Roy Lipski SMi Gas to Liquids North America, March Smaller scale GTL Projects, partnerships and opportunities

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1 Roy Lipski SMi Gas to Liquids North America, March 2014 Smaller scale GTL Projects, partnerships and opportunities

2 Why are we here today? Snapshots from the past few months The press The future will be micro for GTL technology GTL technology offers viable solution for the billions Russia is losing in flared gas Wall Street What if Small-scale gas to liquids was the next Shale gas? Are we on the verge of another energy revolution? Bernstein report Industry leaders We want to work with Velocys because you are the leader in the smaller GTL industry VP oil major 2

3 Velocys Leaders in smaller scale GTL Leader in smaller scale gas-to-liquids technology 15 years and >$300 million invested in technology development Exhaustive global patent protection (>7,500 granted GTL patent claims) First class partners offering a complete GTL solution Onshore: Haldor Topsøe, Ventech, Hatch, Toyo Engineering Offshore: MODEC, Toyo Engineering Commercial roll-out underway Calumet, Pinto Ashtabula, GreenSky/BA, Red Rock Biofuels Critical mass Well capitalised 100 employees with facilities in Houston, Texas, Columbus, Ohio and Oxford, UK Permanent pilot plant in operation Ashtabula GTL BA s GreenSky London 3

4 Large-scale economics at smaller scales Velocys enables smaller plants Conventional slurry reactor Velocys microchannel reactor Velocys FT reactor $k/bpd capacity Cost advantage Velocys microchannels cost range Conventional FT Reactor 2,000 6,000 10,000 15,000 Plant capacity (bpd) Conventional FT e.g. Sasol Microchannel technology offers strong benefits at smaller scales 4

5 GTL for the mainstream of the industry Velocys modular GTL Broader range of sites 1,000-15,000 barrels per day Suitable for remote locations Lower risk Smaller investments Less risk of cost over-runs Reduced costs Standardized modules and reactors Possible integration with existing facilities Easier to execute and expand Quicker plant construction (18-24 months) Easier to permit, supply, build and operate Additional trains can be added later 1,400 bpd FT process unit designed by Ventech Engineers 90 ft L x 46 ft H x ~40 ft W 5

6 Market environment Ripe for smaller scale GTL Shale revolution ushering age of gas surplus Long-term stability of gas-oil arbitrage expected Other favorable drivers Growing demand for middle distillate (diesel and jet) Energy security Environmental benefits e.g. flare elimination and carbon footprint reduction (biomass-to-liquids) Strong location-specific economic and strategic factors Shell and Sasol plants in Qatar showcase viability of GTL 6

7 Growing US demand for distillate fuels Transportation energy consumption by fuel (quadrillion btu) 30 History 2011 Projections % 11% 4% 2% Diesel 60% Motor gasoline CNG/LNG 29% 4% Jet fuel E85 13% Other 1% 4% Pipeline fuel 3% Increased demand for diesel and jet fuel favours GTL 47% Source: EIA, Annual Energy Outlook 2013 Early Release 7

8 Many applications From low-value gas to high-value fungible products Shale gas: monetizing low prices in North America Stranded gas: estimated over 30% of world reserves are uneconomic to bring to market Associated gas: 5% of natural gas production is flared GTL allows valuable products to be created and shipped Ultra low-sulfur diesel (70 cetane) & jet Waxes, lubricants and solvents Not just gas: also biomass and coal 8

9 Velocys enables winning economics Taking the plant to the opportunity Costs & proceeds ($/barrel of liquid products) $150 $125 $100 $75 $50 $25 Premium from sale of diesel Oil (WTI) OPEX Depreciation Natural gas Co-location reduces capex & opex e.g. downstream Lower gas costs if stranded or associated Increased product value if specialties e.g. lubricants / waxes or if producing refined products in remote locations Added value from unlocking restrained oil production $0 Costs of Velocys enabled GTL plant Proceeds from production of liquid fuels 9

10 Commercial projects Selection

11 Commercial projects Growing and maturing sales pipeline Due diligence complete with several customers Healthy depth and variety of sales pipeline encouraging Most opportunities are GTL in North America Interest from Russia / CIS increasing BTL growing; some interest in CTL Close engineering relationships Provide broad geographic coverage Facilitate early adoption Growing global sales pipeline Project development; investment; guarantees Two projects are close to being permitted 11

12 Calumet Specialty Products Integrating in an existing refinery Velocys selected to supply FT technology for 1,400 bpd commercial GTL plant integrated with existing refinery Ventech completed plant design. Provided fixed price quote for the modules Third party due diligence by Calumet s owner's engineer successfully completed Calumet considering progressing with more detailed engineering and a market study Site of GTL plant Karns City, Pennsylvania 12

13 GreenSky London Renewable jet fuel in London Velocys selected as FT supplier for commercial 2,500 bpd waste-biomass-to-liquids plant GreenSky London plant in partnership with British Airways Competitive selection process after technology evaluation advised by Fluor Pre-Front End Engineering completed BA to provide off-take for jet fuel Picture courtesy of British Airways 13

14 Red Rock Biofuels US DoD sponsored BTL Velocys selected for 1,100 bpd biomass-to-liquids (BTL) plant Located in Oregon, USA Using forestry waste feedstock Supported by US Department of Defense and US Department of Energy Received $4.1m phase 1 grant for engineering 1 of 4 projects eligible to apply for $70m construction grant DOE participation more than doubles funding available for phase 2 9 months engineering (FEED) study well underway Engineering study and phase 2 proposal due in April DOD targeting late June for phase 2 grant decision 14

15 Pinto Energy One of many Velocys selected by Pinto Energy Houston-based developer of GTL facilities in North America Portfolio of sites for development of smaller scale GTL 2,800 bpd GTL plant in Ashtabula, Ohio, USA Substantial existing infrastructure enhances economics First phase of a multi-train facility Ventech began engineering in April 2013 Air permit nearing approval Stormwater permit received 15

16 Pinto Energy: Ashtabula project GTL in the Marcellus / Utica Ashtabula GTL Site Will convert abundant low-cost natural gas into: Design complete Q Final notice to proceed 2014 Plant completion 2016 High value specialty products (solvents, lubricants and waxes) Ultra clean transportation fuels 16

17 Pinto Energy: Ashtabula project Location and layout Lake Erie Ashtabula GTL Site benefits from access to substantial existing infrastructure: waste water treatment; power plant; cooling water pumping; air separation; gas pipeline; rail and barge; local customers for bi-products 17

18 Partnerships Complete GTL solution

19 Complete GTL solution Together with world-class partners FT reactor and catalyst suppliers Catalyst supply partners not yet announced Customer s choice. Recommended partners: Technology licensors Smaller scale GTL - onshore Engineering Procurement & Construction Field services Catalyst change out Reactor inspection 19

20 Engineering partners Ventech Engineers Placed reactor order for 1,400 bpd capacity 8 commercial scale reactors ($8 million) Kick-started supply chain Production underway Several GTL plants in engineering Considering investing in some of these Progressing own GTL project in Texas, USA 20

21 Commercial readiness

22 Supply chain Ready for commercial deployment Commercial FT reactor manufactured Optimized final design for manufacture at volume Demonstrated and finalized service, manufacture & quality protocols Catalyst service partner Mourik trained and certified Catalyst loaded Process declared as fit for commercial application Commercial reactor Reactor approved as fit for deployment by independent third party 22

23 Manufacturing Ramping up for mass production Implementing multi-million dollar state-ofthe-art production cell at chosen supplier Cost effective mass production Consistent high quality In place by year end Initial capacity supports 10,000 bpd/yr of orders Reactor manufacture Production cell is replicable and scalable Cost effectively Expected lead-time <12 months Plans in place to support a 4x capacity increase Designed for production 23

24 Pilot plant and training facility Supporting sales and delivery Integrated GTL pilot plant at the Velocys Ohio, USA site Designed to provide Performance data to support differing client designs Product for client studies Permanent training facility for plant operators Platform for Developing our own field support staff Demonstrating future product generations Add pilot plant photo Pilot plant 24

25 Resource build-up Houston commercial center Houston has become the Company s commercial and engineering center Hub of global oil & gas industry Improved access to talent Accelerating commercial roll out, reinforcing market leading position CEO based in Houston Actively growing Process engineers Business development and marketing 2603 Augusta Drive 25

26 Resource build-up Strong commercial and process engineering teams Commercial team Process engineering team 26

27 The time is now!

28 Summary Velocys smaller scale GTL GTL for the mainstream Attractive for wide variety of gas reserves and locations Practical Easier to finance, permit, supply and build Manageable risks Quicker construction; less in-field build; phased investment Profitable Capture gas/oil spread; unlock resources; leverage existing infrastructure Velocys market leading technology is ready for commercial deployment Calumet; Pinto Ashtabula; GreenSky/BA; Red Rock Biofuels 28

29 Changing the way fuels are made "Velocys" and the Velocys logo are trademarks of Velocys