Eastman Gasification

Overview

March 22, 2005

hFounded in 1920 as part of Eastman
Kodak - wood to methanol plant
hSpun off from Kodak - January 1, 1994
hApproximately $6 B in annual sales
hHeadquarters - Kingsport, TN
hManufacturing sites around the world
Gasification 101

Just the Basics

C + O2 + H2O CO + H2
Carbon + Oxygen + Water Carbon Monoxide + Hydrogen

The partial oxidation of carbon to produce a "synthesis" gas

Gasification is not combustion!
Gasification Basics – Slurry Prep

Coal/Petcoke

Water
Coal/Petcoke
Slurry
55% - 70% Solids
Gasification Basics – Air Separation

Oxygen

Oxygen feed to gasifier

95% to 99+% purity Nitrogen
Cryogenic
distillation
-180 Deg C

ASU
Argon

Compressor
Air

Co-production of N2 and Ar for

liquid sales, NOX control,
general inerting
What is Gasification?
Oxygen • Controlled Chemical Reaction
• Up to 1,000 psig or more
• Nominal 2,600 Deg F

Coal or
Petcoke Products (syngas):
CO (Carbon Monoxide)
Gas
Clean-Up
H2 (Hydrogen) Before
[CO/H2 ratio can be adjusted] Product
Water
Use!
By-products:
H 2S (Hydrogen Sulfide)

CO2 (Carbon Dioxide)

Slag (Minerals from coal)

What is Gasification?
Oxygen • Controlled Chemical Reaction
• Up to 1,000 psig or more
• Nominal 2,600 Deg F
Advantages of GE Gasification:
• Lowest capital cost and COE (Quench)
Coal or • Straight forward design (Quench)
Petcoke Products (syngas):
• Gas ready for shifting (Chemicals/H2/CO2 Seq.)
COto 1200
(Carbon Monoxide)
Gas
• High pressure operation (up psig) Clean-Up
H2 (Hydrogen)
• High temp. gasification/Vitrified slag Before
[CO/Hsites)
• More experience (60 installed 2 ratio can be adjusted]
Product
Water
Use!
By-products:
For higher efficiency, HP Steam – Quench/Radiant
or Radiant + Convective
H 2S (Hydrogen Sulfide)

CO2 (Carbon Dioxide)

Slag (Minerals from coal)

Gasification Basics – Gas Cooling

Hot Syngas Steam

Steam Turbine or
process heating

Cool Syngas
BFW

Water/Gas
Separator

Water, recycled
AGR Technologies Can Provide Near 100%
Sulfur Removal If Required
"Clean Syngas" (AGR = Acid Gas Removal)
CO, H2
Clean
Solvent
Three Main Technologies:
• MDEA (methyldiethanolamine) – Chemical absorption,
98% to 99+% S removal, large CO2 slip (unless use a
second stage for CO2 recovery), moderate operating
temperature, lowest AGR capital cost

• Selexol tm (primarily dimethyl ethers of polyethylene

glycol, DEPE) – Physical absorption, 99+% S removal,
variable CO2 slip (based on design), higher AGR cost
than MDEA but overall AGR/SRU system costs are
Dirty
similar
Solvent
• Rectisol tm (methanol) - Physical absorption, 99.5% to
99.9+% S removal, complete CO2 removal possible,
"Dirty Syngas" highest AGR cost, coldest operating temperatures
CO,H2,CO2,H2S
Gasification Basics
Oxygen
Steam
Air Separation
N2
Air

Compressor Ar Cooling/Stm Gen

Clean, Dry
CO
Petcoke Syngas
or H2
Coal Water Solvent/
Slurry Prep H2S Absorbent
CO2
Gasification

Gas Clean-up
Vitrified
Slag
So what can you do with
CO and H2 ?

Syngas

Building Blocks Transportation Clean Electricity

for Chemical Fuels
Industry
NGCC: Natural Gas Combined-Cycle Plant

Natural Gas

Combustion Turbine
Air

Steam CO2

SteamTurbine
Most new power plants Electricity
in the United States in
the last 10 to 15 years
have been natural gas
based
Integrated Gasification Combined-Cycle
(IGCC): Replace NG Feed With Syngas

Natural Gas

X Combustion Turbine
Air

Steam CO2

SteamTurbine
Electricity

Syngas from Coal/Petcoke Gasification

(adjacent or via pipeline)
Integrated Gasification Combined-Cycle (IGCC)

Air
Eastman Coal Gas
Air Separation Facility
Unit (ASU) Volatile Pure
Mercury Sulfur
Oxygen Slag 90+% 98+%
Removal Removal
Combined-
Gasification Gas Clean-Up
Cycle
Block Crude Block Clean
Syngas Syngas
Power Block

Coal Water CO2 Capture

(or other (ready for sequestration) Electricity
Carbon
Source)

Contaminants
Removed
Pre-Combustion !!!
Air Separation
What is IGCC?
Unit (ASU)
Flexibility for CO2
CO2 Sequestration
Coal
Low Temp (Concentrated Stream)
Hg
Slurry Gas Cooling
Removal
+ O2 Shift Rx
90+%
Removal
(option)
CO/H2
H2O
Acid Gas Removal 98+%
Removal
Particulate Sulfur
Scrubber Sulfur Recovery
Claus/Scot
Electricity
GE Steam Turbine Air
"Quench" Fines/Char
Gasifier
HRSG

PRE-COMBUSTION
Treatment of Pollutants
•High pressure
•Low Volume Combustion Turbine Electricity
•Concentrated stream
(easier to treat)
Slag/Frit Compressed Air to ASU
Gasification-Based Polygeneration:
Replace NG and/or Oil With Coal/Petcoke
Natural Gas
and/or Oil

X
Combined-Cycle
Power Plant
Electricity

+
Chemical
Facilities
Chemicals,
Synfuels,
Fertilizers,
Syngas from Coal/Petcoke Gasification
and/or Hydrogen
(adjacent or via pipeline)
Air Separation
Gasification-Based Polygeneration
Unit
(Ultimate Flexibility)
CO2
Coal
Low Temp
Gas Cooling Mercury
Slurry
Removal
+ O2 Shift
Reactor
CO/H2
H2O
Acid Gas Removal

Particulate Sulfur
Scrubber
CO/H2 to chemical plant

Texaco Tail Gas Recycle to C.T.

"Quench" Fines/Char
Gasifier Electricity
CO2 Steam Turbine Air

Chemical
HRSG
Plant

Peak or backup
fuel to C.T.
Slag/Frit Combustion Turbine
Sales Electricity
Polygeneration Potential of Gasification
Coal/Petcoke Iron Reduction
Power & Steam
Gasification Fuel/Town Gas
Naphtha Fischer-
Tropsch Ammonia
Waxes Liquids Synthesis Gas H2
& Urea

FT Diesel Car Fuel Methanol Dimethyl Ether

Methyl Acetate Ethylene

Acetic Acid &
Propylene
VAM Ketene Acetate Esters

Oxo Chemicals
PVA Diketene &
Derivatives Acetic Anhydride Polyolefins
Benefits of Polygeneration
• Higher overall value creation
• Higher overall thermal efficiency and
feedstock utilization
• Synergistic usage of low grade steam
and waste streams
• Enhanced ability to load follow
(intermediate vs. baseload operation)
• Higher employment for the community
• Enhanced reliability, with potential to
store syngas as a liquid fuel
Trends Driving the
Gasification Industry
• Steady Growing Demand for Electricity
• U.S. Energy Security/Diversity (Coal vs. NG)
• Growing Natural Gas (NG) Crisis
• Environmental Drivers (Cleanest
Technology for Coal/Petcoke and Wastes)
• Growing Environmental and Financial
Acceptance
• Flexibility to Face an Uncertain Future and
to Open New Coal Markets
Growing Demand for Electricity
Electric Power Demand - U.S. and China
6000
Steady demand

Demand (billion kwh's)

5000 U.S.
growth of 1.5%
to 2.0% still 4000

projected thru 3000 China

2025 in U.S.; 2000

~ 4.3% China
1000
demand growth.
0
2000 2005 2010 2015 2020 2025

Source: EIA International Energy Outlook 2003 Year

Historical
average
reserve
margin
~20%

Source: NERC 2004 Long-Term Reliability Assessment

Why Coal?
• The U.S. has lots of it …
– U.S. recoverable reserves of 268 Billion tons =
250+ years of supply
• We can distribute it …
– Existing infrastructure in rail, barge, mine mouth
• It costs less and is less volatile in price …
– $0.75-1.75/MMBtu vs. > $4.00-6.00/MMBtu for NG
• We’re familiar with it …
– 50% of current U.S. power is from coal
• It broadens our national fuel portfolio …
– Insulates against price and availability shock of oil and
natural gas

IGCC
IGCC Delivers
Delivers Fuel
Fuel Diversity
Diversity and
and Energy
Energy Security
Security
Slide provided by ChevronTexaco
Power Generation in the U.S.

Coal is still
dominant!

Source: DOE Energy Information Administration

U.S. Natural Gas Supply
How Much is Left ?

U.S. Nat gas reserves:

Proven: 186.9 trillion cubic feet
Unproven: 1150.5 trillion cubic feet

Nat gas consumption: 27 trillion cubic feet/year

(avg. over next 25 years)

Years remaining at current usage:

Proven reserves: 8.0 years
Unproven reserves: 42.6 years
Source: DOE – Energy Information Administration 2005 Annual Energy Outlook
http://www.eia.doe.gov/oiaf/aeo/pdf/trend_4.pdf
NG Prices for the Past Year

Approximate
Gasification
Breakeven NG Price
7 Drivers of Natural Gas Crisis
• Return to more normal winters after
unusually mild recent winters
• Steep drop in U.S. natural gas production
since early 2001
• Continuing rapid growth in use of NG to
produce electricity
• Rapid growth in number of gas-heated
homes
• Declining imports from Canada
• Increasing exports to Mexico
Andrew D. Weissman, Energy Ventures Group
Vast New NG Construction Program

• More than 184 GW of gas-fired capacity

brought into service since 2000
• Enough new generation to serve more
than ½ of Europe !!!
• Average capacity factor of NGCC plants
in 2003 was 32%, leaving over 3.3 Tcf/yr
of overhang capacity for NG demand

William Rosenberg, National Gasification Strategy

More drilling, but less production;
More reliance on imported LNG
U.S. Coal Supply

How Much Coal is Left ?

Coal Reserves:
Demonstrated Reserve Base: 508 billion tons
Estimated % Recoverable: 54%
Estimated recoverable: 268 billion tons

2003 Production: 1.072 billion tons

Source: DOE – Energy Information Administration
“US Coal Reserves 1997 and 2003 Updates”
http://www.eia.doe.gov/cneaf/coal/reserves/chapter3p1.html

Years remaining at current levels: 250 years

Other source: National Mining Association
http://www.nma.org/pdf/c_most_requested.pdf
Coal needs to return as a
key feedstock and energy
source in the U.S. !!!

Gasification is the technology of choice for

converting coal to clean and efficient
power, chemicals, fertilizers, and fuels.
Why Gasification?
• It is the cleanest coal/petcoke technology …
– Inherently lower SOX , NOX , and PM
– Lowest collateral solid wastes and wastewater
– Potential for lowest cost removal of mercury and CO2
• It is proven technology …
– 21+ years of successful commercial operation at Eastman
– Multiple commercial IGCC’s (e.g., TECO Polk, Wabash)
• It is becoming increasingly competitive …
– Capital cost at parity with other clean coal and dropping
– Lowest dispatch cost of all fossil fuel technologies
• It is gaining acceptance …
– Gaining support of environmental groups (e.g., NRDC, CATF)
– Numerous state and federal initiatives and incentives
• It provides great promise for the future …
– Flexible feedstocks, process options, and products
– Opens new markets for coal (synfuels, chemicals, fertilizers)
– It provides the only feasible bridge from coal to hydrogen
(directly converts coal/petcoke to hydrogen)
Why Gasification?
Lowest Air Emissions (approaching NGCC)
Power Plant Typical Emissions by Technology Type

0.5

0.45

0.4
0.41
IGCC Upside Potential:
0.35
• Mercury Removal NOx

0.31 • CO2 Sequestration SO2

lb/MMBtu

0.3
(at fraction of cost for PC) Particulates
0.25

0.2
0.17 0.165
0.15
0.15

0.1 0.085
0.057 0.053
0.05 0.027 0.02 0.018 0.019 0.013 0.015
0.007 0.004 0.01
0.002
0
Traditional PC Retrofit Older PC's Advanced IGCC IGCC NGCC w/SCR
w/Scrubbers & SCR PC/SCPC/CFB w/MDEA Absorber w/Rectisol & SCR
(using low-S Coal)
New NPRC/JGC IGCC is achieving
Type of Power Plant < 2 ppm NOX and < 1 ppm SO2 !!!

Basis: ChevronTexaco White Paper (3/03),

DOE Report (5/99), and Recent EPA Permit Data
IGCC: Lowest Collateral Wastes
CaCO3 + SO2 + ½O2 => CaSO4+CO2 [~ 2-4% add'l CO2]

700

600
Lb/MW-hr (Dry Basis)

500
Sludge Sludge
~ 5X Sulfur
400 Byproducts

300
Useful Sulfur
200

100
Leachable Leachable Vitrified
0
Pulverized Coal
Pulverized Coal Circulating
Circulating Fluid Bed
Fluid Bed IGCC
IGCC

Slag/ Ash Sludge Sulfur CO2

No
NoAdd’l
Add’lCO
CO22Associated
Associatedwith
withSulfur
SulfurRemoval
Removalfor
forIGCC
IGCC
Slide provided by G.E. Power Systems
~ 30% - 40% Less Water Usage with IGCC

DOE Report "Major Environmental Aspects of Gasification-Based

Power Generation Technologies", December 2002
Vapor-Phase
Mercury Removal

Demonstrated for 21 years at Eastman !

IGCC: Low-Cost Option for Mercury Control
An order of magnitude less expensive for IGCC
(COE = Cost of Electricity)

Technology IGCC PC

Mercury (Hg) removal location Syngas (ahead of AGR) Stack gas

Relative volumetric gas flow 1.0 160

Cost of Hg removal, $/MWh $0.254/MWh $3.10/MWh

Fraction of COE < 1% ~ 9%

Cost of removal, $/pound Hg $3,412/pound $37,800/pound

DOE Report, "The Cost of Mercury Removal in an IGCC Plant", September, 2002
IGCC: Low-Risk Option
for Carbon Capture

IGCC Minimizes Capital Cost Penalty of CO2 Capture

DOE Report "Major Environmental Aspects of Gasification-Based

Power Generation Technologies", December 2002
Proven Technology

• First U.S. commercial coal gasification facility

in 1983 at Eastman Chemical Company
• First IGCC plant demonstrated in 1984 at
Cool Water site in California.
• 14 current IGCC plants globally, including
TECO’s Polk Plant and Global Energy’s
Wabash Plant. (~ 130 total global gasifiers)
• Eastman has achieved world-class success in
coal gasification for over 21 years.
Economic Drivers for IGCC
IGCC Economic Project Drivers
560 MW Plant

Elec. Price (+/- 20%)

Capex (+/- 20%)

Critical
Drivers
Reliability (+/- 10%)

Coal Price (+/- 20%)

Heat Rate (+/- 20%)

O & M (+/- 20%)

-250 -200 -150 -100 -50 0 50 100 150 200

NPV Change from Baseline, $M

IGCC Economics are Increasingly
Competitive
• EPC Capital Costs Near Parity with PC Plants:
– Capital costs of pulverized coal plants have
been increasing to ~ $1100-1400/KW as
emissions requirements have tightened.
– Capital costs of IGCC have been falling
(currently projected as ~ $1200-1400/KW) as
multiple plants are built and improved, with
considerable additional downward potential.
• Lowest Dispatch Costs:
– IGCC Dispatch Costs (fuel + variable O&M
+ environmental costs + consumables) are
the lowest of all fossil fuel technologies.
IGCC Capital Cost Breakdown
Combined Cycle Plant
Coal Prep
10% ASU
CT/HRSG/ST 15%
43%
Gasifier Block
AGR
7% 25%

Potential to reduce total capital cost

by re-fueling existing idle NGCC
turbines
IGCC Capital Cost Improvement

Recent Clean
Coal PC
Plants

x
x
Target
Range
For
IGCC

Source: GE Power Systems, Power-Gen 2002 Presentation

Key Advantages of IGCC vs. PC Boilers
Environmental:
• Inherently lower air, water, and solids emissions
• Pre-combustion treatment vs. post-combustion treatment
enables easier and lower removal of pollutants
• Low-cost effective volatile mercury removal
• Much lower costs for CO2 capture than with PC

Efficiency:
• Combined cycle turbines or fuel cells vs. only steam turbines
• IGCC capital costs falling while efficiency increases;
PC/SCPC capital costs increasing while efficiency falls

Flexibility:
• Upgrade later at minimum cost for CO2 sequestration, mercury
removal, or to increase sulfur and NOx removal
• Ability to co-produce chemicals, fertilizers, fuels, or hydrogen
• Can handle variety of feedstocks including petcoke and biomass
Gasification – Ready for Prime Time !!
• Competitive cost of electricity (superior dispatch cost -
lowest for all fossil fuels)
• Exceptional environmental performance, including cost
effective volatile mercury removal and potential for
lowest-cost CO2 capture and sequestration
• Refueling of NGCC plants (replacing NG with coal)
• Production of hydrogen to fuel the coming economy
(FutureGen Initiative)
• Promise of new markets for coal - potential for
transformation of the chemical, fuels, and fertilizer
industries
• Gasification is the future for coal !!!
Eastman’s Experience with Gasification
• We were a pioneer in coal gasification …
– First commercial U.S. coal gasification facility in 1983
– Designated as ACS National Historic Chemical Landmark
• Industry leading operating performance …
– > 98% on-stream time since 1984
– < 1-2% forced outage rate
– Highest production rate per unit of capacity
– Single-train reliability of ~88-90% (~94% excl. refractory change)
• Excellent safety record …
– Plantwide OSHA recordable rate of ~1.0
– No lost time in gasification area in over 12 yrs
• Exceptional environmental performance …
– Remove >99.9% of sulfur
– Patented sulfur-free start-up process
– Volatile mercury removal for over 21 years
• Continual process improvement …
– Reduced maintenance costs 20-30% in past 6 years
– Patented feed injector designs for longer run life
Air Products Steam Clean Syngas Syngas
Conversion

ASU
Hg CO
Compressor Removal
Air H2

Shift

Oxygen
Reactor

Acid Gases
N2/Ar
Coal

Gas Clean-up
(Rectisol)
CO/H2
Water Separation
(Cryogenic)
GE Sulfur
Gasifier Particulate
Recovery
Chemicals
(1 + Spare) Scrubber Acetic Anhydride
Acetic Acid
Grinding Methyl Acetate
Methanol
Rod Mill
CO2
Flash
drum
Lock
Hopper Sulfur
Water recycle

Slurry
Pump
Gasification at Eastman
Solids Filtration Basic Flow Diagram
Chemicals from Coal – The Chemistry

Methanol
Syn Gas (CO + H2) Methyl Acetate
Plant

Methanol
Plant

Methyl
Acetate

Carbon Monoxide (CO) Carbonylation

Plant

Primary Reactions:
CO + H2 Æ CH3OH (methanol)
CH3OH + CO Æ CH3COOH (acetic acid) Acetic
CH3OH+ CH3COOH Æ CH3CO2CH3 (methyl acetate) Anhydride
Acetic
CO + CH3CO2CH3 Æ (CH3CO)2O (acetic anhydride) Acid
Eastman Chemicals from Coal – The Big Picture

It’s likely you have used a product based

on coal gasification from Eastman’s facility!

Acetic Anhydride
Acetic Acid
Coal Methanol
Methyl Acetate

Several major products are single-sourced

from Eastman's coal gasification process!!
Thus, reliability is critical!!!
Reliable Gasification Operation

Yes, it can be done!

“The Devil is in the details.”

Eastman Operating Statistics
Three-Year Cycle (09/01 – 09/04)
including planned shutdown
On-Stream
98.0 %

Unplanned
1.2%

Not Needed
0.0%

Planned
0.8%

Industry-Leading Performance !!!

Eastman Operating Statistics
One-Year Cycle (Sept 2002 - Sept 2003)

On-Stream
98.9 % Planned
0.0%

Unplanned
1.1%

Not Needed
0.0%
Sustained Low Forced Outage Rate
Eastman Gasification Plant
Historical Forced Outage Rate
10

7
% Forced Outage Rate

6
Forced Outage Rate has
Averaged < 2% since 1984 !!!
5

0
1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003
Industry Leading Gasifier Productivity!!!
Continual Process Improvement
Historical Syngas Production Rate

29
Annual loading
factor = 127%
27
Syngas Production BSCF

25

23

21

19

17

15
1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003
AnnualCapacity
Loading Factor
Factor = annual production/(design at full rates x 365 days/yr)
Safety
• Plantwide OSHA recordable injury rate ~ 1.0
[Equates to one injury in over 15 years for a family of four!]
[OSHA injuries = injuries that require more than minor 1st aid]

• Last gasification area work day out case was over

12 years ago (sprained ankle stepping off a curb)

• Plant site received Tennessee OSHA “Volunteer Star”

safety certification in 2001
Eastman Environmental Performance
• Cleanest U.S. coal gasification facility.
• Sulfur removal is > 99.9% (with Rectisol);
<0.1 ppm sulfur in our syngas.
• Eastman has a patented sulfur-free
start-up process (no SO2 from flare).
• Eastman has practiced essentially
complete vapor-phase mercury removal
from syngas since our initial plant start-up.
• Excellent environmental record and
reputation.
Market Needs/Concerns for Gasification
• High Capital Costs: need capital costs similar to
other coal-based technologies
• Unfamiliarity to Utilities: gasifiers are more like
chemical processes than boilers
• Time to Capacity: previous IGCC plants have taken
too long (several years) to get to full design capacity
• Reliability Concerns: need acceptable reliabilities
and availabilities for facilities (90+%)
• Financing of Projects: bankers need guarantees or
assurances that gasifiers will perform well
• Economic and Environmental Uncertainties:
uncertainties regarding economic recovery, Enron fall-out,
natural gas price forecasts, energy bill tax incentives, and
multi-pollutant legislation
Eastman’s Value Proposition
Market Need Eastman Value Creation
High Capital Costs Eastman helps owners make
intelligent design choices
Unfamiliarity to Utilities Eastman knows gasification (21
yrs experience); O&M services
Time to Capacity Eastman's 21-yrs experience
can enable faster start-ups
Reliability Concerns Eastman has the best operating
performance in the industry;
offering O&M services
Financing of Projects Eastman can help offer
adequate warranties
Economic & Environmental Eastman works with industry
Uncertainties and government to understand
& plan for uncertainties
How Important is Reliability
IGCC Economic Project Drivers
560 MW Plant

Elec. Price (+/- 20%)

Capex (+/- 20%)

Reliability (+/- 10%)

Coal Price (+/- 20%)

Heat Rate (+/- 20%)

O & M (+/- 20%)

-250 -200 -150 -100 -50 0 50 100 150 200

NPV Change from Baseline, $M

Eastman will help gasifier owners get
more out of their plants, including faster
start-ups and improved long-term
availability and reliability

• World-class operational performance

• Intelligent design choices to limit capital costs
• Patented technology improvements
• Exceptional safety and environmental records
• Best partner for polygeneration options
Eastman’s Value to Gasifier Owners
Gasification Plant Start-up Schedule

120.0

$$$
100.0
Capacity Factor (% of Design)

80.0
=
60.0

$$$
40.0
--- Eastman Potential
--- Min. Required for Project
20.0 --- Industry Past History

0.0
0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 2.50
Time from Mechanical Completion
Building on Past Success
Eastman Gasification Services Company
A subsidiary of Eastman Chemical Company

Service Offerings:
h Operations, maintenance, and management
contracts
h Technical services
h Critical spare parts fabrication
h Specific technology licensing
h Cooperative services agreement with
ChevronTexaco/GE
h Project development
Don't leave your success to
chance!

Use Eastman Gasification

Services!
Together we can realize the
full potential of gasification!
QUESTIONS?
www.gasificationservices.eastman.com