Diversified usage of renewable energy in Iceland

Diversified Usage of Renewable Energy in Icelandanalysis of alternative energy intensive sectors

Investum | August 2009

Guðmundur Björn ÁrnasonJúlía Egilsdóttir

Gunnar Tryggvason Sigurður Hrafn Kiernan

FormáliForsaga

Síðasta hálfan annan áratug hefur hlutdeild áliðnaðar í raforkunotkun landsins vaxið mikið og notar iðnaðurinn nú yfir 60% af allri raforku sem framleidd er hér á landi. Áhugi orkusamfélagsins áfjölbreyttari hópi kaupenda hefur aukist með hækkun þessa hlutfalls. Því er mikilvægt að íslensk stjórnvöld séu vakandi fyrir þeim möguleikum sem bjóðast við uppbyggingu annarrar tegundar orkufreks iðnaðar en hér er fyrir.

Í febrúarmánuði 2009 fólu Fjárfestingastofa Íslands og Þróunarfélag Keflavíkurflugvallar (Kadeco) ráðgjafafyrirtækinu Investum að gera úttekt á fjórum iðngreinum sem ekki eru stundaðar á Íslandi en teljast orkufrekar og því hugsanlega fýsilegar til uppbyggingar hérlendis. Ekki þótti ástæða til að kanna frekar greinar sem nýlega hafa verið til skoðunnar (ylrækt eða gagnaver) eða eru þegar íuppyggingu (álþynnuiðnað) og var sjónum því beint að greinum sem engar nýlegar greinagerðir eru til um.

Eftirfarandi fjórar iðngreinar urðu fyrir valinu:

klór-alkalí framleiðslanatríum klórat framleiðsla framleiðsla iðnaðargasaframleiðsla liþíum málms

Iðnaðarferlar þessara greina hafa lítinn eða engan útblástur gróðurhúsalofttegunda í för með sér og munu því ekki kalla á frekari útblásturskvóta fyrir Ísland verði af uppbyggingu þeirra hér.

2

Auk þessara fjögurra iðngreina var Investum falið að skoða möguleika þess að þróa iðngarð á Íslandi sem hýst gæti efnaiðnað, s.s. þann sem hér er til umfjöllunar, en slíkir garðar hafa rutt sér til rúms víða í Evrópu og aukið hagkvæmni minni rekstrareininga. Til viðbótar þessu var Investum falið að afla upplýsinga um hvað fyrirsjáanlegar breytingar á viðskiptum með útblásturskvóta íEvrópu hefðu á samkeppnishæfni orku- og stóriðjufyrirtækja á Íslandi.

Tilgangur þessara rannsókna er fyrst og fremst sáað koma auga á atvinnugreinar sem gætu haft hag af því að vera staðsettar á Íslandi en hafa ekki verið skoðaðar með það í huga nýlega. Nýta ániðurstöðurnar, ef þær reynast jákvæðar, til að afla erlenda fjárfestingar í þessar iðngreinar. Til að halda kostnaði í lágmarki var ákveðið að hvorki yrði keypt ráðgjafarvinna erlendra sérfræðinga á hverju sviði né heldur dýrar skýrslur. Ákveðið var að niðurstöður yrðu settar fram á glæruformi með texta á ensku til að auðvelda beina nýtingu þeirra íkynningargögnum Fjárfestingastofu og Kadeco.

F.h. Investum ehf,

_______________________________Gunnar Tryggvason

forstöðumaður orku- og innviðasviðs

Contents

1 Chlor-Alkali2 Sodium Chlorate3 Lithium 4 Chemical Clusters

2


Chlor-Alkali

Conclusions and Recommendations

ConclusionsSeveral studies on chemical industries involving chlorine production have been done in Iceland the past 4 decadesThe process of producing chlorine and caustic soda is highly electrical energy intensive (>3,500 kWe / ton chlorine and >50% of cash cost) which makes Iceland an interesting site for such operationFurthermore some process implementations are also thermal energy heat intensive which makes direct use of geothermal steam attractiveChlor Alkali plant forms the backbone of most chemical parks as majority of chemical processes involves chlor handling in one way or anotherDue to shift in regulations, around 30% of European chlor alkali capacity have to be converted to new technology in the next 10 yearsThe market consensus on growth in chlorine demand indicates 2%-3% YoY long term, but short term decline Stand alone chlor alkali plant in Iceland would have to ship the main product, chlorine gas in a liquid form (-35°C) to a European downstream user. Due to the high dependence of electricity such solution might be economically viable, but impractical as chlorine transport on sea has been abandoned in Europe due to safety reasonsProduction of organic chemicals would require import of ethylene or other types of intermediates which dilutes the percentage of electricity in the cash cost to less than 20% and makes Iceland as a location less attractive

5

Conclusions and Recommendations Cont.

Conclusions cont.However if oil prices surge again, the production of acetylene from calcium carbide as organic source could be attractive in IcelandThe ‘by-product’ caustic soda is easily shippable as a solution or dry to Europe. There remains an undersupply of the product in EuropeModular small scale chlor alkali plants have become available on the market recentlyThis study reveals that niche chlor derivatives using materials available in Iceland such as aluminium and silica and even sulfur can be very attractive If such plant will be build in Iceland export of chlorine in cylinders and drums in marginal quantities could become economically viable

RecommendationsConsider a industrial park concept having chlor alkali plant as backbone operationApproach producers of niche chlorine derivatives such as:

Packaged chlorineAluminium chloridesSilicones

Co-operate with industrial experts like Prochemics to asses the feasibility of small scale modular chlor alkali plant in Iceland

6

Index

Conclusions and Recommendations Industry Overview

...a short chemistry lessonWhat is Chlor Alkali?Production Cost & PricesChlorine Production Cost in Different RegionsProduct SectorsChlor Alkali Plant Output – where does it go? (2)World Chlorine and Caustic ProducersChlor Alkali Plants in EuropeChlor-Alkali Industry in Europe by ProcessThe Membrane Cell

Potential Projects in IcelandAppendixes

7

...a short chemistry lessonElements:

Na: Sodium (Natrium) - metal K: Pottasium (Kali) - metalCl: Chlorine - gas

Compounds:NaCl: Sodium Chloride, or table saltNaClO2: Sodium ChloriteNaClO3: Sodium ChlorateNaClO4: Sodium PerchlorateKCl Potassium ChlorideKClO3: Potassium Chlorate

NaOH: Caustic Soda / Sodium HydroxideNa2CO3 Sodium Carbonade / Soda AshKOH Caustic Potash

8

What is Chlor Alkali?

Chlorine (Cl) is produced by electrolyses of salt (NaCl)Specific power consumption ranges from 2,500 to 3,500 kWh/kg of chlorine depending on the production method usedSodium chlorate is a co product of electrolysisThe main co product Sodium/Natrium (Na) is turned into caustic soda (NaOH)It takes 1,700 kg of salt to produce 1,000 kg of chlorine and 1,100 kg of caustic sodaThe business typically refers to 1 ECU (Electrochemical Unit) as 1,000 kg of chlorine and 1,100 kg of caustic soda

Modern Chlor Alkali Membrane cell room

9

Safewater Chemical’s chlor alkali project in Abu Dhabi

Production Cost & Prices

Compared to production of metals via electrolysis the production of chlorine does not require much electric energy per weight, i.e. 2,500-3,500 kWh per ton chlorine or whereas aluminium electrolysis uses about 14,500 kWh per ton of productBut due to the low cost of raw material (salt) and rather simple process the cost of electricity as a percentage of total cash cost is higher than in any of the bigger chemical industriesElectricity is a significant cost element in chlor-alkali production, estimated to account for 60% of the variable costs of production and approximately 40% of total production cost 1)

1) Source: “The viability of importing packaged chlorine from Europe“, UK competition Commission, 20082) Source: “Impact of Electricity on the Competitiveness of the European Chlor-Alkali Industry“, PROCHEMICS Ltd., October 2007

3) Bank of America & Merrill Lynch , 08.06.2009, Dow Chemical analysis 10

Caustic Soda North America Spot Prices 3)

US

D p

er s

hort

ton

Due to the high electrical prices in Europe, Prochemics, a chemical industry consulting company states that there will be no incentive to build new plants in Europe or to invest in the conversion from mercury cell plant to membrane plant technology, as well as conduct major expensive modernizations 2)

The collapse of caustic soda prices over the past few months has impelled chlor-alkali producers to idle plants and reduce production capacity, and downstream industries such as polyvinyl chloride (PVC) have reported shortages of chlorine as a result

‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09

The Chlorine Production Cost in Different Regions1)

1) Source: “Impact of Electricity on the Competitiveness of the European Chlor-Alkali Industry“, PROCHEMICS Ltd., October 2007

REGION EUROPE US GULF COAST

SAUDI ARABIA CHINA RUSSIA

Raw Materials: €/MT €/MT €/MT €/MT €/MTNet Raw Materials 81.3 73.9 83.9 77.9 83.9

Utility Costs:

Net Utility Costs 253.7 183.9 66.7 129.8 72.5Net Variable Costs 335.0 257.8 150.5 207.6 156.4

Operations & Maint. Costs:

Net Operations & Maintenance 37.2 31.1 31.9 19.1 38.3Plant Gate Cost 528.1 418.9 324.1 319.6 368.1Corp. G&A 13.8 13.8 13.8 13.8 13.8

Total Production Cost (ECU) 541.9 432.7 337.9 333.4 381.9Total Cash Cost (ECU) 421.2 332.2 227.3 260.0 246.1Cl2 Production Cost (excl. NaOH) 239.3 130.2 35.3 30.8 79.3

It can be seen that European cash costs (assuming old, fully depreciated plants) will be still higher than the production costs in other regions (which take into account the capital costs of new plants), there will be no incentive to build new membrane plant technology, as well as conduct major expensive modernizationsDue to high electricity prices in Europe the industry faces tough competition from low electricity price regions of the worldChlor Alkali producers in Europe have pointed out that this can lead to carbon leakage i.e. relocation to countries without capped CO2 emission

11

Production cost varies greatly from region to region manly due to the cost of electrical energy

Product Sectors

* Based on 2005 consumption dataSource: www.worldchlorine.com

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Chlorine chemistry is used in over 50% of all industrial chemical processesIncluding 90% of pharmaceuticals and 96% of crop protection chemicals It is a basic manufacturing chemical and thus affects numerous other industries

Chlorine chemistry is not only important for today's economy, but also plays a key role in enabling future innovations, thus contributing to economic growth. Innovative uses of chlorine chemistry include producing:

• ultra-pure silicon, the basic material of the photovoltaic cell• super-strength polyaramide fibers, used to replace asbestos in brake linings and to

reinforce fiber optic cables• silicon chips, essential to microprocessors that drive computers• titanium metal and aluminum for lightweight aircraft fuselages• epoxy resins used in satellites, cars and planes

Chlor Alkali Plant Output – where does it go?European chlorine applications in 2007 (10.71 million tonnes)

Source: www.eurochlor.org

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Chlor Alkali Plant Output – where does it go?


European caustic soda applications in 2007 (10.01 million tones)

14

World Chlorine and Caustic Producers

Rank Chlorine ProducerCapacity

(-000- short tons)Share

% of total Caustic ProducerCapacity

(-000- short tons)Share

% of total1 Dow 6.002 8% Dow 6.602 8%2 Oxy 2.897 4% Oxy 2.918 3%3 Olin 1.827 2% PPG 1.949 2%4 PPG 1.772 2% Olin 1.917 2%5 Bayer 1.735 2% FPC 1.727 2%6 FPC 1.570 2% Bayer 1.452 2%7 TOSOH 1.260 2% TOSOH 1.386 2%8 INEOS Chlor Vinyls 1.253 2% INEOS Chlor Vinyls 1.379 2%9 Akzo Nobel Chem 1.100 1% Akzo Nobel Chem 1.210 1%

10 Solvin 955 1% Solvin 1.050 1%

Source: Deutsche Bank Securities Inc.

15

Chlor-Alkali Plants in Europe

Total (thereof mercury)


European Chlor-Alkali Producers

Company 000 tonnes

Dow 1.835

INEOS ChlorVinyls 1.296

Bayer 1.290

AkzoNobel 1.087

Solvay 904

SolVin 868

Arkema 781

Ercros 466

Tessenderlo Chemie 460

Vinnolit 392

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Chlor-Alkali Industry in Europe by Process

Source: www.eurochlor.org, www.zeromercury.org

Three main electrolytic production technologiesMercury cell

For many years, the mercury cell has been a significant source of environmental pollution, and authorities want the industry to convert to other technologiesMore than forty mercury-cell chlor-alkali plants (MCCAPs) are still operating in Europe

Diaphragm cellPotential exposure of employees to asbestos and releases to the environmentEfforts are being made to replace asbestos with other diaphragm material

M = membrane; Hg = mercury; D = diaphragm

Membrane cellHas been developed to a high degree of sophistication since 1975Has ecological advantages over the two older processesHas become the most economically advantageous process in resent years

17

Types of plants in operaion in Europe (% of total capacity)

The Membrane Cell

18

Basic membrane cell

The membrane cell technology has become the most widely accepted global production process. This technology is the most energy efficient (power is the largest component of cost of production) and least polluting. However, the capital costs for membrane technology based plants are high

The European Parliament in its March 2006 resolution on the EU Mercury Strategy called for a phase out of the mercury cell chlor-alkali industry by 2010 1)

The shift of technologies is in line with the European chlor- alkali sector’s voluntary agreement to phase out all installed mercury chlor-alkali capacity by 2020

We assume a potential project in Iceland will deploy the membrane cell technology and the necessary investment for those companies still using the mercury technology brings an opportunity for Iceland

18

1) Source: Zero Mercury , IPPC Directive toothless on mercury phase-out

Index

Conclusions and Recommendations Industry OverviewPotential Project in Iceland

Production Cost of ChlorineChlorine Derivatives from Project in IcelandA: Ship Bulk Chlorine to Europe (3)B: Chlorine as an Intermediate to Manufacture non-Chlorinated ProductsC: Inorganic Chlorine derivatives (3)D: Use of Chlorine in Organic Chemistry (2)Acetylene - are there Lessons to be learned for IcelandA fully intergrated Icelandic VCM or PVC ProjectSmaller Chlor-Alkali Solutions for Iceland

Appendixes

19

Production Cost of Chlorine

Electricity is estimated to account for 60% of the variable costs of production and appr. 40% of total production cost 1)

In a study done for Eurochlor in October 2007 by the Swiss consultant company Prochemics concluded that due to high electricity prices in Europe: 2)

”there will be no incentive to build new plants in Europe or to invest in the conversion for mercury cell plant technology to membrane plant technology...”

Since then power prices in Europe have risen even further

20

0

50

100

150

200

250

300

350

400

450

10 20 30 40 50 60 70 80 90 100 110 120

RussiaUSA

Saudi ArabiaChina

Iceland* ,

Impact of Electricity Costs on Chlorine Production Costs in Europe (2007)

Europe

European Future Case

Chlorine Cost Euro-pean Future Case

European Current

Case

Chlorine Cost Euro-pean Current Case

*) Investum estimates

Cl 2

Cos

t (€/

mt)

Electricity Cost (€/MWh)

1) Source: “BOC and Ineos Chlor“, UK Competition Commission, December 20082) Source: “Impact of Electricity on the Competitiveness of the European Chlor-Alkali Industry“, PROCHEMICS Ltd., October 2007

Assumptions:Membrane cell technologyPlant Capacity: 500 kt/a ClOperating rate: 100%Salt Price: 30 €/tCaustic soda price: 275 €/t

Chlorine Derivatives from Project in Iceland

What will we do with the chlorine?A: Ship bulk chlorine to Europe

Chlorine (Cl2) is a hazardous gas at standard temperature and pressure (STP)It can be stored and transported in pressurized vessel or liquefied by cooling below -35°C Transportation of chlorine is done widely in the US but has been reduced significantly in Europe due to safety reasons

B: Chlorine as an Intermediate to manufacture non chlorinated productsLithiumPolysilicon

C: Inorganic chlorine derivativesSiliconesAluminium chloride (AlCl3)

D: Organic chemistry - PVC (Polyvinyl Chloride) Ethylene routeAcetylene through Calcium Carbide

21

1) Source: www.worldchlorine.com* Based on 2005 consumption data

A: Ship Bulk Chlorine to Europe Transportation of Chlorine in Europe 1)

In 2007 about 6% of the 10.7 million tones of Chlorine in Europe where transported from producers This is significantly less than 1996 when 15% of west Europen chlorine production was transportedA large proportion of the chlorine transported, by rail or road tanker, goes to small users who do not require sufficient quantities to make on-site chlorine production feasible In almost 60 years, there has not been a single fatal accident in Europe involving bulk transport of chlorine Chlorine Transport by train

Several factors are leading towards the elimination of storage and transportation of liquid chlorine. Chief among these are: 2)

Regulatory and legislative pressures regarding the control of major accident scenarios for chlorine storage and shipment

Economic pressures to eliminate, if possible, the high energy consumption needed to liquefy chlorine

22

1) Source: Eurochlor Website www.eurochlor.org/tranportation2) Source: www.pvc.org

A: Ship bulk chlorine to Europe Cont.

Brief cost / benefit analysisAs an example, would it be viable to produce Chlorine in Iceland and ship it in liquefied form to the PVC plant in Stenungsund in Sweden and thus replace the mercury chlorine plant there?Size of plant 210,000 t/a ChlorineThe shipping cost is derived from very old data and compared with cost of ammonia transportation cost

Advantage of produce in Iceland 1)

Power cost saving: 18.4 m USD/aDisadvantage of produce in Iceland 2)

Capital at 10% RoI: 0.6 m USD/a Liquefacation energy: 1.0 m USD/a ‘Lost’ Production: 0.8 m USD/a Revaporisation energy: 0.3 m USD/a Transportation : 3) 11.6 m USD/a

Total: 14.3 m USD/a

The industry has taken practical steps to minimise chlorine transport such as:Encouraging new industrial users to locate facilities close to chlorine production plantsUsing sodium hypochlorite, rather than chlorine, in applications such as swimming pool disinfectionConverting chlorine into ethylene dichloride (EDC) for shipment to PVC producer

23

Notably the power cost savings would hardly justify the transportation cost

1) Difference in electrical power prices: 25 USD/MWh, Specific electrical consumption: 3,5 MWh per ton chloride2) Source: “Modern Chlor Alkali Technologi”, Vol 8, Chapter 21

3) Source: BATTELLE, “A Techno –Economic study of the market of magnesium chloride and utilization ..in Iceland”, 1971, with US CPI corrections

A: Ship Bulk Chlorine to Europe Cont.

Transportation of chlorine by seaThe last regular bulk chlorine transport on sea in Europe was to the DuPont’s plant at Maydown, Northern Ireland from a chlorine plant in Spain and from ICI’s chlorine plant in Runcorn, near Liverpool 1)

This transport discontinued when DuPont closed down its chlorine consuming plant in Maydown in the 90’sShipping bulk chlorine from Iceland to Europe is therefore not considered viable given the opposition to chlorine transportIn a recent study the UK Competition Commission did not examine bulk chlorine imports from Europe as evidence suggested that this would face considerable regulatory barriers 2)

According to Eurochlor there is one company shipping 22 ton ISO containers with liquefied chlorine on seawater in Europe, but in marginal quantities 3)

24

1) Source: Telephone talks with Ian White, Otpimax Consulting2) Source: The UK Competition Commission, 2008, “BOC and Ineos Chlor”, page 79

3) Source: Telephone call with Jean Dubel, Eurochlor

B: Chlorine as an Intermediate to Manufacture non-Chlorinated Products

Polysilicon productionThe electronic industry demands silicon with extremely high purity. The so called Siemens process uses trichlorosilane (HSiCl3) as intermediate to purify silicon by distillation to a impurity level less than 10-9 whereas other similar processes use silicon tetrachloride (SiCl4)The growth in solar industry has increased polysilicon demand in recent years and couple of companies have seen Iceland as a potential site

1) Source: FinanzNachrichten, “WACKER plans to set up new polysilicon...”, 26.02.2009

HSiCl3+H2

Elec. energyWaste gases

Insulation

Last February Wacker Polysilicon one of the world’s most established polysilicon producers introduced it’s plan to build it’s next production facility in Tennessee on the basis of several advantages the site is offering including “over the fence supply of chlorine” 1)

25

ManufacturingAnhydrous aluminium chloride (AlCl3) - is produced primarily by the gaseous chlorination of molten aluminum, there are several slightly different processesHydrous aluminium chloride - Commercial-purity hydrous AlCl3 is produced by dissolving anhydrous AlCl3 in dilute hydrochloric acidPolyaluminum chloride - Aluminum chloride solutions can be used to make polyaluminum chloride (PAC), also known as aluminum chloride hydroxide, basic aluminum chloride, polybasic aluminum chloride, aluminum hydroxychloride, aluminum oxychloride and aluminum chlorohydrate

Source: Prochemics Ltd, “Iceland’s objectives in the Chemical Industry”, letter to Investum dated April 17th 2009

UsesAnhydrous aluminum chloride: Most widely used as a Friedel-Crafts catalyst in numerous reactions, particularly in the manufacture of petrochemicalsHydrous aluminum chloride: A significant part was consumed in the production of antiperspirants, with smaller volumes consumed for the production of alumina trihydrate gels for antacid usePolyaluminum chloride: Major uses are in water treatment and in internal sizing in paper production. In water treatment, PAC is used for purifying surface water, sewage and wastewater from chemicalindustries; in backwater purification in the steel industry; in effluent purification in the pulp and paper industry; and for water purification in swimming pools. A smaller use of PAC is in oil separation in refineries. The consumption of PAC has increased significantly since the early 90’s Polyaluminium Chloride appearance is yellow

powder

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C: Inorganic Chlorine Derivatives – Aluminium Chloride

ManufacturingSilicon metal is reacted with methyl chloride to form a mixture of methylchlorosilanes. These products are then separated by distillation and used for the manufacturing of silicone fluids, elastomers or resins; as well as organosilanes, which are high value specialties

Source: Prochemics Ltd, “Iceland’s objectives in the Chemical Industry”, letter to Investum dated April 17th 2009

UsesSilicone fluids are used in a broad variety of applications, such as in the electrical and electronics industries, in the building industry, in cosmetics, paints and coatings and othersSilicone elastomers are mainly used as general purpose and special purpose sealants and rubbersSilicone resins are mainly used in protective coatings, in electrical and electronic applications and for insulation applications

Silicon Fluid (lubrication)

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C: Inorganic Chlorine Derivatives – Silicones

Chlorine gas for end usersPackaged chlorine is sold in drums (1,000 Kg) and cylinders (70 Kg)Main users are water treatment services and swimming poolsAt least two companies import and distribute packaged chlorine in Iceland

Some suppliers of package chlorine in Europe:

Packaged chlorine business in the UK 1)

In 2008 the UK Competition Commission issued a report on the anticipated acquisition by BOC Ltd of the packaged chlorine business of Ineos Chlor Ltd. The reason was the potential risk of monopoly situation if imported chlorine from Europe would not be competitive due to transportation cost

Brenntag GmbH www.brenntag.de MSSA S.A.S. www.metauxspeciaux.fr

C&S Chlorgas GmbH www.chlorgas.de Gerling Holz www.ghc.com

Air Products & Chem.Inc. www.airproducts.com BOC Ltd www.boc-gases.com

In the study BOC and Ineos Chlor stated that the major input cost in the manufacture of chlorine was energy, which was cheaper in Europe than in the UKThe main parties stated that ‘production cost advantages associated with the manufacture of packaged chlorine in Western Europe offset additional transport costs and make this activity economically viable’ and, further that the ‘transportation of packaged chlorine presents no particularly difficulty’

28

C: Smaller Chlor-Alkali Solutions – Packaged Chlorine

1) Source: UK Competition Commission, 2008, “BOC and Ineos Chlor”

Ethylene 1)

Using Chlorine in organic chemistry processes requires hydro carbon input in one way or anotherMost common is the introduction of ethylene (C2H4) gas in the downstream process, such as VCM / PVC productionEthylene is produced in the petrochemical industry by steam cracking and would therefore have to be shipped into Iceland with pressurized vessels or liquid gas tankers and stored as cooled liquid

1) Source: Harriman Chemsult, Outlook for the international PVC Market, June 20052) Source: Snöhvit homepage

Other possible sources of hydrocarbonsGas mining and export of LNG started in the Snöhvit area in N-Norway in 2007, LNG tankers pass Icelandic waters on their way to N-America 2)

Using this gas would require high investments in terminal construction that would hardly be justified Yet due to the current development in “Biomass to liquid” cracking Iceland could have opportunity in providing hydrocarbon for downstream chlorine industry with this new method using fat from seafood

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D: Use of Chlorine in Organic Chemistry

Acetylene Another source of hydrocarbon is Acetylene (HC2H) a colorless gasUntil 1950 Acetylene was the main source of organic chemicals in the chemical industry but has since then be replaced by Ethylene due to lower costAcetylene is normally prepared by the hydrolysis of calcium carbide (CaC2)Calcium carbide is produced from limestone with high temperatures in electric arc furnaces, a process that has already come to question in Iceland due to its power intensity 3,500 kWh/ton CaC2

Producing organic chlor derivatives from acetylene could be an option in Iceland if oil prices surge again

China and Acetylene 1)

One of the misinterpretations of the development of the Chinese industry has been the belief that the acetylene route is a) an old technology and b) that is places limitations on plant capacityBoth these myths have been dispelled. The majority of new expansions in China are acetylene-based and the size of new acetylene plants is now well into the 200,000 -300,000 ton/year scaleThe Western model of integrated cracker-vinyl plants has not really evolved in China because of the success of the acetylene route and the reluctance of olefin producers to get involved with chlor-alkaliHarriman Chemsult estimates that China cost of PVC from carbide was RMB 5,695/t (688 USD/t)Benchmark PVC import prices in Asia in May 2009 are 710 USD/t CFR 2)

1) Source: Harriman Chemsult Outlook for the international PVC Market, June 20052) Source: ICIS.com, “(PVC) Prices and Pricing Information”, May 2009

30

Limestone and Calcium Carbonate

D: Use of Chlorine in Organic Chemistry Cont.

PVC production from AcetyleneThe specific el. energy consumption of the Acetylene route is around 5,300 kWh/ton PVCBased on power el. energy prices of 65 USD/MWh in China the el. cost of one ton PVC is around 340 USD if the acetylene route is used 1)

This is in line with production cost in NW-China according to Tecnon Orbichem 2)

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Cash Cost [USD/ton]

Crude Oil Price [USD/bbl]

HCPE cash cost from cash ethylene ex naphtha cracker

PVC cash cost from cash ethylene ex naphtha cracker

plus cash chlorine = ECU /2.1

AB

Dependence on Crude Oil Price 2)

A= Production cost of PVC from calcium carbide in E-China (excl VAT)

B= Production cost of PVC from calcium carbide in NW-China plus Rmb 599/ton freight cost (excl VAT)

E. ChinaEthylene

NW. ChinaCaC2

E. ChinaCaC2

CaC2Cost

CaC2Cost

EthyleneCost

Cl + H2 Cost

Chlorine Cost

Other costs

Cl + H2Cost

Cash production cost of VCM in China 2)[USD/ton]

1) Source: CBI China, Higher production prices due to electricity price increase, 22.07.20082) Source: Tecnon Orbichem , The world chemical Industry Focuses on Asia, 2008

3) Source: Icelandic Cement, homepage

Iceland and AcetyleneIcelandic Chlor Alkali project could source hydrocarbons through the acetylene route by importing limestone or using 90% calcium carbonate rich shell sand 3)

Such sand is currently used as calcium originator by Icelandic Cement and earlier by fertilizer plantThe cost would be considerably lower than China and competitive with Ethylene if Oil prices remain highAccording to Tecnon Orbichem such acetylene has break even point with Ethylene at 35 USD/bbl

Acetylene - are there Lessons to be learned for Iceland

A fully intergrated Icelandic VCM or PVC Project

El.energy

Steam

Steam

Brine preparationBrine preparation Chlor Alkali ElectrolysisChlor Alkali Electrolysis

VCM or PVCPlant

VCM or PVCPlant

Evaporation PlantEvaporation PlantLiquid Caustic Soda solution

Sea water

NaCl brine Chlorine

VCM or PVC

Dry Caustic Soda

EthyleneA fully integrated chlor-alkali VCM or PVC project in Iceland would either have to rely on imported Ethylene or produce Acetylene via Calcium Carbide productionInstead of importing salt it could be feasible to prepare the brine from seawater with evaporationFor smaller projects a production of caustic soda in dry form could be attractive

Acetylene plantAcetylene plant Water

Limestone

OR

Ethelyne

Acetylene

Arc. FurnaceArc. Furnace

Calcium Carbite

El. energy

32

Smaller Chlor-Alkali Solutions for Iceland 1)

Chemical industry which combine intensive use of electricity /steam with raw materials which may already be available in Iceland or which can be easily importedA key to develop these industries would be the use of smaller electrolysis plants which can operate economically with lower production capacitiesProchemics Ltd. understands that such technologies, based on standard modular plants, have recently become available, and could supply some of the more special industries that are suggested here, and which to not require large quantities of chlorineA further advantage of these modular plants, is that capacity can be expanded as needed by adding modules

Products which could meet the specification for a production plant in Iceland are:Caustic sodaAluminium Chlorides 1)

Silicons 1)

Packaged Chlorine*

1) Source: Prochemics Ltd, “Iceland’s objectives in the Chemical Industry”, letter to Investum dated April 17th 2009

33

* Investum

Index

Conclusions and recommendations Industry overviewPotential project in IcelandAppendixes

34

Following studies involving chlor-alkali or sodium chlorate projects in Iceland have beenconducted earlier:

Following studies of Projects in Iceland involving chlorine have been conducted:

What By When Languague

Natrium metal MIL 199x Icelandic

Sodium Chlorate MIL

Sjóefnavinnsla Rannsóknarráð Ríkissins 1972

What By When Languague

Magnesium Chloride BATELLE 1971 English

Titanium Chloride UNIDO 1973 English

Zirkonium ITÍ

Saltverksmiðja á Reykjanesi Baldur Líndal 1980 Icelandic

35

Earlier Chlorine related Studies in Iceland


Sodium Chlorate


ConclusionsThe pulp and paper industry has chosen Sodium Chlorate instead of elementary chlorine for better quality paperSodium Chlorate is highly electricity intensive process, both in terms of specific energy consumption (5,200 kWh/ton) and especially in terms of energy cost as % of cash cost (>60%)The industry is moving production from places where electricity prices have surged The product is easily shippable in containersWithout any doubt a Sodium Chlorate production in Iceland would be very compatible on the international marketSalt is the main raw material which can be shipped in or sourced locally (evaporation of sea water)The European and N-American market are saturated and no project under developmentEuropean producers are currently curbing production due to difficult marketIt is unlikely that the main producers or new entrants start to look for new sites

RecommendationsKeep in contact with the main producers and have them informed about development of a chemical park if that starts to evolve

37

Index


...a short chemistry lessonWhat is Sodium Chlorate?Sodium Chlorate ProductionMarket TrendsMarket Trends and TransportProductionSodium Chlorate Prices in AmericaEka ChemicalsPlant in Focus Magog - Canada

Potential Project in Iceland

38

...a short chemistry lessonElements:

Na: Sodium (Natrium) - metal Cl: Chloride - gas

Compounds:NaCl: Sodium Chloride, or table saltNaClO2: Sodium ChloriteNaClO3: Sodium ChlorateNaClO4: Sodium PerchlorateKClO3: Potassium Chlorate

NaOH: Caustic Soda / Sodium HydroxideNa2CO3 Sodium Carbonade / Soda Ash

39

What is Sodium Chlorate?

Appearance:In it’s purest form Sodium Chlorate (NaClO3) is a white crystal

Market:The growing demand for elemental chlorine-free (ECF) chemical pulp bleaching drives the sodium chlorate marketBut after tremendous growth during the switch from chlorine bleaching to the elemental chlorine free (EFC) bleaching process the global markets for Sodium Chlorate have matured

Source: www.madehow.com/Volume-6/Sodium-Chlorite.html

Usage:Pulp bleaching – used as the raw material for the production of chlorine dioxide. Up to 95% of all sodium chlorate produced worldwide goes into the pulp and paper industryWeed killerChemical oxygen generation, such as an energy oxygen generation in commercial aircrafts Other minor uses: Production of potassium chlorate and sodium chlorite

40

Sodium Chlorate Production

Production of sodium chlorate is by the electrolysis of sodium chloride (salt) solutionThe process is electricity intensive and uses around 5,200 kWh per ton produced 1)

1) Source: Electrochemistry Encyclopedia, http://electrochem.cwru.edu/encycl/art-b01-brine.htm2) Source: Aker Solutions, Sodium Chlorate Technology

Process: 2)

The process is similar to Chlor Alkali productionTechnology is similar to a diaphragm cell but without a separator

Technology providers:Aker Solutions, Norway (Canada branch)Technip, FranceUhde, Germany

Chlorate cell room with M25 Chemetics cells (Courtesy of Aker Chemetics)

Salt Storage

AC Power Supply

Mother Liquor

Hydrogen Handling

Crystal Product Handling

Primary Brine Purificaton

Secondary Purification

Sodium Chlorate Electolysis

DC Rectification

Crystalization & Drying

41

Market Trends

1) Source: The Innocation Group

42

The pulp and paper industry has for the last decades been seeking a replacement material for elementary chlorineIn 1998, Environmental Protection Agency ruled that chlorine, which had come under attack because of concerns about dioxins and organic halides in pulp mill effluents, could be replaced with chlorine dioxide. The choice of elemental chlorine free (ECF) bleaching over total chlorine-free (TCF) bleaching, boosted the demand for sodium chlorate, a precursor for the production of chlorine dioxide. The deadline for implementing the environmentally friendly technology was eventually set for April 2001 1)

Sodium Chlorate and Hydrogen Peroxide have been competing in popularity The cost of producing Hydrogen Peroxide has reduced faster than Sodium Chlorate but can not replace it in higher brightness paper productsWorld largest producers:

Having completely replaced chlorine in pulp bleaching, chlorate is now growing at only the same rate as the pulp industryNevertheless the sodium chlorate industry in N-America has identified SE-Asia as potential growth for their export

Name HQ% of world production

EKA Chemicals Sweden 28%Canexus Canada 17%ERCO Canada 14%Kemira Finland 14%Others 27%

Market Trends and transport

1) Source: Superior Plus, Specialty Chemicals, 20082) Talks with Erich Hinze and e-mail from Adrew Barr , Aker Solutions

43

Sodium Chlorate is shipped in 1 ton big bags or 20-30 ton ISO containers 2)

When unloading from the ISO container Sodium Chlorate is dissolute in warm water which is circulated through the container and piped to the paper mill 2)

Possibly a shipping company would impose a maximum limit on the quantity of sodium chlorate that can be transported by a single ship 2)

European market news:Due to factors such as the energy cost, the labor cost, the freight cost and the appreciation of local currencies to US dollar, the output of sodium chlorate in European markets has reduced (some production lines have already discontinued product ion). There is a supply shortage of the product 1)

AkzoNobel’s Eka Chemicals says it will permanently close a sodium chlorate plant at Mo i Rana, Norway due to weak market demand and high energy costs. Production will be reallocated to other plants, the company says. Eka said in January 2009 that it would temporarily stop sodium chlorate production at the site 1)

Due to the high electricity consumption Sodium Chlorate producers have been relocating to places where electricity cost is low 1)

Superior Plus

Production

1) Source: www.sriconsulting.com/CEH/Public/Reports/732.1000/2) Source: The Inocation Group website

44

Sizes of Sodium Chlorate plants in N-America 2) [000 ton/a]

N-America is the world largest market for Sodium Chlorate (>50% in 2007) 1)

Sodium Chlorate Prices in America 1)

Sodium Chlorate prices have remained high despite of difficult market in the pulp and paper industry – see chart on the rightBarclays estimates similar prices throughout 2009, 2010 and 2011 i.e. USD 447 per ton

45

Sodium Chlorate PricesUSD per net ton

On the other hand Citibank comments on European prices: 2)

“Hydrogen peroxide prices will probably be weak this year due to the demise of pulp demand. The same

applies to sodium chlorate.”

Apparently the cost of producing sodium chloride has almost kept constant while other consumables of the paper and forest industry have dropped in cost- see bar chart on the left

1) Source: Barkleys Capital, 21.April 2009, “Paper and Forest Products”2) Source: Citi, 18.Jan.2009, “The Quidnunc – Fundamental Focus – Annual”

Eka Chemicals

Eka Chemicals is one of the world's leading manufacturers of bleaching and performance chemicals for the pulp and paper industry. Eka Chemicals has 2,700 employees worldwide and production at 40 sites in 18 countriesEka Chemicals, headquartered in Sweden, is a business unit within Akzo NobelEka Chemicals is the world's largest producer of sodium chlorate. Eka Chemicals has plants in Canada, the US, Brazil, Chile, France, Finland, Norway and Sweden

Source: www.eka.com

Operations (EUR million)Percentage of sales by product group

46

The European Commission (EC) has been investigating the Chlorate market in Europe due to fears of oligopoly. Based on its finding EC fined in 2008 a group of Sodium Chlorate producers, including EKA Chemicals for market sharing and price fixing activities

2004 2005 2006 2007 2008Sales 980 893 963 990 1,005Investments 88 65 46 45 72Employees 3,070 2,907 2,856 2,703 2,718

Plant in Focus Magog - Canada

Source: www.eka.com

47

The Magog Plant:Eka Chemicals operates a plant in a Industrial park near Magog, a town with 23,000 citizens in Canada Began operation in 1979 with 20,000 ton/a capacityProduces now 157,000 ton/a of Sodium Chlorate By-production of 9,200 ton/a of hydrogen – sold partially to BOC Gaz and released to the atmosphereNumber of employees is 60The power required is 90 MWPurchase annually electricity for CAD 30m

This results in power prices of USD 32/MWh (specific consumption 5,200 kWh/ton)

Typically, specific investment cost of a Sodium Chlorate plant is believed to be around USD 1,000 per annual ton in capacity

Based on 25 USD/kWh lower electricity price in Iceland than Europe and 60 USD/ton additional shipping cost of product, an Icelandic plant could favor a additional 16% margin from sale price (USD 450/ton)

Index


Potential Sodium Chlorate Project in Iceland

48

Potential Sodium Chlorate Project in Iceland

49

Plant size: 50,000 t/a Investment: 70 m USDPower needs: 30 MWRevenue: 20 m USD/aEmployees: 20-30By-product: hydrogen, appr. 3,000 t/a

Such plant could benefit from being located closed to the Reykjanes geothermal power plant for this two main reasons:

Available process heat and steamPotential salt production in later stages


Lithium


ConclusionsWorld lithium demand is expected to grow around three fold in ten yearsLithium Metal Production is a small niche and an interesting option for IcelandThe production of Lithium Metal from Lithium Chloride requires much electrical energy per weight, i.e. 35,000 kWh/ton Lithium whereas aluminium electrolysis uses about 14,500 kWh /ton of productSome of the raw material needed for Lithium Metal production could be produced in IcelandLithium exist in geothermal brine and volcanic rocks in IcelandThe raw material Potassium Chloride (KCl) used in the electrolysis appears in geothermal brines in Reykjanes containing 41% KClWith the existence of a Chlor-Alkali plant, Lithium Chloride (LiCl) could be produced locally from imported Lithium Carbonate by using chlorineProduction of Lithium-aluminium alloy containing up to 7.5% lithium could be an interesting end product to produce

51

Conclusions and Recommendations Cont.

RecommendationsCompare a project in Iceland to key projects coming upLook into the feasibility of mining KCl salt from ReykjanesIntroduce Iceland to potential producers of LithiumContact Rio Tinto as they are exploring Lithium mining in Serbia

Recommended ReportsUp to date market and industry information is not available freely as the Lithium market is small and not publicly traded. Investum recommends the following reports for in deep detailed information

The Lithium Industry, Metal Bulletin research, 2009, Price $5,995Roskill, The Economics of Lithium, 11th edition 2009; Price $5,000

52

Index

Conclusions and RecommendationsIndustry Overview

...a short chemistry lessonWhat is Lithium?Major Applications for Lithium (2)Demand (3)The Processing of LithiumLithium CompaniesMining (3)Lithium Metal Production

Potential Project in IcelandAppendixes

53

...a short chemistry lesson

Physical Information [Li]

Atomic Number 3

Relative Atomic Mass 6,941

Melting Point/K 453

Boiling Point/K 1,620

Density/kg m-3 534

54

What is Lithium?

Lithium (Li) has a silvery appearance but quickly becomes covered by a film of black oxide when exposed to airLithium is easily deformed, highly reactive, and has a lower melting and boiling point than most metals. The properties and chemistry of Lithium are modified further due to its small atomic radiusLithium belongs to a group of elements called the alkali metals, the most reactive of all elementsLithium possesses a low coefficient of thermal expansion and the highest specific heat capacity of any solid element and is therefore useful in heat transfer applicationsLithium has a high electrochemical potential, its low atomic mass gives a high charge (and power) to weight ratioLithium chloride is one of the most water absorbent materials known

Lithium in natureDue to its high reactivity it only appears naturally on Earth in the form of compoundsLithium is a comparatively rare element, although it is found in many rocks and some brines, but always in very low concentrations and seldom in magnitude of commercial value. Estimates for crustal content range from 20 to 70 ppm by weight 1)

Seawater contains an estimated 230 billion tons of lithium, though at a low concentration of 0.1 to 0.2 ppm 2)

The most important unexplored deposit of lithium is in the Salar de Uyuni area of Bolivia 3)

The most important exploited deposit of lithium is in the Salar de Atacama of Chile 4)

55

1) Source: Essay:Analysis of the Element Lithium , Green, Thomas, June 2006 "Analysis of the Element Lithium". 2) Source: The Trouble With Lithium 2" (PDF). Meridian International Research. May 28, 2008. Retrieved on 2008-07-07

3) Source: Bolivia holds key to electric car future", BBC, November 9, 20084) Source: Peter Ehren, Independent Lithium Consultant in Chile , June 2009

Major Applications for Lithium

ApplicationsElectrical and electronic uses:

Lithium batteries:disposable batteries that have lithium metal or lithium compounds as an anodeLithium niobate is used extensively in telecommunication products, such as in most mobile phones and optical modulators

Chemical uses:Lithium chloride and lithium bromide are used as desiccantsLithium metal is used in the preparation of organo-lithium compounds

The use of lithium compounds in ceramics, glass, and primary aluminum production represented more than 60% of estimated domestic consumption. Other major end uses for lithium were in the manufacture of lubricants and greases and in the production of synthetic rubber 1)

An increasing popularity for the last 10 years, used in laptops, cameras, cell phones etc. In the coming years it will expand to the hybrid and electrical vehiclesThe annual output of these products contains about 21,800 tons of lithium

56

1) Source: SQM 2007

Major Applications for Lithium Cont.

General engineering:Lithium is used as a flux to promote the fusing of metals during welding and solderingAlloys of the metal with aluminium, cadmium, copper and manganese are used to make high performance aircraft parts

Optics:Lithium is used in glasses and ceramics and non-linear optics applications

Rocketry:Metallic lithium and its complex hydrides are used as high energy additives to rocket propellantsLithium peroxide, lithium nitrate, lithium chlorate and lithium perchlorate are used as oxidizers in both rocket propellants and oxygen candles to supply submarines and space capsules with oxygen

Nuclear applications:Lithium deuteride is used as a fusion material in nuclear weaponsLithium fluoride is used in liquid-fluoride nuclear reactorsLithium is used to produce tritium in nuclear reactors

Other uses:Lithium stearate (soap) has the ability to thicken oils and so is used commercially to manufacture lubricating greasesLithium hydroxide and lithium peroxide are used in confined areas, such as aboard spacecraft and submarines for air purificationLithium compounds can be used to make red fireworks and flaresA block of solid lithium is used in torpedoes, which generates enormous quantities of heat, which is used to generate steam from seawater. The steam propels the torpedo

57

Demand

The demand of Lithium is expanding because of: 1)

The USA´s determination to reduce its dependence of oilThe Chinese government has announced an 880 million Yuan investment to support electric vehicle cars 2)

A global drive to reduce carbon emissions from automotives and the pending auto electrificationThe rise of new portable electronic devices such as laptops, music players and phones that employ lithium batteriesCurrent demand for lithium, measured as Lithium Carbonate Equivalent (LCE), is around 120,000 ton/annum

58

1) Source: Report:The Lithium Industry, Metal Bulletin research, 2009 2) Source: Sterling Group Ventures, Inc

Demand Cont.

Lithium consumption experienced growth of >8% yearly between 2003 and 2007Prices responded accordingly, with lithium carbonate rising from USD 2,000/ton in 2004 to just under USD 5,500/ton in 2008, reflecting the higher costs involved in the mineral conversion process and the raw materials requiredWorld lithium demand is expected to grow around three fold in ten years driven by secondary (rechargeable) batteries and Electric Vehicle (EV) batteriesCurrent LCE demand is expected to rise to around 250,000 to 300,000 tons/year in 2020 driven by secondary (rechargeable) batteries and Electric Vehicle (EV) batteries 2)

The main drivers for growth in the next ten years will be the battery sector and Li alloy production 1)

59

1) Source: TRU Group – Lithium Supply & Markets Conference, Chile 2009 2) Source: Lithium Market outlook &Offtake Update, ASX Media Release, 3 March 2009,

http://www.galaxyresources.com.au/documents/GXY24LithiumMarketOutlookOfftakeUpdate.pdf

Demand Cont.

The largest consuming region is Asia, followed by North America and the EU. Three countries – the USA, Japan and China – are together estimated to account for nearly half of world consumption 1)

The figure shows estimated consumption of lithium by leading countries 2005 2)

Growth has been led by demand for lithium carbonate in secondary batteries, while glass and frits and lubricants have also been expanding markets

Table 1) : Average values of Japanese production of secondary batteries by type 2000-2005 (Yen000/unit)

Year Lithium ion Nickel-metal hydride Nickel-cadmium2000 616 114 1122001 542 117 1092002 440 119 1162003 390 135 1142004 353 201 1082005 312 240 110

Expansion in consumption of lithium ion batteries has been bolstered by falling prices as production volumes increase

60

1) Source: Roskill report, 2006 http://www.roskill.com/reports/lithium 2) Source: USGS, Roskill’s Letter from Japan, SQM and Trade statistics

The Processing of Lithium

The price of the lithium mineral compounds produced is extremely difficult to estimate because of the large number of compounds used in a wide variety of end uses and the great variability of the prices for the different compounds

Pharmaceuticals and Primary Batteries

Lithium

Resources Minerals Brines Clays Sea Water

Lithium

Reserves Minerals Brines

Lithium

ProductsLithium Carbonate

Lithium Hydroxide

Concentrates

Lithium Metal

Butil Lithium

Major Applications

Glazes and Frits

Greases, Lubricants, Batteries and Inorganic Derivates

Aluminum, Continuous Casting Powder, Secondary Batteries, Pharmacuticals, Glazes and Frits

Lithium Chloride

Dehumidifier Systems

Synthetic Rubber, Polymers and Organic Derivates

Lithium Chloride

Pharmaceuticals and Primary Batteries

Lithium


Lithium


Lithium


Lithium Hydroxide

Concentrates

Lithium Metal

Butil Lithium

Major Applications

Glazes and Frits



Lithium Chloride



Lithium Chloride

Lithium


Lithium


Lithium


Lithium Hydroxide

Concentrates

Lithium Metal

Butil Lithium

Major Applications

Glazes and Frits



Lithium Chloride



Lithium Chloride

Potential Icelandic Project

Today the world extracts lithium from two types of resources—brines and minerals to produce lithium carbonate, lithium hydroxide, lithium chloride, lithium metal, and the other lithium-containing products

61

Source: The lithium industry: Its recent evolution and future prospects, Arlene Ebensperger, Philip Maxwell and Christian Moscoso Resources Policy, 2005, vol. 30, issue 3, pages 218-231

Lithium resources in brines

Lithium equivalent tons

Argentina 3,010,000 Bolivia 5,500,000 Chile 6,220,000 China 3,950,600 Israel 2,000000 USA 2,597,600 Total 23,278,200

Alloy

Lithium Companies

Companies Country Raw Material Comments Web page

FMC Lithium USA and UK LiCl Tolling with DuPont in USA http://www.fmclithium.com/Chemetall USA and Germany LiCl http://www.chemetalllithium.com

TVEL Russia Li2CO3The only manufacturer of pure lithium materials in Russia http://www.tvel.ru/en/

Qinghai Lithium China Spodumene Spodumene to Li2CO3 to LiCl http://www.cniecxj.com/Xinyu Ganfeng China Li2CO3 and LiCl http://www.ganfenglithium.com/China Energy Lithium Co., Ltd China http://en.cel-li.com/

Kunming Yongnian China UnknownHonjo Chemical Japan LiCl http://www.honjo-chem.co.jp/

Lithium Metal Producers

Companies Country Web page

SQM Chile http://www.sqm.com/Chemetall Chile http://www.chemetalllithium.com/FMC Lithium Argentina http://www.fmclithium.com/

Lithium Brine Miners

62

Mining

Lithium is separated from other elements in igneous mineral or as lithium salt extracted from the water of mineral springs, brine pools, and brine depositsNearly half the world's known reserves are in South America throughout the Andes mountain chain 2)

The richest lithium source currently being harvested is the Salar de Atacama basin in the Atacama desert in Chile. The following corporations produces Lithium Carbonate or Lithium Cloride from Brines: 3)

SQM (Chile) 30,000 tonnes ( installed cap. 40,000-48,000)Chemetall (Chile and USA) 23,000 tonnes and expandingFMC Corporation (Argentina) 16,500 tonnes ( Li2CO3+ LiCl)

Chemetall and SQM both obtain lithium product from Salar de Atacama and are responsible for approx. 60% of the world production market of lithium carbonate, lithium hydroxide and lithium chloride

Major Producing Countries of Lithium % of world production 4)

Chile 43%Australia 25%Argentina 13%China 6%USA 4%

63

1) FMC estimate, 20092) Source: Simon Romero, "In Bolivia, a Tight Grip on the Next Big Resource," New York Times, Feb. 2, 2009

3) Source: FMC Corporation, 20034) Source: Based on USGS (2008), Sernageomin (2006), Roskill (2006)

Mining Cont.

In the graph to the left the historical Chilean Export data is resumed and described 1)

Currently he major lithium brine producers in South America are planning capacity expansions and the potential for increased production and improved product quality from brine-based lithium 2)

The graph to the right shows historical Lithium Carbonate Prices. The price drop in 1996 is due to the production growth in Chile. The Price increase in 2003 and onwards is due to the consumption growth of >8% yearly. Today the price of Lithium Carbonate is around USD 6,000/ton (USD 3/pound)

0

1

2

3

4

5

6

7

1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008

Dol

lars

per

pou

nd

Current Dollars 2008 Dollars

Historical prices of Lithium CarbonateChilean export of Lithium Carbonate

64

1) Source: Peter Ehren, Independent Lithium Consultant in Chile , May 2009 2) Source: Roskill report, 2006 http://www.roskill.com/reports/lithium

Mining Cont.

The graph shows world production of primary lithium by leading producer in tons of lithium 1)

Production of primary lithium comprisesLithium minerals directly produced from hard rock minerals (Australia, Canada, Portugal, Zimbabwe)Lithium minerals converted to lithium compounds (Brazil, China)Lithium carbonate and chloride produced from brines (Argentina, Chile, USA)

Rio Tinto Plc is entering into the Lithium industry by exploring lithium carbonate production from its jadarite deposit in Serbia 2)

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

2000 2001 2002 2003 2004 2005e

Ton

Argentina Australia Chile China Others

Lithium equivalent production in different Countries

65

1) Source: Roskill report, 2006 http://www.roskill.com/reports/lithium 2) Source: Industrial Minerals, Article: Rio Tinto turns to Lithium, 25 November 2008; www.indmin.com

Lithium Metal Production

4-5,000 tons of lithium metal is produced annually and is growing rapidly 1)

First Lithium Chloride is produced by heating up Lithium Carbonate and Hydrochloric acid. At high temperatures the Hydrochloric acid will react with the lithium atoms

LiCO2 + HCl ---> LiCL + HCO2

Lithium is then purified by electrolysis of a molten lithium chloride (LiCl)-potassium A)

chloride (KCl) mixture in specially designed cells, with the molten metal collecting in the top and being periodically withdrawn and cooled as ingots 2)

As the melting point for LiCl is high (614°C) KCl is used to lower the melting point 1)

LiCl-KCl eutectic with 44.3% LiCl melts at 352°CThe salt mixture in the industry contains about 50% LiCl, which allows electrolysis to be carried out at 400-460°CLi metal is then produced by the following equations:

Cathode: Li+ + e- => LiAnode: Cl- => ½ Cl2 + e-

Total: 2LiCl => 2Li + Cl2

Lithium Chloride

Potassium Chloride

A): Potasium Chloride = Kalium chloride

The production of Lithium from Lithium Chloride (LiCl) via electrolysis requires much electric energy per weight, i.e. 35,000 kWh/ton 3) Lithium whereas aluminium electrolysis uses about 14,500 kWh /ton of productMost of the ingots are then converted into a wide variety of other shapes and forms, including thin sheets, pellets, powder, etc., for each specific useThe purity is mostly 99.5% but higher purity grades are available for the production of lithium primary batteriesSome lithium is alloyed into lithium-aluminium containing up to 7.5% lithiumNo green house gas emission due to the absence of Carbon anode

66

1) Source: Peter Ehren, Independent Lithium Consultant in Chile , May 20092) Source: Donald E. Garrett ,Handbook of lithium and natural calcium chloride, page 197

3) Source: Orkufrek iðnferli, áfangaskýrsla, Iðntæknistofnun Íslands, 1982

Index

Conclusions and RecommendationsIndustry Overview Potential Project in Iceland

Lithium Metal Production in Iceland (3)Extract Lithium from GeothermalCase Study - Extract Lithium in IcelandPros and Cons of Producing Lithium in Iceland

Appendixes

67

Lithium Metal Production in Iceland

Feasible production size in Iceland 1)

A preliminary estimate for a feasible project size would be a 3 stage expansion plan of 250 ton of lithium metal annually each stageThe power required is 8-24 MW The production facility would need 50-75 employees 2)

Production possibilitiesLithium Metal with high Purity as:

Lithium IngotsPelletsFoils

Lithium Alloys with:aluminiumcadmiumcopper manganese

Huge development possibilities

Electrolysis cell

68

1) Source: Peter Ehren, May 20092) Source: Investum estimate

Lithium Metal Production in Iceland Cont.

The raw material needed are: 1)

Lithium Chloride (LiCl)Potassium Chloride (KCl), to lower the melting point.Caustic Soda (NaOH) or Calcium Carbonate (CaCO3) is required to neutralize the chlorine gas produced during the lithium productionElectricity

With the existence of a Chlor Alkali plant in Iceland it could be feasible to import Lithium Carbonate (Li2CO3 ) and produce Lithium Chloride (LiCl) and Caustic Soda on site 1)

The market price for Lithium Carbonate was USD 5-6,000/ton in 2008Potassium Chloride (KCl) appears in geothermal brines in Reykjanes. Salt with 41% KCl content was produced there in the nineties 2)

Environmental and Transport Issues:There are no restrictions regarding shipment of raw material needed for the productionLithium Carbonates and Lithium Chloride are shipped in containersThe only way to transport Lithium Metal from Iceland is by sea as air transport of Lithium is restricted to small amountsThe lithium metal production does not produce waste products. The by-products are:

Chlorine gasSodium hypochlorite also known as bleach (NaClO)Calcium hypocloririte also known as bleaching powder (Ca(ClO)2)Calcium Chlorite (Ca(ClO2)2)

Lithium Carbonate

Caustic Soda

Potassium Carbonate

69

1) Source: Peter Ehren, Emails, May-June 2009 2) Source: Skýrsla: Framleiðsla á natríumskertum matvælum, page 6, Matvælarannsóknir, Keldnaholi, December 1999

Lithium Metal Production in Iceland Cont.

Production cost and feasibility:Cost of Lithium Carbonate is USD 5/kgThe cost of 6 kg Lithium Carbonate is USD 30 but about 6 kg of Lithium Carbonate is needed to produce 1 kg LithiumThe market price of Lithium is USD 58/kg for industrial grade or USD 64-70/kg for battery grade 1)

The added value is about USD 30/kg without taking into account the production cost, other raw material needed and electricity

701) Source: Asian Metal, 12 January 2009; www.asianmetal.com

Extract Lithium from Geothermal

Today, while brine deposits remain the most cost effective means of extracting lithium reserves, there is a vast amount of research into developing technologies that could exploit lithium from other types of deposits such as geothermal brines. Should they succeed, they could seriously compete with the brine producers 1)

Geothermal waters have had intimate and lengthy contact with the layers of the earth’s crust that they flow through, resulting in dissolution of minerals and metals from the rocks, and solution into the hot water 2)

Suitable sites need to have a high concentration of lithium in the brine stream to be efficientSimbol Mining, a Texas based company, focuses on mining lithium from the brine streams of natural and artificial geothermal hotspotsAccording to Simbol Mining their brine steam technology to extract lithium is more cost effective than other mining options

71

1) Source: Report:The Lithium Industry, Metal Bulletin research, 2009 2) Source: http://www.ioes.saga-u.ac.jp/ioes-study/li/lithium/occurence.html

Case Study - Extract Lithium in Iceland

Test samples in Geothermal waters: 1)

About 20 geothermal waters were sampled in Iceland in October 2007 and June 2008 for measurement of lithium isotopesThe samples came from Svartsengi, Reykjanes, Nesjavellir, Krafla and NámufjallThese studies showed Li concentrations of 0.085-5.8 ppm whereas Reykjanes and Svartsengi had the highest concentrationFor comparison:

The usual lithium concentration in the common surface water is about 0.010 ppmThe geothermal field in Salton Sea, southern California, has shown concentrations of 200 ppm 2)

Water source 2) Concentration range in ppm Country

Drinking (surface) 0.002 - 0.017 Czech RepublicDrinking (groundwater) 0.0047 - 0.020 Czech Republic

Geothermal 0.085-5.8 IcelandDrinking (mineral) 0.1 – 13 Czech Republic

Mineral 3-6 RomaniaMineral 4.87-8.00 USAVolcanic 10-46 TurkeyVolcanic 2.9-42 Hekla, IcelandVolcanic 0.1-44.2 Mexico

Geothermal 200 Salton Sea, USA

Test samples in Hekla in 2008: 2)

Seventeen lava eruption samples where investigated from the Hekla central volcanoLithium concentrations in the analyzed samples range from 2.9 to 42 ppm Lithium

It remains to be seen if Lithium mining in Iceland could be feasible although these tests do not indicate a high Lithium brine or rock concentration in Iceland

72

1) Source: Lithium isotopes in Geothermal Fluids in Iceland; Research done by BRGM ,France and ISOR, Iceland 2) Source: Jan A. Schuessler, Ronny Schoenberg and Olgeir Sigmarsson; Iron and lithium isotope systematics of the Hekla volcano, Iceland, July 2008

Pros and Cons of Producing Lithium in Iceland

Pros:Very electrical energy IntensivePossible mining of raw material neededSuitable project size and a growing marketPossibility to produce Aluminium-Lithium alloysBeing part of European Economical Area could attract InvestorsDue to small scale size transportation to and from Iceland would be done by containers and is not a problem

Cons:No Chlor-Alkali plant in IcelandLack of local off takersLittle chemical knowledge locally

73

Source: Peter Ehren, May 2009

Index

Conclusions and RecommendationsIndustry Overview Potential Project in IcelandAppendixes

74

PETER EHREN, Independent Lithium Consultant in Chile

Work Experience• Ehren-González Limitada

• Independent Consultant 2007 -• SQM, Chile

• Process manager Project Engineering• Head of R&D department of Lithium and brine technology

Lithium Expertise • Peter Ehren has more than 12 years experience in the Lithium industry. He started

his interest in the lithium business during his master s thesis at Technical University of the Delft where he investigated for BHP Minerals in Reno the recovery of lithium from geothermal brine (Salton Sea)

Main Advisor

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• He has consulted in a variety of lithium and potash topics such as, process simulations, lithium applications, world lithium supply analysis, lithium export data, lithium prices, cost simulations for a variety of lithium minerals and brine deposits and research and development of Salars

• During his professional carrier he obtained in depth knowledge of the lithium carbonate and lithium hydroxide process. He was responsible for the R&D of a variety of lithium products, where under lithium chloride production. He visited 3 lithium metal plants, 3 spodumene production processes, and 3 lithium carbonate/hydroxide plants from spodumene, Chinese Tanjinair Salt lakes and 2 butyl lithium plants

• He was responsible for R&D for lithium recovery from high magnesium and high sulfate brines• He is an expert in solar evaporation and phase chemistry systems• He has diplomat in business administration, which has been very helpful in project evaluation, supply analysis and

operation costs estimations


Chemical Clusters


ConclusionsThe chemical industry in Europe is suffering from high costTo increase it competitiveness the industry has deliberately taken steps toward clusteringMost chemical clusters are based on raw material supply including hydrocarbons Electricity and steam are one of the most important raw material in the chemical industryA potential Icelandic cluster based on green electricity and steam at competitive prices and located closed to good port facility is likely to attract inorganic chemical industriesIn recent years companies specialized in owning and operating chemical parks have emerged Such company in a public private partnership with Icelandic authorities could be key to a successful FDI policy for Iceland

RecommendationsGet advised by ECSPP on what cluster operators in Europe are most likely to be interested in a potential Icelandic developmentPut together information package on potential cluster possibilities (i.e. sites, energy, country, people, industry sectors viewing Iceland already) and present to cluster operators in Europe/USAPresent a ‘green chemical park project’ to selected group of operatorsDo further research on possible EU support scheme and eventually prepare an application to fund a full blown feasibility study

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Index


What are Chemical Clusters?Chemical ClustersCurrent Situation of European Chemical Industry ClustersMajor Chemical Clusters in EuropeThe Concept and PlayersKey Attributes and Performance Criteria of Successful ClustersChemical Park Delfzijl – the NetherlandsChemical Park Stenungsund – Sweden (2)Kokola Industrial Park – FinlandEU Support SchemesPower Supply and PricesSteam Supply and Prices (2)Energy Production, ongoing Projects and Developments (2)ECSPP

Potential Project in Iceland

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What are Chemical Clusters?

Industrial ParksAn area zoned and planned for the purpose of industrial developmentUsually located outside the main residential area of a city and normally provided with adequate transportation access, including roads and railroadResidents of Industrial Parks benefit from the use of common infrastructure

Chemical Parks / ClusterChemical Clusters are one type of industrial parks that focus on facility provision and services for chemical companiesIn addition of benefiting from common infrastructure of a industrial park clustering allows chemical companies to exchange chemicals that are of little value to one but of more value to anotherAn example of such is when sodium chlorate producers sells the byproduct hydrogen to a fertilizer producer or chlor-alkali producers delivers hydrochloride acid to a polysilicon producer

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Chemical ClustersBy clustering around a particular site, chemical companies can achieve the following advantages:

• upstream integration into feedstock• downstream integration into specialty chemicals or customer sectors• shared services for utilities• access to transportation and logistical capabilities• share best practices in health, safety and the environment

When it comes to integrated chemical clusters, Europe is the world champion. Even as the global manufacturing base shifts eastward to the Middle East and Asia, Europe has consolidated its production into a number of efficient chemical sites with integration advantages 1)

1) Source: ICIS Chemical Business, 5/5/2008, Vol. 273 Issue 182) Source: Swedish Clusters, CIND, Uppsala University, 2003

3) Source: Chemical Industry Parks in China, Gunter Festel and Yong Geng 80

For foreign investors, there are certain advantages to investing in chemical parks as opposed to establishing their own chemical sites. These include: 3)

• reduced costs and risks• reduced culture barriers• accessible resources• synergies in environmental

protection

Agglomeration of Swedish industries 2)

Current Situation of European Chemical Industry Clusters

The EU is still the world’s largest chemicals producer with a market share of 29% and chemical sales at 476 € billion in 2006Although chemical sales in the EU are still growing, the growth rate is slower than in other regions of the world - particularly AsiaThe recent EPCA Study on Chemical Industry Clusters showed that clusters play an important role in improving the supply chain competitiveness of the chemical industryEurope has over 300 chemical production sites, the majority of which are located in clustersMost of these clusters have evolved historically around either a raw material source, or as a supplier to the downstream industryAs the raw material supply and the downstream industries have evolved, so these clusters have adapted to these changesThere are a few examples of “on-purpose” clusters which have been developed more recentlyIn general Europe’s chemical industry clusters are highly integrated along the product value chains and benefit from competitive infrastructure, utilities and services

Source: ECSPP and CEFIC, Improving Competitiveness of European Chemical Industry Clusters

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Major Chemical Clusters in Europe

Source: ECSPP and CEFIC, Improving Competitiveness of European Chemical Industry Clusters

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The Concept and Players

Source: Invest in Germany, Chemical Parks in Germany, 2007

Capital, financial management

Controlling, HR, resources

Analytics

Planning Real estate Infrastructure Safety Environmental Protection

PRLogisticsTechnical servicesEnergies

Customers

Management processes

Core processes

Support processes

Investors develop their business model and outsource all other business processesIn chemical parks investors can focus on their core business

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Operators: Website: Operating in:Currenta www.currenta.de DEInfraServ Höchst www.infraserv.com DEChemSite www.chemsite.de DENUON Industripark management www.nuon‐ipm.de NL, DEValuePark www.dow.com/valuepark/index_e.htm DEEmmtec www.emmtec.nl NLNepic www.nepic.co.uk UK

Key Attributes and Performance Criteria of Successful Clusters 1)

Investment environment; role and support of the authorities in providing incentives and support in the development of infrastructure or attracting investmentAvailability of landRaw material and feedstock supplies at competitive pricesEnergy and utilities at competitive pricesRelative proximity and easy access to most important customersAvailability of efficient services (logistics, finance, IT, packaging, security, marketing, promotion etc.)Availability of labour (skilled and unskilled) at competitive pricesEfficient logistics infrastructureLow-risk and stable business climate and stable regulatory environmentGood schooling and educational facilitiesCo-siting & partnering opportunities

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Not important = 1, Very important = 4

2)

1) Source: ECSPP and CEFIC, Improving Competitiveness of European Chemical Industry Clusters2) Source: Festel Capital, Zukunftsaussichten für Industrieparks und infrastrukturedienstleister in Deutschland, May 2006

Chemical Park Delfzijl - the Netherlands

The Chemical Park Delfzijl is a unique co-operation between companies that exchange raw materials and share supplies, with attention for safety, quality, people, and environmentThe Chemical Park Delfzijl is a sustainably developed industrial area for chemical related companies, connected to each other like a chainThe following companies are settled at the business park

Akzo Nobel – salt, chlorine, caustic soda, hydrogen, monochloric acidic acidTeijin Aramid – aramid polymer, hydrochloric acid Bio MCN – methanolDelamine – ethylene amines, ammonia Delesto – electricity to Essent, utilities, steamLubrizol Advanced Materials Resin BV – synthetic resin (CPVC)Brunner Mond – soda, calcium chlorideKemax – calcium chlorideDynea – formaldehyde resinsNorth Water – treatment plant for salty waste water

Source: www.groningen-seaports.com

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Chemical Park Stenungsund - Sweden

The Chemical cluster in Stenungsund consists of the following 6 different companies all dependent on each other:

AGA Gas – produces oxygen, nitrogen, CO2 and argon from air. The gases are transported through pipes to other industriesAkzoNobel – 470 employees in research, development, sale and marketing, administration and production. They produce etenoxid from ethanol, oxygen and ammoniacBorealis – 1100 employees and the biggest employer in the industrial cluster produces polyethylene. Borealis has one polyethylene plant (PE), one cracker for ethylene and propylene production, and Innovation Centre focusing on R&D for infrastructure markets. The cracker plant is one of the most flexible in Europe, using naphtha, ethane, propane and butane as feedstockINEOS – 329 employees producing PVC through a Chlor Alkali production

Source: http://www.stenungsund.se/

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Perstorp Oxo – 936 employees producing among others Oxo alcohols and plasticizers mainly from crude oil and natural gas derivativesVattenfall – 25 employees running a reserve power plant able to produce 800 MW

Chemical Park Stenungsund – Sweden Cont.

Source: http://www.stenungsund.se/

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Kokkola Industrial Park - Finland

Kokkola Industrial Park is an inorganic production site in ScandinaviaAs strongly developing site, new space for industrial activities has been created, and tight network of connections, infrastructure (pipelines, railways, roads) and services easy establishing and maintaining the chemical production at the siteKokkola Industrial Park has diverse chemical production, metallurgy and supportive activities: base chemical production, intermediates, fine chemicals, specialty chemicals, zinc metallurgy, OMG, petrochemicals and several other production and activities i.e. feed phosphates, gases, electricity, heat and servicesThe following companies are settled at the industrial park

Oy AirLiquide Ab/ PolargasBoliden Kokkola OyKemira OyjKemira GrowHow OyMaintpartner OyOy M. RauanheimoNordkalk CorporationOMG Kokkola Chemicals OyPohjolan voima, Kokkolan Voima Oy

Source: www.kip.fi

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Fortum Power and Heat Oy KemFine LtdNeste Oil Corporation, Terminal of KokkolaTetra Chemicals Europe OyWoikoskiOy Hacklin Ltd OnePoint OyPort of Kokkola

EU Support Schemes

The European Union offers a lot of different support mechanism in various sectorsThe aim of the European co-operation projects is to exchange experience and to transfer successful solution from one country to anotherSome of these programs could be beneficial for the development of a “Green Chemical Park” in Iceland, given that Iceland as a EFTA member qualifies through the European Economical treaty

The following support schemes can be attractive for chemical park developments 1), some may even apply for Iceland:

Interreg IVC: Helps regions within the EU to share solutions (www.interreg4c.net)„the program provides funding for all regions of Europe plus Switzerland and Norway“

Interreg IVB North West Europe Programme: The aim is to find innovative ways to make the most of territorial assets and tackle shared problems of Member States (www.nweurope.eu )

„the fund will be used to co-finance projects that maximize the diversity of NWE‘s territorial assets by tackling common challenges through transnational cooperation“

The 7th Framework Program: ..bundles all research-related EU initiatives together under a common roof playing a crucial role in reaching the goals of growth, competitiveness and employment: (www.cordis.europa.eu/fp7)The competitiveness and innovation framework programme (CIP):The Competitiveness and Innovation Framework Programme (CIP) aims to encourage the competitiveness of European enterprises. With small and medium-sized enterprises (SMEs) as its main target, the programme supports innovation activities (including eco-innovation), provides better access to finance and delivers business support services in the regions (http://ec.europa.eu/cip/index_en.htm )

1) Source: Cluster Mittel Deutschland, www.cluster-chemie-kunststoffe.de

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Power Supply and Prices

90

1) Source: PPA: Power Purchase Agreement2) Source: European Electricity Exchange, Investum estimates

3) Source: National Energy Authority

Bilateral contracts for large consumers: 1)

Long term contracts, typically 20 yearsFixed prices with US CPI indexing...or prices linked to product prices, such as LME – i.e. risk sharing

Price estimation: 20 to 35 USD/MWh

German baseload year futures as of 23.06.2009 [USD/MWh] 2)

Expected price span in Iceland

3)

Steam Supply and Prices

Industrial steam supplySteam is widely used as an energy transport medium, distributing heat and power in many industrial applicationsThe amount of money spent generating steam is very large; equaling to about 40% of the fuel burned by the process industry 1)

One of the key attributes in chemical clusters is the supply of industrial steamSteam is often delivered at various temperatures depending on customer's demand and the suppliers capabilityTypically industrial steam is delivered in three different forms:

Low pressure 3 BargMedium pressure 12 BargHigh pressure 20 Barg

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Steam cost and prices in different places in the worldAccording to Morgan Stanley equity research the GCL-Poly Energy Holding Ltd average revenue from steam sales in China in 2008 was 21 USD/ton 1)

The cost of raising steam using different fuel sources is presented in the graph below

USD/t Cost of raising steam 2)

1) Source: I MIL 1995, “Lowest Energy Prices - in Europe for new contracts”2) Source: Process Engineering, Jan/Feb 2007, “Steam: not a free ride”

Steam Supply and Prices Cont.

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Steam prices in IcelandNo transparent market for geothermal steam has evolved in Iceland so farThere are though some indicators towards steam price that could be expected in a bilateral contract with the Icelandic geothermal energy suppliers:

The diatomite plant at Myvatn that was in operation until 2004 paid 1 USD/ton steamThe national Energy Authority issued prices in 1992: 2.5 USD/ton as shown in the bar chart below 1)

The power company Hitaveita Sudurnesja offered following prices in a leaflet from 1995:

Steam at 20 barg: 4 USD/tonSteam at 6 barg: 3 USD/ton

Investum’s calculation derived from cost of electricity from geothermal power plant indicate cost of 2.5 USD/ton

0

5

10

15

20

25

30

Electricity: Fuel oil Coal Geothermal

Basic cost of industrial steam 2)

25+

12.2

7.3

2.5

Types of steam in IcelandGeothermal steam fields in Iceland are typically operated at 10-12 Barg pressureSome wells, especially in the Reykjanes field deliver higher pressure or up to 18 bargThis is sufficient to meet requirements of customers demanding both LP and MP class of steamThe possibility of boosting this steam with a MP steam driven turbine has been studied 3)

1) Source: MIL 1995, “Lowest Energy Prices - in Europe for new contracts”2) Source: Process Engineering, Jan/Feb, “Steam: not a free ride”

3) Source: Teitur Gunnarsson, Mannvit, verbal

Landsvirkjun (www.lv.is )• Type: Hydro power plants (cascade)• Capacity: 345 MW (80+82+53+130)• Site: Thjorsá river, S-Iceland• Start-up: 2011-2013

Landsvirkjun and others (www.lv.is )• Type: Geothermal power plants• Capacity: 380 MW (250+60+70)• Site: Þeistareikir, Gjástykki, Krafla (extension), NE-Iceland• Start-up: 2013-2014

Orkuveita Reykjavíkur (www.or.is) • Type: Geothermal power plants• Capacity: 315 MW (135+90+90)• Site: Hverahlíð, Bitra and Hellisheiði (extension), S-Iceland• Start-up: 2010-2015

Energy Production, ongoing Projects and Developments

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Hitaveita Sudurnesja (www.hs.is )• Type: Geothermal power plants• Capacity: 140 MW (50+90)• Site: Reykjanes peninsula • Start-up: 2011-2014

Smaller private developers• Type: Hydro Power plants• Capacity: 270 MW (170+30+70)• Site: different• Start-up: 2011-2016

IDDP (www.iddp.is )• Type: Enhanced geothermal power • Capacity: 3x40 MW• Site: Krafla, Nesjavellir & Reykjanes• Start-up: 2011-2013

Energy Production, ongoing Projects and Developments Con.

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ECSPP stands for “European Chemical Site Promotion Platform” (www.ecspp.org)ECSPP promotes Chemical Investment in EuropeMembers are owners and operators of most of the largest chemical parks and sites in EuropeThe members have shared concerns about:

• What role Europe will play in the global chemical business 20 years from now?• Why Europe today seems to be less attractive for new grass-roots chemical investment?• Whether the chemical investment community is well enough informed

about Europe's unique advantages?• How Europe can regain favor in the minds of chemical investors?

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ECSPP

Index


Industrial Park in Iceland – next steps

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Based on a petrochemical free processes Electricity and steam intensive industriesSmall scale chlor-alkali plant as back bone plant

97

Technon Orbichem suggest the first steps in development of a chemical park in Iceland would be: 1)

Define Chemical park philosophyDefine Production of the cluster etc .to take the best combined advantage of limitless local energy and power, sea going access (for feedstock), feedstock suppliesIdentify potential producers and investors Supply and price of feedstock and bio-alternatives - i.e. bio ethanol Identify trading partners - i.e. Europe, Americas, Asia

Industrial Park in Iceland – next steps

1) Source: Technon Orbichem, email 4.6.2009

Power needs [MW]Other industries: from toChlor Alkali 8 200Sodium Chlorate 8 50Fertilizers 20 50Polysilicon 20 100Lithium metal 8 50Carbon Fiber 5 20Methanol 10 100Aluminium foils 20 100Dimethly Ether 10 100

Total: 109 770

Documents

Diversified usage of renewable energy in Iceland