Toward a New Vision for the Pulp and Paper Mill

1
Toward a New Vision for the Pulp and Paper Mill

• Bernard J. Bulkin
• Vantage Point Venture Partners
• Chairman, Chemrec AB

2
The context for the industry has changed

• High energy prices, and in particular high oil
  and gas prices, are here to stay
• We are also in a period of volatility, making it
  hard for energy users to predict costs
  consequence of tightness in the market

3
Natural gas price in 2008 is averaging 30 higher
than 2007
4
Oil prices reached historic highs we are
unlikely to see 50/bbl again
5
Historic Methanol Spot Price (Euro/T)
6
Climate change is a factor in business thinking

• Difficult to predict how aggressive legislation
  will be, but in EU at least it looks pretty
  strong
• Public sentiment favors companies with proactive
  climate policies
• Both candidates for US president have been
  activists on the climate change agenda, so expect
  US role to change

7
Energy security is a complex of issues

• Unpredictable behavior of Russia on exports of
  everything is part of thinking now
• It is not only security of supply, but security
  of costs, that drives business thinking
• And it is not just fuel and power, but chemicals
  derived from fossil fuels

8
Energy Security is big concern of both US
Presidential candidates

• Invest 150 billion over the next ten years to
  develop and deploy climate friendly energy
  supplies, protect our existing manufacturing base
  and create millions of new jobs.
• - Barack Obama Energy Fact sheet

• We have now a confluence of two national security
  requirements..to address the issue of climate
  change.. And to not allow ..use (of) oil as a
  weapon which would..endanger this nation's
  national security.
• - McCain

9
There is also the bigger green agenda

• Customers asking Where do my products come
  from?
• Major companies (Proctor and Gamble, Wal-Mart,
  GE) looking hard at supply chain for green
  components to their final product
• Legislation giving green products favorable tax
  treatment becoming widespread

10
Why is this so important to this industry?

• The industry controls two big sources of
  potential green feedstock
• Black liquor, largest concentrated biomass source
  available on earth
• Other biomass associated with trees
• There is an opportunity to capitalize on this
  stable feedstock source to add enormous value to
  the industry
• While this has been recognized for some time, the
  context is now perfect for exploiting this

11
Technology The Route through Gasification and
Synthesis Gas to Fuels and Chemicals
Coal
SyntheticHydrocarbons (F-T)
Oil products
Synthesis gas(COH2)
Methanol / DME
Natural gas
GASIFICATION
Ammonia
Biomass
Olefins
Black liquor
Cooking chemicals in Black Liquor serve as
catalysts, which helps make the Chemrec process
efficient
12
Syngas Chemistry -from Methane, Coal, Black
Liquor, Biomass
13
The economics are attractive

• Fuel can be produced from Black Liquor profitably
  at 65/bbl oil price without subsidy
• While there is substantial capital investment,
  cash flow is huge and payback times are short
  three years or less, so IRR is high
• At high oil prices, margins are very high, and
  there limited volatility in feedstock cost

14
The quantities are material

• Everyone looking for technology that can make a
  material contribution
• US goal is 16 billion gallons of second
  generation biofuel by 2022 black liquor could
  provide nearly a quarter of this
• Fuels from black liquor could provide 25 of
  Swedish road transport fuel, reduce CO2 emissions
  by 6 million tons/year

15
The industry challenge is new markets, new
relationships

• Fuels and chemicals, at scale, are new market,
  with different dynamics from pulp and paper but
  skill set required is not so different
• Technology providers from the refining industry
  but demands for high reliability build on
  industry capability
• Fuel offtakers will also be critical but they
  are keen to play
• Chemical needs of existing customers may also be
  of interest and they are awake to this option

16
So the message is...

• The context is right for a change to a
  biorefinery model for the mill
• The technology is ready for commercial
  application at scale
• The economics are very attractive
• Other key players including fuel suppliers and
  major packaging users see this and will act
• The industry must seize this opportunity