Dimethyl ether has been one of the fastest-growing applications for methanol in the past few years. South Korea’s Kogas is now on the verge of building a large 300,000 t/a natural gas-based DME plant in Saudi Arabia to feed the burgeoning Korean market, while Chinese capacity has advanced by leaps and bounds to almost seven million tonnes per year, allowing them to transform domestic coal into an LPG substitute and cut down on their rising tide of petrochemical imports. DME can be blended into LPG at levels up to 10-20% without any need to alter distribution infrastructure, and as it was also cheaper and cleaner-burning than imported LPG, China took to it enthusiastically. According to the International DME Association (IDA), Chinese DME capacity quadrupled between 2006 and 2008 alone, although such massive overbuilding seems to have moved far in excess of the market, and actual production in 2008 was just 1.8 million t/a, just 30% of capacity.
However, China’s rush to DME has started to come unstuck, and the issue is a familiar one for DME – corrosion of rubber and plastic seals. DME attacks some types of rubber, and dissolves PVC. LPG containers for the Chinese domestic market often have rubber seals, and in 2008 the Chinese authorities began to become concerned about the potential for these to be corroded to the point where potentially devastating gas leaks could occur. The upshot was the issue of an advisory notice in March 2008 by the Chinese General Administration of Quality Supervision, Inspection and Quarantine that domestic LPG cylinders should not be filled with blends of LPG and DME.
The IDA says that at the levels that DME is blended in China its corrosive properties should present no problems, and that in its “informed view”, any problems reported were probably due to faulty valves, product contamination (eg with water) or inconsistent production and mixing standards. The organisation goes on to state: “there is a concern that some blenders have been tempted to use higher than recommended percentages of DME”, encouraged by the cost advantage of DME over LPG. Reportedly some filling stations were blending at levels of up to 35% DME, which is almost certain to cause corrosion problems. This to my mind goes to the heart of the issue, which is essentially one of standards, regulations and compliance. China does not have a happy history of companies complying with standards even where they are agreed and circulated – and another of the major issues for DME in China is that such standards have lagged behind consumer reality. The Chinese government has yet to set national standards for DME/LPG blends in areas such as storage, transportation and blending ratios.
And in spite of the March 2008 ban, companies continued to blend DME. Dongguan Jiufeng Energy, a major supplier in the southern Guangdong Province, was found to have been continuing to defy the ban after it was reported to the authorities by local media, and after a subsequent investigation it was forced to suspend operations for a week in January. The incident has prompted a major crackdown by the Guangdong Provincial authorities.
If the current crackdown on illegal blending has an upside, it is that it seems to have finally prompted movement by the Chinese government towards a national DME/LPG blend standard – work on which had been languishing since 2008 without formal agreement. In February it was reported that the government was consulting with industry over the establishment of a blend standard and this time was attaching “great significance” to the talks, pressing for a draft as soon as possible, according to Zeng Xiangzhao, a member of the LPG Cylinders Committee of the Standardisation Administration of China. Mr Zeng added that replacing the O-ring seals in LPG cylinders with ones resistant to DME would cost about two yuan each ($0.29).
With Chinese DME capacity still rising, agreement on a national standard cannot come soon enough.
Thursday, 18 March 2010
The future of syngas
As we enter a new decade, even if we haven’t quite decided what to call it yet (twenty-teens?), it is a time for looking both backwards, at where we have come from, and forward, at where we are going. The first decade of the 21st century has been a momentous time for the world, but no less so for the syngas-based chemical industry. Even stepping aside from the political fallout from September 11th 2001, major economic and social factors have been and remain at play. If the 1990s were about the collapse and recovery of the economies of eastern Europe and the FSU, and the beginnings of globalisation, the 2000s have seen the rise of China and the beginnings of a global consensus on climate change. What shape will the new decade take? Will we talk about it as the decade that India came of age?
The syngas industry has seen two major reversals of fortune in the “noughties”. Firstly rising oil and gas prices, driven by the new industrialising countries, especially China, began to make what had become the ‘traditional’ business model – of capacity based in remote areas around cheap ‘stranded’ natural gas – begin to look less attractive. Building costs, finance costs, all soared, but feedstock costs in particular began to make other routes, perhaps based around refurbished, written-down plants close to end use markets, look more attractive. All manner of feeds that had once been the mainstay of the industry, from coal to petroleum coke, made a comeback. China embraced coal enthusiastically. Gasification seemed the way forward, with the new environmental concern also promoting biomass and municipal waste as fuel sources. And sky-high oil prices meant that all manner of routes towards liquid products involving a syngas intermediate step, from methanol to olefins to coal to liquids, became attractive propositions.
But in just the past eighteen months, things have taken a dramatic swing back the other way. The recession has cut oil prices back, although still to historically relatively high levels. Demand for liquids can now be met – for the time being – by existing capacity. The impetus for the syngas routes to fuels has dropped away, although some routes still seem to be gaining ground, with methanol and its derivatives taking an ever greater share of the Chinese fuels market. And developments in the gas arena have changed the feedstock game, too. The US move towards shale gas production has removed that import gap we were all expecting. Now the world is awash with LNG cargoes which were once destined for America (indeed, America is still taking them in, but only to store them and sell them on). While ‘stranded’ gas is becoming a thing of the past, there are still lower gas cost locations in the Middle East, Caribbean, and Central and Southeast Asia, and they are back to the fore.
So what can we expect from the coming 10 years? I am beginning to sense that the era of cheap or even free biomass may be coming to an end. Just as syngas developments which had been assuming that petcoke would remain cheap even once refiners saw that they might have a new buyer for it found that they faced a rude awakening, so I suspect that biomass, already expensive because of its low energy density, may – unless heavily subsidised (and that can’t be ruled out) – end up finding only a few niche applications, such as in the Swedish pulp mills that are producing di-methyl ether via methanol. And although moves towards carbon pricing and trade are still fitful and only sporadically effective, as some of our articles this issue show, the writing may be on the wall for heavy, solid feedstocks like coal unless they can afford some kind of carbon capture system. It will be much easier to justify a natural gas-based plant to a government keen to reduce its carbon emissions than a coal-based one.
Meanwhile, shale gas technology is still spreading, and soon Europe and China, and – who knows, perhaps India – may, like the US, find that they are able to produce far more gas again. Shale gas seems to have finally achieved that long-awaited ‘decoupling’ of oil and gas prices. The question is whether that gap will last through another period of high energy prices such as we saw in 2008. I suspect that it might, and I am starting to be convinced that the next decade will see a return to the ‘traditional’ gas-based model of production, for environmental reasons as much as any, but that higher oil prices might see us beginning to concentrate more on the fuel and liquids end uses for syngas-based products.
But of course… I have been wrong before!
The syngas industry has seen two major reversals of fortune in the “noughties”. Firstly rising oil and gas prices, driven by the new industrialising countries, especially China, began to make what had become the ‘traditional’ business model – of capacity based in remote areas around cheap ‘stranded’ natural gas – begin to look less attractive. Building costs, finance costs, all soared, but feedstock costs in particular began to make other routes, perhaps based around refurbished, written-down plants close to end use markets, look more attractive. All manner of feeds that had once been the mainstay of the industry, from coal to petroleum coke, made a comeback. China embraced coal enthusiastically. Gasification seemed the way forward, with the new environmental concern also promoting biomass and municipal waste as fuel sources. And sky-high oil prices meant that all manner of routes towards liquid products involving a syngas intermediate step, from methanol to olefins to coal to liquids, became attractive propositions.
But in just the past eighteen months, things have taken a dramatic swing back the other way. The recession has cut oil prices back, although still to historically relatively high levels. Demand for liquids can now be met – for the time being – by existing capacity. The impetus for the syngas routes to fuels has dropped away, although some routes still seem to be gaining ground, with methanol and its derivatives taking an ever greater share of the Chinese fuels market. And developments in the gas arena have changed the feedstock game, too. The US move towards shale gas production has removed that import gap we were all expecting. Now the world is awash with LNG cargoes which were once destined for America (indeed, America is still taking them in, but only to store them and sell them on). While ‘stranded’ gas is becoming a thing of the past, there are still lower gas cost locations in the Middle East, Caribbean, and Central and Southeast Asia, and they are back to the fore.
So what can we expect from the coming 10 years? I am beginning to sense that the era of cheap or even free biomass may be coming to an end. Just as syngas developments which had been assuming that petcoke would remain cheap even once refiners saw that they might have a new buyer for it found that they faced a rude awakening, so I suspect that biomass, already expensive because of its low energy density, may – unless heavily subsidised (and that can’t be ruled out) – end up finding only a few niche applications, such as in the Swedish pulp mills that are producing di-methyl ether via methanol. And although moves towards carbon pricing and trade are still fitful and only sporadically effective, as some of our articles this issue show, the writing may be on the wall for heavy, solid feedstocks like coal unless they can afford some kind of carbon capture system. It will be much easier to justify a natural gas-based plant to a government keen to reduce its carbon emissions than a coal-based one.
Meanwhile, shale gas technology is still spreading, and soon Europe and China, and – who knows, perhaps India – may, like the US, find that they are able to produce far more gas again. Shale gas seems to have finally achieved that long-awaited ‘decoupling’ of oil and gas prices. The question is whether that gap will last through another period of high energy prices such as we saw in 2008. I suspect that it might, and I am starting to be convinced that the next decade will see a return to the ‘traditional’ gas-based model of production, for environmental reasons as much as any, but that higher oil prices might see us beginning to concentrate more on the fuel and liquids end uses for syngas-based products.
But of course… I have been wrong before!
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