GASSNOVA SF. the year in. review THE NORWEGIAN STATE ENTERPRISE FOR CARBON CAPTURE AND STORAGE

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1 GASSNOVA SF the year in THE NORWEGIAN STATE ENTERPRISE FOR CARBON CAPTURE AND STORAGE review

2 2 The state enterprise Gassnova works with the development of technology for the capture, transport and storage of CO 2 through the research programme CLIMIT and through the Technology Centre at Mongstad (TCM). Gassnova coordinates and follows up work on full-scale CO 2 management in Norway and is an adviser to the Norwegian Ministry of Petroleum and Energy for questions concerning CCS. DESIGN FETE TYPER PRINTING RENESSANSE MEDIA PHOTO SHUTTERSTOCK + STYRK FJÆRTOFT + ISTOCKPHOTO + HELGE HANSEN + NORCEM + OLE WALTER JACOBSEN + MORTEN BRAKESTAD

3 THE YEAR IN REVIEW 2016 GASSNOVA Contents 3 CCS: THE TIME IS NOW 4 THE GASSNOVA TRIANGLE 5 GASSNOVA TAKES ON SOCIAL RESPONSIBILITY IN THE COMMUNITY 6 SEEING THE RESULTS OF TARGETED RESEARCH 8 TCM PAVES THE WAY FOR FULL-SCALE PROJECTS THROUGHOUT THE WORLD 10 CO 2 CAPTURE FEASIBLE FOR THREE INDUSTRIAL EMISSION SOURCES 12 CCS: WE MUST START USING THE TECHNOLOGY NOW 14

4 GASSNOVA THE YEAR IN REVIEW 2016 CCS: The time is now 4 In 2016, the historic Paris Agreement to limit global warming to a maximum of 2 C was ratified. The climate targets established in the Paris Agreement will not be reached without CCS. Gassnova is working in three areas to promote this climate technology, which the world must soon implement on a scale that really makes a difference. The CLIMIT programme supports research and development projects designed to improve existing technologies or promote future revolutionary solutions. At the Technology Centre at Mongstad (TCM), capture technologies are being prepared for the market. The TCM partners the Norwegian government, Statoil and Shell have agreed on a framework for the negotiation of a new operations management agreement going forward to At the same time, Gassnova is leading a community effort that will result in the establishment of a full-scale CCS chain in Norway. An important part of Gassnova s mission is to share the experience we gain with the world around us and to spread knowledge. In 2016, we were represented at a number of conferences both in Norway and abroad. At the world s largest conference for CCS technologies GHGT 13 Gassnova made a keynote address to over 900 participants. Norway has set a goal to be a leader in work on CCS, and there is a great deal of international interest in Norwegian CCS efforts. There are many indications that Norway can develop Europe s first full-scale CCS chain. The goal is that the experience that is gained through such a project and the establishment of an infrastructure that can be shared with others will blaze the trail for new CCS projects in Europe and the rest of the world. Until around 2030, the biggest emissions cuts worldwide will come from increased energy efficiency, a greater share of renewable energy, and conversion from coal to gas. After that, CCS must be implemented on a large scale, both in fossil fuel power plants, of which there will still be many, and for industrial emission sources. In order for this to happen, the technology must be significantly less costly and more thoroughly tested than it is today. Therefore we must get on board now. The time has come for CCS. Trude Sundset CEO at Gassnova SF

5 THE YEAR IN REVIEW 2016 GASSNOVA The Gassnova triangle The following elements make up Gassnova's triangle: the CLIMIT research programme, the Technology Centre at Mongstad (TCM), and the project that can demonstrate that CO 2 from an industrial plant can be captured, transported and stored safely below the ocean floor. These activities are closely connected and mutually dependent. 5 Our focus is marked by a well-thought-out strategy so that we can succeed in the long term, says Gassnova s CEO Trude Sundset. Many full-scale plants must be built if the world is to be able to meet the Paris Agreement climate targets. At the same time, it is necessary to continue full speed ahead with research, development and demon stration on a larger scale in order to find the most cost-effective solutions. Besides, in order for CCS to be a climate measure that can be extensively implemented in the world, it is decisive to rapidly establish a complete CCS chain. However, our research was not finished when this project was launched. On the contrary, the experience we gain from the first full-scale project will provide input for new research, which can make the next CCS project better and less costly, says Sundset. At TCM. it will be possible to test out new solutions on a larger scale and in realistic industrial surroundings. TCM can also be used as a problem-solving arena for the full-scale project. It is not possible to solve all the problems in an operating industrial plant. We thus need all of these elements: CLIMIT, TCM and full-scale. Gassnova is set up to orchestrate this, Sundset maintains. TCM CO 2 Technology Centre Mongstad Full-Scale One value chain 2022 GASSNOVA CLIMIT Research, Development and Demonstration program

6 GASSNOVA THE YEAR IN REVIEW 2016 Gassnova takes on social responsibility in the community 6 Gassnova has financed an installation at the DuVerden Science Centre in Porsgrunn. The installation is designed as a control room where visitors can themselves control the development of the climate up to the year Children and young people can learn about climate, technology and scientific subjects in practice at the DuVerden Science Centre in Porsgrunn. The centre has a special programme for school classes. Gassnova s installation fits in well with DuVerden s climate and energy zone. Feedback from visitors indicates that this is a thought-provoking installation that challenges all of us to contribute to solving the climate problem. The installation shows how difficult it is for us to make the right choices, but we see that what we do is beneficial. The installation also shows that we must implement many measures at the same time, says Thomas Hansen, who is the educational director at DuVerden. DuVerden is a unique offering for children and young people in Grenland and the surrounding area. It is both a science centre and a maritime museum. The centre has a separate educational programme for school classes, where the climate issue is given special attention. The goal of DuVerden is to enable as many school children as possible to visit. Therefore, they offer free bus transport to schools that participate in the school programme. Gassnova provides financial support for this transport scheme. Gassnova is a good partner for DuVerden. Their transport support has contributed to more students being able to visit the science centre, says Hansen. Gassnova will continue to support DuVerden in For us it is also important that the young people in particular, are familiar with Gassnova s work and how important CCS is in the fight against global warming. We think that science centres is doing a very important job in spreading knowledge, says Gassnova's Director of Communications & Government Relations Torund Bryhn. School children research the connection between the way we live and greenhouse gas emissions at the science centre DuVerden.

7 THE YEAR IN REVIEW 2016 GASSNOVA 7 + THE INSTALLATION SHOWS HOW DIFFICULT IT IS FOR US TO MAKE THE RIGHT CHOICES, BUT WE SEE THAT WHAT WE DO IS BENEFICIAL. +

8 GASSNOVA THE YEAR IN REVIEW 2016 Seeing the results of targeted research 8 Technologies that have been developed with support from CLIMIT, among others, are on the verge of being implemented in full-scale plants. At the same time, the CLIMIT programme is changing its direction somewhat to adapt to a new reality. CLIMIT is a programme for research on and development and demonstration of CCS technology. The main purpose of the programme is to contribute to developing technology and solutions for the capture, transport and storage of CO 2. The feasibility study for full-scale CCS from July 2016 concluded that the CO 2 capture projects at Norcem in Brevik, Yara on Herøya and the Waste-to-Energy Agency in Oslo are technically feasible. Aker Solutions aminebased technology, which has been tested at Norcem in Research and development projects supported by CLIMIT have become solutions that can be utilised commercially today. Brevik and at the Waste-to-Energy Agency in Oslo in connection with the feasibility study, has been supported by CLIMIT for a number of years. We are now seeing the results of this research. This is an example of our work being successful, says the leader of the CLIMIT programme, Hans Jørgen Vinje. Aker Solutions amine-based process has progressed from R&D at SINTEF and NTNU via Aker Solutions own CLIMIT-supported SOLVit programme to the Technology Centre at Mongstad (TCM) and subsequently on to full-scale production. Norcem has tested several technologies at its plant through a CLIMIT-supported project, and it has designated Aker Solutions technology as the preferred technology if a full-scale project is to be realised. CONTRIBUTING TO NEW SOLUTIONS CLIMIT also contributes to the promotion of new technologies and solutions. One example of this is the partnership of NTNU and the international company Air Products to develop and use fixed site carrier membranes for CO 2 capture. NTNU and their partners first received support from CLIMIT R&D for a research project. The solution has gradually progressed and has been piloted by both Tiller and Norcem in Brevik, with support from CLIMIT Demo. The project to test the membranes at Norcem was one of the finalists for the prestigious ONS Award At the end of the year, NTNU entered into an exclusive licence agreement with Air Products. The agreement entitles Air Products to use NTNU's patented membrane technology together with Air Products patented membrane solution for CO 2 capture. This is a new type of CO 2 capture technology, which CLIMIT has supported throughout the entire course of development and which is now ready for the market. The fact that a major commercial actor such as Air Products is now focusing on this technology in a demanding CO 2 capture market is exciting. It shows that they have confidence in this technology, says Vinje. The membranes are coated with an amine-based mixture that allows it to capture CO 2 more effectively than other membranes do. The CO 2 molecules pass through the membrane more quickly, and a higher purity of CO 2 is also achieved. Combined with Air Products hollow fibre membranes, the solution takes up little space

9 THE YEAR IN REVIEW 2016 GASSNOVA and can also be made modular. This special membrane technology makes the capture of CO 2 from flue gas and biogas very energy-efficient. NEW PROGRAMME PLAN The outlook for how CCS will be implemented both nationally and globally has changed since the CLIMIT programme was established 11 years ago. The focus of the programme has shifted from CO 2 capture solutions for gas-fired power plants towards capture solutions for other sources, such as industrial emissions. In 2016, the CLIMIT Secretariat developed a new programme plan that will focus research funding on this new reality. The programme plan was adopted in December The programme plan designates three main focus areas going forward to 2022: Early full-scale CO 2 value chains in Europe Large-scale storage of CO 2 on the Norwegian continental shelf in the North Sea Future solutions for CCS INTERNATIONAL COOPERATION THROUGH CO-FINANCING: Compared to many other countries, Norway does not have many large sources of CO 2 emissions, and the Government's CCS strategy makes it clear that Norwegian investment in CCS should benefit the world. Accelerating CCS Technologies (ACT) is a European initiative that has been created to establish CCS as a tool to prevent global warming. The goal is to finance research and innovation projects that can contribute to safe and costeffective technology. Through ACT, nine countries are cooperating on the announcement of a tender valued at EUR 41 million. The initiative will entail far stronger European cooperation. The mobilisation that has taken place in 2016 is expected to lead to new ACT projects next year, which may in turn contribute to new pilot projects for the capture, transport and storage of CO 2. CLIMIT is also seeking to strengthen cooperation with the USA. Several new CLIMIT projects enjoy fruitful cooperation with key actors from the USA. 9 OTHER CLIMIT PROJECTS REINERTSEN/SINTEF PALLADIUM MEMBRANES The very thin SINTEFpatented palladium membranes effectively separate hydrogen from a mixture of hydrogen and CO 2 that is produced by reforming natural gas. This technology is now approaching commercialisation by Reinertsen AS, and the first step is pilot testing with industrial synthesis gas from Statoil s plant at Tjeldbergodden. AKER SOLUTIONS CO 2 EOR NORSAR AND OCTIO: Monitoring of CO 2 injection NTNU: EDDiCCUT The four-year EDDiCCUT project led by NTNU has established a method for evaluating mature and emerging technologies for the capture and utilisation of CO 2 (CCT & CCU) in a life cycle perspective. Aker Solutions has developed a concept for a seabed installation that can separate reproduced CO 2 and reinject it to recover more oil, a technique known as CO 2 EOR. The concept appears to be very promising and is being developed further in cooperation with the oil industry. Seabed installations may enable enhanced oil recovery and CCS offshore. Both companies are developing a microseismic system to monitor the injection of CO 2 into geological formations. Octio has tested its technology on an injection well in the North Sea. NORSAR is cooperating with the Decatour project in the USA, among others, to further develop the method. The technology has been through many stages, and is now ready for further testing and verification in CO 2 injection projects.

10 GASSNOVA THE YEAR IN REVIEW 2016 TCM paves the way for full-scale projects throughout the world 10 The Technology Centre at Mongstad (TCM) continues to deliver vital results that can provide safer and less costly development of CO 2 capture plants in Norway and the rest of the world. The road to full-scale development at an acceptable cost and risk is a cooperative effort between laboratory research, test plants and full-scale plants. Industrial scale test activities at TCM have already qualified several of the relevant key actors for full-scale projects in Norway and internationally. In addition, TCM can be used as an arena for training, problem-solving and further development. Important actors such as Alstom (now GE), Aker Solutions, Cansolv and Carbon Clean Solutions (CCSL) have already conducted extensive test campaigns at TCM, and thereby qualified themselves for full-scale development. And TCM continues to test new and potentially more efficient capture technologies that may be relevant for future developments. At TCM we can also offer a unique transfer of experience with regard to emission measurements and management and approval processes for the environmental authorities, as well as problem-solving and the training of operating personnel who will work at full-scale plants, says Gassnova s Asset Manager Eirik Harding Hansen. Important results from the test campaigns include the fact that more technology providers can offer their technology for full-scale projects, energy consumption and thus costs have been reduced, challenges related to emissions have been thoroughly researched and dealt with, and knowledge of the choice of materials right quality at the right cost has been expanded. Our expertise in both technology and operations is world class. TCM has had meetings and workshops with several of the planned full-scale projects internationally, such as Road (Holland), Peterhead (UK cancelled), Boundary Dam (Canada) and Petra Nova (USA), and there has been a great deal of interest in TCM s experience. TCM has also shared a great deal of experience and accumulated knowledge through the International Test Centre Network (ITCN), which TCM helped establish in 2012, and which now consists of ten major test centres/ research organisations throughout the world. TCM is still the world's largest and most advanced test centre, and it has been in continuous operation since its inception in Our close cooperation with the US Department of Energy (DOE) continues, and in 2016 the first American company came to TCM with DOE support. The DOE says that the refinery gas at TCM can be used to test CCS for coal power, and ION Engineering's test campaign, which started at TCM in the autumn of 2016, is the first project from the DOE's carbon capture programme that is being carried out outside of the USA. The work carried out at TCM will be financed through a grant of USD 7.6 million from the DOE, with a USD 6.7 million cost share from TCM. We are also contributing to the development of new types of technologies. Until now, TCM has tested various amine-based technologies and chilled ammonia technology, but there are several other types of technologies, such as sorbents (where CO 2 is attached to the surface of a solid), pure membrane processes, thermal cooling processes, etc., that have the potential to provide good, low-cost CCS solutions, says Harding Hansen. TCM also continues to expand its cooperation with external research institutions and companies. SINTEF and TCM are both world leaders in research and test environments for CCS; in May 2016 they entered into a cooperation agreement to more closely link their complementary expertise. TCM views this as further strengthening of its offer to the market of a one stop shop for CCS. Together, we can offer R&D and test facilities from the molecular engineering level to testing and

11 THE YEAR IN REVIEW 2016 GASSNOVA + TCM IS STILL THE WORLD'S LARGEST AND MOST ADVANCED TEST CENTRE, AND IT HAS BEEN IN CONTINUOUS OPERATION SINCE ITS INCEPTION IN optimisation on an industrially relevant scale, Harding Hansen emphasises. TCM is planning several cooperation projects for 2017, which will include the CLIMIT project Aerosolve in cooperation with SINTEF et al., a CLIMIT control project in cooperation with SINTEF/NTNU/ Cybernetica, and new owner-test campaigns focused on reducing operating costs. To promote the global propagation of CCS, TCM promotes broad sharing of knowledge of the results of the open test campaigns carried out under the direction of the owners of TCM (MEA). The results from the MEA2 campaign were broadly presented at a special TCM session at the international CCS conference GHGT-13 in Lausanne in November TCM also arranged the fourth Milestone Mongstad Conference in 2016, which gathered 130 experts and important stakeholders from around the world at Verftet in Bergen in May to be updated on the status of TCM and discuss the way forward for CCS. In 2016, a number of prominent guests visited TCM, including representatives from the US, UK and Ukrainian ministries of energy, the UNIDO Director General, the Norwegian Ministry of Petroleum and Energy and the Norwegian Parliament. TCM also experienced increased interest from the media including a very positive front-page story in Aftenposten and a ten-page article in Teknisk Ukeblad, as well as coverage in international media. Even though the technologies that have been tested at TCM are now ready for the market, there ist still a need for more development. Costs must be reduced in order to make carbon capture technology affordable enough that more, and less wealthy, countries are also able to make use of it. The Norwegian central government, represented by Gassnova, Statoil and Shell, has agreed to continue TCM until at least TCM will continue work on amine-based processes but will also engage in new capture technologies and further develop the concept of open scientific campaigns. TCM will also evaluate how the centre can contribute to the development of CO 2 utilisation (CCU), and be developed further as a global centre of expertise for carbon capture. The Technology Centre at Mongstad (TCM).

12 GASSNOVA THE YEAR IN REVIEW 2016 CO 2 capture feasible for three industrial emission sources 12 The technical feasibility of CO 2 capture for three industrial emission sources in Norway provides a good starting point for further work on full-scale CCS in this country. Work will also continue on a solution for the transport of CO 2 by ship, and on the planning of a CO 2 storage facility at Smeaheia. Feasibility studies for full-scale CO 2 capture from July 2016 conclude that it is technically feasible to implement CO 2 capture at Norcem s cement factory in Brevik, at Yara s ammonia factory on Herøya and at the City of Oslo's energy recovery plant at Klemetsrud. It is gratifying that we have three emission sources in Norway where CO 2 capture is feasible, and industry actors who have indicated that they would like to study this further, says the head of Gassnova s full-scale CCS department Tove Dahl Mustad. All the industry actors conducted feasibility studies in which the technical, financial, health, safety and environmental consequences of implementing CO 2 capture facilities at an industrial plant were assessed. The purpose of the feasibility studies was to find at least one technically feasible solution, and Gassnova found that all three industry actors are technically feasible. Gassnova s recommendation that the industry actors should be given a further opportunity to study CO 2 capture was followed up by the Government in their budget for The next phase of the study is scheduled for 2017, and all three of the industry actors have indicated that they would like to participate. STORAGE AT SMEAHEIA Three storage locations and various development solutions have been assessed in the feasibility study for storage. Statoil and Gassnova have concluded that a development solution with an onshore facility and a CO 2 pipeline to the Smeaheia area east of the Troll field in the North Sea is the best storage solution. Work on this solution will continue in the next phase. Instead of using a single CO 2 emission source going through a pipeline to the storage location as our point of departure, the plan is to transport CO 2 by ship from the Norcem's cement factory in Brevik.

13 THE YEAR IN REVIEW 2016 GASSNOVA point of emission to an onshore facility connected to the storage facility. A storage facility with large capacity and a flexible transport solution easily facilitates capture from other CO 2 sources and the subsequent benefits of a basic investment in CO 2 infrastructure. The feasibility study represents a new way of compiling a CCS chain, which offers flexibility, says Mustad. 13 THE ROAD AHEAD The planning and investment costs for a full-scale CCS chain are estimated to range from NOK 7.2 to 12.6 billion (excl. VAT). These costs will depend on how much CO 2 is to be captured, where it is to be captured from, and how many transport ships are required. The operating costs will vary from around NOK 350 to 890 million per year for the various alternatives. The cost estimates are based on the industry actors feasibility study reports, and have an uncertainty level of +/- 40 per cent or lower. A business model that is interesting for all the parties must be found, but there is no doubt that the central government will have to cover a large share of the costs, says Mustad. If the project moves forward, the basis for an investment decision (DG3) could be ready by the late autumn of 2018, and a decision could be made in the spring of The actors have estimated somewhat differing timelines for the construction of a CO 2 capture plant once an investment decision has been taken, with the realisation period varying from 26 to 42 months. This variation can be attributed primarily to the various needs for local preparations and adaptations for implementation of the capture facilities. Yara s ammonia factory on Herøya. City of Oslo s energy recovery plant at Klemetsrud. EMISSION CUTS THAT MAKE A DIFFERENCE The purpose of the full-scale project is to pave the way for new CCS projects. Not until it is implemented as a solution by many actors will CCS make a difference as a climate measure. Parallel to the work on the full-scale project, Gassnova will work on the realisation of gains, i.e. ensuring the best return on the funds that are invested. You can read more about the realisation of gains on page 14.

14 GASSNOVA THE YEAR IN REVIEW 2016 CCS: We must start using the technology now 14 For the global community, capturing and storing CO 2 from major emission sources in industry and fossil fuel power plants is necessary in order to meet climate targets as inexpensively as possible. However, it is not profitable for industry to implement the technology today. How can this dilemma be solved in the best possible way? This is a classic example of what the economists refer to as market failure and a question that the economists at Gassnova, Ståle Aakenes and Aslak Viumdal are working a great deal on. It is important that Gassnova have a comprehensive understanding of the energy and industrial markets that are the sources of major industrial emissions. If one does not understand the markets in which the companies operate, one will not be able to understand how CCS can best fit in either, says Aakenes. PARIS AGREEMENT HERALDS MAJOR CHANGES The Paris Agreement states that global warming should be kept well under 2 C, and preferably be limited to 1.5 C in relation to the preindustrial level. The IEA and IPCC agree that extensive use of CCS is then required. The market-related instruments that are necessary in order to achieve the climate targets have not yet been formulated and adopted by politicians. So even if the Paris Agreement has been adopted, and the politicians agree on ambitious targets, today s policies and the current economic system are oriented towards a temperature increase of closer to four degrees, says Aakenes. The technology for CCS is available today, but major government intervention is required to stimulate industry to realise CCS. CHANGING ENERGY MARKETS Norwegian investment in CCS started with the wish to develop environmentally friendly gas technologies to ensure climate-friendly use of natural gas. At the time, the political debate had for many years revolved around whether or not gas-fired power plants should be established in Norway, and neither side was willing to compromise. In the spring of 2000, Kjell Magne Bondevik s first Government resigned after having refused to accept the parliamentary majority s desire to develop gas-fired power without CO 2 recycling. Today, few people believe that new gas-fired power plants will be built in Norway in the foreseeable future, and the profitability of gas power in Europe has been weak for several years. We now see that major changes are taking place in global energy and industrial markets. Political ambitions, new technology, new business models and changed attitudes towards climate and environmental issues have laid the foundation for innovation and completely new solutions in society, says Aakenes. Aakenes points out that the development of renewable energy has taken place much faster than experts envisioned a few years ago. In addition, increased energy efficiency has contributed to reducing the demand for energy in the industrialised world. He stresses that this has contributed to uncertainty as to how energy markets will develop going forward. CCS will nevertheless be important, and Aakenes does not rule out that there may be openings for CCS in areas that we have not previously seen. Innovation is very difficult to predict. Therefore, it is important to follow market trends and view them in the context of the development of technology and solutions. Long-term analyses indicate that CCS will be decisive in the long term. If we continue to develop only short-term solutions, however, it will be very difficult to reach the long-term climate targets. Since it takes time to develop infrastructure and cost-effective solutions for CCS, it is therefore very important to start using CCS technology now, says Aakenes.

15 THE YEAR IN REVIEW 2016 GASSNOVA + THE PARIS AGREEMENT STATES THAT GLOBAL WARMING SHOULD BE KEPT WELL UNDER 2 C, AND PREFERABLY BE LIMITED TO 1.5 C IN RELATION TO THE PREINDUSTRIAL LEVEL Aslak Viumdal and Ståle Aakenes analyse the energy and industrial markets and evaluate how CCS can fit in. BENEFITS REALISATION Gassnova and its partners are working to establish a CCS chain in Norway. (See full-scale item p. 12) The purpose of the full-scale project is to pave the way for new CCS projects nationally and internationally. In addition, the project will provide new opportunities connected to business development and greenhouse gas reductions. How can we ensure that the knowledge gained from the full-scale project will be transferred to new projects and will form the basis for future research and development work? And how can we ensure that the established infrastructure and competence building can be used for the future creation of value? At Gassnova, we call this work benefits realisation. This entails planning and organising with a view to realising long-term benefits from the measures, and following up these benefits so that they are actually realised, says Aslak Viumdal, who leads this work. In the full-scale project, the industrial actors make their own investment decisions, and the framework conditions must therefore be established such that the necessary investment decisions can be made along the entire CCS value chain. Experience from the project will help lower the barriers for future CCS projects and show the world that CCS is feasible and safe to implement. The first project will demonstrate an entire value chain and be useful for the authorities in other countries when they facilitate new CCS projects. In addition, the first project will provide experience from industrial use and continued R&D work that can further reduce the costs and risks of future projects, says Viumdal. In addition, Gassnova will assess how the full-scale project can contribute to securing existing industries and jobs in a low-emission future and show how CCS can provide new business opportunities, establish new market actors, further develop suppliers and provide new business development.

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