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Nexant Sees Promising Opportunities for Using Coal as Feedstock for Commodity Chemicals
Wednesday January 11, 3:08 pm ET

WHITE PLAINS, N.Y.--(BUSINESS WIRE)--Jan. 11, 2006--The chemical industry appears to be at a strategic turning point that augurs well for the use of coal to produce chemicals. This shift is due to four key trends:

  • Unprecedented increases in global crude oil prices
  • Explosive increases in natural gas prices in North America and Western Europe
  • Unprecedented energy demand growth in developing economies, particularly in Asia and for liquid transportation fuels
  • Advances in coal utilization processes, such as gasification, and related environmental technologies

While these factors are only partly interrelated, they appear to be having a compound effect on the global chemical industry. For example, in regions with rapidly growing demand, the logistics of obtaining imported feedstocks in interior regions may now have shifted the overall feedstock "equation" toward using local coal resources. On the other hand, in regions with developed economies (such as North America), the future of new competitive capacity for producing large-volume commodity chemicals may now be shifting toward coal.

A new Nexant study, Coal-to-Chemicals: Is It Coal's Time Again?, analyzes the technologies and economics of utilizing coal to produce major petrochemicals via gasification and other known "on-purpose" processes.

Cost-related issues are a major consideration affecting the growth and success of coal-based chemicals, as costs are intertwined with the competitiveness of coal-based processes compared to mature, conventional process routes and feedstocks. Though proven cost-competitiveness will be a critical hurdle for coal, several other issues must also be considered:

  • Continued improvements in gasification and auxiliary system technologies, especially as related to environmental concerns
  • Competition from alternate low-cost feedstocks/processes for the same chemical production, especially for the export market, such as remote or stranded gas from the Middle East, Eastern Europe, and Africa
  • A forecasted shortfall for conventional feedstocks and key chemical products and intermediates in China, potentially offset by China's large coal reserves, coupled with the success and growth of chemicals produced from acetylene that is in turn produced from coal
  • Availability of coal and pressure for utilization of domestic energy recourses. Global crude oil reserves may now be entering an ever-diminishing phase, with greater reliance on regions having geopolitical instability and uncertainty. The growing impetus to reduce this dependency, especially in the United States, will put more pressure on domestic alternatives, regardless of concerns about coal and related environmental issues
  • The environmental aspects of coal gasification, including the potential for lower carbon emissions as compared to conventional coal combustion for power generation
  • The likelihood that the price differential between crude and coal may continue to increase -- a critically important factor

The growth in coal-based production of chemicals will ultimately be dependent on cost-competitiveness; both for gasification-based production and for chemicals produced from acetylene, as in the case of the growing vinyl chloride production in China.

The Nexant report documents the uncompetitive cost position for linear low-density polyethylene (LLDPE) production in the U.S. from the coal-based gasifier process (i.e., coal -- synthesis gas -- methanol -- olefins) as compared to conventional ethylene processes (e.g., naphtha, ethane, or E/P cracking sourced ethylene).

The relatively high cost of ethylene from methanol produced from coal cannot compete with ethylene produced from conventional cracker processes in the U.S., and will not be able to in the foreseeable future.

However, coal-based vinyl chloride monomer (VCM) production in China, either by gasification sourced ethylene (i.e., coal -- synthesis gas -- methanol -- olefins) or acetylene (i.e., coal -- coke -- calcium carbide -- acetylene), is highly competitive.

Of equal importance is the impact of coal economics on trade, and whether coal-rich countries with low-cost coal can compete in the export market for chemicals. The report describes how LLDPE produced conventionally and from coal in China and from coal in Central Europe can compete in Western Europe against current market prices.

The report illustrates the economic competitiveness of a wide range of products produced from coal, including methanol, ammonia and fertilizers, polyolefins, acetyls, and formaldehyde (all via the coal-synthesis gas route via gasification), and vinyl acetate and acrylic acid (via the coal-acetylene route).

Ultimately, it is expected that coal-based chemical production can leverage its advantages into a promising future that successfully addresses environmental issues and encourages energy and feedstock diversity. Continued industry and government investment in gasification technology to ensure secure, environmentally acceptable, economically feasible, and technologically viable sources of energy and feedstocks will likely herald a new era for the coal-based chemical industry.

Source: Nexant, Inc.

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