OxyFuel Combustion -in a Portfolio of Low Emission Coal ... Xstrata... · 6000 7000 8000 Mt Global...

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Commercial in Confidence Copyright © Xstrata plc

OxyFuel Combustion - in a Portfolio of Low

Emission Coal Initiatives

Oxyfuel Combustion Conference 2 Sept 14 2011

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Disclaimer: This presentation and its contents may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part for any purpose without the consent of Xstrata plc (“Xstrata”). The Directors of Xstrata accept responsibility for the information contained in this presentation. Having taken all reasonable care to ensure that such is the case, the information contained in this presentation is, to the best of the knowledge and belief of the Directors of Xstrata, in accordance with the facts and contains no omission likely to affect its import. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities, or a proposal to make a takeover bid in any jurisdiction. Neither this document nor the fact of its distribution nor the making of the presentation constitutes a recommendation regarding any securities. This presentation is being provided to you for information purposes only. Certain statements, beliefs and opinions contained in this presentation, particularly those regarding the possible or assumed future financial or other performance of Xstrata, industry growth or other trend projections are or may be forward looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “goal”, “target”, “aim”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond Xstrata’s ability to control or predict. Forward-looking statements are not guarantees of future performance. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Neither Xstrata, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Services Authority), Xstrata is not under any obligation and Xstrata expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation contains references to “cost curves”. A cost curve is a graphic representation in which the total production volume of a given commodity across the relevant industry is arranged on the basis of average unit costs of production from lowest to highest to permit comparisons of the relative cost positions of particular production sites, individual producers or groups of producers across the world or within a given country or region. Generally, a producer’s position on a cost curve is described in terms of the particular percentile or quartile in which the production of a given plant or producer or group of producers appears. To construct cost curves, industry analysts compile information from a variety of sources, including reports made available by producers, site visits, personal contacts and trade publications. Although producers may participate to some extent in the process through which cost curves are constructed, they are typically unwilling to validate cost analyses directly because of commercial sensitivities. Inevitably, assumptions must be made by the analyst with respect to data that such analyst is unable to obtain and judgment must be brought to bear in the case of virtually all data, however obtained. Moreover, all cost curves embody a number of significant assumptions with respect to exchange rates and other variables. In summary, the manner in which cost curves are constructed means that they have a number of significant inherent limitations. Notwithstanding their shortcomings, independently produced cost curves are widely used in the industries in which Xstrata operate. No statement in this presentation is intended as a profit forecast or a profit estimate and no statement in this presentation should be interpreted to mean that earnings per Xstrata share for the current or future financial years would necessarily match or exceed the historical published earnings per Xstrata share. The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this presentation or any part of it comes should inform themselves about, and observe, any such restrictions. Any failure to comply with such restrictions may constitute a violation of the laws of any such jurisdiction. By attending the presentation and/or accepting or accessing this document you agree to be bound by the foregoing limitations and conditions and will be taken to have represented, warranted and undertaken that you have read and agree to comply with the contents of this notice.

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1. Xstrata Coal Overview

2. Future Demand for Coal

3. Addressing the Challenge of Climate Change

4. Wandoan CCS/CTSCo

5. Challenges

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Xstrata – a global diversified mining group

World’s largest producer of ferrochrome and leading producer of primary vanadium

World’s largest exporter of thermal coal and significant producer of hard coking and semi-soft coal

Fourth largest global copper producer

One of the world's largest producers of refined zinc and zinc concentrates; significant producer of lead

Fourth largest global nickel producer and one of the world’s largest producers of cobalt

Iron Ore Projects

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Xstrata Coal - global operations

1 includes XC Americas production on consolidated basis (excluding Prodeco)

Xstrata Coal Americas 11 Mt export thermal

Xstrata Coal South Africa 11 Mt export thermal 7 Mt domestic thermal

Xstrata Coal Australia 8 Mt export coking 7 Mt export semi-soft 33 Mt export thermal 7 Mt domestic thermal

Xstrata Coal - 2010 total managed production : 96.5Mt

World’s largest international exporter of thermal coal

Employ >16,000 people globally (incl. contractors)

Interests in over 30 operating coal mines: − 20 operations in Australia − 13 operations in South Africa − 1 operation in Colombia

New acquisitions in Canada.

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Xstrata Coal – largest thermal coal exporter

0 20 40 60

Rio Tinto

Anglo

Xstrata

Teck

BHPB

0 20 40 60 80

Adaro

BHPB

Anglo

Bumi

Xstrata

Thermal

• Leading global producer

• Balanced regional exposure

• Operational diversification

• Competitive advantage through marketing network

• Returns through the cycle

Metallurgical coal

• Significant position in prime hard coking coal

• Leading producer of high volatile semi-soft coking coal

• Potential for high returns

Seaborne Traded Thermal Coal 2010

Traded Metallurgical Coal 2010

Source: Xstrata estimates; 1 Production on managed basis (Cerrejon consolidated), excludes Prodeco

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Xstrata Coal - Operations in Australia

• Employ ~ 8,000 people

• Potential 4,500 future jobs via new projects.

• Australian project pipeline of ~A$10bn for additional 50Mtpa.

• Largest producer in New South Wales

• Operate Australia’s most productive underground mine. Oaky Creek in Queensland.

• World class growth of coal resources base to 28 billion tonnes and rising

• XC manage interest in 2 Iron Ore Projects in West Africa.

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Future Demand for Coal

9 Copyright © Xstrata plc

Coal Production – past 30 yrs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1000

2000

3000

4000

5000

6000

7000

8000 Mt

Global Production

Seaborne Trade

Share

Source: BP Statistical Review of World Energy 2010, XC


Global coal production and exports

Major Coal Producers

Country Production - Mt Prod’n %

China 3,050 44

USA 973 14

India 521 8

Australia 409 6

Russia 298 4

Indonesia 333 5

South Africa 330 5

Germany 184 3

Poland 135 2

Kazakhstan 102 1

Colombia 72 1

Canada 63 1

World 6,941

Major Seaborne Exporters

Country Exports- Mt Export %

China 21 2

USA 50 6

Australia 299 33

Russia 93 10

Indonesia 275 30

South Africa 69 8

Colombia + Ven 76 8

Canada 27 3

World 910 100

Source: BP Statistical Review of World Energy 2010

Lowest cost, highest quality coal producers dominate seaborne trade


Coal-fired Build Rate - China and United States


2010 Seaborne Coal Flows – 910Mt

27

43

156

90

547 32

11

3

# Coal Demand

# Coal Exports

Reference: Wood Mackenzie June 2010 (coking + thermal coal)

275

299

21

69

76 23

27

50

93

Global reach, supporting developed and developing economies


Seaborne Thermal Demand Forecast

-

200

400

600

800

1,000

1,200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Mt

India

China

Japan

South Korea

Other Asia

Europe

Americas

Africa & Middle East

3.3%

0%

1.7%

2.3%

4.9%

10.7%

CAGR 2010-2025

Source: WoodMackenzie Coal Market Service

Global growth at 4.1%pa is underpinned by; • Developing Asia: India, Vietnam, Malaysia and Thailand • Southern China domestic supply shortfalls • European domestic supply substitution


Seaborne Thermal Supply Forecast

0

200

400

600

800

1,000

1,200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Mt

Indonesia

Australia

Russia

Colombia

South Africa

Other

China

Vietnam

Venezuela

USA

2.9%

2.6%

4.3%

1.0%

4.1%

CAGR 2010-2025

Source: WoodMackenzie Coal Market Service

Global supply potential exists but is highly dependant on Indonesia and Australia


Addressing the Challenge of Climate Change

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Xstrata Climate Change Public Position

• We recognise climate change poses global social, economic and environmental risks that require a global solution

• We believe that emission reductions from the use of fossil fuels for energy are necessary and achievable

• We believe that growing global energy demand will mean all forms of power generation will be needed – coal, oil, gas, nuclear and renewables

• Xstrata will address climate change through:

– A constructive contribution to international and national climate change efforts by engaging with governments and other key stakeholders

– Understanding, measuring and monitoring our footprint

– Reducing emissions produced directly from our activities and indirectly from our energy usage

– Supporting the development and demonstration of emerging mining and low emission technologies for coal


Global Abatement Task

CCS 19% Renewables 17% Nuclear 6% Power generation efficiency and fuel switching 5% End-use fuel switching 15% End-use fuel and electricity efficiency 38%


Xstrata Coal involvement

• World Coal Association

• IEA – Coal Advisory Board

• IEA – Clean Coal Centre

• Australian Coal Association

• ACALET

• Global CCS Institute

• Qld Clean Coal Council

• NSW Clean Coal Council

• ANLEC R &D

• Callide Oxyfuel Project

• FutureGen Project

• Otway Basin CCS

• Wandoan CCS Flagship Project

• Newcastle Uni Institute for Energy & Resources ; Qld & Sydney Uni

• Masters in International Energy Studies


Over A$210M in Low Emission Technologies

Includes the following:

• A$180million contribution (via 20c/t coal levy on production) to industry A$1 billion COAL21 Fund.

– Callide Oxyfuel Project – demo of capture technology.

– Otway Basin CCS Project – demo of injection and storage of CO2

– Delta-Munmorah PCC Project – demo of capture technology

• A$10million commitment to USA Futuregen CCS project.

• A$10million commitment to Wandoan CCS project in Queensland.

– 100% owned subsidiary CTSCo

– Project listed under Government’s A$1.68 billion CCS Flagship Program

– Focused on developing large scale deep underground storage (CCS)


Role for Oxyfuel Technology

• Xstrata Coal’s approach has been to support a range of projects

• Promote competitive environment to get best/optimal results

• Number of challenges to large scale demonstration projects in Australia

• We support oxyfuel because:

– option for retrofit and new build coal plant

– currently in demonstration phase of development

– multiple projects globally developing knowledge base

• Callide Oxyfuel Project and FutureGen are both key projects for advancing oxyfuel technology towards commercial scale deployment.


XC Greenhouse R&D Projects

• Direct Injection Coal Engine Project – collaborate with XT, CSIRO and MAN on coal water fuel for direct injections into diesel engines for power generation

• Bio Char Research Project - use of coal tailings for the creation of Biochar for soils to enhance productivity in agriculture

• Chemical Looping Project – collaborate with University of Newcastle on chemical looping for combustion and gasification of coal (CCS related)

• Oxyfuel Technology Project – collaborate with University of Newcastle to develop further knowledge of Coal Impurity and Gas Quality Control for Oxy fuel Technology (CCS related)

• Membrane Research Project – collaborate with UQ to develop ceramic capillaries from current hollow fibres for the air separation to produce oxygen for the use in Oxyfuel Power Generation (CCS related)

• Nanotechnology Project – collaborate with University of Sydney to develop nano structured sorbent to use in Post Combustion Capture of CO2 (CCS related)


Xstrata Coal – reducing our GHG footprint

• In 2010 XC GHG emissions were 9.5 million tonnes of CO2e

– 70% of emissions from underground operations (45% of this is VAM)

– 30% of emissions from open cut operations

• In 2010 XC avoided emissions of over 1.1 million tonnes of CO2-e

• Installed flares at underground operations; R&D into VAM gas abatement

• Utilisation of waste coal mine gas from Oaky Creek, Teralba and Tahmoor provided additional power generation of up to 31MW.

• Feasibility project for installing up to an additional 30MW of power generation capacity at Bulga running on waste coal mine gas.


Xstrata Coal -reducing methane emissions (5%)


Wandoan CCS/CTSCo


The Wandoan CCS project (similarities with FutureGen1.0, 2.0?)

• IGCC with CCS

• 2.5 million tonnes CO2 per annum driven by IGCC plant outcomes

• Industrial scale storage by 2015

80%

10% 10%

What we thought...

Technical

Approvals

Stakeholder and community

40%

30%

30%

What we have...

Technical

Approvals

Stakeholder and community

• Standalone CCS demonstration project separated from industrial scale storage stage

• 1 million tonnes CO2 per annum goal driven by industrial scale requirement

• Demonstrable pathway to industrial scale storage by 2020


Xstrata/CTSCo goals

• Prove up 30 years of CO2 storage capacity at 1Mtpa for CCS Flagship project

• Demonstrate progressively that more than 100Mt CO2 can be stored safely at a known cost as part of a storage hub

• Promote competitive environment to get best/optimal results

• Phase 1- Pre-Feasibility Study ($44M IGCC/CCS) – commenced Q1 2010

– $24M for storage PFS – modelling from existing data to predict behaviour of CO2 and water; exploration well (EPQ 7)

• Phase 2 - Feasibility Study – Storage: $150M application by 30 Sept 11 under Federal Govt Flagship program

– drill 4 wells for injection and monitoring; inject 200,000 tonnes CO2

• Phase 3- Execution - 1Mtpa injection for a large scale demonstration integrated CCS project


• Suitable geological formations for CO2 storage in Surat Basin – GHG Storage Atlas potential of up to 2900 Mt

• Substantial amount of existing data and information – lots of well and seismic data

• Collaborative information sharing with Geological Survey of Queensland’s CGI program

• Innovation (e.g. Digital Core Analysis) to speed up proving work and keep costs down

• Potential for demonstration on Xstrata owned land with no overlapping tenement rights

Potential for CCS in the Surat Basin


Storage target is Precipice Sandstone part of the GAB

• Regional livelihood’s depend on water drawn from the GAB

• 1000 km circumference

• Lots of near-surface water data

• Almost no deep-water data

• Oil and gas region that is well explored


Extracting geological trends

Outcrops, existing data and Digital Core Analysis……….

Chinchilla


Innovation “CAT scan” of core (well)samples

Cat scan of void

• Innovations such as Digital Core Analysis have a significant part to play in reducing, cost, timeframes, risk and communicating ‘pore space’ concept

• ANLEC R&D grant to ANU


Challenges for CCS in the Surat Basin

• 47 major resource projects by 2013 (Source: Western Downs Regional Council)

• Overlapping tenement rights and resource competition

• 6000 existing CSG wells growing to 40,000

• Explaining 5 or 6 CO2 storage wells with CO2 storage

• Strategic Cropping legislation

• Land Access regime now enacted

• Community – consultation fatigue


Stakeholder environment is complex and sensitive

• Concern over Great Artesian Basin water resource contamination

• Consultation fatigue – so many regional projects

• Well organised active lobby groups in the Surat

– Coal4breakfast

– Lock the Gate etc.

• Need to differentiate as a demonstration project from extensive commercial business developments

– Funded by governments and associations


Project support

• Projects of this kind need support and the project wishes to acknowledge the following parties:

• The project has received pre-feasibility funding from the Australian Government (as part of the Clean Energy Initiative), the Queensland Government and the Australian Coal Association Coal 21 fund

• Assistance provided also by CO2CRC, CSIRO, ANLEC R&D


Challenges


Challenges going forward

• Lack of conviction around the need for, and the achievability, of CCS

• The IEA Blue Map (19% CCS) is not understood as a fundamental requirement to achieve 450ppm or 550ppm

• Global economic challenges & financing – how will the demonstration projects be funded ?

• Community opposition – how do we overcome community opposition?

• Government policy making, or lack of - particularly around coal fired power

• Technological breakthroughs


Thank You

Oxyfuel Combustion Conference 2 Sept 14 2011

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OxyFuel Combustion -in a Portfolio of Low Emission Coal ... Xstrata... · 6000 7000 8000 Mt Global...

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