10 January 2011 00:00 [Source: ICB]
US-based producer Celanese plans to enter China's fuel ethanol market in a big way in order to capitalize on the country's goals in alternative fuels consumption.
"China is a big potential market for our coal-based fuel ethanol technology, because of the country's abundant coal feedstock, China's growing demand for fuel, and the country's desire to reduce foreign dependency on imported fuel without using subsidies," said chief financial officer Steven Sterin in an interview with ICIS.
Celanese plans to build one or two coal-based ethanol plants in China - each with a capacity of 400,000 short tons/year (363,000 tonnes/year). Each plant's capacity can be expanded to 1m tons/year at a fraction of the original capital investment. The cost to build a 400,000 ton/year plant is expected to be around $300m (€225m), Sterin noted.
Once approved, the Chinese plants - the locations of which have yet to be decided - would take 30 months to build and would initially serve the domestic industrial ethanol market, which is growing at 8-10%/year, as estimated by Celanese.
Celanese estimates current chemical applications for ethanol in China - for products including solvents, inks, lacquers, paints and coatings - at 3m tons/year.
China's fuel ethanol market is currently at 1.5m tons/year but is expected to grow exponentially, given China's intention to increase domestic ethanol production to 15m tons by 2020, said Sterin. China is currently importing 4m bbl/day of oil, which is expected to increase to 8m bbl/day by 2020, he added.
Chinese fuel ethanol is currently selling at a slightly higher price compared with industrial ethanol because of tightening global supply and higher corn and sugar prices worldwide, according to Celanese. Fuel ethanol prices in China were assessed by ICIS at around $950/tonne, CFR (cost & freight).
"If we had production in place with our technology today, we would have a significant advantage and this business would be one of the most profitable in the company," said Sterin. "Even at every price point in corn and sugarcane's historical cycle, we still would have been able to offer a lower cost fuel ethanol alternative without any subsidies involved." He added that Celanese's technology could also use biomass or waste-based feedstock in the future.
In fuels, Celanese will focus on countries or regions around the world with access to economically attractive hydrocarbons and the desire to cut their dependence on imported energy.
An equally important criterion is that the countries' policies support technology and "raw material neutrality - in other words, from an economic standpoint, where there is a level playing field and governments are not selecting winners or losers," said Sterin on a conference call in December, after the interview with ICIS.
China met those criteria, but Celanese continues to explore and evaluate opportunities in other countries around the world. Initial discussions about the technology have been encouraging, he said.
Celanese chairman, president and CEO David Weidman is calling the company's coal-based ethanol technology a "game changer" that could reshape the company and transform the ethanol industry.
"This technology breakthrough is a new platform for earnings growth with the potential to reshape Celanese," Weidman said during the conference call.
He likened the technology's "disruptive" impact on the ethanol industry to the way Amazon.com revolutionized book retailing around the world.
"We are competing in a totally different way than those who are out there today; that's where the excitement comes from," said Weidman. "This is a tremendously advantaged model and a totally new way of creating earnings growth for Celanese in the future."
While Celanese will initially focus its coal-based ethanol technology on industrial markets in China, it will explore the fuel ethanol market as well, he said.
Celanese's technology is not based on the fermentation of carbohydrates, but rather is a cost-advantaged thermo-chemical process that uses coal and other hydrocarbons as feedstock, Weidman explained.
Jim Alder, Celanese senior vice president, operations and technical, said the ethanol technology integrated elements from the company's leading acetyl technologies.
The technology, which will be protected by some 3,000 patents worldwide, is highly capital-efficient as plant capacities could be increased at a fraction of the cost of the initial facility, he said. The technology is ready for commercialization, and Celanese is in the early phase of designing and engineering commercial plants.
In the US, Celanese expects to start up a 40,000 ton/year ethanol plant at Clear Lake, Texas, by early 2013 using natural gas as a feedstock. That facility will be used to drive technology development of the company's ethanol production process.
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