How long until algal biofuel is commercially relevant? Achieving technology readiness in the near term Cynthia J. Warner, President and Chairman 0
CERA estimates that by 2030, the world will demand 35 million barrels per day of liquids from unidentified sources an oil gap that must be filled Global oil supply outlook (as of 2009) Million barrels per day (MBD) 120 110 100 90 80 70 New liquid sources "oil gap" Oil fields under appraisal Oil fields under development Oil fields in production Unconventional liquids* 35 MBD 60 50 40 30 20 CERA s projections suggest this need will be met by oil from newly discovered fields; however, absent enough major new discoveries, filling this gap will a require a portfolio of alternatives (unconventional oil, biofuels, and greater-than-expected production from existing oil fields) 10 0 2000 2005 2010 2015 2020 2025 2030 * Includes extra heavy oil, coal-to-liquids, gas-to-liquids, natural gas liquids, ethanol, biodiesel Source: Cambridge Energy Research Associates The Future of Global Oil Supply, 2009 1
GREEN CRUDE FROM ALGAE A NEW SOURCE OF CRUDE OIL SUSTAINABLE SCALABLE ECONOMICALLY COMPETITIVE 2
Sapphire has developed an end-to-end solution for algae-derived fuel production 1 Strain development 2 Cultivation module Harvested water recycle loop 3 Harvest module Advanced breeding and genetics programs to maximize biomass productivity and oil content Open pond, photosynthetic growth systems with optimized CO 2 and nutrient delivery systems Proprietary process to flocculate and de-water algae while minimizing chemical makeup costs 4 Extraction module High efficiency, proprietary process to remove and pre-refine oil while eliminating need for expensive drying step Oil Other 5 6 Oil refining module Nutrient recycle and residual handling stream Refined by multinational refiners and/or specialty fuel suppliers Jet Diesel Gasoline 3
The decision to pursue this pathway was reached through an analysis of the trade-offs with each alternative focusing on scale and economics From the start, Sapphire has been focused on displacing fossil crude oil using photosynthesis; the question was what approach to take What sort of plant? Terrestrial plants vs. algae Superior photosynthetic systems maximize biomass productivity and oil yield; algae can produce at least 10 times as much oil per hectare as any other plant, all without using freshwater or arable land What type of algae? Heterotrophic vs. photosynthetic Heterotrophic algae require expensive sugar feedstock; photosynthetic algae grow rapidly using sunlight and low-cost CO 2 feedstock What cultivation scheme? Closed photobioreactors vs. open ponds Closed photobioreactors maximize control of cultivation conditions, but are much more expensive than open ponds and are a limiting factor in potential scale 4
Using CO 2 as a feedstock gives Sapphire a major advantage over competitors that use sugar feedstock - Oil Production vs. Refining CO 2 (<<$100/bbl) Outdoor ponds (for algae) Oil Competitors Sugar (>$100/bbl) Fermentation tanks (for algae, bacteria, or yeast) Oil Low-cost CO 2 is critical to Sapphire s commercial economics 5
Green Crude can be competitive with today s marginal cost curve; petroleum cost will only increase as demand increases COST COMPETITIVE Global oil supply costs for 2008 WTI equivalent prices 100 90 80 EIA predictions forecast oil consumption at 100 million barrels per day or more by 2030, but the sources and costs for these oils are yet unknown Other South America and North America Canadian Oil Sands Nigeria Deep Water Angola Deep Water Gulf of Mexico Deep Water Cost of production 2007 USD per barrel 70 60 50 Libya Mexico Brazil Deep Water UK North Sea 40 30 20 10 Saudi Arabia Other Middle East China Russian Federation Other South America, Europe, Eurasia, and Africa Other North America 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Source: Cambridge Energy Research Associates Cumulative production Millions of barrels per day 6
SAPPHIRE ENERGY IS SCALING UP THE INTEGRATED ALGAL BIO-REFINERY (IABR) 7
The goal of the Integrated Algal Biorefinery (IABR) is to achieve technology readiness for this industry Demonstrate commercial technoeconomics for the full end-to-end process Plant startup in 2012 100 barrel per day output 300 acres of cultivation 50 MT/day of CO 2 Total $104.5 million in federal funding 8
Sapphire s pilot test site and commercial demonstration project are located in Southern New Mexico Pilot Site Las Cruces, NM Com. Demo (IABR) Columbus, NM El Paso, TX 9
The IABR process has been scaled and tested in outdoor pilot units Cultivation Harvest Oil Extraction 10
The IABR will begin shakedown operations this summer 11
IABR project partners span government and industry Design and EPC partners Government partners Provides design engineering to develop a fully functional integrated process Performs all engineering, procurement, and construction Conducts siting and environmental assessment studies USDA and DOE contributed $104.5 million in grants and loan guarantees to fund the IABR Sapphire collaborates with federal and state agencies to deliver the full project CO 2 supply and solution design partner Co-developing CO 2 solutions for algal oil production at commodity market prices The leading merchant CO 2 supplier in the U.S. Operates in over 100 countries worldwide with almost 50,000 employees 12
The IABR project requires an ongoing R&D effort across the whole value chain to reach technical readiness Platform technology Traits & organisms Production systems Refining Products 13
Our scaleup efforts seek to decrease the cost of algal oil production via four primary improvement categories 1 2 Intrinsic yield & improvement Stress 3 Oil, products, & nutrient recovery 4 Engineering Optimize and improve intrinsic yield Isolate germplasms and genetic base Identify and optimize cultivation process/cultural practices Apply classical genetics and advanced molecular biology Prevent stress-invoked yield reduction Prevent biotic and abiotic stress-invoked yield loss Apply classical genetics and advanced molecular biology Optimize and improve oil content, product profile, and nutrient recycling Optimize extraction to improve oil yield and profile for product conversion Apply chemistry and biology to recover and recycle nutrients Reduce engineered system CapEx and OpEx, and improve performance Apply innovations and value engineer to reduce capital and energy costs Develop advanced engineered and chemical solutions to reduce CO 2 cost 14
Existing world-scale industries (agriculture, biotechnology, energy) provide solutions and inspiration Cultivation Harvest Extraction Refining Rice paddies Wastewater treatment plants Solvent extraction, recovery Petroleum refining 15
PROGRESS IN STRAIN DEVELOPMENT AND CULTIVATION 16
Strain creation: Sapphire creates algal crops, validates performance, and selects winners for commercial production 1. Multiple options for crop creation 2. Crops are validated 3. Top strains enter production Prospect for strains Create genetic diversity within existing strains (e.g., use chemicals, UV) High-throughput Competitive screening Pond simulation Top strains are selected for fast growth, high oil content, ease of harvest, and stress tolerance Genetically engineer to create new strains 17
Sapphire is partnering with Monsanto to accelerate technology readiness 18
Boosting oil yield: the SN03 gene causes an increase in lipid similar to nitrogen starvation without a reduction in rate Equates to a 1000gal/acre/year increase in yield 19
Sapphire has developed technology that allows for highly precise and predictable evaluation of strains from lab to field Pond simulator reactors Mini-pond array 12x 100 raceway pond array ½ acre ponds 20
Path forward to improve yield through enhanced cultivation techniques Approaches to improving yield and process stability Optimized nutrient monitoring and replenishment Harvest scheduling to maximize oil yield Optimized media formulation Strain improvement for increased oil and biomass Strain improvement for pest resistance Strain improvement for pesticide tolerance Improved process stability Increased oil yield and process stability Improved biomass yield and oil content Increased yield Improved process stability Improved process stability Las Cruces Testing Site, Summer 2011 21
Protect yield in opens ponds using crop protection chemicals Adapted multiple agents for use in algal ponds All are currently used in open agricultural in U.S. Effective agents from different families (i.e., mechanisms) Low dose (< 1 part per million) Cost effective ~$5 per acre per application Demonstrated in ½ acre ponds Safe 22
Algal oil production utilizes 600-700 kilograms of CO 2 feedstock per barrel of algal oil CO 2 600-700 kg Approximately 600-700 kilograms of CO 2 are required per barrel of produced algal oil 23
Linde and Sapphire have entered a research agreement to develop CO 2 capture, transport, and delivery technology Linde and Sapphire each bring their strengths to a joint research project Contribute funds and in-kind services to joint CO 2 R&D Brings extensive CO 2 capture, transport, and delivery technology One of the world s preeminent industrial gas companies, in over 100 countries worldwide Leverages patented algae genetics technology and platforms Runs advanced research programs using industrial, high-throughput screening and selection methods Linde and Sapphire will research and develop CO 2 technology for algae cultivation to meet target economics Outside the fence-line capture and transport Inside the fence-line delivery and distribution OSBL and ISBL technology integration Identify first mover advantaged sites for an algae to fuel facility Provided techno-economic conditions are met, Linde and Sapphire will deploy developed CO 2 technology at commercial-scale High capture efficiency Low unit-cost CO 2 Optimized, integrated solution for algae cultivation 24
Sapphire has evaluated a broad range of CO 2 transfer mechanisms CO 2 -to-pond transfer methods evaluated Method Membrane diffusers Membrane discs Ceramic diffusers Hose diffusers Cloth diffusers Tube traps Venturi Transfer efficiency 52.70% 34.89% 60.99% 29.07% 70.43% 82.99% 92.80% Venturi Tube trap Diffuers 25
For Oswald pond design with hose diffusers, Sapphire and Linde developed a design which raises hose diffuser efficiency above 70% Accumulatative CO 2 Transfer Efficiency CO 2 transfer efficiency into solution and biomass data 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% CO2 Transfer Efficiency to Pond (%) CO2 transfer efficiency to biomass (%) Accumulative Productivity TOC Eq (g/m2/d) 0% 2.0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Days CO 2 uptake by biomass exceeds 70% (includes outgassing); ~2X above values in literature for a non-pressurized system 22.0 17.0 12.0 7.0 Accumulative Productivity (g/m 2 /d) Alternative diffuser CO 2 transfer efficiency into solution 100% Carbonation Efficiency (%) 80% 60% 40% 20% Aquatech measured Solvox B measured Aquatech calculated Solvox B Calculated Tested alternative diffuser materials little difference in efficiency of dissolution 0% 0 0.2 0.4 0.6 0.8 1 1.2 1.4 CO2 flow rate (lb/hr/ft) 26
Cost reduction requires development of low-cost pond systems Lined raceway pond Soil lined pond 27
PROGRESS IN HARVEST 28
Harvesting: algae and water are separated to prepare algae for extraction Sapphire uses a Dissolved Air Flotation (DAF) system to concentrate algae Solution enters the DAF in dilute concentration DAF technology adapted for algae 1. Cluster: chemicals are applied which make the algae stick together 2. Float: air bubbles float algae to the surface 3. Skim: floating algae harvested with a skimmer After the DAF, the algae is concentrated 29
PROGRESS IN EXTRACTION 30
Extraction: concentrated algae is processed using proprietary technology to extract oil and nutrients Sapphire uses a proprietary, innovative, solvent-based extraction system Concentrated algae enters the extractor as a slurry Slurry undergoes chemical reactions 1. Heat and pressure: the slurry is exposed to heat and pressure, causing separation of materials 2. Chemicals: solvents are added to complete separation process Extraction process creates refinable crude oil 31
Sapphire s extraction process achieves a high oil yield from its photosynthetically grown algae Strain Species Extracted oil yield (% ash free dry weight) Dry Hexane (soy bean oil extraction) Sapphire Process v2 (proprietary treatment and solvent extraction) SE0087 Nannochloropsis salina 15% 50.4% SE0088 Nannochloropsis salina 15% 42.5% SE0092 Nannochloropsis oceanica 15% -- SE0107 Desmodesmus sp. 10% 47.7% SE0004 Scenedesmus dimorphus 10% 37.5% SE00CT Spirulina sp. (Arthrospira) 5% 38.4% SE0089 Spirulina platensis 5% 35.8% SE0017 Spirulina maxima 5% 40.7% SE00A8 Spirulina maxima 5% 39.2% Biomass grown in outside ponds Productivity maximized Replete nutrients and inorganic carbon 32
PROGRESS IN OIL UPGRADING 33
There are many options to upgrade bio-crude in traditional refineries Refining options Refinery configuration Upgrading in traditional refineries takes advantage of installed conversion equipment and transportation infrastructure Upgrading can also be done in stand alone bio-refineries Many different options for upgrading in refineries Lab scale upgrading through refinery processes has been completed Primary input option Secondary input option Algae oil can be fed in as an intermediate blend into different parts of the refinery, depending on quality and refinery configuration 34
Algae bio-crude has been cat cracked and hydrotreated to simulate its performance in a refinery Algal oil products Products from hydrotreating algae bio-crude is consistent with petroleum derived feed Products from Fluid Catalytic Cracking algae biocrude are of higher value than traditional vacuum gasoil feed (VGO) FCC conversion VGO Hydrotreated algal oil C/O 3 2.5 Conversion, wt% 70 70 TC2-, wt% 2 0.9 TC3 5.3 6.8 TC4 9.9 13.3 Gasoline 48.6 44.3 LCO 15.9 27.4 DCO 13.5 2.3 Coke 4.5 4.9 35
Sapphire has proven that algae fuel is a real solution compatible with today s infrastructure Two-hour test flight with 2-engine 737-800 Engine 1: Conventional petroleum-based jet fuel Engine 2: 50% conventional, 50% synthetic jet fuel (blend of algae- and jatropha-derived spec jet fuel) The airplane performed perfectly, test pilot Rich Jankowski said. There were no problems. It was textbook. 10-day cross-country tour of plug-in Toyota Prius Used a 5% blend of algae-derived gasoline for 3,750 mile trip Coincided with launch of FUEL the movie and ended on White House lawn 36
Algal biofuel can be commercially relevant within 5 years 37
Backup Slides 38
Sapphire s algae biofuel process meets the RFS criterion LOW CARBON Every barrel of algal oil produced consumes 600 kg of CO 2 CO 2 ~600 kg Algal oil 1 barrel Grams CO 2e * per MJ 95-68% 74 31 21 72-71 30 Production, refining, transport Combustion Total emissions CO 2 uptake Production, refining, transport Combustion Total emissions Petroleum-based diesel Sapphire algal diesel *CO 2e stands for CO 2 equivalent (gases weighted based on strength of greenhouse impact) Source: Life Cycle Associates 39
Carbon life cycle: not all biofuels pass the bar to qualify as a low-carbon fuel Fuel life cycle assessment (LCA) comparative emissions Grams per megajoule 95 96 Indirect land use change LCA emissions 69 60% reduction in LCA emissions 31 22 20 Petroleumbased diesel Corn ethanol Soy biodiesel Algal Oil Cellulosic (forest waste) Cellulosic ethanol (farmed trees) Source: Draft values from California Air Resources Board; Life Cycle Associates, LLC 40