Gasification feedstock offers flexible power generation options

Market opportunity

Gasification of petroleum coke (a by-product of upgrading) can replace natural gas required for the upgrading process anywhere upgrading occurs, including in the oilsands. Natural gas requirements in the oil sands are expected to reach 2.1 Bcf/d by 2015, almost quadruple the 2005 demand.

How Alter Nrg creates value

Alter Nrg's technological capability is flexible and scaleable. This will allow for a gasifier to be integrated with a SAGD project to provide the necessary syngas for steam generation or produce an upgraded light oil product.

BRUDERHEIM PROJECT

Alter Nrg has entered into a purchase and sale agreement to purchase an equipped site in the Bruderheim area for $2.5 million. The Company has submitted a $100,000 non-refundable deposit and closing is conditional upon site subdivision, receipt of regulatory approvals, and a final independent environmental study. All information presented is based upon initial engineering and may change as further detailed engineering is performed.

The Bruderheim Project is an Integrated Gasification Combined Cycle (IGCC) facility which is expected to have a 75 to 80MW production capability. The project will use petroleum coke and oilfield waste as feedstock to create Syngas. The Syngas will then be used to create power in conventional turbine equipment. Bruderheim represents a unique opportunity:

The site has existing infrastructure that allows for capital and time savings. This includes rail access, buildings and access to the power grid to market the power produced.
Petroleum coke is a waste by-product of the upgrading industry and is plentiful in the area. Petroleum coke has a high BTU value - approximately 15,000 btu/lb – twice the heating value of Alberta sub-bituminous coal.
Major oilfields located in the immediate area provide access to oilfield waste. Tipping fees are paid by oil companies to dispose of the waste which improves the economics of the project.
The project will capture CO₂ which it plans to sell to nearby oilfields for enhanced oil recovery, further enhancing project economics.

The project will be completed in two Phases:

PHASE 1 – NATURAL GAS COMBINED CYCLE (NGCC)

Using existing site infrastructure and natural gas as a feedstock in conventional power turbines
Capital cost of approximately $115 million
Production of approximately 75 to 80 MW
Netback per MW/h of approximately $20 to $25

The first phase is a low risk, conventional project which uses a conventional feedstock like natural gas at $7 to $8 per GJ to run turbines. This project, due to its conventional nature, will not require extensive engineering and is expected to receive regulatory approvals on an expedited basis compared to IGCC phase. As such, Alter plans to complete first phase by late 2009 or early 2010 which will generate annual (gross) EBITDA of approximately $18 million.

PHASE 2 – INTEGRATED GASIFICATION COMBINED CYCLE (IGCC)

Replace 2/3 of the natural gas feedstock ($7 to $8/GJ) with Syngas (cash cost of less than $2/GJ)
Maintain the same power output of approximately 80MW.
Increase netback per MW/h of power:

Phase 1 Natural gas netback - $20 to $25
Phase 2 Syngas netback - $55 to $60

The chart below shows the netback per MW/h based on independent forward curves of power, and natural gas. This is reflective of the low cash cost per MW/h produced using IGCC.

PROJECT OPERATIONAL AND FINANCIAL PLANNING

The Bruderheim project represents Alter Nrg's first operated project and is located in the Company's home market. This will be the first IGCC facility in Canada. The project is being managed by Rick Bower, Rob McNeil, Peter Van Nierop and a team of engineers with significant experience in both facility construction, and gasification.