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!