Will the Chinese Still Build their US-Based Methanol Plants?

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Last March, I wrote about several Chinese companies planning to build methanol plants in the United States with the purpose of shipping the product to China for use as feedstock in the Methanol to Olefins (MTO) plants constructed or currently being built in China. I showed that at crude oil prices at that time, i.e. $60/bbl, olefins (ethylene and propylene) from MTO plants enjoyed favorable feedstock costs over ethylene and propylene produced from traditional naphtha crackers.

Over the past year, crude oil prices have declined even further. With the crude oil prices in the current range of $30 – 40/bbl and methanol prices at $250/mt., the MTO feedstock cost advantage has essentially disappeared and in fact has reversed. Olefins, based on naphtha cracking, now enjoy a feedstock cost advantage over MTO-based ethylene and propylene. I wanted to see if this current state of the world crude oil markets had affected the status of any of the Chinese U.S. methanol projects described in my March 2015 blog.

Northwest Innovation Works (NWIW), had announced three U.S. methanol projects: one each at the Port of Kalama and the Port of Tacoma in the state of Washington, and one at the Port of St. Helens, nearby in Oregon. A draft environmental impact statement (EIS) for the $1.8 billion Port of Kalama project was released in March. Technip USA has been selected as EPC contractor based on Johnson Matthey methanol technology with construction expected to begin in the 4th quarter of this year and completion 3 years later in the 4th quarter of 2019. In order to reduce emissions, the plant will use Ultra Low Emissions (ULE) reforming technology provided by Johnson Matthey. More about this technology later.

Regarding its Port of Tacoma $1.8 billion methanol project, based on local opposition, NWIW decided to pause its environmental review and to work closely with local organizations to address their concerns.

NWIW’s Port of St. Helens project in Clatskanie, Oregon, began permitting activities this year which is expected to last 12 to 18 months.

Fund Connell USA Energy, a division of the Chinese Sino Life Insurance Co., announced a $4.5 billion complex at Shoal Point in Texas City, Texas including two 3.6 million metric tons per year plants. As best as I can determine, this project is still proceeding.

Yuhuang Chemical Inc. (YCI), a subsidiary of Shandong Yuhang Chemical, in September, 2015, announced the groundbreaking for the first, (YCI-M1) of their three $1.85 billion planned methanol projects. They have engaged Amec Foster Wheeler as EPC contractor utilizing AirLiquide’s Lurgi methanol technology. Construction is expected to begin later this year.

Based on what I have been able to learn about these projects, they all appear to be proceeding more or less as scheduled despite the current state of the world crude oil price regime. There are likely several reasons for this.

First, there is an existing market in China with MTO plants already on stream requiring 12 million mt/yr of methanol and planned additions that will require 22 million mt/yr of methanol by 2019.

Second, the alternative to imported methanol would be methanol produced domestically in China based on coal gasification. This technology alternative is not as environmentally friendly as methanol produced from natural gas; emitting much higher greenhouse gases, as well as toxic byproducts and wastes. As part of its contribution to the agreements reached at last year’s Paris Conference on climate change, China is implementing policies to address climate change; one of which is to restrict its coal consumption.

This now brings me to the ULE reforming technology being employed by NWIW in their Port of Kalama plant. In a conventional methanol plant, natural gas is first converted to synthesis gas (a mixture of hydrogen and carbon monoxide) by passing the methane feedstock and water in the form of steam over catalyst contained within tubes inside a furnace. This process is known as “steam reforming.” The hydrogen and carbon monoxide are then converted to methanol in a subsequent downstream reactor. Steam reforming is an endothermic reaction, with the required heat provided by burning some of the natural gas to produce the very high temperatures; ie. 900 – 1000 °C, required for the steam reforming reaction. The carbon content of the combusted methane fuel gas ends up as carbon dioxide in the steam reformer furnace flue gas emitted to the atmosphere.

An alternative design includes the steam reforming furnace with a second stage reactor known as an autothermal reformer (ATR). In this arrangement, only part of the natural gas process feed is reacted in the first stage reforming furnace. The remainder is converted in the ATR by reaction with pure oxygen. In contrast to steam reforming, this is an exothermic reaction releasing heat which is absorbed by raising the temperature of the synthesis gas exiting the ATR.

In a conventional methanol plant utilizing this technology, this heat is utilized by generating superheated steam as motive drive for the several compressors required in the process. Johnson Matthey’s ULE reforming technology, on the other hand, utilizes the heat from the ATR for the steam reforming reaction; replacing the steam reforming furnace with a gas-heated reformer (GHR). Thereby eliminating furnace flue gases that would be released to the atmosphere.

The following figure from NWIW’s draft EIS illustrates both techniques:

KALAMA

In its draft EIS, NWI tabulated the greenhouse gas emissions associated with both technology alternatives as summarized below:

operational emissions

As shown in the above table, process emissions utilizing ULE reforming technology offers a 61.1 % reduction over the alternative Combined Reforming (CR) methanol technology. However, ULE technology requires additional on-site electric power generation to satisfy the overall energy requirements of the methanol plant. Adding the emissions from the required electric generation facility to its process emissions, ULE still offers a 31.4 % reduction in total emissions.

Johnson Matthey’s ULE reforming technology is currently being used in Coogee Energy Pty. Ltd.’s small natural gas–based 50,000 mt/yr. methanol plant in Laverton, outside Melbourne, Australia. It was built by BHP Petroleum in 1994.

NWIW’s Port of Kalama, 3.6 million mt/yr. plant, if it ultimately chooses the ULE reforming technology will be the first large-scale commercial application of this technology.

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Marshall Frank

Marshall E. Frank retired from Chem Systems, where he was President and Managing Director, responsible for international consulting activities in North and South America and Asia Pacific. During his more than thirty years with the company, he had technical and administrative responsibility for a large number of multidisciplinary projects, both single-client and multi-client sponsored. Mr. Frank’s areas of expertise include natural gas utilization and conversion, the petrochemical industry, the refining and petrochemical interface, and alternative fuels. He also directed Chem Systems’ Financial Practice, which provided assistance to lenders in assessing the various risks associated with the financing of major international energy, petrochemical, and polymer projects. Prior to joining Chem Systems, Mr. Frank was involved in process evaluation, process engineering, and the startup of many of Halcon/SD’s proprietary processes at Scientific Design Company. Mr. Frank received a B.S. in Chemical Engineering from Cornell University.

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2 comments on “Will the Chinese Still Build their US-Based Methanol Plants?
  1. Santiago Arambula says:

    Very interesting follow-up analysis Marshall, how has your thinking evolved given current 2017 market conditions and MTO added capacity coming online in China?

  2. Dale Simbeck says:

    It appears this massive (now claiming 10 million t/y MeOH at all-in costs of $1.8 to $2.0 billion once completing both phases) China funded for China import NG to methanol plant is proceeding. This is based on several presentations by high level Chinese Academy of Science Holding (key funder) and NW Innovation Works on July 31 and Aug 1, 2017 at a Stanford Natural Gas Initiative (industry funded invitation only) meeting titled “Opportunities and Challenges for Methanol as a Global Liquid Energy Carrier”

    A key part of the ultra low emissions claim is thanks to all electric use via imported hydro power available in the North West United States. Also China’s views of low emissions methanol are likely relative to their large mostly coal gasification based domestic methanol production that have been growing fast with its increasing use for conversion to olefins. Expect this is part of China – US Climate Change CO2 mitigation negotiations from the President Obama Administration.

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