Presentation titlesecond line if required

Introducing BP Biofuels

a growing alternative

Adam J. SchubertFarm to Fuel Conference – August 31st, 2006

BP Biofuels a growing alternative

Questions for the Day

• What are the issues that biofuels can solve?

• What is needed for biofuels to meaningfully address these issues?

• What is BP doing to address these issues?

• What public policies will encourage appropriate solutions in the marketplace?

• What are the unique issues for Florida?

BP Biofuels a growing alternative

Drivers for Change

Key drivers in moving towards sustainable mobility solutions

• Security of supply & energy diversification

• Climate change issues

• Biofuels can address both these issues.

BP Biofuels a growing alternative

Security of Supply and Energy Diversification

• Biofuels will help governments achieve their energy security goals and reduce dependence on imported oil

− In the near-term, logistics play a key role in defining what is feasible and what increases supply security

• Biofuels have the added benefit of helping the agriculture sector

• Current price environment brings popular focus to energy policy

Imported Energy Dependency Profile

53% 64%

81% 89%

47% 72%

66% 84%

2004 2020Transport

N America

EU

China

India

US Crude Imports 2006 (thru May)

18%

17%

15%13%

12%

6%

5%

3%

Canada

Mexico

Saudi Arabia

Venezuela

Nigeria

Iraq

Angola

Algeria

Russia

Ecuador

Kuwait

Columbia

UK

Norway

Brazil

BP Biofuels a growing alternative

• Conventional biofuels are a positive first step in use of biomass

• GHG reductions

• Benefit rural economy

• Limitations :

− Competing land use issues – food vs fuel

− Not ideal fuel molecules: material compatibility; handling/quality issues

• Ethanol issues:

− Significant additional infrastructure costs due to Water Solubility

− Success at scale requires ‘whole of market’ introduction

sugar & starch crops

Ethanol forgasoline

Biodiesel (FAME)

oil crops

“Conventional” bio-components

BP Biofuels a growing alternative

What is needed?

Fuels that can be produced from domestic, renewable resources in high volume and reasonable cost.

Fuels that can be used in existing vehicles and existing infrastructure

Fuels that offer good value to consumers

Fuels that meet the evolving demands of vehicles

Fuels that can be produced from domestic, renewable resources in high volume and reasonable cost.

Fuels that can be used in existing vehicles and existing infrastructure

Fuels that offer good value to consumers

Fuels that meet the evolving demands of vehicles

BP Biofuels a growing alternative

BP’s bio-fuels activity

Europe• British Sugar plant in UK for biobutanol production•First major to introduce 5% FAME blend in Germany• Across Europe ETBE replaces MTBE•EBI Institute University TBD

India$9.4M project of Jatropha “oil bearing crops” for diesel fuel

US• Largest user of Ethanol in gasoline • 20 new markets added in 2005• Biodiesel to small number of B2B, evaluating more widespread customer offer•EBI Institute University TBD•E85 introduction in selected markets by end of 2006

Asia•Round table sustainable Palm Oil

ANZ•Supplying

Ethanol to retail sites in QLD

•Renewable diesel via tallow

BP Biofuels a growing alternative

Issues for Florida

•Dependency on Waterborne Imports

Maximize Utilization of Storage Capacity

Avoid Duplicative Boutique Fuel Burdens

Encourage Diversity of Supply Sources

•Hurricane Vulnerability

Reduce Supply Disruption Potential

Prefer Fully Fungible Fuels

•High Price Sensitivity

Focus on Low Cost Solutions

Minimize New Capital Requirements

BP Biofuels a growing alternative

Next generation Biofuels

• Advanced bio-fuels respond to all drivers - deliver on GHG, security of supply & support agriculture sector

• Biobutanol has a number of attractive properties:

− Easily blended into gasoline

− Can use existing fuel infrastructure without major modification

− Potential to be used at higher blend concentrations than ethanol in unmodified vehicles

− An energy content closer to that of gasoline than ethanol – reducing the impact on fuel economy for the consumer

• Biobutanol is complementary to ethanol:

− Can be used together with ethanol

− It can enhance the performance of ethanol blends in gasoline

− It can be produced from the same feeds as ethanol

• Other Advanced biofuels will be explored through Biomass gasification and lignocellulosics

BP Biofuels a growing alternative

BP’s New Biofuels Business

• Formed a new Biofuels business in June

• Announced plans to invest $500 M in new Energy Biosciences Institute to provide a pipeline of biofuels technology for the business

• Will partner with science company DuPont to develop advanced biofuels-the first introduction is biobutanol.

• BP & DuPont collaborating with British Sugar to convert an ethanol fermentation facility to produce biobutanol

• Initial production targeted in the UK during 2007

BP Biofuels a growing alternative

Public Policy Framework

• Focus on goals

− Give the market room to develop innovative solutions

− Flexibility provides space for quicker response to changing conditions

• Emphasize solutions that can be used in existing vehicles and delivered through existing infrastructure

− These will provide the quickest results at the lowest cost

− These will minimize logistics requirements

• Make room for innovation

− Yesterday’s molecules may not be the best answer for today’s vehicles

− Research can produce improved solutions for tomorrow – but only if they are allowed room to compete in the marketplace

Presentation titlesecond line if required

BP Biofuelsa growing alternative