Overview of Coal Liquefaction

James A. LepinskiVice PresidentHeadwaters IncorporatedU.S.-India Coal Working Group MeetingWashington, D.C.November 18, 2005

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Headwaters at a GlanceCoal Value Chain

3Coal Liquefaction Technologies

• Direct Coal Liquefaction (DCL)• Indirect Coal Liquefaction (ICL)• Hybrid Coal Liquefaction (DCL/ICL)

4Direct Coal Liquefaction Process

RefiningCoal Liquefaction

Hydro-treating

Fractionation

C1 – C2

H2S, NH3, COx

Make-up Hydrogen

Coal + Catalyst

SlurrySlurry

H-Donor

Recycle H2

De-AshedOil (DAO)

Diesel FuelGasoline

LPG

Heavy VacuumGas Oil (HVGO)

Ash RejectSolventDe-ashing

Gas RecoveryTreatment

5Direct Coal Liquefaction Plants

Lawrenceville, NJ30 bpd

Catlettsburg, KY1800 bpd

Inner Mongolia, China17,000 bpd

6Indirect Coal Liquefaction Process

Gasification & Gas Cleaning

Oxygen/Steam

FT Synthesis

Iron Catalyst

Ultra-CleanLiquid Fuels& ChemicalFeedstocks

H2 + COSyngas

Waterand

Oxygenates

Coal*

Sulfur,CO2

and Ash

CxHyLiquids& Wax

FT ProductSeparation &

Upgrading

SteamElectricPower

Generation

Electricity

Steam Tail Gas

*Any carbon-bearing feedstock

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Indirect Coal Liquefaction Plant

Secunda, South Africa135,000 bpd

Brownsville, TX7,000 bpdGTL Plant

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Maximizing the Value of Coal

1 tonCoal*

Combustion

Polygeneration

Electricity ProductionProducts Value1.8 MWh electricity $72Total $72

Fuel and Power ProductionProducts Value 0.05 MWh electricity $20.17 bbls naphtha $81.29 bbls diesel fuel $100Total $110

A choice to make:

*Sub-bituminous coal as received basis

Fuel, Power & Fertilizer ProductionProducts Value

0.19 MWh electricity $80.18 bbls naphtha $90.96 bbls diesel fuel $750.18 t ammonium nitrate $63Total $155

Indirect Coal Liquefaction

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Comparison of DCL and ICL Economics (Based on Sub-bituminous Coal at $1/mm BTU)

Direct IndirectCapex for 50,000 bpd plant ($billion)* 3.3 3.3

Coal required for 50,000 bpd (stpd as rcvd) 23,000 32,000

Coal feedstock cost ($/bbl) 8 11

Opex excluding coal ($/bbl) 17 12

Return on investment @ 15% ($/bbl)** 30 30

Production cost including 15% ROI ($/bbl) 55 53

Crude oil equivalent ($/bbl) 41 40

For discussion purposes only.

* U.S. location. **100% equity basis

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Comparison of DCL and ICL Final ProductsDirect Indirect

Distillable product mix 65% diesel35% naphtha

80% diesel20% naphtha

Diesel cetane 42-47 70-75Diesel sulfur <5 ppm <1 ppmDiesel aromatics 4.8% <4%Diesel specific gravity 0.865 0.780Naphtha octane (RON) >100 45-75Naphtha sulfur <0.5 ppm NilNaphtha aromatics 5% 2%Naphtha specific gravity 0.764 0.673

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Hybrid DCL/ICL Plant Concept

Coal

Raw ICL products

Raw DCL products

H2

H2

FT tail gas

Final Products

CoalGasification

Indirect CoalLiquefaction

(FT)

Product Blending and

Refining

HydrogenRecovery

Direct Coal Liquefaction

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