DME Methanol Outlook for gas conversion Amoco 2000

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Gas to Liquids

Amoco’s Competitive Advantage in the 21st Century

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“... a strategic inflection point is a time in the life of a business when its fundamentals are about to change.”

Andrew S. Grove, President and CEO of INTEL Corporation

The Changing Energy World: A strategic inflection point (SIP), the likes of which the energy

industry has not experienced since the shift from coal to oil, is upon us. The energy choice for the next

millennium is gas! Environmentally it’s the right thing to do. Customers want cleaner, environmentally

friendly fuels and chemical feedstocks. Government regulations are being set to ensure they get it. It’s

decision time. Each energy company must choose, like the coal companies before them, whether to stay

with what made them successful in the past, or to respond to the full-scale changes in the emerging

global natural gas business that will be driven by Gas-to-Liquids technology. Amoco can choose to be a

driving force behind the SIP, or reactive once others cause it to occur... but we cannot avoid it.

Wood Coal Oil Gas Hydrogen



2

Gas-to-Liquids: The Industry’s Next Mega-Trend

Natural gas is increasing in popularity as an alternative fuel where market links exist via pipeline or LNG. Gas-to-liquids (GTL)

represents the next phase in transforming gas into a truly global commodity. The commerciality

of GTL has become the hottest topic in the energy industry. It is now economically feasible to

manufacture clean liquid fuels, fuel additives, and chemical feedstocks from natural gas, capable

of displacing petroleum based products in traditional markets. No single technology has affected

as many segments of the energy industry as GTL will in the future. The implications to the E&P

sector alone are huge. Worldwide natural gas resources are estimated to exceed 14,000 TCF

proved and possible. Over 50% of the current proved resources, 900 TCF, are considered

stranded due to inaccessibility to market. Successfully linking these resources to markets is like

discovering several hundred billion barrels of new clean oil.

The implications for the chemical and refining and marketing sectors could be even greater. Oil

refining produces products from crude oil by breaking (cracking) very large hydrocarbon molecules,

whereas GTL starts with the basic methane molecule and custom builds the desired product. This

fundamental shift in technology will lead to totally new ways of doing business.

New studies, partnerships, and projects are announced monthly. Construction of the first

commercial world-scale GTL plant will set off a major scramble for position. Being first counts!

Once established, GTL will become a serious game of haves and have nots. Those with access to

competitive GTL technology and natural gas resources are in and will be preferred partners to those

trying to catch up.

Companies possessing GTL capabilities will be competitively advantaged to:

1. Capture and monetize new E&P opportunities (gas and oil) previously deemed off limits via non-conventional approaches.

2. Market value-added products in existing and new transportation fuel markets, e.g., clean diesel, diesel and gasoline additives and

fuel cells.

3. Control fundamental building blocks in the chemical value chain, e.g., methanol and DME.

4. Introduce options to address environmental, regulatory and production problems facing customers and governments.

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0

50

100

150

200

250

300

350

400

1980

1982

1984

1986

1988

1990

1992

1994

1996

Liquids

GasMB

OE

/D

Amoco’s International

Oil and Gas Production

“Stranded” Natural Gas Reserves

Amoco Reserves

BP Reserves

Competitor’s Reserves



3

The GTL Game: Technologies, Approaches and Challenges

Major oil and technology companies have invested hundreds of millions of dollars since 1980 on the development of GTL technologies.

Ongoing industry investments have led to several process improvements that substantially

reduced the cost of these technologies over the last several years. Recent breakthroughs

have resulted in smashing through the historical cost barrier of $30,000/bbl of daily

capacity. The long term goal is to push GTL capital costs down to $12,000/bbl of daily

capacity, which is on par with a world-scale crude oil refinery. As cost continues to decline

below $30,000/bbl of daily capacity, new markets in transportation and power fuels, and

expanded chemical feedstock applications will develop and grow, and gas will compete as

a true global commodity.

Today, there are two fundamentally different GTL approaches, Fischer-Tropsch (F-T) and oxygenates. Common to both is the production

of syngas, the process by which natural gas is chemically converted to a reactive intermediate which is in turn converted to the final liquid

product. The syngas step accounts for over 60% of the total capital cost of manufacturing GTL. Amoco established a technical

consortium (Oxygen Transport Membrane - OTM) with BP,

Phillips, Statoil, Praxair and Sasol that is focused on reducing

the cost of syngas production by 20-30%.

F-T is often used interchangeably with GTL, and is by far the

most popular GTL process in terms of dollars invested. The F-T

process generates long, straight-chain hydrocarbons of varying

lengths. This syncrude is sold into global oil markets at a price premium (+30-45% over crude oil) due to it’s added value as a diesel

blending agent and specialty wax. Shell, Exxon, and Sasol are the industry leaders in this technology. All three have proprietary

technologies, however Shell and Exxon regard them as competitive advantage and are unwilling to offer their GTL technologies for

license. The majority of the other big players (Chevron, Texaco, Arco) have pursued this technology via partnerships with either Sasol or

Syntroleum (a relatively new technology provider). Amoco is positioned to pursue F-T, if it chooses to do so, via a cooperative

agreement with Sasol.

Amoco made the strategic decision to pursue GTL by focusing on oxygenate products (e.g., methanol, DME, DMM). This decision was

based on a combination of commercial and technical advantages for oxygenate manufacturing including:

1. Lower capital cost and smaller gas resource requirements

2. Higher conversion efficiency at lower energy consumption

3. The potential breadth of new and existing market applications

4. Opportunity to control technology via patents and exclusivity contracts versus trying to play catch up with Shell and Exxon’s F-T research

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0

20

40

60

80

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1985 1990 1995 2000 2005

IIExxon, FT, Qatar, 1996

Phillips-Sasol, FT

Qatar, 1997

Amoco, DME, 1997I

II

“Economic” GTL ($30000)

Crude Refinery Target ($12000)

+

Catalyst

+

Natural

Gas

Oxygen

Syn Gas

Carbon MonoxideHydrogenCatalyst

Methane

Syn Crude

Dimethoxymethane

(DMM)Methanol

Dimethylether

(DME)

Oxygenates

Fischer-Tropsch



4

Methanol is currently the largest (by volume) oxygenate produced and is used primarily in manufacturing MTBE, formaldehyde and

acetic acid. In addition, there is a wide range of untapped oxygenate markets which include chemical feedstocks, transportation fuels, and

power generation. While certainly smaller than the global oil market available to F-T, these oxygenate markets offer tremendous growth

potential and higher margins. For example, “low cost” methanol currently sells for $100/ton ($5.25/mmbtu) compared to $21/bbl

syncrude ($3.60/mmbtu) in a $15/bbl ($2.60/mmbtu) crude oil market. Amoco’s Vision 2010 (Addendum 1), is to focus in the near term

to establish a commercial position in methanol and DME.

The primary hurdle to developing an oxygenate-based GTL business

will be to establish new market applications and grow existing markets.

Amoco is well positioned in many of these markets and value chains to

cause future SIPs with the introduction of next generation oxygenates

and/or new market applications. For example, using methanol or DME

as the basic building blocks in the manufacture of olefins and/or

aromatics. In transportation fuels, DMM (or derivatives) could be the

key to clean diesel, a diesel additive, an improved substitute for MTBE

in gasoline, and along with methanol, the fuel of choice for fuel cells.

Unlike Shell and Exxon, our strategy to access GTL technology was a

balance of in-house proprietary work and partnering with key

technology developers. Taken as a whole, Amoco’s competitive

advantage is now greater than the sum of the specific partnerships and

agreements listed below, and provides us the option to respond quickly to customer needs.

Exclusivity in the near term with key DME technology

provider - Haldor Topsoe

Partnership with methanol marketer and engineering

company - Saturn and Lurgi

Proprietary DMM technology

Cooperative relationship with key turbine manufacturers -

GE and Westinghouse

GM clean diesel partnership

Two economic projects, Titan and Atlas - establishes a

Caribbean platform for low cost methanol

Cooperative agreement in India - GAIL, IOCL, IIP

Joint DME study in Japan and Far East - EPDC

F-T technology sharing agreement - Sasol

OTM consortium

Partnership with AVL, the worlds largest engine testing lab,

in the development of DME as diesel alternative

The result is that Amoco is poised to jump ahead of the competition in the GTL game. However, there is a limited window of

opportunity in which to act. While the balanced approach has allowed us to leverage our research dollars to gain tremendous capability in

a short time frame, continued exclusivity with these key technology partners requires performance - use it or lose it.

Methanol

DME

Formaldehyde

MTBE

DMC

Olefins

DMM

Acetic Acid

Aromatics

Gasoline

Power Fuel

Natural Gas

Refinery

Polypropylene

Diesel Additive

Polycarbonate

PTA

Gasoline Additive

Cellulose Acetate

Vinylacetate

Fuel Cells

Natural

Gas

Oxygen

Polyethylene



5

Building Capability ===> Future Optionality

Uncertainty gives the GTL business tremendous upside potential.

To continue to make intelligent choices, we must develop flexibility

to respond to new information. Our strategy builds optionality in a

stepwise manner through individual project investments (Addendum

2) designed to secure potential upsides while insuring against the

downside and providing multiple exit points. Ultimately, the value

of the options we generate is recognized through the value of

learning (Addendum 3). The Titan methanol plant provided key

learnings and partnerships which contributed greatly to the

development of the Atlas mega-methanol plant. In turn, Atlas will

provide valuable learnings that enable the commercialization of

DME for the Qatar/India project with less risk.

Another key aspect to optionality is geographic presence - a

foothold in the region. By 2004, we will have established growth

platforms in the Caribbean and Middle East, with a third platform

currently envisioned in the Far East. In addition, there exists a

multitude of stranded gas supply and market development options

that could provide the next steps for continued growth of the GTL

business. To win in the long-term requires Amoco to utilize the

potential of GTL technology to capture large low cost natural gas

resources, NOW.

With low cost manufacturing and secured low cost resources, we

will be competitively advantaged to offer unique energy solutions to

customers with environmentally superior, high value-added

chemical feedstocks, fuels and fuel additives. This is not based

solely on internal perception. Potential customers have

demonstrated a strong interest (Addendum 4) and have confirmed,

“There are vast market opportunities for clean cost competitive

fuels.”

1999 2001 2003-4

Titan

Atlas

Qatar/India DME

Market:

1. Introduction to

MeOH business

2. Establish partner

network

Market:

1. Initiate new MTO

market

2. Initial exposure to

DME value chain

3. Positioned as low

cost producer of

MeOH

Technology:

1. Prove scale-up

mega-methanol

technology

2. DME logistics

Market:

1. DME end users

2. EstablishDME

marketing partners

3. Establish low cost

DME position

Technology:

1. Full scale DME

logistics

2. Optimize “on-purpose”

DME facility

Supply:

1. Capture supply via

tech & markets

Strategic:

1. DME value-chain doability

2. Establishes AN as a leader

in GTL business

MeOH / DME to Olefins

Chemical Feedstocks

Transportation Fuels

Fuel Cells

DME for LPG

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Methanol Supply Hub DME/Methanol Supply Hub

Potential Future Flows of GTL Products



6

Keys to Success

The bottom line... Amoco has a distinct competitive advantage to be a first mover - to move quickly and decisively to build capability,

secure low cost gas resources, create options and establish growth platforms before the competition has time to respond. The key to

success is to understand and respond quickly to external and internal forces.

Our external business challenges are to:

1. Be a first mover to establish credibility, capability and capture higher returns.

2. Utilize our knowledge of the potential of GTL to secure long-term low cost gas supplies before market forces drive up the

competition and gas owner expectations.

3. Manage partnerships with technology providers (i.e., Lurgi and Haldor Topsoe) to optimize speed and flexibility of execution that

results in wins for all parties.

4. Continue improving cost of technology - internally and with partners.

5. Develop next generation oxygenate and/or introduce new market applications to cause future SIPs.

Leverage GM partnership for clean fuels and increased engine efficiency

Partner with UOP to access MTO technology

6. Expand participation in the value chain to capture shifting margins.

Our internal challenges are to:

1. Establish a common mindset that the GTL business is ours to win.

2. Establish single point accountability.

3. Endorse a first mover mentality.

4. Manage as a cross-stream business.

5. Establish processes to enable effective communication and learning.

Amoco is at a very early stage in the overall development of GTL as a core business. A centralized, coordinated effort is needed to ensure

that individual projects realize the learning, capability and optionality objectives which go beyond the specific project scope and

economics. Historically, the industry has not been very successful in realizing the full potential of cross-stream businesses. Amoco is no

exception. As we move forward, this is our biggest challenge. With an effective organization and management structure, and well

defined accountability, we can establish a new core business with PV10 (1/1/98) > $.5 billion by 2010 (Addendum 5).

It’s time to choose to be a have or a have not! We are positioned to influence the inevitable Strategic Inflection Point.

As first movers, we can have the competition chasing us.

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7

Addendum 1: Vision 2010

Our Purpose: Create and build a new core business for the Corporation in gas-to-liquids. Initially, we will focus on the

commercialization of distinctive technologies and the development of new markets, to manufacture and sell DME and methanol. Our

approach to GTL will change the rules governing the methanol business and develop the rules for the DME and oxygenate businesses.

Mission - “What our business is”

The identification and capture of markets for products manufactured from the chemical conversion of natural gas to fuels and chemicals

to optimize short term profitability and promote long term growth.

Vision 2010 - “ What we want to be”

The preferred partner for providing oxygenate fuels and low cost chemical feedstocks from natural gas.

Philosophy - “Underlying concepts, attitudes and general beliefs”

Build the GTL business by taking focused and deliberate project steps to steadily increase capability and establish an advantaged position

for future opportunities.

Each project should stand on its own economically

Analyze individual project scope decisions within the frame of the greater business to enhance the range and quality of future

investment options for growing the business

first to identify and capture new markets

first to realize the potential and capture new technology

Align with partners to grow the business - technology, supply and markets

gain capability and competitive advantage (i.e., exclusivity)

mitigate risk

Realize current technical competitive advantage to create and grow optionality to sustain competitive advantage in the future

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8

Addendum 1: Vision 2010 Continued

Goals - “2010”

Financial (Capture 4 platform projects):

NPV10 (1/1/98) > $300 mm

Net Income > $100 mm

ROACE > 15%

Environment, Health and Safety:

Maintain a healthy and accident free business based on a fully

implemented EHS Management System.

Demonstrate improved environmental quality of produced products.

Stationary sources utilizing our fuel products will achieve a 95%

SOx reduction and a 20% reduction in greenhouse gases (CO2

equivalents, lb/MW-hr) as compared to distillates. Oxygenates used

as diesel additives (10% blend) will achieve 30% reduction in

particulate emissions (soot) over #2 diesel.

Technology:

Reduce the GTL capital cost of daily plant capacity by 25% from

1998 levels.

Markets:

50% of all sales (by volume) will be to new markets created after

1998.

Supply:

Monetize 700 MMCFD gross, 300 MMCFD net of natural gas.

Capture 15 TCF gross of low cost natural gas resources

Organizational Effectiveness / Capability:

Ensure necessary systems and capabilities are in place to qualify as a

world class organization by 2010 (i.e., attain a score of +700 based

on Amoco’s ABA)

Strategies - “How we will accomplish our goals”

Marketing: MARKETS IN A CHANGING WORLD

We will capture growth in existing methanol markets as low cost provider

and create new markets that are awaiting a lower cost oxygenate material.

Supply: GETTING THE BEST SEAT IN THE HOUSE

We will identify, prioritize and capture targeted gas resources in regions that

allow us to best service near-term markets and sustain long-term growth.

External Focus: LIVING IN THE REAL WORLD

We will utilize knowledge from across Amoco and the external world to

identify the most promising market opportunities, to lead their development,

and to capture value from that growth.

Best Cost: UP THE LEARNING CURVE

We will establish and maintain a low cost position via economy of scale,

continuous technology improvements with our partners, and rapid

implementation of learnings across our business.

Environmental: GREEN POWER

We will define the applications of our products that can reduce emissions,

publicly advocate these advantages to our customers, and achieve other

quality of life goals of the communities in which we operate.

Organizational Capability: HONING OUR SKILLS

We will sustain competitive advantage by developing capabilities within

Amoco and with our partners. We will continually identify our most critical

capability gaps and implement plans to fill them.

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Addendum 2: The Projects - Titan, Atlas, and Qatar/India

Amoco entered the GTL business with the Trinidad Titan methanol plant, currently under construction. The primary business driver was

the monetization of equity gas resources - supply push - with an eye toward understanding the methanol business through partnership

with Saturn. This JV created a powerful alliance by combining Amoco’s natural resources with Saturn’s methanol marketing and

technological expertise. Amoco has a 15% working interest and will supply 100% of the gas (80 mmcfd gas sales) to the 2500 TPD Lurgi

designed plant. When operational, Titan will represent one of the lowest capital cost per ton of capacity plants, in the world.

Approximately 80% of production capacity is already sold under take-or-pay contracts to markets in the United States and western

Europe.

The capabilities developed with Titan facilitated the next project step to the 5000 TPD

mega-methanol Atlas plant. Amoco will again supply 100% of the gas (160mmcfd) and

have a 35% working interest in the plant. The Lurgi designed mega plant represents a

manufacturing cost breakthrough (20% overall reduction) and positions Atlas as the low

cost provider in the methanol business. Lurgi has offered Saturn an exclusive license in

Trinidad for its technology, providing the Saturn-Amoco JV a first mover advantage.

Saturn is currently negotiating with Exxon to supply them 500M tons per year of methanol

to feed their Baytown, Texas, methanol-to-olefins (MTO) facility scheduled for start-up in

2002. The results of this pilot could open a new methanol market and provide further

option value as described in Addendum 3.

In addition, the Lurgi technology allows for DME production through a dehydration step at the end of the process at minimum

incremental capital cost and maximum flexibility (0 - 100% DME). The capability to produce DME is critical to initializing several

emerging markets in the Caribbean and United States, e.g., chemical, olefin, power and transportation, where producers and markets have

been at loggerhead with each unwilling to be the first to make the commitment to enable the other to proceed.

DME production at Atlas will also develop capabilities, i.e., logistics and marketing, that will significantly mitigate some of the risks

associated with the Qatar/India and Japan/Far East (EPDC) DME projects, both currently under evaluation. The potential India markets

are huge. With a population approaching one billion, the projected deficit in power generation is 12,000 MW by 2001-02. The

application of LNG is limited and the alternative fuel is naphtha. Diesel consumption exceeds gasoline 7:1 in the transportation market

and is growing at 9%/year. Pollution is a major concern and cleaner fuels are needed. The Qatar /India project scope assumes a 17.5%

WI plant located in Qatar. This will be Amoco’s first on-purpose DME plant employing Haldor-Topsoe technology to manufacture 7000

TPD (MeOH equivalent) DME. Amoco’s partners would be the Qatar General Petroleum Company (QGPC), Gas Authority of India

(GAIL), Indian Oil Corporation Limited (IOCL), and Indian Institute of Petroleum (IIP).

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Qatar/India DME

1999 2001 2003-4

Titan

Atlas

Equity Gas

WI=100%

Lurgi Technology

WI=15%

2500 MTPD

Methanol

Saturn Markets

Methanol

T-O-P

Price Floor

Equity Gas

WI=100%

Lurgi Technology

WI=35%

5000 MTPD

MeOH

Dme Option

Process & EPC

Cost guarantee

Saturn Markets

Methanol

T-O-P

Price Floor

Niche DME market

Captured Supply

WI=17.5%

Partners:

QGPC,

India combine

H-T Technology

WI=17.5%

7000 MTPD (MeOH eqv)

5300 MTPD DME

Indian DME Markets

Power



10

Addendum 3: Optionality

What is optionality? Optionality is additional value derived from an investment over and above the financial returns directly attributable

to that investment. The option value generally impacts future opportunities in the form of reduced risk, preserving existing or creating

new opportunities, reduced chase cost, and increased probability of capture. The value of optionality is real and measurable in post

appraisal. However, it is very difficult to quantify point forward because it’s based on the holders perception of the future. By example,

on Wall Street, an option to buy a share of stock at a predetermined price and future date, is sold at a premium above the strike price. The

cost of the option is determined by the market. The buyers final value won’t be determined until he exercises the option or time runs out

and it expires.

Optionality has real value in the GTL business as well. Our

strategy builds optionality in a stepwise manner through individual

project investments. Because much of the strategy is based on

future projects it is difficult to represent the value optionality

creates. However, to illustrate the potential, consider the

optionality created by the Trinidad Atlas project. As a stand-alone

project, Atlas has a PV(10)=$80mm. Once the Atlas plant is built,

three options are created for the disposition of methanol: 1) sell

methanol as methanol, 2) sell methanol as a transportation fuel

additive via DMM, or 3) sell methanol as olefins (MTO). The latter

two options result in an expanded gas value chain.

Under current project assumptions, Atlas will buy inlet gas for

$.90/mmbtu and sell methanol for $90/MT (w/ escalation) or $4.75/mmbtu. If ongoing work proves commercial, it will be possible to

convert methanol to DMM and Poly-DMM for blending with gasoline and/or diesel, thereby raising the value of the BTUs sold from

$4.75/mmbtu (as methanol) to $8.90-11.00/mmbtu as fuel additives. Granted, the value associated with this expanded value chain is

highly uncertain. However, the potential to triple the revenue received for each BTU sold suggests that this option has significant value.

Another alternative that may develop is to install an MTO plant in Trinidad to supply olefins to a future polyethylene plant. The

Government and Energy Ministry of Trinidad and Tobago are promoting private investment in an ethane cracker and polyethylene plant

to maximize value from their gas. If ongoing work on MTO technology proves commercial and the Trinidad Government’s plans

proceed, this option becomes real. Again, the additional revenue realized for each BTU (or lb) sold is substantial.

Admittedly, there is significant uncertainty associated with each of the alternatives described above. The point to remember is that the

Atlas project and other related GTL activities (DMM & MTO research) have a value, greater than that directly related to the specific

project, by positioning us to capture future growth opportunities once the economics are better understood.

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Atlas MeOHNatural

GasDMM plant Texas City

Refinery

Blended Gasoline

(MTBE substitute

= $.80 / gal)

Blended Diesel

(DMM additives

= $.65 / gal)

2000 TPD 10M BPD

IRR=13%

$90 / Ton

$4.75 / mmbtu

$.50 / gal

$6.85 / mmbtu

$.65 - .80 / gal

$ 8.90-11.00 / mmbtu$.90 / mmbtu

methanol market

FOB price $90 / ton

5000 TPD

2000 TPD

MTO plant

IRR=13%

150 MMCFD

Trinidad

Polyethylene Plant

$90 / Ton

$0.045 / lb$0.18-23 / lb $0.35-50 / lb



11

Addendum 4: Customer Response

Customer response to DME and DMM has been extremely positive. Their message is... “There are vast market opportunities for clean

cost competitive fuels.”

General Electric: In 1996, GE did a test burn in their “E” class turbine using DME provided by Amoco. A comment by the lead

technician sums it up best, “... it took us years to fine tune this machine to burn natural gas. With DME, you guy hit it on the first try.”

Based on this test, GE engineers refined their burner design to virtually eliminate flashback. A second test with an “F” class machine is

scheduled to be completed by year end as part of the Amoco - EPDC (Japan Power Company) joint study agreement. EPDC has agreed

to finance the test.

EPDC: EPDC is one of the largest power producers in Japan. Amoco and EPDC have a joint study agreement to assess the economic

feasibility of DME as a power fuel in Japan and the Far East and a commitment to partner in future power projects. EPDC recognizes the

environmental benefits of DME over conventional fuels and the space benefits (requires smaller footprint) over LNG, and are considering

DME as the power fuel for an expansion project in 2004-6.

India: The Gas Authority of India (GAIL), Indian Oil Corporation Limited (IOCL), and Indian Institute of Petroleum (IIP) have all

expressed keen interest in DME as a potential solution to their growing power and transportation fuel needs. They have signed an MOU

with Amoco to complete a Technical Economic Feasibility Report by early 1999. Their primary message to Amoco has been, “... can we

do it any faster?” DME could prove to be an alternative fuel for naphtha in power as well as address the severe environmental situation

caused by diesel in transportation vehicles in major cities.

AVL Powertrain: AVL is very enthusiastic about DME as a diesel substitute. So much so that it has designed and tested a conversion

package to convert diesel vehicles to DME. They have worked the cost down to roughly $800/conversion and even less on new builds.

Partnership for New Generation Vehicles: In recent testing by the PNGV group (GM, Ford, Chrysler, Mobil, Arco, Amoco, Exxon, and

DOE) DMM was the clear winner of seven fuels tested. Blended 15% with diesel, DMM reduced particulate emissions 45%,

significantly better than F-T liquids, low-sulfur diesel, and biodiesel.

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Addendum 5: The Size of the Prize

In realizing our Vision 2010 (Addendum 1), Amoco will have about $1 billion of assets with multiple GTL plants in operation and a

portfolio rich in growth opportunities. We will have established growth platforms in the Caribbean, Middle East, and Pacific Rim

providing methanol, and DME to chemical, olefin, power, and transportation fuel markets in the United States, India, and Far East.

The value of the GTL business starts with a platform of individual

projects upon which the value of future optionality is added.

These projects are generally limited to upstream development and

the GTL plant. However, optionality is created for future chemical

feedstock, olefin, power, and transportation fuel projects. With the

successful capture of the platform projects, the GTL business will

contribute about $200 MM in annual net income and $240 MM in

annual net cash flow by 2010. At that time, 80% of the capital

expenditures will have been spent, with the largest single year

expenditure of $270 MM spent in 2004. ROACE will reach and

remain over 15% by 2007. By 2005, the business will have

positive net cash flow and a payout by 2010. The full cycle PV10

(1/1/98) contribution from these projects is about $500 MM, with

an overall IRR of 18%.

The additional value from optionality comes as we expand the oxygenate

value chain to include projects such as DMM, MTO, and chemical

feedstocks. For example, 2,000 MTPD of methanol from the Atlas plant

could be converted to 10,000 BPD of DMM. The DMM could then be

shipped to our Texas City refinery and blended with gasoline to replace

MTBE for environmental reasons. The PV10 (1/1/98) created by the DMM

plant alone can range from $60-$100 MM. Expanding the value chain also

mitigates the price risk for methanol. The reduced returns at Atlas are shifted

and captured in the downstream segments. Since each of the projects in the

platform creates optionality, the total value created by the GTL business

could be well in excess of that described for the platform projects alone.

M


Environmentally

Friendly

Po

we

r &

Tra

nsp

ort

ati

on

Fu

el

Ch

em

ical

Fe

ed

sto

ck

GTL

GTL PlantNatural

Gas

Project Platform

1999 2001 2003-4 2005-6 2006-7 2009-10

Titan

Atlas

Qatar/India DME

Pacific Rim

Oxygenate

Equity Gas

WI=100%

Lurgi Technology

WI=15%

2500 MTPD

Methanol

Saturn Markets

Methanol

T-O-P

Price Floor

Equity Gas

WI=100%

Lurgi Technology

WI=35%

5000 MTPD

MeOH

Dme Option

Process & EPC

Cost guarantee

Saturn Markets

Methanol

T-O-P

Price Floor

Niche DME market

Captured Supply

WI=17.5%

Partners:

QGPC,

India combine

H-T Technology

WI=17.5%

7000 MTPD

(MeOH eqv)

5300 MTPD DME

Indian DME Markets

Power

Pacific Basin

NW Shelf

Indonesia

Alaska

DME/MeOH

WI=35%

5000 MTPD

Japan power

Far East chemical

feedstock

DMM feedstock

Expansion of

India 1 except:

Indian Markets

Power

Diesel

Blending stock

H-T Technology

WI=20%

11,000 MTPD

(MeOH eqv)

DME & MeOH

Expansion of

India 2

Caribbean MeOH

North Coast

Trinidad

Venezuela

MeOH

WI=50%

5000 MTPD

USGC Olefins

2005-6

Qatar/India

DME II

Qatar/India

DME III

GTL

GTL Plant DMM Plant Refinery

Blended Diesel

and Gasoline

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Stranded

Gas

DME/

MeOH

Upstream Diesel

Additive

DMM Gasoline

Additive

$/M

MB

TU



13

Certainty Financials for the 7 Projects in the Platform:

Net Income

$0

$100

$200

$3001998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

$M

M

Capital Expenditures

$0

$100

$200

$300

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

$M

MNet Cash Flow

($200)

($100)

$0

$100

$200

$300

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

$M

M

ROCE and Avg. Capital Employed

0%

5%

10%

15%

20%

25%

30%

35%

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

RO

CE

, %

$0

$200

$400

$600

$800

$1,000

$1,200

AC

E,

$M

M

Goal 2010

Goal 2010

GTL

M

TS

Monetize

Stranded Gas

Environmentally

Friendly

Ch

em

ic

al

Fee

dstoc

k

Pow

er &

T

ran

spo

rt

Fu

el

Date post:	15-Apr-2017
Category:	Engineering
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DME Methanol Outlook for gas conversion Amoco 2000

Engineering