An Alternative Use for Fuel Coke

TAPPIEngineering, Pulping and Environmental Conference

October 11 – 14, 2009Memphis, Tennessee

Presented by:J. David Gipson

Director, Business Development Fuel Coke and Sulphur

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION

REFORM ACT OF 1995

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that contain projections about our revenues, income, earnings and other financial items, our plans and objectives for the future, future economic performance, or other projections or estimates about our assumptions relating to these types of statements. These statements usually relate to future events and anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements are based on management's expectations, estimates and projections about ConocoPhillips and the petroleum industry in general on the date this statement was released. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Economic, business, competitive and regulatory factors that may affect ConocoPhillips' business are generally as set forth in ConocoPhillips' filings with the Securities and Exchange Commission (SEC). ConocoPhillips is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Low Cost Fuel for Firing Kilns

Issue #1• Historically volatile natural gas pricing• Growing demand for natural gas

Issue #2• High btu petroleum coke seeking markets• Volumes of hard petcoke increasing

The Opportunity• Petcoke pulverization is a proven commercial industry• Established burner technology for petcoke firing

What is Petroleum Coke?

• Byproduct of oil refining– Cokers: Heavy oils High value

fuels• Carbonaceous solid• Fuel quality vs. carbon quality

– Driven by types of crude oil and coker operation

• Fuel Coke Quality– High heat value, low ash– Can be high in sulfur/metals, low

volatiles• Fuel Coke Value

– Determined by Hardness (HGI) and Sulfur content

Fuel Coke Marketing at ConocoPhillips

• ConocoPhillips U.S. fuel-grade petcoke– Current production ~5 million MT/yr– One of the largest fuel-grade petcoke producers*– Leading U.S. fuel petcoke supplier – Supply continues to grow

• Fuel Coke Marketing Group– Responsible for all sales and logistics– Most active refiner marketing of both equity and 3rd

party cokes

* Source: Pace Petroleum Coke Quarterly Third Qtr 2008

Fuel Coke Production and Marketing

• Production approximately 80 million MT/yr worldwide– U.S. production = 40 million MT/yr

• Typically sold as a substitute for coal– Key markets: Cement & Power Generation– No price correlation to other fuels– Usually sold at a discount to steam coal

• Supply is inelastic• Demand is relatively inelastic

Fuel Coke is Getting Harder

Fuel Coke Production by Hardness

0

5

10

15

20

25

30-39 40-49 50-59 60-69 +70Hardgrove Index (HGI)

Million MT

Harder

• Trend toward more heavy crudes Hard petcoke• Harder petcoke more difficult to market

– Increased energy required to grind

• Volume of sub 40 HGI petcoke expected to increase

Hardness measure = Hardgrove Grindability Index (HGI)

Increasing Quantities of Hard/High Sulfur Petcoke

Need for LowerCost Fuels

PulverizedPetroleum

Coke

+

Identifying an Opportunity

The Pulverization Model

• Applications – Rotary kilns– Boilers

• Numerous, small customers – No/limited grinding capacity

• Centralized pulverization plant– Rail/truck delivery

• Technical assistance

Pulverized Petroleum Cokeis an Excellent Option

• Discount to natural gas• Eliminates the hardness issue

– Additional sulfur is absorbed or captured • Safe to handle • Flame is much hotter/radiant than from natural

gas• Improves performance in industrial uses,

reduces particulate emissions and limits unburned material waste

EIA Industrial Natural Gas Price

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2006 2007 2008 2009 2010

$/MMBtu

Source: Energy Information Agency

Complete Vertical Integration

COP Supplies It’s Ownor Third Party Petcoke

Pulverizer Operated Exclusively for COP

COP Markets the Pulverized

Petcoke

COP Pulverization:How it will work

• Plans are for a plant producing ~240,000 st/yr of pulverized petcoke– Site selection underway

• Pulverized petcoke will be distributed by pneumatic trucks to nearby customers

• Target Market: Natural Gas Consumers• Pulp & Paper• Brick/Glass Manufacturing

• All sales will be conducted by the COP Fuel Coke Marketing Group

ConocoPhillips: Adding value to fuel coke

• Pulverized Petcoke• Attractive alternative fuel for kilns• Less expensive than natural gas and oil

• Solves Issue of Harder Trending Petcokes

• Most existing customer grinding mills designed for soft coal

• Target Market: Natural Gas Consumers

• Pulp & Paper• Brick/Glass Manufacturing

• ConocoPhillips’ First Plant Currently in Development

• Long-Term Goal – Similar Plants in Various Locations

Source: Phoenix Process Engineering, Inc.

Thank You

David GipsonDirector, Business Development

Fuel Coke and Sulphur281/293-3656 (ofc)281/236-1518 (cell)

david.gipson@conocophillips.com