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ICS UNIDO conference "The potential future impact of biotech on the chemical industry" Novozymes

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Conversion of Renewable Feedstocks …

Conversion of Renewable Feedstocks
to Chemicals: technical and
economical perspectives from the
view of a biotechnology player, Novozymes A/S

Published in: Business, Technology

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  • 1. The Potential Future Impact ofBiotech on the Chemical Industry“Conversion of Renewable Feedstocksto Chemicals: technical andeconomical perspectives from theview of a biotechnology player” April 22nd, 2009Thomas Schäfer,Senior Director, BioBusinessTsch@novozymes.com
  • 2. 2 World leader in bio innovation and industrial NOVOZYMES biotechnology IN BRIEF Ca. 50 % market share in industrial enzymes State-of-the-art expertise in microbiology, biotechnology and gene technology Strong global presence Sales of more than 700 different products to more than 130 countries Sales 2007: ~1.5 bn USD Sales 2008: ~ 1.65 bn USD 13% of turnover spent on R&D Ca. 5150 employees in 30 countries
  • 3. 3Novozymes principles for >10 years:the tripple bottomline”We imagine a future whereour biological solutionscreate the necessary balancebetween better business,cleaner environment andbetter lives”.
  • 4. Novozymes Vision is to deliver4 Bio-Innovations in the coming Biobased Society We will deliver biotech solutions from renewable feedstock to consumer & industrial markets
  • 5. 5”Renewable Chemicals” is a Strategic Growth Platformfor Novozymes:Global drivers Support the Business Case Crude oil prices have shown unexpected volatility
  • 6. 6Conversion of Renewables is a Strategic GrowthPlatform for Novozymes:Global drivers Support the Business Case Continued strong growth in China, India, Russia keeps demand for petro derived products high from 6.7 billion people in 2008 to 9 billion people in 2042-2050 new middle classes arising esp. in China, India, LatAm: additional 1 Bio consumers Energy supply security consequence Growing public environmental concerns “Going Green”, green mission statements and environmental/sustainability goals defined by many companies Technology developments to enable the transition
  • 7. 7We need a variety of sustainable solutions:Biotechnologies are expected to contribute
  • 8. 8We need a variety of sustainable solutions:Biotechnologies are expected to contribute
  • 9. 99 28/04/2009 NOVOZYMES PRESENTATIONBiotechnology – enzymes – can contribute- Decoupling use of resources from growthUse of naturalresources Enzymes are efficient biological catalysts known Business as usual from any living organism Used in production they can increase efficiency and Enzymatic solutions yield of a wide range of processes in our society With enzymes we can “produce more with less” and contribute to the decoupling of economic growth and use of natural Economic growth resources
  • 10. 10Environmental impact of industrial enzymes andbiosolutions – in partnership with customers MINUS Novozymes products contribute with a GHG emission reduction of ca. 20 Mio t CO2 equivalents 3,800 KG 3,400 KGCO2 REDUCTION USING 1 KG ENZYMEIN DIFFERENT INDUSTRIES : 1,300 KGMINUS UP TO 600 KG BIOCATALYSIS CEREAL 100 KG 150 KG 150 KG 200 KG 30 KG 40 KG OIL & FATS PAPER TEXTILES BIOETHANOL DETERGENT FOOD CO2 COST PRODUCING 1 KGANIMAL FEED LEATHER ENZYME: PLUS 1-10 KG
  • 11. 11 Our first steps into the biobased economy: 1st and 2nd generation bioethanol Starch Enzyme e.g. corn process Ferment- Fermen- able tation sugars process Pre- Waste Cellulose Enzyme treatment biomass process process Steen Risgaard, CEO Novozymes: “we have commercial BI EN RG CH33 solutions for CH22 biomass OH degradation ready by 2010”
  • 12. Biofuels reduce our dependency on oil In 2007 biofuel production replaced 1 million barrels of crude oil – every day (1) Today’s biofuel share of global transport fuel use is 1-2% – with great regional variation: Brazil: 50% US: 5% China: 2% EU: 1% This level of biofuel production helped keep oil prices 15% lower than otherwise* Biofuels can meet at least 25% of global need for transport fuel in 2030 – without significant increase in acreage used for biofuel feedstocksSource: US DoE, Merrill Lynch, International Energy Agency, UNICA, Renewable Fuel Association, EU Commission(1) ca. 85 Million bbl crude oil are produced daily
  • 13. Novozymes is committed to 2nd generationcellulosic ethanolUnique, global effort: Large projects with a handful of leaders (USA: POET, ICM, ADM, Cargill / China: COFCO / Brazil: CTC) Implication across the entire value chain focusing on integration of key processesFocus on the main feedstock: corn stover & sugar cane bagasseMore than 100 R&D people are working on biomassWell on our way: Department of Energy Grant 2001-2004 (17.8 MUSD) Substantial focus & scale-up work since 2004 New funding allocated by the DoE (2008 – 2011)Novozymes will have a commercial solution in 2010 to serve thefirst commercial plants
  • 14. Starch & biomass processes are important platform technologies: same input to other products We can modify the 1 fermentation process Starch Enzyme e.g. corn process Ferment- Fermen- able tation sugars process Pre- Waste Cellulose Enzyme treatmentbiomass process process Ethanol is more 2 than fuel – it’s a platform chemical
  • 15. Platform technologies:Novozymes technology goes far beyond fuel ethanol- metabolic pathway engineering is key Bio energy transport, energy Starch Enzyme Bio materials e.g. corn process plastic, polymers Ferment- able sugars Pre- Commodity/ Waste Cellulose Enzyme Specialty treatmentbiomass process chemicals process New bio materials
  • 16. Novozymes and Cargill have joined forces todevelop commercial solutions for Bio-Acrylic AcidCurrent petro-route for production of Acrylic Acid: Propylene Acrylic Acid Propylene 2000: 430 USD/metric ton Propylene 2008: 1450 USD/metric tonNew fermentation enabled route to Acrylic Acid Starch, 3-Hydroxy- Bio-Acrylic Biomass Glucose Acid propionic acid NZ Chemical NZ technology: Enzymatic downstream Optimised pathways Process process
  • 17. Acrylic acid is used in a variety of existingmarkets and applications: the existingmarket size is 11 Bio USD illustrative• 3.1 Million tons production in 2005• Serving high end industries such as diapers, hygiene products, flocculants, coatings, dispersions and adhesives• A myriad of applications• Growth 4 %• Mainly in SEA Superabsorbers Fibers 3-HPA Acrylic Acid Coatings, Adhesives Polymers
  • 18. The Bio-route for Acrylic acid is competitive withcurrent propylene-based production processes Regional Bio-Acrylic Acid Cost Competitiveness, 160 000 tonnes per year 1400 1200 1000 $US per tonne 800 600 400 200 0 US LED Glacial US Bio-Glacial BZ Bio-Glacial CH Bio-Glacial Net Raw Materials Utilities Direct Fixed Costs Allocated Fixed Costs Depreciation Source: Nexant LED = Leader Technology, propylene based. Costing year: 2006, Crude oil price: 65 USD/bbl(1)Glucose price assumptions: US (14c/lb); BZ (sucrose 7 c/lb); China (11c/lb) Source: Nexant
  • 19. The capital investment in bio AA should not be prohibitiveas it is competitive with its petrochemical equivalent Petrochemical and Bio-Acrylic Acid Investment, 160 000 tonnes per year 400 350 300 $US millions 250 200 150 100 50 0 US LED Crude US LED Glacial US Bio-3HP US Bio-Glacial Source: Nexant Inside Battery Limits Outside Battery Limits Other Project Costs
  • 20. The bio-process acrylic looks competitive in a mediumcrude oil scenario… and even more competitive ifBrazilian sucrose prices applied Bio-Acrylic Acid Indifference Curve, 160 000 tons per year capacity 20 Technology Leader 18 16 Glucose, cts per lb 14 Equals a US net corn price of $4/bu 12 10 8 Potential sucrose prices in Brazil 6 Brazil 4 2 0 20 25 30 35 40 45 50 55 60 65 70 Crude Oil, $ per bbl
  • 21. 3-HP is a platform chemical on its own – andwill potentially enter existing and newmarketshttp://www1.eere.energy.gov/biomass/pdfs/35523.pdf
  • 22. Selected other projects:”untraditional partnerships” DuPont/BP: Butanol Danisco/Goodyear: Isoprene Amyris Biotechnologies: Isoprene, alternative fuel LS-9: alternative fuels Roquette/DSM: Bio-Succinic Metabolics Explorer: L-Methionine, 1,2-Propanediol, 1,3-Propanediol, N-Butanol, Glycolic acid Genomatica: 1,4-Butanediol
  • 23. 23The general challenges are high Today´s chemicals are a product of many years of optimisation Costs are generally low Performance is generally top
  • 24. 24 Classical Chemistry is highly optimised illustrative Petroleum based chemistryLevel of optimisation Optimisation: challenge • Scale (Ethylene plant SA: 1.5 mio t) • Energy efficiency • Fixed cost reduction • Improved maintenance • Sourcing /supply chains • Value engineering • Plant reliability • On-stream time • … Foundation Development Expansion Diversification Maturity (1) time (1) Modified from “Value Creation”, Budde et al. 2006
  • 25. 25 Classical Chemistry is highly optimised illustrative Petroleum based chemistryLevel of optimisation challenge 1865: BASF 1920: first (www. BASF.com) ethylene plant by Union Carbide 1856: Perkin – purple dye 1892: Viscose 1933: PE from aniline 1933: PVC 1939: Nylon 1941: Polyester 1954: Polypropylene 1958: Polycarbonate time
  • 26. 26 Renewables/Biotech based chemistry is in its infancy but has to compete on price & performance illustrative Petroleum based chemistry “What isLevel of optimisation the price of your product?” challenge challenge “Renewables/Biotech based chemistry” Foundation Development time
  • 27. 27The general challenges are high Today´s chemicals are a product of many years of optimisation Costs are generally low Performance is generally top Yield & productivity for biotech routes must be on top: R&D We can not afford to loose carbon in the future Capex must be affordable Novel downstream processes are needed Most Biorefineries still need to be built: infrastructure …and they have to compete with existing “economy-of-scale” of large petroleum refineries Entry time for new chemicals is traditionally long: strategy As shown for PLA, PHB, PHA “Green” alone does not sell though consumer awareness increases The industry is focused on ”price/performance” New value chain needs to be assembled
  • 28. 28The potentials are significant …. Total Value of Chemical products sold in 2003: USD 1.24 trillion - Excluding pharmaceutical and consumer products Here: Output by region Commodity Chemical Market Size Japan (2005): ca. 360 Billion USD RoW • Virtually all bulk chemicals are produced from oil and gas today Asia • Technological advances and Western sustained high oil prices suggest Europe that it is possible to substitute many bulk chemicals at a lower and USA less volatile cost using a biological route Japan Asia USA Western Europe RoWSource: modified from “Value Creation”, chapter 1Ed.Budde, Felcht, Frankemölle, 2006,
  • 29. 29 … dedicated pioneers have shown ”it can be done” – even with new molecules 1,3-propanediol PLA (Polylactic acid) Branched Poly- hydroxy-alkanoates Poly-hydroxy- butyrate (PHB)
  • 30. 30…but also existing chemicals like PE can be made(Braskem, Dow): Ethanol as platform chemical
  • 31. 31Bio-PE has positive impact on GHG emissions
  • 32. 32 The Board of Directors made an important decision to approve the investment of R$488 million (ca. 200 Mio USD) to build a unit producing ethylene made from 100% renewable raw materials. Capacity of 200 kton/year. The green polyethylene unit already has its building licenses and will be installed at the Triunfo Complex. Braskem should become the first company in the world to produce green polyethylene on an industrial scale, with the plant expected to come online in the first quarter of 2011.
  • 33. 33 09/08/2007 1H 2007 Financial resultsThe biobased economy will further drivetriple bottomline Business: Environment Environment Business: •Future •less emission •less emission •Future Energy and (e.g.CO2), (e.g.CO2), Energy and Materials •replacement •replacement Materials market of brute force of brute force marketThe biobased economy •Trillion USD chemistry chemistry •Trillion USD markets •sustainable •sustainable marketswill create significant today today agriculture agriculturebusiness, will bebeneficial for the Jobs: Jobs: •e.g. in •e.g. inenvironment and will developing developingcreate new jobs countries countries where the new where the new feedstocks are feedstocks are •New value •New value chains chains
  • 34. 34Besides technical risks there are generaluncertainties Decreasing crude oil and propylene prices might make a bioroute less cost competitive Pricing for renewable feedstocks might increase raw material costs structure Decreased demand for Bio-Acrylic acid might influence the growth scenarios for the project Infrastructure development might delay the project
  • 35. 35Besides technical risks there are 2009: Jan generaluncertainties 15.000 jobs lost in the chemical industry Decreasing crude oil and propylene prices might make a bioroute less cost competitive Pricing for renewable feedstocks might increase raw material costs structure Decreased demand for Bio-Acrylic acid might influence the growth scenarios for the project Infrastructure development might delay the project
  • 36. 36 …and potential advantages are many • Independence of volatility of crude oil and its derivatives (energy still needed) • Cost competitiveness (depends on crude oil prices and processes) • Capex reduction • Improved carbon footprints through production and post-consumer value chain incl. reduced GHG emissions and recycling potentials • Exploit waste biomass • Branding of “green products” into the value chain • Novel molecules unattainable from petrochemical sources
  • 37. 37ConclusionsWe are witnessing a gradual change in our feedstock• The Biobased Economy is coming• There is basically no alternative• It is challenging - but it is doable and the timing is right• Offers exciting opportunities for grain processors, technology suppliers and chemical companies – and for developing countries: they own the feedstock of the future• major innovations are expected
  • 38. 38 The way forward into the biobased economy will be in overlapping phases Phase 4 (concept phase): …it does not happen 4 deploy new tech, build “overnight” more infrastructure, invest in new technology, build markets …and innovation will go on from then for many years 3 Phase 3 (R&D phase): deploy new tech, build more infrastructure, invest in new technology, build markets Phase 2 (initiated): 2 deploy new tech, build more infrastructure, new value chains, invest in Plus new technology, build markets 1 Phase 1 (today): employ existing technology, build infrastructure and new value chains, invest in new technology, build markets Foundation Development Expansion Diversification Maturity (1)
  • 39. 39 The way forward …there are several alternatives to create 4 New Bio- energy (wind, solar, materials biogas, nuclear): keep bio-carbon for materials Bio-refineries 2nd generation: multiple feedstocks to multiple products 3 Gradual replacement of existing materials by bio- materials Gradual replacement of 2 existing materials by bio- materials Bio-refineries 1st generation: specific 2nd generation feedstocks to products fuel ethanol 1 1st generation fuel ethanol e.g. dry milling, wet milling
  • 40. 40 The way forward Drivers and enablers: • Crude oil prices above 50 4 USD and volatile • Technology is matured • Policies, subsidies, CO2 credits • Stakeholders • Communication 3 • Labour creation in rural areas (close to feedstock, limited transport of feedstock) •… 2 Challenges and hurdles: • New value chain has to be assembled • New infrastructure needed • Crude oil below 30 USD/bll • Bio-feedstock prices (sugar) above 20 ct/lb 1 • No demand • No money for investments • Economic crisis will cause delays •…
  • 41. 41 Bio-Innovations pave our way towards regained sustainabilitySustainability index (relative) Sustainable agriculture Future Industrial revolution Feedstock based Feedstock based PLUS sustainable industrial processes Industrial revolution crude oil based time High emmission load
  • 42. 42Thank YouTsch@novozymes.com