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1 NNPC Automotive Biomass Ethanol Programme Renewable Energy Division (RED) NNPC BIOFUELS DEVELOPMENT IN NIGERIA Presentation for National Conference on Clean Air, Clean Fuels and Vehicles May 2006

2 Agenda Biofuels Overview The Rise of Biofuels Types of Biofuels Fuel Ethanol Programme for Nigeria: Vision, Objectives & Approach Fuel Ethanol Quality and Regulatory Issues Fuel Ethanol Challenges

4 Overview of Biofuels Biofuel - Is technically, any biomass derived substance used for energy (heat, power, or motive). Biomass denotes plant materials that are part of the short carbon n cycle. The term "biofuels" biofuels (short for "biomass fuel ) ) is commonly used for liquid fuels for transportation, such as ethanol and biodiesel that can be purely from biomass such as plants, cow manure and other organic materials. als. Biofuels can be used in place of diesel, gasoline or natural gas in cars, buses, trucks and machinery requiring little or no engine modifications. Because no net CO 2 emissions are released to the air - biofuels can be considered climate-neutral.

5 Biofuels as Climate-neutral fuels

7 Biofuels are emerging as the primary alternative to fossil-fuel fuel energy sources due to NATIONAL Spiraling energy prices, ongoing reliance on oil and energy security Mounting evidence of global warming Research and development activities with regard to biofuels not only based on reducing the oil-dependency but stimulated by product improvement and environmental issues. Biofuels have been used as oxygenates and octane enhancers to improve the quality of fuels applied in road vehicles. Environmental goals on carbon dioxide (CO2) emissions that were set by national governments and international agreements, such as the KyotoK Protocol (1997). Globally dwindling national crude oil reserves and the associated d increase in cost of crude oil exploration thereby increasing the attractiveness of renewable energy

8 Bio-fuels are emerging as a significant force in motor-fuel markets of the USA, Europe and Brazil. The rationale also applies to Nigeria, making biofuels a strategic opportunity NATIONAL Rationale Oil dependence mitigation/energy security tbpd 100 Lower cost of fuel 50 0 GHG (Green House Gas) emission reductions USA Europe Brazil Promotion of industrial development Source: EIA Ethanol Biodiesel and employment Share of Motor-fuel Consumption Ethanol 1.4% 0.1% 25% Biodiesel ~0% 1% 0% High Growth expectations: 4% of total worldwide motor-fuel consumption by 2010/ 6% in 2020 EU Targets: 2010: 5.75%; 2020: 20%

10 Types of Biofuels Biofuels can be broadly grouped into 2 types Liquid Biofuels Gaseous Biofuels Examples of Liquid biofuels include: Bioalcohols Bioethanol Methanol (which can be produced from biomass although this is not economically viable at present.) Biologically produced oils (Bio-oils) oils) Straight vegetable oil (SVO) Waste vegetable oil (WVO) Biodiesel Examples of Gaseous biofuels include: Bio-methane Wood gas (also known as producer gas, syngas, holzgas,, blue gas, etc) Hydrogen (which can be produced by water electrolysis)

11 Types of Biofuels contd. Liquid biofuels can be divided into two distinct groups; Conventional Biofuels Advanced biofuels Conventional biofuels can be produced using current technologies such as fermentation of sugar beet, or the esterification of oil seed rape (biodiesel). Advanced biofuels are produced using new technology such as ethanol produced by breaking down the lignocellulose in straw or wood and then fermenting it, and biodiesel from Fischer-Tropsch synthesis of gasified woody biomass. This production from plant waste alleviates potential tial stress on the food chain.

12 Ethanol Ethanol is a renewable, cleaner burning, alternate fuel which can n be produced from an astonishingly wide range of raw materials. In fact f any substance which contains sugar, starch or cellulose can be a raw material for production of ethanol. Ethanol made from cellulosic biomass materials instead of traditional feedstocks (starch crops) is called Bioethanol. Feedstock include vegetable matter, sugar-containing agric. products like sugar beet, sugar cane, sweet sorghum and crops that contain starch such as cassava, corn, wheat and barley. Additional sources include industrial waste like sulphite liquor from paper and pulp industry and molasses from sugar industry, waste organic c matter such as straw and saw dust and agricultural waste.

13 Typical yields of feedstock used in ethanol production NATIONAL Crop Yield (ton/ha/yr) Ethanol (liters/ton) Ethanol (liters/ha/yr) Sugarcane ,500-8,000 Sweet sorghum ,750-5,300 5,300 Sugar beet ,350-5,500 5,500 Wheat Rice ,075-2,150 Maize ,944 Sorghum ,295 Cassava ,700-11,050 11,050 Sweet potatoes ,336-8,350 Source: Petrobras

14 Ethanol contd. Ethanol is the most widely used biofuel.. In some countries of the world today, ethanol is blended with gasoline to form an E10 blend (10% ethanol and 90% gasoline), but it can be used in higher concentrations such as E85 or in its pure form like in Brazil. Blends of petrol and up to 22% ethanol can be used in internal combustion engines (ICEs( ICEs) ) without any engine modifications. The predominant technology for converting biomass to ethanol is fermentation followed by distillation. This technology can be used for various types of biomass feedstocks. At present, research and development activities in the field of bio-ethanol are mainly focused on using lignocellulosic or woody materials as a feedstock.

15 Advantages of Fermentation process Lower temperatures and pressures as opposed to those of catalytic process thus lower capital costs and increasing plant safety Higher ethanol yield than the catalytic process Not susceptible to poisoning by sulphur compounds as in catalytic process Functioning catalyst is essentially biological enzyme easily produced by viable organisms within the fermenter

16 Benefits of Ethanol As a renewable fuel, produces less life cycle CO 2 than fossil fuels. High octane rating allows engines to run more efficiently. Lower particulate emissions. Ozone-forming potential is less than for petrol and petrodiesel. Sulphur-free. 100% biodegradable. Low toxicity compared to methanol or biomethanol.

17 Bio-methane Biomethane is an odorless, renewable natural gas. It is made by upgrading or sweetening biogas that is produced by the controlled decomposition of dairy manure or similar waste products. The primary purpose of upgrading biogas to biomethane is to use the biomethane as an energy source in applications that require pipeline quality or vehicle-fuel quality gas, such as transportation. Biomethane can be used to replace compressed natural gas or diesel. As natural gas prices continue to rise, biomethane fuel is becoming cost- competitive with natural gas and diesel, and is much cheaper than hydrogen.

18 Bio-methane methane contd From a functional point of view, biomethane is extremely similar to natural gas except that it comes from renewable sources. Biogas is often used when referring to both the raw and upgraded forms of biogas/biomethane biomethane Biomethane is a proven vehicle fuel. Sweden has 20 plants producing biomethane and runs 2,300 vehicles, mostly buses on it.

19 Biodiesel Biodiesel is non-toxic, biodegradable diesel fuel made through *esterification of a variety of vegetable oils, recycled restaurant greases and animal fats which are all renewable. Feedstock crops include soybean, sunflower, rapeseed, mustard seed, s oil palm and safflower (**( **At present, rapeseed accounts for over 80% of global biodiesel production) The most common types are Rape Methyl Ester (RME) in Europe and Soybean Methyl Ester (SME) in the USA. The conversion of biomass into vegetable oils for automotive fuel applications is similar to the production of vegetable oils for the food industry. *Esterification: Vegetable oil + Alcohol Biodiesel + Glycerin **Source: International resource costs of Biodiesel and bioethanol, 2003, NREL

20 Biodiesel contd. Biodiesel is widely used in Europe. Germany has more than 1,500 filling stations selling biodiesel at the pump. France is the world's largest producer: all French diesel fuel contains between 2% and 5% biodiesel, and that will soon apply to the whole of Europe. Biodiesel can be used straight (in neat form) in any compression ignition (diesel engine), or mixed with petroleum diesel at any percentage. e.

21 Biodiesel contd. Types of Biodiesel Feedstock Virgin oils are vegetable oils that are usually grown, crushed, pressed and filtered for the oil and other co-products such as meal. Eg.. Soybean, sunflower, rapeseed, mustard seed, oil palm, safflower Recycled oils - waste restaurant grease or used vegetable oil that is collected and made into Biodiesel. Yellow grease biodiesel - is a combination of many things, including used restaurant grease and animal fats from rendered animals. It is a commodity (like oil, diesel, and gasoline) and traded on the open market. Other Feedstocks Brown grease, soapstock,, and other low cost, low quality (High Water, High Free Fatty Acid (FFA)) feedstocks can be made into good Biodiesel.. However, current technology makes such production unattractive economically. ly.

22 Benefits of Biodiesel NATIONAL Biodiesel has a high cetane rating which improves engine performance: 20% biodiesel added to conventional diesel fuel improves the cetane rating 3 points, making it a Premium fuel Biodiesel has much better lubricity than conventional diesel fuel and extends engine life. Substantial reductions of unburned hydrocarbons (-93%),( carbon monoxide (-50%),( and particulate matter (-30%).( Biodiesel blended with petroleum-based diesel can reduce emissions of carbon dioxide a chief greenhouse gas by up to 80%. Of special interest is the elimination of sulphur dioxide emissions (biodiesel contains no sulphur aromatics) and the reduced ozone-forming potential of biodiesel emissions (nearly 50% less than conventional diesel fuel)

24 NNPC has set a vision to create a thriving domestic ethanol industry within the next five years NATIONAL Key Elements of The Vision Maximize carbon credit opportunities Environment ally friendly Rural wealth and job creation Thriving Homegrown Industry Integrate Oil and Gas with Agriculture Sustainable Development Energy Selfsufficiency which is expected to reduce the dependence on oil while creating a viable commercial venture at a lower cost of production

25 Ethanol is emerging as an important motor fuel in view of the Kyoto Protocol Agreement to which Nigeria is a signatory NATIONAL What Will the Programme Involve? For the purpose of the Nigeria ethanol program, ethanol will be blended with gasoline to form E10 - an environmentally friendly alternative to PMS NNPC will commence ethanol importation in 2 nd Half of 2006 At the same time, a plan is being developed for local ethanol production Local ethanol will be produced from sugar cane and/or cassava

26 We have completed the Planning Stage and are preparing for the Foundation Stage. NATIONAL Integrated Plan months months to operating stage Continuous Planning Building Foundation Growing Define best crop route / develop economic rationale Secure land Nigeria Ethanol Program Define growth models Define strategic partners Define Operating Strategy Develop implementation plan Detailed feasibility Create venture Secure financing Design & build projects Operate projects Expand best practice models Monitor program effectiveness Ethanol Import Program Identify technical & quality capabilities required / Check infrastructure Design Supply, Pricing & Marketing Strategy Contract Ethanol imports Run test program Ramp-up to rest of network Develop implementation plan Monitor customers and quality control effectiveness Policy Define policy changes required to support E10& long term strategy Implement Policy Changes

27 We engaged key stakeholders during the formative stage of the project Key Stakeholders Federal, Local and State Government and Agencies Farmers and Farming Communities Research Institutes Envisaged Role/Responsibility Facilitate policy implementation Provide fiscal and political support Provide cassava and sugar cane input for ethanol production Ensure smooth disruption free operations Provide information on local agricultural practices, supply and demand data Provide technical support Financial, Technical and Managerial Partners Provide funding and technical/managerial expertise Petroleum Marketers Ensure integrity of E10 distribution programme General Public Early acceptance of new ethanol/gasoline blend

28 Roadmap for the Bio-Fuel Industry in Nigeria Short Term < 2 years Implementation of an ethanol import program Creation of a seeding domestic program (Farm and Ethanol Plant) Creation of public awareness Medium Term < 5 years Boost local production of Sugar cane and cassava by cultivating 60,000ha of Sugar cane/cassava Achieve production of 20% of fuel ethanol consumed in Nigeria Target building of 2 to 4 distillery plants Long Term >10 years Fostering development of a domestic industry with internationally competitive export capability Both ethanol and bio-diesel have reached mature stage

29 We have completed the Planning Stage and are preparing for the Foundation Stage. Some key steps to ensure the successful take-off of the programme NATIONAL Set up a dedicated unit within the NNPC, the Renewable Energy Division (RED) to oversee the development of the industry Signed two memoranda of understanding with two Brazilian companies, Petrobras and COIMEX to leverage their experience in ethanol production and marketing respectively Completed preliminary feasibility studies to determine the optimum route to developing the industry Putting in place plans to commence importation of ethanol in 2 nd Half of 2006

31 Environmental Impact of present PMS specification and benefits of Ethanol blends NATIONAL Environmental Impact of PMS Pollutant High Organics (HC) emissions High SOx and NOx emissions High SMOG formation in cities High emissions of some carcinogens Benefits of Ethanol Blends CO NOx 20 VOCs 30 Benzene 50 Particulate Matter (PM) 50 Percentage Reduction *Octane Enhancement by 2 units for 8% ethanol

32 Comparison of PMS and E10 shows the many benefits E10 offers with the constraint of tight water contamination prevention. NATIONAL Elements Appearance Water Octane PMS Clear and free of suspended matter Nil Ethanol Clear and free of suspended matter Nil E10 Clear and free of suspended matter Nil Lower heating value (Btu/lb) 18,000-19,00019,000 11,500 16,500-17,50017,500 Distillation ( o C) TBD Specific Gravity Vapor Pressure (RVP) in psi Electrical Conductivity (MicroS/m) Vehicle Acceptance TBD Nil All All

33 Statements by Car Manufacturers for 2003 model-year cars on the use of E10 Honda: You may use gasoline containing up to 10% ethanol by volume Hyundai: Gasohol (a mixture of 90% unleaded gasoline and 10% ethanol or grain alcohol) may be used in your Hyundai BMW: Fuels containing up to 10% ethanol will not void applicable warranties with respect to defects or workmanship Toyota: If you use gasohol in your Toyota, be sure that it does not contain more than 10% ethanol FORD: Ford approves the use of gasoline to improve air quality. These gasoline may contain oxygenates up to 10% ethanol

34 E10 can readily be distributed within our network with a few adaptations. Ethanol Imports Ethanol Blending Adaptation Requirements PPMC Facilities Cleaning of tanks & lines (service stations & depots) Inbound Logistics Primary Distribution Secondary Distribution Additional quality assurance tests to avoid water contamination Produce Crude Refine Crude Wholesale (Rack) Marketing Retail Marketing Water avoidance: Use fixed over floating roof tanks Crude Market Products Market (Wholesale) Products Market (Rack) Plug leaks in pipelines Refining Minor piping modifications, in particular loading arm at blending tanks PPMC Petroleum Marketers Laboratory upgrades

35 E10 can readily be distributed within our network with a few adaptations. Ethanol Imports Adaptation Requirements Ethanol Blending Storage and Dispensing Inbound Logistics Primary Distribution Produce Crude Refine Crude Wholesale (Rack) Marketing Secondary Distribution Retail Marketing Same requirements as gasoline within the provisions of NFPA (National Fire Protection Agency standards Dispensing avoid any equipment made from zinc, brass, lead, aluminum or other soft metals (to avoid leaching) Tanks butt-welded CS material Crude Market Products Market (Wholesale) Products Market (Rack) Best is dedicated ethanol tank otherwise, use a tank that has been used for gasoline for transportation (to avoid contamination) Refining PPMC Petroleum Marketers Clean tanks and lines and free them of water

36 E10 can readily be distributed within our network with a few adaptations. Ethanol Imports Ethanol Blending Adaptation Requirements Tests at the Stations Appearance Inbound Logistics Primary Distribution Secondary Distribution HC content Conductivity Produce Crude Refine Crude Wholesale (Rack) Marketing Retail Marketing Moisture Crude Market Products Market (Wholesale) Products Market (Rack) Refining PPMC Petroleum Marketers

38 Challenges Improvement of farming practices to enhance quality and yield Enabling infrastructure to boost production (power, roads, water) Fiscal and regulatory issues Research and development (R&D) issues Product quality and water tolerance Distribution and retail facilities

39 THANK YOU