COST OF DME OR DIESEL, $/MMBTU

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Presented by Helge Holm-Larsen, Haldor Topsoe A/S On behalf of

International DME Association

(www.aboutdme.org)

Nordisk Vejteknisk Forbund September 4, 2006

DME:

A New Clean Transportation Fuel

for the 21 ^st Century

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• About DME

• General

• History of DME as a transportation fuel

• Current DME vehicle/engine developments

• Japan, China and Europe

• International and regional DME organizations

• Key messages

Outline

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About DME

• Burns like natural gas

• Stores/transports like LPG

• Similar to methanol with respect to:

• Manufacturing technology

• Costs

• Petrochemical feedstock

• Environmentally friendly with significant global consumer history as propellant

• Outstanding diesel fuel alternative

• Very large market potential as

synthetic LPG, diesel alternative

and fuel for power generation

Overview

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DME – a simple molecule

Dimethyl-ether (DME)

Methane

Methanol

Water Propane

Butane

Hydrogen Carbon Oxygen

1.4 tons MeOH to 1 ton DME

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Combustion & Fuel Injection Relevant Properties of DME and Diesel

DME Diesel

Chemical Structure

Liquid Density @ 40°C [kg/m

³

] Lower Calorific Value [MJ/kg]

Cetane No.

Viscosity [Cst]

Boiling Point @ atm. Press. [°C]

CH

₃

-O-CH

₃

C

₁₅

H

₂₈

634 840

28.4 42.7

~65 40-50

<0.2 ~3

-25 180-370

Presented by D. W. Gill, AVL, at DME 2 Conference

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Methanol and DME production

Syngas (CO+H₂)

(DME)

Conventional Two Step Process

Natural Gas

Biomass Coal Petroleum Coke

Methanol

• Same chemistry, different engineering

• Methanol to DME conversion is very simple

• Similar Capex and Opex (lower than GTL-FT!)

• Co-production feasible

• Choice of technologies

DME

Methanol and DME

Direct or Combined Processes

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DME: clean and green

• HEALTH:

• Approved as consumer product propellant

• No human hazard relative to toxicity or carcinogenicity within exposure limits

• SAFETY

• Flammable liquid like LPG

• Thermally stable

• No tendency to peroxide formation found

• Similar safety guidelines and codes as LPG

• ENVIRONMENT

• Low emission fuel (LPG, Power, Diesel)

• Does not deplete ozone

• Minimal impact on land/water due to volatility

Visit www.aboutdme.org Extensive HSE file

Photos Courtesy of Akzo Nobel and DuPont

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DME as Diesel Alternative

• Performs in conventional diesel engines with modified fuel injection system

• High cetane

• Quiet combustion

• Clean-burning: substantially lower emissions than diesel

• Completely SOOTLESS (No smoke or particulates)

• 100% SOx reduction

• Challenges

• Poor compatibility with polymers: fluorine based polymers can be used

• Lower lubricity requires lubricating agent

• Lower viscosity can cause leakage

• Requires LPG-like distribution system

• Government regulations

“DME is our preferred long term fuel, and under evaluation.” Volvo Group (2005)

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Emission Results with Dimethyl Ether, DME

California limits 1991

0.1 0.2 0.3

0.0 1 2 3 4 5 6

NOx + HC, g/bhp/h

Particulates, g/bhp/hParticulates, g/bhp/h

ULEV Limits

Typical 1994 diesels

SCTE Turbo, IC+EGR SCTE N.A. Navistar T 444E V8

Obtained Results with large Diesel

Engines

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Early History: to 2002 (So: McCandless, Dec. 2002)

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International DME AssociationProf. HUANG

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AFFORHD:

A Major Step Towards Energy Security and a Clean, Stable

Environment

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DME - Global Activities

Over the past several years, global recognition of DME’s potential manifested by the formation of four associations representing about 160 companies, technical institutes, universities and individuals

Korea DME Forum China DME Association

“www.aboutdme.org” for more information

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Key Messages

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Key Messages

General

• DME is a promising new , multi-source, multi-purpose fuel

• A significant global, cooperative DME effort has evolved - led by Asia.

• The first commercialization of DME is as a LPG blendstock in China

• The IDA welcome you to join

DME as a Transportation Fuel

• DME performs well in conventional diesel engines with modified fuel injection system

• High cetane, quiet combustion, clean burning.

• “DME is our preferred long term fuel…..” Volvo Group (2005)

• Significant market development programs are advancing; particularly in Europe, Japan and China

Dramatic progress has been made in the past 10 years in

understanding and advancing the DME business

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Back up Slides

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International DME Association 100

96-114 96-132 127-129 109-143 109-143 135-155 154-174

0 50 100 150

Diesel DME LPG Gasoline LNG CNG Methanol Ethanol

Relative scale, CO2-equivalents Relative scale, CO2-equivalents

Carbondioxide, Methane and Nitrous oxide Carbondioxide, Methane and Nitrous oxide

Relative well to wheel Greenhouse

gas emission

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Methanol and DME production

Syngas (CO+H₂)

(DME)

Conventional Two Step Process

Natural Gas

Methanol

• Same chemistry, different engineering

• Methanol to DME conversion is very simple

• Similar Capex and Opex (lower than GTL-FT!)

• Co-production feasible

• Choice of technologies

DME

Methanol and DME

Direct or Combined Processes Ready technologies

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Combined Methanol/DME

Processes Syngas

(CO+H₂)

Dimethyl-ether (DME) Conventional Two Step Process

Natural Gas

Methanol

DME can be manufactured from multi-feedstocks similar to methanol production ...

• Today: Current suppliers for propellant market include Akzo Nobel, DuPont, and Mitsubishi Gas Chemcials.

• Tomorrow: Future mega-plant technology providers include Haldor Topsoe, Lurgi, Toyo Engineering, Mitsubishi Gas Chemicals and JFE Holdings.

DME: made from methanol; “Synthetic LPG”

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Why DME now?

Multiple Markets

Ready technologies Multiple Sources

Green

Economic viability

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DME as LPG blendstock

• DME/LPG blending work (BP, ENI)

• Completely miscible

• Below 20 %v DME, existing LPG infrastructure can be used

• THIS IS THE PRIMARY MARKET

• Existing/growing market

• High value market

• Relatively easy blending

• Challenges:

• Regulatory permits

• Validation of blending on large scale

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DME for Power Generation

• 1995-2000: BP partnership with GE and EPDC(Japan);

Studies with Siemens Westinghouse (SW)

• Multiple, detailed combustor tests

• DME is excellent gas turbine fuel

• GE and SW provide commercial offerings of DME-fired E class and F class gas turbines

• GE and SW guarantee power output, heat rate and performance

• DME exhibit record efficiencies and low emissions

Picture Courtesy of GE

MHI Testing – Reported at 2004 DME 1 Conference

• Confirmation and verification of gas-fired and liquid-fired stable combustion aimed at low NOx.

• Following decisions by the customer who would

introduce the technology, performance verification is to be carried out based on the environmental standards, etc. in place at the installation locations.

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DME as Chemical Feedstock

• JGC Corp. (Japan)

Olefins Production (DTO)

• Developed Proprietary Zeolite Catalyst

• High Conversion to Propylene

• Process being developed

Source: Nobuyasu Chikamatsu, DME 1, Paris, October 2004

• Shandong Jiutai Chemical Ind.(China)

Source: 2^ndAsian DME Forum, Shanghai, September 2005

• Process studies reported

DTO MTO

DME Methanol

- H

₂

O

Olefins

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Economics

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DME produced in the Middle East and shipped to China as a diesel substitute can achieve excellent profitability

Dr. Larry Song, 2^ndAsian DME Forum, Sept 05 0

2 4 6 8 10 12 14 16 18

COST OF DME OR DIESEL, $/MMBTU

Natural Gas / Methanol Other Variable Cost Fixed Cost

Depreciation 10% ROCE Transportation

Tariff

Chinese Diesel Fuel Market Price @ $40/BBL Crude

(Natural Gas Price = $1.00/MMBtu)

Conventional Direct

Chinese Diesel Fuel Market Price @ $70/BBL Crude

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Latest DME Developments

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DME in Japan

Japan DME Forum coordinates multiple programs ($200 million over 2002-2005) …..

•Utilization

•Production

•Codes & Standards

•Power generation systems

•Household/industry fuel

•Diesel related technologies

•Emission tests from diesel engine

•Marketing study

•Road test of DME vehicles

•Production technologies

•Ocean transportation

•Studies for standardization of DME fuel

Direct process (JFE) 100t/d demonstration plant

DME Commercial Projects - Studies

• Japan DME Ltd: 5,000 t/d, Western Australia, Middle East, Indonesia, Papua New Guinea

• DME International Inc, 2,500-4,000 t/d, Middle East/Indonesia/Australia

• Mitsui & Co, TEC: 7,000 t/d, Iran, Indonesia Numerous Fleet Tests

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DME in China DME in China

“Now, energy is in short supply. DME can not only ensure energy security of our country, but also reduce environmental pollution.” Shandong Jiutai Chem. Ind.

Luthianhua Group Inc, Luzhou, Sichuan

•10,000 T/y – Commercial DME plant for fuel use - August 2003 start-up. Toyo Engineering methanol dehydration technology.

• 110,000 T/y – with 2005 start-up

Shandong Jiutai Chemical Industry, Linyl, Shandong

• 100,000 T/yr DME capacity. 50,000 customers using bottled DME.

• Established Jiutai Energy Mongolia Ltd. Planning 1 million T/yr.

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DME in Iran

World’s First Large-Scale DME Plant

• Production capacity: 800,000 T/yr

• Owner: Zagros Petrochemical Co.

• Location: Bandar Assalouyeh/ Pars Special Economic/Energy Zone

• Licensor: NPC-RT and Haldor Topsoe AS

• Feed: ASTM Grade AA Methanol

• Technology: methanol dehydration, fixed-bed reactor

• Product purity (wt%) – above 99%

• Primary market: LPG substitute in Iran and Region

• Current Project Status:

•EPC company selected

•First production in 2008

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A brief history of DME

160+ members Formation of IDA and JDF

2000/01

Iran DME project; DME 1 Conference; China DME projects 2^ndAsian DME Conference

2004/5

Japan DME Ltd, DME International, India DME, Chinese ventures

Multiple commercial projects pursued 1996-now

TNO and 16 companies IEA DME Annex XIV and XX (workshops and studies)

1996-2001

AVL, BP, DTU, HTAS, Navistar BP press conference and first papers in Detroit

Feb. 1995

BP visit with NEDO, TEPCO, EPDC and others

DME multi-purpose fuel strategy Jan 1995

AVL, BP, DTU, HTAS, Navistar Diesel fuel demonstration

1992-95

Akzo Nobel First use as aerosol

1963

Companies Major Activity/Event

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Other DME Activities Around the World *

• DME-Fueled Shuttle Bus

Demonstration, Penn State University,

•Moscow program: "Alternative fuels use in city’s motor transport for 2002-2004”..

•VNIIGAZ (GAZPROM Research Institute) developing technology to manufacture DME

* Only a partial list of the extensive global efforts

USA Russia

• Volvo 2^ndgeneration heavy duty vehicle – 3 more in ‘06

•Volvo DME fleet tests in Växjö

Sweden Europe/USA

•A network, headed by the Petrobras Research Centre, was established in 2001 including one Research Institute and three University Laboratories.

Brazil

•AFFORHD. Alternative Fuel for Heavy Duty Engines

•Volvo, AVP/PTI, DTU, BP, TNO, Växjö

• 2002-2004, 4 million euro

Korea

Italy

•Snamprogetti Program : DME as LPG substitute, and LPG/DME interchangeability in diesel engines (with SwRI)

• KOGAS Demo Plant, 2004-9

• Conducting engine research

• KIER/SK/Inha Univ. Project: First prototype truck

COST OF DME OR DIESEL, $/MMBTU

DME:

A New Clean Transportation Fuel

for the 21 st Century

• About DME

• General

• History of DME as a transportation fuel

• Current DME vehicle/engine developments

• Japan, China and Europe

• International and regional DME organizations

• Key messages

Outline

About DME

• Burns like natural gas

• Stores/transports like LPG

• Similar to methanol with respect to:

• Environmentally friendly with significant global consumer history as propellant

• Outstanding diesel fuel alternative

• Very large market potential as

synthetic LPG, diesel alternative

and fuel for power generation

Overview

DME – a simple molecule

Methane

Methanol

Water Propane

Butane

Hydrogen Carbon Oxygen

1.4 tons MeOH to 1 ton DME

Combustion & Fuel Injection Relevant Properties of DME and Diesel

DME Diesel

Chemical Structure

Liquid Density @ 40°C [kg/m

] Lower Calorific Value [MJ/kg]

Cetane No.

Viscosity [Cst]

Boiling Point @ atm. Press. [°C]

CH

-O-CH

C

H

634 840

28.4 42.7

~65 40-50

<0.2 ~3

-25 180-370

Methanol and DME production

(DME)

Natural Gas

DME: clean and green

• HEALTH:

• Approved as consumer product propellant

• No human hazard relative to toxicity or carcinogenicity within exposure limits

• SAFETY

• Flammable liquid like LPG

• Thermally stable

• No tendency to peroxide formation found

• Similar safety guidelines and codes as LPG

• ENVIRONMENT

• Low emission fuel (LPG, Power, Diesel)

• Does not deplete ozone

• Minimal impact on land/water due to volatility

DME as Diesel Alternative

Obtained Results with large Diesel

Engines

Early History: to 2002 (So: McCandless, Dec. 2002)

AFFORHD:

A Major Step Towards Energy Security and a Clean, Stable

Environment

DME - Global Activities

Korea DME Forum China DME Association

Key Messages

Key Messages

Dramatic progress has been made in the past 10 years in

understanding and advancing the DME business

Back up Slides

Relative well to wheel Greenhouse

gas emission

Methanol and DME production

(DME)

for the 21 ^st Century