A view on the MTBE and ETBE market

Introduction to SABIC MTBE facilities

IBN ZAHR Jubail IBN Sina Jubail SADAF Jubail Yansab Yanbu SABIC Geleen 1625 1000 700 20 140

Feed stock: Methanol from ARRAZI & IBN SINA (SABIC Affiliates) Butane from Saudi Aramco oil Company C4 raffinate-1 from Geleen butadiene plant

SABIC is number 1 MTBE producer Asset in Geleen can produce either MTBE or ETBE

EU legislation dictates 10% renewable energy in transport

Ethers = gasoline = politics 2003 Biofuels Directive 2003/30/EC Reduce CO2 emissions Increase security of supply Support rural economy Established indicative targets of 2% bio-energy content in 2005 and 5.75% in 2010

2003
2009

Fuels Directive 2003/17/EC

Renewable Energy Directive 2009/28/EC Mandatory national targets designed to deliver at least 20% share of EU energy from renewable sources in 2020 Mandatory 10% renewables in transport by 2020 Minimum GHG savings from biofuels of 35% Double counting of bio-energy content for 2nd generation biofuels; Fuel Quality Directive 2009/30/EC Member States have until 5 Dec 2010 to transcribe into national law Reduction in life cycle GHG emissions 10ppm sulphur limit Increases oxygen content to 3.7 wt% Allows use of up to 22 vol% fuel ethers Member States may apply for RVP waiver for ethanol blends

2009

New fuel quality directive is required to enable achieving mandatory 10% renewables in transport sector

New European gasoline specifications enable increased biofuels

Current New

Dir. 2003/17/EC
EN228 RVP summer [kPa] Oxygen [wt%] Methanol [vol%] Ethanol [vol%] Ethers [vol%] Isopropyl Alcohol [vol%] IsoButyl Alcolhol [vol%] TertButyl Alcohol [vol%] 60/70* 2.7 3 5 15 10 10 7

Dir. 2009/30/EC
60/70* 3.7 3 10 22 12 15 15

2009 fuel quality directive 2009/30/EC is adopted together with renewable energy directive. Replacement of 2003/17/EC is a long term process in which member states need to take all legislative actions to enforce 2009/30/EC by the end of 2010. New directive requires transition period until 2013 which means that both gasoline specifications will coexist Some states implement earlier (France, Germany in 2009, Spain in 2010). Most states wait until new CEN standard is available. 2.7 wt% oxygen 5 vol% Ethanol + 5 vol% ETBE 4.8 E% biofuels 6.8 E% biofuels

3.7 wt% oxygen 10 vol% Ethanol 22 vol% ETBE

EU27 gasoline consumption is declining since 2000

350000

Source: Eurostat

Gasoline and diesel consumption [Ml] .

300000 250000 200000 150000 100000 50000 0

Since 2000, gasoline demand in Europe is decreasing Diesel demand is increasing rapidly from 40% of road fuels demand to 62% Europe is long in gasoline and short in diesel Future EU gasoline export is a challenge!

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Total gasoline EU 27

Total diesel EU 27

2007

Ethanol consumption almost needs to quadruple from 2008-2020

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Total ethanol consumption (pure and ETBE) doubles from 2006 to 2008; Ethanol consumption must almost quadruple between 2008 and 2020 to achieve maximum ethanol content (pure and ETBE) in gasoline Increased ethanol consumption can be achieved with ethanol splash blending, ETBE and E85
Source: Eurobserver

Ethanol fraction gasoline [vol%] .

10

20 06

20 07

20 08

20 09

20 10

20 11

20 12

20 13

20 14

20 15

20 16

20 17

20 18

20 19

Actual

Forecast

20 20

Different scenarios for oxygenates in gasoline

6000 kton ether consumption in EU (EFOA) 50% ETBE and 50% MTBE 2700 kton ETOH consumption
All ether EU capacity switched to ETBE Ethanol splash blending needs to quadruple from 2008 to 2020 Alternative ETBE imports seem very unlikely No MTBE required for octane ETBE has environmental advantages over ethanol ETBE is best environmental outlet for refinery C4s ETBE doesnt need to be blended near the pump Large ethanol consumption achieved in E85 No need to increase ethanol in conventional gasoline Still room for MTBE

16000 14000

EThanol and ethers demand [Ml] .

12000 10000 8000 6000 4000 2000 0

2008
7

2020 max ETBE 2020 max ETOH Ethanol MTBE ETBE

2020 8.5% E85

9 countries consume 82% of the EU27 gasoline

60000
Source: Eurostat

Gasoline and Diesel consumption [Ml] .

50000
2007 top 5 gasoline consumers consume 66% of EU27 market 2007 top 9 gasoline consumers consume 82% of EU27 market Future of ethers and ethanol depend on local developments in DE, UK, IT, FR and ES and to some extend on NL, PL, EL and SE

40000

30000

20000

10000

DE UK IT FR ES NL PL EL SE CZ AU IE DK FI PT HU BE R SI B SK LU LV LT CY EE MT
Gasoline Diesel

EU 27 ethanol consumption
9 8

Source: Eurobserver+Eurostat

Ethanol consumption [vol%] .

7 6 5 4 3 2 1 0

DE increases ethanol splash blending rapidly over ETBE UK is low on ethonol consumption IT didnt consume ethanol at all FR is splash blending ethanol in the north and using ETBE in the south ES is blending ETBE only NL is both using ETBE and splash blending ethanol, E85 PL is both using ETBE and splash blending ethanol EL didnt consume ethanol at all SE uses E85

Top 5 gasoline consumers 9 Top 6-9 gasoline consumers

AU BE DK FI FR DE EL IE IT LU NL PT ES SE UK CY CZ EE HU LV LT MT PL SK SI BG RO
2006 2007 2008

Double-counted 2nd generation bio-MTBE might be an opportunity

product density RON Oxygen Energy content Bio-energy content Max amount Max biofuels content Biofuels content Fraction bio-fuel Fraction bio-fuel [kg/l] [-] [wt%] [MJ/kg] [MJ/kg] [vol%] [E%] [E%] [vol%] [wt%] ETBE 0.75 118 15.66 36.05 12.62 22 6.8 1 3.8 3.8 ETOH 0.79 120 34.78 28.55 28.55 10 6.8 1 1.6 1.7 bio-MTBE (1) 0.75 116 18.18 35.18 7.85 20 3.6 1 5.6 5.7 bioMTBE (2) 0.75 116 18.18 35.18 15.69 20 7.2 1 2.8 2.9

Bio-MTBE Per unit mass, ETBE contains 12.62/7.85 = 1.61 times as much bio-energy compared to single-counted bio-MTBE (1); Due to double-counting mechanism for bio-MTBE, bio-MTBE (2) contains administratively 15.69/12.62 = 1.24 times as much bio-energy compared to ETBE; Therefore, only 80% of bio-MTBE (2) is required compared to ETBE to achieve the same bio-energy content.

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Conclusions
In case RED will result in achieving maximum bio-energy content in gasoline, then: 3.7 wt% oxygen will be used for ethanol and ETBE; Total EU27 ethanol consumption will almost quadruple towards 2020; All ether capacity in Europe will be devoted to ETBE and ETBE consumption will double towards 2020; Ethanol splash blending will almost need to quadruple towards 2020; Ethanol splash blending will preferentially occur in areas with a high population density, while ETBE will be preferentially used in more remote areas; No room for MTBE will be left since limiting oxygen content is reached and there is no need for octane.

However... Large gasoline consuming countries as IT, UK, EL have currently no or limited ethanol consumption Significant investments need to be done for ethanol splash blending; It makes more sense to increase biodiesel and keeping ethanol/ETBE as low as possible to make EU27 less dependent on gasoline exports and diesel imports; Renewable diesel (neste oil) from hydrogenation of vegetable oil and animal fat can be blended well above 7% (FAME) Potential negative environmental effects of ethanol blending (emissions) might change views and legislation; Other discussions as indirect land use change and food versus fuel might change legislation A focus on flex vehicles can increase E85 consumption to such extend that ethanol blending in conventional gasoline remains at moderate levels, giving still room for MTBE

11