Sasol Coal-to-Liquids Developments

1 Eric van de Venter on behalf of Sasol Synfuels International andSasol Technology (Pty) LtdJohannesburg, Rep. of South AfricaEmail: John Sichinga , Nici Jordaan, Maggie Govender, Eric van de VenterSasol Coal-to-Liquids DevelopmentsPresentation tothe Gasification Technologies Council Conf, 10-12 October 2005,San Sasol View: Drivers Supporting the Establishment of a global CTL in SA Lessons s FT s Position in s International CTL Activities and 1. A Sasol view: Drivers Supporting the Establishment of a global CTL IndustryWhy CTL could of supplyProven reserves of fossil fuels will sustain the world for just over 300 years at current production rates Crude Oil41 years Natural gas67 years Coal 192 yearsSource.

2 BP World Energy ReviewWorld Fossil Energy Reserves01,000,0002,000,0003,000,0004,00 0,0005,000,0006,000,0007,000,0008,000,00 0 AmericaEastern Europe &North AmericaCentral & SouthWestern EuropeFormer EastAfricaFar East & OceaniaTrillion BTUC rude OilNatural GasCoalCoal will last twice as long as the combined crude oil and natural gas reserves at current usage ratesEnergy dynamics impacting competitive landscapeEscalating oil by supply constraints and increased demand resulting emphasis on alternativesrenewed interest in coal useCTL likely to be viable at crude oil prices > USD 35/bbl*Ref.

3 DOE Energy Outlook 2003 Coal usage projected to annual world wide growth in consumption ~ %Coal meets approximately 30% of world s primary energy needsCoal used to produce approximately 40% of world s electricityPrice of coal relatively stable compared to other fossil fuels due to its reversal in the downward about peaking oil production .. Hubbert s Curve Dr. M. King Hubbert s prediction in 1956 that production would peak in about 1970 and decline thereafter was scoffed at then but his analysis has since proved to be remarkably accurate.

4 When, not if, global oil production will peak, is now becoming increasingly accepted"Our ignorance is not so vast as our failure to use what we know. - HubbertResurgence of coal use due to current energy step change in crude oil and natural gas pricesDrives the search for crude oil alternativesDeclining domestic oil and natural gas production in high energy consuming economiesConcern about peaking oil production and refinery capacityUnstable political situation in Middle EastEnergy security and diversification of energy supply features as strategic drivers on the agenda of many nationsLatest technology Developments clean coal technology becoming a realityWhere could CTL

5 With access to:large reserves of low cost and grade gasifiable coal (a minimum of approximately 1 4 billion tons) at proposed locationMinimum plant capacity: 40 000 80 000 barrels per day to realise economy of scale benefitsReserves to support further expansions stranded coal ( due to quality or location) which can not be easily monetised in other waysadequate water resources close to proposed site Major energy consuming countries that are energy shortLow construction cost countriesCountries where suitable sites are close to large attractive marketsCountries with the ability and will to provide enabling supportGeological formations for storage of CO2in sequestration Country Total Fuel Energy DemandOil/Petroleum/Gas ImportsNon-conventional productionDomestic ProductionOil sands, CTL.

6 Biofuels and shale oilCTL opportunity*Based on - Annual Energy Outlook 2005, estimated 1 million barrels per day for ChinaCTL Could Contribute Towards Increased Energy Security For Energy Short, Coal Rich, High Energy Consuming Countries Reduce importsReduce importsIncrease capacity, efficiency, co-production CTL opportunity in the World: upside 2* million bpd by 2025 compared to million bpd for GTLCTL opportunity in the World: upside 2* million bpd by 2025 compared to million bpd for GTLR egions with very large coal reserves (Billion Short tons)173912759355126 Countries with an enabling energy Oil Imports (2003)36% of consumptionNet Oil Imports (2003)57% of consumption33%7%60%48%28%24%31%16%53%Net Oil Imports (2003)64% of consumptionNet Oil Imports (2003)56% of consumptionNet Oil Imports (2003)

7 28% of consumptionSustainable conditions for CTL supported by energy short countries that have a need for energy self-sufficiencyNet Oil Exporter22%61%18%But CTL faces significant intensive processTechnology breakthrough required involvement of critical mass of key industry players CTL is not economically viable without some form of government interventionNeed a new generation CTL project to build on Sasol s successful model Environmental issues Dirty coal - public perceptionThe cost effective handling of CO2still needs to be demonstrated Permission no new refineries built in the US since 1970 sThe first 2nd generation CTL project offers Sasol a unique opportunity to highlight new generation process a clean coal energy solution CTL could offer significant upside oil prices persist above $40 per barrelProject has relatively lower operating costLow feedstock cost: Price of coal = USD 10/t equivalent to ~ USD vs.

8 NG price of around > USD 7/MMBtu in the USTargeting large fast growing domestic markets minimises logistic costsCountries willing to have a first mover advantage maybe willing to provide enabling environmentSupports drive to increase energy security in energy short, high energy consuming countries that offer opportunity with large coal reservesAlternative technologies facing dual challenges of capture and storage of CO2 CTL process concentrates pure CO2which allows for simple CO2sequestrationPolygeneration opportunitiesCould improve plant efficiency2.

9 CTL in SA Lessons Learnt Republic of South AfricaVision of the SA government - a Synfuels IndustryRealization by the South African governmentSA had to be protected from adverse effect of crude oil imports and volatile prices1927 South Africa has very little crude oil reserves but large coal reservesSouth Africa has very little crude oil reserves but large coal reservesLiquid Fuel and Oil Act - support CTL obtained licence for CTL to secure loan from World Bank and lost interest in project1949 Private sector funding did not support the establishment of the capital intensive oil from coal processBirth of SasolSouth African Government investigated the production of oil from coal.

10 Decided to form a state-owned company1950 South African Coal Oil and Gas Corporation ( Sasol ) incorporated as a state owned company in 1950 Sasol s first board of directorsGovernment support was essential for the establishment of a Synfuels IndustrySasol IFirst petrol delivered to the market1955 Sasol became cash positive1958 First profit1960 Initial Facility Profitable within 5 years of start-up Construction of the first Sasol plant in Sasolburg completed at a cost of USD 132 million of the day1954010203040506070801955196019651970 197519801985199019952000 Crude Oil Price ($/Barrel)US$ of the day (Nominal)2003 US$ (Real)