CHEMISTRY, ENERGY and SUSTAINABILITY
  Chemical industry today
  Energy and feedstock
realities in a changing world
  Issues with alternative /
sustainable feedstocks
  Issues with biomass
  Solar energy opportunities
Where Stuff Comes From
Now and in the Future
Issues in Feedstocks and Energy for the Chemical Industry
Jim Stevens
Corporate Fellow
Global Research & Development
The Dow Chemical Company
September 19, 2011
Slide 2
William Henry Perkin
Where Do Chemicals & Plastics Come From?
  Studied college
chemistry at 15.
  Discovered a way to turn
a by-product of coal gas
(coal tar) into synthetic
analine dyes at age 18
in his home laboratory.
  Founded the first
science-based industry.
  Retired rich at 36.
Oil?
Slide 3
Natural gas?
Slide 4
Where Do Chemicals & Plastics Come From?
Our Industry
By-products of the energy business are the major chemical feedstocks
Global Chemical Industry
NaCl +
190 Bn lbs
e-
>95% of the world’s goods use
chemistry as a building block
1.1 kWh per lb Cl2
C2
219 Bn lbs
C3
138 Bn lbs
Naptha
Ethane
<6 C atoms: poor choice for
gasoline
C2H6: 1-6% of natural
gas
C4
20 Bn lbs
C6
77 Bn lbs
[Global Oil Consumption ~ 9200 Bn lbs]
Slide 5
Energy: The Need is Real
The World Needs Energy - 2010
Electricity Losses 154 EJ
Petroleum 180 EJ
Residential 56 EJ
Coal 148 EJ
Commercial & Industrial
225 EJ
Natural Gas 125 EJ
Nuclear 31 EJ
Renewables 52 EJ
“It’s a perfect storm headed
our way -- a steady rise in
global demand for oil
crashing up against an
increasingly limited supply
of economically recoverable
oil."
William Chameides,Ph.D.,
Prof of Environmental
Science
Duke University
US Oil Consumption
Projected
Consumption
US Oil Production
Transportation 101 EJ
chemical
industryuses
uses4038
EJ (8%
TheThe
chemical
industry
Quads
(8% of
ofworld
worldconsumption)
consumption)
Adapted from EIA Energy Outlook May 2009, and IEA: Chemical & Petrochemical Sector 2009
Slide 6
DOE 2011 Outlook. Note: projected consumption for liquid fuels.
Feedstocks and Energy Issues
Impact of Energy on the Chemical Industry
Energy
Energy
Cost
Ethane Naphtha
Revenue
Higher Energy Content
Propane
Energy
content of
feedstocks
Prime
olefins,
etc.
Chemical Action
Benzene
Products
PP
HDPE
LDPE
Pricing time scale:
Seconds (NYMEX)
Pricing time scale:
Contractual
Capital investment
time scale: Years
Propylene
Dow’s Top
15 Products
(by mass)
LLDPE
Ethylene
Energy & energy volatility is a key issue for the chemical industry
Slide 11
-4
-3
-2
Styrene
PS
EG
EO
PO
VCM
Biomass
CO2
Ethyl
Benzene
EDC
Acrylic
Acid
-1
0
1
Average Carbon Oxidation State
2
3
4
Energy & Feedstocks for Chemical
Industry
Original Ethylene Synthesis
Ethylene Preparation c.1795
Carbon Stewardship
Chemical Industry*
Production of ethylene was
accomplished by the reaction
of “one part of alcohol with
six or seven parts, by weight,
of oil of vitriol.”
Ethane to Polyethylene**
Ethane
Nat. Gas,
Naphtha, Fuel
Oil, Coal, &
Biomass
10560 TWh
Fuel Uses
= 49%
Energy to produce
ethylene = 26%
Contained in
Products = 51%
®
Parnell ; "Applied Chemistry", 1844.
Energy to produce
polyethylene = 4%
Source of term olefin
Energy conserved
in polyethylene = 70%
Figure from Bloxam, "Chemistry Inorganic and Organic", 1872.
*EIA 2004 Refining Data and IEA Energy Technology Transitions for Industry 2009,
**Energy and Environmental Profile of the U.S. Chemical Industry, May 2000, Energetics Inc.
Page 14
Energy Volatility – It’s Been a Rough Decade
Current Olefins Technology
LHC-8 Freeport, TX
14 Dow crackers worldwide
Plant asset base is worth over $15 billion
Dow crackers convert over 5 million pounds of feedstock every hour!
R&D supports all cracker technology including reactors, furnaces,
separations, process chemistry, and catalysis.
  Key products include ethylene, propylene, butadiene, benzene,
toluene




Slide 15
Slide 16
Improving Dow’s Energy Intensity
Regional Price Differentials: Natural Gas
110
100
Canada
$6.10
90
UK Germany Ukraine
$9.20
$2.80
$7.85
USA
$7.10
80
70
Trinidad
$1.65
>$100 Billion Extra Cost
60
Russia
$1.45
Japan
China
$8.10
$5.75
Saudi Arabia
$0.75
South Korea
India
$8.20
$3.40
Brazil
$3.60
50
40
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Jan01
Indexed Intensity 1990=100%
Dow Global Energy Consumption
American Chemical Industry Energy Consumption
USA Total Energy Consumption
Dow uses about 1 Million barrels of oil equivalent per day (feedstock + energy)
Dow electricity generation & utilization equivalent to Australia
Jan03
Jan05
Jan07
$1 increase = $3.7 Billion Annual Incremental
Cost to the U.S. Chemical Industry
$US Per Million BTUs
Source: EIA – 1H06 Avg.
Slide 17
Slide 18
Industry Reaction
Untapped Reserves
ANWAR
34 TCF
Most untapped reserves are:

Legally off limits OR...

De facto off limits OR...

Federal lease regulations
bring cost and timing issues
Source: PFC Energy (consultant)
Annual:
U.S. Consumption = 22 TCF
U.S. Chemical Consumption = 2.5 TCF
Pacific
Coast
19 TCF
Rockies
143 TCF
Eastern Gulf
of Mexico
11 TCF
Atlantic
Coast
28 TCF
Currently there are plans to build more than 80 large-scale
chemical plants across the globe in the coming decade ...
One is planned for the U.S.
U.S. industry is at a competitive disadvantage
Slide 19
Slide 20
Total Production cost (2008 $/bbl)
Oil Prices are Rising….
Biomass as a Potential Feedstock
180
Predicted
demand till 2015
130
110
Cellulosic
Ethanol*
Recent (18 mo)
Oil Price range
90
Venezuelan
Heavy Oil
70
50
30
OPEC Middle East
10
0
20
Other OPEC
Other
Conventional
Oil
FSU
Deep Water
60
40
A
R
C
T
EOR
I
C
80
Biofuels
(Corn Based)
CTL
GTL
Oil Shale
Oil Sands (in situ)
Oil Sands (Mining)
Biofuels (Sugar Cane
Based)
120
100
Million Barrels of Oil Equivalent per Day
Conventional
Oil
Source: IEA, EIA, Booz Allen Hamilton, DOE Biomass Multiyear Program Plan April 2011, Dow
Analysis
Non Conventional liquid
sources
Passes a dramatic increase in
renewable fuels mandate
December 2007
*Based on DOE volume projections for US in
2022. DOE price target is ~$113/bbl
Ethanol – Not a Bad Idea….
Page 22
Fads….
CORN ETHANOL
www.sweeteralternative.com
Lincoln NE
1933
McGregor, IA
1979
"Does the average citizen understand what this
means? In from 10 to 20 years this country will
be dependent entirely upon outside sources
for a supply of liquid fuels … paying out vast
sums yearly in order to obtain supplies of
crude oil from Mexico, Russia, and Persia.“
Yale Professor Harold Hibbert - Ethanol promoter, 1925
Ford Model T 1908
Calls for a five year moratorium
on the use of food as a fuel source
Fall 2007
"Ethanol is good for our rural
communities. It's good economic
development for rural America.
When the family farmer's doing
well, it's good for the local
merchants. Ethanol is good for the
environment. ...Ethanol's good for
the whole country.“
President George W. Bush
Corn Ethanol = Serious Consequences
….and Reality
®
CORN ETHANOL
"This is not just hype -- it's
dangerous, delusional bullshit.
Our current ethanol production
represents only 3.5 percent of
our gasoline consumption -- yet
it consumes twenty percent of
the entire U.S. corn crop,
causing the price of corn to
double in the last two years." -Jeff Goodell, Rolling Stone
Magazine
Eutrophication
Soil Erosion
Aquifer
Depletion
Some Places Biomass Makes Sense as Feedstock
®
Benchmarking Land Use
Dow Brazil Plant
Dow LLDPE Capacity
San Mateo
Monterey & Santa Clara
Global LLDPE Capacity
CO2
San Bernardino & Los Angeles
Assumes Brazil Cane Yields






700 Million lbs / yr ethylene and derivatives
Recyclable polyethylene plastic (CO2 fixation)
Existing logistics for ethanol in Brazil
High polyethylene price in Brazil.
High hydrocarbons cost in Brazil.
450 square miles of cane!
Global Polyethylene
Global Ethylene
Page 28
3 Trillion Miles - Options
Vehicle Miles Traveled (U.S. Residential)
3 Trillion Miles – Soy Biodiesel
3 Trillion Miles
Solar/Electric
3 Trillion Miles!
3 Trillion Miles – Corn Ethanol
Aggressively Assumes:
500 gallons per acre
20 miles per gallon
Riverside County
Aggressively Assumes:
100 gallons per acre
40 miles per gallon
Source: Bureau of Transportation Statistics
Conservatively Assumes:
Assume 40 kWh/m2year
(Typical German Production)
1 kWh yields 4 miles
Page 29
Cost and Time to Implement
®
9% of US Liquid Fuel
Consumption in 2020
1 New Plant every 8 days
!$200B in capital
3% of US total
Energy Consumption
in 2020
National Academy of Sciences
Projected Biomass (550MM ton) with
Thermochemical Process
Page 30
Cellulosic Ethanol:
Promise versus the Reality
PROMISE
Switchgrass today = 4.6 ton/acre
Miscanthus – trials only
REALITY
Cumulative Total R&D Investment
Dow Agrosciences
Syngenta
Monsanto
DuPont
Actual Growth from
Corn Ethanol
Data shown in 2020 includes only the energy generated by the 550 MM ton of biomass (Nat. Academy of Sciences) with performance of 2012 DOE target
®
“Promised” to 10-15 ton/acre in a decade and 15-20 ton/acre
over following few decades
Area Productivity
Corn
50 years to 3x yield
Soybean
50 years to 2x yield
Source: Bloomberg for 2007 to 2009 and Annual financial reports from 2010
Source: USDA – quickstats.nass.usda.gov – reports: AFBDFE1E-1AFC-35DE-8A93-7FB72F0DA089,
0DB967AF-4F8E-32ED-9D5D-D150ADE7D838
Cellulosic Ethanol:
Promise versus the Reality
PROMISE
Switchgrass today = 4.6 ton/acre
Miscanthus – trials only
The Scale Challenge
®
“Promised” to 10-15 ton/acre in a decade and 15-20 ton/acre
over following few decades
REALITY
®
12 Refineries = 796 Cellulosic Ethanol Plants (100million gal/year each)
$83.2
$344 billion
Modest NPP Growth over 17 years
Cumulative Total R&D Investment
Dow Agrosciences
Syngenta
Monsanto
DuPont
Source: Bloomberg for 2007 to 2009 and Annual financial reports from 2010
Trends in North American net primary produc;vity derived from satellite observa;ons, 1982–
1998, GLOBAL BIOGEOCHEMICAL CYCLES, VOL. 16, NO. 2, 10.1029/2001GB001550, 2002 Refineries capacities and cost from World Wide Construction update report, O&G Journal, Dec. 6 2010
Distribution in US for cellulosic Ethanol Plants is illustrative and does not represent real locations
Replacing Global Ethylene
®
The Scale of Industry
Cellulosic Ethanol
Largest Social
Community on
Internet
Original
Investment
Nat Gas (F&C)
0.05% of Global
Electricity
Generation
Naptha
Revenue $1051MM/y
0.02% of Global
Electricity
Generation
Revenue $441MM/y
2% of Global MEG
Consumption
Coal
Sugarcane (Integr.)
Corn Ethanol (Integr.)
Ethane (Middle East)
Capital for
Single Plant
Sugarcane Ethanol (Purch.)
Corn Ethanol (Purch.)
Top 50 CapEx
0
0.3% of Global
Ethylene
Consumption
Sources: facebook original investment showing combined amounts from Peter Thiel (PayPal cofounder), Accel Partners and Greylock Partners as described in the History of
facebook on wikipedia; Power Plants: RL34746 report - Stan Kaplan - Congressional Research Service; MTO: PEP Report 261 – SRI and EG: PEP Repor 2I – SRI; Revenues for
Power Plants calculated using 2010 electricity average retail prices (all sectors) 9.88 cents/kWh (data from DOE)
Top 50 Capital Expenditure from C&E News
100
200
300
400
Capital Expenditure ($ Billion)
500
Slide 36
Issues With ANY Solar Process
Limits to Photosynthesis
®
5%
Especially bio-based processes
®
Area Required to Provide 10KW per US Citizen
Assumes 4.8 KWHr m-2 d-1 average solar insolation and no losses in distribution
7,000,000
5%
~2/3
Spectral Irradiance (W/m2/nm)
Relative Efficiency in
Photosynthesis
Efficiency (Ideal conditions)
Cane:
~ 0.9 %
Corn:
< 0.3%
Microalgae: ~2-4% (potential)
~0.6% (current)
Square Miles of Solar Collector
Energy Crops
17 MJ/kg
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
Tropical Sugarcane
Microalgae
Low efficiency processes can potentially
be used as feedstocks, but not
feedstocks + energy
1,000,000
0
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Efficiency of Solar Conversion Process
Page 37
®
Algae-based CO2 to Ethanol to Ethylene to Polyethylene
for Carbon Capture and Sequestration
Carbon Capture and Sequestration – 2
Scenarios
®
•  Dow is working with Algenol Biofuels
and other contributors, to build and
operate a pilot-scale algae-based
integrated biorefinery that will
convert CO2 into ethanol.
Sustainability Profile!
Sugar Cane
•  Tropics
•  Large fresh water input
•  Prime arable land
•  Potential loss of forest land
Algae
•  Near ocean and power plant (CO2 source)
•  Salt water
•  Desert / waste land
•  Potential high cost of bioreactors
Page 39
•  High pressure underground CO2 storage
•  Must not leak - << 1% / yr
•  Energy required for gas separation and
compression
•  Limited number of “safe” underground
reservoirs
•  Bioconversion of CO2 to ethanol,
ethylene, polyolefins
•  Recyclable polymer, stable for centuries
•  Sequester CO2 as “useful stuff”
•  By product O2 can be recycled to power
plant
Page 40
Carbon Capture Schemes from Electrical Power Plants
®
•  Potentially a huge business because of the scale
®
Technology Evaluation
•  50,000 power plants globally
•  10 billion tons yr-1 CO2 emissions out of ~25 billion tons yr-1 total
anthropogenic emissions
Founded in 2005. Raised $4.5MM from 15
investors including TXU Corp (NYSE: TXU).
NaOH
Caustic
•  Currently a reversible acid-base reaction using amines, monoethanol
amine, etc. is available and in demonstration facilities
+
CO2
Carbon Dioxide
NaHCO3
Baking Soda
This technology appears to be a natural fit for Dow, the
world’s leading manufacturer of caustic soda.
•  Scheme that probably will not make a significant impact (from an
industrial perspective):
Slide 42
Page 41
Technology Evaluation
Potential for Solar Energy
®
How is caustic made?
NaCl
Salt
+
H 2O
Water
NaOH
½ Cl2
½ H2
+
+
Caustic
Chlorine
Hydrogen
How much NaOH is needed to capture the CO2 from one 600 MW power plant?
7 billion lb/yr - 5% of the world market. – There are 50,000 coal plants globally
Capital required to build this NaOH capacity?
$4 billion - 4 times the capital required to build the power plant.
How much electricity is required to make this NaOH?
1000 MW plant - 400 MW more than our plant will produce.
How much chlorine byproduct is made?
7 billion lb/yr - 50% of Dow’s annual production.
How many cookies could you make from the product bicarbonate?
>800 trillion yr-1 - >300 cookies per human on the planet per power plant per day.
EtOH- Sugar Cane 0.8
0.3%
EtOH - US Corn
0.195 0.10%
EtOH - Algae
3.75
2.5%
Wind Farm
4
2%
Concentrated
Solar
3.2
1.6%
PV cell (20%)
40
20%
Adapted from Mines ParisTech / Armines ©2006
Total solar energy on land
= 697,000 EJ/year
1300 x world needs!
Average Solar Radiation 1990-2004
Slide 44
PV Production & Price
Issues with Incumbent Technology
Installed cost per watt
7 GWp New US PV Was Ordered in the Last 2 Months
Total 2010 Global Energy Consumption Rate = 15 TW
(10,000 home in California)
Expensive
Difficult to install & replace
Poor aesthetics
Slide 45
Slide 46
PowerHouse* Photovoltaic Shingles
Installed Solar Cost Analysis
$ per watt
Core R&D/Energy
Dow Plastics /Specialty Films
Dow Building Solutions
  Thin film processing
  PV packaging
  BIPV commercial roofing
  Mfg. process optimization
  Back sheet, low-cost injection molding
  BIPV residential roofing
Top layer
Encapsulant
Back sheet
Rooftop Area from Navigant Consulting
Slide 47
Today, as in the past, the key building blocks for stuff
comes from by-products of energy production.
  Chemical production requires a large input of energy.
  Energy production is changing as global fossil fuel
resources are depleted / greenhouse gas issues.
  Efficiency of solar energy conversion (biomass, PV,
photo water-splitting, etc.) directly affects land
requirements and commercial viability.
  Currently, renewable resources based on biomass are
too inefficient to provide global energy/feedstock needs.
  Solar energy / photovoltaics have promising efficiency
but produce electricity – not feedstocks for chemistry.

Slide 49