AIChE/SPE Heavy Oil Workshop - ETX Systems Systems AICh…The Quality ChainThe Quality Chain Production Primary Upgrading Secondary Upgrading Refining 100 e nt 0 Perc 50 Pitch Distillate

The value proposition in increased p pprimary upgrading yieldsAIChE/SPE Heavy Oil Workshop

February 23-24, 2010

ETX Systems Inc. © 2007

The World is UnconventionalThe World is Unconventional

Global reliance on fossil fuels will continue for the foreseeable future

Incremental barrels will be heavy

Barrels require additional processing (upgrading) to meet conventional refinery specifications


The Quality ChainThe Quality Chain

Production Primary Upgrading

Secondary Upgrading Refining

100

ent

0

50

Per

ce

PitchDistillate -GasoilSulfur

0


Su u

Where is the Investment Opportunity?Where is the Investment Opportunity?

Production BlockIncremental demand to be satisfied by unconventional barrels

Increased cost structure associated with this productionIncreased cost structure associated with this production

In absence of proprietary technology or above average quality of resource returns limited to industry benchmarksresource, returns limited to industry benchmarks

Resource Quality (SOR)

Capital Requirements ($/bbl)

IRR (%) “Excess Profit” ($/bbl)*

Top tier (2.0) $17,500 24 7Marginal (3.0) $25,000 12 0Bottom Tier (4.0) $32,000 5 -5


*Excess Profit = Profit – Industry Benchmark Profit

Opportunity in Refining?Opportunity in Refining?

Refining BlockIn North America refining infrastructure is shrinking, not growing

Definite sign that there is no opportunity for capital investment inDefinite sign that there is no opportunity for capital investment in refining in North America

This conclusion will hold until the trend reversesThis conclusion will hold until the trend reverses


Opportunity in Upgrading?Opportunity in Upgrading?

Primary Upgrading Block 8,000

Production/Upgrading BalanceUncommitted

Long term, additional primary upgrading capacity is required to support energy demand

3 0004,000 5,000 6,000 7,000 8,000

city

(KB

PD)

Announced

Applied

Approved

Uncommitted barrels

Best available technology (delayed coking) is open art

0 1,000 2,000 3,000

Production Capacity

Upgrading Capacity

Cap

a Approved

Under Construction

Operating

( y g) p Capacity Capacity Source: Oilsands Review Dec. 2009

Open art nature naturally drives the returns down to minimum return on capital

Has made it difficult for producers with undeveloped assets to rationalize investment in primary upgrading


p y pg g

Unlocking the Value in Primary Upgradingg y pg gAs with production block, technology can increase the attractiveness of primary upgrading investment

“Ideal coking” standard identifies potential benefit

A “better mousetrap” provides returns as compelling as upstream investment

+9% liquid yieldDecreased capital scope

Upgrading Technology

Capital Requirements ($/bbl)

IRR (%) “Excess Profit” ($/bbl)*Technology Requirements ($/bbl) ($/bbl)*

Better Mousetrap $17,500 29 11Delayed Coking $25,000 12 0


*Excess Profit = Profit – Industry Benchmark Profit

What About Secondary Upgrading?What About Secondary Upgrading?

Secondary upgrading requires 2x the capital investment as primary upgrading, for a fraction of the margin

Economics in secondary upgrading are far inferior to primary y pg g p yupgrading metrics

Easier to rationalize hydrogen complex within a refining contextEasier to rationalize hydrogen complex within a refining context


Evaluating Better Mousetraps is SimpleEvaluating Better Mousetraps is Simple…

The technology metrics are:Liquid yieldLiquid qualityCapacity / Capital

The winner achieves benefits in some categories, but compromises in noneo e


but Finding the Winning Concept is Difficult…but Finding the Winning Concept is Difficult

Current picture of upgrading science

Products OvercrackedgasesGas

phase

Products

p

Feed

Liquidphase

Coke

How to meet opposing constraints in liquid and vapour phases with a single technology?g gy


IYQ Upgrading Leverages Current UnderstandingIYQ Upgrading Leverages Current Understanding

Thin films limit liquid severity

Decoupling of vapor and liquid phase residence times allow constraints of vapor phase to be met without compromising capacityp p p g p y

Reactor characteristics enable reduction in operating temperature which benefits both yield and quality


Temperature Dictates Fate of HydrogenTemperature Dictates Fate of Hydrogen

Final distribution of hydrogen among coking products is significantly ff t d b ti t taffected by reaction temperature

Positively affects qualities

Reaction Temperature

Liquid Products

Gas Coke

450°C 83% 8% 9%

470°C 82% 9% 9%

500°C 79% 13% 8%

530°C 74% 18% 8%



Gas Yields Show BenefitsGas Yields Show Benefits

Sulfur release indicates excellent data consistency

9

10

5

6

7

8

d (%

)

2

3

4

5

Yield

H2S

C4‐

0

1

490 500 510 520 530 540

Bed Temperature (°C)


Bed Temperature ( C)

Coke and Gasoil Yields Consistent with ExpectationsCoke and Gasoil Yields Consistent with Expectations

Coke yields relatively insensitive to temperature

Bulk of yield benefit lies in gasoil

70

75

80

7

8

9

10

%)

%)

60

65

70

2

3

4

5

6

Gasoil Y

ield (%

Coke Yield (%

Coke

Gasoil

50

55

0

1

2

490 500 510 520 530 540




Assessing Quality BenefitAssessing Quality Benefit

Primary factor driving quality is hydrogen content

Hydrogen content of gas is much higher than liquids

Olefinic character of gas related to severity of treatment


Quality metrics support IYQ Upgrading ClaimsQuality metrics support IYQ Upgrading Claims

Indications that overcracking dramatically reduced

3.8

4

1

1.2

3

3.2

3.4

3.6

0.6

0.8

1

mol/m

ol)

H2S

(wt/wt)

Propylene

2 2

2.4

2.6

2.8

0.2

0.4 H/C (m

Ratio

with

Propylene

Olefinic C4

Butadiene

H/C

2

2.2

0

490 500 510 520 530 540




Hydrogen Losses to Gas Phase ReducedHydrogen Losses to Gas Phase Reduced

Conservative?


Results Support Basis for ClaimsResults Support Basis for Claims

More liquids produced per amount of pitch reacted

Liquids are of higher quality

Derivative environmental benefits (less upstream resource required)


Upgrading without CompromiseUpgrading without Compromise

Current results support that IYQ Upgrading can deliver:

Improved liquid yields with;Improved product qualitiesp p q

Previous studies show a reduction in capital cost of ~30% relative to competing alternatives (Jacobs Consultancy)co pet g a te at es (Jacobs Co su ta cy)

Therefore, IYQ Upgrading can deliver on all three metrics


Conclusions (Points for Discussion)Conclusions (Points for Discussion)

Enabled by technology primary upgrading is a compelling investment

Improved technology options for primary upgrading with relatively p gy p p y pg g ylow associated risk are here today


Documents

AIChE/SPE Heavy Oil Workshop - ETX Systems Systems AICh…The Quality ChainThe Quality Chain Production Primary Upgrading Secondary Upgrading Refining 100 e nt 0 Perc 50 Pitch Distillate