INSIGHT: Feedstock isn't just about cost

15 May 2007 17:01  [Source: ICIS news]

By John Richardson

 

SINGAPORE (ICIS news)--The three issues that matter most in petrochemicals – feedstock cost, feedstock cost and feedstock cost – may lead to a greater use of abundant coal in countries such as the US and China.

 

The next five to 10 years could also see a lot of innovation in making ethylene from renewable resources, such as ethanol and perhaps even palm oil.

 

“I do not know of a single petrochemical company which is not involved in research to produce cost-effective ethylene that also ticks the environmental box,” said one former petrochemical company chairman recently.  

 

India has already made ethylene from ethanol so there is nothing new in this technology. The breakthrough would be in the ability to build a world-scale plant fed by ethanol or any other renewable fuel that was as cost-effective as a gas cracker in the Middle East.

 

The big pitfall, however, could be the failure to conclusively tick the environmental box by ending up with processes that produce net environmental harm.

 

Petrochemical producers can ill afford any more bad publicity and should take note of the battering being inflicted on the biofuels industry. The dubious logic of trucking ethanol from Iowa to gasoline stations across the US and levelling rainforests to make space for palm oil plantations has quite rightly been exposed.

 

The media cannot and will not get bored with covering the environment as evidence of global warming multiplies. This story will stay near the top of news agendas for years to come, meaning that petrochemical companies have to get their new technologies absolutely right and be willing to engage with and convince the sceptics.

 

But as everyone knows, if you can find a cheap way of making ethylene that keeps the environmental legislators happy, you will guarantee the survival of your company.

 

Some argue that it would be much easier to concentrate on coal-to-methanol and then methanol-to-olefins (MTO) and methanol-to-propylene (MTP) technologies.

 

The US has the world’s biggest coal reserves. In theory, therefore, it could once again be competitive in petrochemicals if the environmental and the Nimby (not in my backyard) lobbies can be overcome.

 

But in practice, the US petrochemical industry might well fail to beat off opposition to using coal to make chemicals because the technology is viewed as dirty. Companies such as Shell will argue otherwise, but convincing the general public is a tall order.

 

Presidential candidate Barack Obama is talking about subsidies for liquefying coal, perhaps with an eye on voters in coal-rich states such as Illinois. Even if he were to make the White House though, there’s no guarantee he’d have the political will or muscle to turn his words into action.

 

More fundamentally, despite several years of research, the MTO and MTP processes have yet to be commercially proven.

 

But ExxonMobil says it is looking for an opportunity to build a commercial plant using its MTO process with Total, UOP and Norsk Hydro aiming for commercial production of their MTO process by 2010. Lurgi has sold two licenses for its MTP technology to Chinese companies.

 

In the case of China, the cost of shipping polymers that might be produced from methanol-derived olefins may prove prohibitive. Most of the coal-to-methanol projects are in western China, whereas the big demand for polymers is in the east.

 

The other issue is how much methanol will end up being converted into olefins and then on to polymers. The big drivers behind China’s coal-to-liquids boom are substituting imports of crude oil and reducing the amount of coal being burnt in homes.

 

Fuels made from coal can be used for domestic heating and cooking, thereby tackling chronic health problems such as in Guizhou province. It’s estimated that 3,000 people in Guizhou in southwestern China suffer from arsenic poisoning from burning raw coal.

 

Further investment in the Middle East is the other well established way of getting your hands on cheap ethylene. But as the June issue of the ICIS insight Asia Middle East Report highlights, the days of gas being treated as a waste product in the Middle East are well and truly over.

 

Another route is to invest in North Africa or Central Asia, but the political risks can be much greater.

 

The petrochemical world has become a great deal more complicated because of ever-greater volumes of low-cost exports from the Middle East and increasing environmental awareness.

 

But if this serves as any comfort to the strategic planners out there, at least life isn’t boring.

 

By: John Richardson
+65 6780 4359

< previous article(ICIS Podcast: Chemical News Central 2 November 2009)

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