Shell’s gasification technology is well suited for coal from Mmamabula
Road Town, Tortola, British Virgin Islands (August 5, 2008) – CIC Energy Corp. (“CIC Energy” or the “Company”) (TSX:ELC, BSE: CIC Energy) today is pleased to announce positive results from feasibility studies on the Company’s planned Coal-to-Hydrocarbons (“CTH”) Project. The Company also announces the signing of an agreement with Royal Dutch Shell plc (“Shell”) for the option to acquire a license for Shell’s coal gasification technology for the CTH Project. In addition, an update is provided on the CIC Energy’s power project, the Mmamabula Energy Project.
Jacobs Feasibility Study
It is anticipated that the CTH Project will convert coal at the Mmamabula Coal Field to fuels and petrochemicals by first gasifying the coal. The purpose of the independent feasibility study conducted by Jacobs Engineering Group Inc., (“Jacobs”) for the CTH Project was to develop and evaluate viable CTH Project alternatives as well as provide technical and cost estimates. This was done while maintaining maximum design flexibility pending the outcome of the previously announced in-depth value-chain study discussed in more detail below.
Three possible CTH Project alternatives were evaluated by Jacobs, all of which included an upstream coal gasification island to produce synthesis gas (“syngas”) with different combinations of downstream processes to make fuels and petrochemicals. The Jacobs feasibility study concluded that the coal from the Mmamabula Coal Field was entirely suitable for the production of synthesis gas (“syngas”) using either the Shell or the Siemens gasification technologies that were evaluated.
“The very encouraging results of the feasibility study by Jacobs on the Coal-to-Hydrocarbons Project provide a strong foundation to advance this project toward initial commercial operations in 2014,” said Mr. Greg Kinross, President of CIC Energy. “Now we can work towards finalization of a bankable feasibility study for the CTH Project, once the environmental impact assessment work and value-chain study are completed. This work will occur in parallel with discussions with potential investment partners and product offtakers for the CTH Project.”
The base case (Alternative 1) of the Jacobs study was to convert the syngas to methanol and then to gasoline and dimethyl-ether (“DME”). DME is being considered for future use as a fuel substitute for diesel for use in power plants and as a transportation fuel or as a fuel additive. Alternative 2 of the Jacobs study was a smaller operation that would produce gasoline. The potential product slate evaluated as part of the Jacobs study for the CTH Project was selected based on the availability of commercially proven technology, as well as previous pre-feasibility stage market research studies that were conducted for CIC Energy by Wood Mackenzie.
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Jacobs Feasibility Study - CTH Project Alternatives |
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Alternative 1 |
Coal→syngas→2 methanol plants→ gasoline & DME |
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Alternative 2 |
Coal→syngas→1 methanol plant → gasoline |
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Alternative 3 |
Coal→syngas→2 methanol plants→methanol pipeline to South Africa |
- Alternative 1 would involve two 44,000 barrels per day (“bbl/day”) methanol plants, totaling 88,000 bbl/day or 10,000 tons per day (“tpd”), whereby the output from one methanol plant would be converted to 16,250 bbl/day gasoline and the output from the second methanol plant would be converted to 3,570 tpd DME. 245 tpd of liquefied petroleum gas (“LPG”) would be produced as a by-product.
- Alternative 2 would involve a 44,000 bbl/day (5,000 tpd) methanol plant, whereby the methanol feedstock is converted downstream to 16,250 bbl/day gasoline and as a by-product, 245 tpd of LPG would be produced.
- A further Alternative 3 was evaluated (subject to confirmation that a methanol offtake for gas-fired turbines is viable), and involved two 44,000 bbl/day methanol plants (totaling 88,000 bbl/day or 10,000 tpd) plus a pipeline for transporting the methanol to a central location in South Africa.
For both Alternative 1 and Alternative 2, the downstream fuel products would be supplied free on board (“FOB”) at Mmamabula, Botswana, based on strong indications of interest from major oil and gas companies.
Estimated coal consumption for the CTH Project is in the range of approximately 4 million tons per annum per 44,000 bbl/day methanol plant. The Company’s current mineral resource estimate for the Mmamabula Coal Field, which is expected to be updated shortly, can accommodate the CTH Project, along with the Company’s plans for a major power station and coal exporting business.
The Jacobs feasibility study included a gasification technology selection process that focused on total coal utilization, environmental friendliness, robustness, carbon conversion efficiency and reliability, specifically for the coal type available at the Mmamabula Coal Field. Two feasible entrained-flow gasification technologies were selected and evaluated, namely Shell Coal Gasification Process (“SCGP”) technology and the Siemens SFG entrained flow gasification technology.
Technology Agreement with Shell
Results of the Jacobs study showed Shell’s coal gasification technology to be best choice based on the factors discussed above. For this reason CIC Energy has signed an Option Agreement with Shell, for the option to acquire a license from Shell for their coal gasification process (SCGP) technology for the CTH Project.
“Shell is pleased to be engaging with CIC Energy on their opportunity to develop the first syngas plant in Botswana,” said Mr. Martin Solomon, Shell’s General Manager – Global Syngas Parks and Business Development, Africa and Middle East.
Shell gasifiers utilize pulverized coal fines (fine particles of coal) which are expected to be a significant by-product of CIC Energy’s planned coal export operations. Utilization of these coal fines by the CTH Project, along with coal not suitable for export markets, will enhance the total value realization of the coal resource at Mmamabula.
CTH Project - Cost Estimates
The Jacobs feasibility study also provided cost estimates for the CTH Project. Preliminary assessment of Engineering, Procurement and Construction (“EPC”) capital costs and annual operating costs as estimated by Jacobs are shown below in June 2008 current dollars.
These preliminary estimates are for equipment, materials, construction and installation costs for the coal gasification island, methanol plant(s), and downstream DME and gasoline plants, as well as the possible methanol pipeline in the case of Alternative 3. The EPC costs are un-escalated for potential future price increases on equipment, engineering services, etc. and do not include capital costs for infrastructure (electricity, water and other) that may be required. The operating costs are also un-escalated and exclude coal, electricity and water consumption. The Jacobs cost estimates were commissioned to be accurate within a ±30% range.
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Estimated Capital Costs* |
Estimated Annual Operating Costs* |
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Alternative 1 – 10,000 tpd methanol |
US$4.9 billion |
US$145-215 million |
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Alternative 2 – 5,000 tpd methanol |
US$2.6 billion |
US$ 75-110 million |
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Alternative 3 – 10,000 tpd methanol |
US$4.5 billion |
US$140-210 million |
* June 2008 current dollar estimates as described above.
Shell Value-Chain Study
The final product slates for the CTH Project will only be determined once the detailed value-chain study, including a comprehensive market study, is completed in the third quarter of this year. This study is being conducted by Shell Global Solutions International, on behalf of CIC Energy, and will provide an independent view of the revenue potential of the CTH Project, based on the evaluation of a full range of potential downstream products, including those in the Jacobs study. The final product may be methanol, for use as a combustion fuel in gas-fired power stations, or the methanol might be converted to any combination of a range of possible fuels and petrochemicals such as DME, gasoline, and propylene, the latter being a raw material for industrial products as diverse as plastics, plywood, paints, explosives, and permanent press textiles.
Commercially Proven Technology
The CTH Project alternatives evaluated in the Jacobs study are all based on technology and processes that are well proven and commercialized. Syngas to methanol technologies being considered are from JM/DPT (Johnson Matthey/Davies Process Technology) and Lurgi’s MegaMethanol technology, both of which have numerous commercial plants operating worldwide. The methanol-to-gasoline (“MTG”) conversion process would be based on ExxonMobil’s proven MTG technology, which operated successfully for over ten years in New Zealand. The methanol-to-DME conversion process would be based on technology either from Japan’s Toyo Engineering (“Toyo”) or Germany’s Uhde GmbH (a division of Thyssenkrupp Technologies), both commercially proven technologies.
Additional Technical Studies
The results from the two additional technical studies that were undertaken, as previously announced, were incorporated into the Jacobs feasibility study. These included the feasibility study related to the manufacturing of DME as a fuel end-product by Toyo Engineering of Japan, and the pre-feasibility study to evaluate at a multi-product pipeline from CIC Energy’s Mmamabula site to Gauteng, South Africa, by a partnership between Lategan & Bouer and VGI. The outcomes of both of these studies were positive and additional work is being considered.
CTH Project Next Steps
The major milestones for the CTH Project following completion of the value-chain study are expected to be: identification of preferred end-products and their associated technology solutions (2008), identification of markets and logistical solutions (2009), selection of preferred investment partners (2009) and completion of environmental impact assessments (2010). Initial commercial operations are anticipated in 2014.
Mmamabula Energy Project - Update
CIC Energy is making substantive progress with an Asian EPC solution for Phase One of the Mmamabula Energy Project (“MEP”). Based on recent discussions, CIC Energy anticipates being in a position to announce the selected EPC contractor for Phase One of the MEP power station before the end of 2008. Phase One will be re-sized to an approximately 1,200 megawatt (“MW”) power station designed with provisions for expansion, as multiple phases are anticipated. The 1,200 MW (net capacity) power station design is expected to comprise of two 600 MW units. CIC Energy continues to anticipate that Phase One of the MEP will be in commercial operation in late 2012 or early 2013.
About CIC Energy Corp.
CIC Energy is a TSX/BSE-listed company engaged in the advancement of the Mmamabula Energy Complex in Botswana, Africa. This planned Complex consists of the Mmamabula Energy Project, the Coal-to-Hydrocarbons Project and the Export Coal Project. The Mmamabula Energy Project is envisaged as a power station and integrated coal mine project. The Coal-to-Hydrocarbons Project is intended to produce syngas from coal which can be converted to a variety of downstream products, including fuels and petrochemicals. The planned Export Coal Project is actively investigating ways to export A grade thermal coal from the Mmamabula Coal Field.
CIC Energy has a treasury of approximately C$100 million. For additional information on the Company and the Mmamabula Energy Complex, please visit CIC Energy’s website at www.cicenergy.com or contact:
Erica Belling, CFA, P.Eng.
VP Investor Relations
Tau Capital Corp.
Tel: (416) 361-9636 x 243
Email: ebelling@taucapital.com
About Jacobs
Jacobs (NYSE:JCE) is one of the world’s largest and most diverse providers of professional technical services with annual revenues exceeding US$8 billion. Jacobs has extensive experience in applying gasification to meet the needs of various industries and has developed proprietary technology to improve the performance of gasification plants. Jacobs also has extensive experience in the production of chemicals and fuels produced from syngas. For more information on Jacobs please visit www.jacobs.com.
Forward-Looking Statements
This news release contains certain "forward-looking statements". All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Such forward-looking statements include, among other things, statements relating to: the CTH Project, including the results of the Jacobs Feasibility Study, Alternatives 1, 2 and 3, the suitability of coal from the Mmamabula Coal Field for the production of syngas, and the suitability of Shell’s gasification technology; and the reconfigured Mmamabula Energy Project, including the selection of an EPC contractor. Forward-looking statements are subject to significant risks and uncertainties and other factors that could cause the actual results to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: the assumptions underlying the Jacobs Feasibility Study and/or the recommendations of such study proving to be inaccurate or incorrect; the capital costs and operating costs of the CTH Project varying significantly from the estimates contained in the Jacobs Feasibility Study; failure to complete, or delays in the completion of, positive bankable feasibility, detailed value-chain and market studies, any requisite interim studies and environmental impact assessments on the CTH Project; failure or delays in entering into technology, intellectual property licensing and other agreements required to develop the CTH Project, including a definitive license agreement with Shell in respect of the SCGP technology and preliminary and/or definitive fixed price contracts with reputable EPC firms; the failure to identify, or delays in the identification of, preferred end-products and their associated technology and logistical solutions for the CTH Project; the failure of the Company to successfully design a viable alternative configuration of the Mmamabula Energy Project and/or failure to complete a positive bankable feasibility study thereon; the grade, quality and recovery of coal which is mined varying from estimates; inflation; changes in exchange rates; the ability to raise the required debt or equity financing for the implementation of the CTH Project and/or the reconfigured Mmamabula Energy Project on favourable terms or at all; changes in anticipated demand for power in southern Africa; changes in equity markets; capital and operating costs varying significantly from estimates; environmental and safety risks, including increased regulatory burdens; delays in the development of the CTH Project and/or the reconfigured Mmamabula Energy Project caused by unavailability of equipment, labour or supplies, limited capacity among EPC firms (and resulting less attractive EPC contract terms being made available), climatic conditions or otherwise; geological and mechanical conditions; delays or failures in obtaining regulatory permits and/or licences (and renewals thereof) respecting mining, the production of chemicals including syngas, methanol, gasoline and/or DME, power generation and/or power transmission lines and other transportation and industrial activities; the existence of undetected or unregistered interests or claims, whether in contract or tort, over the properties of the Company and its subsidiaries and joint venture companies; inability to enter into power purchase agreements and/or transmission agreements with Eskom Holdings Limited and/or Botswana Power Corporation or other requisite agreements, including preliminary and/or definitive fixed price contracts with reputable EPC firm(s) and other agreements required to facilitate the development, operation and financing of the Mmamabula Energy Project on favourable terms or at all; lack of markets for the Company’s coal resources and any products derived therefrom, including methanol, gasoline and DME; political risks arising from operating in Africa; or other factors (including development and operating risks). Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.
