Underground Coal Gasification Unlocking the Deep Resources

Underground Coal Gasification in the “Deep Coals” of the Powder River Basin and Preliminary Implications for EOR

May 29 and 30, 2008 Wyoming Enhanced Oil Recovery Institute

GasTech, Inc. Casper, Wyoming “Our world is fast becoming energy-starved. And yet, in the United States alone, there are vast resources lying just beyond our reach – oil bound in the shales of Colorado, natural gas locked in the “tight” sandstones and shales of the Rockies and Appalachia, and unbelievable quantities of coal, too deep to mine in the usual ways.” US Department of Energy June 1978

May 2008 GasTech UCG Program in the PRB 2 Powder River Basin (PRB) UCG Program

Why Coal, Why UCG? PRB Coal Resources UCG Selection Criteria PRB UCG Economics UCG Pilot Project Commercial UCG – Electricity and Liquid Fuels UCG as a source of CO2 for EOR Conclusions and Recommendations

May 2008 GasTech UCG Program in the PRB 3 Why Coal? 2006 World Energy Consumption

6% 1% 6%

37% Oil NG Oil Coal 27% Nucl Hyd Renew NG

23%

USEIA, 2007

May 2008 GasTech UCG Program in the PRB 4 Why Coal? 2007 Fossil Energy Reserves

17%

Oil NG 16% Coal

67%

Source: BP, 2007

May 2008 GasTech UCG Program in the PRB 5 Why Coal? 2007 Fossil Energy {Reserves + Resources}

2% 2%

Oil

Coal

96%

Source: AAPG and BP, 2007

May 2008 GasTech UCG Program in the PRB 6 World Coal Reserves/Resources Proven world coal reserves (economic) of 909 billion tons (BP, 2007). Cover Wyoming in 8 feet of coal Estimated total world coal resources (identified, not necessarily economic) of up to 18 trillion tons (AAPG) Only 5% of resources are economically extractable as reserves Most resources are simply too deep – known – but too deep Underground Coal Gasification (UCG) converts coal Resources to coal Reserves

May 2008 GasTech UCG Program in the PRB 7 Coal Combustion vs Gasification

Combustion (Excess oxygen)

Carbon + O2Î CO2

Sulfur Î SOx

Nitrogen Î NOx

H2 Î H2O

Water Î Water Vapor Gasification (25% to 50% of oxygen for Combustion)

Carbon + ½ O2 Î CO Red are combustible gases

H2O + C Î H2 + CO

C + CO2 Î 2 CO

May 2008 GasTech UCG Program in the PRB 8 Combustion vs. Gasification

May 2008 GasTech UCG Program in the PRB 9 What is UCG?

Underground Coal Gasification – a mining method utilizing linked well bores

Inject air (air-blown) or O2 and steam (oxygen- blown) through boreholes, ignite the coal in situ Same processes as surface gasification but done in the deep coal seam, a “geo-reactor” Process water from coal seam (and injection)

Produces combustible hot syngas with H2,CH 4, CO, CO2 and H2O; 150 to 300 BTU/scf; energy is combustible gas, temperature, and pressure

May 2008 GasTech UCG Program in the PRB 10 UCG Schematic

Water Table ~ 100 ft 1,000’ + 2

Geo-reactor, or 1 Gasifier From UK DTI, 2004 UCG is like surface gasification, with two major advantages – 1) No surface gasifier; 2) CO2 sequestration May 2008 GasTech UCG Program in the PRB 11 History of UCG

Conceived by William Siemens, 1868 Russians developed commercial UCG starting in 1928, 9 large sites; 2 still operating US Trials started in 1946; 33 trials; peaked with Hanna trials 1972-79 and Rocky Mountain 1 1986-88 Trials in Europe 1982-1999 Australian test 1999 to 2002

May 2008 GasTech UCG Program in the PRB 12 Current UCG Activities

Major Chinese (Xin Ao) commercial efforts underway in 2007 and 2008 ($100 MM) Eskom (South Africa) 2007. Proceeding to commercial. Pilot is 2.5 MMcfd, Commercial in 4 phases up to 4.4 Bcfd for 2,100 Mwe (2 million US homes) Virtually all tests gasified coal A few had operational problems Much learned from these efforts BP/GasTech Demonstration Project

May 2008 GasTech UCG Program in the PRB 13 Cost/Logistical Advantages of UCG

Virtually unlimited reserves – makes available most of the 95% of coals too deep to mine No exploration/delineation costs Manufacturing syngas, not depleting gas reservoir Cap costs 25% to 30% lower than surface gasification Op costs lower – no mining or coal/waste handling Lower energy costs - $1.50 to $2.00/million BTU Commercial project IRRs of 15% to 20%

May 2008 GasTech UCG Program in the PRB 14 Environmental Advantages of UCG

No personnel underground Æ fewer industrial hazards Æ safe extraction technology No (or little) surface water required Limited ash or slag disposal Limited surface impacts (relative to mining) Proper gasifier operation produces organics as gases, not liquids in the cavern Immense UG heat storage Æ stable, robust gas supply CO2 capture economic; sequestration possible

May 2008 GasTech UCG Program in the PRB 15 Basics of UCG Gasifier Operation Gasifier Depth ~ 1,000 feet Less likely coal is used as an aquifer Higher P favors methane Reduces surface subsidence Operate gasifier P < hydrostatic P I-P Well Linkage before ignition Link must be the highest permeability channel Linkage in base of coal seam avoids “by-pass” Allows high volumes of low P gas High Temperature – All phases are gas, no liquids 65% +/- Recovery Controlled subsidence with pillars Galleries direct gas flow May 2008 GasTech UCG Program in the PRB 16 The PRB

May 2008 GasTech UCG Program in the PRB 17 Powder River Basin Coal Resource Facts

510 Billion tons coal in-place (USGS, 1999) Seams up to 250 feet thick Energy content equal to 20 times the world’s total annual energy consumption One ton of PRB coal has 300 times the energy content of the CBM gas in that same ton of coal 307 billion tons amenable to UCG (this study)

Seams >500 ft deep to top of seam

Seams > 30 feet thick

May 2008 GasTech UCG Program in the PRB 18 Powder River Basin and Drill Hole Data Locations 49,000 records

0 12 24

miles

May 2008 GasTech UCG Program in the PRB 19 Example – Locations with 50 ft Coal Overlain by 100 ft Mudstone

May 2008 GasTech UCG Program in the PRB 20 PRB Total Coal Thickness

0 50

May 2008 GasTech UCG Program in the PRB 21 PRB Depth to Major Coal

0 50

May 2008 GasTech UCG Program in the PRB 22 Typical PRB Cross Section

West East 53 miles

4500

3500

2500 Sandstone Siltstone 1500

•Target coals encased in low permeability siltstone rocks •Sandstones are scattered and lenticular

May 2008 GasTech UCG Program in the PRB 23 Factors for UCG Selection – PRB is Ideal Attribute Optimal Powder River Basin Coal Seam Thickness 30 ft + 30 to 250 ft 70 ft avg Coal Seam Continuity High Extremely high - miles Coal Rank Sub Bit to Low Vol Bit Sub Bituminous “B” Ash Content < 40% 6.4% avg Faulting Rare Rare to absent Depth to Coal > 1,000 ft 500 to 2,500 ft Dip 0 to 20 degrees 1 to 3 degrees Intrusions Minimal None Immediate Roof Strong, stable Low perm siltstone Hydraulic Head > 600 ft 500 to 2,500 ft Swelling Character Non-swelling Non-swelling Coal Permeability High High Water Quality Poor Stock quality NG Availability Available, low cost Very Low Cost

May 2008 GasTech UCG Program in the PRB 24 PRB Hydrology and UCG Water is a necessary ingredient in UCG Excessive water influx lowers BTU value of syngas Site selection is key No water wells in coal Thick siltstone “seal” overlying coal No faulting Fully characterize, understand, and accommodate local hydrologic conditions Operate reactor “correctly”

May 2008 GasTech UCG Program in the PRB 25 PRB Infrastructure

0 50

May 2008 GasTech UCG Program in the PRB 28 UCG and Oil and Gas Development Natural potential conflict of two mineral estates CBM value highest in best UCG coals, thick and deep Energy content of coal is 300X the energy in the CBM Sequential development most reasonable Deplete economic CBM, then UCG development Deep oil and gas well bores need to be avoided O&G infrastructure valuable to UCG development UCG can proceed for next 50+ years

May 2008 GasTech UCG Program in the PRB 29 Example of PRB UCG Site

APACHE CORP JIMS WATER SERV INC JIMS WATER SERV INC GEN AMER OIL CO JIMS WATER SERVICE JIMS WATER SERV INC US-WOLTER-A JWS / DL COOK JWS / DL COOK LOWERY COOK D L COOK D L - JWS 1 14W-1604 23W-1604 2 JWS11A-16 12B-15 Subsea <0.33MI> <0.39MI> <0.35MI> <0.36MI> <0.25MI> Subsea Depth 4,483 4,433 4,495 4,585 4,573 4,598 Depth T50N R74W S20 T50N R74W S16 T50N R74W S16 T50N R74W S16 T50N R74W S16 T50N R74W S15 4200 4200

4100 0 4100

4000 0 4000

3900 0 3900

L 6 OW_COA L 0 L 0 A 0 H 0

8 S 0

3800 0 3800

3700 0 3700

Overlying Siltstone 9

0 0

9 1

3600 0 3600

AL 0

N_CO 9

ANDERSO 0

3500 1 3500

1 Target UCG Coal 1

0 3400 2 3400

3300 3 3300

0 4

0 1

3200 4 3200

0 5

8 9 10 11 0 1

7 1

3100 5 3100

0 1

0 3000 6 3000

1 W 6 A 1

L 0

18 17 16 15 14 L 5 _C 1

O 0

0 7

0 1

0 A 1

2900 7 2900

0 L 1

7 50N 74W74W50N 1

Deep Coal 0

0 8

0 1

2800 8 2800

8 19 20 21 22 23 CO2 Sink? 1

0 9

0 1

2700 9 2700

1 30 29 28 27 26 2600 2600 PETRA 8/1/2006 2:44:16 PM

May 2008 GasTech UCG Program in the PRB 30 UCG Demonstration Project Coal Leases & Pipelines

6 5 4 3 2 1 6 Oil pipeline

7 8 9 10 11 12 7 345 KV powerline 18 50N17 16 74W15 14 13 18

19 19 20 21 22 23 24

30 30 29 28 27 NG pipelines26 25

31 31 32 33 34 35 36

May 2008 GasTech UCG Program in the PRB 31 PETRA 8/3/2006 10:18:21 AM Permitting UCG in the PRB

Primarily by Wyoming Department of Environmental Quality Impacts to groundwater, subsidence, air quality are key issues In Situ regulations and Guidelines in place, used for UCG and uranium 24 to 36 months to permit Pilot Significant bonding will be required

May 2008 GasTech UCG Program in the PRB 32 Uses of UCG Gas in the PRB Power generation in Integrated Gasification Combined Cycle (IGCC); Wyoming power growth 5%/yr Synthesis of clean fuels and chemicals Replace coal and NG in power plants Replace NG as chemical feedstock Hydrogen production Produce synthetic NG

May 2008 GasTech UCG Program in the PRB 33 UCG Economic Model

Based on Boysen and Gunn (1979, 2006) UCG Model incorporates

Process dynamics (mass and energy balances, process model)

Equipment design (LVW, UCG modules)

Cost of equipment, piping, facilities, labor

Economic analysis to optimize design

May 2008 GasTech UCG Program in the PRB 34 UCG Economic Model

Determines: UCG module consumption rate, compression requirements, piping and equipment costs, operating costs Calculates: Raw Syngas selling price required to yield a defined Rate of Return on the investment; 15% used in base case Optimizing: Seam depth, seam thickness, well field design and well spacing, compression requirements, casing/piping sizes, oxidant choices

May 2008 GasTech UCG Program in the PRB 35 UCG Raw Syngas Economics PRB Reference Case

Well spacing 200 feet Air-blownÎDry gas heating value 150 Btu/scf Resource recovered is 65% of coal-in-place Zero gas leakage Gasification thermal efficiency of 81% Depth to seam top 1054 ft, thickness 112 ft UCG facility sized to fuel 200 MWe combined cycle power generation plant with 45% generation efficiency Plant capacity factor 95%

May 2008 GasTech UCG Program in the PRB 36 UCG Raw Syngas Economics PRB Reference Case

Current US dollars 2006/7 vendor quotes 100% equity financing Hurdle rate is 15% 20 year life SL depreciation Zero plant salvage value

May 2008 GasTech UCG Program in the PRB 37 UCG Raw Syngas Economics PRB Reference Case

Total Capital $57.2 million Annual operating expenses $13.5 million Raw syngas production cost of $1.62/MMBtu, including 15% ROI on UCG investment

May 2008 GasTech UCG Program in the PRB 38 UCG Raw Syngas Economics PRB Sensitivities

Gas Delivery @ 350 psig Gas Delivery @ 100 psig

1.90

1.85

1.80 U 1.75

1.70

1.65

1.60

1.55 UCG Syngas Cost ($/MMBT 1.50

1.45

1.40 500 700 900 1100 1300 1500 Depth to Top of Coal (ft)

May 2008 GasTech UCG Program in the PRB 39 UCG Raw Syngas Economics PRB Sensitivities

1.75 U

1.70

1.65 UCG SyngasCost ($/MMBT

1.60 50 60 70 80 90 100 110 120 Coal Seam Thickness (ft)

May 2008 GasTech UCG Program in the PRB 40 UCG Raw Syngas Economics PRB Sensitivities

2.60

U 2.35

2.10

UCG Syngas Cost ($/MMBT 1.85

1.60 60 80 100 120 140 160 180 200 Well Spacing (ft)

May 2008 GasTech UCG Program in the PRB 41 UCG-IGCC 200 MW Power Plant

May 2008 GasTech UCG Program in the PRB 42 200 MW UCG-IGCC Power Plant Economics

Total Capital Investment $263 million Annual Operating Expenses $20 million USFIT 35% Sales price electricity $62/MW-hr After all taxes and royalties, DCF-ROR 18.3%, NPV @ 15% of $44.3 million Returns 15% DCF-ROR at electricity price of $51.68/MW-hr

May 2008 GasTech UCG Program in the PRB 43 IGCC VS UCG IGCC FOR ELECTRICITY ONLY

IGCC UCG IGCC

MEGAWATTS 550 200 CAPACITY FACTOR 85% 95% TOTAL CAPITAL, $K $849,310 $263,300 CAPITAL $/KW INSTALLED $1,544 $1,180 76.0% OP COST K$/YR $90,073 $19,916 OP COST $/MWHR SOLD $21.99 $11.96 54.0% CONSTRUCTION, YRS 3 3 OPERATION, YRS 22 22 DEBT/EQUITY 100% EQUITY 100% EQUITY USFIT RATE 35% 35% SALES PRICE FOR 15% ROI $80.60 $51.68 DCF-ROR AT $62/MWHR 10.40% 18.30% PAYBACK AT $62/MWHR, YRS 10.77 7.64

May 2008 GasTech UCG Program in the PRB 44 UCG FT Plant

HRSG Exhaust Gas To Stack

Parasitic Clean Gas Loads Water Pump

Electricity Condensor To Sales Air Steam Turbine Generator Gas Turbine Electricity To Sales ASU Generator

Watertreatment Coal Liquid Recovery FT Synthesis Diesel and To Sales Product Upgrade Naptha Gas Cleanup Recycle and Conditioning Sulfur Recovery Ground Level CO2 Capture

UCG Reactor

May 2008 GasTech UCG Program in the PRB 45 UCG – FT Plant Economics

10,200 bpd (8,560 diesel, 1,640 naptha) FT plant fed with oxygen-fired UCG syngas Generates 104 MW export power Capital cost $622 million Annual Operating cost $53.2 million Diesel price $63/bbl, naptha $30/bbl, electricity $62/MW-hr Straight equity case, after taxes and royalties DCF-ROR of 18.0%, NPV @ 15% discount of $104 million May 2008 GasTech UCG Program in the PRB 46 Pilot Project Objectives Improve upon earlier US UCG trials, produce stable, dependable gas flow and composition Maintain strict environmental compliance Provide cost and operating data for Commercial Project front-end engineering Provide basis for Bankable Feasibility Study for Commercial project Operate 1 year, 3 UCG modules, generate 5 MW electricity. CCS can be added. BP plc is operating partner with GasTech

May 2008 GasTech UCG Program in the PRB 47 Elements of Commercial Project

Both air- and oxygen-blown UCG modules, poly-generation Air-blown for IGCC, providing electricity requirements for Atmospheric Separation Unit to produce oxygen, and for electricity sales Base case is 200 Mwe CC power generation Oxygen-blown syngas for clean diesel, synthetic natural gas formulation; local markets Base case plant capacity 10,000 bpd

May 2008 GasTech UCG Program in the PRB 48 CO2 Sequestration Options for the Commercial Projects

If CCS desired, use all oxygen-blown CCS in the PRB Tertiary oil recovery, as Salt Creek, Hartzog Draw “Extinct” UCG cavities as dense phase Deep marine formations; PRB has numerous candidates for receiver formations: Mesa Verde, Sussex, Shannon, Frontier, Muddy, Morrison, Tensleep Possible carbon credits Energy penalty economically acceptable

May 2008 GasTech UCG Program in the PRB 49 UCG and EOR in the PRB

200 Mwe UCG-IGCC power plant will produce 1 million tons (Mt) CO2/yr UCG syngas is 15% CO2 (air blown) to 30% CO2 (oxy blown) Rocky Mtn Area Transmission Study (2006) predicts 700 Mwe new generating capacity from coal in the PRB; if UCG, produces 3.5 Mt CO2/yr PRB demand for CO2 for 168 reservoirs is 236 to 354 Mt (Wo, 2007) UCG is viable source of CO2 for EOR

May 2008 GasTech UCG Program in the PRB 50 CO2 Removal from Syngas – Energy Penalty

LLNL, 2007

Basis: 100 kgmole syngas, at 10 atm, produced by oxygen gasification

H2 36.1 CO 18.5 CO2 36.1 Other 9.3 Energy content of syngas (@248 BTU/scft) = 57.2*100 = 5720 KWH

O2 used = 27.3 kg moles; Energy needed for O2 = 384 kWH (0.44 kWH/kg O2 )

Case 1: No shift, remove CO2 from raw syngas Removal of CO2 by improved amines absorption (better w/ Selexol): Energy required = 0.11*2.2*36.1*44*.9=346 kWH Total energy penalty for CO2 removal: 346/5720 = 6%

Case 2: syngas after complete shift: (H2 =54.6; CO2 = 54.6; other=9.3) Removal of CO2 by improved amines absorption: Energy required = 0.11*2.2*54.6*44*.9=524 kWH Total energy penalty for CO2 removal: 524/5720 = 9%

Case 3: Oxyfired combusion of raw syngas (e.g., in CES power block)

Energy needed for O2 = (0.44*18.1*36) + (0.44*9.25*36) = 438kWH O2 required for stoichiometric conversion = 18.1 mole + 9.25 moles O2 Total energy penalty for total O2 production: 438/5720 = 8% May 2008 GasTech UCG Program in the PRB 51 Conclusions of LLNL on UCG, 2007

• UCG-CC costs less than PC. • UCG-CC + partial CCS is less than PC without CCS. • UCG-CC + full CCS is less than above-ground IGCC without CCS. • UCG-CC uses less water than any surface equivalent coal application • Costs are changing rapidly. Costs are site specific

May 2008 GasTech UCG Program in the PRB 52 UCG provides unique new strategies for carbon capture and separation LLNL, 2007

Partial decarbonization: CO2 separation from raw syngas • conventional (e.g. Selexol) • downhole: LLNL Proprietary

Full carbon separation • Pre-combustion (water-gas shift+Selexol) • Post-combustion (e.g., MEA) • Air Separation and oxyfiring

Separation Technology: • Could exploit high P applications -- Cryogenic separation -- Pressure Swing Adsorption (e.g., Rectisol) • Could improve WGS/separations in subsurface or well

May 2008 GasTech UCG Program in the PRB 53 UCG Implementation in the PRB

Site selection and characterization Permitting for Pilot Pilot plant program Commercial 200 MW UCG IGCC power project; CCS possible Develop FT liquids project on power project Multiple Commercial projects possible

May 2008 GasTech UCG Program in the PRB 54 UCG In the PRB The Opportunity UCG is clean coal technology Environmental challenges can be met Lowest cost syngas for power generation and chemical feed-stocks Pilot project sites selected; complete Pilot project in 2 to 3 years Commercial Projects for GTL and electricity Use UCG-derived CO2 in EOR projects

May 2008 GasTech UCG Program in the PRB 55