efficiencies in Biomass Use Technical use of biomass can be for energy production,transport fuels and feedstock for chemical industry Highest saving potentials in fossil energy and CO2-emissions by use of biomass in energy production Efficient processes for energy production are already known and practically available Progress in research and development necessary to further enhance the efficient use of biomass for the production of transport fuels and as feedstock in the chemical industry.

From a feasible point of view current focus on sustainableenergy and biofuel production is a reasonable way of biomass use for a foreseeable future Sustainable use of biomass in other sectors must be developed27

Technical Concepts for the Use of Renewable Raw Materials in the Chemical Industry

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3 Generations of Use of Biomass in the Chemical IndustryYesterdayUse of naturally synthesized Molecules as they are Main Part of Today Use Further Potential: low

TodayUse of biomolecules in biotechnological Processes Today very high dynamics Potential: big

TomorrowUse of Biomass in Biorefineries to produce Basic Chemicals Today: basic Research Potential: very big

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1st Generation: Use of Naturally Synthesized Molecules Examples Plant oils and fats for tensides Oils as Lubricants Cellulose as an additive in paints and adhesives andas fiber for textiles and compounds

Starch as adhesive and as material for packagingmaterials

Active ingredients for pharmaceuticals Market for these raw materials is known and covered Growth with the general market growth Inefficient use of biomass because often not more than30% of the total biomass can be used30

2nd Generation: Biotechnology In principal most fine chemicals and intermediates can beproduced using renewable raw materials (carbohydrates, proteins, oils and fats) in biotechnological processes Presently the market with the highest dynamic Potentials often overestimated Mc Kinsey-Study 2000: Between 25 and 30% of al chemicals will be produced by biotechnological processes in 2010 Mc Kinsey 2005: Only 5 to 10% will be possible until 2010 BREW-Study: under optimal conditions (70/t price for saccharose and 75 $/barrel oil price) until 2050 max. 1/3 of the intermediates will be produced by biotechnological processesmore: presentation of T. Jostman31

3rd Generation: Biorefineries Production of Basis Chemicals Concept of biorefineries: Extraction of useful plantcomponents (20%) and (chemical/biotechnological) treatment of the rest (Lignin, Cellulose 80%) to produce basic chemicals Further Research and development is necessary to develop the processes Possible advantages: Present production structure can be maintained; no really new investments are necessary Problem of competition in the use of biomass is smaller, because unspecific biomass can be used completely Possible problems: Effectiveness of processes from the thermodynamic point of view: process is very near to the burning of biomass

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Biorefinery in a Nut ShellDry Matter Energy-Production

Lignin

Plastics

Carbohydrates

Chemicals

Vegetable oils

Fuels

Proteins

Animal feed33

Renewable Raw Materials in the Polymer Sector

Beside fine/specialty chemicals renewable raw materialsget more and more importance in the polymer sector e.g. Natural polymers: Starch Cellulose others Processed polymers (examples): Polylactid Acid (PLA) Polyhydroxybuturate (PHB) One important criteria: biodegradabilitymore: presentation of Plastics Europe34

Hurdles in the Use of Biomass in the Chemical Industry Technical hurdles A lot of R&D to optimize processes to increase efficiencyis still to be done Economical hurdles Biomass price is a major factor in the chemical production based on renewable raw materials, future of biomass prices are very uncertain. Imports at world market prices Logistic hurdles Infrastructure must be developed Wide spread of biomass limits development of large scale production plants (economically and ecologically)

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Summary of Messages (1)

Chemical industry needs carbon as basic unit forthe production of organic chemicals: all carbon sources (fossil and renewable) can be used but there are the same demands concerning availability, quality and prices for all sources Using renewable raw materials is not a matter of substituting feedstock basis but more of broadening Chemical industry needs also competitive prices for renewable raw materials, at least access to world market (prices)

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Summary of Messages (2) There is a total and regional limited availability of biomass Only a part of the world energy and feedstock demand can becovered Most efficient technologies for using renewable raw materials for energy supply and use in chemical industry must be developed: support of governments for R&D is needed We must be open to all technologies for increasing the amount of available biomass, e. g. plant biotechnology: harmonised political conditions for R&D and practical use of these technologies must be set Renewable raw materials can contribute to improved sustainability which has to be assessed case-by-case: Whole life cycle must be considered Most efficient technologies for the use must be applied Political target setting must be very careful and based on sustainability criteria37

Summary of Messages (3)

Present use of renewable raw materials especially inenergy and transport sector can be further improved

New technical concepts must be developed This means for the chemical industry increased use of white biotechnology and evaluating the concept of biorefineries Support in R&D is needed

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Backup

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EU-25 Industrial Use of RRM (2003)Chemical Industry: ~6,4 Mio. t/y Other Industries*: ~2,6 Mio. t/y

74,1 Mio. t petrochemical and about 6,4 Mio. t renewable raw materials are used in the EU-25 chemical industry in 2003, i.e. roughly 8 % of the raw materials are RRM.

10% 8% 6% 4% 2% 0%EU-15

EU-25

6% 1999

8%

* paper industry, natural fibre using industrySource: FNR, GermanySlide 40

2003

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Oleochemical Use of Oils and Fats in EU-25Technical Use in EU: 2,8 Mio. t (2003)Animal Fat Fish Oil

37%

43%Castor Oil Palm und Soybean Oil Coconut OilSlide 41

20%

Rape Oil Sunflower Oil Line Oil Canola Oil

Source: based on data from EU, IENICA, Kaup 41

Industrial Use of Starch in EU-25Food 47%

Feed 4% Chemistry, Pharma & Industrial 14% Paper 28%

Use of Starch in Europe: 9 Mio. t (2005)42

Source: aAf, www.aac-eu.org ( percentage by value)Slide 42

Carbohydrates in Fermentation in EU-25Saccharose 16% Glucose 29%

Starch 24%

Molasses 31%

Starch & Sugar Fermentation Feedstocks in Europe: 3,8 Mio. tSource: EuropaBioSlide 43

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Technical Advantages: More Simple Processing, Better products

Using complex biomolecules (carbohydrates, fatty acidsfrom vegetable oils and fats, pigments, active coumpounds ) as they are Better using the already done synthesis work of the nature to start with complex molecules than to to built up complex molecules from ethylene or propylene Examples: Tensides from vegetable oils and fats Lubricants from vegetable oils and fats Adhesives from starch and cellulose Polymers from starch and cellulose

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Economical Motivation: Competitive Raw MaterialsProduction costs of ethanol from different sourcesEthanol EU (sugar beet) Ethanol EU (wheat) Ethanol USA (corn) Ethanol Thai Tapioca Ethanol Bazil (Cane) Gasoline (fob Rotterdam) Gasoline (NY harbour) 0 10 20 30 40

US Cent/l5045

Source: Christoph Berg, F.O.Lichts Sugar & Ethanol Brazil 2005

Availibility of Biomass in EU 27The usable agricultural area of the EU-27 amounts to 183 Mio. ha. Thereof, about 108 Mio. ha is arable land. Roughly 1/3 of the crop land will be globally available for non-food crops by 2040. Just as much land will be available EU-wide. Hence, EU-27 will potentially have roughly 61 Mio. ha of usable agricultural area including 36 Mio. ha of arable land for RRM by 2040.

Assuming a current average yield of 10-15 t/ha the potential amount of RRM sums up to about 360-540 Mio. tons.

Slide 46

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Availibility of Biomass Global Estimates

arable land forecast (2040):

2,8 bn. ha

Using a scenario assuming a world population of 9 billion by 2040 results in the following supply: Demand for Food: 1,8 bn. ha (65%) Availability for Non-Food: 1,0 bn. ha (35%)

Folie 47

Source: C.GESSA AND F.TRIFIRO, THE GREEN REVOLUTION FOR CHEMISTRY, International South Europe Symposium on Non-Food Crops: From Agriculture to Industry, Bologna, 15-16 May 2003 47

Regional Distribution of Biomass Only 10 to 16% of the expected primary energy consumptionin Europe will be covered by biomass produced in Europe

Biomass will not solve the problem of energy imports intoEurope Europe will have to import the biomass which is needed to meet the European biomass strategy The Chemical industry needs (renewable) raw materials at competitive prices for the world market but is faced the strong use competition of fuel and energy sector To reduce the fuel import dependency of Europe efficient technologies for other alternative energy production must be developed

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World Chemical Sales in 2004 in Billion Euro600 500 400 300 200 100 0EU-25 Asia USA Latin America Other* Rest of Europe49

586 507

Total: 1779 billion Euro415

% 5 : d se a -b io B100 98

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