Tim ZenkVP of Corporate Affairs, Sapphire Energy Inc.

October 11, 2012

Algae is a superior renewable feedstock

Source: Cambridge Energy Research Associates

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90807570656055505 45403530252015

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Saudi

Arabia

Other Middle

East

Russian

Federation

China

Libya

Mexico

Other South

America, Europe,

Eurasia, and

Africa

UK North Sea

Other

North

America

Brazil Deep Water

Gulf of Mexico Deep Water

Angola Deep Water

Nigeria Deep Water

Canadian Oil Sands

Other South America and North America

Oil supply marginal cost curve for 2008 WTI equivalent

Co

st o

f p

rod

uct

ion

($ p

er b

arre

l)

Cumulative production (million barrels per day)

Sapphire algal oil production will increasingly compete with traditional oil as marginal costs continue to rise

• Scalable to millions of barrels per day

• Cost competitive with marginal crude oil production

• Completely fungible with infrastructure and fleet

• Favorable life cycle with respect to CO2

• Does not compete with agricultural products, land, or water

Superior attributes of algae

Algae fuel can be grown on marginal land with saline water

Petroleum-based diesel Sapphire algal diesel

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95-68%

Total emissions

Combustion

72

Production, refining, transport

30

CO2 uptake

-71

Total emissions

Combustion

74

Production, refining, transport

21

Grams CO2e per MJ

22

3

Recent forecasts indicate market demand will continue to drive oil prices above today’s level

Source: Energy Information Administration; Annual Energy Outlook 2012

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2012201020082006200420022000

Oil prices, historical and forecastedDollars per barrel (nominal)

2020201820162014

Historical oil price

EIA reference caseToday

When will oil prices return

back to ‘normal’?

Sapphire has the most experience with large-scale production of photosynthetic algae

Pilot technology facility Commercial demonstration facility

• 22-acre pilot facility operated since 2009

• Over 180,000 hours of large pond

cultivation piloting

• Sapphire is currently finishing construction of the world’s

first integrated algal-oil production facility

• Operations will begin in Q2/Q3 2012

• First Commercial design complete in 2015/ construction

begins 2016

4

I/4 mile

Extraction: concentrated algae is processed using proprietary technology to extract oil and nutrients

Sapphire uses a proprietary, innovative, solvent-based extraction system

Concentrated algae enters

the extractor as a slurry

Extraction process creates

refinable crude oil1. Heat and pressure: the slurry

is exposed to heat and

pressure, causing separation

of materials

2. Chemicals: solvents are

added to complete separation

process

Slurry undergoes chemical reactions

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Refinery Upgrading

Algae Oil Feed

The Boduszynski Plot: C# vs. AEBP

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Jet fuel

Sapphire’s oil is refinable into drop-in fuels using conventional refining technology, requiring no change in infrastructure

Two test flights: Continental Airlines 737-800

(Houston) and Japan Airlines 747-300 (Tokyo)

10-day cross-country tour of plug-in Toyota Prius

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Gasoline and diesel

Policy Priorities for the Algae Industry

• The Renewable Fuels Standards (RFS)- Algae is a qualifying biomass, with an established pathway, complete part 79 - 80 - Algae still requires parity in the RFS and the advanced biofuels industry as a whole must work

together to support the RFS

• Tax parity for algae with all other biofuel feedstocks- In August 2012, the Senate Finance Committee passed a bipartisan tax extenders bill that gives

algae-based fuels AND green crude parity with cellulosic biofuels

• Renewable fuels should be given the same incentives as the Oil and Gas industry

• Farm Bill- The USDA’s Farm Bill funds research on developing renewable biomass crops to supplant the RFS

requirements through BCAP and Loan Guarantees- Senate has passed a 5-year Farm Bill which includes an Energy Title with mandatory funding

• DOD Initiatives- February 2010—Quadrennial Defense Review Report identifies climate change and access to

reliable supplies of energy as threats to national security- The DoD has set ambitious goals to utilize biofuels to increase national security, it is the

responsibility of our nation and our government to ensure that the DoD has the tools to deploy national security initiatives

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